EXHIBIT 10.3
REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
IBJ XXXXXXXX BUSINESS CREDIT CORPORATION
(AS LENDER AND AS AGENT)
WITH
TERRACE HOLDINGS, INC,
A-ONE-A PRODUCE AND PROVISIONS, INC.
TERRACE FRESH, INC.
AND
TERRACE BANNER, INC.
(AS BORROWERS)
July 15, 1998
REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
Revolving Credit, Term Loan and Security Agreement dated July
15, 1998 among Terrace Holdings, Inc., a corporation organized under the laws of
the State of Delaware ("THI"), A-One-A Produce and Provisions, Inc., a
corporation organized under the laws of the State of Florida ("A-One-A"),
Terrace Fresh, Inc., a corporation organized under the laws of the State of
Florida ("Fresh"), and Terrace Banner (d/b/a Banner Beef and Seafood), a
corporation organized under the laws of the State of Florida ("BANNER"), (XXX,
X0X, Fresh and BBSI, each a "Borrower" and collectively "Borrowers"), the
financial institutions which are now or which hereafter become a party hereto
(collectively, the "Lenders" and individually a "Lender") and IBJ XXXXXXXX
BUSINESS CREDIT CORPORATION ("IBJSBCC"), as agent for Lenders (IBJSBCC, in such
capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings
herein contained, Borrowers, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the Note, or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrowers for the fiscal year ended December 31,
1997.
1.2. General Terms. For purposes of this Agreement the following
terms shall have the following meanings:
"Accountants" shall have the meaning set forth in Section 9.7
hereof.
"Acquisition Agreement" shall mean the Asset Acquisition
Agreement including all exhibits and schedules thereto dated as of June 25, 1998
between Banner Beef & Seafood Co., Inc. ("Seller") as seller and THI, as buyer.
"Acquisition Note" shall mean that certain promissory note
dated as of July 15, 1998 issued under the terms and provisions of the
Acquisition Agreement made by THI in favor of Seller in the aggregate principal
amount equal to approximately $1,620,000, in form and substance reasonably
satisfactory to Agent.
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"Advances" shall mean and include the Revolving Advances,
Letters of Credit, as well as the Term Loan.
"Advance Rates" shall have the meaning set forth in Section
2.1(a) hereof.
"Affiliate" of any Person shall mean (a) any Person (other
than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person, or (b) any Person
who is a director or officer (i) of such Person, (ii) of any Subsidiary of such
Person or (iii) of any Person described in clause (a) above. For purposes of
this definition, control of a Person shall mean the power, direct or indirect,
(x) to vote 5% or more of the securities having ordinary voting power for the
election of directors of such Person, or (y) to direct or cause the direction of
the management and policies of such Person whether by contract or otherwise.
"Agent" shall have the meaning set forth in the preamble to
this Agreement and shall include its successors and assigns.
"Alternate Base Rate" shall mean, for any day, a rate per
annum equal to the higher of (i) the Base Rate in effect on such day and (ii)
the Federal Funds Rate in effect on such day plus 1/2 of 1%.
"Authority" shall have the meaning set forth in Section
4.19(d).
"Base Rate" shall mean the base commercial lending rate of
IBJSBCC as publicly announced to be in effect from time to time, such rate to be
adjusted automatically, without notice, on the effective date of any change in
such rate. This rate of interest is determined from time to time by IBJSBCC as a
means of pricing some loans to its customers and is neither tied to any external
rate of interest or index nor does it necessarily reflect the lowest rate of
interest actually charged by IBJSBCC to any particular class or category of
customers of IBJSBCC.
"Blocked Accounts" shall have the meaning set forth in
Section 4.15(h).
"Borrower" or "Borrowers" shall have the meaning set forth in
the preamble to this Agreement and shall extend to all permitted successors and
assigns of such Persons.
"Borrowers on a consolidated basis" shall mean, collectively,
XXX, X0X, Fresh and BBSI.
"Borrowers' Account" shall have the meaning set forth in
Section 2.8.
"Borrowing Agent" shall mean THI.
"Business Day" shall mean any day other than a day on which
commercial banks in New York are authorized or required by law to close.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et
seq.
"Change of Control" shall mean (a) the occurrence of any
event (whether in one or more transactions) which results in a transfer of
control of any Borrower to a Person who is not a member of the Original Board or
an Affiliate thereof, or (b) the occurrence of any event (whether in one or more
transactions) resulting in a majority of the board of THI not being members of
the Original Board, or (c) any merger or consolidation of or with any Borrower
or sale of all or substantially all of the property or assets of any Borrower.
For purposes of this definition, "control of Borrower" shall mean the power,
direct or indirect (x) to vote 50% or more of the securities having ordinary
voting power for the election of directors of any Borrower or (y) to direct or
cause the direction of the management and policies of any Borrower by contract
or otherwise.
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"Change of Ownership" shall mean (a) 50% or more of the
common stock of any Borrower is no longer owned or controlled by (including for
the purposes of the calculation of percentage ownership, any shares of common
stock into which any capital stock of any Borrower held by any of the Original
Board or any Affiliate thereof is convertible or for which any such shares of
the capital stock of any Borrower or of any other Person may be exchanged and
any shares of common stock issuable to such Original Board upon exercise of any
warrants, options or similar rights which may at the time of calculation be held
by such member of the Original Board) a Person who is either a member of the
Original Board or an Affiliate of a Original Board member or (b) any merger,
consolidation or sale of substantially all of the property or assets of any
Borrower; provided, that the sale by THI of any shares of the capital stock of
A1A, Fresh and BBSI shall be deemed a sale of substantially all of THI's assets.
"Charges" shall mean all taxes, charges, fees, imposts,
levies or other assessments, including, without limitation, all net income,
gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation
and property taxes, custom duties, fees, assessments, liens, claims and charges
of any kind whatsoever, together with any interest and any penalties, additions
to tax or additional amounts, imposed by any taxing or other authority, domestic
or foreign (including, without limitation, the Pension Benefit Guaranty
Corporation or any environmental agency or superfund), upon the Collateral, any
Borrower or any of its Affiliates.
"Closing Date" shall mean July 15, 1998 or such other
date as may be agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time and the regulations promulgated thereunder.
"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Real Property;
(f) all Subsidiary Stock;
(g) the Leasehold Interests;
(h) all of each Borrower's right, title and
interest in and to (i) its respective goods and other property including, but
not limited to, all merchandise returned or rejected by Customers, relating to
or securing any of the Receivables; (ii) all of each Borrower's rights as a
consignor, a consignee, an unpaid vendor, mechanic, artisan, or other lienor,
including stoppage in transit, set-off, detinue, replevin, reclamation and
repurchase; (iii) all additional amounts due to any Borrower from any Customer
relating to the Receivables; (iv) other property, including warranty claims,
relating to any goods securing this Agreement; (v) all of each Borrower's
contract rights, rights of payment which have been earned under a contract
right, instruments, documents, chattel paper, warehouse receipts, deposit
accounts, money, securities and investment property; (vi) if and when obtained
by any Borrower, all real and personal property of third parties in which such
Borrower has been granted a lien or security interest as security for the
payment or enforcement of Receivables; and (vii) any other goods, personal
property or real property now owned or hereafter acquired in which any Borrower
has expressly granted a security interest or may in the future grant a security
interest to Agent hereunder, or in any amendment or supplement hereto or
thereto, or under any other agreement between Agent and any Borrower;
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(i) all of each Borrower's ledger sheets, ledger cards,
files, correspondence, records, books of account, business papers, computers,
computer software (owned by any Borrower or in which it has an interest),
computer programs, tapes, disks and documents relating to (a), (b), (c), (d),
(e), (f), (g), or (h) of this Paragraph; and
(j) all proceeds and products of (a), (b), (c), (d), (e),
(f), (g), (h) and (i) in whatever form, including, but not limited to: cash,
deposit accounts (whether or not comprised solely of proceeds), certificates of
deposit, insurance proceeds (including hazard, flood and credit insurance),
negotiable instruments and other instruments for the payment of money, chattel
paper, security agreements, documents, eminent domain proceeds, condemnation
proceeds and tort claim proceeds.
"Collateral Term Loan Short-fall Reserve" shall mean the
reserve established in the amount of $410,000 with respect to the Collateral
Term Loan Short-fall Reserve; provided, however, that, so long as no Default or
Event of Default has occurred and is then continuing, following the satisfactory
receipt and review by the Agent of the Borrowers' financial statements delivered
pursuant to, and in compliance with, Section 9.7 hereof for a given fiscal year,
the Collateral Term Loan Short-fall Reserve shall be reduced as of the date of
such financial statements by an amount equal to the sum of: (x) 20.5% of the
aggregate principal amount of all principal payments of the Term Loan made for
such fiscal year, and (y) 80% of the appraised orderly liquidation value of the
Post-Closing Appraised M&E, as determined in the reasonable discretion of the
Agent; and provided further that upon the receipt by the Agent of the audit of
the Borrowers for fiscal 1998, the Agent agrees to review the performance of the
Borrowers against the projections heretofore received by the Agent with respect
to 1998, and to consider the reduction or elimination of the Collateral Term
Loan Short-fall Reserve; provided further that the Agent shall have no
obligation so to reduce or eliminate the Collateral Term Loan Short-fall
Reserve.
"Commitment Percentage" of any Lender shall mean the
percentage set forth below such Lender's name on the signature page hereof as
same may be adjusted upon any assignment by a Lender pursuant to Section 16.3(b)
hereof.
"Commitment Transfer Supplement" shall mean a document in the
form of Exhibit 16.3 hereto, properly completed and otherwise in form and
substance satisfactory to Agent by which the Purchasing Lender purchases and
assumes a portion of the obligation of Lenders to make Advances under this
Agreement.
"Consents" shall mean all filings and all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and other third parties, domestic or foreign, necessary to carry on
any Borrower's business, including, without limitation, any Consents required
under all applicable federal, state or other applicable law.
"Contract Rate" shall mean, as applicable, the Revolving
Interest Rate or the Term Loan Rate.
"Controlled Group" shall mean all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with any Borrower, are treated as a single
employer under Section 414 of the Code.
"Current Assets" at a particular date, shall mean all cash,
cash equivalents, accounts and inventory of Borrowers on a consolidated basis
and all other items which would, in conformity with GAAP, be included under
current assets on a balance sheet of Borrowers on a consolidated basis as at
such date; provided, however, that such amounts shall not include (a) any
amounts for any Indebtedness owing by an Affiliate of any Borrower, unless such
Indebtedness arose in connection with th sale of goods or rendition of services
in the ordinary course of business and would otherwise constitute current assets
in conformity with GAAP, (b) any shares of stock issued by an Affiliate of any
Borrower, or (c) the cash surrender value of any life insurance policy.
"Current Liabilities" at a particular date, shall mean all
amounts which would, in conformity with GAAP, be included under current
liabilities on a balance sheet of Borrowers on a consolidated basis, as at such
date, but in any event including, without limitation, the amounts of (a) all
Indebtedness of Borrowers on a consolidated basis payable on demand, or, at the
option of the Person to whom such Indebtedness is owed, not more than twelve
(12) months after such date, (b) any payments in respect of any Indebtedness of
any Borrower (whether installment, serial maturity, sinking fund payment or
otherwise) required to be made not more than twelve (12) months after such date,
(c) all reserves in respect of liabilities or Indebtedness payable on demand or,
at the option of the Person to whom such Indebtedness is owed, not more than
twelve (12) months after such date, the validity of which is not contested at
such date, and (d) all accruals for federal or other taxes measured by income
payable within a twelve (12) month period.
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"Customer" shall mean and include the account debtor with
respect to any Receivable and/or the prospective purchaser of goods, services or
both with respect to any contract or contract right, and/or any party who enters
into or proposes to enter into any contract or other arrangement with any
Borrower, pursuant to which such Borrower is to deliver any personal property or
perform any services.
"Default" shall mean an event which, with the giving of
notice or passage of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section
3.1 hereof.
"Defaulting Lender" shall have the meaning set forth in
Section 2.16(a) hereof.
"Depository Accounts" shall have the meaning set forth in
Section 4.15(h) hereof.
"Documents" shall have the meaning set forth in Section
8.1(c) hereof.
"Dollar" and the sign "$" shall mean lawful money of
the United States of America.
"Early Termination Date" shall have the meaning set forth in
Section 13.1 hereof.
"Earnings Before Interest and Taxes" shall mean for any
period the sum of (i) net income (or loss) of Borrowers on a consolidated basis
for such period (excluding extraordinary gains), plus (ii) all interest expense
of Borrowers on a consolidated basis for such period, plus (iii) all charges
against income of Borrowers on a consolidated basis for such period for federal,
state and local taxes actually paid.
"EBITDA" shall mean for any period the sum of (i) Earnings
Before Interest and Taxes for such period plus (ii) depreciation expenses for
such period, plus (iii) amortization expenses for such period.
"Eligible Inventory" shall mean and include Inventory
excluding work in process, with respect to each Borrower valued at the lower of
cost or market value, determined on a first-in-first-out basis, which is not, in
Agent's opinion, obsolete, slow moving or unmerchantable and which Agent, in its
sole discretion, shall not deem ineligible Inventory, based on such
considerations as Agent may from time to time deem appropriate including,
without limitation, whether the Inventory is
subject to a perfected, first priority security interest in favor of Agent and
whether the Inventory conforms to all standards imposed by any governmental
agency, division or department thereof which has regulatory authority over such
goods or the use or sale thereof, provided, however, in no event shall any
produce, fresh meat or non-frozen raw meat be deemed Eligible Inventory.
5
"Eligible Receivables" shall mean and include with respect to
each Borrower, each Receivable of such Borrower arising in the ordinary course
of such Borrower's business and which Agent, in its sole credit judgment, shall
deem to be an Eligible Receivable, based on such considerations as Agent may
from time to time deem appropriate. A Receivable shall not be deemed eligible
unless such Receivable is subject to Agent's first priority perfected security
interest and no other Lien (other than Permitted Encumbrances), and is evidenced
by an invoice or other documentary evidence satisfactory to Agent. In addition,
no Receivable shall be an Eligible Receivable if:
(a) it arises out of a sale made by any Borrower to an
Affiliate of any Borrower or to a Person controlled by an Affiliate of any
Borrower;
(b)it is due or unpaid beyond any of the following: (x) sixty
(60) days after the original invoice date, or (y) if by its terms it is due
within fifteen days or less after the original invoice date, more than thirty
(30) days after such invoice date; or (z) if by terms it is due sixteen (16) or
more days after the original invoice date, more than sixty (60) days after such
invoice date.
(c) fifty percent (50%) or more of the Receivables from such
Customer are not deemed Eligible Receivables hereunder. Such percentage may, in
Agent's sole discretion, be increased or decreased from time to time;
(d) any covenant, representation or warranty contained in
this Agreement with respect to such Receivable has been breached;
(e) the Customer shall (i) apply for, suffer, or consent to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property
or call a meeting of its creditors, (ii) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business, (iii) make a general assignment for the benefit of creditors,
(iv) commence a voluntary case under any state or federal bankruptcy laws (as
now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi)
file a petition seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition
which is filed against it in any involuntary case under such bankruptcy laws, or
(viii) take any action for the purpose of effecting any of the foregoing;
(f) the sale is to a Customer outside the continental United
States of America, unless the sale is on letter of credit, guaranty or
acceptance terms, in each case acceptable to Agent in its sole discretion;
(g) the sale to the Customer is on a xxxx-and-hold,
guaranteed sale, sale-and-return, sale on approval, consignment or any other
repurchase or return basis or is evidenced by chattel paper;
(h) Agent believes, in its sole judgment, that collection of
such Receivable is insecure or that such Receivable may not be paid by reason of
the Customer's financial inability to pay;
(i) the Customer is the United States of America, any state
or any department, agency or instrumentality of any of them, unless the
applicable Borrower assigns its right to payment of such Receivable to Agent
pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C.
Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise
complied with other applicable statutes or ordinances;
(j) the goods giving rise to such Receivable have not been
shipped and delivered to and accepted by the Customer or the services giving
rise to such Receivable have not been performed by the applicable Borrower and
accepted by the Customer or the Receivable otherwise does not represent a final
sale;
(k) the Receivables of the Customer exceed a credit limit
determined by Agent, in its sole discretion, to the extent such Receivable
exceeds such limit;
(l) the Receivable is subject to any offset, deduction,
defense, dispute, or counterclaim, the Customer is also a creditor or supplier
of a Borrower or the Receivable is contingent in any respect or for any reason;
6
(m) the applicable Borrower has made any agreement with any
Customer for any deduction therefrom, except for discounts or allowances made in
the ordinary course of business for prompt payment, all of which discounts or
allowances are reflected in the calculation of the face value of each respective
invoice related thereto;
(n) shipment of the merchandise or the rendition of services
has not been completed;
(o) any return, rejection or repossession of the merchandise
has occurred;
(p) such Receivable is not payable to a Borrower; or
(q) such Receivable is not otherwise satisfactory to Agent as
determined in good faith by Agent in the exercise of its discretion in a
reasonable manner.
"Environmental Complaint" shall have the meaning set forth in
Section 4.19(d) hereof.
"Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"Equipment" shall mean and include as to each Borrower all of
such Borrower's goods (other than Inventory) whether now owned or hereafter
acquired and wherever located including, without limitation, all equipment,
machinery, apparatus, motor vehicles, fittings, furniture, furnishings,
fixtures, parts, accessories and all replacements and substitutions therefor or
accessions thereto.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time and the rules and regulations
promulgated thereunder.
"Event of Default" shall mean the occurrence and continuance
of any of the events set forth in Article X hereof.
"Excess Cash Flow" shall mean for any fiscal period of the
Borrowers, (i) net income (or loss) of the Borrowers on a consolidated basis for
such period, plus (ii) all non-cash charges of the Borrowers on a consolidated
basis deducted in arriving at such net income (or net loss) for such period,
less (iii) all non-cash credits of the Borrowers on a consolidated basis
included in arriving at such net income (or net loss) for such period, less (iv)
all scheduled and mandatory cash principal payments on the Advances and optional
cash principal payments on the Advances made during such period (but, in the
case of the Revolving Advances, only to the extent that the Maximum Revolving
Advance Amount is concurrently therewith permanently reduced by the amount of
such payments) during such period, less (v) all scheduled and mandatory cash
principal payments on notes and other Indebtedness of the Borrower, including
without limitation, capitalized leases, to the extent permitted to be made under
this Agreement, less (vi) the cash portion of capital expenditures made by the
Borrowers on a consolidated basis during such period to the extent permitted to
be made under this Agreement.
7
"Existing Indebtedness" shall mean the Indebtedness, in the
aggregate principal amount of approximately $530,031.62, issued pursuant to that
Loan and Security Agreement, as amended, dated as of August 7, 1997, by and
among Xxxxxxx Ice Cream, Inc., a Delaware corporation, and A-One-A, as
borrowers, and Foothill Capital Corporation, a California corporation, as
lender.
"Federal Funds Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or if such rate is not so published for
any day which is a Business Day, the average of quotations for such day on such
transactions received by IBJSBCC from three Federal funds brokers of recognized
standing selected by IBJSBCC.
"Fee Letter" shall mean the fee letter dated May 29, 1998
between Borrowing Agent and IBJSBCC.
"Fiscal Quarter" shall mean the three month periods ending
March 31, June 30, September 30 and December 31, which in the aggregate
constitute the Borrowers' fiscal year.
"Fixed Charge Coverage" shall mean and include, with respect
to any fiscal period, the ratio of (a) EBITDA, minus non-financed capitalized
expenditures made during such period, to (b) all Senior Debt Payments during
such period plus all dividends paid in accordance with the Intercreditor
Agreement during such period plus all tax payments actually made or required to
be made by the Borrowers.
"Formula Amount" shall have the meaning set forth in Section
2.1(a).
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"General Intangibles" shall mean and include as to each
Borrower all of such Borrower's general intangibles, whether now owned or
hereafter acquired including, without limitation, all choses in action, causes
of action, corporate or other business records, inventions, designs, patents,
patent applications, equipment formulations, manufacturing procedures, quality
control procedures, trademarks, service marks, trade secrets, goodwill,
copyrights, design rights, registrations, licenses, franchises, customer lists,
tax refunds, tax refund claims, computer programs, all claims under guaranties,
security interests or other security held by or granted to such Borrower to
secure payment of any of the Receivables by a Customer all rights of
indemnification and all other intangible property of every kind and nature
(other than Receivables).
"Governmental Body" shall mean any nation or government, any
state or other political subdivision thereof or any entity exercising the
legislative, judicial, regulatory or administrative functions of or pertaining
to a government.
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"Guarantor" shall mean any Person who may hereafter guarantee
payment or performance of the whole or any part of the Obligations and
"Guarantors" means collectively all such Persons.
"Guarantor Security Agreement" shall mean any Security
Agreement executed by any Guarantor in favor of Agent securing the Guaranty of
such Guarantor.
"Guaranty" shall mean any guaranty of the obligations of
Borrowers executed by a Guarantor in favor of Agent for the ratable benefit of
Lenders.
"Hazardous Discharge" shall have the meaning set forth in
Section 4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation, any
flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New York State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
"Indebtedness" of a Person at a particular date shall mean
all obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except capital stock and surplus earned or
otherwise) and in any event, without limitation by reason of enumeration, shall
include all indebtedness, debt and other similar monetary obligations of such
Person whether direct or guaranteed, and all premiums, if any, due at the
required prepayment dates of such indebtedness, and all indebtedness secured by
a Lien on assets owned by such Person, whether or not such indebtedness actually
shall have been created, assumed or incurred by such Person. Any indebtedness of
such Person resulting from the acquisition by such Person of any assets subject
to any Lien shall be deemed, for the purposes hereof, to be the equivalent of
the creation, assumption and incurring of the indebtedness secured thereby,
whether or not actually so created, assumed or incurred.
"Intercreditor Agreement" shall mean that intercreditor and
subordination agreement between the Agent and Network Funds III, Ltd.
"Inventory" shall mean and include as to each Borrower all of
such Borrower's now owned or hereafter acquired goods, merchandise and other
personal property, wherever located, to be furnished under any contract of
service or held for sale or lease, all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or description which are or
might be used or consumed in such Borrower's business or used in selling or
furnishing such goods, merchandise and other personal property, and all
documents of title or other documents representing them.
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"Inventory Advance Rate" shall have the meaning set forth in
Section 2.1(a)(y)(ii) hereof.
"Issuer" shall mean any Person who issues a Letter of Credit
and/or accepts a draft pursuant to the terms hereof.
"Leasehold Interests" shall mean all of each Borrower's
right, title and interest in and to the premises located at (1) 0000 X.X. 00xx
Xxxxxx, Xxxxxxx Xxxxx, Xxxxxxx 00000 (Bays 4, 5 & 6) and (2) 0000 X.X. 00xx
Xxxxxx, Xxxxxxx Xxxxx, Xxxxxxx 00000.
"Lender" and "Lenders" shall have the meaning ascribed to
such term in the preamble to this Agreement and shall include each Person which
becomes a transferee, successor or assign of any Lender.
"Letter of Credit Fees" shall have the meaning set forth in
Section 3.2.
"Letters of Credit" shall have the meaning set forth in
Section 2.9.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction.
"Material Adverse Effect" shall mean a material adverse
effect (a) the condition, operations, assets, business or prospects of the
applicable Person or Persons, (b) any Borrower's ability to pay the Obligations
in accordance with the terms thereof, (c) the value of the Collateral, or
Agent's Liens on the Collateral or the priority of any such Lien or (d) the
practical realization of the benefits of Agent's and each Lender's rights and
remedies under this Agreement and the Other Documents.
"Maximum Loan Amount" shall mean $6,000,000 less repayments
of the Term Loan.
"Maximum Revolving Advance Amount" shall mean $4,000,000.
"Monthly Advances" shall have the meaning set forth in
Section 3.1 hereof.
"Mortgage" shall mean the mortgage on the Real Property
securing the original principal amount of $1,600,000, together with all
extensions, renewals, amendments, supplements, modifications, substitutions and
replacements thereto and thereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Sections 3(37) and 4001(a)(3) of ERISA.
"Net Worth" at a particular date, shall mean the greater of
(a) all amounts which would be included under shareholders' equity on a balance
sheet of the Borrowers on a consolidated basis determined in accordance with
GAAP as at such date or (b) ) all amounts which would be included under
shareholders' equity on a balance sheet of the Borrowers on a consolidated basis
determined in accordance with GAAP as at such date plus the principal amount
outstanding of Subordinated Debt.
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"Note" shall mean collectively, the Term Note and the
Revolving Credit Note.
"Obligations" shall mean and include any and all of each
Borrower's Indebtedness and/or liabilities to Agent or Lenders or any
corporation that directly or indirectly controls or is controlled by or is under
common control with Agent or any Lender of every kind, nature and description,
direct or indirect, secured or unsecured, joint, several, joint and several,
absolute or contingent, due or to become due, now existing or hereafter arising,
contractual or tortious, liquidated or unliquidated, regardless of how such
indebtedness or liabilities arise or by what agreement or instrument they may be
evidenced or whether evidenced by any agreement or instrument, including, but
not limited to, any and all of any Borrower's Indebtedness and/or liabilities
under this Agreement, the Other Documents or under any other agreement between
Agent or Lenders and any Borrower and all obligations of any Borrower to Agent
or Lenders to perform acts or refrain from taking any action.
"Original Board" shall mean those board members of THI on the
Closing Date.
"Other Documents" shall mean the Mortgage, the Note, the
Stock Pledge Agreement, the Questionnaire, any Guaranty, any Guarantor Security
Agreement, the Intercreditor Agreement and any and all other agreements,
instruments and documents, including, without limitation, guaranties, pledges,
powers of attorney, consents, and all other writings heretofore, now or
hereafter executed by any Borrower or any Guarantor and/or delivered to Agent or
any Lender in respect of the transactions contemplated by this Agreement.
"PACA" shall mean the Perishable Agricultural Commodities
Act, as in effect from time to time.
"PACA Liabilities" shall mean all liabilities, including
accrued accounts payable and held checks, in each case PACA related, contingent
obligations and claims, in each case arising under PACA, as determined in the
reasonable discretion of the Agent.
"PACA Reserve" shall mean, as calculated from time to time,
the gross amount of PACA Liabilities; minus the face amount of Letters of Credit
issued hereunder by their terms to be applied to the same; minus the lesser of
(x) $150,000 or (y) the amount of produce subject to PACA included in Inventory;
as determined by the Agent in its sole discretion.
"Parent" of any Person shall mean a corporation or other
entity owning, directly or indirectly at least 50% of the shares of stock or
other ownership interests having ordinary voting power to elect a majority of
the directors of the Person, or other Persons performing similar functions for
any such Person.
"Participant" shall mean each Person who shall be granted the
right by any Lender to participate in any of the Advances and who shall have
entered into a participation agreement in form and substance satisfactory to
such Lender.
"Payment Office" shall mean initially Xxx Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000; thereafter, such other office of Agent, if any, which it
may designate by notice to Borrowing Agent and to each Lender to be the Payment
Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean (a) Liens in favor of
Agent for the benefit of Agent and Lenders; (b) Liens for taxes, assessments or
other governmental charges not delinquent or being contested in good faith and
by appropriate proceedings and with respect to which proper reserves have been
taken by Borrowers; provided, that, the Lien shall have no effect on the
priority of the Liens in favor of Agent or the value of the assets in which
Agent has such a Lien and a stay of enforcement of any such Lien shall be in
effect; (c) Liens disclosed in the financial statements referred to in Section
5.5, the existence of which Agent has consented to in writing; (d) deposits or
pledges to secure obligations under worker's compensation, social security or
similar laws, or under unemployment insurance; (e) deposits or pledges to secure
bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds and other obligations o
like nature arising in the ordinary course of any Borrower's business; (f)
judgment Liens that have been stayed or bonded and mechanics', workers',
materialmen's or other like Liens arising in the ordinary course of any
Borrower's business with respect to obligations which are not due or which are
being contested in good faith by the applicable Borrower; (g) Liens placed upon
fixed assets hereafter acquired to secure a portion of the purchase price
thereof, provided that (x) any such lien shall not encumber any other property
of the Borrowers and (y) the aggregate amount of Indebtedness secured by such
Liens incurred as a result of such purchases during any fiscal year shall not
exceed the amount provided for in Section 7.6; and (h) Liens disclosed on
Schedule 1.2.
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"Person" shall mean any individual, sole proprietorship,
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited liability company,
institution, public benefit corporation, joint venture, entity or government
(whether Federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).
"Plan" shall mean any employee benefit plan within the
meaning of Section 3(3) of ERISA, maintained for employees of Borrowers or any
member of the Controlled Group or any such Plan to which any Borrower or any
member of the Controlled Group is required to contribute on behalf of any of its
employees.
"Post-Closing Appraised M&E" shall mean machinery and
equipment not included in the appraisal undertaken for the Agent, and dated
April 28, 1998, in which the Agent, on behalf off the Lenders, has a perfected,
first, prior and sole lien and security interest.
"Pro Forma Balance Sheet" shall have the meaning set forth in
Section 5.5(a) hereof.
"Pro Forma Financial Statements" shall have the meaning set
forth in Section 5.5(b) hereof.
"Projections" shall have the meaning set forth in Section
5.5(b) hereof.
"Purchasing Lender" shall have the meaning set forth in
Section 16.3 hereof.
"Questionnaire" shall mean the Documentation Information
Questionnaire and the responses thereto provided by Borrowers and delivered to
Agent.
"RCRA" shall mean the Resource Conservation and Recovery Act,
42 U.S.C. Sections 6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all of each Borrower's right,
title and interest in and to the owned and leased premises identified on
Schedule 4.19 hereto.
"Receivables" shall mean and include, as to each Borrower,
all of such Borrower's accounts, contract rights, instruments (including those
evidencing indebtedness owed to Borrowers by their Affiliates), documents,
chattel paper, general intangibles relating to accounts, drafts and acceptances,
and all other forms of obligations owing to such Borrower arising out of or in
connection with the sale or lease of Inventory or the rendition of services, all
guarantees and other security therefor, whether secured or unsecured, now
existing or hereafter created, and whether or not specifically sold or assigned
to Agent hereunder.
"Receivables Advance Rate" shall have the meaning set forth
in Section 2.1(a)(y)(i) hereof.
"Release" shall have the meaning set forth in Section
5.7(c)(i) hereof.
"Reportable Event" shall mean a reportable event described in
Section 4043(b) of ERISA or the regulations promulgated thereunder.
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"Required Lenders" shall mean Lenders holding at least
fifty-one percent (51%) of the Advances and, if no Advances are outstanding,
shall mean Lenders holding fifty-one percent (51%) of the Commitment
Percentages.
"Revolving Advances" shall mean Advances made other
than Letters of Credit and the Term Loan.
"Revolving Credit Note" shall mean the promissory note
referred to in Section 2.1(a) hereof.
"Revolving Interest Rate" shall mean an interest rate per
annum equal to the sum of the Alternate Base Rate plus one-half of one percent
(.50%) per annum.
"Seller" shall mean Banner Beef & Seafood Co., Inc., a
Florida corporation.
"Senior Debt Payments" shall mean and include all cash
actually expended by Borrowers to make (a) interest payments on any Advances
hereunder, plus, (b) scheduled principal payments on the Term Loan, plus (c)
payments for all fees, commissions and charges set forth herein and with respect
to any Advances, plus (d) capitalized lease payments, plus (e) payments with
respect to any other Indebtedness for borrowed money.
"Settlement Date" shall mean the Closing Date and thereafter
Wednesday of each week unless such day is not a Business Day in which case it
shall be the next succeeding Business Day.
"Subordinated Debt" shall mean all Indebtedness f the
Borrowers subordinated to the Obligations pursuant to a subordination agreement
in forma and substance satisfactory to the Agent.
"Subsidiary" shall mean a corporation or other entity of
whose shares of stock or other ownership interests having ordinary voting power
(other than stock or other ownership interests having such power only by reason
of the happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"Subsidiary Stock" shall mean all of the issued and
outstanding shares of stock owned by THI of A1A, Fresh and BBSI.
"Term" shall have the meaning set forth in Section 13.1
hereof.
"Term Loan" shall mean the Advances made pursuant to Section
2.4 hereof.
"Term Loan Rate" shall mean an interest rate per annum equal
to the sum of the Alternate Base Rate plus one percent (1.00%) per annum.
"Term Note" shall mean the promissory note described in
Section 2.4 hereof.
"Termination Event" shall mean (i) a Reportable Event with
respect to any Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower
or any member of the Controlled Group from a Plan or Multiemployer Plan during a
plan year in which such entity was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Plan in a distress termination described in Section 4041(c) of
ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan or
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Multiemployer Plan; (v) any event or condition (a) which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan or Multiemployer Plan, or (b) that may
result in termination of a Multiemployer Plan pursuant to Section 4041A of
ERISA; or (vi) the partial or complete withdrawal within the meaning of Sections
4203 and 4205 of ERISA, of any Borrower or any member of the Controlled Group
from a Multiemployer Plan.
"Toxic Substance" shall mean and include any material present
on the Real Property or the Leasehold Interests which has been shown to have
significant adverse effect on human health or which is subject to regulation
under the Toxic Substances Control Act (TSCA), 15 U.S.C. Sections 2601 et seq.,
applicable state law, or any other applicable Federal or state laws now in force
or hereafter enacted relating to toxic substances. "Toxic Substance" includes
but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based
paints.
"Transactions" shall have the meaning set forth in Section
5.5 hereof.
"Transferee" shall have the meaning set forth in Section
16.3(b) hereof.
"Undrawn Availability" at a particular date shall mean an
amount equal to (a) the lesser of (i) the Formula Amount or (ii) the Maximum
Revolving Advance Amount, minus (b) the sum of (i) the outstanding amount of
Advances (other than the Term Loan) plus (ii) all amounts due and owing to
Borrowers' trade creditors which are outstanding beyond normal trade terms, plus
(iii) fees and expenses for which Borrowers are liable but which have not been
paid or charged to Borrowers' Account, plus (iv) the amount of all checks drawn
by Borrowers which have not cleared.
"Week" shall mean the time period commencing with the opening
of business on a Wednesday and ending on the end of business the following
Tuesday.
1.3. Uniform Commercial Code Terms. All terms used herein and
defined in the Uniform Commercial Code as adopted in the State of New York shall
have the meaning given therein unless otherwise defined herein.
1.4. Certain Matters of Construction. The terms "herein",
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular section, paragraph or
subdivision. Any pronoun used shall be deemed to cover all genders. Wherever
appropriate in the context, terms used herein in the singular also include the
plural and vice versa. All references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations.
Unless otherwise provided, all references to any instruments or agreements to
which Agent is a party, including, without limitation, references to any of the
Other Documents, shall include any and all modifications or amendments thereto
and any and all extensions or renewals thereof.
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II. ADVANCES, PAYMENTS.
2.1. (a) Revolving Advances. Subject to the terms and
conditions set forth in this Agreement, each Lender, severally and not jointly,
will make Revolving Advances to Borrowers in aggregate amounts outstanding at
any time equal to such Lender's Commitment Percentage of the lesser of (x)
the Maximum Revolving Advance Amount less the aggregate amount of outstanding
Letters of Credit or (y) an amount equal to the sum of:
(i) up to 85%, subject to the provisions of
Section 2.1(b) hereof ("Receivables Advance
Rate"), of Eligible Receivables, plus
(ii) up to the lesser of (A) 60%, subject to the
provisions of Section 2.1(b) hereof
("Inventory Advance Rate"), of the value of
the Eligible Inventory (the Receivables
Advance Rate and the Inventory Advance Rate
shall be referred to collectively, as the
"Advance Rates") or (B) the lesser of (1)
$1,000,000 in the aggregate at any one time or
(2) 25% of the value of the Formula Amount at
any one time, minus;
(iii) the aggregate amount of outstanding Letters of
Credit, minus
(iv) such reserves as Agent may reasonably deem
proper and necessary from time to time,
including, without limitation, the PACA
Reserve, reserves for past due accounts
payable and the Collateral Term Loan
Short-fall Reserve.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i) and (ii)
minus (y) Sections 2.1 (a)(y)(iii) and (iv) at any time and from time to time
shall be referred to as the "Formula Amount". The Revolving Advances shall be
evidenced by the secured promissory note (the "Revolving Credit Note")
substantially in the form attached hereto as Exhibit 2.1(a).
(b) Discretionary Rights. The Advance Rates may be
increased or decreased by Agent at any time
and from time to time in the exercise of its
sole discretion. Each Borrower consents to any
such increases or decreases and acknowledges
that decreasing the Advance Rates or
increasing the reserves may limit or restrict
Advances requested by Borrowing Agent.
2.2. Procedure for Revolving Advances Borrowing. Borrowing Agent on
behalf of any Borrower may notify Agent prior to 11:00 a.m. (New York time) on a
Business Day of a Borrower's request to incur, on that day, a Revolving Advance
hereunder. Should any amount required to be paid as interest hereunder, or as
fees or other charges under this Agreement or any other agreement with Agent or
Lenders, or with respect to any other Obligation, become due, same shall be
deemed request for a Revolving Advance as of the date such payment is due, in
the amount required to pay in full such interest, fee, charge or Obligation
under this Agreement or any other agreement with Agent or Lenders, and such
request shall be irrevocable.
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2.3. Disbursement of Advance Proceeds. All Advances shall be disbursed
from whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrowers to Agent or Lenders,
shall be charged to Borrowers' Account on Agent's books. During the Term,
Borrowers may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions hereof. The
proceeds of each Revolving Advance requested by Borrowers or deemed to have been
requested by Borrowers under Section 2.2(a) hereof shall, with respect to
requested Revolving Advances to the extent Lenders make such Revolving Advances,
be made available to the applicable Borrower on the day so requested by way of
credit to such Borrower's operating account at IBJSBCC, or such other bank as
Borrowing Agent may designate following notification to Agent, in immediately
available federal funds or other immediately available funds or, with respect to
Revolving Advances deemed to have been requested by any Borrower, be disbursed
to Agent to be applied to the outstanding Obligations giving rise to such deemed
request.
2.4. Term Loan. Subject to the terms and conditions of this Agreement,
each Lender, severally and not jointly, will make a Term Loan to Borrowers in
the sum equal to such Lender's Commitment Percentage of $2,000,000. The Term
Loan shall be advanced on the Closing Date and shall be, with respect to
principal, payable as follows, subject to acceleration upon the occurrence of an
Event of Default under this Agreement or termination of this Agreement: a
monthly payment, due on the first Business Day of each consecutive month
commencing on July 1, 1998, in the aggregate principal amount equal to $23,810,
with a final payment on the first Business Day of the last month of the Term in
the remaining principal amount of the Term Loan then outstanding hereunder, and
shall be evidenced by a secured promissory note (the "Term Note") in
substantially the form attached hereto as Exhibit 2.4.
2.5. Maximum Advances. The aggregate balance of Revolving Advances
outstanding at any time shall not exceed the lesser of (a) Maximum Revolving
Advance Amount or (b) the Formula Amount.
2.6. Repayment of Advances.
(a) The Advances shall be due and payable in full on the last day
of the Term subject to earlier prepayment as herein provided. The Term Loan
shall be due and payable as provided in Section 2.4 hereof and in the Term Note.
(b) Each Borrower recognizes that the amounts evidenced by checks,
notes, drafts or any other items of payment relating to and/or proceeds of
Collateral may not be collectible by Agent on the date received. In
consideration of Agent's agreement to conditionally credit Borrowers' Account as
of the Business Day on which Agent receives those items of payment, each
Borrower agrees that, in computing the charges under this Agreement, all items
of payment shall be deemed applied b Agent on account of the Obligations one (1)
Business Day after the Business Day Agent receives such payments via wire
transfer or electronic depository check. Agent is not, however, required to
credit Borrowers' Account for the amount of any item of payment which is
unsatisfactory to Agent and Agent may charge Borrowers' Account for the amount
of any item of payment which is returned to Agent unpaid.
(c) All payments of principal, interest and other amounts payable
hereunder, or under any of the related agreements shall be made to Agent at the
Payment Office not later than 1:00 P.M. (New York time) on the due date therefor
in lawful money of the United States of America in federal funds or other funds
immediately available to Agent. Agent shall have the right to effectuate payment
on any and all Obligations due and owing hereunder by charging Borrowers'
Account or by making Advances as provided in Section 2.2 hereof.
(d) Borrowers shall pay principal, interest, and all other amounts
payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
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2.7. Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be immediately due and payable without the necessity of any
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred.
2.8. Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account ("Borrowers' Account") in the name of
Borrowers in which shall be recorded the date and amount of each Advance made by
Agent and the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and amount of any Advance shall
not adversely affect Agent or any Lender. Each month, Agent shall send to
Borrowing Agent a statement showing the accounting for the Advances made,
payments made or credited in respect thereof, and other transactions between
Agent and Borrowers, during such month. The monthly statements shall be deemed
correct and binding upon Borrowers in the absence of manifest error and shall
constitute an account stated between Lenders and Borrowers unless Agent receives
a written statement of Borrowers' specific exceptions thereto within thirty (30)
days after such statement is received by Borrowing Agent. The records of Agent
with respect to the loan account shall be conclusive evidence absent manifest
error of the amounts of Advances and other charges thereto and of payments
applicable thereto.
2.9. Letters of Credit. Subject to the terms and conditions hereof,
Agent shall issue or cause the issuance of Letters of Credit ("Letters of
Credit") on behalf of any Borrower upon three prior Business Days' written
notice therefor; provided, however, that Agent will not be required to issue or
cause to be issued any Letters of Credit to the extent that the face amount of
such Letters of Credit would then cause the sum of (i) the outstanding Revolving
Advances plus (ii) outstanding Letters of Credit to exceed the lesser of (x) the
Maximum Revolving Advance Amount or (y) the Formula Amount. The maximum amount
of outstanding Letters of Credit shall not exceed $500,000 in the aggregate at
any time. All disbursements or payments related to Letters of Credit shall be
deemed to be Revolving Advances and shall bear interest at the applicable
Contract Rate; Letters of Credit that have not been drawn upon shall not bear
interest.
2.10. Issuance of Letters of Credit.
(a) Borrowing Agent, on behalf of Borrowers, may request Agent to
issue or cause the issuance of a Letter of Credit by delivering to Agent at the
Payment Office, Agent's form of Letter of Credit Application (the "Letter of
Credit Application") completed to the satisfaction of Agent; and, such other
certificates, documents and other papers and information as Agent may reasonably
request. Borrowing Agent, on behalf of Borrowers, also has the right to give
instructions and make agreements with respect to any application, any applicable
letter of credit and security agreement, any applicable letter of credit
reimbursement agreement and/or any other applicable agreement, any letter of
credit and the disposition of documents, disposition of any unutilized funds,
and to agree with Agent upon any amendment, extension or renewal of any Letter
of Credit.
(b) Each Letter of Credit shall, among other things, (i) provide
for the payment of sight drafts or acceptances of usance drafts when presented
for honor thereunder in accordance with the terms thereof and when accompanied
by the documents described therein and (ii) have an expiry date not later than
three (3) months after such Letter of Credit's date of issuance (other than the
Letter of Credit naming Pro-Act as beneficiary which may have an expiry date no
later than the las day of the Term); and in no event later than the last day of
the Term. Each Letter of Credit shall be subject to the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500, and any amendments or revision thereof adhered to
by the Issuer and, to the extent not inconsistent therewith, the laws of the
State of New York.
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(c) Agent shall use its reasonable efforts to notify Lenders of
the request by Borrowing Agent for a Letter of Credit hereunder.
2.11. Requirements For Issuance of Letters of Credit.
(a) In connection with the issuance of any Letter of Credit,
Borrowers shall indemnify, save and hold Agent, each Lender and each Issuer
harmless from any loss, cost, expense or liability, including, without
limitation, payments made by Agent, any Lender or any Issuer and expenses and
reasonable attorneys' fees incurred by Agent, any Lender or Issuer arising out
of, or in connection with, any Letter of Credit to be issued or created for any
Borrower. Borrowers shall be bound by Agent's or any Issuer's regulations and
good faith interpretations of any Letter of Credit issued or created for
Borrowers' Account, although this interpretation may be different from its own;
and, neither Agent, nor any Lender, nor any Issuer nor any of their
correspondents shall be liable for any error, negligence, or mistakes, whether
of omission or commission, in following Borrowing Agent's or any Borrower's
instructions or those contained in any Letter of Credit or of any modifications,
amendments or supplements thereto or in issuing or paying any Letter of Credit,
except for Agent's, any Lender's, any Issuer's or such correspondents' willful
misconduct.
(b) Borrowing Agent shall authorize and direct any Issuer to name
the applicable Borrower as the "Applicant" or "Account Party" of each Letter of
Credit. If Agent is not the Issuer of any Letter of Credit, Borrower shall
authorize and direct the Issuer to deliver to Agent all instruments, documents,
and other writings and property received by the Issuer pursuant to the Letter of
Credit and to accept and rely upon Agent's instructions and agreements with
respect to all matter arising in connection with the Letter of Credit, the
application therefor or any acceptance therefor.
(c) In connection with all Letters of Credit issued or caused to
be issued by Agent under this Agreement, each Borrower hereby appoints Agent, or
its designee, as its attorney, with full power and authority (i) to sign and/or
endorse such Borrower's name upon any warehouse or other receipts, letter of
credit applications and acceptances; (ii) to sign such Borrower's name on bills
of lading; (iii) to clear Inventory through the United States of America Customs
Department ("Customs") in the name of such Borrower or Agent or Agent's
designee, and to sign and deliver to Customs officials powers of attorney in the
name of such Borrower for such purpose; and (iv) to complete in such Borrower's
name or Agent's, or in the name of Agent's designee, any order, sale or
transaction, obtain the necessary documents in connection therewith, and collect
the proceeds thereof. Neither Agent nor its attorneys will be liable for any
acts or omissions nor for any error of judgment or mistakes of fact or law,
except for Agent's or its attorney's willful misconduct. This power, being
coupled with an interest, is irrevocable as long as any Letters of Credit remain
outstanding.
(d) Each Lender shall to the extent of the percentage amount equal
to the product of such Lender's Commitment Percentage times the aggregate amount
of all unreimbursed reimbursement obligations arising from disbursements made or
obligations incurred with respect to the Letters of Credit be deemed to have
irrevocably purchased an undivided participation in each such unreimbursed
reimbursement obligation. In the event that at the time a disbursement is made
the unpaid balance of Revolving Advances exceeds or would exceed, with the
making of such disbursement, the lesser of the Maximum Revolving Advance Amount
or the Formula Amount, and such disbursement is not reimbursed by Borrowers
within two (2) Business Days, Agent shall promptly notify each Lender and upon
Agent's demand each Lender shall pay to Agent such Lender's proportionate share
of such unreimbursed disbursement together with such Lender's proportionate
share of Agent's unreimbursed costs and expenses relating to such unreimbursed
disbursement. Upon receipt by Agent of a repayment from any Borrower of any
amount disbursed by Agent for which Agent had already been reimbursed by
Lenders, Agent shall deliver to each Lender that Lender's pro rata share of such
repayment. Each Lender's participation commitment shall continue until the last
to occur of any of the following events: (A) Agent ceases to be obligated to
issue or cause to be issued Letters of Credit hereunder; (B) no Letter of Credit
issued hereunder remains outstanding and uncancelled or (C) all Persons (other
than the applicable Borrower) have been fully reimbursed for all payments made
under or relating to Letters of Credit.
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2.12. Additional Payments. Any sums expended by Agent or any
Lender due to any Borrower's failure to perform or comply with its obligations
under this Agreement or any Other Document including, without limitation, any
Borrower's obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof,
may be charged to Borrowers' Account as a Revolving Advance and added to the
Obligations.
2.13. Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances shall be advanced
according to the applicable Commitment Percentages of Lenders. The Term Loan
shall be advanced according to the Commitment Percentages of Lenders.
(b) Each payment (including each prepayment) by Borrowers on
account of the principal of and interest on the Revolving Advances, shall be
applied to the Revolving Advances pro rata according to the applicable
Commitment Percentages of Lenders. Each payment (including each prepayment) by
Borrowers on account of the principal of and interest on the Term Note, shall be
made from or to, or applied to that portion of the Term Loan evidenced by the
Term Note pro rata according to the Commitment Percentages of Lenders. Except as
expressly provided herein, all payments (including prepayments) to be made by
any Borrower on account of principal, interest and fees shall be made without
set-off or counterclaim and shall be made to Agent on behalf of the Lenders to
the Payment Office, in each case on or prior to 1:00 P.M. (New York time), in
Dollars and in immediately available funds.
(c) (i) Notwithstanding anything to the contrary contained in
Sections 2.13(a) and (b) hereof, commencing with the first Business Day
following the Closing Date, each borrowing of Revolving Advances shall be
advanced by Agent and each payment by any Borrower on account of Revolving
Advances shall be applied first to those Revolving Advances advanced by Agent.
On or before 1:00 P.M. (New York time) on each Settlement Date commencing with
the first Settlement Date following the Closing Date, Agent and Lenders shall
make certain payments as follows: (I) if the aggregate amount of new Revolving
Advances made by Agent during the preceding Week (if any) exceeds the aggregate
amount of repayments applied to outstanding Revolving Advances during such
preceding Week, then each Lender shall provide Agent with funds in an amount
equal to its applicable Commitment Percentage of the difference between (w) such
Revolving Advances and (x) such repayments and (II) if the aggregate amount of
repayments applied to outstanding Revolving Advances during such Week exceeds
the aggregate amount of new Revolving Advances made during such Week, then Agent
shall provide each Lender with funds in an amount equal to its applicable
Commitment Percentage of the difference between (y) such repayments and (z) such
Revolving Advances.
(ii) Each Lender shall be entitled to earn
interest at the applicable Contract Rate on outstanding Advances which it has
funded.
(iii) Promptly following each Settlement Date,
Agent shall submit to each Lender a certificate with respect to payments
received and Advances made during the Week immediately preceding such Settlement
Date. Such certificate of Agent shall be conclusive in the absence of manifest
error.
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(d) If any Lender or Participant (a "benefitted Lender") shall at
any time receive any payment of all or part of its Advances, or interest
thereon, or receive any Collateral in respect thereof (whether voluntarily or
involuntarily or by set-off) in a greater proportion than any such payment to
and Collateral received by any other Lender, if any, in respect of such other
Lender's Advances, or interest thereon, and such greater proportionate payment
or receipt of Collateral is not expressly permitted hereunder, such benefitted
Lender shall purchase for cash from the other Lenders a participation in such
portion of each such other Lender's Advances, or shall provide such other Lender
with the benefits of any such Collateral, or the proceeds thereof, as shall be
necessary to cause such benefitted Lender to share the excess payment or
benefits of such Collateral or proceeds ratably with each of Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Lender so purchasing a portion of another
Lender's Advances may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
(e) Unless Agent shall have been notified by telephone, confirmed
in writing, by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent on the next Settlement Date and, in reliance
upon such assumption, make available to Borrowers a corresponding amount. Agent
will promptly notify Borrowers of its receipt of any such notice from a Lender.
If such amount is made available to Agent on a date after such next Settlement
Date, such Lender shall pay to Agent on demand an amount equal to the product of
(i) the daily average Federal Funds Rate (computed on the basis of a year of 360
days) during such period as quoted by Agent, times (ii) such amount, times (iii)
the number of days from and including such Settlement Date to the date on which
such amount becomes immediately available to Agent. A certificate of Agent
submitted to any Lender with respect to any amounts owing under this paragraph
(e) shall be conclusive, in the absence of manifest error. If such amount is not
in fact made available to Agent by such Lender within three (3) Business Days
after such Settlement Date, Agent shall be entitled to recover such an amount,
with interest thereon at the rate per annum then applicable to such Revolving
Advances hereunder, on demand from Borrowers; provided, however, that Agent's
right to such recovery shall not prejudice or otherwise adversely affect
Borrowers' rights (if any) against such Lender.
2.14. Mandatory Prepayments. (a) When any Borrower sells or
otherwise disposes of any Collateral other than Inventory in the ordinary course
of business, Borrowers shall repay the Advances in an amount equal to the net
proceeds of such sale (i.e., gross proceeds less the reasonable costs of such
sales or other dispositions), such repayments to be made promptly but in no
event more than one (1) Business Day following receipt of such net proceeds, and
until the date o payment, such proceeds shall be held in trust for Agent. The
foregoing shall not be deemed to be implied consent to any such sale otherwise
prohibited by the terms and conditions hereof. Such repayments shall be applied
first, to the outstanding principal installments on the Term Loan in the inverse
order of the maturities thereof and, second, to the remaining Advances in such
order as Agent may determine, subject to Borrowers' ability to reborrow
Revolving Advances in accordance with the terms hereof.
(b) On or before the earlier of (x) ten (10) Business Days of
delivery to the Agent of the financial statements required by Section 9.7 hereof
for each fiscal year commencing with the fiscal year ending December 31, 1998,
or (y) 120 days after the end of each such fiscal year of the Borrowers; the
Borrowers shall pay to the Agent 50% of Excess Cash Flow for such fiscal year
minus the amount of all optional payments of the Term Loan for such fiscal year;
provided in the case of the fiscal year ending December 31, 1998, such payment
will be the prorated amount from the Closing Date through the end of such fiscal
year. The payment required by this paragraph (b) shall be applied to principal
outstanding under the Term Loan in inverse order of maturity of the installments
therefor.
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2.15. Use of Proceeds. Borrowers shall apply the proceeds of Advances
to (i) repay existing indebtedness owed to (i) repay indebtedness incurred in
connection with the Acquisition Agreement, including, without limitation,
Existing Indebtedness, (ii) pay fees and expenses relating to this transaction,
and (iii) to provide for their working capital needs.
2.16. Defaulting Lender.
(a) Notwithstanding anything to the contrary contained herein, in
the event any Lender (x) has refused (which refusal constitutes a breach by such
Lender of its obligations under this Agreement) to make available its portion of
any Advance or (y) notifies either Agent or Borrowing Agent that it does not
intend to make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a "Lender Default"), all rights and obligations hereunder of such Lender
(a "Defaulting Lender") as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.16 while such Lender Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders (the
"Non-Defaulting Lenders") which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender pro rat based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give instructions
to Agent or to approve, disapprove, consent to or vote on any matters relating
to this Agreement and the Other Documents. All amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of "Required
Lenders", a Defaulting Lender shall be deemed not to be a Lender and not to have
Advances outstanding
(d) Other than as expressly set forth in this Section 2.16, the
rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in
this Section 2.16 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudic any rights which any Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.
(e) In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.
2.17. Guaranty. The Obligations of the Borrowers hereunder are joint and
several and each of the Borrowers hereby guarantees the payment, without any
setoff or other deduction, of all the Obligations of the other at any time
accrued with respect thereto. The guaranty made pursuant to this Section 2.17 is
(i) direct, immediate, absolute, irrevocable and unconditional, (ii) is a
guaranty of payment and not of collection, (iii) is independent of and in
addition to all Collateral, (iv) is a continuing guaranty, and (v) shall
continue in full force and effect until indefeasible payment in full of the
Obligations. Agent shall have and may always exercise against each of the
Borrowers, in accordance with the terms hereof and applicable law, each right
and remedy of a creditor against a principal debtor upon a past due liquidated
obligation.
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III. INTEREST AND FEES.
3.1. Interest. Interest on Advances shall be payable in arrears on
the first day of each month. Interest charges shall be computed on the actual
principal amount of Advances outstanding during the month (the "Monthly
Advances") at a rate per annum equal to (i) with respect to Revolving Advances,
the Revolving Interest Rate and (ii) with respect to the Term Loan, the Term
Loan Rate (as applicable, the "Contract Rate"). Whenever, subsequent to the date
of this Agreement, the Alternate Base Rate is increased or decreased, the
applicable Contract Rate shall be similarly changed without notice or demand of
any kind by an amount equal to the amount of such change in the Alternate Base
Rate during the time such change or changes remain in effect. Upon and after the
occurrence of an Event of Default, and during the continuation thereof, (i) the
Obligations shall bear interest at the applicable Contract Rate plus two (2%)
percent per annum the "Default Rate").
3.2. Letter of Credit Fees.
(a) Borrowers shall pay (x) to Agent, for the benefit
of Lenders, fees for each Letter of Credit for the period from and excluding the
date of issuance of same to and including the date of expiration or termination,
equal to the average daily face amount of each outstanding Letter of Credit
multiplied by two percent (2.00%) per annum, such fees to be calculated on the
basis of a 360-day year for the actual number of days elapsed and to be payable
monthly in arrears on the first da
of each month and on the last day of the Term and (y) to the Issuer, any and all
fees and expenses as agreed upon by the Issuer and the Borrowing Agent in
connection with any Letter of Credit, including, without limitation, in
connection with the opening, amendment or renewal of any such Letter of Credit
and any acceptances created thereunder and shall reimburse Agent for any and all
fees and expenses, if any, paid by Agent to the Issuer (all of the foregoing
fees, the "Letter of Credit and Acceptance Fees"). All such charges shall be
deemed earned in full on the date when the same are due and payable hereunder
and shall not be subject to rebate or proration upon the termination of this
Agreement for any reason. Any such charge in effect at the time of a particular
transaction shall be the charge for that transaction, notwithstanding any
subsequent change in the Issuer's prevailing charges for that type of
transaction. All Letter of Credit Fees payable hereunder shall be deemed earned
in full on the date when the same are due and payable hereunder and shall not be
subject to rebate or proration upon the termination of this Agreement for any
reason.
3.3. (a) Closing Fee. Upon the execution of this Agreement,
Borrowers shall pay to Agent for the ratable benefit of Lenders a closing fee of
$75,000 less (1) that portion of the legal closing and diligence fee of $50,000
heretofore paid by Borrowers to Agent remaining after application of such fee to
legal closing and diligence expenses and (2) the non-refundable commitment
issuance fee heretofore paid of $30,000.
(b) Facility Fee. If, for any month during the Term, the average
daily outstanding balance of the Revolving Advances for each day of such month
does not equal the Maximum Revolving Advance Amount (such amount being the "Use
Deficiency"), then Borrowers shall pay to Agent for the ratable benefit of
Lenders a fee, calculated on a daily basis, at a rate equal to (x) one-half of
one percent (.50%) per annum of the Use Deficiency, to the extent the Use
Deficiency is equal to or less than $2,000,000 and (y) three percent (3.00%) of
the Use Deficiency to the extent the Use Deficiency is greater than $2,000,000.
Such fee shall be payable to Agent in arrears on the first day of each month.
3.4. (a) Collateral Evaluation Fee. Borrowers shall pay Agent a
collateral evaluation fee equal to $2,000 per month commencing on the first day
of the month following the Closing Date and on the first day of each month
thereafter during the Term. The collateral evaluation fee shall be deemed earned
in full on the date when same is due and payable hereunder and shall not be
subject to rebate or proration upon termination of this Agreement for any
reason.
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(b) Collateral Monitoring Fee. Borrowers shall pay to Agent
on the first day of each month following any month in which Agent performs any
collateral monitoring - namely any field examination, collateral analysis or
other business analysis, the need for which is to be determined by Agent and
which monitoring is undertaken by Agent or for Agent's benefit - a collateral
monitoring fee in an amount equal to $700 per day for each person employed to
perform such monitoring, plus all costs and disbursements incurred by Agent in
the performance of such examination or analysis.
3.5. Computation of Interest and Fees. Interest and fees hereunder
shall be computed on the basis of a year of 360 days and for the actual number
of days elapsed. If any payment to be made hereunder becomes due and payable on
a day other than a Business Day, the due date thereof shall be extended to the
next succeeding Business Day and interest thereon shall be payable at the
applicable Contract Rate during such extension.
3.6. Maximum Charges. In no event whatsoever shall interest and
other charges charged hereunder exceed the highest rate permissible under law.
In the event interest and other charges as computed hereunder would otherwise
exceed the highest rate permitted under law, such excess amount shall be first
applied to any unpaid principal balance owed by Borrowers, and if the then
remaining excess amount is greater than the previously unpaid principal balance,
Lenders shall promptly refund suc excess amount to Borrowers and the provisions
hereof shall be deemed amended to provide for such permissible rate.
3.7. Increased Costs. In the event that any applicable law, treaty
or governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this Section
3.7, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) with any request or directive (whether or
not having the force of law) from any central bank or other financial, monetary
or other authority, shall
(a) subject Agent or any Lender to any tax of any kind
whatsoever with respect to this Agreement or any Other Document or change the
basis of taxation of payments to Agent or any Lender of principal, fees,
interest or any other amount payable hereunder or under any Other Documents
(except for changes in the rate of tax on the overall net income of Agent or any
Lender by the jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by, any
office of Agent or any Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender any other condition with
respect to this Agreement or any Other Document; and the result of any of the
foregoing is to increase the cost to Agent or any Lender of making, renewing or
maintaining its Advances hereunder by an amount that Agent or such Lender deems
to be material or to reduce the amount of any payment (whether of principal,
interest or otherwise) in respect of any of the Advances by an amount that Agent
or such Lender deems to be material, then, in any case Borrowers shall promptly
pay Agent or such Lender, upon its demand, such additional amount as will
compensat Agent or such Lender for such additional cost or such reduction, as
the case may be. Agent or such Lender shall certify the amount of such
additional cost or reduced amount to Borrowers, and such certification shall be
conclusive absent manifest error.
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3.8. Capital Adequacy.
(a) In the event that Agent or any Lender shall have
determined that any applicable law, rule, regulation or guideline 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, or compliance
by Agent or any Lender (for purposes of this Section 3.8, the term "Lender"
shall include Agent or any Lender and any corporation or bank controlling Agent
or any Lender) 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, has or would have the effect of reducing the rate of return
on Agent or any Lender's capital as a consequence of its obligations hereunder
to a level below that which Agent or such Lender could have achieved but for
such adoption, change or compliance (taking into consideration Agent's and each
Lender's policies with respect to capital adequacy) by an amount deemed by Agent
or any Lender to be material, then, from time to time, Borrowers shall pay upon
demand to Agent or such Lender such additional amount or amounts as will
compensate Agent or such Lender for such reduction. In determining such amount
or amounts, Agent or such Lender may use any reasonable averaging or attribution
methods. The protection of this Section 3.8 shall be available to Agent and each
Lender regardless of any possible contention of invalidity or inapplicability
with respect to the applicable law, regulation or condition.
(b) A certificate of Agent or such Lender setting forth such
amount or amounts as shall be necessary to compensate Agent or such Lender with
respect to Section 3.8(a) hereof when delivered to Borrowers shall be conclusive
absent manifest error.
IV. COLLATERAL: GENERAL TERMS
4.1. Security Interest in the Collateral. To secure the prompt
payment and performance to Agent and each Lender of the Obligations, each
Borrower hereby assigns, pledges and grants to Agent for the ratable benefit of
each Lender a continuing security interest in and to all of its Collateral,
whether now owned or existing or hereafter acquired or arising and wheresoever
located. Each Borrower shall xxxx its books and records as may be necessary or
appropriate to evidence, protect and perfect Agent's security interest and shall
cause its financial statements to reflect such security interest.
4.2. Perfection of Security Interest. Each Borrower shall take all
action that may be necessary or desirable, or that Agent may request, so as at
all times to maintain the validity, perfection, enforceability and priority of
Agent's security interest in the Collateral or to enable Agent to protect,
exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to, (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining landlords' or mortgagees' lien waivers, (iii)
delivering to Agent, endorsed or accompanied by such instruments of assignment
as Agent may specify, and stamping or marking, in such manner as Agent may
specify, any and all chattel paper, instruments, letters of credits and advices
thereof and documents evidencing or forming a part of the Collateral, (iv)
entering into warehousing, lockbox and other custodial arrangements satisfactory
to Agent, and (v) executing and delivering financing statements, instruments of
pledge, mortgages, notices and assignments, in each case in form and substance
satisfactory to Agent, relating to the creation, validity, perfection,
maintenance or continuation of Agent's security interest under the Uniform
Commercial Code or other applicable law. Agent is hereby authorized to file
financing statements signed by Agent instead of Borrower in accordance with
Section 9-402(2) of Uniform Commercial Code as adopted in the State of New York.
All charges, expenses and fees Agen may incur in doing any of the foregoing, and
any local taxes relating thereto, shall be charged to Borrowers' Account as a
Revolving Advance and added to the Obligations, or, at Agent's option, shall be
paid to Agent for the ratable benefit of Lenders immediately upon demand.
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4.3. Disposition of Collateral. Each Borrower will safeguard and
protect all Collateral for Agent's general account and make no disposition
thereof whether by sale, lease or otherwise except (a) the sale of Inventory in
the ordinary course of business and (b) the disposition or transfer of obsolete
and worn-out Equipment in the ordinary course of business during any fiscal year
having an aggregate fair market value of not more than $100,000 and only to the
extent that (i) the proceeds of any such disposition are used to acquire
replacement Equipment which is subject to Agent's first priority security
interest or (ii) the proceeds of which are remitted to Agent as a prepayment on
the Term Loan.
4.4. Preservation of Collateral. Following the occurrence of a
Default or Event of Default, in addition to the rights and remedies set forth in
Section 11.1 hereof, Agent: (a) may at any time take such steps as Agent deems
necessary to protect Agent's interest in and to preserve the Collateral,
including the hiring of such security guards or the placing of other security
protection measures as Agent may deem appropriate; (b) may employ and maintain
at any of any Borrower's premises a custodian who shall have full authority to
do all acts necessary to protect Agent's interests in the Collateral; (c) may
lease warehouse facilities to which Agent may move all or part of the
Collateral; (d) may use any Borrower's owned or leased lifts, hoists, trucks and
other facilities or equipment for handling or removing the Collateral; and (e)
shall have, and is hereby granted, a right of ingress and egress to the places
where the Collateral is located, and may proceed over and through any of
Borrower's owned or leased property. Each Borrower shall cooperate fully with
all of Agent's efforts to preserve the Collateral and will take such actions to
preserve the Collateral as Agent may direct. All of Agent's expenses of
preserving the Collateral, including any expenses relating to the bonding of a
custodian, shall be charged to Borrowers' Account as a Revolving Advance and
added to the Obligations.
4.5. Ownership of Collateral. With respect to the Collateral, at
the time the Collateral becomes subject to Agent's security interest: (a) each
Borrower shall be the sole owner of and fully authorized and able to sell,
transfer, pledge and/or grant a first priority security interest in each and
every item of the its respective Collateral to Agent; and, except for Permitted
Encumbrances the Collateral shall be free and clear of all Liens and
encumbrances whatsoever; (b) each document and agreement executed by each
Borrower or delivered to Agent or any Lender in connection with this Agreement
shall be true and correct in all respects; (c) all signatures and endorsements
of each Borrower that appear on such documents and agreements shall be genuine
and each Borrower shall have full capacity to execute same; and (d) each
Borrower's Equipment and Inventory shall be located as set forth on Schedule 4.5
and shall not be removed from such location(s) without the prior written consent
of Agen except with respect to the sale of Inventory in the ordinary course of
business and Equipment to the extent permitted in Section 4.3 hereof.
4.6. Defense of Agent's and Lenders' Interests. Until (a) payment
and performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. During such period no Borrower shall, without Agent's prior written
consent, pledge, sell (except Inventory in the ordinary course of business and
Equipment to the extent permitted in Section 4.3 hereof), assign, transfer,
create or suffer to exist a Lien upon or encumber or allow or suffer to be
encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Each Borrower shall defend Agent's interests in the Collateral
against any and all Persons whatsoever. At any time following demand by Agent
for payment of all Obligations, Agent shall have the right to take possession of
the indicia of the Collateral and the Collateral in whatever physical form
contained, including without limitation: labels, stationery, documents,
instruments and advertising materials. If Agent exercises this right to take
possession of the Collateral, Borrowers shall, upon demand, assemble it in the
best manner possible and make it available to Agent at a place reasonably
convenient to Agent. In addition, with respect to all Collateral, Agent and
Lenders shall be entitled to all of the rights and remedies set forth herein and
further provided by the Uniform Commercial Code or other applicable law. Each
Borrower shall, and Agent may, at its option, instruct all suppliers, carriers,
forwarders, warehouses or others receiving or holding cash, checks, Inventory,
documents or instruments in which Agent holds a security interest to deliver
same to Agent and/or subject to Agent's order and if they shall come into any
Borrower's possession, they, and each of them, shall be held by such Borrower in
trust as Agent's trustee, and such Borrower will immediately deliver them to
Agent in their original form together with any necessary endorsement.
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4.7. Books and Records. Each Borrower shall (a) keep proper books
of record and account in which full, true and correct entries will be made of
all dealings or transactions of or in relation to its business and affairs; (b)
set up on its books accruals with respect to all taxes, assessments, charges,
levies and claims; and (c) on a reasonably current basis set up on its books,
from its earnings, allowances against doubtful Receivables, advances and
investments and all other proper accruals (including without limitation by
reason of enumeration, accruals for premiums, if any, due on required payments
and accruals for depreciation, obsolescence, or amortization of properties),
which should be set aside from such earnings in connection with its business.
All determinations pursuant to this subsection shall be made in accordance with,
or as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by Borrowers.
4.8. Financial Disclosure. Each Borrower hereby irrevocably
authorizes and directs all accountants and auditors employed by such Borrower at
any time during the Term to exhibit and deliver to Agent and each Lender copies
of any of any Borrower's financial statements, trial balances or other
accounting records of any sort in the accountant's or auditor's possession, and
to disclose to Agent and each Lender any information such accountants may have
concerning such Borrower's financial status and business operations. Each
Borrower hereby authorizes all federal, state and municipal authorities to
furnish to Agent and each Lender copies of reports or examinations relating to
such Borrower, whether made by such Borrower or otherwise; however, Agent and
each Lender will attempt to obtain such information or materials directly from
such Borrower prior to obtaining such information or materials from such
accountants or such authorities.
4.9. Compliance with Laws. Each Borrower shall comply with all
acts, rules, regulations and orders of any legislative, administrative or
judicial body or official applicable to its respective Collateral or any part
thereof or to the operation of such Borrower's business the non-compliance with
which could reasonably be expected to have a Material Adverse Effect on such
Borrower. The Collateral at all times shall be maintained in accordance with the
requirements of all insurance carriers which provide insurance with respect to
the Collateral so that such insurance shall remain in full force and effect.
4.10. Inspection of Premises. At all reasonable times Agent and
each Lender shall have full access to and the right to audit, check, inspect and
make abstracts and copies from each Borrower's books, records, audits,
correspondence and all other papers relating to the Collateral and the operation
of each Borrower's business. Agent, any Lender and their agents may enter upon
any of Borrower's premises at any time during business hours and at any other
reasonable time, and from time to time, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of such
Borrower's business.
4.11. Insurance. Each Borrower shall bear the full risk of any loss
of any nature whatsoever with respect to the Collateral. At each Borrower's own
cost and expense in amounts and with carriers acceptable to Agent, each Borrower
shall (a) keep all its insurable properties and properties in which each
Borrower has an interest insured against the hazards of fire, flood, sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged
in businesses similar to such Borrower's including, without limitation, business
interruption insurance and in amounts and with carriers reasonably satisfactory
to Agent; (b) maintain a bond in such amounts as is customary in the case of
companies engaged in businesses similar to such Borrower insuring against
larceny, embezzlement or other criminal misappropriation of insured's officers
and employees who may either singly or jointly with others at any time have
access to the assets or funds of such Borrower either directly or through
authority to draw upon such funds or to direct generally the disposition of such
assets; (c) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others in amounts and with
carriers reasonably satisfactory to Agent; (d) maintain all such worker's
26
compensation or similar insurance as may be required under the laws of any state
or jurisdiction in which such Borrower is engaged in business; (e) furnish Agent
with (i) copies of all policies and evidence of the maintenance of such policies
by the renewal thereof at least thirty (30) days before any expiration date, and
(ii) appropriate loss payable endorsements in form and substance satisfactory to
Agent, naming Agent as a co-insured and loss payee as its interests may appear
with respect to all insurance coverage referred to in clauses (a) and (c) above,
and providing (A) that all proceeds thereunder shall be payable to Agent, (B) no
such insurance shall be affected by any act or neglect of the insured or owner
of the property described in such policy, and (C) that such policy and loss
payable clauses may not be cancelled, amended or terminated unless at least
thirty (30) days' prior written notice is given to Agent. All such insurance
with respect to assets acquired pursuant to the Acquisition Agreement shall
insure all such assets, and shall be in amounts, subject to terms, and with
carriers in each case satisfactory to Agent. In the event of any loss
thereunder, the carriers named therein hereby are directed by Agent and the
applicable Borrower to make payment for such loss to Agent and not to such
Borrower and Agent jointly. If any insurance losses are paid by check, draft or
other instrument payable to any Borrower and Agent jointly, Agent may endorse
such Borrower's name thereon and do such other things as Agent may deem
advisable to reduce the same to cash. Agent is hereby authorized to adjust an
compromise claims under insurance coverage referred to in clauses (a) and (b)
(e) above. All loss recoveries received by Agent upon any such insurance may be
applied to the Obligations, in such order as Agent in its sole discretion shall
determine. Any surplus shall be paid by Agent to Borrowers or applied as may be
otherwise required by law. Any deficiency thereon shall be paid by Borrowers to
Agent, on demand. Anything hereinabove to the contrary notwithstanding, and
subject to the fulfillment of th conditions set forth below, Agent shall remit
to Borrowers insurance proceeds received by Agent during any calendar year under
insurance policies procured and maintained by Borrowers which insure Borrowers'
insurable properties to the extent such insurance proceeds do not exceed
$100,000 in the aggregate during such calendar yar or $50,000 per occurrence. In
the event the amount of insurance proceeds received by Agent for any occurrence
exceeds $50,000, then Agent shall not be obligated to remit the insurance
proceeds to Borrowers unless Borrowers shall provide Agent with evidence
reasonably satisfactory to Agent that the insurance proceeds will be used by
Borrowers to repair, replace or restore the insured property which was the
subject of the insurable loss. In the event Borrowers have previously received
(or, after giving effect to any proposed remittance by Agent to Borrowers would
receive) insurance proceeds which equal or exceed $100,000 in the aggregate
during any calendar year, then Agent may, in its sole discretion, either remit
the insurance proceeds to Borrowers upon Borrowers providing Agent with evidence
reasonably satisfactory to Agent that the insurance proceeds will be used by
Borrowers to repair, replace or restore the insured property which was the
subject of the insurable loss, or apply the proceeds to the Obligations, as
aforesaid. The agreement of Agent to remit insurance proceeds in the manner
above provided shall be subject in each instance to satisfaction of each of the
following conditions: (x) No Event of Default or Default shall then have
occurred, and (y) Borrowers shall use such insurance proceeds to repair, replace
or restore the insurable property which was the subject of the insurable loss
and for no other purpose.
4.12. Failure to Pay Insurance. If any Borrower fails to obtain
insurance as hereinabove provided, or to keep the same in force, Agent, if Agent
so elects, may obtain such insurance and pay the premium therefor on behalf of
Borrower, and charge Borrowers' Account therefor as a Revolving Advance and such
expenses so paid shall be part of the Obligations.
27
4.13. Payment of Taxes. Each Borrower will pay, when due, all
taxes, assessments and other Charges lawfully levied or assessed upon such
Borrower or any of the Collateral including, without limitation, real and
personal property taxes, assessments and charges and all franchise, income,
employment, social security benefits, withholding, and sales taxes. If any tax
by any governmental authority is or may be imposed on or as a result of any
transaction between any Borrower and Agent or any Lender which Agent or any
Lender may be required to withhold or pay or if any taxes, assessments, or other
Charges remain unpaid after the date fixed for their payment, or if any claim
shall be made which, in Agent's or any Lender's opinion, may possibly create a
valid Lien on the Collateral, Agent may without notice to Borrowers pay the
taxes, assessments or other Charges and each Borrower hereby indemnifies and
holds Agent and each Lender harmless in respect thereof. The amount of any
payment by Agent under this Section 4.13 shall be charged to Borrowers' Account
as a Revolving Advance and added to the Obligations and, until Borrowers shall
furnish Agent with an indemnity therefor (or supply Agent with evidence
satisfactory to Agent that due provision for the payment thereof has been made),
Agent may hold without interest any balance standing to Borrowers' credit and
Agent shall retain its security interest in any and all Collateral held by
Agent.
4.14. Payment of Leasehold Obligations. Each Borrower shall at all
times pay, when and as due, its rental obligations under all leases under which
it is a tenant, and shall otherwise comply, in all material respects, with all
other terms of such leases and keep them in full force and effect and, at
Agent's request will provide evidence of having done so.
4.15. Receivables.
(a) Nature of Receivables. Each of the Receivables shall be a
bona fide and valid account representing a bona fide indebtedness incurred by
the Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of a Borrower, or work, labor or services theretofore
rendered by a Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with the applicable Borrower's standard terms of
sale without dispute, setoff or counterclaim except as may be stated on the
accounts receivable schedules delivered by Borrowers to Agent.
(b) Solvency of Customers. Each Customer, to the best of each
Borrower's knowledge, as of the date each Receivable is created, is and will be
solvent and able to pay all Receivables on which the Customer is obligated in
full when due or with respect to such Customers of any Borrower who are not
solvent such Borrower has set up on its books and in its financial records bad
debt reserves adequate to cover such Receivables.
(c) Locations of Borrower. Each Borrower's chief executive
office is located at the addresses set forth on Schedule 4.15(c) hereto. Until
written notice is given to Agent by Borrowing Agent of any other office at which
any Borrower keeps its records pertaining to Receivables, all such records shall
be kept at such executive office.
(d) Collection of Receivables. Until any Borrower's authority
to do so is terminated by Agent (which notice Agent may give at any time
following the occurrence of an Event of Default or a Default or when Agent in
its sole discretion deems it to be in Lenders' best interest to do so), each
Borrower will, at such Borrower's sole cost and expense, but on Agent's behalf
and for Agent's account, collect as Agent's property and in trust for Agent all
amounts received on Receivables, and shall not commingle such collections with
any Borrower's funds or use the same except to pay Obligations. Each Borrower
shall, upon request, deliver to Agent, or deposit in the Blocked Account, in
original form and on the date of receipt thereof, all checks, drafts, notes,
money orders, acceptances, cash and other evidences of Indebtedness.
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(e) Notification of Assignment of Receivables. At any time
following the occurrence of an Event of Default or a Default, Agent shall have
the right to send notice of the assignment of, and Agent's security interest in,
the Receivables to any and all Customers or any third party holding or otherwise
concerned with any of the Collateral. Thereafter, Agent shall have the sole
right to collect the Receivables, take possession of the Collateral, or both.
Agent's actual collection expenses, including, but not limited to, stationery
and postage, telephone and telegraph, secretarial and clerical expenses and the
salaries of any collection personnel used for collection, may be charged to
Borrowers' Account and added to the Obligations.
(f) Power of Agent to Act on Borrowers' Behalf. Agent shall
have the right to receive, endorse, assign and/or deliver in the name of Agent
or any Borrower any and all checks, drafts and other instruments for the payment
of money relating to the Receivables, and each Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Each
Borrower hereby constitutes Agent or Agent's designee as such Borrower's
attorney with power (i) to endorse such Borrower's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral; (ii) to sign such Borrower's name on any invoice or xxxx of lading
relating to any of the Receivables, drafts against Customers, assignments and
verifications of Receivables; (iii) to send verifications of Receivables to any
Customer; (iv) to sign such Borrower's name on all financing statements or any
other documents or instruments deemed necessary or appropriate by Agent to
preserve, protect, or perfect Agent's interest in the Collateral and to file
same; (v) to demand payment of the Receivables; (vi) to enforce payment of the
Receivables by legal proceedings or otherwise; (vii) to exercise all of
Borrowers' rights and remedies with respect to the collection of the Receivables
and any other Collateral; (viii) to settle, adjust, compromise, extend or renew
the Receivables; (ix) to settle, adjust or compromise any legal proceedings
brought to collect Receivables; (x) to prepare, file and sign such Borrower's
name on a proof of claim in bankruptcy or similar document against any Customer;
(xi) to prepare, file and sign such Borrower's name on any notice of Lien,
assignment or satisfaction of Lien or similar document in connection with the
Receivables; and (xii) to do all other acts and things necessary to carry out
this Agreement. All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designee shall not be liable for any acts of
omission or commission nor for any error of judgment or mistake of fact or of
law, unless done maliciously or with gross (not mere) negligence; this power
being coupled with an interest is irrevocable while any of the Obligations
remain unpaid. Agent shall have the right at any time following the occurrence
of an Event of Default or Default, to change the address for delivery ofmail
addressed to any Borrower to such address as Agent may designate and to receive,
open and dispose of all mail addressed to any Borrower.
(g) No Liability. Neither Agent nor any Lender shall, under
any circumstances or in any event whatsoever, have any liability for any error
or omission or delay of any kind occurring in the settlement, collection or
payment of any of the Receivables or any instrument received in payment thereof,
or for any damage resulting therefrom. Following the occurrence of an Event of
Default or Default, Agent may, without notice or consent from any Borrower, xxx
upon or otherwise collect, extend the time of payment of, compromise or settle
for cash, credit or upon any terms any of the Receivables or any other
securities, instruments or insurance applicable thereto and/or release any
obligor thereof. Agent is authorized and empowered to accept following the
occurrence of an Event of Default or Default the return of the goods represented
by any of the Receivables, without notice to or consent by any Borrower, all
without discharging or in any way affecting any Borrower's liability hereunder.
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(h) Collection of Checks; Establishment of a Lockbox Account,
Dominion Account. (I) All proceeds of Collateral, proceeds of sales and all
receipts of Borrowers of any kind whatsoever, including without limitation all
checks and cash received, shall be batched, and on a daily basis, sent by
federal express or other courier for deposit to a concentration account of the
Borrowers at the Agent, and in the case of electronic payments directly wired to
such concentration accounts at the Agent; provided that in the case of cash
payments, the Borrowers may deposit the same into an account at a bank governed
by a blocked account agreement with the Agent, such cash proceeds to be wired on
a daily basis to the Agent. (II) Following the occurrence of an Event of
Default, at the request of the Agent, the payors of all Receivables of the
Borrowers shall be instructed on the invoice therefor to make payment to, and
all proceeds of Collateral, proceeds of sales and all receipts shall be
deposited directly by Borrowers into, a lockbox account, dominion account or
such other "blocked account" under the sole dominion and control of Agent
("Blocked Accounts") as Agent may require pursuant to an arrangement with such
bank as may be selected by Borrowers and be acceptable to Agent. Borrowers shall
issue to any such bank, an irrevocable letter of instruction directing said bank
to transfer such funds so deposited to Agent, either to any account maintained
by Agent at said bank or by wire transfer to appropriate account(s) of Agent.
All funds deposited in such "blocked account" shall immediately become the
property of Agent and Borrowers shall obtain the agreement by such bank to waive
any offset rights against the funds so deposited. Neither Agent nor any Lender
assumes any responsibility for such "blocked account" arrangement, including
without limitation, any claim of accord and satisfaction or release with respect
to deposits accepted by any bank thereunder. Alternatively, Agent may establish
depository accounts ("Depository Accounts") in the name of Agent at a bank or
banks for the deposit of such fnds and Borrowers shall deposit all proceeds of
Collateral or cause same to be deposited, in kind, in such Depository Accounts
of Agent in lieu of depositing same to the Blocked Accounts.
(i) Adjustments. No Borrower will, without Agent's consent,
compromise or adjust any Receivables (or extend the time for payment thereof) or
accept any returns of merchandise or grant any additional discounts, allowances
or credits thereon except for those compromises, adjustments, returns,
discounts, credits and allowances as have been heretofore customary in the
business of such Borrower.
4.16. Inventory. To the extent Inventory held for sale or lease
has been produced by any Borrower, it has been and will be produced by such
Borrower in accordance with the Federal Fair Labor Standards Act of 1938, as
amended, and all rules, regulations and orders thereunder.
4.17. Maintenance of Equipment. The Equipment shall be maintained
in good operating condition and repair (reasonable wear and tear excepted) and
all necessary replacements of and repairs thereto shall be made so that the
value and operating efficiency of the Equipment shall be maintained and
preserved. No Borrower shall use or operate the Equipment in violation of any
law, statute, ordinance, code, rule or regulation. Each Borrower shall have the
right to sell Equipment to the extent set forth in Section 4.3 hereof.
4.18. Exculpation of Liability. Nothing herein contained shall be
construed to constitute Agent or any Lender as any Borrower's agent for any
purpose whatsoever, nor shall Agent or any Lender be responsible or liable for
any shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause thereof.
Neither Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of any Borrower's obligations under any contract or
agreement assigned to Agent or such Lender, and neither Agent nor any Lender
shall be responsible in any way for the performance by any Borrower of any of
the terms and conditions thereof.
30
4.19. Environmental Matters. (a) Borrowers shall ensure that the
Real Property remains in compliance with all Environmental Laws and they shall
not place or permit to be placed any Hazardous Substances on any Real Property
except as not prohibited by applicable law or appropriate governmental
authorities.
(b) Borrowers shall establish and maintain a system to assure
and monitor continued compliance with all applicable Environmental Laws which
system shall include periodic reviews of such compliance.
(c) Borrowers shall (i) employ in connection with the use of
the Real Property appropriate technology necessary to maintain compliance with
any applicable Environmental Laws and (ii) dispose of any and all Hazardous
Waste generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrowers shall use their best efforts to obtain certificates of disposal, such
as hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrowers in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event any Borrower obtains, gives or receives
notice of any Release or threat of Release of a reportable quantity of any
Hazardous Substances at the Real Property (any such event being hereinafter
referred to as a "Hazardous Discharge") or receives any notice of violation,
request for information or notification that it is potentially responsible for
investigation or cleanup of environmental conditions at the Real Property,
demand letter or complaint, order, citation, or other written notice with regard
to any Hazardous Discharge or violation of Environmental Laws affecting the Real
Property or any Borrower's interest therein (any of the foregoing is referred to
herein as an "Environmental Complaint") from any Person, including any state
agency responsible in whole or in part for environmental matters in the state in
which the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then Borrowing
Agent shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and circumstances of which any Borrower is aware giving rise to
the Hazardous Discharge or Environmental Complaint. Such information is to be
provided to allow Agent to protect its security interest in the Real Property
and is not intended to create nor shall it create any obligation upon Agent or
any Lender with respect thereto.
(e) Borrowers shall promptly forward to Agent copies of any
request for information, notification of potential liability, demand letter
relating to potential responsibility with respect to the investigation or
cleanup of Hazardous Substances at any other site owned, operated or used by any
Borrower to dispose of Hazardous Substances and shall continue to forward copies
of correspondence between any Borrower and the Authority regarding such claims
to Agent until the claim is settled. Borrowers shall promptly forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property that any Borrower is required to file under any Environmental Laws.
Such information is to be provided solely to allow Agent to protect Agent's
security interest in the Real Property and the Collateral.
(f) Borrowers shall respond promptly to any Hazardous
Discharge or Environmental Complaint and take all necessary action in order to
safeguard the health of any Person and to avoid subjecting the Collateral or
Real Property to any Lien. If any Borrower shall fail to respond promptly to any
Hazardous Discharge or Environmental Complaint or any Borrower shall fail to
comply with any of the requirements of any Environmental Laws, Agent on behalf
of Lenders may, but without the obligation to do so, for the sole purpose of
protecting Agent's interest in Collateral: (A) give such notices or (B) enter
onto the Real Property (or authorize third parties to enter onto the Real
Property) and take such actions as Agent (or such third parties as directed by
Agent) deem reasonably necessary or advisable, to clean up, remove, mitigate or
otherwise deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Revolving Advances shall be paid upon demand by Borrowers,
and until paid shall be added to and become a part of the Obligations secured by
the Liens created by the terms of this Agreement or any other agreement between
Agent, any Lender and any Borrower.
31
(g) Promptly upon the written request of Agent from time to
time, Borrowers shall provide Agent, at Borrowers' expense, with an
environmental site assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of Agent, to
assess with a reasonable degree of certainty the existence of a Hazardous
Discharge and the potential costs in connection with abatement, cleanup and
removal of any Hazardous Substances found on, under, at or within the Real
Property. Any report or investigation of such Hazardous Discharge proposed and
acceptable to an appropriate Authority that is charged to oversee the clean-up
of such Hazardous Discharge shall be acceptable to Agent. If such estimates,
individually or in the aggregate, exceed $50,000, Agent shall have the right to
require Borrowers to post a bond, letter of credit or other security reasonably
satisfactory to Agent to secure payment of these costs and expenses.
(h) Borrowers shall defend and indemnify Agent and Lenders
and hold Agent, Lenders and their respective employees, agents, directors and
officers harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including attorney's fees, suffered or
incurred by Agent or Lenders under or on account of any Environmental Laws,
including, without limitation, the assertion of any Lien thereunder, with
respect to any Hazardous Discharge, the presence of any Hazardous Substances
affecting the Real Property, whether or not the same originates or emerges from
the Real Property or any contiguous real estate, including any loss of value of
the Real Property as a result of the foregoing except to the extent such loss,
liability, damage and expense is attributable to any Hazardous Discharge
resulting from actions on the part of Agent or any Lender. Borrowers'
obligations under this Section 4.19 shall arise upon the discovery of the
presence of any Hazardous Substances at the Real Property, whether or not any
federal, state, or local environmental agency has taken or threatened any action
in connection with the presence of any Hazardous Substances. Borrowers'
obligation and the indemnifications hereunder shall survive the termination of
this Agreement.
(i) For purposes of Section 4.19 and 5.7, all references to
Real Property shall be deemed to include all of Borrowers' right, title and
interest in and to its owned and leased premises.
4.20. Financing Statements. Except as respects the financing
statements filed by Agent and the financing statements described on Schedule
1.2, no financing statement covering any of the Collateral or any proceeds
thereof is on file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants as follows:
5.1. Authority. Each Borrower has full power, authority and legal
right to enter into this Agreement and the Other Documents and to perform all
its respective Obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and of the Other Documents (a) are within such
Borrower's corporate powers, have been duly authorized, are not in contravention
of law or the terms of such Borrower's by-laws, certificate of incorporation or
other applicable document relating to such Borrower's formation or to the
conduct of such Borrower's business or of any material agreement or undertaking
to which such Borrower is a party or by which such Borrower is bound, and (b)
will not conflict with nor result in any breach in any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of such Borrower under the provisions of
any agreement, charter document, instrument, by-law, or other instrument t which
such Borrower or its property is a party or by which it may be bound.
32
5.2. Formation and Qualification. (a) Each Borrower is duly
incorporated and in good standing under the laws of the state listed on Schedule
5.2(a) and is qualified to do business and is in good standing in the states
listed on Schedule 5.2(a) which constitute all states in which qualification and
good standing are necessary for such Borrower to conduct its business and own
its property and where the failure to so qualify could reasonably be expected to
have a Material Adverse Effect o such Borrower; provided that A-One-A and Fresh
as of the Closing Date have failed to file certain annual reports, and provided
further that such annual reports will be properly filed in all appropriate
jurisdictions, and all penalties and interest thereon paid, in full compliance
with the laws thereof within 15 Business Days of the Closing Date. Each Borrower
has delivered to Agent true and complete copies of its certificate of
incorporation and by-laws and will promptly notify Agent of any amendment or
changes thereto.
(b) The only Subsidiaries of each Borrower are listed on
Schedule 5.2(b).
5.3. Survival of Representations and Warranties. All
representations and warranties of such Borrower contained in this Agreement and
the Other Documents shall be true at the time of such Borrower's execution of
this Agreement and the Other Documents, and shall survive the execution,
delivery and acceptance thereof by the parties thereto and the closing of the
transactions described therein or related thereto.
5.4. Tax Returns. Each Borrower's federal tax identification
number is set forth on Schedule 5.4. Each Borrower has filed all federal, state
and local tax returns and other reports each is required by law to file and has
paid all taxes, assessments, fees and other governmental charges that are due
and payable. Federal, state and local income tax returns of each Borrower have
been examined and reported upon by the appropriate taxing authority or closed by
applicable statute and satisfied for all fiscal years prior to and including the
fiscal year ending December 31, 1997. The provision for taxes on the books of
each Borrower are adequate for all years not closed by applicable statutes, and
for its current fiscal year, and no Borrower has any knowledge of any deficiency
or additional assessment in connection therewith not provided for on its books.
5.5. Financial Statements.
(a) The pro forma balance sheet of Borrowers on a
consolidated basis (the "Pro Forma Balance Sheet") furnished to Agent on the
Closing Date reflects the consummation of the transactions contemplated by the
Acquisition Agreement and under this Agreement (the "Transactions") and is
accurate, complete and correct and fairly reflects the financial condition of
Borrowers on a consolidated basis as of the Closing Date after giving effect to
the Transactions, and has been prepared i accordance with GAAP, consistently
applied. The Pro Forma Balance Sheet has been certified as accurate, complete
and correct in all material respects by the President and Chief Financial
Officer of THI. All financial statements referred to in this subsection 5.5(a),
including the related schedules and notes thereto, have been prepared, in
accordance with GAAP, except as may be disclosed in such financial statements.
(b) The twelve-month cash flow projections of the Borrowers
on a consolidated basis and their projected balance sheets as of the Closing
Date, copies of which are annexed hereto as Exhibit 5.5(b) (the "Projections")
were prepared by the Chief Financial Officer of THI, are based on underlying
assumptions which provide a reasonable basis for the projections contained
therein and reflect Borrowers' judgment based on present circumstances of the
most likely set of conditions and course of action for the projected period. The
cash flow Projections together with the Pro Forma Balance Sheet, are referred to
as the "Pro Forma Financial Statements".
5.6. Corporate Name. No Borrower has been known by any other
corporate name in the past five years and does not sell Inventory under any
other name except as set forth on Schedule 5.6, nor has any Borrower been the
surviving corporation of a merger or consolidation or acquired all or
substantially all of the assets of any Person during the preceding five (5)
years.
33
5.7. O.S.H.A. and Environmental Compliance.
(a) Each Borrower has duly complied in all material respects
with, and its facilities, business, assets, property, leaseholds and Equipment
are in compliance in all material respects with, the provisions of the Federal
Occupational Safety and Health Act, the Environmental Protection Act, RCRA and
all other Environmental Laws; there have been no outstanding citations, notices
or orders of non-compliance issued to any Borrower or relating to its business,
assets, property, leaseholds or Equipment under any such laws, rules or
regulations.
(b) Each Borrower has been issued all required federal, state
and local licenses, certificates or permits relating to all applicable
Environmental Laws.
(c) (i) There are no visible signs of releases, spills,
discharges, leaks or disposal (collectively referred to as "Releases") of
Hazardous Substances at, upon, under or within any Real Property or any premises
leased by any Borrower; (ii) there are no underground storage tanks or
polychlorinated biphenyls on the Real Property or any premises leased by any
Borrower; (iii) neither the Real Property nor any premises leased by any
Borrower has ever been used as a treatment, storage or disposal facility of
Hazardous Waste; and (iv) no Hazardous Substances are present on the Real
Property or any premises leased by Borrower, excepting such quantities as are
handled in accordance with all applicable manufacturer's instructions and
governmental regulations and in proper storage containers and as are necessary
for the operation of the commercial business of any Borrower or of its tenants.
5.8. Solvency; No Litigation, Violation, Indebtedness or Default.
(a) After giving effect to the Transactions, Borrowers will
be solvent, able to pay their debts as they mature, have capital sufficient to
carry on their business and all businesses in which they are about to engage,
and (i) as of the Closing Date, the fair present saleable value of their assets,
calculated on a going concern basis, is in excess of the amount of their
liabilities and (ii) subsequent to the Closing Date, the fair saleable value of
their assets (calculated on a going concern basis) will be in excess of the
amount of their liabilities.
(b) Except as disclosed in Schedule 5.8(b), no Borrower has
(i) any pending or threatened litigation, arbitration, actions or proceedings
which involve the possibility of having a Material Adverse Effect on such
Borrower, and (ii) any liabilities nor indebtedness for borrowed money other
than the Obligations.
(c) No Borrower is in violation of any applicable statute,
regulation or ordinance in any respect which could reasonably be expected to
have a Material Adverse Effect on such Borrower, nor is any Borrower in
violation of any order of any court, governmental authority or arbitration board
or tribunal.
(d) No Borrower nor any member of the Controlled Group
maintains or contributes to any Plan other than those listed on Schedule 5.8(d)
hereto. Except as set forth in Schedule 5.8(d), (i) no Plan has incurred any
"accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the Code, whether or not waived, and each Borrower and each
member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan
which is intended to be a qualified plan under Section 401(a) of the Code as
currently in effect has been determined by the Internal Revenue Service to be
qualified under Section 401(a) of the Code and the trust related thereto is
exempt from federal income tax under Section 501(a) of the Code, (iii) no
Borrower nor any member of the Controlled Group has incurred any liability to
the PBGC other than for the payment of premiums, and there are no premium
payments whic have become due which are unpaid, (iv) no Plan has been terminated
by the plan administrator thereof nor by the PBGC, and there is no occurrence
which would cause the PBGC to institute proceedings under Title IV of ERISA to
terminate any Plan, (v) at this time, the current value of the assets of each
Plan exceeds the present value of the accrued benefits and other liabilities of
such Plan and no Borrower nor any member of the Controlled Group knows of any
facts or circumstances which would materially change the value of such assets
and accrued benefits and other liabilities, (vi) no Borrower nor any member of
the Controlled Group has breached any of the responsibilities, obligations or
duties imposed on it by ERISA with respect to any Plan, (vii) no Borrower nor
34
any member of a Controlled Group has incurred any liability for any excise tax
arising under Section 4972 or 4980B of the Code, and no fact exists which could
give rise to any such liability, (viii) no Borrower nor any member of the
Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has engaged
in a "prohibited transaction" described in Section 406 of the ERISA or Section
4975 of the Code nor taken any action which would constitute or result in a
Termination Event with respect to any such Plan which is subject to ERISA, (ix)
each Borrower and each member of the Controlled Group has made all contributions
due and payable with respect to each Plan, (x) there exists no event described
in Section 4043(b) of ERISA, for which the thirty (30) day notice period
contained in 29 CFR Section 2615.3 has not been waived, (xi) no Borrower nor any
member of the Controlled Group has any fiduciary responsibility for investments
with respect to any plan existing for the benefit of persons other than
employees or former employees of any Borrower and any member of the Controlled
Group, and (xii) no Borrower nor any member of the Controlled Group has
withdrawn, completely or partially, from any Multiemployer Plan so as to incur
liability under the Multiemployer Pension Plan Amendments Act of 1980.
5.9. Patents, Trademarks, Copyrights and Licenses. All patents,
patent applications, trademarks, trademark applications, service marks, service
xxxx applications, copyrights, copyright applications, design rights,
tradenames, assumed names, trade secrets and licenses owned or utilized by any
Borrower are set forth on Schedule 5.9, are valid and have been duly registered
or filed with all appropriate governmental authorities and constitute all of the
intellectual property rights which are necessary for the operation of its
business; there is no objection to or pending challenge to the validity of any
such material patent, trademark, copyright, design right, tradename, trade
secret or license and no Borrower is aware of any grounds for any challenge,
except as set forth in Schedule 5.9 hereto. Each patent, patent application,
patent license, trademark, trademark application, trademark license, service
xxxx, service xxxx application, service xxxx license, copyright, copyright
applicatio and copyright license owned or held by any Borrower and all trade
secrets used by any Borrower consist of original material or property developed
by such Borrower or was lawfully acquired by such Borrower from the proper and
lawful owner thereof. Each of such items has been maintained so as to preserve
the value thereof from the date of creation or acquisition thereof. With respect
to all software used by any Borrower, such Borrower is in possession of all
source and object codes related to each piece o software or is the beneficiary
of a source code escrow agreement, each such source code escrow agreement being
listed on Schedule 5.9 hereto.
5.10. Licenses and Permits. Except as set forth in Schedule 5.10,
each Borrower (a) is in compliance with and (b) has procured and is now in
possession of, all material licenses or permits required by any applicable
federal, state or local law or regulation for the operation of its business in
each jurisdiction wherein it is now conducting or proposes to conduct business
and where the failure to procure such licenses or permits could have a Material
Adverse Effect on such Borrower.
5.11. Default of Indebtedness. No Borrower is in default in the
payment of the principal of or interest on any Indebtedness or under any
instrument or agreement under or subject to which any Indebtedness has been
issued and no event has occurred under the provisions of any such instrument or
agreement which with or without the lapse of time or the giving of notice, or
both, constitutes or would constitute an event of default thereunder.
5.12. No Default. No Borrower is in default in the payment or
performance of any of its contractual obligations and no Default has occurred.
5.13. No Burdensome Restrictions. No Borrower is party to any
contract or agreement the performance of which could have a Material Adverse
Effect on such Borrower. No Borrower has agreed or consented to cause or permit
in the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien which
is not a Permitted Encumbrance.
5.14. No Labor Diaputes. No Borrower is involved in any labor
dispute; there are no strikes or walkouts or union organization of any
Borrower's employees threatened or in existence and no labor contract is
scheduled to expire during the Term other than as set forth on Schedule 5.14
hereto.
35
5.15. Margin Regulations. No Borrower is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Advance
will be used for "purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
5.16. Investment Company Act. No Borrower is an "investment
company" registered or required to be registered under the Investment Company
Act of 1940, as amended, nor is it controlled by such a company.
5.17. Disclosure. No representation or warranty made by any
Borrower in this Agreement or in the Acquisition Agreement, or in any financial
statement, report, certificate or any other document furnished in connection
herewith or therewith contains any untrue statement of a material fact or omits
to state any material fact necessary to make the statements herein or therein
not misleading. There is no fact known to Borrowers or which reasonably should
be known to Borrowers which Borrowers have not disclosed to Agent in writing
with respect to the transactions contemplated by the Acquisition Agreement, or
this Agreement which could reasonably be expected to have a Material Adverse
Effect on any Borrower.
5.18. Delivery of Acquisition Agreement. Agent has received
complete copies of the Acquisition Agreement (including all exhibits, schedules
and disclosure letters referred to therein or delivered pursuant thereto, if
any) and all amendments thereto, waivers relating thereto and other side letters
or agreements affecting the terms thereof. None of such documents and agreements
has been amended or supplemented, nor have any of the provisions thereof been
waived, except pursuant to a written agreement or instrument which has
heretofore been delivered to Agent.
5.19. Swaps. No Borrower is a party to, nor will it be a party to,
any swap agreement whereby such Borrower has agreed or will agree to swap
interest rates or currencies unless same provides that damages upon termination
following an event of default thereunder are payable on an unlimited "two-way
basis" without regard to fault on the part of either party.
5.20. Conflicting Agreements. No provision of any mortgage,
indenture, contract, agreement, judgment, decree or order binding on any
Borrower or affecting the Collateral conflicts with, or requires any Consent
which has not already been obtained to, or would in any way prevent the
execution, delivery or performance of, the terms of this Agreement or the Other
Documents.
5.21. Application of Certain Laws and Regulations. No Borrower nor
any Affiliate of any Borrower is subject to any statute, rule or regulation
which regulates the incurrence of any Indebtedness, including without
limitation, statutes or regulations relative to common or interstate carriers or
to the sale of electricity, gas, steam, water, telephone, telegraph or other
public utility services.
5.22. Business and Property of Borrower. Upon and after the
Closing Date, Borrowers do not propose to engage in any business other than food
wholesaler and "value added" food processor and activities necessary to conduct
the foregoing. On the Closing Date, each Borrower will own all the property and
possess all of the rights and Consents necessary for the conduct of the business
of such Borrower.
36
5.23. Year 2000. Any reprogramming required to permit the proper
functioning, in and following the year 2000, of (i) each of the Borrower's
computer systems and (ii) equipment containing embedded microchips (including
systems and equipment supplied by others or with which any Borrower's systems
interface) and the testing of all such systems and equipment, as so
reprogrammed, will be completed by January 1, 1999. The cost to each of the
Borrowers of such reprogramming and testing and of the reasonably foreseeable
consequences of year 2000 to such Borrowers (including, without limitation,
reprogramming errors and the failure of others' systems or equipment) will not
result in a Default or a Material Adverse Effect. Except for such of the
reprogramming referred to in the preceding sentence as may be necessary, the
computer and management information systems of the Borrowers are and, with
ordinary course upgrading and maintenance, will continue for the term of this
Agreement to be, sufficient to permit each Borrower to conduct its business
without Material Adverse Effect.
5.24. Receipts and Bank Accounts. The provisions of Sections
4.15(h) and Section 7.21 concerning receipts and bank accounts shall have been,
and continue to be, fully complied with.
VI. AFFIRMATIVE COVENANTS.
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1. Payment of Fees. Pay to Agent on demand all usual and
customary fees and expenses which Agent incurs in connection with (a) the
forwarding of Advance proceeds and (b) the establishment and maintenance of any
Blocked Accounts or Depository Accounts as provided for in Section 4.15(h).
Agent may, without making demand, charge Borrowers' Account for all such fees
and expenses.
6.2. Conduct of Business and Maintenance of Existence and Assets.
(a) Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, tradenames, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect on such Borrower; and
(c) make all such reports and pay all such franchise and other taxes and license
fees and do all such other acts and things as may be lawfully required to
maintain its rights, licenses, leases, powers and franchises under the laws of
the United States or any political subdivision thereof.
6.3. Violations. Promptly notify Agent in writing of any violation
of any law, statute, regulation or ordinance of any Governmental Body, or of any
agency thereof, applicable to any Borrower which could reasonably be expected to
have a Material Adverse Effect on any Borrower.
6.4. Government Receivables. Take all steps necessary to protect
Agent's interest in the Collateral under the Federal Assignment of Claims Act or
other applicable state or local statutes or ordinances and deliver to Agent
appropriately endorsed, any instrument or chattel paper connected with any
Receivable arising out of contracts between any Borrower and the United States,
any state or any department, agency or instrumentality of any of them.
6.5. Minimum Increasing Net Worth. The Borrowers will not permit
their Net Worth on a consolidated basis to be less than: (A) as of the last day
of the Fiscal Quarter ending June 30, 1998, the sum (the "Net Worth Amount") of
(i) $6,000,000 for the Fiscal Quarter ending June 30, 1998, and (B) as of the
last day of each Fiscal Quarter ending thereafter until the Advances are
indefeasibly paid in full, the sum of (i) the Net Worth Amount for the
immediately prior Fiscal Quarter, plus (ii) an amount equal to 50% of the net
income (but not loss) of the Borrowers on a consolidated basis for the Fiscal
Quarter for which this covenant is being calculated.
37
6.6. Minimum Fixed Charge Coverage Ratio. The Fixed Charge
Coverage Ratio for the Borrowers on a consolidated basis shall be equal to or
exceed the minimum ratio for each period specified below, measured as of last
day of each period for the previous fiscal quarter as set forth below:
Period: Minimum Ratio:
------- --------------
Each Fiscal Quarter commencing 1.25 to 1.0
with the Quarter Ending September 30, 1998
6.7. Execution of Supplemental Instruments. Execute and deliver to
Agent from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect.
6.8. Payment of Indebtedness. Pay, discharge or otherwise satisfy
at or before maturity (subject, where applicable, to specified grace periods
and, in the case of the trade payables, to normal payment practices) all its
obligations and liabilities of whatever nature, except when the failure to do so
could not reasonably be expected to have a Material Adverse Effect or when the
amount or validity thereof is currently being contested in good faith by
appropriate proceedings and each Borrower shall have provided for such reserves
as Agent may reasonably deem proper and necessary, subject at all times to any
applicable subordination arrangement in favor of Lenders.
6.9. Standards of Financial Statements. Cause all financial
statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and
9.14 as to which GAAP is applicable to be complete and correct in all material
respects (subject, in the case of interim financial statements, to normal
year-end audit adjustments) and to be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein (except as concurred in by such reporting accountants or officer, as the
case may be, and disclosed therein).
6.12. Exercise of Rights. Enforce all of its rights under the
Acquisition Agreement and any other agreement executed in connection therewith
including, but not limited to, all indemnification rights and pursue all
remedies available to it with diligence and in good faith in connection with the
enforcement of any such rights.
VII. NEGATIVE COVENANTS.
No Borrower shall, until satisfaction in full of the Obligations
and termination of this Agreement:
7.1. Merger, Consolidation, Acquisition and Sale of Assets.
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person or acquire all or a substantial
portion of the assets or stock of any Person or permit any other Person to
consolidate with or merge with it.
(b) Sell, lease, transfer or otherwise dispose of any of its
properties or assets, except in the ordinary course of its business; provided
that the Borrowers may enter into sale/leasebacks of the Post-Closing Appraised
M&E if and only if 100% of the proceeds thereof are applied as a pay-down of the
Revolving Advances.
7.2. Creation of Liens. Create or suffer to exist any Lien or
transfer upon or against any of its property or assets now owned or hereafter
acquired, except Permitted Encumbrances.
38
7.3. Guarantees. Become liable upon the obligations of any Person
by assumption, endorsement or guaranty thereof or otherwise (other than to
Lenders) except (a) as disclosed on Schedule 7.3, (b) guarantees made in the
ordinary course of business up to an aggregate amount of $50,000 outstanding at
any one time, and (c) the endorsement of checks in the ordinary course of
business.
7.4. Investments. Purchase or acquire obligations or stock of, or
any other interest in, any Person, except (a) obligations issued or guaranteed
by the United States of America or any agency thereof, (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating), (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency, and (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof.
7.5. Loans. Make advances, loans or extensions of credit to any
Person, including without limitation, any Parent, Subsidiary or Affiliate except
with respect to (a) the extension of commercial trade credit in connection with
the sale of Inventory in the ordinary course of its business, (b) loans to its
employees in the ordinary course of business not to exceed the aggregate amount
of $25,000 at any time outstanding, and (c) loans to certain employees of the
Seller being assumed by the Borrower in the aggregate principal amount of
$55,000 as of the Closing Date, which loans shall not be increased in principal
amount at any time.
7.6. Capital Expenditures. Contract for, purchase or make any
expenditure or commitments either: (x) for fixed or capital assets ( other than
capitalized leases) in any fiscal year in an amount in excess of $350,000, or
(y) for fixed or capital assets pursuant to capitalized leases in any fiscal
year in an amount in excess of 850,000.
7.7. Dividends. Declare, pay or make any dividend or distribution
on any shares of the common stock or preferred stock of any Borrower (other than
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase, redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or preferred
stock of any Borrower, except as explicitly permitted by the Intercreditor
Agreement.
7.8. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) except in respect of (i) Indebtedness to
Lenders; (ii) Indebtedness incurred for capital expenditures permitted under
Section 7.6 hereof; and (iii) Subordinated Indebtedness.
7.9. Nature of Business. Substantially change the nature of the
business in which it is presently engaged, nor except as specifically permitted
hereby purchase or invest, directly or indirectly, in any assets or property
other than in the ordinary course of business for assets or property which are
useful in, necessary for and are to be used in its business as presently
conducted.
7.10. Transactions with Affiliates. Directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or otherwise deal with, any Affiliate, except transactions
disclosed in the ordinary course of business, on an arm's-length basis on terms
no less favorable than terms which would have been obtainable from a Person
other than an Affiliate.
39
7.11. Leases. Enter as lessee into any lease arrangement for real
or personal property (unless capitalized and permitted under Section 7.6 hereof)
if after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $850,000 in any one fiscal year.
7.12. Subsidiaries.
(a) Form any Subsidiary without the consent of the Agent ,
which consent, without limitation may be conditioned upon the condition
precedent that (i) such Subsidiary expressly joins in this Agreement as a
borrower and becomes jointly and severally liable for the obligations of
Borrowers hereunder, under the Note, and under any other agreement between any
Borrower and Lenders and (ii) Agent shall have received all documents, including
legal opinions, it may reasonably require to establish compliance with each of
the foregoing conditions.
(b) Enter into any partnership, joint venture or similar
arrangement.
7.13. Fiscal Year and Accounting Changes. Change its fiscal year
from December 31 or make any change (i) in accounting treatment and reporting
practices except as required by GAAP or (ii) in tax reporting treatment except
as required by law.
7.14. Pledge of Credit. Now or hereafter pledge Agent's or any
Lender's credit on any purchases or for any purpose whatsoever or use any
portion of any Advance in or for any business other than such Borrower's
business as conducted on the date of this Agreement.
7.15. Amendment of Articles of Incorporation, By-Laws. Amend,
modify or waive any material provision of its Articles of Incorporation or
By-Laws unless required by law.
7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member
of the Controlled Group to maintain, or (y) become obligated to contribute, or
permit any member of the Controlled Group to become obligated to contribute, to
any Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
"prohibited transaction", as that term is defined in section 406 of ERISA and
Section 4975 of the Code, (iii) incur, or permit any member of the Controlled
Group to incur, any "accumulated funding deficiency", as that term is defined in
Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any
member of the Controlled Group to terminate, any Plan where such event could
result in any liability of any Borrower or any member of the Controlled Group or
the imposition of a lien on the property of any Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any
Termination Event, (viii) fail to comply, or permit a member of the Controlled
Group to fail to comply, with the requirements of ERISA or the Code or other
applicable laws in respect of an Plan, (ix) fail to meet, or permit any member
of the Controlled Group to fail to meet, all minimum funding requirements under
ERISA or the Code or postpone or delay or allow any member of the Controlled
Group to postpone or delay any funding requirement with respect of any Plan.
7.17. Prepayment of Indebtedness. At any time, directly or
indirectly, prepay any Indebtedness (other than to Lenders), or repurchase,
redeem, retire or otherwise acquire any Indebtedness of any Borrower.
7.18. Minimum Availability. Permit at any time there to be an
Undrawn Availability of less than $500,000, (x) provided that upon the receipt
by the Agent of the financial statements of the Borrowers for the third Fiscal
Quarter of fiscal 1998, if no Default or Event of Default has occurred, the
Agent agrees to reduce such amount to $300,000, and (y) provided that upon the
receipt by the Agent of the audit of the Borrowers for fiscal 1998, the Agent
agrees to review the performance of the Borrowers against the projections
heretofore received by the Agent with respect to 1998, and to consider the
reduction or elimination of such $300,000 requirement; provided further that the
Agent shall have no obligation so to reduce or eliminate such $300,000
requirement.
40
7.19. Other Agreements. Enter into any material amendment, waiver
or modification of the Acquisition Agreement or any related agreements.
7.20. Public Company. Permit THI to fail to be in good standing
and traded on NASDAQ or other national stock exchange in the ordinary course of
business.
7.21 Receipts and Bank Accounts. Fail to deposit all receipts of
the Borrowers in accordance with Section 4.15 (h) hereof, or open or maintain
any bank account other than with the Agent, other than for local payroll
accounts and a cash depositary account blocked in accordance with Section
4.15(h).
7.22. Post-Closing Items. Fail to perform on a timely basis any of
the post-closing items listed on Schedule 7.22 hereto.
VIII. CONDITIONS PRECEDENT.
8.1. Conditions to Initial Advances. The agreement of Lenders to
make the initial Advances requested to be made on the Closing Date is subject to
the satisfaction, or waiver by Lenders, immediately prior to or concurrently
with the making of such Advances, of the following conditions precedent:
(a) Note. Agent shall have received the Note duly executed
and delivered by an authorized officer of each Borrower;
(b) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any related agreement or under law or reasonably
requested by the Agent to be filed, registered or recorded in order to create,
in favor of Agent, a perfected security interest in or lien upon the Collateral
shall have been properly filed, registered or recorded in each jurisdiction in
which the filing, registration or recordation thereof is so required or
requested, and Agent shall have received an acknowledgment copy, or other
evidence satisfactory to it, of each such filing, registration or recordation
and satisfactory evidence of the payment of any necessary fee, tax or expense
relating thereto;
(c) Corporate Proceedings of Borrowers. Agent shall have
received a copy of the resolutions in form and substance reasonably satisfactory
to Agent, of the Board of Directors of each Borrower authorizing (i) the
execution, delivery and performance of this Agreement, the Note, the Mortgage,
any related agreements and the Acquisition Agreement (collectively the
"Documents") and (ii) the granting by each Borrower of the security interests in
and liens upon the Collateral in each case certified by the Secretary or an
Assistant Secretary of each Borrower as of the Closing Date; and, such
certificate shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded as of the date of such certificate;
(d) Incumbency Certificates of Borrowers. Agent shall have
received a certificate of the Secretary or an Assistant Secretary of each
Borrower, dated the Closing Date, as to the incumbency and signature of the
officers of each Borrower executing this Agreement, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
(e) Certificates. Agent shall have received a copy of the
Articles or Certificate of Incorporation of each Borrower, and all amendments
thereto, certified by the Secretary of State or other appropriate official of
its jurisdiction of incorporation together with copies of the By-Laws of each
Borrower and all agreements of each Borrower's shareholders certified as
accurate and complete by the Secretary of each Borrower;
41
(f) Good Standing Certificates. Agent shall have received
good standing certificates for each Borrower dated not more than 10 days prior
to the Closing Date, issued by the Secretary of State or other appropriate
official of each Borrower's jurisdiction of incorporation and each jurisdiction
where the conduct of each Borrower's business activities or the ownership of its
properties necessitates qualification;
(g) Legal Opinion. Agent shall have received the executed
legal opinion of Fishman, Merrick, Miller, Genelly, Springer, Xxxxxxx & Xxxxxxxx
in form and substance satisfactory to Agent which shall cover such matters
incident to the transactions contemplated by this Agreement, the Notes and
related agreements as Agent may reasonably require and each Borrower hereby
authorizes and directs such counsel to deliver such opinions to Agent and
Lenders;
(h) No Litigation. (i) No litigation, investigation or
proceeding before or by any arbitrator or Governmental Body shall be continuing
or threatened against any Borrower or against the officers or directors of any
Borrower (A) in connection with the Other Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Agent, is deemed
material or (B) which could, in the reasonable opinion of Agent, have a Material
Adverse Effect; and (ii) no injunction, writ, restraining order or other order
of any nature materially adverse to any Borrower or the conduct of its business
or inconsistent with the due consummation of the Transactions shall have been
issued by any Governmental Body;
(i) Financial Condition Certificates. Agent shall have
received an executed Financial Condition Certificate in the form of Exhibit
8.1(i).
(j) Collateral Examination. Agent shall have completed
Collateral examinations and received appraisals, the results of which shall be
satisfactory in form and substance to Lenders, of the Receivables, Inventory,
General Intangibles, Real Property , Leasehold Interest and Equipment of each
Borrower and all books and records in connection therewith;
(k) Fees. Agent shall have received all fees payable to Agent
and Lenders on or prior to the Closing Date pursuant to Article III hereof;
(l) Pro Forma Financial Statements. Agent shall have received
a copy of the Pro Forma Financial Statements which shall be satisfactory in all
respects to Lenders;
(m) Acquisition Documents; Capital Contribution. Agent shall
have received final executed copies of the Acquisition Agreement and all related
agreements, documents and instruments as in effect on the Closing Date and the
transactions contemplated by such documentation, including, without limitation
the complete payment in full of the Acquisition Note, shall be consummated prior
to the making of the initial Advance. The Borrowers shall have received a cash
capital contribution, or proceeds from the issuance of Subordinated
Indebtedness, in the aggregate principal amount equal to $2,000,000 (of which
$160,000 had been contributed on or before May 29, 1998;
(o) Guaranties, Pledge Agreement, Other Documents. Agent
shall have received all Other Documents as executed, each in form and substance
satisfactory to Lenders, with the original stock certificates and stock powers
for the capital stock of AIA, Fresh and BBSI;
(p) Insurance. Agent shall have received in form and
substance satisfactory to Agent, certified copies of Borrowers' casualty
insurance policies, together with loss payable endorsements on Agent's standard
form of loss payee endorsement naming Agent as loss payee, and certified copies
of Borrowers' liability insurance policies, together with endorsements naming
Agent as a co-insured;
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(q) Title Insurance. Agent shall have received fully paid
mortgagee title insurance policies (or binding commitments to issue title
insurance policies, marked to Agent's satisfaction to evidence the form of such
policies to be delivered with respect to the Mortgage), in standard ALTA form,
issued by a title insurance company satisfactory to Agent, each in an amount
equal to not less than the fair market value of the Real Property subject to the
Mortgage, insuring the Mortgag to create a valid Lien on the Real Property with
no exceptions which Agent shall not have approved in writing and no survey
exceptions;
(r) Environmental Reports. Agent shall have received all
environmental studies and reports prepared by independent environmental
engineering firms with respect to all Real Property owned or leased by
Borrowers;
(s) Payment Instructions. Agent shall have received written
instructions from Borrowers directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(t) Blocked Accounts. If requested by Agent, Agent shall have
received duly executed agreements establishing the Blocked Accounts or
Depository Accounts with financial institutions acceptable to Agent for all
existing accounts of the Borrowers or to which the Borrowers' Receivables are
currently payable;
(u) Consents & Acknowledgments. Agent shall have received any
and all Consents necessary to permit the effectuation of the transactions
contemplated by this Agreement and the Other Documents; and, Agent shall have
received such Consents and waivers of such third parties as might assert claims
with respect to the Collateral, as Agent and its counsel shall deem necessary,
and Agent shall have received all acknowledgments required by the Intercreditor
Agreement;
(v) No Adverse Material Change. (i) since March 31, 1998
there shall not have occurred any event, condition or state of facts which could
reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Agent shall have been proven to
be inaccurate or misleading in any material respect;
(w) Leasehold Agreements. Agent shall have received landlord,
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises leased by Borrowers at which Inventory is located;
(x) Mortgage. Agent shall have received in form and substance
satisfactory to Lenders (i) an executed Mortgage, (ii) a title policy for the
Real Property and (iii) surveys;
(y) Other Financial Information. Agent shall have received
the following items from the Borrowers in form and substance reasonably
satisfactory to Agent: (i) financial statements of THI and BBSI for the first
fiscal quarter of 1998, with such financial statements to be reviewed by
accounting firms reasonably acceptable to Agent in all respects and prepared
consistently with internally generated financial statements previously prepared
and delivered to Agent by Borrowers; (ii) results of a reference check with
Foothill Capital Corp., in form and substance reasonably satisfactory to Agent;
(iii) financial statements for fiscal year 1997 of BBSI, with such financial
statements to be prepared by Price Waterhouse LLP and prepared consistently with
internally generated financial statements previously prepared and delivered to
Agent by Borrowers; (iv) interim financial statements for April and May, 1998 of
THI and BBSI; and (v) all historical and current financial information an
operating statements, deemed reasonably necessary by Agent, including, but not
limited to, certified financial statements of THI and BBSI for fiscal year 1997,
balance sheets, financial statements and cash flow projections evidencing an
ability to meet all of their respective obligations as they mature, forecasted
for the Term, as well as, a twelve-month forecast of the Formula Amount, all as
certified by the Chief Financial Officer of the Borrowers.
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(aa) Net Worth. Agent shall have received the Pro Forma
Balance Sheet reflecting a Net Worth after giving effect to the Transactions of
at least $6,000,000;
(bb) Contract Review. Agent shall have reviewed all material
contracts of Borrowers including, without limitation, leases, union contracts,
labor contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory in all
respects to Agent;
(cc) Closing Certificate. Agent shall have received a closing
certificate signed by the Chief Financial Officer of each Borrower dated as of
the date hereof, stating that (i) all representations and warranties set forth
in this Agreement and the Other Documents are true and correct on and as of such
date, (ii) Borrowers are on such date in compliance with all the terms and
provisions set forth in this Agreement and the Other Documents and (iii) on such
date no Default or Even of Default has occurred or is continuing;
(dd) Borrowing Base. Agent shall have received evidence from
Borrowers that the aggregate amount of Eligible Receivables and Eligible
Inventory is sufficient in value and amount to support Advances in the amount
requested by Borrowers on the Closing Date;
(ee) Undrawn Availability. After giving effect to the initial
Advances hereunder, Borrowers shall have Undrawn Availability of at least
$700,000; and
(ff) Other. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
Transactions shall be satisfactory in form and substance to Agent and its
counsel.
8.2. Conditions to Each Advance. The agreement of Lenders to make
any Advance requested to be made on any date (including, without limitation, the
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) Representations and Warranties. Each of the
representations and warranties made by any Borrower in or pursuant to this
Agreement and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date;
(b) No Default. No Event of Default or Default shall have
occurred and be continuing on such date, or would exist after giving effect to
the Advances requested to be made, on such date and, in the case of the initial
Advance, after giving effect to the consummation of the transactions
contemplated by the Acquisition Agreement; provided, however that Lenders, in
their sole discretion, may continue to make Advances notwithstanding the
existence of an Event of Default or Defaul and that any Advances so made shall
not be deemed a waiver of any such Event of Default or Default; and
(c) Maximum Advances. In the case of any Advances requested
to be made, after giving effect thereto, the aggregate Advances shall not exceed
the maximum amount of Advances permitted under Section 2.1 hereof. Each request
for an Advance by any Borrower hereunder shall constitute a representation and
warranty by each Borrower as of the date of such Advance that the conditions
contained in this subsection shall have been satisfied.
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IX. INFORMATION AS TO BORROWERS.
Each Borrower shall, until satisfaction in full of the Obligations
and the termination of this Agreement:
9.1. Disclosure of Material Matters. Immediately upon learning
thereof, report to Agent all matters materially affecting the value,
enforceability or collectibility of any portion of the Collateral including,
without limitation, any Borrower's reclamation or repossession of, or the return
to any Borrower of, a material amount of goods or claims or disputes asserted by
any Customer or other obligor.
9.2. Schedules. Deliver to Agent on or before the fifteenth (15th)
day of each month as and for the prior month (a) accounts receivable ageings,
(b) accounts payable schedules and (c) Inventory reports. In addition, each
Borrower will deliver to Agent at such intervals as Agent may require: (i)
confirmatory assignment schedules, (ii) copies of Customer's invoices, (iii)
evidence of shipment or delivery, and (iv) such further schedules, documents
and/or information regarding the Collateral as Agent may require including,
without limitation, trial balances and test verifications. Agent shall have the
right to confirm and verify all Receivables by any manner and through any medium
it considers advisable and do whatever it may deem reasonably necessary to
protect its interests hereunder. The items to be provided under this Section are
to be in form satisfactory to Agent and executed by each Borrower and delivered
to Agent from time to time solely for Agent's convenience in main taining
records of the Collateral, and any Borrower's failure to deliver any of such
items to Agent shall not affect, terminate, modify or otherwise limit Agent's
Lien with respect to the Collateral.
9.3. Environmental Reports. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Sections 9.7 and 9.8, with a
certificate signed by the President of each Borrower stating, to the best of his
knowledge, that each Borrower is in compliance in all material respects with all
federal, state and local laws relating to environmental protection and control
and occupational safety and health. To the extent any Borrower is not in
compliance with the foregoin laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action such Borrower
will implement in order to achieve full compliance.
9.4. Litigation. Promptly notify Agent in writing of any
litigation, suit or administrative proceeding affecting any Borrower, whether or
not the claim is covered by insurance, and of any suit or administrative
proceeding, which in any such case could reasonably be expected to have a
Material Adverse Effect on any Borrower.
9.5. Material Occurrences. Promptly notify Agent in writing upon
the occurrence of (a) any Event of Default or Default; (b) any event,
development or circumstance whereby any financial statements or other reports
furnished to Agent fail in any material respect to present fairly, in accordance
with GAAP consistently applied, the financial condition or operating results of
any Borrower as of the date of such statements; (c) any accumulated retirement
plan funding deficiency which, if such deficiency continued for two plan years
and was not corrected as provided in Section 4971 of the Code, could subject any
Borrower to a tax imposed by Section 4971 of the Code; (d) each and every
default by any Borrower which might result in the acceleration of the maturity
of any Indebtedness, including the names and addresses of the holders of such
Indebtedness with respect to which there is a default existing or with respect
to which the maturity has been or could be accelerated, and the amount of such
Indebtedness; and (e) any other development in the business or affairs of any
Borrower which could reasonably be expected to have a Material Adverse Effect;
in each case describing the nature thereof and the action Borrowers propose to
take with respect thereto.
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9.6. Government Receivables. Notify Agent immediately if any of its
Receivables arise out of contracts between any Borrower and the United States,
any state, or any department, agency or instrumentality of any of them.
9.7. Annual Financial Statements. Furnish Agent within one hundred
and five (125) days after the end of each fiscal year of Borrowers, financial
statements of Borrowers on a consolidating and consolidated basis including, but
not limited to, statements of income and stockholders' equity and cash flow from
the beginning of the current fiscal year to the end of such fiscal year and the
balance sheet as at the end of such fiscal year, all prepared in accordance with
GAAP applied on a basis consistent with prior practices, and in reasonable
detail and reported upon without qualification by an independent certified
public accounting firm selected by Borrowers and satisfactory to Agent (the
"Accountants"). The report of the Accountants shall be accompanied by a
statement of the Accountants certifying that (i) they have caused the Loan
Agreement to be reviewed, (ii) in making the examination upon which such report
was based either no information came to their attention which to their knowledge
constituted an Event of Default or a Default under this Agreement or any related
agreement or, if such information came to their attention, specifying any such
Default or Event of Default, its nature, when it occurred and whether it is
continuing, and such report shall contain or have appended thereto calculations
which set forth Borrowers' compliance with the requirements or restrictions
imposed by Sections 6.5, 6.6, 6.7, 6.8, 7.6 and 7.11 hereof. In addition, the
reports shall be accompanied by a certificate of each Borrower's Chief Financial
Officer which shall state that, based on an examination sufficient to permit him
to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by such
Borrower with respect to such event, and such certificate shall have appended
thereto calculations which set forth Borrowers' compliance with th requirements
or restrictions imposed by Sections 6.5, 6.6, 6.7, .8, 7.6 and 7.11 hereof.
9.8. Quarterly Financial Statements. Furnish Agent within
forty-five (45) days after the end of each fiscal quarter, financial information
and other data as stated on the Borrowers' Form 10Q submitted to the Securities
and Exchange Commission. The reports shall be accompanied by a certificate
signed by the Chief Financial Officer of each Borrower, which shall state that,
based on an examination sufficient to permit him to make an informed statement,
no Default or Event of Default exists, or, if such is not the case, specifying
such Default or Event of Default, its nature, when it occurred, whether it is
continuing and the steps being taken by Borrowers with respect to such default
and, such certificate shall have appended thereto calculations which set forth
Borrowers' compliance with the requirements or restrictions imposed by Sections
6.5, 6.6, 6.7, 6.8, 7.6 and 7.11 hereof.
9.9. Monthly Financial Statements. Furnish Agent within thirty (30)
days after the end of each month, an unaudited balance sheet of Borrowers on a
consolidated and consolidating basis and unaudited statements of income and
stockholders' equity and cash flow of Borrowers on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal year end adjustments. The reports shall be
accompanied by a certificate of each Borrower's Chief Financial Officer of each
Borrower, which shall state that, based on an examination sufficient to permit
him to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by
Borrowers with respect to such event and, such certificate shall have appended
thereto calculations which set forth Borrowers' compliance with the requirements
or restrictions imposed by Sections 6.5, 6.6, 6.7, 6.8, 7.6 and 7.11 hereof.
9.10. Other Reports. Furnish Agent as soon as available, but in any
event within ten (10) days after the issuance thereof, with copies of such
financial statements, reports and returns as each Borrower shall send to its
stockholders.
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9.11. Additional Information. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Note have been complied with by Borrowers including, without
limitation and without the necessity of any request by Agent, (a) copies of all
environmental audits and reviews, (b) at least thirty (30) days prior thereto,
notice of any Borrower's opening of any new office or place of business or any
Borrower's closing of any existing office or place of business, and (c) promptly
upon any Borrower's learning thereof, notice of any labor dispute to which any
Borrower may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to which
any Borrower is a party or by which any Borrower is bound.
9.12. Projected Operating Budget. Furnish Agent, no later than
thirty (30) days prior to the beginning of each Borrower's fiscal years
commencing with fiscal year ending December 31, 1998 a month by month projected
operating budget and cash flow of Borrowers on a consolidated and consolidating
basis for such fiscal year (including an income statement for each month and a
balance sheet as at the end of the last month in each fiscal quarter), such
projections to be accompanied by a certificate signed by the President or Chief
Financial Officer of each Borrower to the effect that such projections have been
prepared on the basis of sound financial planning practice consistent with past
budgets and financial statements and that such officer has no reason to question
the reasonableness of any material assumptions on which such projections were
prepared.
9.13. Variances From Operating Budget. Furnish Agent, concurrently
with the delivery of the financial statements referred to in Section 9.7 and
each quarterly report, a written report summarizing all material variances from
budgets submitted by Borrowers pursuant to Section 9.12 and a discussion and
analysis by management with respect to such variances.
9.14. Notice of Suits, Adverse Events. Furnish Agent with prompt
notice of (i) any lapse or other termination of any Consent issued to any
Borrower by any Governmental Body or any other Person that is material to the
operation of any Borrower's business, (ii) any refusal by any Governmental Body
or any other Person to renew or extend any such Consent; and (iii) copies of any
periodic or special reports filed by any Borrower with any Governmental Body or
Person, if such reports indicate any material change in the business,
operations, affairs or condition of any Borrower, or if copies thereof are
requested by Lender, and (iv) copies of any material notices and other
communications from any Governmental Body or Person which specifically relate to
any Borrower.
9.15. ERISA Notices and Requests. Furnish Agent with immediate
written notice in the event that (i) any Borrower or any member of the
Controlled Group knows or has reason to know that a Termination Event has
occurred, together with a written statement describing such Termination Event
and the action, if any, which such Borrower or member of the Controlled Group
has taken, is taking, or proposes to take with respect thereto and, when known,
any action taken or threatened by the Internal Revenue Service, Department of
Labor or PBGC with respect thereto, (ii) any Borrower or any member of the
Controlled Group knows or has reason to know that a prohibited transaction (as
defined in Sections 406 of ERISA and 4975 of the Code) has occurred together
with a written statement describing such transaction and the action which such
Borrower or any member of the Controlled Group has taken, is taking or proposes
to take with respect thereto, (iii) a funding waiver request has been filed with
respect to any Plan together with all communications received by any Borrower or
any member of the Controlled Group with respect to such request, (iv) any
increase in the benefits of any existing Plan or the establishment of any new
Plan or the commencement of contributions to any Plan to which any Borrower or
any member of the Controlled Group was not previously contributing shall occur,
(v) any Borrower or any member of the Controlled Group shall receive from the
PBGC a notice of intention to terminate a Plan o to have a trustee appointed to
administer a Plan, together with copies of each such notice, (vi) any Borrower
or any member of the Controlled Group shall receive any favorable or unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Code, together with copies
47
of each such letter; (vii) any Borrower or any member of the Controlled Group
shall receive a notice regarding the imposition of withdrawal liability,
together with copies of each such notice; (viii) any Borrower or any member of
the Controlled Group shall fail to make a required installment or any other
required payment under Section 412 of the Code on or before the due date for
such installment or payment; (ix) any Borrower or any member of the Controlled
Group knows that (a) a Multiemployer Plan has been terminated, (b) the
administrator or plan sponsor of a Multiemployer Plan intends to terminate a
Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings
under Section 4042 of ERISA to terminate a Multiemployer Plan.
9.16. Additional Documents. Execute and deliver to Agent, upon
request, such documents and agreements as Agent may, from time to time,
reasonably request to carry out the purposes, terms or conditions of this
Agreement.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1. (a) failure by any Borrower to pay any principal or interest
on the Obligations when due, whether at maturity or by reason of acceleration
pursuant to the terms of this Agreement or by notice of intention to prepay, or
by required prepayment, or (b) failure to pay any other liabilities or make any
other payment, fee or charge provided for herein when due or in any Other
Document, and the continuation of such failure for a period of five Business
Days;
10.2. any representation or warranty made or deemed made by any
Borrower in this Agreement or any related agreement or in any certificate,
document or financial or other statement furnished at any time in connection
herewith or therewith shall prove to have been misleading in any material
respect on the date when made or deemed to have been made;
10.3. failure by any Borrower to (i) furnish financial information
when due or when requested and the continuation of such failure for a period of
five Business Days, or (ii) permit the inspection of its books and records when
requested;
10.4. issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of any Borrower's property;
10.5. except as otherwise provided for in Sections 10.1 and 10.3,
failure or neglect of any Borrower to perform, keep or observe any term,
provision, condition, covenant herein contained, or contained in any other
agreement or arrangement, now or hereafter entered into between any Borrower and
Agent or any Lender except for a failure or neglect of Borrower to perform, keep
or observe any term, provision, condition or covenant, contained in Sections
4.6, 4.7, 4.9, 4.11, 6.1, 6.3, 6.4, 9. or 9.6 hereof which is cured within 20
days from the occurrence of such failure or neglect;
10.6. any judgment or judgments are rendered or judgment liens
filed against any Borrower for an aggregate amount in excess of $100,000 which
within thirty (30) days of such rendering or filing is not either satisfied,
stayed or discharged of record;
10.7. any Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within thirty (30) days,
any petition filed against it in any involuntary case under such bankruptcy
laws, or (vii) take any action for the purpose of effecting any of the
foregoing;
48
10.8. any Borrower shall admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business;
10.9. any Affiliate or any Subsidiary of any Borrower, or any
Guarantor, shall (i) apply for, consent to or suffer the appointment of, or the
taking of possession by, a receiver, custodian, trustee, liquidator or similar
fiduciary of itself or of all or a substantial part of its property, (ii) admit
in writing its inability, or be generally unable, to pay its debts as they
become due or cease operations of its present business, (iii) make a general
assignment for the benefit of creditors, (iv) commence a voluntary case under
any state or federal bankruptcy laws (as now or hereafter in effect), (v) be
adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vii) acquiesce
to, or fail to have dismissed, within thirty (30) days, any petition filed
against it in any involuntary case under such bankruptcy laws, or (viii) take
any action for the purpose of effecting any of the foregoing;
10.10. any change in any Borrower's condition or affairs (financial
or otherwise) which in Agent's opinion has a Material Adverse Effect;
10.11. any Lien created hereunder or provided for hereby or under
any related agreement for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest;
10.12. any default by any party to the Acquisition Agreement of its
respective obligations thereunder;
10.13. a default of the obligations of any Borrower under any other
agreement to which it is a party shall occur which adversely affects its
condition, affairs or prospects (financial or otherwise) which default is not
cured within any applicable grace period;
10.14. termination or breach of any Guaranty or Guaranty Security
Agreement or similar agreement executed and delivered to Agent in connection
with the Obligations of any Borrower, or if any Guarantor attempts to terminate,
challenges the validity of, or its liability under, any such Guaranty or
Guaranty Security Agreement or similar agreement;
10.15. any Change of Ownership or Change of Control shall occur;
10.16. any material provision of this Agreement shall, for any
reason, cease to be valid and binding on any Borrower, or any Borrower shall so
claim in writing to Agent;
10.17. (i) any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any license, permit, patent trademark or tradename
of any Borrower, or (B) commence proceedings to suspend, revoke, terminate or
adversely modify any such license, permit, trademark, tradename or patent and
such proceedings shall not be dismissed or discharged within sixty (60) days, or
(c) schedule or conduct a hearing on the renewal of any license, permit,
trademark, tradename or patent necessary for the continuation of any Borrower's
business and the staff of such Governmental Body issues a report recommending
the termination, revocation, suspension or material, adverse modification of
such license, permit, trademark, tradename or patent; (ii) any agreement which
is necessary or material to the operation of any Borrower's business shall be
revoked or terminated and not replaced by a substitute acceptable to Agent
within thirty (30) days after the date of such revocation or termination, and
such revocation or termination and non-replacement would reasonably be expected
to have a Material Adverse Effect on any Borrower;
10.18. any portion of the Collateral shall be seized or taken by a
Governmental Body, or any Borrower or the title and rights of any Borrower which
is the owner of any material portion of the Collateral shall have become the
subject matter of litigation which might, in the opinion of Agent, upon final
determination, result in impairment or loss of the security provided by this
Agreement or the Other Documents;
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10.19. the operations of any Borrower's manufacturing facility are
interrupted at any time for more than 50 hours during any period of 20
consecutive days, unless such Borrower shall (i) be entitled to receive for such
period of interruption, proceeds of business interruption insurance sufficient
to assure that its per diem cash needs during such period is at least equal to
its average per diem cash needs for the consecutive three (3) month period
immediately preceding the initial date o interruption and (ii) receive such
proceeds in the amount described in clause (i) preceding not later than thirty
(30) days following the initial date of any such interruption; provided,
however, that notwithstanding the provisions of clauses (i) and (ii) of this
section, an Event of Default shall be deemed to have occurred if such Borrower
shall be receiving the proceeds of business interruption insurance for a period
of thirty (30) consecutive days; or
10.20. an event or condition specified in Sections 7.16 or 9.15
hereof shall occur or exist with respect to any Plan and, as a result of such
event or condition, together with all other such events or conditions, any
Borrower or any member of the Controlled Group shall incur, or in the opinion of
Agent be reasonably likely to incur, a liability to a Plan or the PBGC (or both)
which, in the reasonable judgment of Agent, would have a Material Adverse Effect
on any Borrower.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. Rights and Remedies. (a) Upon the occurrence of (i) an Event
of Default pursuant to Section 10.7 all Obligations shall be immediately due and
payable and this Agreement and the obligation of Lenders to make Advances shall
be deemed terminated; and, (ii) any of the other Events of Default and at any
time thereafter (such default not having previously been cured), at the option
of Required Lenders all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Advances and (iii) a filing of a petition against
Borrower in any involuntary case under any state or federal bankruptcy laws, the
obligation of Lenders to make Advances hereunder shall be terminated other than
as may be required by an appropriate order of the bankruptcy court having
jurisdiction over any Borrower. Upon the occurrence of any Event of Default,
Agent shall have the right to exercise any and all other rights and remedies
provided for herein, under the Uniform Commercial Code and at law or equity
generally, including, without limitation, the right to foreclose the security
interests granted herein and to realize upon any Collateral by any available
judicial procedure and/or to take possession of and sell any or all of the
Collateral with or without judicial process. Agent may enter any of Borrower's
premises or other premises without legal process and without incurring liability
to any Borrower therefor, and Agen may thereupon, or at any time thereafter, in
its discretion without notice or demand, take the Collateral and remove the same
to such place as Agent may deem advisable and Agent may require Borrowers to
make the Collateral available to Agent at a convenient place. With or without
having the Collateral at the time or place of sale, Agent may sell the
Collateral, or any part thereof, at public or private sale, at any time or
place, in one or more sales, at such price or prices, and upon such terms,
either for cash, credit or future delivery, as Agent may elect. Except as to
that part of the Collateral which is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Agent shall
give Borrowers reasonable notification of such sale or sales, it being agreed
that in all events written notice mailed to Borrowers at least five (5) days
prior to such sale or sales is reasonable notification. At any public sale Agent
or any Lender may bid for and become the purchaser, and Agent, any Lender or any
other purchaser at any such sale thereafter shall hold te Collateral sold
absolutely free from any claim or right of whatsoever kind, including any equity
of redemption and such right and equity are hereby expressly waived and released
by each Borrower. In connection with the exercise of the foregoing remedies,
Agent is granted permission to use all of each Borrower's trademarks, trade
styles, trade names, patents, patent applications, licenses, franchises and othe
proprietary rights which are used in connection with (a) Inventory for the
purpose of disposing of such Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished goods. The proceeds realized from the
sale of any Collateral shall be applied as follows: first, to the reasonable
costs, expenses and attorneys' fees and expenses incurred by Agent for
collection and for acquisition, completion, protection, removal, storage, sale
and delivery of the Collateral; second, to interest due upon any of the
Obligations and any fees payable under this Agreement; and, third, to the
principal of the Obligations. If any deficiency shall arise, Borrowers shall
remain liable to Agent and Lenders therefor.
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(b) In addition, upon the occurrence of any Event of Default and at
anytime thereafter (such default having not been previously cured), the
Borrowers shall be required to establish lock-box accounts with financial
institutions acceptable to Agent for the collection or servicing of Receivables
and proceeds of Collateral, and similar instruments for all existing accounts of
the Borrowers or to which the Borrowers' Receivables are currently payable
11.2. Agent's Discretion. Agent shall have the right in its sole
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3. Setoff. In addition to any other rights which Agent or any
Lender may have under applicable law, upon the occurrence of an Event of Default
hereunder, Agent and such Lender shall have a right to apply any Borrower's
property held by Agent and such Lender to reduce the Obligations.
11.4. Rights and Remedies not Exclusive. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any right or remedy shall not preclude the exercise of any other right or
remedies provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. Waiver of Notice. Each Borrower hereby waives notice of
non-payment of any of the Receivables, demand, presentment, protest and notice
thereof with respect to any and all instruments, notice of acceptance hereof,
notice of loans or advances made, credit extended, Collateral received or
delivered, or any other action taken in reliance hereon, and all other demands
and notices of any description, except such as are expressly provided for
herein.
12.2. Delay. No delay or omission on Agent's or any Lender's part
in exercising any right, remedy or option shall operate as a waiver of such or
any other right, remedy or option or of any default.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY
HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT T
TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. Term. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of each
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until July 15, 2001 (the "Term") unless
sooner terminated as herein provided. Borrowers may terminate this Agreement at
any time upon ninety (90) days' prior written notice upon payment in full of the
Obligations. In the event the Obligations are prepaid in full prior to the last
day of the Term for any reason, including acceleration hereunder following an
Event of Default or a mandatory repayment due to the terms hereof (the date of
such prepayment hereinafter referred to as the "Early Termination Date"),
Borrowers shall pay to Agent for the benefit of Lenders an early termination fee
in an amount equal to (x) $180,000 if the Early Termination Date occurs on or
after the Closing Date to and including the date immediately preceding the
eighteenth (18th) month anniversary of the Closing Date, and (y) $0 if the Early
Termination Date occurs on or after the eighteenth (18th) month anniversary of
the Closing Date.
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13.2. Termination. The termination of the Agreement shall not
affect any Borrower's, Agent's or any Lender's rights, or any of the Obligations
having their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The security interests, Liens and rights
granted to Agent and Lenders hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrowers' Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of each Borrower have been paid or performed in full after the
termination of this Agreement or each Borrower has furnished Agent and Lenders
with an indemnification satisfactory to Agent and Lenders with respect thereto.
Accordingly, each Borrower waives any rights which it may have under Section
9-404(1) of the Uniform Commercial Code to demand the filing of termination
statements with respect to the Collateral, and Agent shall not be required to
send such termination statements to each Borrower, or to file them with any
filing office, unless and until this Agreement shall have been terminated in
accordance with its terms and all Obligations paid in full in immediately
available funds. All representations, warranties, covenants, waivers and
agreements contained herein shall survive termination hereof until all
Obligations are paid or performed in full.
XIV. REGARDING AGENT.
14.1. Appointment. Each Lender hereby designates IBJSBCC to act as
Agent for such Lender under this Agreement and the Other Documents. Each Lender
hereby irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Sections
3.3(a) and 3.4), charges and collections (without giving effect to any
collection days) received pursuant to this Agreement, for the ratable benefit of
Lenders. Agent may perform any of its duties hereunder by or through its agents
or employees. As to any matters not expressly provided for by this Agreement
(including without limitation, collection of the Note) Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding; provided, however, that Agent shall not be
required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Documents or applicable law unless Agent
is furnished with an indemnification reasonably satisfactory to Agent with
respect thereto.
14.2. Nature of Duties. Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and the
Other Documents. Neither Agent nor any of its officers, directors, employees or
agents shall be (i) liable for any action taken or omitted by them as such
hereunder or in connection herewith, unless caused by their gross (not mere)
negligence or willful misconduct, or (ii) responsible in any manner for any
recitals, statements, representations or warranties made by any Borrower or any
officer thereof contained in this Agreement, or in any of the Other Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by Agent under or in connection with, this Agreement or any
of the Other Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any of the Other Documents
or for any failure of any Borrower to perform its obligations hereunder. Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any of the Other Documents, or to inspect the
properties, books or records of any Borrower. The duties of Agent as respects
the Advances to Borrowers shall be mechanical and administrative in nature;
Agent shall not have by reason of this Agreement a fiduciary relationship in
respect of any Lender; and nothing in this Agreement, expressed or implied, is
intended to or shall be so construed as to impose upon Agent any obligations in
respect of this Agreement except as expressly set forth herein.
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14.3. Lack of Reliance on Agent and Resignation. Independently and
without reliance upon Agent or any other Lender, each Lender has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of each Borrower in connection with the making and the
continuance of the Advances hereunder and the taking or not taking of any action
in connection herewith, and (ii) its own appraisal of the creditworthiness of
each Borrower. Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession before
making of the Advances or at any time or times thereafter except as shall be
provided by any Borrower pursuant to the terms hereof. Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency of this
Agreement or any Other Document, or of the financial condition of any Borrower,
or be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement, the
Note, the Other Documents or the financial condition of any Borrower, or the
existence of any Event of Default or any Default.
Agent may resign on sixty (60) days' written notice to each of
Lenders and Borrowing Agent and upon such resignation, the Required Lenders will
promptly designate a successor Agent reasonably satisfactory to Borrowers.
Any such successor Agent shall succeed to the rights, powers and
duties of Agent, and the term "Agent" shall mean such successor agent effective
upon its appointment, and the former Agent's rights, powers and duties as Agent
shall be terminated, without any other or further act or deed on the part of
such former Agent. After any Agent's resignation as Agent, the provisions of
this Article XIV shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.
14.4. Certain Rights of Agent. If Agent shall request instructions
from Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5. Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
14.6. Notice of Default. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder or under the Other Documents, unless Agent has received notice from a
Lender or a Borrower referring to this Agreement or the Other Documents,
describing such Default or Event of Default and stating that such notice is a
"notice of default". In the event that Agent receives such a notice, Agent shall
give notice thereof to Lenders. Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided, that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.
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14.7. Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrowers, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct.
14.8. Agent in its Individual Capacity. With respect to the
obligation of Agent to lend under this Agreement, the Advances made by it shall
have the same rights and powers hereunder as any other Lender and as if it were
not performing the duties as Agent specified herein; and the term "Lender" or
any similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with
any Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from any Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
14.9. Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7, 9.8, and 9.9 from any Borrower pursuant
to the terms of this Agreement, Agent will promptly furnish such documents and
information to Lenders.
14.10. Borrowers' Undertaking to Agent. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy the relevant Borrower's obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.
XV. BORROWING AGENCY.
15.1. Borrowing Agency Provisions.
(a) Each Borrower hereby irrevocably designates Borrowing
Agent to be its attorney and agent and in such capacity to borrow, sign and
endorse notes, and execute and deliver all instruments, documents, writings and
further assurances now or hereafter required hereunder, on behalf of such
Borrower or Borrowers, and hereby authorizes Agent to pay over or credit all
loan proceeds hereunder in accordance with the request of Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing
facility with a borrowing agent in the manner set forth in this Agreement is
solely as an accommodation to Borrowers and at their request. Neither Agent nor
any Lender shall incur liability to Borrowers as a result thereof. To induce
Agent and Lenders to do so and in consideration thereof, each Borrower hereby
indemnifies Agent and each Lender and holds Agent and each Lender harmless from
and against any and all liabilities, expenses, losses, damages and claims of
damage or injury asserted against Agent or any Lender by any Person arising from
or incurred by reason of the handling of the financing arrangements of Borrowers
as provided herein, reliance by Agent or any Lender on any request or
instruction from Borrowing Agent or any other action taken by Agent or any
Lender with respect to this Section 15.1 except due to willful misconduct or
gross (not mere) negligence by the indemnified party.
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(c) All Obligations shall be joint and several, and each
Borrower shall make payment upon the maturity of the Obligations by acceleration
or otherwise, and such obligation and liability on the part of each Borrower
shall in no way be affected by any extensions, renewals and forbearance granted
to Agent or any Lender to any Borrower, failure of Agent or any Lender to give
any Borrower notice of borrowing or any other notice, any failure of Agent or
any Lender to pursue or preserve its rights against any Borrower, the release by
Agent or any Lender of any Collateral now or thereafter acquired from any
Borrower, and such agreement by each Borrower to pay upon any notice issued
pursuant thereto is unconditional and unaffected by prior recourse by Agent or
any Lender to the other Borrowers or any Collateral for such Borrower's
Obligations or the lack thereof.
15.2. Waiver of Subrogation. Each Borrower expressly waives any and
all rights of subrogation, reimbursement, indemnity, exoneration, contribution
of any other claim which such Borrower may now or hereafter have against the
other Borrowers or other Person directly or contingently liable for the
Obligations hereunder, or against or with respect to the other Borrowers'
property (including, without limitation, any property which is Collateral for
the Obligations), arising from the existence or performance of this Agreement,
until termination of this Agreement and repayment in full of the Obligations.
XVI. MISCELLANEOUS.
16.1. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applied to
contracts to be performed wholly within the State of New York. Any judicial
proceeding brought by or against any Borrower with respect to any of the
Obligations, this Agreement or any related agreement may be brought in any court
of competent jurisdiction in the State of New York, United States of America,
and, by execution and delivery of this Agreement, each Borrower accepts for
itself and in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Each
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by registered mail (return
receipt requested) directed to Borrowing Agent at its address set forth in
Section 16.6 and service so made shall be deemed completed five (5) days after
the same shall have been so deposited in the mails of the United States of
America, or, at the Agent's and/or any Lender's option, by service upon
Borrowing Agent which each Borrower irrevocably appoints as such Borrower's
Agent for the purpose of accepting service within the State of New York. Nothing
herein shall affect the right to serve process in any manner permitted by law or
shall limit the right of Agent or any Lender to bring proceedings against any
Borrower in the courts of any other jurisdiction. Each Borrower waives any
objection to jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or based upon
forum non conveniens. Any judicial proceeding by any Borrower against Agent or
any Lender involving, directly or indirectly, any matter or claim in any way
arising out of, related to or connected with this Agreement or any related
agreement, shall be brought only in a federal or state court located in the
County of New York, State of New York.
16.2. Entire Understanding. (a) This Agreement and the documents
executed concurrently herewith contain the entire understanding between each
Borrower, Agent and each Lender and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof. Any promises,
representations, warranties or guarantees not herein contained and hereinafter
made shall have no force and effect unless in writing, signed by each
Borrower's, Agent's and each Lender's respective officers. Neither this
Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or by
any course of dealing, or in any manner other than by an agreement in writing,
signed by the party to be charged. Each Borrower acknowledges that it has been
advised by counsel in connection with the execution of this Agreement and Other
Documents and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.
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(b) The Required Lenders, Agent with the consent in writing
of the Required Lenders, and Borrowers may, subject to the provisions of this
Section 16.2 (b), from time to time enter into written supplemental agreements
to this Agreement or the Other Documents executed by Borrowers, for the purpose
of adding or deleting any provisions or otherwise changing, varying or waiving
in any manner the rights of Lenders, Agent or Borrowers thereunder or the
conditions, provisions or term
thereof of waiving any Event of Default thereunder, but only to the extent
specified in such written agreements; provided, however, that no such
supplemental agreement shall, without the consent of all Lenders:
(i) increase the Commitment Percentage of any Lender.
(ii) extend the maturity of any Note or the due date for
any amount payable hereunder, or decrease the rate of interest or reduce any fee
payable by Borrowers to Lenders pursuant to this Agreement.
(iii) alter the definition of the term Required Lenders
or alter, amend or modify this Section 16.2(b).
(iv) release any Collateral during any calendar year
(other than in accordance with the provisions of this Agreement) having an
aggregate value in excess of $500,000.
(v) change the rights and duties of Agent.
(vi) permit any Revolving Advance to be made if after
giving effect thereto the total of Advances outstanding hereunder would exceed
the Formula Amount for more than sixty (60) consecutive Business Days or exceed
one hundred and ten percent (110%) of the Formula Amount.
(vii) increase the Advance Rates above the Advance Rates
in effect on the Closing Date.
(viii) increase the Maximum Revolving Advance Amount or
permit any Revolving Advance to be made if after giving effect thereto the total
of Revolving Advances outstanding hereunder would exceed the Formula Amount for
more than sixty (60) consecutive Business Days or exceed one hundred ten percent
(110%) of the Formula Amount.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
In the event that Agent requests the consent of a Lender pursuant
to this Section 15.2 and such Lender shall not respond or reply to Agent in
writing within five (5) days of delivery of such request, such Lender shall be
deemed to have consented to matter that was the subject of the request. In the
event that Agent requests the consent of a Lender pursuant to this Section 15.2
and such consent is denied, then IBJSBCC may, at its option, require such Lender
to assign its interest in the Advances to IBJSBCC or to another Lender or to any
other Person designated by the Agent (the "Designated Lender"), for a price
equal to the then outstanding principal amount thereof plus accrued and unpaid
interest and fees due such Lender, which interest and fees shall be paid when
collected from Borrower. In the event IBJSBCC elects to require any Lender to
assign its interest to IBJSBCC or to the Designated Lender, IBJSBCC will so
notify such Lender in writing within forty five (45) days following suc Lender's
denial, and such Lender will assign its interest to IBJSBCC or the Designated
Lender no later than five (5) days following receipt of such notice pursuant to
a Commitment Transfer Supplement executed by such Lender, IBJSBCC or the
Designated Lender, as appropriate, and Agent.
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16.3. Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to
the benefit of Borrowers, Agent, each Lender, all future holders of the
Obligations and their respective successors and assigns, except that no Borrower
may assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of Agent and each Lender.
(b) Each Borrower acknowledges that in the regular
course of commercial banking business one or more Lenders may at any time and
from time to time sell participating interests in the Advances to other
financial institutions (each such transferee or purchaser of a participating
interest, a "Transferee"). Each Transferee may exercise all rights of payment
(including without limitation rights of set-off) with respect to the portion of
such Advances held by it or other Obligations payable hereunder as fully as if
such Transferee were the direct holder thereof provided that Borrowers shall not
be required to pay to any Transferee more than the amount which it would have
been required to pay to Lender which granted an interest in its Advances or
other Obligations payable hereunder to such Transferee had such Lender retained
such interest in the Advances hereunder or other Obligations payable hereunder
and in no event shall Borrowers be required to pay any such amount arising from
the same circumstances and with respect to the same Advances or other
Obligations payable hereunder to both such Lender and such Transferee. Each
Borrower hereby grants to any Transferee a continuing security interest in any
deposits, moneys or other property actually or constructively held by such
Transferee as security for the Transferee's interest in the Advances.
(c) Any Lender may with the consent of Agent which shall
not be unreasonably withheld or delayed sell, assign or transfer all or any part
of its rights under this Agreement and the Other Documents to one or more
additional banks or financial institutions and one or more additional banks or
financial institutions may commit to make Advances hereunder (each a "Purchasing
Lender"), in minimum amounts of not less than $5,000,000 pursuant to a
Commitment Transfer Supplement, executed by a Purchasing Lender, the transferor
Lender, and Agent and delivered to Agent for recording. Upon such execution,
delivery, acceptance and recording, from and after the transfer effective date
determined pursuant to such Commitment Transfer Supplement, (i) Purchasing
Lender thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Other Documents. Borrowers hereby consent to the addition of such Purchasing
Lender and the resulting adjustment of the Commitment Percentages arising from
the purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the Other
Documents. Borrowers shall execute and deliver such further documents and do
such further acts and things in order to effectuate the foregoin.
(d) Agent shall maintain at its address a copy of each
Commitment Transfer Supplement delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Advances owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and Borrowers, Agent and Lenders may treat each
Person whose name is recorded in the Register as the owner of the Advance
recorded therein for the purposes of this Agreement. The Register shall be
available for inspection by Borrowers or any Lender at any reasonable time and
from time to time upon reasonable prior notice. Agent shall receive a fee in the
amount of $3,500 payable by the applicable Purchasing Lender upon the effective
date of each transfer or assignment to such Purchasing Lender.
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(e) Borrowers authorize each Lender to disclose to any
Transferee or Purchasing Lender and any prospective Transferee or Purchasing
Lender any and all financial information in such Lender's possession concerning
Borrowers which has been delivered to such Lender by or on behalf of Borrowers
pursuant to this Agreement or in connection with such Lender's credit evaluation
of Borrowers.
16.4. Application of Payments. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that any
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for any Borrower's benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause, then, to such
extent, the Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Agent or such Lender.
16.5. Indemnity. Each Borrower shall indemnify Agent, each Lender
and each of their respective officers, directors, Affiliates, employees and
agents from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including, without limitation, fees and disbursements
of counsel) which may be imposed on, incurred by, or asserted against Agent or
any Lender in any litigation, proceeding or investigation instituted or
conducted by any governmental agency or instrumentality or any other Person with
respect to any aspect of, or any transaction contemplated by, or referred to in,
or any matter related to, this Agreement or the Other Documents, whether or not
Agent or any Lender is a party thereto, except to the extent that any of the
foregoing arises out of the willful misconduct of the party being indemnified.
16.6. Notice. Any notice or request hereunder may be given to any
Borrower or to Agent or any Lender at their respective addresses set forth below
or at such other address as may hereafter be specified in a notice designated as
a notice of change of address under this Section. Any notice or request
hereunder shall be given by (a) hand delivery, (b) overnight courier, (c)
registered or certified mail, return receipt requested, (d) telex or telegram,
subsequently confirmed by registered or certified mail, or (e) telecopy to the
number set out below (or such other number as may hereafter be specified in a
notice designated as a notice of change of address) with electronic confirmation
of its receipt. Any notice or other communication required or permitted pursuant
to this Agreement shall be deemed given (a) when personally delivered to any
officer of the party to whom it is addressed, (b) on the earlier of actual
receipt thereof or three (3) days following posting thereof by certified or
registered mail, postage prepaid, or (c) upon actual receipt thereof when sent
by a recognized overnight delivery service or (d) upon actual receipt thereof
when sent by telecopier to the number set forth below with electronic
confirmation of its receipt, in each case addressed to each party at its address
set forth below or at such other address as has been furnished in writing by a
party to the other by like notice:
(A) If to Agent or IBJ Xxxxxxxx Business Credit Corporation
IBJSBCC at: Xxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000
with a copy to: Pryor, Cashman, Xxxxxxx & Xxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(B) If to a Lender other than Agent, as specified on the signature
pages hereof
58
(C) If to Borrowing Agent
or any Borrower, at: Terrace Holdings, Inc.
0000 X.X. 00xx Xxxxxx
Xxxxxxx Xxxxx, Xx. 00000
Attention: Xxxxxxxx X. Xxxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000
with a copy to: Fishman, Merrick, Miller, Genelly,
Springer, Xxxxxxx & Xxxxxxxx
000 X. Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx, Esq.
Telephone: 000-000-0000
Telecopier: 000-000-0000
16.7. Survival. The obligations of Borrowers under Sections 2.2(f),
3.7, 3.8, 3.9, 4.19(h), 14.7 and 16.5 shall survive termination of this
Agreement and the Other Documents and payment in full of the Obligations.
16.8. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
16.9. Expenses. All costs and expenses including, without
limitation, reasonable attorneys' fees (including the allocated costs of in
house counsel) and disbursements incurred by Agent, Agent on behalf of Lenders
and Lenders (a) in all efforts made to enforce payment of any Obligation or
effect collection of any Collateral, or (b) in connection with the entering
into, modification, amendment, administration and enforcement of this Agreement
or any consents or waivers hereunder and all related agreements, documents and
instruments, or (c) in instituting, maintaining, preserving, enforcing and
foreclosing on Agent's security interest in or Lien on any of the Collateral,
whether through judicial proceedings or otherwise, or (d) in defending or
prosecuting any actions or proceedings arising out of or relating to Agent's or
any Lender's transactions with any Borrower, or (e) in connection with any
advice given to Agent or any Lender with respect to its rights and obligations
under this Agreement and all related agreements, may be charged to Borrowers'
Account and shall be part of the Obligations.
16.10. Injunctive Relief. Each Borrower recognizes that, in the
event any Borrower fails to perform, observe or discharge any of its obligations
or liabilities under this Agreement, any remedy at law may prove to be
inadequate relief to Lenders; therefore, Agent, if Agent so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.
16.11. Consequential Damages. Neither Agent nor any Lender, nor any
agent or attorney for any of them, shall be liable to any Borrower for
consequential damages arising from any breach of contract, tort or other wrong
relating to the establishment, administration or collection of the Obligations.
16.12. Captions. The captions at various places in this Agreement
are intended for convenience only and do not constitute and shall not be
interpreted as part of this Agreement.
16.13. Counterparts; Telecopied Signatures. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
59
16.14. Construction. The parties acknowledge that each party and
its counsel have reviewed this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments, schedules or exhibits thereto.
16.15. Confidentiality; Sharing Information. (a) Agent, each Lender
and each Transferee shall hold all non-public information obtained by Agent,
such Lender or such Transferee pursuant to the requirements of this Agreement in
accordance with Agent's, such Lender's and such Transferee's customary
procedures for handling confidential information of this nature; provided,
however, Agent, each Lender and each Transferee may disclose such confidential
information (a) to its examiners, affiliates, outside auditors, counsel and
other professional advisors, (b) to Agent, any Lender or to any prospective
Transferees and Purchasing Lenders, and (c) as required or requested by any
Governmental Body or representative thereof or pursuant to legal process;
provided, further that (i) unless specifically prohibited by applicable law or
court order, Agent, each Lender and each Transferee shall use its best efforts
prior to disclosure thereof, to notify the applicable Borrower of the applicable
request for disclosure of such non-public information (A) by a Governmental Body
or representative thereof (other than any such request in connection with an
examination of the financial condition of a Lender or a Transferee by such
Governmental Body) or (B) pursuant to legal process and (ii) in no event shall
Agent, any Lender or any Transferee be obligated to return any materials
furnished by any Borrower other than those documents and instruments in
possession of Agent or any Lender in order to perfect its Lien on the Collateral
once the Obligations have been paid in full and this Agreement has been
terminated.
(b) Borrower acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
such Borrower or one or more of its Affiliates (in connection with this
Agreement or otherwise) by any Lender or by one or more Subsidiaries or
Affiliates of such Lender and each Borrower hereby authorizes each Lender to
share any information delivered to such Lender by such Borrower and its
Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of
such Lender, it being understood that any such Subsidiary or Affiliate of any
Lender receiving such information shall be bound by the provision of Section
16.15 as if it were a Lender hereunder. Such authorization shall survive the
repayment of the other Obligations and the termination of the Loan Agreement.
16.16. Publicity. Each Borrower and each Lender hereby authorizes
Agent to make appropriate announcements of the financial arrangement entered
into among Borrowers, Agent and Lenders, including, without limitation,
announcements which are commonly known as tombstones, in such publications and
to such selected parties as Agent shall in its sole and absolute discretion deem
appropriate; subject to the consent of THI, which shall not be unreasonably
denied or delayed.
60
Each of the parties has signed this Agreement as of the day and
year first above written.
TERRACE HOLDINGS, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
__________________________________
Address
A-ONE-A PRODUCE AND PROVISIONS, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
__________________________________
Address
TERRACE FRESH, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
__________________________________
Address
TERRACE BANNER, INC.
(d/b/a BANNER BEEF AND SEAFOOD)
By:_______________________________
Name:_____________________________
Title:____________________________
__________________________________
Address
IBJ XXXXXXXX BUSINESS CREDIT CORPORATION,
as Lender and as Agent
By:_______________________________
Name:_____________________________
Title:____________________________
Xxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Commitment Percentage: 100%
00
XXXXX XX XXX XXXX )
) ss.:
COUNTY OF NEW YORK )
On the 15th day of July, 1998, before me personally came Xxxxxxxx X.
Xxxxx, to me known, who, being by me duly sworn, did depose and say that he is
the Executive Vice President of TERRACE HOLDINGS, INC. and President of each of
A-ONE-A PRODUCE AND PROVISIONS, INC., TERRACE FRESH, INC. and TERRACE BANNER,
INC. (d/b/a BANNER BEEF AND SEAFOOD), the corporations described in and which
executed the foregoing instrument; and that he signed his name thereto as the
act and deed of such corporations by order of the board of directors of said
corporations.
______________________
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 15th day of July, 1998, before me personally came Xxxxx X.Xxxx,
to me known, who, being by me duly sworn, did depose and say that he is the
Senior Vice President of IBJ XXXXXXXX BUSINESS CREDIT CORPORATION, the
corporation described in and which executed the foregoing instrument; and that
he signed his name thereto as the act and deed of such corporation by order of
the board of directors of said corporation.
______________________
NOTARY PUBLIC
62
List of Exhibits and Schedules
------------------------------
Exhibits
Exhibit 2.1(a) Revolving Credit Note
Exhibit 2.4 Term Note
Exhibit 5.5(b) Financial Projections
Exhibit 8.1(i) Financial Condition Certificate
Exhibit 16.3 Commitment Transfer Supplement
Schedules
Schedule 1.2 Permitted Encumbrances
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(c) Location of Executive Offices
Schedule 4.19 Real Property
Schedule 5.2(a) States of Qualification and Good Standing
Schedule 5.2(b) Subsidiaries
Schedule 5.4 Federal Tax Identification Number
Schedule 5.6 Prior Names
Schedule 5.8(b) Litigation
Schedule 5.8(d) Plans
Schedule 5.9 Intellectual Property, Source Code Escrow Agreements
Schedule 5.10 Licenses and Permits
Schedule 5.14 Labor Disputes
Schedule 7.3 Guarantees
Schedule 1.2
Schedule of Permitted Encumbrances
Schedule 4.5
Equipment and Inventory Locations
Schedule 4.15(c)
Location of Executive Offices
Schedule 4.19
Real Property
Schedule 5.2(a)
States of Qualification and Good Standing
Schedule 5.2(b)
Subsidiaries
Schedule 5.4
Federal Tax Identification Number
Schedule 5.5(c)
Material Adverse Change
Schedule 5.6
Prior Names
Schedule 5.8(b)
Indebtedness for Borrowed Money
Schedule 5.8(b)
Litigation
Schedule 5.8(d)
Plans
Schedule 5.9
Intelectual Property
Schedule 5.10
Licenses and Permits
Schedule 5.11
Default on Indebtedness
Schedule 5.12
Default
Schedule 5.14
Labor Disputes
Schedule 7.22
Post-Closing Items
Item to Be Performed Date to be Completed By
1. Key-man life to be obtained August 17, 1998
and certificates delivered to Agent
2. A-One-A and Fresh to be in and
deliver good standing certificates to Agent August 17, 1998
3. THI qualified in Florida as a foreign corporation August 17, 1998
4. Appropriate licenses obtained and copies September 14, 1998
thereof delivered to Agent with respect
Terrace Banner assets
5. All UCC-3 termination statements delivered July 23, 1998
to Agent
6. Foothill cancellation of blocked account July 16, 1998
agreement; all cash payments wired to Agent daily
7. Blocked Account Agreement re cash payments July 29, 1998
wired to Agent established
8. All EDI payments directly to IBJ Xxxxxxxx July 29, 1998
9. Closing balance sheet, certified by EVP of THI, July 29, 1998
reflecting Acquisition and Advances
10. Intercreditor legend on sub debt and certification July 29, 1998
by subordinated obligees
TABLE OF CONTENTS
I. DEFINITIONS.........................................................
1.1. Accounting Terms......................................
1.2. General Terms.........................................
1.3. Uniform Commercial Code Terms.........................
1.4. Certain Matters of Construction.......................
II. ADVANCES, PAYMENTS..................................................
2.1. (a) Revolving Advances.........................
(c) Discretionary Rights.......................
2.2. Procedure for Revolving Advances Borrowing............
2.3. Disbursement of Advance Proceeds......................
2.4. Term Loan.............................................
2.5. Maximum Advances......................................
2.6. Repayment of Advances.................................
2.7. Repayment of Excess Advances..........................
2.8. Statement of Account..................................
2.9. Letters of Credit.....................................
2.10. Issuance of Letters of Credit.........................
2.11. Requirements For Issuance of Letters of Credit........
2.12. Additional Payments...................................
2.13. Manner of Borrowing and Payment.......................
2.14. Mandatory Prepayments.................................
2.15. Use of Proceeds.......................................
2.16. Defaulting Lender.....................................
III. INTEREST AND FEES...................................................
3.1. Interest..............................................
3.2. Letter of Credit Fees.................................
3.3. (a) Closing Fee................................
(b) Facility Fee...............................
3.4. (a) Collateral Evaluation Fee..................
(b) Collateral Monitoring Fee..................
3.5. Computation of Interest and Fees......................
3.6. Maximum Charges.......................................
3.7. Increased Costs.......................................
3.8. Basis For Determining Interest Rate
Inadequate or Unfair..................................
3.9. Capital Adequacy......................................
IV. COLLATERAL: GENERAL TERMS..........................................
4.1. Security Interest in the Collateral...................
4.2. Perfection of Security Interest.......................
4.3. Disposition of Collateral.............................
4.4. Preservation of Collateral............................
4.5. Ownership of Collateral...............................
4.6. Defense of Agent's and Lenders' Interests.............
4.7. Books and Records.....................................
4.8. Financial Disclosure..................................
4.9. Compliance with Laws..................................
4.10. Inspection of Premises................................
4.11. Insurance.............................................
4.12. Failure to Pay Insurance..............................
4.13. Payment of Taxes......................................
4.14. Payment of Leasehold Obligations......................
4.15. Receivables...........................................
(a) Nature of Receivables......................
(b) Solvency of Customers......................
(c) Locations of Borrower......................
(d) Collection of Receivables..................
(e) Notification of Assignment of Receivables..
(f) Power of Agent to Act on Borrowers' Behalf.
(g) No Liability...............................
(h) Collection of Checks; Establishment
of a Lockbox Account, Dominion Account.....
(i) Adjustments................................
4.16. Inventory.............................................
4.17. Maintenance of Equipment..............................
4.18. Exculpation of Liability..............................
4.19. Environmental Matters.................................
4.20. Financing Statements..................................
V. REPRESENTATIONS AND WARRANTIES......................................
5.1. Authority.............................................
5.2. Formation and Qualification...........................
5.3. Survival of Representations and Warranties............
5.4. Tax Returns...........................................
5.5. Financial Statements..................................
5.6. Corporate Name........................................
5.7. O.S.H.A. and Environmental Compliance.................
5.8. Solvency; No Litigation, Violation,
Indebtedness or Default...............................
5.9. Patents, Trademarks, Copyrights and Licenses..........
5.10. Licenses and Permits..................................
5.11. Default of Indebtedness...............................
5.12. No Default............................................
5.13. No Burdensome Restrictions............................
5.14. No Labor Disputes.....................................
5.15. Margin Regulations....................................
5.16. Investment Company Act................................
5.17. Disclosure............................................
5.18. Delivery of Acquisition Agreement.....................
5.19. Swaps.................................................
5.20. Conflicting Agreements................................
5.21. Application of Certain Laws and Regulations...........
Business and Property of Borrower...............................
Year 2000.......................................................
Receipts and Bank Accounts......................................
VI. AFFIRMATIVE COVENANTS...............................................
6.1. Payment of Fees.......................................
6.2. Conduct of Business and Maintenance of
Existence and Assets..................................
6.3. Violations............................................
6.4. Government Receivables................................
6.5. Net Worth.............................................
6.6. Current Ratio.........................................
6.7. Cash Flow Ratio.......................................
6.8. Working Capital.......................................
6.9. Execution of Supplemental Instruments.................
6.10. Payment of Indebtedness...............................
6.11. Standards of Financial Statements.....................
6.12. Exercise of Rights....................................
VII. NEGATIVE COVENANTS..................................................
7.1. Merger, Consolidation, Acquisition and Sale of Assets.
7.2. Creation of Liens.....................................
7.3. Guarantees............................................
7.4. Investments...........................................
7.5. Loans.................................................
7.6. Capital Expenditures..................................
7.7. Dividends.............................................
7.8. Indebtedness..........................................
7.9. Nature of Business....................................
7.10. Transactions with Affiliates..........................
7.11. Leases................................................
7.12. Subsidiaries..........................................
7.13. Fiscal Year and Accounting Changes....................
7.14. Pledge of Credit......................................
7.15. Amendment of Articles of Incorporation, By-Laws.......
7.16. Compliance with ERISA.................................
7.17. Prepayment of Indebtedness............................
7.18. Minimum Availability..................................
Other Agreements................................................
Public Company..................................................
Receipts and Bank Accounts......................................
Post-Closing Items..............................................
VIII. CONDITIONS PRECEDENT................................................
8.1. Conditions to Initial Advances........................
(a) Note.......................................
(b) Filings, Registrations and Recordings......
(c) Corporate Proceedings of Borrowers.........
(d) Incumbency Certificates of Borrowers.......
(e) Certificates...............................
(f) Good Standing Certificates.................
(g) Legal Opinion..............................
(h) No Litigation..............................
(i) Financial Condition Certificates...........
(j) Collateral Examination.....................
(k) Fees.......................................
(l) Pro Forma Financial Statements.............
(m) Acquisition Documents......................
(n) Subordination Agreements...................
(o) Guaranties, Pledge Agreement,
Other Documents............................
(p) Insurance..................................
(q) Title Insurance............................
(r) Environmental Reports......................
(s) Payment Instructions.......................
(t) Blocked Accounts...........................
(u) Consents & Acknowledgments.................
(v) No Adverse Material Change.................
(w) Leasehold Agreements.......................
(x) Mortgage...................................
(y) Subordinated Debt Documentation............
(z) Guarantees and Other Documents.............
(aa) Net Worth..................................
(ab) Contract Review............................
(ac) Closing Certificate........................
(ad) Borrowing Base.............................
(ae) Undrawn Availability.......................
(af) Other......................................
8.2. Conditions to Each Advance............................
(a) Representations and Warranties.............
(b) No Default.................................
(c) Maximum Advances...........................
IX. INFORMATION AS TO BORROWER..........................................
9.1. Disclosure of Material Matters........................
9.2. Schedules.............................................
9.3. Environmental Reports.................................
9.4. Litigation............................................
9.5. Material Occurrences..................................
9.6. Government Receivables................................
9.7. Annual Financial Statements...........................
9.8. Quarterly Financial Statements........................
9.9. Monthly Financial Statements..........................
9.10. Other Reports.........................................
9.11. Additional Information................................
9.12. Projected Operating Budget............................
9.13. Variances From Operating Budget.......................
9.14. Notice of Suits, Adverse Events.......................
9.15. ERISA Notices and Requests............................
9.16. Additional Documents..................................
X. EVENTS OF DEFAULT...................................................
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT..........................
11.1. Rights and Remedies...................................
11.2. Agent's Discretion....................................
11.3. Setoff................................................
11.4. Rights and Remedies not Exclusive.....................
XII. WAIVERS AND JUDICIAL PROCEEDINGS....................................
12.1. Waiver of Notice......................................
12.2. Delay.................................................
12.3. Jury Waiver...........................................
XIII. EFFECTIVE DATE AND TERMINATION......................................
13.1. Term..................................................
13.2. Termination...........................................
XIV. REGARDING AGENT.....................................................
14.1. Appointment...........................................
14.2. Nature of Duties......................................
14.3. Lack of Reliance on Agent and Resignation.............
14.4. Certain Rights of Agent...............................
14.5. Reliance..............................................
14.6. Notice of Default.....................................
14.7. Indemnification.......................................
14.8. Agent in its Individual Capacity......................
14.9. Delivery of Documents.................................
14.10. Borrowers' Undertaking to Agent.......................
XV. BORROWING AGENCY....................................................
15.1. Borrowing Agency Provisions...........................
15.2. Waiver of Subrogation.................................
XVI. MISCELLANEOUS.......................................................
16.1. Governing Law.........................................
16.2. Entire Understanding..................................
16.3. Successors and Assigns; Participations; New Lenders...
16.4. Application of Payments...............................
16.5. Indemnity.............................................
16.6. Notice................................................
16.7. Survival..............................................
16.8. Severability..........................................
16.9. Expenses..............................................
16.10. Injunctive Relief.....................................
16.11. Consequential Damages.................................
16.12. Captions..............................................
16.13. Counterparts; Telecopied Signatures...................
16.14. Construction..........................................
16.15. Confidentiality.......................................
16.16. Publicity.............................................