FINANCING AGREEMENT
THE CIT GROUP/COMMERCIAL SERVICES, INC.
(AS AGENT AND LENDER)
AND
BERNARD CHAUS, INC.
(AS BORROWER)
DATED: SEPTEMBER 27, 2002
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TABLE OF CONTENTS
SECTION 1. DEFINITIONS 1
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SECTION 2. CONDITIONS PRECEDENT. 15
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SECTION 3. REVOLVING LOANS 19
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SECTION 4. TERM LOAN 23
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SECTION 5. LETTERS OF CREDIT 24
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SECTION 6. COLLATERAL 26
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SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS 29
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SECTION 8. INTEREST, FEES AND EXPENSES 39
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SECTION 9. POWERS 45
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SECTION 10. EVENTS OF DEFAULT AND REMEDIES 46
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SECTION 11. TERMINATION 50
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SECTION 12. MISCELLANEOUS 51
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SECTION 13. AGREEMENT BETWEEN THE LENDERS 53
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SECTION 14. AGENCY 56
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EXHIBIT
Exhibit A Form of Term Loan Promissory Note
Exhibit B Form of Revolving Loan Promissory Note
Exhibit C Form of Assignment and Transfer Agreement
Exhibit D Form of Borrowing Base Certificate
Exhibit E Form of Opinion
SCHEDULES
Schedule 1 - Collateral Information
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THE CIT GROUP/COMMERCIAL SERVICES, INC., a New York corporation, with
offices located at 1211 Avenue of the Americas, New York, New York 10036
(hereinafter "CIT"), and CIT as agent for the lenders (the "Agent"), and any
other party which now or hereafter becomes a lender hereunder pursuant to
Section 13 hereof (individually a "Lender" and collectively the "Lenders") are
pleased to confirm the terms and conditions under which the Agent shall make
revolving loans, term loans and other financial accommodations to BERNARD CHAUS,
INC., a Delaware corporation with a principal place of business at 530 Seventh
Avenue, New York, New York 10018 (herein the "Company").
SECTION 1. DEFINITIONS
ACCOUNTS shall mean all of the Company's now existing and future: (a) accounts
(as defined in the UCC), and any and all other receivables (whether or not
specifically listed on schedules furnished to the Agent), including, without
limitation, all accounts created by, or arising from, all of the Company's
sales, leases, rentals of goods or renditions of services to its customers,
including but not limited to, those accounts arising under any of the Company's
trade names or styles, or through any of the Company's divisions; (b) any and
all instruments, documents, chattel paper (including electronic chattel paper)
(all as defined in the UCC); (c) unpaid seller's or lessor's rights (including
rescission, replevin, reclamation, repossession and stoppage in transit)
relating to the foregoing or arising therefrom; (d) rights to any goods
represented by any of the foregoing, including rights to returned, reclaimed or
repossessed goods; (e) reserves and credit balances arising in connection with
or pursuant hereto; (f) guarantees, supporting obligations, payment intangibles
and letter of credit rights (all as defined in the UCC); (g) insurance policies
or rights relating to any of the foregoing; (h) general intangibles pertaining
to any and all of the foregoing (including all rights to payment, including
those arising in connection with bank and non-bank credit cards), and including
books and records and any electronic media and software thereto; (i) notes,
deposits or property of account debtors securing the obligations of any such
account debtors to the Company; and (j) cash and non-cash proceeds (as defined
in the UCC) of any and all of the foregoing.
ANNIVERSARY DATE shall mean the date occurring three (3) years from the Closing
Date and the same date in every year thereafter.
APPLICABLE MARGIN for each type of loan shall mean as of the date of this
Financing Agreement, the applicable percentage specified below:
---------------------------------------- -------------------------------------- --------------------------------------
TYPE OF LOAN APPLICABLE MARGIN APPLICABLE MARGIN FOR LIBOR LOANS
FOR JPMORGAN CHASE
BANK RATE LOANS
---------------------------------------- -------------------------------------- --------------------------------------
Revolving Loans 0.50% 3.25%
---------------------------------------- -------------------------------------- --------------------------------------
Term Loan 1.00% 3.75%
---------------------------------------- -------------------------------------- --------------------------------------
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Thereafter effective as of the first day of the month following delivery to
Agent of the consolidated financial statements of the Company and its
Subsidiaries for the Fiscal Year ended June 30, 2003 (the "2003 Financials"),
the Applicable Margin for each type of loan shall be adjusted (up or down), if
necessary, to the applicable percent per annum set forth in the pricing table
set forth below corresponding to the pricing level set forth below which level
shall correspond to the least favorable performance for any of the following
financial tests; provided, however, with respect to a downward adjustment to
Level IV no such adjustment shall occur unless the Company's performance for
each of the three financial tests is within the levels specified below for Level
IV:
---------------------------------- ---------------------------- -------------------------------- --------------------------
If Availability as of 6/30/03 is: And if Fixed Charge And if Leverage Ratio as of Then, Level of
-------------------------------- -------------------- ----------------------------
Coverage Ratio for the 6/30/03 is: Applicable Margins:
----------------------- ---------- ------------------
rolling four quarters
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ending 6/30/03 is:
-----------------
---------------------------------- ---------------------------- -------------------------------- --------------------------
(greater than or equal to) (greater than or equal to)
$11,000,000 2.75 to 1 (less than or equal to) 1.5 to 1 Level I
---------------------------------- ---------------------------- -------------------------------- --------------------------
(greater than) $9,476,000 (greater than or equal to)
2.25 to 1, but (less than) (less than or equal to) 2.00 to 1,
2.75 to 1 but (greater than) 1.5 to 1 Level II
---------------------------------- ---------------------------- -------------------------------- --------------------------
(equal to) $9,476,000 (greater than or equal to) (less than or equal to)
1.75 to 1, but (less than) 2.43 to 1, but (greater than) Level III
2.25 to 1 2.00 to 1
---------------------------------- ---------------------------- -------------------------------- --------------------------
(less than) $9,476,000 (greater than or equal to) (less than or equal to)
1.5 to 1, but (less than) 2.75 to 1, but (greater than) Level IV
1.75 to 1 2.43 to 1
---------------------------------- ---------------------------- -------------------------------- --------------------------
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Applicable Margins
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Level I Level II Level III Level IV
------- -------- --------- --------
--------------------------------------- ----------------- ---------------- ---------------- -------------------------
Revolving Loan - JP Morgan Chase Bank 0% 0.25% 0.50% 0.75%
Rate
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Revolving Loan - LIBOR 2.75% 3.00% 3.25% 3.50%
--------------------------------------- ----------------- ---------------- ---------------- -------------------------
Term Loan - JP Morgan Chase Bank Rate 0.50% 0.75% 1.00% 1.25%
--------------------------------------- ----------------- ---------------- ---------------- -------------------------
Term Loan - LIBOR 3.25% 3.50% 3.75% 4.00%
--------------------------------------- ----------------- ---------------- ---------------- -------------------------
If the Company shall fail to deliver the 2003 Financials by the date required,
each Applicable Margin shall be conclusively presumed to equal the highest
Applicable Margin specified in the pricing table set forth above until the date
of delivery of such 2003 Financials.
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ARM SERVICES AGREEMENT - shall mean CIT's standard form Receivable Management
Services Agreement pursuant to which CIT provides bookkeeping and collection
services with respect to Accounts.
ASSIGNMENT AND TRANSFER AGREEMENT - shall mean the Assignment and Transfer
Agreement in the form of Exhibit C hereto.
AVAILABILITY shall mean at any time the amount by which: (a) the Borrowing Base
exceeds (b) the outstanding aggregate amount of all Obligations, including
without limitation, all Obligations with respect to Revolving Loans, an amount
equal to 120% of outstanding the Letters of Credit but excluding the Term Loan.
AVAILABILITY RESERVE shall mean the sum of: (a) (i) three (3) months rental
payments or similar charges for any of the Company's leased premises which
contain material amounts of Collateral for which the Company has not delivered
to the Agent a landlord's waiver in form and substance reasonably satisfactory
to the Agent, plus (ii) three (3) months estimated payments plus any other fees
or charges owing by the Company to any applicable warehousemen or third party
processor (as determined by the Agent in its reasonable business judgment),
provided that any of the foregoing amounts shall be adjusted from time to time
hereafter upon (x) the opening or closing of a Collateral location and/or (y)
any change in the amount of rental, storage or processor payments or similar
charges; provided, however, that the foregoing amount, as it relates to any
Collateral location, shall be reduced to zero upon delivery to the Agent of
acceptable landlord waivers for such Collateral location; (b) any reserve which
the Agent may reasonably require from time to time pursuant to this Financing
Agreement, (c) any reserve established by CIT under the Factoring Agreement and
(d) Ledger Debt.
BORROWING BASE shall mean the sum of (a) seventy-five percent (75%) of the
Company's aggregate outstanding Eligible Accounts Receivable, plus (b) the
lesser of (i) fifty percent (50%) of the aggregate value of the Company's
Eligible Inventory, valued at the lower of cost or market, on a first in, first
out basis, or (ii) the Inventory Loan Cap, plus (c) the Seasonal Overadvance
Amount, plus (d) fifty percent (50%) of the aggregate amount of outstanding
Eligible Documentary Letters of Credit, less (e) any applicable Availability
Reserves.
BORROWING BASE CERTIFICATE shall mean a certificate to be executed and delivered
from time to time by the Company in the form attached to this Financing
Agreement as Exhibit D.
BUSINESS DAY shall mean any day on which the Agent and JPMorgan Chase Bank are
open for business.
CAPITAL EXPENDITURES shall mean, for any period, the aggregate expenditures of
the Company during such period on account of, property, plant, equipment or
similar fixed assets that, in conformity with GAAP, are required to be reflected
in the balance sheet of the Company.
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CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure in the balance sheet of the Company.
CLOSING DATE shall mean the date that this Financing Agreement has been duly
executed by the parties hereto and delivered to the Agent.
COLLATERAL shall mean all present and future Accounts, Equipment, Inventory,
Documents of Title, General Intangibles, pledged stock of the Company's
Subsidiaries and Other Collateral.
COMMITMENT shall mean each Lender's commitment in accordance with this Financing
Agreement to make Revolving Loans (the "Revolving Credit Commitment") and the
Term Loan funding (the "Term Loan Commitment"), in the amount of their
respective pro rata share set forth in schedules prepared by the Agent or the
Assignment and Transfer Agreement executed by each such Lender.
CONSOLIDATED BALANCE SHEET shall mean a consolidated balance sheet for the
Company and its Subsidiaries, eliminating all intercompany transactions and
prepared in accordance with GAAP.
COPYRIGHTS shall mean all present and hereafter acquired copyrights, copyright
registrations, recordings, applications, designs, styles, licenses, marks,
prints and labels bearing any of the foregoing, goodwill, any and all general
intangibles, intellectual property and rights pertaining thereto, and all cash
and non-cash proceeds thereof.
DEFAULT shall mean any event specified in Section 10 hereof, which with the
passage of time or giving of notice or both would constitute an Event of
Default.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum on any
Obligations hereunder, equal to the sum of: (a) two percent (2%) and (b) the
applicable increment over the JPMorgan Chase Bank Rate (as set forth in
paragraph 8.1 hereof) plus the JPMorgan Chase Bank Rate, or the applicable
increment over the LIBOR Rate (as set forth in paragraph 8.13 hereof) plus the
LIBOR Rate, which the Agent shall be entitled to charge the Company on all
Obligations due the Agent on behalf of the Lenders by the Company, as further
set forth in Paragraph 10.2 of Section 10 of this Financing Agreement.
DEPOSITORY ACCOUNTS shall mean the collection accounts, which are subject to the
Agent's instructions, as specified in Paragraph 3.4 of Section 3 of this
Financing Agreement.
DOCUMENTS OF TITLE shall mean all present and future documents (as defined in
the UCC), and any and all warehouse receipts, bills of lading, shipping
documents, chattel paper, instruments and similar documents, all whether
negotiable or not and all goods and Inventory relating thereto and all cash and
non-cash proceeds of the foregoing.
EARLY TERMINATION DATE shall mean the date on which the Company terminates this
Financing Agreement or the Revolving Line of Credit which date is prior to an
Anniversary Date.
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EARLY TERMINATION FEE shall: (a) mean the fee the Agent on behalf of the Lenders
is entitled to charge the Company in the event the Company voluntarily
terminates the Revolving Line of Credit or this Financing Agreement on a date
prior to an Anniversary Date; and (b) equal (x) $500,000 if the Early
Termination Date occurs on or before one (1) year from the Closing Date, (y)
$350,000 if the Early Termination Date occurs after one (1) year from the
Closing Date but on or before two (2) years from the Closing Date; and (z)
$150,000 if the Early Termination Date occurs after two (2) years from the
Closing Date but on or before three (3) years from the Closing Date.
EBITDA shall mean, in any period, the consolidated earnings of the Company and
its Subsidiaries before all (i) interest and tax obligations, (ii) depreciation
and (iii) amortization for said period, all determined in accordance with GAAP
on a consistent basis with the latest audited consolidated financial statements
of the Company and its Subsidiaries, but excluding the effect of extraordinary
and/or non-reoccurring gains or losses for such period.
ELIGIBLE ACCOUNTS RECEIVABLE shall mean the gross amount of the Company's Trade
Accounts Receivable (without giving effect to the sale of any Accounts
Receivable pursuant to the Factoring Agreement) that are subject to a valid,
exclusive, first priority and fully perfected security interest in favor of the
Agent, on behalf of the Lenders, which is (I) at any time that the Factoring
Agreement is in effect, an Account Receivable credit approved by CIT under the
Factoring Agreement, not charged back to the Company thereunder nor subject to
any reserves thereunder and (II) at any time that the Factoring Agreement is not
in effect, any other Accounts Receivable which conform to the warranties
contained herein and which, at all times, continue to be acceptable to the Agent
in the exercise of its reasonable business judgment, less, without duplication,
the sum of: any returns, disputes, discounts, claims, and credits (in each case
exclusive of allowances) of any nature (whether issued, owing, granted, claimed
or outstanding), and (b) reserves for any such Trade Accounts Receivable that
arise from or are subject to or include: (i) sales to the United States of
America, any state or other governmental entity or to any agency, department or
division thereof, except for any such sales as to which the Company has complied
with the Assignment of Claims Act of 1940 or any other applicable statute, rules
or regulation, to the Agent's satisfaction in the exercise of its reasonable
business judgment; (ii) foreign sales, other than sales which otherwise comply
with all of the other criteria for eligibility hereunder and are (x) secured by
letters of credit (in form and substance satisfactory to the Agent) issued or
confirmed by, and payable at, banks having a place of business in the United
States of America, or (y) to customers residing in Canada provided such Accounts
do not exceed $100,000 in the aggregate at any one time; (iii) Accounts that
remain unpaid more than ninety (90) days from invoice date; (iv) contra
accounts; (v) sales to any subsidiary, or to any company affiliated with the
Company in any way; (vi) bill and hold (deferred shipment) or consignment sales;
(vii) sales to any customer which is: (A) insolvent, (B) the debtor in any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal or state law, (C) negotiating, or has called a
meeting of its creditors for purposes of negotiating, a compromise of its debts,
or (D) financially unacceptable to the Agent or has a credit rating unacceptable
to the Agent; (viii) all sales to any customer if fifty percent (50%) or more of
the aggregate dollar amount of all outstanding invoices to such customer are
unpaid more than ninety (90) days from invoice date; (ix) pre-billed receivables
and receivables arising from progress billing; (x) an amount representing,
historically, returns, discounts, claims, credits, allowances and applicable
terms; (xi) sales not payable in United States currency; and (xii) any other
reasons deemed
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necessary by the Agent in its reasonable judgment, and which are customary
either in the commercial finance industry or in the lending practices of the
Agent and/or the Lenders.
ELIGIBLE ASSIGNEE shall mean (i) a commercial bank or other financial
institution organized under the laws of the United States, or any State thereof,
having total assets in excess of $500,000,000; (ii) a savings and loan
association or savings bank organized under the laws of the United States, or
any State thereof, having a net worth of at least $250,000,000 calculated in
accordance with GAAP; (iii) any Lender listed on the signature page of this
Agreement; and (iv) any financial institution consented to by the Company, such
consent not to be unreasonably withheld.
ELIGIBLE DOCUMENTARY LETTERS OF CREDIT shall mean documentary Letters of Credit
covering the Company's Eligible Inventory consisting of finished goods Inventory
being imported by the Company to the United States.
ELIGIBLE INVENTORY shall mean the gross amount of the Company's Inventory that
is subject to a valid, exclusive, first priority and fully perfected security
interest in favor of the Agent, on behalf of the Lenders, and which conforms to
the warranties contained herein and which, at all times, continues to be
acceptable to the Agent in the exercise of its reasonable business judgment,
less, without duplication, any (a) work-in-process, (b) supplies, (c) Inventory
not present in the United States of America (except as set forth in paragraph
(e) below), (d) Inventory returned or rejected by the Company's customers (other
than goods that are undamaged and resalable in the normal course of business)
and goods to be returned to the Company's suppliers, (e) Inventory in transit to
third parties (other than finished goods Inventory in transit to Company's
agents or warehouses and with respect to which the following criteria have been
satisfied in the sole judgment of Agent: (i) title with respect to such
Inventory has passed to Company, (ii) such Inventory is insured against types of
loss, damage, hazards and risks, and in amounts, satisfactory to Agent in its
discretion, (iii) such Inventory has been paid for or purchased under a
documentary Letter of Credit which has been consigned to Agent in a manner
satisfactory to Agent and (iv) Agent shall have in its possession (1) all
negotiable bills of lading and other documents of title with respect to such
Inventory properly endorsed and (2) all non-negotiable bills of lading and other
documents of title with respect to such Inventory issued in Agent's name), or in
the possession of a warehouseman, bailee, third party processor, or other third
party, unless such warehouseman, bailee or third party has executed a notice of
security interest agreement (in form and substance satisfactory to the Agent)
and the Agent shall have a first priority perfected security interest in such
Inventory, and (f) less any reserves required by the Agent in its reasonable
discretion, including without limitation for special order goods, discontinued,
slow-moving and obsolete Inventory, market value declines, bill and hold
(deferred shipment), consignment sales, shrinkage and any applicable customs,
freight, duties and Taxes.
EQUIPMENT shall mean all present and hereafter acquired equipment (as defined in
the UCC) which is owned by the Company, including, without limitation, all
machinery, equipment, furnishings and fixtures, and all additions, substitutions
and replacements thereof, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto and all proceeds thereof of whatever sort.
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ERISA shall mean the Employee Retirement Income Security Act or 1974, as amended
from time to time and the rules and regulations promulgated thereunder from time
to time.
EUROCURRENCY RESERVE REQUIREMENTS for any day, as applied to a LIBOR Loan, shall
mean the aggregate (without duplication) of the maximum rates of reserve
requirements (expressed as a decimal fraction) in effect with respect to the
Agent and/or any present or future Lender or participant on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
Regulation D or any other applicable regulations of the Board of Governors of
the Federal Reserve System or other governmental authority having jurisdiction
with respect thereto, as now and from time to time in effect, dealing with
reserve requirements prescribed for Eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by the
Agent and/or any such Lenders or participants (such rate to be adjusted to the
nearest one sixteenth of one percent (1/16 of 1%) or, if there is not a nearest
one sixteenth of one percent (1/16 of 1%), to the next higher one sixteenth of
one percent (1/16 of 1%)).
EVENT(S) OF DEFAULT shall have the meaning provided for in Section 10 of this
Financing Agreement.
FACTORING AGREEMENT shall mean that certain Factoring Agreement dated as of
September 27, 2002 by and between the Company and CIT, as amended, modified and
supplemented from time to time.
FACTORING TERMINATION AGREEMENT shall mean that certain Factoring Termination
Agreement dated the date of this Financing Agreement among the Company, Agent
and CIT, as amended, modified or supplemented from time to time.
FISCAL QUARTER shall mean, with respect to the Company, each three (3) month
period ending December 31, March 31, June 30 and September 30 of each Fiscal
Year.
FISCAL YEAR shall mean each twelve (12) month period commencing on July 1 of
each year and ending on the following June 30.
FIXED CHARGE COVERAGE RATIO shall mean, for the relevant period, the ratio
determined by dividing EBITDA by the sum of (a) all interest obligations paid or
due, (b) the amount of principal repaid or scheduled to be repaid on the Term
Loan, (c) Capital Expenditures actually incurred, and (d) all federal, state and
local income tax expenses due and payable.
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply, provided that in the event the Company
modifies its accounting principles and procedures as applied as of the Closing
Date, the Company shall provide to the Agent and the Lenders such statements of
reconciliation as shall be in form and substance reasonably acceptable to the
Agent.
GENERAL INTANGIBLES shall mean all of the Company's present and hereafter
acquired general intangibles (as defined in the UCC), and shall include, without
limitation, all present and future right, title and interest in and to: (a) all
Trademarks, tradenames, corporate names, business names, logos and any other
designs or sources of business identities, (b) Patents, together with any
improvements
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on said Patents, utility models, industrial models, and designs, (c) Copyrights,
(d) trade secrets, (e) licenses, permits and franchises, (f) all applications
with respect to the foregoing, (g) all right, title and interest in and to any
and all extensions and renewals, (h) goodwill with respect to any of the
foregoing, (i) any other forms of similar intellectual property, (j) all
customer lists, distribution agreements, supply agreements, blueprints,
indemnification rights and tax refunds, together with all monies and claims for
monies now or hereafter due and payable in connection with any of the foregoing
or otherwise, and all cash and non-cash proceeds thereof, including, without
limitation, the proceeds or royalties of any licensing agreements between the
Company and any licensee of any of the Company's General Intangibles.
GOOD FAITH DEPOSIT shall mean the $50,000 deposit paid to Agent upon execution
of that certain letter agreement between the Borrower and the Agent, dated June
20, 2002.
GUARANTIES shall mean the guaranty documents executed and delivered by the
Guarantors guaranteeing the Obligations.
GUARANTORS shall mean (i) Bernard Chaus International (Hong Kong), Inc., a
Delaware corporation, (ii) Bernard Chaus International (Korea), Inc., a Delaware
corporation, and (iii) Chaus Retail, Inc., a New Jersey corporation.
INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of
borrowed money or for the deferred purchase price of property, services or
assets, other than Inventory, or (b) lease obligations which, in accordance with
GAAP, have been, or which should be capitalized.
INSURANCE PROCEEDS shall mean proceeds or payments from an insurance carrier
with respect to any loss, casualty or damage to Collateral.
INTEREST EXPENSE shall mean the total interest obligations (paid or accrued) of
the Company determined in accordance with GAAP, on a consistent basis with the
latest audited statements of the Company.
INTEREST PERIOD shall mean:
(a) with respect to any initial request by the Company for a LIBOR Loan, a
one month, two month or three month period commencing on the borrowing or
conversion date with respect to a LIBOR Loan and ending one, two or three months
thereafter, as applicable; and
(b) thereafter with respect to any continuation of, or conversion to, a
LIBOR Loan, at the option of the Company, any one month, two month or three
month period commencing on the last day of the immediately preceding Interest
Period applicable to such LIBOR Loan and ending one, two or three months
thereafter, as applicable;
provided that, the foregoing provisions relating to Interest Periods are subject
to the following:
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(i) if any Interest Period would otherwise end on a day which is not a
Working Day, that Interest Period shall be extended to the next
succeeding Working Day, unless the result of such extension would
extend such payment into another calendar month in which event such
Interest Period shall end on the immediately preceding Working Day;
(ii) any Interest Period that begins on the last Working Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month, at the end of such Interest
Period) shall end on the last Working Day of a calendar month; and
(iii) for purposes of determining the availability of Interest Periods,
such Interest Periods shall be deemed available if (x) JPMorgan Chase
Bank quotes an applicable rate or the Agent determines LIBOR, as
provided in the definition of LIBOR, (y) the LIBOR determined by
JPMorgan Chase Bank or the Agent will adequately and fairly reflect the
cost of maintaining or funding its loans bearing interest at LIBOR, for
such Interest Period, and (z) such Interest Period will end on or
before the earlier of Anniversary Date or the last day of the then
current term of this Financing Agreement. If a requested Interest
Period shall be unavailable in accordance with the foregoing sentence,
the Company shall continue to pay interest on the Obligations at the
applicable per annum rate based upon the JPMorgan Chase Bank Rate.
INVENTORY shall mean all of the Company's present and hereafter acquired
inventory (as defined in the UCC) and including, without limitation, all
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same in all
stages of production from raw materials through work-in-process to finished
goods - and all proceeds thereof of whatever sort.
INVENTORY LOAN CAP shall mean the amount of $25,000,000.
INVESTMENT PROPERTY shall mean all now owned and hereafter acquired investment
property (as defined in the UCC) and all proceeds thereof.
ISSUER shall mean the financial institution issuing Letters of Credit for the
Company.
JPMORGAN CHASE BANK RATE shall mean the rate of interest per annum announced by
JPMorgan Chase Bank from time to time as its prime rate in effect at its
principal office in New York City. (The prime rate is not intended to be the
lowest rate of interest charged by JPMorgan Chase Bank to its borrowers).
JPMORGAN CHASE BANK RATE LOANS shall mean any loans or advances pursuant to this
Financing Agreement made or maintained at a rate of interest based upon the
JPMorgan Chase Bank Rate.
LEDGER DEBT shall mean any Indebtedness for goods or services purchased or
obtained by the Company from any party whose Accounts are factored or financed
by CIT.
LETTERS OF CREDIT shall mean all letters of credit issued with the assistance of
the Agent, on behalf of the Lenders, in accordance with Section 5 hereof by the
Issuer for or on behalf of the Company.
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LETTER OF CREDIT GUARANTY shall mean the guaranty delivered by the Agent, on
behalf of the Lenders, to the Issuer of the Company's reimbursement obligations
under the Issuer's reimbursement agreement, application for Letter of Credit or
other like document.
LETTER OF CREDIT GUARANTY FEE shall mean the fee the Agent, on behalf of the
Lenders, may charge the Company under Paragraph 8.3 of Section 8 of this
Financing Agreement for: (a) issuing a Letter of Credit Guaranty, and/or (b)
otherwise aiding the Company in obtaining Letters of Credit, all pursuant to
Section 5 hereof.
LETTER OF CREDIT SUB-LINE shall mean the commitment of the Lenders to assist the
Company in obtaining Letters of Credit, pursuant to Section 5 hereof, in an
aggregate amount of $25,000,000.
LEVERAGE RATIO shall mean the ratio determined by dividing Total Liabilities by
Tangible Net Worth.
LIBOR shall mean, at any time of determination, and subject to availability, for
each applicable Interest Period, a variable rate of interest equal to: (a) at
the Agent's election (i) the applicable LIBOR quoted to the Agent by JPMorgan
Chase Bank (or any successor thereof), or (ii) the rate of interest determined
by the Agent at which deposits in U.S. dollars are offered for the relevant
Interest Period based on information presented on Telerate Systems at Page 3750
as of 11:00 A.M. (London time) on the day which is two (2) Business Days prior
to the first day of such Interest Period, provided that, if at least two such
offered rates appear on the Telerate System at Page 3750 in respect of such
Interest Period, the arithmetic mean of all such rates (as determined by the
Agent) will be the rate used; divided by (b) a number equal to 1.0 minus the
aggregate (but without duplication) of the rates (expressed as a decimal
fraction) of Eurocurrency Reserve Requirements in effect on the day which is two
(2) Business Days prior to the beginning of such Interest Period.
LIBOR LENDING OFFICE with respect to the Agent, shall mean the office of
JPMorgan Chase Bank, or any successor thereof, maintained at 270 Park Avenue,
New York, NY 10017.
LIBOR LOAN shall mean any loans made pursuant to this Financing Agreement which
are made or maintained at a rate of interest based upon LIBOR, provided that (i)
no Default or Event of Default has occurred hereunder, which has not been waived
in writing by the Required Lenders, and (ii) no LIBOR Loan shall be made with an
Interest Period that ends subsequent to an Anniversary Date or any applicable
Early Termination Date.
LINE OF CREDIT shall mean the aggregate commitment of the Lenders to (a) make
Revolving Loans pursuant to Section 3 of this Financing Agreement (b) assist the
Company in opening Letters of Credit pursuant to Section 5 of this Financing
Agreement and (c) make the Term Loan pursuant to Section 4 of this Financing
Agreement, in the aggregate amount equal to $50,500,000; provided that nothing
herein shall be deemed to increase any Lenders commitment hereunder, and which
commitment shall be set forth in the applicable schedules maintained by the
Agent or the Assignment and Transfer Agreements executed by such Lender.
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LINE OF CREDIT FEE shall: (a) mean the fee due the Agent at the end of each
month for the Line of Credit, and (b) be determined by multiplying the
difference between (i) the Revolving Line of Credit, and (ii) the sum, for said
month, of (x) the average daily balance of Revolving Loans plus (y) the average
daily balance of Letters of Credit outstanding for said month, by three-eighths
of one percent (3/8%) per annum for the number of days in said month.
LOAN DOCUMENTS shall mean this Financing Agreement, the Promissory Notes, the
other closing documents and any other ancillary loan and security agreements
executed from time to time in connection with this Financing Agreement, all as
may be renewed, amended, extended, increased or supplemented from time to time.
LOAN FACILITY FEE shall mean the fee payable to the Agent and the Lenders (as
applicable) in accordance with, and pursuant to, the provisions of Paragraph 8.7
of Section 8 of this Financing Agreement.
OBLIGATIONS shall mean all loans, advances and extensions of credit made or to
be made by the Agent and/or the Lenders to the Company, or to others for the
Company's account (including, without limitation, all Revolving Loans, Letter of
Credit Guaranties and the Term Loan); any and all indebtedness and obligations
which may at any time be owing by the Company to the Agent and/or the Lenders
howsoever arising, whether now in existence or incurred by the Company from time
to time hereafter; whether principal, interest, fees, costs, expenses or
otherwise; whether secured by pledge, lien upon or security interest in any of
the Company's Collateral, assets or property or the assets or property of any
other person, firm, entity or corporation; whether such indebtedness is absolute
or contingent, joint or several, matured or unmatured, direct or indirect and
whether the Company is liable to the Agent and/or the Lenders for such
indebtedness as principal, surety, endorser, guarantor or otherwise. Obligations
shall also include indebtedness owing to the Agent and/or the Lenders by the
Company under any Loan Document, the Factoring Agreement or under any other
agreement or arrangement now or hereafter entered into between the Company and
the Agent and/or the Lenders; indebtedness or obligations incurred by, or
imposed on, the Agent and/or the Lenders as a result of environmental claims
arising out of the Company's operations, premises or waste disposal practices or
sites in accordance with paragraph 7.7 hereof; the Company's liability to the
Agent and/or the Lenders as maker or endorser of any promissory note or other
instrument for the payment of money; the Company's liability to the Agent and/or
the Lenders under any instrument of guaranty or indemnity, or arising under any
guaranty, endorsement or undertaking which the Agent and/or the Lenders may make
or issue to others for the Company's account, including any Letter of Credit
Guaranty or other accommodation extended by CIT with respect to applications for
Letters of Credit, the Agent's and/or the Lenders' acceptance of drafts or the
Agent's and/or the Lenders' endorsement of notes or other instruments for the
Company's account and benefit and Ledger Debt.
OPERATING LEASES shall mean all leases of property (whether real, personal or
mixed) other than Capital Leases.
OTHER COLLATERAL shall mean all now owned and hereafter acquired lockbox,
blocked account and any other deposit accounts maintained with any bank or
financial institutions into which the proceeds of Collateral are or may be
deposited; all other deposit accounts and all Investment Property; all cash
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and other monies and property in the possession or control of the Agent and/or
any of the Lenders; all books, records, ledger cards, disks and related data
processing software at any time evidencing or containing information relating to
any of the Collateral described herein or otherwise necessary or helpful in the
collection thereof or realization thereon; and all cash and non-cash proceeds of
the foregoing.
OUT-OF-POCKET EXPENSES shall mean all of the Agent's (and the Lenders upon the
occurrence of an Event of Default which is not waived by the Required Lenders)
present and future out-of-pocket expenses incurred relative to this Financing
Agreement or any other Loan Documents, whether incurred heretofore or hereafter,
which expenses shall include, but shall not be duplicative of any other fees or
expenses set forth in this Agreement, without being limited to: the cost of
record searches, all out-of-pocket costs and expenses incurred by the Agent in
opening bank accounts, depositing checks, receiving and transferring funds, and
wire transfer charges, any charges imposed on the Agent due to returned items
and "insufficient funds" of deposited checks and the Agent's standard fees
relating thereto, any amounts paid by, incurred by or charged to, the Agent
and/or the Lenders by the Issuer under a Letter of Credit Guaranty or the
Company's reimbursement agreement, application for Letters of Credit or other
like document which pertain either directly or indirectly to such Letters of
Credit, and the Agent's standard fees relating to the Letters of Credit and any
drafts thereunder, travel, lodging and similar expenses of the Agent's personnel
in connection with inspecting and monitoring the Collateral from time to time
hereunder, any applicable reasonable counsel fees and disbursements, fees and
taxes relative to the filing of financing statements, all expenses, costs and
fees set forth in Paragraph 10.3 of Section 10 of this Financing Agreement.
OVERADVANCE RATE shall mean a rate equal to one-half of one percent (1/2%) per
annum in excess of the applicable contract rate of interest determined in
accordance with Section 8, Paragraph 8.1(a) of this Financing Agreement.
OVERADVANCES shall mean the amount by which (a) the sum of all outstanding
Revolving Loans, Letters of Credit and advances made hereunder exceed (b) the
Borrowing Base.
PATENTS shall mean all of the Company's present and hereafter acquired patents,
patent applications, registrations, any reissues or renewals thereof, licenses,
any inventions and improvements claimed thereunder, and all general intangible,
intellectual property and patent rights with respect thereto of the Company, and
all income, royalties, cash and non-cash proceeds thereof.
PERMITTED ENCUMBRANCES shall mean: (a) liens existing on the date hereof on
specific items of Equipment and other liens expressly permitted, or consented to
in writing by the Agent and/or the Required Lenders; (b) Purchase Money Liens;
(c) liens of local or state authorities for franchise or other like Taxes,
provided that the aggregate amounts of such liens shall not exceed $100,000.00
in the aggregate at any one time; (d) statutory liens of landlords and liens of
carriers, warehousemen, bailees, mechanics, materialmen and other like liens
imposed by law, created in the ordinary course of business and for amounts not
yet due (or which are being contested in good faith, by appropriate proceedings
or other appropriate actions which are sufficient to prevent imminent
foreclosure of such liens) and with respect to which adequate reserves or other
appropriate provisions are being maintained by the Company in accordance with
GAAP; (e) deposits made (and the liens thereon) in
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the ordinary course of business of the Company (including, without limitation,
security deposits for leases, indemnity bonds, surety bonds and appeal bonds) in
connection with workers' compensation, unemployment insurance and other types of
social security benefits or to secure the performance of tenders, bids,
contracts (other than for the repayment or guarantee of borrowed money or
purchase money obligations), statutory obligations and other similar obligations
arising as a result of progress payments under government contracts; (f)
easements (including, without limitation, reciprocal easement agreements and
utility agreements), encroachments, minor defects or irregularities in title,
variation and other restrictions, charges or encumbrances (whether or not
recorded) affecting the Real Estate, if applicable, and which in the aggregate
(A) do not materially interfere with the occupation, use or enjoyment by the
Company of its business or property so encumbered and (B) in the reasonable
business judgment of the Agent do not materially and adversely affect the value
of such Real Estate; and (g) liens granted the Agent by the Company; (h) liens
of judgment creditors provided such liens do not exceed, in the aggregate, at
any time, $100,000.00 (other than liens bonded or insured to the reasonable
satisfaction of the Agent); (i) tax liens which are not yet due and payable or
which are being diligently contested in good faith by the Company by appropriate
proceedings, and which liens are not (x) filed on any public records, (y) other
than with respect to Real Estate, senior to the liens of the Agent or (z) for
Taxes due the United States of America or any state thereof having similar
priority statutes, as further set forth in paragraph 7.6 hereof and (j) Liens
arising under the Factoring Agreement.
PERMITTED INDEBTEDNESS shall mean: (a) current Indebtedness maturing in less
than one year and incurred in the ordinary course of business for raw materials,
supplies, equipment, services, Taxes or labor; (b) the Indebtedness secured by
Purchase Money Liens; (c) Indebtedness arising under the Letters of Credit and
this Financing Agreement; (d) deferred Taxes and other expenses incurred in the
ordinary course of business; (e) the Indebtedness arising by and between the
Company and the Guarantors so long as the aggregate amount of such Indebtedness
does not exceed $5,000,000 per annum and such Indebtedness is used solely to
cover operating expenses and /or expenses incurred in the ordinary course of
business, and (f) other Indebtedness existing on the date of execution of this
Financing Agreement and listed in the most recent financial statement delivered
to the Agent and the Lenders or otherwise disclosed to the Agent and the Lenders
in writing prior to the Closing Date.
PROMISSORY NOTES shall mean the notes, in the form of Exhibits A and B attached
hereto, delivered by the Company to the Agent to evidence the Term Loan and the
Revolving Loans, respectively, pursuant to, and repayable in accordance with,
the provisions of Section 4 of this Financing Agreement.
PURCHASE MONEY LIENS shall mean liens on any item of Equipment acquired after
the date of this Financing Agreement provided that (a) each such lien shall
attach only to the property to be acquired, (b) a description of the Equipment
so acquired is furnished to the Agent and (c) the debt incurred in connection
with such acquisitions shall not exceed, in the aggregate, $250,000 in any
Fiscal Year.
REAL ESTATE shall mean the Company's fee and/or leasehold interests in its real
property.
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REQUIRED LENDERS shall mean the Lenders holding aggregate commitments under this
Financing Agreement in an amount of 51% or more.
REVOLVING LINE OF CREDIT shall mean the aggregate commitment of the Lenders to
make loans and advances pursuant to Section 3 of this Financing Agreement and
issue Letters of Credit Guaranties pursuant to Section 5 hereof to the Company,
in the aggregate amount of $40,000,000.
REVOLVING LOAN ACCOUNT shall mean the account on the Agent's books, in the
Company's name, in which the Company will be charged with all Obligations under
this Financing Agreement.
REVOLVING LOANS shall mean the loans and advances made, from time to time, to or
for the account of the Company by the Agent, on behalf of the Lenders, pursuant
to Section 3 of this Financing Agreement.
SEASONAL OVERADVANCE AMOUNT shall mean an aggregate amount not to exceed (i)
$3,000,000 as of the end of the month of January through the fifth (5th )
Business Day in February of each year and (ii) $0 at all other times.
SEASONAL OVERADVANCES shall mean Revolving Loans made pursuant to Paragraph (c)
of the definition of Borrowing Base.
SETTLEMENT DATE shall mean the date, weekly, and more frequently, at the
discretion of the Agent, upon the occurrence of an Event of Default or a
continuing decline or increase of the Revolving Loans that the Agent and the
Lenders shall settle amongst themselves so that (a) the Agent shall not have, as
the Agent, any money at risk and (b) on such Settlement Date the Lenders shall
have a pro rata amount of all outstanding Revolving Loans and Letters of Credit,
provided that each Settlement Date for a Lender shall be a Business Day on which
such Lender and its bank are open for business.
SUBSIDIARIES shall mean the wholly-owned subsidiaries of the Company.
TANGIBLE NET WORTH shall mean at any date of determination, an amount equal to
(a) Total Assets excluding such other assets as are properly classified as
intangible assets under GAAP, minus (b) Total Liabilities, and shall be
determined in accordance with GAAP, on a consistent basis with the latest
audited consolidated financial statements of the Company and its Subsidiaries.
TAXES shall mean all federal, state, municipal and other governmental taxes,
levies, charges, claims and assessments which are or may be due by the Company
with respect to its business, operations, Collateral or otherwise.
TERM LOAN shall mean the Term Loan in the principal amount of $10,500,000.00
(herein the "Term Loan") made by the Agent on behalf of the Lenders pursuant to,
and repayable in accordance with, the provisions of Section 4 of this Financing
Agreement.
TERM LOAN PROMISSORY NOTE shall mean the promissory note in the form of Exhibit
A hereto executed by the Company to evidence the Term Loan made by the Agent
under Section 4 hereof.
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TOTAL ASSETS shall mean total assets determined in accordance with GAAP, on a
basis consistent with the latest audited consolidated financial statements of
the Company and its Subsidiaries.
TOTAL LIABILITIES shall mean total liabilities determined in accordance with
GAAP, on a basis consistent with the latest audited consolidated financial
statements of the Company and its Subsidiaries.
TRADE ACCOUNTS RECEIVABLE shall mean that portion of the Company's Accounts
which arises from the sale of Inventory or the rendition of services in the
ordinary course of the Company's business.
TRADEMARKS shall mean all present and hereafter acquired trademarks, trademark
registrations, recordings, applications, tradenames, trade styles, service
marks, prints and labels (on which any of the foregoing may appear), licenses,
reissues, renewals, and any other intellectual property and trademark rights
pertaining to any of the foregoing, together with the goodwill associated
therewith, and all cash and non-cash proceeds thereof.
UCC shall mean the Uniform Commercial Code as the same may be amended and in
effect from time to time in the state of New York.
WORKING DAY shall mean any Business Day on which dealings in foreign currencies
and exchanges between banks may be transacted.
SECTION 2. CONDITIONS PRECEDENT.
The obligation of the Agent and the Lenders to make the initial loans
hereunder is subject to the satisfaction of, extension of or waiver of (in
writing), on or prior to, the Closing Date, the following conditions precedent:
(a) LIEN SEARCHES - The Agent shall have received tax, judgment and Uniform
Commercial Code searches satisfactory to the Agent for all locations presently
occupied or used by the Company.
(b) CASUALTY INSURANCE - The Company shall have delivered to the Agent
evidence satisfactory to the Agent that casualty insurance policies listing the
Agent as additional insured, loss payee or mortgagee, as the case may be, are in
full force and effect, all as set forth in Paragraph 7.5 of Section 7 of this
Financing Agreement.
(c) UCC FILINGS - Any financing statements required to be filed in order to
create, in favor of the Agent, on behalf of the Lenders, a first perfected
security interest in the Collateral, subject only to the Permitted Encumbrances,
shall have been properly filed in each office in each jurisdiction required in
order to create in favor of the Agent for the benefit of the Lenders a perfected
lien on the Collateral. The Agent shall have received acknowledgment copies of
all such filings (or, in lieu thereof, the Agent shall have received other
evidence satisfactory to the Agent that all such
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filings have been made) and the Agent shall have received evidence that all
necessary filing fees and all taxes or other expenses related to such filings
have been paid in full.
(d) BOARD RESOLUTION - The Agent shall have received a copy of the
resolutions of the Board of Directors of each of the Company and the Guarantors
(as the case may be) authorizing the execution, delivery and performance of (i)
this Financing Agreement, (ii) the Guaranties, and (iii) any related agreements,
in each case certified by the Secretary or Assistant Secretary of the Company
and the Guarantors (as the case may be) as of the date hereof, together with a
certificate of the Secretary or Assistant Secretary of the Company and the
Guarantors (as the case may be) as to the incumbency and signature of the
officers of the Company and/or the Guarantors executing such Loan Documents and
any certificate or other documents to be delivered by them pursuant hereto,
together with evidence of the incumbency of such Secretary or Assistant
Secretary.
(e) CORPORATE ORGANIZATION - The Agent shall have received (i) a copy of
the Certificate of Incorporation of the Company and the Guarantors certified by
the Secretary of State of the state of its incorporation, and (ii) a copy of the
By-Laws of the Company certified by the Secretary or Assistant Secretary
thereof, all as amended through the date hereof.
(f) OFFICER'S CERTIFICATE - The Agent shall have received an executed
Officer's Certificate of the Company, satisfactory in form and substance to the
Agent, certifying that to the best of his or her knowledge (i) the
representations and warranties contained herein are true and correct in all
material respects on and as of the Closing Date; (ii) the Company is in
compliance with all of the terms and provisions set forth herein; and (iii) no
Default or Event of Default has occurred.
(g) OPINIONS - Counsel for the Company and the Guarantors shall have
delivered to the Agent on behalf of the Lenders opinions substantially in the
form of Exhibit E hereto and otherwise satisfactory to the Agent.
(h) ABSENCE OF DEFAULT - No Default or Event of Default shall have occurred
and no material adverse change shall have occurred in the financial condition,
business, prospects, profits, operations or assets of the Company or the
Company's Subsidiaries.
(i) LEGAL RESTRAINTS/LITIGATION - As of the Closing Date, there shall be
no: (x) litigation, investigation or proceeding (judicial or administrative)
pending or threatened against the Company or the Guarantors or their assets, by
any agency, division or department of any county, city, state or federal
government arising out of this Financing Agreement; (y) injunction, writ or
restraining order restraining or prohibiting the financing arrangements
contemplated under this Financing Agreement; or (z) suit, action, investigation
or proceeding (judicial or administrative) pending against the Company or the
Guarantors or their assets, which, in the opinion of the Agent, if adversely
determined, could reasonably be expected to have a material adverse effect on
the business, operation, assets, financial condition or Collateral of the
Company and/or the Guarantors.
(j) FINANCIAL CONDITION - Agent shall have received and be satisfied with
the financial condition of the Company, including, without limitation, the
preliminary results of its June 30, 2002 consolidated audited financial
statements.
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(k) COMPLIANCE WITH LAWS - Neither this Financing Agreement nor any of the
transactions contemplated in connection herewith: (i) present any material
exposure under any laws relating to bulk sales, fraudulent conveyances or
similar matters, or (ii) could reasonably be expected to have a material adverse
effect on any license agreement of the Company or any of its affiliates.
(l) GUARANTIES - The Guarantors shall have executed and delivered to the
Agent guaranties, in form acceptable to the Agent, guaranteeing all present and
future Obligations of the Company.
(m) CASH BUDGET PROJECTIONS - The Agent shall have received, reviewed and
been satisfied with a twelve (12) month cash budget projection prepared by the
Company on the form provided by the Agent.
(n) PLEDGE AGREEMENT - The Company, as the case may be, shall (i) execute
and deliver to the Agent, on behalf of the Lenders, a pledge and security
agreement pledging to the Agent, on behalf of the Lenders, as additional
collateral for the Obligations of the Company not less than 100% of the issued
and outstanding stock of all Subsidiaries of the Company and, (ii) deliver to
the Agent, on behalf of the Lenders, the stock certificates evidencing such
stock together with duly executed stock powers (undated and in-blank) with
respect thereto, all in form and substance satisfactory to CIT.
(o) ADDITIONAL DOCUMENTS - The Company shall have executed and delivered to
the Agent all Loan Documents necessary to consummate the lending arrangement
contemplated between the Company, the Agent and the Lenders.
(p) DISBURSEMENT AUTHORIZATION - The Company shall have delivered to the
Agent all information necessary for the Agent and the Lenders to issue wire
transfer instructions on behalf of the Company for the initial and subsequent
loans and/or advances to be made under this Financing Agreement including, but
not limited to, disbursement authorizations in form acceptable to the Agent.
(q) EXAMINATION & VERIFICATION - The Agent and each of the Lenders shall
have completed, to their respective satisfaction, an examination and
verification of the Accounts, and Inventory of the Company which examination
shall indicate that, after giving effect to all Revolving Loans, advances and
extensions of credit to be made at closing, the Company shall have an opening
additional Availability of at least $3,000,000.00, as evidenced by a Borrowing
Base Certificate delivered by the Company to the Agent as of the Closing Date.
It is understood that such requirement contemplates that all debts and
obligations are current, and that all payables are being handled in the normal
course of the Company's business and consistent with its past practice.
(r) EXISTING REVOLVING CREDIT AGREEMENT - The Company's existing credit
agreement with GMAC Commercial Credit, LLC (the "Existing Lender") shall be: (i)
terminated; (ii) all loans and obligations of the Company and/or the Guarantors
thereunder shall be paid or satisfied in full, including through utilization of
the proceeds of the initial Revolving Loans and the Term Loan to be
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made under this Financing Agreement; and (iii) all liens or security interests
in favor of the Existing Lender on the Collateral and otherwise in connection
therewith shall be terminated and/or released upon such payment. Agent shall
also have completed an exit interview with the Existing Lender, which shall be
satisfactory to Agent in its sole discretion.
(s) SCHEDULES The Company or its counsel shall provide the Agent with
schedules of: (a) any of the Company's and its Subsidiaries (i) Trademarks, (ii)
Patents, and (iii) Copyrights, as applicable and all in such detail as to
provide appropriate recording information with respect thereto, (b) any
tradenames, (c) monthly rental payments for any leased premises or any other
premises where any Collateral may be stored or processed, and (d) Permitted
Liens, all of the foregoing in form and substance satisfactory to the Agent.
(t) FACTORING DOCUMENTATION - Agent shall have received (i) a copy of the
Factoring Agreement executed and delivered by the Company, (ii) Certified
Resolutions and (iii) all other agreements, documents and instruments executed
in connection therewith each in form and substance satisfactory to Agent.
Upon the execution of this Financing Agreement and the initial disbursement of
loans hereunder, all of the above Conditions Precedent shall have been deemed
satisfied except as otherwise set forth hereinabove or as the Company and the
Agent shall otherwise agree in writing.
2.1. CONDITIONS TO EACH EXTENSION OF CREDIT.
Subject to the terms of this Financing Agreement, including without
limitation the Agent's rights pursuant to paragraph 10.2 of Section 10 hereof,
the agreement of the Agent on behalf of the Lenders to make any extension of
credit requested to be made by it to the Company on any date (including without
limitation, the initial extension of credit) is subject to the satisfaction of
the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES - Each of the representations and
warranties made by the Company in or pursuant to this Financing 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, except to the extent such representation expressly
relates to an earlier date.
(b) NO DEFAULT - No Default or Event of Default shall have occurred and be
continuing on such date or after giving effect to the extension of credit
requested to be made on such date.
(c) BORROWING BASE - Except as may be otherwise agreed to from time to time
by the Agent and the Company in writing, after giving effect to the extension of
credit requested to be made by the Company on such date, the aggregate
outstanding balance of the Revolving Loans and outstanding Letters of Credit
owing by the Company will not exceed the lesser of (i) the Revolving Line of
Credit or (ii) the Borrowing Base.
Each borrowing by the Company hereunder shall constitute a representation and
warranty by the Company as of the date of such loan or advance that each of the
representations, warranties are true
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and correct and that the Company is not then in default under any of the
covenants contained in the Financing Agreement, except as the Company and the
Agent and/or the Required Lenders shall otherwise agree herein or in a separate
writing.
SECTION 3. REVOLVING LOANS
3.1. (a) The Agent and the Lenders agree, subject to the terms and
conditions of this Financing Agreement, from time to time (but subject to the
Agent's and the Lenders' right to make "Overadvances"), to make loans and
advances to the Company on a revolving basis (i.e. subject to the limitations
set forth herein, the Company may borrow, repay and re-borrow Revolving Loans).
Such requests for loans and advances shall be in amounts not to exceed the
lesser of (a) the Availability or (b) the Revolving Line of Credit. All requests
for loans and advances must be received by an officer of the Agent no later than
(i) 11:00 a.m., New York time, of the Business Day on which any such JPMorgan
Chase Bank Rate Loans and advances are required or (ii) three (3) Business Days
prior to any requested LIBOR Loan. Should the Agent for any reason honor
requests for Overadvances, any such Overadvances shall be made in the Agent's
sole discretion and subject to any additional terms the Agent and/or the
Required Lenders deem necessary.
(b) (i) Whenever the Company requests the Agent, on behalf of the Lenders,
to make a Revolving Loan pursuant to this Section 3, it shall give the Agent
notice in writing or irrevocable telephonic notice confirmed promptly in
writing, specifying (A) the amount to be borrowed, and (B) the requested
borrowing date (which shall be a business day and shall be prior to: the
Anniversary Date, and if applicable, any Early Termination Date, or prior to any
effective termination date of this Financing Agreement, all as further set forth
herein), and (C) specify whether the requested Revolving Loan shall bear
interest at the JPMorgan Chase Bank Rate or at the LIBOR Rate, as further set
forth herein. All requests for loans and advances must be received by an officer
of the Agent no later than 11:00 a.m. New York time on any borrowing date. The
procedure for Revolving Loans to be made on a requested borrowing date may be
such other procedure as is mutually satisfactory to the Company, the Agent
and/or the Lenders. The Agent shall make loans and advances to the Depository
Account of the Company.
(ii) Subject to paragraph 14.10 hereof, should the Agent, on behalf of
the Lenders, for any reason honor requests for Overadvances, such Overadvance
shall be made in the Agent's sole discretion, subject to any additional terms
the Agent and/or the Required Lenders deem necessary. Requests for loans and
advances shall be made solely by the Company and shall be directed solely to the
Agent.
(c) The Agent shall on any Settlement Date, and upon notice given by the
Agent no later than 2:00 P.M. New York time, request each Lender to make, and
each Lender hereby agrees to make, a Revolving Loan in an amount equal to such
Lender's Revolving Credit Commitment percentage (calculated with respect to the
aggregate Revolving Credit Commitments then outstanding) of the aggregate amount
of the Revolving Loans made by the Agent from the preceding Settlement Date to
the date of such notice. Each Lender's obligation to make the Revolving Loans
referred to in subsection (a) and to make the settlements pursuant to this
subsection (c) shall be absolute and unconditional and shall not be affected by
any circumstance, including without
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limitation (i) any set-off, counterclaim, recoupment, defense or other right
which any such Lender or the Company may have against the Agent, the Company,
any other Lender or any other person for any reason whatsoever; (ii) the
occurrence or continuance of a Default or an Event of Default; (iii) any adverse
change in the condition (financial or otherwise) of the Company; (iv) any breach
of this Financing Agreement or any other loan document by the Company or any
other Lender; or (v) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing. Without limiting the liability
and obligation of each Lender to make such advances, the Company authorizes the
Agent to charge the Company's Revolving Loan Account with the Agent to the
extent amounts received from the Lenders are not sufficient to repay in full the
amount of any such deficiency.
(d) The Company's Revolving Loan Obligations hereunder shall be evidenced
by the Promissory Note in the form of Exhibit B attached hereto.
(e) The Company shall apply the proceeds of (i) the Term Loan and the
Revolving Loans made on the Closing Date to repay existing indebtedness owed to
GMAC Commercial Credit, LLC and to pay fees and expenses relating to this
transaction, and (ii) Revolving Loans made on and after the Closing Date to
provide for the Company's working capital needs.
3.2. In furtherance of the continuing assignment and security interest in
the Company's Accounts and Inventory, the Company will, upon the creation of
Accounts and purchase or acquisition of Inventory, execute and deliver to the
Agent in such form and manner as the Agent may reasonably require, solely for
the Agent's convenience in maintaining records of Collateral, such confirmatory
schedules of Accounts and Inventory as the Agent may reasonably request,
including, without limitation, weekly schedules of Accounts and Inventory, all
in form and substance satisfactory to the Agent, and such other appropriate
reports designating, identifying and describing the Accounts and Inventory as
the Agent may reasonably request, and provided further that the Agent may
request any such information more frequently, from time to time, upon its
reasonable prior request. In addition, upon the Agent's reasonable request, the
Company shall provide the Agent with copies of agreements with, or purchase
orders from, the Company's customers, and copies of invoices to customers, proof
of shipment or delivery, access to its computers, electronic media and software
programs associated therewith (including any electronic records, contracts and
signatures) and such other documentation and information relating to said
Accounts and other Collateral as the Agent may reasonably require; provided;
however, at any time that the Factoring Agreement is in effect, the provisions
of this paragraph 3.2 relating to Accounts shall be governed by the Factoring
Agreement. Failure to provide the Agent with any of the foregoing shall in no
way affect, diminish, modify or otherwise limit the security interests granted
herein. The Company hereby authorizes the Agent to regard the Company's printed
name or rubber stamp signature on assignment schedules or invoices as the
equivalent of a manual signature by one of the Company's authorized officers or
agents.
3.3. The Company hereby represents and warrants that: each Trade Account
Receivable is based on an actual and bona fide sale and delivery of Inventory or
rendition of services to its customers, made by the Company in the ordinary
course of its business; the Inventory being sold, and the Trade Accounts
Receivable created, are the exclusive property of the Company and are not
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and shall not be subject to any lien, consignment arrangement, encumbrance,
security interest or financing statement whatsoever, other than the Permitted
Encumbrances; the invoices evidencing such Trade Accounts Receivable are in the
name of the Company; and the customers of the Company have accepted the
Inventory or services, owe and are obligated to pay the full amounts stated in
the invoices according to their terms, without dispute, offset, defense,
counterclaim or contra, except for disputes, allowances and other matters
arising in the ordinary course of business with respect to which the Company has
complied with the notification requirements of Paragraph 3.5 of this Section 3
(if applicable). The Company confirms to the Agent that any and all Taxes or
fees relating to its business, its sales, the Accounts or Inventory relating
thereto, are its sole responsibility and that same will be paid by the Company
when due, subject to Paragraph 7.6 of Section 7 of this Financing Agreement, and
that none of said Taxes or fees represent a lien on or claim against the
Accounts. The Company hereby further represents and warrants that it shall not
acquire any Inventory on a consignment basis, nor co-mingle its Inventory with
any of its customers or any other person (excluding Guarantors), including
pursuant to any bill and hold sale or otherwise, and that its Inventory is
marketable to its customers in the ordinary course of business of the Company,
except as it may otherwise report in writing to the Agent pursuant to Paragraph
3.5 hereof from time to time. The Company also warrants and represents that it
is a duly and validly existing corporation and is qualified in all states where
the failure to so qualify would have an adverse effect on the business of the
Company or the ability of the Company to enforce collection of Accounts due from
customers residing in that state. The Company agrees to maintain such books and
records regarding Accounts and Inventory as the Agent may reasonably require and
agrees that the books and records of the Company will reflect the Agent's
interest in the Accounts and Inventory. All of the books and records of the
Company will be available to the Agent during normal business hours, including
any records handled or maintained for the Company by any other company or
entity.
3.4. (a) At such time as the Factoring Agreement has been terminated or the
Company is not subject to an ARM Services Agreement as provided in the Factoring
Termination Agreement and is of no further force and effect, until the Agent has
advised the Company to the contrary after the occurrence of an Event of Default,
the Company, at its own expense, will enforce, collect and receive all amounts
owing on the Accounts in the ordinary course of its business and any proceeds it
so receives shall be subject to the terms hereof, and held on behalf of and in
trust for the Agent on behalf of the Lenders. Such privilege shall terminate at
the election of the Agent, upon the occurrence of an Event of Default, until
such Event of Default is waived in writing by the Required Lenders or cured to
the Agents and/or the Required Lenders satisfaction. Any checks, cash, credit
card sales and receipts, notes or other instruments or property received by the
Company with respect to any Collateral, including Accounts, shall be held by the
Company in trust for the Agent, on behalf of the Lenders, separate from the
Company's own property and funds, and promptly turned over to the Agent with
proper assignments or endorsements by deposit to the Depository Accounts. At
such time as the Factoring Agreement has been terminated and is of no further
force and effect or the Company is not subject to an ARM Services Agreement as
provided in the Factoring Termination Agreement, the Company shall: (i) indicate
on all of its invoices that funds should be delivered to and deposited in a
Depository Account; (ii) direct all of its account debtors to deposit any and
all proceeds of Collateral into the Depository Accounts; (iii) irrevocably
authorize and direct any banks which maintain the initial receipt of cash,
checks and other items to promptly wire transfer all available funds to a
Depository Account; and (iv) advise all such banks of the Agent's security
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interest in such funds. The Company shall provide the Agent with prior written
notice of any and all deposit accounts opened or to be opened subsequent to the
Closing Date. All amounts received by the Agent in payment of Accounts will be
credited to the Revolving Loan Account when the Agent is advised by its bank of
its receipt of such payment at the Agent's bank account in New York, New York on
the Business Day of such advise if advised no later than 1:00 p.m. EST or on the
next succeeding Business Day if so advised after 1:00 p.m. EST. However, the
Company's Revolving Loan Account will be charged monthly with the cost of two
(2) additional Business Days on all such Collections at the interest rate (based
upon the JPMorgan Chase Bank Rate) applicable to Revolving Loans; provided,
however, while the Factoring Agreement is in effect, all items of payment shall
be deemed applied as provided in the Factoring Agreement. No checks, drafts or
other instrument received by the Agent shall constitute final payment to the
Agent and/or the Lenders unless and until such instruments have actually been
collected; provided, that upon receipt of any such check, draft or other
instrument, Agent and/or Lenders shall promptly negotiate such instrument.
(b) At such time as the Factoring Agreement has been terminated and is of
no further force and effect or the Company is not subject to an ARM Services
Agreement as provided in the Factoring Termination Agreement, the Company shall
at the direction of Agent establish and maintain, in its name and at its
expense, lockbox accounts, dominion accounts or deposit accounts with such banks
as are acceptable to the Agent (collectively the "Blocked Accounts") into which
the Company shall promptly cause to be deposited: (i) all proceeds of Collateral
received by the Company, including all amounts payable to the Company from
credit card issuers and credit card processors, and (ii) all amounts on deposit
in deposit accounts used by the Company at each of its locations, all as further
provided in Paragraph 3.4(a) above. The banks at which the Blocked Accounts are
established shall enter into an agreement, in form and substance satisfactory to
the Agent (the "Blocked Account Agreements"), providing that all cash, checks
and items received or deposited in the Blocked Accounts are the property of the
Agent, that the depository bank has no lien upon, or right of set off against,
the Blocked Accounts and any cash, checks, items, wires or other funds from time
to time on deposit therein, except as otherwise provided in the Blocked Account
Agreements, and that automatically, on a daily basis the depository bank will
wire, or otherwise transfer, in immediately available funds, all funds received
or deposited into the Blocked Accounts to such bank account as the Agent may
from time to time designate for such purpose. The Company hereby confirms and
agrees that all amounts deposited in such Blocked Accounts and any other funds
received and collected by the Agent, whether as proceeds of Inventory or other
Collateral or otherwise, shall be the property of the Agent.
3.5. The Company agrees to notify the Agent: (a) of any matters (except for
allowances) affecting the value, enforceability or collectibility of any Account
and of all customer disputes, offsets, defenses, counterclaims, returns (with a
value in excess of $25,000 in the aggregate), rejections and all reclaimed or
repossessed merchandise or goods, and of any adverse effect in the value of its
Inventory, in its weekly and monthly collateral reports (as applicable) provided
to the Agent hereunder, in such detail and format as the Agent may reasonably
require from time to time and (b) promptly of any such matters which are
material, as a whole, to the Accounts and/or the Inventory. The Company agrees
to issue credit memoranda promptly (with duplicates to the Agent upon request
after the occurrence of an Event of Default) upon accepting returns (with a
value in excess of $25,000). Upon the occurrence of an Event of Default (which
is not waived in writing by
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the Required Lenders) and on notice from the Agent, the Company agrees that all
returned, reclaimed or repossessed merchandise or goods shall be set aside by
the Company, marked with the Agent's name (as secured party) and held by the
Company for the Agent's account.
3.6. The Agent shall maintain a Revolving Loan Account on its books in
which the Company will be charged with all loans and advances made by the Agent
to it or for its account, and with any other Obligations, including any and all
costs, expenses and reasonable attorney's fees which the Agent may incur in
connection with the exercise by or for the Agent of any of the rights or powers
herein conferred upon the Agent, or in the prosecution or defense of any action
or proceeding to enforce or protect any rights of the Agent in connection with
this Financing Agreement, the other Loan Documents or the Collateral assigned
hereunder, or any Obligations owing by the Company. The Company will be credited
with all amounts received by the Agent and/or the Lenders from the Company or
from others for the Company's account, including, as above set forth, all
amounts received by the Agent in payment of Accounts, and such amounts will be
applied to payment of the Obligations as set forth herein. In no event shall
prior recourse to any Accounts or other security granted to or by the Company be
a prerequisite to the Agent's right to demand payment of any Obligation.
Further, it is understood that the Agent and/or the Lenders shall have no
obligation whatsoever to perform in any respect any of the Company's contracts
or obligations relating to the Accounts.
3.7. After the end of each month, the Agent shall promptly send the Company
a statement showing the accounting for the charges, loans, advances and other
transactions occurring between the Agent and the Company during that month.
Absent manifest error, the monthly statements shall be deemed correct and
binding upon the Company and shall constitute an account stated between the
Company and the Agent unless the Agent receives a written statement of the
exceptions within thirty (30) days of the date of the monthly statement.
3.8. In the event that any requested advance exceeds Availability or that
(a) the sum of (i) the outstanding balance of Revolving Loans and (ii)
outstanding balance of Letters of Credit exceeds (b)(x) the Borrowing Base or
(y) the Revolving Line of Credit, any such nonconsensual Overadvance shall be
due and payable to the Agent on behalf of the Lenders immediately upon the
Agent's demand therefor.
SECTION 4. TERM LOAN
4.1. The Company hereby agrees to execute and deliver to the Agent, on
behalf of the Lenders, the Term Loan Promissory Note, to evidence the Term Loan
to be extended by the Agent.
4.2. Upon receipt of such Term Loan Promissory Note, the Lenders hereby
agrees to extend to the Company the Term Loan.
4.3. The principal amount of the Term Loan shall be repaid to the Agent, on
behalf of the Lenders, by the Company by: (i) eleven (11) equal quarterly
principal installments of $375,000.00 each, commencing October 1, 2002, and the
subsequent installments shall be due and payable on the
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first day of each Fiscal Quarter thereafter followed by (ii) one (1) installment
of the outstanding balance thereof on the Anniversary Date.
4.4. In the event this Financing Agreement or the Line of Credit is
terminated by either the Agent or the Company for any reason whatsoever, the
Term Loan shall become due and payable on the effective date of such termination
notwithstanding any provision to the contrary in the Promissory Notes or this
Financing Agreement.
4.5. The Company may prepay at any time, at its option, in whole or in
part, the Term Loan without prepayment premium or penalty, provided that on each
such prepayment, the Company shall pay accrued interest on the principal so
prepaid to the date of such prepayment.
4.6. Each prepayment shall be applied to the then last maturing
installments of principal of the Term Loan.
4.7. The Company hereby authorizes the Agent to charge its Revolving Loan
Account with the amount of all obligations owing under this Section 4 as such
amounts become due. The Company confirms that any charges which the Agent may so
make to its Revolving Loan Account as herein provided will be made as an
accommodation to the Company and solely at the Agent's discretion.
SECTION 5. LETTERS OF CREDIT
In order to assist the Company in establishing or opening Letters of Credit
with an Issuer, the Company has requested the Agent, on behalf of the Lenders,
to join in the applications for such Letters of Credit, and/or guarantee payment
or performance of such Letters of Credit and any drafts or acceptances
thereunder through the issuance of the Letters of Credit Guaranty, thereby
lending the Agent's credit to the Company and the Agent has agreed to do so.
These arrangements shall be handled by the Agent subject to the terms and
conditions set forth below.
5.1. Within the Revolving Line of Credit and Availability, the Agent on
behalf of the Lenders shall assist the Company in obtaining Letter(s) of Credit
in an amount not to exceed the outstanding amount of the Letter of Credit
Sub-Line, provided, however, the aggregate face amount of outstanding standby
Letters of Credit shall not exceed $350,000. The Agent's assistance for amounts
in excess of the limitation set forth herein shall at all times and in all
respects be in the Agent's sole discretion. It is understood that the term, form
and purpose of each Letter of Credit and all documentation in connection
therewith, and any amendments, modifications or extensions thereof, must be
mutually acceptable to the Agent, the Issuer and the Company, provided that
Letters of Credit shall not be used for the purchase of domestic Inventory or to
secure present or future debt of domestic Inventory suppliers.
5.2. The Agent shall have the right, without notice to the Company, to
charge the Company's Revolving Loan Account with the amount of any and all
indebtedness, liability or obligation of any kind incurred by the Agent and/or
the Lenders under the Letters of Credit Guaranty at the earlier of (a) payment
by the Agent under the Letters of Credit Guaranty; or (b) the occurrence
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of an Event of Default which has not been waived in writing by the Required
Lenders. Any amount charged to Company's Revolving Loan Account shall be deemed
a Revolving Loan hereunder and shall incur interest at the rate provided in
Paragraph 8.1 of Section 8 of this Financing Agreement.
5.3. The Company unconditionally indemnifies the Agent and the Lenders and
holds the Agent and the Lenders harmless from any and all loss, claim or
liability incurred by the Agent arising from any transactions or occurrences
relating to Letters of Credit established or opened for the Company's account,
the collateral relating thereto and any drafts or acceptances thereunder, and
all Obligations thereunder, including any such loss or claim due to any errors,
omissions, negligence, misconduct or action taken by any Issuer, other than for
any such loss, claim or liability arising out of the gross negligence or willful
misconduct by the Agent and/or the Lenders under the Letters of Credit Guaranty.
This indemnity shall survive termination of this Financing Agreement. The
Company agrees that any charges incurred by the Agent and/or the Lenders for the
Company account by the Issuer shall be conclusive on the Agent and may be
charged to the Company's Revolving Loan Account.
5.4. The Agent shall not be responsible for: (a) the existence, character,
quality, quantity, condition, packing, value or delivery of the goods purporting
to be represented by any documents; (b) any difference or variation in the
character, quality, quantity, condition, packing, value or delivery of the goods
from that expressed in the documents; (c) the validity, sufficiency or
genuineness of any documents or of any endorsements thereon, even if such
documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; (d) the time, place, manner or order in
which shipment is made; (e) partial or incomplete shipment, or failure or
omission to ship any or all of the goods referred to in the Letters of Credit or
documents; (f) any deviation from instructions; (g) delay, default, or fraud by
the shipper and/or anyone else in connection with the goods or the shipping
thereof; or (h) any breach of contract between the shipper or vendors and the
Company.
5.5. The Company agrees that any action taken by the Agent and/or the
Lenders, if taken in good faith, or any action taken by any Issuer, under or in
connection with the Letters of Credit, the Letter of Credit Guarantees, the
drafts or acceptances, or the Collateral, shall be binding on the Company and
shall not result in any liability whatsoever of CIT to the Company. In
furtherance thereof, the Agent shall have the full right and authority to: (a)
clear and resolve any questions of non-compliance of documents; (b) give any
instructions as to acceptance or rejection of any documents or goods; (c)
execute any and all steamship or airways guaranties (and applications
therefore), indemnities or delivery orders; (d) grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances, or documents; and (e) agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letters of Credit, drafts or acceptances;
all in the Agent's sole name. The Issuer shall be entitled to comply with and
honor any and all such documents or instruments executed by or received solely
from the Agent, all without any notice to or any consent from the Company.
Notwithstanding any prior course of conduct or dealing with respect to the
foregoing including amendments and non-compliance with documents and/or the
Company's instructions with respect thereto, the Agent may exercise its rights
hereunder in its sole and reasonable judgment. In addition, without the Agent's
express consent and endorsement in writing, the Company agrees: (a) not to
execute any and all applications for steamship or airway guaranties,
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indemnities or delivery orders; to grant any extensions of the maturity of, time
of payment for, or time of presentation of, any drafts, acceptances or
documents; or to agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any of the
applications, Letters of Credit, drafts or acceptances; and (b) after the
occurrence of an Event of Default which is not cured within any applicable grace
period, if any, or waived by the Agent, not to (i) clear and resolve any
questions of non-compliance of documents, or (ii) give any instructions as to
acceptances or rejection of any documents or goods.
5.6. The Company agrees that: (a) any necessary import, export or other
licenses or certificates for the import or handling of the Collateral will have
been promptly procured; (b) all foreign and domestic governmental laws and
regulations in regard to the shipment and importation of the Collateral, or the
financing thereof will have been promptly and fully complied with; and (c) any
certificates in that regard that the Agent may at any time request will be
promptly furnished. In connection herewith, the Company warrants and represents
that all shipments made under any such Letters of Credit are in accordance with
the laws and regulations of the countries in which the shipments originate and
terminate, and are not prohibited by any such laws and regulations. The Company
assumes all risk, liability and responsibility for, and agrees to pay and
discharge, all present and future local, state, federal or foreign Taxes,
duties, or levies. Any embargo, restriction, laws, customs or regulations of any
country, state, city, or other political subdivision, where the Collateral is or
may be located, or wherein payments are to be made, or wherein drafts may be
drawn, negotiated, accepted, or paid, shall be solely the Company's risk,
liability and responsibility.
5.7. Upon any payments made to the Issuer under the Letter of Credit
Guaranty, the Agent on behalf of the Lenders shall acquire by subrogation, any
rights, remedies, duties or obligations granted or undertaken by the Company to
the Issuer in any application for Letters of Credit, any standing agreement
relating to Letters of Credit or otherwise, all of which shall be deemed to have
been granted to the Agent on behalf of the Lenders and apply in all respects to
the Agent and shall be in addition to any rights, remedies, duties or
obligations contained herein.
SECTION 6. COLLATERAL
6.1. As security for the prompt payment in full of all Obligations, the
Company hereby pledges and grants to the Agent, on behalf of the Lenders, a
continuing general lien upon, and security interest in, all of its:
(a) Accounts;
(b) Inventory;
(c) General Intangibles;
(d) Documents of Title;
(e) Other Collateral; and
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(f) Equipment.
6.2. The security interests granted hereunder shall extend and attach to:
(a) All Collateral which is owned by the Company or in which the
Company has any ownership interest, whether held by the Company or others for
its account;
(b) All Equipment, whether the same constitutes personal property or
fixtures, including, but without limiting the generality of the foregoing, all
dies, jigs, tools, benches, molds, tables, accretions, component parts thereof
and additions thereto, as well as all accessories, motors, engines and auxiliary
parts used in connection with, or attached to, the Equipment; and
(c) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either the Agent or the Company from the
Company's customers, as well as to all supplies, goods, incidentals, packaging
materials, labels and any other items which contribute to the finished goods or
products manufactured or processed by the Company, or to the sale, promotion or
shipment thereof.
6.3. The Company agrees to safeguard, protect and hold all Inventory for
the Agent's account and make no disposition thereof except in the ordinary
course of its business of the Company, as herein provided. The Company
represents and warrants that Inventory will be sold and shipped by the Company
to its customers only in the ordinary course of the Company's business, and then
only on open account and on terms currently being extended by the Company to its
customers, provided that, absent the prior written consent of the Agent, the
Company shall not sell Inventory on a consignment basis nor retain any lien or
security interest in any sold Inventory. Upon the sale, exchange, or other
disposition of Inventory, as herein provided, the security interest in the
Inventory provided for herein shall, without break in continuity and without
further formality or act, continue in, and attach to, all proceeds, including
any instruments for the payment of money, Trade Accounts Receivable, documents
of title, shipping documents, chattel paper and all other cash and non-cash
proceeds of such sale, exchange or disposition. As to any such sale, exchange or
other disposition, the Agent shall have all of the rights of an unpaid seller,
including stoppage in transit, replevin, rescission and reclamation. The Company
hereby agrees to immediately forward any and all proceeds of Collateral to the
Depository Account, and to hold any such proceeds (including any notes and
instruments), in trust for the Agent, on behalf of the Lenders, pending delivery
to the Agent. Irrespective of the Agent's perfection status in any and all of
the General Intangibles, including, without limitations, any Patents,
Trademarks, Copyrights or licenses with respect thereto, the Company hereby
irrevocably grants the Agent a royalty free license to sell or otherwise dispose
or transfer, in accordance with Paragraph 10.3 of Section 10 of this Financing
Agreement, and the applicable terms hereof, of any of the Inventory upon the
occurrence of an Event of Default which has not been waived in writing by the
Agent; provided, that, notwithstanding the foregoing the Agent shall not assert
any license as provided above with respect to any Inventory covered by the
"Josephine" Trademark while such Trademark is subject to that certain License
Agreement dated July 17, 2002 by and between the Company and QVC, Inc..
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6.4. The Company agrees at its own cost and expense to keep the Equipment
in as good and substantial repair and condition as the same is now or at the
time the lien and security interest granted herein shall attach thereto,
reasonable wear and tear excepted, making any and all repairs and replacements
when and where necessary. The Company also agrees to safeguard, protect and hold
all Equipment in accordance with the terms hereof and subject to the Agent's
security interest. Absent the Agent's prior written consent, any sale, exchange
or other disposition of any Equipment shall be made by the Company in the
ordinary course of business and as set forth herein. The Company may, in the
ordinary course of its business, sell, exchange or otherwise dispose of obsolete
or surplus Equipment provided, however, that: (a) the then value of the
Equipment so disposed of in any Fiscal Year does not exceed $100,000 in the
aggregate; and (b) the proceeds of any such sales or dispositions shall be held
in trust by the Company for the Agent and shall be immediately delivered to the
Agent by deposit to the Depository Account, except that the Company may retain
and use such proceeds to purchase forthwith replacement Equipment which the
Company determines in its reasonable business judgment to have a collateral
value at least equal to the Equipment so disposed of or sold; provided, however,
that the aforesaid right shall automatically cease upon the occurrence of a
Default or an Event of Default which is not waived in writing by the Agent. Upon
the sale, exchange, or other disposition of the Equipment, as herein provided,
the security interest provided for herein shall, without break in continuity and
without further formality or act, continue in, and attach to, all proceeds,
including any instruments for the payment of money, Accounts, documents of
title, shipping documents, chattel paper and all other cash and non-cash
proceeds of such sales, exchange or disposition. As to any such sale, exchange
or other disposition, the Agent and the Lenders shall have all of the rights of
an unpaid seller, including stoppage in transit, replevin, rescission and
reclamation.
6.5. The rights and security interests granted to the Agent and the Lenders
hereunder are to continue in full force and effect, notwithstanding the
termination of this Financing Agreement or the fact that the Revolving Loan
Account may from time to time be temporarily in a credit position, until the
final payment in full to the Agent of all Obligations and the termination of
this Financing Agreement. Any delay, or omission by the Agent to exercise any
right hereunder shall not be deemed a waiver thereof, or be deemed a waiver of
any other right, unless such waiver shall be in writing and signed by the Agent.
A waiver on any one occasion shall not be construed as a bar to, or waiver of,
any right or remedy on any future occasion.
6.6. Notwithstanding the Agent's security interest in the Collateral and to
the extent that the Obligations are now or hereafter secured by any assets or
property other than the Collateral or by the guarantee, endorsement, assets or
property of any other person, the Agent shall have the right in its sole
discretion to determine which rights, liens, security interests or remedies the
Agent shall at any time pursue, foreclose upon, relinquish, subordinate, modify
or take any other action with respect to, without in any way modifying or
affecting any of them, or any of the Agent's and/or the Lenders' rights
hereunder.
6.7. Any balances to the credit of the Company and any other property or
assets of the Company in the possession or control of the Agent and/or the
Lenders may be held by the Agent as security for any Obligations and applied in
whole or partial satisfaction of such Obligations when due. The liens and
security interests granted herein, and any other lien or security interest the
Agent
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and/or the Lenders may have in any other assets of the Company, shall secure
payment and performance of all now existing and future Obligations. The Agent
may, in its discretion, charge any or all of the Obligations to the Revolving
Loan Account when due.
6.8. The Company possesses all General Intangibles and rights thereto
necessary to conduct its business as conducted as of the Closing Date and the
Company shall maintain its rights in, and the value of, the foregoing in the
ordinary course of its business, including, without limitation, by making timely
payment with respect to any applicable licensed rights. The Company shall
deliver to the Agent, and/or shall cause the appropriate party to deliver to the
Agent, from time to time such pledge or security agreements with respect to
General Intangibles (now or hereafter acquired) of the Company and its
Subsidiaries as the Agent shall require to obtain valid first liens thereon. In
furtherance of the foregoing, the Company shall provide timely notice to the
Agent of any additional Patents, Trademarks, tradenames, service marks,
Copyrights, brand names, trade names, logos and other trade designations
acquired or applied for subsequent to the Closing Date and the Company shall
execute such documentation as the Agent may reasonably require to obtain and
perfect its lien thereon. The Company hereby confirms that it shall deliver, or
cause to be delivered, any pledged stock issued subsequent to the Closing Date
to the Agent in accordance with the applicable terms of the Pledge Agreement and
prior to such delivery, shall hold any such stock in trust for the Agent. Except
as set forth on Schedule 6.8 hereof, the Company hereby irrevocably grants to
the Agent a royalty-free, non-exclusive license in the General Intangibles,
including tradenames, Trademarks, Copyrights, Patents, licenses, and any other
proprietary and intellectual property rights and any and all right, title and
interest in any of the foregoing, for the sole purpose, upon the occurrence of
an Event of Default, of the right to: (i) advertise for sale and sell or
transfer any Inventory bearing any of the General Intangibles, and (ii) make,
assemble, prepare for sale or complete, or cause others to do so, any applicable
raw materials or Inventory bearing any of the General Intangibles, including use
of the Equipment and Real Estate for the purpose of completing the manufacture
of unfinished goods, raw materials or work-in-process comprising Inventory, and
apply the proceeds thereof to the Obligations hereunder, all as further set
forth in this Financing Agreement and irrespective of the Agent's lien and
perfection in any General Intangibles.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1. The Company hereby warrants, represents and covenants that: (a) the
fair value of the Total Assets exceeds the book value of the Total Liabilities;
(b) the Company is generally able to pay its debts as they become due and
payable; and (c) the Company does not have unreasonably small capital to carry
on its business as it is currently conducted absent extraordinary and unforeseen
circumstances. The Company further warrants and represents that: (i) Schedule 1
hereto correctly and completely sets forth the Company's (A) chief executive
office, (B) Collateral locations, (C) tradenames, and (D) all the other
information listed on said Schedule; (ii) except for the Permitted Encumbrances,
after filing of financing statements in the applicable filing clerks office at
the locations set forth in Schedule 1, this Financing Agreement creates a valid,
perfected and first priority security interest in the Collateral and the
security interests granted herein constitute and shall at all times constitute
the first and only liens on the Collateral; (iii) except for the Permitted
Encumbrances, the Company is, or will be, at the time additional Collateral is
acquired by it, the absolute owner of the Collateral with full right to pledge,
sell, consign, transfer and create a security
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interest therein, free and clear of any and all claims or liens in favor of
others; (iv) the Company will, at its expense, forever warrant and, at the
Agent's request, defend the same from any and all claims and demands of any
other person other than a holder of a Permitted Encumbrance; (v) the Company
will not grant, create or permit to exist, any lien upon, or security interest
in, the Collateral, or any proceeds thereof, in favor of any other person other
than the holders of the Permitted Encumbrances; and that the Equipment does not
comprise a part of the Inventory of the Company; and (vi) the Equipment is and
will only be used by the Company in its business and will not be held for sale
or lease, or removed from its premises, or otherwise disposed of by the Company
except as otherwise permitted in this Financing Agreement.
7.2. The Company agrees to maintain books and records pertaining to the
Collateral in accordance with GAAP and in such additional detail, form and scope
as the Agent shall reasonably require. The Company agrees that the Agent or its
agents, and any of the Lenders who may wish to accompany the Agent at their own
cost and expense may enter upon the Company's premises at any time during normal
business hours, and from time to time in its reasonable business judgment, for
the purpose of inspecting the Collateral and any and all records pertaining
thereto. The Company agrees to afford the Agent thirty (30) days prior written
notice of any change in the location of any Collateral, other than to locations,
that as of the Closing Date, are known to the Agent and at which the Agent has
filed financing statements and otherwise fully perfected its liens thereon. The
Company is also to advise the Agent promptly, in sufficient detail, of any
material adverse change relating to the type, quantity or quality of the
Collateral or on the security interests granted to the Agent therein.
7.3. The Company agrees to: execute and deliver to the Agent, from time to
time, solely for the Agent's convenience in maintaining a record of the
Collateral, such written statements, and schedules as the Agent may reasonably
require, designating, identifying or describing the Collateral. The Company's
failure, however, to promptly give the Agent such statements, or schedules shall
not affect, diminish, modify or otherwise limit the Agent's and/or the Lenders'
security interests in the Collateral.
7.4. The Company agrees to comply in all material respects with the
requirements of all state and federal laws in order to grant to the Agent valid
and perfected first security interests in the Collateral, subject only to the
Permitted Encumbrances. The Agent is hereby authorized by the Company to file
(including pursuant to the applicable terms of the UCC) from time to time any
financing statements, continuations or amendments covering the Collateral. The
Company hereby consents to and ratifies any and all execution and/or filing of
financing statements on or prior to the Closing Date by the Agent. The Company
agrees to do whatever the Agent may reasonably request, from time to time, by
way of: (a) filing notices of liens, financing statements, amendments, renewals
and continuations thereof; (b) cooperating with the Agent's agents and
employees; (c) keeping Collateral records; (d) transferring proceeds of
Collateral to the Agent's possession; and (e) performing such further acts as
the Agent and/or the Lenders may reasonably require in order to effect the
purposes of this Financing Agreement, including but not limited to obtaining
control agreements with respect to deposit accounts and/or Investment Property.
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7.5. (a) The Company agrees to maintain insurance on its Equipment and
Inventory under such policies of insurance, with such insurance companies, in
such reasonable amounts and covering such insurable risks as are at all times
reasonably satisfactory to the Agent. All policies covering the Equipment and
Inventory are, subject to the rights of any holders of Permitted Encumbrances
holding claims senior to the Agent, to be made payable to the Agent, on behalf
of the Lenders, in case of loss, under a standard non-contributory "mortgagee",
"lender" or "secured party" clause and are to contain such other provisions as
the Agent may require to fully protect the Agent's interest in the Inventory and
Equipment and to any payments to be made under such policies. All original
policies or true copies thereof are to be delivered to the Agent, premium
prepaid, with the loss payable endorsement in the Agent's favor, and shall
provide for not less than thirty (30) days prior written notice to the Agent of
the exercise of any right of cancellation. At the Company's request, or if the
Company fails to maintain such insurance, the Agent may arrange for such
insurance, but at the Company's expense and without any responsibility on the
Agent's part for: (i) obtaining the insurance; (ii) the solvency of the
insurance companies; (iii) the adequacy of the coverage; or (iv) the collection
of claims. Upon the occurrence of an Event of Default which is not waived in
writing by the Required Lenders , the Agent shall, subject to the rights of any
holders of Permitted Encumbrances holding claims senior to the Agent, have the
sole right, and at its option, in the name of the Agent or the Company, to file
claims under any insurance policies, to receive, receipt and give acquittance
for any payments that may be payable thereunder, and to execute any and all
endorsements, receipts, releases, assignments, reassignments or other documents
that may be necessary to effect the collection, compromise or settlement of any
claims under any such insurance policies.
(b) (i) In the event of any loss or damage by fire or other casualty,
insurance proceeds relating to Inventory shall first reduce the Company's
Revolving Loan and then the Term Loan. Upon the occurrence of a Default or Event
of Default, such Insurance Proceeds may be applied to the Obligations in such
order as the Agent may elect;
(ii) In the event any part of the Company's Equipment is damaged
by fire or other casualty and the Insurance Proceeds for such damage or other
casualty is less than or equal to $100,000.00, the Agent shall promptly apply
such Proceeds to reduce the Company's outstanding balance in the Revolving Loan
Account. Upon the occurrence of a Default or Event of Default, such Insurance
Proceeds may be applied to the Obligations in such order as the Agent may elect;
(iii) Absent the occurrence of an Event of Default (which has not
been waived in writing by the Required Lenders), and provided that (x) the
Company has sufficient business interruption insurance to replace the lost
profits of any of the Company's facilities, and (y) the Insurance Proceeds are
in excess of $100,000.00, the Company may elect (by delivering written notice to
the Agent) to replace, repair or restore such Equipment to substantially the
equivalent condition prior to such fire or other casualty as set forth herein.
If the Company does not, or cannot, elect to use the Insurance Proceeds as set
forth above, the Agent may, subject to the rights of any holders of Permitted
Encumbrances holding claims senior to the Agent, apply the Insurance Proceeds to
the payment of the Obligations in such manner and in such order as the Agent may
reasonably elect; and
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(iv) If the Company elects to use the Insurance Proceeds for the
repair, replacement or restoration of any Equipment, and there is then no Event
of Default, (x) Insurance Proceeds for any loss in excess of $100,000.00 on
Equipment and/or Real Estate will be applied to the reduction of the Revolving
Loans and (y) the Agent may set up an Availability Reserve for an amount equal
to said Insurance Proceeds. The Availability Reserve will be reduced
dollar-for-dollar upon receipt of non-cancelable executed purchase orders,
delivery receipts or contracts for the replacement, repair or restoration of
Equipment and disbursements in connection therewith.
(c) In the event the Company fails to provide the Agent with timely
evidence, acceptable to the Agent, of its maintenance of insurance coverage
required pursuant to paragraph 7.5(a) above, the Agent may purchase, at the
Company's expense, insurance to protect the Agent's interests in the Collateral.
The insurance acquired by the Agent may, but need not, protect the Company's
interest in the Collateral, and therefore such insurance may not pay claims
which the Company may have with respect to the Collateral or pay any claim which
may be made against the Company in connection with the Collateral. In the event
the Agent purchases, obtains or acquires insurance covering all or any portion
of the Collateral, the Company shall be responsible for all of the applicable
costs of such insurance, including premiums, interest (at the applicable
JPMorgan Chase Bank Rate for Revolving Loans set forth in paragraph 8.1 of
Section 8 hereof), fees and any other charges with respect thereto, until the
effective date of the cancellation or the expiration of such insurance. The
Agent may charge all of such premiums, fees, costs, interest and other charges
to the Company's Revolving Loan Account. The Company hereby acknowledges that
the costs of the premiums of any insurance acquired by the Agent may exceed the
costs of insurance which the Company may be able to purchase on its own. In the
event that the Agent purchases such insurance, the Agent will notify the Company
of said purchase within thirty (30) days of the date of such purchase. If,
within thirty (30) days after the date of such notice, the Company provides the
Agent with proof that the Company had the insurance coverage required pursuant
to 7.5(a) above (in form and substance satisfactory to the Agent) as of the date
on which the Agent purchased insurance and the Company continued at all times to
have such insurance, then the Agent agrees to cancel the insurance purchased by
the Agent and credit the Company's Revolving Loan Account with the amount of all
costs, interest and other charges associated with any insurance purchased by the
Agent, including with any amounts previously charged to the Revolving Loan
Account.
7.6. The Company agrees to pay, when due, all Taxes, including sales taxes,
assessments, claims and other charges lawfully levied or assessed upon the
Company or the Collateral unless such Taxes are being diligently contested in
good faith by the Company by appropriate proceedings and adequate reserves are
established in accordance with GAAP. Notwithstanding the foregoing, if any lien
shall be filed or claimed thereunder (a) for Taxes due the United States of
America, or (b) which in the Agent's reasonable opinion might create a valid
obligation having priority over the rights granted to the Agent herein
(exclusive of Real Estate), such lien shall not be deemed to be a Permitted
Encumbrance hereunder and the Company shall immediately pay such tax and remove
the lien of record. If the Company fails to do so promptly, then at the Agent's
election, the Agent may (i) create an Availability Reserve in such amount as it
may deem appropriate in its business judgment, or (ii) upon the occurrence of a
Default or Event of Default, imminent risk of seizure, filing of any priority
lien, forfeiture, or sale of the Collateral, pay Taxes on the Company's behalf,
and the amount thereof shall be an Obligation secured hereby and due on demand.
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7.7. The Company: (a) agrees to comply with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official, which the failure to comply with would have a material and adverse
impact on the Collateral, or any material part thereof, or on the business or
operations of the Company, provided that the Company may contest any acts,
rules, regulations, orders and directions of such bodies or officials in any
reasonable manner which will not, in the Agent's reasonable opinion, materially
and adversely effect the Agent's and/or the Lender's rights or priority in the
Collateral; (b) agrees to comply with all environmental statutes, acts, rules,
regulations or orders as presently existing or as adopted or amended in the
future, applicable to the Collateral, the ownership and/or use of its real
property and operation of its business, which the failure to comply with would
have a material and adverse impact on the Collateral, or any material part
thereof, or on the operation of the business of the Company; and (c) shall not
be deemed to have breached any provision of this Paragraph 7.7 if (i) the
failure to comply with the requirements of this Paragraph 7.7 resulted from good
faith error or innocent omission, (ii) the Company promptly commences and
diligently pursues a cure of such breach, and (iii) such failure is cured within
(30) days following the Company's receipt of notice of such failure, or if such
cannot in good faith be cured within thirty (30) days, then such breach is cured
within a reasonable time frame based upon the extent and nature of the breach
and the necessary remediation, and in conformity with any applicable consent
order, consensual agreement and applicable law.
7.8. Until termination of this Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Company agrees that, unless
the Agent shall have otherwise consented in writing, the Company will furnish to
the Agent and each Lender: (a) within ninety (90) days after the end of each
Fiscal Year of the Company or within one hundred and five (105) days after the
end of a Fiscal Year if the Company shall have filed for an extension with the
Securities Exchange Commission under Rule 12(b)(25) (or comparable rule) of the
rules and regulations adopted under the Securities Act of 1934, as amended (an
"Extension")), an audited Consolidated Balance Sheet, as at the close of such
year, and statements of profit and loss, cash flow and reconciliation of surplus
of the Company and its Subsidiaries for such year, audited by independent public
accountants selected by the Company and satisfactory to the Agent; (b) within
forty-five (45) days after the end of each Fiscal Quarter if no Extension has
been filed, or within fifty (50) days after the end of each Fiscal Quarter if an
Extension has been filed, a Consolidated Balance Sheet as at the end of such
period and statements of profit and loss, cash flow and surplus of the Company
and its Subsidiaries, certified by an authorized financial or accounting officer
of the Company; (c) within thirty (30) days after the end of each month of such
month is not also a month at the end of a Fiscal Quarter and within forty-five
(45) days after the end of each month if such month is also a month at the end
of a Fiscal Quarter, a Consolidated Balance Sheet as at the end of such period
and statements of profit and loss, cash flow and surplus of the Company and all
Subsidiaries for such period, certified by an authorized financial or accounting
officer of the Company; (d) within thirty (30) days prior to the beginning of
the Company's fiscal year, a month by month projected operating budget and
annual cash flow projections for such fiscal year in form reasonably
satisfactory to Agent, (e) from time to time, such further information regarding
the business affairs and financial condition of the Company and its Subsidiaries
as the Agent may reasonably request, including, without limitation the
accountant's management practice letter and (ii) annual cash flow projections in
form satisfactory to the Agent, and (f) within five (5) days after the end of
each month, a Borrowing Base
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Certificate as and for the prior month. Each financial statement which the
Company is required to submit hereunder must be accompanied by an officer's
certificate, signed by the President, Vice President, Controller, Chief
Financial Officer or Treasurer, pursuant to which any one such officer must
certify that: (x) the financial statement(s) fairly and accurately represent(s)
the Company's financial condition at the end of the particular accounting
period, as well as the Company's operating results during such accounting
period, subject to year-end audit adjustments; and (y) during the particular
accounting period: (A) there has been no Default or Event of Default under this
Financing Agreement, provided, however, that if any such officer has knowledge
that any such Default or Event of Default, has occurred during such period, the
existence of and a detailed description of same shall be set forth in such
officer's certificate; (B) the Company has not received any notice of
cancellation with respect to its property insurance policies; (C) the Company
has not received any notice that could result in a material adverse effect on
the value of the Collateral taken as a whole; and (D) the exhibits attached to
such financial statement(s) constitute detailed calculations showing compliance
with all financial covenants contained in this Financing Agreement.
7.9. Until termination of the Financing Agreement and payment and
satisfaction of all Obligations hereunder, the Company agrees that, without the
prior written consent of the Agent, except as otherwise herein provided, the
Company will not:
(a) Mortgage, assign, pledge, transfer or otherwise permit any lien,
charge, security interest, encumbrance or judgment, (whether as a
result of a purchase money or title retention transaction, or
other security interest, or otherwise) to exist on any of the
Company's Collateral or any other assets, whether now owned or
hereafter acquired, except for the Permitted Encumbrances;
(b) Incur or create any Indebtedness other than the Permitted
Indebtedness;
(c) Sell, lease, assign, transfer or otherwise dispose of (i)
Collateral, except as otherwise specifically permitted by this
Financing Agreement, or (ii) either all or substantially all of
the Company's assets, which do not constitute Collateral;
(d) Merge, consolidate or otherwise alter or modify its corporate
name, principal place of business, structure, or existence,
re-incorporate or re-organize, or enter into or engage in any
operation or activity materially different from that presently
being conducted by the Company, except that the Company may
change its corporate name or address; provided that: (i) the
Company shall give the Agent thirty (30) days prior written
notice thereof and (ii) the Company shall execute and deliver,
prior to or simultaneously with any such action, any and all
documents and agreements requested by the Agent to confirm the
continuation and preservation of all security interests and liens
granted to the Agent hereunder;
(e) Assume, guarantee, endorse, or otherwise become liable upon the
obligations of any person, firm, entity or corporation, except by
the endorsement of
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negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business;
(f) Declare or pay any dividend or distributions of any kind on, or
purchase, acquire, redeem or retire, any of the capital stock or
equity interest, of any class whatsoever, whether now or
hereafter outstanding;
(g) Make any advance (other than advances for expenses in the
ordinary course of business) or loan to, or any investment in,
any firm, entity, person or corporation or purchase or acquire
all or substantially all of the stock or assets of any entity,
person or corporation; provided, however, if there is not then
existing an Event of Default or would exist after giving effect
thereto, the Company may acquire all or substantially all of the
assets of S.L. Danielle, Inc., (the "SL Danielle Acquisition") so
long as (i) the SL Danielle Acquisition is made pursuant to terms
and documentation in form and substance reasonably satisfactory
to Agent, (ii) Agent is satisfied with the financial condition of
the Company after giving effect to the SL Danielle Acquisition,
(iii) the assets of SL Danielle, Inc. shall be clear of all other
liens except Permitted Encumbrances and Agent shall obtain a
perfected first priority security interest therein and (iv) if
the assets are to be held by a Subsidiary of the Company, such
Subsidiary shall execute a joinder to this Financing Agreement in
form and substance satisfactory to Agent and shall execute and
deliver such other documents, certificates, agreements and
opinions as may be requested by Agent in its reasonable
discretion; or
(h) Pay any management, consulting or other similar fees to any
person, corporation or other entity affiliated with the Company
other than compensation arrangements made on an arm's-length
basis and approved by the Compensation Committee of the Company
and not exceeding a per annum compensation amount of $525,000 in
the aggregate for any person or entity.
7.10. Until termination of the Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, the Company shall:
(a) maintain at the end of each Fiscal Quarter ending below a
Tangible Net Worth of not less than the amount set forth below
for the applicable period:
FISCAL QUARTER TANGIBLE NET WORTH
-------------- ------------------
(i) June 30, 2002 $7,000,000
(ii) September 30, 2002 $7,700,000
(iii) December 31, 2002 $5,500,000
(iv) March 31, 2003 $8,000,000
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(v) June 30, 2003 $9,000,000
(vi) September 30, 2003 $9,750,000
(vii) December 31, 2003 $8,000,000
(viii) March 31, 2004 $11,000,000
(ix) June 30, 2004 $14,000,000