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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
Amendment No. 1
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934
For the transition period from _______________ to ___________
Commission File Number 0-17156
MERISEL, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4172359
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
200 Continental Boulevard
El Segundo, CA 90245-0984
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (310) 615-3080
- ---------------------------------------------------------------
Former name, former address, and former fiscal year, if changed since last year
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ______
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Number of Shares Outstanding
Class August 13, 1998
Common Stock, $.01 par value 80,228,393 Shares
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Offer Of Employment Letter to Kristin M. Rogers dated April
30, 1998. *
10.2 Change of Control Agreement dated as of May 11, 1998 between
Kristin M. Rogers and Merisel Americas, Inc. *
10.3 Offer Of Employment Letter to Ronald S. Smith dated June 2,
1998. *
10.4 Waiver and Release Agreement between Robert J. McInerney and
Merisel, Inc. dated as of April 30, 1998. *
10.5 Amendments to Securitization Agreements, dated as of July 31,
1998, among Merisel Americas, Inc., Merisel Capital Funding,
Inc., Redwood Receivables Corporation and General Electric
Capital Corporation. *
10.6 Loan and Security Agreement dated as of June 30, 1998 among
the financial institutions named therein, BankAmerica Business
Credit, Inc. and Merisel Americas, Inc.
(b) The following Reports on Form 8-K were filed during the
quarter ended June 30, 1998.
None
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* Previously filed with Form 10-Q for the period ended June 30, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: August 18, 1998
Merisel, Inc.
By: /s/ Timothy N. Jenson
________________________
Timothy N. Jenson
Senior Vice President, Finance,
and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
LOAN AND SECURITY AGREEMENT
Dated as of June 30, 1998
Among
THE FINANCIAL INSTITUTIONS NAMED HEREIN
as the Lenders
and
BANKAMERICA BUSINESS CREDIT, INC.
as the Agent
and
MERISEL AMERICAS, INC.
as the Borrower
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ARTICLE 1 INTERPRETATION OF THIS AGREEMENT................................................................1
1.1 Definitions............................................................................................1
1.2 Accounting Terms......................................................................................24
1.3 Other Terms...........................................................................................24
1.4 Other Interpretive Provisions.........................................................................24
ARTICLE 2 LOANS AND LETTERS OF CREDIT....................................................................25
2.1 Total Facility........................................................................................25
2.2 Revolving Loans.......................................................................................26
2.3 Letters of Credit.....................................................................................32
2.4 Foreign Exchange Transactions.........................................................................38
ARTICLE 3 INTEREST AND FEES..............................................................................38
3.1 Interest..............................................................................................38
3.2 Conversion and Continuation Elections.................................................................39
3.3 Maximum Interest Rate.................................................................................40
3.4 Facility Fee..........................................................................................41
3.5 Unused Line Fee.......................................................................................41
3.6 Letter of Credit Fee..................................................................................41
3.7 Collateral Management Fee.............................................................................42
3.8 Foreign Exchange Risk Fee.............................................................................42
ARTICLE 4 PAYMENTS AND PREPAYMENTS.......................................................................42
4.1 Revolving Loans.......................................................................................42
4.2 Termination of Facility...............................................................................43
4.3 Payments by the Borrower..............................................................................43
4.4 Payments as Revolving Loans...........................................................................44
4.5 Apportionment, Application and Reversal of Payments...................................................44
4.6 Indemnity for Returned Payments.......................................................................45
4.7 Agent's and Lenders' Books and Records; Monthly Statements............................................45
ARTICLE 5 TAXES, YIELD PROTECTION AND ILLEGALITY.........................................................46
5.1 Taxes.................................................................................................46
5.2 Illegality............................................................................................48
5.3 Increased Costs and Reduction of Return...............................................................48
5.4 Funding Losses........................................................................................49
5.5 Inability to Determine Rates..........................................................................49
5.6 Certificates of Lenders...............................................................................49
5.7 Survival..............................................................................................49
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ARTICLE 6 COLLATERAL.....................................................................................50
6.1 Grant of Security Interest............................................................................50
6.2 Perfection and Protection of Security Interest........................................................50
6.3 Location of Collateral................................................................................51
6.4 Title to, Liens on, and Sale and Use of Collateral....................................................51
6.5 Appraisals............................................................................................52
6.6 Access and Examination; Confidentiality...............................................................52
6.7 Collateral Reporting..................................................................................53
6.8 Accounts..............................................................................................54
6.9 Collection of Accounts; Payments......................................................................55
6.10 Inventory; Perpetual Inventory........................................................................55
6.11 Documents, Instruments, and Chattel Paper.............................................................56
6.12 Right to Cure.........................................................................................56
6.13 Power of Attorney....................................................................................56
6.14 The Agent's and Lenders' Rights, Duties and Liabilities...............................................57
ARTICLE 7 BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES..............................................57
7.1 Books and Records.....................................................................................57
7.2 Financial Information.................................................................................57
7.3 Notices to the Lenders................................................................................59
ARTICLE 8 GENERAL WARRANTIES AND REPRESENTATIONS.........................................................61
8.1 Authorization, Validity, and Enforceability of this Agreement and the Loan Documents..................61
8.2 Validity and Priority of Security Interest............................................................62
8.3 Organization and Qualification........................................................................62
8.4 Corporate Name; Prior Transactions....................................................................62
8.5 Subsidiaries and Affiliates...........................................................................62
8.6 Financial Statements and Projections..................................................................62
8.7 Intentionally Omitted.................................................................................63
8.8 Solvency..............................................................................................63
8.9 Debt..................................................................................................63
8.10 Distributions.........................................................................................63
8.11 Title to Property.....................................................................................63
8.12 Real Estate; Leases...................................................................................63
8.13 Intentionally Omitted.................................................................................63
8.14 Trade Names...........................................................................................63
8.15 Litigation............................................................................................64
8.16 Intentionally Omitted.................................................................................64
8.17 Labor Disputes........................................................................................64
8.18 Environmental Laws....................................................................................64
8.19 No Violation of Law...................................................................................65
8.20 No Default............................................................................................65
8.21 ERISA Compliance......................................................................................65
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8.22 Taxes.................................................................................................66
8.23 Regulated Entities....................................................................................66
8.24 Use of Proceeds; Margin Regulations...................................................................66
8.25 Copyrights, Patents, Trademarks and Licenses, etc.....................................................66
8.26 No Material Adverse Change............................................................................67
8.27 Governmental Authorization............................................................................67
8.28 Year 2000 Compliance..................................................................................67
ARTICLE 9 AFFIRMATIVE AND NEGATIVE COVENANTS.............................................................67
9.1 Taxes and Other Obligations...........................................................................67
9.2 Corporate Existence and Good Standing.................................................................67
9.3 Compliance with Law and Agreements; Maintenance of Licenses...........................................68
9.4 Maintenance of Property...............................................................................68
9.5 Insurance.............................................................................................68
9.6 [Intentionally omitted]...............................................................................69
9.7 Environmental Laws....................................................................................69
9.8 Compliance with ERISA.................................................................................69
9.9 Mergers, Consolidations or Sales......................................................................69
9.10 Distributions; Capital Change; Restricted Investments.................................................69
9.11 Transactions Affecting Collateral or Obligations......................................................70
9.12 Intentionally Omitted.................................................................................70
9.13 Debt..................................................................................................70
9.14 [Intentionally Omitted]...............................................................................70
9.15 Transactions with Affiliates..........................................................................70
9.16 Investment Banking and Finder's Fees..................................................................71
9.17 Business Conducted....................................................................................72
9.18 Liens.................................................................................................72
9.19 [Intentionally Omitted]...............................................................................72
9.20 Intentionally Omitted.................................................................................72
9.21 Fiscal Year...........................................................................................72
9.22 Minimum Adjusted Net Earnings from Operations.........................................................72
9.23 Interest Coverage Ratio...............................................................................72
9.24 Use of Proceeds.......................................................................................72
9.25 Further Assurances....................................................................................72
ARTICLE 10 CONDITIONS OF LENDING..........................................................................72
10.1 Conditions Precedent to Making of Loans on the Closing Date...........................................72
10.2 Conditions Precedent to Each Loan.....................................................................75
ARTICLE 11 DEFAULT; REMEDIES..............................................................................75
11.1 Events of Default.....................................................................................75
11.2 Remedies..............................................................................................78
ARTICLE 12 TERM AND TERMINATION...........................................................................79
12.1 Term and Termination..................................................................................79
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ARTICLE 13 AMENDMENTS; WAIVER; PARTICIPATIONS;
ASSIGNMENTS; SUCCESSORS........................................................................80
13.1 No Waivers Cumulative Remedies.......................................................................80
13.2 Amendments and Waivers................................................................................80
13.3 Assignments; Participations...........................................................................81
ARTICLE 14 THE AGENT......................................................................................83
14.1 Appointment and Authorization.........................................................................83
14.2 Delegation of Duties..................................................................................83
14.3 Liability of Agent....................................................................................84
14.4 Reliance by Agent.....................................................................................84
14.5 Notice of Default.....................................................................................84
14.6 Credit Decision.......................................................................................85
14.7 Indemnification.......................................................................................85
14.8 Agent in Individual Capacity..........................................................................85
14.9 Successor Agent......................................................................................86
14.10 Withholding Tax.......................................................................................86
14.11 Collateral Matters....................................................................................87
14.12 Restrictions on Actions by Lenders; Sharing of Payments...............................................88
14.13 Agency for Perfection.................................................................................89
14.14 Payments by Agent to Lenders..........................................................................89
14.15 Concerning the Collateral and the Related Loan Documents..............................................89
14.16 Field Audit and Examination Reports; Disclaimer by Lenders............................................89
14.17 Relation Among Lenders................................................................................90
ARTICLE 15 MISCELLANEOUS..................................................................................90
15.1 Cumulative Remedies; No Prior Recourse to Collateral..................................................90
15.2 Severability..........................................................................................91
15.3 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.................................91
15.4 WAIVER OF JURY TRIAL..................................................................................93
15.5 Survival of Representations and Warranties............................................................93
15.6 Other Security and Guaranties.........................................................................93
15.7 Fees and Expenses.....................................................................................93
15.8 Notices...............................................................................................94
15.9 Waiver of Notices.....................................................................................95
15.10 Binding Effect........................................................................................95
15.11 Indemnity of the Agent and the Lenders by the Borrower................................................95
15.12 Limitation of Liability...............................................................................96
15.13 Final Agreement.......................................................................................96
15.14 Counterparts..........................................................................................96
15.15 Captions..............................................................................................97
15.16 Right of Setoff.......................................................................................97
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LOAN AND SECURITY AGREEMENT
Loan and Security Agreement, dated as of June 30, 1998, among the
financial institutions listed on the signature pages hereof (such financial
institutions, together with their respective successors and assigns, are
referred to hereinafter each individually as a "Lender" and collectively as the
"Lenders"), BankAmerica Business Credit, Inc., a Delaware corporation ("BABC")
with an office at 40 East 52nd Street, New York, New York 10022, as agent for
the Lenders (in its capacity as agent, the "Agent"), and Merisel Americas, Inc.,
a Delaware corporation, with offices at 200 Continental Boulevard, El Segundo,
California (the "Borrower").
W I T N E S S E T H
WHEREAS, the Borrower has requested the Lenders to make available to
the Borrower a revolving line of credit for loans and letters of credit in an
amount not to exceed $100,000,000 and which extensions of credit the Borrower
will use for its working capital needs and general business purposes;
WHEREAS, the Lenders have agreed to make available to the Borrower a
revolving credit facility upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Agreement, and for good and valuable consideration,
the receipt of which is hereby acknowledged, the Lenders, the Agent, and the
Borrower hereby agree as follows.
ARTICLE 1
INTERPRETATION OF THIS AGREEMENT
1.1 Definitions. As used herein:
"Accounts" means all of the Borrower's now owned or hereafter
acquired accounts (as defined in the UCC) arising from the sale or lease of
Inventory or rendition of services, whether or not they have been earned by
performance, other than Excluded Assets.
"Account Debtor" means each Person obligated in any way on or
in connection with an Account.
"Adjusted Net Earnings from Operations" means, with respect to
any fiscal period of the Parent, the Parent's consolidated net income after
provision for income taxes for such fiscal period, as determined in accordance
with GAAP and reported on the Financial Statements for such period, excluding
(without duplication) any and all of the following included in such net income:
(a) gain (net of any taxes paid or accrued for in accordance with GAAP) or loss
arising from the sale of any capital assets; (b) gain (net of any deferred taxes
liability accrued for in accordance with GAAP) arising from any write-up in the
book value of any asset or loss arising from any write down of any asset (other
than Inventory, Accounts or accounts payable); (c) earnings (net of any taxes
<PAGE>
paid or accrued for in accordance with GAAP) or losses of any corporation,
substantially all the assets of which have been acquired by the Parent in any
pooling of interests transaction, to the extent realized by such other
corporation prior to the date of acquisition; (d) earnings of any
nonconsolidated business entity in which the Parent has an ownership interest
unless (and only to the extent) such earnings shall actually have been received
by the Parent in the form of cash distributions (net of any taxes paid or
accrued for in accordance with GAAP); (e) earnings (net of any taxes paid or
accrued for in accordance with GAAP) of any Person to which a substantial part
of the assets of the Parent shall have been sold, transferred or disposed of, or
into which the Parent shall have been merged, or which has been a party with the
Parent to any consolidation or other form of reorganization, prior to the date
of such transaction; (f) gain (net of any taxes paid or accrued for in
accordance with GAAP) or loss arising from the acquisition of debt or equity
securities of the Parent or from cancellation or forgiveness of debt; and (g)
any other extraordinary non-recurring gains (net of any taxes paid or accrued
for in accordance with GAAP) or losses (other than losses arising from any write
down of Inventory, Accounts or accounts payable).
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person or which owns, directly or indirectly, fifteen percent
(15%) or more of the outstanding equity interest of such Person. A Person shall
be deemed to control another Person if the controlling Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the ownership of
voting securities, by contract, or otherwise.
"Agent" means BankAmerica Business Credit, Inc., solely in its
capacity as agent for the Lenders, and any successor agent.
"Agent Advances" has the meaning specified in Section 2.2(i).
"Agent's Liens" means the Liens in the Collateral granted to
the Agent, for the ratable benefit of the Lenders, BABC, and Agent pursuant to
this Agreement and the other Loan Documents.
"Agent-Related Persons" means the Agent and any successor
agent, together with their respective Affiliates, and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.
"Aggregate Revolver Outstandings" means, at any time: the sum
of (a) the unpaid balance of Revolving Loans, (b) the aggregate amount of
Pending Revolving Loans, (c) one hundred percent (100%) of the aggregate undrawn
face amount of all outstanding Letters of Credit, and (d) the aggregate amount
of any unpaid reimbursement obligations in respect of Letters of Credit.
"Agreement" means this Loan and Security Agreement.
"Anniversary Date" means each anniversary of the Closing Date.
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"Applicable Margin" means (i) with respect to Base Rate
Revolving Loans, 0%; and (ii) with respect to LIBOR Revolving Loans except as
otherwise provided in the immediately succeeding sentence the percentage set
forth below which corresponds to the Interest Coverage Ratio. On the Closing
Date and thereafter for the period ending on the last day of the month in which
the Agent receives the quarterly financial statements for the fiscal quarter
ended June 30, 1998, the Applicable Margin with respect to LIBOR Revolving Loans
shall be 2.0%. The Applicable Margin shall thereafter be adjusted following each
delivery to the Agent of the quarterly financial statements of the Parent
required pursuant to Section 7.2(c) (together with the corresponding Interest
Coverage Ratio Certificate) for the period of two consecutive quarters ending
June 30, 1998, for the period of three consecutive fiscal quarters ending
September 30, 1998, and for each period of four consecutive fiscal quarters
ending on December 31, 1998 and thereafter, each such adjustment to be effective
on the first day of the first full calendar month after each such delivery.
Interest Coverage Ratio LIBOR Revolving Loan Applicable Margin
Greater than or 1.875%
equal to 2.0:1.0
Greater than or 2.0%
equal to 1.25:1.0 but less
than 2.0:1.0
Less than 1.25:1.0 2.25%
Notwithstanding anything in this definition to the contrary, (i) before
any reductions in the Applicable Margin with respect to LIBOR Revolving Loans
will be instituted and maintained, the Availability (calculated without regard
to the Maximum Revolver Amount) must be greater than or equal to $50,000,000.00;
(ii) in the event that the Agent shall fail to receive any such financial
statements and the related Interest Coverage Ratio Certificate for any fiscal
quarter of the Parent within fifty-five (55) days following the end of such
fiscal quarter (within one-hundred (100) days following the end of such fiscal
quarter if such fiscal quarter is the last fiscal quarter of any Fiscal Year),
then the Applicable Margin shall, at the end of such fifty-fifth or
one-hundredth day, as appropriate, immediately and without notice or further
action be the Applicable Margin then in effect (such Applicable Margin to be in
effect until the first day of the first full calendar month after the Agent
receives the quarterly financial statements of the Parent required under Section
7.2(c) for the most recent fiscal quarter of the Parent and the related Interest
Coverage Ratio Certificate ) and (iii) in the event, with respect to any four
(4) fiscal quarter period of the Parent which shall be a Fiscal Year, the
audited financial statements of the Parent required under Section 7.2(a) for
such Fiscal Year shall indicate an Interest Coverage Ratio for such four (4)
fiscal quarter period (as determined by the Agent) less than that reflected in
the Interest Coverage Ratio Certificate delivered to the Agent for such four (4)
fiscal quarter period, the Applicable Margin shall be adjusted retroactively (to
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the effective date of the Applicable Margin which was determined based upon the
delivery of such Interest Coverage Ratio Certificate and the related quarterly
financial statements of the Parent delivered pursuant to Section 7.2(c) for the
last quarter of such four (4) fiscal quarter period) to reflect an Applicable
Margin based upon the Interest Coverage Ratio determined from the audited
financial statements and the Borrower shall make payments to the Agent on behalf
of the Lenders to reflect such adjustment.
"Assignee" has the meaning specified in Section 13.3(a).
"Assignment and Acceptance" has the meaning specified in
Section 13.3(a).
"Attorney Costs" means and includes all reasonable fees,
expenses and disbursements of any law firm or other external counsel engaged by
the Agent, the allocated cost of internal legal services of the Agent and all
reasonable expenses and disbursements of internal counsel of the Agent.
"Availability" means, at any time, (x) the lesser of: (a) the
Maximum Revolver Amount or (b) the Borrowing Base, less (y) the sum of:
(i) the Aggregate Revolver Outstandings;
(ii) the Rent Reserve; and
(iii) all other reserves which the Agent deems necessary in
the exercise of its reasonable credit judgment to maintain with respect to the
Borrower's account, including, without limitation, reserves for any amount which
the Agent or any Lender may be obligated to pay in the future for the account of
the Borrower.
"BABC" means BankAmerica Business Credit, Inc.
"BABC Loan" and "BABC Loans" have the meanings specified in
Section 2.2(h).
"Bank of America" means Bank of America National Trust and
Savings Association, a national banking association, or any successor entity
thereto.
"Bankruptcy Code" means Title 11 of the United States Code
(11 U.S.C. ss. 101 et seq.).
"Base Rate" means, for any day, the rate of interest in effect
for such day as publicly announced from time to time by Bank of America in San
Francisco, California, as its "reference rate" (the "reference rate" being a
rate set by Bank of America based upon various factors including Bank of
America's costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate). Any change in the reference
rate announced by Bank of America shall take effect at the opening of business
on the day specified in the public announcement of such change. Each Interest
Rate based upon the Base Rate shall be adjusted simultaneously with any change
in the Base Rate.
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"Base Rate Revolving Loan" means a Revolving Loan during any
period in which it bears interest based on the Base Rate.
"Borrowing" means a borrowing hereunder consisting of
Revolving Loans made on the same day by the Lenders to the Borrower (or by BABC
in the case of a Borrowing funded by BABC Loans) or by the Agent in the case of
a Borrowing consisting of an Agent Advance.
"Borrowing Base" means (a) the sum of fifty percent (50%) of
Eligible Domestic Inventory, plus forty percent (40%) of Eligible Imported
Inventory; less (b) the sum of the Inventory Mix Reserve, the Liquidation
Expense Reserve, the Foreign Exchange Reserve and the Vendor Lien Reserve.
"Borrowing Base Certificate" means a certificate by a
Responsible Officer of the Borrower, substantially in the form of Exhibit A (or
another form acceptable to the Agent) setting forth the calculation of the
Availability, including a calculation of each component thereof, all in such
detail as shall be satisfactory to the Agent. All calculations of Availability
in connection with the preparation of any Borrowing Base Certificate shall
originally be made by the Borrower and certified to the Agent; provided, that
the Agent shall have the right to review and adjust, in the exercise of its
reasonable credit judgment, any such calculation to the extent that such
calculation is not in accordance with this Agreement.
"Business Day" means (a) any day that is not a Saturday,
Sunday, or a day on which banks in San Francisco, California, are required or
permitted to be closed, and (b) with respect to all notices, determinations,
fundings and payments in connection with the LIBOR Rate or LIBOR Revolving
Loans, any day that is a Business Day pursuant to clause (a) above and that is
also a day on which trading in Dollars is carried on by and between banks in the
London interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any other law,
rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a bank.
"Capital Expenditures" means all expenditures of Borrower or
its Subsidiaries (excluding barter transactions effected in the ordinary course
of business) which should be capitalized in accordance with GAAP, provided,
however, that Capital Expenditures for the Borrower and its Subsidiaries shall
not include (a) expenditures to the extent made with the proceeds of the
issuance of capital stock of Parent or the Borrower or the Borrower's
Subsidiaries, (b) expenditures of the Borrower and its Subsidiaries that are
paid by a third party and for which neither the Borrower nor any Subsidiary of
the Borrower has provided or is required to provide or incur, directly or
indirectly, any consideration or obligation to such third party and (c) the book
value of any asset owned by the Borrower and its Subsidiaries prior to or during
any relevant period to the extent that such book value is included as a Capital
Expenditure during such period as a result of the Borrower and its Subsidiaries
reusing or beginning to reuse such asset during such period without a
corresponding expenditure actually having been made in such period.
<PAGE>
"Capital Lease" means any lease of property by the Borrower
which, in accordance with GAAP, is or should be reflected as a capital lease on
the balance sheet of Borrower.
"Change of Control" means (a) the acquisition by any "person"
or "group" (as such terms are used in Section 13(d) and 14(d)(2) of the Exchange
Act (other than Stonington Capital Appreciation 1994 Fund, L.P. or any of its
Affiliates) of beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Exchange Act) of 35% or more of the
outstanding shares of voting stock of the Parent; (b) during any period of 12
consecutive calendar months, commencing on the date of this Agreement, the
ceasing of those individuals (the "Continuing Directors") who (i) were directors
of the Parent on the first day of each such period or (ii) subsequently became
directors of the Parent and whose initial election or initial nomination for
election subsequent to that date was approved by a majority of the Continuing
Directors then on the board of directors of the Parent to constitute a majority
of the board of directors of the Parent; or (c) the Parent's failure to
beneficially own at least 51% of all of the shares of common stock of the
Borrower and to control the board of directors and management of the Borrower.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute, and regulations promulgated
thereunder.
"Collateral" has the meaning specified in Section 6.1.
"Collateral Management Fee" has the meaning specified in
Section 3.7.
"Commitment" means, at any time with respect to a Lender, the
principal amount set forth beside such Lender's name under the heading
"Commitment" on the signature pages of this Agreement or on the signature page
of the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 13.3, as such Commitment
may be adjusted from time to time in accordance with the provisions of Section
13.3, and "Commitments" means, collectively, the aggregate amount of the
commitments of all of the Lenders.
"Consolidated Net Worth" means, with respect to any Person at
any date of determination, the consolidated stockholders' equity represented by
the shares of such Person's capital stock outstanding at such date, as
determined on a consolidated basis in accordance with GAAP.
"Credit Support" has the meaning specified in Section 2.3(a).
"Contaminant" means any waste, pollutant, hazardous substance,
toxic substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or any constituent of any such substance or waste.
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"Debt" means, as to any Person, (i) indebtedness for borrowed
money or as evidenced by notes, bonds, debentures or similar evidences of any
such Debt of such Person, the deferred and unpaid purchase price of any property
or business (other than trade accounts payable incurred in the ordinary course
of business and constituting current liabilities); (ii) all obligations and
liabilities of any other Person (other than such Person's Subsidiaries) secured
by any Lien on such Person's property, even though such Person shall not have
assumed or become liable for the payment thereof; provided, however, that all
such obligations and liabilities which are limited in recourse to such property
shall be included in Debt only to the extent of the book value of such property
as would be shown on a balance sheet of such Person prepared in accordance with
GAAP; (iii) all obligations or liabilities created or arising under any Capital
Lease or conditional sale or other title retention agreement with respect to
property used or acquired by such Person, even if the rights and remedies of the
lessor, seller or lender thereunder are limited to repossession of such
property; provided, however, that all such obligations and liabilities which are
limited in recourse to such property shall be included in Debt only to the
extent of the book value of such property as would be shown on a balance sheet
of such Person prepared in accordance with GAAP; and (iv) obligations and
liabilities under Guaranties.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default.
"Defaulting Lender" has the meaning specified in Section
2.2(g)(2).
"Default Rate" means a fluctuating per annum interest rate at
all times equal to the sum of (a) the otherwise applicable Interest Rate plus
(b) two percent (2.0%). Each Default Rate shall be adjusted simultaneously with
any change in the applicable Interest Rate. In addition, with respect to Letters
of Credit, the Default Rate shall mean an increase in the Letter of Credit Fee
by two percent (2.0%).
"Distribution" means, in respect of any corporation: (a) the
payment or making of any dividend or other distribution of property in respect
of capital stock (or any options or warrants for such stock) of such
corporation, other than distributions in capital stock (or any options or
warrants for capital stock); or (b) the redemption or other acquisition by such
corporation of any capital stock (or any options or warrants for such stock) of
such corporation.
"DOL" means the United States Department of Labor or any
successor department or agency.
"Dollar" and "$" means dollars in the lawful currency of the
United States.
"Eligible Domestic Inventory" means Eligible Inventory that is
located in the United States.
<PAGE>
"Eligible Imported Inventory" means Imported Inventory (i)
which would constitute Eligible Inventory (except for it being in transit and
not located in the United States), (ii) which is covered by letters of credit,
(iii) with respect to which the documents of title are consigned to the Agent,
and (iv) which is subject to a first perfected Agent's Lien.
"Eligible Inventory" means Inventory, valued by FIFO weighted
average cost, that constitutes raw materials and first quality finished goods
and that, unless the Agent in its sole discretion elects: (a) is not, in the
Agent's reasonable opinion, obsolete, slow moving, or unmerchantable; (b) is
located at premises owned or leased by the Borrower or on premises otherwise
reasonably acceptable to the Agent; (c) upon which the Agent for the benefit of
the Lenders has a first priority perfected security interest (subject only to
those certain Liens set forth in clauses (a), (d), (g) and (o) of the definition
of Permitted Liens); (d) is not work-in-process, spare parts, packaging and
shipping materials, supplies, bill-and-hold Inventory, prepaid but undelivered
Inventory, returned Inventory subject to any Securitization Facility, defective
Inventory, Inventory held for return to suppliers, or Inventory delivered to the
Borrower on consignment; (e) is not in-transit Inventory (except Inventory being
transported between storage facilities of the Borrower); and (f) the Agent, in
the exercise of its reasonable commercial discretion, deems eligible as the
basis for Revolving Loans based on such collateral and credit criteria as the
Agent may from time to time establish. If any Inventory at any time ceases to be
Eligible Inventory, such Inventory shall promptly be excluded from the
calculation of Eligible Inventory.
"Environmental Claims" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for Releases or injury
to the environment.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case relating to environmental, health, safety and land use matters.
"Environmental Lien" means a Lien in favor of any Governmental
Authority for (1) any liability under any Environmental Laws, or (2) damages
arising from, or costs incurred by such Governmental Authority in response to, a
Release or threatened Release of a Contaminant into the environment.
"Environmental Property Transfer Act" means any applicable
requirement of law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the closure of any property or the
transfer, sale or lease of any property or deed or title for any property for
environmental reasons, including, but not limited to, any so-called
"Environmental Cleanup Responsibility Acts" or "Responsible Property Transfer
Acts."
"Equipment" means all of the Borrower's now owned and
hereafter acquired machinery, equipment, furniture, furnishings, fixtures, and
other tangible personal property (except Inventory), including motor vehicles
with respect to which a certificate of title has been issued, aircraft, dies,
tools, jigs, and office equipment, as well as all of such types of property
leased by the Borrower and all of the Borrower's rights and interests with
<PAGE>
respect thereto under such leases (including, without limitation, options to
purchase); together with all present and future additions and accessions
thereto, replacements therefor, component and auxiliary parts and supplies used
or to be used in connection therewith, and all substitutes for any of the
foregoing, and all manuals, drawings, instructions, warranties and rights with
respect thereto; wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Borrower within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it was
a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any
ERISA Affiliate from a Multiemployer Plan or notification that a Multi-employer
Plan is in reorganization; (d) the filing of a notice of intent to terminate,
the treatment of a Plan amendment as a termination under Section 4041 or 4041A
of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) the occurrence of an event or condition which
might reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multiemployer Plan; or (f) the imposition of any material
liability under Title IV of ERISA, other than for PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA
Affiliate.
"Event of Default" has the meaning specified in Section 11.1.
"Excess Cash Flow" for any period means (a) the consolidated
net income of the Borrower and its Subsidiaries for such period, plus the
following to the extent deducted in calculating such consolidated net income:
(i) income tax expense or provision for taxes, (ii) interest expense, (iii)
depreciation expense, (iv) amortization expense and (v) all other noncash
charges, in each case for such period; less (b) the sum of (i) interest expense,
(ii) Capital Expenditures not financed by any other Person, (iii) taxes paid in
cash, and (iv) scheduled payments of principal indebtedness.
"Exchange Act" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"Excluded Asset" shall be any (i) accounts receivable
transferred by Borrower in connection with any Securitization Facility
including, without limitation any Returned Goods and Receivables Assets (as such
terms are defined in the Intercreditor Agreement), (ii) accounts receivable that
are due from the Borrower's vendors, (iii) inventory which as of the Closing
<PAGE>
Date is subject to agreements with vendors or floor plan creditors that prohibit
the granting of an Agent's Lien therein and which are listed on Schedule 1.1,
and (iv) Inventory which after the date of this Agreement becomes subject to
agreements with vendors or floor plan creditors that prohibit the granting of an
Agent's Lien on inventory sold by such vendor or financed by such floor plan
creditor, provided that upon the Agent's receiving written notice from Borrower
(by overnight mail or confirmed facsimile) of the entering into of any such
agreement, the Agent's Lien in such Inventory shall be released on the eleventh
day following the Agent's receipt of such notice; provided that such release
(and the exclusion from Inventory described in the preceding clause (iii) and
this clause (iv)) shall only be for the period any such prohibition is in
effect.
"Facility Fee" has the meaning specified in Section 3.4.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any successor thereto.
"Fee Letter" means that certain agreement between Agent and
Borrower reflecting certain fees owed to the Agent in connection with this
Agreement and the transactions contemplated hereby.
"Financial Statements" means, according to the context in
which it is used, the financial statements referred to in Section 8.6 or any
other financial statements required to be given to the Lenders pursuant to this
Agreement (other than the Latest Projections).
"Fiscal Year" means the Borrower's fiscal year for financial
accounting purposes. The current Fiscal Year of the Borrower will end on the
Saturday closest to December 31, 1998.
"Fixed Assets" means Equipment and Real Estate of the
Borrower.
"Foreign Exchange Reserve" means a reserve equal to the sum
of: (a) five percent (5%) of the notional amount of all Foreign Exchange
Transactions in $ Canadian, plus (b) a percentage of the notional amount of all
Foreign Exchange Transactions outstanding, as determined by the Agent in its
reasonable discretion, for (i) currency other than $ Canadian, or (ii) Foreign
Exchange Transactions greater than 90 days; plus (c) on any Business Day, the
<PAGE>
amount of the settlement risk on the next Business Day less any amounts
deposited by Borrower with Agent on account of such settlement risk at least one
Business Day before such settlement day, provided, however, that such reserve on
account of this clause (c) shall not exceed $5,000,000 on any Business Day; plus
(d) a reserve to be established on the day a Foreign Exchange Transaction is
entered into in an amount by which such settlement risk relating to such Foreign
Exchange Transaction exceeds $5,000,000.
"Foreign Exchange Transactions" means (a) the foreign exchange
line of $100,000,000 (notional value) from Bank of America for foreign exchange
contracts in $ Canadian, and (b) any other foreign exchange line of credit with
Bank of America or a Lender and for any currency; provided that, with respect to
(a) and (b) above, the settlement risk shall not exceed $10,000,000 on any
settlement day.
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
Closing Date.
"GECC" means General Electric Capital Corporation.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guaranty" means, with respect to any Person, all obligations
of such Person which in any manner directly or indirectly guarantee or assure,
or in effect guarantee or assure, the payment or performance of any
indebtedness, dividend or other obligations of any other Person (the "guaranteed
obligations"), or assure or in effect assure the holder of the guaranteed
obligations against loss in respect thereof, including, without limitation, any
such obligations incurred through an agreement, contingent or otherwise: (a) to
purchase the guaranteed obligations or any property constituting security
therefor; (b) to advance or supply funds for the purchase or payment of the
guaranteed obligations or to maintain a working capital or other balance sheet
condition; or (c) to lease property or to purchase any debt or equity securities
or other property or services.
"Impaired Inventory Percentage" means at any time, without
duplication, the sum of (i) Excluded Assets consisting of Inventory plus (ii)
the Vendor Lien Reserve plus (iii) the amount of Inventory described in clause
(g) of the definition of Permitted Liens and that is not Eligible Inventory
solely as a result thereof, expressed as a percentage of the aggregate at such
time of Eligible Inventory plus the amount of Excluded Assets consisting of
Inventory.
<PAGE>
"Imported Inventory" means Inventory that is in the process of
being imported into the United States which (i) has been purchased from a
foreign supplier, (ii) is in the process of being shipped, and (iii) has not yet
been delivered to the Borrower.
"Included Vendor Inventory" means the Inventory included in
the Borrowing Base which is subject to Liens securing Vendor Obligations.
"Indenture" means that certain Indenture dated as of October
15, 1994 between the Parent and The Bank of New York, with respect to the
issuance of 12-1/2% Senior Notes Due 2004 in the aggregate principal amount of
$125,000,000.
"Intercompany Accounts" means all assets and liabilities,
however arising, which are due to the Borrower from, which are due from the
Borrower to, or which otherwise arise from any transaction by the Borrower with,
the Parent or any of its Subsidiaries.
"Intercreditor Agreement" means that certain Intercreditor
Agreement dated as of June 30, 1998, among Agent, the Borrower, Redwood
Receivables Corporation, Merisel Capital Funding, Inc. and GECC.
"Interest Coverage Ratio" means, for any period, the ratio of
(a) Adjusted Net Earnings from Operations for such period plus the sum of the
following to the extent deducted in computing Adjusted Net Earnings from
Operations: (i) tax expense or provision for taxes, (ii) total interest expense
net of interest income, (iii) total amortization expense, (iv) total
depreciation expense, and (v) other non-cash expenses deducted in computing
Adjusted Net Earnings from Operations, over (b) total interest expense during
such period (net of interest income).
"Interest Coverage Ratio Certificate" means a certificate of a
Responsible Officer of the Borrower setting forth the Interest Coverage Ratio
for the four (4) fiscal quarter period of the Parent ending on the last day of
each fiscal quarter of the Parent, together with such supporting documentation
and calculations as the Agent may reasonably request with respect to such
Interest Coverage Ratio.
"Interest Period" means, as to any LIBOR Revolving Loan, the
period commencing on the Funding Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or continued as
a LIBOR Revolving Loan, and ending on the date one, two, three or six months
thereafter as selected by the Borrower in its Notice of Borrowing or Notice of
Conversion/Continuation; provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be extended to the
following Business Day unless the result of such extension would be to carry
such Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(ii)any Interest Period pertaining to a LIBOR
Revolving Loan that begins on the last Business 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 Business Day of the
calendar month at the end of such Interest Period; and
<PAGE>
(iii) no Interest Period shall extend beyond the
Stated Termination Date.
"Interest Rate" means each or any of the interest rates,
including the Default Rate, set forth in Section 3.1.
"Inventory" means all of the Borrower's now owned and
hereafter acquired inventory (as defined in the UCC), wherever located,
including without limitation, and to the extent not prohibited by the Indenture,
all returned goods, materials and supplies of any kind, nature or description
which are or might be consumed in the Borrower's business or used in connection
with the packing, shipping, advertising, selling or finishing of such goods,
merchandise and such other personal property, all chattel paper, documents of
title or other documents representing Inventory and all books, records, account
ledgers, data processing records or systems, computer software and similar
rights or interests related to the Inventory and customarily required or
utilized by lenders under revolving credit facilities secured by inventory and
accounts in order to realize upon such security. Notwithstanding the foregoing,
Inventory shall not include any Excluded Assets.
"Inventory Mix Reserve" means at any time, the amount determined by
reference to clause (a) of the definition of Borrowing Base multiplied by the
Inventory Mix Reserve Percentage at such time.
"Inventory Mix Reserve Percentage" means the quotient, expressed as a
percentage, of the following:
1 - 85% *(OLV);
50
where OLV means the amount determined by the Agent as the realizable
value of Eligible Inventory (expressed as a percentage of cost)
calculated based on the methodology of the Dovetech, Inc. appraisal
most recently submitted to Agent pursuant to Section 6.5; provided,
however, that (i) the Inventory Mix Reserve Percentage shall be
re-determined if, when the Borrowing Base Certificate for the prior
fiscal month-end is delivered, the ratio of (x) the value of the
Inventory described in clauses (iii) and (iv) of the definition of
Excluded Assets to (y) the value of Eligible Inventory, first exceeds
10% of the value of Eligible Inventory and thereafter, when such ratio
is (a) greater than or equal to the next highest integral multiple of
5% in excess of such ratio for the immediately preceding fiscal month
and (b) less than or equal to the highest integral multiple of 5% that
is less than such ratio for the immediately preceding fiscal month;
(ii) as of the Closing Date, the Inventory Mix Reserve Percentage shall
be 9.90%; and (iii) at no time shall the Inventory Mix Reserve
Percentage be less than zero.
<PAGE>
"IRS" means the Internal Revenue Service and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Landlord Waivers" means an agreement, in form and substance
reasonably satisfactory to the Agent, executed by a landlord of Premises leased
by the Borrower where Inventory is located.
"Latest Projections" means: (a) on the Closing Date and
thereafter until the Agent receives new projections pursuant to Section 7.2(f),
the projections of the Borrower's financial condition, results of operations,
and cash flow, dated November 13, 1997 and delivered to the Agent prior to the
Closing Date (including the revised projection, provided in May 1998, of Capital
Expenditures in the amount of $45 million for Fiscal Year 1998); and (b)
thereafter, the projections most recently received by the Agent pursuant to
Section 7.2(f).
"Lender" and "Lenders" have the meanings specified in the
introductory paragraph hereof and shall include the Agent to the extent of any
Agent Advance outstanding and BABC to the extent of any BABC Loan outstanding;
provided that no such Agent Advance or BABC Loan shall be taken into account in
determining any Lender's Pro Rata Share.
"Letter of Credit" means a letter of credit issued or caused
to be issued for the account of the Borrower pursuant to Section 2.3.
"Letter of Credit Fee" has the meaning specified in Section
3.6.
"LIBOR Interest Payment Date" means (i) with respect to a
LIBOR Revolving Loan subject to a one, two or three month Interest Period, the
last day of each Interest Period applicable to such Loan and (ii) with respect
to a LIBOR Revolving Loan subject to a six month Interest Period, the 90th day
and the last day of each Interest Period applicable to such Loan.
"LIBOR Rate" means, for any Interest Period, with respect to
LIBOR Revolving Loans comprising part of the same Borrowing, the rate appearing
on Page 3750 of the Dow Jones Telerate Service (or on any successor or
substitute page of such service, or any successor to or substitute for such
service, providing rate quotations comparable to those currently provided on
such page of such service, as determined by the Agent from time to time for
purposes of providing quotations of interest rates applicable to dollar deposits
in the London interbank market) at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period, as the rate for
dollar deposits with a maturity comparable to such Interest Period. In the event
that such rate is not available at such time for any reason, the "LIBOR Rate"
with respect to such LIBOR Revolving Loan for such Interest Period shall be the
rate at which dollar deposits approximately equal in principal amount to the
amount of such LIBOR Revolving Loan and for a maturity comparable to such
Interest Period are offered to the principal London office of Bank of America in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
<PAGE>
"LIBOR Revolving Loan" means a Revolving Loan during any
period in which it bears interest based on the LIBOR Rate.
"Lien" means: (a) any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute, or
contract, and including without limitation, a security interest, charge, claim,
or lien arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, agreement, security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes; and (b) to the extent not included under clause (a), any
reservation, exception, encroachment, easement, right-of-way, covenant,
condition, restriction, lease or other title exception or encumbrance affecting
property.
"Liquidation Expense Reserve" means a reserve of $8,400,000,
subject to adjustment upwards and downwards by the Agent based on changes in the
Borrower's operating expenses.
"Loan Account" means the loan account of the Borrower, which
account shall be maintained by the Agent.
"Loan Documents" means this Agreement, the Fee Letter, the
Intercreditor Agreement, the Payment Account Agreement, the Post-Closing Letter
(if any) and any other agreements, instruments, and documents heretofore, now or
hereafter evidencing, securing, guaranteeing or otherwise relating to the
Obligations, the Collateral, or this Agreement.
"Loans" means, collectively, all loans and advances provided
for in Article 2.
"Majority Lenders" means at anytime Lenders whose Pro Rata
shares aggregate more than 50% of the Commitments or, if no Commitments shall
then be in effect, Lenders who hold more than 50% of the aggregate principal
amount of the Loans then outstanding.
"Margin Stock" means "margin stock" as such term is defined in
Regulation T, U or X of the Federal Reserve Board.
"Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business, properties or
condition (financial or otherwise) of the Borrower or the Collateral (taken as a
whole); (b) a material impairment of the ability of the Borrower to perform its
material obligations under any Loan Document and to avoid any Event of Default;
or (c) a material adverse effect upon the legality, validity, binding effect or
enforceability against the Borrower of any Loan Document.
"Maximum Merisel Canada Loan" means, until Merisel Canada,
Inc. obtains a revolving working capital facility from any Person which is not
an Affiliate of the Borrower, $55,000,000; provided, however, that such amount
shall increase by $10,000,000 (i) on the closing date of such facility and (ii)
on each anniversary of such date.
"Maximum Revolver Amount" means $100,000,000.
<PAGE>
"Multi-employer Plan" means a "multi-employer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by the Borrower
or any ERISA Affiliate.
"Notice of Borrowing" has the meaning specified in Section
2.2(b).
"Notice of Conversion/Continuation" has the meaning specified
in Section 3.2(b).
"Obligations" means all loans, advances, liabilities,
obligations, covenants, duties, and debts now or hereafter owing by the Borrower
to the Agent and/or any Lender, arising under or pursuant to this Agreement or
any of the other Loan Documents, whether or not evidenced by any note, or other
instrument or document, whether arising from an extension of credit, opening of
a letter of credit, acceptance, loan, guaranty, indemnification or otherwise,
whether direct or indirect (including, without limitation, those acquired by
assignment from others), absolute or contingent, due or to become due, primary
or secondary, as principal or guarantor, and including, without limitation, all
principal, interest, charges, expenses, fees, attorneys' fees, filing fees and
any other sums chargeable to the Borrower hereunder or under any of the other
Loan Documents. "Obligations" includes, without limitation, (a) all debts,
liabilities, and obligations now or hereafter owing from the Borrower to the
Agent and/or any Lender under or in connection with the Letters of Credit and
(b) all debts, liabilities and obligations now or hereafter owing from the
Borrower to the Agent and Lenders arising from or related to Foreign Exchange
Transactions pursuant to the indemnity provided in Section 2.4 hereof.
"Other Taxes" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
(including any interest, penalties and additions to tax) which arise from any
payment made hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any other Loan Documents, provided,
however, that Other Taxes shall not include such taxes (including income taxes
or franchise taxes) as are imposed on or measured by each Lender's net income by
the jurisdiction (or any political subdivision thereof) under the laws of which
the Lender or the Agent, as the case may be, is organized or maintains a lending
office.
"Parent" means Merisel, Inc., a Delaware corporation.
"Participant Lender" means any Person who shall have been
granted the right by any Lender to participate in the financing provided by such
Lender under this Agreement, and who shall have entered into a participation
agreement in form and substance satisfactory to such Lender.
"Payment Account" shall have the meaning set forth in Section
6.9.
"Payment Account Agreement" means the Payment Account
Agreement required to be delivered pursuant to Section 6.9.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Governmental Authority succeeding to the functions thereof.
<PAGE>
"Pending Revolving Loans" means, at any time, the aggregate
principal amount of all Revolving Loans requested in any Notice(s) of Borrowing
received by the Agent which have not yet been advanced.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which the Borrower sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a Multiple-employer Plan has made contributions
at any time during the immediately preceding five (5) plan years.
"Permitted Liens" means:
(a) Liens for taxes not delinquent or statutory Liens
for taxes, provided that the payment of such taxes which are due and payable is
being contested in good faith and by appropriate proceedings diligently pursued
and as to which adequate financial reserves have been established on Borrower's
books and records and an action to enforce such Lien has not been taken, and
provided further that if the amount of such taxes which are subject to statutory
Liens for taxes that remain unpaid past the date when due, exceeds $2,500,000,
the Agent may establish a reserve pursuant to clause (iv) of the definition of
Availability;
(b) the Agent's Liens;
(c) deposits under worker's compensation,unemployment
insurance, social security and other similar laws, or to secure the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure indemnity, performance or other similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations (other than liens arising under ERISA or
Environmental Liens) or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business;
(d) Liens securing the claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and other like
Persons, provided that if any such Lien arises from the nonpayment of such
claims or demand when due, such claims or demands are being contested in good
faith and by appropriate proceedings diligently pursued;
(e) Reservations, exceptions, encroachments,
easements, rights of way, covenants running with the land, and other similar
title exceptions or encumbrances affecting any Real Estate; provided that they
do not in the aggregate materially detract from the value of the Real Estate or
materially interfere with its use in the ordinary conduct of the Borrower's
business;
(f) Judgment and other similar Liens arising in
connection with court proceedings to the extent the attachment or enforcement of
such Liens would not result in an Event of Default hereunder;
<PAGE>
(g) Liens constituting vendor or floor plan
creditor liens existing on the Closing Date (the Agent's Lien shall be junior to
such Liens, provided that the applicable agreement between Borrower and the
vendor or floor plan creditor thereof does not prohibit the granting of junior
liens) and Liens created after the Closing Date on any Inventory in favor of
such vendor thereof or floor plan creditor relating to such Inventory securing
the unpaid purchase price owing to such vendor or floor plan creditor; provided,
however, that the Vendor Obligations and amounts of Inventory that at any
relevant time are subject to the Liens described in this clause (g), shall be
reflected on applicable Borrowing Base Certificates and that the Impaired
Inventory Percentage shall not exceed 50%;
(h) Liens set forth on Schedule 8.9;
(i) Liens securing purchase money Debt on
property other than Collateral;
(j) Liens securing obligations in connection
with real property mortgage financings, synthetic leases of property other than
Collateral and sale-leasebacks of property other than Collateral;
(k) Liens on the assets or property of a
Subsidiary of the Borrower existing at the time such Subsidiary became a
Subsidiary of the Borrower and not incurred as a result of (or in connection
with or in anticipation of) such Subsidiary becoming a Subsidiary of the
Borrower, provided that such Liens do not extend to or cover (A) any property or
assets of the Borrower or any of its other Subsidiaries (other than the property
or assets so acquired) or (B) Collateral;
(l) Liens created pursuant to a Securitization
Facility;
(m) Liens on equipment and related property and
assets (other than Collateral) to secure Capital Lease obligations;
(n) Liens securing Debt which is incurred to
extend, refinance, renew, replace, defease or refund Debt which has been secured
by a Lien permitted under this Agreement and is permitted to be extended,
refinanced, renewed, replaced, defeased or refunded under this Agreement,
provided that such Liens do not extend to or cover any types of property or
assets of the Borrower or any of its Subsidiaries not securing the Debt so
extended, refinanced, renewed, replaced, defeased or refunded;
(o) Liens in favor of customs and revenue
authorities arising by operation of law to secure payment of customs duties in
connection with the importation of goods, which custom duties are not overdue
for a period of more than 60 days;
(p) Liens in favor of the Borrower or any
Subsidiary of the Borrower on the assets of any Subsidiary of the Borrower;
(q) Liens on property other than Collateral
securing Debt of the Borrower and its Subsidiaries, provided that the aggregate
amount of outstanding Debt secured by such Liens shall not exceed at any one
time 20% of the Consolidated Net Worth of the Borrower and its Subsidiaries;
<PAGE>
(r) Liens for property taxes on real property
which is to be abandoned for which the sole recourse for such tax, assessment or
governmental charge or levy is to such property;
(s) licenses, leases or subleases granted to
other Persons in the ordinary course of business not materially interfering with
the conduct of the business of the Borrower and its Subsidiaries taken as a
whole or affecting any Collateral;
(t) Liens arising from precautionary UCC
financing statement filings regarding operating leases entered into by the
Borrower or any of its Subsidiaries;
(u) any interest or title of a lessor,
sublessor, licensee or licensor under any personal property lease, sublease or
license agreement;
(v) Liens in favor of a banking or other
financial institutions encumbering deposits (including the right of set-off)
held by such banking or other financial institutions incurred in the ordinary
course of business;
(w) deposits (including rights of set-off) made
in the ordinary course of business to secure liabilities for premiums to
insurance carriers;
(x) Liens on accounts that are due from the
Borrower's vendors;
(y) Liens on assets of Subsidiaries of the
Borrower (other than Collateral) to secure working capital facilities; and
(z) Liens on deposits to secure standby letters
of credit.
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, Governmental Authority, or any other entity.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Borrower sponsors or maintains or to which the Borrower
makes, is making, or is obligated to make contributions and includes any Pension
Plan.
"Post-Closing Letter" means a letter agreement dated as of the
Closing Date between the Borrower and the Agent.
<PAGE>
"Premises" means the land identified by addresses on Schedule
8.12, together with all buildings, improvements, and fixtures thereon and all
tenements, hereditaments, and appurtenances belonging or in any way appertaining
thereto.
"Promissory Notes" means those certain Promissory Notes of
Merisel Properties, Inc. payable to Heller Financial, Inc. in the aggregate
amount of approximately $7,600,000.
"Pro Rata Share" means, with respect to a Lender, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender's Commitment and the denominator of which is the sum of the amounts of
all of the Lenders' Commitments, or if no Commitments are outstanding, a
fraction (expressed as a percentage), the numerator of which is the amount of
Obligations owed to such Lender and the denominator of which is the aggregate
amount of the Obligations owed to the Lenders.
"Real Estate" means all of the present and future interests of
the Borrower, as owner, lessee, or otherwise, in the Premises, including,
without limitation, any interest arising from an option to purchase or lease the
Premises or any portion thereof.
"Reduction" has the meaning specified in Section 2.1(b).
"Release" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the outdoor environment, including the movement of Contaminants
through or in the air, soil, surface water, groundwater or Real Estate or other
property.
"Rent Reserve" means a reserve equal to the sum of, for each
and every leased Premise where Inventory is located, the amount of three (3)
months rent; provided that the reserve calculation hereunder will not include
(i) leased Premises located in states where the applicable law does not give a
landlord a priority lien on the inventory located on such property and (ii)
those Premises subject to an executed Landlord Waiver.
"Reportable Event" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
"Required Lenders" means at any time Lenders whose Pro Rata
Shares aggregate more than 66 2/3% of the Commitments or, if no Commitments
shall then be in effect, Lenders who hold more than 66 2/3% of the aggregate
principal amount of the Loans then outstanding.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Authority, in each case applicable to or binding
upon the Person or any of its property or to which the Person or any of its
property is subject.
<PAGE>
"Responsible Officer" means the chief executive officer, the
president, the chief operating officer, the chief financial officer, or the
treasurer or the assistant treasurer of the Borrower, or any other officer
having substantially the same authority and responsibility.
"Restricted Investment" means, as to any Person, any
acquisition of stock or indebtedness, or a loan, advance, capital contribution,
or subscription for capital stock, except the following: (a) accounts receivable
arising from the sale or lease of goods or the rendition of services in the
ordinary course of business of the Borrower and its Subsidiaries; (b) direct
obligations of the United States of America, or any agency thereof, or
obligations guaranteed by the United States of America, provided that such
obligations mature within one year from the date of acquisition thereof; (c)
certificates of deposit maturing within one year from the date of acquisition,
bankers' acceptances, Eurodollar bank deposits, or overnight bank deposits, in
each case issued by, created by, or with a bank or trust company organized under
the laws of the United States or any state thereof having capital and surplus
aggregating at least $100,000,000; (d) commercial paper given a rating of "A2"
or better by Standard & Poor's Corporation or "P2" or better by Moody's
Investors Service, Inc. and maturing not more than 90 days from the date of
creation thereof; (e) investments in money market funds substantially all of
whose assets are comprised of securities of the types described in clauses (b)
through (d) above; (f) demand deposit accounts of the Borrower and its
Subsidiaries maintained in the ordinary course of business; (g) in the case of
any Subsidiary organized under the laws of a jurisdiction other than a State of
the United States (A) direct obligations of the sovereign nation (or any agency
thereof) in which such Subsidiary is organized and is conducting business or in
obligations fully and unconditionally guaranteed by such sovereign nation (or
any agency thereof), (B) investments of the type and maturity described in
clauses (b) through (d) above of foreign obligors, which investments or obligors
(or the direct or indirect parents of such obligors) have ratings described in
such clauses or equivalent ratings from comparable foreign rating agencies, (C)
investments of the type and maturity described in clauses (b) through (d) above
of foreign obligors (or the direct or indirect parents of such obligors), which
investments or obligors (or the direct or indirect parents of such obligors) are
not rated as provided in such clauses but which are, in the reasonable judgment
of the Borrower or its Subsidiaries, comparable in investment quality to such
investments and obligors (or the direct or indirect parent of such obligors), or
(D) investments in money market funds substantially all of whose assets are
comprised of securities of the types described in this clause (g); (h) stock,
debt, securities or other property received in connection with the bankruptcy or
reorganization of, or in settlement of delinquent obligations of, or disputes
with or otherwise managed to enhance yield or to facilitate payment of
obligations by, customers and suppliers arising in the ordinary course of
business; (i) acquisitions of stock or indebtedness of the Parent by the
Borrower or any other Subsidiary of the Parent or of any Subsidiary of the
Parent by the Borrower or any other Subsidiary of the Parent or loans, advances,
capital contributions or subscriptions for capital stock to the Parent or any
Subsidiary of the Parent, in each case to the extent permitted under Section
9.15; (j) acquisition of stock or indebtedness of Persons other than the Parent
and its Subsidiaries in an amount not to exceed $2 million in any Fiscal Year or
$7.5 million in aggregate during the term of this Agreement; (k) loans,
advances, capital contributions or subscriptions for capital stock to Persons
other than the Parent, the Borrower or Subsidiaries of the Parent in an amount
not to exceed $2 million in any Fiscal Year or $7.5 million in aggregate during
<PAGE>
the term of this Agreement; (l) advances or loans to directors or employees in
the ordinary course of business; (m) to the extent permitted by Section 9.9,
investments in stock or indebtedness of Persons that are not Subsidiaries of the
Borrower if as a result thereof such Person becomes a Subsidiary of the Borrower
or is merged or consolidated with or into the Borrower or transfers all or
substantially all of its assets to the Borrower or its Subsidiaries; and (n)
obligations under interest rate and currency rate protection arrangements
entered into in the ordinary course of business.
"Revolving Loans" has the meaning specified in Section 2.2 and
includes each Agent Advance and BABC Loan.
"Securitization Facility" means (i) the Amended and Restated
Receivables Purchase and Servicing Agreement dated as of September 27, 1996
among Merisel Capital Funding, Inc., Redwood Receivables Corporation, the
Borrower and General Electric Capital Corporation, (ii) the Amended and Restated
Receivables Transfer Agreement dated as of September 27, 1996 between the
Borrower and Merisel Capital Funding, Inc., (iii) the Receivables Purchase
Agreement dated December 15, 1995 between Merisel Canada Inc. and Canadian
Master Trust and (iv) all documents, agreements and instruments entered into
connection with the foregoing, and as any of the same may be amended, restated,
supplemented, modified, renewed, replaced or refinanced, including any
agreements restructuring or adding Persons to such agreements or documents and
whether with the same or other financial institutions (and including any related
agreements or instruments).
"Settlement" and "Settlement Date" have the meanings specified
in Section 2.2(j)(l).
"Significant Subsidiary" of Borrower shall mean (i) Merisel
Canada, Inc. and (ii) any other Subsidiary of Borrower that would be a
"significant subsidiary" of Borrower as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Exchange Act, as such Regulation is
in effect on the date hereof.
"Solvent" means when used with respect to any Person that at
the time of determination:
(i) the assets of such Person, at a fair valuation,
are in excess of the total amount of its debts (including, without limitation,
contingent liabilities); and
(ii)the present fair saleable value of its assets is
greater than its probable liability on its existing debts as such debts become
absolute and matured; and
(iii) it is then able and expects to be able to
pay its debts (including, without limitation, contingent debts and other
commitments) as they mature; and
(iv)it has capital sufficient to carry on its
business as conducted and as proposed to be conducted.
<PAGE>
For purposes of determining whether a Person is Solvent, the
amount of any contingent liability shall be computed as the amount that, in
light of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability.
"Stated Termination Date" means June 30, 2003.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than fifty
percent (50%) of the voting stock or other equity interests (in the case of
Persons other than corporations), is owned or controlled directly or indirectly
by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires, references
herein to a "Subsidiary" refer to a Subsidiary of the Borrower.
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings (including any interest, penalties,
or additions to tax) imposed by the United States or any State therein or
imposed by any foreign jurisdiction ("Foreign Taxes"); provided, however, that
Foreign Taxes (x) shall not include any such taxes that would not have been
imposed by any such foreign jurisdiction but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
taxes and the Agent or such Lender (including, without limitation, a connection
arising from the Agent or such Lender or related person being or having been a
citizen or resident of such jurisdiction, or being or having been organized,
present or engaged in a trade or business in such jurisdiction, or office) but
(y) notwithstanding the foregoing clause (x), shall include any such taxes
imposed by a foreign jurisdiction because of any present or former connection
between the jurisdiction of the government or taxation authority imposing such
taxes and the Borrower; but, in the case of any domestic or Foreign Tax,
excluding, in the case of each Lender and the Agent, such taxes (including
income taxes or franchise taxes) as are imposed on or measured by each Lender's
net income by the jurisdiction (or any political subdivision thereof) under the
laws of which such Lender or the Agent, as the case may be, is organized or
maintains a lending office.
"Termination Date" means the earliest to occur of (i) the
Stated Termination Date, (ii) the date the Total Facility is terminated either
by the Borrower pursuant to Section 4.2 or by the Majority Lenders pursuant to
Section 11.2, and (iii) the date this Agreement is otherwise terminated for any
reason whatsoever.
"Total Facility" has the meaning specified in Section 2.1.
"UCC" means the Uniform Commercial Code (or any successor
statute) of the State of California or of any other state the laws of which are
required by Section 9-103 thereof to be applied in connection with the issue of
perfection of security interests.
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current value
of that Plan's assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.
<PAGE>
"Unrelated Person" means any Person other than (a) a
Subsidiary of the Parent or (b) an employee stock ownership plan or other
employee benefit plan covering the employees of the Parent or its Subsidiaries.
"Unused Letter of Credit Subfacility" means an amount equal to
$25,000,000 minus the sum of (a) the aggregate undrawn amount of all outstanding
Letters of Credit plus (b) the aggregate unpaid reimbursement obligations with
respect to all Letters of Credit.
"Unused Line Fee" has the meaning specified in Section 3.5.
"Vendor Lien Reserve' means the amount of Vendor Obligations
owing to any vendor who has a Lien on such vendor's inventory sold to Borrower
but only if Borrower includes such inventory (to the extent it constitutes
Eligible Domestic Inventory) in the calculation of the Borrowing Base.
"Vendor Obligations" means the amount of the obligations of
the Borrower owed to vendors and secured by Inventory, to the extent such vendor
is entitled to apply such security towards payment of such obligations.
"Year 2000 Problem" means the risk that computer applications
may not be able to properly perform date sensitive functions after December 31,
1999.
1.2 Accounting Terms. Any accounting term used in this Agreement shall
have, unless otherwise specifically provided herein, the meaning customarily
given in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
as consistently applied and using the same method for inventory valuation as
used in the preparation of the Financial Statements.
1.3 Other Terms. All other undefined terms contained in this Agreement
shall, unless the context indicates otherwise, have the meanings provided for by
the UCC to the extent the same are used or defined therein. Wherever appropriate
in the context, terms used herein in the singular also include the plural, and
vice versa, and each masculine, feminine, or neuter pronoun shall also include
the other genders.
1.4 Other Interpretive Provisions. (a) The meanings of defined terms
are equally applicable to the singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
<PAGE>
(iii) In the computation of periods of time from a
specified date to a later specified
date, the word "from" means "from and including," the words "to" and "until"
each mean "to but excluding" and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any statute
or regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the Agent, the
Borrower and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the Agent merely
because of the Agent's or Lenders' involvement in their preparation.
ARTICLE 2
LOANS AND LETTERS OF CREDIT
2.1 (a) Total Facility. Subject to all of the terms and conditions of
this Agreement, the Lenders severally agree to make available a total credit
facility of up to $100,000,000 (as such amount may be reduced from time to time
pursuant to Section 2.1(b), the "Total Facility") for the Borrower's use from
time to time during the term of this Agreement. The Total Facility shall be
comprised of a revolving line of credit consisting of revolving loans and
letters of credit up to the Maximum Revolver Amount, as described in Sections
2.2 and 2.3.
(b) Permanent Reductions. The Borrower shall have the right, at
any time from time to time, without premium or penalty, to permanently reduce
the Total Facility, the Maximum Revolver Amount and the Commitments (each a
"Reduction"), and the Commitment of each Lender shall be reduced by its Pro Rata
Share of each Reduction, if all of the following conditions are met as to each
requested Reduction:
(i) The Borrower shall give the Agent at least five (5) days'
prior written notice of the requested Reduction;
<PAGE>
(ii)The aggregate amount of such Reduction and all prior
Reductions shall not exceed $25,000,000.
(iii) Each requested Reduction must be in an amount not less
than $5,000,000 or that is an integral multiple of $1,000,000 in excess thereof;
(iv)The requested Reduction shall not require a payment to be
made pursuant to the last sentence of Section 4.1.
(v) The amount of each requested Reduction shall be applied at
the option of the Borrower (as designated to the Agent in the written notice
required under clause (i) above) to reduce (A) the Maximum Revolver Amount, (B)
the Unused Letter of Credit Facility, or (C) any combination thereof, provided,
that, each Reduction in (A) or (B) shall: (x) be in an amount of $5,000,000 or
an integral multiple thereof, (y) not cause the Maximum Revolver Amount, if so
reduced, to be less than the Aggregate Revolver Outstandings at such time; and
(z) not cause the Unused Letter of Credit Subfacility, if so reduced, to be less
than the sum of the aggregate undrawn amount of Letters of Credit at such time
and the aggregate amount of any unpaid reimbursement obligations in respect of
Letters of Credit at such time.
2.2 Revolving Loans.
(a) Amounts. Subject to the satisfaction of the conditions
precedent set forth in Article 10, each Lender severally agrees, upon the
Borrower's request from time to time on any Business Day during the period from
the Closing Date to the Termination Date, to make revolving loans (the
"Revolving Loans") to the Borrower, in amounts not to exceed (except for BABC
with respect to BABC Loans or Agent Advances) such Lender's Pro Rata Share of
the Borrower's Availability. The Lenders, however, in their discretion, may
elect to make Revolving Loans or participate (as provided for in Section 2.3(f))
in the credit support or enhancement provided through the Agent to the issuers
of Letters of Credit in excess of the Availability on one or more occasions, but
if they do so, neither the Agent nor the Lenders shall be deemed thereby to have
changed the limits of the Maximum Revolver Amount or the Availability or to be
obligated to exceed such limits on any other occasion. If at any time (i) the
Aggregate Revolver Outstanding exceeds the Availability (with the Availability
for purposes of this clause (i) calculated as if the Aggregate Revolver
Outstandings were zero), or (ii) the Availability is less than $50,000,000 (with
availability for purposes of this clause (ii) calculated without regard to
Maximum Revolver Amount), then the Lenders may refuse to make or otherwise
restrict the making of Revolving Loans as the Lenders determine until such
excess has been eliminated (in the case of clause (i)) or such deficiency has
been eliminated (in the case of clause (ii)), subject to the Agent's authority,
in its sole discretion, to make Agent Advances pursuant to the terms of Section
2.2(i).
(b) Procedure for Borrowing.
(1) Each Borrowing shall be made upon the Borrower's
irrevocable written notice delivered to the Agent in the form of a notice of
borrowing substantially in the form of Exhibit C ("Notice of Borrowing")
<PAGE>
together with a Borrowing Base Certificate reflecting sufficient Availability,
(which must be received by the Agent prior to 10:00 a.m. (Pacific time) (i) at
least three Business Days prior to the requested Funding Date, in the case of
LIBOR Revolving Loans and (ii) no later than 10:00 a.m. (Pacific time) on the
requested Funding Date, in the case of Base Rate Revolving Loans, specifying:
(A) the amount of the Borrowing (which, in
the case of LIBOR Revolving Loans, shall be in an amount not less than
$2,500,000, and which shall be in integral multiples of $250,000);
(B) the requested Funding Date, which shall
be a Business Day;
(C) whether the Revolving Loans requested
are to be Base Rate Revolving Loans
or LIBOR Revolving Loans; and
(D) the duration of the Interest Period if
the requested Revolving Loans are to be LIBOR Revolving Loans. If the Notice of
Borrowing fails to specify the duration of the Interest Period for any Borrowing
comprised of LIBOR Revolving Loans, such Interest Period shall be one month;
(2) With respect to any request for Base Rate
Revolving Loans, in lieu of delivering the above-described Notice of Borrowing
the Borrower may give the Agent telephonic notice of such request by the
required time, with such telephonic notice to be confirmed in writing within 24
hours of the giving of such notice but the Agent shall be entitled to rely on
the telephonic notice in making such Revolving Loans. If it receives telephonic
notice by 10:00 a.m. (Pacific time), the Agent shall use its best efforts to
initiate the funding of Base Rate Revolving Loans by 12:00 noon (Pacific time).
(3) With respect to any request for LIBOR Revolving
Loans, no more than ten (10) LIBOR Revolving Loans may be outstanding at any one
time.
(c) Reliance upon Authority. On or prior to the Closing Date
and thereafter prior to any change with respect to any of the information
contained in the following clauses (i) and (ii), the Borrower shall deliver to
the Agent a writing setting forth (i) the account of the Borrower to which the
Agent is authorized to transfer the proceeds of the Revolving Loans requested
pursuant to this Section 2.2, and (ii) the names of the persons authorized to
request Revolving Loans on behalf of the Borrower, and shall provide the Agent
with a specimen signature of each such person. The Agent shall be entitled to
rely conclusively on such person's authority to request Revolving Loans on
behalf of the Borrower, the proceeds of which are to be transferred to any of
the accounts specified by the Borrower pursuant to the immediately preceding
sentence, until the Agent receives written notice to the contrary. The Agent
shall have no duty to verify the identity of any individual representing him or
herself as one of the officers authorized by the Borrower to make such requests
on its behalf.
(d) No Liability. The Agent shall not incur any liability to
the Borrower as a result of acting upon any notice referred to in Sections
2.2(b) and (c), which notice the Agent believes in good faith to have been given
by an officer duly authorized by the Borrower to request Revolving Loans on its
<PAGE>
behalf or for otherwise acting in good faith under this Section 2.2, and the
crediting of Revolving Loans to the Borrower's deposit account, or transmittal
to such Person as the Borrower shall direct, shall conclusively establish the
obligation of the Borrower to repay such Revolving Loans as provided herein.
(e) Notice Irrevocable. Any Notice of Borrowing (or telephonic
notice in lieu thereof) made pursuant to Section 2.2(b) shall be irrevocable and
the Borrower shall be bound to borrow the funds requested therein in accordance
therewith.
(f) Agent's Election. Promptly after receipt of a Notice of
Borrowing (or telephonic notice in lieu thereof) pursuant to Section 2.2(b), the
Agent shall elect, in its discretion, (i) to have the terms of Section 2.2(g)
apply to such requested Borrowing, or (ii) to request BABC to make a BABC Loan
pursuant to the terms of Section 2.2(h) in the amount of the requested
Borrowing; provided, however, that if BABC declines in its sole discretion to
make a BABC Loan pursuant to Section 2.2(h), the Agent shall elect to have the
terms of Section 2.2(g) apply to such requested Borrowing.
(g) Making of Revolving Loans.
(1) In the event that the Agent shall elect to have
the terms of this Section 2.2(g) apply to a requested Borrowing as described in
Section 2.2(f), then promptly after receipt of a Notice of Borrowing or
telephonic notice pursuant to Section 2.2(b), the Agent shall notify the Lenders
by telecopy, telephone or other similar form of transmission, of the requested
Borrowing. Each Lender shall make the amount of such Lender's Pro Rata Share of
the requested Borrowing available to the Agent in same day funds, to such
account of the Agent as the Agent may designate, not later than 12:00 noon,
(Pacific time) on the Funding Date applicable thereto. After the Agent's receipt
of the proceeds of such Revolving Loans, upon satisfaction of the applicable
conditions precedent set forth in Article 10, the Agent shall make the proceeds
of such Revolving Loans available to the Borrower on the applicable Funding Date
by transferring same day funds equal to the proceeds of such Revolving Loans
received by the Agent to the account of the Borrower, designated in writing by
the Borrower and acceptable to the Agent; provided, however, that the amount of
Revolving Loans so made on any date shall in no event exceed the Availability of
the Borrower on such date.
(2) Unless the Agent receives notice from a Lender on
or prior to the Closing Date or, with respect to any Borrowing after the Closing
Date, at least one Business Day prior to the date of such Borrowing, that such
Lender will not make available as and when required hereunder to the Agent for
the account of the Borrower the amount of that Lender's Pro Rata Share of the
Borrowing, the Agent may assume that each Lender has made such amount available
to the Agent in immediately available funds on the Funding Date and the Agent
may (but shall not be so required), in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If and to the
extent any Lender shall not have made its full amount available to the Agent in
immediately available funds and the Agent in such circumstances has made
available to the Borrower such amount, that Lender shall on the Business Day
following such Funding Date make such amount available to the Agent, together
<PAGE>
with interest at the Federal Funds Rate for each day during such period. A
notice of the Agent submitted to any Lender with respect to amounts owing under
this subsection shall be conclusive, absent manifest error. If such amount is so
made available, such payment to the Agent shall constitute such Lender's Loan on
the payment date for all purposes of this Agreement. If such amount is not made
available to the Agent on the Business Day following the Funding Date, the Agent
will notify the Borrower of such failure to fund and, upon demand by the Agent,
the Borrower shall pay such amount to the Agent for the Agent's account,
together with interest thereon for each day elapsed since the date of such
Borrowing, at a rate per annum equal to the Interest Rate applicable at the time
to the Loans comprising such Borrowing. The failure of any Lender to make any
Loan on any Funding Date (any such Lender, prior to the cure of such failure,
being hereinafter referred to as a "Defaulting Lender") shall not relieve any
other Lender of any obligation hereunder to make a Loan on such Funding Date,
but no Lender shall be responsible for the failure of any other Lender to make
the Loan to be made by such other Lender on any Funding Date.
(3) The Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by Borrower to the Agent for the Defaulting
Lender's benefit; nor shall a Defaulting Lender be entitled to the sharing of
any payments hereunder. Amounts payable to a Defaulting Lender shall instead be
paid to or retained by the Agent. The Agent may hold and, in its discretion,
re-lend to Borrower the amount of all such payments received or retained by it
for the account of such Defaulting Lender. Any amounts so re-lent to the
Borrower shall bear interest at the rate applicable to Base Rate Revolving Loans
and for all other purposes of this Agreement shall be treated as if they were
Revolving Loans, provided, however, that for purposes of voting or consenting to
matters with respect to the Loan Documents and determining Pro Rata Shares, such
Defaulting Lender shall be deemed not to be a "Lender" and such Defaulting
Lender's Commitment and the principal amount of Loans owed to such Lender shall
be deemed to be zero (-0-). Until a Defaulting Lender cures its failure to fund
its Pro Rata Share of any Borrowing (1) such Defaulting Lender shall not be
entitled to any portion of the Unused Line Fee and (2) the Unused Line Fee shall
accrue in favor of the Lenders which have funded their respective Pro Rata
Shares of such requested Borrowing and shall be allocated among such performing
Lenders ratably based upon their relative Commitments. This section shall remain
effective with respect to such Lender until such time as the Defaulting Lender
shall no longer be in default of any of its obligations under this Agreement.
The terms of this Section shall not be construed to increase or otherwise affect
the Commitment of any Lender, or relieve or excuse the performance by the
Borrower of its duties and obligations hereunder.
(h) Making of BABC Loans.
(1) In the event the Agent shall elect, with the
consent of BABC, to have the terms of this Section 2.2(h) apply to a requested
Borrowing as described in Section 2.2(f), BABC shall make a Revolving Loan in
the amount of such Borrowing (any such Revolving Loan made solely by BABC
pursuant to this Section 2.2(h) being referred to as a "BABC Loan" and such
Revolving Loans being referred to collectively as "BABC Loans") available to the
Borrower on the Funding Date applicable thereto by transferring same day funds
to an account of the Borrower, designated in writing by the Borrower and
<PAGE>
acceptable to the Agent. Each BABC Loan is a Revolving Loan hereunder and shall
be subject to all the terms and conditions applicable to other Revolving Loans
except that all payments thereon shall be payable to BABC solely for its own
account (and for the account of the holder of any participation interest with
respect to such Revolving Loan). The Agent shall not request BABC to make any
BABC Loan if (i) the Agent shall have received written notice from any Lender,
or otherwise has actual knowledge, that one or more of the applicable conditions
precedent set forth in Article 10 will not be satisfied on the requested Funding
Date for the applicable Borrowing, or (ii) the requested Borrowing would exceed
the Availability of the Borrower on such Funding Date. BABC shall not otherwise
be required to determine whether the applicable conditions precedent set forth
in Article 10 have been satisfied or the requested Borrowing would exceed the
Availability of the Borrower on the Funding Date applicable thereto prior to
making, in its sole discretion, any BABC Loan.
(2) The BABC Loans shall be secured by the
Collateral, shall constitute Revolving Loans and Obligations hereunder, and
shall bear interest at the rate applicable to the Revolving Loans from time to
time.
(i) Agent Advances.
(1) Subject to the limitations set forth in the
provisos contained in this Section 2.2(i), the Agent is hereby authorized by the
Borrower and the Lenders, from time to time in the Agent's sole discretion, (1)
after the occurrence of a Default or an Event of Default, or (2) at any time
that any of the other applicable conditions precedent set forth in Article 10
have not been satisfied, to make Revolving Loans to the Borrower on behalf of
the Lenders which the Agent, in its reasonable business judgment, deems
necessary or desirable (A) to preserve or protect the Collateral, or any portion
thereof, (B) to enhance the likelihood of, or maximize the amount of, repayment
of the Loans and other Obligations, or (C) to pay any other amount chargeable to
the Borrower pursuant to the terms of this Agreement, including, without
limitation, costs, fees and expenses as described in Section 15.7 (any of the
advances described in this Section 2.2(i) being hereinafter referred to as
"Agent Advances"); provided, that the Required Lenders may at any time revoke
the Agent's authorization contained in this Section 2.2(i) to make Agent
Advances, any such revocation to be in writing and to become effective
prospectively upon the Agent's receipt thereof;
(2) The Agent Advances shall be repayable on demand
and secured by the Collateral, shall constitute Revolving Loans and Obligations
hereunder, and shall bear interest at the rate applicable to the Revolving Loans
from time to time. The Agent shall notify each Lender in writing of each such
Agent Advance.
(j) Settlement. It is agreed that each Lender's funded portion
of the Revolving Loan is intended by the Lenders to be equal at all times to
such Lender's Pro Rata Share of the outstanding Revolving Loans. Notwithstanding
such agreement, the Agent, BABC, and the other Lenders agree (which agreement
shall not be for the benefit of or enforceable by the Borrower) that in order to
facilitate the administration of this Agreement and the other Loan Documents,
settlement among them as to the Revolving Loans, the BABC Loans and the Agent
Advances shall take place on a periodic basis in accordance with the following
provisions:
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(1) The Agent shall request settlement ("Settlement")
with the Lenders on a weekly basis, or on a more frequent basis if so determined
by the Agent, (1) on behalf of BABC, with respect to each outstanding BABC Loan,
(2) for itself, with respect to each Agent Advance, and (3) with respect to
collections received, in each case, by notifying the Lenders of such requested
Settlement by telecopy, telephone or other similar form of transmission, of such
requested Settlement, no later than 11:00 a.m. (Pacific time) on the date of
such requested Settlement (the "Settlement Date"). Each Lender (other than BABC,
in the case of BABC Loans) shall make the amount of such Lender's Pro Rata Share
of the outstanding principal amount of the BABC Loans and Agent Advances with
respect to which Settlement is requested available to the Agent, for itself or
for the account of BABC, in same day funds, to such account of the Agent as the
Agent may designate, not later than 1:00 p.m. (Pacific time), on the Settlement
Date applicable thereto, regardless of whether the applicable conditions
precedent set forth in Article 10 have then been satisfied. Such amounts made
available to the Agent shall be applied against the amounts of the applicable
BABC Loan or Agent Advance and, together with the portion of such BABC Loan or
Agent Advance representing BABC's Pro Rata Share thereof, shall constitute
Revolving Loans of such Lenders. If any such amount is not made available to the
Agent by any Lender on the Settlement Date applicable thereto, the Agent shall
be entitled to recover such amount on demand from such Lender together with
interest thereon at the Federal Funds Rate for the first three (3) days from and
after the Settlement Date and thereafter at the Interest Rate then applicable to
the Revolving Loans.
(2) Notwithstanding the foregoing, not more than one
(1) Business Day after demand is made by the Agent (whether before or after the
occurrence of a Default or an Event of Default and regardless of whether the
Agent has requested a Settlement with respect to a BABC Loan or Agent Advance),
each other Lender shall irrevocably and unconditionally purchase and receive
from BABC or the Agent, as applicable, without recourse or warranty, an
undivided interest and participation in such BABC Loan or Agent Advance to the
extent of such Lender's Pro Rata Share thereof by paying to the Agent, in same
day funds, an amount equal to such Lender's Pro Rata Share of such BABC Loan or
Agent Advance. If such amount is not in fact made available to the Agent by any
Lender, the Agent shall be entitled to recover such amount on demand from such
Lender together with interest thereon at the Federal Funds Rate for the first
three (3) days from and after such demand and thereafter at the Interest Rate
then applicable to the Revolving Loans.
(3) From and after the date, if any, on which any
Lender purchases an undivided interest and participation in any BABC Loan or
Agent Advance pursuant to subsection (ii) above, the Agent shall promptly
distribute to such Lender at such address as such Lender may request in writing,
such Lender's Pro Rata Share of all payments of principal and interest and all
proceeds of Collateral received by the Agent in respect of such BABC Loan or
Agent Advance.
<PAGE>
(4) Between Settlement Dates, the Agent, to the
extent no Agent Advances or BABC Loans are outstanding, may pay over to BABC any
payments received by the Agent, which in accordance with the terms of this
Agreement would be applied to the reduction of the Revolving Loans, for
application to BABC's other outstanding Revolving Loans. If, as of any
Settlement Date, collections received since the then immediately preceding
Settlement Date have been applied to BABC's other outstanding Revolving Loans
other than to BABC Loans or Agent Advances, as provided for in the previous
sentence, BABC shall pay to the Agent for the accounts of the Lenders, to be
applied to the outstanding Revolving Loans of such Lenders, an amount such that
each Lender shall, upon receipt of such amount, have, as of such Settlement
Date, its Pro Rata Share of the Revolving Loans. During the period between
Settlement Dates, BABC with respect to BABC Loans, the Agent with respect to
Agent Advances, and each Lender with respect to the Revolving Loans other than
BABC Loans and Agent Advances, shall be entitled to interest at the applicable
rate or rates payable under this Agreement on the actual average daily amount of
funds employed by BABC, the Agent and the other Lenders.
(k) Notation. The Agent shall record on its books the
principal amount of the Revolving Loans owing to each Lender, including the BABC
Loans owing to BABC, and the Agent Advances owing to the Agent, from time to
time. In addition, each Lender is authorized, at such Lender's option, to note
the date and amount of each payment or prepayment of principal of such Lender's
Revolving Loans in its books and records, including computer records, such books
and records constituting rebuttably presumptive evidence, absent manifest error,
of the accuracy of the information contained therein.
(l) Lenders' Failure to Perform. All Loans (other than BABC
Loans and Agent Advances) shall be made by the Lenders simultaneously and in
accordance with their Pro Rata Shares. It is understood that (a) no Lender shall
be responsible for any failure by any other Lender to perform its obligation to
make any Loans hereunder, nor shall any Commitment of any Lender be increased or
decreased as a result of any failure by any other Lender to perform its
obligation to make any Loans hereunder, (b) no failure by any Lender to perform
its obligation to make any Loans hereunder shall excuse any other Lender from
its obligation to make any Loans hereunder, and (c) the obligations of each
Lender hereunder shall be several, not joint and several.
2.3 Letters of Credit.
(a) Agreement to Cause Issuance. Subject to the terms and
conditions of this Agreement, and in reliance upon the representations and
warranties of the Borrower herein set forth, the Agent agrees to (i) cause to be
issued by Bank of America for the account of the Borrower standby and
documentary letters of credit ("Letters of Credit"), and (ii) provide credit
support or other enhancement to banks acceptable to Agent, which issue Letters
of Credit for the account of the Borrower (any such credit support or
enhancement being herein referred to as a "Credit Support") in accordance with
this Section 2.3 from time to time during the term of this Agreement.
<PAGE>
(b) Amounts; Outside Expiration Date. The Agent shall not have
any obligation to take steps to cause to be issued any Letter of Credit or to
provide Credit Support for any Letter of Credit at any time if: (1) the maximum
undrawn amount of the requested Letter of Credit is greater than the Unused
Letter of Credit Subfacility at such time; (2) the maximum undrawn amount of the
requested Letter of Credit would exceed the Availability of the Borrower at such
time; or (3) any standby Letter of Credit has an expiration date more than
twelve (12) months from the date of issuance.
(c) Other Conditions. In addition to being subject to the
satisfaction of the applicable conditions precedent contained in Article 10, the
obligation of the Agent to cause Bank of America to issue any Letter of Credit
or to provide Credit Support for any Letter of Credit is subject to the
following conditions precedent having been satisfied in a manner satisfactory to
the Agent:
(1) The Borrower shall have delivered to the proposed
issuer of such Letter of Credit,
at such times and in such manner as such proposed issuer may prescribe, an
application in form and substance satisfactory to such proposed issuer and the
Agent for the issuance of the Letter of Credit and such other documents as may
be reasonably required pursuant to the terms thereof, and the form and terms of
the proposed Letter of Credit shall be reasonably satisfactory to the Agent and
such proposed issuer; and
(2) As of the date of issuance, no order of any
court, arbitrator or Governmental
Authority shall purport by its terms to enjoin or restrain money center banks
generally from issuing letters of credit of the type and in the amount of the
proposed Letter of Credit, and no law, rule or regulation applicable to money
center banks generally and no request or directive (whether or not having the
force of law) from any Governmental Authority with jurisdiction over money
center banks generally shall prohibit, or request that the proposed issuer of
such Letter of Credit refrain from, the issuance of letters of credit generally
or the issuance of such Letters of Credit.
(d) Issuance of Letters of Credit.
(1) Request for Issuance. The Borrower shall give
the Agent at least two (2) Business Days' prior written notice of the Borrower's
request for the issuance of a Letter of Credit. Such notice shall be irrevocable
and shall specify the original face amount of the Letter of Credit requested,
the effective date (which date shall be a Business Day) of issuance of such
requested Letter of Credit, whether such Letter of Credit may be drawn in a
single or in partial draws, the date on which such requested Letter of Credit is
to expire (which date shall be a Business Day), the purpose for which such
Letter of Credit is to be issued, and the beneficiary of the requested Letter of
Credit. The Borrower shall attach to such notice the proposed form of the Letter
of Credit.
(2) Responsibilities of the Agent; Issuance. The
Agent shall determine, as of the Business Day immediately preceding the
requested effective date of issuance of the Letter of Credit set forth in the
notice from the Borrower pursuant to Section 2.3(d)(1), (i) the amount of the
<PAGE>
applicable Unused Letter of Credit Subfacility and (ii) the Availability of the
Borrower as of such date. If (i) the undrawn amount of the requested Letter of
Credit is not greater than the applicable Unused Letter of Credit Subfacility
and (ii) the issuance of such requested Letter of Credit would not exceed the
Availability of the Borrower, the Agent shall cause Bank of America to issue the
requested Letter of Credit on such requested effective date of issuance.
(3) Notice of Issuance. On each Settlement Date the
Agent shall give notice to each Lender of the issuance of all Letters of Credit
issued since the last Settlement Date.
(4) No Extensions or Amendment. The Agent shall not
be obligated to cause any Letter of Credit to be extended or amended unless the
requirements of this Section 2.3(d) are met as though a new Letter of Credit
were being requested and issued. With respect to any Letter of Credit which
contains any "evergreen" or automatic renewal provision, each Lender shall be
deemed to have consented to any such extension or renewal unless any such Lender
shall have provided to the Agent, not less than 30 days prior to the last date
on which the applicable issuer can in accordance with the terms of the
applicable Letter of Credit decline to extend or renew such Letter of Credit,
written notice that it declines to consent to any such extension or renewal,
provided, that if all of the requirements of this Section 3.4 are met and no
Default or Event of Default exists, no Lender shall decline to consent to any
such extension or renewal.
(e) Payments Pursuant to Letters of Credit.
(1) Payment of Letter of Credit Obligations. The
Borrower agrees to reimburse the issuer for any draw under any Letter of Credit
and the Agent for the account of the Lenders upon any payment pursuant to any
Credit Support immediately upon demand, and to pay the issuer of the Letter of
Credit the amount of all other obligations and other amounts payable to such
issuer under or in connection with any Letter of Credit immediately when due,
irrespective of any claim, setoff, defense or other right which the Borrower may
have at any time against such issuer or any other Person.
(2) Revolving Loans to Satisfy Reimbursement
Obligations. In the event that the issuer of any Letter of Credit honors a draw
under such Letter of Credit or the Agent shall have made any payment pursuant to
any Credit Support and the Borrower shall not have repaid such amount to the
issuer of such Letter of Credit or the Agent, as applicable, pursuant to Section
2.3(e)(1), the Agent shall, upon receiving notice of such failure, notify each
Lender of such failure, and each Lender shall unconditionally pay to the Agent,
for the account of such issuer or the Agent, as applicable, as and when provided
hereinbelow, an amount equal to such Lender's Pro Rata Share of the amount of
such payment in Dollars and in same day funds. If the Agent so notifies the
Lenders prior to 11:00 a.m. (Pacific time) on any Business Day, each Lender
shall make available to the Agent the amount of such payment, as provided in the
immediately preceding sentence, on such Business Day. Such amounts paid by the
Lenders to the Agent shall constitute Revolving Loans which shall be deemed to
have been requested by the Borrower pursuant to Section 2.2 as set forth in
Section 4.7.
<PAGE>
(f) Participations.
(1) Purchase of Participations. Immediately upon
issuance of any Letter of Credit in accordance with Section 2.3(d), each Lender
shall be deemed to have irrevocably and unconditionally purchased and received
without recourse or warranty, an undivided interest and participation in the
Letter of Credit or the Credit Support provided through the Agent to such issuer
in connection with the issuance of such Letter of Credit, equal to such Lender's
Pro Rata Share of the face amount of such Letter of Credit or the amount of such
Credit Support (including, without limitation, all obligations of the Borrower
with respect thereto, and any security therefor or guaranty pertaining thereto).
(2) Sharing of Reimbursement Obligation Payments.
Whenever the Agent receives a payment from the Borrower on account of
reimbursement obligations in respect of a Letter of Credit or Credit Support as
to which the Agent has previously received for the account of the issuer thereof
payment from a Lender pursuant to Section 2.3(e)(2), the Agent shall promptly
pay to such Lender such Lender's Pro Rata Share of such payment from the
Borrower in Dollars. Each such payment shall be made by the Agent on the
Business Day on which the Agent receives immediately available funds from the
Borrower pursuant to the immediately preceding sentence, if received prior to
1:00 p.m. (Pacific time) on such Business Day and otherwise on the next
succeeding Business Day.
(3) Documentation. Upon the request of any Lender,
the Agent shall furnish to such Lender copies of any Letter of Credit,
reimbursement agreements executed in connection therewith, application for any
Letter of Credit and credit support or enhancement provided through the Agent in
connection with the issuance of any Letter of Credit, and such other
documentation as may reasonably be requested by such Lender.
(4) Obligations Irrevocable. The obligations of each
Lender to make payments to the Agent with respect to any Letter of Credit or
with respect to any Credit Support provided through the Agent with respect to a
Letter of Credit, and the obligations of the Borrower to make payments to the
Agent, for the account of the Lenders in connection therewith, shall be
irrevocable, not subject to any qualification or exception whatsoever ,
including, without limitation, any of the following circumstances:
(i) any lack of validity or enforceability
of this Agreement or any of the other Loan Documents;
(ii)the existence of any claim, setoff,
defense or other right which the Borrower may have at any time against a
beneficiary named in a Letter of Credit or any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), any Lender,
the Agent, the issuer of such Letter of Credit, or any other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transactions between the Borrower or any other Person and the beneficiary named
in any Letter of Credit);
<PAGE>
(iii) any draft, certificate or any other
document presented under the Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv)the surrender or impairment of any
security for the performance or observance of any of the terms of any of the
Loan Documents; or
(v) the occurrence of any Default or Event
of Default.
(g) Recovery or Avoidance of Payments. In the event any
payment by or on behalf of the Borrower received by the Agent with respect to
any Letter of Credit or Credit Support provided for any Letter of Credit (or any
guaranty by the Borrower or reimbursement obligation of the Borrower relating
thereto) and distributed by the Agent to the Lenders on account of their
respective participations therein is thereafter set aside, avoided or recovered
from the Agent in connection with any receivership, liquidation or bankruptcy
proceeding, the Lenders shall, upon demand by the Agent, pay to the Agent their
respective Pro Rata Shares of such amount set aside, avoided or recovered,
together with interest at the rate required to be paid by the Agent upon the
amount required to be repaid by it.
(h) Compensation for Letters of Credit.
(1) Letter of Credit Fee. The Borrower agrees to pay
to the Agent with respect to each Letter of Credit, for the account of the
Lenders, the Letter of Credit Fee specified in, and in accordance with the terms
of, Section 3.6.
(2) Issuer Fees and Charges. The Borrower shall pay
to the issuer of any Letter of Credit, or to the Agent, for the account of the
issuer of any such Letter of Credit, solely for such issuer's account, such fees
and other charges as are charged by such issuer for letters of credit issued by
it, including, without limitation, its standard fees for issuing, administering,
amending, renewing, paying and canceling letters of credit and all other fees
associated with issuing or servicing letters of credit, as and when assessed as
such fees are determined in accordance with Schedule 3.6.
(i) Indemnification; Exoneration; Power of Attorney
(1) Indemnification. In addition to amounts payable
as elsewhere provided in this Section 2.3, the Borrower hereby agrees to
protect, indemnify, pay and save the Lenders and the Agent harmless from and
against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees) which any Lender or
the Agent may incur or be subject to as a consequence, direct or indirect, of
the issuance of any Letter of Credit or the provision of any credit support or
enhancement in connection therewith. The agreement in this Section 2.3(i)(1)
shall survive payments of all Obligations.
<PAGE>
(2) Assumption of Risk by the Borrower. As among the
Borrower, the Lenders, and the Agent, the Borrower assumes all risks of the acts
and omissions of, or misuse of any of the Letters of Credit by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, the Lenders and the Agent shall not be responsible for: (A) the
form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any Person in connection with the application for and
issuance of and presentation of drafts with respect to any of the Letters of
Credit, even if it should prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (C) the failure of the beneficiary of any Letter of Credit to comply
duly with conditions required in order to draw upon such Letter of Credit; (D)
errors, omissions, interruptions, or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they be
in cipher; (E) errors in interpretation of technical terms; (F) any loss or
delay in the transmission or otherwise of any document required in order make a
drawing under any Letter of Credit or of the proceeds thereof; (G) the
misapplication by the beneficiary of any Letter of Credit of the proceeds of any
drawing under such Letter of Credit; or (H) any consequences arising from causes
beyond the control of the Lenders or the Agent, including, without limitation,
any act or omission, whether rightful or wrongful, of any present or future de
jure or de facto Governmental Authority. None of the foregoing shall affect,
impair or prevent the vesting of any rights or powers of the Agent or any Lender
under this Section 2.3(i).
(3) Exoneration. In furtherance and extension, and
not in limitation, of the specific
provisions set forth above, any action taken or omitted by the Agent or any
Lender under or in connection with any of the Letters of Credit or any related
certificates, if taken or omitted in the absence of gross negligence or willful
misconduct, shall not put the Agent or any Lender under any resulting liability
to the Borrower or relieve the Borrower of any of its obligations hereunder to
any such Person.
(4) Power of Attorney. In connection with all
Inventory financed by Letters of
Credit, the Borrower hereby appoints the Agent, or the Agent's designee, as its
attorney, with full power and authority: (a) to sign and/or endorse the
Borrower's name upon any warehouse or other receipts relating to Inventory; (b)
to sign the Borrower's name on bills of lading and negotiable documents relating
to Inventory; (c) following the occurrence and during the continuance of an
Event of Default, to clear Inventory through customs in the Agent's or the
Borrower's name, and to sign and deliver to customs officials powers of attorney
in the Borrower's name for such purpose; (d) following the occurrence and during
the continuance of an Event of Default, to complete in the Borrower's or the
Agent's name, any order, sale, or transaction relating to the Inventory, obtain
the necessary documents in connection therewith, and collect the proceeds
thereof; and (e) following the occurrence and during the continuance of an Event
of Default, to do such other acts and things as are necessary in order to enable
the Agent to obtain possession of the Inventory. Neither the Agent nor its
designee, as the Borrower's attorney, will be liable for any acts or omissions,
nor for any error of judgement or mistakes of fact or law. This power, being
coupled with an interest, is irrevocable until all Obligations have been paid
and satisfied.
<PAGE>
(5) Account Party. The Borrower hereby authorizes
and directs any issuer of a Letter of Credit to name the Borrower as the
"Account Party" therein and to deliver to the Agent (copies of which will be
forwarded to the Borrower) all instruments, documents and other writings and
property received by the issuer pursuant to the Letter of Credit, and to accept
and rely upon the Agent's instructions and agreements with respect to all
matters arising in connection with the Letter of Credit or the application
therefor.
(6) Control of Inventory. In connection with all
Inventory financed by Letters of Credit, the Borrower will, following the
occurrence and during the continuance of an Event of Default at the Agent's
request, instruct all suppliers, carriers, forwarders, warehouses or others
receiving or holding cash, checks, Inventory, documents or instruments in which
the Agent holds a security interest to deliver them to the Agent and/or subject
to the Agent's order, and if they shall come into the Borrower's possession, to
deliver them, upon request, to the Agent in their original form.
(7) Agent as Consignee. The Borrower shall also, at
the Agent's request, designate the Agent as the consignee on all bills of lading
and other negotiable and non-negotiable documents relating to Inventory.
(j) Supporting Letter of Credit. If, notwithstanding the
provisions of Section 2.3(b) and Section 12.1 any Letter of Credit is
outstanding upon the termination of this Agreement, then upon such termination
the Borrower shall deposit with the Agent, for the ratable benefit of the Agent
and the Lenders, with respect to each Letter of Credit then outstanding, a
standby letter of credit (a "Supporting Letter of Credit") in form and substance
reasonably satisfactory to the Agent, issued by an issuer reasonably
satisfactory to the Agent in an amount equal to the greatest amount for which
such Letter of Credit may be drawn plus any fees and expenses associated with
such Letter of Credit, under which Supporting Letter of Credit the Agent is
entitled to draw amounts necessary to reimburse the Agent and the Lenders for
payments made by the Agent and the Lenders under such Letter of Credit or under
any credit support or enhancement provided through the Agent with respect
thereto and any fees and expenses associated with such Letter of Credit.
2.4 Foreign Exchange Transactions. The Borrower may request and the
Agent shall use reasonable efforts to arrange for the Borrower to obtain from
Bank of America Foreign Exchange Transactions (to the extent Bank of America is
able to provide such transactions). The Borrower agrees to indemnify and hold
the Agent and the Lenders harmless from any and all obligations now or hereafter
owing by the Agent and the Lenders to (a) Bank of America arising from or
related to such Foreign Exchange Transactions pursuant to the indemnity referred
to in clause (z) below, or (b) to any other Lender that enters into a Foreign
Exchange Transaction pursuant to any indemnity that the Agent in its sole
discretion elects to provide to such other Lender with respect to such Foreign
Exchange Transaction. Immediately upon the Agent issuing any indemnity to the
Bank of America or such other Lender in connection with Foreign Exchange
Transactions, each Lender shall be deemed to have irrevocably and
unconditionally purchased an undivided interest and participation in any such
indemnity provided by the Agent equal to such Lender's Pro Rata Share of such
<PAGE>
indemnity (including, without limitation, all obligations of the Borrower with
respect thereto). The Borrower agrees to pay the Bank of America all amounts
owing to the Bank of America or such Lender pursuant to Foreign Exchange
Transactions. In the event the Borrower shall not have paid to the Bank of
America or such Lender such amounts, the Agent and the Lenders shall pay the
Bank of America or such Lender any amounts required to be paid under the
applicable indemnity and such amounts when paid by the Agent and the Lenders
shall constitute a Revolving Loan which shall be deemed to have been requested
by the Borrower. The Borrower acknowledges and agrees that the obtaining of
Foreign Exchange Transactions from Bank of America (x) is in the discretion of
Bank of America, (y) is subject to all rules and regulations of Bank of America,
and (z) is due to Bank of America relying on the indemnity of the Agent and the
Lenders to Bank of America with respect to obligations of the Borrower to the
Bank of America in connection with the Foreign Exchange Transactions.
ARTICLE 3
INTEREST AND FEES
3.1 Interest.
(a) Interest Rates. All outstanding Loans shall bear interest
on the unpaid principal amount thereof (including, to the extent permitted by
law, on interest thereon not paid when due) from the date made until paid in
full in cash at a rate determined by reference to the Base Rate or the LIBOR
Rate and Sections 3.1(a)(i) or (ii), as applicable, but not to exceed the
Maximum Rate described in Section 3.3. Subject to the provisions of Section 3.2,
any of the Loans may be converted into, or continued as, Base Rate Revolving
Loans or LIBOR Revolving Loans in the manner provided in Section 3.2. If at any
time Loans are outstanding with respect to which notice has not been delivered
to the Agent in accordance with the terms of this Agreement specifying the basis
for determining the interest rate applicable thereto, then those Loans shall be
Base Rate Revolving Loans and shall bear interest at a rate determined by
reference to the Base Rate until notice to the contrary has been given to the
Agent in accordance with this Agreement and such notice has become effective.
Except as otherwise provided herein, the outstanding Loans shall bear interest
as follows:
(i) For all Base Rate Revolving Loans at a
fluctuating per annum rate equal to the Base Rate plus the Applicable Margin;
(ii)For all Libor Revolving Loans at a per annum rate
equal to the Libor Rate plus the Applicable Margin.
Each change in the Base Rate shall be reflected in the interest rate described
in clause (i) above as of the effective date of such change. All interest
charges shall be computed on the basis of a year of 360 days and actual days
elapsed (which results in more interest being paid than if computed on the basis
of a 365-day year). Interest accrued on all Base Rate Revolving Loans will be
payable in arrears on the first day of each month hereafter. Interest accrued on
all LIBOR Revolving Loans will be payable on the LIBOR Interest Payment Date.
<PAGE>
(b) Default Rate. If any Event of Default occurs and is
continuing and the Majority Lenders in their discretion so elect, then, while
any such Event of Default is outstanding, all of the Obligations shall bear
interest at the Default Rate applicable thereto; provided, however, that if any
Obligations other than Loans are not paid when due, they shall bear interest at
the Default Rate applicable thereto.
3.2 Conversion and Continuation Elections. (a) The Borrower may,
upon irrevocable written notice to the Agent in accordance with Subsection
3.2(b):
(i) elect, as of any Business Day, in the case of
Base Rate Revolving Loans to convert any such Loans (or any part thereof in an
amount not less than $2,500,000, or that is in an integral multiple of $250,000
in excess thereof) into LIBOR Revolving Loans; or
(ii)elect, as of the last day of the applicable
Interest Period, to continue any LIBOR Revolving Loans having Interest Periods
expiring on such day (or any part thereof in an amount not less than $2,500,000,
or that is in an integral multiple of $250,000 in excess thereof);
provided, that if at any time the aggregate amount of LIBOR Revolving Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $2,500,000, such LIBOR Revolving Loans shall
automatically convert into Base Rate Revolving Loans, and on and after such date
the right of the Borrower to continue such Loans as, and convert such Loans
into, LIBOR Revolving Loans, as the case may be, shall terminate.
(b) The Borrower shall deliver a notice of
conversion/continuation ("Notice of Conversion/Continuation"), substantially in
the form of Exhibit D attached hereto, to be received by the Agent not later
than 10:00 a.m. (Pacific time) at least three Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or continued
as LIBOR Revolving Loans and specifying:
(i) the proposed Conversion/Continuation Date;
(ii)the aggregate amount of Loans to be converted or
renewed;
(iii) the type of Loans resulting from the
proposed conversion or continuation; and
(iv)the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable
to LIBOR Revolving Loans, the Borrower has failed to select timely a new
Interest Period to be applicable to LIBOR Revolving Loans or if any Event of
Default then exists, the Borrower shall be deemed to have elected to convert
such LIBOR Revolving Loans into Base Rate Revolving Loans effective as of the
expiration date of such Interest Period.
<PAGE>
(d) The Agent will promptly notify each Lender of its receipt
of a Notice of Conversion/Continuation. All conversions and continuations shall
be made ratably according to the respective outstanding principal amounts of the
Loans with respect to which the notice was given held by each Lender.
(e) During the existence of a Default or Event of Default, the
Borrower may not elect to have a Loan converted into or continued as a LIBOR
Revolving Loan.
(f) After giving effect to any conversion or continuation of
Loans, there may not be more than ten (10) different Interest Periods in effect.
3.3 Maximum Interest Rate. In no event shall any interest rate provided
for hereunder exceed the maximum rate legally chargeable by any Lender under
applicable law for loans of the type provided for hereunder (the "Maximum
Rate"). If, in any month, any interest rate, absent such limitation, would have
exceeded the Maximum Rate, then the interest rate for that month shall be the
Maximum Rate, and, if in future months, that interest rate would otherwise be
less than the Maximum Rate, then that interest rate shall remain at the Maximum
Rate until such time as the amount of interest paid hereunder equals the amount
of interest which would have been paid if the same had not been limited by the
Maximum Rate. In the event that, upon payment in full of the Obligations, the
total amount of interest paid or accrued under the terms of this Agreement is
less than the total amount of interest which would, but for this Section 3.3,
have been paid or accrued if the interest rates otherwise set forth in this
Agreement had at all times been in effect, then the Borrower shall, to the
extent permitted by applicable law, pay the Agent, for the account of the
Lenders, an amount equal to the excess of (a) the lesser of (i) the amount of
interest which would have been charged if the Maximum Rate had, at all times,
been in effect over (ii) the amount of interest which would have accrued had the
interest rates otherwise set forth in this Agreement, at all times, been in
effect over (b) the amount of interest actually paid or accrued under this
Agreement. In the event that a court determines that the Agent and/or any Lender
has received interest and other charges hereunder in excess of the Maximum Rate,
such excess shall be deemed received on account of, and shall automatically be
applied to reduce, the Obligations other than interest, in the inverse order of
maturity, and if there are no Obligations outstanding, the Agent and/or such
Lender shall refund to the Borrower such excess.
3.4 Facility Fee. The Borrower agrees to pay the Agent, for its own
account, a facility fee (the "Facility Fee") in the amount set forth in the Fee
Letter, which Facility Fee shall be fully earned by the Agent on the Closing
Date.
3.5 Unused Line Fee. Until the Obligations have been paid in full and
the Agreement terminated, the Borrower agrees to pay, on the first day of each
month and on the Termination Date, to the Agent, for the ratable account of the
Lenders, an unused line fee equal to three-eighths of one percent (.375%) per
annum on the average daily amount by which, during the immediately preceding
month or shorter period if calculated on the Termination Date, the Maximum
Revolver Amount exceeded the sum of (i) the average daily outstanding amount of
Revolving Loans, (ii) the undrawn face amount of all outstanding Letters of
Credit and (iii) the average daily amount of the Foreign Exchange Reserve, but
<PAGE>
only to the extent the Borrowing Base Availability is less than the Maximum
Revolver Amount. The unused line fee shall be computed on the basis of a 360-day
year for the actual number of days elapsed. All payments received by the Agent
on account of Accounts or as proceeds of other Collateral shall be deemed to be
credited to the Borrower's Loan Account immediately upon receipt for purposes of
calculating the unused line fee pursuant to this Section 3.5.
3.6 Letter of Credit Fee.
(a) Subject to the provisions of Section 3.6(b), the Borrower
agrees to pay to the Agent, for the ratable account of the Lenders, for each
Letter of Credit, a fee (the "Letter of Credit Fee") equal to:
(i) 1.875%, if the Interest Coverage Ratio is greater than or
equal to 2.0:1;
(ii)2.00%, if the Interest Coverage Ratio is less than 2.0:1
and greater than or equal to 1.25:1; and
(iii) 2.25%, if the Interest Coverage Ratio is less
than 1.25:1;
per annum of the undrawn face amount of each Letter of Credit issued for the
Borrower's account at the Borrower's request, plus all reasonable out-of-pocket
costs, fees and expenses incurred by the Agent in connection with the
application for, issuance of, or amendment to any Letter of Credit, as such fees
are determined according to Schedule 3.6. The Letter of Credit Fee shall be
payable monthly in arrears on the first day of each month following any month in
which a Letter of Credit was issued and/or in which a Letter of Credit remains
outstanding. The Letter of Credit Fee shall be computed on the basis of a
360-day year for the actual number of days elapsed. If any Event of Default
occurs and is continuing and the Majority Lenders in their discretion so elect,
then, while any Event of Default is outstanding, the Letter of Credit Fee shall
be increased to the Default Rate.
(b) The per annum Letter of Credit Fee payable on the Closing
Date and for the period ending on the last day of the month in which the Agent
receives the quarterly financial statements for the fiscal quarter ended June
30, 1998, shall be 2.0%. The Letter of Credit Fee shall thereafter be adjusted
following each delivery to the Agent of the quarterly financial statements of
the Parent required pursuant to Section 7.2(c) (together with the corresponding
Interest Coverage Ratio Certificate) for the period of two consecutive fiscal
quarters ending June 30, 1998, for the period of three consecutive fiscal
quarters ending September 30, 1998, and for each period of four consecutive
fiscal quarters ending on December 31, 1998 and thereafter each such adjustment
to be effective on the first day of the first full calendar month after each
such delivery. Notwithstanding anything in this section to the contrary, (i)
before any reductions in the Letter of Credit Fee will be instituted and
maintained, the Availability (calculated without regard to the Maximum Revolver
Amount) must be greater than $50,000,000.00; (ii) in the event that the Agent
shall fail to receive any such financial statements and the related Interest
Coverage Ratio Certificate for any fiscal quarter of the Parent within
fifty-five (55) days following the end of such fiscal quarter (within
one-hundred (100) days following the end of such fiscal quarter if such fiscal
quarter is the last fiscal quarter of any Fiscal Year), then the Letter of
<PAGE>
Credit Fee shall, at the end of such fifty-fifth or one-hundredth day, as
appropriate, immediately and without notice or further action be the Letter of
Credit Fee then in effect (such Letter of Credit Fee to be in effect until the
first day of the first full calendar month after the Agent receives the
quarterly financial statements of the Parent required under Section 7.2(c) for
the most recent fiscal quarter of the Parent and the related Interest Coverage
Ratio Certificate ) and (iii) in the event, with respect to any four (4) fiscal
quarter period of the Parent which shall be a Fiscal Year, the audited financial
statements of the Parent required under Section 7.2(a) for such Fiscal Year
shall indicate an Interest Coverage Ratio for such four (4) fiscal quarter
period (as determined by the Agent) less than that reflected in the Interest
Coverage Ratio Certificate delivered to the Agent for such four (4) fiscal
quarter period, the Letter of Credit Fee shall be adjusted retroactively (to the
effective date of the Letter of Credit Fee which was determined based upon the
delivery of such Interest Coverage Ratio Certificate and the related quarterly
financial statements of the Parent delivered pursuant to Section 7.2(c) for the
last quarter of such four (4) fiscal quarter period) to reflect a Letter of
Credit Fee based upon the Interest Coverage Ratio determined from the audited
financial statements and the Borrower shall make payments to the Agent on behalf
of the Lenders to reflect such adjustment.
3.7 Collateral Management Fee. The Borrower agrees to pay to the Agent,
for its own account, an annual collateral management fee (the "Collateral
Management Fee") in the amount of $50,000 on the Closing Date and on each
Anniversary Date thereafter.
3.8 Foreign Exchange Risk Fee. The Borrower agrees to pay $50 for each
assumption of settlement risk by the Agent pursuant to clause (c) of the
definition of Foreign Exchange Reserve.
ARTICLE 4
PAYMENTS AND PREPAYMENTS
4.1 Revolving Loans. The Borrower shall repay the outstanding principal
balance of the Revolving Loans, plus all accrued but unpaid interest thereon, on
the Termination Date. The Borrower may prepay Revolving Loans at any time, and
reborrow subject to the terms of this Agreement; provided, however, that with
respect to any LIBOR Revolving Loans prepaid by the Borrower prior to the
expiration date of the Interest Period applicable thereto, the Borrower promises
to pay to the Agent for account of the Lenders the amounts described in Section
5.4; provided, however, if at any time the prepayment of Loans pursuant to this
Agreement would result, in the Borrower incurring breakage costs under Section
5.4 as a result of LIBOR Revolving Loans being prepaid other than on the last
day of an Interest Period applicable thereto (the "Affected LIBOR Loans"), then
the Borrower may in its sole discretion initially deposit a portion (up to 100%)
of the amounts that otherwise would have been paid in respect of the Affected
LIBOR Loans with the Bank of America or an Affiliate for the benefit of the
Agent (which deposit, after giving effect to interest to be earned on such
deposit prior to the last day of the relevant Interest Periods, must be equal in
amount to the amount of Affected LIBOR Loans not immediately prepaid) to be held
as security for the obligations of the Borrower hereunder pursuant to an
agreement to be entered into in form and substance reasonably satisfactory to
<PAGE>
the Agent, with such cash collateral to be directly applied upon the first
occurrence (or occurrences) thereafter of the last day of an Interest Period
applicable to the relevant Loans that are LIBOR Revolving Loans (or such earlier
date or dates as shall be requested by the Borrower), to repay an aggregate
principal amount of such Loans equal to the Affected LIBOR Loans not initially
repaid pursuant to this sentence. Notwithstanding anything to the contrary
contained in the immediately preceding sentence, all amounts deposited as cash
collateral pursuant to the immediately preceding sentence shall be held for the
sole benefit of the Lenders whose Loans would otherwise have been immediately
repaid with the amounts deposited and upon the taking of any action by the Agent
or the Lenders pursuant to the remedial provisions of Section 11, any amounts
held as cash collateral pursuant to this Section 4.1 shall, subject to the
requirements of applicable law, be immediately applied to the relevant Loans.
Following repayment of the relevant Loans, any remaining cash collateral will be
returned to the Borrower. In addition, and without limiting the generality of
the foregoing, upon demand and no later than the next Business Day following
such demand, the Borrower promises to pay to the Agent, for account of the
Lenders, the amounts, without duplication, by which at any time (a) the
Aggregate Revolver Outstanding exceeds the Availability (with Availability for
purposes of this clause (a) calculated as if the Aggregate Revolver Outstandings
were zero), and (b) the Availability is less than $50,000,000 (with Availability
for purposes of this clause (b) calculated without regard to Maximum Revolver
Amount).
4.2 Termination of Facility. The Borrower may terminate this
Agreement upon at least ten (10) Business Days' notice to the Agent and the
Lenders, upon (a) the payment in full of all outstanding Revolving Loans,
together with accrued interest thereon, and the cancellation of all outstanding
Letters of Credit, (b) the payment in full in cash (or as otherwise provided in
Section 2.3(j))of all other Obligations then due together with accrued interest
thereon, and (c) with respect to any LIBOR Revolving Loans prepaid in connection
with such termination prior to the expiration date of the Interest Period
applicable thereto, the payment of the amounts described in Section 5.4.
4.3 Payments by the Borrower.
(a) All payments to be made by the Borrower shall be made
without set-off, recoupment or counterclaim. Except as otherwise expressly
provided herein, all payments by the Borrower shall be made to the Agent for the
account of the Lenders at the Agent's address set forth in Section 15.8, and
shall be made in Dollars and in immediately available funds, no later than 11:30
a.m. (Pacific time) on the date specified herein. Any payment received by the
Agent later than 11:30 a.m.. (Pacific time) shall be deemed to have been
received on the following Business Day and any applicable interest or fee shall
continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
<PAGE>
(c) Unless the Agent receives notice from the Borrower prior
to the date on which any payment is due to the Lenders that the Borrower will
not make such payment in full as and when required, the Agent may assume that
the Borrower has made such payment in full to the Agent on such date in
immediately available funds and the Agent may (but shall not be so required), in
reliance upon such assumption, distribute to each Lender on such due date an
amount equal to the amount then due such Lender. If and to the extent the
Borrower has not made such payment in full to the Agent, each Lender shall repay
to the Agent on demand such amount distributed to such Lender, together with
interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Lender until the date repaid.
4.4 Payments as Revolving Loans. All payments of principal, interest,
reimbursement obligations in connection with Letters of Credit, fees, premiums
and other sums payable hereunder, including all reimbursement for expenses
pursuant to Section 15.7, may, at the option of the Agent, in its sole
discretion, subject only to the terms of this Section 4.4, be paid from the
proceeds of Revolving Loans made hereunder, whether made following a request by
the Borrower pursuant to Section 2.2 or a deemed request as provided in this
Section 4.4. [The Borrower hereby irrevocably authorizes the Agent to charge the
Loan Account for the purpose of paying principal, interest, reimbursement
obligations in connection with Letters of Credit, fees, premiums and other sums
payable hereunder, including reimbursing expenses pursuant to Section 15.7, and
agrees that all such amounts charged shall constitute Revolving Loans (including
BABC Loans and Agent Advances) and that all such Revolving Loans so made shall
be deemed to have been requested by Borrower pursuant to Section 2.2.
Notwithstanding this Section 4.4, if no Base Rate Loans are outstanding as of
the close of business on the date that any (i) fees payable hereunder, including
the Facility Fee, the Unused Line Fee, the Letter of Credit Fee, the Collateral
Management Fee and the Foreign Exchange Risk Fee, (ii) amounts payable under
Article 5, (iii) indemnity payments to Section 15.11 and (iv) reimbursement for
expenses pursuant to Section 15.7(e), (g) and (h), are due from any Borrower,
the Agent shall notify the Borrower of the aggregate amount of such sums then
owing by the Borrower and provided that the Borrower pays such amount into the
Agent's Account by federal wire transfer by the next Business Day following
delivery of such notice, then such payment shall be deemed to have been paid on
the date of such notice and no interest on such amount shall accrue.
4.5 Apportionment, Application and Reversal of Payments. Aggregate
principal and interest payments shall be apportioned ratably among the Lenders
(according to the unpaid principal balance of the Loans to which such payments
relate held by each Lender) and payments of the fees shall, as applicable, be
apportioned ratably among the Lenders. All payments shall be remitted to the
Agent and all such payments not relating to principal or interest of specific
Loans, or not constituting payment of specific fees, and all proceeds of
Accounts or other Collateral received by the Agent, shall be applied, ratably,
subject to the provisions of this Agreement, first, to pay any fees, indemnities
or expense reimbursements including any amounts relating to Foreign Exchange
Transactions then due to the Agent from the Borrower; second, to pay any fees or
expense reimbursements then due to the Lenders from the Borrower; third, to pay
interest due in respect of all Revolving Loans, including BABC Loans and Agent
Advances; fourth, to pay or prepay principal of the BABC Loans and Agent
Advances; fifth, to pay or prepay principal of the Revolving Loans (other than
BABC Loans and Agent Advances) and (without duplication) unpaid reimbursement
<PAGE>
obligations in respect of Letters of Credit; and sixth, to the payment of any
other Obligation due to the Agent or any Lender by the Borrower. Notwithstanding
anything to the contrary contained in this Agreement, unless so directed by the
Borrower, or unless an Event of Default is outstanding, neither the Agent nor
any Lender shall apply any payments which it receives to any LIBOR Revolving
Loan, except (a) on the expiration date of the Interest Period applicable to any
such LIBOR Revolving Loan, or (b) in the event, and only to the extent, that
there are no outstanding Base Rate Revolving Loans. The Agent shall promptly
distribute to each Lender, pursuant to the applicable wire transfer instructions
received from each Lender in writing, such funds as it may be entitled to
receive, subject to a Settlement delay as provided for in Section 2.2(j). The
Agent and the Lenders shall have the continuing and exclusive right to apply and
reverse and reapply any and all such proceeds and payments to any portion of the
Obligations.
4.6 Indemnity for Returned Payments. If, after receipt of any payment
of, or proceeds applied to the payment of, all or any part of the Obligations,
the Agent or any Lender is for any reason compelled to surrender such payment or
proceeds to any Person, because such payment or application of proceeds is
invalidated, declared fraudulent, set aside, determined to be void or voidable
as a preference, impermissible setoff, or a diversion of trust funds, or for any
other reason, then the Obligations or part thereof intended to be satisfied
shall be revived and continue and this Agreement shall continue in full force as
if such payment or proceeds had not been received by the Agent or such Lender,
and the Borrower shall be liable to pay to the Agent, and hereby does indemnify
the Agent and the Lenders and hold the Agent and the Lenders harmless for, the
amount of such payment or proceeds surrendered. The provisions of this Section
4.6 shall be and remain effective notwithstanding any contrary action which may
have been taken by the Agent or any Lender in reliance upon such payment or
application of proceeds, and any such contrary action so taken shall be without
prejudice to the Agent's and the Lenders' rights under this Agreement and shall
be deemed to have been conditioned upon such payment or application of proceeds
having become final and irrevocable. The provisions of this Section 4.6 shall
survive the termination of this Agreement.
4.7 Agent's and Lenders' Books and Records; Monthly Statements. The
Borrower agrees that the Agent's and each Lender's books and records showing the
Obligations and the transactions pursuant to this Agreement and the other Loan
Documents shall be admissible in any action or proceeding arising therefrom, and
shall constitute rebuttably presumptive proof thereof, irrespective of whether
any Obligation is also evidenced by a promissory note or other instrument. The
Agent will provide to the Borrower a monthly statement of Loans, payments, and
other transactions pursuant to this Agreement. Such statement shall be deemed
correct, accurate, and binding on the Borrower and an account stated (except for
reversals and reapplications of payments made as provided in Section 4.5 and
corrections of errors discovered by the Agent), unless the Borrower notifies the
Agent in writing to the contrary within thirty (30) days after such statement is
rendered. In the event a timely written notice of objections is given by the
Borrower, only the items to which exception is expressly made will be considered
to be disputed by the Borrower.
<PAGE>
ARTICLE 5
TAXES, YIELD PROTECTION AND ILLEGALITY
5.1 Taxes.
(a) Subject to Section 5.1(c) hereof, and unless otherwise
required by applicable law, any and all payments by the Borrower to each Lender
or the Agent under this Agreement and any other Loan Document shall be made free
and clear of, and without deduction or withholding for any Taxes. In addition,
the Borrower shall pay all Other Taxes.
(b) Subject to Section 5.1(c) hereof, the Borrower agrees to
indemnify and hold harmless each Lender and the Agent for the full amount of
Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by the Lender or the
Agent. In the event that the imposition of any such tax or Other Tax for which
indemnification is being requested hereunder may not have been correctly or
legally asserted (a "Disputed Tax"), the parties shall cooperate to contest or
otherwise endeavor to settle with the relevant tax authority any such Disputed
Tax. Payment under this indemnification shall be made within 30 days after the
date the Lender or the Agent makes written demand therefor; provided that such
demand must be made within 120 days after the date such Taxes or Other Taxes
were paid by the Lender or the Agent and (ii) set forth in reasonable detail the
basis of the Borrower's obligation to indemnify such Lender or Agent pursuant to
this Section 5.1(b) and the computation of such indemnifiable amount.
(c) The Borrower shall not be required to pay any additional
amounts to, or otherwise indemnify, the Agent, any Lender, or any Assignee,
pursuant to this Section 5.1 unless the Agent, Lender or Assignee, as the case
may be is, on the Closing date, or on the Assignment and Acceptance Date in the
case of an Assignee, either (i) a "United States person" for purposes of United
States federal income taxation and is subject to United States federal income
taxation on a net income basis or (ii) a non-"United States person" for purposes
of United States federal income taxation and has certified to the Borrower, on
the Closing Date or on the Assignment and Acceptance Date in the case of an
Assignee (and, but for a change in applicable law, at such other times as
specified in Section 14.10 hereof), that it is completely exempt from the
imposition of United States withholding taxation by delivery to the Borrower of
the forms specified in Section 14.10 hereof.
(d) If the Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, then:
(i) the sum payable shall be increased as necessary
so that after making all required deductions and withholdings such Lender or the
Agent, as the case may be, receives an amount equal to the sum it would have
received had no such deductions or withholdings been made;
(ii)the Borrower shall make such deductions and
withholdings; and
<PAGE>
(iii) the Borrower shall pay the full amount
deducted or withheld to the relevant taxing authority or other authority in
accordance with applicable law;
(e) Within 90 days after the date of any payment by the
Borrower of Taxes or Other Taxes, the Borrower shall use its reasonable efforts
to furnish the Agent with evidence of payment thereof reasonably satisfactory to
the Agent.
(f) If the Borrower is required to pay additional amounts to
any Lender or the Agent pursuant to subsection (c) of this Section, then such
Lender shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its lending office so as to reduce
or eliminate any such additional payment by the Borrower which may thereafter
accrue, if such change in the reasonable judgment of such Lender is not
otherwise materially disadvantageous to such Lender.
(g) Each Lender agrees that (i) it will take all reasonable
actions necessary to maintain all exemptions, if any, available to it from
United States withholding taxation (whether available by treaty, existing
administrative waiver, or by virtue of the jurisdiction of its lending office)
and (ii) otherwise cooperate with the Borrower to minimize any amounts payable
by the Borrower under this Section 5.1. In the event that any such payment of
Taxes or indemnification of Taxes under this Section 5.1 results in a tax credit
to such Lender under the laws of a jurisdiction other than that to which the
Taxes are paid, the Lender shall promptly notify the Borrower and pay to the
Borrower an amount equal to any net tax benefit (after taking into account any
related tax detriment relating to such payment) resulting from such credit.
(h) In the event that the amount that the Borrower is required
to pay to or for the account of any Lender is increased in any material respect
as a result of any payments required to be made by the Borrower under this
Section 5.1 (any such Lender being referred to herein as an "Affected Lender"),
the Borrower shall have the right, subject to the consent of the Agent which
consent shall not be unreasonably withheld, upon notice to such Affected Lender,
to (i) prepay the principal amount or any portion thereof held by such Affected
Lender plus all interest, fees, and other amounts owing to such Affected Lender
as of the date of such prepayment or (ii) require such Affected Lender to assign
to one or more assignees specified by the Company who are willing to so purchase
from such Affected Lender all, or any portion thereof, of such Affected Lender's
rights and obligations under this Agreement provided that such assignee or
assignees shall pay to such Affected Lender, in consideration for such
assignment, an amount equal to all principal, interest, fees, and other amounts
owing to such Affected Lender, plus any out-of-pocket transaction costs related
thereto incurred by such Affected Lender, that is allocable to the portion of
such rights and obligations being assigned as of the date of such assignment.
5.2 Illegality.
(a) If any Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Lender or its applicable lending office to make
LIBOR Revolving Loans, then, on notice thereof by the Lender to the Borrower
<PAGE>
through the Agent, any obligation of that Lender to make LIBOR Revolving Loans
shall be suspended until the Lender notifies the Agent and the Borrower that the
circumstances giving rise to such determination no longer exist.
(b) If a Lender determines that it is unlawful to maintain any
LIBOR Revolving Loan, the Borrower shall, upon its receipt of notice of such
fact and demand from such Lender (with a copy to the Agent), prepay in full such
LIBOR Revolving Loans of that Lender then outstanding, together with interest
accrued thereon and one-half of the amounts required under Section 5.4, either
on the last day of the Interest Period thereof, if the Lender may lawfully
continue to maintain such LIBOR Revolving Loans to such day, or immediately, if
the Lender may not lawfully continue to maintain such LIBOR Revolving Loan. If
the Borrower is required to so prepay any LIBOR Revolving Loan, then
concurrently with such prepayment, the Borrower shall borrow from the affected
Lender, in the amount of such repayment, a Base Rate Revolving Loan.
5.3 Increased Costs and Reduction of Return.
(a) If any Lender determines that, due to either (i) the
introduction of or any change in the interpretation of any law or regulation or
(ii) the compliance by that Lender with any guideline or request from any
central bank or other Governmental Authority (whether or not having the force of
law) issued after the date of this Agreement, there shall be any increase in the
cost (other than any increase in cost arising from, in connection with, or
related to the imposition of any taxes, which event shall be governed solely by
Section 5.1 hereof) to such Lender of agreeing to make or making, funding or
maintaining any LIBOR Revolving Loans, then the Borrower shall be liable for,
and shall from time to time, upon demand (with a copy of such demand to be sent
to the Agent), pay to the Agent for the account of such Lender, additional
amounts as are sufficient to compensate such Lender for such increased costs.
(b) If any Lender shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Lender or any corporation or other entity controlling the
Lender with any Capital Adequacy Regulation changed or introduced after the date
of this Agreement, affects or would affect the amount of capital required or
expected to be maintained by the Lender or any corporation or other entity
controlling the Lender and (taking into consideration such Lender's or such
corporation's or other entity's policies with respect to capital adequacy and
such Lender's desired return on capital) reasonably determines that the amount
of such capital is increased as a consequence of its Commitment[s], loans,
credits or obligations under this Agreement, then, upon demand of such Lender to
the Borrower through the Agent, the Borrower shall pay to the Lender, from time
to time as specified by the Lender, additional amounts sufficient to compensate
the Lender for such increase.
5.4 Funding Losses. The Borrower shall reimburse each Lender and hold
each Lender harmless from any net loss or expense arising from the liquidation
<PAGE>
or reemployment of funds obtained by it to maintain its LIBOR Revolving Loans or
from fees payable to terminate the deposits from which such funds were obtained
which the Lender may sustain or incur as a consequence of:
(a) the failure of the Borrower to make on a timely basis any
payment of principal of any LIBOR Revolving Loan;
(b) the failure of the Borrower to borrow, continue or convert
a Loan after the Borrower has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/ Continuation; or
(c) the prepayment or other payment (including after
acceleration thereof) of an LIBOR Revolving Loan on a day that is not the last
day of the relevant Interest Period.
5.5 Inability to Determine Rates. If the Agent determines that adequate
and reasonable means do not exist for determining the LIBOR Rate for any
requested Interest Period with respect to a proposed LIBOR Revolving Loan, or
that the LIBOR Rate for any requested Interest Period with respect to a proposed
LIBOR Revolving Loan does not adequately and fairly reflect the cost to the
Lenders of funding such Loan, the Agent will promptly so notify the Borrower and
each Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR
Revolving Loans hereunder shall be suspended until the Agent revokes such notice
in writing. Upon receipt of such notice, the Borrower may revoke any Notice of
Borrowing or Notice of Conversion/Continuation then submitted by it. If the
Borrower does not revoke such Notice, the Lenders shall make, convert or
continue the Loans, as proposed by the Borrower, in the amount specified in the
applicable notice submitted by the Borrower, but such Loans shall be made,
converted or continued as Base Rate Revolving Loans instead of LIBOR Revolving
Loans.
5.6 Certificates of Lenders; Treatment of Borrower. Any Lender claiming
reimbursement or compensation under this Article 5 shall deliver to the Borrower
(with a copy to the Agent) a certificate setting forth in reasonable detail the
amount payable to the Lender hereunder and such certificate shall be conclusive
and binding on the Borrower in the absence of manifest error. Each Lender shall
be entitled to be compensated for amounts pursuant to Sections 5.1, 5.2 and 5.3
only to the extent that such Lender makes the same kinds of demands to its other
borrowers who are similarly situated and face similar circumstances.
5.7 Survival. The agreements and obligations of the Borrower in this
Article 5 shall survive the payment of all other Obligations.
ARTICLE 6
COLLATERAL
6.1 Grant of Security Interest.
(a) As security for all present and future Obligations, the
Borrower hereby grants to the Agent, for the ratable benefit of the Agent and
<PAGE>
the Lenders, a continuing security interest in, lien on, assignment of, and
right of set-off against, all of the following property of the Borrower, whether
now owned or existing or hereafter acquired or arising, regardless of where
located (in all cases excluding the Excluded Assets):
(i) all Inventory;
(ii)all Accounts;
(iii) all accessions to and proceeds of any of the
foregoing, including, without limitation and to the extent not prohibited by the
Indenture, claims against carriers, shippers and other third parties, and rights
under letters of credit or guaranties with respect to all or any of the
foregoing.
All of the foregoing, and all other property of the Borrower in which the Agent
or any Lender may at any time be granted a Lien, is herein collectively referred
to as the "Collateral."
(b) All of the Obligations shall be secured by all of the
Collateral.
6.2 Perfection and Protection of Security Interest.
(a) The Borrower shall, at its expense, perform all steps
reasonably requested by the Agent at any time to perfect, maintain, protect, and
enforce the Agent's Liens, including, without limitation: (i) executing and
filing financing or continuation statements, and amendments thereof, in form and
substance satisfactory to the Agent; (ii) delivering to the Agent the originals
of all instruments, documents, and chattel paper which the Agent reasonably
determines it should have physical possession of in order to perfect and protect
the Agent's security interest in the Collateral, duly pledged, endorsed or
assigned to the Agent without restriction; (iii) following the occurrence and
during the continuance of an Event of Default, (A) delivering to the Agent
warehouse receipts covering any portion of the Collateral located in warehouses
and for which warehouse receipts are issued and certificates of title covering
any portion of the Collateral for which certificates of title have been issued,
(B) transferring Inventory to warehouses designated by the Agent, and (C)
placing notations on the Borrower's books of account to disclose the Agent's
security interest subject to the Securitization Facility; (iv) upon request
delivering to the Agent all letters of credit relating to Inventory on which the
Borrower is named beneficiary; and (v) taking such other steps as are deemed
necessary or desirable by the Agent to maintain and protect the Agent's Liens.
To the extent permitted by applicable law, the Agent may file, without the
Borrower's signature, one or more financing statements disclosing the Agent's
Liens, but the Agent shall provide the Borrower with a copy of any such
financing statement not signed by the Borrower. The Borrower agrees that a
carbon, photographic, photostatic, or other reproduction of this Agreement or of
a financing statement is sufficient as a financing statement.
(b) If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of the Borrower's agents or
processors, then the Borrower shall notify the Agent thereof and shall, at the
request of Agent, notify such Person of the Agent's security interest in such
<PAGE>
Collateral and instruct such Person to hold all such Collateral for the Agent's
account subject to the Agent's instructions. If at any time any Collateral is
located on any operating facility of the Borrower which is not owned by the
Borrower, then the Borrower shall, at the request of the Agent, make reasonable
efforts to obtain written waivers, in form and substance reasonably satisfactory
to the Agent, of all present and future Liens to which the owner or lessor of
such premises may be entitled to assert against the Collateral.
(c) From time to time, the Borrower shall, upon the Agent's
reasonable request, execute and deliver confirmatory written instruments
pledging to the Agent, for the ratable benefit of the Agent and the Lenders, the
Collateral with respect to the Borrower, but the Borrower's failure to do so
shall not affect or limit any security interest or any other rights of the Agent
or any Lender in and to the Collateral with respect to the Borrower. So long as
this Agreement is in effect and until all Obligations have been fully satisfied,
the Agent's Liens shall continue in full force and effect in all Collateral
(whether or not deemed eligible for the purpose of calculating the Availability
or as the basis for any advance, loan, extension of credit, or other financial
accommodation).
6.3 Location of Collateral. The Borrower represents and warrants to the
Agent and the Lenders that: (a) Schedule 6.3 is a correct and complete list of
the Borrower's chief executive office, the location of its books and records
relating to the Collateral, and the locations of the Collateral and (b) Schedule
6.3 correctly identifies any of such facilities and locations that are not owned
by the Borrower and sets forth the names of the owners and lessors or sublessors
of such facilities and locations. The Borrower covenants and agrees that it will
not (i) maintain any Collateral at any location other than those locations
listed for the Borrower on Schedule 6.3, (ii) otherwise change or add to any of
such locations, or (iii) change the location of its chief executive office from
the location identified in Schedule 6.3, unless it gives the Agent at least
thirty (30) days' prior written notice thereof and executes any and all
financing statements and other documents that the Agent reasonably requests in
connection therewith. Without limiting the foregoing, the Borrower represents
that all of its Inventory (other than Inventory in transit) is, and covenants
that all of its Inventory will be, located either (a) on Premises owned by the
Borrower, (b) on premises leased by the Borrower, provided that the Agent has,
if requested by the Agent, received an executed landlord waiver from the
landlord of such premises in form and substance satisfactory to the Agent or has
established a Rent Reserve with respect to such Premises, or (c) in a public
warehouse, provided that the Agent has, if requested by the Agent, received an
executed bailee letter from the applicable public warehouseman in form and
substance satisfactory to the Agent.
6.4 Title to, Liens on, and Sale and Use of Collateral. The Borrower
represents and warrants to the Agent and the Lenders and agrees with the Agent
and the Lenders that: (a) all of the Collateral is and will continue to be owned
by the Borrower free and clear of all Liens whatsoever, except for Permitted
Liens; (b) the Agent's Liens in the Collateral will not be subject to any prior
Lien, except for those certain Liens described in subsections (a), (d), (g) and
(o) of the definition of Permitted Liens; (c) the Borrower will use, store, and
maintain the Collateral with all reasonable care and will use such Collateral
for lawful purposes only; and (d) the Borrower will not, without the Agent's
prior written approval, not to be unreasonably withheld, sell, or dispose of or
permit the sale or disposition of any of the Collateral except for sales of
<PAGE>
Inventory in the ordinary course of business (including, without limitation,
liquidation sales and markdowns with respect to obsolete or slow-moving
Inventory), and sales or dispositions permitted under Section 9.15. The
inclusion of proceeds in the Collateral shall not be deemed to constitute the
Agent's or any Lender's consent to any sale or other disposition of the
Collateral except as expressly permitted herein.
6.5 Appraisals. Whenever a Default or Event of Default exists, and at
such other times not more frequently than once a year (or twice a year if
Aggregate Revolver Outstandings exceed $50,000,000; provided that the cost of
such second appraisal to be paid by the Borrower shall not exceed $10,000) as
the Agent requests (and, upon the Agent's request, at any one time after the
Impaired Inventory Percentage exceeds (i) 25%; (ii) 35%; or (iii) 45%), the
Borrower shall, at its expense and upon the Agent's request, provide the Agent
with appraisals or updates thereof of any or all of the Collateral from an
appraiser, and prepared on a basis, reasonably satisfactory to the Agent.
6.6 Access and Examination; Confidentiality.
(a) The Agent, accompanied by any Lender which so elects, may
at all reasonable times during regular business hours (and at any time when a
Default or Event of Default exists and is continuing) have access to, examine,
audit, make extracts from or copies of and inspect any or all of the Borrower's
records, files, and books of account and the Collateral, and discuss the
Borrower's affairs with the Borrower's officers and management. The Borrower
will deliver to the Agent any instrument necessary for the Agent to obtain
records from any service bureau maintaining records for the Borrower. The Agent
may, and at the direction of the Majority Lenders shall, at any time when a
Default or Event of Default exists, and at the Borrower's expense, make copies
of all of the Borrower's books and records, or require the Borrower to deliver
such copies to the Agent. The Agent may, without expense to the Agent, use such
of the Borrower's respective personnel, supplies, and premises as may be
reasonably necessary for maintaining or enforcing the Agent's Liens. After the
occurrence and during the continuance of an Event of Default, the Agent shall
have the right, at any time, in the Agent's name or in the name of a nominee of
the Agent, to verify the validity, amount or any other matter relating to the
Accounts, Inventory, or other Collateral, by mail, telephone, or otherwise.
(b) The Borrower agrees that, subject to the Borrower's prior
consent for uses other than in a traditional tombstone, which consent shall not
be unreasonably withheld or delayed, the Agent and each Lender may use the
Borrower's name in advertising and promotional material and in conjunction
therewith disclose the general terms of this Agreement. The Agent and each
Lender agree to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all confidential information provided to the
Agent or such Lender by or on behalf of the Borrower, under this Agreement or
any other Loan Document, and neither the Agent, nor such Lender nor any of their
respective Affiliates shall use any such information other than in connection
with or in enforcement of this Agreement and the other Loan Documents, except to
the extent that such information (i) was or becomes generally available to the
public other than as a result of disclosure by the Agent or such Lender, or (ii)
was or becomes available on a nonconfidential basis from a source other than the
<PAGE>
Borrower, provided that such source is not bound by a confidentiality agreement
with the Borrower known to the Agent or such Lender; provided, however, that the
Agent and any Lender may disclose such information (1) at the request or
pursuant to any requirement of any Governmental Authority to which the Agent or
such Lender is subject or in connection with an examination of the Agent or such
Lender by any such Governmental Authority; (2) pursuant to subpoena or other
court process; (3) when required to do so in accordance with the provisions of
any applicable requirement of law; (4) to the extent reasonably required in
connection with any litigation or proceeding (including, but not limited to, any
bankruptcy proceeding) to which the Agent, any Lender or their respective
Affiliates may be party; (5) to the extent reasonably required in connection
with the exercise of any remedy hereunder or under any other Loan Document; (6)
to the Agent's or such Lender's independent auditors, accountants, attorneys and
other professional advisors who shall be bound by the confidentiality provisions
of this Section 6.6 and who shall utilize such information solely in connection
with this Agreement (but who shall have the benefit of clauses (1) through (5)
above); (7) to any prospective Participant or assignee under any Assignment and
Acceptance, actual or potential, provided that such prospective Participant or
assignee agrees to keep such information confidential to the same extent
required of the Agent and the Lenders hereunder; (8) as expressly permitted
under the terms of any other document or agreement regarding confidentiality to
which the Borrower is party or is deemed party with the Agent or such Lender,
and (9) to its Affiliates who shall be bound by the confidentiality provisions
of this Section 6.6 and who shall utilize such information solely in connection
with this Agreement (but who shall have the benefit of clauses (1) through (5)
above).
6.7 Collateral Reporting. The Borrower shall provide the Agent with the
following documents at the following times in form reasonably satisfactory to
the Agent: (a) on a monthly basis no later than the 20th day of the following
month, or more frequently (but not more frequently than weekly) if requested by
the Agent at any time that the Aggregate Revolver Outstandings are $50,000,000
or more, a Borrowing Base Certificate, a summary report listing on hand
Inventory balances by vendor and accounts payable owing to any vendor or
supplier who has a Lien on any Inventory, summary Inventory reports by category
and location (and, if requested by the Agent, additional detail thereof); (b)
upon request, a statement of the balance of each of the Intercompany Accounts;
(c) upon the occurrence and during the continuance of an Event of Default, on a
weekly basis no later than the third Business Day of the following week (or more
frequently if requested by the Agent), Borrowing Base certificates, and on a
monthly basis (or more frequently if requested by the Agent), an aging of
accounts payable which is not aged by vendor credit terms, an aging of Accounts
reconciled against the previous month's aging and the Borrower's general ledger
and copies of invoices and purchase orders as requested by the Agent; and (d)
such other reports as to the Collateral of the Borrower as the Agent shall
reasonably request from time to time. If any of the Borrower's records or
reports of the Collateral are prepared by an accounting service or other agent,
the Borrower hereby authorizes such service or agent to deliver such records,
reports, and related documents to the Agent, for distribution to the Lenders.
For the purposes of this Section 6.7, the word "month" shall mean "fiscal
month."
<PAGE>
6.8 Accounts.
(a) The Borrower hereby represents and warrants to the Agent
and the Lenders, with respect to the Borrower's Accounts, that: (i) each
existing Account represents, and each future Account will represent, a bona fide
sale or lease and delivery of goods by the Borrower, or rendition of services by
the Borrower, in the ordinary course of the Borrower's business; (ii) each
existing Account is, and each future Account will be, for a liquidated amount
payable by the Account Debtor thereon on the terms set forth in the invoice
therefor or in the schedule thereof delivered to the Agent, without any offset,
deduction, defense, or counterclaim except those arising in the ordinary course
of business or known to the Borrower and disclosed to the Agent and the Lenders
pursuant to this Agreement; (iii) no payment will be received with respect to
any Account, and no credit, discount, or extension, or agreement therefor has
been granted on any Account, except in the ordinary course of business.
(b) Upon an acceleration of the Obligations following the
occurrence of an Event of Default:
(i) The Borrower shall not accept any note or other
instrument (except a check or other
instrument for the immediate payment of money) with respect to any Account
without the Agent's written consent except to the extent that the Borrower is
obligated to do so. If the Agent consents to the acceptance of any such
instrument or the Borrower is obligated to accept any such instrument, it shall
be considered as evidence of the Account and not payment thereof and the
Borrower will promptly deliver such instrument to the Agent, endorsed by the
Borrower to the Agent in a manner satisfactory in form and substance to the
Agent. Regardless of the form of presentment, demand, notice of protest with
respect thereto, the Borrower shall remain liable thereon until such instrument
is paid in full.
(ii) The Borrower shall notify the Agent promptly of all
disputes and claims in excess of
$1,000,000 with any Account Debtor, and agrees to settle, contest, or adjust
such dispute or claim at no expense to the Agent or any Lender. No discount,
credit or allowance shall be granted to any such Account Debtor without the
Agent's prior written consent, except for discounts, credits and allowances made
or given in the ordinary course of the Borrower's business when no Event of
Default exists hereunder. The Collateral information reported to the Agent under
Section 6.7 shall give effect to credit memoranda, discounts, and allowances.
The Agent may, and at the direction of the Majority Lenders shall, settle or
adjust disputes and claims directly with Account Debtors for amounts and upon
terms which the Agent or the Majority Lenders, as applicable, shall consider
advisable and, in all cases, the Agent will credit the Borrower's Loan Account
with only the net amounts received by the Agent in payment of any Accounts.
(iii) Subject to the provisions of the Intercreditor
Agreement, in the event any Account Debtor returns Inventory to the Borrower,
the Borrower, upon request of the Agent, shall: (i) hold the returned Inventory
in trust for the Agent; (ii) segregate all returned Inventory from all of its
other property; (iii) dispose of the returned Inventory solely according to the
Agent's written instructions; and (iv) not issue any credits or allowances with
respect thereto without the Agent's prior written consent. All returned
Inventory shall be subject to the Agent's Liens thereon.
<PAGE>
6.9 Collection of Accounts; Payments. The Borrower shall establish and
maintain a bank account ("Payment Account") with a bank acceptable to the Agent
pursuant to an agreement among the bank, the Borrower and the Agent, in form and
substance reasonably satisfactory to the Agent (the "Payment Account
Agreement"). Subject to the provisions of the Intercreditor Agreement, the
Borrower shall deposit in the Payment Account all proceeds of Collateral and all
funds received from Merisel Capital Funding, Inc. or other Person in connection
with any Securitization Facility to which the Borrower is the originator. The
Payment Account Agreement shall provide, inter alia, that upon notice to the
bank by the Agent that an Event of Default and acceleration of the Obligations
have occurred, the bank is authorized to transfer all funds in the Payment
Account to the Agent. The notice to the Agent shall confirm that the Agent's
Lien does not extend to the Payment Account itself, but does extend to the
extent contemplated in this Agreement, to the proceeds of the Borrower's
Inventory and Accounts which are deposited into the Payment Account. Unless and
until the Agent gives such notice, the Borrower shall be free to withdraw funds
from the Payment Account in such amount and with frequency as the Borrower may
from time to time determine, without notice to or the consent of the Agent. In
the event such notice of acceleration is given (subject to the Intercreditor
Agreement): (a) the Borrower shall cease transferring any accounts receivable in
connection with any Securitization Facility; (b) the proceeds of such accounts
receivable and of all other Accounts which are not transferred in connection
with the Securitization Facility shall be delivered in their original form duly
endorsed in blank into the Payment Account; (c) if the Agent requests, the
Borrower shall establish a lock-box service for collections of Accounts at a
bank acceptable to the Agent and pursuant to documentation reasonably
satisfactory to the Agent; (d) if such lock-box service is established, the
Borrower shall instruct all Account Debtors to make all payments directly to the
address established for such service; (e) if, notwithstanding such instructions,
the Borrower receives any proceeds of Accounts, it shall receive such payments
as the Agent's trustee, and shall immediately deliver such payments to the Agent
in their original form duly endorsed in blank or deposit them into the Payment
Account, as the Agent may direct; (f) the Agent or the Agent's designee may
notify Account Debtors that the Accounts have been assigned to the Agent and of
the Agent's security interest therein, and may collect them directly and the
collection costs and expenses shall constitute Obligations; and (g) the
Borrower, at the Agent's request, shall execute and deliver to the Agent such
documents as the Agent shall require to grant the Agent access to any post
office box in which collections of Accounts are received.
6.10 Inventory; Perpetual Inventory. The Borrower represents and
warrants to the Agent and the Lenders and agrees with the Agent and the Lenders
that all of the Inventory owned by the Borrower is and will be held for sale or
lease, or to be furnished in connection with the rendition of services, in the
ordinary course of the Borrower's business, and is and will be fit for such
purposes. The Borrower will keep its Inventory in good and marketable condition
subject to ordinary wear and tear, at its own expense. Borrower will not,
without the prior written consent of the Agent, acquire or accept any Inventory
on consignment or approval (except in the ordinary course of business). The
<PAGE>
Borrower agrees that all Inventory produced by the Borrower in the United States
will be produced in accordance with the Federal Fair Labor Standards Act of
1938, as amended, and all rules, regulations, and orders thereunder. The
Borrower will maintain accurate records of Inventory and will (i) continue to
perform "cycle" counts in a manner consistent with past practices or (ii)
conduct a physical count of the inventory at least once during each Fiscal Year.
The Borrower will also conduct a physical count of the Inventory after and
during the continuation of an Event of Default, at such time or times as the
Agent requests.The Borrower will maintain a perpetual inventory reporting system
at all times.
6.11 Documents, Instruments, and Chattel Paper. The Borrower represents
and warrants to the Agent and the Lenders that to the best of its knowledge, or
unless otherwise disclosed to the Agent, all material documents, instruments,
and chattel paper describing, evidencing, constituting or relating to Inventory,
and all signatures and endorsements thereon, are and will be complete, valid,
and genuine.
6.12 Right to Cure. Following the occurrence and during the continuance
of an Event of Default the Agent may, in its discretion, and shall, at the
direction of the Majority Lenders, pay any amount or do any act required of the
Borrower hereunder or under any other Loan Document in order to preserve,
protect, maintain or enforce the Obligations, the Collateral or the Agent's
Liens therein, and which the Borrower fails to pay or do, including, without
limitation, payment of any judgment against the Borrower, any insurance premium,
any warehouse charge, any finishing or processing charge, any landlord's claim,
and any other Lien upon or with respect to the Collateral; provided, however,
that the Agent may pay, upon two Business Days prior notice to the Borrower,
without regard to the existence of any Event of Default, any insurance premium
which is due and payable within ten days of the expiration of any insurance
policy required under Section 9.5 according to any notice received by Agent from
an insurer. All payments that the Agent makes under this Section 6.12 and all
out-of-pocket costs and expenses that the Agent pays or incurs in connection
with any action taken by it hereunder shall be charged to the Borrower's Loan
Account as a Revolving Loan . Any payment made or other action taken by the
Agent under this Section 6.12 shall be without prejudice to any right to assert
an Event of Default hereunder and to proceed thereafter as herein provided.
6.13 Power of Attorney. The Borrower hereby appoints the Agent and the
Agent's designee as the Borrower's attorney, with power: (a) from and after the
acceleration of the Obligations following the occurrence of an Event of Default,
and subject to the provisions of the Intercreditor Agreement, to endorse the
Borrower's name on notices of assignment and on any checks, notes, acceptances,
money orders, or other forms of payment or security that come into the Agent's
or any Lender's possession in connection with perfecting any Agent's Lien on
Collateral; (b) to sign the Borrower's name on financing statements and other
public records and to file any such financing statements by electronic means
with or without a signature as authorized or required by applicable law or
filing procedure to the extent necessary to perfect the Agent's Lien on the
Collateral; (c) from and after the acceleration of the Obligations following the
occurrence of an Event of Default, to notify the post office authorities to
change the address for delivery of the Borrower's mail to an address designated
by the Agent and to receive, open and dispose of all mail addressed to the
Borrower, and to send requests for verification of Accounts to customers or
Account Debtors; and (d) after the occurrence and during the continuance of any
<PAGE>
Event of Default, to sign the Borrower's name on any invoice, bill of lading,
warehouse receipt or other document of title relating to any Collateral, on
drafts against customers and on assignments of Accounts. None of the Lenders or
the Agent nor their attorneys will be liable for any acts or omissions or for
any error of judgment or mistake of fact or law. This power, being coupled with
an interest, is irrevocable until this Agreement has been terminated and the
Obligations have been fully satisfied.
6.14 The Agent's and Lenders' Rights, Duties and Liabilities. The
Borrower assumes all responsibility and liability arising from or relating to
the use, sale or other disposition of the Collateral. The Obligations shall not
be affected by any failure of the Agent or any Lender to take any steps to
perfect the Agent's Liens or to collect or realize upon the Collateral, nor
shall loss of or damage to the Collateral release the Borrower from any of the
Obligations. Following the occurrence and continuation of an Event of Default,
the Agent may (but shall not be required to), and at the direction of the
Majority Lenders shall, without notice to or consent from the Borrower, sue upon
or otherwise collect, extend the time for payment of, modify or amend the terms
of, compromise or settle for cash, credit, or otherwise upon any terms, grant
other indulgences, extensions, renewals, compositions, or releases, and take or
omit to take any other action with respect to the Collateral, any security
therefor, any agreement relating thereto, any insurance applicable thereto, or
any Person liable directly or indirectly in connection with any of the
foregoing, without discharging or otherwise affecting the liability of the
Borrower for the Obligations or under this Agreement or any other agreement now
or hereafter existing between the Agent and/or any Lender and the Borrower.
ARTICLE 7
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
7.1 Books and Records. The Borrower shall maintain, at all times,
books, records and accounts in which materially complete, correct and timely
entries are made of its transactions in accordance with GAAP applied
consistently with the audited Financial Statements required to be delivered
pursuant to Section 7.2(a). The Borrower shall, by means of appropriate entries,
reflect in such accounts and in all Financial Statements proper liabilities and
reserves for all taxes and proper provision for depreciation and amortization of
property and bad debts, all in accordance with GAAP. The Borrower shall maintain
at all times books and records, which are accurate and complete in all material
respects, pertaining to the Collateral including, but not limited to, records of
(a) all payments received and all credits and extensions granted with respect to
the Accounts; and (b) the return, rejections, repossession, stoppage in transit,
loss, damage, or destruction of any Inventory.
7.2 Financial Information. The Borrower will furnish to the Agent, in
sufficient copies for distribution by the Agent to each Lender, in such detail
as the Agent or the Lenders shall reasonably request, the following:
(a) As soon as available, but in any event not later than one
hundred (100) days after the close of each Fiscal Year, consolidated audited
balance sheets, and statements of income and expense, cash flow and statement of
changes in stockholders' equity for the Parent and its Subsidiaries for such
<PAGE>
Fiscal Year, and the accompanying notes thereto, setting forth in each case in
comparative form figures for the previous Fiscal Year, all in reasonable detail,
fairly presenting the financial position and the results of operations of the
Parent and its consolidated Subsidiaries as at the date thereof and for the
Fiscal Year then ended, and prepared in accordance with GAAP, and unaudited
balance sheets and statements of income and expense of the Borrower. Such
audited statements shall be examined in accordance with generally accepted
auditing standards by and, in the case of such statements performed on a
consolidated basis, accompanied by a report thereon unqualified as to scope
(including not qualified due to possible failure to take all appropriate steps
to successfully address the Year 2000 Problem) of Deloitte & Touche LLP or other
nationally recognized independent certified public accountants selected by the
Borrower.
(b) As soon as available after the end of each fiscal month, a
monthly financial report in substantially the form of Exhibit F, setting forth
certain unaudited financial information of the Parent and its Subsidiaries (with
such changes to such Exhibit F as Parent may adopt from time to time).
(c) As soon as available, but in any event not later than
fifty-five (55) days after the close of each fiscal quarter other than the
fourth quarter of a Fiscal Year, consolidated unaudited balance sheets of the
Parent and its consolidated Subsidiaries as at the end of such quarter, and
consolidated unaudited statements of income and expense and statement of cash
flows for the Parent and its Subsidiaries for such quarter and for the period
from the beginning of the Fiscal Year to the end of such quarter, all in
reasonable detail, fairly presenting the financial position and results of
operation of the Borrower and its Subsidiaries as at the date thereof and for
such periods, prepared in accordance with GAAP consistent with the audited
Financial Statements required to be delivered pursuant to Section 7.2(a), and
unaudited balance sheets and statements of income and expense of the Borrower.
Such financial statements of the Parent shall be accompanied by a certificate
signed by the Parent's chief financial officer, treasurer, assistant treasurer
or, in their absence, a controller of the Borrower or Parent that all such
statements have been prepared in accordance with GAAP and present fairly,
subject to normal year-end adjustments, the Parent's financial position as at
the dates thereof and its results of operations for the periods then ended.
(d) With each of the Financial Statements of the Parent
delivered pursuant to Section 7.2(a) and (c), a certificate of the treasurer,
assistant treasurer or chief financial officer of the Parent or, in their
absence, a controller of the Borrower or Parent (i) setting forth in reasonable
detail the calculations required to establish that the Borrower was in
compliance with the covenants set forth in Sections 9.22 and 9.23 during the
period covered in such Financial Statements and as at the end thereof, and (ii)
stating that, except as explained in reasonable detail in such certificate, (A)
all of the representations and warranties of the Borrower contained in this
Agreement and the other Loan Documents are correct and complete in all material
respects as at the date of such certificate as if made at such time, except for
those that speak as of a particular day, (B) the Borrower is, at the date of
such certificate, in compliance in all material respects with all of its
respective covenants and agreements in this Agreement and the other Loan
Documents, and (C) no Default or Event of Default then exists or existed during
<PAGE>
the period covered by such Financial Statements. If such certificate discloses
that a representation or warranty is not correct or complete, or that a covenant
has not been complied with, or that a Default or Event of Default existed or
exists, such certificate shall set forth what action the Borrower has taken or
proposes to take with respect thereto.
(e) Within two weeks of preparation, and, in any event, no
later than ninety (90) days after the end of each Fiscal Year (beginning with
Fiscal Year 1998) annual forecasts (to include forecasted consolidated and, if
available, consolidating balance sheets, statements of income and expenses and
statements of cash flow) for the Parent and its Subsidiaries as at the end of
and for each month of such Fiscal Year.
(f) Upon request, after filing with the PBGC and the IRS, a
copy of each annual report or other filing filed with respect to each Plan of
the Borrower.
(g) Promptly upon the filing thereof, copies of all Form
10-Ks, Form 10-Qs, Form 8-Ks Schedule 13Ds and any other material reports, if
any, filed by the Parent or any of its Subsidiaries with the Securities and
Exchange Commission under the Exchange Act.
(h) As soon as available, but in any event not later than 15
days after the Borrower's receipt thereof, a copy of all management reports and
management letters, together with management's response, prepared for the
Borrower by Deloitte & Touche LLP or any other independent certified public
accountants of the Borrower.
(i) Upon request, a copy of each annual tax return filed by
the Borrower or by any of its Subsidiaries with the IRS.
(j) Such additional information as the Agent and/or any Lender
may from time to time reasonably request regarding the financial and business
affairs of the Borrower or any Subsidiary.
7.3 Notices to the Lenders. The Borrower shall notify the Agent and the
Lenders, in writing of the following matters at the following times:
(a) Promptly but no later than three Business Days after a
Responsible Officer becomes aware of any Default or Event of Default.
(b) Promptly but no later than three Business Days after a
Responsible Officer becomes aware of the assertion by the holder of any capital
stock of the Borrower or Subsidiary thereof or of any Debt in excess of
$10,000,000 that a default exists with respect thereto or that the Borrower is
not in compliance with the terms thereof, or the threat or commencement by such
holder of any enforcement action because of such asserted default or
non-compliance.
(c) Promptly but no later than three Business Days after a
Responsible Officer becomes aware of any material adverse change in the
Borrower's or any Subsidiary's property, business, operations, or condition
(financial or otherwise).
<PAGE>
(d) Promptly but no later than three Business Days after a
Responsible Officer becomes aware of any pending or threatened action, suit,
proceeding, or counterclaim by any Person that could reasonably be expected to
result in a Material Adverse Effect, or any pending or threatened investigation
by a Governmental Authority which may materially and adversely affect the
Collateral, the repayment of the Obligations, the Agent's or any Lender's rights
under the Loan Documents, or the Borrower's and its Subsidiaries' property,
business, operations, or condition (financial or otherwise), taken as a whole.
(e) Promptly but no later than three Business Days after a
Responsible Officer becomes aware of any pending or threatened strike, work
stoppage, unfair labor practice claim, or other labor dispute affecting the
Borrower or any of its Subsidiaries in a manner which could reasonably be
expected to have a Material Adverse Effect.
(f) Promptly but no later than three Business Days after a
Responsible Officer becomes aware of any violation of any law, statute,
regulation, or ordinance of a Governmental Authority affecting the Borrower
which could reasonably be expected to have a Material Adverse Effect.
(g) Promptly but no later than three Business Days after
receipt by a Responsible Officer of any notice of any violation by the Borrower
or any of its Subsidiaries of any Environmental Law which could reasonably be
expected to have a Material Adverse Effect or that any Governmental Authority
has asserted that the Borrower or any Subsidiary thereof is not in compliance
with any Environmental Law (where such non-compliance may reasonably be expected
to result in liability over $2,500,000) or is investigating the Borrower's or
such Subsidiary's compliance therewith.
(h) Promptly but no later than three Business Days after
receipt by a Responsible Officer of any written notice that the Borrower or any
of its Subsidiaries is or may reasonably be expected to be liable to any Person
as a result of the Release or threatened Release of any Contaminant or that the
Borrower or any Subsidiary is subject to investigation by any Governmental
Authority evaluating whether any remedial action is needed to respond to the
Release or threatened Release of any Contaminant which, in either case, is
reasonably likely to give rise to liability in excess of $2,500,000.
(i) Promptly but no later than three Business Days after
receipt by a Responsible Officer of any written notice of the imposition of any
Environmental Lien against any property of the Borrower or any of its
Subsidiaries.
(j) Any change in the Borrower's name, state of incorporation,
or form of organization, trade names under which the Borrower will sell
Inventory or create Accounts, or to which instruments in payment of Accounts may
be made payable, in each case at least thirty (30) days prior thereto.
<PAGE>
(k) Within ten Business Days after the Borrower or any ERISA
Affiliate knows or has reason to know, that an ERISA Event or a prohibited
transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has
occurred, and, when known, any action taken or threatened by the IRS, the DOL or
the PBGC with respect thereto.
(l) Within three Business Days after the occurrence thereof:
(i) any changes in the benefits of any existing Pension Plan which increase the
Borrower's annual costs with respect thereto by an amount in excess of
$5,000,000, or the establishment of any new Pension Plan or the commencement of
contributions to any Plan to which the Borrower or any ERISA Affiliate was not
previously contributing; or (ii) any failure by the Borrower or any ERISA
Affiliate to make a required installment in excess of $2,000,000 or any other
required payment in excess of $2,000,000 under Section 412 of the Code on or
before the due date for such installment or payment.
(m) Within three Business Days after the Borrower or any ERISA
Affiliate knows or has reason to know that any of the following events has or
will occur: (i) a Multi-employer Plan has been or will be terminated; (ii) the
administrator or plan sponsor of a Multi-employer Plan intends to terminate a
Multi-employer Plan; or (iii) the PBGC has instituted or will institute
proceedings under Section 4042 of ERISA to terminate a Multi-employer Plan.
Each notice given under this Section shall describe the
subject matter thereof in reasonable detail, and shall set forth the action that
the Borrower, its Subsidiary, or any ERISA Affiliate, as applicable, has taken
or proposes to take with respect thereto.
ARTICLE 8
GENERAL WARRANTIES AND REPRESENTATIONS
The Borrower warrants and represents to the Agent and the Lenders that
except as hereafter disclosed to and accepted by the Agent and the Majority
Lenders in writing:
8.1 Authorization, Validity, and Enforceability of this Agreement and
the Loan Documents. The Borrower has the corporate power and authority to
execute, deliver and perform this Agreement and the other Loan Documents, to
incur the Obligations, and to grant to the Agent Liens upon and security
interests in the Collateral. The Borrower has taken all necessary corporate
action (including without limitation, obtaining approval of its stockholders if
necessary) to authorize its execution, delivery, and performance of this
Agreement and the other Loan Documents to which it is a party. This Agreement
and the other Loan Documents have been duly executed and delivered by the
Borrower, and constitute the legal, valid and binding obligations of the
Borrower, enforceable against it in accordance with their respective terms,
except as the enforceability hereof and thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in equity or at law). The
Borrower's execution, delivery, and performance of this Agreement and the other
Loan Documents do not and will not materially conflict with, or constitute a
violation or breach of, or constitute a default under, or result in the creation
or imposition of any Lien upon the property of the Borrower or any of its
Subsidiaries by reason of the terms of (a) any material contract, mortgage,
Lien, lease, agreement, indenture, or instrument to which the Borrower is a
<PAGE>
party or which is binding upon it (except for Liens created under the Loan
Documents and except for any conflicts, violations, breaches, defaults or Liens
that could not reasonably be expected to materially and adversely affect the
Borrower), (b) any Requirement of Law applicable to the Borrower or any of its
Subsidiaries, the noncompliance with which could not reasonably be expected to
result in a Material Adverse Effect or (c) the certificate or articles of
incorporation or by-laws of the Borrower or any of its Subsidiaries.
8.2 Validity and Priority of Security Interest. The provisions of this
Agreement and the other Loan Documents create legal and valid Liens on all the
Collateral in favor of the Agent, for the ratable benefit of the Agent and the
Lenders, and such Liens, upon filing of UCC-1 Financing Statements in all
relevant jurisdictions, to the extent perfection may be achieved by filing,
constitute perfected and continuing Liens on all the Collateral covered by
Article 9 of the UCC, having priority over all other Liens on the Collateral,
(other than liens listed in clauses (a), (d), (g) and (o) of the definition of
Permitted Liens) securing all the Obligations, and enforceable against the
Borrower and all third parties.
8.3 Organization and Qualification. The Borrower (a) is duly
incorporated and organized and validly existing in good standing under the laws
of the state of its incorporation, (b) as of the Closing Date, is qualified to
do business as a foreign corporation and is in good standing in the
jurisdictions set forth on Schedule 8.3 which are the only jurisdictions in
which the failure to so qualify or be in good standing could reasonably be
expected to result in a Material Adverse Effect, and (c) has all requisite power
and authority to conduct its business and to own its property.
8.4 Corporate Name; Prior Transactions. As of the Closing Date the
Borrower has not, during the past five (5) years, been known by or used any
other corporate or fictitious name, or, within the past two years, been a party
to any merger or consolidation, or acquired all or substantially all of the
assets of any Person (other than mergers between Subsidiaries of the Parent), or
acquired any of its property outside of the ordinary course of business.
8.5 Subsidiaries and Affiliates. Schedule 8.5 is a correct and complete
list of the name and relationship to the Borrower of each and all of the Parent
and Parent's Subsidiaries. Each Subsidiary is (a) duly incorporated (or
otherwise created, if not a corporation) and validly existing in good standing
under the laws of its state of organization set forth on Schedule 8.5, and (b)
qualified to do business as a foreign corporation and in good standing in each
jurisdiction in which the failure to so qualify or be in good standing could
reasonably be expected to have a material adverse effect on any such
Subsidiary's business, operations, property, or condition (financial or
otherwise) and (c) has all requisite power and authority to conduct its business
and own its property.
8.6 Financial Statements and Projections. (a) The Borrower has
delivered to the Agent and the Lenders the audited balance sheet and related
statements of income, retained earnings, cash flows, and changes in stockholders
equity for the Parent and its consolidated Subsidiaries as of December 31, 1997,
and for the Fiscal Year then ended, accompanied by the report thereon of the
Parent's independent certified public accountants, Deloitte & Touche LLP. The
<PAGE>
Parent has also delivered to the Agent and the Lenders the unaudited balance
sheet and related statements of income and cash flows for the Parent and its
consolidated Subsidiaries as of March 31, 1998. All such financial statements
have been prepared in accordance with GAAP and present accurately and fairly the
financial position of the Parent and its consolidated Subsidiaries as at the
dates thereof and their results of operations for the periods then ended
(subject to year end adjustments in the case of the unaudited balance sheet and
related statements of income and cash flows as of March 31, 1998).
(b) The Latest Projections when submitted to the Lenders as
required herein (or when prepared with respect to the Latest Projections dated
November 13, 1997) represented the Borrower's best estimate of the future
financial performance of the Borrower and its consolidated Subsidiaries for the
periods set forth therein. The Latest Projections have been prepared on the
basis of the assumptions set forth therein, which the Borrower believed were
fair and reasonable in light of the then current and reasonably foreseeable
business conditions at the time submitted to the Lender (it being understood
that the projections are subject to significant uncertainties and contingencies,
many of which are beyond the control of the Borrower, and that no assurance can
be given that the projections will be realized).
8.7 [Intentionally Omitted].
8.8 Solvency. The Borrower is Solvent prior to and after giving effect
to the making of the Revolving Loans to be made on the Closing Date and the
issuance of the Letters of Credit to be issued on the Closing Date.
8.9 Debt. As of the Closing Date, the Borrower and its Subsidiaries
have no Debt, except (a) the Obligations, (b) the obligations under the
Securitization Facility, (c) the obligations under the Indenture, (d) the
obligations under the Promissory Notes, (e) Debt for borrowed money not in
excess of $5,000,000, (f) Capital Lease obligations, and (g) Debt described on
Schedule 8.9.
8.10 Distributions. As of the Closing Date, since March 31, 1998, no
Distribution has been declared, paid, or made upon or in respect of any capital
stock or other securities of the Borrower or any of its Subsidiaries, except as
would be permitted by Section 9.10.
8.11 Title to Property. The Borrower has good and marketable title in
fee simple to its real property listed as being owned in Schedule 8.12 hereto,
and the Borrower has good and merchantable title to all of its other property
material to its business free of all Liens except Permitted Liens.
8.12 Real Estate; Leases. Schedule 8.12 sets forth, as of the Closing
Date, a correct and complete list of all Real Estate owned by the Borrower or
any of its Subsidiaries where any of the Collateral is stored, and all Real
Estate leased or subleased by the Borrower or its Subsidiaries as lessee or
sublessee where any of the Collateral is stored. Each of such leases and
subleases is valid and enforceable in accordance with its terms and is in full
force and effect, and no material default by Borrower under any such lease or
sublease exists which would entitle the lessor or sublessor thereunder to
terminate such lease or sublease.
<PAGE>
8.13 [Intentionally omitted]
8.14 Trade Names. All trade names under which the Borrower or any of
its Subsidiaries sells Inventory or creates Accounts, or to which instruments in
payment of Accounts may be made payable, are listed on Schedule 8.14.
8.15 Litigation. Except as set forth on Schedule 8.15 or Parent's Form
10-Q for the quarter ended March 31, 1998 filed with the Securities and Exchange
Commission, there is no pending or (to the best of the Borrower's knowledge)
threatened, action, suit, proceeding, or counterclaim by any Person, or
investigation by any Governmental Authority, or any basis for any of the
foregoing, which could reasonably be expected to cause a Material Adverse
Effect.
8.16 [Intentionally Omitted]
8.17 Labor Disputes. Except as set forth on Schedule 8.17, (a) there is
no collective bargaining agreement or other labor contract covering employees of
the Borrower or any of its Subsidiaries, (b) no such collective bargaining
agreement or other labor contract is scheduled to expire during the term of this
Agreement, (c) no union or other labor organization is seeking to organize, or
to be recognized as, a collective bargaining unit of employees of the Borrower
or any of its Subsidiaries or for any similar purpose, and (d) there is no
pending or (to the best of the Borrower's knowledge) threatened, strike, work
stoppage, material unfair labor practice claim, or other material labor dispute
against or affecting the Borrower or its Subsidiaries or their employees which
could reasonably be expected to result in a Material Adverse Effect.
8.18 Environmental Laws.Except as otherwise disclosed on Schedule 8.18:
(a) The Borrower and its Subsidiaries have complied in all
material respects with all Environmental Laws applicable to its Premises and
business, and neither the Borrower nor any Subsidiary nor any of its present
Premises or operations, nor to the best of Borrower's knowledge its past
property or operations, is subject to any enforcement order from or liability
agreement with any Governmental Authority or private Person respecting (i)
compliance with any Environmental Law or (ii) any potential liabilities and
costs or remedial action arising from the Release or threatened Release of a
Contaminant except where any of the foregoing would not reasonably be expected
to result in a Materially Adverse Effect.
(b) The Borrower and its Subsidiaries have obtained all
permits necessary for their current operations under Environmental Laws, and all
such permits are in good standing and the Borrower and its Subsidiaries are in
compliance with all terms and conditions of such permits except where failure to
obtain or maintain such permits in good standing or to comply therewith would
not reasonably be expected to result in a Materially Adverse Effect.
(c) Neither the Borrower nor any of its Subsidiaries, nor, to
the best of the Borrower's knowledge, any of its predecessors in interest, has,
in violation of applicable law, stored, treated or disposed of any hazardous
waste on any Premises, as defined pursuant to 40 CFR Part 261 or any equivalent
Environmental Law except where such violation of law would not reasonably be
expected to result in a Materially Adverse Effect.
<PAGE>
(d) Neither the Borrower nor any of its Subsidiaries has
received any outstanding summons, complaint, order or similar written notice
that it is not currently in compliance with, or that any Governmental Authority
is investigating its compliance with, any Environmental Laws or that it is or
may be liable to any other Person as a result of a Release or threatened Release
of a Contaminant except where any of the foregoing would not reasonably be
expected to result in a Materially Adverse Effect.
(e) Neither the Borrower nor any of its Subsidiaries has
received any written notice that any of the present or past operations of the
Borrower and its Subsidiaries is the subject of any on going investigation by
any Governmental Authority evaluating whether any remedial action is needed to
respond to a Release or threatened Release of a Contaminant, except for
potential remedial actions that would not be reasonably expected to result in a
Material Adverse Effect.
(f) Neither the Borrower nor any of its Subsidiaries has filed
any notice under any requirement of Environmental Law reporting a spill or
accidental and unpermitted release or discharge of a Contaminant into the
environment except where any of the foregoing would not reasonably be expected
to result in a Materially Adverse Effect.
(g) Neither the Borrower nor any of its Subsidiaries has
entered into any negotiations or settlement agreements with any Person
(including, without limitation, the prior owner of its property) imposing any
outstanding material obligations or liabilities on the Borrower or any of its
Subsidiaries with respect to any remedial action in response to the Release of a
Contaminant or environmentally related claim except for obligations or
liabilities that would not reasonably be expected to result in a Material
Adverse Effect.
(h) None of the products manufactured, distributed or sold by
the Borrower or any of its Subsidiaries contain asbestos containing material.
(i) No Environmental Lien has attached to any Premises owned
in fee simple by the Borrower or any of its Subsidiaries.
8.19 No Violation of Law. Neither the Borrower nor any of its
Subsidiaries is in violation of any law, statute, regulation, ordinance,
judgment, order, or decree applicable to it which violation could reasonably be
expected to have a Material Adverse Effect.
8.20 No Default. Neither the Borrower nor any of its Subsidiaries is in
default with respect to any note, indenture, loan agreement, mortgage, lease,
deed, or other agreement to which the Borrower or such Subsidiary is a party or
by which it is bound, which default could reasonably be expected to have a
Material Adverse Effect.
8.21 ERISA Compliance. Except as specifically disclosed in Schedule
8.21:
(a) Each Pension Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law except where such noncompliance would not reasonably be expected to
cause a Material Adverse Effect. Each Plan which is intended to qualify under
<PAGE>
Section 401(a) of the Code has received a favorable determination letter from
the IRS and to the best knowledge of the Borrower, nothing has occurred which
would cause the loss of such qualification. The Borrower and each ERISA
Affiliate has made all required contributions to any Pension Plan subject to
Section 412 of the Code, and no application for a funding waiver or an extension
of any amortization period pursuant to Section 412 of the Code has been made
with respect to any Pension Plan.
(b) There are no pending or, to the best knowledge of
Borrower, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no non-exempt
prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan which has resulted or could reasonably be expected to result
in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or, to the Borrower's
knowledge, is reasonably expected to occur; (ii) no Pension Plan has any
Unfunded Pension Liability which could reasonably be expected to result in a
Material Adverse Effect; (iii) neither the Borrower nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability under Title IV of ERISA
with respect to any Pension Plan which could reasonably be expected to result in
a Material Adverse Effect (other than premiums due and not delinquent under
Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with respect to a
Multi employer Plan which could reasonably be expected to result in a Material
Adverse Effect; and (v) neither the Borrower nor any ERISA Affiliate has engaged
in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.
8.22 Taxes. The Borrower and its Subsidiaries have filed all material
federal and other tax returns and reports required to be filed, and have paid or
adequately accrued or reserved for all material federal and other taxes,
assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets otherwise due and payable.
8.23 Regulated Entities. None of the Borrower, or any Subsidiary of the
Borrower, is an "Investment Company" required to be registered within the
meaning of the Investment Company Act of 1940. The Borrower is not subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, any state public utilities code or law, or any other federal or state
statute or regulation limiting its ability to incur indebtedness.
8.24 Use of Proceeds; Margin Regulations. The proceeds of the Loans are
to be used for working capital purposes and general business purposes and for
loans to Merisel Canada, Inc. (as permitted under Section 9.15) Neither the
Borrower nor any Subsidiary will use proceeds of the Loans to purchase or carry
Margin Stock.
8.25 Copyrights, Patents, Trademarks and Licenses, etc. The Borrower
owns or is licensed or otherwise has the right to use all of the patents,
trademarks, service marks, trade names, copyrights, contractual franchises,
<PAGE>
authorizations and other rights that are reasonably necessary for the operation
of its businesses, without conflict with the rights of any other Person. To the
best knowledge of the Borrower, no slogan or other advertising device, product,
process, method, substance, part or other material now employed by the Borrower
or any Subsidiary infringes upon any rights held by any other Person. No claim
or litigation regarding any of the foregoing is pending or to the knowledge of
Borrower threatened, and no patent, invention, device, application, principle or
any statute, law, rule, regulation, standard or code is pending or, to the
knowledge of the Borrower, proposed, which, in either case, could reasonably be
expected to have a Material Adverse Effect.
8.26 No Material Adverse Change. No Material Adverse Effect has
occurred since the later of (i) the date of the Financial Statements referred to
in Section 8.6(a), and (ii) the latest financial statements delivered pursuant
to Section 7.2(a) or (c).
8.27 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or other person is necessary or required in connection
with the execution, delivery or performance by, or enforcement against, the
Borrower or any of its Subsidiaries of this Agreement or any other Loan Document
except those filings that may be required in connection with the perfection of
security interests granted under this Agreement and in connection with the
Payment Account Agreement.
8.28 Year 2000 Compliance. As of the Closing Date, the Borrower is
conducting a comprehensive review and assessment of its computer applications.
The Borrower does not believe the Year 2000 Problem will have a Material Adverse
Effect.
ARTICLE 9
AFFIRMATIVE AND NEGATIVE COVENANTS
The Borrower covenants to the Agent and each Lender that, so long as
any of the Obligations remain outstanding or this Agreement is in effect:
9.1 Taxes and Other Obligations. The Borrower shall, and shall cause
each of its Subsidiaries to, (a) file when due (as such due date may be
extended) all material tax returns and other reports which it is required to
file; (b) pay, or provide for the payment, prior to delinquency, of all material
taxes, fees, assessments and other governmental charges against it or upon its
property, income and franchises, make all required material withholding and
other tax deposits, and establish adequate reserves for the payment of all such
items, and provide to the Agent and the Lenders, upon request, satisfactory
evidence of its timely compliance with the foregoing; provided, however, so long
as the Borrower has notified the Agent in writing, neither the Borrower nor any
of its Subsidiaries need pay any tax, fee, assessment, or governmental charge
that (i) it is contesting in good faith by appropriate proceedings diligently
pursued, (ii) the Borrower or any of its Subsidiaries, as the case may be, has
established proper reserves for as provided in GAAP, and (iii) the non-payment
of which would not result in a Lien (other than a Lien described in clause (a)
of the definition of Permitted Lien).
<PAGE>
9.2 Corporate Existence and Good Standing. The Borrower shall, and
shall cause each of its Subsidiaries to, maintain its corporate existence and
its qualification and good standing in all jurisdictions in which the failure to
maintain such existence and qualification or good standing could reasonably be
expected to have a Material Adverse Effect; provided that any Subsidiary of the
Borrower may merge, consolidate, reorganize, liquidate, wind-up, dissolve or
transfer all or substantially all of its assets as permitted under Section 9.9.
9.3 Compliance with Law and Agreements; Maintenance of Licenses. The
Borrower shall comply, and shall cause each Subsidiary to comply, in all
material respects with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the Federal Fair Labor
Standards Act) except where such non-compliance could not reasonably be expected
to result in a Material Adverse Effect. The Borrower shall, and shall cause each
of its Subsidiaries to, obtain and maintain all licenses, permits, franchises,
and governmental authorizations necessary to own its property and to conduct its
business as conducted on the Closing Date (except where the failure to obtain or
maintain such could not reasonably be expected to result in a Material Adverse
Effect). The Borrower shall not modify, amend or alter its certificate or
article of incorporation other than in a manner which does not adversely affect
the rights of the Lenders or the Agent.
9.4 Maintenance of Property. The Borrower shall, and shall cause each
of its Subsidiaries to, maintain all of its property necessary and useful in the
conduct of its business, in good operating condition and repair, ordinary wear
and tear excepted (except where the failure to so maintain such property could
not reasonably be expected to result in a Material Adverse Effect).
9.5 Insurance.
(a) The Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, with financially sound and reputable insurers having a
rating of at least A-VII or better by Best Rating Guide, insurance against loss
or damage to Inventory as is customary for Persons engaged in the same or
similar business.
(b) The Borrower shall cause the Agent, for the ratable
benefit of the Agent and the Lenders, to be named with respect to each such
policy relating to any Inventory, as loss payee or as an additional insured, in
a manner reasonably acceptable to the Agent. Each such policy of insurance shall
contain a clause or endorsement requiring the insurer to give not less than
thirty (30) days' prior written notice to the Agent in the event of cancellation
of the policy for any reason whatsoever and a clause or endorsement stating that
the interest of the Agent shall not be impaired or invalidated by any act or
neglect of the Borrower or any of its Subsidiaries or the owner of any premises
for purposes more hazardous than are permitted by such policy. All premiums for
such insurance shall be paid by the Borrower when due, and certificates of
insurance and, if requested by the Agent or any Lender, photocopies of the
policies, shall be delivered to the Agent, in each case in sufficient quantity
for distribution by the Agent to each of the Lenders. If the Borrower fails to
procure such insurance or to pay the premiums therefor when due, the Agent may,
and at the direction of the Majority Lenders shall, do so from the proceeds of
Revolving Loans.
<PAGE>
(c) The Borrower shall promptly notify the Agent and the
Lenders of any material loss, damage, or destruction to the Collateral in excess
of $10,000,000 arising from its use, whether or not covered by insurance.
9.6 [Intentionally omitted].
9.7 Environmental Laws. The Borrower shall, and shall cause each of its
Subsidiaries to, conduct its business in compliance with all Environmental Laws
applicable to it, including, without limitation, those relating to the
generation, handling, use, storage, and disposal of any Contaminant except as
such non-compliance as would not reasonably be expected to result in a Material
Adverse Effect. The Borrower shall, and shall cause each of its Subsidiaries to,
take prompt and appropriate action to respond to any material non-compliance
with Environmental Laws and shall regularly report to the Agent on such
response.
9.8 Compliance with ERISA. The Borrower shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Pension Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification; (c) make all required
contributions to any Plan subject to Section 412 of the Code; (d) not engage in
a non-exempt prohibited transaction (as defined in Section 4975 of the Code)
which could reasonably be expected to result in a Material Adverse Effect; and
(e) not engage in a transaction that could be subject to Section 4069 or 4212(c)
of ERISA.
9.9 Mergers, Consolidations or Sales. (a) Neither the Borrower nor any
of its Subsidiaries shall enter into any transaction of merger, reorganization,
or consolidation, or transfer, sell, assign, lease, or otherwise dispose of all
or any substantial part of its property, or wind up, liquidate or dissolve, or
agree to do any of the foregoing, except (i) for sales of Inventory in the
ordinary course of its business, (ii) subject to the Intercreditor Agreement,
for accounts receivable transferred in connection with a Securitization
Facility, (iii) for sales or other dispositions of Equipment or other assets in
the ordinary course of business that are obsolete or no longer useable or useful
by Borrower in its business; (iv) for any merger or consolidation of the
Borrower or its Subsidiaries with, or the acquisition of all or substantially
all of the assets of, any Person other than the Parent or a Subsidiary of the
Parent if (A) the Borrower or Subsidiary of the Borrower party thereto is the
surviving entity or the transferee, as the case may be, (B) such merger,
consolidation or acquisition would not result in a Default or Event of Default
after giving pro forma effect thereto for the prior four fiscal quarters, (C)
such Person is engaged in the same or similar business, (D) in any Fiscal Year
of the Borrower the book value of the inventory of such Person or Persons
acquired pursuant to any such merger, consolidation or acquisition shall not
exceed an amount equal to 30% of Borrower's Eligible Inventory (calculated at
the time of such merger or consolidation), (F) all UCC searches and filings are
made and all releases of liens are obtained as the Agent may reasonably require
to ensure that the extent and priority of the Agent's Lien is not adversely
affected by the merger, consolidation or acquisition, and (G) the Agent is given
10 days' prior written notice of such merger, consolidation or acquisition and,
upon the Agent's request, copies of the merger agreement and related documents;
and (v) as permitted under Section 9.15.
<PAGE>
9.10 Distributions; Capital Change; Restricted Investments. Neither the
Borrower nor any of its Subsidiaries shall (i) directly or indirectly declare or
make, or incur any liability to make, any Distribution, except Distributions
permitted under Section 9.15, (ii) make any change in its capital structure
which could have a Material Adverse Effect or (iii) make any Restricted
Investment except as permitted under Section 9.15.
9.11 Transactions Affecting Collateral or Obligations. Neither the
Borrower nor any of its Subsidiaries shall enter into any transaction which
would be reasonably expected to have a Material Adverse Effect.
9.12 [Intentionally Omitted].
9.13 Debt. Neither the Borrower nor any of its Subsidiaries shall incur
or maintain any Debt, other than: (a) the Obligations; (b) obligations under the
Securitization Facility; (c) obligations under the Indenture; (d) obligations
under the Promissory Notes; (e) other Debt existing on the Closing Date; (f) if
no Default or Event of Default would occur after giving effect to the incurrence
thereof: (i) Capital Lease obligations, (ii) the purchase money Debt, real
property mortgage financings and sale/leaseback transactions referred to in
clauses (i), (j) and (k) of the definition of Permitted Liens, and (iii) other
Debt the aggregate principal amounts outstanding of which do not exceed
$20,000,000; (g) Guarantees by the Borrower or its Subsidiaries of Debt
otherwise permitted to be incurred under this Agreement; (h) Guarantees by the
Borrower or any of its Subsidiaries of the obligations of any of the Borrower's
Subsidiaries incurred in the ordinary course of business; (i) Debt issued in
exchange for, or the net proceeds of which are used to extend, refinance, renew,
replace, defease or refund Debt permitted to be incurred under this Agreement or
outstanding on the Closing Date, (j) Debt in respect of performance bonds,
bankers' acceptances, letters of credit or surety or appeal bonds entered into
by the Borrower and its Subsidiaries in the ordinary course of business; (k)
Debt arising from the honoring by a bank or other financial institution of a
check, draft, or similar instrument inadvertently drawn against insufficient
funds; (l) Debt of a Subsidiary of the Borrower existing at the time such
Subsidiary became a Subsidiary of the Borrower and not incurred as a result of
(or in connection with or in anticipation of) such Subsidiary becoming a
Subsidiary of the Borrower; (m) Debt relating to the consignment of inventory to
the Borrower by Finova Capital Corporation provided that no interest thereon or
with respect thereto becomes payable or accrues at a per annum rate of 12% or
more for a period of more than ten days; (n) any revolving working capital
facility obtained by Merisel Canada, Inc. from any Person not an Affiliate; (o)
Debt permitted under Section 9.15; and (p) Debt incurred in connection with
interest rate or currency rate protection agreements entered into in the
ordinary course of business.
9.14 [Intentionally Omitted].
9.15 Transactions with Affiliates. Except as set forth below, neither
the Borrower nor any of its Subsidiaries shall, sell, transfer, distribute, or
pay any money or property, including, but not limited to, any fees or expenses
of any nature (including, but not limited to, any fees or expenses for
management services), to any Affiliate, or lend or advance money or property to
any Affiliate, or invest in (by capital contribution or otherwise) or purchase
or repurchase any stock or indebtedness, or any property, of any Affiliate, or
become liable on any Guaranty of the indebtedness, dividends, or other
obligations of any Affiliate. Notwithstanding the foregoing:
<PAGE>
(a) without regard to the existence or effectiveness of the
Indenture: (i) the Borrower may make loans or advances to Merisel Canada, Inc.
from the proceeds of Loans under this Agreement up to a maximum amount of
$25,000,000, provided, however, that in no event shall the aggregate outstanding
principal amounts of the Borrower's loans and advances to Merisel Canada (such
loans and advances for purposes of this clause (i) including the amount of any
trade payables owing by Merisel Canada, Inc. to Borrower (other than any such
payables in dispute), that are not paid within 55 days from the date of the
invoices relating thereto and interest not paid when due), exceed the Maximum
Merisel Canada Loan at one time; (ii) the Borrower's Subsidiaries may make
distributions to the Borrower; (iii) the Borrower and its Subsidiaries may pay
cash dividends or other advances or distributions to the Parent: to pay
interest, principal and other amounts in respect of notes issued under the
Indenture, to pay taxes owed by the Parent and other expenses incurred by the
Parent in the ordinary course of its business, and otherwise in the amount of
fifty percent of the Borrower's Excess Cash Flow; (iv) any Subsidiary of the
Borrower may merge, consolidate, reorganize or transfer, sell, assign, lease or
otherwise dispose all or substantially all of its property or assets to the
Borrower (if the Borrower is the surviving corporation of any such merger or
consolidation) or any other Subsidiary of the Borrower; (v) any Subsidiary of
the Borrower may be liquidated or dissolved or wound-up if such would not
reasonably be expected to result in a Material Adverse Effect; and (vi) the
Borrower or its Subsidiaries may, subject to clause (a)(i) above, engage in
other transactions with the Parent or Subsidiaries of the Parent in good faith
in the ordinary course of business, including, without limitation, loans,
investments and the transfer of accounts receivable in connection with the
Securitization Facility;
(b) so long as the Indenture is in effect: (i) the Borrower
and its Subsidiaries may pay dividends and make distributions, lend to and pay
indebtedness of , and transfer property or assets to, the Parent or any of its
Subsidiaries to the extent such actions are required to be permitted under
Section 4.16 of the Indenture, (ii) Borrower agrees to give Agent advance notice
of the taking of such actions, and (iii) if any such actions are taken which are
not also permitted to be taken under clause (a) above, the Agent may refuse to
make or otherwise restrict the making of new Revolving Loans or cause not to be
issued or restrict the issuance of new Letters of Credit; and
(c) subject to clause (a) above, the Borrower and its
Subsidiaries may engage in transactions with Affiliates in good faith in the
ordinary course of business, and on terms no less favorable to the Borrower and
its Subsidiaries than would be obtained in a comparable arm's-length transaction
with a Person who is not an Affiliate and, with respect to transactions
involving consideration in excess of $1,000,000, in amounts and upon terms fully
disclosed to the Agent.
9.16 Investment Banking and Finder's Fees. Neither the Borrower nor any
of its Subsidiaries shall pay or agree to pay, or reimburse any other party with
respect to, any investment banking or similar or related fee, underwriter's fee,
<PAGE>
finder's fee, or broker's fee to any Person in connection with this Agreement
except as contemplated by the Fee Letter. The Borrower shall defend and
indemnify the Agent and the Lenders against and hold them harmless from all
claims of any Person that the Borrower is obligated to pay for any such fees,
and all costs and expenses (including without limitation, attorneys' fees)
incurred by the Agent and/or any Lender in connection therewith.
9.17 Business Conducted. The Borrower shall not and shall not permit
any of its Subsidiaries to, engage directly or indirectly, in any line of
business other than the businesses in which the Borrower and its Subsidiaries
are engaged on the Closing Date and businesses related thereto.
9.18 Liens. Neither the Borrower nor any of its Subsidiaries shall
create, incur, assume, or permit to exist any Lien on any property now owned or
hereafter acquired by any of them, except Permitted Liens.
9.19 [Intentionally Omitted]
9.20 [Intentionally Omitted].
9.21 Fiscal Year. The Borrower shall not change its Fiscal Year.
9.22 Minimum Adjusted Net Earnings from Operations. The Parent will
maintain Adjusted Net Earnings from Operations, determined as of the last day of
each Fiscal Year, of not less than $3,000,000.
9.23 Interest Coverage Ratio. The Parent will maintain an Interest
Coverage Ratio of 1.1: 1.0 for (a) the period of two consecutive fiscal quarters
ending June 30, 1998; (b) the period of the three consecutive fiscal quarters
ending September 30, 1998; and (c) each period of four consecutive fiscal
quarters ending December 31, 1998 and thereafter.
9.24 Use of Proceeds. The Borrower shall not, and shall not suffer or
permit any Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise
refinance indebtedness of the Borrower or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act.
9.25 Further Assurances. The Borrower shall execute and deliver, or
cause to be executed and delivered, to the Agent and/or the Lenders such
documents and agreements, and shall take or cause to be taken such actions, as
the Agent or any Lender may, from time to time, reasonably request to maintain,
protect, preserve, establish and perfect the Agent's Liens on the Collateral.
<PAGE>
ARTICLE 10
CONDITIONS OF LENDING
10.1 Conditions Precedent to Making of Loans on the Closing Date. The
obligation of the Lenders to make the initial Revolving Loans on the Closing
Date, and the obligation of the Agent to cause to be issued or provide Credit
Support for any Letter of Credit on the Closing Date and the obligation of the
Lenders to participate in Letters of Credit issued on the Closing Date or in
Credit Support for any Letters of Credit, are subject to the following
conditions precedent having been satisfied in a manner satisfactory to the Agent
and each Lender:
(a) This Agreement and the other Loan Documents have been
executed by each party thereto and the Borrower shall have performed and
complied with all covenants, agreements and conditions contained herein and the
other Loan Documents which are required to be performed or complied with by the
Borrower before or on such Closing Date.
(b) Upon making the Revolving Loans on the Closing Date and
with all its obligations current, the Borrower would have Availability in an
amount no less than $50,000,000.
(c) All representations and warranties made hereunder and in
the other Loan Documents shall be true and correct in all material respects as
of the Closing Date as if made on such date (except representations and
warranties which are made as of a specified date shall only be required to be
true and correct in all material respects as of such specified date).
(d) No Default or Event of Default shall exist on the Closing
Date, or would exist after giving effect to the Loans to be made on such date.
(e) The Agent and the Lenders shall have received such
opinions of counsel for the Borrower and its Subsidiaries as the Agent or any
Lender shall request, each such opinion to be in a form, scope, and substance
satisfactory to the Agent, the Lenders, and their respective counsel.
(f) The Agent shall have received:
(i) duly executed copies of proper financing
statements, suitable for filing under the UCC of all jurisdictions that the
Agent may deem necessary or desirable in order to perfect the Agent's Lien; and
(ii)[Intentionally Omitted]
(iii) Certified copies of resolutions of the Board
of Directors of the Borrower approving (A) the execution and delivery of the
Loan Documents to which the Borrower is a party, (B) the performance of the
Obligations incurred by the Borrower under Loan Documents to which it is a
party, and (C) the consummation of the transactions contemplated by the Loan
Documents;
<PAGE>
(iv)A certificate of the Secretary or an Assistant
Secretary of the Borrower certifying the names and true signatures of the
officers of the Borrower, authorized to sign the Loan Documents;
(v) A copy of the Certificate of Incorporation
of the Borrower, certified by the Secretary of State of the State of
incorporation as of a recent date;
(vi)A copy of the Bylaws of the Borrower, certified
by the Secretary or an Assistant Secretary of the Borrower, as of the date of
this Agreement as being accurate and complete;
(vii) A Certificate of the Secretary of State of
the State of incorporation for the Borrower certifying that the Borrower is in
good standing as of a recent date; and
(viii) A pro forma balance sheet of the Borrower
dated as of April 30, 1998 (which balance sheet shall reflect no material
adverse changes from the Borrower's most recent pro forma balance sheet
previously delivered to the Agent).
(g) There shall have occurred no material adverse change (as
determined by the Agent in its reasonable discretion) in (i) the assets, books
and records of the Borrower since June 15, 1998; (ii) in the business,
operations, profits of the Borrower since March 31, 1998.
(h) The Agent shall have received a certificate from a
Responsible Officer of the Borrower certifying that the Borrower has materially
met the financial performance projections (taken as a whole) previously provided
to the Agent dated November 13, 1997 (including the revised projections,
provided in May 1998, of Capital Expenditures in the amount of $45,000,000 in
fiscal year 1998).
(i) All documentation relating to the Securitization Facility
that GECC is a party to shall be reasonably satisfactory to the Agent.
(j) Except as previously disclosed by the Borrower to the
Agent or in filings with the Securities and Exchange Commission, there shall
exist no action, suit, investigation, litigation, or proceeding pending or
threatened in any court or before any arbitrator or governmental instrumentality
that in the Agent's reasonable judgment (i) could be expected to have a material
adverse effect on the business, condition (financial or otherwise), operations,
performance, or properties of the Borrower or which could impair Borrower's
ability to perform satisfactorily under this Agreement.
(k) The Agent shall have received copies of all consents or
approvals of any Governmental Authority or other Person which the Agent
reasonably determines is required in connection with the transactions
contemplated by this Agreement.
(l) The Borrower shall have paid all reasonable fees and
expenses of the Agent and the Attorney Costs incurred in connection with any of
<PAGE>
the Loan Documents and the transactions contemplated thereby to the extent
invoiced and to the extent the Borrower is obligated to pay such fees and
expenses under Section 15.7 and pursuant to the Fee Letter.
(m) The Agent shall have received evidence, in form, scope,
and substance, reasonably satisfactory to the Agent, of all insurance coverage
as required by this Agreement.
(n) The Agent and the Lenders shall have had an opportunity,
if they so choose, to examine the books of account and other records and files
of the Borrower and to make copies thereof, and to conduct a pre-closing audit
which shall include, without limitation, verification of Inventory, Accounts,
and Availability, and the results of such examination and audit shall have been
satisfactory to the Agent and the Lenders in all respects.
(o) All proceedings taken in connection with the execution of
this Agreement, all other Loan Documents and all documents and papers relating
thereto shall be satisfactory in form, scope, and substance to the Agent and the
Lenders.
The acceptance by the Borrower of any Loans made on the Closing Date
shall be deemed to be a representation and warranty made by the Borrower to the
effect that all of the conditions precedent to the making of such Loans set
forth in Section 10.2 have been satisfied, with the same effect as delivery to
the Agent and the Lenders of a certificate signed by a Responsible Officer of
the Borrower, dated the Closing Date, to such effect.
Execution and delivery to the Agent by a Lender of a counterpart of
this Agreement shall be deemed confirmation by such Lender that (i) all
conditions precedent in this Section 10.1 have been fulfilled to the
satisfaction of such Lender and (ii) the decision of such Lender to execute and
deliver to the Agent an executed counterpart of this Agreement was made by such
Lender independently and without reliance on the Agent or any other Lender as to
the satisfaction of any condition precedent set forth in this Section 10.1.
10.2 Conditions Precedent to Each Loan. The obligation of the Lenders
to make each Loan, including the initial Revolving Loans on the Closing Date,
and the obligation of the Agent to take reasonable steps to cause to be issued
or to provide Credit Support for any Letter of Credit and the obligation of the
Lenders to participate in Letters of Credit or Credit Support for Letters of
Credit, shall be subject to the further conditions precedent that on and as of
the date of any such extension of credit:
(a) the following statements shall be true, and the acceptance
by the Borrower of any extension of credit shall be deemed to be a statement to
the effect set forth in clauses (i) and (ii), with the same effect as the
delivery to the Agent and the Lenders of a certificate signed by a Responsible
Officer, dated the date of such extension of credit, stating that:
(i) The representations and warranties contained in
this Agreement and the other Loan Documents are correct in all material respects
on and as of the date of such extension of credit as though made on and as of
such date, other than any such representation or warranty which relates to a
specified prior date and except to the extent the Agent and the Lenders have
been notified by the Borrower that any representation or warranty is not correct
and the Majority Lenders have explicitly waived in writing compliance with such
representation or warranty; and
<PAGE>
(ii)No event has occurred and is continuing, or would
result from such extension of credit, which constitutes a Default or an Event of
Default; and
(b) without limiting Section 10.1(b), the amount of the
Availability shall be sufficient to make such Revolving Loan without exceeding
the Availability, provided, however, that the foregoing conditions precedent are
not conditions to each Lender participating in or reimbursing BABC or the Agent
for such Lenders' Pro Rata Share of any BABC Loan or Agent Advance or Revolving
Loan as provided in Sections 2.2(h), (i) and (j) and Section 2.3(e)(2).
ARTICLE 11
DEFAULT; REMEDIES
11.1 Events of Default. It shall constitute an event of default ("Event
of Default") if any one or more of the following shall occur for any reason:
(a) any failure to pay the principal of the Loans when due or
interest on any of the Obligations within one Business Day of the date when due,
whether upon demand or otherwise;
(b) any representation or warranty made or deemed made by the
Borrower in this Agreement or by the Borrower in any of the other Loan
Documents, any Financial Statement, or any certificate furnished by the Borrower
or the Parent at any time to the Agent or any Lender shall prove to be untrue in
any material respect as of the date on which made, deemed made, or furnished;
(c) any default shall occur in the observance or performance
by the Borrower of any of the covenants and agreements contained in this
Agreement and such default shall continue for thirty (30) days after the
Borrower has been notified by the Agent (either written or oral) of the
occurrence of such default (except that (i) a three-day period shall apply to a
default with respect to Section 6.7; (ii) a five-day period shall apply to a
default with respect to Sections 6.6(a), 6.10 and 7.2 (other than (f), (g) and
(h) thereof); (ii) a ten-day period shall apply to a default with respect to
Sections 6.2, 6.3 or 7.3; and (iii) no thirty-day or other period shall apply to
a default with respect to Sections 6.4, 6.9, 9.2 (as to the Borrower), 9.5
(other than insurance unrelated to the Collateral), 9.9 through and including
9.17 and 9.21 through and including 9.24), any other Loan Documents, or any
other agreement entered into at any time to which the Borrower, the Parent, or
any of Parent's other Subsidiaries and the Agent or any Lender are party, or if
any such agreement or document shall terminate (other than in accordance with
its terms or the terms hereof or with the written consent of the Agent and the
Majority Lenders) or become void or unenforceable other than as a result of a
change in applicable law or any action or inaction by the Agent or the Lender,
without the written consent of the Agent and the Majority Lenders;
<PAGE>
(d) default shall occur with respect to any Debt (other than
the Obligations) in an outstanding principal amount which exceeds $10,000,000,
or under any agreement or instrument under or pursuant to which any such Debt
may have been issued, created, assumed, or guaranteed by the Borrower, the
Parent, or any of the Borrower's Significant Subsidiaries, and such default
shall continue for more than the period of grace, if any, therein specified, if
the effect thereof (with or without the giving of notice or further lapse of
time or both) is to accelerate, or to permit the holders of any such Debt to
accelerate, the maturity of any such Debt; or any such Debt shall be declared
due and payable or be required to be prepaid (other than by a required
prepayment) prior to the stated maturity thereof;
(e) the Borrower, the Parent, or any of Borrower's Significant
Subsidiaries shall (i) file a voluntary petition in bankruptcy or file a
voluntary petition or an answer or otherwise commence any action or proceeding
seeking reorganization, arrangement or readjustment of its debts or for any
other relief under the federal Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency act or law, state or federal, now or hereafter
existing, or consent to, approve of, or acquiesce in, any such petition, action
or proceeding; (ii) apply for or acquiesce in the appointment of a receiver,
assignee, liquidator, sequestrator, custodian, monitor, trustee or similar
officer for it or for all or any part of its property; (iii) make an assignment
for the benefit of creditors; or (iv) be unable generally to pay its debts as
they become due;
(f) an involuntary petition or proposal shall be filed or an
action or proceeding otherwise commenced seeking reorganization, arrangement,
consolidation or readjustment of the debts of the Borrower, the Parent, or any
of Borrower's Significant Subsidiaries or for any other relief under the federal
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act or
law, state or federal, now or hereafter existing and either (i) such petition,
proposal, action or proceeding shall not have been dismissed within a period of
sixty (60) days after its commencement or (ii) an order for relief against the
Borrower, the Parent, or such other Subsidiary shall have been entered in such
proceeding;
(g) a receiver, assignee, liquidator, sequestrator, custodian,
monitor, trustee or similar officer for the Borrower, the Parent, or any of
Borrower's Significant Subsidiaries or for all or any part of its property shall
be appointed or a warrant of attachment, execution or similar process shall be
issued against any part of the property of the Borrower, the Parent, or any of
Borrower's Significant Subsidiaries;
(h) the Borrower, the Parent, or any of Borrower's Significant
Subsidiaries shall file a certificate of dissolution under applicable state law
or shall be liquidated, dissolved or wound-up or shall commence or have
commenced against it any action or proceeding for dissolution, winding-up or
liquidation, or shall take any corporate action in furtherance thereof;
(i) [Intentionally omitted];
(j) one or more judgments or orders for the payment of money
aggregating in excess of $5,000,000, which amount shall not be fully covered by
insurance, shall be rendered against the Borrower, the Parent, or any of
<PAGE>
Borrower's Significant Subsidiaries and such judgments shall be final and
non-appealable or shall not be vacated, discharged, or stayed or bonded pending
appeal for any period of 60 consecutive days;
(k) any loss, theft, damage or destruction of any item or
items of Collateral or other property of the Borrower occurs which is not
covered by insurance and will have a Material Adverse Effect;
(l) there is filed against the Borrower or the Parent any
criminal action, suit or proceeding under any federal or state racketeering
statute (including, without limitation, the Racketeer Influenced and Corrupt
Organization Act of 1970), which action, suit or proceeding (1) is not dismissed
within one hundred twenty (120) days, and (2) could reasonably be expected to
result in the confiscation or forfeiture of any material portion of the
Collateral;
(m) for any reason other than the failure of the Agent to take
any action available to it to maintain perfection of the Agent's Liens, pursuant
to the Loan Documents, any Loan Document ceases to be in full force and effect
or any Lien with respect to any material portion of the Collateral intended to
be secured thereby ceases to be, or is not, valid, perfected and prior to all
other Liens (other than the Liens listed in clauses (a), (d), (g) and (o) of the
definition of Permitted Liens) or is terminated, revoked or declared void;
(n) an ERISA Event shall occur with respect to a Pension Plan
or Multi-employer Plan which has resulted or could reasonably be expected to
result in liability of the Borrower under Title IV of ERISA to the Pension Plan,
Multi-employer Plan or the PBGC in an aggregate amount in excess of $5,000,000 ;
(ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans
at any time exceeds $2,000,000 ; or (iii) the Borrower or any ERISA Affiliate
shall fail to pay when due, after the expiration of any applicable grace period,
any installment payment with respect to its withdrawal liability under Section
4201 of ERISA under a Multi-employer Plan in an aggregate amount in excess of
$2,000,000 ; or
(o) a Facility Termination Date (as defined in the
Intercreditor Agreement) occurs with respect to Securitization Facility; or
(p) there occurs a Change of Control.
11.2 Remedies. (a) If an Event of Default exists, the Agent may, in its
discretion, and shall, at the direction of the Majority Lenders, do one or more
of the following at any time or times and in any order, without notice to or
demand on the Borrower: (i) reduce the Maximum Revolver Amount, or the advance
rates against Eligible Accounts and/or Eligible Inventory used in computing the
Availability, or reduce one or more of the other elements used in computing the
Availability; (ii) restrict the amount of or refuse to make Revolving Loans; and
(iii) restrict or refuse to arrange for or provide Letters of Credit or Credit
<PAGE>
Support. If an Event of Default exists and is continuing, the Agent shall, at
the direction of the Majority Lenders, do one or more of the following, in
addition to the actions described in the preceding sentence, at any time or
times and in any order, without notice to or demand on the Borrower: (a)
terminate the Commitments and this Agreement; (b) declare any or all Obligations
to be immediately due and payable; provided, however, that upon the occurrence
of any Event of Default with respect to the Borrower described in Sections
11.1(e), 11.1(g), or 11.1(h), the Commitments shall automatically and
immediately expire and all Obligations shall automatically become immediately
due and payable without notice or demand of any kind; and (c) pursue its other
rights and remedies under the Loan Documents and applicable law.
(b) If an Event of Default has occurred and is continuing: (i)
the Agent shall have for the benefit of the Lenders, in addition to all other
rights of the Agent and the Lenders, the rights and remedies of a secured party
under the UCC; (ii) the Agent may, at any time, take possession of the
Collateral and keep it on the Borrower's premises, at no cost to the Agent or
any Lender, or remove any part of it to such other place or places as the Agent
may desire, or the Borrower shall, upon the Agent's demand, at the Borrower's
cost, assemble the Collateral and make it available to the Agent at a place
reasonably convenient to the Agent; and (iii) the Agent may sell and deliver any
Collateral at public or private sales, for cash, upon credit or otherwise, at
such prices and upon such terms as the Agent deems advisable, in its sole
discretion, and may, if the Agent deems it reasonable, postpone or adjourn any
sale of the Collateral by an announcement at the time and place of sale or of
such postponed or adjourned sale without giving a new notice of sale. Without in
any way requiring notice to be given in the following manner, the Borrower
agrees that any notice by the Agent of sale, disposition or other intended
action hereunder or in connection herewith, whether required by the UCC or
otherwise, shall constitute reasonable notice to the Borrower if such notice is
mailed by registered or certified mail, return receipt requested, postage
prepaid, or is delivered personally against receipt, at least ten (10) Business
Days prior to such action to the Borrower's address specified in or pursuant to
Section 15.8. If any Collateral is sold on terms other than payment in full at
the time of sale, no credit shall be given against the Obligations until the
Agent or the Lenders receive payment, and if the buyer defaults in payment, the
Agent may resell the Collateral without further notice to the Borrower. In the
event the Agent seeks to take possession of all or any portion of the Collateral
by judicial process, the Borrower irrevocably waives: (a) the posting of any
bond, surety or security with respect thereto which might otherwise be required;
(b) any demand for possession prior to the commencement of any suit or action to
recover the Collateral; and (c) any requirement that the Agent retain possession
and not dispose of any Collateral until after trial or final judgment. The
Borrower agrees that the Agent has no obligation to preserve rights to the
Collateral or marshal any Collateral for the benefit of any Person. The Agent is
hereby granted a license or other right to use, without charge, the Borrower's
labels, patents, copyrights, name, trade secrets, trade names, trademarks, and
advertising matter, or any similar property, in completing production of,
advertising or selling any Collateral, and the Borrower's rights under all
licenses and all franchise agreements shall inure to the Agent's benefit for
such purpose. The proceeds of sale shall be applied first to all expenses of
sale, including attorneys' fees, and then to the Obligations in whatever order
the Agent elects. The Agent will return any excess to the Borrower and the
Borrower shall remain liable for any deficiency.
(c) If an Event of Default occurs, the Borrower hereby waives
all rights to notice and hearing prior to the exercise by the Agent of the
Agent's rights to repossess the Collateral without judicial process or to
replevy, attach or levy upon the Collateral without notice or hearing.
<PAGE>
ARTICLE 12
TERM AND TERMINATION
12.1 Term and Termination. The term of this Agreement shall end on the
Stated Termination Date. The Agent upon direction from the Majority Lenders may
terminate this Agreement without notice upon the occurrence and during the
continuance of an Event of Default. Upon the effective date of termination of
this Agreement for any reason whatsoever, all Obligations (including, without
limitation, all unpaid principal, accrued interest and, if applicable, any
amounts payable pursuant to Section 5.4) shall become immediately due and
payable and the Borrower shall immediately arrange for the cancellation of
Letters of Credit then outstanding. Notwithstanding the termination of this
Agreement, until all Obligations are indefeasibly paid and performed in full in
cash or cash equivalents acceptable to the Agent, the Borrower shall remain
bound by the terms of this Agreement and shall not be relieved of any of its
Obligations hereunder, and the Agent and the Lenders shall retain all their
rights and remedies hereunder (including, without limitation, the Agent's Liens
in and all rights and remedies with respect to all then existing and
after-arising Collateral).
ARTICLE 13
AMENDMENTS; WAIVER; PARTICIPATIONS; ASSIGNMENTS; SUCCESSORS
13.1 No Waivers Cumulative Remedies. No failure by the Agent or any
Lender to exercise any right, remedy, or option under this Agreement or any
present or future supplement thereto, or in any other agreement between or among
the Borrower and the Agent and/or any Lender, or delay by the Agent or any
Lender in exercising the same, will not operate as a waiver thereof. No waiver
by the Agent or any Lender will be effective unless it is in writing, and then
only to the extent specifically stated. No waiver by the Agent or the Lenders on
any occasion shall affect or diminish the Agent's and each Lender's rights
thereafter to require strict performance by the Borrower of any provision of
this Agreement (except to the extent waived). The Agent's and each Lender's
rights under this Agreement will be cumulative and not exclusive of any other
right or remedy which the Agent or any Lender may have.
13.2 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Borrower therefrom, shall be effective unless the same shall be
in writing and signed by the Majority Lenders (or by the Agent at the written
request of the Majority Lenders) and the Borrower and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver, amendment, or
consent shall, unless in writing and signed by all the Lenders and the Borrower
and acknowledged by the Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or any fees or other amounts payable hereunder or under any
other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Lenders
or any of them to take any action hereunder;
(e) increase any of the percentages set forth in the
definition of Borrowing Base;
(f) amend this Section or any provision of the Agreement
providing for consent or other action by all Lenders;
(g) release Collateral other than as permitted by Section
14.11;
(h) change the definitions of "Majority Lenders" or "Required
Lenders";
(i) increase the Maximum Revolver Amount and Unused Letter of
Credit Subfacility.
and, provided further, that no amendment, waiver or consent shall, unless in
writing and signed by the Agent, affect the rights or duties of the Agent under
this Agreement or any other Loan Document.
13.3 Assignments; Participations.
(a) Any Lender may, with Borrower's consent, which consent
shall not be unreasonably withheld (and which consent shall not be required upon
the occurrence or during the continuance of an Event of Default, it being
understood that the refusal to grant such consent shall be reasonable if the
contemplated assignment could reasonably be expected to result in or increase
the risk to the Borrower of the payment of amounts to such assignee pursuant to
Article V), and with the written consent of the Agent, assign and delegate to
one or more assignees (provided that no written consent of the Borrower or Agent
shall be required in connection with any assignment and delegation by a United
States Lender to a United States Affiliate of such Lender) (each an "Assignee")
all, or any ratable part of all, of the Loans, the Commitments and the other
rights and obligations of such Lender hereunder, in a minimum amount of
$10,000,000 but any assignment of less than the entire amount of such Lender's
Commitment shall not cause such Lender's remaining Commitment to be less than
$10,000,000; provided, however, that the Borrower and the Agent may continue to
deal solely and directly with such Lender in connection with the interest so
assigned to an Assignee, and such assignment shall be treated as a participation
as described in Section 13.3(e) hereof, until (i) written notice of such
assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Borrower
<PAGE>
and the Agent by such Lender and the Assignee; (ii) such Lender and its Assignee
shall have delivered to the Borrower and the Agent an Assignment and Acceptance
in the form of Exhibit E ("Assignment and Acceptance") (the date upon which such
Assignment and Acceptance has been delivered hereinafter referred to as the
"Assignment and Acceptance Date") and (iii) the assignor Lender or Assignee has
paid to the Agent a processing fee in the amount of $3,000. The Borrower shall
cooperate with the Agent with respect to any assignment or participation under
this Section 13.3, including, upon the reasonable request of the Agent, meeting
with any prospective Lender.
(b) From and after the date that the Agent notifies the
assignor Lender that it has received an executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations,
including, but not limited to, the obligation to participate in Letters of
Credit and Credit Support have been assigned to it pursuant to such Assignment
and Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assignor Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto).
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto; (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other Loan Document furnished pursuant
hereto; (3) such Assignee confirms that it has received a copy of this
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (4) such Assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (5) such Assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Agent by the terms hereof, together with such powers as
are reasonably incidental thereto; and (6) such Assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(d) After the Borrower's receipt of notice by the Agent that
it has received from an Assignee an executed Assignment and Acceptance and the
payment of the processing fee, and effective upon such Assignee's making its
processing fee payment under the Assignment and Acceptance, this Agreement shall
<PAGE>
be deemed to be amended to the extent, but only to the extent, necessary to
reflect the addition of the Assignee and the resulting adjustment of the
Commitments arising therefrom. The Commitment allocated to each Assignee shall
reduce such Commitments of the assigning Lender pro tanto.
(e) Any Lender may at any time sell to one or more commercial
banks, financial institutions, or other Persons not Affiliates of the Borrower
(a "Participant") participating interests in any Loans, the Commitment of that
Lender and the other interests of that Lender (the "originating Lender")
hereunder and under the other Loan Documents; provided, however, that (i) the
originating Lender's obligations under this Agreement shall remain unchanged,
(ii) the originating Lender shall remain solely responsible for the performance
of such obligations, (iii) the Borrower and the Agent shall continue to deal
solely and directly with the originating Lender in connection with the
originating Lender's rights and obligations under this Agreement and the other
Loan Documents, and (iv) no Lender shall transfer or grant any participating
interest under which the Participant has rights to approve any amendment to, or
any consent or waiver with respect to, this Agreement or any other Loan
Document, and all amounts payable by the Borrower hereunder shall be determined
as if such Lender had not sold such participation; except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
and subject to the same limitation as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement.
(f) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.
ARTICLE 14
THE AGENT
14.1 Appointment and Authorization. Each Lender hereby designates and
appoints BankAmerica Business Credit, Inc. as its Agent under this Agreement and
the other Loan Documents and each Lender hereby irrevocably authorizes the Agent
to take such action on its behalf under the provisions of this Agreement and
each other Loan Document and to exercise such powers and perform such duties as
are expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto. The
Agent agrees to act as such on the express conditions contained in this Article
14. The provisions of this Article 14 are solely for the benefit of the Agent
and the Lenders and the Borrower shall have no rights as a third party
beneficiary of any of the provisions contained herein. Notwithstanding any
provision to the contrary contained elsewhere in this Agreement or in any other
Loan Document, the Agent shall not have any duties or responsibilities, except
<PAGE>
those expressly set forth herein, nor shall the Agent have or be deemed to have
any fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
Without limiting the generality of the foregoing sentence, the use of the term
"agent" in this Agreement with reference to the Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties. Except as expressly
otherwise provided in this Agreement, the Agent shall have and may use its sole
discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions which the
Agent is expressly entitled to take or assert under this Agreement and the other
Loan Documents, including, without limitation, (a) the determination of the
applicability of ineligibility criteria with respect to the calculation of the
Availability, (b) the making of Agent Advances pursuant to Section 2.2(i), and
(c) the exercise of remedies pursuant to Section 11.2, and any action so taken
or not taken shall be deemed consented to by the Lenders.
14.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.
14.3 Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by the Borrower or any Subsidiary or
Affiliate of the Borrower, or any officer thereof, contained in this Agreement
or in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Borrower or any other party
to any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Borrower or any of the
Borrower's Subsidiaries or Affiliates.
14.4 Reliance by Agent. (a) The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Borrower), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
<PAGE>
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Lenders as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the Majority Lenders and such request and any action taken
or failure to act pursuant thereto shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions
specified in Section 10.1, each Lender that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Lender for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Lender.
14.5 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default, except with
respect to defaults in the payment of principal, interest and fees required to
be paid to the Agent for the account of the Lenders, unless the Agent shall have
received written notice from a Lender or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default." The Agent will notify the Lenders of its
receipt of any such notice. The Agent shall take such action with respect to
such Default or Event of Default as may be requested by the Majority Lenders in
accordance with Section 11; provided, however, that unless and until the Agent
has received any such request, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable.
14.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Borrower and its Affiliates, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Borrower and its Affiliates, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Borrower. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Borrower and its Affiliates. Except for notices, reports
and other documents expressly herein required to be furnished to the Lenders by
the Agent, the Agent shall not have any duty or responsibility to provide any
<PAGE>
Lender with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of the
Borrower and its Affiliates which may come into the possession of any of the
Agent-Related Persons.
14.7 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Borrower and without limiting the obligation of the Borrower to do so), pro
rata, from and against any and all Indemnified Liabilities as such term is
defined in Section 15.11; provided, however, that no Lender shall be liable for
the payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse the
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that the Agent is not reimbursed for such expenses by or on behalf
of the Borrower. The undertaking in this Section shall survive the payment of
all Obligations hereunder and the resignation or replacement of the Agent.
14.8 Agent in Individual Capacity. BABC and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Borrower and its
Subsidiaries and Affiliates as though BABC were not the Agent hereunder and
without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, BABC or its Affiliates may receive information
regarding the Borrower or its Affiliates (including information that may be
subject to confidentiality obligations in favor of the Borrower or such
Subsidiary) and acknowledge that the Agent shall be under no obligation to
provide such information to them. With respect to its Loans, BABC shall have the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not the Agent, and the terms "Lender" and "Lenders"
include BABC in its individual capacity.
14.9 Successor Agent. The Agent may resign as Agent upon 30 days'
notice to the Lenders and the Borrower. In the event BABC sells all of its
Commitments and Revolving Loans as part of a sale, transfer or other disposition
by BABC of substantially all of its loan portfolio, BABC shall resign as Agent
and such purchaser or transferee shall become the successor Agent hereunder. If
the Agent resigns under this Agreement, subject to the proviso in the preceding
sentence, the Majority Lenders, shall with the consent of the Borrower which
consent shall not unreasonably be withheld, appoint from among the Lenders a
successor agent for the Lenders. If no successor agent is appointed prior to the
effective date of the resignation of the Agent, the Agent may appoint, after
consulting with the Lenders and with the consent of the Borrower which consent
shall not unreasonably be withheld, a successor agent from among the Lenders.
Upon the acceptance of its appointment as successor agent hereunder, such
successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
<PAGE>
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 14 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement. If no successor agent
has accepted appointment as Agent by the date which is 30 days following a
retiring Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of the Agent hereunder until such time, if any, as the Majority Lenders
appoint a successor agent as provided for above.
14.10 Withholding Tax. (a) If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Lender agrees with and in favor of the Agent and the
Borrower, to deliver to the Agent and the Borrower:
(i) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 (or applicable successor form) (i) on the
Closing date, or the Assignment and Acceptance Date in the case of an Assignee
and (ii) before the payment of any interest in each third succeeding calendar
year during which interest may be paid under this Agreement;
(ii)if such Lender claims that interest paid under
this Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Lender, two
properly completed and executed copies of IRS Form 4224 (or applicable successor
form) (i) on the Closing Date, or the Assignment and Acceptance Date in the case
of an Assignee and (ii) in each succeeding taxable year of such Lender during
which interest may be paid under this Agreement, and IRS Form W-9 (or applicable
successor form); and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Lender agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 (or
applicable successor form) and such Lender sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Borrower to such Lender, such Lender agrees to notify the Agent and the Borrower
of the percentage amount in which it is no longer the beneficial owner of
Obligations of the Borrower to such Lender and such transfer shall be treated
either as an assignment or a participation, as the case may be, pursuant to
Section 13.3 hereof. To the extent of such percentage amount, the Agent will
treat such Lender's IRS Form 1001 (or applicable successor form) as no longer
valid.
(c) If any Lender is entitled to a reduction in the applicable
withholding tax, the Agent or the Borrower, as the case may be (but only based
<PAGE>
on Agent's determination that such Lender is entitled to such deduction), may
withhold from any interest payment to such Lender an amount equivalent to the
applicable withholding tax after taking into account such reduction. If the
forms or other documentation required by subsection (a) of this Section are not
delivered to the Agent or the Borrower, then the Agent or the Borrower, as the
case may be, may withhold from any interest payment to such Lender not providing
such forms or other documentation an amount equivalent to the applicable
withholding tax until such forms are delivered.
(d) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent or the
Borrower did not properly withhold tax from amounts paid to or for the account
of any Lender (because the appropriate form was not delivered, was not properly
executed, or because such Lender failed to notify either the Agent or the
Borrower of a change in circumstances which rendered the exemption from, or
reduction of, withholding tax ineffective, or (as to the Agent) for any other
reason) such Lender shall indemnify the Agent or the Borrower, as the case may
be, fully for all amounts paid, directly or indirectly, by the Agent or the
Borrower, as the case may be, as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Agent or the Borrower under this Section, together with all costs
and expenses (including Attorney Costs and any similar costs incurred by the
Borrower). The obligation of the Lenders under this subsection shall survive the
payment of all Obligations and the resignation or replacement of the Agent.
Notwithstanding the foregoing, the Lenders shall not be required to indemnify
the Borrower for amounts that the Borrower is required to pay or indemnify the
Lenders pursuant to Section 5.1.
14.11 Collateral Matters.
(a) The Lenders hereby irrevocably authorize the Agent, at its
option and in its sole discretion, to release any Agent's Lien upon any
Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by Borrower of all Loans and reimbursement obligations in
respect of Letters of Credit and Credit Support, and the termination of all
outstanding Letters of Credit (whether or not any of such obligations are due)
and all other Obligations; (ii) constituting property being sold or disposed of;
or (iii) constituting property in which the Borrower owned no interest at the
time the Lien was granted or at any time thereafter. Except as provided above,
the Agent will not release any of the Agent's Liens without the prior written
authorization of the Lenders; provided that the Agent may, in its discretion,
release the Agent's Liens on Collateral valued in the aggregate not in excess of
$25,000,000 in any one year period without the prior written authorization of
the Lenders. Upon request by the Agent or the Borrower at any time, the Lenders
will confirm in writing the Agent's authority to release any Agent's Liens upon
particular types or items of Collateral pursuant to this Section 14.11.
(b) Upon receipt by the Agent of any authorization required
pursuant to Section 14.11(a) from the Lenders of the Agent's authority to
release any Agent's Liens upon particular types or items of Collateral, and upon
at least five (5) Business Days' prior written request by the Borrower, the
Agent shall (and is hereby irrevocably authorized by the Lenders to) execute
such documents as may be necessary to evidence the release of the Agent's Liens
upon such Collateral; provided, however, that (i) the Agent shall not be
<PAGE>
required to execute any such document on terms which, in the Agent's opinion,
would expose the Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse or warranty,
and (ii) such release shall not in any manner discharge, affect or impair the
Obligations or any Liens of the Agent (other than those expressly being
released) upon (or obligations of the Borrower in respect of) all interests
retained by the Borrower (other than Excluded Assets).
(c) The Agent shall have no obligation whatsoever to any of
the Lenders to assure that the Collateral exists or is owned by the Borrower or
is cared for, protected or insured or has been encumbered, or that the Agent's
Liens have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to the Agent pursuant to any of the Loan Documents, it
being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, the Agent may act in any manner it may deem
appropriate, in its sole discretion given the Agent's own interest in the
Collateral in its capacity as one of the Lenders and that the Agent shall have
no other duty or liability whatsoever to any Lender as to any of the foregoing.
14.12 Restrictions on Actions by Lenders; Sharing of Payments. (a) Each
of the Lenders agrees that it shall not, without the express consent of all
Lenders, and that it shall, to the extent it is lawfully entitled to do so, upon
the request of all Lenders, set off against the Obligations, any amounts owing
by such Lender to the Borrower or any accounts of the Borrower now or hereafter
maintained with such Lender. Each of the Lenders further agrees that it shall
not, unless specifically requested to do so by the Agent, take or cause to be
taken any action to enforce its rights under this Agreement or against the
Borrower, including, without limitation, the commencement of any legal or
equitable proceedings, to foreclose any Lien on, or otherwise enforce any
security interest in, any of the Collateral.
(b) If at any time or times any Lender shall receive (i) by
payment, foreclosure, setoff or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations of the Borrower to such Lender arising
under, or relating to, this Agreement or the other Loan Documents, except for
any such proceeds or payments received by such Lender from the Agent pursuant to
the terms of this Agreement, or (ii) payments from the Agent in excess of such
Lender's ratable portion of all such distributions by the Agent, such Lender
shall promptly (1) turn the same over to the Agent, in kind, and with such
endorsements as may be required to negotiate the same to the Agent, or in same
day funds, as applicable, for the account of all of the Lenders and for
application to the Obligations in accordance with the applicable provisions of
this Agreement, or (2) purchase, without recourse or warranty, an undivided
interest and participation in the Obligations owed to the other Lenders so that
such excess payment received shall be applied ratably as among the Lenders in
accordance with their Pro Rata Shares; provided, however, that if all or part of
such excess payment received by the purchasing party is thereafter recovered
from it, those purchases of participations shall be rescinded in whole or in
part, as applicable, and the applicable portion of the purchase price paid
therefor shall be returned to such purchasing party, but without interest except
to the extent that such purchasing party is required to pay interest in
connection with the recovery of the excess payment.
<PAGE>
14.13 Agency for Perfection. Each Lender hereby appoints each other
Lender as agent for the purpose of perfecting the Lenders' security interest in
assets which, in accordance with Article 9 of the UCC can be perfected only by
possession. Should any Lender (other than the Agent) obtain possession of any
such Collateral, such Lender shall notify the Agent thereof, and, promptly upon
the Agent's request therefor shall deliver such Collateral to the Agent or in
accordance with the Agent's instructions.
14.14 Payments by Agent to Lenders. All payments to be made by the
Agent to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds to their respective accounts set forth on the
signature pages hereof, or pursuant to such other wire transfer instructions as
each party may designate for itself by written notice to the Agent. Concurrently
with each such payment, the Agent shall identify whether such payment (or any
portion thereof) represents principal, premium or interest on the Revolving
Loans, or otherwise.
14.15 Concerning the Collateral and the Related Loan Documents. Each
Lender authorizes and directs the Agent to enter into this Agreement and the
other Loan Documents relating to the Collateral, for the ratable benefit of the
Agent and the Lenders. Each Lender agrees that any action taken by the Agent,
Majority Lenders or Required Lenders, as applicable, in accordance with the
terms of this Agreement or the other Loan Documents relating to the Collateral,
and the exercise by the Agent, the Majority Lenders, or the Required Lenders, as
applicable, of their respective powers set forth therein or herein, together
with such other powers that are reasonably incidental thereto, shall be binding
upon all of the Lenders.
14.16 Field Audit and Examination Reports; Disclaimer by Lenders. By
signing this Agreement, each Lender:
(a) is deemed to have requested that the Agent furnish such
Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and collectively, "Reports") prepared by the
Agent;
(b) expressly agrees and acknowledges that neither BABC nor
the Agent (i) makes any representation or warranty as to the accuracy of any
Report, or (ii) shall be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that the Agent or other party performing
any audit or examination will inspect only specific information regarding the
Borrower and will rely significantly upon the Borrower's books and records, as
well as on representations of the Borrower's personnel;
(d) agrees to keep all Reports confidential and strictly for
its internal use in connection with this Agreement and the transactions
contemplated hereunder, and not to distribute except to its participants, or use
any Report in any other manner; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold the
Agent and any such other Lender preparing a Report harmless from any action the
<PAGE>
indemnifying Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to the Borrower, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of the Borrower; and (ii) to pay and protect, and indemnify,
defend and hold the Agent and any such other Lender preparing a Report harmless
from and against, the claims, actions, proceedings, damages, costs, expenses and
other amounts (including, without limitation attorney costs) incurred by the
Agent and any such other Lender preparing a Report as the direct or indirect
result of any third parties who might obtain all or part of any Report through
the indemnifying Lender.
14.17 Relation Among Lenders. The Lenders are not partners or
co-venturers, and no Lender shall be liable for the acts or omissions of, or
(except as otherwise set forth herein in case of the Agent) authorized to act
for, any other Lender.
ARTICLE 15
MISCELLANEOUS
15.1 Cumulative Remedies; No Prior Recourse to Collateral. The
enumeration herein of the Agent's and each Lender's rights and remedies is not
intended to be exclusive, and such rights and remedies are in addition to and
not by way of limitation of any other rights or remedies that the Agent and the
Lenders may have under the UCC or other applicable law. The Agent and the
Lenders shall have the right, in their sole discretion, to determine which
rights and remedies are to be exercised and in which order. The exercise of one
right or remedy shall not preclude the exercise of any others, all of which
shall be cumulative. The Agent and the Lenders may, without limitation, proceed
directly against the Borrower to collect the Obligations without any prior
recourse to the Collateral. No failure to exercise and no delay in exercising,
on the part of the Agent or any Lender, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege.
15.2 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
15.3 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver. (a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICT OF LAWS PROVISIONS PROVIDED THAT PERFECTION ISSUES WITH
RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE EFFECT TO APPLICABLE CHOICE OR CONFLICT
OF LAW RULES SET FORTH IN ARTICLE 9 OF THE UCC) OF THE STATE OF CALIFORNIA;
PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.
<PAGE>
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF CALIFORNIA OR OF THE UNITED STATES FOR THE CENTRAL DISTRICT OF CALIFORNIA,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE AGENT
AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER, THE AGENT AND
THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO.
NOTWITHSTANDING THE FOREGOING: (1) THE AGENT AND THE LENDERS SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION THE AGENT OR THE LENDERS DEEM NECESSARY OR
APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR THE
OBLIGATIONS AND (2) EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT ANY APPEALS
FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE THOSE JURISDICTIONS.
(c) THE BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO THE BORROWER AT ITS
ADDRESS SET FORTH IN SECTION 15.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S.
MAILS. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT OR THE LENDERS
TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.
(d) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO
THE CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES, ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT INCLUDING ANY CLAIM
BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL AT THE REQUEST OR EITHER PARTY
HERETO BE DETERMINED BY BINDING ARBITRATION. The arbitration shall be conducted
in accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of law provision in this Agreement, and under the
Commercial Rules of the American Arbitration Association ("AAA"). The
arbitrator(s) shall give effect to statutes of limitation in determining any
claim. Any controversy concerning whether an issue is arbitrable shall be
determined by the arbitrator(s). Judgment upon the arbitration award may be
entered in any court having jurisdiction. The institution and maintenance of an
action for judicial relief or pursuant to a provisional or ancillary remedy
shall not constitute a waiver of the right of either party, including the
plaintiff, to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.
<PAGE>
(e) Notwithstanding the provisions of (d) above, no
controversy or claim shall be submitted to arbitration without the consent of
all parties if, at the time of the proposed submission, such controversy or
claim arises from or related to an obligation to the Lender which is secured by
real estate property collateral (exclusive of real estate space lease
assignments). If all the parties do not consent to submission of such a
controversy or claim to arbitration, the controversy or claim shall be
determined as provided in Section 15.3(f).
(f) At the request of either party a controversy or claim
which is not submitted to arbitration as provided and limited in Section 15.3(d)
and (f) shall be determined by judicial reference. If such an election is made,
the parties shall designate to the court a referee or referees selected under
the auspices of the AAA in the same manner as arbitrators are selected in
AAA-sponsored proceedings. The presiding referee of the panel, or the referee if
there is a single referee, shall be an active attorney or retired judge.
Judgment upon the award rendered by such referee or referees shall be entered in
the court in which such proceeding was commenced.
(g) No provision of Sections (d) through (g) shall limit the
right of the Agent or the Lenders to exercise self-help remedies such as setoff,
foreclosure against or sale of any real or personal property collateral or
security, or obtaining provisional or ancillary remedies from a court of
competent jurisdiction before, after, or during the pendency of any arbitration
or other proceeding. The exercise of a remedy does not waive the right of either
party to resort to arbitration or reference. At the Agent's option, foreclosure
under a deed of trust or mortgage may be accomplished either by exercise of
power of sale under the deed of trust or mortgage or by judicial foreclosure.
15.4 WAIVER OF JURY TRIAL. SUBJECT TO THE PROVISIONS OF SECTION
15.3(d), THE BORROWER, THE LENDERS AND THE AGENT EACH WAIVE THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER, THE LENDERS AND THE
AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
<PAGE>
15.5 Survival of Representations and Warranties. All of the Borrower's
representations and warranties contained in this Agreement shall survive the
execution, delivery, and acceptance thereof by the parties, notwithstanding any
investigation by the Agent or the Lenders or their respective agents.
15.6 Other Security and Guaranties. The Agent, may, without notice or
demand and without affecting the Borrower's obligations hereunder, from time to
time: (a) take from any Person other than the Borrower and hold collateral
(other than the Collateral) for the payment of all or any part of the
Obligations and exchange, enforce or release such collateral or any part
thereof; and (b) accept and hold any endorsement or guaranty of payment of all
or any part of the Obligations and release or substitute any such endorser or
guarantor, or any Person who has given any Lien in any other collateral as
security for the payment of all or any part of the Obligations, or any other
Person in any way obligated to pay all or any part of the Obligations.
15.7 Fees and Expenses. The Borrower agrees to pay to the Agent, for
its benefit, on demand, all reasonable costs and expenses that Agent pays or
incurs in connection with the negotiation, preparation, syndication,
consummation, modification, enforcement, and termination of this Agreement or
any of the other Loan Documents, including, without limitation: (a) Attorney
Costs (which shall not exceed $100,000 in the case of the fees of outside
counsel in connection with the negotiation, preparation and consummation of this
Agreement prior to July 3, 1998); (b) costs and expenses (including attorneys'
and paralegals' fees and disbursements which shall include the allocated costs
of Agent's in-house counsel fees and disbursements) for any amendment,
supplement, waiver, consent, or subsequent closing in connection with the Loan
Documents and the transactions contemplated thereby; (c) costs and expenses of
lien and title searches required or advisable in connection with this Agreement;
(d) taxes, fees and other charges for filing financing statements and
continuations, and other actions to perfect, protect, and continue the Agent's
Liens (including costs and expenses paid or incurred by the Agent in connection
with the consummation of Agreement); (e) sums paid or incurred to pay any amount
or take any action required of the Borrower under the Loan Documents that the
Borrower fails to pay or take and the Agent is authorized under this Agreement
to pay or take; (f) costs of appraisals, inspections, and verifications of the
Collateral, including, without limitation, travel, lodging, and meals for
inspections of the Collateral and the Borrower's operations by the Agent plus
the Agent's then customary charge for field examinations and audits and the
preparation of reports thereof (such charge is currently $750 per day (or
portion thereof), plus out of pocket expenses, for each agent or employee of the
Agent with respect to each field examination or audit); (g) reasonably and
customary costs and expenses of forwarding loan proceeds, collecting checks and
other items of payment, and establishing and maintaining Payment Accounts and
lock boxes; (h) costs and expenses of preserving and protecting the Collateral;
and (i) Attorneys Costs paid or incurred to obtain payment of the Obligations,
enforce the Agent's Liens, sell or otherwise realize upon the Collateral, and
otherwise enforce the provisions of the Loan Documents, or to defend any claims
made or threatened against the Agent or any Lender arising out of the
transactions contemplated hereby (including without limitation, preparations for
and consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by the Borrower. All of the foregoing costs and expenses
<PAGE>
shall be charged to the Borrower's Loan Account as Revolving Loans as described
in Section 4.4; provided, that, such costs and expenses (other than such costs
and expenses payable on the Closing Date pursuant to Section 10.1(m) and costs
and expenses described in clauses (e), (g) and (h) above) shall only be charged
to the Borrower's Loan Account if the Borrower fails to pay such costs and
expenses thirty (30) days after the Agent notifies the Borrower that such
amounts are due.
15.8 Notices. Except as otherwise provided herein, all notices, demands
and requests that any party is required or elects to give to any other shall be
in writing, or by a telecommunications device capable of creating a written
record, and any such notice shall become effective (a) upon personal delivery
thereof, including, but not limited to, delivery by overnight mail and courier
service, (b) four (4) days after it shall have been mailed by United States
mail, first class, certified or registered, with postage prepaid, or (c) in the
case of notice by such a telecommunications device, when properly transmitted,
in each case addressed to the party to be notified as follows:
If to the Agent or to BABC:
BankAmerica Business Credit, Inc.
40 East 52nd Street,
New York, New York 10022,
Attention: Division Manager
Telecopy No. (212) 836-5167
with copies to:
Bank of America NT & SA
335 Madison Avenue
New York, New York 10017
Attention: Legal Department
Telecopy No. (212) 503-7350
If to the Borrower:
Merisel Americas, Inc.
200 Continental Boulevard
El Segundo, CA 90245
Attention: Tim Jenson
Telecopy No. (310) 615-1234
or to such other address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
<PAGE>
15.9 Waiver of Notices. Unless otherwise expressly provided herein, the
Borrower waives presentment, protest and notice of demand or dishonor and
protest as to any instrument, notice of intent to accelerate the Obligations and
notice of acceleration of the Obligations, as well as any and all other notices
not specifically required herein to which it might otherwise be entitled. No
notice to or demand on the Borrower which the Agent or any Lender may elect to
give shall entitle the Borrower to any or further notice or demand in the same,
similar or other circumstances.
15.10 Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective representatives, successors, and
assigns of the parties hereto; provided, however, that no interest herein may be
assigned by the Borrower without prior written consent of the Agent and each
Lender, and no interest herein may be assigned by the Lenders except as provided
in Section 13.3 . The rights and benefits of the Agent and the Lenders hereunder
shall, if such Persons so agree, inure to any party acquiring any interest in
the Obligations or any part thereof.
15.11 Indemnity of the Agent and the Lenders by the Borrower.
(a) The Borrower agrees to defend, indemnify and hold the
Agent-Related Persons, and each Lender and each of its respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or replacement of any Lender) be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such Person under or
in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding) related to or arising out of this Agreement, any other
Loan Document, or the Loans or the use of the proceeds thereof, whether or not
any Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities"); provided, that the Borrower shall have no obligation
hereunder to any Indemnified Person with respect to Indemnified Liabilities
resulting solely from the gross negligence or willful misconduct of such
Indemnified Person. The agreements in this Section shall survive payment of all
other Obligations.
(b) The Borrower agrees to indemnify, defend and hold harmless
the Agent and the Lenders from any loss or liability directly or indirectly
arising out of the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal or presence of a hazardous substance
relating to the Borrower's operations, business or property. This indemnity will
apply whether the hazardous substance is on, under or about the Borrower's
property or operations or property leased to the Borrower. The indemnity
includes but is not limited to attorneys' fees (including the reasonable
estimate of the allocated cost of in-house counsel and staff). The indemnity
<PAGE>
extends to the Agent and the Lenders, their parents, affiliates, subsidiaries
and all of their directors, officers, employees, agents, successors, attorneys
and assigns. "Hazardous substances" means any substance, material or waste that
is or becomes designated or regulated as "toxic," "hazardous," "pollutant," or
"contaminant" or a similar designation or regulation under any federal, state or
local law (whether under common law, statute, regulation or otherwise) or
judicial or administrative interpretation of such, including without limitation
petroleum or natural gas. This indemnity will survive repayment of all other
Obligations.
15.12 Limitation of Liability. No claim may be made by the Borrower,
any Lender or other Person against the Agent, any Lender, or the affiliates,
directors, officers, officers, employees, or agents of any of them for any
special, indirect, consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions contemplated by this Agreement or any other Loan Document, or
any act, omission or event occurring in connection therewith, and the Borrower
and each Lender hereby waive, release and agree not to sue upon any claim for
such damages, whether or not accrued and whether or not know or suspected to
exist in its favor.
15.13 Final Agreement. This Agreement and the other Loan Documents are
intended by the Borrower, the Agent and the Lenders to be the final, complete,
and exclusive expression of the agreement between them. This Agreement
supersedes any and all prior oral or written agreements relating to the subject
matter hereof. No modification, rescission, waiver, release, or amendment of any
provision of this Agreement or any other Loan Document shall be made, except by
a written agreement signed by the Borrower and a duly authorized officer of each
of the Agent and the requisite Lenders.
15.14 Counterparts. This Agreement may be executed in any number of
counterparts, and by the Agent, each Lender and the Borrower in separate
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement; signature pages may be detached
from multiple separate counterparts and attached to a single counterpart so that
all signature pages are physically attached to the same document.
15.15 Captions. The captions contained in this Agreement are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.
15.16 Right of Setoff. In addition to any rights and remedies of the
Lenders provided by law, if an Event of Default exists or the Loans have been
accelerated, each Lender is authorized at any time and from time to time,
without prior notice to the Borrower, any such notice being waived by the
Borrower to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held by, and other indebtedness at any time owing by, such Lender to or for
the credit or the account of the Borrower against any and all Obligations owing
to such Lender, now or hereafter existing, irrespective of whether or not the
Agent or such Lender shall have made demand under this Agreement or any Loan
Document and although such Obligations may be contingent or unmatured. Each
Lender agrees promptly to notify the Borrower and the Agent after any such
set-off and application made by such Lender; provided, however, that the failure
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to give such notice shall not affect the validity of such set-off and
application. NOTWITHSTANDING THE FOREGOING, NO LENDER SHALL EXERCISE ANY RIGHT
OF SET-OFF, BANKER'S LIEN, OR THE LIKE AGAINST ANY DEPOSIT ACCOUNT OR PROPERTY
OF THE BORROWER HELD OR MAINTAINED BY SUCH LENDER WITHOUT THE PRIOR WRITTEN
CONSENT OF THE AGENT.
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
"BORROWER"
MERISEL AMERICAS, INC.,
a Delaware corporation
/s/Timothy N. Jenson
By: ----------------------------
Timothy N. Jenson
Name: --------------------------
Senior V.P., Finance and Treasurer
Title:--------------------------
"AGENT"
BankAmerica Business Credit,Inc.,as the Agent
/s/Richard Levenson
By: ----------------------------
Richard Levenson
Name: --------------------------
Vice President
Title:--------------------------
"LENDERS"
Commitment: $100,000,000 BankAmerica Business Credit,Inc., as a Lender
/s/Richard Levenson
By: ----------------------------
Richard Levenson
Name: --------------------------
Vice President
Title: -------------------------
