<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
COMMISSION FILE NUMBER: 0-26022
SERENGETI EYEWEAR, INC.
(Exact Name of Small Business Issuer as specified in its Charter)
NEW YORK 65-0665659
(State of incorporation) (I.R.S. Employer Identification No.)
8125 25TH COURT EAST
SARASOTA, FLORIDA 34243
(Address of principal executive offices)
(941) 359-3599
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
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 as of October 31, 1999:
2,384,000 shares of Common Stock, $.001 par value.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.
Serengeti Eyewear, Inc.
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 142,379 $ 87,774
Accounts receivable - trade 4,895,798 7,796,963
Income tax refund receivable -- 358,055
Inventories 14,856,068 12,536,224
Prepaid expenses 623,707 958,603
----------- -----------
Total current assets 20,517,952 21,737,619
Fixed assets - net of accumulated depreciation 1,964,562 2,170,582
Other assets:
Goodwill - net 6,028,306 6,290,314
Patents and trademarks - net 9,792,356 10,258,068
Other assets 152,761 157,261
----------- -----------
Total Other Assets 15,973,423 16,705,643
----------- -----------
Total assets $38,455,937 $40,613,844
----------- -----------
----------- -----------
</TABLE>
2
<PAGE>
Serengeti Eyewear, Inc.
Consolidated Balance Sheets
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Bank overdraft $ 460,925 $ 288,414
Note payable - bank 8,299,687 7,322,704
Accounts payable 8,926,652 10,952,090
Accrued dividends 1,173,000 1,476,000
Accrued expenses 884,855 519,492
Current portion of long-term debt 1,392,293 5,263,448
------------ ------------
Total current liabilities 21,137,412 25,822,148
------------ ------------
Long-term debt 758,590 91,415
------------ ------------
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, $.001 par value,
1,000,000 shares authorized;
25,384 and 23,908 shares
issued and outstanding 23,809,000 22,333,000
Common stock, $.001 par value,
10,000,000 shares authorized;
2,384,000 shares issued and
Outstanding 2,384 2,384
Additional paid in capital 10,586,094 10,586,094
Accumulated deficit (17,837,543) (18,221,197)
------------ ------------
Total stockholders' equity 16,559,935 14,700,281
------------ ------------
Total liabilities and stockholders' equity $ 38,455,937 $ 40,613,844
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
Serengeti Eyewear, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------- ------------------------------------
SEPT. 30, 1999 SEPT. 30, 1998 SEPT. 30, 1999 SEPT. 30, 1998
-------------- -------------- -------------- --------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 6,747,430 $ 10,531,339 $ 30,842,422 $ 34,132,176
Cost of goods sold 3,601,319 6,685,436 17,173,199 22,002,183
------------ ------------ ------------ ------------
Gross Profit 3,146,111 3,845,903 13,669,223 12,129,993
Operating expenses:
Depreciation and amortization 365,279 358,142 1,089,734 1,107,745
Selling Expenses 1,024,923 859,001 2,405,785 4,199,824
General and administrative exp. 2,354,577 1,903,075 7,295,884 7,272,134
------------ ------------ ------------ ------------
Total operating expenses 3,744,779 3,120,218 10,791,403 12,579,703
------------ ------------ ------------ ------------
Income (loss) from operations (598,668) 725,685 2,877,820 (449,710)
Interest expense 519,397 433,370 1,321,166 1,301,358
------------ ------------ ------------ ------------
Net income (loss) (1,118,065) 292,315 1,556,654 (1,751,068)
Preferred stock dividends (391,000) (369,000) (1,173,000) (1,107,000)
------------ ------------ ------------ ------------
Net income (loss) applicable to
Common stock $ (1,509,065) $ (76,685) $ 383,654 $ (2,858,068)
------------ ------------ ------------ ------------
Net income (loss) per share:
Basic $ (0.63) $ (0.03) $ 0.16 $ (1.20)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted $ (0.63) $ (0.03) $ 0.05 $ (1.20)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average shares:
Basic 2,384,000 2,384,000 2,384,000 2,384,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted 2,384,000 2,384,000 33,838,771 2,384,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
Serengeti Eyewear, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net Income (loss) $ 1,556,654 $(1,751,068)
Adjustments to reconcile net income (loss) to
Net cash provided by operating activities:
Depreciation and amortization 1,089,734 1,517,244
(Gain)/loss on disposal of fixed asset (925) --
Cash provided by (used for):
Accounts receivable 2,901,165 2,808,299
Income tax refund receivable 358,055 --
Inventories (2,319,844) 2,918,058
Prepaid expenses and other assets 339,396 109,649
Accounts payable (2,025,435) (2,310,331)
Customer deposits -- (900,122)
Accrued expenses 365,363 (7,681)
----------- -----------
Net cash provided by operating activities 2,264,163 2,384,048
----------- -----------
Cash flows from investing activities:
Acquisition of patents and trademarks - (53,113)
Purchase of fixed assets (113,378) (346,368)
Proceeds from disposal of fixed assets 946 -
----------- -----------
Net cash used in investing activities (112,432) (399,481)
----------- -----------
Cash flows from financing activities:
Increase in bank overdraft 172,511 -
Repayment of related party debt - (44,842)
Net borrowings from line of credit 251,983 -
-
Proceeds from term loan 725,000 910,000
Repayment of term loan (3,200,000) (2,212,500)
Principal payments on long-term debt (46,620) (42,862)
----------- -----------
Net cash (used in) financing activities (2,097,126) (1,390,204)
----------- -----------
Net increase (decrease) in cash 54,605 594,363
Cash - beginning of period 87,774 128,188
----------- -----------
Cash - end of period $ 142,379 $ 722,551
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
Serengeti Eyewear, Inc.
Consolidated Statements of Cash Flows
(Continued)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------------------------
SEPTEMBER 30 , 1999 SEPTEMBER 30, 1998
------------------- ------------------
<S> <C> <C>
Supplemental cash flow
information - cash paid
for interest $1,091,721 $1,180,373
Non-cash financing activities
including the issuance of
preferred stock for payment
of dividends $1,476,000 $1,290,000
Non-cash financing activity from
trade-in of vehicle $ 42,639 --
</TABLE>
6
<PAGE>
Serengeti Eyewear, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note A. Basis of presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Pursuant to the rules of the Securities and Exchange Commission,
those financial statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair presentation have
been included. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full year. For
further information, refer to the financial statements of Serengeti Eyewear,
Inc. (the "Company") as of December 31, 1998 and for the two years then ended,
including notes thereto included in the Company's Form 10-KSB.
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiary, Solartechnics (HK) Ltd.
Intercompany transactions and balances have been eliminated in consolidation.
INVENTORIES
Inventories are valued at the lower of cost or market on a first
in-first out basis.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes", which
requires use of the liability method. FAS 109 provides that deferred tax assets
and liabilities are recorded based on the differences between the tax bases of
assets and liabilities and their carrying amounts for financial reporting
purposes, referred to as temporary differences. Deferred tax assets and
liabilities at the end of each period are determined using the currently enacted
tax rates applied to taxable income in the periods in which the deferred tax
assets and liabilities are expected to be settled or realized.
INCOME (LOSS) PER SHARE
Net income (loss) per share amounts are computed based upon the
weighted average number of common shares and potential common shares outstanding
during each period. Potential common shares for the nine months ended September
30, 1999 of 31,454,771 include shares underlying the convertible preferred
stock. Potential common shares are not considered in the computation for the
three months ended September 30, 1999 and the three and nine months ended
September 30, 1998, as their effect would be anti-dilutive.
7
<PAGE>
Serengeti Eyewear, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
The reconciliation of the net income and shares for the basic and
diluted earnings per share computation are as follows for the nine months ended
September 30, 1999:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
---------------------------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
---------- ------------ ---------
<S> <C> <C> <C>
Net income applicable to
common stock (Basic) $ 383,654 $ 2,384,000 $ 0.16
Effect of Dilutive Securities:
Series A convertible
preferred stock 421,298 10,708,798
Series B convertible
preferred stock 375,851 10,372,986
Series C convertible
preferred stock 375,851 10,372,986
---------- ------------
Net income applicable
to common stock and
assumed conversions (diluted) $1,556,654 $ 33,838,770 $ 0.05
---------- ------------ ---------
</TABLE>
8
<PAGE>
Serengeti Eyewear, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note B. Inventories
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
(Unaudited)
<S> <C> <C>
Inventory amounts consist of the following:
Raw Materials $ 2,114,418 $ 4,490,117
Work-in-process 4,001,363 2,768,884
Finished Goods 8,740,287 5,277,223
------------ -------------
Total $14,856,068 $12,536,224
------------ -------------
</TABLE>
Note C. Note payable - bank
During September 1999, the Company secured with an asset-based lender a
$12 million revolving credit facility with interest payable at prime plus 1.75%,
replacing all but $2 million of the then existing credit facility. The
prime-lending rate at September 30, 1999 was 8.25%.
Under the current revolver facility, as amended, the Company is able to
borrow up to 1) 85% of eligible domestic accounts receivable, 2) 75% of eligible
foreign accounts receivable, and 3) 80% and 50% of the value of the Company's
eligible premium and non-premium inventory, respectively, subject to additional
limitations on inventory-based loans. The unused portion of the facility was
$1,096,039 at September 30, 1999. The revolver facility is collateralized by
substantially all the Company's assets and is automatically renewable on its
anniversary date in September 2001.
Note D. Stockholders' equity - Preferred stock
On October 4, 1996, the Company issued 7,500 shares of its $.001 par
value Series A 6.5% cumulative convertible non-voting preferred stock to RBB
Bank Aktiengesellschaft ("RBB"), a banking institution located in Austria, in a
private offshore offering pursuant to Regulation S for cash aggregating
$7,500,000 less commissions aggregating $525,000. Concurrently with the closing
of the acquisition, whereby the Company purchased certain assets of the
Serengeti Eyewear division of Corning, Inc. ("Corning"), RBB purchased, pursuant
to said Regulation S offering, 7,500 shares of the Company's $.001 par value
Series B 6% cumulative convertible non-voting preferred stock and 7,500 shares
of the Company's $.001 par value Series C 6% cumulative convertible non-voting
preferred stock for cash aggregating $15,000,000 less commissions aggregating
$1,050,000. Dividends on the preferred stock are payable in cash or additional
shares of preferred stock at the option of the Company. During 1998, dividends
aggregating 1,290 shares of preferred stock, valued
9
<PAGE>
Serengeti Eyewear, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
at $1,290,000, which represent dividends accrued in 1997, were issued. During
the nine months ended September 30, 1999, dividends accrued in 1998 aggregating
$1,476,000 were paid to RBB through the issuance of 1,476 shares of preferred
stock. At September 30, 1999, dividends aggregating $1,173,000 were due and
payable to RBB.
Each of the Series A Preferred Shares may be converted into shares of
common stock at any time. Each Series A share is convertible into such number of
common shares as is determined by dividing its stated value of $1,000 by a
conversion rate equal to the lower of (a) $5.50 or (b) 80% of the average market
price for the common stock for the ten trading days ending three days prior to
the giving by the holder of a notice of conversion.
Each of the Series B Preferred Shares may be converted into shares of
common stock at any time. Each Series B share is convertible into such number of
common shares as is determined by dividing its stated value of $1,000 by a
conversion rate equal to the lower of (a) $6.75 or (b) 80% of the average market
price for the common stock for the ten trading days ending three days prior to
the giving by the holder of a notice of conversion.
Each of the Series C Preferred Shares may be converted into shares of
common stock at any time after July 1, 1997. Each Series C share is convertible
into such number of common shares as is determined by dividing its stated value
of $1,000 by a conversion rate equal to the lower of (a) $8.25 or (b) 80% of the
average market price for the common stock for the ten trading days ending three
days prior to the giving by the holder of a notice of conversion.
At any time after September 30, 2000 the Company will have the right to
force conversion of the preferred shares into common stock.
Note E. Concentration of credit risk/major customers
During the nine months ended September 30, 1999 and 1998, the Company
made net sales to three customers of approximately $14,100,000 and $11,900,000,
or 45.8% and 34.8% of its total net sales, respectively.
Approximately $1,800,000, or 31.5%, of the gross accounts receivable
were due from three customers at September 30, 1999 and were unsecured.
Approximately $4,100,000, or 47.7%, of the gross accounts receivable were due
from two customers at December 31, 1998 and were unsecured.
Note F: Litigation
During January, 1998 RBB, the entity which purchased $22.5 million of
the Company's preferred stock, the proceeds of which were utilized by the
Company to purchase the Serengeti
10
<PAGE>
Serengeti Eyewear, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
business, filed an action in the United States District Court, Southern District
of New York. In the action, RBB alleges various violations of the securities
laws in connection with the purchase by RBB of the 22,500 shares of the
Company's convertible preferred stock. RBB contends that the Company failed to
disclose certain material information and that RBB relied to its detriment on
these omissions in purchasing the Company's convertible preferred stock. There
are also common law claims for fraud and negligent misrepresentation.
RBB seeks compensatory damages in the sum of $22.5 million, equal to
the purchase price of the preferred stock, and punitive damages in the sum of
$25 million. The Company has reviewed the claims and intends to vigorously
defend itself against this action. Although the risk of loss for this action is
deemed reasonably possible, the amount of loss is not estimable, and therefore,
no accrual for such is reflected in these financial statements.
In addition to the above matter and in the normal course of conducting
its business, the Company is involved in various other legal matters. Other than
with respect to the RBB litigation, the Company is not a party to any legal
matter which management believes could result in a judgment that would have a
material adverse effect on the Company's financial position, liquidity or
results of operations.
11
<PAGE>
Serengeti Eyewear, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note G. Foreign operations
The Company distributes its products from two geographic areas: The
United States and Hong Kong. Following is a summary of information by area for
the three and nine months ended:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- ---------------------------------
SEPT. 30 SEPT. 30 SEPT. 30 SEPT. 30
1999 1998 1999 1998
---------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales to unaffiliated customers:
United States $ 6,532,683 $10,269,758 $27,939,283 $32,953,781
Hong Kong $ 214,747 $ 261,581 2,903,139 1,178,395
---------- ----------- ----------- -----------
$ 6,747,430 $10,531,339 $30,842,422 $34,132,176
---------- ----------- ----------- -----------
Income (loss) from
operations:
United States $ (593,381) $ 363,686 $ 2,642,015 $ (957,016)
Hong Kong $ (5,287) $ 361,999 235,805 507,306
---------- ----------- ----------- -----------
$ (598,668) $ 725,685 $ 2,877,820 $ (449,710)
Interest expense $ (519,397) $ (433,370) (1,321,166) (1,301,358)
---------- ----------- ----------- -----------
Net income (loss) $(1,118,065) $ 292,315 $ 1,556,654 $(1,751,068)
---------- ----------- ----------- -----------
Identifiable assets:
United States $38,446,129 $47,116,581 $38,446,129 $47,116,581
Hong Kong 9,808 775,528 9,808 775,528
---------- ----------- ----------- -----------
$38,455,937 $47,892,109 $38,455,937 $47,892,109
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following should be read in conjunction with the Consolidated
Financial statements and the Notes thereto appearing elsewhere in this report.
FORWARD-LOOKING STATEMENTS
The forward-looking statements contained herein involve risks and
uncertainties, and are subject to change based on various important factors
including, but not limited to, the Company's continuing ability to develop and
introduce innovative products, changing consumer preferences, actions by
competitors, manufacturing capacity constraints of its suppliers and the
availability of raw materials, the effect of economic conditions, dependence on
certain customers and other risks identified from time to time in the Company's
Securities and Exchange Commission filings. Given these uncertainties, undue
reliance should not be given to such statements. The Company also undertakes no
obligation to update these forward-looking statements.
GENERAL
The Company is engaged in the business of designing, manufacturing
through outside sources, marketing and distributing a wide array of quality
sunglasses.
On February 13, 1997, the Company acquired for $27.5 million in cash
(the "Acquisition") the assets of the Serengeti Eyewear division of Corning used
in the design, manufacture and distribution of Serengeti brand sunglasses.
Drivers sunglasses, first introduced by Corning in 1985, constitute the core of
the Serengeti product line. Over the years, Serengeti sunglasses have developed
a brand identity which provides appeal to consumers in the market for premium
sunglasses. The Serengeti brand identity is based upon superior lens technology,
quality and performance.
Prior to the Acquisition, the Company primarily designed and marketed
selected non-premium lines of sunglasses such as Solar*X sunglasses, which were
targeted for distribution through mass merchandisers as a sunglass with quality
comparable to that of premium sunglasses at popular prices. Solar*X features a
ground and polished lens which provides virtually complete protection from
harmful ultraviolet sunrays and glare. The Company also markets to the mass
merchandise market other sunglass brands, each of which the Company believes
creates a niche among popular-priced sunglasses of various categories.
In the latter part of 1995, with the proceeds of its initial public
offering completed in August 1995, the Company launched its H(2)Optix line of
sunglasses which is designed specifically for use in the water environment.
H(2)Optix utilizes a combination of characteristics which the
13
<PAGE>
Company believes differentiates it from other competing sunglasses which target
the water sports market. H(2)Optix sales approximated $1.2 million in each of
1996 and 1997 and $2 million in 1998. H(2)Optix sales remained virtually
unchanged for the nine months ended September 30, 1998 as compared to the same
period in 1999.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1999 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1998.
Net sales decreased 35.9%, from approximately $10.5 million for the
three months ended September 30, 1998 to approximately $6.7 million for the
same period in 1999. During the third quarter of 1998, the Company closed-out
approximately $2.2 million of excess inventory. This close-out sale was not
repeated in 1999. In addition, the Company's sales to Wal-Mart decreased
approximately $800,000 in the third quarter of 1999 when compared to the
third quarter of 1998. Wal-Mart established a corporate goal to reduce its
inventory by the end of September 1999 and reduced its third quarter
purchases from the Company accordingly. The Company maintained its sales
volumes with its key accounts, including Sunglass Hut and its International
business, for the third quarter of 1999 compared to 1998, but had declines in
its sales through its distributors of approximately $100,000.
Gross profit as a percentage of sales increased to 46.6% for the three
months ended September 30, 1999 compared to 36.5% for the same period for 1998,
primarily due to higher average unit selling prices in 1999 and the effect of
its limited close-out sales in 1998, which typically had substantially lower
profit margins.
Selling expenses increased from approximately $859,000 during the three
months ended September 30, 1998 to approximately $1.0 million for the same
period in 1999. This increase resulted primarily from an increase in media print
advertising expenditures during the period.
General and administrative expenses increased from approximately $1.9
million for the three months ended September 30, 1998 to approximately $2.4
million for the same period in 1999, primarily due to increases in payroll and
bad debt expense, and foreign exchange costs associated with purchases from
Japanese suppliers, resulting from the devaluation of the U.S. Dollar against
the Japanese Yen.
Interest expense increased from approximately $433,000 for the three
months ended June 30, 1998 to approximately $519,000 for the same period in
1999, primarily as a result of the write-off of deferred loan costs associated
with the Company's former credit facility, which was replaced with a new credit
facility in September 1999, as discussed later in this section under the heading
"Liquidity and Capital Resources".
14
<PAGE>
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1999 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998.
Net sales decreased 9.6%, from approximately $34.1 million for the nine
months ended September 30, 1998 to approximately $30.8 million for the same
period in 1999, as the Company did not repeat certain close-out sales promotions
which had taken place in 1998. Sales to major customers increased approximately
$2.2 million, or 18.9%. Sales of non-premium product to Wal-Mart through the
Company's Hong Kong subsidiary increased approximately $1.9 million.
Gross profit as a percentage of sales increased to 44.3% for the nine
months ended September 30, 1999 compared to 35.5% for the same period for 1998,
primarily due to higher average unit selling prices and limited close-out sales
for 1999 as compared to 1998, which typically have lower profit margins.
Selling expenses decreased from approximately $4.2 million during the
nine months ended September 30, 1998 to approximately $2.4 million for the same
period in 1999. This decrease resulted primarily from a reduction in
marketing-related expenditures such as retail cooperative advertising,
endorsements, miscellaneous promotions and public relations.
General and administrative expenses remained virtually unchanged for
the nine months ended September 30, 1998 as compared to the same period in 1999.
Interest expense remained virtually unchanged for the nine months ended
September 30, 1998 as compared to the same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company entered into a loan agreement for a new senior
credit facility on September 17, 1999 which includes 1) a $12 million revolver
facility with interest calculated at prime plus 1.75%, and 2) a term loan of
$725,000 with interest calculated at prime plus 2.00%, payable in 12 equal
monthly installments commencing November 1999.
Under the new credit facility, the Company is able to borrow up to 85%
of eligible domestic accounts receivable and 75% of eligible foreign accounts
receivable, and up to 80% and 50% of the value of the Company's eligible premium
and non-premium inventory, respectively, subject to additional limitations on
inventory-based loans. The unused portion of the facility was approximately $1.1
million at September 30, 1999.
The new agreement requires the Company to maintain certain financial
ratios. Pursuant to the credit facility, in the event the Company has "surplus
cash" in any fiscal year, the Company is required to make mandatory prepayments
against the term loan in the amount of 25% of the
15
<PAGE>
surplus cash. The agreement also contains a number of customary covenants,
including, among others, limitations on liens, affiliate transactions, mergers,
acquisitions, asset sales, dividends and advances. The agreement is secured by a
first priority lien on substantially all of the assets of the Company and its
subsidiaries. At September 30, 1999, the company was in compliance with its loan
agreement.
The new loan agreement retired all but $2 million of the debt which
existed with the Company's former senior lender. An amendment was signed with
the former senior lender which requires the Company to retire said debt in 18
equal monthly installments commencing November 1999, with interest calculated at
prime plus 4.00%.
The Company's liquidity improved from a working capital deficit of
approximately $4.1 million at December 31, 1998 to a working capital deficit of
approximately $600,000 at September 30, 1999, primarily as a result of payments
on the credit facility.
The Company incurred capital expenditures of $113,378 during the nine
months ended September 30, 1999.
The Company anticipates, based on its currently proposed plans,
including (i) the introduction of procedures designed to strengthen management
and increase sales efficiency; and (ii) the development and introduction of new
products, that the net cash available from operations will be sufficient to
satisfy its anticipated cash requirements for the 1999 fiscal year.
YEAR 2000 ISSUES
The Year 2000 problem arises because many computer systems were
designed to identify a year using two digits, instead of four digits, in order
to conserve memory and other resources. For instance, "1997" would be held in
the memory of a computer as "97".
When the year changes from 1999 to 2000, a two digit system would read
the year as changing from "99" to "00." For a variety of reason, many computer
systems are not designed to make such a date change or are not designed to
"understand" or react appropriately to such a date change. Therefore, as the
date changes to the year 2000, many computer systems could completely stop
working or could perform in an improper and unpredictable manner.
During November, 1997 the Company began converting its information
system to be Year 2000 compliant. At December 31, 1997, the Company had
completed the installation of the new software and completed the process of
updating applications by mid-1998. The Company incurred charges aggregating
approximately $50,000 in 1998 and has incurred charges aggregating approximately
$65,000 through September 30, 1999. The Company does not anticipate incurring
further material charges in this regard.
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Pursuant to the Company's Year 2000 planning, the Company has requested
information regarding the computer systems of its key suppliers, customers,
creditors and financial service organizations. Where practicable, the Company
will attempt to mitigate its risks with respect to the failure of any of these
institutions to be year 2000 compliant. The effect, if any, on the Company's
results of operations from the failure of each party to be Year 2000 compliant
is not readily determinable. Those parties which have responded to the Company's
requests have indicated that their Year 2000 compliance issues have been, or
will be, resolved such that they do not anticipate an interruption of their
normal business practices.
SEASONALITY
The Company anticipates that the seasonality of its premium sunglass
business generally will follow the selling activity of its largest customer,
Sunglass Hut. Historically, the strongest quarter in terms of premium sales is
the second quarter, followed by the first, fourth and third quarters.
The seasonality of the Company's non-premium sunglass business
generally follows the selling activity of its largest customer for such
products, Wal-Mart. Historically, the Company's strongest quarter in terms of
sales is the fourth quarter, followed by the first, second and third quarters.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires companies to
recognize all derivatives contracts as either assets or liabilities on the
balance sheet and to measure them at fair value. If certain conditions are met,
a derivative may be specifically designated as a hedge of the: (i) exposure to
changes in the fair value of a recognized asset or liability or an unrecognized
firm commitment, (ii) exposure to variable cash flows of a forecasted
transaction, or (iii) foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security, or a
foreign-currency- denominated forecasted transaction. The objective of hedge
accounting is to match the timing of gain or loss recognition on the hedging
derivative with the recognition of the: (i) the changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk or (ii)
earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument (e.g., derivative contracts entered into for
speculative purposes), the gain or loss is recognized as income in the period of
change.
SFAS 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. The Company has adopted SFAS 133 effective July 1, 1999. On
that date, hedging relationships
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will be designated anew and documented. The Company periodically enters into
derivative contracts for the purpose of hedging risks attributable to interest
rate fluctuations and, in general, such hedges have been fully effective in
offsetting the changed in fair value of the underlying risk. The Company expects
to continue its hedging activities in the future. However, it has not yet
evaluated the financial statement impact of adopting SFAS 133.
GOING CONCERN CONSIDERATION
The Company has experienced significant operating losses which have
resulted in an accumulated deficit of $17,837,543 at September 30, 1999. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. However, the Company has realized an operating profit of
$2,877,820 for the nine months ended September 30, 1999.
The Company believes that the following actions and plans will allow it
to continue operations for a reasonable period of time:
o The Company has introduced procedures to strengthen management
and increase sales efficiency.
o The Company has secured a new revolving credit facility which
management anticipates will better enable the Company to
satisfy financial commitments with its suppliers, thus helping
to ensure timely inventory procurement consistent with the
Company's needs.
o The Company has developed and will continue to introduce new
product styles for its 2000 catalog which management believes
will become widely accepted by its customers.
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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISKS
The Company is exposed to various market risks, including changes in
interest rates.
FOREIGN CURRENCY EXCHANGE
The Company presently transacts most business internationally in United
States currency. To date, the Company has not been affected significantly by
currency exchange fluctuations. However, future currency fluctuations in
countries in which the Company does business could adversely affect the Company
by resulting in pricing that is not competitive with prices denominated in local
currencies.
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PART II
OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
Reference is made to the Company's annual report on Form 10-KSB for the
year ended December 31, 1998 for a discussion of certain litigation.
In the normal course of conducting its business, the Company is
involved in various legal matters. The Company is not a party to any other legal
matter, other than discussed in its most recent Form 10-KSB, which management
believes could result in a judgment that would have a material adverse affect on
the Company's financial position, liquidity or results of operations.
ITEM 2: CHANGES IN SECURITIES
None
ITEM 3: DEFAULT UPON SENIOR SECURITIES
None
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5: OTHER INFORMATION
None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10 - Material Contracts
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURE
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.
SERENGETI EYEWEAR, INC.
Dated: November 15, 1999 By: /s/ Stephen Nevitt
------------------- --------------------------------
Stephen Nevitt
President
(Principal Executive Officer)
By: /s/ William McMahon
--------------------------------
William McMahon
Chief Financial Officer
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SERENGETI EYEWEAR, INC.
EXHIBIT 10
MATERIAL CONTRACTS
22
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PTC-6
9-16-99
Execution
AMENDED AND RESTATED TERM LOAN AGREEMENT
Dated as of September 17, 1999
By And Among
SERENGETI EYEWEAR, INC.
and
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION,
individually and as Agent
and
BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC.
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS; CONSTRUCTION 1
Section 1.1 Definitions. 1
Section 1.2 Accounting Terms and Determination 11
Section 1.3 Other Definitional Terms 11
Section 1.4 Exhibits and Schedules 11
ARTICLE II This Article is not applicable. 11
ARTICLE III TERM LOANS 11
Section 3.1 Term Loan Commitments; Use of Proceeds. 11
Section 3.2 Term Notes; Repayment of Principal. 11
Section 3.3 Mandatory Prepayments of Surplus Cash Flow 12
Section 3.4 Status of Payments Under CIT Subordination Agreement. 12
ARTICLE IV GENERAL LOAN TERMS 13
Section 4.1 This Section is not applicable. 13
Section 4.2 This Section is not applicable. 13
Section 4.3 Interest. 13
Section 4.4 This Section is not applicable. 13
Section 4.5 Fees. 13
Section 4.6 Voluntary Prepayments of Borrowings. 13
Section 4.7 Payments, Etc. 14
Section 4.8 This Section is not applicable. 15
Section 4.9 This Section is not applicable. 15
Section 4.10 This Section is not applicable. 15
Section 4.11 This Section is not applicable. 15
Section 4.12 This Section is not applicable. 15
Section 4.13 This Section is not applicable. 15
Section 4.14 This Section is not applicable. 15
Section 4.15 Sharing of Payments, Etc. 15
Section 4.16 Capital Adequacy 15
Section 4.18 Limitation on Certain Payment Obligations. 16
Section 4.19 This Section is not applicable. 16
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ARTICLE V CONDITIONS TO BORROWINGS 16
Section 5.1 Conditions Precedent to Restructuring of Term Loans. 16
Section 5.2 This Section is not applicable. 18
ARTICLE VI REPRESENTATIONS AND WARRANTIES 18
Section 6.1 Organization and Qualification. 18
Section 6.2 Corporate Authority. 18
Section 6.3 This Section is not applicable. 18
Section 6.4 Borrower Financial Statements. 18
Section 6.5 Tax Returns. 18
Section 6.6 Actions Pending. 19
Section 6.7 Representations; No Defaults. 19
Section 6.8 Title to Properties. 19
Section 6.9 Enforceability of Agreement. 19
Section 6.10 Consent 19
Section 6.11 Use of Proceeds; Federal Reserve Regulations. 19
Section 6.12 ERISA. 19
Section 6.13 Subsidiaries. Schedule 6.1 20
Section 6.14 Outstanding Indebtedness. 20
Section 6.15 Conflicting Agreements. 20
Section 6.16 Pollution and Other Regulations. 20
Section 6.17 Possession of Franchises, Licenses, Etc. 21
Section 6.18 Patents, Etc. 21
Section 6.19 Governmental Consent. 21
Section 6.20 Disclosure. 22
Section 6.21 Insurance Coverage. 22
Section 6.22 Labor Matters. 22
Section 6.23 Intercompany Loans; Dividends. 22
Section 6.24 Burdensome Restrictions. 23
Section 6.25 Solvency 23
Section 6.26 Compliance with Laws 23
Section 6.27 Permitted Investments 23
Section 6.28 Perfected Security Interest in Collateral. 23
Section 6.29 This Section is not applicable. 23
Section 6.30 Capital Stock. 23
Section 6.31 Places of Business. 24
Section 6.32 Y2K Compliance. 24
ARTICLE VII AFFIRMATIVE COVENANTS 24
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Section 7.1 Corporate Existence, Etc 24
Section 7.2 Compliance with Laws, Etc. 24
Section 7.3 Payment of Taxes and Claims, Etc 24
Section 7.4 Keeping of Books 25
Section 7.5 Visitation, Inspection, Etc. 25
Section 7.6 Insurance; Maintenance of Properties. 25
Section 7.7 Reporting Covenants 25
Section 7.8 Financial Covenants. 29
Section 7.9 Notices Under Certain Other Indebtedness 30
Section 7.10 Additional Guarantors 30
Section 7.11 Ownership of Guarantors 30
Section 7.12 CIT Financing. 30
Section 7.13 Life Insurance Policy 30
Section 7.14 Foreign Collateral. 31
Section 7.15 Collateral Audit 31
ARTICLE VIII NEGATIVE COVENANTS 31
Section 8.1 Indebtedness 31
Section 8.2 Liens 32
Section 8.3 Sales, Etc. 32
Section 8.4 Mergers, Acquisitions, Etc. 33
Section 8.5 Investments, Loans, Etc. 33
Section 8.6 Sale and Leaseback Transactions. 33
Section 8.7 Transactions with Affiliates. 34
Section 8.8 Optional Prepayments. 34
Section 8.9 Changes in Business. 34
Section 8.10 ERISA 34
Section 8.11 Additional Negative Pledges 34
Section 8.12 Limitation on Payment Restrictions Affecting
Consolidated Companies 34
Section 8.13 Actions Under Certain Documents 35
Section 8.14 Financial Statements; Fiscal Year 35
Section 8.15 Change of Management 35
Section 8.16 Guaranties 35
Section 8.17 Changes in Debt Instruments. 35
Section 8.18 No Cash Dividends on Capital or Preferred Stock 35
ARTICLE IX EVENTS OF DEFAULT 35
Section 9.1 Payments. 35
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Section 9.2 Covenants Without Notice. 36
Section 9.3 Other Covenants. 36
Section 9.4 Representations. 36
Section 9.5 Non-Payments of Other Indebtedness. 36
Section 9.6 Defaults Under Other Agreements. 36
Section 9.7 Bankruptcy. 36
Section 9.8 ERISA 36
Section 9.9 Money Judgment 37
Section 9.10 Ownership of Credit Parties and Pledged Entities 37
Section 9.11 Default Under Other Credit Documents 37
Section 9.12 Management. 37
Section 9.13 Attachments 37
Section 9.14 Indebtedness of Borrower. 37
Section 9.15 Default Under Subordinated Debt 37
Section 9.16 This Section is not applicable. 37
Section 9.17 Default Under CIT Financing 37
ARTICLE X THE AGENT 38
Section 10.1 Appointment of Agent 38
Section 10.2 Nature of Duties of Agent. 38
Section 10.3 Lack of Reliance on the Agent. 38
Section 10.4 Certain Rights of the Agent 39
Section 10.5 Reliance by Agent 39
Section 10.6 Indemnification of Agent 39
Section 10.7 The Agent in its Individual Capacity 39
Section 10.8 Holders of Notes 39
Section 10.9 Successor Agent 40
ARTICLE XI MISCELLANEOUS 40
Section 11.1 Notices 40
Section 11.2 Amendments, Etc 40
Section 11.3 No Waiver; Remedies Cumulative 41
Section 11.4 Payment of Expenses, Etc. 41
Section 11.5 Right of Set-Off 42
Section 11.6 Benefit of Agreement 43
Section 11.7 Governing Law; Submission to Jurisdiction 44
Section 11.8 Independent Nature of Lenders' Rights 44
Section 11.9 Collateral to Benefit All Lenders 45
Section 11.10 Counterparts 45
Section 11.11 Effectiveness; Survival 45
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Section 11.12 Severability 45
Section 11.13 Independence of Covenants 45
Section 11.14 Change in Accounting Principles, Fiscal Year or Tax Laws 45
Section 11.15 Headings Descriptive; Entire Agreement 45
Section 11.16 Time is of the Essence 46
Section 11.17 Usury 46
Section 11.18 Construction 46
Section 11.19 Miscellaneous Matters Regarding Extension/restructuring. 46
Section 11.20 Complete Agreement 47
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SCHEDULES
<S> <C>
Schedule 6.5 Tax Filings and Payments
Schedule 6.6 Certain Pending and Threatened Litigation
Schedule 6.12 Employee Benefit Matters
Schedule 6.14 Outstanding Indebtedness and Defaults
Schedule 6.15 Conflicting Agreements
Schedule 6.16(a) Environmental Compliance
Schedule 6.16(b) Environmental Notices
Schedule 6.16(c) Environmental Permits
Schedule 6.18 Patent, Trademark, License, and Other Intellectual Property Matters
Schedule 6.22 Labor and Employment Matters
Schedule 6.23 Intercompany Loans
Schedule 6.24 Burdensome Restrictions
Schedule 6.26 Compliance with Laws
Schedule 6.27 Permitted Investments
Schedule 6.31(a) Places of Business
Schedule 6.31(b) Material Places of Business
Schedule 8.1(c) Existing Indebtedness
Schedule 8.2 Existing Liens
EXHIBITS
Exhibit A Form of Term Note
Exhibit B Form of Pledge Agreement
Exhibit C Form of Security Agreement
Exhibit D Form of Guaranty Agreement
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SCHEDULES
<S> <C>
Exhibit E Form of Closing Certificate
Exhibit F Form of Opinion of Borrower's Counsel
</TABLE>
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AMENDED AND RESTATED TERM LOAN AGREEMENT
THIS AMENDED AND RESTATED TERM LOAN AGREEMENT, dated as of September
17, 1999 (the "AGREEMENT") by and among SERENGETI EYEWEAR, INC. (f/k/a
Solar-Mates, Inc.) (the "BORROWER"), a New York corporation, SUNTRUST BANK,
CENTRAL FLORIDA, NATIONAL ASSOCIATION, ("SUNTRUST") a national banking
association, and BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC., a Delaware
corporation (f/k/a Creditanstalt Corporate Finance, Inc.) (as Assignee of
CREDITANSTALT-BANKVEREIN, an Australian banking corporation) (collectively, the
"LENDERS" and, individually, a "LENDER") and SunTrust, as Agent for the Lenders.
W I T N E S S E T H:
THAT for and in consideration of the mutual covenants made herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE 1 DEFINITIONS; CONSTRUCTION
ARTICLE 1.1 DEFINITIONS. As used in this Agreement, and in any instrument,
certificate, document or report delivered pursuant thereto, the following terms
shall have the following meanings (to be equally applicable to both the singular
and plural forms of the term defined):
ARTICLE 1.2
ARTICLE 1.3 "AFFILIATE" of any Person means any other Person directly or
indirectly controlling, controlled by, or under common control with, such
Person, whether through the ownership of voting securities, by contract or
otherwise. For purposes of this definition, "CONTROL" (including with
correlative meanings, the terms "CONTROLLING", "CONTROLLED BY", and "UNDER
COMMON CONTROL WITH") as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person.
ARTICLE 1.4
ARTICLE 1.5 "AGENT" shall mean SunTrust Bank, Central Florida, National
Association, as agent for the Lenders hereunder and under the other Credit
Documents, and each successor Agent.
ARTICLE 1.6
ARTICLE 1.7 "AGREEMENT" shall mean this Revolving Line of Credit And Term Loan
Agreement, as originally executed and as it may be from time to time
supplemented, amended, restated, renewed or extended and in effect.
ARTICLE 1.8
ARTICLE 1.9 "APPLICABLE MARGIN" shall mean 4.0%.
ARTICLE 1.10
ARTICLE 1.11 "ASSET VALUE" shall mean, with respect to any property or asset of
any Consolidated Company as of any particular date, an amount equal to the
greater of (i) the then book value of such property
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or asset as established in accordance with GAAP, and (ii) the then fair market
value of such property or asset as determined in good faith by the board of
directors of such Consolidated Company.
ARTICLE 1.12
ARTICLE 1.13 "BANKRUPTCY CODE" shall mean The Bankruptcy Code of 1978, as
amended and in effect from time to time (11 U.S.C. ss.5101 ET Seq.).
ARTICLE 1.14
ARTICLE 1.15 "BASE ADVANCE RATE" shall mean, with respect to a Base Rate
Advance, the rate obtained by adding (i) the Base Rate, AND (ii) the Applicable
Margin.
ARTICLE 1.16 "BASE RATE" shall mean (with any change in the Base Rate to be
effective as of the date of change of said Rate) the rate which the Agent
designates from time to time to be its prime lending rate, as in effect from
time to time. The Agent's prime lending rate is a reference rate and does not
necessarily represent the lowest or best rate charged to its customers; the
Agent may make commercial loans or other loans at rates of interest at, above or
below the Agent's prime lending rate.
ARTICLE 1.17
ARTICLE 1.18 "BUSINESS DAY" shall mean, with respect to Eurodollar Advances, any
day other than a day on which commercial banks are closed or required to be
closed for domestic and international business, including dealings in Dollar
deposits on the London Interbank Market, and with respect to all other Loans and
matters, any day other than Saturday, Sunday and a day on which commercial banks
are required to be closed for business in Orlando, Florida.
ARTICLE 1.19
ARTICLE 1.20 "CAPITAL EXPENDITURES" shall mean for any period shall mean the
aggregate of all expenditures of the Borrower during such period that in
conformity with GAAP are required to be included in or reflected by the
property, plant or equipment or similar fixed asset account reflected in the
balance sheet of the Borrower.
ARTICLE 1.21
ARTICLE 1.22 "CAPITALIZED LEASE OBLIGATIONS" shall mean all lease obligations
which have been or are required to be, in accordance with GAAP, capitalized on
the books of the lessee.
ARTICLE 1.23
ARTICLE 1.24 "CAPITAL STOCK" of any Person shall mean any shares, equity or
profits interests, participations or other equivalents (however designated) of
capital stock and any rights, warrants or options, or other securities
convertible into or exercisable or exchangeable for any such shares, equity or
profits interest, participations or other equivalents, directly or indirectly
(or any equivalent ownership interest, in the case of a Person which is not a
Corporation.
ARTICLE
1.25
ARTICLE 1.26 "CERCLA" has the meaning set forth in Section 6.16(a) of this
Agreement.
ARTICLE 1.27
ARTICLE 1.28 "CIT" shall mean the CIT Group/Business Credit, Inc., which is also
referred to as the Senior Creditor in the CIT Subordination Agreement.
ARTICLE 1.29
ARTICLE 1.30 "CIT FINANCING AGREEMENT" shall mean that certain Financing
Agreement between CIT and the Borrower dated September 9, 1999, in effect as of
the date hereof, and as amended pursuant to the provisions of Section 7.12
hereof.
ARTICLE 1.31
ARTICLE 1.32 "CIT FINANCING" shall mean the transaction by which the credit
facilities held by the Lenders have been restructured (with the payoff and
termination of the Revolving Loans and the restructuring of the Term Loans) and
the extension of credit by CIT to the Borrower, all as set forth in the CIT
Financing Agreement.
ARTICLE 1.33
ARTICLE 1.34 "CIT SUBORDINATION AGREEMENT" shall mean that certain Subordination
Agreement dated the date hereof by and among the Lenders, CIT and the Borrower
which, among other matters, provides for the subordination of the Obligations
(including the Term Loans) to the Senior Debt.
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ARTICLE 1.35
ARTICLE 1.36 "CIT TERM DEBT" shall mean the $725,000 Term Loan made to Borrower
pursuant to the CIT Financing Agreement.
ARTICLE 1.37
ARTICLE 1.38 "CLOSING DATE" shall mean the date on or before September 17, 1999,
on which the Term Loans are restructured and the conditions set forth in Section
5.1 are satisfied or waived in accordance with Section 11.3.
ARTICLE 1.39
ARTICLE 1.40 "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
ARTICLE 1.41
"COLLATERAL" shall mean all the assets, real and personal, intangible
and tangible, of the Consolidated Companies, now owned or hereafter acquired,
including, but not limited to, all accounts, chattel paper, equipment,
inventory, general intangibles, and real property, and a pledge of all the
Capital Stock of each Material Subsidiary, now owned or hereafter acquired, and
the Life Insurance Policy.
"COMMITMENT FEE" shall mean the amount of $30,000, payable as follows:
$15,000 upon the execution of this Agreement, $7,500 on or before December 17,
1999, and the balance of $7,500 on or before March 17, 2000.
"CONSENT BY LESSOR" shall mean the written agreement to the Agent by a
landlord for any Material Place of Business located within the United States of
America which is leased by any Consolidated Company by which said landlord
agrees that any landlord's lien, security interest, or any other encumbrance
which the landlord may at any time have in or to any property of the
Consolidated Company as a tenant for said Material Place of Business is
subordinate in all respects to the lien granted SunTrust in any personal
property of said Consolidated Company.
"CONSOLIDATED COMPANIES" shall mean, collectively, Borrower and all of
its Material Subsidiaries.
"CONSOLIDATED EBIT" shall mean, for any fiscal period of the Borrower,
an amount equal to the sum of (i) its Consolidated Net Income (Loss), PLUS, (ii)
to the extent deducted in determining Consolidated Net Income (Loss), (i)
provisions for taxes based on income, and (ii) Consolidated Interest Expense.
"CONSOLIDATED EBITDA" shall mean, for any fiscal period of the
Borrower, an amount equal to the sum of (i) its Consolidated EBIT, PLUS (ii)(A)
depreciation and (B) amortization, of the Consolidated Companies.
"CONSOLIDATED INTEREST EXPENSE" shall mean, for any fiscal period of
Borrower, total interest expense of the Consolidated Companies (including
without limitation, interest expense attributable to Capitalized Lease
Obligations, all capitalized interest, all commissions, discounts and other fees
and charges owed with respect to banker's acceptance financing, and
3
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total interest expense (whether shown as interest expense or as a loss and
expense on sale of receivables) under a receivables purchase facility)
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME (LOSS)" shall mean, for any fiscal period of
Borrower, the net income (or loss) of the Consolidated Companies on a
consolidated basis for such period (taken as a single accounting period)
determined in conformity with GAAP; PROVIDED THAT there shall be excluded
therefrom (i) any items of gain or loss, together with any related provision for
taxes, which were included in determining such consolidated net income and were
not realized in the ordinary course of business or the result of a sale of
assets other than in the ordinary course of business; and (ii) the income (or
loss) of any Person accrued prior to the date such Person becomes a Material
Subsidiary of Borrower or (in the case of a Person other than a Material
Subsidiary) is merged into or consolidated with any Consolidated Company, or
such Person's assets are acquired by any Consolidated Company.
"CONSOLIDATED NET WORTH" shall mean as of the date of determination,
the Borrower's total Shareholders' Equity as determined in accordance with GAAP.
"CONSOLIDATED SUBSIDIARY" shall mean, as at any particular time, any
corporation included as a consolidated Subsidiary of Borrower in Borrower's most
recent financial statements.
"CONTRACTUAL OBLIGATION" of any Person shall mean any provision of any
security issued by such Person or of any agreement, instrument or undertaking
under which such Person is obligated or by which it or any of the property owned
by it is bound.
"CREDIT DOCUMENTS" shall mean, collectively, this Agreement, the Notes,
the Guaranty Agreements, the Pledge Agreements and all other Security Documents.
"CREDIT PARTIES" shall mean, collectively, each of Borrower, the
Guarantors, and every other Person who from time to time executes (or is
obligated to execute) a Credit Document with respect to all or any portion of
the Obligations.
"DEFAULT" shall mean any condition or event which, with notice or lapse
of time or both, would constitute an Event of Default.
"DEFAULT RATE" shall mean the rate of interest set forth in Section
4.3(b) hereof.
"DOLLAR" and "U.S. DOLLAR" and the sign "$" shall mean lawful money of
the United States of America.
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"DOMESTIC COLLATERAL" shall mean any of the Collateral which (i) in the
case of tangible personal property is located from time to time physically
within the United States of America, and (ii) in the case of intangible personal
property (e.g., patents, trademarks, etc.) an appropriate filing has been made
under the laws of the United States of America or any State to protect or create
such rights; thus, for example, the tradename "Serengeti" shall be deemed to be
Domestic Collateral in regard to any filings made with any federal or state
agencies.
"ENVIRONMENTAL LAWS" shall mean all federal, state, local and foreign
statutes and codes or regulations, rules or ordinances issued, promulgated, or
approved thereunder, now or hereafter in effect (including, without limitation,
those with respect to asbestos or asbestos containing material or exposure to
asbestos or asbestos containing material), relating to pollution or protection
of the environment and relating to public health and safety, relating to (i)
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial toxic or hazardous constituents,
substances or wastes, including without limitation, any Hazardous Substance,
petroleum including crude oil or any fraction thereof, any petroleum product or
other waste, chemicals or substances regulated by any Environmental Law into the
environment (including without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), or (ii) the manufacture, processing,
distribution, use, generation, treatment, storage, disposal, transport or
handling of any Hazardous Substance, petroleum including crude oil or any
fraction thereof, any petroleum product or other waste, chemicals or substances
regulated by any Environmental Law, and (iii) underground storage tanks and
related piping, and emissions, discharges and releases or threatened releases
therefrom, such Environmental Laws to include, without limitation (i) the Clean
Air Act (42 U.S.C. ss.7401 ET Seq.), (ii) the Clean Water Act (33 U.S.C. ss.1251
ET Sec.), (iii) the Resource Conservation and Recovery Act (42 U.S.C. ss.6901 ET
Seq.), (iv) the Toxic Substances Control Act (15 U.S.C. ss.2601 et SEQ.) and (v)
the Comprehensive Environmental Response Compensation and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act (42 U.S.C. ss.9601
ET Seq.).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended and in effect from time to time.
"ERISA AFFILIATE" shall mean, with respect to any Person, each trade or
business (whether or not incorporated) which is a member of a group of which
that Person is a member and which is either within a controlled group of
corporations or under common control within the meaning of the regulations
promulgated under Section 414 of the Code and the regulations promulgated
thereunder.
"EVENT OF DEFAULT" shall have the meaning set forth in Article IX
hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute thereto.
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"EXECUTIVE OFFICER" shall mean with respect to any Person (other than a
Guarantor), the President, any Vice President, Chief Financial Officer,
Treasurer, Secretary and any Person holding comparable offices or duties, and
with respect to a Guarantor, the President.
"FACILITY" or "FACILITIES" shall mean the Term Loan Commitments and
Term Loans, as the context may indicate.
"FISCAL QUARTER" shall mean each three (3) month period ending on March
31, June 30, September 30, and December 31 of each year.
"FISCAL YEAR" shall mean each twelve (12) month period commencing on
first day of January each year and ending on the following December 31 or such
year.
"FIXED CHARGES" shall mean Consolidated Interest Expense for the period
of determination (including both capitalized and non-capitalized interest and
the interest component of Capitalized Lease Obligations) plus minimum rent
payments under operating leases for such period, calculated on a consolidated
basis in accordance with GAAP, PLUS (i) consolidated current maturities of long
term debt, and (ii) capital expenditures.
FIXED CHARGE COVERAGE RATIO" shall mean, for the relevant period, the
ratio determined by dividing (a) Consolidated EBITDA minus unfunded Capital
Expenditures, by (b) the sum of (i) Consolidated Interest Expense, (ii) the
amount of principal repaid or scheduled to be repaid on the Term Loans and the
Senior Debt, (iii) mandatory prepayments made to CIT for the benefit of the
Senior Lenders or to the Agent for the ratable benefit of Lenders pursuant to
Section 3.3 of this Agreement and (iv) all cash dividends or distributions, to
the extent permitted by this Agreement.
"FOREIGN COLLATERAL" shall mean any of the Collateral which (i) in the
case of tangible personal property is physically located outside the United
States of America, (ii) in the case of intangible personal property, relates to
filings made with any state or governmental agency located outside the United
States of America, and (iii) in the case of the Borrowers foreign Subsidiary,
Solartechniks HK Limited, any property of that Subsidiary including its accounts
receivable.
"FUNDED DEBT" shall mean all Indebtedness for money borrowed,
Indebtedness evidenced or secured by purchase money liens, Capitalized Lease
Obligations, outstandings under asset securitization vehicles, conditional sales
contracts and similar title retention debt instruments, including any current
maturities of such indebtedness, which by its terms matures more than one year
from the date of any calculation thereof and/or which is renewable or extendable
at the option of the obligor to a date beyond one year from such date. The
calculation of Funded Debt shall include (without duplication) (i) all Funded
Debt of the
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Consolidated Companies, (ii) all Funded Debt of other Persons, other than
Material Subsidiaries, which has been Guaranteed by a Consolidated Company,
which is supported by a letter of credit issued for the account of a
Consolidated Company, or as to which and to the extent a Consolidated Company or
its assets have otherwise become liable for payment thereof, and (iii) all
Indebtedness for money borrowed by the Consolidated Companies pursuant to lines
of credit or revolving credit facilities (regardless of the term thereof), and
(iv) all Subordinated Debt.
"GAAP" shall mean generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of determination.
"GUARANTEED INDEBTEDNESS" shall mean, as to any Person, any obligation
of such Person guaranteeing any indebtedness, lease, dividend, or other
obligation ("PRIMARY OBLIGATION") of any other Person (the "PRIMARY OBLIGOR") in
any manner including, without limitation, any obligation or arrangement of such
Person (i) to purchase or repurchase any such primary obligation; (ii) to
advance or supply funds (a) for the purchase or payment of any such primary
obligation, or (b) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor; (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation; (iv) to indemnify the owner of such primary obligation against loss
in respect thereof; (v) by which and to the extent said Person or its assets
have otherwise become liable for payment of any such primary obligation; or (vi)
supporting a letter of credit issued for the account of said primary obligor.
"GUARANTORS" shall mean, collectively, all present and future Material
Subsidiaries, and their respective successors and permitted assigns.
"GUARANTY" shall mean any contractual obligation, contingent or
otherwise, of a Person with respect to any Indebtedness or other obligation or
liability of another Person, including without limitation, any such
Indebtedness, obligation or liability directly or indirectly guaranteed,
endorsed, co-made or discounted or sold with recourse by that Person, or in
respect of which that Person is otherwise directly or indirectly liable,
including contractual obligations (contingent or otherwise) arising through any
agreement to purchase, repurchase, or otherwise acquire such Indebtedness,
obligation or liability or any security therefor, or any agreement to provide
funds for the payment or discharge thereof (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise), or to maintain
solvency, assets, level of income, or other financial condition, or to make any
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payment other than for value received. The amount of any Guaranty shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect to which said Guaranty is made or, if not so stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"GUARANTY AGREEMENTS" shall mean, collectively, the Guaranty Agreement
executed by each of the Guarantors from time to time in favor of the Lenders and
the Agent, substantially in the form of EXHIBIT "D" as the same may be amended,
restated or supplemented from time to time.
"HAZARDOUS MATERIALS" shall mean oil, petroleum or chemical liquids or
solids, liquid or gaseous products, asbestos, or any other hazardous waste or
Hazardous Substances, including, without limitation, hazardous medical waste or
any other substance described in any Hazardous Materials Law.
"HAZARDOUS MATERIALS LAW" shall mean the CERCLA and RCRA, the state
hazardous waste laws, as such laws may from time to time be in effect, and
related regulations, and all similar laws and regulations.
"HAZARDOUS SUBSTANCES" has the meaning assigned to that term in CERCLA.
"INCIDENTAL CONTRACTS" shall mean those contracts to which a
Consolidated Company is a party or by which its assets are bound, and as to
which (i) the assets or services provided to the Consolidated Company under said
contract are not material, (ii) the assets or services so provided under said
contract are generic in nature and can readily be replaced on substantially
comparable terms, or (iii) the loss of said assets or services would not have a
Materially Adverse Effect.
"INDEBTEDNESS" of any Person shall mean, without duplication (i) all
obligations of such Person which in accordance with GAAP would be shown on the
balance sheet of such Person as a liability (including, without limitation,
obligations for borrowed money and for the deferred purchase price of property
or services, obligations evidenced by bonds, debentures, notes or other similar
instruments, and contingent reimbursement obligations under undrawn letters of
credit); (ii) all Capitalized Lease Obligations; (iii) all Guaranteed
Indebtedness of such Person; (iv) Indebtedness of others secured by any Lien
upon property owned by such Person, whether or not assumed; and (v) obligations
or other liabilities under currency contracts, interest rate hedging contracts,
or similar agreements or combinations thereof.
"INTERCOMPANY CREDIT DOCUMENTS" shall mean, collectively, the
promissory notes and all related loan, subordination, and other agreements, to
the extent that they exist, relating in any manner to the Intercompany Loans.
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"INTERCOMPANY LOANS" shall mean, collectively, (i) the loans more
particularly described on SCHEDULE 6.23, and (ii) those loans or other
extensions of credit from time to time made by any Consolidated Company to
another Consolidated Company satisfying the terms and conditions set forth in
Section 8.1(e) or as may otherwise be approved in writing by the Agent and the
Required Lenders.
"INVESTMENT" shall mean, when used with respect to any Person, any
direct or indirect advance, loan or other extension of credit (other than the
creation of receivables in the ordinary course of business) or capital
contribution by such Person (by means of transfers of property to others or
payments for property or services for the account or use of others, or
otherwise) to any Person, or any direct or indirect purchase or other
acquisition by such Person of, or of a beneficial interest in, capital stock,
partnership interests, bonds, notes, debentures or other securities issued by
any other Person.
"LENDER" or "LENDERS" shall mean SunTrust Bank, Central Florida,
National Association, the other banks and lending institutions listed on the
signature pages hereof, and each Eligible Assignee thereof, if any.
"LENDING OFFICE" shall mean for each Lender the office such Lender may
designate in writing from time to time to Borrower and the Agent with respect to
each Type of Loan. In regard to any Notice of Borrowing or Notice of
Conversion/Continuation, the Lending Office for the Agent shall, unless
otherwise designated in writing by the Agent, be the Lending Office of the Agent
in Atlanta, Georgia.
"LEVERAGE RATIO" shall mean, of the relevant period, the ratio
determined by dividing Total Liabilities by EBITDA.
"LIEN" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind or description and shall include, without limitation,
any agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any capitalized lease in the nature thereof including any
lease or similar arrangement with a public authority executed in connection with
the issuance of industrial development revenue bonds or pollution control
revenue bonds, and the filing of or agreement to give any financing statement
under the Uniform Commercial Code of any jurisdiction.
"LIFE INSURANCE POLICY" shall mean a key man life insurance policy on
Stephen Nevitt in the initial amount of $2,000,000 and reduced from time to time
in amount as set forth in Section 7.13 below.
"LOANS" shall mean, collectively, the Term Loans.
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"MARGIN REGULATIONS" shall mean Regulation G, Regulation T, Regulation
U and Regulation X of the Board of Governors of the Federal Reserve System, as
the same may be in effect from time to time.
"MATERIAL PLACE OF BUSINESS" shall mean a Place of Business which is
either (i) owned by a Consolidated Company, or (ii) leased by a Consolidated
Company, at which the Consolidated Company manufactures or assembles any of its
inventory or equipment, or undertakes any administrative or management
functions, which current Material Places of Business are set forth in SCHEDULE
6.31(B) hereto.
"MATERIALLY ADVERSE EFFECT" shall mean the occurrence of an event which
could reasonably be expected to cause a materially adverse change in (i) the
business, results of operations, financial condition, assets or prospects of the
Consolidated Companies, taken as a whole, (ii) the ability of the Borrower to
perform its obligations under this Agreement, or (iii) the ability of the Credit
Parties (taken as a whole) to perform their respective obligations under the
Credit Documents.
"MATERIAL SUBSIDIARY" shall mean each Subsidiary of Borrower, now
existing or hereinafter established or acquired, that at any time, has or
acquires total assets in excess of $250,000 or that accounted for or produced
more than 10% of the Consolidated EBIT of Borrower on a consolidated basis
during any of the three most recently completed fiscal years of Borrower.
"MATURITY DATE" shall mean March 1, 2001.
"MINIMUM AVAILABILITY REQUIREMENT" shall have the meaning as set forth
in the CIT Subordination Agreement.
"MULTI-EMPLOYER PLAN" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"NET WORTH" shall mean assets in excess of liabilities, and shall be
determined in accordance with GAAP, on a consistent basis with the latest
audited statements.
"NOTE" shall mean any of the Term Notes, as originally executed and as
the same may be from time to time supplemented, modified, amended, renewed or
extended.
"OBLIGATIONS" shall mean all amounts owing to the Agent or any Lender
pursuant to the terms of this Agreement or any other Credit Document, including
without limitation, all Loans (including all principal and interest payments due
thereunder), fees (including reasonable attorneys' fees as permitted under any
Credit Document), expenses, indemnification and reimbursement payments, all
obligations due under any interest rate swap or hedge agreement described in
Section 7.12 below, indebtedness, liabilities, and obligations of the
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Credit Parties, direct or indirect, absolute or contingent, liquidated or
unliquidated, now existing or hereafter arising, together with all renewals,
extensions, modifications or refinancings thereof.
"PERMITTED LIENS" shall mean those Liens expressly permitted by Section
8.2 hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, and any
successor thereto.
"PERMITTED ACQUISITIONS" shall mean only an acquisition (whether by
merger, consolidation, purchase or otherwise, including the deposit by any
Consolidated Company of any downpayment with respect thereto), by any
Consolidated Company of any Person or substantially all the assets of said
Person which has been approved in writing by the holders of Senior Debt, and if
there is no Senior Debt outstanding, Agent.
"PERSON" shall mean any individual, partnership, joint venture, firm,
corporation, trust, unincorporated association, government or any department or
agency thereof, and any other entity whatsoever.
"PLACES OF BUSINESS" shall mean those locations owned or leased by any
Consolidated Company or at which any assets of any Consolidated Company are
located, as set forth in SCHEDULE 6.31(A) hereto.
"PLAN" shall mean any employee benefit plan, program, arrangement,
practice or contract, maintained by or on behalf of the Borrower or an ERISA
Affiliate, which provides benefits or compensation to or on behalf of employees
or former employees, whether formal or informal, whether or not written,
including but not limited to, the following types of plans:
(a) EXECUTIVE ARRANGEMENTS - any bonus, incentive
compensation, stock option, deferred compensation, commission,
severance, "GOLDEN PARACHUTE", "RABBI TRUST", or other executive
compensation plan, program, contract, arrangement or practice;
(b) ERISA PLANS - any "EMPLOYEE BENEFIT PLAN" defined in
Section 3(3) of ERISA, including, but not limited to, any defined
benefit pension plan, profit sharing plan, money purchase pension plan,
savings or thrift plan, stock bonus plan, employee stock ownership
plan, Multi-Employer Plan, or any plan, fund, program, arrangement or
practice providing for medical (including post-retirement medical),
hospitalization, accident, sickness, disability, or life insurance
benefits; and
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(c) OTHER EMPLOYEE FRINGE BENEFITS - any stock purchase,
vacation, scholarship, day care, prepaid legal services, severance pay
or other fringe benefit plan, program, arrangement, contract or
practice.
"PLEDGE AGREEMENT" shall mean, collectively, that certain Pledge
Agreement executed in favor of the Agent, substantially in the form of EXHIBIT
"B" providing for the grant of perfected Liens on the Pledged Stock as the same
may be amended, restated or supplemented from time to time.
"PLEDGED STOCK" shall mean, collectively, 100% of all the issued and
outstanding Capital Stock, together with all warrants, stock options, and other
purchase and conversion right with respect to such Capital Stock, of each
Material Subsidiary at any time outstanding.
"PRO RATA SHARE" shall mean, with respect to each of the Commitments of
each Lender and each Loan to be made by and each payment (including, without
limitation, any payment of principal, interest or fees) to be made to each
Lender, including the percentage designated as such Lender's Pro Rata Share of
such Commitments, such Loans, or such payments, as applicable, set forth under
the name of such Lender on the respective signature page for such Lender, in
each case as such Pro Rata Share may change from time to time as a result of
assignments or amendments made pursuant to this Agreement.
"RCRA" shall mean the meaning set forth in Section 6.16(a) of this
Agreement.
"REGULATION D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System, as the same may be in effect from time to time.
"REQUIRED LENDERS" shall mean, at any time, not less than two Lenders
holding at least 66 2/3% of the Total Commitments.
"REQUIREMENT OF LAW" for any Person shall mean the articles or
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or a court or other governmental authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"SECURITY AGREEMENT" shall mean, collectively, that certain Amended and
Restated Security Agreement executed in favor of the Agent, substantially in the
form of EXHIBIT "C" providing for the grant of perfected Liens on such of the
Collateral not constituting Pledged Stock or real property, as the same may be
amended, restated or supplemented from time to time, subject only to Liens
permitted under Section 8.2 below.
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"SECURITY DOCUMENTS" shall mean such Security Agreements, financing
statements, collateral assignment of life insurance policy, Pledge Agreements,
blank stock powers, Mortgage Documents and other documents as are necessary to
grant to the Agent, as agent for the Lenders, a perfected security interest in
the Collateral.
"SENIOR CREDITOR LOAN DOCUMENTS" shall mean the agreements, documents
and other items executed or delivered by Borrower in connection with the CIT
Financing Agreement.
"SENIOR CREDITOR TERM NOTE" shall mean the Secured Promissory Note made
by Borrower to CIT in its capacity as Lender under the CIT Financing Agreement
in the original principal amount of $725,000.
"SENIOR DEBT" shall have the meaning set forth in the CIT Subordination
Agreement, as in effect as of the date hereof.
"SENIOR DEBT DEFAULT" shall mean an Event of Default under (and as
defined in) the CIT Loan Agreement.
"STATEMENT DATE" shall mean the last day of the fiscal quarter of
Borrower to which the quarterly financial statements relate as delivered from
time to time by the Borrower under Section 7.7(b) hereof.
"STOCK OPTIONS" shall mean options granted by the Borrower from time to
time to its employees pursuant to the Borrower's stock option plan.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation or
other entity (including, without limitation, partnerships, joint ventures, and
associations) regardless of its jurisdiction of organization or formation, at
least a majority of the total combined voting power of all classes of voting
stock or other ownership interests of which shall, at the time as of which any
determination is being made, be owned by such Person, either directly or
indirectly through one or more other Subsidiaries.
"SURPLUS CASH FLOW" shall have the same meaning as set forth in the CIT
Subordination Agreement.
"SUNTRUST AFFILIATE" shall mean SunTrust Bank, Gulf Coast, N.A., or
such other affiliate of SunTrust as may be agreed upon between the Borrower and
the Agent.
"TANGIBLE NET WORTH" shall mean the Borrower's Net Worth at the time in
questions, after deducting therefrom the amount of all intangible items
reflected therein, including all unamortized debt discount and expense,
unamortized research and development expense, unamortized deferred charges,
goodwill, patents, trademarks, service marks, trade names,
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copyrights, unamortized excess cost of investment in Subsidiaries over equity at
dates of acquisition, and all similar items which should properly be treated as
intangibles in accordance with GAAP.
"TAXES" shall mean any present or future taxes, levies, imposts,
duties, fees, assessments, deductions, withholdings or other charges of whatever
nature, including without limitation, income, receipts, excise, property, sales,
transfer, license, payroll, withholding, social security and franchise taxes now
or hereafter imposed or levied by the United States, or any state, local or
foreign government or by any department, agency or other political subdivision
or taxing authority thereof or therein and all interest, penalties, additions to
tax and similar liabilities with respect thereto.
"TERM LOAN COMMITMENT" shall mean, as of the Closing Date for any
Lender, the amount of such Lender's commitment for Term Loans set forth opposite
each Lender's name on the signature page hereof.
"TERM LOANS" shall mean, collectively, the term loans made to Borrower
by the Lenders pursuant to Article III hereof.
"TERM NOTES" shall mean the promissory notes evidencing the Term Loans
in the form attached hereto as EXHIBIT "A".
"TOTAL CAPITAL" shall mean the sum of Funded Debt and Consolidated Net
Worth of the Consolidated Companies.
"TOTAL COMMITMENT" shall mean, for any Lender at any time, the sum of
such Lender's Term Loan, and "TOTAL COMMITMENTS" shall mean for all Lenders at
any time, the sum of the Total Commitments of Lenders.
"TOTAL LIABILITIES" shall mean total liabilities determined in
accordance with GAAP, on a basis consistent with the latest audited statements
of the Borrower.
"WHOLLY OWNED SUBSIDIARY" shall mean any Subsidiary, all the stock or
ownership interest of every class of which, except directors' qualifying shares,
shall, at the time as of which any determination is being made, be owned by
Borrower either directly or indirectly.
ARTICLE 1.1 ACCOUNTING TERMS AND DETERMINATION . Unless otherwise defined or
specified herein, all accounting terms shall be construed herein, all accounting
determinations hereunder shall be made, all financial statements required to be
delivered hereunder shall be prepared, and all financial records shall be
maintained in accordance with, GAAP.
ARTICLE 1.2
ARTICLE 1.3 OTHER DEFINITIONAL TERMS . The words "HEREOF", "HEREIN" and
"HEREUNDER" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any
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particular provision of this Agreement, and Article, Section, Schedule, Exhibit
and like references are to this Agreement unless otherwise specified.
ARTICLE 1.4
ARTICLE 1.5 EXHIBITS AND SCHEDULES . All Exhibits and Schedules attached hereto
are by reference made a part hereof.
ARTICLE 1.6
ARTICLE 2 THIS ARTICLE IS NOT APPLICABLE.
ARTICLE 1 TERM LOANS
ARTICLE 1.1 TERM LOAN COMMITMENTS; USE OF PROCEEDS.
ARTICLE 1.2
(a) Subject to and upon the terms and conditions herein set forth,
each Lender severally agrees to make to Borrower on the
Closing Date Term Loans in an aggregate amount equal to such
Lender's Term Loan Commitment. The existing Term Loans shall
be amended and restructured in the form of Term Loans as set
forth in this Agreement.
(a) The parties hereto agree that the aggregate principal balance
of all Term Loans of the Lenders shall not exceed $2,000,000,
and no Lender shall be obligated to make Term Loans in excess
of the Term Loan Commitment of such Lender.
ARTICLE 1.1 TERM NOTES; REPAYMENT OF PRINCIPAL.
ARTICLE 1.2
(a) Borrower's obligations to pay the principal of, and interest
on, the Term Loans to each Lender shall be evidenced by the
records of the Agent and such Lender and by the Term Note
payable to such Lender completed in conformity with this
Agreement.
(a) All outstanding amounts under the Term Loans shall be due and
payable as follows:
(i) Interest shall be due and payable in such amounts and
at the end of such periods as set forth in Sections
4.3 and 4.4 hereof;
(i) Principal shall be payable monthly in equal principal
payments of $111,000 beginning November 1, 1999, and
continuing on the first day of each and every month
thereafter;
(i) All unpaid principal and accrued but unpaid interest
shall be due and payable in full on the Maturity
Date.
(a) If as of the time a required principal payment is to be made
on the Term Notes the Borrower does not have a Minimum
Availability Requirement of at least $200,000, then, in that
event, the principal payments required to be made on the Term
Notes will be such principal payments as are permitted to be
made so as to maintain the Minimum Availability Requirement,
PROVIDED, HOWEVER, the foregoing shall not relieve the
Borrower from making the full payment due.
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ARTICLE 1.1 MANDATORY PREPAYMENTS OF SURPLUS CASH FLOW . The Borrower shall in
addition to the amounts set forth in Section 3.2 above, also pay to the Lenders
in accordance with their Pro Rata Shares for application on the Term Loans the
following amounts:
ARTICLE 1.2
(a) Subject to paragraph (b) below, 50% of all Surplus Cash, which
payment will be determined and made after the end of each
fiscal year of the Borrower.
(a) Until such time as the CIT Term Debt is paid in full, 25% of
the Surplus Cash shall be paid to CIT for application on the
CIT Term Debt (or if less than 25% of the Surplus Cash is then
due under CIT Term Debt, that amount shall be paid to CIT)
and, 25% of the Surplus Cash shall be paid to the Lenders in
accordances with their Pro Rata Shares for application on the
Term Loans.
Any prepayments made under this Section shall be made by the Borrower shall be
applied pro rata to the reduction of the remaining scheduled principal payments
under Section 3.2(b)(ii) above, in the inverse order of their maturity.
ARTICLE 1.1 STATUS OF PAYMENTS UNDER CIT SUBORDINATION AGREEMENT. Under the CIT
Subordination Agreement, the obligation of the Borrower to make payments upon
the Term Loans and the right of the Lenders to receive said payments are, under
certain circumstances, precluded. However:
ARTICLE 1.2
(a) To the extent the Borrower is permitted to make and the
Lenders are permitted to receive less than a full payment
otherwise required to be paid on the Term Loans, the Borrower
shall make said payment.
(a) If, under the terms of the CIT Subordination Agreement, the
restrictions precluding payment on the Term Loans expire or no
longer apply, the Borrower at that time shall pay to the
Lenders any amounts not previously paid on the Term Loans,
together with default interest, if applicable.
(a) Notwithstanding the provisions of the CIT Subordination
Agreement or the provisions of Section 3.2 (c) above regarding
the Minimum Availability Requirement, if a payment is required
to be made on the Term Loans and said payment is not made,
after any applicable grace period, the failure to make said
payment in full shall constitute an Event of Default
hereunder.
(b) The CIT Subordination Agreement is solely for the benefit of
CIT; nothing contained therein shall grant any rights or
privileges to the Borrower. Thus, for example, CIT and the
Lenders may, at any time, amend or modify the CIT
Subordination Agreement without the approval or consent of the
Borrower.
ARTICLE 1 GENERAL LOAN TERMS
ARTICLE 1.1 THIS SECTION IS NOT APPLICABLE.
ARTICLE 1.2
ARTICLE 1.3 THIS SECTION IS NOT APPLICABLE.
ARTICLE 1.4
ARTICLE 1.5 INTEREST.
ARTICLE 1.6
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(a) Borrower agrees to pay interest in respect of all unpaid
principal amounts of the Term Loans from the respective dates
such principal amounts were advanced to maturity (whether by
acceleration, notice of prepayment or otherwise) at rates per
annum (computed on the basis of a 360-day year based upon the
actual number of days elapsed) equal to the Base Advance Rate
in effect from time to time.
(a) Overdue principal and, to the extent not prohibited by
applicable law, overdue interest, in respect of the Term Loans
and all other overdue amounts owing hereunder, shall bear
interest from each date that such amounts are due, at the Base
Advance Rate PLUS an additional seven percent (7.0%) per
annum;
PROVIDED, HOWEVER, the interest charged shall never exceed the maximum
amount permitted from time to time by applicable law.
(a) Interest on each Loan shall accrue from and including the date
of such Loan to but excluding the date of any repayment
thereof shall be payable monthly in arrears on the first day
of each and every month commencing on November 1, 1999.
ARTICLE 1.1 THIS SECTION IS NOT APPLICABLE.
ARTICLE 1.2
ARTICLE 1.3 FEES. Borrower shall pay to the Agent, for the account of and
distribution of the respective Pro Rata Share to each Lender, the Commitment Fee
as follows:
ARTICLE 1.4
ARTICLE 1.5 $15,000 Upon the execution of this Agreement.
ARTICLE 1.6
ARTICLE 1.7 $ 7,500 On or before December 17, 1999.
ARTICLE 1.8
ARTICLE 1.9 $ 7,500 On or before March 17, 2000.
ARTICLE 1.10
ARTICLE 1.11 VOLUNTARY PREPAYMENTS OF BORROWINGS.
ARTICLE 1.12
(a) Borrower may, at its option, prepay Borrowings at any time in whole, or
from time to time in part, all without penalty.
(a) All voluntary prepayments shall be applied to the Term Loans shall be
applied pro-rata to the reduction of the remaining scheduled principal
payments on the Term Loan in the inverse order of maturity.
ARTICLE 1.2 PAYMENTS, ETC.
ARTICLE 1.3
(a) Except as otherwise specifically provided herein, all payments
under this Agreement and the other Credit Documents, other
than the payments specified in clause (b) below, shall be made
without demand, defense, set-off or counterclaim to the Agent,
not later than 3:00 p.m. (local time for the Agent) on the
date when due and shall be made in Dollars in immediately
available funds to the Agent at the Agent's Lending Office.
The Agent shall then pay to each Lender that Lender's Pro Rata
Share of said payment.
(a) All such payments shall be made free and clear of and without
deduction or withholding for any Taxes in respect of this
Agreement, the Notes or other Credit Documents, or any
payments of principal, interest, fees or other amounts payable
hereunder
17
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or thereunder (but excluding any Taxes imposed on the overall
net income of the Lenders pursuant to the laws of any
jurisdiction). If any Taxes are so levied or imposed (other
than excluded Taxes based on income as set forth above),
Borrower agrees (A) to pay the full amount of such Taxes, and
such additional amounts as may be necessary so that every net
payment of all amounts due hereunder and under the Notes and
other Credit Documents, after withholding or deduction for or
on account of any such Taxes (including additional sums
payable under this Section 4.7), will not be less than the
full amount provided for herein had no such deduction or
withholding been required, (B) to make such withholding or
deduction, and (C) to pay the full amount deducted to the
relevant authority in accordance with applicable law. Borrower
will furnish to the Agent and each Lender, within thirty days
after the date the payment of any Taxes is due pursuant to
applicable law, certified copies of tax receipts evidencing
such payment by Borrower. Borrower will indemnify and hold
harmless the Agent and each Lender and reimburse the Agent and
each Lender upon written request for the amount of any such
Taxes (exclusive of any taxes imposed on the overall net
income of any Lender) so levied or imposed and paid by the
Agent or Lender and any liability (including penalties,
interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or illegally
asserted. A certificate as to the amount of such payment by
such Lender or the Agent, absent manifest error, shall be
final, conclusive and binding for all purposes; Each Lender
that is organized under the laws of any jurisdiction other
than the United States of America or any State thereof
(including the District of Columbia) agrees to furnish to
Borrower and the Agent, prior to the time it becomes a Lender
hereunder, two copies of either U.S. Internal Revenue Service
Form 4224 or U.S. Internal Revenue Service Form 1001 or any
successor forms thereto (wherein such Lender claims
entitlement to complete exemption from or reduced rate of U.S.
Federal withholding tax on interest paid by Borrower
hereunder) and to provide to Borrower and the Agent a new Form
4224 or Form 1001 or any successor forms thereto if any
previously delivered form is found to be incomplete or
incorrect in any material respect or upon the obsolescence of
any previously delivered form PROVIDED, HOWEVER, that no
Lender shall be required to furnish a form under this
paragraph (ii) if it is not entitled to claim an exemption
from or a reduced rate of withholding under applicable
law. A Lender that is not entitled to claim an exemption
from or a reduced rate of withholding under applicable law,
shall promptly upon written request of Borrower, so inform
Borrower in writing.
(a) Subject to Section 4.4(a)(ii), whenever any payment to be made
hereunder or under any Note shall be stated to be due on a day
which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and, with respect
to payments of principal, interest thereon shall be payable at
the applicable rate during such extension.
(a) All computations of interest and fees shall be made on the
basis of a year of 360 days based on the actual number of days
elapsed (including the first day but excluding the last day)
occurring in the period for which such interest or fees are
payable (to the extent computed on the basis of days elapsed)
(a) Payment by Borrower to the Agent in accordance with the terms
of this Agreement shall, as to Borrower, constitute payment to
the Lenders under this Agreement.
ARTICLE 1.1 THIS SECTION IS NOT APPLICABLE.
ARTICLE 1.2
ARTICLE 1.3 THIS SECTION IS NOT APPLICABLE.
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ARTICLE 1.4
ARTICLE 1.5 THIS SECTION IS NOT APPLICABLE.
ARTICLE 1.6
ARTICLE 1.7 THIS SECTION IS NOT APPLICABLE.
ARTICLE 1.8
ARTICLE 1.9 THIS SECTION IS NOT APPLICABLE.
ARTICLE 1.10
ARTICLE 1.11 THIS SECTION IS NOT APPLICABLE.
ARTICLE 1.12
ARTICLE 1.13 THIS SECTION IS NOT APPLICABLE.
ARTICLE 1.14
ARTICLE 1.15 SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment or
reduction (including, without limitation, any amounts received as adequate
protection of a deposit treated as cash collateral under the Bankruptcy Code) of
the Obligations (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) in excess of its pro rata portion of payments or
reductions on account of such obligations obtained by all the Lenders, such
Lender shall forthwith (i) notify each of the other Lenders and Agent of such
receipt, and (ii) purchase from the other Lenders such participations in the
affected obligations as shall be necessary to cause such purchasing Lender to
share the excess payment or reduction, net of costs incurred in connection
therewith, ratably with each of them, provided that if all or any portion of
such excess payment or reduction is thereafter recovered from such purchasing
Lender or additional costs are incurred, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery or such additional costs,
but without interest unless the Lender obligated to return such funds is
required to pay interest on such funds. Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 4.15
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of Borrower in the amount of such
participation.
ARTICLE 1.16
ARTICLE 1.17 CAPITAL ADEQUACY . Without limiting any other provision of this
Agreement, in the event that any Lender shall have determined that the adoption
of any law, treaty, governmental (or quasi-governmental) rule, regulation,
guideline or order regarding capital adequacy not currently in effect or fully
applicable as of the Closing Date, or any change therein or in the
interpretation or application thereof after the Closing Date, or compliance by
such Lender with any request or directive regarding capital adequacy not
currently in effect or fully applicable as of the Closing Date (whether or not
having the force of law and whether or not failure to comply therewith would be
unlawful) from a central bank or governmental authority or body having
jurisdiction, does or shall have the effect of reducing the rate of return on
such Lender's capital as a consequence of its obligations hereunder to a level
below that which such Lender could have achieved but for such law, treaty, rule,
regulation, guideline or order, or such change or compliance (taking into
consideration such Lender's policies with respect to capital adequacy by an
amount deemed by such Lender to be material, then within ten Business Days after
written notice and demand by such Lender (with copies thereof to the Agent),
Borrower shall from time to time pay to such Lender additional amounts
sufficient to compensate such Lender for such reduction (but, in the case of
outstanding Base Rate Advances, without duplication of any amounts already
recovered by such Lender by reason of an adjustment in the applicable Base
Rate). Each certificate as to the amount payable under this Section 4.16 (which
certificate shall set forth the basis for requesting such amounts in reasonable
detail), submitted to Borrower by any Lender in good faith, shall, absent
manifest error, be final, conclusive and binding for all purposes.
ARTICLE 1.18
ARTICLE 1.19 THIS SECTION IS NOT APPLICABLE.
ARTICLE 1.20
ARTICLE 1.21 LIMITATION ON CERTAIN PAYMENT OBLIGATIONS.
(a) Each Lender or Agent shall make written demand on Borrower for
indemnification or compensation pursuant to Section 4.7 hereof
no later than ninety (90) days after the
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earlier of (i) the date on which such Lender or Agent makes
payment of such Taxes, and (ii) the date on which the relevant
taxing authority or other governmental authority makes written
demand upon such Lender or Agent for payment of such Taxes.
(a) THIS SUBSECTION IS NOT APPLICABLE.
(a) Each Lender or Agent shall make written demand on Borrower for
indemnification or compensation pursuant to Section 4.16 no
later than ninety days after such Lender or Agent receives
actual notice or obtains actual knowledge of the promulgation
of a law, rule, order or interpretation or occurrence of
another event giving rise to a claim pursuant to such
sections.
(a) In the event that the Lenders or Agent fail to give Borrower
notice within the time limitations prescribed in paragraphs
(a) or (b) above, Borrower shall not have any obligation to
pay such claim for compensation or indemnification. In the
event that the Lender or Agent fail to give Borrower notice
within the time limitation prescribed in paragraph (c) above,
Borrower shall not have any obligation to pay any amount with
respect to claims accruing prior to the ninetieth day
preceding such written demand.
ARTICLE 1.1 THIS SECTION IS NOT APPLICABLE.
ARTICLE 1.2
ARTICLE 2 CONDITIONS TO BORROWINGS
CONDITIONS TO BORROWINGS
ARTICLE 1
ARTICLE 2 The obligations of each Lender to accept a Term Note on the Closing
Date is subject to the satisfaction of the following conditions:
ARTICLE 3
ARTICLE 3.1 CONDITIONS PRECEDENT TO RESTRUCTURING OF TERM LOANS. The Agent shall
have received the following, in form and substance reasonably satisfactory in
all respects to the Agent:
ARTICLE 3.2
(a) The duly executed counterparts of this Agreement;
(a) The duly executed Term Notes evidencing the Term Loan
Commitments;
(a) The duly executed Credit Documents, to the extent not
otherwise specifically identified herein;
(a) The duly executed CIT Subordination Agreement;
(a) The payment to the Lenders of all other amounts due and owing
to the Lenders other than the $2,000,000 due on the
restructured Term Notes;
(a) Evidence reasonably satisfactory to the Agent that the
Borrower, concurrently with the restructuring of the Term
Loans, will complete the CIT Financing, and the furnishing to
the Agent copies of all loan documents executed in connection
with the CIT Financing and referenced or provided for in the
CIT Financing Agreement;
20
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(a) Duly executed Certificates of the Secretary or Assistant Secretary of
each of the Credit Parties attaching and certifying copies of the
resolutions of the boards of directors of the Credit Parties,
authorizing as applicable the execution, delivery and performance of
the Credit Documents;
(a) Duly executed Certificates of the Secretary or an Assistant Secretary
of the Borrower and, in the case of Solartechniks, a Director,
certifying (i) the name, title and true signature of each officer of
such entities executing the Credit Documents, and (ii) in the case of
the Borrower, the bylaws or comparable governing documents of such
entities;
(a) Photocopies of Certified copies of the certificate or articles of
incorporation of the Borrower certified by the Secretary of State or
the Secretary or Assistant Secretary of the Borrower, together with
photocopies of certificates of good standing or existence, as may be
available from the Secretary of State of the jurisdiction of
incorporation or organization of the Borrower;
(a) If and to the extent required by the Agent, copies of all documents and
instruments, including all consents, authorizations and filings,
required or advisable under any Requirement of Law or by any material
Contractual Obligation of the Credit Parties, in connection with the
execution, delivery, performance, validity and enforceability of the
Credit Documents and the other documents to be executed and delivered
hereunder, and such consents, authorizations, filings and orders shall
be in full force and effect and all applicable waiting periods shall
have expired;
(a) If and to the extent required by the Agent, certified copies of the
Intercompany Credit Documents, to the extent that they exist;
(a) If and to the extent required by the Agent, a summary, set forth in
format and detail reasonably acceptable to the Agent, of the types and
amounts of insurance (property and liability) maintained by the
Consolidated Companies;
(a) The duly executed favorable opinion of Cooperman Levitt Winikoff Lester
& Newman, P.C., counsel to the Borrower, substantially in the form of
EXHIBIT "F" attached hereto addressed to the Agent and each of the
Lenders;
(a) No Default or Event of Default has occurred, and there has been
delivered to the Agent the Closing Certificate in the form attached
hereto as EXHIBIT "E" attached hereto to this effect;
(a) The establishment of $2,000,000 in key man life insurance on Mr.
Stephen Nevitt, as set forth in Section 7.13 hereof.
(a) A copy of the management letter furnished by the accountants for the
Borrower for the audited financial statements for the fiscal year
ending December 31, 1998; and
(a) The Agent shall have received such other documents or legal opinions as
the Agent or any Lender may reasonably request, all in form and
substance reasonably satisfactory to the Agent.
21
<PAGE>
ARTICLE 1.1 THIS SECTION IS NOT APPLICABLE.
ARTICLE 1.2
ARTICLE 2 REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES
ARTICLE 1
ARTICLE 2 Borrower represents, warrants and covenants to Lenders that:
ARTICLE 3
ARTICLE 3.1 ORGANIZATION AND QUALIFICATION. Borrower is a corporation duly
organized and existing in good standing under the laws of the State of New York.
Each Subsidiary of Borrower is a corporation duly organized and existing under
the laws of Hong Kong. Borrower and each of its Subsidiaries are duly qualified
to do business as a foreign corporation and are in good standing in each
jurisdiction in which the character of their properties or the nature of their
business makes such qualification necessary, except for such jurisdictions in
which a failure to qualify to do business would not have a Materially Adverse
Effect. Borrower and each of its Subsidiaries have the corporate power to own
their respective properties and to carry on their respective businesses as now
being conducted.
ARTICLE 3.2
ARTICLE 3.3 CORPORATE AUTHORITY. The execution and delivery by Credit Parties of
and the performance by Credit Parties of their obligations under the Credit
Documents have been duly authorized by all requisite corporate action and all
requisite shareholder action, if any, on the part of Credit Parties and do not
and will not (i) violate any provision of any law, rule or regulation, any
judgment, order or ruling of any court or governmental agency, the
organizational papers or bylaws of Credit Parties, or except for any Incidental
Contracts, any indenture, agreement or other instrument to which Credit Parties
are a party or by which Credit Parties or any of their properties is bound, or
(ii) except for any Incidental Contracts be in conflict with, result in a breach
of, or constitute with notice or lapse of time or both a default under any such
indenture, agreement or other instrument.
ARTICLE 3.4
ARTICLE 3.5 THIS SECTION IS NOT APPLICABLE.
ARTICLE 3.6
ARTICLE 3.7 BORROWER FINANCIAL STATEMENTS. Borrower has furnished Lenders with
the following financial statements, identified by the Treasurer of Borrower:
consolidated balance sheets and consolidated statements of income, stockholders'
equity and cash flow of Borrower as of and for the fiscal years ended on the
last day in December 1997 and 1998 certified by BDO Seidman, and the six (6)
month consolidated balance sheets and consolidated statements of income and
stockholder equity of Borrower as and for the six (6) months ended on June 30,
1999. Such Borrower financial statements (including any related schedules and
notes) are true and correct in all material respects, have been prepared in
accordance with GAAP consistently applied throughout the period or periods in
question (subject, as to interim statements, to omissions or condensations as
stated in the notes thereto, and to changes resulting from audits and year end
adjustments) and show, in the case of audited statements, all liabilities,
direct or contingent, of Borrower and its subsidiaries, required to be shown in
accordance with GAAP consistently applied throughout the period or periods in
question and fairly present in all material respects the consolidated financial
position and the consolidated results of operations of Borrower and its
Subsidiaries for the periods indicated therein. To Borrower's knowledge, after
inquiry, there has been no change in the business, condition or operations,
financial or otherwise, of Borrower and its Subsidiaries (taken as a whole)
since June 30, 1999 which could reasonably be expected to have a Materially
Adverse Effect.
ARTICLE 3.8
ARTICLE 3.9 TAX RETURNS. Except as set forth on SCHEDULE 6.5 attached hereto,
each of Borrower and its Subsidiaries has filed all federal, state and other
income tax returns which, to the best knowledge of Borrower and its
Subsidiaries, are required to have been filed, and each has paid all taxes as
shown on said returns and on all assessments received by it to the extent that
such taxes have become due or except such as are being
22
<PAGE>
contested in good faith by appropriate proceedings for which adequate reserves
have been established in accordance with GAAP.
ARTICLE 3.10
ARTICLE 3.11 ACTIONS PENDING. Except as disclosed in filing made by the
Borrower with the Securities and Exchange Commission, there is no action,
suit, investigation or proceeding pending or, to the knowledge of Borrower,
threatened against or affecting Borrower or any of its Subsidiaries or any of
their properties or rights, by or before any court, arbitrator or
administrative or governmental body, which could reasonably be expected to
result in any Materially Adverse Effect.
ARTICLE 3.12
ARTICLE 3.13 REPRESENTATIONS; NO DEFAULTS. At the time of each Borrowing, there
shall exist no Default or Event of Default.
ARTICLE 3.14
ARTICLE 3.15 TITLE TO PROPERTIES. Each of Borrower and its Subsidiaries has (i)
good and marketable fee simple title to its respective real properties (other
than real properties which it leases from others), including all such real
properties reflected in the consolidated balance sheet of Borrower and its
Subsidiaries as of December 31, 1998 hereinabove described (other than real
properties disposed of in the ordinary course of business), subject to no Lien
of any kind except as set forth on SCHEDULE 6.8 attached hereto or as permitted
by Section 8.2 hereof, and (ii) good title to all of its other respective
properties and assets (other than properties and assets which it leases from
others), (other than properties and assets disposed of in the ordinary course of
business or sold in accordance with Section 8.3 below), subject to no Lien of
any kind except as set forth on said SCHEDULE 6.8, or as permitted by Section
8.2 hereof. Each of Borrower and its Subsidiaries enjoys peaceful and
undisturbed possession under all leases necessary in any material respect for
the operation of its respective properties and assets, none of which contains
any unusual or burdensome provisions which might materially affect or impair the
operation of such properties and assets, and all such leases are valid and
subsisting and in full force and effect.
ARTICLE 3.16
ARTICLE 3.17 ENFORCEABILITY OF AGREEMENT. This Agreement is the legal, valid and
binding agreement of Borrower enforceable against Borrower in accordance with
its terms, and the Notes, and all other Credit Documents, when executed and
delivered, will be similarly legal, valid, binding and enforceable as against
all applicable Credit Parties, except as the enforceability of the Notes and
other Credit Documents may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditor's rights and remedies in general
and by general principles of equity, whether considered in a proceeding at law
or in equity.
ARTICLE 3.18
ARTICLE 3.19 CONSENT . Except for such consents of parties to any Incidental
Contracts, no consent, permission, authorization, order or license of any
governmental authority or Person is necessary in connection with the execution,
delivery, performance or enforcement of the Credit Documents.
ARTICLE 3.20
ARTICLE 3.21 USE OF PROCEEDS; FEDERAL RESERVE REGULATIONS. The proceeds of the
Notes will be used solely for the purposes specified in Section 2.1(c) and
3.1(c) and none of such proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any "MARGIN SECURITY" or "MARGIN STOCK" or for
the purpose of reducing or retiring any indebtedness that originally was
incurred to purchase or carry a "MARGIN SECURITY" or "MARGIN STOCK" or for any
other purpose that might constitute this transaction a "PURPOSE CREDIT" within
the meaning of the regulations of the Board of Governors of the Federal Reserve
System.
ARTICLE 3.22
ARTICLE 3.23 ERISA.
ARTICLE 3.24
(a) COMPLIANCE. Each Plan is being maintained, by its terms and in
operation, in accordance with all applicable laws, except such
noncompliance (when taken as a whole) that will not have a
Materially Adverse Effect;
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(a) LIABILITIES. Neither the Borrower nor any Subsidiary is
currently or will become subject to any liability (including
withdrawal liability), tax or penalty whatsoever to any person
whomsoever with respect to any Plan including, but not limited
to, any tax, penalty or liability arising under Title I or
Title IV of ERISA or Chapter 43 of the Code, except such
liabilities (when taken as a whole) as will not have a
Materially Adverse Effect; and
(a) FUNDING. The Borrower and each ERISA Affiliate have made full
and timely payment of all amounts (i) required to be
contributed under the terms of each Plan and applicable law
and (ii) required to be paid as expenses of each Plan, except
where such non-payment would not have a Materially Adverse
Effect. As of the date of this Agreement, no Plan has an
"AMOUNT OF UNFUNDED BENEFIT LIABILITIES" (as defined in
Section 4001(a)(18) of ERISA) except as disclosed on said
SCHEDULE 6.12. No Plan is subject to a waiver or extension of
the minimum funding requirements under ERISA or the Code, and
no request for such waiver or extension is pending.
ARTICLE 1.1 SUBSIDIARIES. SCHEDULE 6.1 attached hereto sets forth each
Subsidiary of the Borrower as of the date of this Agreement, designating which
are Material Subsidiaries, if any. All the outstanding shares of Capital Stock
of each such Subsidiary have been validly issued and are fully paid and
nonassessable and all such outstanding shares, except as noted on said SCHEDULE
6.1 hereto, are owned by Borrower or a Wholly Owned Subsidiary of Borrower free
of any Lien or claim (other than those in favor of the holders of Senior Debt
and the Agent).
ARTICLE 1.2
ARTICLE 1.3 OUTSTANDING INDEBTEDNESS. Except as set forth on SCHEDULE 6.14
attached hereto, as of the Closing Date and after giving effect to the
transactions contemplated by this Agreement, no Credit Party has outstanding
any Indebtedness except as permitted by Section 8.1 hereof and as of the
Closing Date there exists no default under the provisions of any instrument
evidencing such Indebtedness or of any agreement relating thereto except as
noted on said SCHEDULE 6.14.
ARTICLE 1.4
ARTICLE 1.5 CONFLICTING AGREEMENTS. Except as set forth on SCHEDULE 6.15
attached hereto, none of Borrower or any of its Subsidiaries is a party to
any contract or agreement or other burdensome restrictions or subject to any
charter or other corporate restriction which could reasonably be expected to
have a Materially Adverse Effect. Assuming the consummation of the
transactions contemplated by this Agreement, neither the execution or
delivery of this Agreement or the Credit Documents, nor fulfillment of or
compliance with the terms and provisions hereof and thereof, will except as
set forth in said SCHEDULE 6.15, conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a default under, or result
in any violation of, or result in the creation of any Lien upon any of the
properties or assets of Borrower or any of its Subsidiaries (other than those
in favor of the holders of Senior Debt and the Agent) the charter or By-Laws
of Borrower or any of its Subsidiaries, any award of any arbitrator or any
agreement (including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which Borrower or any
of its Subsidiaries is subject, and none of Borrower or any of its
Subsidiaries is a party to, or otherwise subject to any provision contained
in, any instrument evidencing Indebtedness of Borrower or any of its
Subsidiaries in an amount exceeding $100,000, any agreement relating thereto
or any other contract or agreement (including its charter but excluding
Incidental Contracts) which limits the amount of, or otherwise imposes
restrictions on the incurring of, Indebtedness of the type to be evidenced by
the Notes or contains dividend or redemption limitations on Common Stock of
Borrower, except for the CIT Financing Agreement this Agreement, Borrower's
Certificate of Incorporation, and those matters listed on said SCHEDULE 6.15.
ARTICLE 1.6
ARTICLE 1.7 POLLUTION AND OTHER REGULATIONS.
ARTICLE 1.8
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(a) Except as set forth on SCHEDULE 6.16(a) attached hereto, each
of the Borrower and its Subsidiaries has to the best of its
knowledge complied in all material respects with all
applicable Environmental Laws, including without limitation,
compliance with permits, licenses, standards, schedules and
timetables issued pursuant to Environmental Laws, and is not
in violation of, and does not presently have outstanding any
liability under, has not been notified that it is or may be
liable under and does not have knowledge of any material
liability or potential material liability (including any
liability relating to matters set forth on said SCHEDULE
6.16(a)), under any applicable Environmental Law, including
without limitation, the Resource Conservation and Recovery Act
of 1976, as amended ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
by the Superfund Amendments and Reauthorization Act of 1986
("CERCLA"), the Federal Water Pollution Control Act, as
amended ("FWPCA"), the Federal Clean Air Act, as amended
("FCAA"), and the Toxic Substance Control Act ("TSCA"), which
violation, liability or potential liability could reasonably
be expected to have a Materially Adverse Effect.
(a) Except as set forth on SCHEDULE 6.16(b) attached hereto, as of
the date of this Agreement, neither the Borrower nor any of
its Subsidiaries has received a written request for
information under CERCLA, any other Environmental Laws or any
comparable state law, or any public health or safety or
welfare law or written notice that any such entity has been
identified as a potential responsible party under CERCLA, and
other Environmental Laws, or any comparable state law, or any
public health or safety or welfare law, nor has any such
entity received any written notification that any Hazardous
Materials that it or any of its respective predecessors in
interest has generated, stored, treated, handled, transported,
or disposed of, has been released or is threatened to be
released at any site at which any Person intends to conduct or
is conducting a remedial investigation or other action
pursuant to any applicable Environmental Law.
(a) Except as set forth on SCHEDULE 6.16(c) attached hereto, each
of the Borrower and its Subsidiaries has obtained all material
permits, licenses or other authorizations required for the
conduct of their respective operations under all applicable
Environmental Laws and each such authorization is in full
force and effect, except where the failure to do so would not
have a Materially Adverse Effect.
ARTICLE 1.1 POSSESSION OF FRANCHISES, LICENSES, ETC. Each of Borrower and its
Subsidiaries possesses all material franchises, certificates, licenses, permits
and other authorizations from governmental political subdivisions or regulatory
authorities, free from burdensome restrictions, the failure of which to possess
would have a Materially Adverse Effect and neither Borrower nor any of its
Subsidiaries is in violation of any thereof in any material respect.
ARTICLE 1.2
ARTICLE 1.3 PATENTS, ETC. Except as set forth on SCHEDULE 6.18 attached hereto,
each of Borrower and its Subsidiaries owns or has the right to use all patents,
trademarks, service marks, trade names, copyrights, licenses and other rights,
free from burdensome restrictions, which are necessary for the operation of its
business as presently conducted. Nothing has come to the attention of Borrower
or any of its Subsidiaries to the effect that (i) any product, process, method,
substance, part or other material presently contemplated to be sold by or
employed by Borrower or any of its Subsidiaries in connection with its business
may infringe any patent, trademark, service mark, trade name, copyright, license
or other right owned by any other Person, (ii) there is pending or threatened
any claim or litigation against or affecting Borrower or any of its Subsidiaries
contesting its right to sell or use any such product, process, method,
substance, part or other material or (iii) there is, or there is pending or
proposed, any patent, invention, device, application or principle or any
statute, law, rule, regulation, standard or code, which would in any case
prevent, materially inhibit or render obsolete
25
<PAGE>
the production or sale of any products of, or substantially reduce the projected
revenues of, or otherwise have a Materially Adverse Effect.
ARTICLE 1.4
ARTICLE 1.5 GOVERNMENTAL CONSENT. Neither the nature of Borrower or any of its
Subsidiaries nor any of their respective businesses or properties, nor any
relationship between Borrower and any other Person, nor any circumstance in
connection with the execution and delivery of the Credit Documents and the
consummation of the transactions contemplated thereby is such as to require on
behalf of Borrower or any of its Subsidiaries any consent, approval or other
action by or any notice to or filing with any court or administrative or
governmental body in connection with the execution and delivery of this
Agreement and the Credit Documents, except for such filings with the Securities
and Exchange Commission as may be required by applicable law (which filings the
Borrower agrees to make promptly and diligently pursue to completion) or such
filings as are necessary to perfect the Liens of the holders of Senior Debt.
ARTICLE 1.6
ARTICLE 1.7 DISCLOSURE. Neither this Agreement nor the Credit Documents nor any
other document, certificate or written statement furnished to Lenders by or on
behalf of Borrower in connection herewith contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which they were made, not misleading. There is no fact peculiar to Borrower
which materially adversely affects or in the future may (so far as Borrower can
now foresee) materially adversely affect the business, property or assets,
financial condition or prospects of Borrower which has not been set forth in
this Agreement or in the Credit Documents, other documents, certificates and
written statements furnished to Lenders by or on behalf of Borrower prior to the
date hereof in connection with the transactions contemplated hereby.
ARTICLE 1.8
ARTICLE 1.9 INSURANCE COVERAGE. Each property of Borrower or any of its
Subsidiaries is insured in amounts deemed adequate by Borrower's management and
no less than those amounts customary in the industry in which Borrower and its
Subsidiaries operate against risks usually insured against by Persons operating
businesses similar to those of Borrower or its Subsidiaries in the localities
where such properties are located.
ARTICLE 1.10
ARTICLE 1.11 LABOR MATTERS.
ARTICLE 1.12
(a) Except as set forth on SCHEDULE 6.22 attached hereto for the
period ending on the Closing Date, the Borrower and the
Borrower's Subsidiaries have experienced no strikes, labor
disputes, slow downs or work stoppages due to labor
disagreements which have had, or would reasonably be expected
to have, a Materially Adverse Effect, and, to the best
knowledge of Borrower, there are no such strikes, disputes,
slow downs or work stoppages threatened against any Borrower
or any of Borrower's Subsidiaries, the result of which could
have a Materially Adverse Effect.
(a) The hours worked and payment made to employees of the Borrower
and Borrower's Subsidiaries have not been in violation in any
material respect of the Fair Labor Standards Act or any other
applicable law dealing with such matters.
(a) All payments due from the Borrower and Borrower's
Subsidiaries, or for which any claim may be made against the
Consolidated Companies, on account of wages and employee
health and welfare insurance and other benefits have been paid
or accrued as liabilities on the books of the Borrower and
Borrower's Subsidiaries where the failure to pay or accrue
such liabilities would reasonably be expected to have a
Materially Adverse Effect.
26
<PAGE>
(a) Each of Borrower and its Subsidiaries complies in all material
respects with all laws and regulations relating to equal
employment opportunity and employee safety in all
jurisdictions in which it is presently doing business, and
Borrower will use its best efforts to comply, and to cause
each of its Subsidiaries to comply, with all such laws and
regulations which may be legally imposed in the future in
jurisdictions in which Borrower or any of its Subsidiaries may
then be doing business, except where the failure to do so
would not have a Materially Adverse Effect.
ARTICLE 1.1 INTERCOMPANY LOANS; DIVIDENDS. The Intercompany Loans and the
Intercompany Credit Documents, to the extent that they exist, have been duly
authorized and approved by all necessary corporate and shareholder action on the
part of the parties thereto, and constitute the legal, valid and binding
obligations of the parties thereto, enforceable against each of them in
accordance with their respective terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
creditors' rights generally, and by general principles of equity. Except as set
forth in the Credit Documents, there are no restrictions on the power of any
Consolidated Company to repay any Intercompany Loan or to pay dividends on the
Capital Stock. Intercompany loans as of the Closing Date are described in
SCHEDULE 6.23 attached hereto.
ARTICLE 1.2
ARTICLE 1.3 BURDENSOME RESTRICTIONS. Except as set forth on SCHEDULE 6.24, on
the Closing Date none of the Consolidated Companies is a party to or bound by
any Contractual Obligation or Requirement of Law which has had or would
reasonably be expected to have a Materially Adverse Effect.
ARTICLE 1.4
ARTICLE 1.5 SOLVENCY. Each of the Consolidated Companies is solvent and able to
pay its debts as and when they accrue and are due.
ARTICLE 1.6
ARTICLE 1.7 COMPLIANCE WITH LAWS . Except as set forth on SCHEDULE 6.26 attached
hereto, each Consolidated Company is in compliance with all laws, statutes,
orders, rules, regulations, or judgments entered by any court, the failure of
which could reasonably be expected to have a Material Adverse Effect.
ARTICLE 1.8
ARTICLE 1.9 PERMITTED INVESTMENTS . Except as set forth in SCHEDULE 6.27
attached hereto, no Consolidated Company has any Investment, either equity or
long-term indebtedness, in any other Person not Affiliated with the Borrower.
ARTICLE 1.10
ARTICLE 1.11 PERFECTED SECURITY INTEREST IN COLLATERAL. The Agent, for and in
behalf of the Lenders, has a perfected security interest in the Collateral to
secure the Obligations subject to no other Liens except as permitted in Section
8.2 hereof.
ARTICLE 1.12
ARTICLE 1.13 THIS SECTION IS NOT APPLICABLE.
ARTICLE 1.14
ARTICLE 1.15 CAPITAL STOCK.
ARTICLE 1.16
(a) The authorized Capital Stock of the Borrower consists of (i)
10,000,000 shares of common stock, $.001 par value, of which
2,384,000 shares are issued and outstanding and (ii) 1,000,000
shares of preferred stock, par value $.001 per share, of which
7,500 shares of Series A 6.5% Convertible Preferred Stock,
7,500 shares of Series B 6% Convertible Preferred Stock and
7,500 shares of Series C 6% Convertible Preferred Stock are
issued and outstanding on the Closing Date (collectively, the
"PREFERRED STOCK"). All outstanding Capital Stock of the
Borrower is validly issued, fully paid and nonassessable.
27
<PAGE>
(a) Except for (i) the Preferred Stock as referred to in the
Financial Statements of Borrower identified in Section 6.4
above, (ii) the Existing Warrants, (iii) the Underwriter
Option and (iv) the Stock Options, both existing on the
Closing Date and as may be issued from time to time in
accordance with the Borrower's stock option plan, none of the
Borrower or any Subsidiary of the Borrower has outstanding any
options, warrants or similar rights to acquire its Capital
Stock, any securities convertible into or exchangeable for
such Capital Stock, or any stock appreciation rights or
phantom stock plans.
(a) None of the Borrower or any subsidiary of the Borrower is
subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of its Capital
Stock or any warrants, options or other securities or rights
directly or indirectly convertible into or exercisable or
exchangeable for its Capital Stock.
ARTICLE 1.1 PLACES OF BUSINESS.
ARTICLE 1.2
(a) The Places of Business identified in SCHEDULE 6.31(a) attached
hereto constitute all the Places of Business for the
Consolidated Companies.
(a) The Places of Business identified in SCHEDULE 6.31(b) attached
hereto as Material Places of Business are the only Places of
Business which are Material Places of Business.
ARTICLE 1.1 Y2K COMPLIANCE. The Borrower has taken reasonable steps to ensure
that the Borrower's and each Subsidiary's software and hardware systems which
impact or affect in any material way the business operations of the Borrower and
its Subsidiaries will be Year 2000 Compliant and Ready (as defined below) by no
later than September 30, 1999. Upon request of the Lender, the Borrower will
prepare a summary of the Y2K measures it has taken and shall make those of its
information technology employees and consultants who are in charge of the
Borrower's Y2K compliance available to answer questions from the Lender. As used
herein, "YEAR 2000 COMPLIANT AND READY" means that the Borrower's and each
Subsidiary's hardware and software systems which impact or affect in any
material way the operation of their business will: (i) handle date information
involving any and all dates before, during and/or after January 1, 2000,
including accepting input, providing output and performing dated calculations in
whole or in part; (ii) operate accurately without interruption on and in respect
of any and all dates before, during and/or after January 1, 2000 and without any
change in performance; (iii) respond to and process two-digit year input without
creating any ambiguity as to the century; and (iv) store and provide date input
information without creating any ambiguity as to the century.
ARTICLE 1.2
ARTICLE 2 AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that so long as it may borrow under
this Agreement or so long as any indebtedness remains outstanding under the
Notes that it will:
ARTICLE 1.1 CORPORATE EXISTENCE, ETC . Preserve and maintain, and cause each of
its Subsidiaries to preserve and maintain, its corporate existence, its material
rights, franchises, and licenses, and its material patents and copyrights (for
the scheduled duration thereof), trademarks, trade names, and service marks,
necessary or desirable in the normal conduct of its business, and its
qualification to do business as a foreign corporation in all jurisdictions where
it conducts business or other activities making such qualification
28
<PAGE>
necessary, in each case where the failure to do so could reasonably be expected
to have a Materially Adverse Effect.
ARTICLE 1.2
ARTICLE 1.3 COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its
Subsidiaries to comply, with all Requirements of Law (including, without
limitation, the Environmental Laws, subject to the exception set forth in
Section 7.7(g) below where the penalties, claims, fines, and other liabilities
resulting from noncompliance with such Environmental Laws do not involve amounts
in excess of $250,000. in the aggregate) and material Contractual Obligations
applicable to or binding on any of them where the failure to comply with such
Requirements of Law and material Contractual Obligations would reasonably be
expected to have a Materially Adverse Effect.
ARTICLE 1.4
ARTICLE 1.5 PAYMENT OF TAXES AND CLAIMS, ETC . Pay, and cause each
of its Subsidiaries to pay, (i) all taxes, assessments and governmental charges
imposed upon it or upon its property, and (ii) all claims (including, without
limitation, claims for labor, materials, supplies or services) which might, if
unpaid, become a Lien upon its property, unless, in each case, the validity or
amount thereof is being contested in good faith by appropriate proceedings and
adequate reserves are maintained with respect thereto.
ARTICLE 1.1 KEEPING OF BOOKS . Keep, and cause each of its Subsidiaries to keep,
proper books of record and account, containing complete and accurate entries of
all their respective financial and business transactions.
ARTICLE 1.2
ARTICLE 1.3 VISITATION, INSPECTION, ETC. Permit, and cause each of its
Subsidiaries to permit, any representative of the Agent or any Lender to visit
and inspect any of its properties, to examine its books and records and to make
copies and take extracts therefrom, and to discuss its affairs, finances and
accounts with its officers, all at such reasonable times and as often as the
Agent or such Lender may reasonably request after reasonable prior notice to
Borrower; PROVIDED, HOWEVER, that at any time following the occurrence and
during the continuance of a Default or an Event of Default, no prior notice to
Borrower shall be required.
ARTICLE 1.4
ARTICLE 1.5 INSURANCE; MAINTENANCE OF PROPERTIES.
ARTICLE 1.6
(a) Maintain or cause to be maintained with financially sound and
reputable insurers, insurance with respect to its properties
and business, and the properties and business of the Borrower
and each of its Subsidiaries, against loss or damage of the
kinds customarily insured against by reputable companies in
the same or similar businesses, such insurance to be of such
types and in such amounts, including such self-insurance and
deductible provisions, as is customary for such companies
under similar circumstances; PROVIDED, HOWEVER, that in any
event Borrower shall use its best commercial efforts to
maintain, or cause to be maintained, insurance in amounts and
with coverages not materially less favorable to any
Consolidated Company as in effect on the date of this
Agreement, except where the costs of maintaining such
insurance would, in the judgment of both Borrower and the
Agent, be excessive. Unless otherwise agreed by Agent,
insurance shall be for the insurable value of all inventory
and equipment.
(a) Cause, and cause each of the Consolidated Companies to cause,
all properties used or useful in the conduct of its business
to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and
will cause to be made all necessary repairs, renewals,
replacements, settlements and improvements thereof, all as in
the judgment of Borrower may be necessary so that the business
carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent Borrower from
discontinuing the operation or
29
<PAGE>
maintenance of any such properties if such discontinuance is,
in the judgment of Borrower, desirable in the conduct of its
business or the business of any Consolidated Company.
ARTICLE 1.1 REPORTING COVENANTS . Furnish to each Lender:
ARTICLE 1.2
(a) CIT INFORMATION. As and when any financial information is sent
to CIT, a copy of said financial information. The Borrower
covenants that it will send to each Lender as and when due
copies of the required information as set forth in the CIT
Financing Agreement.
(a) MONTHLY FINANCIAL STATEMENTS. Without duplication of
information furnished pursuant to Section 7.7(c), soon as
available and in any event within thirty days after the end of
each month, balance sheets of the Consolidated Companies as at
the end of such month presented on a consolidated basis and
the related statements of income, shareholders' equity, and
cash flows (if available) of the Consolidated Companies for
such month and for the portion of Borrower's fiscal year ended
at the end of such month, presented on a consolidated basis
setting forth in each case in comparative form the figures for
the corresponding month of the corresponding portion of
Borrower's previous fiscal year, all in reasonable detail and
certified by the chief financial officer or principal
accounting officer of Borrower that such financial statements
fairly present in all material respects the financial
condition of the Consolidated Companies as at the end of such
month on a consolidated basis, and the results of operations
and statements of cash flows of the Consolidated Companies for
such month and such portion of Borrower's fiscal year, in
accordance with GAAP consistently applied (subject to normal
year end audit adjustments and the absence of footnotes, and
to any change in accounting treatment which the Borrower may
give to accounting for leases of property PROVIDED, HOWEVER,
if the Borrower changes its accounting treatment for said
leases, the Borrower shall notify the Agent and the Lenders of
said change and the impact of said change).
(a) QUARTERLY FINANCIAL STATEMENTS. Without duplication of
information furnished pursuant to Section 7.7(c), soon as
available and in any event within forty-five (45) days after
the end of each fiscal quarter, balance sheets of the
Consolidated Companies as at the end of such fiscal quarter
presented on a consolidated basis and the related statements
of income, shareholders' equity, and cash flows (if available)
of the Consolidated Companies for such fiscal quarter and for
the portion of Borrower's fiscal year ended at the end of such
fiscal quarter, presented on a consolidated basis setting
forth in each case in comparative form the figures for the
corresponding fiscal quarter of the corresponding portion of
Borrower's previous fiscal year, all in reasonable detail and
certified by the chief financial officer or principal
accounting officer of Borrower that such financial statements
fairly present in all material respects the financial
condition of the Consolidated Companies as at the end of such
fiscal quarter on a consolidated basis, and the results of
operations and statements of cash flows of the Consolidated
Companies for such fiscal quarter and such portion of
Borrower's fiscal year, in accordance with GAAP consistently
applied (subject to normal year end audit adjustments and the
absence of footnotes, and to any change in accounting
treatment which the Borrower may give to accounting for leases
of property PROVIDED, HOWEVER, if the Borrower changes its
accounting treatment for said leases, the Borrower shall
notify the Agent and the Lenders of said change and the impact
of said change).
(a) ANNUAL FINANCIAL STATEMENTS. Without duplication of
information furnished pursuant to Section 7.7(c), soon as
available and in any event within ninety (90)
30
<PAGE>
days after the end of each fiscal year of Borrower, balance
sheets of the Consolidated Companies as at the end of such
year, presented on a consolidated basis, and the related
statements of income, shareholders' equity, and cash flows of
the Consolidated Companies for such fiscal year, presented on
a consolidated basis, setting forth in each case in
comparative form the figures for the previous fiscal year, all
in reasonable detail. For the fiscal years beginning January
1, 1997, said reports shall be accompanied by a report thereon
are independent public accountants of either (i) recognized
national standing, or (ii) of recognized regional standing,
and capable of performing the same services as an independent
public accounting firm of national standing and reasonably
acceptable to the Agent, which such report shall be
unqualified as to going concern and scope of audit and shall
state that such financial statements present fairly in all
material respects the financial condition as at the end of
such fiscal year on a consolidated basis, and the results of
operations and statements of cash flows of the Consolidated
Companies for such fiscal year in accordance with GAAP and
that the examination by such accountants in connection with
such consolidated financial statements has been made in
accordance with GAAP, and where said financial statements are
not consistently applied with the prior fiscal year statements
and the impact of said difference. Together with said annual
financial statements, there will also be furnished with a copy
of the management letter prepared by the independent public
accountants.
(a) NO DEFAULT/COMPLIANCE CERTIFICATE. Together with the financial
statements required pursuant to subsections (c) and (d) above,
a certificate of the president, chief financial officer or
principal accounting officer of Borrower, and in the case of
audited financial statements, the certificate from the
auditors, (i) to the effect that, based upon a review of the
activities of the Consolidated Companies and such financial
statements during the period covered thereby, there exists no
Event of Default and no Default under this Agreement, or if
there exists an Event of Default or a Default hereunder,
specifying the nature thereof and the proposed response
thereto, and (ii) demonstrating in reasonable detail
compliance as at the end of such fiscal year (in the case of
the last month of a fiscal quarter) or such fiscal quarter
with Section 7.8 and Sections 8.1 through 8.4; PROVIDED, in
the case of a certificate to be delivered with
respect to the end of a fiscal quarter, that part
demonstrating compliance with Section 7.8 and Sections 8.1
through 8.4 may be delivered within forty-five (45) days after
the end of such quarter.
(a) NOTICE OF DEFAULT. Promptly after Borrower has notice or
knowledge of the occurrence of an Event of Default or a
Default, a certificate of the chief financial officer or
principal accounting officer of Borrower specifying the nature
thereof and the proposed response thereto.
(a) LITIGATION. Promptly after (i) the occurrence thereof, notice
of the institution of or any adverse development in any
action, suit or proceeding or any governmental investigation
or any arbitration, before any court or arbitrator or any
governmental or administrative body, agency or official,
against any Consolidated Company, or any material property
thereof, in any case which could reasonably be expected to
have a Materially Adverse Effect, or (ii) actual knowledge
thereof, notice of the threat of any such action, suit,
proceeding, investigation or arbitration.
(a) ENVIRONMENTAL NOTICES. Promptly after receipt thereof, notice
of any actual or alleged violation, or notice of any action,
claim or request for information, either judicial or
administrative, from any governmental authority relating to
any actual or alleged claim,
<PAGE>
notice of potential responsibility under or violation of any
Environmental Law, or any actual or alleged spill, leak,
disposal or other release of any Hazardous Material by any
Consolidated Company which could result in penalties, fines,
claims or other liabilities to any Consolidated Company in
amounts in excess of $250,000.00 individually or in the
aggregate.
(a) ERISA.
(i) Promptly after the occurrence thereof with respect to
any Plan of any Consolidated Company or any ERISA
Affiliate thereof, or any trust established
thereunder, notice of (x) a "REPORTABLE EVENT"
described in Section 4043 of ERISA and the
regulations issued from time to time thereunder
(other than a "REPORTABLE EVENT" not subject to the
provisions for thirty day notice to the PBGC under
such regulations), or (y) any other event which could
subject any Consolidated Company to any tax, penalty
or liability under Title I or Title IV of ERISA or
Chapter 43 of the Code, or any tax or penalty
resulting from a loss of deduction under Sections
162, 404 or 419 of the Code, where any such taxes,
penalties or liabilities exceed or could exceed
$250,000 in the aggregate;
(i) Promptly after such notice must be provided to the
PBGC, or to a Plan participant, beneficiary or
alternative payee, any notice required under Section
101(d), 302(f)(4), 303, 307, 4041(b)(1)(A) or
4041(c)(1)(A) of ERISA or under Section 401(a)(29) or
412 of the Code with respect to any Plan of any
Consolidated Company or any ERISA Affiliate thereof;
(i) Promptly after receipt, any notice received by any
Consolidated Company or any ERISA Affiliate thereof
concerning the intent of the PBGC or any other
governmental authority to terminate a Plan of such
Company or ERISA Affiliate thereof which is subject
to Title IV of ERISA, to impose any liability on such
Company or ERISA Affiliate under Title IV of ERISA or
Chapter 43 of the Code;
(i) Upon the request of the Agent, promptly upon the
filing thereof with the Internal Revenue Service
("IRS") or the Department of Labor ("DOL"), a copy of
IRS Form 5500 or annual report for each Plan of any
Consolidated Company or ERISA Affiliate thereof which
is subject to Title IV of ERISA; and
(i) Upon the request of the Agent, (A) true and complete
copies of any and all documents, government reports
and IRS determination or opinion letters or rulings
for any Plan of any Consolidated Company from the
IRS, PBGC or DOL, (B) any reports filed with the IRS,
PBGC or DOL with respect to a Plan of the
Consolidated Companies or any ERISA Affiliate
thereof, or (C) a current statement of withdrawal
liability for each Multi-Employer Plan of any
Consolidated Company or any ERISA Affiliate thereof.
<PAGE>
(a) LIENS. Promptly upon any Consolidated Company becoming aware thereof,
notice of the filing of any federal statutory Lien, tax or other state
or local government Lien or any other Lien affecting their respective
properties, other than Permitted Liens except as expressly required by
Section 8.2 hereof.
(a) PUBLIC FILINGS, ETC. Promptly upon the filing thereof or otherwise
becoming available, copies of all financial statements, annual,
quarterly and special reports, proxy statements and notices sent or
made available generally by Borrower to its public security holders, of
all regular and periodic reports and all registration statements and
prospectuses, if any, filed by any of them with any securities
exchange, and of all press releases and other statements made available
generally to the public containing material developments in the
business or financial condition of Borrower and the other Consolidated
Companies.
(a) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, copies of all
financial statements of, and all reports submitted by, independent
public accountants to Borrower in connection with each annual, interim,
or special audit of Borrower's consolidated financial statements.
(a) BURDENSOME RESTRICTIONS, ETC. Promptly upon the existence or occurrence
thereof, notice of the existence or occurrence of (i) any Contractual
Obligation or Requirement of Law described in Section 6.24 hereof ,
(ii) failure of any Consolidated Company to hold in full force and
effect those material trademarks, service marks, patents, trade names,
copyrights, licenses and similar rights necessary in the normal conduct
of its business, and (iii) any strike, labor dispute, slow down or work
stoppage as described in Section 6.22.
(a) NEW MATERIAL SUBSIDIARIES. Within thirty days after the formation or
acquisition of any Material Subsidiary, or any other event resulting in
the creation of a new Material Subsidiary, notice of the formation or
acquisition of such Material Subsidiary or such occurrence, including a
description of the assets of such entity, the activities in which it
will be engaged, and such other information as the Agent may request.
(a) INTERCOMPANY ASSET TRANSFERS. Promptly upon the occurrence thereof,
notice of the transfer of any assets from Borrower or any Guarantor to
any other Consolidated Company that is not the Borrower or a Guarantor
(in any transaction or series of related transactions), excluding sales
or other transfers of assets in the ordinary course of business, where
the Asset Value of such assets is less than $100,000.
(a) OTHER INFORMATION. With reasonable promptness, such other information
about the Borrower or Consolidated Companies as the Agent or any Lender
may reasonably request from time to time.
ARTICLE 1.1 FINANCIAL COVENANTS.
ARTICLE 1.2
(a) Maintain at all times during the periods below a consolidated Tangible
Net Worth of not less than the amount set forth below for the
applicable period:
<PAGE>
<TABLE>
<CAPTION>
PERIOD TANGIBLE NET WORTH
------ ------------------
<S> <C>
For the Fiscal Year ending $1.00
December 31, 1999
For the Fiscal Year ending $2,790,000
December 31, 2000
For the Fiscal Year ending $5,175,000
December 31, 2001
For the Fiscal Year ending $7,425,000
December 31, 2002
For the Fiscal Year ending $9,675,000
December 31, 2003
</TABLE>
Commencing with the Fiscal Year ending December 31, 2004 and as of the
last day of each Fiscal Year thereafter, the minimum Tangible Net Worth
requirement shall be increased as of the last day of each such Fiscal
Year by the amount of $2,250,000 over the minimum Tangible Net Wroth
for the immediately preceding Fiscal year.
(a) Maintain at the end of each Fiscal Quarter during the term of
this Agreement a consolidated Fixed Charge Coverage Ratio of
not less than the ratio of 1.08 to 1.0
(a) Maintain at the end of each Fiscal Quarter during the periods
set forth below a consolidated Leverage Ratio of no more than
the ratio set forth below for the applicable period:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
For the Fiscal Year ending 4.95 to 1.0
December 31, 1999
For the Fiscal Year ending 3.575 to 1.0
December 31, 2000
For the Fiscal Year ending 3.3 to 1.0
December 31, 2000 and each
Fiscal Year thereafter
</TABLE>
ARTICLE 1.1 NOTICES UNDER CERTAIN OTHER INDEBTEDNESS . Immediately upon its
receipt thereof, Borrower shall furnish the Agent a copy of any notice received
by it, or any other Consolidated Company
<PAGE>
from the holder(s) of Indebtedness referred to in Section 8.1 hereof (or from
any trustee, agent, attorney, or other party acting on behalf of such holder(s))
in an amount which, in the aggregate, exceeds $250,000, where such notice states
or claims the existence or occurrence of any default or event of default with
respect to such Indebtedness under the terms of any indenture, loan or credit
agreement, debenture, note, or other document evidencing or governing such
Indebtedness. Borrower agrees to take such actions as may be necessary to
request the holder(s) of any Indebtedness (or any trustee or agent acting on
their behalf) in an amount exceeding $250,000 incurred pursuant to documents
executed or amended and restated after the Closing Date, to furnish copies of
all such notices directly to the Agent simultaneously with the furnishing
thereof to Borrower, and that such requirement may not be altered or rescinded
without the prior written consent of the Agent. In any event, the Borrower shall
agree to immediately furnish to the Agent copies of any such notices.
ARTICLE 1.2
ARTICLE 1.3 ADDITIONAL GUARANTORS /Credit Parties/Collateral. Promptly after (i)
the formation or acquisition (provided that nothing in this Section shall be
deemed to authorize the acquisition of any entity) nor any Material Subsidiary
not listed on SCHEDULE 6.1 attached hereto, (ii) the transfer of assets to any
Consolidated Company if notice thereof is required to be given pursuant to
Section 7.7(n) and as a result thereof the recipient of such assets becomes a
Material Subsidiary, (iii) the occurrence of any other event creating a new
Material Subsidiary, Borrower shall cause to be executed and delivered a
Guaranty Agreement from each such Material Subsidiary in the form attached
hereto as EXHIBIT "D", the joinder to the Contribution Agreement in the form
attached hereto as EXHIBIT "H" by such Material Subsidiary, a certificate to be
added to the Pledge Agreement by the Person owning the Capital Stock of said
Material Subsidiary by which all of said Capital Stock is pledged to the Agent,
and a certificate to be added to the Security Agreement from said Material
Subsidiary whereby a first, perfected security interest in the assets of said
Material Subsidiary is granted to the Agent.
ARTICLE 1.4
ARTICLE 1.5 OWNERSHIP OF GUARANTORS . Borrower shall maintain its percentage of
ownership existing as of the date hereof of all Guarantors, and shall not
decrease its ownership percentage in each Person which becomes a Guarantor after
the date hereof, as such ownership exists at the time such Person becomes a
Guarantor or may be increased thereafter.
ARTICLE 1.6
ARTICLE 1.7 CIT FINANCING. In regard to the CIT Financing:
ARTICLE 1.8
(a) The Borrower shall immediately furnish to each Lender in
regard to the CIT Financing:
(i) Copies of any and all notices received from CIT
including, but not limited to, any and all default
notices.
(i) Copies of any and all notices and other materials
furnished to CIT including, but not limited to, any
financial statements or other financial information
furnished to CIT.
(a) The Borrower shall not amend, modify or in any other way
change the CIT Financing Agreement except in the manner
provided in The CIT Subordination Agreement.
ARTICLE 1.1 LIFE INSURANCE POLICY . In regard to the Life Insurance Policy, the
Borrower will maintain in full force and effect, and pay all premiums upon, said
Policy. In this regard, the Policy will be in an initial amount not less than
$2,000,000, which amount may be reduced by the Borrower from time to time with
the amount of the reduction equal to fifty percent (50%) of the total principal
payments made by the Borrower on the Term Loans PROVIDED, HOWEVER, the amount of
the Policy shall never be less than $1,000,000.00.
<PAGE>
ARTICLE 1.2
ARTICLE 1.3 FOREIGN COLLATERAL. The Lenders are not requiring at this time that
the Borrower grant to the Lenders a security interest in the Foreign Collateral
which includes accounts receivable do and owing to Solartechniks. In this
regard:
ARTICLE 1.4
(a) No security in said Foreign Collateral has been granted to
CIT.
(a) If and when the Borrower should grant to CIT a security
interest in any Foreign Collateral, then, in that event, the
Borrower will at that same time grant to the Lenders a
security interest in the same Foreign Collateral. Any security
interest so granted to the Lenders shall be subject to the CIT
Subordination Agreement.
ARTICLE 1.1 COLLATERAL AUDIT . The Agent shall have the right from time to time
to undertake a collateral audit of the Borrower for the purposes of determining
compliance with the CIT Financing Agreement, the cost of which shall be paid by
the Borrower. Said audit may not be undertaken more frequently than quarterly.
ARTICLE 1.2
ARTICLE 2 NEGATIVE COVENANTS
So long as any Commitment remains in effect hereunder or any Note shall
remain unpaid, Borrower will not and will not permit any Subsidiary to:
ARTICLE 1.1 INDEBTEDNESS . Create, incur, assume or suffer to exist any
Indebtedness, other than:
ARTICLE 1.2
(a) Indebtedness under this Agreement.
(a) Indebtedness to CIT or any Senior Lender as set forth in the
CIT Financing Agreement.
(a) Indebtedness outstanding on the date hereof or pursuant to
lines of credit in effect on the date hereof and described on
SCHEDULE 8.1(c) attached hereto, together with all extensions,
renewals and refinancings thereof, PROVIDED, HOWEVER, any such
extensions, renewals and refinancings shall not, without the
written consent of the Agent and Required Lenders, increase
any such Indebtedness or modify the terms of said Indebtedness
on terms less favorable to the maker or obligor.
(a) Purchase money Indebtedness to the extent secured by a Lien
permitted by Section 8.2(b) hereof provided such purchase
money Indebtedness does not at any one time exceed in the
aggregate $250,000.
(a) Unsecured current liabilities (other than liabilities for
borrowed money or liabilities evidenced by promissory notes,
bonds or similar instruments) incurred in the ordinary course
of business (whether now outstanding or hereafter arising or
incurred) and either (i) not more than 120 days past due, or
(ii) being disputed in good faith by appropriate proceedings
with reserves for such disputed liability maintained in
conformity with GAAP and Indebtedness in the nature of
contingent repayment obligations arising in the ordinary and
normal course of business with respect to deposits and
downpayments.
<PAGE>
(a) The Intercompany Loans described on SCHEDULE 6.23 attached
hereto and any other loans between Consolidated Companies
provided that no loan or other extension of credit may be made
by a Guarantor to another Consolidated Company that is not a
Guarantor hereunder and all such loans and extensions of
credit shall not exceed $100,000 in the aggregate at any one
time outstanding (excluding Intercompany Loans listed on said
SCHEDULE 6.23) unless otherwise agreed in writing by the Agent
and the Required Lenders.
(a) Indebtedness arising under interest rate exchange agreements
referred to in Section 7.12 hereof.
ARTICLE 1.1 LIENS . Create, incur, assume or suffer to exist any Lien on any of
its property now owned or hereafter acquired to secure any Indebtedness other
than:
ARTICLE 1.2
(a) Liens existing on the date hereof disclosed on SCHEDULE 8.2
attached hereto, and provided no Event of Default has occurred
and is then continuing, any renewal, extension or refunding of
such Lien in an amount not exceeding the amount thereof
remaining unpaid immediately prior to such renewal, extension
or refunding,
(a) Any Lien on any property securing Indebtedness incurred or
assumed for the purpose of financing all or any part of the
acquisition cost of such property and any refinancing thereof,
provided that such Lien does not extend to any other property,
and provided further that the aggregate principal amount of
Indebtedness secured by all such Liens at any time does not
exceed $250,000.
(a) Liens for taxes not yet due, and Liens for taxes or Liens
imposed by ERISA which are being contested in good faith by
appropriate proceedings and with respect to which adequate
reserves are being maintained.
(a) Statutory Liens of carriers, warehousemen, mechanics,
materialmen and other Liens imposed by law (excluding any
landlords liens in regard to any Material Place of Business,
which said landlords liens are not permitted under this
Section 8.2) created in the ordinary course of business for
amounts not yet due or which are being contested in good faith
by appropriate proceedings and with respect to which adequate
reserves are being maintained.
(a) Liens incurred or deposits made in the ordinary course of
business in connection with workers or workmans compensation,
unemployment insurance and other types of social security, or
to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of
borrowed money).
(a) Liens securing the Facilities.
(a) Liens reserved or invested in governmental authority
(including without limitation zoning laws) which do not
materially impair the use of such property.
<PAGE>
(a) Easements, licenses, covenants and other restrictions
affecting the use of real property which do not in any
material respect interfere with the use of such real property.
(a) Liens securing the Senior Debt.
ARTICLE 1.1 SALES, ETC. Sell, lease, or otherwise dispose of (as distinct from
Lien)its accounts, property or other assets (including Capital Stock of
Subsidiaries); PROVIDED, HOWEVER, that the foregoing restrictions on asset sales
shall not be applicable to (i) sales of equipment or other personal property
being replaced by other equipment or other personal property purchased as a
capital expenditure item, (ii) sales of inventory in the ordinary course of
business and (iii) dispositions of obsolete, damaged or unusable assets.
ARTICLE 1.2
ARTICLE 1.3 MERGERS, ACQUISITIONS, ETC. Merge or consolidate with any other
Person, or acquire by purchase any other person or all or substantially all of
its assets, PROVIDED FURTHER, that the foregoing restrictions shall not apply to
(i) Permitted Acquisitions, (ii) mergers between a Subsidiary of Borrower and
Borrower or a Material Subsidiary, or between Material Subsidiaries of Borrower,
or (iii) mergers between a third party and the Borrower where the Borrower is
the surviving corporation PROVIDED THAT said merger, purchase, etc. is a
Permitted Acquisition, PROVIDED, HOWEVER, that no transaction pursuant to
clauses (i), (ii), or (iii) shall be permitted if any Default or Event of
Default otherwise exists at the time of such transaction or would otherwise
exist as a result of such transaction.
ARTICLE 1.4
ARTICLE 1.5 INVESTMENTS, LOANS, ETC. Make, permit or hold any Investments in any
Person, or otherwise acquire or hold any Subsidiaries, other than:
ARTICLE 1.6
(a) Investments in Subsidiaries that are Guarantors under this
Agreement, whether such Subsidiaries are Guarantors on the
Closing Date or become Guarantors in accordance with Section
7.10 hereof after the Closing Date; PROVIDED, HOWEVER, nothing
in this Section 8.5 shall be deemed to authorize an investment
pursuant to this paragraph (a) in any entity that is not a
Subsidiary and a Guarantor prior to such investment.
(a) Investments in Subsidiaries, other than those Subsidiaries
that are or become Guarantors under this Agreement, made after
the Closing Date, in an aggregate amount not to exceed
$250,000 unless otherwise consented to in writing by the Agent
and the Required Lenders.
(a) Direct obligations of the United States or any agency thereof,
or obligations guaranteed by the United States or any agency
thereof, in each case supported by the full faith and credit
of the United States and maturing within one year from the
date of creation thereof.
(a) Commercial paper maturing within one year from the date of
creation thereof rated in the highest grade by a nationally
recognized credit rating agency.
(a) Time deposits maturing within one year from the date of
creation thereof with, including certificates of deposit
issued by any Lender and any office located in the United
States of any bank or trust company which is organized under
the laws of the United States or any state thereof and has
total assets aggregating at least $500,000,000, including
without limitation, any such deposits in Eurodollars issued by
a foreign branch of any such bank or trust company.
<PAGE>
(a) Investments made by Plans.
(a) Permitted Intercompany Loans on terms and conditions
acceptable to the Agent.
(a) Investments in stock or assets of another entity which thereby
becomes a Subsidiary, which transaction constitutes a
Permitted Acquisition.
(a) Advances made to employees in the ordinary and normal course
of business consistent with past practice and for business
purposes, and which advances are repaid by the employee within
thirty days PROVIDED, HOWEVER, individual employee advances
may not exceed $10,000 and the aggregate of all said advances
at any time outstanding shall not exceed $50,000.
ARTICLE 1.1 SALE AND LEASEBACK TRANSACTIONS. Sell or transfer any property, real
or personal, whether now owned or hereafter acquired, and thereafter rent or
lease such property or other property which any Consolidated Company intends to
use for substantially the same purpose or purposes as the property being sold or
transferred.
ARTICLE 1.2
ARTICLE 1.3 TRANSACTIONS WITH AFFILIATES. Except as
otherwise approved in writing by the Agent and Required Lenders:
ARTICLE 1.4
(a) Enter into any material transaction or series of related
transactions which in the aggregate would be material, whether
or not in the ordinary course of business, with any Affiliate
of any Consolidated Company (but excluding any Affiliate which
is also a Material Subsidiary), other than on terms and
conditions substantially as favorable to such Consolidated
Company as would be obtained by such Consolidated Company at
the time in a comparable arm's length transaction with a
Person other than an Affiliate.
(a) Convey or transfer to any other Person (including any other
Consolidated Company) any real property, buildings, or
fixtures used in the manufacturing or production operations of
any Consolidated Company, or convey or transfer to any other
Consolidated Company any other assets (excluding conveyances
or transfers in the ordinary course of business) if at the
time of such conveyance or transfer any Default or Event of
Default exists or would exist as a result of such conveyance
or transfer.
ARTICLE 1.1 OPTIONAL PREPAYMENTS. Directly or indirectly, prepay, purchase,
redeem, retire, defease or otherwise acquire, or make any optional payment on
account of any principal of, interest on, or premium payable in connection with
the optional prepayment, redemption or retirement of, any of its Indebtedness,
or give a notice of redemption with respect to any such Indebtedness, or make
any payment in violation of the subordination provisions of any Senior Debt,
except with respect to (i) the Obligations under this Agreement and the Notes,
(ii) prepayments of Indebtedness outstanding pursuant to revolving credit,
overdraft and line of credit facilities permitted pursuant to Section 8.1 (c)
and (d), (iii) Intercompany Loans made or outstanding pursuant to Section
8.1(e), (iv) Intercompany Loans where both Consolidated Companies are not Credit
Parties made or outstanding pursuant to Section 8.1 upon the prior written
consent of the Agent and the Required Lenders.
ARTICLE 1.2
<PAGE>
ARTICLE 1.3 CHANGES IN BUSINESS. Enter into any business which is substantially
different from that presently conducted by the Consolidated Companies taken as a
whole.
ARTICLE 1.4
ARTICLE 1.5 ERISA . Take or fail to take any action with respect to any Plan of
any Consolidated Company or, with respect to its ERISA Affiliates, any Plans
which are subject to Title IV of ERISA or to continuation health care
requirements for group health plans under the Code, including without limitation
(i) establishing any such Plan, (ii) amending any such Plan (except where
required to comply with applicable law), (iii) terminating or withdrawing from
any such Plan, or (iv) incurring an amount of unfunded benefit liabilities, as
defined in Section 4001(a)(18) of ERISA, or any withdrawal liability under Title
IV of ERISA with respect to any such Plan, without first obtaining the written
approval of the Agent and the Required Lenders, to the extent that such actions
or failures could reasonably be expected to result in a Materially Adverse
Effect.
ARTICLE 1.6
ARTICLE 1.7 ADDITIONAL NEGATIVE PLEDGES . Create or otherwise cause or suffer to
exist or become effective, directly or indirectly, any prohibition or
restriction on the creation or existence of any Lien upon any asset of any
Consolidated Company, other than pursuant to (i) the terms of any agreement,
instrument or other document pursuant to which any Indebtedness permitted by
Section 8.2(b) hereof is incurred by any Consolidated Company, so long as such
prohibition or restriction applies only to the property or asset being financed
by such Indebtedness, (ii) any requirement of applicable law or any regulatory
authority having jurisdiction over any of the Consolidated Companies, and (iii)
the CIT Financing Agreement.
ARTICLE 1.8
ARTICLE 1.9 LIMITATION ON PAYMENT RESTRICTIONS AFFECTING CONSOLIDATED COMPANIES.
Create or otherwise cause or suffer to exist or become effective, except for the
Credit Documents and the CIT Financing Agreement, any consensual encumbrance or
restriction on the ability of any Consolidated Company to (i) pay dividends or
make any other distributions on such Consolidated Company's stock, or (ii) pay
any indebtedness owed to Borrower or any other Consolidated Company, or (iii)
transfer any of its property or assets to Borrower or any other Consolidated
Company, except any consensual encumbrance or restriction existing under the
Credit Documents and the Preferred Stock.
ARTICLE 1.10
ARTICLE 1.11 ACTIONS UNDER CERTAIN DOCUMENTS . Without the prior written consent
of the Agent (which consent shall not be unreasonably withheld), modify, amend,
cancel or rescind the Intercompany Loans or Intercompany Credit Documents
(except that a loan between Consolidated Companies as permitted by Section
8.1(e) hereof may be modified or amended so long as it otherwise satisfies the
requirements of Section 8.1), or make demand of payment or accept payment on any
Intercompany Loans permitted by Section 8.1(e) hereof, except that current
interest accrued thereon as of the date of this Agreement and all interest
subsequently accruing thereon (whether or not paid currently) may be paid unless
a Default or Event of Default has occurred and is continuing.
ARTICLE 1.12
ARTICLE 1.13 FINANCIAL STATEMENTS; FISCAL YEAR . Borrower shall make no change
in the dates of the fiscal year now employed for accounting and reporting
purposes without the prior written consent of the Required Lenders, which
consent shall not be unreasonably withheld.
ARTICLE 1.14
ARTICLE 1.15 CHANGE OF MANAGEMENT . Allow or suffer to occur any change of
management of the Borrower which creates an Event of Default under Section 9.13.
ARTICLE 1.16
ARTICLE 1.17 GUARANTIES . Without the prior written consent of the Agent, extend
or permit Borrower or any Subsidiary to execute any Guaranty other than (i)
endorsements of instruments for deposit or collection in the ordinary and normal
course of business, and (ii) Guaranties acceptable in writing to the Agent and
Required Lenders.
ARTICLE 1.18
ARTICLE 1.19 CHANGES IN DEBT INSTRUMENTS. Without the prior written consent of
the Agent and Required Lenders, enter into any amendment, change or modification
of any agreement relating to any Indebtedness
<PAGE>
(exclusive of the Senior Debt, but only in compliance with the provisions of
Section 7.12) PROVIDED, HOWEVER, the foregoing restrictions shall not prohibit
any such amendment, change or modification where (i) it relates solely to an
extension of a maturity date if said Indebtedness is not already in default, and
(ii) other changes in said agreements which are not material, PROVIDED, HOWEVER
if said amendment, change or modification constitutes the waiver of any default
condition under said agreement, notice of said matter along with a copy of said
amendment, change or modification shall be given to the Agent and the Lenders.
ARTICLE 1.20
ARTICLE 1.21 NO CASH DIVIDENDS ON CAPITAL OR PREFERRED STOCK . Without the prior
written consent of the Agent and Required Lender, (which consent may be withheld
in their absolute discretion), declare or pay any cash dividends or make any
other cash distributions whatsoever on any Capital or Preferred Stock. Dividends
on Preferred Stock may only be paid in Capital Stock.
ARTICLE 1.22
ARTICLE 2 EVENTS OF DEFAULT
EVENTS OF DEFAULT
ARTICLE 1
ARTICLE 2 Upon the occurrence and during the continuance of any of the following
specified events (each an "EVENT OF DEFAULT"):
ARTICLE 3
ARTICLE 3.1 PAYMENTS. Borrower shall fail to make promptly when due (including,
without limitation, by mandatory prepayment) any principal payment with respect
to the Loans, or Borrower shall fail to make within thirty (30) Days after the
due date thereof any payment of interest, fee or other amount payable hereunder.
ARTICLE 3.2
ARTICLE 3.3 COVENANTS WITHOUT NOTICE. Borrower shall fail to observe or perform
any covenant or agreement contained in Sections 7.8, 7.11, 8.1 through 8.21.
ARTICLE 3.4
ARTICLE 3.5 OTHER COVENANTS. Borrower shall fail to observe or perform any
covenant or agreement contained in this Agreement, other than those referred to
in Sections 9.1 and 9.2 hereof, and, if capable of being remedied, such failure
shall remain unremedied for thirty days after the earlier of (i) Borrower's
obtaining actual knowledge thereof, or (ii) written notice thereof shall have
been given to Borrower by Agent or any Lender.
ARTICLE 3.6
ARTICLE 3.7 REPRESENTATIONS. Any representation or warranty made or deemed to be
made by Borrower or any other Credit Party under this Agreement or any other
Credit Document (including the Schedules attached thereto), or any certificate
or other document submitted to the Agent or the Lenders by any such Person
pursuant to the terms of this Agreement or any other Credit Document, shall be
incorrect in any material respect when made.
ARTICLE 3.8
ARTICLE 3.9 NON-PAYMENTS OF OTHER INDEBTEDNESS. Any Consolidated Company shall
fail to make when due (whether at stated maturity, by acceleration, on demand or
otherwise, and after giving effect to any applicable grace period) any payment
of principal of or interest on any Indebtedness (other than the Obligations)
exceeding $250,000 in the aggregate.
ARTICLE 3.10
ARTICLE 3.11 DEFAULTS UNDER OTHER AGREEMENTS. Any Consolidated Company shall
fail to observe or perform any covenants or agreements contained in any
agreements or instruments relating to any of its Indebtedness exceeding $250,000
in the aggregate, or any other event shall occur in respect of Indebtedness
exceeding $250,000 if the effect of such failure or other event is to
accelerate, or to permit the holder of such Indebtedness or any other Person to
accelerate, the maturity of such Indebtedness; or any such Indebtedness
<PAGE>
shall be required to be prepaid (other than by a regularly scheduled required
prepayment) in whole or in part prior to its stated maturity.
ARTICLE 3.12
ARTICLE 3.13 BANKRUPTCY. Borrower, any Consolidated Company, or any Credit Party
shall commence a voluntary case concerning itself under the Bankruptcy Code or
an involuntary case for bankruptcy is commenced against any Consolidated Company
and the petition is not controverted within twenty (20) days, or is not
dismissed within sixty days, after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or any
substantial part of the property of any Consolidated Company; or any
Consolidated Company commences proceedings of its own bankruptcy or to be
granted a suspension of payments or any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction, whether now or
hereafter in effect, relating to any Consolidated Company or there is commenced
against any Consolidated Company any such proceeding which remains undismissed
for a period of sixty days; or any Consolidated Company is adjudicated insolvent
or bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or any Consolidated Company suffers any appointment of
any custodian or the like for it or any substantial part of its property to
continue undischarged or unstayed for a period of sixty days; or any
Consolidated Company makes a general assignment for the benefit of creditors; or
any Consolidated Company shall fail to pay, or shall state that it is unable to
pay, or shall be unable to pay, its debts generally as they become due; or any
Consolidated Company shall call a meeting of its creditors with a view to
arranging a composition or adjustment of its debts; or any Consolidated Company
shall by any act or failure to act indicate its consent to, approval of or
acquiescence in any of the foregoing; or any corporate action is taken by any
Consolidated Company for the purpose of effecting any of the foregoing.
ARTICLE 3.14
ARTICLE 3.15 ERISA. A Plan of a Consolidated Company or a Plan subject to Title
IV of ERISA of any of its ERISA Affiliates:
ARTICLE 3.16 (a) shall fail to be funded in accordance with the minimum funding
standard required by applicable law, the terms of such Plan, Section 412 of the
Code or Section 302 of ERISA for any plan year or a waiver of such standard is
sought or granted with respect to such Plan under applicable law, the terms of
such Plan or Section 412 of the Code or Section 303 of ERISA; or
(a) is being, or has been, terminated or the subject of
termination proceedings under applicable law or the terms of
such Plan; or
(a) shall require a Consolidated Company to provide security under
applicable law, the terms of such Plan, Section 401 or 412 of
the Code or Section 306 or 307 of ERISA; or
(a) results in a liability to a Consolidated Company under
applicable law, the terms of such Plan, or Title IV of ERISA;
and there shall result from any such failure, waiver, termination or other event
a liability to the PBGC or a Plan that could reasonably be expected to have a
Materially Adverse Effect.
ARTICLE 1.1 MONEY JUDGMENT . A judgment or order for the payment of money in
excess of $250,000 or otherwise having a Materially Adverse Effect shall be
rendered against Borrower, any other Consolidated Company, or any other Credit
Party and such judgment or order shall continue unsatisfied (in the case of a
<PAGE>
money judgment) and in effect for a period of thirty (30) days during which
execution shall not be effectively stayed or deferred (whether by action of a
court, by agreement or otherwise).
ARTICLE 1.2
ARTICLE 1.3 OWNERSHIP OF CREDIT PARTIES AND PLEDGED ENTITIES. If Borrower shall
at any time fail to own and control the required percentage of the voting stock
of any Guarantor, either directly or indirectly through a wholly-owned
Subsidiary of Borrower, as of the date that Person became or was required to
become a Guarantor.
ARTICLE 1.4
ARTICLE 1.5 DEFAULT UNDER OTHER CREDIT DOCUMENTS. There shall exist or occur any
"EVENT OF DEFAULT" as provided under the terms of any other Credit Document
(after giving effect to any applicable grace period), or any Credit Document
ceases to be in full force and effect or the validity or enforceability thereof
is disaffirmed by or on behalf of Borrower or any other Credit Party, or at any
time it is or becomes unlawful for Borrower or any other Credit Party to perform
or comply with its obligations under any Credit Document, or the obligations of
Borrower or any other Credit Party under any Credit Document are not or cease to
be legal, valid and binding on Borrower or any such Credit Party;
ARTICLE 1.6
ARTICLE 1.7 MANAGEMENT. If there is any change in management that results in a
default under Section 10.1.11 of the CIT Financing Agreement.
ARTICLE 1.8
ARTICLE 1.9 ATTACHMENTS. An attachment or similar action shall be made on or
taken against any of the assets of any Consolidated Company with an Asset Value
exceeding $500,000 in aggregate and is not removed, suspended or enjoined within
thirty days of the same being made or any suspension or injunction being lifted.
ARTICLE 1.10
ARTICLE 1.11 INDEBTEDNESS OF BORROWER. If any Consolidated Company without
the prior written consent of the Agent and Required Lenders, incurs any
Indebtedness whatsoever (other than Indebtedness permitted by Section 8.1) or
declares any cash dividends on its Capital Stock or Preferred Stock.
ARTICLE 1.12
ARTICLE 1.13 DEFAULT UNDER SUBORDINATED DEBT . An event of default occurs and is
continuing under any Subordinated Debt.
ARTICLE 1.14
ARTICLE 1.15 THIS SECTION IS NOT APPLICABLE.
ARTICLE 1.16
ARTICLE 1.17 DEFAULT UNDER CIT FINANCING . Borrower has defaulted under the CIT
Financing Agreement, and said default has not been cured within any applicable
notice or cure period.
ARTICLE 1.18 then, and in any such event, and at any time thereafter if any
Event of Default shall then be continuing, subject to and in accordance with the
terms of the CIT Subordination Agreement, the Agent may, and upon the written
request of the Required Lenders, shall, by written notice to Borrower, take any
or all of the following actions, without prejudice to the rights of the Agent,
any Lender or the holder of any Note to enforce its claims against Borrower or
any other Credit Party: (i) declare all Commitments terminated, whereupon the
Commitments of each Lender shall terminate immediately and any fees due under
this Agreement shall forthwith become due and payable without any other notice
of any kind; (ii) declare the principal of and any accrued interest on the
Loans, and all other obligations owing hereunder, to be due and payable,
whereupon the same shall become forthwith due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
Borrower (iii) exercise such other remedies as are provided to the Lenders or
the Agent under any other Credit Document; (iv) exercise such other rights as
may be provided by applicable law; and (v) declare that all Obligations shall
thereafter bear interest at the Default Rate; provided, that, if an Event of
Default specified in Section 9.7 shall occur, the result which would occur upon
the giving of written notice by the Agent to any Credit Party, as specified in
clauses (i), (ii), (iii) or, (iv) or (v) above, shall occur automatically
without the giving of any such notice.
ARTICLE 1.19
<PAGE>
ARTICLE 2 THE AGENT
ARTICLE 1.1 APPOINTMENT OF AGENT. Each Lender hereby designates SunTrust, as
Agent, to administer all matters concerning the Loans and to act as herein
specified. Each Lender hereby irrevocably authorizes, and each holder of any
Note by the acceptance of a Note shall be deemed irrevocably to authorize, the
Agent to take such actions on its behalf under the provisions of this Agreement,
the other Credit Documents, and all other instruments and agreements referred to
herein or therein, and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the
Agent by the terms hereof and thereof and such other powers as are reasonably
incidental thereto. The Agent may perform any of its duties hereunder by or
through its agents or employees. The provisions of this Section 10.1 are solely
for the benefit of the Agent, and Borrower and the other Consolidated Companies
shall not have any rights as third party beneficiaries of any of the provisions
hereof. In performing its functions and duties under this Agreement, the Agent
shall act solely as agent of the Lenders and does not assume and shall not be
deemed to have assumed any obligations towards or relationship of agency or
trust with or for the Borrower and the other Consolidated Companies.
ARTICLE 1.2
ARTICLE 1.3 NATURE OF DUTIES OF AGENT. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and the
other Credit Documents. None of the Agent nor any of its respective officers,
directors, employees or agents shall be liable for any action taken or omitted
by it as such hereunder or in connection herewith, unless caused by its or their
gross negligence or willful misconduct. The duties of the Agent shall be
ministerial and administrative in nature; the Agent shall not have by reason of
this Agreement a fiduciary relationship in respect of any Lender; and nothing in
this Agreement, express or implied, is intended to or shall be so construed as
to impose upon the Agent any obligations in respect of this Agreement or the
other Credit Documents except as expressly set forth herein.
ARTICLE 1.4
ARTICLE 1.5 LACK OF RELIANCE ON THE AGENT.
ARTICLE 1.6
(a) Independently and without reliance upon the Agent, each
Lender, to the extent it deems appropriate, has made and shall
continue to make (i) its own independent investigation of the
financial condition and affairs of the Credit Parties in
connection with the taking or not taking of any action in
connection herewith, and (ii) its own appraisal of the
creditworthiness of the Credit Parties, and, except as
expressly provided in this Agreement, the Agent shall have no
duty or responsibility, either initially or on a continuing
basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its
possession before the making of the Loans or at any time or
times thereafter.
(a) The Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or
warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution,
effectiveness, genuineness, validity, enforceability,
collectibility, priority or sufficiency of this Agreement, the
Notes, the Guaranty Agreements, or any other documents
contemplated hereby or thereby, or the financial condition of
the Credit Parties, or be required to make any inquiry
concerning either the performance or observance of any of the
terms, provisions or conditions of this Agreement, the Notes,
the Guaranty Agreements, or the other documents contemplated
hereby or thereby, or the financial condition of the Credit
Parties, or the existence or possible existence of any Default
or Event of Default; PROVIDED, HOWEVER, to the extent that the
Agent has been advised that a Lender has not received any
information formally delivered to the Agent pursuant to
Section 7.7, the Agent shall deliver or cause to be delivered
such information to such Lender.
<PAGE>
ARTICLE 1.1 CERTAIN RIGHTS OF THE AGENT. If the Agent shall request
instructions from the Required Lenders with respect to any action or actions
(including the failure to act) in connection with this Agreement, the Agent
shall be entitled to refrain from such act or taking such act, unless and until
the Agent shall have received instructions from the Required Lenders; and the
Agent shall not incur liability in any Person by reason of so refraining.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against the Agent as a result of the Agent acting or refraining from
acting hereunder in accordance with the instructions of the Required Lenders.
ARTICLE 1.2
ARTICLE 1.3 RELIANCE BY AGENT. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note, writing, resolution,
notice, statement, certificate, telex, teletype or telecopier message, cable
gram, radiogram, order or other documentary, teletransmission or telephone
message believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person. The Agent may consult with legal counsel
(including counsel for any Credit Party), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts.
ARTICLE 1.4
ARTICLE 1.5 INDEMNIFICATION OF AGENT. To the extent the Agent is not reimbursed
and indemnified by the Credit Parties, each Lender will reimburse and indemnify
the Agent, ratably according to the respective amounts of the Loans outstanding
under all Facilities (or if no amounts are outstanding, ratably in accordance
with the Total Commitments), in either case, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including counsel fees and disbursements) or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by or asserted
against the Agent in performing its duties hereunder, in any way relating to or
arising out of this Agreement or the other Credit Documents; provided that no
Lender shall be liable to the Agent for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or willful
misconduct.
ARTICLE 1.1 THE AGENT IN ITS INDIVIDUAL CAPACITY . With respect to its
obligation to lend under this Agreement, the Loans made by it and the Notes
issued to it, the Agent shall have the same rights and powers hereunder as any
other Lender or holder of a Note and may exercise the same as though it were not
performing the duties specified herein; and the terms "LENDERS", "REQUIRED
LENDERS", "HOLDERS OF NOTES", or any similar terms shall, unless the context
clearly otherwise indicates, include the Agent in its individual capacity. The
Agent may accept deposits from, lend money to, and generally engage in any kind
of banking, trust, financial advisory or other business with the Consolidated
Companies or any affiliate of the Consolidated Companies as if it were not
performing the duties specified herein, and may accept fees and other
consideration from the Consolidated Companies for services in connection with
this Agreement and otherwise without having to account for the same to the
Lenders.
ARTICLE 1.2
ARTICLE 1.3 HOLDERS OF NOTES. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof shall have been filed with the
Agent. Any request, authority or consent of any Person who, at the time of
making such request or giving such authority or consent, is the holder of any
Note shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
ARTICLE 1.4
<PAGE>
ARTICLE 1.5 SUCCESSOR AGENT.
ARTICLE 1.6
(a) The Agent may resign at any time by giving written notice
thereof to the Lenders and Borrower and may be removed at any
time with or without cause by the Required Lenders; PROVIDED,
HOWEVER, the Agent may not resign or be removed until a
successor Agent has been appointed and shall have accepted
such appointment. Upon any such resignation or removal, the
Required Lenders shall have the right to appoint a successor
Agent subject to Borrower's prior written approval. If no
successor Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30
days after the retiring Agent's giving of notice of
resignation or the Required Lenders' removal of the retiring
Agent, then the retiring Agent shall have no further duties or
obligations whatsoever as Agent hereunder.
(a) Upon the acceptance of any appointment as the Agent hereunder
by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring Agent's resignation
or removal hereunder as Agent, the provisions of this ARTICLE
X shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was an Agent under this
Agreement.
ARTICLE 1 MISCELLANEOUS
ARTICLE 1.1 NOTICES . All notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, telex, telecopy or
similar teletransmission or writing) and shall be given to such party at its
address or applicable teletransmission number set forth on the signature pages
hereof, or such other address or applicable teletransmission number as such
party may hereafter specify by notice to the Agent and Borrower. Each such
notice, request or other communication shall presumptively be effective (i) if
given by telex, when such telex is transmitted to the telex number specified in
this Agreement and the appropriate answerback is received, (ii) if given by
mail, 72 hours after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid, (iii) if given by telecopy, when
such telecopy is transmitted to the telecopy number specified in this Section
and the appropriate confirmation is received, or (iv) if given by any other
means (including, without limitation, by air courier), when delivered or
received at the address specified in this Agreement; provided that notices to
the Agent shall not be deemed effective until received.
ARTICLE 1.1 AMENDMENTS, ETC . No amendment or waiver of any provision of this
Agreement or the other Credit Documents, nor consent to any departure by any
Credit Party therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Required Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided that no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders do any of the following: (i) waive any of
the conditions specified in Sections 5.1 or 5.2 hereof, (ii) increase the
Commitments or other contractual obligations to Borrower under this Agreement,
(iii) reduce the principal of, or interest on, the Notes or any fees hereunder,
(iv) postpone any date fixed for the payment in respect of principal of, or
interest on, the Notes or any fees hereunder, (v) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes, or the
number or identity of Lenders which shall be required for the Lenders or any of
them to take any action hereunder, (vi) release any Guarantor from its
obligations under any Guaranty Agreement, (vii) modify the definition of
"REQUIRED LENDERS," or (viii) modify this Section 11.2. Notwithstanding the
foregoing, no amendment, waiver or consent shall, unless in writing
<PAGE>
and signed by the Agent in addition to the Lenders required hereinabove to take
such action, affect the rights or duties of the Agent under this Agreement or
under any other Credit Document.
ARTICLE 1.2
ARTICLE 1.3 NO WAIVER; REMEDIES CUMULATIVE . No failure or delay on the part of
the Agent, any Lender or any holder of a Note in exercising any right or remedy
hereunder or under any other Credit Document, and no course of dealing between
any Credit Party and the Agent, any Lender or the holder of any Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right or remedy hereunder or under any other Credit Document preclude any other
or further exercise thereof or the exercise of any other right or remedy
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Agent, any
Lender or the holder of any Note would otherwise have. No notice to or demand on
any Credit Party not required hereunder or under any other Credit Document in
any case shall entitle any Credit Party to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the rights of the
Agent, the Lenders or the holder of any Note to any other or further action in
any circumstances without notice or demand.
ARTICLE 1.4
ARTICLE 1.5 PAYMENT OF EXPENSES, ETC. Borrower shall:
ARTICLE 1.6
(a) whether or not the transactions hereby contemplated are
consummated, pay all reasonable, out-of-pocket costs and
expenses (including travel costs and attorneys' fees) of the
Agent and the Lenders in the administration (both before and
after the execution hereof and including reasonable expenses
actually incurred relating to advice of counsel as to the
rights and duties of the Agent and the Lenders with respect
thereto) of, and in connection with the preparation, execution
and delivery of, preservation of rights under, enforcement of,
and, after a Default or Event of Default, refinancing,
renegotiation or restructuring of, this Agreement and the
other Credit Documents and the documents and instruments
referred to therein, and any amendment, waiver or consent
relating thereto (including, without limitation, the
reasonable fees actually incurred and disbursements of counsel
for the Agent and the Lenders), and in the case of enforcement
of this Agreement or any Credit Document after the occurrence
and during the continuance of an Event of Default, all such
reasonable, out-of-pocket costs and expenses (including,
without limitation, the reasonable fees actually incurred and
disbursements of counsel), for any of the Lenders;
(a) subject, in the case of certain Taxes, to the applicable
provisions of Section 4.7(b), pay and hold each of the Lenders
harmless from and against any and all present and future
stamp, documentary, intangible and other similar Taxes with
respect to this Agreement, the Notes and any other Credit
Documents, any collateral described therein, or any payments
due thereunder, including interest and penalties and save each
Lender harmless from and against any and all liabilities with
respect to or resulting from any delay or omission of Borrower
to pay such Taxes, provided, HOWEVER, nothing contained in
this subsection shall obligate the Borrower to pay any taxes
based on the overall income of the Lenders; and
(a) indemnify the Agent and each Lender, and their respective
officers, directors, employees, representatives and agents
from, and hold each of them harmless against, any and all
costs, losses, liabilities, claims, damages or expenses
incurred by any of them (whether or not any of them is
designated a party thereto) (an "INDEMNITEE") arising out of
or by reason of any investigation, litigation or other
proceeding related to any actual or proposed use of the
proceeds of any of the Loans or any Credit Party's entering
into and performing of the Agreement, the Notes, or the other
Credit Documents, including, without limitation, the
reasonable fees actually incurred and disbursements of counsel
(including
<PAGE>
foreign counsel) incurred in connection with any such
investigation, litigation or other proceeding; PROVIDED,
HOWEVER, Borrower shall not be obligated to indemnify any
Indemnitee for any of the foregoing arising out of such
Indemnitee's gross negligence or willful misconduct or the
breach by the Indemnitee of its obligations under this
Agreement;
(a) without limiting the indemnities set forth in subsection (c)
above, indemnify each Indemnitee for any and all expenses and
costs (including without limitation, remedial, removal,
response, abatement, cleanup, investigative, closure and
monitoring costs), losses, claims (including claims for
contribution or indemnity and including the cost of
investigating or defending any claim and whether or not such
claim is ultimately defeated, and whether such claim arose
before, during or after any Credit Party's ownership,
operation, possession or control of its business, property or
facilities or before, on or after the date hereof, and
including also any amounts paid incidental to any compromise
or settlement by the Indemnitee or Indemnitees to the holders
of any such claim), lawsuits, liabilities, obligations,
actions, judgments, suits, disbursements, encumbrances, liens,
damages (including without limitation damages for
contamination or destruction of natural resources), penalties
and fines of any kind or nature whatsoever (including without
limitation in all cases the reasonable fees actually incurred,
other charges and disbursements of counsel in connection
therewith) incurred, suffered or sustained by that Indemnitee
based upon, arising under or relating to Environmental Laws
based on, arising out of or relating to in whole or in part,
the existence or exercise of any rights or remedies by any
Indemnitee under this Agreement, any other Credit Document or
any related documents (but excluding those incurred, suffered
or sustained by any Indemnitee as a result of any action taken
by or on behalf of the Lenders with respect to Borrower or any
Subsidiary of Borrower (or the assets thereof) owned or
controlled by the Lender). The indemnity permitted in this
clause (d) shall (i) not apply as to any Indemnity to any
costs or expenses in connection with any condition, suspected
condition, threatened condition or alleged condition which
first arises and occurs after said Indemnitee Lender succeeds
to the ownership of, takes possession of or operates the
business or any property of the Borrower or any of its
Subsidiaries, and (ii) in the case of cleanup, investigative,
closure and monitoring costs concerning or relating to
Hazardous Materials or any Environmental Laws shall only apply
after an Event of Default has occurred and is continuing
PROVIDED THAT the Credit Party is then undertaking and
fulfilling all its obligations under this Agreement and
Environmental Laws with respect to said cleanup,
investigation, closure and monitoring.
(a) If any claim for which an Indemnitee is entitled to indemnity
is asserted against such Indemnitee by a third party, such
Indemnitee shall promptly give Borrower notice thereof and
give Borrower an opportunity to defend the same with counsel
of Borrower's choice subject to the Agent's approval, which
will not be unreasonably withheld, at Borrower's expense. All
Indemnitees shall provide reasonable cooperation in connection
with such defense. In the event that Borrower desires to
compromise or settle any such claim, all Indemnitee shall have
the right to consent to such settlement or compromise;
provided, however, that if such compromise or settlement is
for money damages only (paid by Borrower in full) and will
include a full release and discharge of such Indemnitee, and
such Indemnitee withholds its consent to such compromise or
settlement, such Indemnitee and Borrower agree that (1)
Borrower's liability shall be limited to the amount of the
proposed settlement and Borrower shall thereupon be relieved
of any further liability with respect to such claim, and (2)
from and after such date, such Indemnitee will undertake all
legal costs and expenses in connection with any such claim.
<PAGE>
If and to the extent that the obligations of Borrower under this Section 11.4
are unenforceable for any reason, Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.
ARTICLE 1.1 RIGHT OF SET-OFF . In addition to and not in limitation of all
rights of off-set that any Lender or other holder of a Note may have under
applicable law, each Lender or other holder of a Note shall, upon the occurrence
and during the continuance of any Event of Default and whether or not such
Lender or such holder has made any demand or any Credit Party's obligations are
matured, have the right to appropriate and apply to the payment of any Credit
Party's obligations hereunder and under the other Credit Documents, all deposits
of any Credit Party (general or special, time or demand, provisional or final,
other than escrow or trust accounts denoted as such) then or thereafter held by
and other indebtedness or property then or thereafter owing by such Lender or
other holder to any Credit Party, whether or not related to this Agreement or
any transaction hereunder. Each Lender shall promptly notify Borrower of any
off-set hereunder.
ARTICLE 1.2
ARTICLE 1.3 BENEFIT OF AGREEMENT.
ARTICLE 1.4
(a) This Agreement shall be binding upon and inure to the benefit
of and be enforceable by the respective successors and assigns
of the parties hereto, PROVIDED THAT Borrower may not assign
or transfer any of its interest hereunder without the prior
written consent of the Lenders.
(a) Any Lender may make, carry or transfer Loans at, to or for the
account of, any of its branch offices or the office of an
Affiliate of such Lender. A Lender may participate any of its
Commitments to any of its Affiliates.
(a) Each Lender may assign all or a portion of its interests,
rights and obligations under this Agreement (including all or
a portion of any of its Commitments and the Loans at the time
owing to it and the Notes held by it) at any time.
(a) Any Lender or participant may, in connection with the
assignment or participation or proposed assignment or
participation, pursuant to this Section, disclose to the
assignee or participant or proposed assignee or participant
any information relating to Borrower or the other Consolidated
Companies furnished to such Lender by or on behalf of Borrower
or any other Consolidated Company. With respect to any
disclosure of confidential, non-public, proprietary
information, such proposed assignee or participant shall agree
to use the information only for the purpose of making any
necessary credit judgments with respect to this credit
facility and not to use the information in any manner
prohibited by any law, including without limitation, the
securities laws of the United States. The proposed participant
or assignee shall agree not to disclose any of such
information except (i) to directors, employees, auditors or
counsel to whom it is necessary to show such information, each
of whom shall be informed of the confidential nature of the
information, (ii) in any statement or testimony pursuant to a
subpoena or order by any court, governmental body or other
agency asserting jurisdiction over such entity, or as
otherwise required by law (provided prior notice is given to
Borrower and the Agent unless otherwise prohibited by the
subpoena, order or law), and (iii) upon the request or demand
of any regulatory agency or authority with proper
jurisdiction. The proposed participant or assignee shall
further agree to return all documents or other written
material and copies thereof received from any Lender, the
Agent or Borrower relating to such confidential information
unless otherwise properly disposed of by such entity.
<PAGE>
(a) Any Lender may at any time assign all or any portion of its
rights in this Agreement and the Notes issued to it to a
Federal Reserve Bank; provided that no such assignment shall
release the Lender from any of its obligations hereunder.
(a) If (i) any Taxes referred to in Section 4.7(b) hereof have
been levied or imposed so as to require withholdings or
deductions by Borrower and payment by Borrower of additional
amounts to any Lender as a result thereof, (ii) any Lender
shall make demand for payment of any material additional
amounts as compensation for increased costs pursuant to
Section 4.10 hereof or for its reduced rate of return pursuant
to Section 4.16 hereof, or (iii) any Lender shall decline to
consent to a modification or waiver of the terms of this
Agreement or the other Credit Documents requested by Borrower,
then and in such event, upon request from Borrower delivered
to such Lender and the Agent, such Lender shall assign, in
accordance with the provisions of Section 11.6(c) hereof, all
of its rights and obligations under this Agreement and the
other Credit Documents to another Lender or an Eligible
Assignee selected by Borrower, in consideration for the
payment by such assignee to the Lender of the principal of,
and interest on, the outstanding Loans accrued to the date of
such assignment, and the assumption of such Lender's Total
Commitment hereunder, together with any and all other amounts
owing to such Lender under any provisions of this Agreement or
the other Credit Documents accrued to the date of such
assignment.
ARTICLE 1.1 GOVERNING LAW; SUBMISSION TO JURISDICTION .
ARTICLE 1.2
(A) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND UNDER THE NOTES SHALL BE CONSTRUED IN ACCORDANCE
WITH AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF) OF THE STATE OF FLORIDA.
(A) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT,
THE NOTES OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE
CIRCUIT COURT OF ORANGE COUNTY, FLORIDA, OR ANY OTHER COURT OF
THE STATE OF FLORIDA OR OF THE UNITED STATES OF AMERICA FOR
THE MIDDLE DISTRICT OF FLORIDA, AND, BY EXECUTION AND DELIVERY
OF THIS AGREEMENT, BORROWER HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND, TO THE EXTENT
PERMITTED BY LAW, BORROWER HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, 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 SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS.
(A) BORROWER HEREBY IRREVOCABLY DESIGNATES THE PRESIDENT OF THE
BORROWER, AS SO DESIGNATED FROM TIME TO TIME, AT THE ADDRESS
SET FORTH ON THE BORROWER'S SIGNATURE PAGE TO THIS AGREEMENT
AS ITS DESIGNEE, APPOINTEE AND LOCAL AGENT TO RECEIVE, FOR AND
ON BEHALF OF BORROWER, SERVICE OF PROCESS IN SUCH RESPECTIVE
JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT OR THE NOTES OR ANY DOCUMENT RELATED
THERETO. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED
ON SUCH LOCAL AGENT WILL BE PROMPTLY
<PAGE>
FORWARDED BY SUCH LOCAL AGENT AND BY THE SERVER OF SUCH
PROCESS BY MAIL TO BORROWER AT ITS ADDRESS SET FORTH OPPOSITE
ITS SIGNATURE BELOW, BUT, TO THE EXTENT PERMITTED BY LAW, THE
FAILURE OF BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN
ANY WAY THE SERVICE OF SUCH PROCESS. BORROWER FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO BORROWER AT ITS SAID ADDRESS, SUCH SERVICE
TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.
(a) Nothing herein shall affect the right of the Agent, any
Lender, any holder of a Note or any Credit Party to serve
process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against Borrower in any
other jurisdiction.
ARTICLE 1.1 INDEPENDENT NATURE OF LENDERS' RIGHTS . The amounts payable at any
time hereunder to each Lender shall be a separate and independent debt, and each
Lender shall be entitled to protect and enforce its rights pursuant to this
Agreement and its Notes, and it shall not be necessary for any other Lender to
be joined as an additional party in any proceeding for such purpose.
ARTICLE 1.2
ARTICLE 1.3 COLLATERAL TO BENEFIT ALL LENDERS . The security interest in the
Collateral has been granted to the Agent, for the benefit of all the Lenders, to
the extent of each Lender's Commitment.
ARTICLE 1.4
ARTICLE 1.5 COUNTERPARTS . This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
ARTICLE 1.6
ARTICLE 1.7 EFFECTIVENESS; SURVIVAL .
ARTICLE 1.8
(a) This Agreement shall become effective on the date (the
"EFFECTIVE DATE") on which all of the parties hereto shall
have signed a counterpart hereof (whether the same or
different counterparts) and shall have delivered the same to
the Agent pursuant to Section 11.1 or, in the case of the
Lenders, shall have given to the Agent written or telex notice
(actually received) that the same has been signed and mailed
to them.
(a) The obligations of Borrower under Sections 4.7(b), 4.10, 4.12,
4.13, and 4.16 above hereof shall survive for ninety days
after the payment in full of the Notes after the Maturity
Date. PROVIDED, HOWEVER, in regard to documentary stamp taxes
and intangible taxes, if any, obligations for reimbursement of
those amounts shall continue for the applicable statute of
limitations. All representations and warranties made herein,
in the certificates, reports, notices, and other documents
delivered pursuant to this Agreement shall survive the
execution and delivery of this Agreement, the other Credit
Documents, and such other agreements and documents, the making
of the Loans hereunder, and the execution and delivery of the
Notes.
ARTICLE 1.1 SEVERABILITY . In case any provision in or obligation under this
Agreement or the other Credit Documents shall be invalid, illegal or
unenforceable, in whole or in part, in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
ARTICLE 1.2
<PAGE>
ARTICLE 1.3 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitation of, another covenant, shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.
ARTICLE 1.4
ARTICLE 1.5 CHANGE IN ACCOUNTING PRINCIPLES, FISCAL YEAR OR TAX LAWS . If (i)
any preparation of the financial statements referred to in Section 7.7 hereafter
occasioned by the promulgation of rules, regulations, pronouncements and
opinions by or required by the Financial Accounting Standards Board or the
American Institute of Certified Public Accounts (or successors thereto or
agencies with similar functions) result in a material change in the method of
calculation of financial covenants, standards or terms found in this Agreement,
(ii) there is any change in Borrower's fiscal quarter or fiscal year, or (iii)
there is a material change in federal tax laws which materially affects any of
the Consolidated Companies' ability to comply with the financial covenants,
standards or terms found in this Agreement, Borrower and the Required Lenders
agree to enter into negotiations in order to amend such provisions so as to
equitably reflect such changes with the desired result that the criteria for
evaluating any of the Consolidated Companies' financial condition shall be the
same after such changes as if such changes had not been made. Unless and until
such provisions have been so amended, the provisions of this Agreement shall
govern.
ARTICLE 1.6
<PAGE>
ARTICLE 1.7 HEADINGS DESCRIPTIVE; ENTIRE AGREEMENT . The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
ARTICLE 1.8
ARTICLE 1.9 TIME IS OF THE ESSENCE . Time is of the
essence in interpreting and performing this Agreement and all other Credit
Documents.
ARTICLE 1.10
ARTICLE 1.11 USURY . It is the intent of the parties hereto not to violate any
federal or state law, rule or regulation pertaining either to usury or to the
contracting for or charging or collecting of interest, and Borrower and Lenders
agree that, should any provision of this Agreement or of the Notes, or any act
performed hereunder or thereunder, violate any such law, rule or regulation,
then the excess of interest contracted for or charged or collected over the
maximum lawful rate of interest shall be applied to the outstanding principal
indebtedness due to Lenders by Borrower under this Agreement.
ARTICLE 1.12
ARTICLE 1.13 CONSTRUCTION . Should any provision of this Agreement require
judicial interpretation, the parties hereto agree that the court interpreting or
construing the same shall not apply a presumption that the terms hereof shall be
more strictly construed against one party by reason of the rule of construction
that a document is to be more strictly construed against the party who itself or
through its agents prepared the same, it being agreed that Borrower, Agent,
Lenders and their respective agents have participated in the preparation hereof.
The "promise to pay" the Term Loans as evidenced solely by the Term Notes and
not by this Agreement or any other Credit Document.
ARTICLE 1.1 MISCELLANEOUS MATTERS REGARDING EXTENSION/RESTRUCTURING. In regard
to the extension and restructuring set forth in this Agreement, and as a
condition for the Lenders agreeing to same, the parties agree to the following
provisions:
ARTICLE 1.2
(a) AMOUNTS DUE/NO DEFENSES OR SET OFFS. By the execution hereof,
the Borrower hereby agrees as follows:
(i) AMOUNTS DUE ON LOANS. That there is currently due and
owing on the Loans as of the date hereof the
following principal amounts:
Term Loan $2,000,000
Interest is due on said Loans at the rate and on the terms set
forth in this Agreement.
(i) AMOUNTS ABSOLUTELY DUE. That the amounts set forth in
clause (i) hereof are absolutely and unconditionally
due and owing to the Lenders pursuant to the Credit
Documents, and are not subject to any claim,
counter-claim, or other right of offset.
(i) VALIDITY OF CREDIT DOCUMENTS. That each and all of
the Credit Documents, and the rights and remedies
granted to the Lenders thereunder, are fully binding
upon and enforceable against the Borrower in
accordance with their respective terms.
(i) WAIVER OF ANY DEFENSES. That it is not now entitled
to any claim, counterclaim, defense, affirmative
defense or other right of set-off
<PAGE>
whatsoever against the Lenders or its successors and assigns,
with regard to the payment of any or all of the amounts
described in clause (i) hereof or the enforcement of any of
the rights and remedies of the Lenders under any of the Credit
Documents, and the Borrower does hereby release, waive and
surrender any and all claims, counterclaims, defenses,
affirmative defenses and other rights of set-off whatsoever,
relating to acts, events, conduct or other matters whatsoever
occurring at or prior to the execution and delivery of this
Agreement, that any of such persons or entities might
otherwise have been entitled to assert or allege against the
Lenders for any reason, including but not limited to, any
matter related to, connected with, arising out of or regarding
the payment of such amounts to the Lenders, or the enforcement
of the provisions of any of the Credit Documents.
(a) RELIEF FROM STAY. The Lenders are entering into this Agreement
with the express understanding that the Borrower will not
hereinafter voluntarily file and seek the entry of an order
for relief in any case under the Bankruptcy Code of 1978, as
amended (hereinafter referred to as the "BANKRUPTCY CODE"), or
consent to the entry of an order for relief in any involuntary
case under the Bankruptcy Code. In the event that the Borrower
does file a voluntary case or does consent to any such
involuntary case under the Bankruptcy Code, the Borrower
agrees that Lenders's security or other interest in any
Collateral will not be adequately protected and that Lenders,
upon request, shall be entitled to immediate EX PARTE relief
from the automatic stay under Section 362(d)(1) of the
Bankruptcy Code and that it shall not object to or in any
other manner seek to forestall the grant of such relief to
Lenders.
The provisions set forth in this Section 11.19 are a material inducement for the
Lenders' willingness to enter into this Agreement; but for the agreement of the
Borrower to the provisions contained in this Section 11.19, the Lenders would
not have been willing to execute this Agreement and the Lenders would have
undertaken to proceed with the collection of the Loan and the enforcement of its
rights and remedies under the Credit Documents free of the conditions and
restrictions set forth herein.
ARTICLE 1.1 COMPLETE AGREEMENT . This Agreement, along with each and every other
Credit Document, collectively constitutes the complete agreement between the
Borrower, the Lenders and the Agent as to the matters set forth herein, and
incorporate all prior discussions, representations and other agreements.
ARTICLE 1.2
ARTICLE 1.3 IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their duly authorized officers as
of the day and year first above written.
ARTICLE 1.4
<PAGE>
[SIGNATURE PAGE TO
AMENDED AND RESTATED TERM LOAN AGREEMENT
BETWEEN SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION, AS AGENT,
AND SERENGETI EYEWEAR, INC.
BORROWER:
SERENGETI EYEWEAR, INC.
Address For Notices:
By:____________________________
William L. McMahon,
Vice President and Chief Financial Officer
8125 25th Court East
Sarasota, Florida
Attention: Stephen Nevitt
Telephone No.: (941) 359-3599
Telecopy No.: (941) 359-3598
In the case of Notices to the Borrower, copies shall be sent to:
COOPERMAN LEVITT WINIKOFF LESTER
& NEWMAN, P.C.
800 Third Avenue
New York, New York 10022
Attention: Robert Winikoff, Esquire
Telephone No.: (212) 688-7000
Telecopy No.: (212) 755-2839
<PAGE>
SIGNATURE PAGE TO
AMENDED AND RESTATED TERM LOAN AGREEMENT
BETWEEN SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION, AS AGENT,
AND SERENGETI EYEWEAR, INC.
Address for Notices: SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION,
Individually and as Agent
200 South Orange Avenue
6th Floor, SOAB
Post Office Box 3833 By: ___________________________
Orlando, Florida 32897 Lawrence L. Perry,
First Vice President
Attention: Lawrence L. Perry,
First Vice President
Telephone No.: (407) 237-4857
Telecopy No.: (407) 237-4076
- -------------------------------------------------------------------
<TABLE>
<S> <C>
Term Loan Commitment: $1,142,856
Pro Rata Share of Term Loan Commitment: 57.1428%
</TABLE>
<PAGE>
SIGNATURE PAGE TO
AMENDED AND RESTATED TERM LOAN AGREEMENT
BETWEEN SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION, AS AGENT,
AND SERENGETI EYEWEAR, INC.
Address for Notices: BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
Two Ravinia Drive
Suite 1680
Atlanta, Georgia 30346
By: ____________________________
Attention: Francine J. Wanalista Title:
Telephone No.: (770) 390-1850
Telecopy No.: (770) 390-1851 By: ____________________________
Title:
Lending Office:
Creditanstalt-Bankversin
Two Greenwich Plaza
Greenwich, Connecticut 06830-6353
- -------------------------------------------------------------------
<TABLE>
<S> <C>
Term Loan Commitment: $857,144
Pro Rata Share of Term Loan Commitment: 42.8572%
</TABLE>
<PAGE>
SERENGETI EYEWEAR, INC.
EXHIBIT 10
MATERIAL CONTRACTS (CONTINUED)
<PAGE>
FINANCING AGREEMENT
THE CIT GROUP/BUSINESS CREDIT, INC.
AND
SERENGETI EYEWEAR, INC.
DATED: September 9, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. DEFINITIONS -1-
SECTION 2. CONDITIONS PRECEDENT -8-
2.1. LIEN SEARCHES -8-
2.2. CASUALTY INSURANCE -8-
2.3. UCC FILINGS -8-
2.4. GUARANTIES -9-
2.5. OPINIONS -9-
2.6. PLEDGE AGREEMENT -9-
2.7. ADDITIONAL DOCUMENTS -9-
2.8. SUBORDINATION AGREEMENT -9-
2.9. BOARD RESOLUTION -9-
2.10. CORPORATE ORGANIZATION -10-
2.11. OFFICER'S CERTIFICATE -10-
2.12. ABSENCE OF DEFAULT -10-
2.13. APPRAISALS -10-
2.14. LEGAL RESTRAINTS/LITIGATION -10-
2.15. DISBURSEMENT AUTHORIZATION -10-
2.16. EXAMINATION, VERIFICATION AND EXCESS AVAILABILITY -10-
2.17. CASH BUDGET PROJECTIONS -11-
2.18. COLLECTION ACCOUNTS -11-
2.19. EXISTING REVOLVING CREDIT AGREEMENT -11-
2.20. AGENT COMMITMENT LETTER -11-
SECTION 3. REVOLVING LOANS -12-
SECTION 4. TERM LOAN -15-
SECTION 5. MANNER OF BORROWING REVOLVING LOANS -15-
SECTION 6. COLLATERAL -17-
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS -20-
SECTION 8. INTEREST, FEES AND EXPENSES -28-
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 9. POWERS -29-
SECTION 10. EVENTS OF DEFAULT AND REMEDIES -30-
SECTION 11. TERMINATION -33-
SECTION 12. MISCELLANEOUS -33-
SECTION 13. AGREEMENT BETWEEN THE LENDERS -35-
SECTION 14. AGENCY -38-
</TABLE>
<PAGE>
FINANCING AGREEMENT
THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation,
(hereinafter "CITBC") with offices located at 1200 Ashwood Parkway, Suite 150,
Atlanta, Georgia 30338 (CITBC and any other party hereafter becoming a Lender
hereunder pursuant to Section 13.9 hereof each individually sometimes referred
to as a "Lender" and collectively the "Lenders") and CITBC as Agent for the
Lenders (hereinafter the "Agent") are pleased to confirm the terms and
conditions under which the Lenders acting through the Agent shall make revolving
loans, a term loan and other financial accommodations to SERENGETI EYEWEAR,
INC., (herein the "Company"), a New York corporation with a principal place of
business at 8125 25th Court East, Sarasota, Florida 34243.
SECTION 1. DEFINITIONS.
ACCOUNTS shall mean all of the Company's now existing and future: (a)
accounts (as defined in the U.C.C.) and any and all other receivables (whether
or not specifically listed on schedules furnished to the Agent), including,
without limitation, all accounts created by or arising from all of their sales
of goods or rendition of services to their customers, and all accounts arising
from sales or rendition of services made under any of their trade names or
styles, or through any of their divisions; (b) any and all instruments (as
defined in the U.C.C.), documents (as defined in the U.C.C.), contract rights
(as defined in the U.C.C.) and chattel paper (as defined in the U.C.C.); (c)
unpaid seller's rights (including rescission, replevin, reclamation and stoppage
in transit) relating to the foregoing or arising therefrom; (d) rights to any
goods represented by any of the foregoing, including rights to returned or
repossessed goods; (e) reserves and credit balances arising hereunder; (f)
guarantees or collateral for any of the foregoing; (g) insurance policies or
rights relating to any of the foregoing; and (h) cash and non-cash proceeds of
any and all the foregoing.
AGENT COMMITMENT LETTER shall have the mean the commitment letter dated
May 17, 1999 issued by the Agent to, and accepted by, the Company.
AGREEMENT shall mean this Financing Agreement, as amended and modified
from time to time.
ANNIVERSARY DATE shall mean the date occurring two (2) years from the
date hereof and the same date in every year thereafter.
ASSIGNMENT AND TRANSFER AGREEMENT shall mean the Assignment and
Transfer Agreement in the form of EXHIBIT C hereto.
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<PAGE>
AVAILABILITY shall mean, as to the Company, at any date of
determination the excess of (a) the sum of (i) 85% of the Eligible Domestic
Accounts Receivable of the Company and (ii) the lesser of (A) $2,000,000 or (B)
75% of the Eligible Foreign Accounts Receivable of the Company and (iii) the
lesser of (A) $10,000,000 or (B) the sum of (I) 80% of the Eligible Premium
Inventory of the Company and (II) 50% of the Eligible Non-Premium Inventory of
the Company, OVER (b) the sum of (i) the outstanding aggregate amount of all
Revolving Loan as of any such date and (ii) the amount of the Availability
Reserve.
AVAILABILITY RESERVE shall mean, as to the Company, the sum of three
(3) months rental payments on all of its leased premises for which it has not
delivered to the Agent a landlord's waiver (in form and substance reasonably
satisfactory to the Agent), provided that such amount shall be adjusted from
time to time hereafter upon (a) delivery to the Agent of any such acceptable
waiver, (b) the opening or closing of a Collateral location and/or (c) any
material change in rental payments.
BUSINESS DAY shall mean any day that the Agent is open for business in
New York, New York, which is not (a) a Saturday, Sunday or legal holiday in the
state of New York or (b) a day on which banking institution chartered by the
state of New York or the United States are legally required to close.
CAPITAL EXPENDITURES for any period shall mean the aggregate of all
expenditures of the Company during such period that in conformity with GAAP are
required to be included in or reflected by the property, plant or equipment or
similar fixed asset account reflected in the balance sheet of the Company,
including the principal portion of all lease obligations required to be
capitalized under GAAP.
CAPITAL IMPROVEMENTS shall mean operating Equipment and facilities
(other than land) acquired or installed for use in the Company's business
operations.
CAPITAL LEASE shall mean any lease of property (whether real, personal
or mixed) which, in conformity with GAAP, is accounted for as a capital lease or
a Capital Expenditure on the balance sheet of the Company.
CHASE BANK RATE shall mean the rate of interest per annum announced by
Chase Manhattan Bank from time to time as its prime rate in effect at its
principal office in the City of New York. Such prime rate is not intended to be
the lowest rate of interest charged by Chase Manhattan Bank to its borrowers.
CITBC shall have the meaning specified in the preamble to this
Agreement.
CLOSING DATE shall mean the date on or after the date hereof upon which
the Agent in
2
<PAGE>
behalf of the Lenders makes the initial extension of credit
hereunder whether in the form of Revolving Loans or the Term Loan.
COLLATERAL shall mean all present and future Accounts, Equipment,
Inventory, Documents of Title, General Intangibles and Other Collateral of the
Company.
COLLATERAL MANAGEMENT FEE shall mean the amount of $12,000.00, which
shall be paid to the Agent in accordance with Section 8.8 hereof to offset the
expenses and costs of the Agent in connection with record keeping, periodic
examinations, analyzing and evaluating the Collateral.
CONSOLIDATED BALANCE SHEET shall mean a consolidated balance sheet for
the Company and its consolidated subsidiaries eliminating all inter-company
transactions and prepared in accordance with GAAP.
CONSOLIDATING BALANCE SHEET shall mean a Consolidated Balance Sheet
plus individual balance sheets for the Company and its subsidiaries showing all
eliminations of inter-company transactions and prepared in accordance with GAAP
and including a balance sheet for the Company exclusively.
CURRENT ASSETS shall mean those assets which in accordance with GAAP
are classified as current.
CURRENT LIABILITIES shall mean those liabilities which in accordance
with GAAP, are classified as "current", provided, however, that notwithstanding
GAAP, the Revolving Loans and the current portion of Permitted Indebtedness
shall be considered "current liabilities".
CUSTOMARILY PERMITTED LIENS shall mean:
(a) liens of local or state authorities for franchise or other like
taxes provided the aggregate amounts of such liens shall not exceed $50,000 in
the aggregate for the Company at any one time;
(b) statutory liens of landlords and liens of carriers, warehousemen,
mechanics, materialmen, including, without limitation, statutory liens of
contract manufacturers in Inventory held by such entities for manufacture or
assemblage charges, and other like liens imposed by law, created in the ordinary
course of business and for amounts not yet due after giving effect to any
applicable period of grace (or which are being contested in good faith by
appropriate proceedings or other appropriate actions which are sufficient to
prevent imminent foreclosure of such liens) and with respect to which adequate
reserves or other appropriate provisions are being maintained in accordance with
GAAP;
(c) deposits made (and the liens thereon) in the ordinary course of
business (including, without limitation, security deposits for leases, surety
bonds and appeal bonds) in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids, contracts (other than for the repayment or
guarantee of
3
<PAGE>
borrowed money or purchase money obligations), statutory obligations and other
similar obligations arising as a result of progress payments under government
contracts; and
(d) easements (including, without limitation, reciprocal easement
agreements and utility agreements), encroachments, minor defects or
irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting any real property of the
Company and which in the aggregate do no materially interfere with the
occupation, use or enjoyment by the Company in their business of the property so
encumbered.
DEFAULT shall mean any event specified in Section 10 hereof, whether or
not any requirement for the giving of notice, the lapse of time, or both, or any
other condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum equal
to the sum of: (a) 2% plus (b) the applicable contract rate of interest based
upon the applicable increment over the Chase Bank Rate as determined under
Section 8 hereof, which the Agent in behalf of the Lenders shall be entitled to
charge the Company on all Obligations due the Agent on behalf of the Lenders by
the Company to the extent provided in Section 10.2 of this Agreement.
DEPOSITORY ACCOUNTS shall have the meaning specified in Section 3.4
hereof.
DOCUMENTS OF TITLE shall mean all present and future documents (as
defined in the U.C.C.) including, without limitation all warehouse receipts,
bills of lading, shipping documents, chattel paper, instruments and similar
documents, all whether negotiable or not and all goods and Inventory relating
thereto and all cash and non-cash proceeds of the foregoing.
EARLY TERMINATION DATE shall mean the date on which the Company
terminate this Agreement or the Line of Credit which date is prior to an
Anniversary Date.
EARLY TERMINATION FEE shall mean the fee the Company shall pay to the
Agent on behalf of the Lenders in the event the Company terminates the Line of
Credit or this Agreement on a date prior to an Anniversary Date, which fee shall
be in the amount of 2% of the amount of the Line of Credit as of the date of any
such termination if the Line of Credit or this Agreement is terminated during
the first year after the Closing Date (September 8, 1999 through September 9,
2000), and 1% of the amount of the Line of Credit as of the date of any such
termination if the Line of Credit or this Agreement is terminated during the
second year after the Closing Date (September 8, 2000 through September 9,
2001).
EBIT shall mean, in any period, all earnings before all interest and
tax obligations for said period, determined in accordance with GAAP but
excluding the effect of extraordinary and/or non-reoccurring gains or losses for
such period..
4
<PAGE>
EBITDA shall mean, in any period, all earnings before all (a) interest
and tax obligations, (b) depreciation, and (c) amortization for said period, all
determined in accordance with GAAP on a basis consistent with the latest audited
financial statements of the Company but excluding the effect of extraordinary
and/or non-reoccuring gains or losses for such period.
ELIGIBLE DOMESTIC ACCOUNTS RECEIVABLE shall mean the gross amount of
the Company's Trade Accounts Receivable that are subject to a valid, first
priority and fully perfected security interest in favor of the Agent in behalf
of the Lenders and which conform to the warranties contained herein and at all
times continue to be acceptable to the Agent in the exercise of its reasonable
business judgment, less, without duplication, the sum of (a) any returns,
discounts, claims, credits and allowances of any nature (whether issued, owing,
granted or outstanding) and (b) reserves for: (i) sales to the United States of
America or to any agency, department or division thereof; (ii) foreign sales
other than sales (x) secured by stand-by letters of credit (in form and
substance satisfactory to the Agent) issued or confirmed by, and payable at,
banks having a place of business in the United States of America and payable in
United States currency, or (y) to customers residing in Canada provided such
sales otherwise comply with all of the other criteria for eligibility hereunder,
are payable in United States currency and such sales do not exceed 10% of the
aggregate amount of Eligible Domestic Accounts Receivable at any date of
determination; (iii) (x) Accounts that remain unpaid on the sooner of 60 days
from due date or 120 days from invoice date; (iv) contras; (v) sales to any
subsidiary or to any company affiliated with the Company in any way; (vi) bill
and hold (deferred shipment) or consignment sales; (vii) sales to any customer
which is (a) insolvent, (b) the debtor in any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceedings under any
federal or state law, (c) negotiating, or has called a meeting of its creditors
for purposes of negotiating, a compromise of its debts or (d) financially
unacceptable to the Agent or has a credit rating unacceptable to the Agent;
(viii) all sales to any customer if 50% or more of the aggregate dollar amount
of all outstanding invoices of such customer are unpaid more than 60 days from
due date or 120 days from invoice date; (ix) the amount by which sales to either
Wal-Mart Stores, Inc. or The Sunglass Hut ,Inc. exceed 25% of the net amount of
all Accounts or the amount by which sales to any other customer exceeds 10% of
the net amount of all Accounts; (x) any other reasons deemed necessary by the
Agent in its reasonable business judgment and which are customary either in the
commercial finance industry or in the lending practices of the Agent or any
Lender; and (x) an amount representing, historically, returns, discounts,
claims, credits and allowances.
ELIGIBLE FOREIGN ACCOUNTS RECEIVABLE shall mean the gross amount of the
Company's Trade Accounts receivable that (a) would constitute Eligible Domestic
Accounts Receivable but for the fact that they do not satisfy the requirements
for foreign sales under clause (ii)of such definition and (b) the payment of
which is insured by Continental Insurance Group or other insurers acceptable to
as Agent under policies which have been assigned to Agent for the benefit of the
Lenders, in form acceptable to Agent.
ELIGIBLE NON-PREMIUM INVENTORY shall mean, as to the Company, the gross
amount of
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<PAGE>
the Company's Inventory comprised of first quality sunglasses bearing
tradenames other than those set forth in the definition of Eligible Premium
Inventory that is subject to a valid, first priority and fully perfected
security interest in favor of the Agent in behalf of the Lenders and which
conform to the warranties contained herein and which at all times continue to be
acceptable to the Agent in the exercise of its reasonable business judgment less
any work-in-process, supplies (other than raw material), goods not present in
the United States of America, goods returned or rejected by its customers other
than goods that are undamaged and resaleable in the normal course of business,
goods to be returned to its suppliers, goods in transit to third parties (other
than its agents or warehouses), Inventory in possession of a warehouseman,
bailee or other third party unless such warehouseman, bailee or third party has
executed a notice of security interest agreement (in form and substance
satisfactory to the Agent) and the Agent has taken all other action required to
perfect its security interest in such Inventory, and less any reserves required
by the Agent in its reasonable discretion for special order goods, market value
declines and bill and hold (deferred shipment) or consignment sales.
ELIGIBLE PREMIUM INVENTORY shall mean, as to the Company, the gross
amount of the Company's Inventory comprised of (i) first quality sunglasses
bearing the Serengeti, Drivers, Kinetix and H20ptix tradenames and (ii) first
quality prescription lenses identified to Agent in writing by specific SKU's, in
all such cases subject to a valid, first priority and fully perfected security
interest in favor of the Agent in behalf of the Lenders and which conform to the
warranties contained herein and which at all times continue to be acceptable to
the Agent in the exercise of its reasonable business judgment less any
work-in-process, supplies (other than raw material), goods not present in the
United States of America, goods returned or rejected by its customers other than
goods that are undamaged and resaleable in the normal course of business, goods
to be returned to its suppliers, goods in transit to third parties (other than
its agents or warehouses), Inventory in possession of a warehouseman, bailee or
other third party unless such warehouseman, bailee or third party has executed a
notice of security interest agreement (in form and substance satisfactory to the
Agent) and the Agent has taken all other action required to perfect its security
interest in such Inventory, and less any reserves required by the Agent in its
reasonable discretion for special order goods, market value declines and bill
and hold (deferred shipment) or consignment sales.
EQUIPMENT shall mean all present and hereafter acquired equipment (as
defined in the U.C.C.) including, without limitation, all machinery, equipment,
furnishings and fixtures, and all additions, substitutions and replacements
thereof, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto and all proceeds
of whatever sort.
ERISA shall mean the Employee Retirement Income Security Act or 1974,
as amended from time to time and the rules and regulations promulgated
thereunder from time to time.
EVENT(S) OF DEFAULT shall have the meaning provided for in Section 10.1
of this
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<PAGE>
Agreement.
EXECUTIVE OFFICERS shall mean the Chairman, President, Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer, any Executive Vice
President, any Senior Vice President, Treasurer, Controller and Secretary of the
Company.
FISCAL QUARTER shall mean each three (3) month period ending on March
31, June 30, September 30, and December 31 of each year.
FISCAL YEAR shall mean each twelve (12) month period commencing on
first day of January each year and ending on the following December 31 of such
year.
FIXED CHARGE COVERAGE RATIO shall mean, for the relevant period, the
ratio determined by dividing (a) EBITDA minus unfunded Capital Expenditures, by
(b) the sum of (i) Interest Expense, (ii) the amount of principal repaid or
scheduled to be repaid on the Term Loan and Subordinated Debt, (iii) Mandatory
Prepayments made to Agent for the ratable benefit of Lenders pursuant to Section
4.6 of this Agreement and (iv) all cash dividends or distributions, to the
extent permitted by this Agreement.
GAAP shall mean generally accepted accounting principles in the United
States of America as in effect from time to time and for the period as to which
such accounting principles are to apply.
GENERAL INTANGIBLES shall have the meaning set forth in the U.C.C. and
shall include, without limitation, all present and future right, title and
interest in and to all tradenames, Trademarks (together with the goodwill
associated therewith), Patents, licenses, customer lists, distribution
agreements, supply agreements, indemnification rights and tax refunds, together
with all monies and claims for monies now or hereafter due and payable in
connection with any of the foregoing or otherwise, and all cash and non-cash
proceeds thereof.
GUARANTORS shall mean SolarTechnics (HK) Limited, a Hong Kong
corporation, and each other Person who guarantees payment or performance of the
whole or any part of the Obligations.
INDEBTEDNESS shall mean, without duplication, all liabilities,
contingent or otherwise, which are any of the following: (a) obligations in
respect of money (borrowed or otherwise) or for the deferred purchase price of
property, services or assets, other than Inventory, or (b) lease obligations
which, in accordance with GAAP, have been, or which should be capitalized.
INTEREST EXPENSE shall mean total interest obligations (paid or
accrued) of the Company, determined in accordance with GAAP on a basis
consistent with the latest audited statements of the Company.
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<PAGE>
INVENTORY shall mean all of the Company's present and hereafter
acquired inventory (as defined in the U.C.C. including, without limitation all
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same; in all
stages of production- from raw materials through work-in-process to finished
goods - and all proceeds thereof of whatever sort.
INVENTORY LOAN CAP shall mean $10,000,000.00.
LEVERAGE RATIO shall mean, for the relevant period, the ratio
determined by dividing Total Liabilities by EBITDA.
LINE OF CREDIT shall mean the commitment of the Lenders to make
Revolving Loans pursuant to Section 3 of this Agreement in the aggregate amount
not to exceed at any date $12,000,000.
LINE OF CREDIT FEE shall mean the fee due the Agent for the benefit of
the Lenders at the end of each month for the Line of Credit and shall be
determined by multiplying the difference between the Line of Credit, and the
average daily balance of Revolving Loans of the Company for said month by .5%
per annum for the number of days in said month.
LOAN FACILITY FEE shall mean the fee payable to the Agent for the
benefit of the Lenders in accordance with, and pursuant to, the provisions of
Section 8.7 of this Agreement.
MANDATORY PREPAYMENT shall mean the amount by which the Company must
prepay the Term Loan on or before the 90th day after the end of each Fiscal
Year, which amount shall be determined as set forth in Section 4.6 of this
Agreement.
NET WORTH shall mean assets in excess of liabilities, and shall be
determined in accordance with GAAP, on a consistent basis with the latest
audited statements.
OBLIGATIONS shall mean all loans and advances made or to be made by the
Agent or any Lender to the Company or to others for the Company's account
(including, without limitation, all Revolving Loans and the Term Loan); any and
all indebtedness and obligations which may at any time be owing by the Company
to the Agent or any Lender howsoever arising, whether now in existence or
incurred by the Company from time to time hereafter; whether secured by pledge,
lien upon or security interest in any of the Company's assets or property or the
assets or property of any other person, firm, entity or corporation; whether
such indebtedness is absolute or contingent, joint or several, matured or
unmatured, direct or indirect and whether the Company is liable to the Agent or
any Lender for such indebtedness as principal, surety, endorser, guarantor or
otherwise. Obligations shall also include indebtedness owing to the Agent or any
Lender by the Company under this Agreement or under any other agreement or
arrangement now or
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<PAGE>
hereafter entered into between the Company and the Agent or any Lender;
indebtedness or obligations incurred by, or imposed on, the Agent or any Lender
as a result of environmental claims (other than as a result of actions of the
Agent or any Lender) arising out of the Company's operation, premises or waste
disposal practices or sites; the Company's liability to the Agent or any Lender
as maker or endorser on any promissory note or other instrument for the payment
of money; the Company's liability to the Agent or any Lender under any
instrument of guaranty or indemnity, or arising under any guaranty, endorsement
or undertaking which the Agent or any Lender may make or issue to others for the
Company's account, including any accommodation extended with respect to
applications for letters of credit, the Agent's (in behalf of the Lenders)
acceptance of drafts or the Agent's (in behalf of the Lenders) endorsement of
notes or other instruments for the Company's account and benefit.
OPERATING LEASES shall mean all leases of property (whether real,
personal or mixed) other than Capital Leases.
OTHER COLLATERAL shall mean all now owned and hereafter acquired
deposits accounts maintained with any bank or financial institutions; all cash
and other monies and property in the possession or control of the Agent or any
Lender; all books, records, ledger cards, disks and related data processing
software at any time evidencing or containing information relating to any of the
Collateral described herein or otherwise necessary or helpful in the collection
thereof or realization thereon, and all cash and non-cash proceeds of the
foregoing.
OUT-OF-POCKET EXPENSES shall mean all of the Agent's or any Lender'
present and future expenses incurred relative to this Agreement, whether
incurred heretofore or hereafter, which expenses shall include, without being
limited to, all reasonable legal, accounting, appraisal fees and expenses
incurred by the Agent or any Lender, the cost of record searches, all costs and
expenses incurred by the Agent or any Lender in opening bank accounts,
depositing checks, receiving and transferring funds, and any charges imposed on
the Agent or any Lender due to "insufficient funds" of deposited checks and the
Agent's or any Lender's standard fee relating thereto, and any amounts paid by
the Agent or any Lender, incurred by or charged to the Agent or any Lender to
any bank issuing a letter of credit for the benefit of the Company, or any sums
paid by Lender under any guaranty given by Lender of the Company's reimbursement
obligations to such issuing bank or other like document which pertains either
directly or indirectly to any such letters of credit, and reasonable local
counsel fees and their out-of-pocket expenses and all expenses, costs and fees
incurred by Agent or any Lender as set forth in Section 10.3 of this Agreement.
PATENTS shall mean all present and hereafter acquired patents and/or
patent rights of the Company and all cash and non-cash proceeds thereof.
PERMITTED ENCUMBRANCES shall mean: (a) liens existing on the date
hereof on specific items of Equipment and listed on Schedule 1 hereto and other
liens expressly permitted, or consented to, by the Agent; (b) Purchase Money
Liens; (c) Customarily Permitted Liens; (d) liens
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granted to the Agent by the Company; (e) liens of judgment creditors provided
such liens do not exceed, in the aggregate for the Company, at any time,
$50,000, unless such liens are bonded or insured to the reasonable satisfaction
of the Agent or being diligently contested in good faith by the Company by
appropriate proceedings; (f) liens for taxes not yet due and payable or which
are being diligently contested in good faith by the Company by appropriate
proceedings and which liens are not senior to the liens of the Agent or for
taxes due the United States of America; (g) liens in Inventory held by unpaid
vendors located in the United States which are not senior to the liens of the
Agent; (h) liens in inventory held by unpaid vendors located outside the United
States which may be senior to the liens of Agent to the extent such Inventory is
in the possession of such vendors; and (i) liens granted to the Subordinating
Creditor to secure the Subordinated Debt.
PERMITTED INDEBTEDNESS shall mean: (a) current indebtedness maturing in
less than one year and incurred in the ordinary course of business for raw
materials, supplies, equipment, services, taxes or labor; (b) the indebtedness
secured by the Purchase Money Liens; (c) Subordinated Debt; (d) indebtedness
arising under this Agreement; (e) deferred taxes and other expenses incurred in
the ordinary course of business; and (f) other indebtedness existing on the date
of execution of this Agreement and listed in the most recent financial statement
delivered to the Agent or otherwise disclosed to the Agent in writing.
PROMISSORY NOTES shall mean the notes, in the form of Exhibits A and B
attached hereto, delivered by the Company to the Agent and Lenders to evidence
the Revolving Loans and the Term Loan.
PURCHASE MONEY LIENS shall mean liens on any item of equipment acquired
after the date hereof in connection with the financing of Capital Expenditures
incurred in compliance with this Agreement provided that (a) each such lien
shall attach only to the property to be acquired, and (b) a description of the
property so acquired is furnished to the Agent.
REQUIRED LENDERS shall mean Lenders holding more than 50% of the
outstanding loans, advances, extensions of credit and commitments to the Company
hereunder.
REVOLVING LOAN PROMISSORY NOTE shall mean the promissory note in the
form of EXHIBIT A hereto executed by the Company to evidence Revolving Loans.
REVOLVING LOANS shall mean the loans and advances made, from time to
time, to or for the account of the Company by the Lenders or the Agent on behalf
of the Lenders pursuant to Section 3 of this Agreement.
REVOLVING LOAN ACCOUNT shall have the meaning specified in Section 3.6
hereof.
SETTLEMENT DATE shall mean the date, weekly, and more frequently, at
the discretion of the Agent, upon the occurrence of an Event of Default or a
continuing decline or increase of the
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Revolving Loans that the Agent and the Lenders shall settle amongst themselves
so that (x) the Agent shall not have, as the Agent, any money at risk and (y) on
such Settlement Date the Lenders shall have a pro rata amount of all outstanding
Revolving Loans, provided that each Settlement Date for a Lender shall be a
Business Day on which such Lender and its bank are open for business.
SUBORDINATED DEBT shall mean the indebtedness owing the Subordinating
Creditors which has been subordinated, by the Subordination Agreement, to the
prior payment and satisfaction of the Obligations of the Company owing from time
to time hereunder to the Agent or any Lender.
SUBORDINATING CREDITORS shall mean SunTrust Bank, Central Florida,
National Association, Bank Austria Creditanstalt Corporate Finance and any other
party hereafter executing a Subordination Agreement.
SUBORDINATION AGREEMENT shall mean the Subordination Agreement, dated
on or about the date hereof, among the Company, Subordinating Creditors and the
Agent pursuant to which (a) the Subordinated Debt is subordinated to the prior
payment and satisfaction of the Company's Obligations to the Agent and any
Lender (b) all security interests of the Subordinating Creditor in the
Collateral securing the Subordinated Debt is subordinated in priority to the
security interest granted to Agent for the benefit of the Lenders hereunder in
the Collateral.
SURPLUS CASH shall mean for each Fiscal Year ending after the Closing
Date the sum of (a) EBIT, (b) depreciation and (c) other non-cash charges less
the sum of (i) all interest obligations actually paid to the Agent or any Lender
by the Company, (ii) the amount of principal actually repaid to the Agent or any
Lender on the Term Loan, (iii) the amount of principal and interest actually
paid to the Subordinating Creditors with respect to the Subordinated Debt, (iv)
Capital Expenditures actually paid by the Company, and (v) all federal, state
and local tax obligations of the Company actually paid.
TANGIBLE NET WORTH shall mean the Company's Net Worth at the time in
question, after deducting therefrom the amount of all intangible items reflected
therein, including all unamortized debt discount and expense, unamortized
research and development expense, unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, copyrights, unamortized excess
cost of investment in Subsidiaries over equity at dates of acquisition, and all
similar items which should properly be treated as intangibles in accordance with
GAAP.
TERM LOAN PROMISSORY NOTE shall mean the promissory note in the form of
EXHIBIT B hereto executed by the Company to evidence the Term Loan made by the
Agent in behalf of the Lenders under Section 4 hereof.
TERM LOAN shall mean the term loan in the principal amounts of $725,000
made by the
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Agent in behalf of the Lenders pursuant to Section 4 hereof.
TOTAL LIABILITIES shall mean total liabilities determined in accordance
with GAAP, on a basis consistent with the latest audited statements of the
Company.
TRADE ACCOUNTS RECEIVABLE shall mean that portion of Accounts which
arises from the sale of Inventory or the rendition of services in the ordinary
course of business.
TRADEMARKS shall mean all present and hereafter acquired trademarks
and/or trademark rights (together with the goodwill associated therewith) and
all cash and non-cash proceeds thereof.
U.C.C. shall mean the Uniform Commercial Code as in effect from time to
time in the State of Georgia.
WORKING CAPITAL shall mean Current Assets in excess of Current
Liabilities.
SECTION 2. CONDITIONS PRECEDENT.
The obligation of the Agent and the Lenders to make loans hereunder is
subject to the satisfaction of, or waiver of, immediately prior to or
concurrently with the making of such loans, the following conditions precedent:
2.1. LIEN SEARCHES. The Agent shall have received tax, judgment and Uniform
Commercial Code searches satisfactory to the Agent for all locations presently
occupied or used by the Company.
2.2. CASUALTY INSURANCE. The Company shall have delivered to the Agent evidence
satisfactory to the Agent that casualty insurance policies listing the Agent as
loss payee are in full force and effect, all as set forth in Section 7. 5 of
this Agreement.
2.3. UCC FILINGS. Any documents (including without limitation, financing
statements) required to be filed in order to create, in favor of the Agent for
the benefit of the Lenders, a first priority perfected security interest in the
Collateral with respect to which a security interest may be perfected by a
filing under the U.C.C. shall have been properly filed in each office in each
jurisdiction required in order to create in favor of the Agent a perfected lien
on the Collateral. The Agent shall have received acknowledgment copies of all
such filings (or, in lieu thereof, the Agent shall have received other evidence
satisfactory to the Agent that all such filings have been made); and the Agent
shall have received evidence that all necessary filing fees and all taxes or
other expenses related to such filings have been paid in full.
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2.4. GUARANTIES. The Guarantors shall have executed and delivered to the Agent
guaranties, in form acceptable to the Agent, guaranteeing all present and future
Obligations of the Company to the Agent or any Lender.
2.5. OPINIONS. Counsel for the Company shall have delivered to the Agent an
opinion satisfactory to the Agent opining, inter alia, that, subject to the (a)
filing, priority and remedies provisions of the Uniform Commercial Code, (b) the
provisions of the Bankruptcy Code, insolvency statutes or other like laws, (c)
the equity powers of a court of law and (d) such other matters as may be agreed
upon with the Agent: (i) this Agreement and all other loan documents of the
Company are valid, binding and enforceable according to their terms, are duly
authorized and do not violate any terms, provisions, representations or
covenants in the charter or by-laws of the Company or, to the best knowledge of
such counsel, of any loan agreement, mortgage, deed of trust, note, security or
pledge agreement or indenture to which the Company is a signatory or by which
the Company or its assets are bound; and (ii) the provisions of all federal and
state securities laws applicable to this Agreement and the other Loan Documents
have been fully complied with or that compliance is not legally required.
2.6. PLEDGE AGREEMENT. The Company shall (a) execute and deliver to the Agent
for the benefit of the Lenders a pledge and security agreement and stock powers
pledging to the Agent for the benefit of the Lenders as additional collateral
for the Obligations of the Company all of the issued and outstanding stock of
any and all subsidiaries of the Company and, (b) deliver to the Agent (or to an
independent third party who agrees, on terms acceptable to Agent, in its sole
discretion, to act at the instruction and on behest of Agent if such delivery is
not achievable) for the benefit of the Lenders the stock certificates evidencing
such stock together with duly executed stock powers with respect thereto.
2.7. ADDITIONAL DOCUMENTS. The Company shall have executed and delivered to the
Agent all loan documents necessary to consummate the lending arrangement
contemplated between the Company and the Agent.
2.8. SUBORDINATION AGREEMENT. The Subordinating Creditors shall have executed
and delivered to the Agent the Subordination Agreement, in form and substance
satisfactory to the Agent.
2.9. BOARD RESOLUTION. The Agent shall have received a copy of the resolutions
of the Board of Directors of the Company and the Guarantor authorizing the
execution, delivery and performance of this Agreement, the Guaranty and any
related agreements, in each case certified by the Secretary or Assistant
Secretary of the Company and the Guarantor (as the case may be) as of the date
hereof, together with a certificate of the Secretary or Assistant Secretary of
the Company and the Guarantors (as the case may be) as to the incumbency and
signature of the officers of the Company and/or the Guarantor executing such
agreements and any certificate or other documents to be delivered by them
pursuant hereto, together with evidence of the incumbency of such Secretary or
Assistant Secretary.
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2.10. CORPORATE ORGANIZATION. The Agent shall have received (a) a copy of the
Certificate of Incorporation of the Company and the Guarantor certified by the
Secretary of State of their respective states of incorporation, and (b) a copy
of the By-Laws (as amended through the date hereof) of the Company and the
Guarantor certified by the Secretary or Assistant Secretary thereof.
2.11. OFFICER'S CERTIFICATE. The Agent shall have received an executed Officer's
Certificate of the Company, satisfactory in form and substance to the Agent,
certifying that (a) the representations and warranties contained herein are true
and correct in all material respects on and as of the date hereof; (b) the
Company is in compliance with all of the terms and provisions set forth herein;
and (c) no Default or Event of Default has occurred.
2.12. ABSENCE OF DEFAULT. No Default, Event of Default or material adverse
change in the financial condition, business, prospects, profits, operations or
assets of the Company shall have occurred.
2.13. APPRAISALS. The Agent shall have received appraisals on the Company's
Equipment which appraisals shall be by an appraiser acceptable to the Agent and
shall indicate an orderly liquidation value of the Company's tradenames and
related marks satisfactory to Agent.
2.14. LEGAL RESTRAINTS/LITIGATION. At the date of execution of this Agreement,
there shall be no (a) litigation, investigation or proceeding (judicial or
administrative) pending or threatened against the Company or the Guarantors or
their assets, by any agency, division or department of any county, city, state
or federal government, (b) injunction, writ or restraining order restraining or
prohibiting the consummation of the financing arrangements contemplated under
this Agreement or (c) other than as previously disclosed in the Company's public
filings with the United States Securities and Exchange Commission, to the best
knowledge of the Company, suit, action, investigation or proceeding (judicial or
administrative) pending or threatened against the Company or the Guarantor or
their assets, which, in the opinion of the Agent, if adversely determined could
have a material adverse effect on the business, operation, assets, financial
condition or Collateral of the Company/or the Guarantor.
2.15. DISBURSEMENT AUTHORIZATION. The Company shall have delivered to the Agent
all information necessary for the Agent to issue wire transfer instructions on
behalf of the Company for the initial and subsequent loans and/or advances to be
made under this Agreement including, but not limited to, disbursement
authorizations in form acceptable to the Agent.
2.16. EXAMINATION, VERIFICATION AND EXCESS AVAILABILITY. The Agent shall have
completed to the satisfaction of the Agent an examination and verification of
the Accounts, Inventory, books and records of the Company which examination
shall indicate that, after giving effect to all loans, advances and extensions
of credit to be made on the Closing Date, the Company shall have an opening
excess aggregate Availability of $750,000, all as more fully required by the
Agent Commitment Letter. It is understood that such requirement contemplates
that all debts, obligations
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and payables are current or within terms except as otherwise disclosed to the
Agent in writing prior to the date hereof.
2.17. CASH BUDGET PROJECTIONS. The Agent shall have received, reviewed and be
satisfied with a 12 month cash budget projection prepared by the Company in the
form provided by the Agent.
2.18. COLLECTION ACCOUNTS. The Company shall have established a system of bank
accounts with respect to the collection of Accounts and the deposit of proceeds
of Inventory as shall be acceptable to the Agent in all respects.
2.19. EXISTING REVOLVING CREDIT AGREEMENT. The Company's existing revolving
credit agreement with SunTrust Bank, Central Florida, National Association, as
agent, shall be terminated and the indebtedness of the Company and/or the
Guarantors thereunder shall be reduced, amended and restated to an amount not
less than $2,000,000 from the proceeds of the initial Revolving Loans and the
Term Loan to be made hereunder on the Closing Date and all liens upon or
security interest in favor of SunTrust Bank, Central Florida, National
Association, as agent, in connection therewith shall be subordinated in priority
to the security interest of Agent under this Agreement in accordance with the
terms of the Subordination Agreement.
2.20. AGENT COMMITMENT LETTER. The Company shall have fully complied, to the
satisfaction of the Agent, with all of the terms and conditions of the Agent
Commitment Letter.
Upon the execution of this Agreement and the initial disbursement of
loans hereunder, all of the above Conditions Precedent shall have been deemed
satisfied except as the Company and the Agent shall otherwise agree in writing.
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SECTION 3. REVOLVING LOANS.
3.1. Each Lender agrees, subject to the terms and conditions of this Agreement
from time to time to make Revolving Loans to the Company, severally and not
jointly to the extent of their respective pro rata interests in the Revolving
Loans, up to an aggregate amount at no time exceeding the lesser of (a) the
amount of the Line of Credit or (b) Availability as of any date of determination
thereof. The Revolving Loans may be repaid and reborrowed in accordance with the
provisions of this Agreement. Each request by the Company for a Revolving Loan
hereunder shall constitute, unless otherwise disclosed in writing to the Agent
and the Lenders, a representation and warranty by the Company that (i) no
Default or Event of Default exists as of such date and (ii) such requested
Revolving Loan, together with the aggregate amount of Revolving Loans then
outstanding, will not result in the aggregate amount of outstanding Revolving
Loans thereafter outstanding to exceed the lesser of the amount of the Line of
Credit or the Company's Availability as of any such date. Should the Agent for
any reason honor requests for Revolving Loans in excess of the limitations set
forth herein, such advances shall be considered "Overadvances", shall be secured
by the Collateral and shall be made in the Agent's sole discretion, subject to
any additional terms the Agent deems appropriate.
3.2. In furtherance of the continuing assignment and security interest in the
Company's Accounts, the Company will, upon the creation of Accounts, execute and
deliver to the Agent, in such form and manner as the Agent may reasonably
require such confirmatory schedules of Accounts ("Schedule of Accounts") as the
Agent may reasonably request, and such other appropriate reports designating,
identifying and describing the Accounts as the Agent may reasonably require. In
addition, upon the Agent's request the Company shall provide the Agent with
copies of agreements with, or purchase orders from, the Company's customers, and
copies of invoices to customers, proof of shipment or delivery and such other
documentation and information relating to said Accounts and other collateral as
the Agent may reasonably require. Failure to provide the Agent with any of the
foregoing shall in no way affect, diminish, modify or otherwise limit the
security interests granted herein. The Company hereby authorizes the Agent to
regard the Company's printed name or rubber stamp signature on assignment
schedules or invoices as the equivalent of a manual signature by one of the
Company's authorized officers or agents.
3.3. The Company hereby represents and warrants that: each of its Trade Accounts
Receivable is based on an actual and bona fide sale and delivery of goods or
rendition of services to customers, made by them in the ordinary course of their
business; the goods and Inventory being sold and the Trade Accounts Receivable
created are their exclusive property and are not and shall not be subject to any
lien, consignment arrangement, encumbrance, security interest or financing
statement whatsoever, other than the Permitted Encumbrances; the invoices
evidencing such Trade Accounts Receivable are in their name; and their customers
have accepted the goods or services, owe and are obligated to pay the full
amounts stated in the invoices according to their terms, without dispute,
offset, defense, counterclaim or contra, except for disputes, adjustments,
returns and other matters arising in the ordinary course of business with
respect to which it has complied with the notification
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requirements of Section 3.5 hereof. The Company confirms to the Agent that any
and all taxes or fees relating to its business, its sales, the Accounts or goods
relating thereto, are its sole responsibility and that same will be paid by them
when due and that none of said taxes or fees represent a lien on or claim
against the Accounts. The Company agrees to maintain such books and records
regarding Accounts as the Agent may reasonably require and agrees that such
books and records will reflect the Agent's interest in the Accounts. All of the
books and records of the Company will be available to the Agent at normal
business hours, including any records handled or maintained for the Company by
any other company or entity.
3.4. Until the Agent has advised the Company to the contrary after the
occurrence of an Event of Default, the Company may and will enforce, collect and
receive all amounts owing on the Accounts for the Agent's and Lenders' benefit
and on their behalf, but at the Company's expense; such privilege shall
terminate automatically upon the institution by or against the Company of any
proceeding under any bankruptcy or insolvency law or, at the election of the
Agent, upon the occurrence of any other Event of Default and until such Event of
Default is waived in writing by the Agent or cured to the Agent's satisfaction.
Any checks, cash, notes or other instruments or property received by the Company
with respect to any Accounts shall be held by them in trust for the Agent for
the benefit of the Lenders, separate from their own property and funds, and
immediately turned over to the Agent with proper assignments or endorsements by
deposit to the special depository accounts in the Agent's name designated by the
Agent for such purposes (the "Depository Accounts"). All amounts received by the
Agent in payment of Accounts will be credited to the Company's appropriate
Revolving Loan Account upon the Agent's receipt of "collected funds" at the
Agent's bank account in New York, New York on the Business Day following the
date of receipt if received no later than 1:00 pm or on the second succeeding
Business Day after receipt if received after 1:00 pm on any Business Day. No
checks, drafts or other instrument received by the Agent shall constitute final
payment to the Agent unless and until such instruments have actually been
collected.
3.5. If the Company grants any discounts, allowances or credits that are not
shown on the face of the invoice for the Account involved, the Company shall
report such discounts, allowances or credits, as the case may be to Agent as
part of the next required Schedule of Accounts. If any amounts due and owing in
excess of $100,000 are in dispute between any the Company and any account
debtor, or if any returns are made in excess of $100,000 with respect to any
Accounts owing from an account debtor, the Company shall provide Agent with
written notice thereof at the time of submission of the next Schedule of
Accounts, explaining in detail the reason for the dispute or return, all claims
related thereto and the amount in controversy. Upon and after the occurrence of
an Event of Default, Agent shall have the right to settle or adjust all disputes
and claims directly with the account debtor and to compromise the amount or
extend the time for payment of any Accounts comprising a part of the Collateral
upon such terms and conditions as Agent may deem advisable, and to charge the
deficiencies, costs and expenses thereof, including attorney's fees, to
Borrowers. Upon the occurrence of an Event of Default and until such time as
such Event of Default is waived in writing by the Agent or cured to the Agent's
satisfaction and on notice from the Agent, the
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Company agrees that all returned, reclaimed or repossessed merchandise or goods
shall be set aside by the Company, marked with the Agent's name and held by the
Company for the Agent's account as owner and assignee.
3.6. The Agent shall maintain a separate account on its books in the Company's
name (herein the "Revolving Loan Account") in which the Company will be charged
with loans and advances made by the Lenders to it or for its account, and with
any other Obligations, including any and all costs, expenses and reasonable
attorney's fees which the Agent may incur in connection with the exercise by or
for the Agent or any Lender of any of the rights or powers herein conferred upon
the Agent, or in the prosecution or defense of any action or proceeding to
enforce or protect any rights of the Agent in connection with this Agreement or
the Collateral assigned hereunder, or any Obligations owing to the Agent and the
Lenders by the Company. The Company will be credited with all amounts received
by the Agent or any Lender from it or from others for the Company's account,
including, as above set forth, all amounts received by the Agent in payment of
assigned Accounts and such amounts will be applied to payment of the
Obligations. In no event shall prior recourse to any Accounts or other security
granted to or by the Company be a prerequisite to the Agent's right to demand
payment of any Obligation. Further, it is understood that the Agent nor any
Lender shall have any obligation whatsoever to perform in any respect any of the
Company's contracts or obligations relating to the Accounts.
3.7. The Company shall deliver to Agent a completed, executed Borrowing Base
Certificate in substantially the form of EXHIBIT D attached hereto no less
frequently than weekly as of the last day of the immediately preceding week.
3.8. After the end of each month, the Agent shall promptly send the Company a
statement showing the accounting for the charges, loans, advances and other
transactions occurring between the Agent and the Company during that month. The
monthly statements shall be deemed correct and binding upon the Company and
shall constitute an account stated between the Company and the Agent unless the
Agent receives a written statement of the exceptions within thirty (30) days of
the date of the monthly statement.
3.9. In the event that the sum of the outstanding balance of Revolving Loans
exceeds the maximum amount thereof available to the Company under Section 3
hereof (herein the amount of any such excess shall be referred to as the
"Excess") such Excess shall be due and payable to the Agent for the benefit of
the Lenders immediately upon the Agent's demand therefor.
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SECTION 4. TERM LOAN.
4.1. Subject to and upon the terms and conditions herein set forth, Lender
agrees to make to the Company the Term Loan. The Term Loan shall be in the
principal amount of $725,000 and shall be funded by Lenders on the Closing Date,
concurrently with Lender's funding of the initial Revolving Loan. The proceeds
of the Term Loan shall be used by the Company solely for purposes for which the
proceeds of the Revolving Loans are authorized to be used. The Company shall not
be entitled to reborrow any amounts repaid with respect to the Term Loan.
4.2. The Company shall execute and deliver to Agent on behalf of Lender, on the
Closing Date, the Term Loan Promissory Note to evidence the Term Loan. The Term
Loan Promissory Note shall be dated the Closing Date and shall provide for
payment of the Term Loan evidenced thereby as specified in Section 4.3 hereof.
4.3. The principal amount of the Term Loan shall be due and payable to Agent for
the ratable benefit of Lenders as follows: (a) eleven (11) equal monthly
principal installments of $60,416.67 each, followed by (b) one (1) installment
of $60,416.63, whereof the first installment shall be due and payable on
November 1, 1999 and the subsequent installments shall be due and payable on the
first Business Day of each month thereafter until paid in full.
4.4. In the event this Agreement or the Line of Credit is terminated by the
Agent or any Lender acting through the Agent or by the Company for any reason
whatsoever, the Term Loan shall become due and payable on the effective date of
such termination notwithstanding any provision to the contrary in the Term Loan
Promissory Note or this Agreement.
4.5. The Company may prepay at any time, at its option, in whole or in part, the
Term Loan, provided that on each such prepayment, the Company shall pay accrued
interest on the principal so prepaid to the date of such prepayment.
4.6. In the event the Company has Surplus Cash in any Fiscal Year beginning with
the Fiscal Year ending December 31, 1999 the Company shall make a Mandatory
Prepayment of the Term Loan in an amount equal to 25% of such Surplus Cash. Each
prepayment of the Term Loan shall be applied to installments of principal in the
inverse order of their maturity.
4.7. The Company hereby authorizes the Agent to charge its Revolving Loan
Account with the amount of all amounts due under this Section 4 as such amounts
become due. The Company confirms that any charges which the Agent may so make to
its account as herein provided will be made as an accommodation to the Company
and solely at the Agent's discretion.
SECTION 5. MANNER OF BORROWING REVOLVING LOANS.
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Borrowings under the credit facility established pursuant to Section
3.1 hereof shall be as follows:
5.1. A request for a Revolving Loan shall be made, or shall be deemed to be
made, in the following manner: (i) the Company may give Agent notice of its
intention to borrow, in which notice the Company shall specify the amount of the
proposed borrowing and the proposed borrowing date, no later than 11:00 a.m. on
the proposed borrowing date; and (ii) unless payment is otherwise timely made by
the Company, the becoming due of any amount required to be paid under this
Agreement or the Term Note or any of the other Loan Documents, as principal,
accrued interest, fees or other charges, shall be deemed irrevocably to be a
request by the Company from Agent for a Revolving Loan on the due date of, and
in an aggregate amount required to pay, such principal, accrued interest, fees
or other charges and the proceeds of each such Revolving Loan may be disbursed
by Agent by way of direct payment of the relevant Obligation and shall bear
interest at the rate of interest applicable to Revolving Loans. Neither Agent
nor any Lender shall have any obligation to the Company to honor any deemed
request for a Revolving Loan, but may do so in its discretion and without regard
to the existence of, and without being deemed to have waived, any Default or
Event of Default and without regard to the existence or creation of an
Overadvance. As an accommodation to the Company, the Agent may permit telephonic
requests for loans and electronic transmittal of instructions, authorizations,
agreements or reports to the Agent by the Company. Unless the Company
specifically directs the Agent in writing not to accept or act upon telephonic
or electronic communications from the Company, the Agent shall not have any
liability to the Company for any loss or damage suffered by the Company as a
result of the Agent's honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to it
telephonically or electronically and purporting to have been sent to the Agent
by the Company and the Agent shall have no duty to verify the origin of any such
communication or the identity or authority of the entity or person sending it.
5.2. The Company hereby irrevocably authorizes the Agent to disburse the
proceeds of each Revolving Loan requested, or deemed to be requested pursuant to
Section 5.1, as follows: (i) the proceeds of each Revolving Loan requested under
Section 5.1(i) shall be disbursed by the Agent in immediately available funds,
in the case of the initial borrowing, in accordance with the terms of the
written disbursement letter from the Company, and in the case of each subsequent
borrowing, by wire transfer to such bank account as may be agreed upon by the
Company and the Agent from time to time or elsewhere if pursuant to a written
direction from the Company; and (ii) the proceeds of each Revolving Loan
requested under Section 5.1(ii) shall be disbursed by the Agent by way of direct
payment of the relevant interest or other Obligation.
16
<PAGE>
SECTION 6. COLLATERAL.
6.1. As security for the prompt payment in full of all loans and advances made
and to be made to the Company from time to time by the Agent or any Lender
pursuant hereto, as well as to secure the payment in full of the other
Obligations, the Company hereby pledges and grants to the Agent for the benefit
of the Lenders a continuing general lien upon and security interest in all of
its:
6.1.1. present and hereafter acquired Inventory;
6.1.2. present and hereafter acquired Equipment;
6.1.3. present and future Accounts;
6.1.4. present and future Documents of Title;
6.1.5. present and future General Intangibles; and
6.1.6. present and future Other Collateral.
6.2. The security interests granted hereunder shall extend and attach to:
6.2.1. All Collateral which is presently in existence and which is
owned by the Company or in which the Company has any interest, whether held by
them or others for their account, and, if any Collateral is Equipment, whether
the Company's interest in such Equipment is as owner or lessee or conditional
vendee;
6.2.2. All Equipment whether the same constitutes personal property or
fixtures, including, but without limiting the generality of the foregoing, all
dies, jigs, tools, benches, tables, accretions, component parts thereof and
additions thereto, as well as all accessories, motors, engines and auxiliary
parts used in connection with or attached to the Equipment; and
6.2.3. All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either the Agent or the Company from the
Company's customers, as well as to all supplies, goods, incidentals, packaging
materials, labels and any other items which contribute to the finished goods or
products manufactured or processed by the Company, or to the sale, promotion or
shipment thereof.
6.3. The Company shall keep accurate and complete records of its Inventory and
shall furnish Agent and Lenders inventory reports respecting such Inventory in
form and detail satisfactory to Agent and Lenders at such times as Agent and
Lenders may request, but so long as no Default or
17
<PAGE>
Event of Default exists, no more frequently than once each week. The Company
shall conduct a physical inventory no less frequently than annually and shall
provide to Agent and Lenders a report based on each such physical inventory
promptly thereafter, together with such supporting information as Agent shall
reasonably request. All Inventory, other than Inventory in transit, shall at all
times be kept by the Company at one or more of the business locations of the
Company, or at one or more locations of suppliers or processors, in each case as
set forth in SCHEDULE 2 hereto and shall not be moved therefrom, without no less
than 30 days prior written notice to Agent and Borrower's delivery of
appropriate landlord or processor agreements and UCC-1 financing statements,
except that in the absence of an Event of Default and acceleration of the
maturity of the Obligations in consequence thereof, the Company may make sales
of Inventory in the ordinary course of its business. The Company shall not
return any of its Inventory to a supplier or vendor thereof, or any other
person, whether for cash, credit against future purchases or then existing
payables, or otherwise, unless (i) such return is in the ordinary course of
business of the Company and such person; (ii) no Default or Event of Default
exists or would result therefrom; (iii) the return of such Inventory will not
result in an Overadvance; (iv) the Company promptly notifies Agent thereof if
the aggregate book value of all Inventory returned in any month exceeds
$100,000; and (v) any payments received by the Company in connection with any
such return are promptly turned over to Agent for application to the
Obligations. Cash sales or sales of inventory in which a lien upon, or security
interest in, Inventory is retained by the Company shall be made by the Company
only with the approval of the Agent, and the proceeds of such sales or sales of
Inventory for cash shall not be commingled with the Company's other property,
but shall be segregated, held by the Company in trust for the Agent for the
benefit of the Lenders as the Agent's exclusive property, and shall be delivered
immediately by the Company to the Agent in the identical form received by the
Company by deposit to the Depository Accounts. Upon the sale, exchange, or other
disposition of Inventory, as herein provided, the security interest in the
Company's Inventory provided for herein shall, without break in continuity and
without further formality or act, continue in, and attach to, all proceeds,
including any instruments for the payment of money, accounts receivable,
contract rights, documents of title, shipping documents, chattel paper and all
other cash and non-cash proceeds of such sale, exchange or disposition. As to
any such sale, exchange or other disposition, the Agent shall have all of the
rights of an unpaid seller, including stoppage in transit, replevin, rescission
and reclamation. Notwithstanding the foregoing the Company may make cash sales
of Inventory, provided that (a) the aggregate amount thereof for the Company
during any Fiscal Year does not exceed $50,000 during such Fiscal Year and (b)
the proceeds of such sales are turned over to the Agent by deposit in the
Depository Accounts.
6.4. The Company agrees at its own cost and expense to keep the Equipment in as
good and substantial repair and condition as the same is now or at the time the
lien and security interest granted herein shall attach thereto, reasonable wear
and tear excepted, making any and all repairs and replacements when and where
necessary. The Company also agrees that all Equipment shall at all times be kept
at one or more of the business locations of the Company or at one or more
locations of processors or third parties set forth in SCHEDULE 2 and to
safeguard, protect and hold all Equipment and make no disposition thereof unless
it first obtains the prior written approval of the
18
<PAGE>
Agent. Any sale, exchange or other disposition of any Equipment shall only be
made by the Company with the prior written approval of the Agent, and the
proceeds of any such sales shall not be commingled with the Company's other
property, but shall be segregated, held by the Company in trust for the Agent
for the benefit of the Lenders as the Agent's exclusive property, and shall be
delivered immediately by the Company to the Agent in the identical form received
by the Company by deposit to the Depository Accounts. Upon the sale, exchange,
or other disposition of the Equipment, as herein provided, the security interest
provided for herein shall, without break in continuity and without further
formality or act, continue in, and attach to, all proceeds, including any
instruments for the payment of money, accounts receivable, contract rights,
documents of title, shipping documents, chattel paper and all other cash and
non-cash proceeds of such sales, exchange or disposition. As to any such sale,
exchange or other disposition, the Agent shall have all of the rights of an
unpaid seller, including stoppage in transit, replevin, rescission and
reclamation. Notwithstanding anything hereinabove contained to the contrary, the
Company may sell, exchange or otherwise dispose of obsolete Equipment or
Equipment no longer needed in the Company's operations, provided, however, that
(a) the then book value of the Equipment so disposed of does not exceed $50,000
in the aggregate for the Company in any Fiscal Year and (b) the proceeds of such
sales or dispositions are delivered to the Agent in accordance with the
foregoing provisions of this Section 6.4, except that the Company may retain and
use such proceeds to purchase forthwith replacement Equipment which the Company
determine in their reasonable business judgment to have a collateral value at
least equal to the Equipment so disposed of or sold, provided, however, that the
aforesaid right shall automatically cease upon the occurrence of an Event of
Default which is not cured within any applicable grace period or waived.
6.5. The rights and security interests granted to the Agent for the benefit of
the Lenders hereunder are to continue in full force and effect, notwithstanding
the termination of this Agreement or the fact that any account maintained in the
Company's name on the books of the Agent may from time to time be temporarily in
a credit position, until the final payment in full to the Agent and the Lenders
of all Obligations and the termination of this Agreement. Any delay, or omission
by the Agent or any Lender to exercise any right hereunder, shall not be deemed
a waiver thereof, or be deemed a waiver of any other right, unless such waiver
be in writing and signed by the Agent. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right or remedy on any future occasion.
6.6. To the extent that the Obligations are now or hereafter secured by any
assets or property other than the Collateral or by the guarantee, endorsement,
assets or property of any other person, then the Agent shall have the right in
its sole discretion to determine which rights, security, liens, security
interests or remedies the Agent shall at any time pursue, foreclose upon,
relinquish, subordinate, modify or take any other action with respect to,
without in any way modifying or affecting any of them, or any of the Agent's or
Lenders' rights hereunder.
6.7. Any reserves or balances to the credit of the Company and any other
property or assets of the Company in the possession of the Agent or any Lender
may be held by the Agent as security for any
19
<PAGE>
Obligations and applied in whole or partial satisfaction of such Obligations
when due. The liens and security interests granted herein and any other lien or
security interest the Agent may have in any other assets of the Company, shall
secure payment and performance of all now existing and future Obligations. The
Agent may in its discretion charge any or all of the Obligations to the
Revolving Loan Accounts of the Company when due.
6.8. The Company shall give to the Agent for the benefit of the Lenders, from
time to time such pledge or security agreements with respect to General
Intangibles and capital stock of any subsidiaries of the Company as the Agent
shall require to obtain valid first liens thereon.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS.
7.1. The Company hereby warrants and represents and/or covenants that: (a) the
fair value of its assets exceeds the book value of its liabilities; (b) it is
generally able to pay its debts as they become due and payable; and (c) it does
not have unreasonably small capital to carry on its business as it is currently
conducted absent extraordinary and unforeseen circumstances. The Company further
warrants and represents that it and its subsidiaries are each duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and that each is duly qualified and is authorized to do business
and is in good standing as a foreign corporation in each state or jurisdiction
listed on SCHEDULE 2 hereto and in all other states and jurisdictions in which
the failure of the Company or any of its subsidiaries to be so qualified would
have a material adverse effect on the financial condition of the Company or such
subsidiaries as a whole. The Company further warrants and represents that
SCHEDULE 2 hereto correctly and completely sets forth its chief executive office
and all of its Collateral locations; and except for the Permitted Encumbrances,
the security interests granted herein constitute and shall at all times
constitute the first and only liens on the Collateral; that, except for the
Permitted Encumbrances, the Company is or will be at the time additional
Collateral is acquired, the absolute owner of the Collateral with full right to
pledge, sell, consign, transfer and create a security interest therein, free and
clear of any and all claims or liens in favor of others; that the Company will
at their expense forever warrant and, at the Agent's request, defend the same
from any and all claims and demands of any other person other than the Permitted
Encumbrances; that the Company will not grant, create or permit to exist, any
lien upon or security interest in the Collateral, or any proceeds thereof, in
favor of any other person other than the holders of the Permitted Encumbrances;
and that the Equipment does not comprise a part of its Inventory and that the
Equipment is and will only be used by the Company (or its processors) in their
business and will not be held for sale or lease, or removed from their premises,
or otherwise disposed of by the Company without the prior written approval of
the Agent except as otherwise permitted in Section 6.4 of this Agreement.
7.2. The Company agrees to maintain books and records pertaining to the
Collateral in such detail, form and scope as the Agent shall reasonably require.
The Company agrees that the Agent or its agents may enter upon the Company's
premises during normal business hours from time to time for the purpose of
inspecting the Collateral and any and all records pertaining thereto. The
20
<PAGE>
Company agrees to afford the Agent prior written notice of any change in the
location of any Collateral, other than to locations, that as of the date hereof,
are known to the Agent and at which the Agent has filed financing statements and
otherwise fully perfected its liens thereon. The Company is also to advise the
Agent promptly, in sufficient detail, of any material adverse change relating to
the type, quantity or quality of the Collateral or on the security interests
granted to the Agent therein.
7.3. The Company agrees to execute and deliver to the Agent, from time to time,
solely for the Agent's convenience in maintaining a record of the Collateral,
such written statements, and schedules as the Agent may reasonably require,
designating, identifying or describing the Collateral pledged to the Agent
hereunder. The Company's failure, however, to promptly give the Agent such
statements, or schedules shall not affect, diminish, modify or otherwise limit
the Agent's security interests in the Collateral.
7.4. The Company agrees to comply with the requirements of all state and federal
laws in order to grant to the Agent valid and perfected first security interests
in the Collateral, subject only to the Permitted Encumbrances. The Agent is
hereby authorized by the Company to file any financing statements covering the
Collateral whether or not the Company's signature appears thereon. The Company
agrees to do whatever the Agent may reasonably request, from time to time, by
way of: filing notices of liens, financing statements, amendments, renewals and
continuations thereof; cooperating with the Agent's custodians; keeping stock
records; transferring proceeds of Collateral to the Agent's possession; and
performing such further acts as the Agent may reasonably require in order to
effect the purposes of this Agreement.
7.5. The Company agrees to maintain insurance on the Equipment and Inventory
under such policies of insurance, with such insurance Company, in such
reasonable amounts and covering such insurable risks as are at all times
reasonably satisfactory to the Agent. All policies covering the Equipment and
Inventory are, subject to the rights of any holders of Permitted Encumbrances
holding claims senior to the Agent, to be made payable to the Agent for the
benefit of the Lenders, in case of loss, under a standard non-contributory
"mortgagee", "lender" or "secured party" clause and are to contain such other
provisions as the Agent may require to fully protect the Agent's interest in the
Inventory and Equipment and to any payments to be made under such policies. All
original policies or true copies thereof are to be delivered to the Agent,
premium prepaid, with the loss payable endorsement in the Agent's favor, and
shall provide for not less than thirty (30) days prior written notice to the
Agent of the exercise of any right of cancellation. At the Company's request, or
if the Company fail to maintain such insurance, the Agent may arrange for such
insurance, but at the Company's expense and without any responsibility on the
Agent's part for: obtaining the insurance, the solvency of the insurance
Company, the adequacy of the coverage, or the collection of claims. Upon the
occurrence of an Event of Default which is not waived or cured to the Agent's
satisfaction, the Agent shall, subject to the rights of any holders of Permitted
Encumbrances holding claims senior to the Agent, have the sole right, in the
name of the Agent or the Company, to file claims under any insurance policies,
to receive, receipt and give acquittance for any payments that
21
<PAGE>
may be payable thereunder, and to execute any and all endorsements, receipts,
releases, assignments, reassignments or other documents that may be necessary to
effect the collection, compromise or settlement of any claims under any such
insurance policies.
7.5.1. In the event of any loss or damage by fire or other casualty,
insurance proceeds relating to Inventory of the Company shall first reduce the
Company's Revolving Loans and then the Term Loan;
7.5.2. In the event any part of the Company's Equipment is damaged by
fire or other casualty and the insurance proceeds for such damage or other
casualty (the "Proceeds") is less than or equal to $10,000.00, the Agent shall
promptly apply such Proceeds to reduce the Company's outstanding balance in its
Revolving Loan Account.
7.5.3. As long as an Event of Default has not occurred (which is not
cured to the Agent's satisfaction), the Company's have sufficient business
interruption insurance to replace the lost profits of any of the Company's
facilities, and the Proceeds are in excess of $10,000.00, the Company may elect
(by delivering written notice to the Agent) to replace, repair or restore such
Equipment to substantially the equivalent condition prior to such fire or other
casualty as set forth herein. If the Company do not, or cannot, elect to use the
Proceeds as set forth above, the Agent may, subject to the rights of any holders
of Permitted Encumbrances holding claims senior to the Agent, apply the Proceeds
to the payment of the Obligations in such manner and in such order as the Agent
may reasonably elect.
7.5.4. If the Company elects to use the Proceeds for the repair,
replacement or restoration of any Equipment, and there is then no Event of
Default, (a) proceeds of insurance on Equipment in excess of $25,000 will be
applied to the reduction of the Revolving Loans of the Company and (b) the Agent
may set up a reserve against Availability for an amount equal to the proceeds
referred to in clause (a) hereof. The reserve will be reduced dollar-for-dollar
upon receipt of non-cancelable executed purchase orders, delivery receipts or
contracts for the replacement, repair or restoration of Equipment and
disbursements in connection therewith.
7.5.5. The Company agrees to pay any reasonable costs, fees or expenses
which the Agent may reasonably incur in connection herewith.
7.6. The Company agrees to pay, when due (after giving effect to any applicable
grace periods), all taxes, assessments, claims and other charges (herein
"taxes") lawfully levied or assessed upon the Company or the Collateral and if
such taxes remain unpaid after the date fixed for the payment thereof unless
such taxes are being diligently contested in good faith by the Company by
appropriate proceedings or if any lien shall be claimed thereunder (a) for taxes
due the United States of America or (b) which in the Agent's opinion might
create a valid obligation having priority over the rights granted to the Agent
herein, the Agent may, on the Company's behalf, pay such taxes, and the amount
thereof shall be an Obligation secured hereby and due to the Agent on demand.
22
<PAGE>
7.7. The Company: (a) agrees to comply with all acts, rules, regulations and
orders of any legislative, administrative or judicial body or official, which
the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the operation of the Company's
business; provided that the Company may contest any acts, rules, regulations,
orders and directions of such bodies or officials in any reasonable manner which
will not, in the Agent's reasonable opinion, materially and adversely effect the
Agent's rights or priority in the Collateral; (b) agrees to comply with all
environmental statutes, acts, rules, regulations or orders as presently existing
or as adopted or amended in the future, applicable to the ownership and/or use
of its real property and operation of its business, which the failure to comply
with would have a material and adverse impact on the Collateral, or any material
part thereof, or on the operation of the business of the Company. The Company
hereby indemnifies the Agent and the Lenders and agrees to defend and hold the
Agent and the Lenders harmless from and against any and all loss, damage, claim,
liability, injury or expense which the Agent or any Lender may sustain or incur
(other than as a result of actions of the Agent or any Lender) in connection
with: any claim or expense asserted against the Agent or any Lender as a result
of any environmental pollution, hazardous material or environmental clean-up of
the Company's real property; or any claim or expense which results from the
Company's operations (including, but not limited to, the Company's off-site
disposal practices) and the Company further agree that this indemnification
shall survive termination of this Agreement as well as the payment of all
Obligations or amounts payable hereunder; and (c) shall not be deemed to have
breached any provision of this Section 7.7 if (i) the failure to comply with the
requirements of this Section 7.7 resulted from good faith error or innocent
omission, (ii) the Company promptly commence and diligently pursues a cure of
such breach and (iii) such failure is cured within 30 days following the
Company's receipt of notice of such failure.
7.8. Until termination of this Agreement and payment and satisfaction of all
Obligations due hereunder, the Company will furnish to the Agent and each
Lender, within 90 days after the end of each Fiscal Year of the Company, an
audited Consolidated Balance Sheet and an audited Consolidating Balance Sheet as
at the close of such year, and statements of profit and loss, cash flow and
reconciliation of surplus of the Company and all subsidiaries of each for such
year, audited by BDO Seidman LLP (or other firm of independent public
accountants selected by the Company and acceptable to Agent); within 60 days
after the end of each Fiscal Quarter a Consolidated Balance Sheet and
Consolidating Balance Sheet as at the end of such period and statements of
profit and loss, cash flow and surplus of the Company and all subsidiaries of
each, certified by an authorized financial or accounting officer of the Company;
and within 30 days after the end of each month a Consolidated Balance Sheet as
at the end of such period and statements of profit and loss, cash flow and
surplus of the Company and all subsidiaries for such period, certified by an
authorized financial or accounting officer of the Company; and from time to
time, such further information regarding the business affairs and financial
condition of the Company and any subsidiaries thereof as the Agent may
reasonably request, including without limitation (a) the accountant's management
practice letter and (b) annual cash flow projections in form satisfactory to the
Agent. Each financial statement which the Company is required to submit
hereunder must be accompanied by an officer's certificate,
23
<PAGE>
signed by the President, Vice President, Controller, or Treasurer, pursuant to
which any one such officer must certify that: (i) the financial statements
fairly and accurately represent the Company's financial condition in all
material respects at the end of the particular accounting period, as well as the
Company's operating results during such accounting period, subject to year-end
audit adjustments; (ii) during the particular accounting period: (x) there has
been no Default or Event of Default under this Agreement, provided, however,
that if any such officer has knowledge that any such Default or Event of
Default, has occurred during such period, the existence of and a detailed
description of same shall be set forth in such officer's certificate; and (y)
the Company has not received any notice of cancellation with respect to its
property insurance policies; and (iii) the exhibits attached to such financial
statement(s) constitute detailed calculations showing compliance with all
financial covenants contained in this Agreement.
7.9. Until termination of this Agreement and payment and satisfaction of all
Obligations due hereunder, the Company agrees that, without the prior written
consent of the Agent, except as otherwise herein provided, the Company will not:
7.9.1. Mortgage, assign, pledge, transfer or otherwise permit any lien,
charge, security interest, encumbrance or judgment, (whether as a result of a
purchase money or title retention transaction, or other security interest, or
otherwise) to exist on any of its assets or goods, whether real, personal or
mixed, whether now owned or hereafter acquired, except for the Permitted
Encumbrances;
7.9.2. Incur or create any Indebtedness other than the Permitted
Indebtedness;
7.9.3. Borrow any money on the security of the Collateral from sources
other than the Agent and the Lenders;
7.9.4. Sell, lease, assign, transfer or otherwise dispose of (a)
Collateral, except as otherwise specifically permitted by this Agreement, or (b)
either all or substantially all of their assets, which do not constitute
Collateral;
7.9.5. Merge, consolidate or otherwise alter or modify its corporate
name, principal place of business, structure, status or existence, or enter into
or engage in any operation or activity materially different from that presently
being conducted by the Company, except that the Company may (a) merge with each
other and/or (b) change their corporate name or address; provided that in any
instance under clauses (a) and (b) (i) the Company shall give the Agent thirty
(30) days prior written notice thereof and (ii) the Company shall execute and
deliver prior to or simultaneously with any such action any and all documents
and agreements requested by the Agent (including, without limitation, any and
all U.C.C. financing statements) to confirm (A) the assumption by the surviving
corporation of all Obligations to the Agent and the Lenders of the other Company
so merged, (B) the continuation and preservation of all security interests and
liens granted to the Agent hereunder
24
<PAGE>
and (C) that such surviving corporation adopts, ratifies and confirms its
agreement to be bound by and comply with this Agreement;
7.9.6. Assume, guarantee, endorse, or otherwise become liable upon the
obligations of any person, firm, entity or corporation, except by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business;
7.9.7. Declare or pay any dividend of any kind (except for dividends in
capital stock) on, or purchase, acquire, redeem or retire, any of the capital
stock or equity interest, of any class whatsoever, whether now or hereafter
outstanding;
7.9.8. Make any advance or loan to, or any investment in, any firm,
entity, person or corporation, except loans and advances by the Company to
SolarTechnics (HK) Limited ("SolarTechnics") which advances shall be for
SolarTechnics' ordinary operating expenses and shall not exceed $350,000 in the
aggregate during any Fiscal Year;
7.9.9. Permit the aggregate amount of outstanding accounts receivable
of SolarTechnics to exceed $150,000 at any date unless and until Borrower,
SolarTechnics, Agent and Lenders shall have entered into agreements satisfactory
to Agent and Lenders regarding the remittance of payments with respect to the
accounts receivable of SolarTechnics.
7.9.10. Pay management, consulting or other similar fees to any person,
corporation or other entity.
7.10. Until termination of this Agreement and payment and satisfaction in full
of all Obligations hereunder, the Company shall:
7.10.1. maintain at all times during the periods below a consolidated
Tangible Net Worth of not less than the amount set forth below for the
applicable period:
<TABLE>
<CAPTION>
PERIOD TANGIBLE NET WORTH
------ ------------------
<S> <C>
For the Fiscal Year ending
December 31, 1999 $1.00
For the two Fiscal Quarters
ending June 30, 2000 $1,500,000
For the Fiscal Year ending
December 31, 2000 $3,100,000
</TABLE>
25
<PAGE>
<TABLE>
<S> <C>
For the Fiscal Year ending
December 31, 2001 $5,750,000
For the Fiscal Year ending
December 31, 2002 $8,250,000
For the Fiscal Year ending
December 31, 2003 $10,750,000
</TABLE>
Commencing with the Fiscal Year ending December 31, 2004 and as of the
last day of each Fiscal Year thereafter, the minimum Tangible Net Worth
requirement shall be increased as of the last day of each such Fiscal
Year by the amount of $2,500,000 over the minimum Tangible Net Worth
for the immediately preceding Fiscal Year.
7.10.2. maintain (i) at the end of the Fiscal Quarter ending September
30, 1999, for a period of three (3) Fiscal Quarters then ending, and (ii) at the
end of each Fiscal Quarter thereafter for the twelve month period then ending, a
consolidated Fixed Charge Coverage Ratio of not less than the ratio of 1.2 to
1.0.
7.10.3. maintain at the end of each fiscal period during the periods
set forth below a consolidated Leverage Ratio of no more than the ratio set
forth below for the applicable period:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
As of September 30, 1999 for the
three (3) Fiscal Quarters then
ending and as of the Fiscal Year
ending December 31, 1999 4.5 to 1.0
As of the last day of the Fiscal
Quarters ending March 31, 2000,
June 30, 2000 and September 30, 2000
for the twelve month periods then ending
and for the Fiscal Year ending
December 31, 2000 3.25 to 1.0
For the Fiscal Year ending December 31,
2000 and the last day of each Fiscal
Quarter thereafter for the 12-month
period then ending 3.0 to 1.0
</TABLE>
26
<PAGE>
7.10.4. Without the prior written consent of the Agent, the Company
will not: (a) enter into any Operating Lease if after giving effect thereto the
aggregate obligations with respect to Operating Leases of the Company during any
Fiscal Year would exceed $250,000 or (b) contract for, purchase, make
expenditures for, lease pursuant to a Capital Lease or otherwise incur
obligations with respect to Capital Expenditures (whether subject to a security
interest or otherwise) during any period below in the aggregate amount for the
Company in excess of $25,000 in the aggregate during any Fiscal Year.
7.11. The Company agrees to advise the Agent in writing of: (a) all expenditures
(actual or anticipated) in excess of $25,000 for (x) environmental clean-up, (y)
environmental compliance or (z) environmental testing and the impact of said
expenses on the Company's Working Capital; and (b) any notices the Company
receive from any local, state or federal authority advising the Company of any
environmental liability (real or potential) stemming from the Company's
operations, premises, waste disposal practices, or waste disposal sites used by
the Company and to provide the Agent with copies of all such notices if so
required.
7.12. The Company will not enter into, or be a party to any transaction with any
affiliate or stockholder, except: (i) the transactions contemplated by this
Agreement; (ii) payment of reasonable compensation to officers and employees for
services actually rendered to the Company; (iii) payment of customary directors'
fees and indemnities; (iv) transactions with affiliates that were consummated
prior to the date hereof and have been disclosed to Agent prior to the Closing
Date; and (v) in the ordinary course of and pursuant to the reasonable
requirements of the Company's business and upon terms which are fully disclosed
to Agent and are no less favorable to the Company than would obtain in a
comparable arm's length transaction with a person or an entity not an affiliate
or stockholder of the Company.
7.13. The Company shall take all action necessary to assure that its computer
based systems are able to operate and effectively process data including dates
on and after January 1, 2000. The Company shall provide Agent written assurance
acceptable to Agent that such systems are Year 2000 compliant on or before
October 1, 1999. The Company shall (a) promptly and in no event later than
October 1, 1999, take all action necessary to ensure that all material computer
based systems of the Company and its subsidiaries are capable of the following:
(i) handling date information involving all and any dates before, during and/or
after January 1, 2000, including accepting input, providing output and
performing date calculations in whole or in part; (ii) operating, accurately
without interruption on and in respect of any and all dates before, during
and/or after January 1, 2000, and without any change in performance; (iii)
responding to and processing two digit year input without creating any ambiguity
as to the century; (iv) storing and providing date input information without
creating any ambiguity as to the century; and (b) promptly and in no event later
than October 1, 1999, take all action reasonably necessary and within its
control to obtain confirmation that all computer based systems of the Company's
material vendors, suppliers and customers are capable of (i) through (iv) above,
where noncompliance could be reasonably expected to have a material adverse
effect on the financial condition of the Company.
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SECTION 8. INTEREST, FEES AND EXPENSES.
8.1. Interest on the Revolving Loan shall be payable monthly as of the end of
each month and shall be an amount equal to 1.75% plus the Chase Bank Rate per
annum on the average of the net balances owing by the Company to the Agent in
the Company's Revolving Loan Account at the close of each day during such month.
In the event of any change in the Chase Bank Rate, the foregoing interest rate
shall change, as of the first of the month following any change, so as to remain
1.75% above the Chase Bank Rate. The rate hereunder shall be calculated based on
a 360-day year. The Agent and the Lenders shall be entitled to charge the
Company's Revolving Loan Account at the rate provided for herein when due until
all Obligations have been paid in full. The Chase Bank Rate on the date hereof
is 8.25% per annum and, therefore, the rate of interest in effect hereunder on
the date hereof with respect to Revolving Loans, expressed in simple interest
terms, is 10% per annum.
8.2. Interest on the Term Loan shall be payable monthly as of the end of each
month on the unpaid balance or upon payment in full prior to maturity in an
amount equal to 2.0% plus the Chase Bank Rate per annum on balances, on a per
annum basis, on the average of the net balance of the Term Loan owing by the
Company to the Agent or any Lender at the close of each day during such month.
In the event of any change in the Chase Bank Rate, the foregoing interest rate
under clause (a) above shall change, as of the first of the month following any
change, so as to remain 2.0% above the Chase Bank Rate. The rate hereunder shall
be calculated based on a 360 day year. The Agent and the Lenders shall be
entitled to charge the Company's Revolving Loan Account(s) at the rate provided
for herein when due until all Obligations have been paid in full. The Chase Bank
Rate on the date hereof is 8.25% per annum and, therefore, the rate of interest
in effect hereunder on the date hereof with respect to the Term Loan, expressed
in simple interest terms, is 10.25% per annum.
8.3. [Reserved]
8.4. [Reserved]
8.5. The Company shall reimburse or pay the Agent, as the case may be, for all
Out-of-Pocket Expenses.
8.6. Upon the last Business Day of each month, commencing with the last day of
the month in which this Agreement is executed the Company shall pay the Agent
for the benefit of the Lenders the Line of Credit Fee.
8.7. To induce the Agent and the Lenders to enter into this Agreement and to
extend to the Company the Revolving Loan and the Term Loan, the Company shall
pay to the Agent for the benefit of the Lenders a Loan Facility Fee in the
amount of $150,000.00 of which $37,500 shall be
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payable as of the Closing Date, $37,500 of which shall be payable as of the last
day of the three (3) fiscal quarters ending hereafter thereafter commencing
December 31, 1999, until paid in full.
8.8. Upon the date hereof and on each annual anniversary thereof the Company
shall pay to the Agent the Collateral Management Fee, which shall be fully
earned and not refundable or rebateable when due.
8.9. The Company shall pay the Agent's standard charges for, and the fees and
expenses of, the Agent personnel used by the Agent for reviewing the books and
records of the Company and for verifying, testing protecting, safeguarding,
preserving or disposing of all or any part of the Collateral provided, however,
that the foregoing shall not be payable until the occurrence of an Event of
Default for so long as the Company is paying the Collateral Management Fee.
8.10. The Company hereby authorizes the Agent to charge its Revolving Loan
Account with the Agent with the amount of all payments due hereunder as such
payments become due. The Company confirms that any charges which the Agent may
so make to the Company's account as herein provided will be made as an
accommodation to the Company and solely at the Agent's discretion. Agent shall
promptly notify the Company of all such charges to the Revolving Loan Account.
SECTION 9. POWERS.
The Company hereby constitutes the Agent in behalf of the Lenders or
any person or agent the Agent may designate as its attorney-in-fact, at the
Company's cost and expense, to exercise all of the following powers, which being
coupled with an interest, shall be irrevocable until all of the Company's
Obligations to the Agent and the Lenders have been paid in full:
9.1. To receive, take, endorse, sign, assign and deliver, all in the name of the
Agent or the Company, any and all checks, notes, drafts, and other documents or
instruments relating to the Collateral;
9.2. To receive, open and dispose of all mail addressed to the Company and to
notify postal authorities to change the address for delivery thereof to such
address as the Agent may designate;
9.3. To request from customers indebted on Accounts at any time, in the name of
the Agent or the Company or that of the Agent's designee, information concerning
the amounts owing on the Accounts;
9.4. To transmit to customers indebted on Accounts notice of the Agent's
interest therein and to notify customers indebted on Accounts to make payment
directly to the Agent for the Company's account; and
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9.5. To take or bring, in the name of the Agent or the Company, all steps,
actions, suits or proceedings deemed by the Agent necessary or desirable to
enforce or effect collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the
powers set forth in 9.2, 9.4 and 9.5 above may only be exercised after the
occurrence of an Event of Default and until such time as such Event of Default
is waived in writing by the Agent or cured to the Agent's satisfaction. In
addition, the powers set forth in 9.3 above will only be exercised in the name
of the Company or a certified public accountant designated by the Agent prior to
the occurrence of such Event of Default.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.
10.1. Notwithstanding anything hereinabove to the contrary, the Lenders acting
through the Agent may terminate this Agreement immediately upon the occurrence
of any of the following (herein "Events of Default"):
10.1.1. cessation of the business of the Company or the calling of a
meeting of the creditors of the Company, or any one of them, for purposes of
compromising their debts and obligations;
10.1.2. the failure of the Company generally to pay its debts as they
mature;
10.1.3. the commencement by or against the Company of any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceedings
under any federal or state law, provided that in the event of any involuntary
proceeding commenced against the Company such proceeding is not dismissed or
discharged within 45 days after commencement thereof;
10.1.4. breach by the Company of any warranty, representation or
covenant contained herein (other than those referred to in Section 10.1.5 below)
or in any other written agreement between the Company and the Agent or any
Lender, provided that such breach by the Company of any of the warranties,
representations or covenants referred in this Section 10.1.4 shall not be deemed
to be an Event of Default unless and until such breach shall remain unremedied
to the Agent's satisfaction for a period of 15 days from the after the sooner to
occur of any Executive Officer's receipt of notice of such breach from Agent or
the date on which such failure or neglect first becomes known to any Executive
Officer; PROVIDED, HOWEVER, that such notice and opportunity to cure shall not
apply in the case of any failure to perform, keep or observe any covenant which
is not capable of being cured at all or within such 15-day period or which is a
willful and knowing breach by the Company;
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10.1.5. breach by the Company, of any warranty, representation or
covenant of Section 3.3, Section 3.4, Section 6.3 Section 6.4, Section 7.1,
Section 7.5, Section 7.6, Section 7.9, and Section 7.10;
10.1.6. failure of the Company to pay any of the Obligations within
five (5) Business Days of the due date thereof, provided that nothing contained
herein shall prohibit the Agent from charging such amounts to the Company's
Revolving Loan Account on the due date thereof;
10.1.7. the Company sustains a consolidated loss in any Fiscal Year, as
determined in accordance with GAAP, exclusive, to the extent applicable, of
dividends paid in capital stock of Borrower;
10.1.8. the Company shall (a) engage in any "prohibited transaction" as
defined in ERISA, (b) have any "accumulated funding deficiency" as defined in
ERISA, (c) have any Reportable Event as defined in ERISA, (d) terminate any
Plan, as defined in ERISA or (e) be engaged in any proceeding in which the
Pension Benefit Guaranty Corporation shall seek appointment, or is appointed, as
trustee or administrator of any Plan, as defined in ERISA, and with respect to
this Section 10.1.8 such event or condition remains uncured for a period of
thirty (30) days from date of occurrence;
10.1.9. the Company shall (a) amend or modify any instrument or
agreement evidencing Subordinated Debt, or (b) make any payment on account of
the Subordinated Debt except as permitted in the Subordination Agreement;
10.1.10. the occurrence of any default or event of default (after
giving effect to any applicable grace periods) under any instrument or agreement
evidencing (a) the Subordinated Debt (unless waived in writing by the
Subordinated Creditors), or (b) any other Indebtedness of the Company having a
principal amount in excess of $100,000; or
10.1.11. either Stephen H. Nevitt or William L. McMahon ceases for any
reason whatsoever (other than as a result of death or permanent disability) to
be actively engaged in the management of the Company.
10.2. Upon the occurrence of a Default and/or an Event of Default, the Agent may
(at its option) and shall at the direction of the Required Lenders declare that,
all loans, advances and extensions of credit provided for in Section 3 of this
Agreement shall be thereafter in the Agent's sole discretion and the obligation
of the Agent or any Lender to make Revolving Loans shall cease unless such
Default or Event of Default is waived in writing by the Agent or cured to the
Agent's satisfaction, and upon the occurrence of an Event of Default the Agent
may (at its option) and shall at the direction of the Required Lenders declare
that: (a) all Obligations shall become immediately due and payable; (b) the
Default Rate of Interest shall be charged on all then outstanding or thereafter
incurred Obligations in lieu of the interest provided for in Section 8 of this
Agreement provided that
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respect to this clause "(b)" (i) the Agent has given the Company written notice
of the Event of Default, provided, however, that no notice is required if the
Event of Default is the Event listed in Section 10.1.3 and (ii) the Company has
failed to cure the Event of Default within ten (10) days after (x) the Agent
deposited such notice in the United States mail or (y) the occurrence of an
Event of Default listed in Section 10.1.3; and (c) this Agreement shall
immediately terminate upon notice to the Company, provided, however, that no
notice of termination is required if the Event of Default is an Event of Default
described in Section 10.1.3. The exercise of any option is not exclusive of any
other option which may be exercised at any time by the Agent or any Lender.
10.3. Immediately upon the occurrence of any Event of Default, the Agent may and
at the request of the Required Lenders shall to the extent permitted by law: (a)
remove from any premises where same may be located any and all documents,
instruments, files and records, and any receptacles or cabinets containing same,
relating to the Accounts, or the Agent may use, at the Company's expense, such
of the Company's personnel, supplies or space at the Company's places of
business or otherwise, as may be necessary to properly administer and control
the Accounts or the handling of collections and realizations thereon; (b) bring
suit, in the name of the Company or the Agent in behalf of the Lenders, and
generally shall have all other rights respecting said Accounts, including
without limitation the right to: accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any
Accounts and issue credits in the name of the Company or the Agent; (c) sell,
assign and deliver the Collateral and any returned, reclaimed or repossessed
merchandise, with or without advertisement, at public or private sale, for cash,
on credit or otherwise, at the Agent's sole option and discretion, and the Agent
may bid or become a purchaser at any such sale, free from any right of
redemption, which right is hereby expressly waived by the Company; (d) foreclose
the security interests created herein by any available judicial procedure, or to
take possession of any or all of the Inventory, Equipment and/or Other
Collateral without judicial process, and to enter any premises where any
Inventory, Equipment and/or Other Collateral may be located for the purpose of
taking possession of or removing the same and (v) exercise any other rights and
remedies provided in law, in equity, by contract or otherwise. the Agent shall
have the right, without notice or advertisement, to sell, lease, or otherwise
dispose of all or any part of the Collateral whether in its then condition or
after further preparation or processing, in the name of the Company or the
Agent, or in the name of such other party as the Agent may designate, either at
public or private sale or at any broker's board, in lots or in bulk, for cash or
for credit, with or without warranties or representations, and upon such other
terms and conditions as the Agent in its sole discretion may deem advisable, and
the Agent shall have the right to purchase at any such sale. If any Inventory
and Equipment shall require rebuilding, repairing, maintenance or preparation,
the Agent shall have the right, at its option, to do such of the aforesaid as is
necessary, for the purpose of putting the Inventory and Equipment in such
saleable form as the Agent shall deem appropriate. The Company agrees, at the
request of the Agent, to assemble the Inventory and Equipment and to make it
available to the Agent at premises of the Company or elsewhere and to make
available to the Agent the premises and facilities of the Company for the
purpose of the Agent's taking possession of, removing or putting the Inventory
and Equipment in saleable form. However, if notice of intended disposition of
any Collateral is required by law, it is agreed that ten (10) days
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notice shall constitute reasonable notification and full compliance with the
law. The net cash proceeds resulting from the Agent's exercise of any of the
foregoing rights, (after deducting all charges, costs and expenses, including
reasonable attorneys' fees) shall be applied by the Agent to the payment of the
Company's Obligations, whether due or to become due, in such order as the Agent
may elect, and the Company shall remain liable to the Agent and the Lenders for
any deficiencies, and the Agent and the Lenders in turn agree to remit to the
Company or their successors or assigns, any surplus resulting therefrom. The
enumeration of the foregoing rights is not intended to be exhaustive and the
exercise of any right shall not preclude the exercise of any other rights, all
of which shall be cumulative.
SECTION 11. TERMINATION.
Except as otherwise permitted herein, the Company or any Lender acting
through the Agent may terminate this Agreement and the Line of Credit only as of
the initial or any subsequent Anniversary Date and then only by giving the other
at least sixty (60) days prior written notice of termination. Notwithstanding
the foregoing the Lenders acting through the Agent may terminate this Agreement
immediately upon the occurrence of an Event of Default, provided, however, that
if the Event of Default is an event listed in Section 10.1.3 hereof, the Agent
and the Lenders may regard this Agreement as terminated and notice to that
effect is not required. This Agreement, unless terminated as herein provided,
shall automatically continue from Anniversary Date to Anniversary Date.
Notwithstanding the foregoing, the Company may terminate this Agreement and the
Line of Credit prior to any applicable Anniversary Date upon sixty (60) days'
prior written notice to the Agent and the Lenders, provided that the Company pay
to the Agent for the benefit of the Lenders immediately on demand, the Early
Termination Fee and the Prepayment Premium. Termination by any of the Company
shall constitute termination with respect to all Company. All Obligations shall
become due and payable as of any termination hereunder or under Section 10
hereof and, pending a final accounting, the Agent and the Lenders may withhold
any balances in the Company's accounts (unless supplied with an indemnity
satisfactory to the Agent) to cover all of the Company's Obligations, whether
absolute or contingent. All of the Agent's and Lenders' rights, liens and
security interests shall continue after any termination until all Obligations
have been paid and satisfied in full.
SECTION 12. MISCELLANEOUS.
12.1. The Company hereby waives diligence, demand, presentment and protest and
any notices thereof as well as notice of nonpayment. No delay or omission of the
Agent or the Lenders or the Company to exercise any right or remedy hereunder,
whether before or after the happening of any Event of Default, shall impair any
such right or shall operate as a waiver thereof or as a waiver of any such Event
of Default. No single or partial exercise by the Agent or the Lenders of any
right or remedy precludes any other or further exercise thereof, or precludes
any other right or remedy.
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12.2. This Agreement and the documents executed and delivered in connection
therewith constitute the entire agreement between the Company and the Agent and
the Lenders; supersede any prior agreements; and shall bind and benefit the
Company and the Agent and their respective successors and assigns. This
Agreement can be amended, modified or changed only by a writing signed by the
Company, the Agent and the Required Lenders (unless the consent of all Lenders
is required pursuant to Section 14.10 hereof).
12.3. In no event shall the Company, upon demand by the Agent or any Lender for
payment of any indebtedness relating hereto, by acceleration of the maturity
thereof, or otherwise, be obligated to pay interest and fees in excess of the
amount permitted by law. Regardless of any provision herein or in any agreement
made in connection herewith, the Agent or any Lender shall never be entitled to
receive, charge or apply, as interest on any indebtedness relating hereto, any
amount in excess of the maximum amount of interest permissible under applicable
law. If the Agent or any Lender ever receive, collect or apply any such excess,
it shall be deemed a partial repayment of principal and treated as such; and if
principal is paid in full, any remaining excess shall be refunded to the
Company. This Section 12.3 shall control every other provision hereof and of any
other agreement made in connection herewith.
12.4. If any provision hereof or of any other agreement made in connection
herewith is held to be illegal or unenforceable, such provision shall be fully
severable, and the remaining provisions of the applicable agreement shall remain
in full force and effect and shall not be affected by such provision's
severance. Furthermore, in lieu of any such provision, there shall be added
automatically as a part of the applicable agreement a legal and enforceable
provision as similar in terms to the severed provision as may be possible.
12.5. THE COMPANY, THE AGENT AND THE LENDERS EACH HEREBY WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT. THE
COMPANY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO
SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED.
12.6. Except as otherwise herein provided, any notice or other communication
required hereunder shall be in writing, and shall be deemed to have been validly
served, given or delivered when hand delivered or sent by telegram or telex, or
three days after deposit in the United State mails, with proper first class
postage prepaid and addressed to the party to be notified as follows:
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(A) if to the Agent or CITBC, at:
The CIT Group/Business Credit, Inc.
1200 Ashwood Parkway
Suite 150
Atlanta, Georgia 30338
Fax No.: (770) 522-7673
Attention: Office Head
(B) if to any other party becoming a Lender hereunder to
the address specified in the Assignment and Transfer
Agreement.
(C) if to the Company at:
Serengeti Eyewear, Inc.
8125 25th Court East
Sarasota, Florida 34243
Fax No.: (941) 359-3598
Attn: Stephen H. Nevitt
(D) With a courtesy copy to:
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022-7601
Fax No.: (212) 755-2839
Attn: Robert L. Winikoff, Esq.
or to such other address as any party may designate for itself by like notice.
12.7. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF GEORGIA.
SECTION 13. AGREEMENT BETWEEN THE LENDERS.
13.1. (a) The Agent, for the account of the Lenders, shall disburse all loans
and advances to the Company and shall handle all collections of Collateral and
repayment of Obligations. It is understood that for purposes of advances to the
Company and for purposes of this Section 13 the Agent is using the funds of the
Agent.
(b) Unless the Agent shall have been notified in writing by any Lender
prior
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to any advance to the Company that such Lender will not make the amount which
would constitute its share of the borrowing on such date available to the Agent,
the Agent may assume that such Lender shall make such amount available to the
Agent on a Settlement Date, and the Agent may, in reliance upon such assumption,
make available to the Company a corresponding amount. A certificate of the Agent
submitted to any Lender with respect to any amount owing under this subsection
shall be conclusive, absent manifest error. If such Lender's share of such
borrowing is not in fact made available to the Agent by such Lender on the
Settlement Date, the Agent shall be entitled to recover such amount with
interest thereon at the rate per annum applicable to Revolving Loans hereunder,
on demand, from the Company without prejudice to any rights which the Agent may
have against such Lender hereunder. Nothing contained in this subsection shall
relieve any Lender which has failed to make available its ratable portion of any
borrowing hereunder from its obligation to do so in accordance with the terms
hereof. Nothing contained herein shall be deemed to obligate the Agent to make
available to the Company the full amount of a requested advance when the Agent
has any notice (written or otherwise) that any of the Lenders will not advance
its ratable portion thereof.
13.2. On the Settlement Date, the Agent and the Lenders shall each remit to the
other, in immediately available funds, all amounts necessary so as to ensure
that, as of the Settlement Date, the Lenders shall have their proportionate
share of all outstanding Obligations.
13.3. The Agent shall forward to each Lender, at the end of each month, a copy
of the account statement rendered by the Agent to the Company.
13.4. The Agent shall, after receipt of any interest and fees earned under this
Agreement, promptly remit to the Lenders: (a) their pro rata portion of all
fees; provided, however, that the Lenders (other than CITBC as the Agent) shall
(x) not share in the Collateral Management Fee or the fees provided for in
Section 8.9 hereof; and (y) receive their share of the Loan Facility Fee in
accordance with their respective agreements with the Agent; (b) interest
computed at the rate and as provided for in Section 8 of this Agreement on all
outstanding amounts advanced by the Lenders on each Settlement Date, prior to
adjustment, that are subsequent to the last remittance by the Agent to the
Lenders of the Company's interest payments; (c) its pro rata portion of all
principal repaid on the Term Loan; and (d) interest on the Term Loan computed at
the rate and as provided for in Section 8 of this Agreement.
13.5. (a) The Company acknowledge that the Lenders may sell participations in
the loans and extensions of credit made and to be made to the Company hereunder.
The Company further acknowledge that in doing so, the Lenders may grant to such
participants certain rights which would require the participant's consent to
certain waivers, amendments and other actions with respect to the provisions of
this Agreement, provided that the consent of any such participant shall not be
required except for matters requiring the consent of all Lenders hereunder as
set forth in Section 14.10 hereof.
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(b) The Company authorizes each Lender to disclose to any participant
or purchasing lender (each, a "Transferee") and any prospective Transferee any
and all financial information in such Lender's possession concerning the Company
and their affiliates which has been delivered to such Lender by or on behalf of
the Company pursuant to this Agreement or which has been delivered to such
Lender by or on behalf of the Company in connection with such Lender's credit
evaluation of the Company and their affiliates prior to entering into this
Agreement.
13.6. The Company hereby agree that each Lender is solely responsible for its
portion of the Line of Credit and that neither the Agent nor any Lender shall be
responsible for, nor assume any obligations for the failure of any Lender to
make available its portion of the Line of Credit. Further, should any Lender
refuse to make available its portion of the Line of Credit, then the other
Lender may, but without obligation to do so, increase, unilaterally, its portion
of the Line of Credit in which event the Company is so obligated to that other
Lender.
13.7. In the event that the Agent, the Lenders or any one of them is sued or
threatened with suit by the Company or any one of them, or by any receiver,
trustee, creditor or any committee of creditors on account of any preference,
voidable transfer or lender liability issue, alleged to have occurred or been
received as a result of, or during the transactions contemplated under this
Agreement, then in such event any money paid in satisfaction or compromise of
such suit, action, claim or demand and any expenses, costs and attorneys' fees
paid or incurred in connection therewith, whether by the Agent, the Lenders or
any one of them, shall be shared proportionately by the Lenders. In addition,
any costs, expenses, fees or disbursements incurred by outside agencies or
attorneys retained by the Agent to effect collection or enforcement of any
rights in the Collateral, including enforcing, preserving or maintaining rights
under this Agreement shall be shared proportionately between and among the
Lenders to the extent not reimbursed by the Company or from the proceeds of
Collateral. The provisions of this Section 13.7 shall not apply to any suits,
actions, proceedings or claims that (a) predate the date of this Agreement or
(b) are based on transactions, actions or omissions that predate the date of
this Agreement.
13.8. Each of the Lenders agrees with each other Lender that any money or assets
of the Company held or received by such Lender, no matter how or when received,
shall be applied to the reduction of the Obligations (to the extent permitted
hereunder) after (a) the occurrence of an Event of Default and (b) the election
by the Required Lenders to accelerate the Obligations. In addition, the Company
authorizes, and the Lenders shall have the right, without notice, upon any
amount becoming due and payable hereunder, to set-off and apply against any and
all property held by, or in the possession of such Lender the Obligations due
such Lenders.
13.9. Each Lender shall have the right at any time to assign to one or more
commercial banks, commercial finance lenders or other financial institutions all
or a portion of its rights and obligations under this Agreement (including,
without limitation, its obligations under the Line of Credit, the Term Loan and
the Revolving Loans. Upon execution of an Assignment and Transfer Agreement, (a)
the assignee thereunder shall be a party hereto and, to the extent that rights
and obligations
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hereunder have been assigned to it pursuant to such assignment, have the rights
and obligations of such Lender as the case may be hereunder and (b) such Lender
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such assignment, relinquish its rights and be released from its
obligations under this Agreement. The Company shall, if necessary, execute any
documents reasonably required to effectuate the assignments. No Lender other
than CITBC may assign its interest in the loans and advances and extensions of
credit hereunder without the prior written consent of the Agent.
SECTION 14. AGENCY.
14.1. Each Lender hereby irrevocably designates and appoints CITBC as the Agent
for the Lenders under this Agreement and any ancillary loan documents and
irrevocably authorizes CITBC as the Agent for such Lender, to take such action
on its behalf under the provisions of this Agreement and all ancillary documents
and to exercise such powers and perform such duties as are expressly delegated
to the Agent by the terms of this Agreement and all ancillary documents together
with such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Agreement, the Agent shall not have
any duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into
Agreement and the ancillary documents or otherwise exist against the Agent.
14.2. The Agent may execute any of its duties under this Agreement and all
ancillary documents by or through agents or attorneys-in-fact and shall be
entitled to the advice of counsel concerning all matters pertaining to such
duties.
14.3. Neither the Agent nor any of its officers, directors, employees, agents,
or attorneys-in-fact shall be (a) liable to any Lender for any action lawfully
taken or omitted to be taken by it or such person under or in connection with
this Agreement and all ancillary documents (except for its or such person's own
gross negligence or willful misconduct), or (b) responsible in any manner to any
of the Lenders for any recitals, statements, representations or warranties made
by the Company or any officer thereof contained in this Agreement and all
ancillary documents 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 and all ancillary documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement and
all ancillary documents or for any failure of the Company to perform their
obligations thereunder. The Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement and all ancillary
documents or to inspect the properties, books or records of the Company.
14.4. The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
38
<PAGE>
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, without
limitation, counsel to the Company), independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or refusing
to take any action under this Agreement and all ancillary documents unless it
shall first receive such advice or concurrence of the Lenders, or the Required
Lenders, as the case may be, as it deems appropriate or 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 and all ancillary documents in
accordance with a request of the Lenders, or the Required Lenders, as the case
may be, and such request and any action taken or failure to act pursuant thereto
shall be binding upon all the Lenders.
14.5. The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received notice from a Lender or the Company describing such Default or Event of
Default. In the event that the Agent receives such a notice, the Agent shall
promptly give notice thereof to the Lenders. The Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Lenders, or Required Lenders, as the case may be; provided that unless
and until the Agent shall have received such direction, the Agent may in the
interim (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 and in the best interests of the Lenders.
14.6. Each Lender expressly acknowledges that neither the Agent nor any of its
officers, directors, employees, agents or attorneys-in-fact has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Company shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Company and made its own decision to enter into this
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Agent 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 analysis, appraisals and decisions in taking or not taking action under
this Agreement and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
or creditworthiness of the Company. The Agent, however, shall provide the
Lenders with copies of all financial statements, projections and business plans
which come into the possession of the Agent or any of its officers, employees,
agents or attorneys-in-fact.
14.7. The Lenders agree to indemnify the Agent in its capacity as such (to the
extent not reimbursed by the Company and without limiting the obligation of the
Company to do so), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
39
<PAGE>
expenses or disbursements of any kind whatsoever (including negligence on the
part of the Agent) which may at any time be imposed on, incurred by or asserted
against the Agent in anyway relating to or arising out of this Agreement or any
ancillary documents or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing; provided that no Lender shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the Agent's gross negligence or willful
misconduct. The agreements in this Section 14.7 shall survive the payment of the
obligations.
14.8. The Agent may make loans to, and generally engage in any kind of business
with the Company as though the Agent were not the Agent hereunder. With respect
to its loans made or renewed by it or loan obligations hereunder as Lender, the
Agent shall have the same rights and powers, duties and liabilities under this
Agreement as any Lender and may exercise the same as though it was not the Agent
and the terms "Lender" and "Lenders" shall include the Agent in its individual
capacities.
14.9. The Agent may resign as the Agent upon 30 days' notice to the Lenders and
such resignation shall be effective upon the appointment of a successor Agent.
If the Agent shall resign as Agent, then the Lenders shall appoint a successor
Agent for the Lenders whereupon such successor Agent shall succeed to the
rights, powers and duties of the Agent and the term "the Agent" shall mean such
successor Agent effective upon its appointment, and the former Agent's rights,
powers and duties as the Agent shall be terminated, without any other or further
act or deed on the part of such former Agent or any of the parties to this
Agreement. After any retiring Agent's resignation hereunder as the Agent the
provisions of this Section 14.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Agent.
14.10. Notwithstanding anything contained in this Agreement to the contrary, the
Agent will not, without the prior written consent of all Lenders: (a) amend this
Agreement to increase the Line of Credit; reduce the interest rates; reduce or
waive any fees in which the Lenders share hereunder or forgive, defer or waive
the repayment of any Obligations; (b) extend the maturity of the Obligations; or
(c) alter or amend this Section 14.10 or the definitions of Eligible Domestic
Accounts Receivable, Eligible Foreign Accounts Receivable, Eligible Premium
Inventory, Eligible Non-Premium Inventory, Inventory Loan Cap, Collateral or
Required Lenders; (d) release Collateral in bulk without a corresponding
reduction in the Obligations to the Lenders, or (e) intentionally make any
Revolving Loan hereunder if after giving effect thereto the total of Revolving
Loans for the Company would exceed 110% of the maximum amount available under
Section 3 hereof. In all other respects the Agent is authorized to take such
actions or fail to take such actions if the Agent, in its reasonable discretion,
deems such to be advisable and in the best interest of the Lenders, including,
but not limited to, the making of an overadvance or the termination of this
Agreement upon the occurrence of an Event of Default unless it is specifically
instructed to the contrary by the Required Lenders.
40
<PAGE>
14.11. In the event a Lender's consent is required pursuant to the provisions of
this Agreement and such Lender does not respond to any request by the Agent for
such consent within 10 days after such request is made to such Lender, such
failure to respond shall be deemed a consent. In addition, in the event that any
Lender declines to give its consent to any such request, it is hereby mutually
agreed that the Agent and/or any other Lender shall have the right (but not the
obligation) to purchase such Lender's share of the Loans for the full amount
thereof together with accrued interest thereon to the date of such purchase.
14.12. Each Lender agrees that notwithstanding the provisions of Section 11 of
this Agreement any Lender may terminate this Agreement and the Line of Credit
only as of the initial or any subsequent Anniversary Date and then only by
giving the Agent 90 days prior written notice thereof. Within 30 days after
receipt of any such termination notice, the Agent shall, at its option, either
(a) give notice of termination to the Company hereunder or (b) purchase the
Lender's share of the Obligations hereunder for the full amount thereof plus
accrued interest thereon. Unless so terminated this Agreement and the Line of
Credit shall be automatically extended from Anniversary Date to Anniversary
Date.
14.13. The obligations of each Lender hereunder are several, and no Lender shall
be responsible for the obligations or commitment of any other Lender. Nothing
contained in this Agreement and no action taken by Lenders pursuant hereto shall
be deemed to constitute the Lenders to be a partnership, association, joint
venture or any other kind of entity. The amounts payable at any time hereunder
to each Lender shall be a separate and independent debt, and each Lender shall
be entitled, to the extent not otherwise restricted hereunder, to protect and
enforce its rights arising out of this Agreement and any of the other documents
executed in connection therewith and it shall not be necessary for Agent or any
other Lender to be joined as an additional party in any proceeding for such
purpose.
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their proper and duly authorized officers as of the
date set forth above.
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC., AS AGENT AND LENDER
By:____________________________________
Title: Vice President
READ AND AGREED TO:
SERENGETI EYEWEAR, INC.
ATTEST:
___________________________________ By: ___________________________________
Assistant Secretary Title: President
[CORPORATE SEAL]
42
<PAGE>
EXHIBIT A
REVOLVING LOAN PROMISSORY NOTE
$12,000,000.00 September 9, 1999
FOR VALUE RECEIVED, the undersigned, SERENGETI EYEWEAR, INC., a New
York corporation (the "Company"), promises to pay to the order of THE CIT
GROUP/BUSINESS CREDIT, INC. (herein "CITBC") as Agent for the Lenders under a
certain Financing Agreement of even date herewith between CITBC as Agent and
Lender, other Lenders parties thereto and the Company (herein the "Agreement")
at its office located at 1200 Ashwood Parkway, Suite 150, Atlanta, Georgia
30338, in lawful money of the United States of America and in immediately
available funds, the principal amount of $12,000,000.00, or such other principal
amount advanced pursuant to Section 3.1 of the Agreement. The balance of such
Revolving Loan will fluctuate as a result of the daily application of the
proceeds of collections of the Accounts and the making of additional Revolving
Loans as described in Section 3 of the Agreement. The Revolving Loans may be
borrowed, repaid and reborrowed by the Company in accordance with Section 5 of
the Agreement. A final payment in an amount equal to the outstanding aggregate
balance of principal and interest remaining unpaid, if any, under this Revolving
Loan Promissory Note as shown on the books and records of the Agent shall be due
and payable upon any termination of the Agreement.
All capitalized terms used herein shall have the meaning provided
therefor in the Agreement, unless otherwise defined herein.
The Company further promises to pay interest at such office, in like
money, on the unpaid principal amount owing hereunder from time to time from the
date hereof on the dates and at the rates specified in Section 8.1 of the
Agreement.
If any payment on this Revolving Loan Promissory Note becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day, and with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension.
This Revolving Loan Promissory Note is the Revolving Loan Promissory
Note referred to in the Agreement, and is subject to, and entitled to, all
provisions and benefits thereof and is subject to optional and mandatory
prepayment, in whole or in part, as provided therein.
1
<PAGE>
The date and amount of the advance(s) made hereunder may be recorded on
the schedule which is attached hereto and hereby made part of this Note or the
separate ledgers maintained by the Agent, provided that any failure to record
any such information on such schedule shall not in any manner affect the
obligation of the Company to make payments of principal and interest in
accordance with the terms of this Revolving Loan Promissory Note. The aggregate
unpaid principal amount of all advances made pursuant hereto may be set forth in
the balance column on said schedule or such ledgers maintained by the Agent. All
such advances, whether or not so recorded, shall be due as part of this
Revolving Loan Promissory Note.
The Company confirms that any amount received by or paid to the Agent
in connection with the Agreement and/or any balances standing to its credit on
any of its accounts on the Agent's books under the Agreement may in accordance
with the terms of the Agreement be applied in reduction of this Revolving Loan
Promissory Note, but no balance or amounts shall be deemed to effect payment in
whole or in part of this Revolving Loan Promissory Note unless the Agent shall
have actually charged such account or accounts for the purposes of such
reduction or payment of this Revolving Loan Promissory Note.
Upon the occurrence of any one or more of the Events of Default
specified in the Agreement or upon termination of the Agreement, all amounts
then remaining unpaid on this Revolving Loan Promissory Note may become, or be
declared to be, immediately due and payable as provided in the Agreement.
The Company and any and all guarantors, sureties and endorsers jointly
and severally waive grace, demand, presentment for payment, notice of dishonor
or default, notice of intent to accelerate, notice of acceleration, protest and
diligence in collecting.
This Revolving Loan Promissory Note shall be governed by, and construed
in accordance with, the laws of the state of Georgia and the applicable federal
laws of the United States.
SERENGETI EYEWEAR, INC.
ATTEST:
__________________________ By: _______________________________
Assistant Secretary Title: President
[CORPORATE SEAL]
2
<PAGE>
SCHEDULE TO GRID
<TABLE>
<CAPTION>
=================== ========================= ============================= ====================================
DATE LOAN PAYMENT BALANCE
- ------------------- ------------------------- ----------------------------- ------------------------------------
<S> <C> <C> <C>
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
- ------------------- ------------------------- ----------------------------- ------------------------------------
=================== ========================= ============================= ====================================
</TABLE>
1
<PAGE>
EXHIBIT B
TERM LOAN PROMISSORY NOTE
$725,000.00 September ___ , 1999
FOR VALUE RECEIVED, the undersigned, SERENGETI EYEWEAR, INC., a New
York corporation (the "Company"), promises to pay to the order of THE CIT
GROUP/BUSINESS CREDIT, INC. (herein "CITBC") as Agent for the Lenders under a
certain Financing Agreement (herein the "Agreement") of even date herewith among
CITBC, as Agent and Lender and the Company at Agent's office located at 1200
Ashwood Parkway, Suite 150, Atlanta, Georgia 30338, in lawful money of the
United States of America and in immediately available funds, the principal
amount of $725,000.00 as follows: (a) commencing November 1, 1999 and continuing
on the first day of each month thereafter, through and including September 1,
2000, principal installments of $60,416.67 each, and (b) on October 1, 2000 a
final payment of the remaining unpaid principal balance of this Note. The
Company further agrees to pay interest at said office, in like money, on the
unpaid principal amount owing hereunder from time to time on the dates and at
the rate specified in Section 8.2 of the Agreement.
Capitalized terms used herein and defined in the Agreement shall have
the same meanings as set forth therein unless otherwise specifically defined
herein.
If any payment on this Note becomes due and payable on a day other than
a Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is Term Loan Promissory Note referred to in the Agreement,
evidences the Term Loan thereunder, and is subject and entitled to all
provisions and benefits thereof and is subject to optional and mandatory
prepayment, in whole or in part, as provided therein.
1
<PAGE>
Upon the occurrence of any one or more of the Events of Default
specified in the Agreement or upon termination of the Agreement, all amounts
then remaining unpaid on this Note may become, or be declared to be, at the sole
election of the Agent, immediately due and payable as provided in the Agreement.
SERENGETI EYEWEAR, INC.
Attest:
__________________________ By: _______________________________
Assistant Secretary Title: President
2
<PAGE>
EXHIBIT C - ASSIGNMENT AND TRANSFER AGREEMENT
Dated: ______ , _____
Reference is made to the Financing Agreement dated as of September 9,
1999 (as amended, modified, supplemented and in effect from time to time, the
"Agreement"), among SERENGETI EYEWEAR, INC., a New York corporation (the
"Company"), the Lenders named therein, and The CIT Group/Business Credit, Inc.,
as Agent (the "Agent"). Capitalized terms used herein and not otherwise defined
shall have the meanings assigned to such terms in the Agreement. This Assignment
and Transfer Agreement, between the Assignor (as defined and set forth on
Schedule 1 hereto and made a part hereof) and the Assignee (as defined and set
forth on Schedule 1 hereto and made a part hereof) is dated as of Effective Date
(as set forth on Schedule 1 hereto and made a part hereof).
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date, an undivided interest (the "Assigned Interest") in and to all
the Assignor's rights and obligations under the Agreement respecting those, and
only those, financing facilities contained in the Agreement as are set forth on
Schedule 1 (collectively, the "Assigned Facilities" and individually, an
"Assigned Facility"), in a principal amount for each Assigned Facility as set
forth on Schedule 1.
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Agreement or any other instrument, document or
agreement executed in conjunction therewith (collectively the "Ancillary
Documents") or the execution, legality, validity, enforceability, genuiness,
sufficiency or value of the Agreement, any Collateral thereunder or any of the
Ancillary Documents furnished pursuant thereto, other than that it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any adverse claim and (ii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Company or any guarantor or the performance or
observance by the Company or any guarantor of any of its respective obligations
under the Agreement or any of the Ancillary Documents furnished pursuant
thereto.
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Transfer Agreement; (ii) confirms
that it has received a copy of the Agreement, together with the copies of the
most recent financial statements of the Company, and such other documents and
information as it has deemed appropriate to make its own credit analysis; (iii)
agrees that it will, independently and without reliance upon the Agent, the
Assignor or any other Lender and based on such documents and information as it
shall deem
1
<PAGE>
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Agreement; (iv) appoints and authorizes
the Agent to take such action as agent on its behalf and to exercise such powers
under the Agreement as are delegated to the Agent by the terms thereof, together
with such powers as are reasonably incidental thereto; (v) agrees that it will
be bound by the provisions of the Agreement and will perform in accordance with
its terms all the obligations which by the terms of the Agreement are required
to be performed by it as Lender; and (vi) if the Assignee is organized under the
laws of a jurisdiction outside the United States, attaches the forms prescribed
by the Internal Revenue Service of the United States certifying as to the
Assignee's exemption from United States withholding taxes with respect to all
payments to be made to the Assignee under the Agreement or such other documents
as are necessary to indicate that all such payments are subject to such tax at a
rate reduced by an applicable tax treaty.
4. Following the execution of this Assignment and Transfer Agreement,
such agreement will be delivered to the Agent for acceptance by it and the
Company, effective as of the Effective Date.
5. Upon such acceptance, from and after the Effective Date, the Agent
shall make all payments in respect of the assigned interest (including payments
of principal, interest, fees and other amounts) to the Assignee, whether such
amounts have accrued prior to the Effective Date or accrue subsequent to the
Effective Date. The Assignor and Assignee shall make all appropriate adjustments
in payments for periods prior to the Effective Date made by the Agent or with
respect to the making of this assignment directly between themselves.
6. From and after the Effective Date, (i) the Assignee shall be a party
to the Agreement and, to the extent provided in this Assignment and Transfer
Agreement, have the rights and obligations of a Lender thereunder, and (ii) the
Assignor shall, to the extent provided in this Assignment and Transfer
Agreement, relinquish its rights and be released from its obligations under the
Agreement.
7. THIS ASSIGNMENT AND TRANSFER AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA .
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective duly authorized officers on
Schedule 1 hereto.
2
<PAGE>
SCHEDULE 1 TO ASSIGNMENT AND TRANSFER AGREEMENT
Name of Assignor:
Name of Assignee:
Effective Date of Assignment: ___________ , _____
<TABLE>
<CAPTION>
Percentage Assigned of
Each Facility (Shown
as a percentage of
Principal aggregate original
Amount Assigned principal amount of all Lenders)
<S> <C> <C>
Revolving Loans $_____________ ___%
Letter of Credit
participation
interest $ N/A ___%
Term Loan: $_____________ ___%
Total $________
</TABLE>
1
<PAGE>
Accepted:
THE CIT GROUP/BUSINESS
CREDIT, INC., AS AGENT
------------------------------,
as Assignor
By: _________________________________ By: ___________________________
Title: _________________________ Title: ______________________
SERENGETI EYEWEAR, INC.
(the "Company")
------------------------------,
as Assignee
By: _________________________________ By: ___________________________
Title: _________________________ Title: ______________________
2
<PAGE>
SCHEDULE 1
EXISTING LIENS
<TABLE>
<CAPTION>
FILING FILING SECURED
LOCATION DEBTOR NUMBER DATE PARTY COLLATERAL
<S> <C> <C> <C> <C>
</TABLE>
1
<PAGE>
SCHEDULE 2
COLLATERAL LOCATIONS, CHIEF EXECUTIVE OFFICE AND QUALIFICATIONS
CHIEF EXECUTIVE OFFICE
COLLATERAL LOCATIONS
JURISDICTIONS IN WHICH QUALIFIED
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND THE CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 142,379
<SECURITIES> 0
<RECEIVABLES> 6,087,129
<ALLOWANCES> 1,191,331
<INVENTORY> 14,856,068
<CURRENT-ASSETS> 20,517,952
<PP&E> 3,215,308
<DEPRECIATION> 1,250,746
<TOTAL-ASSETS> 38,455,937
<CURRENT-LIABILITIES> 21,137,412
<BONDS> 758,590
0
23,809,000
<COMMON> 2,384
<OTHER-SE> (7,251,449)
<TOTAL-LIABILITY-AND-EQUITY> 38,455,937
<SALES> 30,842,422
<TOTAL-REVENUES> 30,842,422
<CGS> 17,173,199
<TOTAL-COSTS> 17,173,199
<OTHER-EXPENSES> 10,791,403
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,321,166
<INCOME-PRETAX> 1,556,654
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,556,654
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,556,654
<EPS-BASIC> .16
<EPS-DILUTED> .05
</TABLE>
