Ohio 0-21026 31-1364046
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(STATE OR OTHER (COMMISSION FILE NO.) (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
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On September 20, 2000, Rocky Shoes & Boots, Inc., an Ohio corporation (the "Company"), issued a press release announcing that the Company completed a refinancing of its bank credit facilities with GMAC Business Credit, LLC ("GMAC"). The press release is included as Exhibit 99 to this Form 8-K and is incorporated herein by this reference. The Loan and Security Agreement, dated September 18, 2000, among the Company, Lifestyle Footwear, Inc., and GMAC, is included as Exhibit 10.1 to this Form 8-K and is incorporated herein by this reference.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: September 20, 2000 By: /s/ David Fraedrich
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David Fraedrich, Executive Vice President
and Chief Financial Officer
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Exhibit No. Description
10.1 Loan and Security Agreement, dated September 18, 2000, among
Rocky Shoes & Boots, Inc., Lifestyle Footwear, Inc., and GMAC
Business Credit, LLC.
99 Press Release, dated September 20, 2000, entitled "Rocky Shoes
& Boots, Inc. Announces $50 Million Credit Facility."
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(This Table of Contents is not part of this Agreement and is only for convenience of reference.)
Page
1. GENERAL LENDING TERMS.........................................................................................1
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2. DEFINITIONS...................................................................................................2
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ACCOUNT DEBTOR.................................................................................................2
ACCOUNTS.......................................................................................................2
AVAILABILITY RESERVE...........................................................................................2
BUSINESS DAY...................................................................................................2
BUSINESS RECORDS...............................................................................................3
CAPITAL EXPENDITURES...........................................................................................3
CLAIMS.........................................................................................................3
COLLATERAL.....................................................................................................3
DILUTION.......................................................................................................3
DILUTION RESERVE...............................................................................................3
EBITDA.........................................................................................................3
ELIGIBLE ACCOUNTS..............................................................................................3
ELIGIBLE INVENTORY.............................................................................................6
ENVIRONMENTAL LAWS.............................................................................................7
EQUIPMENT......................................................................................................8
ERISA..........................................................................................................8
ERISA AFFILIATE................................................................................................8
EUROCURRENCY RESERVE REQUIREMENT...............................................................................8
EXPENSES.......................................................................................................8
FIXED CHARGE COVERAGE RATIO....................................................................................9
GENERAL INTANGIBLES............................................................................................9
HAZARDOUS MATERIAL.............................................................................................9
INSOLVENCY PROCEEDING..........................................................................................9
INVENTORY.....................................................................................................10
LIBOR BASED LOANS.............................................................................................10
LIBOR INTEREST PERIOD.........................................................................................10
LIBOR RATE....................................................................................................10
LIBOR RATE OPTION.............................................................................................10
LINE OF CREDIT................................................................................................10
LOAN DOCUMENTS................................................................................................10
LOANS .......................................................................................................10
MATERIAL ADVERSE EFFECT.......................................................................................11
MULTIEMPLOYER PLAN............................................................................................11
NEGOTIABLE COLLATERAL.........................................................................................11
NET WORTH.....................................................................................................11
NOTES .......................................................................................................11
OBLIGATIONS...................................................................................................11
OVERADVANCE...................................................................................................11
PERMITTED CANADIAN PROVINCE...................................................................................12
PERMITTED LIENS...............................................................................................12
PLAN..........................................................................................................13
PRIME BASED LOAN..............................................................................................13
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PRIME RATE....................................................................................................13
PROPRIETARY BOXES.............................................................................................13
REAL ESTATE...................................................................................................13
REPORTABLE EVENT..............................................................................................13
REIMBURSEMENT OBLIGATIONS.....................................................................................13
RETAIL INVENTORY..............................................................................................14
TAX DISTRIBUTIONS.............................................................................................14
3. LINE OF CREDIT, OTHER LOANS, INTEREST AND PAYMENTS...........................................................14
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3.1 REVOLVING LINE OF CREDIT...............................................................................14
3.2 RENEWAL OF AGREEMENT...................................................................................14
3.3 TERM LOAN..............................................................................................14
3.4 LETTERS OF CREDIT......................................................................................15
3.5 BORROWERS' APPOINTMENT OF AGENT........................................................................15
3.6 TERMINATION PREMIUM....................................................................................16
3.7 CROSS-DEFAULTS AND CROSS-COLLATERALIZATION.............................................................16
3.8 INTEREST RATES; DEFAULT INTEREST RATES.................................................................16
3.9 PAYMENTS...............................................................................................19
3.10 CREDITING PAYMENTS.....................................................................................19
3.11 PAYMENT MECHANICS......................................................................................19
3.12 ALLOCATION OF EXPENSES.................................................................................20
4. CONDITIONS OF BORROWING......................................................................................20
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4.1 REPRESENTATIONS TRUE...................................................................................20
4.2 NO DEFAULT.............................................................................................20
4.3 LEGAL OPINIONS.........................................................................................20
4.4 INITIAL MINIMUM AVAILABILITY...........................................................................20
4.5 ADVERSE DEVELOPMENTS...................................................................................21
5. SECURITY FOR THE OBLIGATIONS.................................................................................21
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5.1 GRANT OF SECURITY......................................................................................21
5.2 NEGOTIABLE COLLATERAL..................................................................................21
5.3 ADDITIONAL DOCUMENTATION...............................................................................21
5.4 POWER OF ATTORNEY......................................................................................21
5.5 RIGHT TO INSPECT.......................................................................................22
6. REPRESENTATIONS AND WARRANTIES...............................................................................23
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6.1 ORGANIZATION...........................................................................................23
6.2 FINANCIAL STATEMENTS...................................................................................23
6.3 LIENS..................................................................................................23
6.4 ABSENCE OF CONFLICTING OBLIGATIONS.....................................................................23
6.5 TAXES..................................................................................................23
6.6 ABSENCE OF MATERIAL LITIGATION.........................................................................23
6.7 ABSENCE OF ENVIRONMENTAL PROBLEMS......................................................................23
6.8 LEGAL NAME.............................................................................................24
6.9 FINANCING STATEMENTS...................................................................................24
6.10 ERISA..................................................................................................24
6.11 BROKER'S FEES..........................................................................................24
6.12 PRINCIPAL EXECUTIVE OFFICE, BUSINESS LOCATION..........................................................24
6.13 FULL DISCLOSURE........................................................................................24
6.14 FLOOD HAZARD...........................................................................................24
6.15 INTELLECTUAL PROPERTY..................................................................................24
6.16 COMPLIANCE WITH LAW....................................................................................25
6.17 ACCOUNTS...............................................................................................25
6.18 LABOR MATTERS..........................................................................................25
6.19 SUBSIDIARIES...........................................................................................25
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6.20 DEPOSIT ACCOUNTS.......................................................................................26
6.21 CUSTOMER RELATIONS.....................................................................................26
6.22 CUSTOMER SUPPLY PROGRAMS...............................................................................26
6.23 INTEGRATED OPERATIONS..................................................................................26
6.24 USE OF PROCEEDS........................................................................................26
7. NEGATIVE COVENANTS...........................................................................................26
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7.1 RESTRICTION ON LIENS...................................................................................26
7.2 RESTRICTION ON INDEBTEDNESS............................................................................27
7.3 MERGERS; CONSOLIDATIONS; DISPOSITION OF ASSETS.........................................................27
7.4 SALE AND LEASEBACK.....................................................................................27
7.5 DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS...............................................................27
7.6 INVESTMENTS............................................................................................27
7.7 CONTINGENT LIABILITIES.................................................................................28
7.8 SALARIES AND OTHER COMPENSATION........................................................................28
7.9 STOCK..................................................................................................28
7.10 NATURE OF BUSINESS.....................................................................................28
7.11 INSIDER TRANSACTIONS...................................................................................28
7.12 CAPITAL ASSET EXPENDITURES.............................................................................28
7.13 OBLIGATIONS AS LESSEE..................................................................................29
8. AFFIRMATIVE COVENANTS........................................................................................29
8.1 INSURANCE..............................................................................................29
8.2 EXISTENCE; PAYMENT OF TAXES AND OTHER LIABILITIES......................................................29
8.3 ACCOUNTING RECORDS; REPORTS............................................................................29
8.4 INSPECTIONS............................................................................................31
8.5 LITIGATION.............................................................................................31
8.6 AUDITS AND EXAMINATIONS................................................................................31
8.7 COMPLIANCE WITH LAWS...................................................................................31
8.8 MAINTENANCE OF PROPERTIES..............................................................................32
8.9 FURTHER ASSURANCES.....................................................................................32
8.10 DOMINION OF FUNDS......................................................................................32
8.11 FINANCIAL COVENANTS....................................................................................32
9. DEFAULTS....................................................................................................32
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9.1 DEFAULT IN PAYMENT OF OBLIGATIONS......................................................................33
9.2 DEFAULT UNDER ANY AGREEMENTS...........................................................................33
9.3 REPRESENTATIONS OR STATEMENTS FALSE....................................................................33
9.4 DEFAULT ON OTHER DEBT..................................................................................33
9.5 JUDGMENTS..............................................................................................33
9.6 BANKRUPTCY; INSOLVENCY.................................................................................33
9.7 REPORTABLE EVENT.......................................................................................33
9.8 MATERIAL LOSS OR ADVERSE CHANGE........................................................................34
9.9 INTENTIONALLY OMITTED..................................................................................34
9.10 INTENTIONALLY OMITTED..................................................................................34
9.11 DEFAULT UNDER OTHER DOCUMENTS..........................................................................34
9.12 GOVERNMENT LIEN........................................................................................34
9.13 LEVY OR ATTACHMENT.....................................................................................34
10. REMEDIES ON OCCURRENCE......................................................................................34
10.1 RIGHTS AND REMEDIES....................................................................................34
10.2 NO WAIVER..............................................................................................36
11. CROSS-GUARANTY..............................................................................................36
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11.1 CROSS-GUARANTY.........................................................................................36
11.2 DEMAND BY LENDER.......................................................................................37
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11.3 ENFORCEMENT OF GUARANTY................................................................................38
11.4 WAIVER.................................................................................................38
11.5 BENEFIT OF GUARANTY....................................................................................38
11.6 REINSTATEMENT..........................................................................................38
11.7 SUBORDINATION OF SUBROGATION, ETC......................................................................39
11.8 ELECTION OF REMEDIES...................................................................................39
11.9 CONTINUING GUARANTY....................................................................................40
11.10 LIMITATION.............................................................................................40
11.11 CONTRIBUTION WITH RESPECT TO GUARANTY OBLIGATIONS......................................................40
11.12 LIABILITY CUMULATIVE...................................................................................41
12. GENERAL TERMS...............................................................................................41
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12.1 EXPENSES, FEES AND COSTS; INDEMNIFICATION..............................................................41
12.2 SUCCESSORS.............................................................................................41
12.3 ASSIGNMENTS AND PARTICIPATIONS.........................................................................41
12.4 WAIVERS BY BORROWERS...................................................................................42
12.5 ANTI-WAIVER; AMENDMENTS; AND CUMULATIVE REMEDIES PROVISIONS............................................42
12.6 CONTROLLING LAW........................................................................................42
12.7 COUNTERPARTS...........................................................................................42
12.8 NOTICES................................................................................................42
12.9 LOAN AGREEMENT CONTROLS................................................................................43
12.10 PARTIAL INVALIDITY.....................................................................................43
12.11 LEGAL RATE ADJUSTMENT..................................................................................43
12.12 SETOFF.................................................................................................43
12.13 NO MARSHALLING.........................................................................................43
12.14 REINSTATEMENT OF OBLIGATIONS AND SECURITY..............................................................44
12.15 SURVIVAL; RELIANCE.....................................................................................44
12.16 INTERPRETATION.........................................................................................44
12.17 INDEPENDENCE OF COVENANTS..............................................................................44
12.18 COMMUNICATION WITH ACCOUNTANTS.........................................................................44
12.19 COMMUNICATION WITH CUSTOMERS...........................................................................45
12.20 ILLEGALITY AND IMPOSSIBILITY...........................................................................45
12.21 CERTAIN RULES OF CONSTRUCTION..........................................................................45
12.22 ENTIRE AGREEMENT OF THE PARTIES........................................................................46
12.23 ACKNOWLEDGMENT OF BORROWERS............................................................................46
12.24 SUBMISSION TO JURISDICTION AND VENUE...................................................................46
12.25 WAIVER OF JURY TRIAL...................................................................................48
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GMAC BUSINESS CREDIT, LLC ("LENDER"), a Delaware limited liability company, with offices at 300 Galleria Officentre, Suite 110, Southfield, Michigan 48034 and ROCKY SHOES & BOOTS, INC., an Ohio corporation ("PARENT"), and LIFESTYLE FOOTWEAR, INC., a Delaware Corporation ("LIFESTYLE", or together with Parent, the "BORROWERS" or individually, a "BORROWER") enter into this Loan and Security Agreement on September 18, 2000 (the "AGREEMENT").
1. GENERAL LENDING TERMS
The following are the general terms of the loans to be made under this Agreement:
(a) A revolving line of credit (the "REVOLVING LOANS") up to the
lesser of the "Borrowing Base" (defined below) or
$50,000,000.00 minus the from time-to-time principal balance
of the Term Loan (the "REVOLVING ADVANCE LIMIT"). The
Borrowing Base is (i) 80% of the aggregate outstanding amount
of Eligible Accounts PLUS (ii) 46% of the aggregate value of
raw materials that are Eligible Inventory PLUS (iii) from May
1 through October 31 of each year, 72% of the aggregate value
of Retail Inventory which is Eligible Inventory and 81% of the
aggregate value of finished goods that are Eligible Inventory;
PLUS (iv) from November 1 of each year through April 30 of the
succeeding year, 60% of the aggregate value of Retail
Inventory which is Eligible Inventory and 77% of the aggregate
value of finished goods that are Eligible Inventory, PLUS (v)
19% of the aggregate value of work in process which is
Eligible Inventory, MINUS (vi) the Dilution Reserve MINUS
(vii) the Availability Reserve. Notwithstanding the foregoing,
(A) aggregate advances against Eligible Inventory shall not
exceed $27,500,000 during the period of May through October of
each year and $23,000,000 during other periods, (B) aggregate
advances against Eligible Inventory in Puerto Rico shall not
exceed $2,000,000 at any time, (C) aggregate advances against
raw materials that are Eligible Inventory shall not exceed
$10,000,000 at any time, (D) aggregate advances against
Proprietary Boxes (which are part of raw materials) which are
Eligible Inventory shall not exceed the lesser of 5% of the
aggregate value of raw material Inventory or $350,000, and (E)
aggregate advances against work in process that is Eligible
Inventory shall not exceed $1,000,000.
(b) A $822,000 term loan as provided in SECTION 3.3 below (the "TERM LOAN")
(c) As provided in SECTION 3.4 below, Lender will provide a $5,000,000 standby letter of credit facility as part of the Revolving Line of Credit. The stated amount of all letters of credit issued for Borrowers' benefit will be reserved against availability under the Revolving Line of Credit (the "LC RESERVES").
(e) Unless renewed as provided in SECTION 3.2 below, this Agreement expires on September 18, 2003 (the "INITIAL TERM").
(f) Borrowers shall pay Lender a loan administration fee of $5,000.00 per month in arrears commencing on October 1, 2000 (with the October 2000 payment prorated for the number of days in September 2000 from and after execution of this agreement) and continuing on the first day of each month thereafter.
(g) Borrowers shall pay Lender an unused line fee on the first day of each month, in arrears, of three-eighths of one percent (0.375%) per annum times the average daily unused portion of the Revolving Advance Limit (including LC Reserves) during the preceding month.
(h) Borrowers have paid Lender a loan commitment fee of $130,000.00 prior to the date of this Agreement, which fee shall be fully earned as of the date of this Agreement.
2. DEFINITIONS.
In addition to the terms defined in this Agreement, the following terms have the given definitions:
"ACCOUNT DEBTOR" means any obligor under, with respect to, or on account of an Account.
"ACCOUNTS" means all presently existing and hereafter arising accounts receivable, contract rights, and all other forms of obligations owing to each Borrower arising out of the sale or lease of goods or the rendition of services by a Borrower, whether or not earned by performance, all credit insurance, guaranties, and other security therefor, as well as all goods returned to or reclaimed by a Borrower, and a Borrower's Business Records relating to any of the foregoing.
"AVAILABILITY RESERVE" means $3,000,000; PROVIDED, HOWEVER, if after receipt of Borrowers' fiscal 2001 audited financial statements, no Event of Default has occurred and is continuing, the Availability Reserve will be reduced to zero.
"BUSINESS DAY" means a day on which Lender is open for business in Southfield, Michigan.
"CAPITAL EXPENDITURES" shall mean, with respect to the Borrowers for any period, the sum of the aggregate of all expenditures (whether paid in cash, capitalized as an asset or accrued as a liability) by the Borrowers during such period which, in accordance with GAAP, are or should be included in "capital expenditures" or similar items reflected on the statements of cash flows of the Borrowers.
"CLAIMS" means any demand, claim, action or cause of action, damage, liability, loss, cost, debt, expense, obligation, tax, assessment, charge, lawsuit, contract, agreement, undertaking or deficiency, of any kind or nature, whether known or unknown, fixed, actual, accrued or contingent, liquidated or unliquidated (including interest, penalties, attorneys' fees and other costs and expenses incident to proceedings or investigations relating to any of the foregoing or the defense of any of the foregoing), whether or not litigation has commenced.
"COLLATERAL" means all of the following: the Accounts; the Equipment; the General Intangibles; the Inventory; the Negotiable Collateral; the Business Records, any money or other assets of any Borrower which hereafter come into the possession, custody or control of Lender; 65% of the capital stock of any Borrower's foreign subsidiaries and all of the capital stock of any Borrower's domestic subsidiaries; and all proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the Collateral, and any and all Accounts, Equipment, General Intangibles, Inventory, Negotiable Collateral, Business Records, money, deposit accounts or other tangible or intangible property resulting from the sale or other disposition of the Collateral or any portion thereof or interest therein, and the proceeds thereof.
"DILUTION" means the aggregate amount of credits, returned goods, adjustments, deductions, setoffs and recoupments granted by Parent or taken by all of Parent's Account Debtors in any calendar month DIVIDED BY the aggregate amount of Parent's sales during the calendar month.
"DILUTION RESERVE" means a Borrowing Base reserve in an amount determined in good faith by Lender to reflect the from time to time amount by which Dilution exceeds 10%. The Dilution Reserve will be adjusted on a quarterly basis to reflect any increase or decrease in Dilution on a rolling 12 month basis.
"EBITDA" means the consolidated income of Parent and its subsidiaries before interest, taxes, depreciation and amortization, all determined according to generally accepted accounting principles consistently applied.
"ELIGIBLE ACCOUNTS" means Parents' Accounts listed on Borrowing Base Certificates delivered to Lender which Lender, in its good faith discretion, determines to be an Eligible Account. Without limiting the generality of the immediately preceding sentence,
(1) The Account is valued at its face amount and represents a complete, bona fide transaction for Eligible Inventory sold, delivered, and not rejected by the Account Debtor or for services rendered (but excluding any amounts in the nature of a service charge added to the amount due on an invoice because the invoice has not been paid when due) that requires no further act under any circumstances on the part of Parent or any other person or entity to make such Account payable by the Account Debtor, and the Account arises from an arm's-length transaction in the ordinary course of Parent's business between Parent and an Account Debtor that is not an affiliate, partner, officer, or employee of any Borrower, or a member of the family of any partner, officer, or employee of any Borrower.
(2) If Parent's payment terms on such Account are net 45 days or less, the Account is not unpaid more than 90 days from the earlier of (A) the date on which the original invoice rendered in connection with such Account was issued, and (B) the date on which the Eligible Inventory was shipped to the Account Debtor or the services performed.
(3) If Parent's payment terms on such Account are more than net 45 days, the Account is not more than 30 days past due and is not more than 180 days from the earlier of (A) the date on which the original invoice rendered in connection with such Account was issued, and (B) the date on which the Eligible Inventory was shipped to the Account Debtor or the services performed.
(4) The goods the sale of which gave rise to the Account were shipped or delivered or provided to the Account Debtor on a final sale basis and not on a bill and hold sale basis, a consignment sale basis, a guaranteed sale basis, a sale or return basis, or on the basis of any other similar understanding, and no part of such goods have been returned or rejected for which the Account has not been reduced by an amount sufficient to appropriately reflect such returned or rejected goods.
(5) The Account is not evidenced by chattel paper or an instrument of any kind.
(6) The Account Debtor with respect to the Account (A) is not the subject of any bankruptcy or Insolvency Proceeding of any kind or of any other proceeding or action, threatened or pending, which might have a materially adverse effect on its business, and (B) is not, in Lender's sole good faith discretion deemed ineligible for credit for other reasons (including, without limitation, unsatisfactory past experience of any Borrower or Lender with the Account Debtor or unsatisfactory reputation of the Account Debtor).
(7) The Account Debtor is located within United States of America or Permitted Canadian Provinces.
(9) (A) The Account Debtor is not the government of the United States of America or Canada, or any department, agency or instrumentality thereof, or (B) if the Account Debtor is an entity mentioned in the preceding clause, the Federal Assignment of Claims Act (or applicable similar legislation) has been fully complied with so as to lawfully recognize Lender's first-priority security interest to Lender's satisfaction vis-a-vis such Account Debtor.
(10) The Account is a valid, legally enforceable obligation of the Account Debtor with respect thereto and is not subject to any asserted or otherwise known dispute, condition, contingency, setoff, recoupment, reduction, claim for credit, allowance, adjustment, counterclaim or defense on the part of such Account Debtor, and no fact exists that may provide a basis for any of the foregoing in the present or future.
(11) The Account is subject to a first-priority security interest in Lender's favor and is not subject to any other lien, claim, encumbrance, or security interest whatsoever.
(12) The Account is evidenced by an invoice or other documentation used in the ordinary course of Parent's business and arises from a contract, purchase order, or release used in the ordinary course of Parent's business.
(13) Parent has observed and complied with (A) all laws of the United States of America (including the Fair Labor Standards Act), the failure of which would cause such Account to be subject to a lien or claim of any third party, and (B) all laws of the state in which the Account Debtor or the Account is located which, if not observed and complied with, would deny Parent access to the courts of such state.
(14) No representation or warranty contained in this Agreement or any other agreement between any Borrower and Lender, or in any Borrowing Base Certificate with respect to such Account has been breached in any material respect.
(15) The Account is not subject to any provision prohibiting its assignment.
(16) The Account does not represent any manufacturer's or supplier's credits, discounts, incentive plans, or other similar arrangements entitling Parent to discounts on future purchases.
(18) The Account is payable in United States Dollars.
In addition to the foregoing requirements, Accounts of any Account Debtor that are otherwise eligible will be reduced to the extent of (1) any accounts payable (including, without limitation, Lender's good faith estimate of any contingent liabilities) by Borrowers to such Account Debtor ("CONTRAS") and (2) that portion of an Account representing a retainage or holdback by the Account Debtor; provided that Lender, in its sole discretion may determine that none of such Accounts are Eligible Accounts if Contras represent 10% or more of the amount owing to Parent from such Account Debtor. Finally, all Accounts owing by a given Account Debtor will be ineligible if more than 50% of the total Accounts owing by such Account Debtor are otherwise ineligible.
Any Account that is at any time an Eligible Account and that subsequently fails to meet any of the requirements set forth above will immediately cease to be an Eligible Account and must be removed from the Borrowing Base immediately.
"ELIGIBLE INVENTORY" means that portion of each Borrower's Inventory consisting of finished goods Inventory in respect of which no further manufacturing, processing, or other work has to be done (other than packaging or crating for shipment or distribution), Retail Inventory and raw materials held for use in the ordinary course of any Borrower's business in manufacturing finished goods Inventory and work in process for finished goods manufactured in the ordinary course of Borrowers' business that is listed on a Borrowing Base Certificate delivered to Lender in accordance with this Agreement that Lender determines in good faith to be Eligible Inventory. Without limiting the generality of the immediately preceding sentence, no Inventory will be Eligible Inventory unless it meets all the following minimum requirements:
(1) The Inventory has not been shipped, delivered, provided to, purchased or sold by a Borrower on a bill and hold, consignment sale, guaranteed sale, or sale or return basis, or any other similar basis or understanding.
(2) No Account has arisen with respect to such Inventory.
(3) The Inventory has not been billed to a customer on a "progress billing" or similar basis prior to shipment to the customer.
(4) The Inventory is valued at the lower of standard cost or book value, on a first-in-first-out basis.
(5) The Inventory is in a Borrower's possession, and if the Inventory is located on premises not owned by a Borrower, the landlord or owner of such premises must have waived its distraint, lien, and similar rights
(6) The Inventory is not subject to any royalty, copyright, trademark, trade name, or licensing arrangement, or any law, rule, or regulation that could limit or impair Lender's ability to exercise its rights with respect to such Inventory.
(7) In case of finished goods Inventory and Retail Inventory, if otherwise eligible, the Inventory is in a quantity not in excess of Borrowers' reasonably projected 12 month sales of such Inventory. To the extent Inventory does not qualify to be Eligible Inventory under this subparagraph, such Inventory will also not qualify to be Eligible Inventory by classifying such Inventory as raw materials.
(8) The Inventory is not packaging (excluding Proprietary Boxes), labels, manuals or supplies.
(9) The Inventory materially meets all standards imposed by any governmental or agency, department, or division having regulatory authority over such Inventory or its use or sale including, without limitation, standards set forth in the Fair Labor Standards Act.
(10) No representation or warranty in this Agreement, any other agreement between any Borrower and Lender, or any Borrowing Base Certificate has been breached in any material respect with respect to such Inventory.
(11) The Inventory is not obsolete, is of good and merchantable quality, and is readily salable.
(12) The Inventory is subject to a first-priority security interest in Lender's favor and is not subject to any other lien or encumbrance not permitted by this Agreement, and is located in the United States or Puerto Rico.
(13) The Inventory is not so-called "co-op point of purchase inventory" or the equivalent.
Any Inventory that is at any time Eligible Inventory and that subsequently fails to meet any of the requirements set forth above will cease to be Eligible Inventory immediately and must be removed from the Borrowing Base immediately.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, the Resource Conservation and Recovery Act of 1976, the Hazardous Materials Transportation Act, the Toxic Substances Control Act, the regulations pertaining to such statutes, and any other safety, health or environmental statutes, laws, regulations or ordinances of the United
"EQUIPMENT" means all of each Borrower's present and hereafter acquired equipment, machinery, machine tools, motors, furniture, furnishings, fixtures, motor vehicles, rolling stock, processors, tools, parts, dies, jigs, goods (other than consumer goods, farm products or Inventory), wherever located, and any interest of a Borrower in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions and improvements to any of the foregoing, wherever located.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.
"ERISA AFFILIATE" means each trade or business (whether or not incorporated and whether or not foreign) which is or may hereafter become a member of a group of which Borrowers are members and which is treated as a single employer under ERISA Section 4001(b)(1), or IRC Section 414.
"EUROCURRENCY RESERVE REQUIREMENT" is defined as part of the definition of LIBOR Rate.
"EXCESS AVAILABILITY" means the difference between the amount of the Borrowing Base and the sum of the outstanding Revolving Loans plus the amount of all accounts payable which are more than 30 days past due (unless such accounts payable are contested by Borrowers in good faith with reserves therefore instituted which are reasonably acceptable to Lender).
"EXPENSES" means all reasonable fees and out-of-pocket disbursements incurred by Lender, including reasonable fees of counsel and court costs, in any way arising from or in connection with this Agreement, any Loan Documents, any of the Collateral, any of the Obligations or the business relationship between Lender and any Borrower other than resulting from Lender's gross negligence or willful misconduct, including, without limitation, (a) audit fees at the per day rate provided for in SECTION 8.6 below; (b) all fees and expenses (including recording fees and applicable insurance policy fees) of Lender and counsel for Lender for the preparation, examination, approval, negotiation, execution and delivery of, or the closing of any of the transactions contemplated by, this Agreement and any Loan Documents; (c) all fees and out-of-pocket disbursements incurred by Lender, including attorneys' fees, in any way arising from or in connection with any action taken by Lender to monitor, advise, administer, enforce or collect any of the Obligations under this Agreement, any Loan Documents or any other obligations of the Borrowers, whether joint, joint and several, or several, under this Agreement (or any Loan Documents), or any other existing or future document or agreement, or arising from or relating to the business relationship between Lender, and Borrowers, or otherwise securing any of the Obligations, including any actions to lift the automatic stay or to otherwise in any way monitor or participate in any Insolvency Proceeding of any Borrower; (d) all expenses and fees (including attorneys' fees) incurred in relation to, in connection with, in defense of and/or in prosecution of any litigation instituted by any Borrower, Lender or any third party against or involving Lender arising from, relating to, or in connection with any of the Obligations or any Borrower's other obligations, this Agreement (or any Loan Documents), any of the
"FIXED CHARGE COVERAGE RATIO" means the ratio of (i) EBITDA MINUS internally funded capital expenditures to (ii) scheduled principal payments on long term indebtedness and scheduled payments on capitalized leases and all income taxes, all as determined according to generally accepted accounting principles, consistently applied.
"GENERAL INTANGIBLES" means all of each Borrower's present and future general intangibles and other personal property (including contract rights, rights arising under common law, statutes or regulations, choses or things in action, goodwill, going concern value, "blue sky", patents, trade names, trademarks, service marks, copyrights, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, monies due under any royalty or licensing agreements, route lists, infringement claims, computer programs, computer discs, computer tapes, literature, reports, catalogs, deposit accounts, insurance premium rebates, tax refunds and tax refund claims) OTHER THAN goods and Accounts, and a Borrower's Business Records relating to any of the foregoing.
"HAZARDOUS MATERIAL" means any substance, material, emission or waste which is or hereafter becomes regulated or classified as a hazardous substance, hazardous material, toxic substance or solid waste under any Environmental Law, asbestos, petroleum products, urea formaldehyde, polychlorinated biphenyls (PCBs), radon and any other hazardous or toxic substance, material, emission or waste.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or against any person or entity under any provision of the United States Bankruptcy Code, 11 U.S.C. sec.101 ET. SEQ., or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with its creditors or proceedings seeking reorganization, liquidation, arrangement or other similar relief.
"LIBOR BASED LOANS" means that portion of the Loans on which interest accrues at the LIBOR Base Rate.
"LIBOR INTEREST PERIOD" is defined as a calendar month.
"LIBOR RATE" means an annual rate of interest determined by Lender as being the rate available at approximately 11:00 a.m. London time in the London Interbank Market, as referenced by Reuters Screen "LIBOR", in accordance with the usual practice in such market, for 1 month LIBOR loans, in effect two Business Days prior to the first Business Day of each calendar month, as such rate may be adjusted by the reserve percentage applicable during the LIBOR Interest Period in effect (or if more than one such percentage shall be applicable, the daily average of such percentages for those days in such LIBOR Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or an successor) for determining the maximum reserve requirement (including without limitation, any emergency, supplemental or other marginal reserve requirement) for a national bank with respect to liabilities or assets consisting of or including "Eurocurrency Liabilities" as such term is defined in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time, having a term equal to such LIBOR Interest Period ("EUROCURRENCY RESERVE REQUIREMENT"), as reasonably applied to loans of this type. Such adjustment shall be effectuated by calculating, and the LIBOR Rate shall be equal to, the quotient of (i) the offered rate divided by (ii) one minus the Eurocurrency Reserve Requirement.
"LIBOR RATE OPTION" is defined in SECTION 3.8(b)(i) below.
"LINE OF CREDIT" means the revolving line of credit provided for in this Agreement.
"LOAN DOCUMENTS" means, collectively, this Agreement, any Notes, any security agreements, pledge agreements, assignments, deeds of trust, mortgages or other encumbrances or agreements which secure or relate to the Obligations or the collateral security for the Obligations, any guaranties of the Obligations, any lock box or blocked account agreements and any other agreements entered into between any Borrower or any guarantor of the Obligations and Lender relating to or in connection with this Agreement.
"LOANS" means the Revolving Loans together with any other loans or advances made by Lender to any Borrower.
(a) The assets, business, profits, properties, condition (financial or otherwise), operations or foreseeable financial prospects of the Borrowers and their subsidiaries, taken as a whole; or
(b) The ability of any Borrower to perform any of its payment or other obligations under this Agreement, any other Loan Documents or the transactions contemplated thereby; or
(c) The ability of any Borrower to perform any of its payment or material obligations under the Note or hereunder.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in ERISA Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of Borrower or any ERISA Affiliate.
"NEGOTIABLE COLLATERAL" means all of each Borrower's present and future letters of credit, notes, drafts, instruments, certificated and uncertificated securities, documents, leases and chattel paper, and a Borrower's Business Records relating to any of the foregoing.
"NET WORTH" means the consolidated net worth of Parent and its subsidiaries determined according to generally accepted accounting principles consistently applied MINUS intangible assets other than Accounts, PLUS the amount of all subordinated debt subject to subordination agreements in form and substance acceptable to Lender.
"NOTES" means any promissory notes executed by any Borrower. Likewise, the term "NOTE" refers to any of the Notes.
"OBLIGATIONS" means all Loans, advances, debts, liabilities (including all amounts charged to Borrowers' loan account pursuant to any agreement authorizing Lender to charge Borrowers' loan account), obligations, fees, lease payments, Reimbursement Obligations for Letters of Credit, guaranties, covenants and duties owing by any Borrower to Lender of any kind and description for the payment of money or otherwise, (whether pursuant to or evidenced by the Loan Documents, by any Note or other instrument or by any other agreement between Lender and any Borrower), whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including any debt, liability or obligation owing from any Borrower to others which Lender may obtain by assignment or otherwise, and all interest thereon, including any interest that, but for the provisions of the Bankruptcy Code, would have accrued, and all Expenses which any Borrower is required to pay or reimburse pursuant to the Loan Documents, by law or otherwise.
"OVERADVANCE" means if at any time and for any reason, the aggregate amount of the outstanding Revolving Loans exceeds the dollar or percentage limitations set forth in SECTION 1 (a) of this Agreement.
"PERMITTED LIENS" means:
(i) liens for taxes, assessments or governmental charges, and liens incident to construction, which are either not delinquent or are being contested in good faith by the applicable Borrower by appropriate proceedings, which will prevent foreclosure of such liens, and against which adequate reserves have been provided, and upon demand by Lender, with adequate security being posted with Lender;
(ii) liens or deposits in connection with workers' compensation or other insurance or to secure customs' duties, public or statutory obligations in lieu of surety, stay or appeal bonds, or to secure performance of contracts or bids (other than contracts for the payment of money borrowed), or deposits required by law or governmental regulations or by any court order, decree, judgment or rule as condition to the transaction of business or the exercise of any right, privilege or license; or other liens or deposits of a like nature made in the ordinary course of business;
(iii) security interests or mortgages granted to Lender;
(iv) liens and security interests identified on SCHEDULE 2;
(iv) liens of suppliers, mechanics, carriers, materialmen, warehousemen or workmen, banker's liens and other liens imposed by law 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 (in Lender's good faith, reasonable judgment) or other appropriate provisions are being maintained in accordance with GAAP;
(v) liens arising with respect to zoning restrictions, licenses, covenants, building restrictions and other similar charges or encumbrances on the use of real property of such Borrower which do not materially interfere with the ordinary conduct of such Borrower's business;
(vi) any interest or title of a lessor under any lease permitted hereunder;
(vii) any interest or title of any lessee under any leases or subleases of real property of any Borrower, PROVIDED that all such liens do not in the aggregate materially detract from the value of such Borrower's property or materially impair the use thereof in the operation of the businesses;
(ix) attachment, prejudgment or judgment liens permitted hereunder with respect to which execution has been stayed or with respect to which payment in full above any applicable deductible is covered by insurance or a bond or, with respect to any prejudgment lien, the underlying claim for which is being contested in good faith and for which reserves (in Lender's good faith, reasonable judgment) or other appropriate provisions, if any, as required by GAAP have been made; and
(x) defects and irregularities in titles, survey exceptions, encumbrances, easements or reservations of others for rights-of-way, roads, pipelines, railroad crossings, services, utilities or other similar purposes; outstanding mineral rights or reservations (including rights with respect to the removal of material resource) which do not materially diminish the value of the surface estate, assuming usage of such surface estate similar to that being carried on by a Borrower or its subsidiaries as of the date hereof.
"PLAN" means any plan described in ERISA Section 3(2) maintained for employees of any Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
"PRIME BASED LOAN" means that portion of the Loans on which interest accrues at the Prime Base Rate.
"PRIME RATE" means the variable rate of interest, per annum, which is quoted from time to time in The Wall Street Journal as the base "prime rate" on corporate loans posted as of such time by at least 75% of the nation's 30 largest banks, adjusted daily. The Prime Rate is nothing more nor less than an index for determining the interest rate payable under the terms of this Agreement. The Prime Rate is not necessarily the best rate, or any other definition of rates, offered by Lender.
"PROPRIETARY BOXES" means cardboard shoe boxes bearing the "Rocky" name or trademark.
"REAL ESTATE" means all real estate and rights in real estate and all related property which is covered by any mortgages or deeds of trust executed by any Borrower in favor of Lender.
"REPORTABLE EVENT" means a "reportable event" as that term is defined and applied in connection with ERISA.
"REIMBURSEMENT OBLIGATIONS" has the meaning given in SECTION 3.5 below.
"TAX DISTRIBUTIONS" means, for all periods, if any, in which a Borrower is a "pass-through" entity for federal income tax purposes, an amount equal to each member's federal, state and local income tax attributable to a Borrower's earnings which are allocated to Borrower's members or shareholders under applicable law in lieu of being paid by a Borrower.
3. LINE OF CREDIT, OTHER LOANS, INTEREST AND PAYMENTS
3.1 REVOLVING LINE OF CREDIT. From time to time prior to the expiration of the Initial Term, or any extension terms provided for in SECTION 3.2 below, so long as an Event of Default has not occurred or if an Event of Default has occurred, such Event of Default has been timely remedied, Lender will, subject to the terms and conditions set forth in this Agreement, make Revolving Loans to Borrowers in such amounts as Borrowers may request, provided that the aggregate principal amount of all Revolving Loans shall not exceed the Revolving Advance Limit or other limits set forth in Section 1(a) above.
Borrowers, through Parent, may request from time to time Revolving Loan advances by submitting a signed, completed Borrowing Base Certificate to Lender, in each case given no later than 11:00 a.m. (Southfield, Michigan time) on the Business Day of the proposed Revolving Loan advance. Subject to the terms and conditions of this Agreement, Lender will make the proceeds of each such requested Revolving Loan advance available to Borrowers by depositing such proceeds in the account designated by Borrowers on the same Business Day.
The Revolving Loans will not be evidenced by a promissory note and a copy of Lender's books and records related to the Revolving Loans shall constitute PRIMA FACIE evidence of the outstanding amount of Revolving Loans.
Should an Overadvance exist, Borrowers shall immediately make principal reduction payments of such excess to Lender as are required to reduce the outstanding balance of the Revolving Loans such that no Overadvance exists.
3.2 RENEWAL OF AGREEMENT. Unless Lender or Parent provides the other party at least 90 days written notice of its intention to not renew this Agreement after the Initial Term or any annual anniversary thereafter, this Agreement will be extended from year to year on the terms set forth in this Agreement and any amendments to this Agreement.
3.3 TERM LOAN. Simultaneous with the execution of this Agreement, the Borrower has obtained from Lender the Term Loan, which is evidenced by a promissory note in the original principal amount of $850,000 payable to the order of and dated on the date of this Agreement (the "TERM LOAN").
(a) The aggregate face amount of all outstanding Letters of Credit shall not exceed $5,000,000;
(b) All Letters of Credit will expire on or before the expiration of the Initial Term or any renewals of the Initial Term agreed to by Lender.
(c) Borrowers have sufficient Borrowing Base availability to cover the Borrowing Base reserve instituted in connection with the Letter of Credit.
(d) Borrowers have satisfactorily completed and delivered all documents required by the issuing bank(s).
Borrowers shall pay Lender a Letter of Credit fee equal to two percent (2.0%) per annum of the face amount of all outstanding Letters of Credit (for such portion of the year the Letters of Credit are outstanding), plus all other fees and costs incurred by Lender from the issuing bank(s). All fees and costs due on account of Letters of Credit shall be payable on the first calendar day of each month, in arrears. Borrowers shall reimburse Lender for all amounts paid by or for the benefit of Lender by the issuing bank on account of Letters of Credit (the "REIMBURSEMENT OBLIGATIONS"). Borrowers' Reimbursement Obligations shall be part of the Obligations for all purposes and shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which Borrowers may have against the beneficiary of the Letter of Credit.
In determining whether to pay under any Letter of Credit, the Letter of Credit issuer shall not have any obligation to Borrowers other than to use ordinary care in determining whether the documents required to be delivered under such Letter of Credit substantially comply on their face with the requirements of the Letter of Credit. Subject to the foregoing, any action taken or omitted to be taken by the Letter of Credit issuer in the absence of gross negligence or willful misconduct shall create no rights or liabilities in favor of Borrowers and against Lender or the Letter of Credit issuer.
3.5 BORROWERS' APPOINTMENT OF AGENT. Each Borrower hereby appoints Parent as its agent for purposes of requesting Loans, signing Borrowing Base Certificates and providing Lender with any information requested by Lender in connection with this Agreement and to receive any notices from Lender hereunder. Each Borrower ratifies the acts of Parent pursuant to this section and agrees that Lender shall have the right to rely on certificates, requests, Borrowing Base Certificates and other documents and information provided by Parent in its capacity as agent for all Borrowers with the same legal effect as if the same were signed and/or delivered by the respective Borrower(s). The appointment of Parent as agent pursuant to this SECTION 3.5 is coupled with an interest and shall be irrevocable until all Obligations are fully and finally paid.
(a) 2% of the Advance Limit if terminated before September 18, 2001.
(b) one-half percent (0.50%) of the Advance Limit if terminated after September 18, 2001, but other than on September 18, 2003.
The Termination Premium will also be due and payable in connection with termination of this Agreement or payment of the Obligations by any trustee or debtor-in-possession in any Insolvency Proceeding. The Termination Premium is presumed to be a reasonable estimate of the amount of damages sustained by Lender as a result of the early termination of this Agreement and Borrower agrees that such amount is reasonable under the circumstances currently existing.
3.7 CROSS-DEFAULTS AND CROSS-COLLATERALIZATION. A default under any Loan or Note is a default under any all other Notes and Loans and under all Obligations. All Collateral secures all Obligations.
3.8 INTEREST RATES; DEFAULT INTEREST RATES.
(a) GENERALLY.
The aggregate outstanding amount of all Obligations shall bear interest at the rates set forth in SECTION 1 above, with the Borrowers having the option (subject to the terms set forth below) to elect a LIBOR Base Rate for certain Loans. The aggregate outstanding amounts of the Obligations shall bear interest, from and after the occurrence of an Event of Default and without constituting a waiver of any such Event of Default, at the rate of three percent (3.0%) per annum above the otherwise applicable Base Rate(s). All interest payable under the Loan Documents shall be computed on the basis of a three hundred sixty (360) day year for the actual number of days elapsed, based on the aggregate amount of the Obligations that are outstanding on each day. Interest shall continue to accrue until all of the Obligations are paid in full.
(b) LIBOR RATE OPTION.
(i) Provided no Event of Default has occurred and is continuing, Borrowers shall have the option to have up to one-half of the outstanding Obligations bear interest at the LIBOR Base Rate ("LIBOR RATE OPTION"), provided that LIBOR Based Loans shall be in One Million Dollar ($1,000,000) increments and in a minimum amount of One Million Dollars ($1,000,000.00). In no event, however, may Borrowers have more than three (3) LIBOR Based Loans outstanding at any one time.
(ii) Borrower shall elect the LIBOR Rate Option by giving Lender written notice (in the form of Schedule 3.8) at least 3 Business Days prior to but no more than 5 Business Days prior to the last Business Day of each calendar month of Borrower's
(iii) The LIBOR Rate may be automatically adjusted by Lender on a prospective monthly basis to take into account the additional or increased cost of maintaining any necessary reserves for Eurodollar deposits or increased costs due to changes in applicable law or regulation or the interpretation thereof occurring subsequent to the commencement of the then applicable LIBOR Interest Period, including but not limited to changes in tax laws (except changes of general applicability in corporate income tax laws as they affect financial institutions) and changes in any applicable law or regulation that increases the cost to Lender of funding the LIBOR Based Loan. Lender shall promptly give Borrowers notice of such a determination and adjustment, which determination shall be conclusive as to the correctness of the fact and the amount of such adjustment, absent manifest error. The Borrowers may, by written notice to Lender, (A) request Lender to furnish to Borrowers a statement setting forth the basis for adjusting such LIBOR Based Rate and the method for determining the amount of such adjustment; and/or (B) prepay the LIBOR Based Loan with respect to which such adjustment is made, subject to the requirements of SECTION 3.8(e) below.
(iv) In the event that Borrowers shall have requested the LIBOR Rate Option in accordance with this Agreement and Lender shall have reasonably determined that Eurodollar deposits equal to the amount of the principal of the requested LIBOR Based Loan and for the LIBOR Interest Period specified are unavailable, impractical, or unlawful, or that the rate based on the LIBOR Rate will not adequately and fairly reflect the cost of funds, of making or maintaining the principal amount of the requested LIBOR Based Loan specified by the Borrower, or that by reason of circumstances affecting Eurodollar markets, adequate and reasonable means do not exist for ascertaining the rate based on the applicable LIBOR Rate, Lender shall promptly give notice of such determination to Borrowers that the rate based on the LIBOR Rate is not available. A determination by Lender hereunder shall be prima facie evidence of the correctness of the fact and amount of such additional costs or unavailability. Upon such a determination, (A) the right of Borrowers to select, convert to, or maintain a LIBOR Based Loan at the rate based on the LIBOR Rate shall be suspended until Lender shall have notified the Borrower that such conditions shall have ceased to exist, and (B) the Loans subject to the requested LIBOR Rate Option shall accrue interest as Prime Based Loans.
(b) LIMITATION ON LIBOR BASED LOANS. Upon the occurrence and continuance of an Event of Default, Lender, in its sole discretion, may eliminate the LIBOR Rate Option and the availability of LIBOR Based Loans.
(c) CONVERSION. Following the occurrence of an Event of Default which is not timely cured, at the option of Lender, all LIBOR Based Loans shall convert to a Prime Based Loan, which conversion is independent of Lender's other rights under this Agreement.
(e) INDEMNITY/LOSS OF MARGIN.
(i) Borrowers shall indemnify, defend and hold harmless Lender against any and all loss, liability, cost or expense which Lender may sustain or incur as a consequence of (i) any failure of Borrower to obtain, convert or extend any LIBOR Based Loan after notice thereof has been given to Lender; (ii) any payment, prepayment, termination or conversion of a LIBOR Based Loan made for any reason on a date other than the last day of the applicable LIBOR Interest Period; or (iii) any failure of Borrowers to be entitled to a Loan hereunder which is subject to the LIBOR Rate Option. Borrowers shall pay the full amount thereof to Lender on demand.
(ii) In the event that any present or future law, rule, regulation, treaty or official directive or the interpretation or application thereof by any central bank, monetary authority or governmental authority, or the compliance with any guideline or request of any central bank, monetary authority or governmental authority (whether or not having the force of law) imposes, modifies or deems applicable any deposit insurance, reserve, special deposit, or other similar requirement with respect to deposits in or for the account of, or loans or advances or commitment to make loans or advances by, or letters of credit issued or commitment to issue letters of credit by Lender and the result of any of the foregoing is to increase the costs of Lender, reduce the income receivable by or return on equity of Lender or impose any expense upon Lender with respect to any advances or extensions of credit or commitments to make advances or extensions of credit under this Agreement upon notice from Lender, Borrowers agree to pay such Lender the amount of such increase in cost, reduction in income, reduced return on equity or capital, or additional expense after presentation by Lender of a statement concerning such increase in cost, reduction in income, reduced return on equity or capital, or additional expense. Such statement shall set forth a brief explanation of the amount and Lender's calculation of the amount (in determining such amount Lender may use any reasonable averaging and attribution methods), which statement shall be conclusively deemed correct absent manifest error.
(f) INCENTIVE PRICING. Provided no Event of Default has occurred and is continuing, upon Lender's receipt of fiscal 2000 or 2001 audited financial statements for Borrowers, the Base Rates shall change to the following if the annual consolidated net income of Parent and its subsidiaries (determined according to generally accepted accounting principles consistently applied) (i) for fiscal year 2000 is at least $2.5 million or (ii) for fiscal years 2000 AND 2001 is at least $2.5 million in the aggregate:
Applicable Base Rate Interest Rate to apply
-------------------- ----------------------
Prime Base Rate Prime
LIBOR Base Rate LIBOR Rate plus 200
basis points (2.0%)
|
3.10 CREDITING PAYMENTS. For the purpose of calculating Borrowing Base availability for Revolving Loans, the receipt by Lender of any wire transfer or electronic funds transfer of funds, check or other item of payment shall be applied immediately to provisionally reduce the Obligations, but such receipt shall not be considered a payment on account unless such wire transfer or electronic funds transfer is of immediately available federal funds and is made to the appropriate deposit account of Lender or unless and until such check or other item of payment is honored when presented for payment. For the purpose of calculating interest, the receipt by Lender of any check or other item of payment shall be deemed to have occurred two (2) Business Days after the date Lender actually receives such item of payment and as to any wire transfer or electronic funds transfer, one (1) Business Day after the date Lender actually receives such item of payment. In the event any check or other item of payment is not honored when presented for payment, Borrowers shall be deemed not to have made such payment. Notwithstanding anything to the contrary contained herein, any wire transfer, electronic funds transfer, check or other item of payment received by Lender after 1:00 p.m. Southfield time shall be deemed to have been received by Lender as of the opening of business on the immediately following Business Day.
3.11 PAYMENT MECHANICS. As an administrative convenience to Borrowers to ensure the timely payment of amounts owing by Borrowers to Lender under this Agreement, Borrower hereby requests Lender to advance for the account of Borrowers an amount each month sufficient to pay interest accrued on the principal amount of the Obligations during the immediately preceding month and all monthly principal installments or other payments due under the Notes or other Loan Document and amounts from time to time sufficient to pay all fees and Expenses owing by Borrowers under this Agreement; PROVIDED, HOWEVER, Lender will provide Parent with a summary of Expenses at least 7 days prior to making a Revolving Loan to pay any Expenses. Borrowers authorize Lender, in Lender's sole discretion, to make a Revolving Loan for Borrowers' account of a sum sufficient each month to pay, on the due date thereof, all interest accrued on the principal amount of the Obligations during the immediately preceding month and all monthly principal installments or other payments due under the Notes or other Loan Documents and sums from time to time sufficient to pay, on the due date thereof, all fees and Expenses owing by Borrowers under this Agreement, and Lender may apply the proceeds of each such Revolving Loan to the payment of such interest, installments, fees and Expenses. Each such Revolving Loan shall thereafter accrue interest at the rate then applicable under this Agreement. Lender, however, shall not be obligated to make any such Revolving Loan and Borrowers acknowledge that Lender will be particularly disinclined to do so if an Event of Default or an Overadvance exists at the time of, or would result from the making of, such Revolving Loan.
4. CONDITIONS OF BORROWING
Notwithstanding any other terms of this Agreement, Lender is not required to make any Loan to the Borrowers under this Agreement unless all of the following conditions are met at or prior to the time such Loan is made:
4.1 REPRESENTATIONS TRUE. Borrowers' representations and warranties in this Agreement (and in all agreements referred to or executed in connection with this Agreement) are true in all material respects as of the date of each Loan or advance under this Agreement with the same effect as though such representations and warranties had been made by the Borrowers at such time, unless any of the same relate expressly to an earlier date.
4.2 NO DEFAULT. No Event of Default under this Agreement exists, nor does any event exist which, upon the lapse of time, service of notice, or both, would constitute an Event of Default under this Agreement, and no suit or proceeding at law or in equity or of any governmental body has been instituted or, to the knowledge of the Borrowers, threatened which, in either case, would materially and adversely affect Borrowers' financial condition or business operations.
4.3 LEGAL OPINIONS. Simultaneously with the execution of this
Agreement, Lender must have received legal opinions from Borrowers' Ohio and
Puerto Rico and Lender's Dominican Republic counsel as to: (a) the due
authorization, execution and delivery by Borrowers of this Agreement and all
documents and agreements referred to or executed in connection with this
Agreement; (b) the due authorization, validity and binding effect of the Loans
contemplated by this Agreement to be executed and delivered by the Borrowers
evidencing such Loans; (c) Borrowers' due organization, existence and
qualification as a foreign company in each jurisdiction where such qualification
is required, whether by virtue of Borrowers' performance of services or
ownership or leasing of property located in the jurisdiction or otherwise; and
(d) such other matters as Lender may require relating to the validity and
enforceability of this Agreement, the security interests and liens created for
Lender's benefit under the terms of the documents described or referenced in
this Agreement. The Borrowers must also execute and deliver to Lender or its
counsel all documents Lender may request concerning Borrowers' status and
authorization to enter into the transactions contemplated by this Agreement.
4.4 INITIAL MINIMUM AVAILABILITY. At the time of the initial Loans under this Agreement, Borrowers have positive Borrowing Base availability after paying all closing and transaction costs, all obligations to Borrowers' existing secured working capital lender and bringing all accounts payable to within 90 days of invoice date and all taxes current.
5. SECURITY FOR THE OBLIGATIONS
5.1 GRANT OF SECURITY. Borrowers hereby grant Lender a continuing security interest in all presently existing and hereafter acquired or arising Collateral to secure prompt repayment of all Obligations and to secure the prompt performance by Borrower of each of its covenants and duties in this Agreement and any other agreements with Lender. Simultaneous with execution of this Agreement, Parent will execute and deliver documents sufficient to give Lender the equivalent of a first priority security interest in all of its Inventory located in the Dominican Republic. Lender's security interest in the Collateral shall attach to all Collateral without further act on the part of Lender or Borrowers. Borrowers have no authority, express or implied, to dispose of, sell or transfer any of the Collateral other than (a) sales of finished goods Inventory to buyers in the ordinary course of business, (b) sales of Equipment which is obsolete or no longer useful in the ordinary course of Borrowers' business and has a fair market value of less than $100,000 in the aggregate per fiscal year, or (c) assignments and licenses of intellectual property in the ordinary course of business.
5.2 NEGOTIABLE COLLATERAL. In the event that any Collateral, including proceeds, is evidenced by or consists of Negotiable Collateral, Borrowers shall, upon the request of Lender, immediately endorse and assign such Negotiable Collateral to Lender and deliver physical possession of such Negotiable Collateral to Lender.
5.3 ADDITIONAL DOCUMENTATION. At the request of Lender, Borrowers shall execute and deliver to Lender, all financing statements, continuation financing statements, fixture filings, security agreements, pledges, assignments, endorsements of certificates of title, applications for title, affidavits, reports, notices, schedules of accounts, letters of authority, and all other documents that Lender may reasonably request, in form satisfactory to Lender, to perfect and continue perfected Lender's security interest in the Collateral and in order to fully consummate all of the transactions contemplated hereunder and under the other Loan Documents.
5.4 POWER OF ATTORNEY. Borrowers hereby irrevocably designate, make,
constitute and appoint Lender (and any of Lender's officers, employees or agents
designated by Lender) as Borrowers' true and lawful attorney-in-fact for
purposes set forth in this Agreement. Pursuant to this power of attorney,
Lender, or Lender's agent, may, without notice to Borrowers and in either the
name of a Borrower or in Lender's name, but at the cost and expense of
Borrowers, at such time or times as Lender in its sole discretion may determine:
(a) upon the occurrence and during the continuance of an Event of Default,
demand payment of the Accounts from the Account Debtors, enforce payment of the
Accounts by legal proceedings or otherwise, and generally exercise all of
Borrowers' rights and remedies with respect to the collection of the Accounts;
(b) take control, in any manner, of any item of payment or proceeds relating to
any Collateral; (c) upon the occurrence and during the continuance of an Event
of Default, prepare, file and sign any Borrower's name to a proof of claim in
bankruptcy or similar document against any Account Debtor or to any notice of
lien, assignment or satisfaction of lien or similar document in connection with
any
5.5 RIGHT TO INSPECT. Lender, through any of its officers, employees or
agents, shall have the right at any time or times during any Borrower's usual
business hours, or during the usual business hours of any third party having
control over any of any Borrower's Business Records, to inspect the Business
Records in order to verify the amount or condition of, or any other matter
relating to, the Collateral or any Borrower's financial condition. Lender also
shall have the right at any time or times during any Borrower's usual business
hours to inspect and examine the Inventory and the Equipment and to check and
test the same as to quality, quantity, value and condition. If an Event of
Default has occurred or if Lender reasonably believes that an Event of Default
has occurred, Lender may conduct any of the inspections referenced in this
SECTION 5.5 at any time without regard to any Borrower's or any third party's
usual business hours.
In order to induce Lender to make Loans as provided in this Agreement each Borrower represents and warrants as to itself to Lender as follows:
6.1 ORGANIZATION. The Borrower is a corporation duly organized and existing under the laws of the state or country set forth immediately below its name on the last pages of this Agreement, and the execution, delivery and performance of the Loan Documents, including this Agreement and the issuance of the Notes as provided in this Agreement are within Borrower's powers, have been duly authorized, are not in contravention of law or the terms of the Borrower's Articles of Formation, Bylaws or Code of Regulations and do not require the consent or approval of any governmental body, agency or authority. The Borrower is duly licensed or qualified to do business in all jurisdictions in which the Borrower has substantial property or business operations.
6.2 FINANCIAL STATEMENTS. Parent's and its subsidiaries' consolidated balance sheets and the statements of profit and loss and surplus furnished to Lender from time to time will be in all material respects correct and complete and will fairly present Borrower's financial condition as of the relevant dates and the results of its operations for the applicable time periods.
6.3 LIENS. Except for Permitted Liens, the Borrower has good and marketable title to all its assets, including all Collateral, free and clear of all liens and encumbrances.
6.4 ABSENCE OF CONFLICTING OBLIGATIONS. The making and execution of the Loan Documents and compliance with its terms and the issuance of the Notes will not result in a breach of any of the terms and conditions of or result in the imposition of any lien, charge, or encumbrance upon any property of the Borrower pursuant to, or constituting a default under, any indenture or other agreement or instrument to which the Borrower is a party or by which it is bound.
6.5 TAXES. Other than as disclosed in writing to Lender, Borrower has no outstanding unpaid tax liabilities (except for taxes which are currently accruing from its current operations and ownership of property, and which are not delinquent or taxes which are being contested in good faith and with respect to which reserves reasonably satisfactory to Lender have been established), and no tax deficiencies have been proposed or assessed against Borrower. There have been no audits of Borrower's federal income tax returns, which have resulted in or are likely to result in the assessment of any material tax liability against Borrower and all taxes shown by any returns have been paid.
6.6 ABSENCE OF MATERIAL LITIGATION. Borrower is not a party to any litigation or administrative proceeding, nor so far as is known by the Borrower is any litigation or administrative proceeding threatened against it, which in either case would, if adversely determined, cause a Material Adverse Effect.
6.7 ABSENCE OF ENVIRONMENTAL PROBLEMS. Except as disclosed in writing to Lender and except where non-compliance would not have a Material Adverse Effect, the Borrower is in full and complete compliance with all Environmental Laws involving Borrower's past or present operations, facilities and property. Further, except where non-
6.8 LEGAL NAME. Borrower's full legal name is exactly as set forth on the signature page of this Agreement and Borrower has not changed its name since the date of its organization, nor has it used any assumed name, tradename, or tradestyle.
6.9 FINANCING STATEMENTS. Except for financing statements covering Permitted Liens, Lender's liens and liens of Borrowers' existing lender which will be paid off as part of the initial financing hereunder, no financing statements covering any Collateral, proceeds of Collateral, or any other of Borrower's property are on file in any public office.
6.10 ERISA. No Reportable Event has occurred with respect to any Plan.
6.11 BROKER'S FEES. Borrower has made no commitment, and has taken no action, that could result in a claim for any brokers', finders', or similar fees or commitments in respect to the transactions described in this Agreement. Borrower agrees to pay all finders' fees or similar fees payable to any persons or entities in connection with this Agreement and to defend and hold Lender harmless against any and all such fees.
6.12 PRINCIPAL EXECUTIVE OFFICE, BUSINESS LOCATION.
(a) Borrower's principal place of business, all physical
Collateral, records concerning the Collateral and all other Business
Records are located at or about the addresses set forth on SCHEDULE
6.12; and
(b) Borrower will provide Lender with 30 days prior written notice of any change with respect to any of the foregoing.
6.13 FULL DISCLOSURE. This Agreement and all of the Exhibits, Schedules and other written material delivered by the Borrower to Lender in connection with the transactions contemplated by this Agreement do not contain any statement that is false or misleading in any material respect with respect to any material fact and do not omit to state a material fact necessary in order to make the statements therein not false or misleading. There is no additional fact that Borrower is aware of that has not been disclosed in writing to Lender that will or may have a Material Adverse Effect.
6.14 FLOOD HAZARD. No location at which the Borrower does business falls within the boundaries of a special flood hazard area so designated by the United States Federal Emergency Management Administration, or if so, Borrower has purchased appropriate flood insurance with respect thereto.
6.15 INTELLECTUAL PROPERTY, The Borrower owns or possesses adequate licenses or other rights to use all patents, processes, trademarks, trade names, and copyrights necessary to conduct its business as now conducted or presently intended to be conducted and the Borrower has no reason to believe that any such rights conflict or will conflict with the rights of others except for where such failure will not have a Material Adverse Effect. As of the date hereof, all of Borrower's patents, trademarks and copyrights are described in the
6.16 COMPLIANCE WITH LAW. Borrower is in compliance with all laws and regulations applicable to it, its business and properties, except where non-compliance would not have a Material Adverse Effect. Borrower has all licenses, permits, orders and approvals that are required under any governmental law or regulation in connection with the Borrower's business and properties ("PERMITS"), except where non-compliance would not have a Material Adverse Effect. No notice of any violation has been received with respect of any Permits and no proceeding is pending or, to the best of the Borrower's knowledge, threatened to terminate, revoke or limit any Permits.
6.17 ACCOUNTS. All of Borrower's Accounts constitute bona fide existing obligations created by the sale and delivery of Inventory or the rendition of services to Account Debtors in the ordinary course of Borrower's business, and, in the case of Accounts created by the sale and delivery of Inventory, the Inventory giving rise to such Accounts has been delivered to the Account Debtor. At the time of the creation of each Eligible Account or the assignment thereof to Lender, each such Eligible Account is unconditionally owed to Borrower without defense, dispute, offset, counterclaim or right of return or cancellation (other than normal, ordinary course of business adjustments) and Borrower has not received notice of actual or imminent bankruptcy, Insolvency Proceeding or material impairment of the financial condition of the Account Debtor regarding such Eligible Account.
6.18 LABOR MATTERS. No strikes or other labor disputes against Borrower are pending or, to Borrower's knowledge, threatened. Hours worked by and payment made to employees of Borrower have not been in violation of the Fair Labor Standards Act or any other applicable federal, state, local or foreign law dealing with such matters, except where any such violation would not have a Material Adverse Effect. All payments due from Borrower on account of employee health and welfare insurance have been paid or accrued as a liability on the books of Borrower. Except as set forth in SCHEDULE 6.18, Borrower has no obligation under any collective bargaining agreement, management agreement, consulting agreement or any employment agreement. There is no organizing activity involving Borrower pending or, to Borrower's knowledge, threatened by any labor union or group of employees. Except as set forth in SCHEDULE 6.18, there are no representation proceedings pending or, to Borrower's knowledge, no group of employees of Borrower has made a pending demand for recognition. Except as set forth in SCHEDULE 6.18, there are no complaints or charges against Borrower pending or threatened to be filed with any federal, state, local or foreign court, governmental agency or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment by Borrower of any individual.
6.19 SUBSIDIARIES. Parent has no subsidiaries and is not engaged in any joint venture or partnership with any other person, or is an affiliate of any other person other than Life Style and Five Star Enterprises, Ltd., a Cayman Islands corporation. All of the issued and outstanding stock of Parent's subsidiaries is owned by Parent. Except for management incentive plans, director plans, employee benefit plans and other options outstanding as of the date hereof and summarized on SCHEDULE 6.19 (collectively, the "BENEFIT PLANS"), there are no outstanding rights to purchase options, warrants or similar rights or agreements
6.20 DEPOSIT ACCOUNTS. SCHEDULE 6.20 lists all banks and other financial institutions at which Borrower maintains deposits and/or other accounts, including any disbursement accounts, and SCHEDULE 6.20 correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number.
6.21 CUSTOMER RELATIONS. There exists no actual or threatened termination or cancellation of, or any material adverse modification or change in: (a) the business relationship of Borrower with any customer or group of customers whose purchases during the preceding twelve (12) months caused them to be ranked among the ten largest customers of Borrower; or (b) the business relationship of Borrower with any supplier material to the operations of Borrower. The ratings ("CUSTOMER RATINGS") assigned to Borrower by its customers and any other applicable customer have not been withdrawn, rescinded or downgraded in the past twelve (12) months, nor has Borrower received any notice of any adverse action taken or proposed to be taken by any customer in respect of any Customer Ratings.
6.22 CUSTOMER SUPPLY PROGRAMS. Borrower does not participate in any resale, "off-load" or other programs under which any of Borrower's customers (or any affiliates of any customer) sell or supply raw materials, component parts or other inventory to Borrower, including without limitation, on a consignment or other basis.
6.23 INTEGRATED OPERATIONS. Borrower and the other Borrowers are a part of an integrated group which share business operations, functions and services, including sales, marketing, finance, accounting, management, manufacturing, engineering, quality control and shipping. Likewise, the Borrowers historically have managed all cash as a consolidated group and presently handle all receipts and disbursements through Parent and it is not practicable for Borrowers to manage cash on an individual Borrower basis. As a result of the foregoing, Borrower will benefit in a direct and substantial way from Loans and advances made by Lender to the other Borrowers and, but for Lender making Loans to the other Borrowers and such other Borrowers being able to provide business services to Borrower, Borrower's business operations would be materially and negatively impacted.
6.24 USE OF PROCEEDS. The Borrowers represent that the proceeds of the Revolving Loans shall be used by them to pay Borrowers' existing secured lender and for general working capital purposes which are legal and proper purposes and which are consistent with all applicable laws and statutes.
7. NEGATIVE COVENANTS
While any of the Obligations remain unpaid, each Borrower must not agree to and must not (without Lender's prior written consent):
7.1 RESTRICTION ON LIENS. Except for Permitted Liens or liens in connection with indebtedness permitted by SECTION 7.2 below, create or permit to be created or allow to
7.2 RESTRICTION ON INDEBTEDNESS. Create, incur, assume, or have outstanding any indebtedness for borrowed money except:
(a) The Obligations;
(b) Indebtedness incurred in the ordinary course of Borrower's business for necessary materials, supplies, etc., all of which must be due not more than 90 days from the date of invoice and none of which may be past due;
(c) Indebtedness for Permitted Liens; and
(d) Indebtedness for borrowed money incurred for purchase money financing or capital leases incurred by the Borrower or any subsidiary to finance the acquisition of fixed assets, and any indebtedness to refinance, extend, renew, refund or replace any of the same, not to exceed the aggregate outstanding principal amount of $250,000 at any time.
7.3 MERGERS; CONSOLIDATIONS; DISPOSITION OF ASSETS. Merge with or into or consolidate with or into any other corporation or entity; or sell, lease, transfer or otherwise dispose of all or any part of its property, assets or business (other than by sales of Inventory made in the ordinary course of business).
7.4 SALE AND LEASEBACK. Enter into an agreement under which Borrower leases or purchases any property that Borrower has sold or is to sell.
7.5 DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS. Except for Tax Distributions and dividends payable in shares of its stock, pay or declare any dividend, or make any other distribution on account of any shares of any class of its stock, or redeem, purchase, or otherwise acquire directly or indirectly, any shares of any class of its capital stock.
7.6 INVESTMENTS. Make any loans or advances to, or investments in, other persons, corporations or entities, except:
(a) The Parent in its subsidiaries;
(b) investments in (i) bank certificates of deposit and savings Accounts; (ii) obligations of the United States; and (iii) prime commercial paper maturing within 90 days of the date of acquisition by the Borrower.
(c) subject to subpart (d) below, loans and advances made to employees and agents in the ordinary course of business, such as travel and entertainment advances and similar items, not to exceed in the aggregate $10,000.00 in any fiscal year of the Borrowers.
(d) loans and advances made to independent, commissioned sales representatives in the ordinary course of business, not to exceed in the aggregate
(e) investments in cash and cash equivalents including without limitation mutual funds investing in cash and cash equivalents;
(f) investments received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of and other disputes with customers and suppliers arising in the ordinary course of business; and
(g) investments not to exceed $250,000 at any one time outstanding in the aggregate in certificates of deposit and bank deposits with maturities of up to five years in Puerto Rican financial institutions necessary to maintain the Parent's or any subsidiary's preferred tax treatment in Puerto Rico
7.7 CONTINGENT LIABILITIES. Guarantee or become a surety or otherwise contingently liable for any obligations for borrowed money of others, except pursuant to the deposit and collection of checks and similar items in the ordinary course of business, and except for the guaranties arising under SECTION 11 below.
7.8 SALARIES AND OTHER COMPENSATION. Pay salaries, bonuses, profit sharing payments, consulting or management fees, or any other compensation of any kind to Borrower's, shareholders, officers, key employees or directors, whether as officers, directors, employees or otherwise, in excess of those called for by the Benefit Plans outstanding on the date of this Agreement, with such amounts not to be increased by more than 10% in each successive fiscal year.
7.9 STOCK. Pledge, hypothecate or otherwise encumber or sell or otherwise transfer any shares of any class of its capital stock or make any change in Borrower's capital structure, except as required by the Benefit Plans outstanding on the date of this Agreement.
7.10 NATURE OF BUSINESS. Make any substantial change in the nature of its business from that engaged in on the date of this Agreement or engage in any other businesses other than those engaged in on the date of this Agreement and any business or activities which are substantially similar, related or incidental thereto.
7.11 INSIDER TRANSACTIONS. Enter into, or permit or suffer to exist, any transaction or arrangement with any shareholder, member, employee, director, officer, affiliate, or member of management, except on terms that are reasonably comparable to what Borrower could obtain in arm's-length transactions, with persons who have no relationship with Borrower.
7.12 CAPITAL ASSET EXPENDITURES. Make or incur obligations for Capital Expenditures exceeding in the aggregate $3,250,000 in fiscal year 2000 and $2,500,000 in any fiscal year thereafter.
8. AFFIRMATIVE COVENANTS
While any of the Obligations remain unpaid, each Borrower must at all times:
8.1 INSURANCE. Maintain adequate fire and extended coverage and liability insurance covering all of its present and future real and personal property, including the Collateral, with Lender's loss payable and noncontributory mortgagee clauses in Lender's favor, protecting Lender's interest, as such interest may appear, together with such policies of business interruption insurance and products liability insurance as Lender may reasonably request and insurance in accordance with all applicable workers' compensation laws. Such insurance must be in such form, with such companies, and in such amounts as is acceptable to Lender, insuring against liability for damage to persons or property, and must provide for thirty (30) days prior written notice to Lender of cancellation or material alteration. Upon Lender's request, Borrower must provide Lender with evidence of insurance for all such coverages and copies of the policies, simultaneously with the execution of this Agreement, showing that Lender's interest has properly been endorsed on the applicable policy. Lender may, in its sole but good faith discretion, on 30 days written notice to the Borrower, require the Borrower to obtain additional or different insurance coverages as Lender may reasonably request.
8.2 EXISTENCE; PAYMENT OF TAXES AND OTHER LIABILITIES. Maintain its corporate existence and pay all taxes, assessments and other governmental charges against it or its property, and all of its other liabilities, before the same become delinquent and before penalties accrue on these debts and obligations except to the extent and so long as the same are being contested in good faith by appropriate proceedings in such manner as not to cause any material adverse effect upon its financial condition, with adequate reserves provided for such payments, and, upon demand by Lender, posting with Lender of adequate security to protect Lender.
8.3 ACCOUNTING RECORDS; REPORTS. Maintain a standard and modern system for accounting in accordance with generally accepted accounting principles consistently applied throughout all accounting periods, and furnish to Lender:
(a) Within 15 calendar days after the end of each month, as of the last day of the preceding month, aging and summary reports of Accounts and accounts payable in such form and detail as Lender may request.
(b) On the second Business Day of each week, borrowing base certificates (each, a "BORROWING BASE CERTIFICATE") as of the close of business of the preceding week in a form acceptable to Lender.
(c) Account receivable and collection reports with each Borrowing Base Certificate.
(e) Within 10 Business Days of Lender's request, a physical inventory report listing all of Borrower's Inventory, wherever located.
(f) Within 30 calendar days after the end of each month, an internally prepared balance sheet of the Borrower as of the close of each such month and of the comparable month in the preceding fiscal year, and statements of income and surplus of the Borrower for each month and for that part of the fiscal year ending with each such month and for the corresponding period of the preceding fiscal year, all in reasonable detail and certified as true and correct (subject to audit and normal year-end adjustments) by the chief financial officer of the Borrower.
(g) Within 90 calendar days after the close of each fiscal year of Borrower, a copy of Borrower's detailed long-form audit report for such year and accompanying financial statements, as prepared by independent certified public accountants of recognized standing selected by the Borrower and reasonably acceptable to Lender, together with all management letters, which report shall be accompanied by an unqualified opinion of such accountants, in form satisfactory to Lender, to the effect that the financial statements fairly present the financial condition of the Borrower and the results of its operations as of the relevant dates, and each such financial statement shall be accompanied by a certification by Borrower's chief financial officer that there exists no Event of Default or other action, condition or event which, with the giving of notice or lapse of time or both, would constitute an Event of Default under this Agreement, or if such condition does exist, stating the nature thereof and the action, if any, Borrower is taking to correct such condition.
(h) Within 90 calendar days after the end of each fiscal year of Borrower, a schedule showing all insurance policies which the