LOAN AND SECURITY AGREEMENT
DATED AS OF OCTOBER 11, 2007
BETWEEN
NEW STREAM SECURED CAPITAL, L.P.
as Lender
and
HOUSE OF TAYLOR JEWELRY, INC.
as Borrower
TABLE OF CONTENTS
Page
1.
AMOUNT AND TERMS OF CREDIT
1
1.1
Loans
1
1.2
Term and Prepayment
2
1.3
Use of Proceeds
2
1.4
Single Loan
2
1.5
Interest
2
1.6
Cash Management System
3
1.7
Fees
3
1.8
Receipt of Payments
3
1.9
Application and Allocation of Payments
4
1.10
Accounting
4
1.11
Indemnity
4
1.12
Borrowing Base; Reserves
5
2.
CONDITIONS PRECEDENT
5
2.1
Conditions to the Initial Loans
5
2.2
Further Conditions to the Loans
6
3.
REPRESENTATIONS, WARRANTIES AND AFFIRMATIVE COVENANTS
6
3.1
Corporate Existence; Compliance with Law
7
3.2
Executive Offices; Corporate or Other Names
7
3.3
Corporate Power; Authorization; Enforceable Obligations
7
3.4
Financial Statements and Projections; Books and Records
8
3.5
Material Adverse Change
8
3.6
Real Estate; Property
8
3.7
Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness
9
3.8
Government Regulation; Margin Regulations
9
3.9
Taxes; Charges
9
3.10
Payment of Obligations
10
3.11
ERISA
10
3.12
Litigation
10
3.13
Intellectual Property
10
3.14
Full Disclosure
11
3.15
Hazardous Materials
11
3.16
Insurance
11
3.17
Deposit and Disbursement Accounts
12
3.18
Accounts and Inventory
12
3.19
Conduct of Business
12
3.20
Anti-Terrorism Laws.
13
3.21
Further Assurances
13
4.
FINANCIAL MATTERS; REPORTS
13
4.1
Reports and Notices. From the Closing Date until the Termination
Date, Borrower shall deliver to Lender: 13
4.2
Financial Covenants
15
4.3
Other Reports and Information
15
5.
NEGATIVE COVENANTS
15
6.
SECURITY INTEREST
17
6.1
Grant of Security Interest
17
6.2
Lender’s Rights
18
6.3
Lender’s Appointment as Attorney-in-fact
19
6.4
Grant of License to Use Intellectual Property Collateral
20
7.
EVENTS OF DEFAULT: RIGHTS AND REMEDIES
20
7.1
Events of Default
20
7.2
Remedies
22
7.3
Waivers by Credit Parties
23
7.4
Proceeds
23
8.
SUCCESSORS AND ASSIGNS
24
9.
MISCELLANEOUS
24
9.1
Complete Agreement; Modification of Agreement
24
9.2
Expenses
24
9.3
No Waiver
25
9.4
Severability; Section Titles
25
9.5
Authorized Signature
26
9.6
Notices
26
9.7
Counterparts
26
9.8
Time of the Essence
26
9.9
GOVERNING LAW
26
9.10
SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL
27
9.11
USA Patriot Act Notice
27
9.12
Press Releases
28
9.13
Reinstatement
28
INDEX OF EXHIBITS AND SCHEDULES
|
|
|
Schedule
A
|
Definitions
|
|
Schedule
B
|
Lender’s and Borrower’s Addresses for Notices
|
|
Schedule
C
|
[
INTENTIONALLY OMITTED ]
|
|
Schedule
D
|
Cash
Management System
|
|
Schedule
E
|
Fees and
Expenses
|
|
Schedule
F
|
Schedule of
Documents
|
|
Schedule
G
|
Financial
Covenants
|
|
|
|
|
Disclosure
Schedule (3.2)
|
Places of
Business; Corporate Names
|
|
Disclosure
Schedule (3.6)
|
Real
Estate
|
|
Disclosure
Schedule (3.7)
|
Stock;
Affiliates
|
|
Disclosure
Schedule (3.9)
|
Taxes
|
|
Disclosure
Schedule (3.11)
|
ERISA
|
|
Disclosure
Schedule (3.12)
|
Litigation
|
|
Disclosure
Schedule (3.13)
|
Intellectual Property
|
|
Disclosure
Schedule (3.15)
|
Environmental Matters
|
|
Disclosure
Schedule (3.16)
|
Insurance
|
|
Disclosure
Schedule (3.18)
|
Contracts
(Offset Risk)
|
|
Disclosure
Schedule (5(b))
|
Indebtedness
|
|
Disclosure
Schedule (5(e))
|
Liens
|
|
Disclosure
Schedule (6.1)
|
Actions to
Perfect Liens
|
|
|
|
|
Exhibit
A
|
Form of
Notice of Revolving Credit Advance
|
|
Exhibit
B
|
[
INTENTIONALLY OMITTED ]
|
|
Exhibit
C
|
Form of
Borrowing Base Certificate
|
|
Exhibit
C-1
|
Form of
Inventory Rollforward and Reconciliation
|
|
Exhibit
D
|
Form of
Accounts Payable Analysis
|
|
Exhibit
E
|
Form of
Accounts Receivable Rollforward Analysis
|
|
Exhibit
F
|
Form of
Revolving Credit Note
|
|
Exhibit
G
|
Form of
Term Note
|
|
Exhibit
H
|
Form of
Secretarial Certificate
|
|
Exhibit
I
|
Form of
Power of Attorney
|
|
Exhibit
J
|
Form of
Certificate of Compliance
|
This LOAN AND SECURITY AGREEMENT is dated as of
October 11, 2007 and agreed to by and between HOUSE OF TAYLOR
JEWELRY, INC. , a Nevada corporation
(“Borrower”), any other Credit Party executing this
Agreement, and NEW STREAM SECURED CAPITAL, L.P. , a
Delaware limited partnership (“Lender”).
RECITALS
A.
Borrower desires to obtain the Loans and other
financial accommodations from Lender and Lender is willing to
provide the Loans and accommodations all in accordance with the
terms of this Agreement.
B.
Capitalized terms used herein shall have the
meanings assigned to them in Schedule A and, for purposes
of this Agreement and the other Loan Documents, the rules of
construction set forth in Schedule A shall govern.
All schedules, attachments, addenda and exhibits hereto,
or expressly identified to this Agreement, are incorporated
herein by reference, and taken together with this Agreement,
constitute but a single agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises
and the mutual covenants hereinafter contained, the parties
hereto agree as follows:
1.
AMOUNT AND TERMS OF CREDIT
1.1
Loans
. i) Subject to the terms and
conditions of this Agreement, from the Closing Date and until
the Commitment Termination Date (1) Lender agrees to make
available to Borrower advances (each, a “Revolving Credit
Advance”) and (2) Borrower may at its request from time to
time borrow, repay and reborrow under this Section 1.1.
The Revolving Credit Loan shall be evidenced by, and be
repayable in accordance with the terms of, the Revolving Credit
Note and this Agreement.
(b)
Borrower shall request each Revolving Credit
Advance by written notice to Lender substantially in the form of
Exhibit A (each a “Notice of Revolving Credit
Advance”) given no later than 11:00 a.m. New York City
time on the Business Day of the proposed advance. After
the Closing Date, each Revolving Credit Advance shall be in an
amount of not less than $50,000. Lender shall be fully
protected under this Agreement in relying upon, and shall be
entitled to rely upon, (3) any Notice of advance believed by
Lender to be genuine, and (4) the assumption that the Persons
making electronic requests or executing and delivering a Notice
of Revolving Credit Advance were duly authorized, unless the
responsible individual acting thereon for Lender shall have
actual knowledge to the contrary. As an accommodation to
Borrower, Lender may permit telephonic, electronic, or facsimile
requests for a Revolving Credit Advance and electronic or
facsimile transmittal of instructions, authorizations,
agreements or reports to Lender by Borrower. Unless
Borrower specifically directs Lender in writing not to accept or
act upon telephonic, facsimile or electronic communications from
Borrower, Lender shall have no liability to Borrower for any
loss or damage suffered by Borrower as a result of
Lender’s honoring of any requests, execution of any
instructions, authorizations or agreements or reliance on any
reports communicated to it telephonically, by facsimile or
electronically and purporting to have been sent to Lender by
Borrower
and Lender shall have no duty to verify the
origin of any such communication or the identity or authority of
the Person sending it.
(c)
In making any Loan hereunder Lender shall be
entitled to rely upon the most recent Borrowing Base Certificate
delivered to Lender by Borrower and other information available
to Lender. Lender shall be under no obligation to make any
further Revolving Credit Advance or incur any other Obligation
if Borrower shall have failed to deliver a Borrowing Base
Certificate to Lender by the time specified in Section
4.1(b).
(d)
Term Loan . Subject to the terms
and conditions of this Agreement, Lender agrees to make the Term
Loan to Borrower on the Closing Date in the original principal
amount specified in the Term Note. The Term Note shall be
evidenced by, and be repayable in accordance with the terms of,
the Term Note and this Agreement.
1.2
Term and Prepayment
. ii) Upon the Commitment
Termination Date the obligation of Lender to make Revolving
Credit Advances and extend other credit hereunder shall
immediately terminate and Borrower shall pay to Lender in full,
in cash: (5) all outstanding Revolving Credit Advances and all
accrued but unpaid interest thereon; (6) all principal and
accrued but unpaid interest on the Term Loan; and (7) all other
non-contingent Obligations due to or incurred by Lender.
(b)
If the Revolving Credit Loan shall at any time
exceed the Borrowing Availability, then Borrower shall
immediately repay the Revolving Credit Loan in the amount of
such excess.
(c)
Borrower shall have the right, at any time upon
thirty (30) days’ prior written notice to Lender to (8)
terminate voluntarily Borrower’s right to receive or
benefit from, and Lender’s obligation to make and to
incur, Revolving Credit Advances, (9) prepay all or a portion of
the Term Loan; provided , that , any prepayment of
less than all of the outstanding balance of the Term Loan shall
be applied to the remaining installments of the Term Loan in the
inverse order of their maturity, and (10) prepay all of the
Obligations. The effective date of termination of the Revolving
Credit Loan and the Term Loan specified in such notice shall be
the Commitment Termination Date.
1.3
Use of Proceeds
. Borrower shall use the proceeds of the
Loans to refinance on the Closing Date certain outstanding
Indebtedness as provided in Section 2.1(b) and for working
capital and other general corporate purposes.
1.4
Single Loan
. The Loans and all of the other
Obligations of Borrower to Lender shall constitute one general
obligation of Borrower secured by all of the Collateral.
1.5
Interest
. iii) Borrower shall pay interest
to Lender on the aggregate outstanding Revolving Credit Advances
at a floating rate equal to the greater of (11) the Index Rate
plus two and one-half (2.50%) per annum or (12) ten (10%)
percent per annum (the “Revolving Credit Rate”) and
on the outstanding balance of the Term Loan at a rate equal to
eighteen (18%) percent per annum (the “Term Loan
Rate”). All computations of interest shall be made
by Lender on the basis of a three hundred and sixty (360) day
year, in each case for the actual number of days occurring in
the period for which such interest or fee is payable. Each
determination by Lender of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.
In no event will Lender charge interest at a rate that
exceeds the highest rate of interest permissible
under any law that a court of competent jurisdiction shall, in a
final determination, deem applicable.
(b)
Interest shall be payable on the outstanding
Revolving Credit Advances and balance of the Term Loan (13) in
arrears for the preceding calendar month on the first day of
each calendar month, (14) on the Commitment Termination Date,
and (15) if any interest accrues or remains payable after the
Commitment Termination Date, upon demand by Lender.
(c)
Effective upon the occurrence of an Event of
Default under Section 7.1(a) and for so long as any Event of
Default shall be continuing, the Revolving Credit Rate and the
Term Loan Rate shall automatically be increased by three
percentage points (3%) per annum and effective upon the
occurrence of any other Event of Default under Section 7.1 and
for so long as any Event of Default shall be continuing, the
Revolving Credit Rate and the Term Loan Rate shall automatically
be increased by two percentage points (2%) per annum (such
increased rates, the “Default Rate”), and all
outstanding Obligations, including unpaid interest, shall
continue to accrue interest from the date of such Event of
Default at the Default Rate applicable to such Obligations.
(d)
If any interest or any other payment (including
Unused Line Fees and Collateral Monitoring Fees) to Lender under
this Agreement becomes due and payable on a day other than a
Business Day, such payment date shall be extended to the next
succeeding Business Day and interest thereon shall be payable at
the then applicable rate during such extension.
1.6
Cash Management System
. On or prior to the Closing Date and
until the Termination Date, Borrower will establish and maintain
the cash management system described in Schedule D .
All payments in respect of the Collateral shall be made to
or deposited in the blocked or lockbox accounts described in
Schedule D in accordance with the terms thereof.
1.7
Fees
. Borrower agrees to pay to Lender the
Fees set forth in Schedule E .
1.8
Receipt of Payments
. Borrower shall make each payment under
this Agreement (not otherwise made pursuant to Section 1.9)
without set-off, counterclaim or deduction and free and clear of
all Taxes not later than 12:00 noon New York City time on the
day when due in lawful money of the United States of America in
immediately available funds to the Collection Account. If
Borrower shall be required by law to deduct any Taxes from any
payment to Lender under any Loan Document, then the amount
payable to Lender shall be increased so that, after making all
required deductions, Lender receives an amount equal to that
which it would have received had no such deductions been made.
For purposes of computing interest and Fees, all payments
shall be deemed received by Lender following receipt of
immediately available funds in the Collection Account. For
purposes of determining the Borrowing Availability, payments
shall be deemed received by Lender upon receipt of immediately
available funds in the Collection Account.
1.9
Application and Allocation of
Payments
. Borrower irrevocably agrees that Lender
shall have the continuing and exclusive right to apply any and
all payments against the then due and payable Obligations in
such order as Lender may deem advisable. Lender is authorized
to, and at its option may (without prior notice or precondition
and at any time or times), but shall not be obligated to, make
or cause to be made Revolving Credit Advances on behalf of
Borrower for: iv) payment of all Fees,
expenses, indemnities, charges, costs,
principal, interest, or other Obligations owing by Borrower
under this Agreement or any of the other Loan Documents, v) the
payment, performance or satisfaction of any of Borrower’s
obligations with respect to preservation of the Collateral, or
vi) any premium in whole or in part required in respect of any
of the policies of insurance required by this Agreement, even if
the making of any such Revolving Credit Advance causes the
outstanding balance of the Revolving Credit Loan to exceed the
Borrowing Availability, and Borrower agrees to repay
immediately, in cash, any amount by which the Revolving Credit
Loan exceeds the Borrowing Availability.
1.10
Accounting
. Lender is authorized to record on its
books and records the date and amount of each Loan and each
payment of principal thereof and such recordation shall
constitute prima facie evidence of the accuracy of the
information so recorded. Lender shall provide Borrower on
a monthly basis a statement and accounting of such recordations
but any failure on the part of the Lender to keep any such
recordation (or any errors therein) or to send a statement
thereof to Borrower shall not in any manner affect the
obligation of Borrower to repay any of the Obligations.
Except to the extent that Borrower shall, within thirty
(30) days after such statement and accounting is sent, notify
Lender in writing of any objection Borrower may have thereto
(stating with particularity the basis for such objection), such
statement and accounting shall be deemed final, binding and
conclusive upon Borrower, absent manifest error.
1.11
Indemnity
. Borrower and each other Credit Party
executing this Agreement jointly and severally agree to
indemnify and hold Lender and its Affiliates, and their
respective employees, attorneys and agents (each, an
“Indemnified Person”), harmless from and against any
and all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses of any kind or nature whatsoever
(including attorneys’ fees and disbursements and other
costs of investigation or defense, including those incurred upon
any appeal) that may be instituted or asserted against or
incurred by any such Indemnified Person as the result of credit
having been extended, suspended or terminated under this
Agreement and the other Loan Documents or with respect to the
execution, delivery, enforcement, performance and administration
of, or in any other way arising out of or relating to, this
Agreement and the other Loan Documents or any other documents or
transactions contemplated by or referred to herein or therein
and any actions or failures to act with respect to any of the
foregoing, including any and all product liabilities,
Environmental Liabilities, Taxes and legal costs and expenses
arising out of or incurred in connection with disputes between
or among any parties to any of the Loan Documents (collectively,
“Indemnified Liabilities”), except to the extent
that any such Indemnified Liability is finally determined by a
court of competent jurisdiction to have resulted from such
Indemnified Person’s gross negligence or willful
misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE
TO ANY CREDIT PARTY, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY
BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR ANY ACT OR FAILURE TO ACT UNDER ANY
POWER OF ATTORNEY OR FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES THAT MAY BE ALLEGED AS A RESULT OF CREDIT
HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR AS A RESULT OF ANY OTHER
TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
1.12
Borrowing Base; Reserves
. The Borrowing Base shall be determined
by Lender (including the eligibility of Accounts and Inventory)
based on the most recent Borrowing Base Certificate delivered
to
Lender in accordance with Section 4.1(b) and
such other information available to Lender. The Revolving Credit
Loan shall be subject to Lender’s continuing right to
withhold from Borrowing Availability reserves, and to increase
and decrease such reserves from time to time, if and to the
extent that in Lender’s good faith credit judgment such
reserves are necessary, including to protect Lender’s
interest in the Collateral or to protect Lender against possible
non-payment of Accounts for any reason by Account Debtors or
possible diminution of the value of any Collateral or possible
non-payment of any of the Obligations or for any Taxes or in
respect of any state of facts that could constitute a Default.
Lender may, at its option in its good faith credit
judgment, implement reserves by designating as ineligible a
sufficient amount of Accounts or Inventory that would otherwise
be Eligible Accounts or Eligible Inventory, as the case may be,
so as to reduce the Borrowing Base by the amount of the intended
reserves.
2.
CONDITIONS PRECEDENT
2.1
Conditions to the Initial Loans
. Lender shall not be obligated to make
any of the Loans perform any other action hereunder, until the
following conditions have been satisfied in a manner
satisfactory to Lender in its sole discretion, or waived in
writing by Lender:
(a)
the Loan Documents to be delivered on or before
the Closing Date shall have been duly executed and delivered by
the appropriate parties, all as set forth in the Schedule of
Documents ( Schedule F );
(b)
the Existing Notes shall have been paid in full
from the proceeds of the initial Loans and/or converted into
shares of Borrower’s Stock and all Liens upon any of the
property of Borrower or any other Credit Party in respect
thereof shall have been terminated immediately upon such
payment;
(c)
Lender shall have received evidence satisfactory
to it that the insurance policies provided for in Section 3.16
are in full force and effect, together with appropriate evidence
showing loss payable or additional insured clauses or
endorsements in favor of Lender as required under such
Section;
(d)
Lender shall have received evidence satisfactory
to it that Borrower has received, on or immediately prior to the
Closing Date, cash equity contributions in an aggregate amount
of not less than $5,800,000;
(e)
as of the Closing Date, Net Borrowing
Availability shall be not less than $5,000,000 after giving
effect to the initial Revolving Credit Advance (on a pro forma
basis, with trade payables being paid currently, and expenses
and liabilities being paid in the ordinary course of business
and without acceleration of sales); and
(f)
Lender shall have received an opinion(s) of
counsel to the Borrower with respect to the Loan Documents in
form and substance reasonably satisfactory to Lender.
2.2
Further Conditions to the Loans
. Lender shall not be obligated to fund
any Loan (including the initial Loans), if, as of the date
thereof:
(a)
any representation or warranty by any Credit
Party contained herein or in any of the other Loan Documents
shall be untrue or incorrect as of such date, except to the
extent that any such representation or warranty is expressly
stated to relate to a specific earlier date, in which case, such
representation and warranty shall be true and correct as of such
earlier date; or
(b)
any event or circumstance that has had or
reasonably could be expected to have a Material Adverse Effect
shall have occurred since the Closing Date; or
(c)
any Default shall have occurred and be
continuing or would result after giving effect to such Loan;
or
(d)
after giving effect to such Loan, the Revolving
Credit Loan would exceed the Borrowing Availability.
The request and acceptance by Borrower of the
proceeds of any Loan shall be deemed to constitute, as of the
date of such request and the date of such acceptance, (16) a
representation and warranty by Borrower that the conditions in
this Section 2.2 have been satisfied and (17) a restatement by
Borrower of each of the representations and warranties made by
it in any Loan Document and a reaffirmation by Borrower of the
granting and continuance of Lender’s Liens pursuant to the
Loan Documents.
3.
REPRESENTATIONS, WARRANTIES AND AFFIRMATIVE COVENANTS
To induce Lender to enter into this Agreement
and to make the Loans, Borrower and each other Credit Party
executing this Agreement represent and warrant to Lender (each
of which representations and warranties shall survive the
execution and delivery of this Agreement), and promise to and
agree with Lender until the Termination Date as follows:
3.1
Corporate Existence; Compliance with
Law
. Each Corporate Credit Party: vii)
is, as of the Closing Date, and will continue to be (18) a
corporation, limited liability company or limited partnership,
as applicable, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation
or organization, (19) duly qualified to do business and in good
standing in each other jurisdiction where its ownership or lease
of property or the conduct of its business requires such
qualification, except where the failure to be so qualified could
not reasonably be expected to have a Material Adverse Effect,
and (20) in compliance with all Requirements of Law and
Contractual Obligations, except to the extent failure to comply
therewith could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; and
viii) has and will continue to have (1) the requisite corporate
power and authority and the legal right to execute, deliver and
perform its obligations under the Loan Documents, and to own,
pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease, and
to conduct its business as now, heretofore or proposed to be
conducted, and (2) all licenses, permits, franchises, rights,
powers, consents or approvals from or by all Persons or
Governmental Authorities having jurisdiction over such Corporate
Credit Party that are necessary or appropriate for the conduct
of its business.
3.2
Executive Offices; Corporate or Other
Names
. ix) Each Corporate Credit Party’s
name as it appears in official filings in the state of its
incorporation or organization, x) the type of entity of each
Corporate Credit Party, xi) the organizational identification
number issued by each such Credit Party’s
state of incorporation or organization or a
statement that no such number has been issued, xii) each
Corporate Credit Party’s state of organization or
incorporation, and xiii) the location of each Corporate Credit
Party’s chief executive office, corporate offices,
warehouses, other locations of Collateral and locations where
records with respect to Collateral are kept (including in each
case the county of such locations) are as set forth in
Disclosure Schedule (3.2 ) and, except as set forth in
such Disclosure Schedule, such locations have not changed during
the preceding twelve months. As of the Closing Date,
during the prior five years, except as set forth in
Disclosure Schedule (3.2 ), no Corporate Credit Party has
been known as or conducted business in any other name (including
trade names). Each Corporate Credit Party has only one
state of incorporation or organization.
3.3
Corporate Power; Authorization; Enforceable
Obligations
. The execution, delivery and performance
by each Credit Party of the Loan Documents to which it is a
party, and the creation of all Liens provided for herein and
therein: xiv) are and will continue to be within such
Credit Party’s power and authority; xv) have been and will
continue to be duly authorized by all necessary or proper
action; xvi) are not and will not be in violation of any
Requirement of Law or Contractual Obligation of such Credit
Party xvii) do not and will not result in the creation or
imposition of any Lien (other than Permitted Encumbrances) upon
any of the Collateral; and xviii) do not and will not require
the consent or approval of any Governmental Authority or any
other Person. As of the Closing Date, each Loan Document
shall have been duly executed and delivered by or on behalf of
each Credit Party, and each such Loan Document upon such
execution and delivery shall be and will continue to be a legal,
valid and binding obligation of such Credit Party, enforceable
against it in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency and other
similar laws affecting creditors’ rights generally.
3.4
Financial Statements and Projections; Books
and Records
. xix) The Financial Statements delivered
by Borrower to Lender for its most recently ended Fiscal Year
and Fiscal Quarter, are true, correct and complete and reflect
fairly and accurately the financial condition of Borrower as of
the date of each such Financial Statement in accordance with
GAAP. The Projections most recently delivered by Borrower
to Lender have been prepared in good faith, with care and
diligence and use assumptions that are reasonable under the
circumstances at the time such Projections were prepared and as
of the date delivered to Lender and all such assumptions are
disclosed in the Projections.
(b)
Borrower and each other Corporate Credit Party
shall keep adequate Books and Records with respect to the
Collateral and its business activities in which proper entries,
reflecting all consolidated and consolidating financial
transactions, and payments and credits received on, and all
other dealings with, the Collateral, will be made in
accordance with GAAP and all Requirements of Law and on a basis
consistent with the Financial Statements.
3.5
Material Adverse Change
. Between the date of Borrower’s
most recently audited Financial Statements delivered to Lender
and the Closing Date: xx) no Corporate Credit Party has
incurred any obligations, contingent or non-contingent
liabilities, or liabilities for Charges, long-term leases or
unusual forward or long-term commitments that are not reflected
in the Projections delivered on the Closing Date and which
could, alone or in the aggregate, reasonably be expected to have
a Material Adverse Effect; xxi) there has been no material
deviation from such Projections; and xxii) no events have
occurred that alone or in the aggregate has had or could
reasonably be expected to have a Material Adverse Effect.
No Requirement of Law or Contractual Obligation of any
Credit Party has or have had
or could reasonably be expected to have a
Material Adverse Effect. No Credit Party is in default,
and to such Credit Party’s knowledge no third party is in
default, under or with respect to any of its Contractual
Obligations, that alone or in the aggregate has had or could
reasonably be expected to have a Material Adverse Effect.
3.6
Real Estate; Property
. The real estate listed in Disclosure
Schedule (3.6 ) constitutes all of the real property owned,
leased, or used by each Corporate Credit Party in its business,
and such Credit Party will not execute any material agreement or
contract in respect of such real estate after the date of this
Agreement without giving Lender prompt prior written notice
thereof. Each Corporate Credit Party holds and will
continue to hold good and marketable fee simple title to all of
its owned real estate, and good and marketable title to all of
its other properties and assets, and valid and insurable
leasehold interests in all of its leases (both as lessor and
lessee, sublessee or assignee), and none of the properties and
assets of any Corporate Credit Party are or will be subject to
any Liens, except Permitted Encumbrances. With respect to each
of the premises identified in Disclosure Schedule (3.2 )
on or prior the Closing Date a bailee, landlord or mortgagee
agreement acceptable to Lender has been obtained.
3.7
Ventures, Subsidiaries and Affiliates;
Outstanding Stock and Indebtedness
. Except as set forth in Disclosure
Schedule (3.7 ), as of the Closing Date no Corporate Credit
Party has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person, or is an Affiliate of any
other Person. All of the issued and outstanding Stock of
each Corporate Credit Party (including all rights to purchase,
options, warrants or similar rights or agreements pursuant to
which any Corporate Credit Party may be required to issue, sell,
repurchase or redeem any of its Stock) as of the Closing Date is
owned by each of the Stockholders (and in the amounts) set forth
in Disclosure Schedule (3.7 ). All outstanding
Indebtedness of each Corporate Credit Party as of the Closing
Date is described in Disclosure Schedule (5(b )).
3.8
Government Regulation; Margin
Regulations
. No Corporate Credit Party is subject to
or regulated under any Federal or state statute, rule or
regulation that restricts or limits such Person’s ability
to incur Indebtedness, pledge its assets, or to perform its
obligations under the Loan Documents. The making of the Loans,
the application of the proceeds and repayment thereof, and the
consummation of the transactions contemplated by the Loan
Documents do not and will not violate any Requirement of Law.
No Corporate Credit Party is engaged, nor will it engage,
in the business of extending credit for the purpose of
“purchasing” or “carrying” any
“margin security” as such terms are defined in
Regulation U of the Federal Reserve Board as now and hereafter
in effect (such securities being referred to herein as
“Margin Stock”). No Corporate Credit Party
owns any Margin Stock, and none of the proceeds of the Loans or
other extensions of credit under this Agreement will be used,
directly or indirectly, for the purpose of purchasing or
carrying any Margin Stock or reducing or retiring any
Indebtedness that was originally incurred to purchase or carry
any Margin Stock. No Corporate Credit Party will take or
permit to be taken any action that might cause any Loan Document
to violate any regulation of the Federal Reserve Board.
3.9
Taxes; Charges
. Except as disclosed in Disclosure Schedule
(3.9 ) all tax returns, reports and statements required by
any Governmental Authority to be filed by Borrower or any other
Credit Party have, as of the Closing Date, been filed and will,
until the Termination Date, be filed with the appropriate
Governmental Authority and no tax Lien has been filed against
any Credit Party or any Credit Party’s property.
Proper and accurate amounts have been and will be withheld
by Borrower and
each other Credit Party from their respective
employees for all periods in complete compliance with all
Requirements of Law and such withholdings have and will be
timely paid to the appropriate Governmental Authorities.
Disclosure Schedule (3.9 ) sets forth as of the Closing
Date those taxable years for which any Credit Party’s tax
returns are currently being audited by the IRS or any other
applicable Governmental Authority and any assessments or
threatened assessments in connection with such audit, or
otherwise currently outstanding. Except as described on
Disclosure Schedule (3.9) , none of the Credit Parties or
their respective predecessors are liable for any Charges: xxiii)
under any agreement (including any tax sharing agreements or
agreement extending the period of assessment of any Charges) or
xxiv) to each Credit Party’s knowledge, as a transferee.
As of the Closing Date, no Credit Party has agreed or been
requested to make any adjustment under IRC Section 481(a), by
reason of a change in accounting method or otherwise, which
could reasonably be expected to have a Material Adverse
Effect.
3.10
Payment of Obligations
. Each Credit Party will pay, discharge or
otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all of its Charges and other
obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP
with respect thereto have been provided on the books of such
Credit Party and none of the Collateral is or could reasonably
be expected to become subject to any Lien or forfeiture or loss
as a result of such contest.
3.11
ERISA
. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all
other existing ERISA Events, could reasonably be expected to
result in a liability of any Credit Party of more than the
Minimum Actionable Amount. Except as disclosed in
Disclosure Schedule (3.11) , the present value of all
accumulated benefit obligations of the Credit Parties under each
Plan (based on the assumptions used for purposes of Statement of
Financial Accounting Standards No. 87) did not, as of the date
of the most recent Financial Statements reflecting such amounts,
exceed the fair market value of the assets of such Plan by more
than the Minimum Actionable Amount, and the present value of all
accumulated benefit obligations of all underfunded Plans (based
on the assumptions used for purposes of Statement of Financial
Account Standards No. 87) did not, as of the date of the most
recent Financial Statements reflecting such amounts, exceed the
fair market value of the assets of such underfunded Plans by
more than the Minimum Actionable Amount. No Credit Party
or ERISA Affiliate has incurred or reasonably expects to incur
any Withdrawal Liability in excess of the Minimum Actionable
Amount..
3.12
Litigation
. No Litigation is pending or, to the
knowledge of any Credit Party, threatened by or against any
Credit Party or against any Credit Party’s properties or
revenues xxv) with respect to any of the Loan Documents or any
of the transactions contemplated hereby or thereby, or xxvi)
that could reasonably be expected to have a Material Adverse
Effect. Except as set forth in Disclosure Schedule
(3.12 ), as of the Closing Date there is no Litigation
pending or threatened against any Credit Party that seeks
damages in excess of $50,000 or injunctive relief or alleges
criminal misconduct of any Credit Party. Each Credit Party
shall notify Lender promptly in writing upon learning of the
existence, threat or commencement of any Litigation against any
Credit Party, any ERISA Affiliate or any Plan or any allegation
of Criminal misconduct against any Credit Party.
3.13
Intellectual Property
. As of the Closing Date, all material
Intellectual Property owned or used by any Corporate Credit
Party is listed, together with application or registration
numbers, where
applicable, in Disclosure Schedule (3.13
). Each Corporate Credit Party owns, or is licensed to
use, all Intellectual Property necessary to conduct its business
as currently conducted except for such Intellectual Property the
failure of which to own or license could not reasonably be
expected to have a Material Adverse Effect. Each Corporate
Credit Party will maintain the patenting and registration of all
Intellectual Property with the United States Patent and
Trademark Office, the United States Copyright Office, or other
appropriate Governmental Authority and each Corporate Credit
Party will promptly patent or register, as the case may be, all
new Intellectual Property and notify Lender in writing five (5)
Business Days prior to filing any such new patent or
registration.
3.14
Full Disclosure
. No information contained in any Loan
Document, the Financial Statements or any written statement
furnished by or on behalf of any Credit Party under any Loan
Document, or to induce Lender to execute the Loan Documents,
contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances
under which they were made.
3.15
Hazardous Materials
. Except as set forth in Disclosure
Schedule (3.15 ), as of the Closing Date, xxvii) each real
property location owned, leased or occupied by each Corporate
Credit Party (the “Real Property”) is maintained
free of contamination from any Hazardous Material, xxviii) no
Corporate Credit Party is subject to any Environmental
Liabilities or, to any Credit Party’s knowledge, potential
Environmental Liabilities, in excess of $50,000 in the
aggregate, xxix) no notice has been received by any Corporate
Credit Party identifying it as a “potentially responsible
party” or requesting information under CERCLA or analogous
state statutes, and to the knowledge of any Credit Party, there
are no facts, circumstances or conditions that may result in any
Corporate Credit Party being identified as a “potentially
responsible party” under CERCLA or analogous state
statutes; and xxx) each Corporate Credit Party has provided to
Lender copies of all existing environmental reports, reviews and
audits and all written information pertaining to actual or
potential Environmental Liabilities, in each case relating to
any Corporate Credit Party. Each Corporate Credit Party:
(3) shall comply in all material respects with all applicable
Environmental Laws and environmental permits; (4) shall notify
Lender in writing within seven (7) days if and when it becomes
aware of any Release, on, at, in, under, above, to, from or
about any of its Real Property; and (5) shall promptly forward
to Lender a copy of any order, notice, permit, application, or
any communication or report received by it or any other Credit
Party in connection with any such Release.
3.16
Insurance
. As of the Closing Date, Disclosure
Schedule (3.16 ) lists all insurance of any nature
maintained for current occurrences by Borrower and each other
Corporate Credit Party, as well as a summary of the terms of
such insurance. Each Corporate Credit Party shall deliver
to Lender certified copies and endorsements to all of its and
those of its Subsidiaries xxxi) “All Risk” and
business interruption insurance policies naming Lender loss
payee, and xxxii) general liability and other liability policies
naming Lender as an additional insured. All policies of
insurance on real and personal property will contain an
endorsement, in form and substance acceptable to Lender, showing
loss payable to Lender (Form 438 BFU or equivalent) and extra
expense and business interruption endorsements. Such
endorsement, or an independent instrument furnished to Lender,
will provide that the insurance companies will give Lender at
least thirty (30) days’ prior written notice before any
such policy or policies of insurance shall be altered or
canceled and that no act or default of Borrower or any other
Person shall affect the right of Lender to recover under such
policy or policies of insurance in case of loss or damage.
Each Corporate Credit Party shall direct all present and
future insurers under its “All
Risk” policies of insurance to pay all
proceeds payable thereunder directly to Lender. If any
insurance proceeds are paid by check, draft or other instrument
payable to any Credit Party and Lender jointly, Lender may
endorse such Credit Party’s name thereon and do such other
things as Lender may deem advisable to reduce the same to cash.
Lender reserves the right at any time, upon review of each
Credit Party’s risk profile, to require additional forms
and limits of insurance. Each Corporate Credit Party
shall, on each anniversary of the Closing Date and from time to
time at Lender’s request, deliver to Lender a report by a
reputable insurance broker, satisfactory to Lender, with respect
to such Person’s insurance policies.
3.17
Deposit and Disbursement Accounts
. Attachment I to Schedule D lists
all banks and other financial institutions at which Borrower, or
any other Corporate Credit Party, maintains deposits and/or
other accounts, including the Disbursement Account, and such
Attachment correctly identifies the name, address and telephone
number of each such depository, the name in which the account is
held, a description of the purpose of the account, and the
complete account number.
3.18
Accounts and Inventory
. As of the date of each Borrowing Base
Certificate delivered to Lender, each Account listed thereon as
an Eligible Account shall be an Eligible Account and all
Inventory listed thereon as Eligible Inventory shall be Eligible
Inventory. Borrower has not made, and will not make, any
agreement with any Account Debtor with respect to any Account
listed as an Eligible Account on the Borrowing Base
Certificate, for any extension of time for the payment of any
Account any compromise or settlement for less than the full
amount thereof, any release of any Account Debtor from liability
therefor, or any deduction therefrom except a discount or
allowance for prompt or early payment allowed by Borrower in the
ordinary course of its business consistent with historical
practice and as previously disclosed to Lender in writing.
Disclosure Schedule (3.18) sets forth each Contract of
the Borrower with any Account Debtor that gives such Account
Debtor the right (under such Contract, under common law or
otherwise) to offset any Accounts for Borrower’s failure
to perform under such Contract and Borrower has obtained an
offset waiver for each such contract in form and substance
satisfactory to Lender. With respect to the Accounts
pledged as collateral pursuant to any Loan Document xxxiii) the
amounts shown on all invoices, statements and reports that may
be delivered to the Lender with respect thereto are actually and
absolutely owing to the relevant Credit Party as indicated
thereon and are not in any way contingent; xxxiv) no payments
have been or shall be made thereon except payments immediately
delivered to the applicable accounts described in paragraph 1 to
Schedule D or the Lender as required hereunder; and xxxv)
to Borrower’s knowledge all Account Debtors have the
capacity to contract. Borrower shall notify Lender promptly of
any event or circumstance that to Borrower’s knowledge
would cause Lender to consider any then existing Account or
Inventory as no longer constituting an Eligible Account or
Eligible Inventory, as the case may be.
3.19
Conduct of Business
. Each Corporate Credit Party xxxvi) shall
conduct its business substantially as now conducted or as
otherwise permitted hereunder, and xxxvii) shall at all times
maintain, preserve and protect all of the Collateral and such
Credit Party’s other property, used or useful in the
conduct of its business and keep the same in good repair,
working order and condition and make, or cause to be made, all
necessary or appropriate repairs, replacements and improvements
thereto consistent with industry practices.
3.20
Anti-Terrorism Laws.
(a)
Neither Borrower nor, to the knowledge of the
Borrower, any of its Affiliates or any Credit Party is in
violation of any laws relating to terrorism or money laundering
(“Anti-Terrorism Laws”), including Executive Order
No. 13224 on Terrorist Financing, effective September 24, 2001
(the “Executive Order”), and the Uniting and
Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, Public Law
107-56.
(b)
Neither Borrower nor, to the knowledge of the
Borrower, any Affiliate, Creditor Party or other agent of
Borrower acting or benefiting in any capacity in connection with
the Loans is any of the following: (6) a person that is listed
in the annex to, or is otherwise subject to the provisions of,
the Executive Order; (7) a person owned or controlled by, or
acting for or on behalf of, any person that is listed in the
annex to, or is otherwise subject to the provisions of, the
Executive Order; (8) a person with which the Lender is
prohibited from dealing or otherwise engaging in any transaction
by any Anti-Terrorism Law; (9) a person that commits, threatens
or conspires to commit or supports “terrorism” as
defined in the Executive Order; or (10) a person that is named
as a “specially designated national and blocked
person” on the most current list published by the U.S.
Treasury Department Office of Foreign Assets Control
(“OFAC”) at its official website or any replacement
website or other replacement official publication of such
list.
(c)
Neither Borrower nor, to the knowledge of the
Borrower, any agent of any Affiliate or any Credit Party acting
in any capacity in connection with the Loans (11) conducts any
business or engages in making or receiving any contribution of
funds, goods or services to or for the benefit of any person
described in paragraph (b) above, (12) deals in, or otherwise
engages in any transaction relating to, any property or
interests in property blocked pursuant to the Executive Order,
or (13) engages in or conspires to engage in any transaction
that evades or avoids, or has the purpose of evading or
avoiding, or attempts to violate, any of the prohibitions set
forth in any Anti-Terrorism Law.
3.21
Further Assurances
. At any time and from time to time, upon
the written request of Lender and at the sole expense of
Borrower, Borrower and each other Credit Party shall promptly
and duly execute and deliver any and all such further
instruments and documents and take such further action as Lender
may reasonably deem desirable xxxviii) to obtain the full
benefits of this Agreement and the other Loan Documents, xxxix)
to protect, preserve and maintain Lender’s rights in any
Collateral, or xl) to enable Lender to exercise all or any of
the rights and powers herein granted.
4.
FINANCIAL MATTERS; REPORTS
4.1
Reports and Notices. From the Closing Date
until the Termination Date, Borrower shall deliver to
Lender:
(a)
within fifteen (15) days following the end of
each Fiscal Month, an aged trial balance by Account Debtor and
an Inventory Perpetual or Physical (as requested by Lender) and
as soon as available but in no event later than 30 days
following the end of each Fiscal Month, a reconciliation of the
aged trial balance and the Inventory Perpetual or Physical (as
the case may be) to the Borrower’s general ledger and from
the general ledger to the Financial Statements for such Fiscal
Month accompanied by supporting detail and documentation as
Lender may request;
(b)
as frequently as Lender may request and in any
event no later than Wednesday of each week, a Borrowing
Base Certificate in the form of Exhibit C as of the last
day of the previous week detailing ineligible Accounts and
Inventory for adjustment to the Borrowing Base, certified as
true and correct by the Chief Financial Officer of Borrower or
such other officer as is acceptable to Lender;
(c)
within fifteen (15) days following the end of
each Fiscal Month, an Accounts Payable Analysis in the Form of
Exhibit D (together with an accounts payable aging),
an Accounts Receivable Roll Forward Analysis in the Form of
Exhibit E , and an Inventory Rollforward and
Reconciliation in the form of Exhibit C-1 each certified
as true and correct by the Chief Financial Officer of Borrower
or such other officer as is acceptable to Lender;
(d)
within thirty (30) days following the end of
each Fiscal Month (or within fifty-two (52) days following the
end of any Fiscal Month which is also the end of any Fiscal
Quarter), the Financial Statements for such Fiscal Month, which
shall provide comparisons to budget and actual results for the
corresponding period during the prior Fiscal Year, both on a
monthly and year-to-date basis, and accompanied by a
certification in the form of Exhibit J by the Chief
Executive Officer or Chief Financial Officer of Borrower that
such Financial Statements are complete and correct, that there
was no Default (or specifying those Defaults of which he or she
was aware), and showing in reasonable detail the calculations
used in determining compliance with the financial covenants
hereunder;
(e)
within fifty-two (52) days following the end of
each Fiscal Quarter, the Financial Statements for such Fiscal
Quarter, which shall provide comparisons to budget and actual
results for the corresponding period during the prior Fiscal
Year, both on a monthly and year-to-date basis, and accompanied
by a certification in the form of Exhibit J by the Chief
Executive Officer or Chief Financial Officer of Borrower that
such Financial Statements are complete and correct, that there
was no Default (or specifying those Defaults of which he or she
was aware), and showing in reasonable detail the calculations
used in determining compliance with the financial covenants
hereunder;
(f)
within one hundred and five (105) days following
the close of each Fiscal Year, the Financial Statements for such
Fiscal Year certified by an independent certified accounting
firm acceptable to Lender, which shall provide comparisons to
the prior Fiscal Year, and shall be accompanied by (14) a
statement in reasonable detail showing the calculations used in
determining compliance with the financial covenants hereunder
and (15) any management letter that may be issued; and
(g)
not less than thirty (30) days after the
commencement of each Fiscal Year, the Projections, which will be
prepared by Borrower in good faith, with care and diligence, and
using assumptions that are reasonable under the circumstances at
the time such Projections are delivered to Lender and disclosed
therein when delivered.
4.2
Financial Covenants
. Borrower shall not breach any of the
financial covenants set forth in Schedule G . For
purposes of Section 7.1, a breach of a financial covenant set
forth in Schedule G shall be deemed to have occurred as
of any date of determination by Lender or as of the last day of
any
specified measurement period, regardless of when
the Financial Statements reflecting such breach are delivered to
Lender.
4.3
Other Reports and Information
. Borrower shall advise Lender promptly,
in reasonable detail, of: xli) any Lien, other than
Permitted Encumbrances, attaching to or asserted against any of
the Collateral or any occurrence causing a material loss or
decline in value of any Collateral and the estimated (or actual,
if available) amount of such loss or decline; xlii) any material
change in the composition of the Collateral; and xliii) the
occurrence of any Default or other event that has had or could
reasonably be expected to have a Material Adverse Effect.
Borrower shall, upon request of Lender, furnish to Lender
such other reports and information in connection with the
affairs, business, financial condition, operations, prospects or
management of Borrower or any other Credit Party or the
Collateral as Lender may request, all in reasonable detail.
5.
NEGATIVE COVENANTS
Borrower and each Credit Party executing this
Agreement covenants and agrees (for itself and each other Credit
Party) that, without Lender’s prior written consent, from
the Closing Date until the Termination Date, neither Borrower
nor any other Corporate Credit Party shall, directly or
indirectly, by operation of law or otherwise:
(a)
form any Subsidiary or merge with, consolidate
with, acquire all or substantially all of the assets or Stock
of, or otherwise combine with or make any investment in or,
except as provided in Section 5(c) below, loan or advance to,
any Person;
(b)
cancel any debt owing to it or create, incur,
assume or permit to exist any Indebtedness, except: (16)
the Obligations, (17) Indebtedness existing as of the Closing
Date set forth in Disclosure Schedule 5(b) , (18)
deferred taxes, (19) by endorsement of Instruments or items of
payment for deposit to the general account of such Credit Party,
(20) for Guaranteed Indebtedness incurred for the benefit of
Borrower if the primary obligation is permitted by this
Agreement; and (21) additional Indebtedness (including Purchase
Money Indebtedness) incurred after the Closing Date in an
aggregate outstanding amount for all such Corporate Credit
Parties combined not exceeding $50,000;
(c)
enter into any lending, borrowing or other
commercial transaction with any of its employees, directors,
Affiliates or any other Credit Party (including upstreaming and
downstreaming of cash and intercompany advances and payments by
a Credit Party on behalf of another Credit Party that are not
otherwise permitted hereunder) other than loans or advances to
employees in the ordinary course of business in an aggregate
outstanding amount not exceeding $100,000;
(d)
make any changes in any of its business
objectives, purposes, or operations or engage in any business
other than that presently engaged in or proposed to be engaged
in the Projections delivered to Lender on the Closing Date that
in each such case could reasonably be expected to adversely
affect repayment of the Obligations or could reasonably be
expected to have a Material Adverse Effect;
(e)
create or permit any Lien on any of its
properties or assets, except for Permitted Encumbrances;
(f)
sell, transfer, issue, convey, assign or
otherwise dispose of any of its assets or properties, including
its Accounts or engage in any sale-leaseback, synthetic lease or
similar transaction ( provided , that , the
foregoing shall not prohibit the sale of Inventory or obsolete
or unnecessary Equipment in the ordinary course of its
business);
(g)
change (22) its name as it appears in official
filings in the state of its incorporation or organization, (23)
its chief executive office, corporate offices, warehouses or
other Collateral locations, or location of its records
concerning the Collateral, (24) the type of legal entity that it
is, (25) its organization identification number, if any, issued
by its state of incorporation or organization, or (26) its state
of incorporation or organization, or acquire, lease or use any
real estate after the Closing Date without such Person, in each
instance, giving thirty (30) days prior written notice thereof
to Lender and taking all actions deemed necessary or appropriate
by Lender to continuously protect and perfect Lender’s
Liens upon the Collateral;
(h)
establish any depository or other bank account
of any kind with any financial institution (other than the
accounts set forth in Attachment 1 to Schedule D )
without Lender’s prior written consent;
(i)
make or permit any Restricted Payment;
(j)
(27) knowingly conduct any business or
engage in making or receiving any contribution of funds, goods
or services to or for the benefit of any Person described in
Section 3.20 above, (28) knowingly deal in, or otherwise engage
in any transaction relating to, any property or interests in
property blocked pursuant to the Executive Order or any other
Anti-Terrorism Law, (29) knowingly engage in or conspire to
engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of
the prohibitions set forth in any Anti-Terrorism Law (and the
Borrower shall deliver to the Lender any certification or other
evidence requested from time to time by Lender in its reasonable
discretion, confirming the Borrower’s compliance with this
Section, or (30) cause or permit any of the funds of Borrower
that are used to repay the Loans to be derived from any unlawful
activity with the result that the making of the Loans would be
in violation of law..
(k)
knowingly cause or permit (31) any of the funds
or properties of the Borrower or any other Credit Party that are
used to repay the Loans to constitute property of, or be
beneficially owned directly or indirectly by, any Person subject
to sanctions or trade restrictions under United States law
(“Embargoed Person” or “Embargoed
Persons”) that is identified on (a) the “List of
Specially Designated Nationals and Blocked Persons” (the
“SDN List”) maintained by OFAC and/or on any other
similar list (“Other List”) maintained by OFAC
pursuant to any authorizing statute including, but not limited
to, the International Emergency Economic Powers Act, 50 U.S.C.
§§ 1701 et seq., The Trading with the Enemy Act, 50
U.S.C. App. 1 et seq., and any Executive Order or regulation
promulgated thereunder, with the result that the investment in
the Borrower (whether directly or indirectly) is prohibited by
law, or the Loans made by the Lender would be in violation of
law, or (b) the Executive Order, any related enabling
legislation or any other similar Executive Orders, or (32)
any Embargoed Person to have any direct or
indirect interest, of any nature whatsoever in the Borrower or
any other Credit Party, with the result that the investment in
the Borrower (whether directly or indirectly) is prohibited by
law or the Loans is in violation of law.
6.
SECURITY INTEREST
