EXHIBIT 10.49
LOAN AND SECURITY AGREEMENT
between
KELTIC FINANCIAL PARTNERS, LP
and
DELTA COMPUTEC INC.
May 31, 2001
TABLE OF CONTENTS
1. DEFINITIONS...............................................................1
2. REVOLVING LOAN............................................................9
2.1 Making of Revolving Loans/Definition of Revolving Loan
Limit.........................................................9
2.2 Payment of Revolving Loans/Balance/Statements/etc..............10
3. ADDITIONAL PROVISIONS RE: INTEREST AND PAYMENTS..........................11
3.1 Interest Rate..................................................11
3.2 Interest Calculation; Lawful Rate..............................11
3.3 Interest Payments..............................................11
3.4 Default Rate...................................................12
3.5 Non-Business Days..............................................12
3.6 Fees...........................................................12
4. SECURITY INTEREST........................................................12
4.1 Grant of Security Interests....................................12
4.2 Further Assurances.............................................13
5. REPRESENTATIONS AND WARRANTIES...........................................13
5.1 Organization and Qualification.................................13
5.2 Due Authorization; No Default..................................13
5.3 No Governmental Consent Necessary..............................14
5.4 No Proceedings.................................................14
5.5 Financial Statements...........................................14
5.6 No Change in Financial Condition; Solvency.....................14
5.7 Compliance With Laws...........................................14
5.8 No Other Violations............................................14
5.9 Taxes and Assessments..........................................15
5.10 Accounts.......................................................15
5.11 Inventory......................................................15
5.12 Books and Records..............................................15
5.13 Location of Collateral.........................................15
5.14 Places of Business.............................................15
5.15 Other Names or Entities........................................15
5.16 Title and Liens................................................15
5.17 ERISA..........................................................16
5.18 O.S.H.A........................................................16
5.19 Environmental Matters..........................................16
5.20 Labor Disputes.................................................17
5.21 Intellectual Property..........................................17
5.22 Representations and Warranties True, Accurate and Complete.....17
6. AFFIRMATIVE COVENANTS....................................................17
6.1 Maintenance of Existence and Qualifications....................17
6.2 Payment of Taxes and Other Obligations.........................17
6.3 Maintenance of Properties......................................17
6.4 Notice of Adverse Events.......................................17
6.5 Information and Documents to be Furnished to Lender............18
6.6 Access to Records and Property.................................20
6.7 Insurance......................................................20
6.8 Condition of Collateral; No Liens..............................21
6.9 Proceeds of Collateral.........................................21
6.10 Records........................................................21
6.11 Delivery of Documents..........................................21
6.12 United States Contracts........................................21
6.13 Further Assurances.............................................21
6.14 Related Entities...............................................21
7. NEGATIVE COVENANTS.......................................................22
7.1 No Consolidation, Merger, Acquisition, Liquidation.............22
7.2 Disposition of Assets or Collateral............................22
7.3 Liens..........................................................22
7.4 Liabilities....................................................22
7.5 Loans..........................................................22
7.6 Guaranties; Contingent Liabilities.............................22
7.7 Dividends and Other Distributions..............................23
7.8 Transactions With Affiliates...................................23
7.9 Sale of Inventory..............................................23
7.10 Removal of Collateral..........................................23
7.11 Transfer of Notes or Accounts..................................23
7.12 Settlements....................................................23
7.13 Modification of Governing Documents ...........................23
7.14 Change of Business.............................................23
7.15 Change of Location or Name.....................................23
7.16 Change of Accounting Practices.................................23
7.17 Inconsistent Agreement.........................................23
7.18 Related Entities...............................................23
8. CONDITIONS TO MAKING EXTENSIONS OF CREDIT................................24
8.1 Initial Extension of Credit....................................24
8.2 Conditions to All Extensions of Credit.........................27
9. ADDITIONAL POWERS OF LENDER..............................................27
9.1 Powers of Lender...............................................27
9.2 Irrevocability; Lender's Discretion............................28
10. EVENTS OF DEFAULT........................................................29
10.1 Failure to Pay.................................................29
10.2 Failure to Perform.............................................29
10.3 Cross Default; Default on Other Debt...........................29
10.4 False Representation or Warranty...............................29
10.5 Cessation of Business..........................................29
10.6 Change in Condition............................................29
10.7 Change of Control..............................................29
10.8 Change in Management...........................................29
10.9 Insecurity.....................................................29
10.10 Liquidation or Dissolution....................................30
10.11 Inability to Pay Debts........................................30
10.12 Bankruptcy; Insolvency........................................30
10.13 Judgments.....................................................30
10.14 Attachment....................................................30
10.15 Condemnation..................................................30
10.16 Loss of Lien..................................................30
10.17 Environmental Laws............................................30
10.18 Necessary Licenses............................................30
10.19 ERISA.........................................................30
10.20 Guaranty......................................................31
11. REMEDIES.................................................................31
11.1 Rights in General..............................................31
11.2 Specific Rights Regarding Collateral...........................31
11.3 Set-Off........................................................33
11.4 Cumulative Remedies; No Waiver by Lender.......................33
11.5 Waivers and Agreements Relating to Remedies....................33
12. ADDITIONAL WAIVERS AND CONSENTS OF BORROWER..............................34
12.1 Waivers........................................................34
12.2 Consents.......................................................34
12.3 Applications of Payments.......................................34
13. TERMINATION OF AGREEMENT.................................................34
13.1 Termination By Lender..........................................34
13.2 Termination By Borrower........................................34
13.3 Effect on Revolving Loan Limit.................................34
13.4 Mutual Release.................................................35
14. COSTS, EXPENSES AND TAXES................................................35
14.1 Obligation of Borrower for Costs, Expenses and Taxes...........35
14.2 Reimbursements Charged to Revolving Loan ......................35
15. INDEMNIFICATION BY BORROWER/WAIVER OF CLAIMS.............................36
15.1 Indemnification................................................36
15.2 Savings Clause for Indemnification.............................36
15.3 Waiver.........................................................36
16. MISCELLANEOUS............................................................37
16.1 Entire Agreement; Amendments; Lender's Consent.................37
16.2 Notices........................................................37
16.3 Gender.........................................................38
16.4 Participation; Assignment......................................38
16.5 Cross Default; Cross Collateral................................38
16.6 Binding Effect; Governing Law..................................38
16.7 Execution in Counterparts......................................38
16.8 Severability of Provisions.....................................38
16.9 Table of Contents; Headings....................................38
16.10 Exhibits and Schedules........................................38
16.11 Further Assurances............................................38
17. FURTHER ACKNOWLEDGMENTS AND AGREEMENTS OF BORROWER AND LENDER............39
17.1 General Acknowledgments........................................39
17.2 Waiver of Jury Trial...........................................40
17.3 Consent to Jurisdiction; Service of Process....................40
17.4 Acknowledgment of Waivers......................................40
EXHIBITS AND SCHEDULES:
Exhibit A: Borrowing Base Certificate
Exhibit B: Notice of Borrowing
Exhibit C: Revolving Note
Schedule 1: Description of Borrower Collateral
Schedule 5.5: Financial Statements
Schedule 5.13: Collateral Locations, Landlords and Mortgagees
Schedule 5.14: Other Offices and Locations of Business
Schedule 5.15: Other Names/Entities
Schedule 5.16: Liens and Encumbrances
Schedule 5.19: Environmental Disclosures
This is a LOAN AND SECURITY AGREEMENT (this "Agreement") made as of May 31,
2001, between KELTIC FINANCIAL PARTNERS, LP ("Lender"), having offices at ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇, ▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and Delta Computec
Inc., a corporation organized under the laws of the State of New York
("Borrower"), having its principal place of business located at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
W I T N E S S E T H:
WHEREAS, Borrower has requested and Lender has agreed to provide a
revolving loan facility to Borrower; and
WHEREAS, the revolving loan facility is to be secured by, among other
things, the accounts, inventory, equipment and all the other assets of Borrower;
and
WHEREAS, Borrower and Lender wish to memorialize the terms of their
agreements by this writing;
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and other good and valuable consideration, receipt of which is hereby
acknowledged, it is agreed as follows:
1 DEFINITIONS:
"Account" -- all items described in the UCC definition thereof and all of
the following, whether or not so described (in all cases whether now existing or
hereafter created): all obligations of any kind at any time due or owing to
Borrower and all rights of Borrower to receive payment or any other
consideration (whether classified under the UCC or the law of any other state as
accounts, accounts receivable, contract rights, chattel paper, General
Intangibles, or otherwise) including without limitation invoices, contract
rights, accounts receivable, general intangibles, choses-in-action, notes,
drafts, acceptances, instruments and all other debts, obligations and
liabilities in whatever form owing to Borrower from any person, firm,
corporation, governmental authority or other entity, together with all security
for any thereof, and all of Borrower's rights to goods sold (whether delivered,
undelivered, in transit or returns), represented by any thereof, together with
all proceeds and products of any of the foregoing.
"Account Debtor" -- as described in the UCC definition thereof, including,
whether or not so described, any Person who is or may become obligated under or
with respect to or upon an Account, General Intangible or Chattel Paper.
"Affiliate" -- as to any Person, any other Person (i) which directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, such Person; or (ii) which beneficially
owns or holds ten percent (10%) or more of any class of the voting securities or
other equity interest of such Person; or (iii) of which such Person beneficially
owns or holds ten percent (10%) or more of any class of the voting securities or
other equity interest.
"Agreement" -- this Loan and Security Agreement, all exhibits and schedules
hereto and all extensions, renewals, amendments, modifications, substitutions
and replacements hereto and hereof.
"Authorized Person" -- any natural Person authorized in writing by Borrower
to sign a Notice of Borrowing or any other notice, certificate, report or
document provided by Borrower to Lender.
"Base Rate" -- the rate per annum which is the Prime Rate upon any date of
the determination thereof.
"Blocked Account" -- as defined in Section 2.2(b)(i) .
"Borrower" -- as defined in the preamble to this Agreement.
"Borrower Collateral" -- all the following, wherever located and whether
now existing or hereafter created or arising and whether now owned or hereafter
acquired by Borrower: (i) the Accounts; (ii) the Inventory; (iii) the Equipment;
(iv) all documents of title, policies or certificates of insurance, securities,
chattel paper and other documents and instruments evidencing or pertaining to
any thereof; all claims of Borrower against third parties for loss of or damage
to, or otherwise relating to, any of the Collateral; (v) all moneys, drafts,
notes, items, leases, general or special deposits, balances, sums, proceeds and
credits of Borrower; (vi) all other property of Borrower; (vii) all rights and
remedies which Borrower might exercise with respect to any of the foregoing but
for the execution of this Agreement; and (viii) all accessions and additions to,
replacements and substitutions for, and proceeds and products of, the items
described in the preceding clauses (i) through (vii), all as more fully
described in Schedule 1 attached hereto.
"Borrowing Base Certificate" -- a certificate substantially in the form of
Exhibit A attached hereto and made a part hereof which shall be completed by
Borrower periodically as Lender shall require and shall be submitted to Lender
and shall include a record of Borrower's daily sales and collections since the
previously submitted such certificate, and which shall serve as the basis for
calculating Borrower's Revolving Loan availability.
"Business Day" -- any day on which Lender is open and conducting business,
other than a Saturday, Sunday or legal holiday which banks located in the State
of New York are allowed to close.
"Code" -- the Internal Revenue Code of 1986, as amended from time to time,
and the regulations promulgated thereunder.
"Collateral" -- collectively, the Borrower Collateral and the Guarantor
Collateral.
"Compliance Certificate" -- as defined in Section 6.5(d).
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"Credit Facility" -- the Revolving Loan facility of One Million Five
Hundred Thousand Dollars ($1,500,000.00).
"Default" -- any event which, but for the lapse of time, giving of notice
or any other condition, would constitute an Event of Default.
"Default Rate" -- a rate of interest equal to the rate which otherwise
would be in effect from time to time plus three percent (3%) per annum.
"Eligible Account" -- an Account which has been identified and described to
Lender's satisfaction, is represented by Borrower (by its acceptance of
Revolving Loans thereon) as meeting all of the following criteria on its
origination date and thereafter until collected, and is in all other respects
acceptable to Lender:
(a) Borrower is the sole owner of the Account and has not sold,
assigned or otherwise transferred it, and the Account is not subject to any
claim, lien or security interest;
(b) The Account is bona fide and legally enforceable and owing to
Borrower for the sale of goods or performance of services in the ordinary course
of business and the Account does not require any further act on the part of
Borrower or any other Person to make it owing by the Account Debtor (except if
such Account is generated in the normal course of Borrower's business,
consistent with Borrower's practice in effect as of the date of this Agreement),
and Borrower has delivered to Lender (or, at the time of origination of the
Account, if required by Lender, will deliver to Lender) invoices, ▇▇▇▇▇▇▇▇,
shipping documents and other documents evidencing the obligation to pay the
Account;
(c) The Account Debtor is not domiciled in any country other than the
United States of America unless such Account is supported by a documentary
letter of credit issued in United States dollars, duly assigned to and in the
possession of Lender, from a financial institution acceptable to Lender, the
terms and conditions of which letter of credit are acceptable to Lender or by
credit insurance duly assigned to Lender issued by an insurance company, and in
form and substance, in all respects acceptable to Lender;
(d) The Account is evidenced by a written invoice or other
documentation which is in form and substance satisfactory to Lender;
(e) The Account does not arise out of a contract with, or order from,
an Account Debtor that, by its terms, forbids or makes void or unenforceable the
grant of the security interest from Borrower to Lender in and to the Account
arising with respect thereto, nor is the Account originated in or subject to the
laws of a jurisdiction wherein such agreement of a security interest is
similarly void, invalid or unenforceable;
(f) The Account does not represent a conditional sale, consignment,
▇▇▇▇ and hold, guaranteed sale or return, or other sale on a basis which would
make the Account Debtor payment obligation conditional other than that of
absolute sale (except if such Account is generated in the normal course of
Borrower's business, consistent with Borrower's practice in effect as of the
date of this Agreement), is not evidenced by any note, instrument, chattel paper
or like document;
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(g) The Account does not arise out of a contract with the United
States of America or any of its departments, agencies or instrumentalities
unless the Borrower shall have taken all actions deemed necessary by Lender to
perfect the Lender's security interest therein, including but not limited to any
notices or filings required under the Assignment of Claims Act of 1940 as
amended, or other applicable statutes or laws;
(h) The Account is invoiced, for payment, on the date goods or
services represented thereby are shipped or rendered to, as the case may be, the
Account Debtor (except if such Account is generated in the normal course of
Borrower's business, consistent with Borrower's practice in effect as of the
date of this Agreement) and the invoice has not been outstanding for more than
90 days;
(i) The Account is not due from an Account Debtor whose Accounts are
fifty percent (50%) or more outstanding for more than 90 days past the original
invoice date of such Accounts;
(j) The amount of the Account included in calculating the Revolving
Loan Limit does not exceed twenty percent (20%) of Borrower's total Eligible
Accounts at the time outstanding; provided, however, the aggregate amount of all
Accounts from St. Barnabas Healthcare System, St. Barnabas Corporate Data Center
and St. Barnabas System Business Office shall not exceed forty percent (40%) of
Borrower's total Eligible Accounts at the time outstanding, and the aggregate
amount of all Accounts from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall not exceed forty (40%) of
Borrower's total Eligible Accounts at the time outstanding;
(k) The Account is not subject to any defense, offset, counterclaim,
recoupment, claim of reduction or claims for credits, allowances or adjustments
because of returned, inferior or damaged goods or unsatisfactory servicing or
for any other reason;
(l) Borrower has not received any notice, nor has it any knowledge, of
any facts which adversely affect the credit of the Account Debtor;
(m) The Account Debtor is not a Related Entity nor a director or
officer of Borrower or an Affiliate of any director or officer;
(n) The Account duly complies with all applicable laws; and
(o) The Account is not otherwise deemed unsatisfactory by Lender, as
determined by Lender in its sole and absolute discretion.
"Encumbrance" -- any security interest, mortgage, charge, claim, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any capitalized lease
having substantially the same economic effect as any of the foregoing, and the
filing of any financing statement under the UCC) in, upon, or against Borrower
or any Guarantor or any asset of Borrower or any Guarantor, whether or not
voluntarily given.
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"Environmental Claim" -- any claim, suit, notice, order, demand or other
communication made by any Person, with respect to Borrower or any Guarantor or
any of their properties, whether owned or leased, that: (i) asserts a violation
of an Environmental Law; (ii) asserts a liability under an Environmental Law;
(iii) orders any investigation, corrective action, remediation or other response
under an Environmental Law; (iv) demands information under an Environmental Law;
(v) alleges personal injury or property damage resulting from Hazardous
Substances; or (vi) alleges that there is or may be contamination.
"Environmental Law" -- any Governmental Rule, now or hereafter in effect,
concerning protection of the environment or regulation of the discharge of
substances into the environment, including but not limited to those concerning
air emissions, water discharges and treatment, storage tanks, and the handling,
generation, treatment, storage and disposal of waste materials, chemical
substances, pollutants, contaminants, toxic substances, pathogens, radioactive
materials or hazardous substances of any kind, whether solid, liquid or gaseous,
including without limitation the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended, 42 U.S.C.ss.9601 et seq., as
further amended by the Superfund Amendments and Reauthorization Act of 1986; the
Resource Conservation and Recovery Act of 1976, 42 U.S.C.ss.6901 et seq.; the
Federal Water Pollution Control Act, 33 U.S.C.ss.1251 et seq.; the Clean Air
Act, 42 U.S.C.ss.7401 et seq.; the National Environmental Policy Act, 42
U.S.C.ss.4321 et seq.; the Refuse Act, 33 U.S.C.ss.401 et seq.; the Hazardous
Materials Transportation Act of 1975, 49 U.S.C.ss.ss.1801-1812; the Toxic
Substances Control Act, 15 U.S.C.ss.2601 et seq.; the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C.ss.136 et seq.; the Safe Drinking Water
Act, 42 U.S.C.ss.300 et seq.; each as amended and as now or hereafter in effect,
and their state and local counterparts or equivalents, including any regulations
promulgated thereunder.
"Equipment" -- all items described in the UCC definition thereof and all of
the following, whether or not so described (in all cases whether now owned or
hereafter acquired by Borrower and wherever located): all equipment, machinery,
furniture, fixtures, motor vehicles, parts, supplies and tools, and all other
tangible personal property similar to any of the foregoing, and all repairs,
modifications, alterations, replacements, additions, controls and operating
accessories therefor and proceeds and products thereof.
"ERISA" -- as defined in Section 5.17
"Event of Default" -- as defined in Section 10.
"GAAP" -- generally accepted accounting principles in effect in the United
States of America, consistently applied from period to period.
"General Intangible" -- all items described in the UCC definition thereof
and all of the following whether or not so described, owned by Borrower or in
which Borrower has any right, title or interest, whether now owned or in
existence or hereafter created or acquired: any chose in action, cause of
action, business records, deposit account, invention, design, patent, patent
application, trademark, trademark application, service ▇▇▇▇, service ▇▇▇▇
application, trade name, trade name application, trade secret, goodwill,
copyright, copyright application, registration, license, franchise, customer
list, tax refund claim, computer program, claims under guaranties, security
interests, rights to indemnification or any other intangible property of any
kind or nature (other than an Account).
5
"Governmental Authority" -- (i) any nation, state, government, jurisdiction
or jurisdictional authority (domestic, foreign or international), any political
subdivision thereof, and any governmental, quasi-governmental, judicial, public,
statutory, administrative or regulatory body, agency, department, bureau,
authority, court, commission, board, office, instrumentality, administrative
tribunal or other entity of any of the foregoing and any official thereof and
(ii) any arbitrator, arbitration tribunal or other non-governmental entity which
has jurisdiction over Borrower or any Guarantor as a result of (A) the consent
of Borrower or such Guarantor or (B) being vested with such jurisdiction by any
other Governmental Authority.
"Governmental Rule" -- any constitutional provision, law, statute, code,
act, rule, regulation, permit, license, treaty, ordinance, order, writ,
injunction, decree, judgment, guideline, award, standard, directive, decision,
determination, demand or holding of any Governmental Authority, whether in
existence on the date hereof or whether issued, enacted or adopted hereafter,
and any change therein or in the interpretation or application thereof following
the date hereof.
"Guarantor" -- NQL Inc., a corporation of the State of Delaware, and any
Person who is at any time a guarantor or surety for Borrower.
"Guarantor Collateral" -- all property of any Guarantor, whether real,
personal or mixed in and to which Lender is granted a security interest,
mortgage lien or other interest at any time, whether pursuant to the Relevant
Documents or otherwise. (Lender acknowledges that, as of the date of this
Agreement, NQL Inc. has not granted to Lender a security interest, mortgage,
lien or other interest in and to any of its property, except as provided in that
certain Warrant and that certain Continuing Unlimited Corporate Guaranty
delivered to Lender contemporaneously herewith.)
"Inventory" -- all items described in the UCC definition thereof and all of
the following, whether or not so described (in all cases whether now owned or
hereafter acquired by Borrower and wherever located): all goods, merchandise or
other personal property held for sale or lease or to be furnished under labels
and other devices, names or marks affixed thereto for purposes of selling or
identifying the same or the seller or manufacturer thereof, and all right, title
and interest of Borrower therein and thereto; all raw materials; all work or
goods in process; and all materials and supplies of any kind or description used
or usable in connection with the manufacture, packaging, shipping,
advertisement, sale or finishing of any of the foregoing, together with all
proceeds and products of any of the foregoing.
"Lender" -- as defined in the preamble to this Agreement.
"Liabilities" -- all of the following:
(a) all items which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a consolidated
balance sheet of Borrower and each Subsidiary and Guarantor as at the date on
which such liabilities are to be determined, including, without limitation,
capitalized lease obligations;
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(b) all obligations of other Persons which Borrower or any Subsidiary
or Guarantor has guaranteed;
(c) All reimbursement obligations (contingent or otherwise) in
connection with letters of credit or letter of credit guarantees issued for the
account or upon the application of Borrower or any Subsidiary or Guarantor; and
(d) the Obligations.
"Lockbox" -- as defined in Section 2.2(b)(i).
"Material Adverse Effect" -- any material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise, of
Borrower or any Guarantor; (b) Borrower's or any Guarantor's ability to pay or
perform the Obligations in accordance with their terms; (c) the value of the
Collateral or the perfection or priority of Lender's liens; (d) the validity or
enforceability of this Agreement or any of the Relevant Documents; or (e) the
practical realization of the benefits, rights and remedies inuring to Lender
hereunder or under the Relevant Documents. Notwithstanding anything contained
herein to the contrary, as to NQL Inc., a decline in NQL Inc.'s stock price or a
delisting of NQL Inc. from trading on a nationally recognized stock exchange
shall not constitute a Material Adverse Effect.
"Notice of Borrowing" -- an irrevocable notice of borrowing substantially
in the form of Exhibit B attached hereto and made a part hereof by which
Borrower shall request Lender to make a Revolving Loan.
"Obligations" -- all the following:
(a) all principal of and interest on the Revolving Loans and all other
sums payable by Borrower under the terms of this Agreement or any of the
Relevant Documents;
(b) all other indebtedness, liabilities, obligations and agreements of
every kind and nature of Borrower to or with Lender or any Affiliate of Lender
whether pursuant to this Agreement, any of the Relevant Documents or otherwise,
whether in the form of refinancing, letters of credit, bankers acceptances,
interest rate agreements, hedge or currency contracts, guaranties, loans,
interest, overdrafts, charges, fees, expenses or otherwise, whether direct or
indirect, whether acquired outright, conditionally or as collateral security
from another, whether absolute or contingent, joint or several, liquidated or
unliquidated, secured or unsecured, and whether arising by operation of law or
otherwise;
(c) any participation or interest of Lender or any Affiliate of Lender
in any indebtedness, liabilities, obligations or agreements of Borrower to or
with others; and
(d) all out-of-pocket costs and expenses incurred by Lender in
connection with this Agreement and the Relevant Documents at any time,
including, but not limited to, the expenses and reasonable fees of Lender's
counsel, whether of outside counsel or the allocated cost of Lender's in-house
counsel;
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in each case whether now existing or hereafter created, whether now or hereafter
contemplated, and including without limitation any future advances, renewals,
extensions modifications or changes in form of, or substitutions for, any of the
items described in the preceding clauses (a) through (e).
"PBGC" -- as defined in Section 5.17.
"Permitted Encumbrance" -- any or any combination of the following:
(a) The liens and security interests in the Collateral granted to
Lender;
(b) Liens for taxes, assessments, governmental charges or levies on
Borrower or any of Borrower's properties, but only if such taxes, assessments,
governmental charges or levies (i) are at the time not due and payable or if
they can thereafter be paid without penalty or are being contested in good faith
by appropriate proceedings diligently conducted and with respect to which
Borrower has created adequate reserves in conformity with GAAP; and (ii) are not
pursuant to any Environmental Law;
(c) Pledges or deposits to secure payment of workers' compensation
obligations, unemployment insurance, deposits or indemnities to secure public or
statutory obligations or for similar purposes;
(d) Mechanics', carriers', workmen's, repairmen's and other similar
statutory liens incurred in the ordinary course of Borrower's business, so long
as the liability secured is not overdue or, if overdue, is being contested in
good faith by appropriate actions or proceedings diligently conducted with
respect to which Borrower has created adequate reserves in conformity with GAAP
or has adequate insurance protection; provided, however, that at no time may the
aggregate amount of such liens exceed $10,000.00; and
(e) Encumbrances existing on the date hereof and listed on Schedule
5.16.
"Person" -- any individual, partnership, corporation, association, trust,
business trust, joint venture, joint stock company, limited liability company,
limited liability partnership, limited partnership, unincorporated organization
or enterprise or Governmental Authority.
"Plan" -- as defined in Section 5.17.
"Prime Rate" -- the rate published as the Base Rate in the "Money Rates"
column of the Wall Street Journal, from time to time or, in the event that the
Wall Street Journal is not available at any time, such rate as is published in
another publication chosen by Lender in its sole and absolute discretion.
"Related Entity" -- any Subsidiary or Affiliate of Borrower and any
unincorporated association or other Person through which Borrower conducts any
part of its business.
"Relevant Documents" -- any and all documents and instruments delivered to
Lender pursuant or incident to this Agreement or in connection with any of the
Revolving Loans by Borrower or any Related Entity.
8
"Revolving Loan" or "Revolving Loans" -- the loans made to Borrower
pursuant to Section 2.
"Revolving Loan Limit" -- as defined in Section 2.1(c).
"Revolving Note" -- as defined in Section 2.1(a).
"Subsidiary" -- any Person of which another Person owns a majority of the
equity interest or other controlling interest.
"Subordination Agreement" -- that certain Standstill Subordination
Agreement being entered into contemporaneously herewith between NQL Inc., Lender
and Borrower, as same may be amended, modified, replaced or substituted.
"Termination Date" -- (a) the date that is one day prior to the date that
is one (1) year from the date hereof or any extended date that is agreed upon in
writing, or (b) such earlier date as otherwise provided for under the terms and
conditions of this Agreement.
"UCC" -- the Uniform Commercial Code as in effect from time to time in the
State of New York, and, as to issues of perfection and exercise of remedies
only, the Uniform Commercial Code as in effect from time to time in the
jurisdiction (i) wherein any of the Collateral is located or (ii) governing the
Collateral.
All accounting terms used herein, if not otherwise defined, shall be defined in
conformity with GAAP.
2. REVOLVING LOAN
2.1 Making of Revolving Loans/Definition of Revolving Loan Limit
(a) Making of Revolving Loans. Subject to the terms and conditions set
forth herein, Lender shall, upon the request of Borrower, from the date hereof
through the Termination Date, make Revolving Loans hereunder to Borrower from
time to time in an aggregate principal amount not in excess at any time
outstanding of the Revolving Loan Limit, which Revolving Loans shall be
evidenced by a note in the form attached hereto as Exhibit C (the "Revolving
Note"). Borrower may repay and reborrow subject to the terms and conditions set
forth herein. The Revolving Loans shall be payable in accordance with the terms
of this Agreement.
(b) Purposes of Revolving Loans. Borrower may obtain Revolving Loans
solely for the ordinary working capital purposes of Borrower and to make
payments and other distributions to NQL Inc. in accordance with the provisions
of the Subordination Agreement. At such time as Borrower requests a Revolving
Loan, Lender may require evidence that is satisfactory, in Lender's sole
discretion, that such Revolving Loan shall be used for the purpose stated by
Borrower.
9
(c) Definition of Revolving Loan Limit. Borrower's Revolving Loan
Limit shall be the lesser of: (i) One Million Five Hundred Thousand Dollars
($1,500,000.00); or (ii) seventy five percent (75%) of the face amount of
Eligible Accounts, which percentage Lender may increase or decrease from time to
time as Lender in its sole and absolute discretion may determine. Lender shall
have the right to increase or decrease the Revolving Loan Limit from time to
time and/or establish such reserves as it shall deem necessary from time to
time; and the sums advanced pursuant thereto shall nevertheless be secured by
the Collateral and subject to the terms of this Agreement. The Revolving Loan
Limit shall be subject to the limitation stated in Section 13.3 in the event of
notice of termination of this Agreement.
(d) Procedure for Requesting Revolving Loans. Each Revolving Loan
shall be requested in writing via facsimile by a Notice of Borrowing executed by
an Authorized Person, not later than 11:00 A.M. Eastern Time on any Business Day
on which a Revolving Loan is requested.
2.2 Payment of Revolving Loans/Balance/Statements/etc.
(a) Repayment. The entire outstanding principal balance of the
Revolving Loans, plus all accrued and unpaid interest thereon and all fees and
other amounts payable under this Agreement and the Relevant Documents, shall be
due and payable, in full, on the Termination Date.
(b) Collection and Remittance.
(i) Borrower covenants and agrees to (x) open one or more bank
accounts in the name of Borrower but over which Lender shall
have the sole power of withdrawal ("Blocked Account"), and
(y), if Lender shall require at any time, to open a lockbox
account ("Lockbox") over which Lender shall have the sole
power of withdrawal. All proceeds of Accounts and all
payments from the sale of Inventory, in each case whether
cash, checks, drafts, notes, acceptances or other forms of
payment, if received by Borrower shall be received by
Borrower in trust for Lender, and Borrower agrees to deliver
such payments forthwith, in the identical form in which
received, to Lender or to the Blocked Account or Lockbox, as
Lender shall require from time to time.
(ii) Collected funds in any Blocked Account or Lockbox shall be
swept daily and the proceeds deposited to an account of
Lender as Lender shall elect.
(iii)Not later than 2:00 p.m. Eastern Time on each Business Day,
Borrower shall notify Lender of the remittances deposited to
the Lockbox or Blocked Account on such Business Day.
(c) Determination of Balance of Revolving Loans. In determining the
outstanding balance of the Revolving Loans, (i) available funds received from
the Blocked
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Account or the Lockbox in the Lender's account at Fleet Bank Connecticut,
Account Name: Keltic Financial Partners, LP fob Fleet Capital Corp.; Account No.
_________, ABA _____________, before Noon Eastern Time of a Business Day will be
credited on that Business Day, and thereafter on the following Business Day;
(ii) any other form of funds received by Lender will be credited on the Business
Day when Lender has received notification that such funds are collected and
available to Lender if before Noon (Eastern Time), and thereafter on the
following Business Day; (iii) all credits shall be conditional upon final
payment to Lender in cash or solvent credits of the items giving rise to them
and, if any item is not so paid, the amount of any credit given for it shall be
charged to the balance of the Revolving Loans whether or not the item is
returned; and (iv) for the purpose of computing interest on the Revolving Loans
and other Obligations, interest shall continue to accrue on the amount of any
payment credited to Borrower's Revolving Loan balance by Lender for a period of
three (3) Business Days after the date so credited.
(d) Statements of Account. Any statement of account rendered by Lender
shall be considered correct, accepted by Borrower and conclusively binding upon
Borrower, unless Borrower gives Lender written notice to the contrary within ten
(10) Business Days after the sending of the statement by Lender. If Borrower
disputes the correctness of any such statement, Borrower's notice shall specify
in detail the particulars of its basis for contending that such statement is
incorrect.
(e) Excess Revolving Loan Balance. If the aggregate outstanding amount
of Revolving Loans at any time should exceed the Revolving Loan Limit, such
excess (i) shall nevertheless be secured by the Collateral and be subject to the
terms of this Agreement and (ii) shall be payable immediately upon demand by
Lender.
3. ADDITIONAL PROVISIONS RE: INTEREST AND PAYMENTS
3.1 Interest Rate. Interest shall accrue on the outstanding principal
balance of the Revolving Loans at a rate equal at all times to the Base Rate in
effect from time to time during the period for which interest is being
calculated plus two and one half (2 1/2%) percentage points per annum. The
applicable interest rate shall change as and when the Base Rate changes without
notice to Borrower.
3.2 Interest Calculation; Lawful Rate.
(a) Interest on the Revolving Loans shall be calculated on a daily
basis, with each day representing 1/360th of a year, upon the aggregate
outstanding principal balance of all Revolving Loans.
(b) If the interest rate calculated in accordance with any provision
of this Agreement would at any time exceed the maximum permitted by any law then
applicable, then for such period as such rate would exceed the maximum permitted
by such law (and no longer) the rate of interest payable shall be reduced to the
maximum permitted by such law.
3.3 Interest Payments. Interest shall be due and payable by Borrower, in
arrears, on the first (1st) day of each month and shall be paid by Lender's
making an advance in the amount
11
of the interest due against the Revolving Loan. Lender shall present an invoice
to Borrower on a monthly basis reflecting the interest payment due, but any
failure or delay by Lender in submitting any invoice for interest shall not
discharge or relieve Borrower of its obligation to make such interest payment.
3.4 Default Rate. Upon the occurrence and during the continuance of any
Event of Default, the Revolving Loans shall, at the option of Lender, bear
interest at the Default Rate.
3.5 Non-Business Days. If any payment pursuant to this Agreement or any of
the Relevant Documents shall be stated to be due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the interest or other
payment due.
3.6 Fees.
(a) Closing Commitment Fee. Borrower has paid Lender, and Lender
acknowledges receipt of, the sum of $22,500.00, representing the
closing/commitment fee due to Lender. The closing/commitment fee shall be deemed
fully earned and non-refundable, upon the execution of this Agreement.
(b) Facility Fee: Borrower shall pay to Lender a facility fee
calculated as one percent (1%) per annum of the Credit Facility (the "Facility
Fee"), which fee shall be deemed fully earned and non-refundable upon the
execution of this Agreement. The Facility Fee for each annual period shall be
paid in twelve (12) equal monthly installments. One-twelfth (1/12th) of the
Facility Fee shall be charged by Lender on the first (1st) Business Day of each
month to Borrower's Revolving Loan and shall be deemed fully earned on execution
of this Agreement. In the event a Termination Date shall occur prior to the date
that is one day prior to the first anniversary of the date hereof, any unpaid
portion of the Facility Fee shall become immediately due and payable.
(c) Field Examinations. Lender, at such intervals as Lender shall
elect, and whether by its own employees or by agents chosen by Lender, shall
conduct field examinations at Borrower's premises, provided, however, Lender
shall in no event conduct field examinations more than three (3) times in any
fiscal year of Borrower, unless there shall occur or be continuing a Default or
Event of Default, in which event, Lender shall be authorized to conduct field
examinations at such intervals as Lender shall elect. Borrower shall pay or
reimburse Lender for all reasonable costs and expenses incurred by Lender in
conducting such field examinations. Payments due from Borrower to Lender for
field examinations shall be paid by Lender's making an advance in the amount of
such costs and expenses, against the Revolving Loan on the first (1st) Business
Day of the month following each field examination.
4. SECURITY INTEREST
4.1 Grant of Security Interests. As security for the due and punctual
payment and performance of all of the Obligations, whether pursuant to this
Agreement or otherwise, Borrower hereby pledges, transfers and assigns to
Lender, and grants to Lender, first priority
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security interests in (a) all of the Borrower Collateral wherever located and
whether now existing or hereafter created and whether now owned or hereafter
acquired by Borrower, and (b) all accessions and additions thereto, replacements
and substitutions therefor, and proceeds, including, without limitation, all
insurance proceeds and products thereof. The security interests granted hereby,
and all remedies and other rights stated or referred to in this Agreement or any
of the Relevant Documents, shall continue in full force and effect until full
and final payment and performance of the Obligations and this Agreement is fully
and finally terminated.
4.2 Further Assurances. Borrower shall execute and deliver such financing
statements and other documents (in form and substance satisfactory to Lender)
and take such other actions as Lender may request from time to time in order to
create, perfect or continue the security interests and other liens provided for
by this Agreement under the UCC or other laws of the State of New York or under
any other applicable state or federal law.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender, knowing and intending that Lender
will rely thereon in making the Revolving Loans contemplated hereby, that the
following statements are true and accurate:
5.1 Organization and Qualification.
(a) Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction stated at the beginning of this
Agreement.
(b) Borrower has the power and authority, and all necessary licenses
or other authorizations, to own or lease its properties and to carry on its
business as now conducted, and is duly qualified and in good standing in each
jurisdiction wherein the nature of the property owned or used or of the business
conducted requires such qualification.
5.2 Due Authorization; No Default.
(a) The execution, delivery and performance by Borrower of this
Agreement, and the Relevant Documents are within Borrower's powers, have been
duly authorized by all necessary action on the part of Borrower, and do not and
will not (i) violate Borrower's Certificate of Incorporation or Bylaws or any
Governmental Rule; (ii) constitute a breach of, or default under, any agreement,
undertaking or instrument to which Borrower is a party or by which it may be
affected, or (iii) result in the imposition of any Encumbrance or restrictions
on any assets of Borrower, except in favor of Lender.
(b) Borrower has delivered to Lender true and complete copies of
Borrower's resolutions necessary to authorize the transactions contemplated by
this Agreement and the Relevant Documents, and of Borrower's constitutive
documents, all as in effect on the date hereof and certified by a duly
authorized officer of Borrower.
13
(c) This Agreement and the Relevant Documents upon their execution and
delivery, will be legal, valid and binding obligations of Borrower, enforceable
against Borrower in accordance with their respective terms.
5.3 No Governmental Consent Necessary. No authorization, approval or other
action by, and no notice to or filing with, any Governmental Authority is
required for the due execution, delivery and performance by Borrower of this
Agreement or any of the Relevant Documents.
5.4 No Proceedings. There are no pending or threatened claims, actions,
proceedings or investigations before any Governmental Authority that may, singly
or in the aggregate, have a Material Adverse Effect.
5.5 Financial Statements.
(a) Subject to any limitation stated therein, all balance sheets,
income statements and other financial data which have been or shall hereafter be
furnished to Lender do and will truly and fairly represent the financial
condition of Borrower as at the respective dates thereof and the results of its
operations for the periods ended on such dates, in accordance with GAAP. All
other information, reports and other papers and data furnished to Lender are, or
will be at the time the same are so furnished, true, accurate and complete in
all material respects.
(b) Except as shown on the most recent financial statements identified
on Schedule 5.5, Borrower has no liabilities as of the date hereof which would
have a Material Adverse Effect.
5.6 No Change in Financial Condition; Solvency.
(a) Except as disclosed on Schedule 5.5, there has been no material
adverse change in Borrower's business, assets, operations, prospects or
condition, financial or otherwise, since the date of its last financial
statements identified on Schedule 5.5.
(b) Borrower's assets, at a fair valuation, exceed Borrower's
liabilities (including, without limitation, contingent liabilities), Borrower is
paying its debts as they become due, and Borrower has capital and assets
sufficient to carry on its business.
5.7 Compliance With Laws. Borrower is in compliance with all Governmental
Rules applicable to its ownership or use of properties or the conduct of its
business, the non-compliance with which could have a Material Adverse Effect;
Borrower has not received any notice of violation of any of the foregoing; and
Borrower is not in violation of any Governmental Rule, which could have a
Material Adverse Effect.
5.8 No Other Violations. Borrower is not in violation of any term of its
Certificate of Incorporation or Bylaws and no event or condition has occurred
and is continuing which constitutes or results in (or would constitute or result
in, with the giving of notice, lapse of time or other condition) (a) a breach
of, or a default under, any material agreement, undertaking or instrument to
which Borrower is a party or by which it or any of its property may be affected,
or (b) the imposition of any Encumbrance on any property of Borrower.
14
5.9 Taxes and Assessments. Borrower has filed all federal, state and local
tax returns and other reports it is required to file (or has obtained valid,
written extensions as to any not so filed), has paid all taxes, assessments, and
other governmental charges due and payable, and has made adequate provision for
the payment of such taxes, assessments and charges accrued but not yet payable.
Borrower has no knowledge of any material deficiency or additional assessment in
connection with any taxes, assessments or other governmental charges not
provided for or disclosed in the financial statements set forth on Schedule 5.5.
5.10 Accounts. The list of Accounts, dated May 23, 2001, delivered to
Lender, is complete and contains an accurate aging thereof and, except as
otherwise specified by Borrower to Lender in writing, each of said Accounts
meets the criteria for a Eligible Account stated in the definition section of
this Agreement.
5.11 Inventory. Borrower's Inventory consists of items of a quality and
quantity usable or salable in the ordinary course of its business; the values of
obsolete items, items below standard quality and items in the process of repair
have been written down to realizable market value, or adequate reserves have
been provided therefor; and the values carried on said balance sheet are set at
the lower of cost or market, in accordance with generally accepted accounting
principles consistently applied.
5.12 Books and Records. Borrower maintains its books and records relative
to its Accounts and the other Borrower Collateral at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
5.13 Location of Collateral. None of the Inventory, Equipment or other
tangible property constituting part of the Borrower Collateral is or will be, or
has been during the six months preceding execution of this Agreement, located in
or on any premises other than those identified in Schedule 5.13. Schedule 5.13
contains an accurate record of all landlords of premises leased by Borrower and
of all mortgagees of premises owned by Borrower.
5.14 Places of Business. The principal place of business and chief
executive office of Borrower is located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇. Schedule 5.14 lists all of the other offices or locations in or
from which Borrower conducts any of its business or operations.
5.15 Other Name or Entities. Except as disclosed on Schedule 5.15, none of
Borrower's business is conducted through any corporate subsidiary,
unincorporated association or other entity and Borrower has not, within the
seven years preceding the date of this Agreement, (a) changed its name, (b) used
any name other than the name stated at the beginning of this Agreement, or (c)
merged or consolidated with, or acquired the assets of, any other corporation or
business.
5.16 Title and Liens. Borrower and Guarantor have good and marketable title
to all of the Collateral and all of their other property as sole owners thereof,
free and clear of any Encumbrance, except the liens created by this Agreement
and any liens or encumbrances identified on Schedule 5.16. Except as set forth
on Schedule 5.16, none of the Collateral is subject to any prohibition against
encumbering, pledging, hypothecating, or assigning the same or requires notice
or consent in connection therewith.
15
5.17 ERISA. Borrower is in compliance in all material respects with the
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the related provisions of the Code and with all regulations and
published interpretations issued thereunder by the United States Treasury
Department, the United States Department of Labor and the Pension Benefit
Guaranty Corporation ("PBGC"). Neither a reportable event as defined in Section
4043 of ERISA, nor a prohibited transaction as defined in Section 406 of ERISA
or Section 4975 of the Code has occurred and is continuing with respect to any
employee benefit plan subject to ERISA established or maintained, or to which
contributions have been or may be made, by Borrower or by any trade or business
(whether or not incorporated) which together with Borrower would be treated as a
single employer under Section 4001 of ERISA (any such trade or business being
referred to hereinafter as an "ERISA Affiliate," and any such employee benefit
plan being referred to hereinafter as a "Plan").
5.18 O.S.H.A. Borrower has duly complied with, and its facilities,
business, leaseholds, equipment and other property are in compliance in all
material respects with, the provisions of the federal Occupational Safety and
Health Act and all rules and regulations thereunder and all similar state and
local Governmental Rules. There are no outstanding citations, notices or orders
of non-compliance issued to Borrower or relating to its facilities, business,
leaseholds, equipment or other property under any such Governmental Rules.
5.19 Environmental Matters. Except as disclosed in Schedule 5.19:
(a) No property owned or used by Borrower is or has been used for the
generation, manufacture, refining, transportation, treatment, storage, handling
or disposal of any "hazardous substances" or "hazardous wastes". The following
are all of the Standard Industrial Classification Codes applicable to the
properties and operations of Borrower: 7376 and 7378. The following are all of
the North American Industrial Classification System numbers applicable to the
properties and operations of Borrower: 541513 and 811212; (b) Borrower is in
compliance with all applicable Environmental Laws; (c) there has been no
contamination or release of hazardous substances at, upon, under or within any
property owned or leased by Borrower, and there has been no contamination (as
defined in any applicable Environmental Law) or release of hazardous substances
(as defined in any applicable Environmental Law) on any other property that has
migrated or threatens to migrate to any property owned or leased by Borrower;
(d) no hazardous substances are present at any property owned or leased by
Borrower, nor will any hazardous substances be present upon any such property or
in the operation thereof by Borrower, except such hazardous substances which are
transported, used, stored, disposed of and otherwise handled in accordance with
all Environmental Laws, in proper storage containers; (e) all permits and
authorizations required under Environmental Laws for all operations of Borrower
have been duly issued and are in full force and effect, including but not
limited to those for air emissions, water discharges and treatment, storage
tanks and the generation, treatment, storage and disposal of hazardous
substances; (f) there are no past, pending or threatened Environmental Claims
against Borrower or any property owned or leased by Borrower; and there is no
condition or occurrence on any property owned or leased by Borrower that could
reasonably be anticipated (i) to form the basis of an Environmental Claim
against Borrower or its properties or (ii) to cause any property owned or leased
by Borrower to be subject to any restrictions on its ownership, occupancy or
transferability under any Environmental Law; and (g) the representations and
16
warranties set forth in this Section 5.19 shall survive repayment of the
Obligations and the termination of this Agreement and the Relevant Documents.
5.20 Labor Disputes. There are no pending or, to Borrower's knowledge,
threatened labor disputes which could have a Material Adverse Effect.
5.21 Intellectual Property. Borrower is the owner of or possesses the right
to use all necessary patents, trademarks, service marks, copyrights and other
intellectual property necessary or useful in the operation of its business, in
each case free of any claims or infringements.
5.22 Representations and Warranties True, Accurate and Complete. None of
the representations, warranties or statements to Lender contained in this
Agreement, in any of the Relevant Documents or in any other writing delivered to
Lender in connection with the Collateral, this Agreement or any of the
transactions contemplated hereby or thereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make such representation, warranty or statement not materially
misleading in light of the circumstances under which it is made. All of such
representations, warranties and statements shall survive until full and final
payment and performance of the Revolving Loans and all other Obligations under
this Agreement and the Relevant Documents.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until full and final payment and performance
of all Obligations, Borrower shall, unless Lender shall otherwise consent in
writing:
6.1 Maintenance of Existence and Qualifications. Maintain and preserve in
full force and effect its existence and good standing and all other rights,
powers, franchises, licenses and qualifications necessary or desirable for its
ownership or use of properties or the conduct of its business.
6.2 Payment of Taxes and Other Obligations. Pay (a) when due, all taxes,
assessments and governmental charges imposed upon it or any of its property or
required to be collected by it, and (b) in the ordinary course of business, all
other indebtedness and liabilities of any kind now or hereafter owing by it.
6.3 Maintenance of Properties. Maintain its properties in good working
order and condition.
6.4 Notice of Adverse Events. Promptly notify Lender in writing of the
occurrence or existence of any of the following: (a) any Event of Default or
Default; (b) any matter or event which has resulted in, or may result in, a
Material Adverse Effect; (c) any claim, action, proceeding or investigation
filed or instituted against Borrower, or any adverse determination in any
pending action, proceeding or investigation affecting it in excess of Twenty
Thousand Dollars ($20,000.00); (d) any loss from casualty or theft in excess of
Twenty Thousand Dollars ($20,000.00), whether or not insured, affecting property
of Borrower; (e) whether or not
17
otherwise reportable under this Section 6.4, any complaint, citation, order or
other notice of a violation or a claim involving any of the following, if the
liability or penalty therefor may exceed Twenty Thousand Dollars ($20,000.00)
singly or in the aggregate.
6.5 Information and Documents to be Furnished to Lender. Furnish to Lender
in form and content satisfactory to it:
(a) Annual Financial Statements. As soon as available NQL Inc. and its
Subsidiaries, including, without limitation, Borrower, but in no event later
than ninety (90) days after the end of each fiscal year of Borrower and NQL
Inc., a consolidated and consolidating balance sheet of NQL Inc. and its
Subsidiaries, including, without limitation, Borrower, as of the end of such
year and consolidated and consolidating statements of income, cash flows and
changes in stockholders' equity for such year (all in reasonable detail and with
all notes and supporting schedules), audited by an independent certified public
accountant satisfactory to Lender, as presenting fairly the financial condition
of NQL Inc. and its Subsidiaries including, without limitation, Borrower, as of
the dates and for the periods indicated and as having been prepared in
accordance with GAAP, except as may be otherwise disclosed in such financial
statements or the notes thereto.
(b) Quarterly Financial Statements. As soon as available but in no
event later than forty-five (45) days after the end of each quarter of each
fiscal year of Borrower, except the fourth such quarter in any fiscal year a
consolidated and consolidating balance sheet of Borrower and its Subsidiaries,
if any, as of the end of such quarter and consolidated and consolidating
statements of income, cash flows and changes in stockholders' equity for such
quarter and for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter (all in reasonable detail and with all notes
and supporting schedules), prepared by Borrower and certified by the chief
financial officer of Borrower as presenting fairly the financial condition of
Borrower as of the dates and for the periods indicated and as having been
prepared in accordance with GAAP consistently applied, except as may be
otherwise disclosed in such financial statements or the notes thereto.
(c) Monthly Financial Statements. If requested by Lender, as soon as
available but in no event later than thirty (30) days after the end of each
month of each fiscal year of Borrower, a balance sheet of Borrower as of the end
of such month and statements of income, cash flows and changes in stockholders'
equity for such month and for the period commencing at the end of the previous
fiscal year and ending with the end of such month (all in reasonable detail and
with all notes and supporting schedules), prepared by Borrower and certified by
the chief financial officer of Borrower as presenting fairly the financial
condition of Borrower as of the dates and for the periods indicated and as
having been prepared in accordance with GAAP consistently applied, except as may
be otherwise disclosed in such financial statements or the notes thereto.
(d) Compliance Certificate. Simultaneously with the delivery of each
annual and quarterly financial statement referred to in Sections 6.5(a) and (b)
a completed certificate in form and substance acceptable to Lender ("Compliance
Certificate"), executed by an authorized officer of Borrower, and containing
such additional information as Lender may request from time to time, (i)
certifying that the financial statements being delivered with such Compliance
18
Certificate are true, complete and correct, (ii) setting forth in reasonable
detail the calculations required to establish whether Borrower was in compliance
with all financial covenants for the fiscal period in question, (iii) stating
(A) whether any Event of Default has occurred or is continuing since the date of
the previously delivered Compliance Certificate and the details of same, (B)
without limiting the requirements of (A), stating specifically whether any event
has occurred since the date of the previously delivered Compliance Certificate
which may result in an Event of Default; and (C) such other information as
Lender may from time to time reasonably require to be included in the Compliance
Certificate.
(e) Projections. Not later than thirty (30) days prior to the
beginning of each fiscal year, a month-to-month projected operating budget and
cash flow of Borrower for such fiscal year.
(f) Accounts and Accounts Payable Reports. On or before the 15th day
of each month as at the close of the preceding month, or more frequently if
Lender shall require: certificates and assignment schedules describing the
Eligible Accounts in detail and total, Accounts Receivable and accounts payable
agings and reconciliations and Collateral and Loan reconciliation reports, all
in such form as Lender may require.
(g) Daily Reporting. On or before 10:00 a.m. of each Business Day, in
the form attached hereto as Exhibit D or such other form as Lender shall from
time to time require, and signed by an Authorized Person, a report of all sales
and collections for the preceding day or if Borrower was opened for business on
a day other than a Business Day then for such day on the next Business Day.
(h) Account Debtor Information. On the first (1st) Business Day after
January 1 and July 1 of each year and at such other time as Lender may request,
provide to Lender a list of all Account Debtors to whom Borrower has made a sale
within the last six (6) months including the name of each Account Debtor, the
current address of each Account Debtor, the name of Borrower's current contact
at each Account Debtor and the current telephone number of each Account Debtor.
(i) Borrowing Base Certificates/Sales and Collections. With each
request for a Revolving Loan, and in any event not less frequently than weekly,
a complete Borrowing Base Certificate, in form and substance acceptable to
Lender, signed by the President of Borrower, accompanied by a report in form and
substance as Lender shall require, of all sales and collections, on a day by day
basis, since the prior Borrowing Base Certificate.
(j) Guarantors' Financial Statements. As soon as available but in no
event later than ninety (90) days after the end of each calendar year, a
financial statement of each Guarantor in form and substance satisfactory to
Lender.
(k) Change in Status. As soon as is commercially practicable, notice
identifying any Account that has ceased to be Eligible.
(l) Rejection, Delay, Claims. As soon as is commercially practicable,
notice of the rejection of goods, delay in performance, or claims made in regard
to Accounts.
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(m) Violations. As soon as is commercially practicable, a copy of any
complaint, citation, order or other notice of a violation or claim required to
be reported pursuant to Subsections 6.4(c), 6.4(d) or 6.4(e), which could have a
Material Adverse Effect.
(n) Other Documents. As soon as commercially practicable after demand:
(i) A certificate executed by an Authorized Person satisfactory
to Lender stating that there then exists no Default or Event
of Default;
(ii) All original and other documents evidencing a right to
payment, including but not limited to invoices, original
orders, and shipping and delivery receipts; and
(iii)Such other documents or information as Lender may
reasonably request, including financial projections and cash
flow analysis.
6.6 Access to Records and Property. At any time and from time to time, upon
request by Lender, give any representative of Lender access during normal
business hours to inspect and audit the Collateral and Borrower's other property
and to examine, copy and make extracts from Borrower's books and records.
6.7 Insurance.
(a) Liability and Property Insurance. Maintain at Borrower's expense
(with such insurers, in such amounts and with such deductibles as is
satisfactory to Lender) public liability and third party property damage
insurance and insurance on the Collateral (including without limitation,
insurance against fire, explosion, boiler damage, theft, burglary, spoilage,
pilferage, loss in transit and all other hazards and risks ordinarily insured
against by other owners or users of such properties in similar businesses),
which insurance shall be evidenced by policies (i) in form and substance
satisfactory to Lender, (ii) designating Lender and its assigns as additional
co-insureds and loss payees as their interests may appear from time to time,
(iii) containing a "breach of warranty clause" whereby the insurer agrees that a
breach of the insuring conditions or any negligence of Borrower or any other
Person shall not invalidate the insurance as to Lender and its assigns, and (iv)
requiring at least thirty (30) days' prior written notice to Lender and its
assigns before cancellation or any material change shall be effective.
(b) Copies of Policies. Upon request, deliver to Lender the original
of each policy evidencing insurance required by this Section 6.7, together with
evidence of payment of all premiums therefor.
(c) Notice and Proof of Loss. In the event of loss or damage in an
aggregate amount in excess of $20,000, forthwith notify Lender and file proofs
of loss satisfactory to Lender with the appropriate insurer.
(d) Proceeds. Forthwith upon receipt of insurance proceeds (for any
loss or property damage) in an aggregate amount in excess of $20,000, at the
option of Lender, (i) utilize same to repair, reconstruct, improve and restore
the damaged property to substantially the
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same or an improved condition or utility value as existed prior to such event,
or (ii) pay same to Lender to be credited against the Obligations, provided,
however, Borrower's receipt of insurance proceeds of $20,000 or less shall be
utilized to repair, reconstruct, improve or restore the damaged property as
aforesaid.
(e) No Duty for Lender. In no event shall Lender be required either to
(i) ascertain the existence of or examine any insurance policy, or (ii) advise
Borrower in the event such insurance coverage shall not comply with the
requirements of this Agreement.
6.8 Condition of Collateral; No Liens. Maintain or cause to be maintained
the Borrower Collateral and all its other assets and properties in good
condition and repair at all times, preserve the Borrower Collateral and all its
other assets and properties from loss, damage, or destruction of any nature
whatsoever, and keep the Borrower Collateral and all its other assets and
properties free and clear of any Encumbrance, except Permitted Encumbrances
including any identified on Schedule 5.16.
6.9 Proceeds of Collateral. Forthwith upon receipt, pay to Lender all
proceeds of Collateral, whereupon such proceeds shall be applied to the
Obligations in an order and manner as shall be determined in the sole and
absolute discretion of Lender.
6.10 Records. Maintain complete and accurate books and records of all its
operations and properties, including records of the Collateral and the status of
each of the Accounts.
6.11 Delivery of Documents. Notify Lender if any proceeds of Accounts shall
include, or any of the Accounts shall be evidenced by, notes, trade acceptances
or instruments or documents, or if any Inventory is covered by documents of
title or chattel paper, whether or not negotiable, and if required by Lender,
immediately deliver them to Lender appropriately endorsed. Borrower waives
protest regardless of the form of the endorsement. If Borrower fails to endorse
any instrument or document, Lender is authorized to endorse it on Borrower's
behalf.
6.12 United States Contracts. If any of the Accounts arises out of a
contract with the United States or any of its departments, agencies or
instrumentalities, immediately notify Lender, and if required by Lender, execute
any necessary instruments in order that all money due or to become due under
such contract shall be assigned to Lender and proper notice of the assignment
given under the Federal Assignment of Claims Act.
6.13 Further Assurances. From time to time, execute and deliver such
further documents and take such further actions as Lender may reasonably request
in order to carry out the purposes of this Agreement, the Relevant Documents and
any other instruments, documents and agreements which shall be executed
concurrently herewith or hereafter with regard to the transactions contemplated
by this Agreement.
6.14 Related Entities. Cause each Related Entity to comply with the
following covenants, to the extent relevant to such Person, as if stated with
reference to such Person: 6.1, 6.2, 6.3, 6.4 (provided such adverse event has
resulted in or may result in a Material Adverse Effect on such Related Entity),
6.5(a), 6.5(d) (as to annual statements only), 6.5(j), 6.5(m), 6.6 (only upon
the occurrence and during the continuance of a Default or Event of Default),
6.7(a) (insofar as such covenant requires Guarantor to maintain at its own
expense public liability and
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third party property damage insurance), 6.8 (as to the covenant to maintain its
assets in good condition and repair and preserve its assets and properties from
loss, damage or destruction), 6.10 (as to the covenant to maintain complete and
accurate books and records of all of its operations and properties) and 6.13.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, until full and final payment and performance
of the Obligations, Borrower shall not, unless Lender shall otherwise consent in
writing:
7.1 No Consolidation, Merger, Acquisition, Liquidation. Enter into any
merger, consolidation, reorganization or recapitalization; take any steps in
contemplation of dissolution or liquidation; conduct any part of Borrower's
business through any corporate subsidiary, unincorporated association or other
entity not disclosed on Schedule 5.15; or acquire the stock or assets of any
Person, whether by merger, consolidation, purchase of stock or otherwise.
7.2 Disposition of Assets or Collateral. Sell, lease, or otherwise transfer
or dispose of any or all of the Collateral or other assets of Borrower, other
than the sale of Inventory in the ordinary course of business and the retirement
of other assets in the normal course of operations.
7.3 Liens. Incur, create or permit to exist any Encumbrance, conditional
sale or other title retention agreement, financing lease having substantially
the same effect as any of the foregoing, or other preferential arrangement of
any type, in each case upon or with respect to any assets of Borrower, whether
now owned or hereafter acquired, except Permitted Encumbrances and to secure any
Liabilities incurred to the extent permitted under Section 7.4 hereof.
7.4 Liabilities. Incur, create, assume or permit to exist any Liability
secured by an Encumbrance except: (a) the Obligations; (b) Liabilities
subordinated to payment of the Obligations on terms approved by Lender in
writing; (c) those Liabilities existing on the date of this Agreement and shown
in the financial statements identified on Schedule 5.5; and (d) Liabilities
incurred in the ordinary course of Borrower's business in any fiscal year in an
aggregate amount in excess of $100,000.00.
7.5 Loans. Make loans to any Person (other than to NQL Inc., provided,
however, any such loans are subject to the provisions of the Subordination
Agreement) and travel advances to employees made in the ordinary course of
business.
7.6 Guaranties; Contingent Liabilities.
(a) Assume, guarantee, endorse, contingently agree to purchase or
otherwise become liable upon the obligation of any Person, except by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, or
(b) Agree to maintain the working capital or net worth of any Person
or to make investments in any Person (except for short-term investments of
excess cash as herein permitted).
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7.7 Dividends and Other Distributions. Declare or pay any cash dividend or
make any distribution on, or redeem, retire or otherwise acquire, directly or
indirectly, any shares of its stock, or make any distribution of assets to its
stockholders, except as otherwise authorized in the Subordination Agreement.
7.8 Transactions with Affiliates. Enter into any transaction with any
Affiliate of Borrower on a basis less favorable in any material respect to
Borrower than if such transactions were not with such a Person.
7.9 Sale of Inventory. Sell any of the Inventory on a ▇▇▇▇-and-hold,
guaranteed sale, sale-and-return, sale on approval or consignment basis, or any
other basis subject to a repurchase obligation or return right.
7.10 Removal of Collateral. Remove, or cause or permit to be removed, any
of the Collateral or other assets from the premises identified on Schedule 5.13
to this Agreement, except for sales of Inventory in the ordinary course of
business.
7.11 Transfer of Notes or Accounts. Sell, assign, transfer, discount or
otherwise dispose of any Accounts or any promissory note or other instrument
payable to it with or without recourse, except for collection without recourse
in the ordinary course of business.
7.12 Settlements. Compromise, settle or adjust any claim in a material
amount relating to any of the Collateral.
7.13 Modification of Governing Documents. Make or permit any material
change, alteration or modification of its Certificate of Incorporation or
Bylaws.
7.14 Change of Business. Cause or permit a change in the nature of its
business as conducted on the date of this Agreement.
7.15 Change of Location or Name. Change any of the following: (a) the
location stated in Section 5.12 for the maintenance of the books and records
relative to the Accounts and any of the other Borrower Collateral, (b) the
location of the principal place of business or chief executive office of
Borrower as stated in Section 5.14, (c) the locations at which Borrower conducts
any of its business or operations set forth in Schedule 5.14, (d) the location
of the Borrower Collateral set forth in Section 5.13 and Schedule 5.13, or (e)
the name under which Borrower conducts any of its business or operations.
7.16 Change of Accounting Practices. Change its present accounting
principles or practices in any material respect, except as may be required by
changes in GAAP.
7.17 Inconsistent Agreement. Enter into any agreement containing any
provision that would be violated by the performance of the Obligations or
Borrower's obligations under any document delivered or to be delivered by it in
connection with this Agreement or any Relevant Document.
7.18 Related Entities. Cause, suffer or permit any Related Entity to fail
to observe any of the following covenants, as if stated with reference to such
Related Entity, provided,
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however, such negative covenants shall not be deemed to be breached unless such
Related Entity's failure to comply with any such covenant is reasonably likely
to result in a Material Adverse Effect on such Related Entity: Sections 7.1,
7.2, 7.3, 7.6, 7.8, 7.14 and 7.17.
8. CONDITIONS TO MAKING EXTENSIONS OF CREDIT
8.1 Initial Extension of Credit. The obligation of Lender to make the first
Revolving Loan hereunder is subject to the satisfaction or waiver by Lender of
each of the following conditions precedent:
(a) Loan and Security Agreement/Relevant Documents. Receipt by Lender
of a fully-executed copy of this Agreement and all Relevant Documents.
(b) Schedules. Receipt by Lender of all schedules to this Agreement
prepared by Borrower and Lender's determination that any exceptions shown on
such schedules are satisfactory.
(c) Financing Statements. Receipt by Lender of all UCC financing
statements required by it, each signed by the applicable party.
(d) Landlord's/Mortgagee/Warehouse Waivers. Receipt by Lender of
waivers, in form and substance satisfactory to Lender and its counsel, for each
real property location either occupied by Borrower or any Guarantor, or where
Collateral is located, executed by the owner and/or lessor and/or mortgagee
and/or operator of such location.
(e) Guaranty Agreements. Receipt by Lender of a guaranty agreement
executed by each Guarantor in form and substance acceptable to Lender and its
counsel and each together with any document to be delivered in connection
therewith.
(f) Lockbox/Blocked Account Agreements. Receipt by Lender of executed
Lockbox and/or Blocked Account agreements as Lender shall require, in form and
substance acceptable to Lender.
(g) Insurance. Receipt by Lender of (i) copies of insurance policies
with respect to all Collateral, containing a long-form lender loss payable
and/or mortgagee endorsements, as applicable, satisfactory to Lender and which
in all other respects comply with the requirements hereof and any insurance
requirements set forth in the Relevant Documents, and (ii) a current insurance
certificate for all such policies identifying Lender as loss payee and
additional insured as to liability.
(h) Searches. Receipt by Lender of lien, judgment, and good standing
searches satisfactory to Lender.
(i) Appraisals. Receipt by Lender of, and satisfaction of Lender with,
an appraisal of the Collateral.
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(j) Collateral Examination. Completion by Lender of a Collateral
examination update in form and substance, and with results, satisfactory to
Lender.
(k) Completion of Due Diligence. Receipt by Lender of all information
requested from Borrower in connection with Lender's due diligence review of
Borrower and all other parties, including, without limitation, credit and
background investigations on ▇▇▇▇ ▇▇▇▇▇▇, and completion of such review by
Lender, with results satisfactory to Lender.
(l) Governing Documents. Receipt by Lender of the following documents
for Borrower and each Guarantor which is not a natural Person:
(i) a copy of its articles and/or certificate of incorporation
or certificate of formation certified as true and correct by
the President of such Person or other officer of such Person
who is acceptable to Lender;
(ii) good standing certificates issued by the Secretaries of
State of the state where incorporated or formed and each
state where required to be qualified to do business, each
dated not more than 30 days prior to the date hereof;
(iii)resolutions of its board of directors or members
authorizing the execution of this Agreement and the Relevant
Documents and their performance pursuant thereto, certified
by an officer or managing member as being true, correct,
complete and in effect as of the date hereof and in form and
substance satisfactory to Lender;
(iv) a copy of its by-laws or operating agreement and all
amendments thereto, certified by an authorized officer or
managing member as being true, correct, complete and in
effect;
(v) an incumbency certificate showing the names of its officers,
their respective titles and signatures and its directors and
shareholders or members and managers; and
(vi) such other documents, instruments, records, opinions,
assurances and papers relating to Borrower or any Guarantor
as Lender or its counsel may reasonably require, all in form
and substance satisfactory to Lender and its counsel.
(m) Opinion of Counsel. Receipt by Lender of an opinion of counsel to
Borrower and Guarantors, addressed to Lender and in all respects satisfactory to
Lender and its counsel.
(n) Estoppel Certificate. Receipt by Lender of a certificate, dated as
of the date hereof and executed by an Authorized Person, stating that, as of
such date, there has been no adverse change in the business, assets, operations,
prospects or condition, financial or otherwise, of the Borrower, that all
representations and warranties set forth in Section 5 and in the Relevant
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Documents are true and accurate as of the date hereof; that there are no
material pending or, to Borrower's knowledge, threatened litigation or material
contingent obligations in existence; and to such further effect as the Lender or
its counsel may reasonably require.
(o) No Default Certificate. Receipt by Lender of a certificate, dated
as of the date hereof and executed by an Authorized Person, stating that, as of
such date, no Event of Default or Default exists and to such further effect as
Lender or its counsel may reasonably require.
(p) Payoff Letters. If applicable, receipt by Lender of payoff letters
from each existing lender to Borrower whose loans are being repaid with proceeds
of the initial Revolving Loan, in form and substance satisfactory to Lender.
(q) Termination Statements, Etc. Receipt by Lender of all UCC
termination statements, mortgage discharges and other documents and instruments
of termination and release necessary so that the security interests granted to
Lender pursuant to this Agreement and the Relevant Documents are first and prior
liens and security interests, subject only to Permitted Encumbrances.
(r) Review of Contracts. Satisfactory review by Lender of all
Borrower's and Guarantors' material contracts.
(s) Fees. Receipt by Lender of all fees and expenses which are payable
to Lender, its counsel, or to third-party providers of services related to
the closing of this transaction.
(t) Intentionally Omitted.
(u) Warrant. Receipt by Lender of a fully executed warrant with
respect to certain stock ownership rights issued by Guarantor with respect to
the stock of Guarantor in form and substance acceptable to Lender and its
counsel.
(v) Minimum Excess Availability. Receipt by Lender of documentation
evidencing a minimum excess availability under the Revolving Loan of Five
Hundred Thousand Dollars ($500,000.00) after giving effect to the payment of all
related fees and expenses.
(w) Subordination Agreement. Receipt by Lender of a fully executed
subordination agreement from NQL Inc. in form and substance acceptable to Lender
and its counsel, which shall provide, inter alia, for Borrower's ability to make
payments to NQL Inc. provided that: (i) Borrower is not in Default of any term
of provision of this Agreement or any Relevant Document at or immediately after
the time of such payment; and (ii) there shall be a minimum excess availability
under the Revolving Loan immediately after any such payment in an amount at
least equal to Five Hundred Thousand Dollars ($500,000.00).
(x) Miscellaneous. Receipt by Lender of such other documents,
instruments, records, opinions, assurances and papers as Lender or its counsel
may reasonably require, all in form and substance satisfactory to Lender and its
counsel.
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8.2 Conditions to All Extensions of Credit.
(a) Lender's obligation to advance any Revolving Loan is subject to
the condition that, as of the date of such Revolving Loan, no Event of Default
or Default shall have occurred and be continuing and that the matters set forth
in Sections 5.1 through 5.22 and the representations set forth in the Relevant
Documents continue to be true and complete.
(b) Borrower's acceptance of each Revolving Loan under this Agreement
shall constitute a confirmation, as of the date of such Revolving Loan, of the
matters set forth in Sections 5.1 through 5.22, of the representations set forth
in the Relevant Documents, and that no Default or Event of Default then exists.
If requested by Lender, Borrower shall further confirm such matters by delivery
of a certificate dated the day of such Revolving Loan and signed by an
Authorized Person.
9. ADDITIONAL POWERS OF LENDER
9.1 Powers of Lender.
(a) Powers of Attorney. Borrower hereby constitutes and appoints
Lender (and any employee or agent of Lender, with full power of substitution)
its true and lawful attorney and agent in fact to take any or all of the actions
described below in Lender's or Borrower's name and at Borrower's expense.
(b) Evidence of Liens. Lender may execute such financing statements
and other documents and take such other actions as Lender deems necessary or
proper in order to create, perfect or continue the security interests and other
liens provided for by this Agreement or any of the Relevant Documents, and
Lender may file the same (or a photocopy of appropriate portions of this
Agreement or of any financing statement signed by Borrower) in any appropriate
governmental office.
(c) Preservation of Collateral. Lender may take any and all actions
that it deems necessary or proper to preserve its interest in the Collateral,
including without limitation the payment of debts of Borrower that might impair
the Collateral or Lender's security interest therein, the purchase of insurance
on the Collateral, the repair or safeguarding of the Collateral, or the payment
of taxes, assessments or other liens thereon. All sums so expended by Lender
shall be added to the Obligations, shall be secured by the Collateral, and shall
be payable on demand with interest at the Default Rate from the respective dates
such sums are expended.
(d) Lender's Right to Cure. In the event Borrower fails to perform any
of its duties or obligations hereunder, then Lender may perform the same but
shall not be obligated to do so. All sums so expended by Lender shall be added
to the Obligations, shall be secured by the Collateral, and shall be payable on
demand with interest at the Default Rate from the respective dates such sums are
expended.
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(e) Verification of Accounts. Lender may make test verifications of
any and all Accounts in any manner and through any medium Lender considers
advisable, and Borrower shall render any necessary assistance.
(f) Collections; Modification of Terms. Upon the occurrence and during
the continuance of an Event of Default, Lender may demand, ▇▇▇ for, collect and
give receipts for any money, instruments or property payable or receivable on
account of or in exchange for any of the Collateral, or make any compromises it
deems necessary or proper, including without limitation extending the time of
payment, permitting payment in installments, or otherwise modifying the terms or
rights relating to any of the Collateral, all of which may be effected without
notice to or consent by Borrower and without otherwise discharging or affecting
the Obligations, the Collateral or the security interest granted under this
Agreement or any of the Relevant Documents.
(g) Notification of Account Debtors. (i) Borrower, at the request of
Lender, shall notify the Account Debtors of Lender's security interest in its
Accounts; and (ii) Lender may notify the Account Debtors on any of the Accounts
to make payment directly to Lender, and Lender may endorse all items of payment
received by it that are payable to Borrower.
(h) Notification as to Inventory. Lender may notify the bailee of any
Inventory of Lender's security interest therein.
(i) Endorsements. Lender may endorse Borrower's name on checks, notes,
acceptances, drafts, invoices, bills of lading and any other documents or
instruments requiring Borrower's endorsement.
(j) Mails. Upon the occurrence and continuance of any Event of
Default, Lender may notify the postal authorities to deliver all mail, parcels,
and other material addressed to Borrower to Lender at such address as Lender may
direct, and Lender may open and deal with same as it deems necessary or proper.
(k) Insurance. Lender may file proofs of loss and claim with respect
to any of the Collateral with the appropriate insurer, and may endorse in its
own and Borrower's name any checks or drafts constituting insurance proceeds.
9.2 Irrevocability; Lender's Discretion. Borrower covenants and agrees that
any action described in Section 9.1 may be taken at Lender's sole and absolute
discretion, at any time and from time to time, and whether prior or subsequent
to an Event of Default, and Borrower hereby ratifies and confirms all actions so
taken. Borrower further covenants and agrees that the powers of attorney granted
by Section 9.1 are coupled with an interest and shall be irrevocable until full
and final payment and performance of the Obligations; that said powers are
granted solely for the protection of Lender's interest and Lender shall have no
duty to exercise any thereof; that the decision whether to exercise any of such
powers, and the manner of exercise, shall be solely within Lender's discretion;
and that neither Lender nor any of its directors, officers, employees or agents
shall be liable for any act of omission or commission, or for any mistake or
error of judgment, in connection with any such powers.
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10. EVENTS OF DEFAULT
The occurrence of any of the following shall constitute an Event of Default:
10.1 Failure to Pay. Borrower fails to pay (a) when due any principal of
any Revolving Loan or (b) within three (3) days of when due, any interest on any
Revolving Loan or any other sum owing to Lender, including without limitation
any of the Obligations, other than the principal of any Revolving Loan, arising
under this Agreement or any of the Relevant Documents or under any other
agreement with Lender or an Affiliate of Lender;
10.2 Failure to Perform. Borrower or any Guarantor fails to perform or
observe any covenant, term or condition under Section 7 of this Agreement or
Borrower or any Guarantor fails to perform or observe any other covenant, term
or condition of this Agreement or the Relevant Documents (other than as
referenced in this Section 10) and such failure shall continue for fifteen (15)
days after notice thereof to Borrower from Lender, provided such failure is
curable and such covenant, term or condition does not specify a notice and cure
period;
10.3 Cross Default; Default on Other Debt. Failure to pay any indebtedness
for borrowed money in an aggregant amount in excess of $20,000 of Borrower or of
any Guarantor to any third party (except as contemplated in the Subordination
Agreement); or a default occurs under or in respect of indebtedness for borrowed
money in an aggregant amount in excess of $20,000 of Borrower or of any
Guarantor to any third party that entitles such third party to declare such
indebtedness or other obligation due prior to its date of maturity (except as
contemplated in the Subordination Agreement);
10.4 False Representation or Warranty. Any representation, warranty or
statement contained in this Agreement, in any of the Relevant Documents or in
any other writing delivered to Lender in connection with the Collateral, this
Agreement or any of the transactions contemplated hereby or thereby, proves to
have been incorrect in any material respect when made or deemed made;
10.5 Cessation of Business. Borrower or any Guarantor ceases to do business
as a going concern;
10.6 Change in Condition. There occurs any Material Adverse Effect which,
in the opinion of Lender, impairs Lender's security or increases its risks;
10.7 Change of Control. At any time NQL Inc. does not own all of the equity
interest in Borrower.
10.8 Change in Management. At any time ▇▇▇▇ ▇▇▇▇▇▇ ceases to be involved in
the daily management of Borrower and a replacement reasonably satisfactory to
Lender is not appointed and acting in the capacity of president or chief
operating officer of Borrower within sixty (60) days after ▇▇▇▇ ▇▇▇▇▇▇ ceases to
be so involved.
10.9 Insecurity. At any time Lender reasonably believes that the prospect
of payment or performance of any of the Obligations is impaired;
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10.10 Liquidation or Dissolution. Borrower or any Guarantor takes any
action to authorize its liquidation or dissolution;
10.11 Inability to Pay Debts. Borrower or any Guarantor (a) becomes unable
or fails to pay its debts generally as they become due, (b) admits in writing
its inability to pay its debts, or (c) proposes or makes a composition agreement
with creditors, a general assignment for the benefit of creditors, or a bulk
sale;
10.12 Bankruptcy; Insolvency. Any proceeding is instituted by or against
Borrower or any Guarantor (a) seeking to adjudicate it bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or (b) seeking appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property, or Borrower
takes any action to authorize or consent to any action described in this Section
10.12.
10.13 Judgments. One or more judgments or orders for the payment of money
exceeding Twenty Thousand Dollars ($20,000.00) in the aggregate are rendered
against Borrower or any Guarantor, and, if adequate reserves have not been
established therefor (as determined in Lender's discretion), any such
judgment(s) or order(s) continues unsatisfied and not effectively stayed for a
period of thirty (30) or more consecutive days;
10.14 Attachment. Any part of the assets of Borrower or any Guarantor which
Lender deems material becomes subject to attachment, execution, levy or like
process which shall not have been effectively stayed;
10.15 Condemnation. Any governmental agency, or other entity with power to
do so, commences proceedings to condemn, seize or expropriate assets of Borrower
or any Guarantor necessary for the conduct of Borrower's or any Guarantor's
business as conducted on the date of this Agreement, without material change, or
Borrower or any Guarantor abandons such assets or suspends operation thereof for
a period of thirty (30) or more consecutive days;
10.16 Loss of Lien. Any security interest or lien granted by this Agreement
or the Relevant Documents that has been perfected and thereafter ceases to be a
valid, binding, enforceable and perfected first priority security interest in or
lien on the Collateral.
10.17 Environmental Laws. Non-compliance by Borrower or any Guarantor with
any Environmental Laws, if such non-compliance results in or could result in a
Material Adverse Effect;
10.18 Necessary Licenses. Non-compliance with or loss or failure by the
Borrower or any Guarantor to obtain or maintain any necessary license, permit,
approval, certification, agreement or accreditation issued by any licensor or
Governmental Authority material to them or their property or business, or
authorization, if such non-compliance, loss or failure results in or could
result in a Material Adverse Effect;
10.19 ERISA. With respect to any Plan, there occurs or exists any of the
events or conditions described in the following clauses (a) through (h) and such
event or condition, together with all like events or conditions, could in the
opinion of Lender subject Borrower to
30
any tax, penalty or other liability that might, singly or in the aggregate, have
a Material Adverse Effect: (a) a reportable event as defined in Section 4043 of
ERISA, (b) a prohibited transaction as defined in Section 406 of ERISA or
Section 4975 of the Code, (c) termination of such Plan or filing of notice of
intention to terminate, (d) institution by the PBGC of proceedings to terminate,
or to appoint a trustee to administer, such Plan, or circumstances that
constitute grounds for any such proceedings, (e) complete or partial withdrawal
from a multiemployer Plan, or the reorganization, insolvency or termination of a
multiemployer Plan, (f) an accumulated funding deficiency within the meaning of
ERISA, (g) violation of the reporting, disclosure or fiduciary responsibility
requirements of ERISA or the Code, or (h) any act or condition which could
result in direct, indirect or contingent liability to any Plan or the PBGC; or
10.20 Guaranty. Any guaranty of any of the Obligations ceases to be
effective or any Guarantor denies liability thereunder or revokes his or its
guaranty, or there shall occur the death or incompetence of any Guarantor who is
a natural Person.
11. REMEDIES
11.1 Rights in General. Automatically upon the occurrence of an Event of
Default described in Section 10.12, and at the option of Lender upon the
occurrence of any other Event of Default, (a) all provisions for additional
Revolving Loans under this Agreement shall terminate, (b) the principal and
interest of the Revolving Loans, all other amounts payable under this Agreement
and all other Obligations shall become and be immediately due and payable,
without presentment, demand, protest, or further notice of any kind, all of
which are hereby expressly waived by Borrower, and (c) Lender shall be entitled
to exercise forthwith (to the extent and in such order as Lender may elect, in
its sole and absolute discretion) any or all rights and remedies provided for in
this Agreement or any Relevant Documents, all rights and remedies of a secured
party under the UCC, and all other rights and remedies that may otherwise be
available to Lender by agreement or at law or in equity.
11.2 Specific Rights Regarding Collateral. In addition to the rights as
stated generally in Section 11.1, Borrower agrees that, upon the occurrence of
an Event of Default, Lender shall be entitled to the rights and remedies, and
Borrower shall have the obligations, set forth below:
(a) Lender may enter upon the premises where any of the Collateral is
located and take possession thereof and, at Lender's option, remove or sell in
place any or all thereof.
(b) Upon notice from Lender, Borrower shall promptly at its expense
assemble any or all of the Collateral and make it available at a reasonably
convenient place designated by Lender.
(c) Lender may, with or without judicial process, sell, lease or
otherwise dispose of any or all of the Collateral at public or private sale or
proceedings, by one or more contracts, in one or more parcels, at the same or
different times and places, with or without having the Collateral at the place
of sale or other disposition, to such persons or entities, for cash or credit or
for future delivery and upon such other terms, as Lender may in its discretion
deem
31
best in each such matter. The purchaser of any of the Collateral at any
such sale shall hold the same free of any equity of redemption or other right or
claim of Borrower, all of which - together with all rights of stay, exemption or
appraisal under any statute or other law now or hereafter in effect - Borrower
hereby unconditionally waives and releases to the fullest extent permitted by
law. If any of the Collateral is sold on credit or for future delivery, Lender
shall not be liable for the failure of the purchaser to pay for same and, in the
event of such failure, Lender may resell such Collateral.
(d) Borrower hereby further agrees that notice of the time and place
of any public sale, or of the time after which any private sale or other
intended disposition or action relating to any of the Collateral is to be made
or taken, shall be deemed commercially reasonable notice thereof, and shall
satisfy the requirements of any applicable statute or other law, if such notice
(i) is delivered not less than five (5) Business Days prior to the date of the
sale, disposition or other action to which the notice relates, or (ii) is mailed
(by ordinary first class mail, postage prepaid) not less than ten (10) Business
Days prior thereto. Lender shall not be obligated to make any sale or other
disposition or take other action pursuant to such notice and may, without other
notice or publication, adjourn or postpone any public or private sale or other
disposition or action by announcement at the time and place previously fixed
therefor, and such sale, disposition or action may be held or accomplished at
any times or places to which the same may be so adjourned or postponed.
(e) Lender may purchase any or all of the Collateral at any public
sale and may purchase at private sale any of the Collateral that is of the type
customarily sold in a recognized market or the subject of widely distributed
price quotations or as may be further permitted by law. Lender may make payment
of the purchase price for any Collateral by credit against the then outstanding
amount of the Obligations.
(f) Lender may at its discretion retain any or all of the Collateral
and apply the same in satisfaction of part or all of the Obligations.
(g) Any cash proceeds of sale, lease or other disposition of
Collateral shall be applied as follows:
First: To the expenses of collecting, enforcing, safeguarding,
holding and disposing of Collateral, and to other expenses
of Lender in connection with the enforcement of this
Agreement, any of the other Relevant Documents, or any other
agreement relating to any of the Obligations (including
without limitation court costs and the reasonable fees and
expenses of attorneys, accountants and appraisers), together
with interest at the Default Rate from the respective dates
such sums are expended;
Second: Any surplus then remaining to the payment of interest and
principal of the Revolving Loans and other sums payable as
part of the Obligations, in such order as Lender elects; and
Third: Any surplus then remaining to Borrower or whoever may be
lawfully entitled thereto.
32
11.3 Set-Off. Borrower further agrees that:
(a) Upon the occurrence of an Event of Default, Lender is hereby
authorized at any time and from time to time, without notice to Borrower (any
such notice being expressly waived by Borrower), to set off and apply (or cause
any Affiliate of Lender to set off and apply) any and all deposits (including
general or special, time or demand, provisional or final but excluding ▇▇▇▇▇ or
other trust accounts) at any time held and other indebtedness at any time owing
by Lender or such Affiliate to or for the credit or the account of Borrower,
against any or all of the Obligations of Borrower now or hereafter existing
under this Agreement irrespective of whether or not Lender shall have made any
demand and although such Obligations may be unmatured.
(b) Any such set-off shall be deemed to have occurred upon the
occurrence of such Event of Default, notwithstanding that the book entries
relating to same may be made at a later date.
11.4 Cumulative Remedies; No Waiver by Lender. No remedy referred to in
this Agreement (including the right of set-off) is intended to be exclusive, but
each shall be cumulative and in addition to any other remedy referred to in this
Agreement or otherwise available to Lender by agreement or at law or in equity,
and Lender may exercise its remedies concurrently, independently, or
successively. No express or implied waiver by Lender of any Default or Event of
Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Default or Event of Default. The failure or delay of Lender in
exercising any rights granted it hereunder upon any occurrence of any of the
contingencies set forth herein shall not constitute a waiver of any such right
upon the continuation or recurrence of any such contingency or similar
contingencies, and any single or partial exercise of any particular right by
Lender shall not exhaust the same or constitute a waiver of any other right.
11.5 Waivers and Agreements Relating to Remedies. In connection with any
action or proceeding arising out of or relating in any way to this Agreement,
any of the Revolving Loans, any of the Relevant Documents, any other agreement
relating to any of the Obligations, any of the Collateral, or any act or
omission relating to any of the foregoing:
(a) Borrower waives personal service of any summons, complaint or
other process in connection with any such action or proceeding and agrees that
service thereof may be made, as Lender may elect, by certified mail directed to
Borrower at the location provided for notices to Borrower under this Agreement
or, in the alternative, in any other form or manner permitted by law;
(b) Borrower agrees that all of the Collateral constitutes equal
security for all of the Obligations, and agrees that Lender shall be entitled to
sell, retain or otherwise deal with any or all of the Collateral, in any order
or simultaneously as Lender shall determine in its sole and absolute discretion,
free of any requirement for the marshaling of assets or other restriction upon
Lender in dealing with the Collateral; and
33
(c) Borrower agrees that Lender may proceed directly against Borrower
for collection of any or all of the Obligations without first selling, retaining
or otherwise dealing with any of the Collateral.
12. ADDITIONAL WAIVERS AND CONSENTS OF BORROWER
12.1 Waivers. Borrower waives demand, presentment, notice of dishonor and
protest of any instruments either of Borrower or others which may be included in
the Collateral.
12.2 Consents. Borrower consents to (a) any extension, postponement of time
of payment or other indulgence, (b) any substitution, exchange or release of
Collateral, (c) any addition to, or release of, any party or person primarily or
secondarily liable, and (d) any acceptance of partial payments on any Accounts
or instruments and the settlement, compromising or adjustment thereof.
12.3 Applications of Payments. Borrower consents and agrees that, whether
or not an Event of Default shall have occurred, Lender shall be entitled to
apply the proceeds of any payment made to Lender by or on behalf of Borrower,
including, without limitation, any and all proceeds arising from any of the
Collateral securing the obligations of Borrower to Lender, in the manner and
against the obligation or obligations as determined in the sole and absolute
discretion of Lender.
13. TERMINATION OF AGREEMENT
13.1 Termination by Lender. Upon the Termination Date, (a) all provisions
for additional Revolving Loans under this Agreement shall terminate, (b) the
principal and interest of the Revolving Loans, and all other Obligations, shall
become and be immediately due and payable, without presentment, demand, protest,
or further notice of any kind, all of which are hereby expressly waived by
Borrower, and (c) Lender shall be entitled to exercise forthwith (to the extent
and in such order as Lender may elect, in its sole and absolute discretion) any
or all of the rights and remedies referred to in Section 11 for the collection
of such amounts.
13.2 Termination by Borrower.
Borrower may terminate this Agreement as of any date that is not less than
sixty (60) days, and not more than one hundred twenty (120) days, after Borrower
gives written notice of its intent to terminate this Agreement, provided that on
such Termination Date the principal and interest of the Loans, and all other
Obligations, have been paid in full together with a termination fee of three
(3%) (calculated on the total amount of the Revolving Loan facility) percent if
Borrower terminates this Agreement prior to the date that is one (1) year from
the date hereof.
13.3 Effect on Revolving Loan Limit. Upon the giving of notice of
termination pursuant to Section 13.2, the Revolving Loan Limit thereafter shall
not exceed the principal
34
balance of the Revolving Loans then outstanding. All other requirements for
Revolving Loans shall remain unchanged.
13.4 Mutual Release. Upon full and final payment and performance of the
Obligations, Borrower and Lender shall thereupon automatically each be fully,
finally and forever released and discharged from any and all claims, liabilities
and obligations (except as they may relate to any indemnifications provided by
Borrower to Lender hereunder and any other Obligations, duties or liabilities
that expressly survive the termination of this Agreement or any Relevant
Documents, all of which are expressly intended to survive payment of the
Obligations and the termination hereof whether in contract or tort, arising out
of or relating in any way to this Agreement, any of the Revolving Loans, or any
act or omission relating to any of the foregoing or to any of the Collateral or
Relevant Documents).
14. COSTS, EXPENSES AND TAXES
14.1 Obligation of Borrower for Costs, Expenses and Taxes. Borrower agrees
to pay on demand:
(a) all costs and expenses (whether paid or payable by Lender) in
connection with the preparation, execution, delivery and administration of this
Agreement, the Relevant Documents, and the other documents to be delivered in
connection with this Agreement, or any amendments to any of the foregoing
(including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel for Lender and the cost of appraisals and reappraisals of
Collateral);
(b) all losses, costs and expenses (whether paid or payable by Lender)
incurred by Lender in connection with the enforcement of this Agreement, any of
the Relevant Documents, or any other agreement relating to any of the
Obligations, or in the preservation of any rights of Lender under any thereof,
or in connection with legal advice relating to the rights or responsibilities of
Lender under any thereof (including without limitation court costs and the
reasonable fees and expenses of attorneys, accountants and appraisers), and any
expenditure made by Lender in accordance with Section 9.1(c) or (d); and
(c) any and all stamp and other taxes payable or determined to be
payable in connection with the execution and delivery of this Agreement or any
of the Relevant Documents, and all liabilities to which Lender may become
subject as the result of delay in paying or omission to pay such taxes.
14.2 Reimbursements Charged to Revolving Loan. With respect to any amount
advanced by Lender and required to be reimbursed by Borrower pursuant to the
foregoing provisions of this Section 14, it is hereby agreed that Lender may
charge any such amount to Borrower's Revolving Loan on the dates such
reimbursement is made. Borrower's obligations under this Section 14 shall
survive termination of the other provisions of this Agreement.
35
15. INDEMNIFICATION BY BORROWER/WAIVER OF CLAIMS
15.1 Indemnification. Borrower hereby covenants and agrees to indemnify,
defend and hold harmless Lender and its officers, partners, employees and agents
(collectively, the "Indemnified Parties") from and against any and all claims,
damages, liabilities, costs and expenses (including with limitation, the
reasonable fees and out-of-pocket expenses of counsel) which may be incurred by
or asserted against Lender or any such other individual or entity in connection
with (except to the extent arising out of the gross negligence or willful
misconduct of any such Indemnified Party):
(a) any investigation, action or proceeding arising out of or in any
way relating to this Agreement, any of the Revolving Loans, any of the Relevant
Documents, any other agreement relating to any of the Obligations, any of the
Collateral, or any act or omission relating to any of the foregoing; or
(b) any taxes, liabilities, claims or damages relating to the
Collateral or Lender's liens thereon; or
(c) the correctness, validity or genuineness of any instruments or
documents that may be released or endorsed to Borrower by Lender (which shall
automatically be deemed to be without recourse to Lender in any event), or the
existence, character, quantity, quality, condition, value or delivery of any
goods purporting to be represented by any such documents; or
(d) any broker's commission, finder's fee or similar charge or fee in
connection with the Revolving Loans and the transactions contemplated in this
Agreement, provided, however, it is understood that Lender has incurred no such
fee or charge with respect to this transaction.
15.2 Savings Clause for Indemnification. To the extent that the undertaking
to indemnify, pay and hold harmless set forth in this Section 15 may be
unenforceable because it is violative of any law or public policy, Borrower
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all matters referred to
under this Section 15.
15.3 Waiver. To the extent permitted by applicable law, no claim may be
made by Borrower or any other person against Lender or any of its affiliates,
partners, officers, employees, agents, attorneys or consultants for any special,
indirect, consequential or punitive damages in respect of any claim for breach
of contract, tort or any other theory of liability arising out of or related to
the transactions contemplated by this Agreement or any act, omission or event
occurring in connection therewith; and Borrower hereby waives, releases and
agrees not to ▇▇▇ upon any claim for any such damages, whether or not accrued
and whether or not known or suspected to exist in its favor. Neither Lender nor
any of its affiliates, partners, officers, employees or agents shall be liable
for any action taken or omitted to be taken by it or them under or in connection
with this Agreement or the transactions contemplated hereby, except for its or
their own gross negligence or willful misconduct.
36
16. MISCELLANEOUS
16.1 Entire Agreement; Amendments; Lender's Consent. This Agreement
(including the Exhibits and Schedules thereto) and the Relevant Documents
supersede, with respect to their subject matter, all prior and contemporaneous
agreements, understandings, inducements or conditions between the respective
parties, whether express or implied, oral or written. No amendment or waiver of
any provision of this Agreement or any of the Relevant Documents, nor consent to
any departure by Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by Lender, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
16.2 Notices. All notices and other communications relating to this
Agreement (or to any of the Relevant Documents, unless otherwise specified
therein) shall be in writing, and addressed as follows and sent by hand
delivery, recognized overnight courier service or telecopier with confirmation
of delivery:
If to Lender: Keltic Financial Partners, LP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇
▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Managing Director
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Pitney, ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Borrower: Delta Computec Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, President
Facsimile No. ______
With a copy to: ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile No. ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as the respective party or its successors or assigns
may subsequently designate by proper notice. All notices shall be effective one
(1) Business Day after deposit with a courier or when received, if earlier.
The failure to transmit a copy of the notice to the foregoing counsel shall not
constitute defective notice to the Borrower or Lender.
37
16.3 Gender. Throughout this Agreement, the masculine shall include the
feminine and vice versa and the singular shall include the plural and vice
versa, unless the context of this Agreement indicates otherwise.
16.4 Participation; Assignment. Lender shall have the right, without the
necessity of any further consent or authorization by the Borrower, to sell,
assign, securitize or grant participations in all, or a portion of, Lender's
interest in the Revolving Loans, to other financial institutions of the Lender's
choice and on such terms as are acceptable to Lender in its sole discretion.
Lender shall request that each prospective participant or purchaser maintain the
information and documentation submitted to such Person in confidence in
accordance with their customary practices.
16.5 Cross Default; Cross Collateral. Borrower hereby agrees that (a) all
other agreements between Borrower and Lender or any of Lender's Affiliates are
hereby amended so that a default under this Agreement is a default under all
such other agreements and a default under any one of the other agreements is a
default under this Agreement, and (b) the Collateral under this Agreement
secures the Obligations now or hereafter outstanding under all other agreements
between Borrower and Lender or any of Lender's Affiliates and the collateral
pledged under any other agreement with Lender or any of its Affiliates secures
the Obligations under this Agreement.
16.6 Binding Effect; Governing Law. This Agreement shall be binding upon
and inure to the benefit of Borrower and Lender and their respective successors
and assigns, except that Borrower shall not have the right to assign its rights
or obligations hereunder or any interest herein without the prior written
consent of Lender. This Agreement, the Relevant Documents and the other
documents delivered in connection with this Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
16.7 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement.
16.8 Severability of Provisions. Any provision of this Agreement or any of
the Relevant Documents that is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of this
Agreement or the Relevant Documents or affecting the validity or enforceability
of such provision in any other jurisdiction.
16.9 Table of Contents; Headings. The table of contents and headings
preceding the text of this Agreement are inserted solely for convenience of
reference and shall not constitute a part of this Agreement or affect its
meaning, construction or effect.
16.10 Exhibits and Schedules. All of the Exhibits and Schedules to this
Agreement are hereby incorporated by reference herein and made a part hereof.
16.11 Further Assurances. The Borrower shall execute and deliver from time
to time, such additional instruments, certificates and documents, and shall take
all actions, as the Lender shall reasonably request for the purpose of
implementing or effectuating the provisions of this
38
Agreement, or any Relevant Document, and upon the exercise by the Lender of any
power, right, privilege or remedy pursuant to this Agreement or any Relevant
Document, which require any consent, approval, registration, qualification or
authorization of any Governmental Authority, execute and deliver all
applications, certifications, instruments and other documents and papers that
the Lender that may be so required to obtain.
17. FURTHER ACKNOWLEDGMENTS AND AGREEMENTS OF BORROWER AND LENDER
17.1 General Acknowledgments.
(a) Borrower and Lender acknowledge and agree that they (i) have
independently reviewed and approved each and every provision of this Agreement,
including the Exhibits and Schedules attached hereto and any and all other
documents and items as they or their counsel have deemed appropriate, and (ii)
have entered into this Agreement and have executed the closing documents
voluntarily, without duress or coercion, and have done all of the above with the
advice of their legal counsel.
(b) Borrower and Lender acknowledge and agree that, to the extent
deemed necessary by them or their counsel, they and their counsel have
independently reviewed, investigated and/or have full knowledge of all aspects
of the transaction and the basis for the transaction contemplated by this
Agreement and/or have chosen not to so review and investigate (in which case,
Borrower acknowledges and agrees that it has knowingly and upon the advice of
counsel waived any claim or defense based on any fact or any aspect of the
transaction that any investigation would have disclosed), including without
limitation:
(i) the risks and benefits of the various waivers of rights
contained in this Agreement, including but not limited to,
the waiver of the right to a jury trial; and
(ii) the adequacy of the consideration being transferred under
this Agreement, including the adequacy of the consideration
for the mutual release as set forth in Section 13.4.
(c) Borrower has made its own investigation or elected not to make
such investigation as to all matters it deems material to this transaction and
has not relied on any statement of fact or opinion, disclosure or non-disclosure
of Lender, and has not been induced by Lender in any way, except for the
consideration recited herein, in entering into this Agreement and executing the
closing documents contemplated hereby, and further acknowledges that Lender has
not made any warranties or representations of any kind in connection with this
transaction except as specifically set forth herein or in the documents executed
in conjunction with this Agreement, and Borrower is not relying on any such
representations or warranties.
(d) Borrower acknowledges and agrees that, after careful
consideration, it does not deem any matter not reviewed or investigated by it to
be material to this Agreement and the transactions contemplated hereby.
39
17.2 WAIVER OF JURY TRIAL.
BORROWER AND LENDER ACKNOWLEDGE AND AGREE THAT ANY SUIT, ACTION OR
PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY BORROWER OR
LENDER ON OR WITH RESPECT TO ANY REVOLVING LOANS, THE OBLIGATIONS OR THE
RELEVANT DOCUMENTS OR THE DEALINGS OF THE PARTIES WITH RESPECT HERETO OR THERETO
SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY AND EACH PARTY HEREBY WAIVES
THE RIGHT TO TRIAL BY JURY. BORROWER AND LENDER AGREE THAT THIS SECTION IS A
MATERIAL AND SPECIFIC ASPECT OF THIS AGREEMENT AND LENDER WOULD NOT EXTEND
CREDIT IF THE WAIVER SET FORTH IN THIS SECTION WAS NOT PART OF THIS AGREEMENT.
17.3 Consent to Jurisdiction; Service of Process.
(a) Borrower and Lender consent to the jurisdiction of the State
Supreme Court in the County of Westchester, New York, and of the Federal
District Courts in the Southern District of New York; irrevocably waive any
objection they may now or hereafter have to the laying of venue of any suit,
action or proceeding enumerated in Section 17.2 in such courts; and further
irrevocably waive any right and agree not to claim or object that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum
(b) Borrower waives personal service of any summons, complaint or
other process in connection with any such action or proceeding and agrees that
service thereof may be made as Lender may elect, by certified mail directed to
Borrower at the location provided for notices to Borrower under this Agreement
or, in the alternative, in any other form or manner permitted by law.
17.4 ACKNOWLEDGMENT OF WAIVERS. THIS AGREEMENT PROVIDES FOR THE WAIVER OF
CERTAIN RIGHTS AND REMEDIES. BORROWER ACKNOWLEDGES THAT IT IS REPRESENTED BY
COUNSEL (OR HAS HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL) AND THAT SUCH
COUNSEL HAS REVIEWED AND EXPLAINED THE MEANING OF THESE WAIVERS TO BORROWER.
[Signature Page Follows]
40
IN WITNESS WHEREOF, the undersigned have set their hands and seals or
caused these presents to be executed by their proper corporate officers and
sealed with their seal the day and year first above written.
DELTA COMPUTEC INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
Attest:
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Assistant Secretary
KELTIC FINANCIAL PARTNERS, LP
By: Keltic Financial Services LLC,
General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
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EXHIBIT A
BORROWING BASE CERTIFICATE
42
EXHIBIT B
NOTICE OF BORROWING
To: Keltic Financial Partners, LP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇
▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Date:
Pursuant to that certain Loan and Security Agreement dated May __, 2001, as
amended and as the same may be further amended from time to time (the
"Agreement"), we hereby give you this Notice of Borrowing with respect to
Revolving Loans outstanding or to be made to the Borrower pursuant to the
Agreement:
(i) Requested Amount: $___________
(ii) Requested Date of Funding: ___________
(iii) Purpose of Borrowing: _______________________
[---------------------------------]
By:
----------------------------------------
Name:
Title:
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EXHIBIT C
REVOLVING NOTE
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SCHEDULE 1
DESCRIPTION OF BORROWER COLLATERAL
"Collateral" shall mean all of the following:
(a) "Account" -- all items described in the UCC definition thereof and all
of the following, whether or not so described (in all cases whether now existing
or hereafter created): all obligations of any kind at any time due or owing to
Borrower and all rights of Borrower to receive payment or any other
consideration (whether classified under the UCC or the law of any other state as
accounts, accounts receivable, contract rights, chattel paper, General
Intangibles, or otherwise) including without limitation invoices, contract
rights, accounts receivable, general intangibles, choses-in-action, notes,
drafts, acceptances, instruments and all other debts, obligations and
liabilities in whatever form owing to Borrower from any person, firm,
corporation, governmental authority or other entity, together with all security
for any thereof, and all of Borrower's rights to goods sold (whether delivered,
undelivered, in transit or returns), represented by any thereof, together with
all proceeds and products of any of the foregoing.
(b) "Equipment" -- all items described in the UCC definition thereof and
all of the following, whether or not so described (in all cases whether now
owned or hereafter acquired by Borrower and wherever located): all equipment,
machinery, furniture, fixtures, motor vehicles, parts, supplies and tools, and
all other tangible personal property similar to any of the foregoing, and all
repairs, modifications, alterations, replacements, additions, controls and
operating accessories therefor and proceeds and products thereof.
(c) "General Intangibles" -- all items described in the UCC definition
thereof and all of the following whether or not so described, owned by Borrower
or in which Borrower has any right, title or interest, whether now owned or in
existence or hereafter created or acquired, and including, without limitation,
all of the following, whether or not so described: any chose in action, cause of
action, business records, deposit account, letter of credit rights, invention,
design, patent, patent application, trademark, trademark application, service
▇▇▇▇, service ▇▇▇▇ application, trade name, trade name application, trade
secret, goodwill, copyright, copyright application, registration, license,
franchise, customer list, tax refund claim, computer program, claims under
guaranties, security interests, rights to indemnification or any other
intangible property of any kind or nature (other than an Account).
(d) "Inventory" -- all items described in the UCC definition thereof and
all of the following, whether or not so described (in all cases whether now
owned or hereafter acquired by Borrower and wherever located): all goods,
merchandise or other personal property held for sale or lease or to be furnished
under labels and other devices, names or marks affixed thereto for purposes of
selling or identifying the same or the seller or manufacturer thereof, and all
right, title and interest of Borrower therein and thereto; all raw materials,
work or goods in process; and all materials and supplies of any kind or
description used or usable in connection with the manufacture, packaging,
shipping, advertisement, sale or finishing of any of the foregoing, together
with all proceeds and products of any of the foregoing.
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(e) Merchandise, which shall include all goods and returned or
repossessed Inventory, whether now owned or hereafter acquired.
(f) Any claims of Borrower against third parties for loss or damage
to, or destruction of, any and all of the foregoing, all guarantees, security
and liens for payment of any Accounts and documents of title, policies,
certificates of insurance, insurance proceeds, securities, chattel paper, and
Relevant Documents and instruments evidencing or pertaining thereto, and all
files, correspondence, computer programs, tapes, discs and related data
processing software owned by Borrower or in which Borrower has an interest which
contain information identifying any one or more of the items in (a), (b), (c),
(d) and (e) above, this subsection (f), or (g) or (h) below, or any Account
Debtors, showing the amounts owed by each, payments thereon or otherwise
necessary or helpful in the realization thereon or the collection thereof.
(g) Any and all monies, securities, drafts, notes, contracts leases,
licenses, General Intangibles, and other property of Borrower, including
customer lists and all proceeds and products thereof, and all other assets of
Borrower, now or hereafter held or received by or in transit to Lender from or
for Borrower, or which may now or hereafter be in the possession of Lender or as
to which Lender may now or hereafter control possession, by documents of title
or otherwise, whether for safekeeping, custody, pledge, transmission, collection
or otherwise, and any and all deposits, general or special, balances, sums,
proceeds and credits of Borrower, and all rights and remedies which the Borrower
might exercise with respect to any of the foregoing, but for the execution of
this Agreement in favor of Lender.
(h) All Borrower's right, title and interest throughout the world, in
and to the trade secrets' rights in the information regarding computer software
programs developed by or for the Borrower, including without limitation, the
right to prevent all persons, including Borrower, from using the programs or
from using and transferring the information contained therein without
authorization.
(i) All proceeds, including insurance proceeds, and products of the
Collateral.
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SCHEDULE 5.5 -- FINANCIAL STATEMENTS
SCHEDULE 5.19 -- ENVIRONMENTAL DISCLOSURES
None