EXHIBIT 10.9
LOAN AND SECURITY AGREEMENT
DATED AS OF MARCH 27, 2002
BETWEEN
GENERAL ELECTRIC CAPITAL CORPORATION
AS LENDER
AND
COMPUTER COMPONENTS CORPORATION
AS BORROWER
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INDEX OF EXHIBITS AND SCHEDULES
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Schedule A - Definitions
Schedule B - Lender's and Borrower's Addresses for Notices
Schedule C - Letters of Credit
Schedule D - Cash Management System
Schedule E - Fees and Expenses
Schedule F - Schedule of Documents
Schedule G - Financial Covenants
Disclosure Schedule (3.2) - Places of Business; Corporate Names
Disclosure Schedule (3.4(a)) - Projections
Disclosure Schedule (3.6) - Real Estate
Disclosure Schedule (3.7) - Stock; Affiliates
Disclosure Schedule (3.9) - Taxes
Disclosure Schedule (3.11) - ERISA
Disclosure Schedule (3.12) - Litigation
Disclosure Schedule (3.13) - Intellectual Property
Disclosure Schedule (3.15) - Environmental Matters
Disclosure Schedule (3.16) - Insurance
Disclosure Schedule (3.18) - Contracts (Offset Risk)
Disclosure Schedule (5(b)) - Indebtedness
Disclosure Schedule (5(e)) - Liens
Disclosure Schedule (6.1) - Actions to Perfect Liens
Exhibit A - Form of Notice of Revolving Credit Advance
Exhibit B - Other Reports and Information
Exhibit C - Form of Borrowing Base Certificate
Exhibit C-1 - Inventory Rollforward and Reconcilliation
Exhibit D - Form of Accounts Payable Analysis
Exhibit E - Form of Accounts Receivable Rollforward Analysis
Exhibit F - Form of Revolving Credit Note
Exhibit G - [Intentionally Left Blank]
Exhibit H - Form of Secretarial Certificate (Borrower)
Exhibit H-1 - Form of Secretarial Certificate (Guarantor)
Exhibit I - Form of Power of Attorney
Exhibit J - Form of Certificate of Compliance
Exhibit K - Form of Lockbox Agreement
Exhibit L - Form of Landlord's Waiver and Consent
Exhibit M-1 - [Intentionally Left Blank]
Exhibit M-2 - [Intentionally Left Blank]
Exhibit N-1 - Form of Guarantee
Exhibit N-1.A - [Intentionally Left Blank]
Exhibit N-2 - [Intentionally Left Blank]
Exhibit N-2.A - [Intentionally Left Blank]
Exhibit O - Form of Opinion of Counsel to Borrower
Exhibit P-1 - [Intentionally Left Blank]
Exhibit P-2 - [Intentionally Left Blank]
Exhibit Q - Form of Standard Payoff Letter
Exhibit R - Form of U.C.C. Schedule
Exhibit S - Form of Payment of Proceeds Letter
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TRANSACTION SUMMARY AS OF THE DATE OF THIS AGREEMENT
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REVOLVING CREDIT LOAN
Maximum Amount: $12,000,000
--------------
Term: 3 years
----
Revolving Credit Rate: Index Rate plus 1.25%
---------------------
Letter of Credit Subfacility: $250,000
----------------------------
Borrowing Base: Eighty-five percent (85%) of the value (as
-------------- determined by Lender) of Borrower's Eligible
Accounts; provided that Lender shall reduce
the foregoing percentage by one percentage
point for each percentage point that the
dilution of Borrower's Accounts (calculated
monthly by Lender as the average dilution
over the most recent three months) exceeds
5%; plus
----
the lesser of (i) $3,000,000 or (ii) the
lesser of (A) eighty-five percent (85%) of
the net orderly liquidation value of
Borrower's Eligible Inventory (as determined
by Lender) and (B) fifty-five percent (55%)
of the lower of cost or market of Borrower's
Eligible Inventory (as determined by Lender).
FEES
Closing Fee: $30,000, $7,500 of which will be due and
----------- payable at closing (against which will be
credited the unused balance, net of expenses,
of the underwriting deposit) and the balance
of which will be due in three installments of
$7,500 each payable on or before the first
day of the next three fiscal quarters of
Borrower after closing.
Accommodation Fee: $25,000.
-----------------
Collateral Monitoring Fee: $18,000 per annum, payable in quarterly
------------------------- installments of $4,500 each at closing and
quarterly thereafter.
Unused Line Fee: 0.25% per annum
---------------
Letter of Credit Fee: 2.0% per annum
--------------------
Prepayment Fee: 2.0% in year one; 1.0% year two; and 0.5% in
-------------- year three.
The Loans described generally here are established and governed by the terms and
conditions set forth below in this Agreement and the other Loan Documents, and
if there is any conflict between this general description and the express terms
and conditions below or elsewhere in the Loan Documents, such other express
terms and conditions shall control.
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This LOAN AND SECURITY AGREEMENT is dated as of March 27, 2002, and agreed to by
and between COMPUTER COMPONENTS CORPORATION, a Texas corporation ("Borrower"),
any other Credit Party executing this Agreement, and GENERAL ELECTRIC CAPITAL
CORPORATION, a Delaware corporation ("Lender").
RECITALS
A. Borrower desires to obtain the Loans and other financial accommodations from
Lender and Lender is willing to provide the Loans and accommodations all in
accordance with the terms of this Agreement.
B. Capitalized terms used herein shall have the meanings assigned to them in
Schedule A and, for purposes of this Agreement and the other Loan Documents, the
rules of construction set forth in Schedule A shall govern. All schedules,
attachments, addenda and exhibits hereto, or expressly identified to this
Agreement, are incorporated herein by reference, and taken together with this
Agreement, constitute but a single agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Loans. (a) Subject to the terms and conditions of this Agreement, from
-----
the Closing Date and until the Commitment Termination Date (i) Lender agrees (A)
to make available to Borrower advances (each, a "Revolving Credit Advance") and
(B) to incur Letter of Credit Obligations, in an aggregate outstanding amount
not to exceed the Borrowing Availability, and (ii) Borrower may at its request
from time to time borrow, repay and reborrow, and may cause Lender to incur
Letter of Credit Obligations, under this Section 1.1. The Revolving Credit Loan
shall be evidenced by, and be repayable in accordance with the terms of, the
Revolving Credit Note and this Agreement.
(b) Borrower shall request each Revolving Credit Advance by written
notice to Lender substantially in the form of Exhibit A (each a "Notice of
----------
Revolving Credit Advance") given no later than 11:00 A.M. (New York City time)
on the Business Day of the proposed advance. Lender shall be fully protected
under this Agreement in relying upon, and shall be entitled to rely upon, (i)
any Notice of Revolving Credit Advance believed by Lender to be genuine, and
(ii) the assumption that the Persons making electronic requests or executing and
delivering a Notice of Revolving Credit Advance were duly authorized, unless the
responsible individual acting thereon for Lender shall have actual knowledge to
the contrary. As an accommodation to Borrower, Lender may permit telephonic,
electronic, or facsimile requests for a Revolving Credit Advance and electronic
or facsimile transmittal of instructions, authorizations, agreements or reports
to Lender by Borrower. Unless Borrower specifically directs Lender in writing
not to accept or act upon telephonic, facsimile or electronic communications
from Borrower, Lender shall have no liability to Borrower for any loss or damage
suffered by Borrower as a result of Lender's honoring of any requests, execution
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of any instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically, by facsimile or electronically and purporting
to have been sent to Lender by Borrower and Lender shall have no duty to verify
the origin of any such communication or the identity or authority of the Person
sending it.
(c) In making any Loan hereunder Lender shall be entitled to rely upon
the most recent Borrowing Base Certificate delivered to Lender by Borrower and
other information available to Lender. Lender shall be under no obligation to
make any further Revolving Credit Advance or incur any other Obligation if
Borrower shall have failed to deliver a Borrowing Base Certificate to Lender by
the time specified in Section 4.1(b).
(d) [Intentionally Left Blank]
(e) Letters of Credit. Subject to the terms and conditions of this
Agreement, including Schedule C, Borrower shall have the right to request, and
Lender agrees to incur, the Letter of Credit Obligations for the account of
Borrower in accordance with Schedule C.
1.2 Term and Prepayment. (a) Upon the Commitment Termination Date the obligation
-------------------
of Lender to make Revolving Credit Advances and extend other credit hereunder
shall immediately terminate and Borrower shall pay to Lender in full, in cash:
(i) all outstanding Revolving Credit Advances and all accrued but unpaid
interest thereon; (ii) an amount sufficient to enable Lender to hold cash
collateral as specified in Schedule C; and (iii) all other non-contingent
-----------
Obligations due to or incurred by Lender.
(b) If the Revolving Credit Loan shall at any time exceed the Borrowing
Availability, then Borrower shall immediately repay the Revolving Credit Loan in
the amount of such excess.
(c) Borrower shall have the right, at any time upon thirty (30) days'
prior written notice to Lender to (i) terminate voluntarily Borrower's right to
receive or benefit from, and Lender's obligation to make and to incur, Revolving
Credit Advances and Letter of Credit Obligations, and (ii) prepay all of the
Obligations. The effective date of termination of the Revolving Credit Loan
specified in such notice shall be the Commitment Termination Date. If Borrower
exercises its right of termination and prepayment, or if Lender's obligation to
make Loans is terminated for any reason prior to the Stated Expiry Date
(including as a result of the occurrence of a Default), Borrower shall pay to
Lender the applicable Prepayment Fee.
1.3 Use of Proceeds. Borrower shall use the proceeds of the Loans to refinance
---------------
on the Closing Date certain outstanding Indebtedness as provided in Section
2.1(b) and for working capital and other general corporate purposes.
1.4 Single Loan. The Loans and all of the other Obligations of Borrower to
-----------
Lender shall constitute one general obligation of Borrower secured by all of the
Collateral.
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1.5 Interest. (a) Borrower shall pay interest to Lender on the aggregate
--------
outstanding Revolving Credit Advances at a floating rate equal to the Index Rate
plus one and one-quarter percent (1.25%) per annum (the "Revolving Credit
Rate"). All computations of interest, and all calculations of the Letter of
Credit Fee, shall be made by Lender on the basis of a three hundred and sixty
(360) day year, in each case for the actual number of days occurring in the
period for which such interest or fee is payable. Each determination by Lender
of an interest rate hereunder shall be conclusive and binding for all purposes,
absent manifest error. In no event will Lender charge interest at a rate that
exceeds the highest rate of interest permissible under any law that a court of
competent jurisdiction shall, in a final determination, deem applicable.
(b) Interest shall be payable on the outstanding Revolving Credit
Advances (i) in arrears for the preceding calendar month on the first day of
each calendar month, (ii) on the Commitment Termination Date, and (iii) if any
interest accrues or remains payable after the Commitment Termination Date, upon
demand by Lender.
(c) Effective upon the occurrence of any Event of Default and for so
long as any Event of Default shall be continuing, the Revolving Credit Rate and
the Letter of Credit Fee shall automatically be increased by three percentage
points (3%) per annum with respect to the Revolving Credit Rate and two
percentage points (2%) per annum with respect to the Letter of Credit Fee (such
increased rates, the "Default Rate"), and all outstanding Obligations, including
unpaid interest and Letter of Credit Fees, shall continue to accrue interest
from the date of such Event of Default at the Default Rate applicable to such
Obligations.
(d) If any interest or any other payment (including Unused Line Fees
and Collateral Monitoring Fees) to Lender under this Agreement becomes due and
payable on a day other than a Business Day, such payment date shall be extended
to the next succeeding Business Day and interest thereon shall be payable at the
then applicable rate during such extension.
1.6 Cash Management System. On or prior to the Closing Date and until the
------------------------
Termination Date, Borrower will establish and maintain the cash management
system described in Schedule D. All payments in respect of the Collateral shall
----------
be made to or deposited in the blocked or lockbox accounts described in Schedule
D in accordance with the terms thereof. --------
-
1.7 Fees. Borrower agrees to pay to Lender the Fees set forth in Schedule E.
---- -----------
1.8 Receipt of Payments. Borrower shall make each payment under this Agreement
-------------------
(not otherwise made pursuant to Section 1.9) without set-off, counterclaim or
deduction and free and clear of all Taxes not later than 11:00 A.M. (New York
City time) on the day when due in lawful money of the United States of America
in immediately available funds to the Collection Account. If Borrower shall be
required by law to deduct any Taxes from any payment to Lender under any Loan
Document, then the amount payable to Lender shall be increased so that, after
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making all required deductions, Lender receives an amount equal to that which it
would have received had no such deductions been made. For purposes of computing
interest and Fees, all payments shall be deemed received by Lender one (1)
Business Day following receipt of immediately available funds in the Collection
Account. For purposes of determining the Borrowing Availability, payments shall
be deemed received by Lender upon receipt of immediately available funds in the
Collection Account.
1.9 Application and Allocation of Payments. Borrower irrevocably agrees that
---------------------------------------
Lender shall have the continuing and exclusive right to apply any and all
payments against the then due and payable Obligations in such order as Lender
may deem advisable. Lender is authorized to, and at its option may (without
prior notice or precondition and at any time or times), but shall not be
obligated to, make or cause to be made Revolving Credit Advances on behalf of
Borrower for: (a) payment of all Fees, expenses, indemnities, charges, costs,
principal, interest, or other Obligations owing by Borrower under this Agreement
or any of the other Loan Documents, (b) the payment, performance or satisfaction
of any of Borrower's obligations with respect to preservation of the Collateral,
or (c) any premium in whole or in part required in respect of any of the
policies of insurance required by this Agreement, even if the making of any such
Revolving Credit Advance causes the outstanding balance of the Revolving Credit
Loan to exceed the Borrowing Availability, and Borrower agrees to repay
immediately, in cash, any amount by which the Revolving Credit Loan exceeds the
Borrowing Availability.
1.10 Accounting. Lender is authorized to record on its books and records the
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date and amount of each Loan and each payment of principal thereof and such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded. Lender shall provide Borrower on a monthly basis a
statement and accounting of such recordations but any failure on the part of the
Lender to keep any such recordation (or any errors therein) or to send a
statement thereof to Borrower shall not in any manner affect the obligation of
Borrower to repay any of the Obligations. Except to the extent that Borrower
shall, within thirty (30) days after such statement and accounting is sent,
notify Lender in writing of any objection Borrower may have thereto (stating
with particularity the basis for such objection), such statement and accounting
shall be deemed final, binding and conclusive upon Borrower, absent manifest
error.
1.11 Indemnity. Borrower and each other Credit Party executing this Agreement
---------
jointly and severally agree to indemnify and hold Lender and its Affiliates, and
their respective employees, attorneys and agents (each, an "Indemnified
Person"), harmless from and against any and all suits, actions, proceedings,
claims, damages, losses, liabilities and expenses of any kind or nature
whatsoever (including attorneys' fees and disbursements and other costs of
investigation or defense, including those incurred upon any appeal) that may be
instituted or asserted against or incurred by any such Indemnified Person as the
result of credit having been extended, suspended or terminated under this
Agreement and the other Loan Documents or with respect to the execution,
delivery, enforcement, performance and administration of, or in any other way
arising out of or relating to, this Agreement and the other Loan Documents or
any other documents or transactions contemplated by or referred to herein or
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therein and any actions or failures to act with respect to any of the foregoing,
including any and all product liabilities, Environmental Liabilities, Taxes and
legal costs and expenses arising out of or incurred in connection with disputes
between or among any parties to any of the Loan Documents (collectively,
"Indemnified Liabilities"), except to the extent that any such Indemnified
Liability is finally determined by a court of competent jurisdiction to have
resulted solely from such Indemnified Person's gross negligence or willful
misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY CREDIT
PARTY, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON
ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR ANY ACT OR FAILURE TO ACT
UNDER ANY POWER OF ATTORNEY OR FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES THAT MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR
THEREUNDER.
1.12 Borrowing Base; Reserves. The Borrowing Base shall be determined by Lender
------------------------
(including the eligibility of Accounts and Inventory) based on the most recent
Borrowing Base Certificate delivered to Lender in accordance with Section 4.1(b)
and such other information available to Lender. The Revolving Credit Loan shall
be subject to Lender's continuing right to withhold from Borrowing Availability
reserves, and to increase and decrease such reserves from time to time, if and
to the extent that in Lender's good faith credit judgment such reserves are
necessary, including to protect Lender's interest in the Collateral or to
protect Lender against possible non-payment of Accounts for any reason by
Account Debtors or possible diminution of the value of any Collateral or
possible non-payment of any of the Obligations or for any Taxes or in respect of
any state of facts that could constitute a Default. Lender may, at its option,
implement reserves by designating as ineligible a sufficient amount of Accounts
or Inventory that would otherwise be Eligible Accounts or Eligible Inventory, as
the case may be, so as to reduce the Borrowing Base by the amount of the
intended reserves. In addition to its other rights set forth in this Agreement,
Lender shall have the right to adjust the advance rate against Eligible
Inventory from time to time based upon the mix of Eligible Inventory as set
forth in appraisals with respect thereto obtained from time to time by Lender.
2. CONDITIONS PRECEDENT
2.1 Conditions to the Initial Loans. Lender shall not be obligated to make any
--------------------------------
of the Loans, or to perform any other action hereunder, until the following
conditions have been satisfied in a manner satisfactory to Lender in its sole
discretion, or waived in writing by Lender:
(a) the Loan Documents to be delivered on or before the Closing Date
shall have been duly executed and delivered by the appropriate parties, all as
set forth in the Schedule of Documents (Schedule F);
----------
(b) all of the obligations of Borrower to Xxxxx Fargo Business Credit,
Inc. under its financing documentation as in effect immediately prior to the
Closing Date will be performed and paid in full from the proceeds of the initial
Loans and all Liens upon any of the property of Borrower or any other Credit
Party in respect thereof shall have been terminated immediately upon such
payment;
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(c) Lender shall have received evidence satisfactory to it that the
insurance policies provided for in Section 3.16 are in full force and effect,
together with appropriate evidence showing loss payable or additional insured
clauses or endorsements in favor of Lender as required under such Section;
(d) as of the Closing Date Net Borrowing Availability shall be not less
than $500,000 after giving effect to the initial Revolving Credit Advance and
Letter of Credit Obligations (on a pro forma basis, with trade payables and
taxes being paid within sixty (60) days from due date, and expenses and
liabilities being paid in the ordinary course of business and without
acceleration of sales);
(e) Lender shall have received an opinion(s) of counsel to the Borrower
with respect to the Loan Documents in form and substance satisfactory to Lender;
and
(f) Lender shall have received satisfactory vendor references
(including a reference from PowerTech Industrial).
2.2 Further Conditions to the Loans. Lender shall not be obligated to fund any
--------------------------------
Loan (including the initial Loans), if, as of the date thereof:
(a) any representation or warranty by any Credit Party contained herein
or in any of the other Loan Documents shall be untrue or incorrect as of such
date, except to the extent that any such representation or warranty is expressly
stated to relate to a specific earlier date, in which case, such representation
and warranty shall be true and correct as of such earlier date; or
(b) any event or circumstance that has had or reasonably could be
expected to have a Material Adverse Effect shall have occurred since the Closing
Date; or
(c) any Default shall have occurred and be continuing or would result
after giving effect to such Loan; or
(d) after giving effect to such Loan, the Revolving Credit Loan would
exceed the Borrowing Availability.
The request and acceptance by Borrower of the proceeds of any Loan shall be
deemed to constitute, as of the date of such request and the date of such
acceptance, (i) a representation and warranty by Borrower that the conditions in
this Section 2.2 have been satisfied and (ii) a restatement by Borrower of each
of the representations and warranties made by it in any Loan Document and a
reaffirmation by Borrower of the granting and continuance of Lender's Liens
pursuant to the Loan Documents.
3. REPRESENTATIONS, WARRANTIES AND AFFIRMATIVE COVENANTS
To induce Lender to enter into this Agreement and to make the Loans, Borrower
and each other Credit Party executing this Agreement represent and warrant to
Lender (each of which representations and warranties shall survive the execution
and delivery of this Agreement), and promise to and agree with Lender until the
Termination Date as follows:
3.1 Corporate Existence; Compliance with Law. Each Corporate Credit Party: (a)
--------------------
is, as of the Closing Date, and will continue to be (i) a corporation, limited
liability company or limited partnership, as applicable, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, (ii) duly qualified to do business and in good
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standing in each other jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification, except where the
failure to be so qualified could not reasonably be expected to have a Material
Adverse Effect, and (iii) in compliance with all Requirements of Law and
Contractual Obligations, except to the extent failure to comply therewith could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and (b) has and will continue to have (i) the requisite
corporate power and authority and the legal right to execute, deliver and
perform its obligations under the Loan Documents, and to own, pledge, mortgage
or otherwise encumber and operate its properties, to lease the property it
operates under lease, and to conduct its business as now, heretofore or proposed
to be conducted, and (ii) all licenses, permits, franchises, rights, powers,
consents or approvals from or by all Persons or Governmental Authorities having
jurisdiction over such Corporate Credit Party that are necessary or appropriate
for the conduct of its business.
3.2 Executive Offices; Corporate or Other Names. (a) Each Corporate Credit
---------------------------------------------
Party's name as it appears in official filings in the state of its incorporation
or organization, (b) the type of entity of each Corporate Credit Party, (c) the
organizational identification number issued by each such Credit Party's state of
incorporation or organization or a statement that no such number has been
issued, (d) each Corporate Credit Party's state of organization or
incorporation, and (e) the location of each Corporate Credit Party's chief
executive office, corporate offices, warehouses, other locations of Collateral
and locations where records with respect to Collateral are kept (including in
each case the county of such locations) are as set forth in Disclosure Schedule
--------------------
(3.2) and, except as set forth in such Disclosure Schedule, such locations have
----
not changed during the preceding twelve months. As of the Closing Date, during
the prior five years, except as set forth in Disclosure Schedule (3.2), no
--------------------------
Corporate Credit Party has been known as or conducted business in any other name
(including trade names). Each Corporate Credit Party has only one state of
incorporation or organization.
3.3 Corporate Power; Authorization; Enforceable Obligations. The execution,
-----------------------------------------------------------
delivery and performance by each Credit Party of the Loan Documents to which it
is a party, and the creation of all Liens provided for herein and therein: (a)
are and will continue to be within such Credit Party's power and authority; (b)
have been and will continue to be duly authorized by all necessary or proper
action; (c) are not and will not be in violation of any Requirement of Law or
Contractual Obligation of such Credit Party (d) do not and will not result in
the creation or imposition of any Lien (other than Permitted Encumbrances) upon
any of the Collateral; and (e) do not and will not require the consent or
approval of any Governmental Authority or any other Person. As of the Closing
Date, each Loan Document shall have been duly executed and delivered on behalf
of each Credit Party party thereto, and each such Loan Document upon such
execution and delivery shall be and will continue to be a legal, valid and
binding obligation of such Credit Party, enforceable against it in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency and other similar laws affecting creditors' rights generally.
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3.4 Financial Statements and Projections; Books and Records. (a) The Financial
---------------------------------------------------------
Statements delivered by Borrower to Lender for its most recently ended Fiscal
Year and Fiscal Month, are true, correct and complete and reflect fairly and
accurately the financial condition of Borrower as of the date of each such
Financial Statement in accordance with GAAP. The Projections set forth on
Disclosure Schedule (3.4(a)) have been prepared in good faith, with care and
-----------------------------
diligence and use assumptions that are reasonable under the circumstances at the
time such Projections were prepared and as of the date delivered to Lender and
all such assumptions are disclosed in the Projections.
(b) Borrower and each other Corporate Credit Party shall keep adequate
Books and Records with respect to the Collateral and its business activities in
which proper entries, reflecting all consolidated and consolidating financial
transactions, and payments and credits received on, and all other dealings with,
the Collateral, will be made in accordance with GAAP and all Requirements of Law
and on a basis consistent with the Financial Statements.
3.5 Material Adverse Change. Between the date of Borrower's most recently
-------------------------
audited Financial Statements delivered to Lender and the Closing Date: (a) no
Corporate Credit Party has incurred any obligations, contingent or
non-contingent liabilities, or liabilities for Charges, long-term leases or
unusual forward or long-term commitments that are not reflected in the
Projections delivered on the Closing Date and which could, alone or in the
aggregate, reasonably be expected to have a Material Adverse Effect; (b) there
has been no material deviation from such Projections; and (c) no events have
occurred that alone or in the aggregate has had or could reasonably be expected
to have a Material Adverse Effect. No Requirement of Law or Contractual
Obligation of any Credit Party has or have had or could reasonably be expected
to have a Material Adverse Effect. No Credit Party is in default, and to such
Credit Party's knowledge no third party is in default, under or with respect to
any of its Contractual Obligations, that alone or in the aggregate has had or
could reasonably be expected to have a Material Adverse Effect.
3.6 Real Estate; Property. The real estate listed in Disclosure Schedule (3.6)
----------------------
constitutes all of the real property owned, leased, or used by each Corporate
Credit Party in its business, and such Credit Party will not execute any
material agreement or contract in respect of such real estate after the date of
this Agreement without giving Lender prompt prior written notice thereof. Each
Corporate Credit Party holds and will continue to hold good and marketable fee
simple title to all of its owned real estate, and good and marketable title to
all of its other properties and assets, and valid and insurable leasehold
interests in all of its leases (both as lessor and lessee, sublessee or
assignee), and none of the properties and assets of any Corporate Credit Party
are or will be subject to any Liens, except Permitted Encumbrances. With respect
to each of the premises identified in Disclosure Schedule (3.2) on or prior the
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Closing Date a bailee, landlord or mortgagee agreement acceptable to Lender has
been obtained.
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3.7 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.
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Except as set forth in Disclosure Schedule (3.7), as of the Closing Date no
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Corporate Credit Party has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person, or is an Affiliate of any other Person. All
of the issued and outstanding Stock of each Corporate Credit Party (including
all rights to purchase, options, warrants or similar rights or agreements
pursuant to which any Corporate Credit Party may be required to issue, sell,
repurchase or redeem any of its Stock) as of the Closing Date is owned by each
of the Stockholders (and in the amounts) set forth in Disclosure Schedule (3.7).
------------------------
All outstanding Indebtedness of each Corporate Credit Party as of the Closing
Date is described in Disclosure Schedule (5(b)).
-------------------------
3.8 Government Regulation; Margin Regulations. No Corporate Credit Party is
--------------------------------------------
subject to or regulated under any Federal or state statute, rule or regulation
that restricts or limits such Person's ability to incur Indebtedness, pledge its
assets, or to perform its obligations under the Loan Documents. The making of
the Loans, the application of the proceeds and repayment thereof, and the
consummation of the transactions contemplated by the Loan Documents do not and
will not violate any Requirement of Law. No Corporate Credit Party is engaged,
nor will it engage, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin security" as such terms are defined in
Regulation U of the Federal Reserve Board as now and hereafter in effect (such
securities being referred to herein as "Margin Stock"). No Corporate Credit
Party owns any Margin Stock, and none of the proceeds of the Loans or other
extensions of credit under this Agreement will be used, directly or indirectly,
for the purpose of purchasing or carrying any Margin Stock or reducing or
retiring any Indebtedness that was originally incurred to purchase or carry any
Margin Stock. No Corporate Credit Party will take or permit to be taken any
action that might cause any Loan Document to violate any regulation of the
Federal Reserve Board.
3.9 Taxes; Charges. Except as disclosed in Disclosure Schedule (3.9) all tax
--------------- --------------------------
returns, reports and statements required by any Governmental Authority to be
filed by Borrower or any other Credit Party have, as of the Closing Date, been
filed and will, until the Termination Date, be filed with the appropriate
Governmental Authority and no tax Lien has been filed against any Credit Party
or any Credit Party's property. Proper and accurate amounts have been and will
be withheld by Borrower and each other Credit Party from their respective
employees for all periods in complete compliance with all Requirements of Law
and such withholdings have and will be timely paid to the appropriate
Governmental Authorities. Disclosure Schedule (3.9) sets forth as of the Closing
------------------------
Date those taxable years for which any Credit Party's tax returns are currently
being audited by the IRS or any other applicable Governmental Authority and any
assessments or threatened assessments in connection with such audit, or
otherwise currently outstanding. Except as described on Disclosure Schedule
(3.9), none of the Credit Parties or their respective predecessors are liable
for any Charges: (a) under any agreement (including any tax sharing agreements
or agreement extending the period of assessment of any Charges) or (b) to each
24
Credit Party's knowledge, as a transferee. As of the Closing Date, no Credit
Party has agreed or been requested to make any adjustment under IRC Section
481(a), by reason of a change in accounting method or otherwise, which could
reasonably be expected to have a Material Adverse Effect.
3.10 Payment of Obligations. Each Credit Party will pay, discharge or otherwise
----------------------
satisfy at or before maturity or before they become delinquent, as the case may
be, all of its Charges and other obligations of whatever nature, except where
the amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on the books of such Credit Party and none of the
Collateral is or could reasonably be expected to become subject to any Lien or
forfeiture or loss as a result of such contest.
3.11 ERISA. No ERISA Event has occurred or is reasonably expected to occur that,
-----
when taken together with all other existing ERISA Events, could reasonably be
expected to result in a liability of any Credit Party of more than the Minimum
Actionable Amount. Except as disclosed in Disclosure Schedule (3.11), the
---------------------------
present value of all accumulated benefit obligations of the Credit Parties under
each Plan (based on the assumptions used for purposes of Statement of Financial
Accounting Standards No. 87) did not, as of the date of the most recent
Financial Statements reflecting such amounts, exceed the fair market value of
the assets of such Plan by more than the Minimum Actionable Amount, and the
present value of all accumulated benefit obligations of all underfunded Plans
(based on the assumptions used for purposes of Statement of Financial Account
Standards No. 87) did not, as of the date of the most recent Financial
Statements reflecting such amounts, exceed the fair market value of the assets
of such underfunded Plans by more than the Minimum Actionable Amount. No Credit
Party or ERISA Affiliate has incurred or reasonably expects to incur any
Withdrawal Liability in excess of the Minimum Actionable Amount.
3.12 Litigation. No Litigation is pending or, to the knowledge of any Credit
----------
Party, threatened by or against any Credit Party or against any Credit Party's
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby, or (b) that could reasonably be
expected to have a Material Adverse Effect. Except as set forth on Disclosure
----------
Schedule (3.12), as of the Closing Date there is no Litigation pending or
---------------
threatened against any Credit Party that seeks damages in excess of $50,000 or
injunctive relief or alleges criminal misconduct of any Credit Party. Each
Credit Party shall notify Lender promptly in writing upon learning of the
existence, threat or commencement of any Litigation against any Credit Party,
any ERISA Affiliate or any Plan or any allegation of criminal misconduct against
any Credit Party.
3.13 Intellectual Property. As of the Closing Date, all material Intellectual
----------------------
Property owned or used by any Corporate Credit Party is listed, together with
25
application or registration numbers, where applicable, in Disclosure Schedule
-------------------
(3.13). Each Corporate Credit Party owns, or is licensed to use, all
-----
Intellectual Property necessary to conduct its business as currently conducted
except for such Intellectual Property the failure of which to own or license
could not reasonably be expected to have a Material Adverse Effect. Each
Corporate Credit Party will maintain the patenting and registration of all
Intellectual Property with the United States Patent and Trademark Office, the
United States Copyright Office, or other appropriate Governmental Authority and
each Corporate Credit Party will promptly patent or register, as the case may
be, all new Intellectual Property and notify Lender in writing five (5) Business
Days prior to filing any such new patent or registration.
3.14 Full Disclosure. No information contained in any Loan Document, the
----------------
Financial Statements or any written statement furnished by or on behalf of any
Credit Party under any Loan Document, or to induce Lender to execute the Loan
Documents, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made.
3.15 Hazardous Materials. Except as set forth in Disclosure Schedule (3.15), as
------------------- -------------------------
of the Closing Date, (a) each real property location owned, leased or occupied
by each Corporate Credit Party (the "Real Property") is maintained free of
contamination from any Hazardous Material, (b) no Corporate Credit Party is
subject to any Environmental Liabilities or, to any Credit Party's knowledge,
potential Environmental Liabilities, in excess of $50,000 in the aggregate, (c)
no notice has been received by any Corporate Credit Party identifying it as a
"potentially responsible party" or requesting information under CERCLA or
analogous state statutes, and to the knowledge of any Credit Party, there are no
facts, circumstances or conditions that may result in any Corporate Credit Party
being identified as a "potentially responsible party" under CERCLA or analogous
state statutes; and (d) each Corporate Credit Party has provided to Lender
copies of all existing environmental reports, reviews and audits and all written
information pertaining to actual or potential Environmental Liabilities, in each
case relating to any Corporate Credit Party. Each Corporate Credit Party: (i)
shall comply in all material respects with all applicable Environmental Laws and
environmental permits; (ii) shall notify Lender in writing within seven (7) days
if and when it becomes aware of any Release, on, at, in, under, above, to, from
or about any of its Real Property; and (iii) shall promptly forward to Lender a
copy of any order, notice, permit, application, or any communication or report
received by it or any other Credit Party in connection with any such Release.
3.16 Insurance. As of the Closing Date, Disclosure Schedule (3.16) lists all
--------- --------------------------
insurance of any nature maintained for current occurrences by Borrower, as well
as a summary of the terms of such insurance. Borrower shall deliver to Lender
certified copies and endorsements to all of its and those of its Subsidiaries
(a) "All Risk" and business interruption insurance policies naming Lender loss
payee, and (b) general liability and other liability policies naming Lender as
an additional insured. All policies of insurance on real and personal property
will contain an endorsement, in form and substance acceptable to Lender, showing
loss payable to Lender (Form 438 BFU or equivalent) and extra expense and
26
business interruption endorsements. Such endorsement, or an independent
instrument furnished to Lender, will provide that the insurance companies will
give Lender at least thirty (30) days' prior written notice before any such
policy or policies of insurance shall be altered or canceled and that no act or
default of Borrower or any other Person shall affect the right of Lender to
recover under such policy or policies of insurance in case of loss or damage.
Borrower shall direct all present and future insurers under its "All Risk"
policies of insurance to pay all proceeds payable thereunder directly to Lender.
If any insurance proceeds are paid by check, draft or other instrument payable
to Borrower and Lender jointly, Lender may endorse Borrower's name thereon and
do such other things as Lender may deem advisable to reduce the same to cash.
Lender reserves the right at any time, upon review of Borrower's risk profile,
to require additional forms and limits of insurance. Borrower shall, on each
anniversary of the Closing Date and from time to time at Lender's request,
deliver to Lender a report by a reputable insurance broker, satisfactory to
Lender, with respect to Borrower's insurance policies.
3.17 Deposit and Disbursement Accounts. Attachment I to Schedule D lists all
----------------------------------- ----------
banks and other financial institutions at which Borrower or any other Corporate
Credit Party, maintains deposits and/or other accounts, including the
Disbursement Account, and such Attachment correctly identifies the name, address
and telephone number of each such depository, the name in which the account is
held, a description of the purpose of the account, and the complete account
number.
3.18 Accounts and Inventory. As of the date of each Borrowing Base Certificate
----------------------
delivered to Lender, each Account listed thereon as an Eligible Account shall be
an Eligible Account and all Inventory listed thereon as Eligible Inventory shall
be Eligible Inventory. Borrower has not made, and will not make, any agreement
with any Account Debtor for any extension of time for the payment of any
Account, any compromise or settlement for less than the full amount thereof, any
release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance for prompt or early payment allowed by
Borrower in the ordinary course of its business consistent with historical
practice and as previously disclosed to Lender in writing. Disclosure Schedule
-------------------
(3.18) sets forth each Contract of the Borrower with any Account Debtor that
-----
gives such Account Debtor the right (under such Contract, under common law or
otherwise) to offset any Accounts for Borrower's failure to perform under such
Contract and Borrower has obtained an offset waiver for each such contract in
form and substance satisfactory to Lender. With respect to the Accounts pledged
as collateral pursuant to any Loan Document (a) the amounts shown on all
invoices, statements and reports that may be delivered to the Lender with
respect thereto are actually and absolutely owing to the relevant Credit Party
as indicated thereon and are not in any way contingent; (b) no payments have
been or shall be made thereon except payments immediately delivered to the
applicable accounts described in paragraph 1 to Schedule D or the Lender as
required hereunder; and (c) to Borrower's knowledge all Account Debtors have the
capacity to contract. Borrower shall notify Lender promptly of any event or
circumstance that to Borrower's knowledge would cause Lender to consider any
then existing Account or Inventory as no longer constituting an Eligible Account
or Eligible Inventory, as the case may be.
27
3.19 Conduct of Business. Each Corporate Credit Party (a) shall conduct its
-------------------
business substantially as now conducted or as otherwise permitted hereunder, and
(b) shall at all times maintain, preserve and protect all of the Collateral and
such Credit Party's other property, used or useful in the conduct of its
business and keep the same in good repair, working order and condition and make,
or cause to be made, all necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices.
3.20 Further Assurances. At any time and from time to time, upon the written
-------------------
request of Lender and at the sole expense of Borrower, Borrower and each other
Credit Party shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as Lender may
reasonably deem desirable (a) to obtain the full benefits of this Agreement and
the other Loan Documents, (b) to protect, preserve and maintain Lender's rights
in any Collateral, or (c) to enable Lender to exercise all or any of the rights
and powers herein granted.
3.21 Brinks Contract. Prior to entering into any contract with Brinks, Borrower
---------------
shall submit to Lender the final form of such contract and such form shall be
satisfactory to Lender in form and substance.
4. FINANCIAL MATTERS; REPORTS
4.1 Reports and Notices. From the Closing Date until the Termination Date,
-------------------
Borrower shall deliver to Lender:
(a) within fifteen (15) days following the end of each Fiscal Month, an
aged trial balance by Account Debtor and an Inventory Perpetual or Physical (as
requested by Lender) and as soon as available but in no event later than fifteen
(15) days following the end of each Fiscal Month, a reconciliation of the aged
trial balance and the Inventory Perpetual or Physical (as the case may be) to
the Borrower's general ledger and from the general ledger to the Financial
Statements for such Fiscal Month accompanied by supporting detail and
documentation as Lender may request;
(b) as frequently as Lender may request and in any event no later than
fifteen (15) days following the end of each Fiscal Month, a Borrowing Base
Certificate in the form of Exhibit C as of the last day of the previous Fiscal
---------
Month detailing ineligible Accounts and Inventory for adjustment to the
Borrowing Base, certified as true and correct by the Chief Financial Officer of
Borrower or such other officer as is acceptable to Lender;
(c) within fifteen (15) days following the end of each Fiscal Month, an
Accounts Payable Analysis in the Form of Exhibit D (together with an accounts
---------
payable aging) and an Accounts Receivable Roll Forward Analysis in the Form of
Exhibit E, each certified as true and correct by the Chief Financial Officer of
---------
Borrower or such other officer as is acceptable to Lender;
28
(d) within thirty (30) days following the end of each Fiscal Month, the
Financial Statements for such Fiscal Month, which shall provide comparisons to
budget and actual results for the corresponding period during the prior Fiscal
Year, both on a monthly and year-to-date basis, and accompanied by (i) a
certification in the form of Exhibit J by the Chief Executive Officer or Chief
---------
Financial Officer of Borrower and Parent that such Financial Statements are
complete and correct, that there was no Default (or specifying those Defaults of
which he or she was aware), and showing in reasonable detail the calculations
used in determining compliance with the financial covenants hereunder and (ii)
evidence satisfactory to Lender (which may include payment receipts or wiring
confirmations) confirming all dividend payments made by Borrower during such
Fiscal Month the proceeds of which were used to allow AlphaNet Hospitality
Systems, Inc. to make payments of its debt;
(e) within ninety (90) days following the close of each Fiscal Year,
the Financial Statements for such Fiscal Year certified without qualification by
an independent certified accounting firm acceptable to Lender, which shall
provide comparisons to the prior Fiscal Year, and shall be accompanied by (i) a
statement in reasonable detail showing the calculations used in determining
compliance with the financial covenants hereunder, (ii) a report from Borrower's
and Parent's accountants to the effect that in connection with their audit
examination nothing has come to their attention to cause them to believe that a
Default has occurred or specifying those Defaults of which they are aware, and
(iii) any management letter that may be issued;
(f) not less than thirty (30) days prior to the close of each Fiscal
Year, the Projections, which will be prepared by Borrower in good faith, with
care and diligence, and using assumptions that are reasonable under the
circumstances at the time such Projections are delivered to Lender and disclosed
therein when delivered; and
(g) all the reports and other information set forth in Exhibit B in the
---------
time frames set forth therein.
4.2 Financial Covenants. Borrower shall not breach any of the financial
--------------------
covenants set forth in Schedule G. For purposes of Section 7.1, a breach of a
----------
financial covenant set forth in Schedule G shall be deemed to have occurred as
----------
of any date of determination by Lender or as of the last day of any specified
measurement period, regardless of when the Financial Statements reflecting such
breach are delivered to Lender.
4.3 Other Reports and Information. Borrower shall advise Lender promptly, in
------------------------------
reasonable detail, of: (a) any Lien, other than Permitted Encumbrances,
attaching to or asserted against any of the Collateral or any occurrence causing
a material loss or decline in value of any Collateral and the estimated (or
actual, if available) amount of such loss or decline; (b) any material change in
the composition of the Collateral; and (c) the occurrence of any Default or
other event that has had or could reasonably be expected to have a Material
Adverse Effect. Borrower shall, upon request of Lender, furnish to Lender such
29
other reports and information in connection with the affairs, business,
financial condition, operations, prospects or management of Borrower or any
other Credit Party or the Collateral as Lender may request, all in reasonable
detail.
5. NEGATIVE COVENANTS
Borrower covenants and agrees that, without Lender's prior written consent, from
the Closing Date until the Termination Date, Borrower shall not, directly or
indirectly, by operation of law or otherwise:
(a) form any Subsidiary or merge with, consolidate with, acquire all or
substantially all of the assets or Stock of, or otherwise combine with or make
any investment in or, except as provided in Section 5(c) below, loan or advance
to, any Person;
(b) cancel any debt owing to it or create, incur, assume or permit to
exist any Indebtedness, except: (i) the Obligations, (ii) Indebtedness existing
as of the Closing Date set forth in Disclosure Schedule 5(b), (iii) deferred
taxes, (iv) by endorsement of Instruments or items of payment for deposit to the
general account of Borrower, (v) for Guaranteed Indebtedness incurred for the
benefit of Borrower if the primary obligation is permitted by this Agreement;
and (vi) additional Indebtedness (including Purchase Money Indebtedness)
incurred after the Closing Date in an aggregate outstanding amount not exceeding
$50,000;
(c) enter into any lending, borrowing or other commercial transaction
with any of its employees, directors, Affiliates or any other Credit Party
(including upstreaming and downstreaming of cash and intercompany advances and
payments by a Credit Party on behalf of another Credit Party that are not
otherwise permitted hereunder) other than loans or advances to employees in the
ordinary course of business in an aggregate outstanding amount not exceeding
$50,000;
(d) make any changes in any of its business objectives, purposes, or
operations that could reasonably be expected to adversely affect repayment of
the Obligations or could reasonably be expected to have a Material Adverse
Effect or engage in any business other than that presently engaged in or
proposed to be engaged in the Projections delivered to Lender on the Closing
Date or amend its charter or by-laws or other organizational documents;
(e) create or permit any Lien on any of its properties or assets,except
for Permitted Encumbrances;
(f) sell, transfer, issue, convey, assign or otherwise dispose of any
of its assets or properties, including its Accounts or any shares of its Stock
or engage in any sale-leaseback, synthetic lease or similar transaction
(provided, that the foregoing shall not prohibit the sale of Inventory or
obsolete or unnecessary Equipment in the ordinary course of its business);
(g) change (i) its name as it appears in official filings in the state
of its incorporation or organization, (ii) its chief executive office, corporate
offices, warehouses or other Collateral locations, or location of its records
concerning the Collateral, (iii) the type of legal entity that it is, (iv) its
organization identification number, if any, issued by its state of incorporation
30
or organization, or (v) its state of incorporation or organization, or acquire,
lease or use any real estate after the Closing Date without such Person, in each
instance, giving thirty (30) days prior written notice thereof to Lender and
taking all actions deemed necessary or appropriate by Lender to continuously
protect and perfect Lender's Liens upon the Collateral;
(h) establish any depository or other bank account of any kind with any
financial institution (other than the accounts set forth in Attachment 1 to
Schedule D) without Lender's prior written consent; or
(i) make or permit any Restricted Payment; provided, however, Borrower
-------- -------
may (A) pay a monthly management fee to the Parent of up to $40,000 per month
provided that (1) no Default or Event of Default exists immediately prior to or
after any such payment including, without limitation, a Default or Event of
Default on account of a violation of the Fixed Charge Coverage Ratio set forth
in Section 1 of Schedule G and (2) there is at least $500,000 of Net Borrowing
Availability immediately after the making of any such payment, (B) a dividend of
$421,000 on the Closing Date provided that (1) such dividend is wired directly
by Lender to a designated dividend account at a U.S. bank for the benefit of the
holders of the existing debt of AlphaNet Hospitality Systems, Inc., (2) such
designated dividend account (including the disbursement provisions with respect
thereto) is satisfactory to Lender, (3) AlphaNet Hospitality Systems, Inc.
finalizes the restructuring of its debt with its existing lenders, such
restructuring to be satisfactory to Lender and (4) Borrower shall not be a party
to, or acknowledge the terms of, such restructuring and (C) until such time as
the existing indebtedness of AlphaNet Hospitality Systems, Inc. under its
existing credit facility has been paid in full (without regard to any subsequent
increases in such indebtedness), quarterly dividends equal to 50% of the Net
Income of Borrower for any Fiscal Quarter provided that (1) no more than one
dividend is paid per Fiscal Quarter, (2) any such dividend is paid no sooner
than 30 days from Lender's receipt of the financial statements delivered
pursuant to Section 4(d) hereof for the month whose end coincides with the end
of such Fiscal Quarter, (3) the Fixed Charge Coverage Ratio for such Fiscal
Quarter is equal to or greater than 1.5 to 1.0, (4) any such dividend is paid
directly to a designated dividend account at a U.S. bank for the benefit of the
holders of such existing indebtedness of AlphaNet Hospitality Systems, Inc. and
are applied to such indebtedness, (5) such dividend account (including the
disbursement provisions with respect thereto) is satisfactory to Lender, and (6)
no Default or Event of Default exists as of the date of the payment of any such
dividend.
6. SECURITY INTEREST
6.1 Grant of Security Interest. (a) As collateral security for the prompt and
---------------------------
complete payment and performance of the Obligations, each of the Borrower and
any other Credit Party executing this Agreement hereby grants to the Lender a
security interest in and Lien upon all of its property and assets, whether real
or personal, tangible or intangible, and whether now owned or hereafter
acquired, or in which it now has or at any time in the future may acquire any
right, title, or interest, including all of the following property in which it
now has or at any time in the future may acquire any right, title or interest:
all Accounts; all Deposit Accounts, other bank accounts and all funds on deposit
therein; all money, cash and cash equivalents; all Stock (other than Stock in
31
Borrower or AlphaNet Hospitality Systems, Inc.); all Investment Property; all
Goods (including Inventory, Equipment and Fixtures); all Chattel Paper,
Documents and Instruments; all Books and Records; all General Intangibles
(including all Intellectual Property, contract rights, choses in action, Payment
Intangibles and Software); all Letter-of-Credit Rights; all Supporting
Obligations; and to the extent not otherwise included, all Proceeds, tort
claims, insurance claims and other rights to payment not otherwise included in
the foregoing and products of all and any of the foregoing and all accessions
to, substitutions and replacements for, and rents and profits of, each of the
foregoing but excluding in all events Hazardous Waste (all of the foregoing,
together with any other collateral pledged to the Lender pursuant to any other
Loan Document, collectively, the "Collateral").
(b) Borrower, Lender and each other Credit Party executing this
Agreement agree that this Agreement creates, and is intended to create, valid
and continuing Liens upon the Collateral in favor of Lender. Borrower and each
other Credit Party executing this Agreement represents, warrants and promises to
Lender that: (i) Borrower and each other Credit Party granting a Lien in
Collateral has rights in and the power to transfer each item of the Collateral
upon which it purports to xxxxx x Xxxx pursuant to the Loan Documents, free and
clear of any and all Liens or claims of others, other than Permitted
Encumbrances; (ii) the security interests granted pursuant to this Agreement,
upon completion of the filings and other actions listed on Disclosure Schedule
--------------------
(6.1) (which, in the case of all filings and other documents referred to in said
----
Schedule, have been delivered to the Lender in duly executed form) will
constitute valid perfected security interests in all of the Collateral in favor
of the Lender as security for the prompt and complete payment and performance of
the Obligations, enforceable in accordance with the terms hereof against any and
all creditors of and purchasers from any Credit Party (other than purchasers of
Inventory in the ordinary course of business) and such security interests are
prior to all other Liens on the Collateral in existence on the date hereof
except for Permitted Encumbrances that have priority by operation of law; and
(iii) no effective security agreement, mortgage, deed of trust, financing
statement, equivalent security or Lien instrument or continuation statement
covering all or any part of the Collateral is or will be on file or of record in
any public office, except those relating to Permitted Encumbrances. Borrower and
each other Credit Party executing this Agreement promise to defend the right,
title and interest of Lender in and to the Collateral against the claims and
demands of all Persons whomsoever, and each shall take such actions, including
(w) all actions necessary to grant Lender "control" of any Investment Property,
Deposit Accounts, Letter-of-Credit Rights or electronic Chattel Paper owned by
such Credit Party, with any agreements establishing control to be in form and
substance satisfactory to Lender, (x) the prompt delivery of all original
Instruments, Chattel Paper, negotiable Documents and certificated Stock owned by
such Credit Party (in each case, accompanied by stock powers, allonges or other
instruments of transfer executed in blank), (y) notification of Lender's
interest in Collateral at Lender's request, and (z) the institution of
litigation against third parties as shall be prudent in order to protect and
preserve each Credit Party's and Lender's respective and several interests in
the Collateral. Borrower (and any other Credit Party granting a Lien in
Collateral) shall xxxx its Books and Records pertaining to the Collateral to
evidence the Loan Documents and the Liens granted under the Loan Documents. If
any Credit Party retains possession of any Chattel Paper or Instrument with
32
Lender's consent, such Chattel Paper and Instruments shall be marked with the
following legend: "This writing and the obligations evidenced or secured hereby
are subject to the security interest of General Electric Capital Corporation."
Each Credit Party executing this Agreement shall promptly, and in any event
within two (2) Business Days after the same is acquired by it, notify Lender of
any commercial tort claim (as defined in the Code) acquired by it and unless
otherwise consented by Lender, such Credit Party shall enter into a supplement
to this Loan Agreement granting to Lender a Lien in such commercial tort claim.
6.2 Lender's Rights. (a) Lender may, (i) at any time in Lender's own name or in
---------------
the name of Borrower, communicate with Account Debtors, parties to Contracts,
and obligors in respect of Instruments, Chattel Paper or other Collateral to
verify to Lender's satisfaction, the existence, amount and terms of, and any
other matter relating to, Accounts, Payment Intangibles, Instruments, Chattel
Paper or other Collateral, and (ii) at any time after a Default has occurred and
is continuing and without prior notice to Borrower or any other Credit Party,
notify Account Debtors and other Persons obligated on any Collateral that Lender
has a security interest therein and that payments shall be made directly to
Lender. Upon the request of Lender, Borrower shall so notify such Account
Debtors and other Persons obligated on any Collateral. Once any such notice has
been given to any Account Debtor or other Person obligated on any Collateral,
the affected Credit Party shall not give any contrary instructions to such
Account Debtor or such other Person without Lender's prior written consent.
Borrower hereby constitutes Lender or Lender's designee as Borrower's attorney
with power to endorse Borrower's name upon any notes, acceptance drafts, money
orders or other evidences of payment or Collateral.
(b) Borrower shall remain liable under each Contract, Instrument and
License to observe and perform all the conditions and obligations to be observed
and performed by it thereunder, and Lender shall have no obligation or liability
whatsoever to any Person under any Contract, Instrument or License (between
Borrower or any other Credit Party and any Person other than Lender) by reason
of or arising out of the execution, delivery or performance of this Agreement,
and Lender shall not be required or obligated in any manner (i) to perform or
fulfill any of the obligations of Borrower, (ii) to make any payment or inquiry,
or (iii) to take any action of any kind to collect, compromise or enforce any
performance or the payment of any amounts that may have been assigned to it or
to which it may be entitled at any time or times under or pursuant to any
Contract, Instrument or License.
(c) Borrower and each other Credit Party shall, with respect to each
owned, leased, or controlled property, during normal business hours and upon
reasonable advance notice (unless a Default shall have occurred and be
continuing, in which event no notice shall be required and Lender shall have
access at any and all times): (i) provide access to such property to Lender and
any of its officers, employees and agents, as frequently as Lender determines to
be appropriate; (ii) permit Lender and any of its officers, employees and agents
to inspect, audit and make extracts and copies (or take originals if reasonably
necessary) from all of Borrower's and such Credit Party's Books and Records; and
(iii) permit Lender to inspect, review, evaluate and make physical verifications
and appraisals of the Inventory and other Collateral in any manner and through
any medium that Lender considers advisable (provided, however, prior to the
-------- -------
occurrence of a Default or Event of Default, Borrower shall only be obligated to
33
pay for one such appraisal per year), and Borrower and such Credit Party agree
to render to Lender, at Borrower's and such Credit Party's cost and expense,
such clerical and other assistance as may be reasonably requested with regard
thereto.
(d) After the occurrence and during the continuance of a Default,
Borrower, at its own expense, shall cause the certified public accountant then
engaged by Borrower to prepare and deliver to Lender at any time and from time
to time, promptly upon Lender's request, the following reports: (i) a
reconciliation of all Accounts; (ii) an aging of all Accounts; (iii) trial
balances; and (iv) test verifications of such Accounts as Lender may request.
Borrower, at its own expense, shall cause its certified independent public
accountants to deliver to Lender the results of any physical verifications of
all or any portion of the Inventory made or observed by such accountants when
and if such verification is conducted. Lender shall be permitted to observe and
consult with Borrower's accountants in the performance of these tasks.
6.3 Lender's Appointment as Attorney-in-fact. On the Closing Date, Borrower and
----------------------------------------
each other Credit Party executing this Agreement shall execute and deliver a
Power of Attorney in the form attached as Exhibit I. The power of attorney
----------
granted pursuant to the Power of Attorney and all powers granted under any Loan
Document are powers coupled with an interest and shall be irrevocable until the
Termination Date. The powers conferred on Lender under the Power of Attorney are
solely to protect Lender's interests in the Collateral and shall not impose any
duty upon it to exercise any such powers. Lender agrees not to exercise any
power or authority granted under the Power of Attorney unless an Event of
Default has occurred and is continuing. Borrower and each other Credit Party
executing this Agreement also hereby (i) authorizes Lender to file any financing
statements, continuation statements or amendments thereto that (x) indicate the
Collateral (1) as all assets of such Credit Party (or any portion of such Credit
Party's assets) or words of similar effect, regardless of whether any particular
asset comprised in the Collateral falls within the scope of Article 9 of the
Code or such jurisdiction, or (2) as being of an equal or lesser scope or with
greater detail, and (y) contain any other information required by Part 5 of
Article 9 of the Code for the sufficiency or filing office acceptance of any
financing statement, continuation statement or amendment and (ii) ratifies its
authorization for Lender to have filed any initial financial statements, or
amendments thereto if filed prior to the date hereof. Borrower and each other
Credit Party executing this Agreement acknowledges that it is not authorized to
file any financing statement or amendment or termination statement with respect
to any financing statement without the prior written consent of Lender and
agrees that it will not do so without the prior written consent of Lender,
subject to such Credit Party's rights under Section 9-509(d)(2) of the Code.
6.4 Grant of License to Use Intellectual Property Collateral. Borrower and each
--------------------------------------------------------
other Credit Party executing this Agreement hereby grants to Lender an
irrevocable, non-exclusive license (exercisable upon the occurrence and during
the continuance of an Event of Default without payment of royalty or other
compensation to Borrower or such Credit Party) to use, transfer, license or
sublicense any Intellectual Property now owned, licensed to, or hereafter
acquired by Borrower or such Credit Party, and wherever the same may be located,
and including in such license access to all media in which any of the licensed
34
items may be recorded or stored and to all computer software and programs used
for the compilation or printout thereof, and represents, promises and agrees
that any such license or sublicense is not and will not be in conflict with the
contractual or commercial rights of any third Person; provided, that such
license will terminate on the Termination Date.
7. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
7.1 Events of Default. The occurrence of any one or more of the following events
-----------------
(regardless of the reason therefor) shall constitute an "Event of Default"
hereunder which shall be deemed to be continuing until waived in writing by
Lender in accordance with Section 9.3:
(a) Borrower shall fail to make any payment in respect of any
Obligations when due and payable or declared due and payable; or
(b) Borrower or any other Credit Party (whether or not such Credit
Party has signed this Agreement) shall fail or neglect to perform, keep or
observe any of the covenants, promises, agreements, requirements, conditions or
other terms or provisions contained in this Agreement or any of the other Loan
Documents; or
(c) an event of default shall occur under any Contractual Obligation of
the Borrower or any other Credit Party (other than this Agreement and the other
Loan Documents), and such event of default (i) involves the failure to make any
payment (whether or not such payment is blocked pursuant to the terms of an
intercreditor agreement or otherwise), whether of principal, interest or
otherwise, and whether due by scheduled maturity, required prepayment,
acceleration, demand or otherwise, in respect of any Indebtedness (other than
the Obligations) of such Person in an aggregate amount exceeding the Minimum
Actionable Amount, or (ii) causes (or permits any holder of such Indebtedness or
a trustee to cause) such Indebtedness, or a portion thereof, in an aggregate
amount exceeding the Minimum Actionable Amount to become due prior to its stated
maturity or prior to its regularly scheduled date of payment; or
(d) any representation or warranty in this Agreement or any other Loan
Document, or in any written statement pursuant hereto or thereto, or in any
report, financial statement or certificate made or delivered to Lender by
Borrower or any other Credit Party shall be untrue or incorrect as of the date
when made or deemed made, regardless of whether such breach involves a
representation or warranty with respect to a Credit Party that has not signed
this Agreement; or
(e) there shall be commenced against the Borrower or any other Credit
Party any Litigation seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its assets
that results in the entry of an order for any such relief that remains unstayed
or undismissed for thirty (30) consecutive days; or Borrower or any other Credit
Party shall have concealed, removed or permitted to be concealed or removed, any
part of its property with intent to hinder, delay or defraud any of its
creditors or made or suffered a transfer of any of its property or the incurring
of an obligation that may be fraudulent under any bankruptcy, fraudulent
transfer or other similar law; or
(f) a case or proceeding shall have been commenced involuntarily
against Borrower or any other Credit Party in a court having competent
jurisdiction seeking a decree or order: (i) under the United States Bankruptcy
Code or any other applicable Federal, state or foreign bankruptcy or other
similar law, and seeking either (x) the appointment of a custodian, receiver,
35
liquidator, assignee, trustee or sequestrator (or similar official) for such
Person or of any substantial part of its properties, or (y) the reorganization
or winding up or liquidation of the affairs of any such Person, and such case or
proceeding shall remain undismissed or unstayed for sixty (60) consecutive days
or such court shall enter a decree or order granting the relief sought in such
case or proceeding; or (ii) invalidating or denying any Person's right, power,
or competence to enter into or perform any of its obligations under any Loan
Document or invalidating or denying the validity or enforceability of this
Agreement or any other Loan Document or any action taken hereunder or
thereunder; or
(g) Borrower or any other Credit Party shall (i) commence any case,
proceeding or other action under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization,
conservatorship or relief of debtors, seeking to have an order for relief
entered with respect to it or seeking appointment of a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for it or
any substantial part of its properties, (ii) make a general assignment for the
benefit of creditors, (iii) consent to or take any action in furtherance of, or,
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in paragraphs (e) or (f) of this Section 7.1 or clauses (i) and (ii) of
this paragraph (g), or (iv) shall admit in writing its inability to, or shall be
generally unable to, pay its debts as such debts become due; or
(h) a final judgment or judgments for the payment of money in excess of
the Minimum Actionable Amount in the aggregate shall be rendered against
Borrower or any other Credit Party, unless the same shall be (i) fully covered
by insurance and the issuer(s) of the applicable policies shall have
acknowledged full coverage in writing within fifteen (15) days of judgment, or
(ii) vacated, stayed, bonded, paid or discharged within a period of fifteen (15)
days from the date of such judgment; or
(i) any other event shall have occurred that has had or could
reasonably be expected to have a Material Adverse Effect; or (j) any provision
of any Loan Document shall for any reason cease to be valid, binding and
enforceable in accordance with its terms, or any Lien granted, or intended by
the Loan Documents to be granted, to Lender shall cease to be a valid and
perfected Lien having the first priority (or a lesser priority if expressly
permitted in the Loan Documents) in any of the Collateral (or any Credit Party
shall so assert any of the foregoing); or
(k) a Change of Control shall have occurred with respect to any
Corporate Credit Party; or
(l) an ERISA Event shall have occurred that, in the opinion of the
Lender, when taken together with all other ERISA Events that have occurred and
are then continuing, could reasonably be expected to result in liability of any
Credit Party in an aggregate amount exceeding the Minimum Actionable Amount.
7.2 Remedies. (a) If any Default shall have occurred and be continuing, then
--------
Lender may terminate or suspend its obligation to make further Revolving Credit
Advances and to incur additional Letter of Credit Obligations. In addition, if
any Event of Default shall have occurred and be continuing, Lender may, without
notice, take any one or more of the following actions: (i) declare all or any
portion of the Obligations to be forthwith due and payable, including contingent
liabilities with respect to Letter of Credit Obligations, whereupon such
Obligations shall become and be due and payable; (ii) require that all Letter of
Credit Obligations be fully cash collateralized pursuant to Schedule C; or (iii)
----------
36
exercise any rights and remedies provided to Lender under the Loan Documents or
at law or equity, including all remedies provided under the Code; provided, that
upon the occurrence of any Event of Default specified in Sections 7.1 (e), (f)
or (g), the Obligations shall become immediately due and payable (and any
obligation of Lender to make further Loans, if not previously terminated, shall
immediately be terminated) without declaration, notice or demand by Lender.
(b) Without limiting the generality of the foregoing, Borrower and each
other Credit Party executing this Agreement expressly agrees that upon the
occurrence of any Event of Default, Lender may collect, receive, assemble,
process, appropriate and realize upon the Collateral, or any part thereof, and
may forthwith sell, lease, assign, give an option or options to purchase or
otherwise dispose of and deliver said Collateral (or contract to do so), or any
part thereof, in one or more parcels at public or private sale or sales, at any
exchange at such prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. Lender shall have the right upon
any such public sale, to the extent permitted by law, to purchase for the
benefit of Lender the whole or any part of said Collateral so sold, free of any
right of equity of redemption, which right Borrower and each other Credit Party
executing this Agreement hereby releases. Such sales may be adjourned, or
continued from time to time with or without notice. Lender shall have the right
to conduct such sales on any Credit Party's premises or elsewhere and shall have
the right to use any Credit Party's premises without rent or other charge for
such sales or other action with respect to the Collateral for such time as
Lender deems necessary or advisable.
(c) Upon the occurrence and during the continuance of an Event of
Default and at Lender's request, Borrower and each other Credit Party executing
this Agreement further agrees, to assemble the Collateral and make it available
to Lender at places that Lender shall reasonably select, whether at its premises
or elsewhere. Until Lender is able to effect a sale, lease, or other disposition
of the Collateral, Lender shall have the right to complete, assemble, use or
operate the Collateral or any part thereof, to the extent that Lender deems
appropriate, for the purpose of preserving such Collateral or its value or for
any other purpose. Lender shall have no obligation to any Credit Party to
maintain or preserve the rights of any Credit Party as against third parties
with respect to any Collateral while such Collateral is in the possession of
Lender. Lender may, if it so elects, seek the appointment of a receiver or
keeper to take possession of any Collateral and to enforce any of Lender's
remedies with respect thereto without prior notice or hearing. To the maximum
extent permitted by applicable law, Borrower and each other Credit Party
executing this Agreement waives all claims, damages, and demands against Lender,
its Affiliates, agents, and the officers and employees of any of them arising
out of the repossession, retention or sale of any Collateral except such as are
determined in a final judgment by a court of competent jurisdiction to have
arisen solely out of the gross negligence or willful misconduct of such Person.
Borrower and each other Credit Party executing this Agreement agrees that ten
(10) days' prior notice by Lender to such Credit Party of the time and place of
any public sale or of the time after which a private sale may take place is
reasonable notification of such matters. Borrower and each other Credit Party
shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all amounts to which
Lender is entitled.
37
(d) Lender's rights and remedies under this Agreement shall be
cumulative and nonexclusive of any other rights and remedies that Lender may
have under any Loan Document or at law or in equity. Recourse to the Collateral
shall not be required. All provisions of this Agreement are intended to be
subject to all applicable mandatory provisions of law that may be controlling
and to be limited, to the extent necessary, so that they do not render this
Agreement invalid or unenforceable, in whole or in part.
7.3 Waivers by Credit Parties. Except as otherwise provided for in this
----------------------------
Agreement and to the fullest extent permitted by applicable law, Borrower and
each other Credit Party executing this Agreement waives: (a) presentment, demand
and protest, and notice of presentment, dishonor, intent to accelerate,
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all Loan Documents, the Note or any
other notes, commercial paper, Accounts, Contracts, Documents, Instruments,
Chattel Paper and guaranties at any time held by Lender on which such Credit
Party may in any way be liable, and hereby ratifies and confirms whatever Lender
may do in this regard; (b) all rights to notice and a hearing prior to Lender's
taking possession or control of, or to Lender's replevy, attachment or levy
upon, any Collateral or any bond or security that might be required by any court
prior to allowing Lender to exercise any of its remedies; and (c) the benefit of
all valuation, appraisal and exemption laws. Borrower and each other Credit
Party executing this Agreement acknowledges that it has been advised by counsel
of its choices and decisions with respect to this Agreement, the other Loan
Documents and the transactions evidenced hereby and thereby.
7.4 Proceeds. The Proceeds of any sale, disposition or other realization upon
--------
any Collateral shall be applied by Lender upon receipt to the Obligations in
such order as Lender may deem advisable in its sole discretion (including the
cash collateralization of any Letter of Credit Obligations), and after the
indefeasible payment and satisfaction in full in cash of all of the Obligations,
and after the payment by Lender of any other amount required by any provision of
law, including Section 9-608(a)(1) of the Code (but only after Lender has
received what Lender considers reasonable proof of a subordinate party's
security interest), the surplus, if any, shall be paid to Borrower or its
representatives or to whomsoever may be lawfully entitled to receive the same,
or as a court of competent jurisdiction may direct.
8. SUCCESSORS AND ASSIGNS
Each Loan Document shall be binding on and shall inure to the benefit of
Borrower and each other Credit Party executing such Loan Document, Lender, and
their respective successors and assigns, except as otherwise provided herein or
therein. Neither Borrower nor any other Credit Party may assign, transfer,
hypothecate, delegate or otherwise convey its rights, benefits, obligations or
duties under any Loan Document without the prior express written consent of
Lender. Any such purported conveyance by Borrower or such Credit Party without
the prior express written consent of Lender shall be void. There shall be no
third party beneficiaries of any of the terms and provisions of any of the Loan
Documents. Lender reserves the right at any time to create and sell
participations in the Loans and the Loan Documents and to sell, transfer or
assign any or all of its rights in the Loans and under the Loan Documents.
38
9. MISCELLANEOUS
9.1 Complete Agreement; Modification of Agreement. This Agreement and the other
----------------------------------------------
Loan Documents constitute the complete agreement between the parties with
respect to the subject matter hereof and thereof, supersede all prior
agreements, commitments, understandings or inducements (oral or written,
expressed or implied). No Loan Document may be modified, altered or amended
except by a written agreement signed by Lender, and each other Credit Party a
party to such Loan Document. Borrower and each other Credit Party executing this
Agreement or any other Loan Document shall have all duties and obligations under
this Agreement and such other Loan Documents from the date of its execution and
delivery, regardless of whether the initial Loan has been funded at that time.
9.2 Expenses. Borrower agrees to pay or reimburse Lender for all costs and
--------
expenses (including the fees and expenses of all counsel, advisors, consultants
(including environmental and management consultants) and auditors retained in
connection therewith), incurred in connection with: (a) the preparation,
negotiation, execution, delivery, performance and enforcement of the Loan
Documents and the preservation of any rights thereunder; (b) collection,
including deficiency collections; (c) the forwarding to Borrower or any other
Person on behalf of Borrower by Lender of the proceeds of any Loan (including a
wire transfer fee of $25 per wire transfer); (d) any amendment, waiver or other
modification with respect to any Loan Document or advice in connection with the
administration of the Loans or the rights thereunder; (e) any litigation,
dispute, suit, proceeding or action (whether instituted by or between any
combination of Lender, Borrower or any other Person), and an appeal or review
thereof, in any way relating to the Collateral, any Loan Document, or any action
taken or any other agreements to be executed or delivered in connection
therewith, whether as a party, witness or otherwise; and (f) any effort (i) to
monitor the Loans, (ii) to evaluate, observe or assess Borrower or any other
Credit Party or the affairs of such Person, and (iii) to verify, protect,
evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of the
Collateral.
9.3 No Waiver. Neither Lender's failure, at any time, to require strict
----------
performance by Borrower or any other Credit Party of any provision of any Loan
Document, nor Lender's failure to exercise, nor any delay in exercising, any
right, power or privilege hereunder, shall operate as a waiver thereof or waive,
affect or diminish any right of Lender thereafter to demand strict compliance
and performance therewith,. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. Any suspension or waiver of a
Default or other provision under the Loan Documents shall not suspend, waive or
affect any other Default or other provision under any Loan Document, and shall
not be construed as a bar to any right or remedy that Lender would otherwise
have had on any future occasion. None of the undertakings, indemnities,
agreements, warranties, covenants and representations of Borrower or any other
Credit Party to Lender contained in any Loan Document and no Default by Borrower
or any other Credit Party under any Loan Document shall be deemed to have been
suspended or waived by Lender, unless such waiver or suspension is by an
instrument in writing signed by an officer or other authorized employee of
Lender and directed to Borrower specifying such suspension or waiver (and then
39
such waiver shall be effective only to the extent therein expressly set forth),
and Lender shall not, by any act (other than execution of a formal written
waiver), delay, omission or otherwise, be deemed to have waived any of its
rights or remedies hereunder.
9.4 Severability; Section Titles. Wherever possible, each provision of the Loan
-----------------------------
Documents shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of any Loan Document shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of such Loan Document. Except as
otherwise expressly provided for in the Loan Documents, no termination or
cancellation (regardless of cause or procedure) of any financing arrangement
under the Loan Documents shall in any way affect or impair the Obligations,
duties, covenants, representations and warranties, indemnities, and liabilities
of Borrower or any other Credit Party or the rights of Lender relating to any
unpaid Obligation, (due or not due, liquidated, contingent or unliquidated), or
any transaction or event occurring prior to such termination, or any transaction
or event, the performance of which is not required until after the Commitment
Termination Date, all of which shall not terminate or expire, but rather shall
survive such termination or cancellation and shall continue in full force and
effect until the Termination Date; provided, that all indemnity obligations of
the Credit Parties under the Loan Documents shall survive the Termination Date.
The Section titles contained in any Loan Document are and shall be without
substantive meaning or content of any kind whatsoever and are not a part of the
agreement between parties hereto.
9.5 Authorized Signature. Until Lender shall be notified in writing by Borrower
--------------------
or any other Credit Party to the contrary, the signature upon any document or
instrument delivered pursuant hereto and believed by Lender or any of Lender's
officers, agents, or employees to be that of an officer of Borrower or such
other Credit Party shall bind Borrower and such other Credit Party and be deemed
to be the act of Borrower or such other Credit Party affixed pursuant to and in
accordance with resolutions duly adopted by Borrower's or such other Credit
Party's Board of Directors, and Lender shall be entitled to assume the authority
of each signature and authority of the person whose signature it is or appears
to be unless the person acting in reliance thereon shall have actual knowledge
to the contrary.
9.6 Notices. Except as otherwise provided herein, whenever any notice, demand,
-------
request or other communication shall or may be given to or served upon any party
by any other party, or whenever any party desires to give or serve upon any
other party any communication with respect to this Agreement, each communication
shall be in writing and shall be deemed to have been validly served, given or
delivered (a) upon the earlier of actual receipt and three (3) days after
deposit in the United States Mail, registered or certified mail, return receipt
requested, with proper postage prepaid, (b) upon transmission, when sent by
telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery or
United States Mail as otherwise provided in this Section 9.6), (c) one (1)
Business Day after deposit with a reputable overnight courier with all charges
prepaid or (d) when hand-delivered, all of which shall be addressed to the party
40
to be notified and sent to the address or facsimile number indicated in Schedule
--------
B or to such other address (or facsimile number) as may be substituted by notice
-
given as herein provided. Failure or delay in delivering copies of any such
communication to any Person (other than Borrower or Lender) designated in
Schedule B to receive copies shall in no way adversely affect the effectiveness
----------
of such communication.
9.7 Counterparts. Any Loan Document may be authenticated in any number of
------------
separate counterparts by any one or more of the parties thereto, and all of said
counterparts taken together shall constitute one and the same instrument. Any
Loan Document may be authenticated by manual signature, facsimile or, if
approved in writing by Lender, electronic means, all of which shall be equally
valid.
9.8 Time of the Essence. Time is of the essence for performance of the
-------------------
Obligations under the Loan Documents.
9.9 GOVERNING LAW. THE LOAN DOCUMENTS AND THE OBLIGATIONS ARISING UNDER THE LOAN
-------------
DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF
LAWS.
9.10 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. (A) BORROWER AND EACH
--------------------------------------------------
OTHER CREDIT PARTY EXECUTING THIS AGREEMENT HEREBY CONSENT AND AGREE THAT THE
STATE OR FEDERAL COURTS LOCATED IN NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND SUCH CREDIT PARTY
AND LENDER PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO
ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS; PROVIDED, THAT LENDER, BORROWER AND SUCH CREDIT PARTY ACKNOWLEDGE
THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL
BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF LENDER. BORROWER AND EACH OTHER CREDIT PARTY
EXECUTING THIS AGREEMENT EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER AND
SUCH CREDIT PARTY HEREBY WAIVE ANY OBJECTION THAT IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. BORROWER AND EACH
OTHER CREDIT PARTY EXECUTING THIS AGREEMENT HEREBY WAIVE PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREE
THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER OR SUCH CREDIT PARTY AT THE
ADDRESS SET FORTH IN SCHEDULE B OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL
----------
BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S OR SUCH CREDIT PARTY'S ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID.
41
(B) THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT,
TORT, OR OTHERWISE BETWEEN LENDER, BORROWER AND ANY CREDIT PARTY ARISING OUT OF,
CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN
THEM IN CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
9.11 Press Releases. Neither any Credit Party nor any of its Affiliates will in
--------------
the future issue any press release or other public disclosure using the name of
General Electric Capital Corporation or its affiliates or referring to this
Agreement or the other Loan Documents without at least two (2) Business Days'
prior notice to Lender and without the prior written consent of Lender unless
(and only to the extent that) such Credit Party or Affiliate is required to do
so under law and then, in any event, such Credit Party or Affiliate will consult
with Lender before issuing such press release or other public disclosure.
9.12 Reinstatement. This Agreement shall continue to be effective, or be
-------------
reinstated, as the case may be, if at any time payment of all or any part of the
Obligations is rescinded or must otherwise be returned or restored by Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
Borrower or any other Credit Party, or otherwise, all as though such payments
had not been made.
IN WITNESS WHEREOF, this Loan and Security Agreement has been duly executed as
of the date first written above.
COMPUTER COMPONENTS CORPORATION
By:
---------------------------
Name:
Title:
By:
----------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
42
SCHEDULE A - DEFINITIONS
Capitalized terms used in this Agreement and the other Loan Documents shall have
(unless otherwise provided elsewhere in this Agreement or in the other Loan
Documents) the following respective meanings:
"Account Debtor" shall mean any Person who is or may become obligated with
respect to, or on account of, an Account, Chattel Paper or General Intangible
(including a Payment Intangible).
"Accounts" means all "accounts," as such term is defined in the Code, now owned
or hereafter acquired by any Person, including: (i) all accounts receivable,
other receivables, book debts and other forms of obligations (other than forms
of obligations evidenced by Chattel Paper or Instruments) (including any such
obligations which may be characterized as an account or contract right under the
Code); (ii) all of such Person's rights in, to and under all purchase orders or
receipts for goods or services; (iii) all of such Person's rights to any goods
represented by any of the foregoing (including unpaid sellers' rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods); (iv) all rights to payment due to
such Person for Goods or other property sold, leased, licensed, assigned or
otherwise disposed of, for a policy of insurance issued or to be issued, for a
secondary obligation incurred or to be incurred or to be incurred, for energy
provided or to be provided, for the use or hire of a vessel under a charter or
other contract, arising out of the use of a credit card or charge card, or for
services rendered or to be rendered by such Person or in connection with any
other transaction (whether or not yet earned by performance on the part of such
Person), and (v) all health care insurance receivables; and (vi) all collateral
security of any kind given by any Account Debtor or any other Person with
respect to any of the foregoing.
"Accounts Payable Analysis" means a certificate in the form of Exhibit D
"Accounts Receivable Roll Forward Analysis" means a certificate in the form of
Exhibit E.
"Affiliate" means, with respect to any Person: (i) each other Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, five percent (5%) or more of the Stock having
ordinary voting power for the election of directors of such Person; (ii) each
other Person that controls, is controlled by or is under common control with
such Person or any Affiliate of such Person; or (iii) each of such Person's
officers, directors, joint venturers and partners. For the purpose of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" means this Agreement including all appendices, exhibits or schedules
attached or otherwise identified thereto, restatements and modifications and
supplements thereto, and any appendices, exhibits or schedules to any of the
foregoing, each as effect at the time such reference becomes operative;
provided, that except as specifically set forth in this Agreement, any reference
to the Disclosure Schedules to this Agreement shall be deemed a reference to the
Disclosure Schedules as in effect on the Closing Date or in a written amendment
thereto executed by Borrower and Lender.
43
"Books and Records" means all books, records, board minutes, contracts,
licenses, insurance policies, environmental audits, business plans, files,
computer files, computer discs and other data and software storage and media
devices, accounting books and records, financial statements (actual and pro
forma), filings with Governmental Authorities and any and all records and
instruments relating to the Collateral or Borrower's business.
"Borrower" means the Person identified as such in the preamble of this
Agreement.
"Borrowing Availability" means, at any time, the lesser of (i) the Maximum
Amount or (ii) the Borrowing Base, in each case less reserves established by
Lender from time to time.
"Borrowing Base" means at any time an amount equal to the sum at such time of:
(a) eighty-five percent (85%) of the value (as determined by Lender) of
Borrower's Eligible Accounts; provided that Lender shall reduce the foregoing
percentage by one percentage point for each percentage point that the dilution
of Borrower's Accounts (calculated monthly by Lender as the average dilution
over the most recent three months) exceeds 5%; plus
(b) the lesser of (i) $3,000,000 or (ii) the lesser of (A) eighty-five
percent (85%) of the net orderly liquidation value of Borrower's Eligible
Inventory (as determined by Lender) and (B) fifty-five percent (55%) of the
lower of cost or market of Borrower's Eligible Inventory (as determined by
Lender).
"Borrowing Base Certificate" means a certificate in the form of Exhibit C.
"Brinks" means Brinks Home Security, Inc.
"Business Day" means any day that is not a Saturday, a Sunday or a day on which
banks are required or permitted to be closed in the State of New York.
"Capital Expenditures" means all payments or accruals (including Capital Lease
Obligations) for any fixed assets or improvements or for replacements,
substitutions or additions thereto, that have a useful life of more than one
year and that are required to be capitalized under GAAP.
"Capital Lease" means, with respect to any Person, any lease of any property
(whether real, personal or mixed) by such Person as lessee that, in accordance
with GAAP, either would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person or otherwise would be disclosed
as such in a note to such balance sheet, other than, in the case of Borrower,
any such lease under which Borrower is the lessor.
"Capital Lease Obligation" means, with respect to any Capital Lease, the amount
of the obligation of the lessee thereunder that, in accordance with GAAP, would
appear on a balance sheet of such lessee in respect of such Capital Lease or
otherwise be disclosed in a note to such balance sheet.
"Cash Collateral Account" has the meaning assigned to it in Schedule C.
44
"Change of Control" means, with respect to any Person on or after the Closing
Date, that any change in the composition of such Person's stockholders as of the
Closing Date shall occur which would result in any stockholder or group
acquiring 49.9% or more of any class of Stock of such Person, or that any Person
(or group of Persons acting in concert) shall otherwise acquire, directly or
indirectly (including through Affiliates), the power to elect a majority of the
Board of Directors of such Person or otherwise direct the management or affairs
of such Person by obtaining proxies, entering into voting agreements or trusts,
acquiring securities or otherwise.
"Charges" means all Federal, state, county, city, municipal, local, foreign or
other governmental taxes (including taxes owed to PBGC at the time due and
payable), levies, customs or other duties, assessments, charges, liens, and all
additional charges, interest, penalties, expenses, claims or encumbrances upon
or relating to (i) the Collateral, (ii) the Obligations, (iii) the employees,
payroll, income or gross receipts of any Credit Party, (iv) the ownership or use
of any assets by any Credit Party, or (v) any other aspect of any Credit Party's
business.
"Chattel Paper" means all "chattel paper," as such term is defined in the Code,
including electronic chattel paper, now owned or hereafter acquired by any
Person.
"Closing Date" means the Business Day on which the conditions precedent set
forth in Section 2 have been satisfied or specifically waived in writing by
Lender, and the initial Loan has been made.
"Closing Fee" has the meaning assigned to it in Schedule E.
"Code" means the Uniform Commercial Code as the same may, from time to time, be
in effect in the State of New York; provided, that in the event that, by reason
of mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Lender's Lien on any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, the term "Code" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions of
this Agreement relating to such attachment, perfection, priority or remedies and
for purposes of definitions related to such provisions; provided further, that
to the extent that the Code is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles or Divisions
of the Code, the definition of such term contained in Article or Division 9
shall govern.
"Collateral" has the meaning assigned to it in Section 6.1.
"Collection Account" means that certain account of Lender, account number
00-000-000 in the name of GECC-CAF Depository at Bankers Trust Company, 0
Xxxxxxx Xxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx, XXX number 000-000-000.
"Commitment Termination Date" means the earliest of (i) the Stated Expiry Date,
(ii) the date Lender's obligation to advance funds is terminated pursuant to
Section 7.2, and (iii) the date of indefeasible prepayment in full by Borrower
of the Obligations in accordance with the provisions of Section 1.2(c).
45
"Contracts" means all the contracts, undertakings, or agreements (other than
rights evidenced by Chattel Paper, Documents or Instruments) in or under which
any Person may now or hereafter have any right, title or interest, including any
agreement relating to the terms of payment or the terms of performance of any
Account.
"Contractual Obligation" means as to any Person, any provision of any security
issued by such Person or of any agreement, instrument, or other undertaking to
which such Person is a party or by which it or any of its property is bound.
"Copyright License" means rights under any written agreement now owned or
hereafter acquired by any Person granting the right to use any Copyright or
Copyright registration.
"Copyrights" shall mean all of the following now owned or hereafter adopted or
acquired by any Person: (i) all copyrights in any original work of authorship
fixed in any tangible medium of expression, now known or later developed, all
registrations and applications for registration of any such copyrights in the
United States or any other country, including registrations, recordings and
applications, and supplemental registrations, recordings, and applications in
the United States Copyright Office; and (ii) all Proceeds of the foregoing,
including license royalties and proceeds of infringement suits, the right to xxx
for past, present and future infringements, all rights corresponding thereto
throughout the world and all renewals and extensions thereof.
"Corporate Credit Party" means any Credit Party that is a corporation,
partnership or limited liability company.
"Credit Party" means Borrower, and each other Person (other than Lender) that is
or may become a party to this Agreement or any other Loan Document.
"Default" means any Event of Default or any event that, with the passage of time
or notice or both, would, unless cured or waived, become an Event of Default.
"Default Rate" has the meaning assigned to it in Section 1.5(c).
"Deposit Accounts" means all "deposit accounts" as such term is defined in the
Code, now or hereafter held in the name of any Person.
"Documents" means all "documents," as such term is defined in the Code, now
owned or hereafter acquired by any Person, wherever located, including all bills
of lading, dock warrants, dock receipts, warehouse receipts, and other documents
of title, whether negotiable or non-negotiable.
"EBITDA" means, for any period, the Net Income (Loss) of Borrower and its
Subsidiaries on a consolidated basis for such period, plus interest expense,
income tax expense, amortization expense, depreciation expense and extraordinary
losses and minus extraordinary gains, in each case, of Borrower and its
Subsidiaries on a consolidated basis for such period determined in accordance
with GAAP to the extent included in the determination of such Net Income (Loss).
"Eligible Accounts" means as at the date of determination, all Accounts of the
Borrower except any Account:
46
(a) that does not arise from the sale of goods or the performance of
services by Borrower in the ordinary course of Borrower's business;
(b) upon which (i) Borrower's right to receive payment is not absolute or
is contingent upon the fulfillment of any condition whatsoever or (ii)
Borrower is not able to bring suit or otherwise enforce its remedies
against the Account Debtor through judicial process;
(c) against which any defense, counterclaim or setoff, whether
well-founded or otherwise, is asserted or which is a "contra" Account;
(d) that is not a true and correct statement of a bona fide indebtedness
incurred in the amount of the Account for merchandise sold or services
performed and accepted by the Account Debtor obligated upon such
Account;
(e) with respect to which an invoice, acceptable to Lender in form and
substance, has not been sent;
(f) that is not owned by Borrower or is subject to any right, claim, or
interest of another Person, other than the Lien in favor of Lender;
(g) that arises from a sale to or performance of services for an employee,
Affiliate, Subsidiary or Stockholder of Borrower or any other Credit
Party, or an entity which has common officers or directors with
Borrower or any other Credit Party;
(h) that is the obligation of an Account Debtor that is the Federal (or
local) government or a political subdivision thereof, unless Lender
has agreed to the contrary in writing and Borrower has complied with
the Federal Assignment of Claims Act of 1940 (or the state equivalent
thereof, if any) with respect to such obligation;
(i) that is the obligation of an Account Debtor located in a foreign
country unless such Account is supported by a letter of credit in
which Lender has a first priority perfected security interest by
possession or credit insurance acceptable to Lender (and naming Lender
as loss payee);
(j) that is the obligation of an Account Debtor to whom Borrower is or may
become liable for goods sold or services rendered by the Account
Debtor to Borrower, to the extent of Borrower's liability to such
Account Debtor;
(k) that arises with respect to goods which are delivered on a
cash-on-delivery basis or placed on consignment, guaranteed sale or
other terms by reason of which the payment by the Account Debtor may
be conditional;
(l) that is an obligation for which the total unpaid Accounts of the
Account Debtor exceed 20% of the aggregate of all Accounts, to the
extent of such excess (or 15% of the aggregate outstanding Revolving
Credit Advances in the case of Xxxxxxxxxx);
(m) that is not paid within 60 days from its due date or 90 days from its
invoice date or that are Accounts of an Account Debtor if 50% or more
of the Accounts owing from such Account Debtor remain unpaid within
such time periods (or are Accounts of Xxxxxxxxxx if 25% or more of the
Accounts owing from Xxxxxxxxxx remain unpaid within 60 days from their
respective invoice dates);
(n) is an obligation of an Account Debtor that has suspended business,
made a general assignment for the benefit of creditors, is unable to
pay its debts as they become due or as to which a petition has been
filed (voluntary or involuntary) under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors;
(o) that arises from any xxxx-and-hold or other sale of goods which remain
in Borrower's possession or under Borrower's control;
47
(p) as to which Lender's interest therein is not a first priority
perfected security interest;
(q) to the extent that such Account exceeds any credit limit established
by Lender in Lender's good faith credit judgment;
(r) as to which any of Borrower's representations or warranties pertaining
to Accounts are untrue;
(s) that represents interest payments, late or finance charges, or service
charges owing to Borrower; or
(t) that is not otherwise acceptable in the good faith discretion of
Lender, provided, that Lender shall have the right to create and
adjust eligibility standards and related reserves from time to time in
its good faith credit judgment.
In addition to the foregoing exclusions set forth in subparagraphs (a)
through (t) above, no Account of the Borrower from Xxxxxxxxxx shall be an
"Eligible Account" unless the invoice with respect thereto reflects "Direct
Shipment" and "FOB Hong Kong" or applicable shipping port and is accompanied by
all marine shipping documentation (or if such documentation is not available,
contact information for shipping line for verification of shipment).
"Eligible Inventory" means as at the date of determination, all Inventory of the
Borrower, except any Inventory that:
(a) is not subject to a first priority perfected security interest of
Lender or is not owned by Borrower free and clear of all Liens and
rights of others (except the Liens in favor of Lender);
(b) is not located on premises owned or operated by Borrower and
referenced in Disclosure Schedule (3.2),
(c) is not located on premises where the aggregate amount of all Inventory
(valued at cost) of such Borrower located thereon is greater than
$100,000;
(d) is located on premises with respect to which Lender has not received a
landlord or mortgagee letter acceptable in form and substance to
Lender;
(e) is in transit;
(f) is covered by a negotiable document of title, unless such document and
evidence of acceptable insurance covering such Inventory has been
delivered to Lender,
(g) in Lender's good faith credit judgment, is obsolete, unsalable,
shopworn, damaged, unfit for further processing, is of substandard
quality or is not of good and merchantable quality, free from any
defects;
(h) consists of (i) discontinued items, (ii) slow-moving or excess items
held in inventory, or (iii) used items held for resale;
(i) does not consist of raw materials or finished goods;
(j) does not meet all standards imposed by any Governmental Authority,
including with respect to its production, acquisition or importation
(as the case may be);
(k) is placed by Borrower on consignment or held by Borrower on
consignment from another Person;
(l) is held for rental or lease by or on behalf of Borrower;
(m) is produced in violation of the Fair Labor Standards Act and subject
to the "hot goods" provisions contained in 29 U.S.C.ss.215 or any
successor statute or section;
(n) in any way fails to meet or violates any warranty, representation or
covenant contained in this Agreement or any other Loan Document;
48
(o) is subject to any licensing, patent, royalty, trademark, trade name or
copyright agreement with any third parties;
(p) requires the consent of any Person for the completion of manufacture,
sale or other disposition of such Inventory by Lender following an
Event of Default and such completion, manufacture or sale constitutes
a breach or default under any contract or agreement to which Borrower
is a party or to which such Inventory is or may become subject; or
(q) is not otherwise acceptable in the good faith discretion of Lender,
provided, that Lender shall have the right to create and adjust
eligibility standards and related reserves from time to time in its
good faith credit judgment.
In addition to the foregoing exclusions set forth in subparagraphs (a)
through (q) above, no Inventory of Borrower shall be Eligible Inventory if
Borrower has not occupied a new or additional warehouse facility (satisfactory
to Lender) within 90 days from the date of this Agreement.
"Environmental Laws" means all Federal, state and local laws, statutes,
ordinances and regulations, now or hereafter in effect, and in each case as
amended or supplemented from time to time, and any applicable judicial or
administrative interpretation thereof relating to the regulation and protection
of human health, safety, the environment and natural resources (including
ambient air, surface water, groundwater, wetlands, land surface or subsurface
strata, wildlife, aquatic species and vegetation).
"Environmental Liabilities" means all liabilities, obligations,
responsibilities, remedial actions, removal costs, losses, damages of whatever
nature, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts and consultants and costs of investigation and
feasibility studies), fines, penalties, sanctions and interest incurred as a
result of any claim, suit, action or demand of whatever nature by any Person and
which relate to any health or safety condition regulated under any Environmental
Law, environmental permits or in connection with any Release, threatened
Release, or the presence of a Hazardous Material.
"Equipment" means all "equipment" as such term is defined in the Code, now owned
or hereafter acquired by any Person, wherever located, including any and all
machinery, apparatus, equipment, fittings, furniture, fixtures, motor vehicles
and other tangible personal property (other than Inventory) of every kind and
description that may be now or hereafter used in such Person's operations or
which are owned by such Person or in which such Person may have an interest, and
all parts, accessories and accessions thereto and substitutions and replacements
therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974 (or any
successor legislation thereto), as amended from time to time, and any
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
that, together with any Credit Party, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the IRC, or, solely for the purposes of
Section 302 of ERISA and Section 412 of the IRC, is treated as a single employer
under Section 414 of the IRC.
49
"ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the IRC or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(b) of the IRC or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by any Credit Party or any ERISA Affiliate of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by any Credit Party or any ERISA Affiliate from the PBGC or a
plan administrator of any notice relating to an intention to terminate any Plan
or to appoint a trustee to administer any Plan; (f) the incurrence by any Credit
Party or any ERISA Affiliate of any liability with respect to any withdrawal or
partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by
any Credit Party or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from any Credit Party or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Event of Default" has the meaning assigned to it in Section 7.1.
"Fees" means the fees due to Lender as set forth in Schedule E.
"Financial Statements" means the consolidated and consolidating income
statement, balance sheet and statement of cash flows of (i) Parent and (ii)
Borrower and its Subsidiaries, in each case internally prepared for each Fiscal
Month, and audited for each Fiscal Year, prepared in accordance with GAAP.
"Fiscal Month" means any of the monthly accounting periods of Borrower.
"Fiscal Quarter" means any of the quarterly accounting periods of Borrower.
"Fiscal Year" means the 12 month period of Borrower ending December 31 of each
year. Subsequent changes of the fiscal year of Borrower shall not change the
term "Fiscal Year" unless Lender shall consent in writing to such change.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of the following
for Borrower and its Subsidiaries on a consolidated basis determined in
accordance with GAAP: (a) EBITDA for such period less Capital Expenditures for
such period which are not financed through the incurrence of any Indebtedness
(excluding the Revolving Credit Loan) to (b) the sum of (i) interest expense
paid or accrued in respect of any Indebtedness during such period, plus (ii)
taxes to the extent accrued or otherwise payable with respect to such period
plus (iii) regularly scheduled payments of principal paid or that were required
to be paid on Funded Debt (excluding the Revolving Credit Loan) during such
period plus (iv) dividends or other distributions paid to Stockholders during
such period.
"Fixtures" means all "fixtures" as such term is defined in the Code, now owned
or hereafter acquired by any Person.
"Funded Debt" means, for any Person, all of such Person's Indebtedness which by
the terms of the agreement governing or instrument evidencing such Indebtedness
matures more than one year from, or is directly or indirectly renewable or
50
extendible at the option of such Person under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over a period of
more than one year from, the date of creation thereof, including current
maturities of long-term debt, revolving credit, and short-term debt extendible
beyond one year at the option of such Person.
"GAAP" means generally accepted accounting principles in the United States of
America as in effect from time to time, consistently applied.
"General Intangibles" means all "general intangibles," as such term is defined
in the Code, now owned or hereafter acquired by any Person, including all right,
title and interest that such Person may now or hereafter have in or under any
Contract, all Payment Intangibles, customer lists, Licenses, Intellectual
Property, interests in partnerships, joint ventures and other business
associations, permits, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials, Books and Records, Goodwill
(including the Goodwill associated with any Intellectual Property), all rights
and claims in or under insurance policies (including insurance for fire, damage,
loss, and casualty, whether covering personal property, real property, tangible
rights or intangible rights, all liability, life, key-person, and business
interruption insurance, and all unearned premiums), uncertificated securities,
choses in action, deposit accounts, rights to receive tax refunds and other
payments, rights to receive dividends, distributions, cash, Instruments and
other property in respect of or in exchange for pledged Stock and Investment
Property, and rights of indemnification.
"Goods" means all "goods," as such term is defined in the Code, now owned or
hereafter acquired by any Person, wherever located, including embedded software
to the extent included in "goods" as defined in the Code, manufactured homes,
standing timber that is cut and removed for sale and unborn young of animals.
"Goodwill" means all goodwill, trade secrets, proprietary or confidential
information, technical information, procedures, formulae, quality control
standards, designs, operating and training manuals, customer lists, and
distribution agreements now owned or hereafter acquired by any Person.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranteed Indebtedness" means, as to any Person, any obligation of such Person
guaranteeing any indebtedness, lease, dividend, or other obligation ("primary
obligations") of any other Person (the "primary obligor") in any manner,
including any obligation or arrangement of such guaranteeing Person (whether or
not contingent): (i) to purchase or repurchase any such primary obligation; (ii)
to advance or supply funds (a) for the purchase or payment of any such primary
obligation or (b) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor; (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation; or (iv) to indemnify the owner of such primary obligation against
loss in respect thereof.
51
"Guarantor" means each Person that executes a guaranty or a support, put or
other similar agreement in favor of Lender in connection with the transactions
contemplated by this Agreement.
"Guaranty" means any agreement to perform all or any portion of the Obligations
on behalf of Borrower or any other Credit Party, in favor of, and in form and
substance satisfactory to, Lender, together with all amendments, modifications
and supplements thereto, and shall refer to such Guaranty as the same may be in
effect at the time such reference becomes operative.
"Hazardous Material" means any substance, material or waste that is regulated by
or forms the basis of liability now or hereafter under, any Environmental Laws,
including any material or substance that is (a) defined as a "solid waste,"
"hazardous waste," "hazardous material," "hazardous substance," "extremely
hazardous waste," "restricted hazardous waste," "pollutant," "contaminant,"
"hazardous constituent," "special waste," "toxic substance" or other similar
term or phrase under any Environmental Laws, (b) petroleum or any fraction or
by-product thereof, asbestos, polychlorinated biphenyls (PCB's), or any
radioactive substance.
"Hazardous Waste" has the meaning ascribed to such term in the Resource
Conservation and Recovery Act (42 X.X.X.xx.xx. 6901 et. seq.).
"Indebtedness" of any Person means: (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services
(including reimbursement and all other obligations with respect to surety bonds,
letters of credit and bankers' acceptances, whether or not matured, but not
including obligations to trade creditors incurred in the ordinary course of
business and not more than forty-five (45 days past due); (ii) all obligations
evidenced by notes, bonds, debentures or similar instruments; (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreements with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property); (iv)
all Capital Lease Obligations; (v) all Guaranteed Indebtedness; (vi) all
Indebtedness referred to in clauses (i), (ii), (iii), (iv) or (v) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness;
(vii) the Obligations; and (viii) all liabilities under Title IV of ERISA.
"Indemnified Liabilities" and "Indemnified Person" have the respective meanings
assigned to them in Section 1.11.
"Index Rate" means the latest month-end published Prime Lending Rate, which
normally is published in the "Money Rates" section of The Wall Street Journal
(or if such rate ceases to be so published, as quoted from such other generally
available and recognizable source as Lender may select). The Index Rate shall be
determined (i) on the first Business Day immediately prior to the Closing Date
and (ii) thereafter, on the last Business Day of each calendar month for
calculation of interest for the following month.
52
"Instruments" means all "instruments," as such term is defined in the Code, now
owned or hereafter acquired by any Person, wherever located, including all
certificated securities and all promissory notes and other evidences of
indebtedness, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.
"Intellectual Property" means any and all Licenses, Patents, Copyrights,
Trademarks, trade secrets and customer lists.
"Inventory" means all "inventory," as such term is defined in the Code, now
owned or hereafter acquired by any Person, wherever located, including all
inventory, merchandise, goods and other personal property that are held by or on
behalf of such Person for sale or lease or are furnished or are to be furnished
under a contract of service or that constitute raw materials, work in process,
finished goods, returned goods or materials or supplies of any kind, nature or
description used or consumed or to be used or consumed in such Person's business
or in the processing, production, packaging, promotion, delivery or shipping of
the same, including all supplies and embedded software.
"Investment Property" means all "investment property," as such term is defined
in the Code, now owned or hereafter acquired by any Person, wherever located.
"IRC" and "IRS" mean respectively, the Internal Revenue Code of 1986 and the
Internal Revenue Service, and any successors thereto.
"Lender" means General Electric Capital Corporation and, if at any time Lender
shall decide to assign or syndicate all or any of the Obligations, such term
shall include such assignee or such other members of the syndicate.
"Letters of Credit" means any and all documentary or standby letters of credit
issued at the request and for the account of Borrower for which Lender has
incurred Letter of Credit Obligations.
"Letter of Credit Fee" has the meaning assigned to it in Schedule E.
"Letter of Credit Obligations" means all outstanding obligations (including all
duty, freight, taxes, costs, insurance and any other charges and expenses)
incurred by Lender, whether direct or indirect, contingent or otherwise, due or
not due, in connection with the issuance or guarantee, by Lender or another, of
Letters of Credit, all as further set forth in Schedule C.
"Letter-of-Credit Rights" means "letter-of-credit rights" as such term is
defined in the Code, now owned or hereafter acquired by any Person, including
rights to payment or performance under a letter of credit, whether or not such
Person, as beneficiary, has demanded or is entitled to demand payment or
performance.
"License" means any Copyright License, Patent License, Trademark License or
other license of rights or interests now held or hereafter acquired by any
Person.
"Lien" means any mortgage, security deed or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, security title, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
53
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Code or comparable law of any jurisdiction).
"Litigation" means any claim, lawsuit, litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority.
"Loan Documents" means this Agreement, the Note, the Financial Statements, each
Guaranty, the Power of Attorney, the Lock Box Account Agreements, and the other
documents and instruments listed in Schedule F, and all security agreements,
mortgages and all other documents, instruments, certificates, and notices at any
time delivered by any Person (other than Lender) in connection with any of the
foregoing.
"Loans" means the Revolving Credit Loan, including the Letter of Credit
Obligations.
"Lock Box Account" and "Lock Box Account Agreement" have the meanings assigned
to such terms in Schedule D.
"Material Adverse Effect" means: a material adverse effect on (a) the business,
assets, operations, prospects or financial or other condition of Borrower or any
other Credit Party or the industry within which Borrower or any other Credit
Party operates, (b) Borrower's or any other Credit Party's ability to pay or
perform the Obligations under the Loan Documents to which such Credit Party is a
party in accordance with the terms thereof, (c) the Collateral or Lender's Liens
on the Collateral or the priority of any such Lien, or (d) Lender's rights and
remedies under this Agreement and the other Loan Documents.
"Maximum Amount" means $12,000,000.
"Minimum Actionable Amount" means $50,000.
"Multiemployer Plan" means a "multiemployer plan," as defined in Section 4001(a)
(3) of ERISA, to which Borrower, any other Credit Party or any ERISA Affiliate
is making, is obligated to make, has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.
"Net Borrowing Availability" means at any time the Borrowing Availability less
the Revolving Credit Loan.
"Net Income (Loss)" means with respect to any Person and for any period, the
aggregate net income (or loss) after taxes of such Person for such period,
determined in accordance with GAAP.
"Note" means the Revolving Credit Note.
"Notice of Revolving Credit Advance" has the meaning assigned to it in Section
1.1(b).
"Obligations" means all loans, advances, debts, expense reimbursement, fees,
liabilities, and obligations for the performance of covenants, tasks or duties
or for payment of monetary amounts (whether or not such performance is then
required or contingent, or amounts are liquidated or determinable) owing by
54
Borrower and any other Credit Party to Lender, of any kind or nature, present or
future, whether or not evidenced by any note, agreement or other instrument,
whether arising under any of the Loan Documents or under any other agreement
between Borrower, such Credit Party and Lender, and all covenants and duties
regarding such amounts. This term includes all principal, interest (including
interest accruing at the then applicable rate provided in this Agreement after
the maturity of the Loans and interest accruing at the then applicable rate
provided in this Agreement after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding), Fees, Charges, expenses, attorneys' fees and any other sum
chargeable to Borrower under any of the Loan Documents, and all principal and
interest due in respect of the Loans and all obligations and liabilities of any
Guarantor under any Guaranty.
"Parent" means Tech Electro Industries, Inc.
"Patent License" means rights under any written agreement now owned or hereafter
acquired by any Person granting any right with respect to any invention on which
a Patent is in existence.
"Patents" means all of the following in which any Person now holds or hereafter
acquires any interest: (i) all letters patent of the United States or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State or Territory thereof, or any other country; and (ii) all reissues,
continuations, continuations-in-part or extensions thereof.
"Payment Intangibles" means all "payment intangibles" as such term is defined in
the Code, now owned or hereafter acquired by any Person.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto.
"Permitted Encumbrances" means the following encumbrances: (i) Liens for taxes
or assessments or other governmental Charges or levies, either not yet due and
payable or to the extent that nonpayment thereof is permitted by the terms of
Section 3.10; (ii) pledges or deposits securing obligations under worker's
compensation, unemployment insurance, social security or public liability laws
or similar legislation; (iii) pledges or deposits securing bids, tenders,
contracts (other than contracts for the payment of money) or leases to which any
Credit Party is a party as lessee made in the ordinary course of business; (iv)
deposits securing public or statutory obligations of any Credit Party; (v)
inchoate and unperfected workers', mechanics', or similar liens arising in the
ordinary course of business so long as such Liens attach only to Equipment,
fixtures or real estate; (vi) carriers', warehousemans', suppliers' or other
similar possessory liens arising in the ordinary course of business and securing
indebtedness not yet due and payable in an outstanding aggregate amount not in
excess of $25,000 at any time so long as such Liens attach only to Inventory;
(vii) deposits of money securing, or in lieu of, surety, appeal or customs bonds
in proceedings to which any Credit Party is a party; (viii) zoning restrictions,
easements, licenses, or other restrictions on the use of real property or other
minor irregularities in title (including leasehold title) thereto, so long as
the same do not materially impair the use, value, or marketability of such real
55
estate; (ix) Purchase Money Liens securing Purchase Money Indebtedness (or rent)
to the extent permitted under Section 5(b)(vi); (x) Liens in existence on the
Closing Date as disclosed on Disclosure Schedule 5(e) provided that no such Lien
is spread to cover additional property after the Closing Date and the amount of
Indebtedness secured thereby is not increased.; and (xi) Liens in favor of
Lender securing the Obligations.
"Person" means any individual, sole proprietorship, partnership, limited
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, public benefit
corporation, entity or government (whether Federal, state, county, city,
municipal or otherwise, including any instrumentality, division, agency, body or
department thereof), and shall include such Person's successors and assigns.
"Plan" means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the IRC or
Section 302 of ERISA, and in respect of which any Credit Party or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Prepayment Fee" means the prepayment fee specified in Schedule E.
"Proceeds" means "proceeds," as such term is defined in the Code and, in any
event, shall include: (i) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to Borrower or any other Credit Party from time to
time with respect to any Collateral; (ii) any and all payments (in any form
whatsoever) made or due and payable to Borrower or any other Credit Party from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of any Collateral by any governmental body, authority,
bureau or agency (or any person acting under color of governmental authority);
(iii) any claim of Borrower or any other Credit Party against third parties (a)
for past, present or future infringement of any Intellectual Property or (b) for
past, present or future infringement or dilution of any Trademark or Trademark
License or for injury to the goodwill associated with any Trademark, Trademark
registration or Trademark licensed under any Trademark License; (iv) any
recoveries by Borrower or any other Credit Party against third parties with
respect to any litigation or dispute concerning any Collateral, including claims
arising out of the loss or nonconformity of, interference with the use of,
defects in, or infringement of rights in, or damage to, Collateral; (v) all
amounts collected on, or distributed on account of, other Collateral, including
dividends, interest, distributions and Instruments with respect to Investment
Property and pledged Stock; and (vi) any and all other amounts, rights to
payment or other property acquired upon the sale, lease, license, exchange or
other disposition of Collateral and all rights arising out of Collateral.
"Projections" means as of any date the consolidated and consolidating balance
sheet, statements of income and cash flow for Borrower and its Subsidiaries
(including forecasted Capital Expenditures and Net Borrowing Availability) (i)
by month for the next Fiscal Year, and (ii) by year for the following three
Fiscal Years, in each case prepared in a manner consistent with GAAP and
accompanied by senior management's discussion and analysis of such plan.
"Purchase Money Indebtedness" means (i) any Indebtedness incurred for the
payment of all or any part of the purchase price of any fixed asset, (ii) any
Indebtedness incurred for the sole purpose of financing or refinancing all or
56
any part of the purchase price of any fixed asset, and (iii) any renewals,
extensions or refinancings thereof (but not any increases in the principal
amounts thereof outstanding at that time).
"Purchase Money Lien" means any Lien upon any fixed assets which secures the
Purchase Money Indebtedness related thereto but only if such Lien shall at all
times be confined solely to the asset the purchase price of which was financed
or refinanced through the incurrence of the Purchase Money Indebtedness secured
by such Lien and only if such Lien secures only such Purchase Money
Indebtedness.
"Real Property" has the meaning assigned to it in Section 3.15.
"Release" means as to any Person, any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials in the indoor or outdoor environment by such
Person, including the movement of Hazardous Materials through or in the air,
soil, surface water, ground water or property.
"Requirement of Law" means as to any Person, the Certificate or Articles of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case binding upon
such Person or any of its property or to which such Person or any of its
property is subject.
"Restricted Payment" means: (i) the declaration or payment of any dividend or
the incurrence of any liability to make any other payment or distribution of
cash or other property or assets on or in respect of Borrower's or any other
Credit Party's Stock; (ii) any payment or distribution made in respect of any
subordinated Indebtedness of Borrower or any other Credit Party in violation of
any subordination or other agreement made in favor of Lender; (iii) any payment
on account of the purchase, redemption, defeasance or other retirement of
Borrower's or any other Credit Party's Stock or Indebtedness or any other
payment or distribution made in respect of any thereof, either directly or
indirectly; other than (a) that arising under this Agreement or (b) interest and
principal, when due without acceleration or modification of the amortization as
in effect on the Closing Date, under Indebtedness (not including subordinated
Indebtedness, payments of which shall be permitted only in accordance with the
terms of the relevant subordination agreement made in favor of Lender) described
in Disclosure Schedule (5(b)) or otherwise permitted under Section 5(b)(vi); or
(iv) any payment, loan, contribution, or other transfer of funds or other
property to any Stockholder of such Person which is not expressly and
specifically permitted in this Agreement; provided, that no payment to Lender
shall constitute a Restricted Payment.
"Revolving Credit Advance" has the meaning assigned to it in Section 1.1(a).
"Revolving Credit Loan" means at any time the sum of (i) the aggregate amount of
Revolving Credit Advances then outstanding, plus (ii) the total Letter of Credit
Obligations incurred by Lender and outstanding at such time, plus (iii) the
amount of accrued but unpaid interest thereon and Letter of Credit Fees with
respect thereto.
57
"Revolving Credit Note" means the promissory note of Borrower dated the Closing
Date, substantially in the form of Exhibit F.
"Revolving Credit Rate" has the meaning assigned to it in Section 1.5(a).
"Xxxxxxxxxx" means Xxxxxxxxxx Electric Corp.
"Software" means all "software" as such term is defined in the Code, now owned
or hereafter acquired by any Person, including all computer programs and all
supporting information provided in connection with a transaction related to any
program.
"Stated Expiry Date" means March 27, 2005.
"Stock" means all certificated and uncertificated shares, options, warrants,
membership interests, general or limited partnership interests, participation or
other equivalents (regardless of how designated) of or in a corporation,
partnership, limited liability company or equivalent entity whether voting or
nonvoting, including common stock, preferred stock, or any other "equity
security" (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934).
"Stockholder" means each holder of Stock of Borrower or any other Credit Party.
"Subsidiary" means, with respect to any Person, (i) any corporation of which an
aggregate of more than 50% of the outstanding Stock having ordinary voting power
to elect a majority of the board of directors of such corporation (irrespective
of whether, at the time, Stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person and/or one or more Subsidiaries of such Person, or
with respect to which any such Person has the right to vote or designate the
vote of 50% or more of such Stock whether by proxy, agreement, operation of law
or otherwise, and (ii) any partnership or limited liability company in which
such Person or one or more Subsidiaries of such Person has an equity interest
(whether in the form of voting or participation in profits or capital
contribution) of more than 50% or of which any such Person is a general partner
or manager or may exercise the powers of a general partner or manager.
"Supporting Obligations" means all "supporting obligations" as such term is
defined in the Code, including letters of credit and guaranties issued in
support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments,
or Investment Property.
"Tangible Net Worth" means, with respect to any Person, at any date, the total
assets (excluding any assets attributable to any issuances by such Person of any
Stock after the Closing Date and excluding any intangible assets) minus the
total liabilities, in each case, of such Person at such date determined in
accordance with GAAP.
"Taxes" means taxes, levies, imposts, deductions, Charges or withholdings, and
all liabilities with respect thereto, excluding taxes imposed on or measured by
the net income of Lender.
58
"Termination Date" means the date on which all Obligations under this Agreement
are indefeasibly paid in full, in cash (other than amounts in respect of Letter
of Credit Obligations if any, then outstanding, provided that Borrower shall
have funded such amounts in cash in full into the Cash Collateral Account), and
Borrower shall have no further right to borrow any moneys or obtain other credit
extensions or financial accommodations under this Agreement.
"Trademark License" means rights under any written agreement now owned or
hereafter acquired by any Person granting any right to use any Trademark or
Trademark registration.
"Trademarks" means all of the following now owned or hereafter adopted or
acquired by any Person: (i) all trademarks, trade names, corporate names,
business names, trade styles, service marks, logos, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature (whether registered or
unregistered) all registrations and recordings thereof, and all applications in
connection therewith, including all registrations, recordings and applications
in the United States Patent and Trademark Office or in any similar office or
agency of the United States, any State or Territory thereof, or any other
country or any political subdivision thereof: (ii) all reissues, extensions or
renewals thereof; and (iii) all goodwill associated with or symbolized by any of
the foregoing.
"Transaction Summary" means the Transaction Summary set forth in the Recitals to
this Agreement.
"Unused Line Fee" has the meaning assigned to it in Schedule E.
"Withdrawal Liability" means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
Any accounting term used in this Agreement or the other Loan Documents shall
have, unless otherwise specifically provided therein, the meaning customarily
given such term in accordance with GAAP, and all financial computations
thereunder shall be computed, unless otherwise specifically provided therein, in
accordance with GAAP consistently applied; provided, that all financial
covenants and calculations in the Loan Documents shall be made in accordance
with GAAP as in effect on the Closing Date unless Borrower and Lender shall
otherwise specifically agree in writing. That certain items or computations are
explicitly modified by the phrase "in accordance with GAAP" shall in no way be
construed to limit the foregoing. All other undefined terms contained in this
Agreement or the other Loan Documents shall, unless the context indicates
otherwise, have the meanings provided for by the Code. The words "herein,"
"hereof" and "hereunder" or other words of similar import refer to this
Agreement as a whole, including the exhibits and schedules thereto, as the same
may from time to time be amended, modified or supplemented, and not to any
particular section, subsection or clause contained in this Agreement.
For purposes of this Agreement and the other Loan Documents, the following
additional rules of construction shall apply, unless specifically indicated to
59
the contrary: (a) wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural; (b) the term "or" is not exclusive; (c) the term "including" (or any
form thereof) shall not be limiting or exclusive; (d) all references to statutes
and related regulations shall include any amendments of same and any successor
statutes and regulations; and (e) all references to any instruments or
agreements, including references to any of the Loan Documents, shall include any
and all modifications or amendments thereto and any and all extensions or
renewals thereof.
60
Schedule B
LENDER'S AND BORROWER'S ADDRESS FOR NOTICES
Lender's Address
Name: General Electric Capital Corporation
Address: 0000 Xxxxxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Computer Components Corporation Account Manager
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Borrower's Address
Name: Computer Components Corporation
Address: 0000 Xxxxx Xxxx Xxxx
Xxxxxxx, Xxxxx 00000
Attn: Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
61
SCHEDULE C - LETTERS OF CREDIT
1. Lender agrees, subject to the terms and conditions hereinafter set forth, to
incur Letter of Credit Obligations in respect of the issuance of Letters of
Credit issued on terms acceptable to Lender and supporting obligations of
Borrower incurred in the ordinary course of Borrower's business, in order to
support the payment of Borrower's inventory purchase obligations, insurance
premiums, or utility or other operating expenses and obligations, as Borrower
shall request by written notice to Lender that is received by Lender not less
than five Business Days prior to the requested date of issuance of any such
Letter of Credit; provided, that: (a) that the aggregate amount of all Letter of
--------
Credit Obligations at any one time outstanding (whether or not then due and
payable) shall not exceed $250,000; (b) no Letter of Credit shall have an expiry
date which is later than the Stated Expiry Date or one year following the date
of issuance thereof; and (c) Lender shall be under no obligation to incur any
Letter of Credit Obligation if after giving effect to the incurrence of such
Letter of Credit Obligation, the Net Borrowing Availability would be less than
zero. The maximum amount payable in respect of each Letter of Credit requested
by Borrower will be guaranteed by Lender in favor of the issuing bank under
terms of a separate agreement between Lender and the issuing bank. Borrower will
enter into an application and agreement for such Letter of Credit with the
issuing bank selected by Lender (which may be an Affiliate of Lender). The bank
that issues any Letter of Credit pursuant to this Agreement shall be determined
by Lender in its sole discretion.
2. The notice to be provided to Lender requesting that Lender incur Letter of
Credit Obligations shall be in the form of a Letter of Credit application in the
form customarily employed by the issuing bank, together with a written request
by Borrower and the bank that Lender approve Borrower's application. Upon
receipt of such notice Lender shall establish a reserve against the Borrowing
Availability in the amount of 100% of the face amount of the Letter of Credit
Obligation to be incurred. Approval by Lender in the written form agreed upon
between Lender and the issuing bank (a) will authorize the bank to issue the
requested Letter of Credit, and (b) will conclusively establish the existence of
the Letter of Credit Obligation as of the date of such approval.
3. In the event that Lender shall make any payment on or pursuant to any Letter
of Credit Obligation, Borrower shall be unconditionally obligated to reimburse
Lender therefor, and such payment shall then be deemed to constitute a Revolving
Credit Advance. For purposes of computing interest under Section 1.5, a
------------
Revolving Credit Advance made in satisfaction of a Letter of Credit Obligation
shall be deemed to have been made as of the date on which the issuer or endorser
makes the related payment under the underlying Letter of Credit.
4. In the event that any Letter of Credit Obligations, whether or not then due
or payable, shall for any reason be outstanding on the Commitment Termination
Date, Borrower will either (a) cause the underlying Letter of Credit to be
returned and canceled and each corresponding Letter of Credit Obligation to be
terminated, or (b) pay to Lender, in immediately available funds, an amount
equal to 105% of the maximum amount then available to be drawn under all Letters
of Credit not so returned and canceled to be held by Lender as cash collateral
in an account under the exclusive dominion and control of Lender (the "Cash
Collateral Account").
62
5. In the event that Lender shall incur any Letter of Credit Obligations,
Borrower agrees to pay the Letter of Credit Fee to Lender as compensation to
Lender for incurring such Letter of Credit Obligations. In addition, Borrower
shall reimburse Lender for all fees and charges paid by Lender on account of any
such Letters of Credit or Letter of Credit Obligations to the issuing bank.
6. Borrower's Obligations to Lender with respect to any Letter of Credit or
Letter of Credit Obligation shall be evidenced by Lender's records and shall be
absolute, unconditional and irrevocable and shall not be affected, modified or
impaired by (a) any lack of validity or enforceability of the transactions
contemplated by or related to such Letter of Credit or Letter of Credit
Obligation; (b) any amendment or waiver of or consent to depart from all or any
of the terms of the transactions contemplated by or related to such Letter of
Credit or Letter of Credit Obligation; (c) the existence of any claim, set-off,
defense or other right which Borrower or any other Credit Party may have against
Lender, the issuer or beneficiary of such Letter of Credit, or any other Person,
whether in connection with this Agreement, any other Loan Document or such
Letter of Credit or the transactions contemplated thereby or any unrelated
transactions; or (d) the fact that any draft, affidavit, letter, certificate,
invoice, xxxx of lading or other document presented under or delivered in
connection with such Letter of Credit or any other Letter of Credit proves to
have been forged, fraudulent, invalid or insufficient in any respect or any
statement therein proves to have been untrue or incorrect in any respect.
7. In addition to any other indemnity obligations which Borrower may have to
Lender under this Agreement and without limiting such other indemnification
provisions, Borrower hereby agrees to indemnify Lender from and to hold Lender
harmless against any and all claims, liabilities, losses, costs and expenses
(including, attorneys' fees and expenses) which Lender may (other than as a
result of its own gross negligence or willful misconduct) incur or be subject to
as a consequence, directly or indirectly, of (a) the issuance of or payment of
or failure to pay under any Letter of Credit or Letter of Credit Obligation or
(b) any suit, investigation or proceeding as to which Lender is or may become a
party as a consequence, directly or indirectly, of the issuance of any Letter of
Credit, the incurring of any Letter of Credit Obligation or any payment of or
failure to pay under any Letter of Credit or Letter of Credit Obligation. The
obligations of Borrower under this paragraph shall survive any termination of
this Agreement and the payment in full of the Obligations.
8. Borrower hereby assumes all risks of the acts, omissions or misuse of each
Letter of Credit by the beneficiary or issuer thereof and, in connection
therewith, Lender shall not be responsible (a) for the validity, sufficiency,
genuineness or legal effect of any document submitted in connection with any
drawing under any Letter of Credit even if it should in fact prove in any
respect to be invalid, insufficient, inaccurate, untrue, fraudulent or forged;
(b) for the validity or sufficiency of any instrument transferring or assigning
or purporting to transfer or assign any Letter of Credit or any rights or
benefits thereunder or any proceeds thereof, in whole or in part, even if it
should prove to be invalid or ineffective for any reason; (c) for the failure of
any issuer or beneficiary of any Letter of Credit to comply fully with the terms
thereof, including the conditions required in order to effect or pay a drawing
thereunder; (d) for any errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, telecopy, telex or otherwise;
(e) for any loss or delay in the transmission or otherwise of any document or
draft required in order to make a drawing under any Letter of Credit; or (f) for
any consequences arising from causes beyond the direct control of Lender.
63
SCHEDULE D - CASH MANAGEMENT
Borrower agrees to establish, and to maintain, until the Termination Date, the
cash management system described below:
1. Borrower: (i) shall not (and shall not permit any of its Subsidiaries to)
open or maintain any deposit, checking, operating or other bank account, or
similar money handling account, with any bank or other financial institution
except for those accounts identified in Attachment I hereto (to include a xxxxx
cash account not to exceed $5,000 during any Fiscal Month, a payroll account not
to exceed an amount equal to one regular payroll at any time and local accounts
for retail locations (the "Local Accounts") to be swept daily into the Lock Box
Accounts); and (ii) shall not close or permit to be closed any of the accounts
listed in Attachment I hereto, in each case without Lender's prior written
------------
consent, and then only after Borrower has implemented agreements with such bank
or financial institution and Lender acceptable to Lender.
2. Commencing on the Closing Date and until the Termination Date, Borrower shall
cause to be deposited directly (or indirectly through the Local Accounts with
respect to the retail locations) all cash, checks, notes, drafts or other
similar items relating to or constituting proceeds of or payments made in
respect of any and all Collateral into lock boxes or lock box accounts in
Borrower's or Lender's name (collectively, the "Lock Box Accounts") set forth in
paragraph 1 of Attachment I hereto. -----------------
------------
3. On or before the Closing Date, each bank at which the Lock Box Accounts are
held shall have entered into tri-party lock box agreements (the "Lock Box
--------
Account Agreements") with Lender and Borrower, in form and substance acceptable
------------------
to Lender. Each such Lock Box Account Agreement shall provide, among other
things, that (a) such bank executing such agreement has no rights of setoff or
recoupment or any other claim against such Lock Box Account, other than for
payment of its service fees and other charges directly related to the
administration of such account, and (b) such bank agrees to sweep on a daily
basis all amounts in the Lock Box Account to the Collection Account.
4. On the Closing Date, (a) the lock box and blocked account arrangements shall
immediately become operative at the banks at which the Lock Box Accounts are
maintained, and (b) amounts outstanding under the Revolving Credit Loan (for
purposes of the Borrowing Availability) shall be reduced through daily sweeps,
by wire transfer, of the Lock Box Accounts into the Collection Account. Borrower
acknowledges that it shall have no right to gain access to any of the moneys in
the Lock Box Accounts until after the Termination Date.
5. Borrower may maintain, in its name, accounts (the "Disbursement Accounts") at
---------------------
a bank or banks acceptable to Lender into which Lender shall, from time to time,
deposit proceeds of Revolving Credit Advances made pursuant to Section 1.1 for
use solely in accordance with the provisions of Section 1.3. All of the
Disbursement Accounts as of the Closing Date are listed in paragraph 2 of
Attachment I hereto.
64
6. Upon the request of Lender, Borrower shall forward to Lender, on a daily
basis, evidence of the deposit of all items of payment received by Borrower into
the Lock Box Accounts and copies of all such checks and other items, together
with a statement showing the application of those items relating to payments on
Accounts to outstanding Accounts and a collection report with regard thereto in
form and substance satisfactory to Lender.
65
ATTACHMENT I TO SCHEDULE D
--------------------------
LIST OF BANK ACCOUNTS
1. Lock Box Accounts.
-----------------
2. Disbursement Accounts.
---------------------
3. Xxxxx Cash Account (not to exceed $5,000)
------------------
4. Payroll Account (not to exceed one regular payroll).
---------------
5. Retail Location Accounts (to be swept daily into the Lock Box Accounts)
------------------------
66
SCHEDULE E - FEES
1. UNUSED LINE FEE: For each day from the Closing Date, and through and
including the Termination Date, an amount equal to the Maximum Amount less the
Revolving Credit Loan for such day multiplied by 0.25%, the product of which is
then divided by 360. The Unused Line Fee for each month (except for the month in
which the Termination Date occurs) is payable on the first day of each calendar
month following the Closing Date; the final monthly installment of the Unused
Line Fee is payable on the Termination Date. Notwithstanding the foregoing, any
unpaid Unused Line Fee is immediately due and payable on the Commitment
Termination Date.
2. LETTER OF CREDIT FEE: For each day for which Lender maintains Letter of
Credit Obligations outstanding, an amount equal to the amount of the Letter of
Credit Obligations outstanding on such day, multiplied by 2.00%, the product of
which is then divided by 360. The Letter of Credit Fee incurred for each month
is payable at the same time each payment of the Unused Line Fee is due.
Notwithstanding the foregoing, any unpaid Letter of Credit Fee is immediately
due and payable on the Commitment Termination Date.
3. CLOSING FEE; COLLATERAL MONITORING FEE: A fully earned and non-refundable
closing fee of $30,000 (the "Closing Fee"), $7,500 of which will be due and
payable on the Closing Date (against which will be credited the unused balance,
net of expenses, of the underwriting deposit paid by Borrower to Lender) and the
balance of which will be due in three $7,500 installments payable on or before
the first day of the next three Fiscal Quarters of Borrower following the
Closing Date. A fully earned and non-refundable collateral monitoring fee of
$18,000 per annum, payable quarterly in advance in quarterly installments of
$4,500 each on the Closing Date and on the first day of each Fiscal Quarter
thereafter.
4. PREPAYMENT FEE:
An amount equal to the Maximum Amount multiplied by:
2.0% if Lender's obligation to make further Revolving Credit Advances
or incur additional Letter of Credit Obligations is terminated (voluntarily by
Borrower, upon Default or otherwise) on or after the Closing Date and on or
before the first anniversary of the Closing Date, payable on the Commitment
Termination Date;
1.0% if Lender's obligation to make further Revolving Credit Advances
or incur additional Letter of Credit Obligations is terminated (voluntarily by
Borrower, upon Default or otherwise) after the first anniversary of the Closing
Date and on or before the second anniversary of the Closing Date, payable on the
Commitment Termination Date; or
0.5% if Lender's obligation to make further Revolving Credit Advances
or incur additional Letter of Credit Obligations is terminated (voluntarily by
Borrower, upon Default or otherwise) after the second anniversary of the Closing
Date and on or before Stated Expiry Date, payable on the Commitment Termination
Date.
Borrower acknowledges and agrees that (i) it would be difficult or impractical
to calculate Lender's actual damages from early termination of Lender's
obligation to make further Revolving Credit Advances and incur additional Letter
of Credit Obligations for any reason pursuant to Section 1.2(c) or Section 7.2,
(ii) the Prepayment Fees provided above are intended to be fair and reasonable
approximations of such damages, and (iii) the Prepayment Fees are not intended
to be penalties.
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5. AUDIT FEES: Borrower will reimburse Lender at the rate of $750 per person per
day, plus out of pocket expenses, for the audit reviews, field examinations and
collateral examinations conducted by Lender; provided, however, prior to the
occurrence of a Default or Event of Default, Borrower's obligation to reimburse
Lender for field examinations shall be limited to up to four (4) field
examinations in any twelve month period.
6. ACCOMMODATION FEE: A fully earned and non-refundable accommodation fee of
$25,000 which will be due and payable on the Closing Date.
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Schedule F
SCHEDULE OF DOCUMENTS
The obligation of Lender to make the initial Revolving Credit Advances is
subject to satisfaction of the condition precedent that Lender shall have
received the following, each, unless otherwise specified below or the context
otherwise requires, dated the Closing Date, in form and substance satisfactory
to Lender and its counsel, unless the context otherwise requires or as otherwise
specified below:
PRINCIPAL LOAN DOCUMENTS
1. Agreement. The Loan and Security Agreement duly executed by Borrower.
----------
2. Revolving Credit Note. A duly executed Revolving Credit Note to the order of
---------------------
Lender.
3. Borrowing Base Certificate. An original Borrowing Base Certificate duly
--------------------------
executed by a responsible officer of Borrower.
4. Notice of Revolving Credit Advance. An original Notice of Revolving Credit
----------------------------------
Advance duly executed by a responsible officer of Borrower.
COLLATERAL DOCUMENTS.
1. Acknowledgment Copies of Financing Statements. Acknowledgement copies of
-----------------------------------------------
proper Financing Statements (Form UCC-l) (the "Financing Statements") duly
filed under the Code, or chattel mortgages duly filed under other applicable
law, of all jurisdictions as may be necessary or, in the opinion of Lender,
desirable to perfect Lender's Lien created on the Collateral.
2. Other Evidence of Filing and Perfection. Certified copies of Requests for
----------------------------------------
Information (Form UCC-11), or other evidence satisfactory to Lender, listing
all effective financing statements or chattel mortgages which name Borrower
(under its present name, any previous name or any trade or doing business
name) as debtor and which are filed in the jurisdictions referred to in
paragraph (a) above, together with copies of such other financing statements
(none of which shall cover the Collateral).
3. Intellectual Property Documents. Agreements relating to the granting to
---------------------------------
Lender of a security interest in Intellectual Property of Borrower to the
extent applicable in a form suitable for filing with the appropriate Federal
or State filing office.
4. Other Recordings and Filings. Evidence of the completion of all other
-------------------------------
recordings and filings (including UCC-3 termination statements and other
Lien release documentation) as may be necessary or, in the opinion of and at
the request of Lender, desirable to perfect Lender's Lien on the Collateral.
5. Power of Attorney. The Power of Attorney duly executed by Borrower.
-----------------
6. Pledge Agreements. Duly executed pledge agreements and related documentation
-----------------
regarding the pledge by Borrower of all of its bank accounts.
69
THIRD PARTY AGREEMENTS.
1. Landlord Consents. Unless otherwise agreed to in writing by Lender, duly
------------------
executed landlord waivers and consents from the landlords of all of
Borrower's leased locations where Collateral is held, in each case, in form
and substance satisfactory to Lender.
2. Cash Management System. Duly executed Lock Box Account Agreements (if any)
-----------------------
and the Concentration Account Agreement and, if required by Lender, pledged
account agreements in respect of the Disbursement Accounts as contemplated
by Schedule D.
3. Guaranty. Duly executed Guaranty by Parent.
--------
DOCUMENTS DELIVERED BY BORROWER.
1. Secretary Certificates. A Secretary Certificates in the form of Exhibit H to
----------------------
the Agreement duly completed and executed by the Secretary of Borrower,
together with all attachments thereto and a Secretary Certificate in the
form of Exhibit H-1 to the Agreement duly completed and executed by the
Secretary of Parent together with all attachments thereto.
2. Environmental Audit. Copies of all existing environmental reviews and audits
-------------------
and other information pertaining to actual or potential environmental claims
relating to the Collateral and Borrower as Lender may require.
3. Financial Statements and Projections. Copies of the Financial Statements and
------------------------------------
Projections, which Projections shall include a capital expenditures budget
for Borrower in form and substance satisfactory to Lender.
4. Insurance Policies. Copies of insurance policies described in Section 3.16
-------------------
together with evidence showing loss payable or additional insured clauses or
endorsements in favor of Lender.
5. Existing Lease Agreements. Copies of any existing real property leases and
--------------------------
equipment leases to which Borrower is a party and any other document or
instrument evidencing or relating to existing Indebtedness of Borrower,
together with all certificates, opinions, instruments, security documents
and other documents relating thereto, all of which shall be satisfactory in
form and substance to Lender, certified by an authorized officer of Borrower
as true, correct and complete copies thereof.
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Schedule G
FINANCIAL COVENANTS
1. Fixed Charge Coverage Ratio. Borrower and its Subsidiaries on a consolidated
---------------------------
basis shall have at the end of each month (commencing with the month ending
March 31, 2002) a Fixed Charge Coverage Ratio of not less than 1:50:1 (in each
case computed for the three monthly periods then ending).
2 Minimum Tangible Net Worth. Borrower and its Subsidaries on a consolidated
--------------------------
basis shall have at the end of each Fiscal Quarter, Tangible Net Worth of not
less than the amount of Tangible Net of Borrower and its Subsidiaries as of the
first day of such Fiscal Quarter plus (if positive) 100% of Net Income for such
Fiscal Quarter.
3. Capital Expenditures. Borrower and its Subsidiaries on a consolidated basis
--------------------
shall not make aggregate Capital Expenditures, other than Capital Expenditures
financed through the incurrence of Indebtedness (excluding the Revolving Credit
Loan), in any Fiscal Year in excess of $ 250,000 (calculated on a non-cumulative
basis).
4. Net Borrowing Availability. At all times after the Closing Date Borrower
--------------------------
shall maintain Net Borrowing Availability of at least $500,000.
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GUARANTEE
GUARANTEE, dated as of , 2002, made by TECH ELECTRO
--------------
INDUSTRIES, INC. (the "Guarantor"), in favor of GENERAL ELECTRIC CAPITAL
---------
CORPORATION, as Lender (the "Lender") under the Loan Agreement referred to
------
below.
W I T N E S S E T H:
--------------------
WHEREAS, pursuant to the Loan and Security Agreement dated as of even
date herewith (as the same may be amended, supplemented or otherwise modified
from time to time, the "Loan Agreement") between Computer Components Cororation
--------------
(the "Borrower") and Lender, the Lender has agreed to make extensions of credit
--------
to the Borrower upon the terms and subject to the conditions set forth therein;
WHEREAS, it is a condition precedent to the effectiveness of the Loan
Agreement that the Guarantor guarantee payment and performance of the Borrower's
obligations under the Loan Agreement and the other Loan Documents;
WHEREAS, the Guarantor owns directly or indirectly all or substantially
all of the issued and outstanding stock of the Borrower.
NOW, THEREFORE, to induce the Lender to enter into the Loan Agreement
and to induce the Lender to make its extensions of credit to the Borrower under
the Loan Agreement and for other consideration the receipt and sufficiency of
which is hereby acknowledged, the Guarantor hereby agrees with the Lender as
follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms defined in
-------------
the Loan Agreement and used herein shall have the meanings given to them in the
Loan Agreement.
(b) As used herein, "Obligations" shall mean all loans, advances,
-----------
debts, expense reimbursement, fees, liabilities, and obligations, for the
performance of covenants, tasks or duties or for payment of monetary amounts
(whether or not such performance is then required or contingent, or amounts are
liquidated or determinable) owing by Borrower and any other Credit Party to
Lender, of any kind or nature, present or future, whether or not evidenced by
any note, agreement or other instrument, whether arising under any of the Loan
Documents or under any other agreement between Borrower, such Credit Party and
Lender, and all covenants and duties regarding such amounts. This term includes
all principal, interest (including interest accruing at the then applicable rate
provided in the Loan Agreement after the maturity of the Loans and interest
accruing at the then applicable rate provided in the Loan Agreement after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), Fees, Charges, expenses,
72
attorneys' fees and any other sum chargeable to Borrower under any of the Loan
Documents, and all principal and interest due in respect of the Loans and all
obligations and liabilities of the Guarantor under this Guarantee.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Guarantee shall refer to this Guarantee as a whole and
not to any particular provision of this Guarantee, and section and paragraph
references are to this Guarantee unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Guarantee. (a) The Guarantor hereby unconditionally and irrevocably
---------
guarantees to the Lender and its successors, indorsees, transferees and assigns,
the prompt and complete payment and performance by the Borrower when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations.
(b) The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of counsel) which may
be paid or incurred by the Lender in enforcing, or obtaining advice of counsel
in respect of, any rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or collecting against,
the Guarantor under this Guarantee.
(c) The Guarantor agrees that the Obligations may at any time and from
time to time exceed the amount of the liability of the Guarantor hereunder
without impairing this Guarantee or affecting the rights and remedies of the
Lender hereunder.
(d) No payment or payments made by the Borrower, any other guarantor or
any other Person or received or collected by the Lender from the Borrower, any
other guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of the Guarantor hereunder which
shall, notwithstanding any such payment or payments, other than payments made by
the Guarantor in respect of the Obligations or payments received or collected
from the Guarantor in respect of the Obligations, remain liable for the
Obligations hereunder until the Obligations are indefeasibly paid in full.
(e) The Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Lender on account of its liability
hereunder, it will notify the Lender in writing that such payment is made under
this Guarantee for such purpose.
3. No Subrogation. Notwithstanding any payment or payments made by the
--------------
Guarantor hereunder or any set-off or application of funds of the Guarantor by
the Lender, the Guarantor shall not be entitled to be subrogated to any of the
rights of the Lender against the Borrower or any other guarantor or any
collateral security or guarantee or right of offset held by the Lender for the
payment of the Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower or any other Person in
73
respect of payments made by the Guarantor hereunder until all amounts owing to
the Lender by the Borrower on account of the Obligations are indefeasibly paid
in full. If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time when all of the Obligations shall not have been
indefeasibly paid in full, such amount shall be held by the Guarantor in trust
for the Lender, segregated from other funds of the Guarantor and shall forthwith
upon receipt by the Guarantor, be turned over to the Lender in the exact form
received by the Guarantor (duly indorsed by the Guarantor to the Lender, if
required), to be applied against the Obligations, whether matured or unmatured,
in such order as the Lender may elect.
4. Amendments, etc. with respect to the Obligations; Waiver of Rights.
------------------------------------------------------------------
The Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against the Guarantor and without notice to or further
assent by the Guarantor, any demand for payment of any of the Obligations made
by the Lender may be rescinded and any of the Obligations continued, and the
Obligations, or the liability of any other party upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered or released by
the Lender, and the Loan Agreement and the other Loan Documents and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Lender) may
deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by the Lender for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. The Lender
shall not have any obligation to protect, secure, perfect or insure any Lien at
any time held by it as security for the Obligations or for this Guarantee or any
property subject thereto. When making any demand hereunder against the
Guarantor, the Lender may, but shall be under no obligation to, make a similar
demand on the Borrower or any other guarantor, and any failure by the Lender to
make any such demand or to collect any payments from the Borrower or any such
other guarantor or any release of the Borrower or such other or guarantor shall
not relieve the Guarantor of the obligations or liabilities hereunder, and shall
not impair or affect the rights and remedies, express or implied, or as a matter
of law, of the Lender against the Guarantor. For the purposes hereof "demand"
shall include the commencement and continuance of any legal proceedings.
5. Guarantee Absolute and Unconditional. The Guarantor waives any and
------------------------------------
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Lender upon this Guarantee
or acceptance of this Guarantee, and the Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred, or renewed,
extended, amended or waived, in reliance upon this Guarantee; and all dealings
between the Borrower and the Guarantor, on the one hand, and the Lender on the
other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon this Guarantee. The Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Borrower or the Guarantor with respect to the Obligations. The
Guarantor understands and agrees that this Guarantee shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity, regularity or enforceability of the Loan Agreement, or any
other Loan Document, any of the Obligations or any other collateral security
74
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by the Lender (b) any defense, set-off or counterclaim
(other than a defense of payment or performance) which may at any time be
available to or be asserted by the Borrower against the Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge of the Borrower
or the Guarantor) which constitutes, or might be construed to constitute, an
equitable or legal discharge of the Borrower for the Obligations, or of the
Guarantor under this Guarantee, in bankruptcy or in any other instance. When
pursuing its rights and remedies hereunder against any Guarantor, the Lender
may, but shall be under no obligation to, pursue such rights and remedies as it
may have against the Borrower or any other Person or against any collateral
security or guarantee for the Obligations or any right of offset with respect
thereto, and any failure by the Lender to pursue such other rights or remedies
or to collect any payments from the Borrower or any such other Person or to
realize upon any such collateral security or guarantee or to exercise any such
right of offset, or any release of the Borrower or any such other Person or any
such collateral security, guarantee or right of offset, shall not relieve the
Guarantor of any liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of the
Lender against the Guarantor. This Guarantee shall remain in full force and
effect and be binding in accordance with and to the extent of its terms upon the
Guarantor and the successors and assigns thereof, and shall inure to the benefit
of the Lender, and its successors, indorsees, transferees and assigns, until all
the Obligations and the obligations of the Guarantor under this Guarantee shall
have been satisfied by indefeasible payment in full in cash.
6. Reinstatement. This Guarantee shall continue to be effective, or be
-------------
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Lender upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or the Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrower or the Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been made.
7. Payments. The Guarantor hereby guarantees that payments hereunder
--------
will be paid to the Lender without set-off or counterclaim in U.S. Dollars at
the office of the Lender located at 0000 Xxxxxxxxx Xxxx Xxxxx, Xxxxx 000,
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000.
8. Representations and Warranties. The Guarantor hereby represents and
------------------------------
warrants that:
(a) it has the power and authority and the legal right and capacity to
execute and deliver, and to perform its obligations under, this Guarantee and
has taken all necessary action to authorize its execution, delivery and
performance of this Guarantee;
(b) this Guarantee constitutes a legal, valid and binding obligation of
the Guarantor enforceable in accordance with its terms, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
75
other similar laws relating to or affecting the enforcement of creditors' rights
generally, general equitable principles and an implied covenant of good faith
and fair dealing;
(c) the execution, delivery and performance of this Guarantee will not
violate any provision of any Requirement of Law or Contractual Obligation of the
Guarantor and will not result in or require the creation or imposition of any
Lien on any of the properties or revenues of the Guarantor pursuant to any
Requirement of Law or Contractual Obligation of the Guarantor;
(d) no consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority and no consent of any other
Person (including, any shareholder or creditor of the Guarantor) is required in
connection with the execution, delivery, performance, validity or enforceability
of this Guarantee;
(e) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of the
Guarantor, threatened by or against the Guarantor or against any of its
properties or revenues (1) with respect to this Guarantee or any of the
transactions contemplated hereby, (2) which could have a material adverse effect
on the business, property, or financial or other condition of the Guarantor;
(f) the statements concerning the financial condition and net worth of
Guarantor previously provided to the Lender are true and correct; there is no
event, fact, circumstance or condition known to Guarantor which is inconsistent
with such statements or is required to be disclosed in order to cause such
statements not to be misleading.
The Guarantor agrees that the foregoing representations and warranties
shall be deemed to have been made by the Guarantor on the date of each borrowing
by the Borrower under the Loan Agreement on and as of such date of borrowing as
though made hereunder on and as of such date.
9. Notices. All notices, requests and demands to or upon the Lender or
-------
the Guarantor to be effective shall be in writing (or by telex, fax or similar
electronic transfer) and shall be deemed to have been duly given or made (1)
when delivered by hand or (2) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (3) if by telex, fax or similar
electronic transfer, when sent and receipt has been confirmed, addressed as
follows:
(a) if to the Lender, at its address or transmission number for notices
provided in the Loan Agreement; and
(b) if to the Guarantor, at its address or transmission number for
notices set forth under its signature below.
The Lender, and the Guarantor may change their respective addresses and
transmission numbers for notices by notice in the manner provided in this
Section.
76
10. Severabilility. Any provision of this Guarantee which 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 hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11. Integration. This Guarantee represents the agreement of the
-----------
Guarantor with respect to the subject matter hereof and there are no promises or
representations by the Lender relative to the subject matter hereof not
reflected herein.
12. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of
-----------------------------------------------------
the terms or provisions of this Guarantee may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by the Guarantor
and the Lender, provided that any provision of this Guarantee may be waived by
the Lender in a letter or agreement executed by the Lender or by telex or
facsimile transmission from the Lender.
(b) The Lender shall not by any act (except by a written instrument
pursuant to paragraph 12(a) hereof), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default or in any breach of any of the terms and conditions
hereof. No failure to exercise, nor any delay in exercising, on the part of the
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Lender would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
13. [Intentionally left blank].
14. Section Headings. The section headings used in this Guarantee are
----------------
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
15. Successors and Assigns. This Guarantee shall be binding upon the
----------------------
successors and assigns of the Guarantor and shall inure to the benefit of the
Lender and its successors and assigns.
16. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED
-------------
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
77
17. Submission to Jurisdiction; Waivers. The Guarantor hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Guarantee or any other Loan Document to which it is
a party, or for recognition and enforcement of any judgment in respect thereof,
to the non-exclusive general jurisdiction of the courts of the State of New
York, the courts of the United States of America located in the state of New
York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives trial by jury and any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding may
be effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such Guarantor at its
address set forth under its signature below or at such other address of which
the Lender shall have been notified pursuant to Section 9; and
(d) agrees that nothing herein shall affect the right to effect service
of process in any other manner permitted by law or shall limit the right to xxx
in any other jurisdiction.
78
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered as of the day and year first above written.
TECH ELECTRO INDUSTRIES, INC.
By:
--------------------------------------------
Name:
------------------------------------------
Address for Notices:
=============================
79
