EXHIBIT 10.6
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT is entered into as of September
16, 1998 (this "Restated Loan Agreement") between CEDRO GROUP, INC., a
California corporation (herein called "Borrower"), and IMPERIAL BANK (herein
called "Bank"). This Restated Loan Agreement amends, restated and supersedes in
its entirety the Original Loan Agreement (as hereinafter defined).
RECITALS
A. Borrower and Bank entered into that certain Loan Agreement dated as of
December 24, 1997 (the "Original Loan Agreement"), pursuant to which Bank agreed
to extend and make revolving loans available to Borrower under the "Facility-A
Commitment" and the "Facility-B Commitment," and equipment term loans available
to Borrower under the "Facility-C Commitment" (as said terms are defined in the
Original Loan Agreement).
B. The Facility-A Commitment and the Facility-B Commitment under the
Original Loan Agreement have been terminated and Borrower is no longer permitted
to request advances thereunder.
C. Borrower and Bank desire to amend and restate the Loan Agreement in its
entirety to, among other things, modify certain financial covenants and
reporting requirements under the Facility-C Commitment and to extend and make
available to Borrower a term loan facility to be evidenced by the New Term Loan
Commitment (as hereinafter defined), all as more fully set forth herein.
D. Bank has agreed to make and maintain the credit facilities described in
this Restated Loan Agreement, but only upon the terms and subject to the
conditions hereinafter set forth and in reliance on the representations and
warranties set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants hereinafter set forth, and intending to be legally bound, Borrower and
Bank hereby agree as follows:
1. COMMITMENTS.
A. NEW TERM LOAN COMMITMENT. Subject to all the terms and conditions
of this Loan Agreement and prior to the termination of its commitment as
hereinafter provided, Bank hereby agrees to make loans (each a "New Term Loan")
to Borrower in such amounts as Borrower shall request pursuant to this Section
1.A. at any time from the date hereof through September 30, 1999 (the "New Term
Loan Availability End Date"), in an aggregate principal amount not to exceed
$800,000.00 (the "New Term Loan Commitment"). If at any time or for any reason,
the outstanding principal amount of the New Term Loan Account (as hereinafter
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defined) is greater than the New Term Loan Commitment, Borrower shall
immediately pay to Bank, in cash, the amount of such excess. Any commitment of
Bank, pursuant to the terms of this Loan Agreement, to make New Term Loans shall
expire on the New Term Loan Availability End Date, subject to Bank's right to
renew said commitment in its sole and absolute discretion at Borrower's request.
Any such renewal of said commitment shall not be binding upon Bank unless it is
in writing and signed by an officer of Bank. New Term Loans that are repaid by
Borrower may not be reborrowed. Borrower promises to pay to Bank the outstanding
unpaid principal balance (and all accrued unpaid interest thereon) of the New
Term Loan Account on or before September __, 2001 ("New Term Loan Maturity
Date"),
(1) NEW TERM LOANS. The amount of each New Term Loan made by Bank
to Borrower hereunder shall be debited to the loan ledger account of Borrower
maintained by Bank for the New Term Loan Commitment (herein called the "New Term
Loan Account") and Bank shall credit the New Term Loan Account with all loan
repayments in respect thereof made by Borrower. When Borrower desires to obtain
a New Term Loan, Borrower shall notify Bank (which notice shall be signed by an
officer of Borrower and shall be irrevocable) in accordance with Section 2
hereof, to be received no later than 3:00 p.m. Pacific time one (1) Banking Day
(as hereinafter defined) before the day on which the New Term Loan is to be
made. The notice shall be signed by an officer of Borrower and include a copy of
the invoice and serial numbers for the capital equipment, furniture, software or
telephone equipment to be financed. New Term Loans may only be used to reimburse
Borrower for capital equipment, furniture, software or telephone equipment
purchased on or after June 1, 1998 and on or before September 30, 1999. New Term
Loans for capital equipment will be limited to one hundred percent (100%) of the
original invoice amount for such capital equipment, approved from time to time
by Bank, less any taxes, shipping and freight charges or discounts, warranty
charges, installation expenses and other soft costs. New Term Loans for
software, furniture or telephone equipment will be limited to: (a) seventy-five
(75%) of the original invoice amount for such software, furniture or telephone
equipment approved from time to time by Bank, less any taxes, shipping and
freight charges or discounts, warranty charges, installation expenses and
similar soft costs and (b) the maximum aggregate total amount of $200,000.00.
(2) INTEREST PAYMENTS PRIOR TO NEW TERM LOAN MATURITY DATE.
Borrower further promises to pay to Bank from the date of the advance of the
initial New Term Loan through the New Term Loan Availability End Date, on or
before the fifteenth (15th) day of each month, interest on the average daily
unpaid balance of the New Term Loan Account during the immediately preceding
month at a floating rate of interest equal to one half of one percent (0.50%)
per annum in excess of the rate of interest which Bank has announced as its
prime lending rate (the "Prime Rate"), which shall vary concurrently with any
change in the Prime Rate. Interest shall be computed at the above rate on the
basis of the actual number of days during which the principal balance of the New
Term Loan is outstanding divided by 360, which shall for interest computation
purposes be considered one (1) year.
(3) PRINCIPAL PAYMENTS FOLLOWING NEW TERM LOAN AVAILABILITY END
DATE. Borrower further promises to pay to Bank, on or before the fifteenth
(15th) day of the month immediately following the New Term Loan Availability End
Date and on or before the fifteenth (15th) day of each month thereafter through
the New Term Loan Maturity Date, (a) the outstanding principal balance of the
New Term Loan Account on the New Term Loan
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Availability End Date plus any accrued interest pursuant to Section 1.A.(2) in
twenty-four (24) equal monthly installments plus (b) interest on the average
daily unpaid balance of the New Term Loan Account accruing during the
immediately preceding month at the rate of interest and computed in accordance
with Section 1.A.(2) hereof.
B. EXISTING TERM LOAN COMMITMENT. Subject to all the terms and
conditions of this Loan Agreement and prior to the termination of its commitment
as hereinafter provided, Bank hereby agrees to make loans (each an "Existing
Term Loan") to Borrower in such amounts as Borrower shall request pursuant to
this SECTION 1.B. at any time from the date hereof through December 22, 1998
(the "Existing Term Loan Availability End Date"), in an aggregate principal
amount not to exceed $150,000.00 (the "Existing Term Loan Commitment"). If at
any time or for any reason, the outstanding principal amount of the Existing
Term Loan Account (as hereinafter defined) is greater than the Existing Term
Loan Commitment, Borrower shall immediately pay to Bank, in cash, the amount of
such excess. Any commitment of Bank, pursuant to the terms of this Loan
Agreement, to make Existing Term Loans shall expire on the Existing Term Loan
Availability End Date, subject to Bank's right to renew said commitment in its
sole and absolute discretion at Borrower's request. Any such renewal of said
commitment shall not be binding upon Bank unless it is in writing and signed by
an officer of Bank. Existing Term Loans that are repaid by Borrower may not be
reborrowed. Borrower promises to pay to Bank the outstanding unpaid principal
balance (and all accrued unpaid interest thereon) of the Existing Term Loan
Account on or before December 15, 2000 ("Existing Term Loan Maturity Date").
(1) EXISTING TERM LOANS. The amount of each Existing Term Loan
made by Bank to Borrower hereunder shall be debited to the loan ledger account
of Borrower maintained by Bank for the Existing Term Loan Commitment (herein
called the "Existing Term Loan Account") and Bank shall credit the Existing Term
Loan Account with all loan repayments in respect thereof made by Borrower. When
Borrower desires to obtain an Existing Term Loan, Borrower shall notify Bank
(which notice shall be signed by an officer of Borrower and shall be
irrevocable) in accordance with SECTION 2 hereof, to be received no later than
3:00 p.m., Pacific time one (1) Banking Day before the day on which the Existing
Term Loan is to be made. The notice shall be signed by an officer of Borrower
and include a copy of the invoice and serial numbers for the capital equipment,
furniture, software or telephone equipment to be financed. Existing Term Loans
may only be used to purchase capital equipment, furniture, software or telephone
equipment. Existing Term Loans for capital equipment will be limited to ninety
percent (90%) of the invoice amount for such capital equipment, approved from
time to time by Bank, less any taxes, shipping and freight charges or discounts,
warranty charges, installation expenses and other soft costs. Existing Term
Loans for software, furniture or telephone equipment will be limited to: (a)
seventy-five (75%) of the invoice amount for such software, furniture or
telephone equipment approved from time to time by Bank, less any taxes, shipping
and freight charges or discounts, warranty charges, installation expenses and
similar soft costs and (b) the maximum aggregate total amount of $30,000.00.
(A) COMERICA ADVANCE. Notwithstanding any of the provisions
contained in Section 1.B.(1) hereof, Bank hereby agrees to make a single advance
of an Existing Term Loan to Borrower in order to repay an existing equipment
loan and all related indebtedness owed by Borrower to Comerica Bank (the
"Comerica Advance"); provided,
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however, that the amount of the Comerica Advance shall be deemed to constitute
an Existing Term Loan for the purpose of calculating the availability under the
Existing Term Loan Commitment.
(2) INTEREST PAYMENTS PRIOR TO EXISTING TERM LOAN MATURITY DATE.
Borrower further promises to pay to Bank from the date of the advance of the
initial Existing Term Loan through the Existing Term Loan Maturity Date, on or
before the fifteenth (15th) day of each month, interest on the average daily
unpaid balance of the Existing Term Loan Account during the immediately
preceding month at a floating rate of interest equal to one percent (1.00%) per
annum in excess of the Prime Rate, which shall vary concurrently with any change
in the Prime Rate. Interest shall be computed at the above rate on the basis of
the actual number of days during which the principal balance of the Existing
Term Loan Account is outstanding divided by 360, which shall for interest
computation purposes be considered one (1) year.
(3) PRINCIPAL PAYMENTS FOLLOWING EXISTING TERM LOAN AVAILABILITY
END DATE. Borrower further promises to pay to Bank, on or before the fifteenth
(15th) day of the month immediately following the Existing Term Loan
Availability End Date and on or before the fifteenth (15th) day of each month
thereafter through the Existing Term Loan Maturity Date, (a) the outstanding
principal balance of the Existing Term Loan Account on the Existing Term Loan
Availability End Date in twenty-four (24) equal monthly installments plus (b)
interest on the average daily unpaid balance of the Existing Term Loan Account
accruing during the immediately preceding month at the rate of interest and
computed in accordance with SECTION 1.B.(2) hereof.
2. LOAN REQUESTS. Requests for Loans hereunder shall be in writing duly
executed by Borrower in a form satisfactory to Bank and shall contain a
certification setting forth the matters referred to in SECTION 1, which shall
disclose that Borrower is entitled to the amount and type of Loan being
requested. Bank is hereby authorized to charge Borrower's deposit account with
Bank for all sums due Bank under this Restated Loan Agreement.
3. DELIVERY OF PAYMENTS. Payment to Bank of all amounts due hereunder
shall be made at its Santa Xxxxx Valley Regional office, or at such other place
as may be designated in writing by Bank from time to time. If any payment date
fall on a day that is not a day that Bank is open for the transaction of
business ("Banking Day"), the payment due date shall be extended to the next
Banking Day.
4. LATE CHARGE. If any interest payment, principal payment or principal
balance payment required hereunder is not received by Bank on or before ten (10)
days from the date in which such payment becomes due, Borrower shall pay to
Bank, a late charge equal to the lesser of (a) five percent (5.0%) of the amount
of such unpaid payment, in addition to said unpaid payment or (b) the maximum
amount permitted to be charged by applicable law, until remitted to Bank;
provided; however, nothing contained in this SECTION 4, shall be construed as
any obligation on the part of Bank to accept payment of any past due payment or
less than the total unpaid principal balance of the applicable Loan Account
following the New Term loan Maturity Date and/or the Existing Term Loan Maturity
Date, as applicable. All payments shall be applied first to any late charges due
hereunder, next to accrued interest then payable and the remainder, if any, to
reduce any unpaid principal due under the applicable Loan Account.
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5. DEFAULT INTEREST. From and after the New Term Loan Maturity Date
and/or the Existing Term Loan Maturity Date, as applicable, or such earlier date
as all sums owing under any Loan Account becomes due and payable by acceleration
or otherwise, or upon the occurrence of an Event of Default, at the option of
Bank all sums owing under the applicable Loan Account shall bear interest until
paid in full at a rate equal to the lesser of (a) five percent (5.0%) per annum
in excess of the then applicable interest rate provided for in SECTIONS 1.A.(2)
and 1.B.(2) hereof or (b) the maximum amount permitted to be charged by
applicable law, until all obligations hereunder are repaid in full or the Event
of Default is waived or cured to the satisfaction of Bank, as applicable.
6. DEFINITIONS. As used in this Restated Loan Agreement and unless
otherwise defined herein, all initially capitalized terms shall have the
meanings set forth on exhibit A attached hereto and incorporated herein by this
reference.
7. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Bank: (a) That Borrower is a corporation, duly organized and existing in the
State of its incorporation and the execution, delivery and performance of each
of the Loan Documents are within Borrower's corporate powers have been duly
authorized and are not in conflict with law or the terms of any charter, by-law
or other incorporation papers, or of any indenture agreement or undertaking to
which Borrower is a party or by which Borrower is bound or affected; (b)
Borrower is, and at the time the Collateral becomes subject to Bank's security
interest will be, the true and lawful owner of and has, and at the time the
Collateral becomes subject to Bank's security interest will have, good and clear
title to the Collateral, subject only to Bank's rights therein and to Permitted
Liens; (c) Each Account is, and at the time the Account comes into existence
will be, a true and correct statement of a bona fide indebtedness incurred by
the debtor named therein in the amount of the Account for either merchandise
sold or delivered (or being held subject to Borrower's delivery instructions)
to, or services rendered, performed and accepted by, the account debtor; (d)
That there are and will be no defenses, counterclaims, or setoffs which may be
asserted against the Accounts from time to time represented by Borrower to be
Eligible Accounts, except as permitted in the definition thereof; (e) Any and
all financial information, including information relating to the Collateral
submitted by Borrower to Bank, whether previously or in the future, is and will
be true and correct; (f) There is no litigation or other proceeding pending or
threatened against or affecting Borrower, and Borrower is not in default with
respect to any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority; (g) (i) The consolidated balance sheets of
Borrower dated as of July 31, 1998, and the related consolidated profit and loss
statements for the fiscal year then ended, copies of which have heretofore been
delivered to Bank by Borrower, and all other statements and data submitted in
writing by Borrower to Bank in connection with Borrower's request for credit are
true and correct, and said balance sheet and profit and loss statement
accurately, present the financial condition of Borrower as of the date thereof
and the results of the Operations of Borrower for the period covered thereby,
and have been prepared in accordance with GAAP, (ii) since such date, there have
been no material adverse changes in the financial condition of Borrower, and
(iii) Borrower has no knowledge of any liabilities, contingent or otherwise,
which are not reflected in said balance and Borrower has not entered into any
special commitments or substantial contracts which are not reflected said
balance sheet, other than in the ordinary and normal course of its business,
which may have a Material Adverse Effect upon its financial condition,
operations or business as now conducted; (h) Borrower has
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no delinquent local, state or federal taxes, and, if Borrower has contracted
with an government agency, it has no liability for renegotiation of profits; and
(i) Borrower, as of the date hereof, possesses all necessary trademarks, trade
names, copyrights, patents, patent rights, and licenses to conduct its business
as now operated, without any known conflict with valid trademarks, trade names,
copyrights, patents, patent rights and license rights of others; and (j)
Borrower and its subsidiaries ("Subsidiaries") have reviewed the areas within
their operations and business which could be adversely affected by, and have
developed or are developing a program to address on a timely basis, the Year
2000 Problem and have made related appropriate inquiry of material suppliers and
vendors and based on such review and program, the Year 2000 Problem will not
have a Material Adverse Effect upon its financial condition, operations or
business as now conducted.
8. NEGATIVE COVENANTS. Borrower agrees that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or the
commitment of Bank hereunder is in effect, neither Borrower, nor any of its
Subsidiaries will, without the prior written consent of Bank:
A. Make any substantial change in the character of its business as
now conducted;
B. Create, incur, assume or permit to exist any Indebtedness other
than loans from Bank except obligations now existing as shown in the financial
statements referenced in Section 7.(g)(i), excluding those being refinanced by
Bank, Subordinated Debt and Permitted Indebtedness-, or sell or transfer, either
with or without recourse, any accounts or notes receivable or any monies due or
to become due;
C. Create, incur, assume or permit to exist any mortgage, pledge,
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
Permitted Liens and liens in favor of Bank;
D. Sell, dispose of or grant a security interest in any of the
Collateral other than to Bank (other than the disposing of such Collateral in
the ordinary and normal course of its business as now conducted or other assets
which are obsolete or otherwise considered surplus), or execute any financing
statements covering the Collateral in favor of any secured party or Person other
than Bank;
E. Make any loans or advances to any Person or other entity other
than in the ordinary and normal course of its business as now conducted
(provided that such loans or advances are not made to any Person or entity that
is controlled by or under common control with Borrower) or make any investment
in the securities of any Person or other entity other than the United States
Government;
F. (1) Purchase or otherwise acquire all or substantially all of the
assets or business of any Person or other entity, or (2) liquidate, dissolve,
merge or consolidate, or commence any proceedings therefore, or (3) except in
the ordinary and normal course of its business as now conducted, sell
(including, without limitation, the setting of any property or
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other asset accompanied by the leasing back of the same) any assets including
any fixed assets, any property, or other assets necessary for the continuance of
its business as now conducted. Notwithstanding the foregoing, Borrower may
proceed with any acquisition, merger or consolidation (as described above) so
long as any and all outstanding Indebtedness owed to Bank is paid in full to
Bank upon the consummation of such acquisition, merger or consolidation;
provided, however, that any continuation of a lending relationship between Bank
and Borrower after the closing of such acquisition, merger or consolidation is
subject to approval by Bank's Commercial Loan Administration; and
G. Declare or pay any dividend or make any other distribution on any
of its capital stock now Outstanding or hereafter issued or purchase, redeem or
retire any of such stock other than in dividends or distributions in Borrower's
or any such Subsidiary's capital stock, except for the repurchase of Borrower's
capital stock from officers, directors, employees or consultants of Borrower
upon termination of their employment with or rendering of service to Borrower.
9. AFFIRMATIVE COVENANTS. Borrower affirmatively covenants that so long
as any loans, obligations or liabilities remain outstanding or unpaid to Bank or
the commitment of Bank hereunder is in effect, it will:
A. Furnish Bank from time to time such financial statements and
information as Bank may reasonably request and inform Bank immediately upon the
occurrence of a material adverse change therein;
B. Permit representatives of Bank to conduct an audit of Borrower's
books and records relating to the Collateral and make extracts therefrom, with
results satisfactory to Bank, provided that Bank shall use its best efforts to
not interfere with the conduct of Borrower's business, and to the extent
possible to arrange for verification of the Accounts directly with the account
debtors obligated thereon or otherwise, all under reasonable procedures
acceptable to Bank and at Borrower's sole expense, the cost of each such audit
of which shall not exceed $1,000.00. Borrower hereby acknowledges and agrees
that upon completion of any such audit. Bank shall have the right to adjust the
Borrowing Base percentage, in its sole and reasonable discretion, based on its
review of the results of such Collateral audit;
C. Promptly notify Bank of any attachment or other legal process
levied against any of the Collateral and any information received by Borrower
relative to the Collateral, including the Accounts, the account debtors or other
Persons obligated in connection therewith, which may in any way affect the value
of the Collateral or the rights and remedies of Bank in respect thereto;
D. Reimburse Bank upon demand for any and all legal costs, including
reasonable attorneys' fees, and other expense incurred in (1) collecting any
sums payable by Borrower under any Loan Account or any other obligation secured
hereby, (2) enforcing any term or provision of this Restated Loan Agreement or
otherwise or (3) the checking, handling and collection of the Collateral and the
preparation and enforcement of any agreement relating thereto;
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E. Notify Bank of each location and of each office of Borrower at
which records of Borrower relating to the Accounts are kept;
F. Provide, maintain and deliver to Bank policies insuring the
Collateral against loss or damage by such risks and in such amounts, forms and
companies as Bank may require (to the extent customarily maintained by
businesses similar to Borrower) and with loss payable to Bank, and, in the event
Bank takes Possession of the Collateral, the insurance policy or policies and
any unearned or returned premium thereon shall at the option of Bank become the
sole property of Bank, such policies and the proceeds of any other insurance
Covering or in any way relating to the Collateral, whether now in existence or
hereafter obtained, being hereby assigned to Bank;
G. In the event the unpaid balance of any Loan Account shall exceed
the maximum amount of outstanding loans to which Borrower is entitled under
SECTION 1 hereof, as applicable. Borrower shall immediately pay to Bank for
credit to such Loan Account the amount of such excess;
H. Maintain and preserve all rights, franchises and other authority
adequate and necessary for the conduct of its business and maintain and preserve
its existence in the State of its incorporation and any state(s) in which
Borrower conducts its business, except with respect to such other state(s), as
failure to do so would not have a Material Adverse Effect;
I. Maintain public liability, property damage and workers
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses. Borrower shall provide evidence of property
insurance in amounts and types acceptable to Bank, and certificates naming Bank
as a loss payee;
J. Pay and discharge, before the same becomes delinquent and
penalties accrue thereon, all assessments and governmental charges upon or
against it or any of its properties, and any of its other liabilities at any
time existing, except to the extent and so long as: (1) the same are being
contested in good faith and by appropriate proceedings in such manner as not to
cause any Material Adverse Effect or the loss of any right of redemption from
any sale thereunder, and (2) it shall have set aside on its books reserves
(segregated to the extent required by GAAP);
K. Maintain a standard and modern system of accounting in accordance
with GAAP on a basis consistently maintained, permit Bank's representatives to
have access to, and to examine its properties, books and records at all
reasonable times, provided that Bank shall use its best efforts to not interfere
with the conduct of Borrower's business;
L. Maintain its properties, equipment and facilities in good order
and repair;
M. Bank and maintain a minimum of fifty percent (50%) of investable
funds in interest-bearing accounts at Bank, provided that the rates offered by
Bank for such accounts are not less than twenty-five (25) basis points less than
those rates offered by similar institutions for similar accounts with similar
maturities;
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N. Prior to allowing any of Borrower's raw materials, work in
process, finished goods inventory and property, plant and equipment to be
transported to or be held at any contract manufacturer, warehouse or other
location (other than with bona fide distributors and retail accounts), Borrower
shall provide notice to Bank and Borrower shall have complied with such filing
and notice requirements as shall, in Bank's opinion, assure Borrower's and
Bank's priority in such property over creditors of such contract manufacturer.
Warehouseman or operator of such other location, including, without limitation,
making filings under California Commercial Code (S)2326, providing notice under
California Commercial Code (S)9114 and making filings and publications as
required under California Civil Code (S)3440.1 and (S)3440.5. All such filings,
notices and publications shall be in form and substance satisfactory to Bank;
and
O. Borrower shall perform all acts reasonably necessary to ensure
that Borrower and any business in which Borrower holds a substantial interest
becomes Year 2000 Compliant in a timely manner. Such acts shall include, without
limitation, performing a comprehensive review and assessment of all of
Borrower's systems and adopting a detailed plan, with an itemized budget, for
the remediation, monitoring and testing of such systems. If requested by Bank,
Borrower shall deliver a statement to Bank summarizing the Year 2000 exposure.
Program or progress of Borrower and its Subsidiaries or other evidence of
Borrower's compliance with the terms of this Section, certified by an officer of
Borrower.
10. FINANCIAL COVENANTS AND INFORMATION. All financial covenants and
financial information referenced herein shall be interpreted and prepared in
accordance with GAAP as used in the United States of America applied on a basis
consistent with previous years. Compliance with the financial covenants shall be
Calculated and monitored on a monthly basis, except as shall be expressly stated
to the contrary. Borrower affirmatively covenants that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or any
commitment is outstanding hereunder, it will, on a consolidated basis:
A. At all times have Maximum Monthly Losses not in excess of (1)
$850,000 during the fiscal quarter ending December 31, 1998, (2) $650,000.00
during the fiscal quarter ending March 31, 1999, (3) $1,200,000 during the
fiscal quarter ending June 30, 1999, (4) $1,500,000.00 during the fiscal quarter
ending September 30, 1999 and (5) $2,300,000.00 during its fiscal quarter ending
December 31, 1999;
B. At all times maintain either:
(1) a Minimum Liquidity Ratio of not less than 1.20:1.00. As used
herein "Liquidity Ratio" means the sum of all cash plus 80% of Eligible Accounts
divided by the sum of the total outstanding debt to Bank plus accrued interest;
or
(2) measured on a quarterly basis on the last day of each fiscal
quarter, a Minimum Cash Flow Coverage Ratio of not less than 1.25:1.00 for two
consecutive fiscal quarters. As used herein "Cash Flow Coverage Ratio" means the
sum of net income plus depreciation and amortization divided by the current
portion of long term indebtedness due within ninety (90) days of such
measurement. Notwithstanding the financial covenants contained in SECTIONS
10.B.(1) and 10.B.(2) hereof, the requirement that Borrower meet either of
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said financial covenants shall be waived for ninety (90) days following the date
of the delivery to Bank of the Additional Equity Round Term Sheets;
C. At all times maintain a Minimum Tangible Net Worth of not less
than $2,000,000.00 beginning on September 1, 1999. As used herein, "Tangible Net
Worth" shall mean all assets (excluding any value for goodwill, trademarks,
patents, copyrights, organization expense and other similar intangible items),
less all liabilities, plus Subordinated Debt;
D. As soon as it is available, but not later than twenty-five (25)
days after and as of the end of each month, deliver to Bank an internally-
prepared financial statement consisting of a balance sheet and profit and loss
statement, in form satisfactory to Bank, and a Compliance Certificate in the
form of Exhibit B attached hereto and incorporated herein by this reference,
certified by an officer of Borrower;
E. As soon as it is available, but not later than one hundred twenty
(120) days after the end of Borrower's fiscal year, deliver to Bank copies of
Borrower's consolidated financial statement's together with changes in financial
position audited by an independent certified public accountant selected by
Borrower but acceptable to Bank;
F. Upon the reasonable request of Bank, deliver to Bank current
budgets, sales projections. Operating plans and other financial exhibits and
information in form and substance satisfactory to Bank; and
G. Upon any officer becoming aware, deliver immediately to Bank
written notice of any pending or threatened litigation claiming, or reasonably
likely to result in, damages against Borrower in an amount in excess of
$50,000.00.
11. LOAN FEE. Borrower has paid, and Bank hereby acknowledges receipt of
a loan fee in the amount of Three Thousand Dollars ($3,000.00) in connection
with the extension of the New Term Loan Commitment.
12. DEFAULT AND REMEDIES, The occurrence of any one or more of the
following shall constitute an "Event of Default": (a) Default be made in the
payment of any obligation by Borrower under any Loan Document, (b) Except for
any failure to pay as described in clause (a) above, breach be made in any
warranty, statement, promise, term or condition, contained herein or in any
other Loan Document and the same shall not have been cured to the satisfaction
of Bank within fifteen (15) days after Borrower shall have become aware thereof
whether by written notice from Bank, or otherwise, (except that no cure period
shall exist for breaches in respect of Borrower's obligations under SECTION 8,
SUBSECTIONS 9.A., 9.B., 9.C., 9.F., 9.G., 9.H., 9.I, and 9.O., SUBSECTIONS
10.A., 10.B., 10.C., 10.D., and 10.E. of this Restated Loan Agreement, and
SECTIONS 1 and 2 of the General Security Agreement), (c) Any statement, warranty
or representation made by Borrower at any time proves false; (d) Borrower
defaults in the repayment of any principal of or the payment of any interest on
any indebtedness exceeding in the aggregate principal amount $10,000.00 or
breaches or violates any term or provision of any promissory note, loan
agreement, mortgage, indenture or other evidence of such indebtedness pursuant
to which amounts outstanding in the aggregate exceed $10,000.00 if the effect of
such breach is to permit the acceleration of such indebtedness, whether or not
waived
-10-
by the note holder or obligee, and such failure shall not have been cured to
Bank's satisfaction within fifteen (15) calendar days after Borrower shall
become aware thereof, whether by written notice from Bank or otherwise, or there
has in fact been an acceleration of such indebtedness; (e) Borrower becomes
insolvent or makes an assignment for the benefit of creditors: (f) Any
proceeding be commenced by Borrower under any bankruptcy, reorganization,
arrangement, readjustment of debt or moratorium law or statute or, any such a
proceeding is commenced against Borrower and is not dismissed or stayed within
ten (10) days (provided that no Loans will be made prior to the dismissal of
such proceeding), (g) Any money judgment, writ of attachment, garnishment,
execution or other legal process be entered against Borrower or issued against
any material property of Borrower which is not fully covered by insurance
(subject to reasonable deductibles) and remains unvacated, unbonded, unstayed or
unpaid or undischarged for more than fifteen (15) days (whether or not
consecutive) or in any event later than five (5) days prior to the date of any
proposed sale thereunder, or if any assessment for taxes against Borrower other
than against any of its real property, is made by the Federal or State
government or any department thereof, or (h) Any change in Borrower's financial
condition, prospects or operations which has a Material Adverse Effect. Upon the
occurrence and during the continuance of an Event of Default, Bank may, at its
option and without demand first made and without notice to Borrower, do any one
or more of the following: (i) Terminate its obligation to make loans to Borrower
as provided in SECTION 1 hereof, (ii) Declare all sums secured hereby
immediately due and payable, (iii) Immediately take possession of the Collateral
wherever it may be found, using all legally permissible means to do so, or
require Borrower to assemble the Collateral and make it available to Bank at a
place designated by Bank which is reasonably convenient to Borrower and Bank,
and Borrower waives all claims for damages due to or arising from or connected
with any such taking, (iv) Proceed in the foreclosure of Bank's security
interest and sale of the Collateral in any manner permitted by law, or provided
for herein: (v) Sell, lease or otherwise dispose of the Collateral at public or
private sale, with or without having the Collateral at the place of sale, and
upon terms and in such manner as Bank may determine, and Bank may purchase same
at any such sale: (vi) Retain the Collateral in full satisfaction of the
obligations secured thereby to the extent permitted under the Uniform Commercial
Code, or (vii) Exercise any remedies of a secured party under the Uniform
Commercial Code. Prior to any such disposition. Bank may at its option, cause
any of the Collateral to be repaired or reconditioned in such manner and to such
extent as Bank may deem advisable, and any sums expanded therefor by Bank shall
be repaid by Borrower and secured hereby. Bank shall have the right to enforce
one or more remedies hereunder successively or concurrently, and any such action
shall not stop or prevent Bank from pursuing any further remedy that it may
have hereunder or by law. If a sufficient sum is not realized from any such
disposition of the Collateral to pay all obligations secured, by this Restated
Loan Agreement. Borrower hereby promises and agrees to pay Bank any deficiency.
13. RECORDS RETENTION. Borrower authorizes Bank to destroy all invoices,
delivery receipts, reports and other types of documents and records submitted to
Bank in connection with the transactions contemplated herein at any, time
subsequent to four (4) months from the time such items are delivered to Bank.
14. ATTORNEYS' FEES. Borrower agrees to reimburse Bank for its reasonable
attorneys' fees and expenses up to $1000 incurred in connection with the
negotiation, preparation, execution and delivery of the Loan Documents.
-11-
15. GOVERNING LAW; JUDICIAL REFERENCE.
A. GOVERNING LAW. This Agreement shall be deemed to have been made
in the State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under, governed by, and construed in accordance with the internal laws of the
State of California, without regard to principles of conflicts of laws.
B. JUDICIAL REFERENCE.
(1) Other than (a) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property,
or (b) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Restated Loan Agreement or the other Loan Documents, which
controversy, dispute or claim is not settled in writing within thirty (30) days
after the "Claim Date" (defined as the date on which a party subject to this
Restated Loan Agreement gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference proceeding
in California in accordance with the provisions of Section 638 et seq. of the
California Code of Civil Procedure, or their successor section ("CCP"), which
shall constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Restated Loan Agreement, including whether such
controversy, dispute or claim is subject to the reference proceeding and except
as set forth above, the parties waive their rights to initiate any legal
proceedings against each other in any court or jurisdiction other than the
Superior Court in the County where the real property, if any, is located or
Santa Xxxxx County, if none (the "Court"). The referee shall be a retired Judge
of the Court selected by mutual agreement of the parties, and if they cannot so
agree within forty-five (45) days after the Claim Date, the referee shall be
promptly selected by the Presiding Judge of the Court (or his/her
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP (S) 170.6. The
referee shall (x) be requested to set the matter for hearing within sixty (60)
days after the date of selection of the referee and (y) try any and all issues
of law or fact and report a statement of decision upon them, if possible, within
ninety (90) days of the Claim Date. Any decision rendered by the referee will be
final, binding and conclusive and judgement shall be entered pursuant to CCP (S)
644 in any court in the State of California having jurisdiction. Any party may
apply for a reference proceeding at any time after thirty (30) days following
notice to any other party of the nature of the controversy, dispute or claim, by
filing a petition for a hearing and/or trial. All discovery permitted by this
Restated Loan Agreement shall be completed no later than fifteen (15) days
before the first hearing date established by the referee. The referee may extend
such period in the event of a party's refusal to provide requested discovery for
any reason whatsoever, including, without limitation, legal objections raised to
such discovery or unavailability of a witness due to absence or illness. No
party shall be entitled to "priority" in conducting discovery. Depositions may
be taken by either party upon seven (7) days written notice, and request for
production or inspection of documents shall be responded to within ten (10) days
after service. All disputes relating to discovery which cannot be solved by the
parties shall be submitted to the referee whose decision
-12-
shall be final and binding upon the parties. Pending appointment of the referee
as provided herein, the Superior Court is empowered to issue temporary and/or
provisional remedies, as appropriate.
(2) Except as expressly set forth in this Restated Loan
Agreement, the referee shall determine the manner in which the reference
proceeding is conducted including the time and place of all hearings, the order
of presentation of evidence, and all other questions that arise with respect to
the course of the reference proceeding. All proceedings and hearings conducted
before the referee, except for trial, shall be conducted without a court
reporter except that when any party so requests, a court reporter will be used
at any hearing conducted before the referee. The party making such a request
shall have the obligation to arrange for and pay for the court reporter. The
costs of the court reporter at the trial shall be borne equally by the parties.
(3) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to at law in the State of
California will be applicable to the reference proceeding. The referee shall be
empowered to enter equitable as well as legal relief, to provide all temporary
and/or provisional remedies and to enter equitable orders that will be binding
upon the parties. The referee shall issue a single judgment at the close of the
reference proceeding that shall dispose of all of the claims of the parties that
are the subject of the reference. The parties hereto expressly reserve the right
to contest or appeal from the final judgment or any appealable order or right
appealable judgment entered by the referee. The parties hereto expressly reserve
the right to findings of fact, conclusions of laws, a written statement of
decision, and the right to move for a new trial or a different judgment, which
new trial, if granted, is also to be a reference proceeding under this
provision.
(4) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, (S) 1280 through (S) 1294.2 of the CCP as
amended from time to time. The limitations with respect to discovery as set
forth hereinabove shall apply to any such arbitration proceeding.
16. MISCELLANEOUS PROVISIONS.
A. Nothing herein shall in any way limit the effect of the conditions
set forth in any other security or other agreement executed by Borrower, but
each and every condition hereof shall be in addition thereto.
B. No failure or delay on the part of Bank, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof.
C. All rights and remedies existing under this Restated Loan
Agreement or any other Loan Document are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
-13-
D. All headings and captions in this Restated Loan Agreement and any
related documents are for convenience only and shall not have any substantive
effect.
E. This Restated Loan Agreement is not intended to be, and shall not
be construed to create, a novation or accord and satisfaction, and, except as
otherwise provided herein, the Original Loan Agreement is amended and restated
in full by the terms of this Restated Loan Agreement and all obligations
outstanding under the Original Loan Agreement are governed by the terms of this
Restated Loan Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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F. This Restated Loan Agreement may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. Each
such agreement shall become effective upon the execution of a counterpart hereof
or thereof by each of the parties hereto and telephonic notification that such
executed counterpart has been received by Borrower and Bank.
BANK: BORROWER:
Imperial Bank CEDRO GROUP, INC.,
a California corporation
By: /S/ Xxxxxx Xxxxxxx By: /s/ Xxx Xxxxxxxxxx
---------------------------------------- -------------------------------------------
Xxxxxx Xxxxxxx, Assistant Vice President Xxx Xxxxxxxxxx, President
By: /s/ Xxxxx von Lossberg
-------------------------------------------
Xxxxx von Lossberg, Chief Financial Officer
LIST OF EXHIBITS AND SCHEDULES
------------------------------
EXHIBIT A: Definitions
SCHEDULE 1 TO EXHIBIT A: List of Specific Permitted Indebtedness
SCHEDULE 2 TO EXHIBIT A: List of Specific Permitted Liens
EXHIBIT B: Compliance Certificate
EXHIBIT C: Borrowing Base Certificate
-15-
EXHIBIT A
DEFINITIONS
"ACCOUNTS" means any right to payment for goods sold or leased, or to be
sold or to be leased, or for services rendered or to be rendered no matter how
evidenced, including accounts receivable, contract rights, chattel paper,
instruments, purchase orders, notes, drafts, acceptances, general intangibles
and other forms of obligations and receivables.
"ADDITIONAL EQUITY ROUND TERM SHEETs" means signed, definitive term sheets
for a minimum of Ten Million Dollars ($10,000,000) of new equity investments by
investors acceptable to Bank, which term sheets shall be delivered on or before
February 28, 1999 and shall specify that said minimum round amount must not
require additional investments from unidentified investors in order to meet the
minimum round amount of Ten Million Dollars ($10,000,000).
"CAPITAL LEASE" means, as to any Person, any lease of any Property by such
Person as lessee that is, or should be in accordance with Financing Accounting
Standards Board Statement No. 13, classified and accounted for as a "capital
lease" on the balance sheet of such Person prepared in accordance with GAAP.
"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.
"COLLATERAL" means any and all personal property of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest hereunder (including without
limitation, the Accounts), or pursuant to the terms of the General Security
Agreement, the IP Security Agreement or otherwise.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business), co-made or discounted or sold with recourse by that Person,
or in respect of which that Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation for which that Person is in
effect liable through an agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, capital stock purchases, capital contributions or
otherwise), or to maintain the solvency of the obligor of such obligation, or to
make payment for any products, materials or supplies or for any transportation,
services or lease regardless of the non-delivery or non-furnishing thereof, in
any such case if the purpose or intent of such agreement is to provide assurance
that such obligation will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof. The amount of
any Contingent Obligation of any Person
-16-
shall be deemed to be an amount equal to the maximum amount of such Person's
liability with respect to the stated or determinable amount of the primary
obligation for which such Contingent Obligation is incurred or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder).
"ELIGIBLE ACCOUNTS" means such of Borrower's Accounts as Bank in its sole
reasonable discretion shall determine are eligible from time to time, provided,
however, that in no event shall Eligible Accounts include the following:
(1) all Accounts under which payment is not received within the
earlier of (a) ninety (90) days from the applicable invoice date or (b)
sixty (60) days from the applicable payment due date;
(2) all Accounts against which the account debtor or any other Person
obligated to make payment thereon asserts any defense, offset, counterclaim
or other right to avoid or reduce the liability represented by the
Accounts;
(3) any Accounts if the account debtor or any other Person liable in
connection therewith is insolvent, subject to bankruptcy or receivership
proceedings or has made an assignment for the benefit of creditors or whose
credit standing is unacceptable to Bank and Bank has so notified Borrower;
(4) Accounts with respect to which the account debtor is an officer,
director, shareholder, employee or Subsidiary;
(5) Accounts due from an account debtor if more than twenty-five
percent (25%) of the aggregate amount of Accounts of such account debtor
have at that time remained unpaid for more than the earlier of (a) ninety
(90) days from the applicable invoice date or (b) sixty (60) days from the
applicable payment due date.
(6) Accounts with respect to international transactions unless either
(a) such Accounts are insured or covered by a letter of credit in a manner
and form acceptable to the Bank or (b) Bank shall have otherwise permitted
in writing in its sole and absolute direction;
(7) salesperson's accounts for promotional purposes;
(8) the amount by which the aggregate of all Accounts of an account
debtor exceeds twenty percent (20.0%) of the total accounts receivable
balance;
(9) Accounts where the account debtor is a seller to borrower, to the
extent that a potential offset exists; and
(10) Accounts where the account debtor is a federal governmental
entity, federal agency or instrumentality thereof.
"EVENT OF DEFAULT" has the meaning set forth in Section 12.
-17-
"EXISTING- TERM LOAN MATURITY DATE" has the meaning set forth in Section
1.B.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and Pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as `nay be approved by the significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GENERAL SECURITY AGREEMENT" means that certain General Security Agreement
(Tangible and Intangible Personal Property) dated as of December 24, 1997, made
by Borrower in favor of Bank.
"INDEBTEDNESS" means, as to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money, including, without limitation,
all of such indebtedness outstanding under this Restated Loan Agreement any of
the other Loan Documents, (b) all Capital Lease Obligations of such Person, (c)
to the extent of the outstanding indebtedness thereunder, any obligation of such
Person representing an extension of credit to such Person, whether or not for
borrowed money, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than (i) trade or other accounts payable in
the ordinary course of business in accordance with customary industry terms and
(ii) deferred franchise fees), (e) all Contingent Obligations, (f) any
obligation of such Person of the nature described in clauses (a), (b), (c), (d)
or (e) above, that is secured by a Lien on assets of such Person and which is
non-recourse to the credit of such Person, but only to the extent of the fair
market value of the assets so subject to the Lien, (g) obligations of such
Person arising under acceptance facilities or under facilities for the discount
of accounts receivable of such Person, (h) any obligation of such Person to
reimburse the issuer of any letter of credit issued for the account of such
Person upon which a draw has been made, and (i) any lease having the effect of
indebtedness, whether or not the same shall be treated as such on the balance
sheet of Borrower under GAAP.
"IP SECURITY AGREEMENT" means that certain Collateral Assignment, Patent
Mortgage and Security Agreement dated as of December 24, 1997, made by Borrower
in favor of Bank.
"LIEN" means any mortgage, pledge, security interest, lien or other charge
or encumbrance, including the lien or retained security title of a conditional
vendor, upon or with respect to any property or assets.
"LOAN ACCOUNT OR LOAN ACCOUNTS" means individually and collectively, the
New Term Loan Account and the Existing Term Loan Account.
"LOAN DOCUMENTS" means this Restated Loan Agreement, the General Security
Agreement, the IP Security Agreement and that certain Agreement to Provide
Insurance (Real or Personal Property) dated of even date herewith, each as
executed by Borrower in favor of Bank, together with all other document's
entered into or delivered pursuant to any of the foregoing, in each case as
originally executed or as the same may from time to time be modified, amended,
supplemented or restated.
-18-
"LOANS" means individually and collectively, the New Term Loans and the
Existing Term Loans advanced pursuant to Section 1.
"MATERIAL ADVERSE EFFECT" means any set of circumstances or events which
(a) has or could reasonably be expected to have any material adverse effect upon
the validity or enforceability of any material provision of any Loan Document,
(b) is or could reasonably be expected to be material and adverse to the
condition (financial or otherwise) or business operations of Borrower, (c)
materially impairs or could reasonably be expected to materially impair the
ability of Borrower, to perform its material Obligations, (d) materially impairs
or could reasonably be expected to materially impair the value or priority of
Bank's security interest in any Collateral or (e) materially impairs or could
reasonably be expected to materially impair the ability of Bank to enforce any
of its legal remedies pursuant to the Loan Documents.
"NEW TERM LOAN MATURITY DATE" has the meaning set forth in Section 1.A.
"PERMITTED INDEBTEDNESS" means the following:
(1) indebtedness of Borrower or Indebtedness and Contingent
Obligations of its Subsidiaries in favor of Bank arising under this
Restated Loan Agreement and the other Loan Documents;
(2) the existing Indebtedness and Contingent Obligations disclosed on
Schedule I attached hereto and incorporated herein by this reference;
provided that the principal amount thereof is not increased and the terms
thereof are not modified to impose more burdensome terms upon Borrower or
any of its Subsidiaries;
(3) the Subordinated Debt;
(4) extensions, renewals or refinancings of Indebtedness permitted
under this Restated Loan Agreement, other than clause (3) immediately
above;
(5) accrued dividends on the preferred stock of Borrower;
(6) interest rate and currency hedging agreements;
(7) guaranties of any Subsidiary's suppliers in connection with the
purchase of supplies in the ordinary course of business;
(8) guaranties of lease obligations incurred in the ordinary course
of business and to the extent otherwise permitted hereunder;
(9) Contingent Obligations constituting Permitted Liens; and
(10) the indebtedness referred to in clause (3)(a) of the definition
of Permitted Liens.
-19-
"PERMITTED LIENS" means the following:
(1) liens and security interests existing as of this date and
disclosed in Schedule 2 attached hereto and incorporated herein by this
reference;
(2) liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by
appropriate proceedings;
(3) liens and security interests (a) upon or in any equipment
acquired or held by Borrower to secure the purchase price of such equipment
or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment and in an amount not greater than the
purchase price thereof or (b) existing on such equipment at the time of its
acquisition, provided that the lien and security interest is confined
solely to the property so acquired and improvements thereon, and the
proceeds of such equipment;
(4) liens consisting of leases or subleases and licenses and
sublicenses granted to others in the ordinary course of Borrower's business
not interfering in any material respect with the business of Borrower and
any interest or title of a lessor or licensor under any lease or license,
as applicable;
(5) liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons or entities
imposed without action of such parties, provided that the payment thereof
is not yet required;
(6) liens incurred or deposits made in the ordinary course of
Borrower's business in connection with worker's compensation, unemployment
insurance, social security and other like laws;
(7) liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(8) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances affecting real property not interfering in any material
respect with the ordinary conduct of Borrower's business;
(9) liens in favor of customs and revenue authorities arising, as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(10) liens that are not prior to Bank's security interest which
constitute rights of set-off of a customary nature;
(11) any interest or title of a lessor in equipment subject to any
Capitalized Lease otherwise permitted hereunder, and
(12) any liens arising from the filing of any financial statements
relating to true leases otherwise permitted hereunder.
-20-
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, firm, joint stock
company, estate, entity or governmental agency.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
"SUBORDINATED DEBT" means indebtedness of Borrower, the repayment of
principal and interest of which is fully subordinated in time and right of
payment to the Loans, and has been approved in Bank's sole and absolute
discretion and in writing.
"YEAR 2000 COMPLIANT" means, in regard to Borrower or any Person, that all
software, hardware, firmware, equipment, goods or systems utilized by or
material to the business operations or financial condition of Borrower or such
Person, will properly perform date sensitive functions before, during and after
the year 2000.
"YEAR 2000 PROBLEM" means the risk that any computer applications used by
Borrower and its Subsidiaries may be unable to recognize and properly perform
date-sensitive functions involving certain dates prior to and any date on or
after December 31, 1999.
-21-
