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Exhibit 10.11
COMMERCIAL REVOLVING LOAN, ADDITIONAL LOAN
AND SECURITY AGREEMENT
This Commercial Revolving Loan, Additional Loan and Security Agreement
dated December 17, 1997 is by and among CYCOMM INTERNATIONAL, INC. a Wyoming
corporation with its chief executive office and principal place of business at
0000 Xxxxxxxxxx Xxxx, Xxxxx 000, XxXxxx, Xxxxxxxx 00000 ("CYCOMM"), XL COMPUTING
CORP., INC., a Delaware corporation with its chief executive office and
principal place of business at 00000 000xx Xxxxxxx, Xxxxxxxxx, Xxxxxxx 00000
("XL"), XL COMPUTING (CANADA) INC., a Quebec, Canada corporation with its chief
executive office and principal place of business at 0000 Xxxxxxxxxx, Xxxxx
X-000, Xxxxxxxx (Xxxxxx) Xxxxxx X0X0X0 ("XL CANADA" and, together with Cycomm
and XL, collectively referred to as the "BORROWERS") and AMERICAN COMMERCIAL
FINANCE CORPORATION, a Delaware corporation with an office at 000 Xxxxx Xxxx
Xxxxxx, Xxxx Xxxxxxxx, Xxxxxxxxxxx 00000 ("LENDER").
PREAMBLE
WHEREAS, Borrowers have requested Lender to extend to Borrowers (a) a
revolving loan in the maximum aggregate principal amount of up to $4,000,000
(the "REVOLVING LOAN") and (b) an additional loan in the original principal
amount of $568,000 (the "ADDITIONAL LOAN" and, together with the Revolving Loan,
the "LOANS"); and
WHEREAS, Lender has agreed to extend the Loans to Borrowers on the
conditions set forth below.
NOW, THEREFORE, for the mutual considerations contained in this Agreement,
Borrowers and Lender agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1. ACCOUNTING TERMS; ETC. Unless otherwise defined, all
accounting terms shall be construed, and all computations or
classifications of assets and liabilities and of income and expenses shall
be made or determined in accordance with generally accepted accounting
principles consistently applied. As used herein, or in the Financing
Agreements (as hereinafter defined) or in any certificate, document or
report delivered pursuant to this Agreement or any other Financing
Agreement, the following terms shall have the following meanings:
(a) "Account" and "Accounts" shall have the meanings assigned in
Section 8.1(a) hereof.
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(b) "Account Debtor" and "Account Debtors" shall mean the person or
entity or persons or entities obligated to Borrowers upon the Accounts.
(c) "Additional Loan" shall have the meaning assigned in Section 3.1
hereof.
(d) "Additional Loan Promissory Note" shall have the meaning
assigned in Section 3.1 hereof.
(e) "Agreement" shall mean this Commercial Revolving Loan,
Additional Loan and Security Agreement as the same may from time to time
be amended, supplemented or otherwise modified.
(f) "Arrangement" and "Arrangements" shall have the meaning assigned
in Section 5.1(n) hereof.
(g) "Borrowers" shall have the meaning assigned in the first
paragraph hereof.
(h) "Borrowing Base" shall mean an amount equal to the lesser of (i)
the amount by which FOUR MILLION DOLLARS ($4,000,000) exceeds the
outstanding indebtedness under the Additional Loan and (ii) an amount
equal to the sum of (1) the Eligible U.S. Borrower Accounts Amount plus
(2) the Eligible Canadian Accounts Amount plus (3) the Eligible Foreign
Accounts Amount plus (4) the Eligible XL Inventory Account Amount plus (5)
the Eligible Canadian Inventory Amount.
(i) "Business Day" shall mean any day other than a day on which
commercial banks in Hartford, Connecticut are required or permitted by law
to close.
(j) "Canadian Conversion Rate" shall mean such conversion or
currency exchange rate as may be selected by Lender in its sole discretion
to convert Canadian currency into United States currency, which exchange
rate is .72 as of the date hereof.
(k) "Collateral" shall mean the property of Borrowers described in
Section 8.1 hereof.
(l) "Commitment Letter" shall mean that certain commitment letter
issued by Lender to Borrower and dated November 17, 1997.
(m) "Company" and "Companies" shall mean Borrowers and any entities
affiliated with Borrowers in connection with any Plan.
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(n) "Cycomm" shall have the meaning assigned in the first paragraph
hereof.
(o) "Cycomm Revolving Loan Account" shall have the meaning assigned
in Section 2.3 hereof.
(p) "Defaulting Event" shall mean the occurrence of an Event of
Default or the occurrence of any condition or event which but for the
giving of notice or passage of time or both would constitute an Event of
Default.
(q) "Dollar" and the sign "$" shall mean lawful money of the United
States of America.
(r) "Eligible Accounts" shall mean those Accounts of Borrowers which
arise from the sale of inventory or rendition of services in the ordinary
course of Borrowers' business, are subject to Lender's perfected, first
lien security interest and no other lien or security interest, and are
evidenced by an invoice or other documentary evidence reasonably
satisfactory to Lender. Further, no Account shall be an Eligible Account
if:
(i) it arises out of a sale made by Borrowers to any
affiliate, division, subsidiary or parent of Borrowers or to any
person or entity controlled by or under common control with an
affiliate, division, subsidiary or parent of Borrowers;
(ii) it is due or unpaid more than ninety (90) days after its
original invoice date;
(iii) the account debtor is also a creditor or supplier of any
Borrower, has disputed liability or made any claim with respect to
any other account due from such account debtor to Borrowers, or the
account is otherwise subject to any defense, counterclaim or offset
of or by the account debtor;
(iv) the account debtor is located outside the United States
and Canada (unless (A) such account is supported by a letter of
credit or credit insurance acceptable in form, scope and substance
to Lender in Lender's reasonable discretion or (B) such account is
an Eligible Foreign Account);
(v) the account debtor is located in New Jersey or Minnesota,
unless Borrowers have (x) filed a Notice of Business Activity Report
in the appropriate office or agency for such state in the then
current year, or (y) received a Certificate of Authority to do
business and is in good standing in such state;
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(vi) the sale giving rise to the account is on a
xxxx-and-hold, guaranteed sale, sale-and-return, sale on approval,
consignment or other repurchase or return basis, or is evidenced by
a note or chattel paper;
(vii) Borrowers have made an agreement with the account debtor
for any deduction from the invoice representing said account, except
for discounts or allowances made in the ordinary course of
Borrowers' business for prompt payment, which discounts or
allowances are reflected in the calculation of the face value of
each respective invoice related thereto;
(viii) fifteen percent (15%) or more of the aggregate invoices
for an account debtor are due or unpaid for more than ninety (90)
days after their original invoice date;
(ix) it arises out of a sale made by the Borrowers to an
account debtor that is the United States Government or any agency or
subdivision thereof (collectively the "GOVERNMENT"), unless
Borrowers have complied in all respects with the Federal Assignment
of Claims Act of 1940, or has otherwise satisfied Lender as to the
assignability and collectability of said accounts; or
(x) the Lender in its sole discretion deems the Account to be
unacceptable for any reason.
If there is any dispute as to whether any Account is an Eligible Account,
the determination of Lender shall at all times control.
(s) "Eligible Canadian Accounts" shall mean Accounts which are
otherwise Eligible Accounts and further are accounts in respect of which
the account debtors have been notified in writing to remit payment
directly to Lender or to an address designated by Lender pursuant to a
notice in form and content satisfactory to Lender.
(t) "Eligible Canadian Accounts Amount" shall mean an amount equal
to the lesser of (i) TWO HUNDRED AND FIFTY THOUSAND DOLLARS ($250,000) and
(ii) the product of (1) eighty percent of Eligible Canadian Accounts
multiplied by (2) the Canadian Conversion Rate then in effect.
(u) "Eligible Canadian Inventory Amount" shall mean an amount equal
to the lesser of (i) twenty-five percent of Eligible Inventory of XL
Canada which is valued in U.S. dollars and (ii) FIVE HUNDRED THOUSAND
DOLLARS ($500,000).
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(v) "Eligible Foreign Accounts" shall mean Accounts that are
otherwise Eligible Accounts (except that such Accounts do not satisfy the
conditions set forth in clause (iv) of the definition of Eligible
Accounts) and further (i) are accounts in respect of which the account
debtors have been notified to remit payment directly to Lender or to an
address designated by Lender pursuant to a notice in writing in form and
content satisfactory to Lender in its sole discretion and (ii) are
accounts that have originally been invoiced in, and are payable in,
Dollars only.
(w) "Eligible Foreign Accounts Amount" shall mean an amount equal to
the lesser of (i) eighty percent (80%) of Eligible Foreign Accounts and
(ii) an amount equal to thirty percent (30%) of all Accounts of the
Borrowers.
(x) "Eligible Inventory" shall mean Borrowers' inventory of
computers and electronics components to the extent Lender, in its sole
discretion, determines that such inventory is eligible for advance. In
addition and without limiting Lender's discretion, Eligible Inventory
shall be valued in Dollars, net of reserves and returns, valued at the
lower of cost or market, and subject to Lender's perfected first security
interest and to no other lien or security interest. Further and without
limiting Lender's discretion, no inventory shall be eligible if it is:
(i) deemed by Lender as slow moving or obsolete;
(ii) not otherwise in good condition and salable through
normal trade channels; or
(iii) not salable in the ordinary course of Borrower's
business.
(y) "Eligible Inventory of XL" shall mean the Eligible Inventory
owned by XL and located at XL's principal place of business in Sebastian,
Florida.
(z) "Eligible Inventory of XL Canada" shall mean the Eligible
Inventory owned by XL Canada and located at 0000 Xxxxxxxxxx, Xxxxx X000,
Xxxxxxxx (Xxxxxx) Xxxxxx X0X 0X0, XL Canada's principal place of business.
(aa) "Eligible U.S. Borrower Accounts" shall mean, collectively, the
Eligible Accounts of Cycomm and the Eligible Accounts of XL.
(bb) "Eligible U.S. Borrower Accounts Amount" shall mean an amount
equal to eighty percent (80%) of Eligible U.S. Borrower Accounts.
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(cc) "Eligible XL Inventory Amount" shall mean an amount equal to
the lesser of (i) twenty-five percent (25%) of Eligible Inventory of XL
and (ii) FIVE HUNDRED THOUSAND DOLLARS ($500,000).
(dd) "Environmental Laws" shall mean any and all applicable foreign,
federal, state and local statutes, laws, regulations, rules, ordinances,
orders, guidances, policies or common law (whether now existing or
hereafter enacted or promulgated) pertaining to the environment, of any
and all federal, state or local governments and governmental and
quasi-governmental agencies, bureaus, subdivisions, commissions or
departments which may now or hereafter have jurisdiction over either
Borrower and all applicable judicial and administrative and regulatory
decrees, judgments and orders, including common law rulings and
determinations, relating to injury to, or the protection of, real or
personal property or human health or the environment, including, without
limitation, all requirements pertaining to reporting, licensing,
permitting, investigation, remediation and removal of emissions,
discharges, releases or threatened releases of Hazardous Materials,
chemical substances, pollutants or contaminants whether solid, liquid or
gaseous in nature, into the environment or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of such Hazardous Materials, chemical substances, pollutants or
contaminants.
Without limiting the generality of the foregoing, the term "Environmental
Laws" shall encompass each of the following statutes, and regulations
promulgated thereunder, and amendments and successors to such statutes and
regulations, as may be enacted and promulgated from time to time: Federal
Occupational Safety and Health Act ("OSHA"); the Clean Air Act ("CAA"); the
Toxic Substances Control Act ("TSCA"); the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("XXXX"); the Clean Water Act
("CWA"); the Resource Conservation and Recovery Act, as amended by the Hazardous
and Solid Waste Amendments of 1984 ("RCRA"); the Hazardous Materials
Transportation Act; the Nuclear Liability Act (Canada); An Act Respecting
Occupational Health and Safety (Quebec); the Canadian Environmental Protection
Act (Canada); the Environment Quality Act (Quebec); the Hazardous Materials
Information Review Act (Canada); the Transportation of Dangerous Goods Act
(Canada); the Use of Petroleum Products Act (Canada); and all applicable
Environmental Laws of each state and municipality in which any Borrower conducts
business or locates assets and all rules and regulations thereunder and
amendments thereto, and all similar state and local laws, rules and regulations.
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(ee) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974 and all rules and regulations promulgated pursuant thereto, as the
same may from time to time be supplemented or amended.
(ff) "Event of Default" and "Events of Default" shall have the
meanings assigned in Section 9.1 hereof.
(gg) "Fidelity Guarantor" shall have the meaning assigned in Section
6.1(d) hereof.
(hh) "Fidelity Guaranty" shall have the meaning assigned in Section
6.1(d) hereof.
(ii) "Financing Agreement" or "Financing Agreements" shall mean this
Agreement, the Notes, the Fidelity Guaranty, the Guaranties, the Province
of Quebec Security Documents and any and all other instruments, agreements
and documents executed in connection herewith or therewith or related
hereto or thereto, together with any amendments, supplements or
modifications hereto or thereto.
(jj) "Fixed Assets" shall mean equipment and other assets of
Borrowers which, by generally accepted accounting principles, must be
treated as fixed assets in financial statements of Borrowers.
(kk) "Further Loans" shall have the meaning assigned in Section 6.2
hereof.
(ll) "Guaranty" and "Guaranties" shall have the meaning assigned in
Section 6.1(h) hereof.
(mm) "Hazardous Material" shall mean any chemical, compound,
material, mixture or substance: (i) the presence of which requires or may
hereafter require notification, investigation, monitoring or remediation
under any Environmental Law; (ii) which is or becomes defined as a
"hazardous waste", "hazardous material" or "hazardous substance" or "toxic
substance" or "pollutant" or "contaminant" under any present or future
applicable federal, state or local law or under the rules and regulations
adopted or promulgated pursuant thereto, including, without limitation,
the Environmental Laws; (iii) which is toxic, explosive, corrosive,
reactive, ignitable, infectious, radioactive, carcinogenic, mutagenic or
otherwise hazardous and is or becomes regulated by any governmental
authority, agency, department, commission, board, agency or
instrumentality of any foreign country, the United States, any state of
the United States, or any political subdivision thereof to the extent any
of the foregoing has or had jurisdiction over any Borrower; (iv) which
contains without limitation, gasoline, diesel fuel or other petroleum
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products, asbestos or polychlorinated biphenyls ("PCBS"); or (v) any other
chemical, material or substance, exposure to, or disposal of, which is now
or hereafter prohibited, limited or regulated by any federal, state or
local governmental body, instrumentality or agency.
(nn) "Indemnifiable Liability" shall have the meaning assigned in
Section 14.1(a) hereof.
(oo) "Indemnitee" and "Indemnitees" shall have the meanings
assigned in Section 14.1(a) hereof.
(pp) "Lender" shall have the meaning assigned in the first
paragraph hereof.
(qq) "Lessor's Agreements" shall have the meaning assigned in
Section 6.1(e) hereof.
(rr) "Liabilities and Expenses" shall have the meaning assigned in
Section 11.1(b) hereof.
(ss) "Loan" means a Revolving Loan or the Additional Loan and
"Loans" means the Revolving Loans and the Additional Loan.
(tt) "Minimum Balance" shall have the meaning assigned in Section
4.1(a) hereof.
(uu) "Minimum Interest Amount" shall have the meaning assigned in
Section 13.1(c) hereof.
(vv) ""Movable Hypothec" shall have the meaning assigned in
Section 7.13 hereof.
(ww) "Notes" shall mean the Revolving Promissory Note and the
Additional Loan Promissory Note.
(xx) "Notice of Borrowing" shall have the meaning assigned in
Section 2.3 hereof.
(yy) "Obligation" and "Obligations" shall mean and include all
loans, advances, interest, indebtedness, liabilities, obligations, fees,
charges, expenses, guaranties, covenants and duties at any time owing by
Borrowers to Lender of every kind and description, whether or not
evidenced by any note or other instrument, whether or not for the payment
of money, whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, including, but not limited
to, the Loans, the Termination Fee, all other indebtedness,
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liabilities and obligations of Borrowers arising under this Agreement and
the other Financing Agreements or otherwise, and all costs, expenses,
fees, charges incurred by Lender hereunder or otherwise with respect to
Borrowers, including without limitation, reasonable fees and expenses of
attorneys, paralegals and other professionals incurred in connection with
any of the foregoing, or in any way connected with, involving or relating
to the preservation, enforcement, protection or defense of, or realization
under this Agreement, any of the other Financing Agreements, any related
agreement, document or instrument, the Collateral and the rights and
remedies hereunder or thereunder, including without limitation, all
reasonable costs, expenses and fees incurred in inspecting or surveying
mortgaged real estate, if any, or conducting Environmental studies or
tests, and all reasonable costs, expenses and fees incurred in connection
with any "workout" or default resolution negotiations involving legal
counsel or other professionals and further in connection with any
modification, renegotiation or restructuring of the indebtedness evidenced
by this Agreement and/or any of the other Financing Agreements and/or
Obligations.
(zz) "Plan" shall mean any employee benefit plan or other plan
maintained by Borrowers or any entity affiliated with Borrowers for
employees covered by Title I of ERISA.
(aaa) "Premises" shall mean the real property located at (i) 0000
Xxxxxxxxxx Xxxx, XxXxxx, Xxxxxxxx, (ii) 00000 000xx Xxxxxxx, Xxxxxxxxx,
Xxxxxxx and (iii) 0000 Xxxxxxxxxx, Xxxxx X-000, Xxxxxxxx (Xxxxxx) Xxxxxx.
(bbb) "Prime Rate" shall mean the Prime Rate as published from time
to time in the "Money Rates" section of The Wall Street Journal or any
successor publication, or in the event that such rate is no longer
published in The Wall Street Journal, a comparable index or reference
selected by Lender. The Prime Rate need not and may not necessarily be
Lender's lowest or most favorable rate.
(ccc) "Province of Quebec Security Documents" shall have the meaning
assigned in Section 6.1(g) hereof.
(ddd) "Receivables" shall have the meaning assigned in Section
8.1(a) hereof.
(eee) "Release" shall mean any release, emission, disposal, leaching
or migration into the environment (including, without limitation, the
abandonment or disposal of any barrels, containers, or other closed
receptacles containing any Hazardous Materials) or into or out of any
property owned, occupied or used by Borrowers.
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(fff) "Renewal Term" shall have the meaning assigned in Section 13.1
(a) hereof.
(ggg) "Revolving Loan" and "Revolving Loans" shall have the meanings
assigned in Section 2.1 hereof.
(hhh) "Revolving Loan Account" shall have the meaning assigned in
Section 2.3 hereof.
(iii) "Revolving Promissory Note" shall have the meaning assigned in
Section 2.3 hereof.
(jjj) "Subsidiary" and "Subsidiaries" shall mean any corporation or
corporations of which the majority of outstanding shares of any stock
having ordinary voting power is at the time owned by Borrowers and/or by
one or more Subsidiaries.
(kkk) "Term" shall have the meaning assigned in Section 13.1(a)
hereof.
(lll) "Termination Fee" shall have the meaning assigned in Section
13.1(c) hereof.
(mmm) "XL" shall have the meaning assigned in the first paragraph
hereof.
(nnn) "XL Canada" shall have the meaning assigned in the first
paragraph hereof.
(ooo)) "XL Revolving Loan Account" shall have the meaning assigned
in Section 2.3 hereof.
ARTICLE II. REVOLVING LOANS
SECTION 2.1. AMOUNT. Subject to the terms and conditions contained
in this Agreement, and so long as no Defaulting Event has occurred, Lender
agrees, in its sole discretion, to make loans (collectively, the
"REVOLVING LOANS" and, individually, a "REVOLVING LOAN") to Borrowers from
time to time until terminated as provided below in principal amounts not
exceeding in the aggregate at any one time outstanding the Borrowing Base,
it being agreed and understood that at no time shall the maximum aggregate
principal amount of the Revolving Loans made by Lender exceed the
Borrowing Base. Without limiting Lender's discretion, notwithstanding the
actual net face value of any Eligible Account of Borrowers, for purposes
of computing the Borrowing Base, the value of any Eligible Account with a
net face value in excess of
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$50,000 shall be reduced to $50,000 prior to the application of such
Borrowing Base. Lender may, in its sole discretion, raise or lower the
$50,000 limit set forth in the immediately preceding sentence without in
any way creating a course of conduct which requires Lender to maintain
such raised or lowered limit or to raise or lower such limit again in the
future.
SECTION 2.2. PAYMENT ON DEMAND. ALL OBLIGATIONS OF BORROWERS ARISING
UNDER THE REVOLVING LOANS SHALL BE PAID BY BORROWERS IN FULL UPON DEMAND
BY LENDER, NOTWITHSTANDING LENDER'S RIGHTS UPON THE OCCURRENCE OF AN EVENT
OF DEFAULT AND WHETHER OR NOT SUCH EVENT OF DEFAULT HAS OCCURRED.
SECTION 2.3. PROCEDURE FOR ADVANCES, NOTICE OF BORROWING, REVOLVING
PROMISSORY NOTE, ETC. Within the limits of the Borrowing Base and the
Term, so long as Borrowers are in compliance with all of the terms and
conditions of this Agreement and no Defaulting Event has occurred,
Borrowers may request borrowings, repay and request reborrowings of
Revolving Loans. Whenever any Borrower desires an advance, Cycomm (on
behalf of itself and XL Canada) or XL, as applicable, shall notify Lender
(which notice shall be irrevocable) by telex, telecopy or telephone of the
proposed borrowing. Such notice (each, a "NOTICE OF BORROWING") shall
specify the date of the proposed borrowing and the amount to be borrowed.
Each Notice of Borrowing must be received by Lender no later than 11:00
a.m., Hartford, Connecticut time on the day such borrowing is requested.
In addition to this Agreement, the Revolving Loans shall be evidenced by a
revolving promissory note payable to Lender in the form of Exhibit A
attached hereto (the "REVOLVING PROMISSORY NOTE"). Insofar as Cycomm (on
behalf of itself and XL Canada) or XL may request, and Lender shall make,
Revolving Loans hereunder, Lender shall enter such advances as debits on
the revolving loan account maintained by or on behalf of such Borrower
with Lender (each such account is herein referred to as a "REVOLVING LOAN
ACCOUNT"; such account maintained by Cycomm on behalf of itself and XL
Canada is herein referred to as the "CYCOMM REVOLVING LOAN ACCOUNT"; and
such account maintained by XL is herein referred to as the "XL REVOLVING
LOAN ACCOUNT"). Lender may record to the Cycomm Revolving Loan Account, in
accordance with customary accounting procedures, all accrued and unpaid
interest paid in respect of borrowings by Cycomm on behalf of itself and
XL Canada. Lender may record to the XL Revolving Loan Account, in
accordance with customary accounting procedures, all accrued and unpaid
interest paid in respect of borrowings by XL. Lender may also record to
either the Cycomm Revolving Loan Account or the XL Revolving Loan Account,
in Lender's sole discretion (or Lender may allocate between
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the Revolving Loan Accounts in amounts determined by Lender in its sole
discretion), all fees, late fees, usual and customary charges for the
maintenance and administration of checking and any other accounts
maintained by Borrowers with Lender and other fees and charges which are
properly chargeable to Borrowers under this Agreement; all payments,
subject to collection, made by Borrowers on account of indebtedness
evidenced by either Revolving Loan Account; all proceeds of Collateral
which are finally paid to Lender in its own office in cash or collected
items; and other appropriate debits and credits, including, without
limitation, payments of interest due hereunder; provided that Lender
shall, to the extent practical, apply any proceeds of Collateral first to
the Revolving Loan Account maintained by or on behalf of the Borrower who
previously owned such Collateral.
SECTION 2.4. MONTHLY STATEMENTS. On a monthly basis, Lender shall
render a statement for each Revolving Loan Account, which statement shall
be considered correct and accepted by Borrowers and conclusively binding
upon Borrowers unless Borrowers notify Lender to the contrary twenty (20)
days of the receipt of said statement by Borrowers. Lender shall have the
right to debit each applicable Revolving Loan Account for all interest
charges on the Loan as and when the same shall be due and payable, if not
otherwise paid by Borrowers.
SECTION 2.5. LENDER DISCRETION. Nothing herein shall be construed to
(a) require Lender to make Revolving Loans, and/or (b) prohibit Lender
from lending in excess of the Borrowing Base, it being agreed that all
such loans and advances shall be at Lender's sole discretion and shall not
establish a pattern or custom binding upon Lender.
SECTION 2.6. COLLECTIONS ON CANADIAN ACCOUNTS. The Borrowers agree
that payments on all Accounts with Account Debtors located in Canada shall
be remitted directly by such Account Debtors to Lender or to an address
designated by Lender. Borrowers agree to give irrevocable notice to such
Account Debtors that all payments in respect of such Accounts shall be so
paid directly to such account of Lender. Upon Lender's request, Borrowers
agree to execute a lockbox agreement in form, scope and substance
satisfactory to Lender in its sole discretion.
SECTION 2.7. CONVERSION OF CANADIAN CURRENCY.
(a) Borrowers acknowledge and agree that all Accounts and all
Inventory (including Inventory located in Canada and Inventory owned by XL
Canada) shall be valued and denominated in U.S. Dollars for all purposes
of this Agreement.
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(b) All payments of Accounts in Canadian currency shall be converted
to Dollars by multiplying the amount thereof by the Canadian Conversion
Rate then in effect at the time such payment is received by Lender.
(c) Borrowers acknowledge and agree that any and all fees, taxes and
exchange risks and charges, foreign or otherwise, on or in respect of the
conversion, valuation or determination of any such amounts shall be the
sole responsibility of Borrowers and Lender may charge any such costs to
the Cycomm Revolving Loan Account.
ARTICLE III. ADDITIONAL LOAN
SECTION 3.1. AMOUNT. Subject to the terms and conditions contained
in this Agreement, Lender agrees to make a loan to Borrowers in the
original principal amount of $568,000 (the "ADDITIONAL LOAN"). In addition
to this Agreement, the Additional Loan shall be evidenced by an Additional
Loan Promissory Note payable to Lender in the form of Exhibit B attached
hereto (the "ADDITIONAL LOAN PROMISSORY NOTE").
SECTION 3.2. PAYMENT ON DEMAND. ALL OBLIGATIONS OF BORROWERS ARISING
UNDER THE ADDITIONAL LOAN SHALL BE PAID BY BORROWERS IN FULL UPON DEMAND
BY LENDER, NOTWITHSTANDING LENDER'S RIGHTS UPON THE OCCURRENCE OF AN EVENT
OF DEFAULT AND WHETHER OR NOT SUCH EVENT OF DEFAULT HAS OCCURRED AND, IF
DEMAND IS NOT SOONER MADE, AS SET FORTH IN THE ADDITIONAL LOAN PROMISSORY
NOTE.
SECTION 3.3. MONTHLY STATEMENTS. On a monthly basis, Lender shall
render a statement for the Additional Loan, which statement shall be
considered and accepted by Borrowers and conclusively binding upon
Borrowers unless Borrowers notifies Lender to the contrary within twenty
(20) days of the receipt of said statement by Borrowers. Lender shall have
the right to debit either Revolving Loan Account for all principal,
interest and other charges on the Additional Loan as and when the same
shall be due and payable, if not otherwise paid by Borrowers.
ARTICLE IV. INTEREST, FEES AND OTHER CHARGES
SECTION 4.1. INTEREST.
(a) INTEREST RATES. So long as no Defaulting Event has occurred, the
Loans shall bear interest (from the date made through and including the
date of payment in full), at a floating rate per annum equal to three
percentage points (3.0%) above the Prime Rate, on the greatest of:
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(i) the actual average balance outstanding under the Loans; (ii) the sum
of (A) a minimum assumed average monthly balance outstanding under the
Revolving Loan of $400,000 attributable to borrowings by Cycomm plus (B) a
minimum assumed average monthly balance outstanding under the Revolving
Loan of $1,132,000 attributable to borrowings by XL plus (C) the actual
average balance outstanding under the Additional Loan; (iii) the sum of
(A) a minimum assumed average monthly balance outstanding under the
Revolving Loan of $400,000 attributable to borrowings by Cycomm (on behalf
of itself and XL Canada) plus (B) the actual average balance outstanding
under the Revolving Loan attributable to borrowings by XL plus (C) the
actual average balance outstanding under the Additional Loan; and (iv) the
sum of (A) the actual average balance outstanding under the Revolving Loan
attributable to borrowings by Cycomm (on behalf of itself and XL Canada)
plus (B) a minimum assumed average monthly balance outstanding under the
Revolving Loan of $1,132,000 attributable to borrowings by XL plus (C) the
actual average balance outstanding under the Additional Loan (the "MINIMUM
BALANCE") .
(b) PAYMENT OF INTEREST. So long as any of the Obligations remain
outstanding, interest on the Loans shall be due and payable without notice
or demand monthly in arrears beginning on January 1, 1998 and continuing
on the first Business Day of each and every month thereafter.
(c) DEFAULT INTEREST RATE. Notwithstanding the foregoing, interest
on the Loans, at all times after the occurrence of an Event of Default,
and interest on all payments of interest that are not paid when due, shall
accrue at a rate per annum equal to four percentage points (4.0%) above
the applicable interest rates otherwise in effect under this Agreement.
(d) CALCULATION OF INTEREST. Interest on the Loans shall be
calculated on the basis of a 360-day year and the actual number of days
elapsed.
(e) LATE PAYMENT. If any amount due hereunder or under the Notes are
not paid within ten (10) days after the date it is due and payable,
without in any way affecting Lender's right to make demand hereunder or to
declare an Event of Default to have occurred, Lender may in its sole
discretion assess a late charge equal to five percent (5.0%) of such late
payment against Borrowers, which late charge shall be immediately due and
payable and may be paid by a charge to Borrowers' loan account as
contemplated in Section 2.3 above.
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(f) LAWFUL INTEREST. It being the intent of the parties that the
rate of interest and all other charges to Borrowers be lawful, if for any
reason the payment of a portion of interest, fees or charges as required
by this Agreement would exceed the limit established by applicable law
which a commercial lender such as Lender may charge to commercial
Borrowers such as Borrowers, then the obligation to pay interest or
charges shall automatically be reduced to such limit and, if any amounts
in excess of such limits shall have been paid, then such amounts shall be
applied to the unpaid principal amount of the Obligations or refunded to
Borrowers so that under no circumstances shall interest or charges
required hereunder exceed the maximum rate allowed by law, as aforesaid.
SECTION 4.2. CLOSING FEES. On or before the date hereof, Borrowers
shall pay or have paid to Lender all fees, expenses and other costs
incurred by Lender in connection with the closing of the Loans (including,
without limitation, all reasonable attorney's and other professionals'
fees and expenses).
SECTION 4.3. COMMITMENT FEE. Borrowers shall also pay to Lender a
nonrefundable commitment fee equal to one percent (1%) of the maximum
principal amount of the Loans on the date hereof and on each anniversary
date of this Agreement. It is understood that the determination of the
maximum principal amount of the Loans shall be made without regard to the
components of the Borrowing Base based upon Eligible Accounts and Eligible
Inventory. For example, for purposes of this provision, on the date hereof
the maximum principal amount of the Loans is $4,000,000 and the commitment
fee payable on the date hereof is $40,000.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
SECTION 5.1. REPRESENTATIONS AND WARRANTIES. The Borrowers
jointly and severally represent and warrant to Lender that:
(a) GOOD STANDING AND QUALIFICATION. They are duly organized,
validly existing and in good standing under the laws of the State of
Wyoming in the case of Cycomm, the State of Delaware in the case of XL and
the Province of Quebec and Canada in the case of XL Canada. Each Borrower
has all requisite corporate power and authority to own and operate its
properties and to carry on its business as presently conducted and is duly
qualified to do business and is in good standing as a foreign corporation
in each jurisdiction wherein the character of the properties owned or
leased by it therein or in which the transaction of its business therein
makes such qualification necessary.
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(b) CORPORATE AUTHORITY. They have full power and authority to enter
into this Agreement and the other Financing Agreements to which they are a
party, to make the borrowings contemplated herein, to execute and deliver
the Notes and the other Financing Agreements to which they are a party,
and to incur the obligations provided for herein and therein, all of which
have been duly authorized by all necessary and proper corporate action. No
other consent or approval or the taking of any other action in respect of
shareholders or of any public authority is required as a condition to the
validity or enforceability of this Agreement, the Notes, the other
Financing Agreements or any other instrument, document or agreement
delivered in connection herewith or therewith.
(c) BINDING AGREEMENTS. This Agreement constitutes, and the Notes
and the other Financing Agreements executed and/or delivered in connection
herewith or therewith, when issued and delivered pursuant hereto for value
received shall constitute, valid and legally binding obligations of
Borrowers, enforceable in accordance with their respective terms, except
as enforcement may be limited by principles of equity, bankruptcy,
insolvency, or other laws affecting the enforcement of creditors' rights
generally.
(d) LITIGATION. To the best of Borrowers' knowledge after due and
diligent inquiry by each Borrower's President and Chief Financial Officer,
there are no actions, suits or proceedings pending against Borrowers
before any court or administrative agency, nor are there any actions,
suits or proceedings threatened, which, individually or in the aggregate,
would materially and adversely affect the financial condition, assets or
operations of Borrowers, nor are there any such actions, suits or
proceedings which question the validity of this Agreement, the Notes, any
of the other Financing Agreements, or any action to be taken in connection
with the transactions contemplated hereby or thereby.
(e) NO CONFLICTING LAW OR AGREEMENTS. The execution, delivery and
performance by Borrowers of this Agreement, the Notes and each other
Financing Agreement, as the case may be, does not (i) violate any
provision of any of their Charters, certificates of incorporation, or
By-laws or any order, decree or judgment, or any provision of any statute,
rule or regulation to which any Borrower may be subject; (ii) violate or
conflict with, result in a breach of or constitute (with notice or lapse
of time, or both) a default under any shareholder agreement, stock
preference agreement, mortgage, hypothec, indenture or other contract or
undertaking to which any one of them is a party, or by which any of their
properties may be bound; and (iii) result in the creation or imposition of
any lien, charge or encumbrance of any nature whatsoever upon any
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property or assets of Borrowers except for the liens granted hereunder to
Lender.
(f) TAXES. With respect to all of its taxable periods they have
filed all tax returns which are required to be filed and all federal,
state, provincial, municipal, franchise and other taxes shown on such
filed returns have been paid or are being diligently contested by
appropriate proceedings and have been reserved against, as required by
generally accepted accounting principles, consistently applied.
(g) FINANCIAL STATEMENTS. The Borrowers have heretofore delivered to
Lender and Lender acknowledges receipt of, Borrowers': (i) audited annual
balance sheets as of December 31, 1996, and the related statements of
income, retained earnings and cash flows for the fiscal year or period
then ended. Each of such statements is complete and correct in all
material respects and fairly presents their consolidated financial
condition as of the dates and for the periods referred to therein and has
been prepared in accordance with generally accepted accounting principles
consistently applied by the applicable Borrower throughout the periods
involved. There are no liabilities, direct or indirect, fixed or
contingent, of Borrowers as of the dates of said balance sheets which are
not reflected in such statements or in the notes thereto.
(h) ADVERSE DEVELOPMENTS. Since December 31, 1996 there has been no
material adverse change in their financial condition, business,
operations, affairs or prospects or in any of their properties or assets.
(i) EXISTENCE OF ASSETS AND TITLE THERETO. They have good and
marketable title to all of their properties and assets, including the
properties and assets reflected in the financial statements delivered in
connection herewith. None of such properties or assets are subject to any
mortgage, hypothec, pledge, lien, lease, encumbrance or charge except
those permitted under the terms of this Agreement.
(j) REGULATIONS G, T, U AND X. The proceeds of the borrowings
hereunder are not being used and will not be used, directly or indirectly,
for the purposes of purchasing or carrying any margin stock in
contravention, or which would cause any Borrower or Lender to be in
violation, of Regulations G, T, U or X promulgated by the Board of
Governors of the Federal Reserve System or any applicable Canadian or
Quebec laws.
(k) COMPLIANCE. To the best of Borrowers' knowledge after due and
diligent inquiry by each Borrower's President and Chief Financial Officer,
they are not in default with respect to any order, writ, injunction
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or decree of any court or of any federal, state, provincial, municipal or
other governmental department, commission, board, bureau, agency,
authority or official, nor are they in violation of any law, statute, rule
or regulation to which they or any of their properties are subject and
they have not received notice of any such default from any party and are
not in default in the payment or performance of any of their obligations
to any third parties or in the performance of any mortgage, hypothec,
indenture, lease, contract or other agreement to which they are a party or
by which any of their assets or properties may be bound.
(l) LEASES They enjoy quiet and undisturbed possession under all
leases under which they are operating, and all of such leases are valid
and subsisting and not in default.
(m) PENSION PLANS.
(i) None of the Companies sponsors or maintains any Plan
or has ever sponsored or maintained any Plan;
(ii) To the extent applicable, each of the Companies agrees to
do all acts, including, but not limited to, making all contributions
necessary to maintain compliance with ERISA or the Code, and agrees
not to terminate any Plan in a manner or do or fail to do any act
which could result in the imposition of a lien on any of its
properties pursuant to Section 4068 of ERISA;
(iii) None of the Companies sponsors or maintains, or has ever
contributed to, or has incurred any withdrawal liability under, a
"multi-employer plan" as defined in Section 3 of ERISA and none of
the Companies has any written or verbal commitment of any kind to
establish, maintain or contribute to any "multi-employer plan" under
the Multi-employer Pension Plan Amendment Act of 1980;
(iv) None of the Companies has any unfunded liability in
contravention of ERISA and the Code;
(n) DEFERRED COMPENSATION ARRANGEMENTS. Except as set forth in
Schedule 5.1(n) attached hereto, none of the Companies has entered into
employment contracts or deferred compensation plans, incentive
compensation plans, executive compensation plans, arrangements or
commitments (each, individually, an "ARRANGEMENT"). With respect to each
such Arrangement:
(i) Such Arrangement complies currently, and has complied in
the past, both as to form and operation with its terms
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and the provisions of the Code and ERISA and all applicable laws,
rules and regulations;
(ii) To the extent applicable, the disclosure and reporting
provisions of the Securities Act of 1933 and the Securities Exchange
Act of 1934 have been satisfied;
(iii) Such Arrangement is legally valid and binding and is in
full force and effect;
(iv) The Companies have made all contributions required to be
made under any such Arrangement and no contributions are currently
due and owing;
(v) There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the best of the Companies'
knowledge which could be reasonably expected to be asserted against
any such Arrangement; and
(vi) The Companies have performed all obligations required to
be performed by it under any such Arrangement and the Companies are
not in default or in violation of, and the Companies have no
knowledge of a default or violation by any other party to any such
Arrangement.
(o) CHIEF EXECUTIVE OFFICE. Their chief executive offices and
principal places of business, and the offices where their books and
records concerning Collateral are kept, are set forth in the first
paragraph of this Agreement.
(p) PLACES OF BUSINESS AND LOCATION OF COLLATERAL. They have no
other places of business and locate no Collateral, specifically including
books and records, at any location other than as set forth in the first
paragraph of this Agreement and as set forth on Schedule 5.1(p) attached
hereto. They shall maintain a full and complete set of their books and
records in their offices at the chief executive offices described in the
immediately preceding paragraph.
(q) CONTINGENT LIABILITIES. They are not party to any suretyship,
guaranty or other similar type agreement, nor have they offered their
endorsement to any individual, concern, corporation or other entity or
acted or failed to act in any manner which would in any way create a
contingent liability that does not appear in the financial statements
referred to hereinbefore.
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(r) CONTRACTS. No contract to which any Borrower is a party is
currently being renegotiated or is by its terms subject to renegotiation,
nor is any Borrower in default in any material respect of any contract. No
Borrower is party to any government contract.
(s) UNIONS AND PENSIONS. They are not a party to any collective
bargaining or union agreement.
(t) LICENSES. They have all licenses, permits and other permissions
required by any government, agency or subdivision thereof, or from any
licensing entity to which Borrowers may be subject, if any, necessary for
the conduct of their respective businesses, all of which they represent to
be in good standing and in full force and effect.
(u) COLLATERAL. The Borrowers are and shall continue to be the sole
owners of the Collateral free and clear of all liens, encumbrances,
security interests and claims except the liens granted to Lender hereunder
and the security interests and liens listed on Schedule 5.1(u) attached
hereto; Borrowers are fully authorized to sell, transfer, pledge and/or
grant a security interest in each and every item of the Collateral to
Lender; all documents and agreements related to the Collateral shall be
true and correct and in all respects what they purport to be; all
signatures and endorsements that appear thereon shall be genuine and all
signatories and endorsers shall have full capacity to contract; none of
the transactions underlying or giving rise to the Collateral shall violate
any applicable state, provincial or federal laws or regulations; all
documents relating to the Collateral shall be legally sufficient under
such laws or regulations and shall be legally enforceable in accordance
with their terms; and Borrowers agree to defend the Collateral against the
claims of all persons other than Lender.
(v) TRADENAMES. Except as set forth in Schedule 5.1(v) attached
hereto, they do not have any tradenames.
(w) FINANCIAL INFORMATION. All financial information including, but
not limited to, information relating to the Receivables and Inventory,
submitted by any Borrower to Lender, whether previously or in the future,
is and will be true and correct in all material respects, and is and will
be complete insofar as may be necessary to render it a true and accurate
depiction of the subject matter to which it relates.
(x) PARENT, AFFILIATE OR SUBSIDIARY CORPORATIONS. Except as set
forth in Schedule 5.1(x) attached hereto, Borrowers have no parent
corporation and have no affiliates or Subsidiaries.
(y) ENVIRONMENTAL MATTERS.
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(i) The Borrowers have obtained all permits, licenses and
other authorizations which are required under all Environmental
Laws, if any. They are in compliance with the terms and conditions
of all such permits, licenses and authorizations, if any, and are
also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental
Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or
approved thereunder.
(ii) To the best of Borrowers' knowledge after due and
diligent inquiry by each Borrower's President and Chief Financial
Officer, no notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review
is pending or threatened by any governmental or other entity with
respect to any alleged failure by any Borrower to have any permit,
license or authorization required in connection with the conduct of
its business or with respect to any Environmental Laws, including
without limitation, Environmental Laws relating to the generation,
treatment, storage, recycling, transportation, disposal or release
of any Hazardous Materials.
(iii) No oral or written notification of a release of any
Hazardous Material has been filed by or against Borrowers and no
property now or previously owned, leased or used by any Borrower,
including without limitation, the Premises, is listed or proposed
for listing on the Comprehensive Environmental Response,
Compensation and Inventory of Sites or National Priorities List
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or on any similar state or
federal list of sites requiring investigation or cleanup.
(iv) There are no liens or encumbrances arising under or
pursuant to any Environmental Laws on any of the property or
properties owned, leased or used by the Borrowers, including without
limitation, any of the properties owned or leased by the Borrowers,
and to the best of Borrower's knowledge after due and diligent
inquiry by each Borrower's President and Chief Financial Officer, no
governmental actions have been taken or are in process which could
subject any of such properties to such liens or encumbrances or, as
a result of which Borrowers would be required to place any notice or
restriction relating to the presence of
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Hazardous Materials at any property owned by the Borrowers in any
deed to such property.
(v) Neither it nor, to the best knowledge of Borrowers, any
previous owner, tenant, occupant or user of any property owned,
leased or used by Borrowers, has (i) engaged in or permitted any
operations or activities upon or any use or occupancy of such
property, or any portion thereof, for the purpose of or in any way
involving the release, discharge, refining, dumping or disposal
(whether legal or illegal, accidental or intentional) of any
Hazardous Materials on, under, or in or about such property; or (ii)
transported or had transported any Hazardous Materials to such
property except to the extent such Hazardous Materials are raw
products commonly used in day-to-day manufacturing operations of
such property and, in such case, in compliance with, all
Environmental Laws; (iii) engaged in or permitted any operations or
activities which would allow the facility to be considered a
treatment, storage or disposal facility as that term is defined in
40 CFR 264 and 265; or (iv) constructed, stored or otherwise located
Hazardous Materials on, under, in or about any such property except
to the extent commonly used in day-to-day operations of any such
property and, in such case, in compliance with all Environmental
Laws. Further, to the best knowledge of Borrowers, no Hazardous
Materials have migrated from other properties upon, about or beneath
any such property.
(z) USE OF PROCEEDS. The Borrowers will use the proceeds of the
Loans solely (i) to satisfy in full loans outstanding to Xxxxxxx Bank and
Banque Nationale de Paris (Canada) on the date hereof and (ii) for working
capital purposes.
ARTICLE VI. CONDITIONS OF LENDING
SECTION 6.1. CONDITIONS OF THE INITIAL LOANS. Subject to the terms
hereof, the obligation of Lender to make the first Revolving Loan and the
Additional Loan under this Agreement is subject to the fulfillment of the
following conditions precedent at the time of the execution of this
Agreement:
(a) NOTES. Lender shall have received a duly executed Revolving
Promissory Note and a duly executed Additional Loan Promissory Note drawn
to its order.
(b) EVIDENCE OF CORPORATE ACTION. Lender shall have received
certified copies of all corporate action (in form and substance
satisfactory to Lender) taken by Borrowers to authorize the execution,
delivery and
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performance of this Agreement, the Notes and the other Financing
Agreements to which any Borrower is a party, and the borrowings to be made
hereunder and thereunder, together with true copies of Borrowers'
respective Charters and By-laws and such other papers as Lender or its
counsel may require.
(c) OPINIONS OF COUNSEL. Lender shall have received favorable
written opinions of United States and Canadian counsel for the Borrowers
and the Fidelity Guarantor, accompanied by such supporting documents as
Lender or its counsel may require.
(d) FIDELITY GUARANTY. Lender shall have received a duly executed
Fidelity Guaranty (a "FIDELITY GUARANTY") from Xxxxxxx X. Xxxxx (the
"FIDELITY GUARANTOR"). The Fidelity Guaranty shall be in form, scope and
substance satisfactory to Lender and its counsel.
(e) LESSOR'S AGREEMENT. Borrowers shall cause to be delivered to
Lender lessor's agreements with respect to the Premises located in
Sebastian, Florida and Quebec, Canada (collectively, the "LESSOR'S
AGREEMENTS") each in form, scope and substance satisfactory to Lender and
its counsel.
(f) UCC-1 FINANCING STATEMENTS, QUEBEC REGISTRATION CERTIFICATES.
Lender shall have received from Borrowers duly executed UCC-1 financing
statements, Quebec registration certificates and such other documents as
Lender deems necessary or proper to perfect its security interest in the
Collateral, all of which shall be in form, scope and substance
satisfactory to Lender and its counsel.
(g) PROVINCE OF QUEBEC SECURITY DOCUMENTS. Lender shall have
received the duly executed Moveable Hypothec and each other document or
instrument Lender deems necessary or proper to perfect its security
interest in the Collateral under Canadian law (the "PROVINCE OF QUEBEC
SECURITY DOCUMENTS"), all of which shall be in form, scope and substance
satisfactory to Lender and its counsel.
(h) GUARANTIES. Lender shall have received from each Borrower a duly
executed Guaranty Agreement (each a "GUARANTY" and collectively, the
"GUARANTIES") each in form, scope and substance satisfactory to Lender and
its counsel.
(i) NOTICE OF ASSIGNMENTS AND POST OFFICE BOX CHANGE OF ADDRESS
CARDS. Lender shall have received a notice of assignment and a post office
change of address cards from each of the Borrowers, which shall be in
form, scope and substance satisfactory to Lender and its counsel; provided
that such documents shall be held by Lender and
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utilized by Lender only after the occurrence of a demand for payment of
the Loans or an Event of Default.
(j) FURTHER DOCUMENTS. Lender shall have received such further
documents, instruments and agreements as Lender may request, including
without limitation, landlord's agreements, warehouse agreements and
evidence that the insurance policies and certificates evidencing adequate
insurance and coverage on each of Borrowers' assets are currently in full
force and effect, continue to name Lender as loss payee or additional
insured, as the case may be, and that the premiums are current.
SECTION 6.2. CONDITIONS OF ADDITIONAL REVOLVING LOANS. In addition
to the conditions in Section 6.1 above, Lender shall make no further
Revolving Loans (collectively, the "FURTHER LOANS") unless the following
conditions shall exist or have been satisfied by Borrowers at the time any
Further Loan is requested:
(a) ABSENCE OF TERMINATION OR DEFAULT. Lender shall not have
terminated the Revolving Loan facility or the Additional Loan hereunder,
nor shall a Defaulting Event exist or have occurred.
(b) COMPLIANCE CERTIFICATES. On the date of each Revolving Loan
hereunder and after giving effect thereto, Borrowers shall have delivered
to Lender, upon Lender's request, a certificate executed by their chief
financial officer which states, among other things, that: (i) Borrowers
have complied, and are then in compliance, with all the terms, covenants
and conditions of this Agreement and the other Financing Agreements to
which they are a party; (ii) there exists no Event of Default or
Defaulting Event; and (iii) the representations and warranties contained
herein and in the other Financing Agreements are true and correct with the
same effect as though such representations and warranties had been made at
the time of each Further Loan.
(c) BORROWING BASE. The indebtedness of Borrowers by virtue of the
making of any Revolving Loan shall not exceed the Borrowing Base.
Borrowers shall not request any Revolving Loan if the effect of such
Revolving Loan shall be to cause the balance of all Revolving Loans to
exceed the Borrowing Base.
(d) FURTHER DOCUMENTS. Lender shall have received such further
documents, instruments and agreements as Lender may reasonably request.
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ARTICLE VII. COVENANTS
A. AFFIRMATIVE COVENANTS.
The Borrowers jointly and severally covenant and agree that from the date
hereof until payment and performance in full of all Obligations, and until the
termination of this Agreement, unless Lender otherwise consents in writing,
Borrowers shall:
SECTION 7.1. FINANCIAL STATEMENTS. Deliver or caused to be delivered
to Lender: (a) within thirty (30) days after the close of each fiscal
month of Borrowers, internally prepared financial statements of Borrowers
including consolidated and consolidating balance sheets as of the close of
each month, and statements of income and retained earnings for such month,
and for that portion of the fiscal year-to-date then ended, which shall be
prepared on a basis consistent with that of the preceding period or
containing disclosure of the effect on financial condition or results of
operations of any change in such preparation, and which shall be certified
by the chief financial officer of Borrowers as being accurate and fairly
presenting the financial condition of Borrowers; (b) within ninety (90)
days after the close of each fiscal year of Borrowers, consolidated
audited financial statements including a balance sheet as of the close of
such fiscal year and statements of income, stockholders' capital and cash
flow for the year then ended, prepared in conformity with generally
accepted accounting principles, applied on a basis consistent with that of
the preceding year or containing disclosure of the effect on financial
condition or results of operations of any change in the application of
accounting principles during the year, and accompanied by a report thereon
of a recognized certified public accounting firm selected by Borrowers and
reasonably satisfactory to Lender, which opinion shall state that such
financial statements fairly present the financial condition and results of
operations of Borrowers in accordance with generally accepted accounting
principles, and also accompanied by a written statement from such
accountants stating that they have reviewed such financial statements and
have found no evidence of an Event of Default having occurred or of an
event which with passage of time and/or giving of notice would constitute
an Event of Default having occurred; (c) within ninety (90) days after the
close of each fiscal year of Borrowers, internally prepared consolidating
financial statements including a balance sheet as of the close of such
fiscal year and statements of income, stockholders' capital and cash flow
for the year then ended, prepared in conformity with generally accepted
accounting principles, applied on a basis consistent with that of the
preceding year or containing disclosure of the effect on financial
condition or results of operations of any change in the application of
accounting principles during the year; (d) within ten (10)
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days of the close of each month, monthly aging of accounts receivable and
accounts payable and inventory status reports in form, scope and substance
satisfactory to Lender; (e) within ten (10) days after filing the same
with the Securities and Exchange Commission, a copy of Cycomm's Annual
Report on Form 10-K, its Quarterly Reports on Form 10-Q, any Current
Reports on Form 8-K and any proxy statements; (f) promptly upon Lender's
written request, such other information about the financial condition and
operations of Borrowers as Lender may, from time to time, reasonably
request; and (g) upon becoming aware of any Event of Default, or the
occurrence or existence of a Defaulting Event, notice thereof in writing.
All reports required hereunder or requested by Lender involving items such
as sales and cash receipts, accounting journals, monthly detailed account
receivable aging reports and accounts payable and inventory status reports
shall be provided by Borrowers to Lender in ASCII readable format either
on disk or via modem transmission to Lender. Borrower agrees to cooperate
fully with Lender to coordinate the timely receipt of all such reports in
such form or format as Lender may reasonably request.
SECTION 7.2. INSURANCE AND ENDORSEMENTS. (a) Keep their properties
and cause the Premises to be insured against fire and other hazards
(pursuant to so-called "All Risk" coverage) in amounts and with companies
reasonably satisfactory to Lender to the same extent and covering such
risks as is customary in the same or a similar business; maintain public
liability coverage, including without limitation, products liability
coverage, against claims for personal injuries or death; and maintain all
worker's compensation, C.S.S.T., employment or similar insurance as may be
required by applicable law; and (b) all insurance shall contain such
terms, be in such form, and be for such periods reasonably satisfactory to
Lender, and be written by carriers duly licensed by the appropriate
governmental authority of each state where any Collateral is located.
Without limiting the generality of the foregoing, such insurance must
provide that it may not be canceled without thirty (30) days' prior
written notice to Lender. Borrowers shall cause Lender to be endorsed as a
loss payee with a long form Lender's Loss Payable Clause, in form and
substance reasonably acceptable to Lender on all such insurance. In the
event of failure to provide and maintain insurance as herein provided,
Lender may, at its option, provide such insurance and charge the amount
thereof to either Revolving Loan Account in Lender's sole discretion.
Borrowers shall furnish to Lender certificates or other satisfactory
evidence of compliance with the foregoing insurance provisions. Borrowers
hereby irrevocably appoint Lender as their attorney-in-fact, coupled with
an interest, to make proofs of loss and claims for insurance, and to
receive payments of the insurance proceeds and execute and endorse all
documents, checks and drafts in connection
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with payment of such insurance. Any insurance proceeds received by Lender
shall be applied to the Obligations in such order and manner as Lender
shall determine in its sole discretion.
SECTION 7.3. TAX AND OTHER LIENS. Comply with all statutes and
government regulations and pay all taxes, assessments, governmental
charges or levies, or claims for labor, supplies, rent and other
obligations made against any of them or their property which, if unpaid,
might become a lien or charge against Borrowers or their properties,
except liabilities being contested in good faith and against which
adequate reserves have been established in accordance with generally
accepted accounting principles.
SECTION 7.4. PLACES OF BUSINESS; LOCATION OF COLLATERAL. Maintain
their chief places of business and chief executive offices at the
addresses set forth in the introductory sentence hereof and their other
places of business and locations of Collateral as set forth in Schedule
5.1(p) hereto unless Borrowers shall have given Lender thirty (30) days'
prior written notice of any change thereof.
SECTION 7.5. INSPECTIONS. Allow Lender by or through any of its
officers, attorneys, and/or accountants designated by it, for the purpose
of ascertaining whether or not each and every provision hereof and of any
related agreement, instrument and document is being performed, to enter
the offices and plants of Borrowers to examine or inspect any of the
properties, books and records or extracts therefrom, to make copies of
such books and records or extracts therefrom and to make complete
environmental studies and/or investigations, and to discuss the affairs,
finances and accounts thereof with Borrowers, all at such reasonable
times, upon reasonable notice (at least 48 hours in advance) and as often
as Lender or any representative of Lender may reasonably request. In
addition, upon Lender's request, Borrowers shall provide Lender with an
environmental site assessment or environmental audit report, or an update
of such an assessment or audit, all in scope, form and content
satisfactory to Lender.
SECTION 7.6. LITIGATION. Promptly advise Lender of the commencement
or threat of litigation, including arbitration proceedings and any
proceedings before any governmental agency (but excluding product
liability claims which are either fully covered by insurance or adequately
covered by insurance and which are not likely to have a material adverse
effect on the business, assets or condition (financial or otherwise) of
Borrowers), which is instituted against any Borrower or, upon receipt of
any information pertaining thereto, and is reasonably
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likely to have a materially adverse effect upon the condition, financial,
operating or otherwise, of Borrowers.
SECTION 7.7. MAINTENANCE OF EXISTENCE. Maintain their corporate
existence and comply with all valid and applicable statutes, rules and
regulations, and maintain their properties in good repair, working order
and operating condition. Borrowers shall immediately notify Lender of any
event causing material loss in the value of their assets.
SECTION 7.8. INVENTORY. Allow Lender to examine and inspect the
Inventory at reasonable times and intervals and upon reasonable notice, at
least 48 hours in advance. Borrowers shall immediately notify Lender of
any event causing material loss or depreciation in value of Inventory and
the amount of such loss or depreciation.
SECTION 7.9. ERISA. Immediately notify Lender of any event
which causes any Borrower not to be in compliance with ERISA in all
material respects.
SECTION 7.10. NOTICE OF CERTAIN EVENTS. Give prompt written
notice to Lender of:
(a) any material dispute that may arise between Borrowers and any
governmental regulatory body or law enforcement agency;
(b) any labor controversy resulting or likely to result in a strike
or work stoppage against Borrowers;
(c) any proposal by any public authority to acquire the assets or
business of Borrowers;
(d) the location of any Collateral other than at Borrowers' places
of business disclosed in this Agreement (other than Collateral in transit
in the ordinary course of Borrowers' business);
(e) any proposed or actual change of the name, identity or corporate
structure of Borrowers;
(f) any circumstance or event by virtue of which or in connection
with which Borrowers may have incurred or may incur any liability, expense
or responsibility under any Environmental Law including, without
limitation: (i) any Release of any Hazardous Material required to be
reported to any federal, state or local governmental authority,
instrumentality or agency under any applicable Environmental Law; (ii) any
and all written communications with respect to claims or suits under
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any applicable Environmental Law or any Release of Hazardous Material
required to be reported to any federal, state or local governmental
authority, instrumentality or agency; (iii) any remedial action taken by
Borrowers or any other person in response to (A) any Hazardous Material
on, under or about the properties or assets of Borrowers, the existence of
which may give rise to a claim or suit resulting in a material change of
Borrowers' business operations or financial condition, or (B) any claim or
suit resulting in a material change of Borrowers' business operations or
financial condition; (iv) Borrowers' discovery of any occurrence or
condition on any real property adjoining or in the vicinity of Borrowers'
business premises which may cause such premises to be in violation of any
Environmental Law or to be subject to any restrictions on the ownership,
occupation, transferability or use thereof under any Environmental Law;
and (v) any request for information from any federal, state or local
governmental authority, instrumentality or agency that indicates such
entity is investigating Borrowers' potential responsibility for a Release
of Hazardous Material;
(g) any other matter which has resulted or is reasonably likely to
result in a material adverse change in the financial condition or
operations of Borrowers;
(h) any information received by Borrowers with respect to any
Receivable that may materially affect the value thereof or the rights and
remedies of Lender with respect thereto; and
(i) any action, suit or claim pending or which could be reasonably
expected to be asserted against Borrowers.
SECTION 7.11. DEFAULTS. Upon the occurrence of an Event of Default
or of a Defaulting Event, give prompt written notice of such occurrence to
Lender signed by the president or chief financial officer of Borrowers
describing such occurrence and the action, if any, being taken to cure the
Event of Default or Defaulting Event.
SECTION 7.12. DUTIES. Borrowers have complied and will continue to
comply with any and all federal, state, provincial and local laws
affecting their businesses, including, but not limited to, payment of all
federal and state taxes with respect to sales to Account Debtors by
Borrowers and disclosures in connection therewith. Borrowers jointly and
severally agree to indemnify Lender against and hold Lender harmless from,
all claims, actions and losses, including reasonable attorney's fees and
costs incurred by Lender arising from any contention, whether well founded
or otherwise, that there has been a failure to comply with such laws.
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SECTION 7.13. COLLATERAL DUTIES. Do whatever Lender may reasonably
request from time to time by way of obtaining, executing, delivering and
filing financing statements, assignments, landlord's or mortgagee's
waivers, warehouse agreements and other notices and amendments and
renewals of any of the foregoing, and Borrowers will take any and all
steps and observe such formalities as Lender may reasonably request, in
order to create and maintain a valid and enforceable first lien upon,
pledge of, and first priority security interest in, any and all of the
Collateral. Lender hereby is authorized to file financing statements
without the signature of Borrowers and to execute and file such financing
statements on behalf of any Borrower as specified by the Uniform
Commercial Code to perfect or maintain its security interest in all of the
Collateral. All reasonable charges, expenses and fees Lender may incur in
filing any of the foregoing, together with reasonable costs and expenses
of any lien search required by Lender, and any taxes relating thereto,
shall be charged to either Revolving Loan Account (or divided between
them) in Lender's sole discretion and added to the Obligations. XL Canada
agrees to sign a moveable hypothec of first rank in favor of Lender and in
form and substance satisfactory to Lender (the "MOVEABLE HYPOTHEC") and
consents to the registration of the Moveable Hypothec at the Office of the
Register of Personal and Moveable Real Rights of the Province of Quebec.
SECTION 7.14. AUDIT AND APPRAISALS BY LENDER; FEES. Permit Lender to
audit the books and records of Borrowers and to conduct or cause to be
conducted appraisals of Borrowers' assets at such times, upon reasonable
notice of at least 48 hours, and in such manner and detail as Lender deems
reasonable. Without limiting the generality of the foregoing, Lender shall
be allowed to verify the Receivables and Inventory of Borrowers and to
confirm with Account Debtors the validity and amount of Receivables.
Borrowers shall promptly pay to Lender reasonable audit fees and any
out-of-pocket expenses incurred in connection with any audit performed by
Lender, or by any third party retained by Lender in its sole discretion if
Lender, in its sole discretion, deems it necessary to hire outside
auditors, after Lender has made a demand for payment of any Obligations
and Borrowers have not immediately paid in full in cash such Obligations
or after the occurrence of an Event of Default. In addition, Borrowers
shall promptly pay or reimburse Lender for the costs of any such
appraisals conducted by or for Lender. Lender may charge any such audit
fees and out-of-pocket expenses to either Revolving Loan Account (or
divide such fees and expenses between the Revolving Loan Accounts) in
Lender's sole discretion.
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SECTION 7.15. BANK ACCOUNTS. Maintain all of their bank accounts,
including without limitation, their operating and depository accounts, at
First Union National Bank of Virginia, Xxxxxxx Bank of Central Florida
and/or Banque Nationale de Paris (Canada).
B. NEGATIVE COVENANTS.
The Borrowers joint and severally covenant and agree that from the date
hereof until payment and performance in full of all Obligations, and until the
termination of this Agreement, unless Lender otherwise consents in writing, none
of the Borrowers shall:
SECTION 7.16. ENCUMBRANCES. Incur or permit to exist any lien,
mortgage, hypothec, charge or other encumbrance against any of their
properties or assets, whether now owned or hereafter acquired, except: (a)
liens required or expressly permitted by this Agreement; (b) pledges or
deposits in connection with or to secure worker's compensation, C.S.S.T,
unemployment or liability insurance; (c) those listed on Schedule 5.1(u)
attached hereto.
SECTION 7.17. LIMITATION ON INDEBTEDNESS. Except for (i) amounts
owed by one Borrower to another Borrower arising out of shipments of
inventory in the ordinary course of business; (ii) indebtedness in respect
of loans existing and outstanding as of the date hereof owing to Cycomm by
(A) XL in the aggregate amount of $1,450,000 and (B) XL Canada in the
aggregate amount of $1,743,000 (which loans, if they are repaid in whole
or part, may not be remade or increased from any reduced amount thereof);
and (iii) additional intercompany loans from Cycomm to XL and XL Canada in
a combined amount not to exceed $50,000 in the aggregate outstanding at
any one time, create, incur or guarantee any indebtedness or obligation
for borrowed money (including without limitation, any reimbursement
obligations for any letter of credit issued by any financial institution)
from, or issue or sell any of their obligations to, any lender.
SECTION 7.18. CONTINGENT LIABILITIES. Assume, guarantee, endorse or
otherwise become liable upon the obligations of any person, firm or
corporation, or enter into any purchase or option agreement or other
arrangement having substantially the same effect as such a guarantee,
except by the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
provided that, Cycomm may assume, guarantee, endorse or otherwise become
liable upon the obligations of any person, firm or corporation in the
ordinary course of its business consistent with past practices and upon
thirty (30) days prior written notice to Lender of each
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such assumption, guarantee or endorsement so long as: (A) Lender has not
made demand for payment of any of the Obligations (or, if any such demand
has been made, Borrowers have not immediately paid in full in cash such
Obligations) and (B) no Defaulting Event has occurred.
SECTION 7.19. CONSOLIDATION OR MERGER. Merge into or consolidate
with or into any corporation; provided that Cycomm may merge with any
other corporation or entity so long as: (A) Cycomm is the surviving
corporation and has a tangible net worth after giving effect to the merger
that is not less than its tangible net worth immediately prior to such
merger, (B) Lender has not made demand for payment of any of the
Obligations (or, if any such demand has been made, Borrowers have not
immediately paid in full in cash such Obligations) and (C) no Defaulting
Event has occurred.
SECTION 7.20. LOANS, ADVANCES, INVESTMENTS. Make or permit to exist
any loans or advances to, or purchase any stock, other securities or
evidences of indebtedness of, or make or permit to exist any investment
(including without limitation the acquisition of stock of a corporation),
or acquire any assets or any other interest whatsoever, in any other
person; provided that Cycomm may purchase the stock of, or acquire the
assets of, another corporation or other entity in the ordinary course of
its business consistent with past practices so long as: (A) such purchase
or acquisition is made with the proceeds of a debt or equity financing
from a party other than Lender sufficient to acquire such stock or assets
and no liens have been granted on any assets of Borrowers to or for the
benefit of such financing party except as shall have been permitted
pursuant to an intercreditor agreement with Lender in form and substance
satisfactory to Lender, (B) Lender has not made demand for payment of any
of the Obligations (or, if any such demand has been made, Borrowers have
not immediately paid in full in cash such Obligations) and (C) no
Defaulting Event has occurred.
SECTION 7.21. ACQUISITION OF STOCK OF BORROWERS; DIVIDENDS.
Purchase, acquire, redeem or retire, or make any commitment to purchase,
acquire, redeem or retire any of the capital stock of Borrowers, whether
now or hereafter outstanding, or declare or pay any dividend, or make any
distribution to any of their stockholders; provided that Cycomm may
purchase, acquire, redeem or retire, or declare or pay dividends in
respect of Borrowers capital stock so long as: (A) such purchase,
acquisition, redemption, retirement or dividend payment is made from the
proceeds of a financing from a party other than Lender sufficient to pay
the costs of such purchase, acquisition, retirement or dividend payment
and no liens have been granted on any assets of Borrowers to or for the
benefit of such financing party except as shall have
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been permitted pursuant to an intercreditor agreement with Lender in form
and substance satisfactory to Lender, (B) Lender has not made demand for
payment of any of the Obligations (or, if any such demand has been made,
Borrowers have not immediately paid in full in cash such Obligations) and
(C) no Defaulting Event has occurred.
SECTION 7.22. SALE AND LEASE OF ASSETS. Sell or lease any of the
assets of the Borrowers, except for sales of inventory in the ordinary
course of business consistent with past practices and on an arms-length
basis.
SECTION 7.23. NAME CHANGES. Change their names or styles other
than as set forth in this Agreement.
SECTION 7.24. PROHIBITED TRANSFERS. Transfer, in any manner, either
directly or indirectly, any cash, property, or other asset to any parent
or any of their affiliates or Subsidiaries, other than (i) sales made in
the ordinary course of business and for fair consideration on terms no
less favorable than if such sale had been an arms-length transaction
between Borrowers or such Subsidiary and an unaffiliated entity and (ii)
transfers by Cycomm to any Subsidiary in an aggregate amount for all such
transfers not to exceed $250,000 in any calendar year.
SECTION 7.25. NO MANAGEMENT/OWNERSHIP CHANGE. Suffer (i) Xxxxxx X.
Xxxx, Xxxxxxx X. Xxxxx or Xxxx Xxxxxxxx to cease to be employed by and
actively and materially engaged in the management and operation of the
Borrowers' businesses unless each such person ceases to be so employed and
engaged and is replaced within thirty (30) days by someone acceptable to
Lender in its sole discretion, or (ii) any change in the ownership of XL
or XL Canada.
SECTION 7.26. LEASEBACKS. Lease any real estate or other
capital asset from any lessor who shall have acquired such property
from Borrowers.
SECTION 7.27. LOANS TO OFFICERS, DIRECTORS AND/OR SHAREHOLDERS. Make
any loan or advance or make any transfer, in any manner, of any cash,
property or other asset to or on behalf of any of their officers,
directors or shareholders.
ARTICLE VIII. COLLATERAL
SECTION 8.1. GRANT. To secure the prompt payment and performance of
each and all of the Obligations, each of the Borrowers pledges, assigns,
transfers and grants to Lender a continuing, first lien
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security interest in the following property of Borrowers, now owned or
hereafter acquired or arising (the "COLLATERAL"):
(a) All accounts and accounts receivable related to or arising from
the sale or lease of inventory or rendition of services by Borrowers (the
"ACCOUNTS") and all other accounts, bank accounts, contracts, contract
rights, notes, documents, chattel paper, instruments, acceptances, drafts
or other forms of obligations and receivables (collectively with the
Accounts, the "RECEIVABLES"), whether or not the same are listed on any
schedules, assignments or reports furnished to Lender from time to time,
and whether such Receivables are now existing or are created or arise at
any time hereafter, together with all goods, inventory and merchandise
returned by or reclaimed by or repossessed from customers wherever such
goods, inventory and merchandise are located, and all proceeds thereto
including without limitation, proceeds of insurance thereon and all
guaranties, securities, and liens which Borrowers may hold for the payment
of any such Receivables, including without limitation, all rights of
stoppage in transit, replevin, revendication and reclamation and all other
rights and remedies of an unpaid vendor or lienor or, and any liens held
by Borrowers as a mechanic, contractor, subcontractor, processor,
materialman, machinist, manufacturer, artisan, or otherwise;
(b) All documents, instruments, investment property, documents of
title, general intangibles, policies and certificates of insurance,
guaranties, securities, chattel paper, deposits, tax returns, proceeds of
insurance, proceeds of an eminent domain or condemnation award, cash,
liens or other property, which are now or may hereinafter be in the
possession of Borrowers or as to which Borrowers may now or hereafter
control possession by documents of title or otherwise, including, but not
limited to, all property allocable to unshipped orders relating to
Receivables and Inventory;
(c) All books, records, customer lists, supplier lists, ledgers,
evidences of shipping, invoices, purchase orders, sales orders and all
other evidences of Borrowers' business records, including all cabinets,
drawers, etc. that may hold the same; computer records, lists, software,
programs, wherever located, all whether now existing or hereafter arising
or acquired;
(d) All of Borrowers' inventory, whether now owned or hereafter
acquired, including without limitation (collectively, the "INVENTORY"):
(i) all goods manufactured or acquired for sale or lease, and any piece
goods, raw materials, work in process and finished merchandise, findings
or component materials, and all supplies, goods, incidentals, office
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supplies, packaging materials, and any and all items including machinery
and equipment used or consumed in the operation of the business of
Borrowers or which contribute to the finished product or to the sale,
promotion and shipment thereof, in which Borrowers may now or at any time
hereafter may have an interest, whether or not such inventory is listed in
this Agreement on any reports furnished to Lender from time to time; (ii)
all inventory whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of Borrowers or
is held by Borrowers or by others for the Accounts, including without
limitation, all goods covered by purchase orders and contracts with
suppliers and all goods billed and held by suppliers; (iii) all inventory
which may be located on the premises of Borrowers or of any carrier,
forwarding agents, truckers, warehousemen, vendors, selling agents or
third parties; (iv) all general intangibles relating to or arising out of
inventory; (v) all proceeds and products of the foregoing resulting from
the sale, lease or other disposition of inventory, including cash,
accounts receivable, other non-cash proceeds and trade-ins; and (vi) with
respect to after-acquired inventory, the security interest shall be deemed
to be a purchase money security interest;
(e) All general intangibles, including without limitation, tax
refunds, proceeds of insurance, eminent domain awards, condemnation
proceeds, and patents, copyrights, tradenames, trademarks, applications
therefor, and licenses to any patent, copyright, trademark, or tradename
that Borrowers now own, have the right to use or may hereafter own or
acquire the right to use;
(f) All equipment, machinery, appliances, and furniture and
fixtures, now existing or hereafter arising, wherever located, and all
contracts, contract rights and chattel paper arising out of any lease of
any of the foregoing;
(g) All other collateral in which Borrowers may hereafter grant to
Lender a security interest; and
(h) All renewals, substitutions, replacements, additions,
accessions, proceeds and products of any and all of the foregoing,
including without limitation, all proceeds of credit, fire and other
insurance and also including, without limitation, rents and profits
resulting from the temporary use of the Collateral.
ARTICLE IX. EVENTS OF DEFAULT
SECTION 9.1. EVENTS OF DEFAULT. Without affecting the demand nature
of the Loans which shall at all times be due and payable on demand, any
and all Obligations, including without limitation, the
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Obligations arising pursuant to or in connection with the Loans shall, at
the option of Lender and notwithstanding any time or credit allowed by any
note or agreement, become immediately due and payable without notice if
any one or more of the following events (collectively, "EVENTS OF DEFAULT"
and individually, an "EVENT OF DEFAULT") shall occur:
(a) Borrowers' failure to pay principal, interest or any other
sum due hereunder or under the Notes;
(b) Borrowers' failure to pay or perform when due any other
covenant, duty, indebtedness, liability or obligation arising under this
Agreement, the Notes or any of the other Financing Agreements, or any
other Obligation, or such failure by the Fidelity Guarantor;
(c) the making by Borrowers or the Fidelity Guarantor of any
misrepresentation of a material fact to Lender;
(d) loss, theft, or destruction of any Collateral in excess of Fifty
Thousand Dollars ($50,000) in value which is not covered by insurance with
Lender's loss payee endorsement as required herein;
(e) the filing, making or issuance of any lien, levy, seizure,
attachment, garnishment, injunction, execution, tax lien or judgment upon
or against Borrowers or any of the Collateral, or any other property or
assets of Borrowers which lien, levy, seizure, attachment, garnishment,
injunction, executing tax lien or judgment is not released or bonded to
the satisfaction of Lender within thirty (30) days from its initial
issuance or creation;
(f) any of the following of, by, or involving Borrowers: insolvency
(failure to pay debts generally as they mature or where the fair value of
assets is not in excess of liabilities); business failure; appointment of
a receiver or custodian; assignment for the benefit of creditors; calling
of a meeting of creditors; appointment of a committee of creditors, or
liquidating banks, or offering of a composition extension to creditors; or
the commencement of any proceedings under any bankruptcy or insolvency
law;
(g) the ownership of greater than fifty percent (50%) of the capital
or voting stock of any class of Cycomm shall be transferred from the
owners thereof as of the date hereof pursuant to one or more tender
offers;
(h) Borrowers' failure to keep the Collateral insured against loss
by fire or otherwise for the full insurable value thereof with companies
and for coverages (including Lender's Long Form Loss Payable
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Endorsement) reasonably acceptable to Lender and making the loss, if any,
payable to Lender;
(i) the loss, revocation or failure to renew any license and/or
permit now held or hereafter acquired by Borrowers which adversely affects
the ability of Borrowers to continue their operations as presently
conducted;
(j) the occurrence of a default or event of default (howsoever
defined) under any other agreement between Lender and the Fidelity
Guarantor;
(k) the declaration of a default that permits acceleration of
maturity under any obligation of Borrowers to any other creditor; or
(l) the occurrence of any event or circumstance with respect to the
Borrowers such that Lender shall believe in good faith that the prospect
of payment of all or any part of Obligations or the performance by the
Borrowers under this Agreement, or any other agreement between the Lender
and the Borrowers, is impaired or there shall occur any material adverse
change in the business or financial condition of the Borrowers.
Upon the occurrence of any Event of Default, at the option of Lender: (x)
any and all Obligations, including without limitation the Obligations arising
from or in connection with the Loans, shall become immediately due and payable,
and (y) Borrowers' eligibility to request any Further Loans shall automatically
and immediately terminate, without presentment, demand, protest, notice of
protest or other notice or requirements of any kind, all of which Borrowers
expressly waive. Notwithstanding the foregoing sentence, if any Event of Default
under clause (f) occurs, the acceleration of the Obligations and termination of
Borrowers' eligibility to request Further Loans shall be automatic.
At any time after an Event of Default, Lender may proceed to enforce the
rights of Lender whether by suit in equity or by action at law, whether for
specific performance of any covenant or agreement contained in this Agreement,
the Notes or the other Financing Agreements, or in aid of the exercise of any
power granted in either this Agreement or the Notes or any other Financing
Agreement, or it may proceed to obtain judgment or any other relief whatsoever
appropriate to the enforcement of such rights, or proceed to enforce any legal
or equitable right which Lender may have by reason of the occurrence of any
Event of Default hereunder.
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ARTICLE X. COLLECTION OF RECEIVABLES
SECTION 10.1. DEPOSITS. Except as otherwise set forth in Section 2.6
hereof, until Lender exercises its rights to collect the Receivables as
provided for in this Agreement, Borrowers shall continue direct collection
of all Receivables. All collections and other proceeds of Receivables
which Borrowers receive shall be received in trust for Lender and
Borrowers shall: keep all such collections separate and apart from all of
their other funds and property; identify such collections and proceeds as
the property of Lender; and immediately deposit such collections in the
identical form received in such accounts of Lender as designated by Lender
from time to time.
SECTION 10.2. SCHEDULE. All collections of Receivables shall be set
forth on a schedule in form and substance satisfactory to Lender.
Collections of Receivables shall be credited to the Obligations of
Borrowers on the day of their actual receipt by Lender; provided, however,
that all credits shall be conditional credits subject to collection and
that returned items, at Lender's option, may be charged to Borrowers; and
further provided that for purposes of the computation of interest, items
shall not be deemed to be collected until three (3) days after their
actual receipt by Lender; provided further that Receivables in respect of
Eligible Canadian Accounts shall be deemed collected when deposited in and
credited to Lender's Canadian bank account.
ARTICLE XI. RETURNED MERCHANDISE
SECTION 11.1. PROCEDURES. Until Lender exercises its rights to
collect the Receivables as provided for in this Agreement, Borrowers may
continue their present policies for returned merchandise and adjustments,
but shall promptly notify Lender of any credits, adjustments or disputes
arising concerning the goods or services represented by Receivables. In
any event, Borrowers will immediately pay Lender from their own funds (and
not from the proceeds of Receivables), for application to the Revolving
Loans, an amount equal to any credit or adjustment made to any Eligible
Accounts; provided, however, that so long as Borrowers are not in default
hereunder, such payment need not be made if Borrowers shall have, after
making such credit or adjustment, sufficient Receivables to maintain the
aggregate outstanding balance of the Revolving Loans under the Borrowing
Base.
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ARTICLE XII. RIGHTS AND REMEDIES OF LENDER
SECTION 12.1. REMEDIES OF LENDER. Upon Lender's demand for payment
of the Loans or upon the occurrence of any Event of Default, Lender shall
have in any jurisdiction where enforcement of this Agreement, the Notes or
any other Financing Agreement is sought, in addition to all other rights
and remedies which Lender may have under law and equity, the following
rights and remedies, all of which may be exercised with or without further
notice to Borrowers and without a prior judicial or administrative
hearing, which notice and hearing are expressly waived: to occupy any of
Borrowers' premises for up to six (6) months rent free for the purposes of
liquidating Collateral, including without limitation, conducting an
auction thereon; to enforce or foreclose the liens and security interests
created under this Agreement or under any other agreement relating to
Collateral by any available judicial procedure or without judicial
process; to enter any premises where any Collateral may be located for the
purpose of taking possession or removing the same; to sell, assign, lease,
or otherwise dispose of Collateral or any part thereof, either at public
or private sale, in lots or in bulk, for cash, on credit or otherwise,
with or without representations or warranties, and upon such terms as
shall be acceptable to Lender, all at Lender's sole option and as Lender
in its sole discretion may deem advisable; to bid or become purchaser at
any such sale if public; and, at the option of Lender, to apply or be
credited with the amount of all or any part of the Obligations owing to
Lender against the purchase price bid by Lender at any such sale.
SECTION 12.2. SPECIFIC POWERS. Lender may at any time, before (with
respect to clauses (iii), (v), (vii) and (x) of this Section 12.2) or
after the occurrence of a demand for payment of the Loans or an Event of
Default, at Lender's sole discretion: (i) give notice of assignment to any
Account Debtor; (ii) collect Receivables directly and charge, or cause to
be charged, the collection costs and expenses to either Revolving Loan
Account (or divided between the Revolving Loan Accounts) in Lender's sole
discretion; (iii) collect receivables submitted by Borrowers to Lender for
collection and charge, or cause to be charged, the collection costs and
expenses to either Revolving Loan Account (or divided between the
Revolving Loan Accounts) in Lender's sole discretion; (iv) settle or
adjust disputes and claims directly with Account Debtors for amounts and
upon terms which Lender considers advisable, and credit, or cause to be
credited, the applicable Revolving Loan Account with the net amounts
received in payment of Receivables; (v) exercise all other rights granted
in this Agreement and the other Financing Agreements; (vi) receive, open
and dispose of all mail addressed to Borrowers and notify the Post Office
authorities to change the address for delivery of Borrowers' mail to an
address designated by Lender; (vii) endorse the name of Borrowers on any
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checks or other evidence of payment that may come into possession of
Lender and on any invoice, freight or express xxxx, xxxx of lading or
other document; (viii) in the name of Borrowers or otherwise, demand, xxx
for, collect and give acquittance for any and all monies due or to become
due on Receivables; (ix) compromise, prosecute or defend any action, claim
or proceeding concerning Receivables; and (x) do any and all things
necessary and proper to carry out the purposes contemplated in this
Agreement, the other Financing Agreements and any other agreement between
the parties. Neither Lender nor any person acting as its representative
hereunder shall be liable for any acts or omissions or for any error of
judgment or mistake of fact or law, except for gross negligence or willful
misconduct. Borrowers agree that the powers granted hereunder, being
coupled with an interest, shall be irrevocable so long as any Obligation
remains unsatisfied. Notwithstanding the foregoing, it is understood that
Lender is under no duty to take any of the foregoing actions and that
after having made demand upon the Account Debtors for payment, Lender
shall have no further duty as to the collection or protection of
Receivables or any income therefrom and no further duty to preserve any
rights pertaining thereto, other than the safe custody thereof in the
event Lender takes possession thereof.
SECTION 12.3. DUTIES AFTER DEMAND OR DEFAULT. Borrowers will, at
Lender's request, assemble all Collateral and make it available to Lender
at places which Lender may reasonably select, whether at the premises of
Borrowers or elsewhere and will make available to Lender all premises and
facilities of Borrowers for the purpose of Lender taking possession of
Collateral or of removing or putting the Collateral in salable form. In
the event that Lender elects to exercise its right to take possession and
control of any Collateral, and any goods called for in any sales order,
contract, invoice or other instrument or agreement evidencing or
purporting to give rise to any Receivable shall not have been delivered or
shall be claimed to be defective by any customer, Lender shall have the
right in its sole discretion to use and deliver to such customer any goods
of Borrowers to fulfill such order, contract or the like so as to make
good any such Receivable. If any Collateral shall require repairing,
maintenance, preparation, or the like, or is in process or other
unfinished state, Lender shall have the right, but shall not be obligated,
to effectuate such repair, maintenance, preparation, processing or
completion of manufacturing for the purpose of putting the same in such
salable form as Lender shall deem appropriate, provided that Lender shall
nonetheless have the right to sell or dispose of such Collateral without
such processing. The net cash proceeds resulting from the collection,
liquidation, sale, lease or other disposition of Collateral shall be
applied first to the expenses (including all reasonable attorneys' and
professionals' fees) of retaking, holding, storing, processing and
preparing for sale, selling, collecting, liquidating
41
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and the like such collateral and then to the satisfaction of all
Obligations (application as to particular Obligations or against principal
or interest to be at Lender's sole discretion), and then, upon full and
final payment of the Obligations, and unless otherwise prohibited by court
order or law, to Borrowers, it being agreed that if any such payment made
to Lender is recovered from or repaid by Lender in whole or in part in any
bankruptcy, insolvency or similar proceeding instituted by or against
Borrowers, this Agreement automatically shall be reinstated without any
further action by Borrowers and Lender. Borrowers shall be liable to
Lender and shall pay to Lender on demand any deficiency which may remain
after such sale, disposition, collection or liquidation of Collateral.
SECTION 12.4. CUMULATIVE REMEDIES. The enumeration of Lender's
rights and remedies set forth in this Article XII is not intended to be
exhaustive and the exercise by Lender of any right or remedy hereunder
shall not preclude the exercise of any other rights or remedies, all of
which shall be cumulative and shall be in addition to any other right or
remedy given hereunder or under any other agreement between the parties or
which may now or hereafter exist in law or at equity or by suit or
otherwise. No delay or failure to take action on the part of Lender in
exercising any right, power or privilege shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power
or privilege preclude other or further exercise thereof or the exercise of
any other right, power or privilege or shall be construed to be a waiver
of any Event of Default. No course of dealing between Borrowers and Lender
or its employees shall be effective to change, modify or discharge any
provision of this Agreement or to constitute a waiver of any Event of
Default.
ARTICLE XIII. TERM
SECTION 13.1. TERM AND TERMINATION.
(a) REVOLVING LOAN. Unless sooner terminated by Lender as a result
of the occurrence of a demand, an Event of Default, or a Defaulting Event,
Borrowers' eligibility to request Revolving Loans shall commence on the
date hereof and shall continue for a period through and including December
31, 1999 (the "TERM"). Borrowers' eligibility to request Revolving Loans
may be extended after the Term (and after any Renewal Term, as defined
below) only with the express written consent of all Borrowers and Lender.
Any such extension (and any further extension) shall be made only with the
express written consent of all Borrowers and Lender (each being a "RENEWAL
TERM"). At the end of the Term (or at the end of a Renewal Term, if
applicable), Borrowers shall pay the entire balance of the Revolving
Loans, the Additional Loan and all other
42
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outstanding Obligations. Further, upon termination of the Revolving Loan
facility, all of the rights, interests and remedies of Lender and
Obligations of Borrowers shall survive and Borrowers shall have no right
to receive, and Lender shall have no obligation to make, any further
Revolving Loans. Upon full, final and indefeasible payment of the
Obligations to Lender, all rights and remedies of Borrowers and Lender
hereunder shall cease, so long as any payment so made to Lender and
applied to the Obligations is not thereafter recovered from or repaid by
Lender in whole or in part in any bankruptcy, insolvency or similar
proceeding instituted by or against Borrowers, whereupon this Agreement
shall be automatically reinstated without any further action by Borrowers
and Lender and shall continue to be fully applicable to such Obligations
to the same extent as though the payment so recovered or repaid had never
been originally made on such Obligations.
(b) ADDITIONAL LOAN. Unless sooner terminated by Lender as a result
of the occurrence of a demand, an Event of Default or a Defaulting Event,
the Additional Loan shall be repaid as set forth in the Additional Loan
Promissory Note. The Borrowers may prepay the unpaid principal balance of
the Additional Loan, in whole or in part, at any time without penalty or
premium. Any and all such prepayments shall be applied first to interest
accrued to the date of prepayment and then to the principal balance in
inverse order of maturity and shall not relieve the Borrowers from the
obligation to make the regularly-scheduled payments required thereunder.
(c) TERMINATION FEE AND MINIMUM INTEREST. In the event that (a) this
Agreement is terminated by Borrowers as of any date other than the end of
the Term or the end of a Renewal Term, or (b) this Agreement is terminated
as a result of: (i) a demand by Lender for payment of the Loans related to
(A) Borrowers' financial condition or prospects, (B) Borrowers' failure to
comply with any term or provision of the Financing Agreements or failure
to cooperate fully with Lender in Lender's administration of the Loans; or
(C) the occurrence of an Event of Default or Defaulting Event; or (ii) the
occurrence of an Event of Default or a Defaulting Event, Borrowers shall
pay to Lender on the effective date of such termination, in addition to
the Minimum Interest Amount, if applicable, and in addition to any other
payments Borrowers are required to make hereunder, a termination charge
equal to: five percent (5.0%) of the maximum principal amount of the
Loans, if terminated during the first year of the Loans, and one and
one-half percent (1.5%) of the maximum principal amount of the Loans, if
terminated during the second year of the Loans (the "TERMINATION FEE");
provided, however, that there shall be no Termination Fee if, during the
second year of the Loans, the Loans are paid in full directly or
indirectly from the proceeds of a loan
43
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from a commercial bank or from the proceeds of a public or private
offering of Borrowers' stock or convertible debentures. It is understood
that the determination of the maximum principal amount of the Loans shall
be made without regard to the components of the Borrowing Base based upon
Eligible Accounts and Eligible Inventory. For example, for purposes of
this provision, on the date hereof the maximum principal amount of the
Loans is $4,000,000 and the Termination Fee would be $200,000 if the Loans
were terminated during the first year. In the event that (x) Borrowers
attempt to breach this Agreement by terminating this Agreement prior to
the expiration of the Term (or prior to the expiration of any Renewal
Term), or (y) Borrowers give to Lender less than sixty (60) days notice
that Borrowers intend to decline to extend the term of this Agreement at
the end of the Term or any Renewal Term, or (z) this Agreement is
terminated as a result of: (i) a demand by Lender for payment of the Loans
related to (A) Borrowers' financial condition or prospects, (B) Borrowers'
failure to comply with any term or provision of the Financing Agreements
or failure to cooperate fully with Lender in Lender's administration of
the Loans; or (C) the occurrence of an Event of Default or Defaulting
Event; or (ii) the occurrence of an Event of Default or a Defaulting
Event, Borrowers shall pay to Lender the Minimum Interest Amount on the
effective date of such termination, in addition to the Termination Fee and
any other payments Borrowers are required to make hereunder. All other
amounts due from Borrowers to Lender prior to or in connection with any
termination of this Agreement, which have not been previously paid, shall
be paid by Borrowers on or before the effective date of the termination.
As used herein, the "MINIMUM INTEREST AMOUNT" means interest upon the
Minimum Balance at the interest rate in effect on the date that express
written notice of such termination is given to Lender (or, if no such
notice is given, the rate in effect on the effective date of termination),
for the period commencing on the date of such written notice of
termination (or, if no such notice is given, commencing on the effective
date of termination) and ending at the end of the Term (or at the end of a
period of sixty (60) days thereafter, if such termination notice is given
by Borrowers during or at the end of a Renewal Term on less than sixty
(60) days notice or if no termination notice is given).
ARTICLE XIV. MISCELLANEOUS
SECTION 14.1. INDEMNIFICATION.
(a) In consideration of Lender's execution and delivery of this
Agreement and Lender's making of the Loans hereunder and in addition to
all other obligations of Borrowers under this Agreement, Borrowers hereby
jointly and severally agree to defend, protect, indemnify and hold
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harmless Lender, its successors, assigns, officers, directors, employees
and agents (including without limitation, those retained in connection
with the transactions contemplated by this Agreement) (individually, an
"INDEMNITEE" and collectively, the "INDEMNITEES") from and against any and
all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages and expenses in connection therewith
(irrespective of whether any such Indemnitees is a party to any action for
which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements as and when incurred (collectively, the
"INDEMNIFIABLE LIABILITIES") incurred by the Indemnitees or any of them as
a result of, or arising out of, or relating to the operation of Borrowers'
business from and after the date hereof, including without limitation
those arising under any Environmental Laws. To the extent that the
foregoing undertaking by Borrowers may be unenforceable for any reason,
Borrowers shall make the maximum contribution to the payment and
satisfaction of each of the Indemnifiable Liabilities which is permissible
under applicable law.
(b) Borrowers hereby jointly and severally covenant and agree at all
times to indemnify, hold harmless and defend the Indemnitees, whether as
secured party in possession or as successor in interest to Borrowers as
owner of any personal property assets located on the real property of
Borrowers, by virtue of any action taken by Lender pursuant to the
Financing Agreement, the Uniform Commercial Code (as in effect in any
applicable jurisdiction) or otherwise from and against any and all
liabilities, losses, damages, costs, expenses, penalties, fines, causes of
action, suits, claims, demands or judgments, including without limitation,
reasonable attorneys' fees and expenses (collectively, "LIABILITIES AND
EXPENSES"), suffered or incurred in connection with: (i) the Environmental
Law, including, without limitation, liens or claims of any federal, state
or municipal government or quasi-governmental agency or any third person,
whether arising under any Environmental Law or any other federal, state,
provincial or municipal law or regulation; (ii) any spill or contamination
affecting the Premises or any other property owned, leased, controlled or
used by Borrowers, including without limitation, any Hazardous Material or
other waste-like or toxic substances located on, under, emanating from or
relating to the Premises or such property from and on and after the date
hereof or any portion of any thereof or any property contiguous to the
Premises or such property from and after the date hereof, and including
without limitation, any loss of value of the Premises or such property as
a result of any such spill or contamination; and (iii) the direct or
indirect installation, use, generation, manufacture, production, storage,
release, threatened release, discharge, disposal or presence of any
Hazardous Material, on, under or about the Premises or any other property
owned, leased, controlled or used by Borrowers or any portion of any
thereof, from
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and including all consequential damages, the costs of any required or
necessary repair, cleanup or detoxification, and the costs of the
preparation and implementation of any closure, remedial or other required
plans unless such Liabilities and Expenses arise solely as a result of
Lender's gross negligence or willful misconduct. Further, the mere fact
that such Indemnitee has been declared an "owner" or "operator" (as such
term is defined in any Environmental Law) resulting from such Indemnitee
having taking possession of any of the Collateral (without any negligence
on the part of such Indemnitee) shall not exonerate Borrowers from any
claim by any Indemnitee seeking such indemnification.
SECTION 14.2. PAYMENT SET-ASIDE. To the extent that Borrowers make a
payment or payments to Lender (whether hereunder, under the Notes, or
under the other Financing Agreements) or Lender enforces its security
interests or rights or exercises its right of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded,
repaid or otherwise restored to Borrowers, a trustee, receiver or any
other person under any law (including without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action) in
each case in connection with any bankruptcy or similar proceeding
involving Borrowers, then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not
been made or such enforcement or setoff had not occurred.
SECTION 14.3. SET-OFF. The Borrowers hereby grant to Lender a lien
and right of setoff for all their liabilities to Lender upon and against
all their deposits, credits, collateral and property now or hereafter in
the possession or control of Lender or in transit to Lender. Lender may,
upon the occurrence of any Event of Default or Defaulting Event or both,
apply or exercise the right of set-off against any or all of the
foregoing, or any part thereof against any liability of Borrowers to
Lender, regardless whether such liability is matured or unmatured.
SECTION 14.4. COVENANTS TO SURVIVE; BINDING AGREEMENT. All
covenants, agreements, warranties and representations made herein, in the
Notes, in the other Financing Agreements, and in all certificates or other
documents of Borrowers shall survive the advances of money made by Lender
to Borrowers hereunder and the delivery of the Notes and the other
Financing Agreements, and all such covenants, agreements, warranties and
representations shall be binding upon and inure to the
46
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benefit of Lender and its successors and assigns, whether or not so
expressed.
SECTION 14.5. CROSS-COLLATERALIZATION. All Collateral which Lender
may at any time acquire from Borrowers or from any other source in
connection with Obligations arising under this Agreement and the other
Financing Agreements shall constitute collateral for each and every
Obligation, without apportionment or designation as to particular
Obligations and all Obligations, however and whenever incurred, shall be
secured by all Collateral however and whenever acquired, and Lender shall
have the right, in its sole discretion, to determine the order in which
Lender's rights in or remedies against any Collateral are to be exercised
and which type of Collateral or which portions of Collateral are to be
proceeded against and the order of application of proceeds of Collateral
as against particular Obligations.
SECTION 14.6. CROSS-DEFAULT. Each of the Borrowers acknowledges and
agrees that an Event of Default and/or Defaulting Event under any one of
the Financing Agreements shall constitute an Event of Default or
Defaulting Event under each of the other Financing Agreements.
SECTION 14.7. AMENDMENTS AND WAIVERS. Neither this Agreement, the
Notes, the other Financing Agreements, nor any term, covenant or condition
hereof or thereof may be changed, waived, discharged, modified or
terminated except by a writing executed by the parties hereto or thereto.
No failure on the part of Lender to exercise, and no delay in exercising,
any right, remedy or power hereunder or under the Notes or the other
Financing Agreements shall preclude any other or future exercise thereof,
or the exercise of any other right, remedy or power.
SECTION 14.8. NOTICES. All notices, requests, consents, demands and
other communications hereunder shall be in writing and shall be mailed by
first class mail to the respective parties to this Agreement to the
addresses set forth in the introductory sentence hereof.
SECTION 14.9. TRANSFER OF LENDER'S INTEREST. The Borrowers hereby
agree that Lender, in its sole discretion, may freely sell, assign or
otherwise transfer participations, portions, co-lender interests or other
interests in all or any portion of the indebtedness, liabilities or
obligations arising in connection with or in any way related to the
financing transactions of which this Agreement is a part provided that
such transferee is a recognized financial institution. In the event of any
such transfer, the transferee may, in Lender's sole discretion, have and
enforce
47
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all the rights, remedies and privileges of Lender. Each of the Borrowers
consents to the release by Lender to any potential transferee of any and
all information (including without limitation, financial information)
pertaining to Borrowers as Lender, in its sole discretion, may deem
appropriate. If such transferee so participates with Lender in making
loans or advances hereunder or under any other agreement between such
Lender and Borrowers, the Borrowers hereby grant to such transferee and
such transferee shall have and is hereby given a continuing lien and
security interest in any money, securities or other property of Borrowers
in the custody or possession of such transferee, including the right of
setoff under circumstances consistent with this Agreement, to the extent
of such transferee's participation in the Obligations of Borrowers to
Lender.
SECTION 14.10. WAIVERS.
(a) THE BORROWERS ACKNOWLEDGE THAT THE LOANS EVIDENCED HEREBY ARE
COMMERCIAL TRANSACTIONS AND WAIVE THEIR RIGHT TO NOTICE AND HEARING UNDER
CHAPTER 903A OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE ALLOWED
BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH
LENDER MAY DESIRE TO USE, AND FURTHER WAIVES THEIR RIGHTS TO REQUEST THAT
LENDER POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT BORROWERS AGAINST
DAMAGES THAT MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY
LENDER. THE BORROWERS FURTHER WAIVE DILIGENCE, DEMAND, PRESENTMENT FOR
PAYMENT, NOTICE OF NONPAYMENT, PROTEST AND NOTICE OF ANY RENEWALS OR
EXTENSIONS.
(b) THE BORROWERS HEREBY WAIVE TRIAL BY JURY IN ANY COURT IN ANY
SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN
ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT IS A
PART AND/OR THE ENFORCEMENT OF ANY OF LENDER'S RIGHTS, INCLUDING WITHOUT
LIMITATION, TORT CLAIMS. BORROWERS ACKNOWLEDGES THAT THEY MAKE THIS WAIVER
KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER CONSIDERATION OF THE
RAMIFICATIONS OF THIS WAIVER WITH THEIR ATTORNEYS. THE BORROWERS FURTHER
ACKNOWLEDGE THAT LENDER HAS NOT REPRESENTED TO BORROWERS THAT THE
48
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PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
(c) THE BORROWERS JOINTLY AND SEVERALLY ACKNOWLEDGE THAT THEY MAKE
THE FOREGOING WAIVERS IN CLAUSE (a) AND CLAUSE (b) ABOVE, KNOWINGLY,
VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER CONSIDERATION OF THE
RAMIFICATIONS OF SUCH WAIVERS WITH THEIR ATTORNEYS.
SECTION 14.11. SECTION HEADINGS; SEVERABILITY; ENTIRE AGREEMENT.
Section and subsection headings have been inserted herein for convenience
only and shall not be construed as part of this Agreement. Every provision
of this Agreement, the Notes and the other Financing Agreements is
intended to be severable; if any term or provision of this Agreement, the
Notes, the other Financing Agreements, or any other document delivered in
connection herewith shall be invalid, illegal or unenforceable for any
reason whatsoever, the validity, legality and enforceability of the
remaining provisions hereof or thereof shall not in any way be affected or
impaired thereby. All Exhibits and Schedules to this Agreement shall be
annexed hereto and shall be deemed to be part of this Agreement. This
Agreement, the other Financing Agreements, and the Exhibits and Schedules
attached hereto and thereto embody the entire agreement and understanding
between Borrowers and Lender and supersede all prior agreements and
understandings relating to the subject matter hereof unless otherwise
specifically reaffirmed or restated herein.
SECTION 14.12. GOVERNING LAW, NOTICE AND SERVICE OF PROCESS,
PLEADINGS AND OTHER PAPERS. This Agreement and the other Financing
Agreements, and all transactions, assignments and transfers hereunder and
thereunder, and all the rights of the parties, shall be governed as to
validity, construction, enforcement and in all other respects by the laws
of the State of Connecticut (but not its conflicts of law provisions). The
Borrowers hereby designate and appoint, without power of revocation, the
Secretary of the State of Connecticut as Borrowers' agent upon whom may be
served all process, pleadings, notices or other papers which may be served
upon such Borrower as a result of any of its Obligations under this
Agreement or other Financing Agreements. The Borrowers agree that the
Superior Court for the Judicial District of Hartford/New Britain or the
United States District Court for the District of Connecticut shall have
jurisdiction to hear and determine any claims or disputes pertaining to
the financing transactions of which this Agreement is a part and/or to any
matter arising or in any way related to this Agreement or any other
agreement between Lender and Borrowers, and
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each of the Borrowers expressly submits and consents in advance to such
jurisdiction in any action or proceeding.
SECTION 14.13. JOINT AND SEVERAL OBLIGATIONS. Each of the Borrowers
acknowledges that (a) the Obligations are the joint and several
obligations of each Borrower, (b) the Borrowers are affiliate
corporations, and (c) for reasons of simplicity and administrative ease,
the Borrowers desire that the Loans be extended to Cycomm (on behalf of
itself and XL Canada) and XL as co-borrowers. The security interests,
liens and other rights and interests in and relative to any of the real or
personal property of the Borrowers now or hereafter granted to Lender by
the Borrowers or in any instrument or agreement, shall serve as security
for any and all of the Obligations, including but not limited to, the
obligations arising under the Loans and, for the repayment thereof, Lender
may resort to any security held by it in such order and manner as it may
elect. References in this Agreement to the Borrower in the singular shall
include the plural and all obligations herein contained are and shall be
joint and several.
SECTION 14.14. ADDITIONAL ACKNOWLEDGMENTS, AGREEMENTS, ETC. XL
Canada acknowledges that it has granted or will grant security on its
assets, as it is receiving a benefit from the financing contemplated
hereby. XL Canada further agrees that the Movable Hypothec executed in
connection herewith shall be for the amount of $6,530,000.00 Canadian
dollars at 20%, it being understood that the interest rate and the debt
shall be determined by the terms and provisions of this Agreement,
notwithstanding the amount and interest in the Movable Hypothec. It is
hereby agreed and understood that any and all provisions in the Agreement
which are in conflict with any law of public order in the province of
Quebec and Canada shall not affect any other provisions in this Agreement
which will remain unaffected thereby and in full force and effect.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
NEXT PAGE IS SIGNATURE PAGE].
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the date first above written.
Witnessed:
------------------------- CYCOMM INTERNATIONAL, INC.
By: /s/ Xxxxxxx Xxxxx
------------------------- -------------------------------------
Xxxxxxx Xxxxx
Its Chief Financial Officer
------------------------- XL COMPUTING CORP., INC.
By: /s/ Xxxxxxx Xxxxx
------------------------- -------------------------------------
Xxxxxxx Xxxxx
Its Assistant Secretary
------------------------- XL COMPUTING (CANADA) INC.
By: /s/ Xxxxxxx Xxxxx
------------------------- -------------------------------------
Xxxxxxx Xxxxx
Its Assistant Secretary
AMERICAN COMMERCIAL FINANCE
------------------------- CORPORATION
By:
------------------------- -------------------------------------
Xxxxxxx X. Mount
Its President
51
DISTRICT OF COLUMBIA )
) ss.
)
Before me, the undersigned, this 17th day of December, 1997, personally
appeared Xxxxxxx Xxxxx, known to me to be the Chief Financial Officer of Cycomm
International, Inc. and that he as such officer, signer and sealer of the
foregoing instrument, acknowledged the execution of the same to be his free act
and deed individually and as such officer, and the free act and deed of said
corporation.
In Witness Whereof, I hereunto set my hand.
/s/ Xxxxx X. Xxxxxx
----------------------------------------
Notary Public
My Commission Expires: April 30, 0000
XXXXXXXX XX XXXXXXXX )
) ss.
)
Before me, the undersigned, this 17th day of December, 1997, personally
appeared Xxxxxxx Xxxxx, known to me to be the Assistant Secretary of XL
Computing Corp., Inc. and that he as such officer, signer and sealer of the
foregoing instrument, acknowledged the execution of the same to be his free act
and deed individually and as such officer, and the free act and deed of said
corporation.
In Witness Whereof, I hereunto set my hand.
/s/ Xxxxx X. Xxxxxx
----------------------------------------
Notary Public
My Commission Expires: April 30, 0000
00
XXXXXXXX XX XXXXXXXX )
) ss.
)
Before me, the undersigned, this 17th day of December, 1997, personally
appeared Xxxxxxx Xxxxx, known to me to be the Vice President of XL Computing
(Canada) Inc. and that he as such officer, signer and sealer of the foregoing
instrument, acknowledged the execution of the same to be his free act and deed
individually and as such officer, and the free act and deed of said corporation.
In Witness Whereof, I hereunto set my hand.
/s/ Xxxxx X. Xxxxxx
----------------------------------------
Notary Public
My Commission Expires: April 30, 0000
XXXXX XX XXXXXXXXXXX )
) ss.
COUNTY OF HARTFORD )
Before me, the undersigned, this ___ day of December, 1997, personally
appeared Xxxxxxx X. Mount, known to me to be the President of American
Commercial Finance Corporation and that he as such officer, signer and sealer of
the foregoing instrument, acknowledged the execution of the same to be his free
act and deed individually and as such officer, and the free act and deed of said
corporation.
In Witness Whereof, I hereunto set my hand.
----------------------------------------
Notary Public
My Commission Expires:
Commissioner of the Superior Court
53
SCHEDULE 5.1(m) - PENSION PLANS
Not Applicable
54
SCHEDULE 5.1(n) - DEFERRED COMPENSATION ARRANGEMENTS
EMPLOYMENT CONTRACTS
--------------------
1. Xxxxxx X. Xxxx Chief Executive Officer, Cycomm International Inc.
2. Xxxxxxx X. Xxxxx Chief Financial Officer, Cycomm International Inc.
3. Xxxxxxx Xxxxxxxx Chief Operating Officer, Cycomm International Inc.
4. X.X. Xxxxxxx President and C.E.O. - XL Computing Corp
Chief Executive Officer - XL Computing (Canada) Inc.
DEFERRED COMPENSATION PLANS
None
INCENTIVE COMPENSATION PLANS
None
EXECUTIVE COMPENSATION PLANS, ARRANGEMENTS OR COMMITMENTS
None
55
SCHEDULE 5.1(p) - PLACE OF BUSINESS AND LOCATION OF COLLATERAL
Location of Books and Records:
Cycomm International, Inc.
0000 Xxxxxxxxxx Xx., Xxxxx 000
XxXxxx, XX 00000
Location of Collateral:
XL Computing Corporation
00000 000xx Xxxxxxx
Xxxxxxxxx, XX 00000
000 Xxxxxxxxxx Xxxx Xxxx
Xxxx Xxxxx, XX 00000
00000 Xxxxxx Xxxx 000 *
Xxxxxxxxx, XX 00000
XL Computing (Canada) Inc.
0000X Xxxxxxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx
Xxxxxx J4X 1C2
* Space will be vacant by 12/31/97
56
SCHEDULE 5.1(u) - SECURITY INTERESTS AND LIENS ON COLLATERAL
CAPITAL LEASES: XL Computing Corporation and XL Computing (Canada) Inc. have
capital leases for various assets. The lessors maintain unperfected security
interests in the leased assets.
XL Computing Corporation
Lessor Description of Asset Lease Inception Lease Term
------ -------------------- --------------- ----------
AT&T Xxxxxx Insertion Press Aug. 1996 65 months
AT&T Accupress Hydr. Brake Sept. 1996 65 months
AT&T 3 Dell Servers Jan. 1997 24 months
XL Computing (Canada) Inc.
Lessor Description of Asset Lease Inception Lease Term
------ -------------------- --------------- ----------
BNP Mfg., office, comp equip. Oct. 1997 24 months
Telecom Leasing
Canada Telephone System Dec. 1996 24 months
Xerox Canada Photocopier July 1997 24 months
Services Financiers
Commcorp Fax/printer Nov. 1997 24 months
57
SCHEDULE 5.1(v) - TRADENAMES
Tradenames
PCMobile
58
SCHEDULE 5.1(x) - PARENT, AFFILIATE OR SUBSIDIARY CORPORATIONS
SUBSIDIARIES OF CYCOMM INTERNATIONAL INC.
1. Cycomm Corporation. Incorporated on January 1, 1985, in Oregon, USA. A
wholly-owned subsidiary of Cycomm International Inc.
1.a. Val-Comm Inc. Incorporated on July 17, 1984, in New Mexico,
USA. A wholly-owned subsidiary of Cycomm Corporation.
2. XL Computing Corporation. Incorporated on February 26, 1996 in Delaware,
USA. A wholly-owned subsidiary of Cycomm International Inc.
3. XL Computing (Canada) Inc. Incorporated on June 3, 0000 xx Xxxxxx, Xxxxxx.
A wholly-owned subsidiary of Cycomm International Inc.
4. Cypher Communications de Venezuela CA. Incorporated on July 22, 1993, in
Venezuela. A wholly-owned subsidiary of Cycomm International Inc.
