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EXHIBIT 99.1
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (as it may be amended, this
"AGREEMENT") is entered into on February 20, 1998 between NATIONSCREDIT
COMMERCIAL CORPORATION, THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION
("Lender"), having an address at 1177 Avenue of the Xxxxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000 and Xxxxx Corporation ("BORROWER"), whose chief executive
office is located at 0000 Xxxxxxxxx Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxx 00000
("BORROWER'S ADDRESS"). The Schedules to this Agreement are an integral part of
this Agreement and are incorporated herein by reference. Terms used, but not
defined elsewhere, in this Agreement are defined in Schedule B.
1. LOANS AND CREDIT ACCOMMODATIONS.
1.1 AMOUNT. Subject to the terms and conditions contained in this
Agreement, Lender will:
(a) REVOLVING LOANS AND CREDIT ACCOMMODATIONS. From time to time
during the Term at Borrower's request, make revolving loans to Borrower
("REVOLVING LOANS"), and make letters of credit, bankers acceptances and other
credit accommodations ("CREDIT ACCOMMODATIONS") available to Borrower, in each
case to the extent that there is sufficient Availability based upon assets of
Borrower at the time of such request to cover, dollar for dollar, the requested
Revolving Loan or Credit Accommodation; PROVIDED, that after giving effect to
such Revolving Loan or Credit Accommodation, (x) the outstanding balance of all
monetary Obligations (INCLUDING the principal balance of any Term Loan and,
solely for the purpose of determining compliance with this provision, the Credit
Accommodation Balance) will not exceed the Maximum Facility Amount set forth in
Section 1(a) of Schedule A and (y) none of the other Loan Limits set forth in
Section 1 of Schedule A will be exceeded. For this purpose, "AVAILABILITY"
means:
(i) the aggregate amount of Eligible Accounts (less
maximum existing or asserted taxes, discounts, credits and allowances)
multiplied by the Accounts Advance Rate set forth in Section 1(b)(i) of
Schedule A but not to exceed the Accounts Sublimit set forth in Section
1(c) of Schedule A;
PLUS
(ii) the appraised Orderly Liquidation Value of Eligible
Inventory multiplied by the Inventory Advance Rate(s) set forth in
Section 1(b)(ii) of Schedule A, but not to exceed the Inventory
Sublimit(s) set forth in Section 1(d) of Schedule A;
MINUS
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(iii) all Reserves which Lender has established pursuant
to Section 1.2 (including those to be established in connection with the
requested Revolving Loan or Credit Accommodation);
MINUS
(iv) the outstanding balance of all of the monetary
Obligations (EXCLUDING the Credit Accommodation Balance and the
principal balance of the Term Loan); and
PLUS
(v) the Overadvance Amount, if any, set forth in Section
1(g) of Schedule A.
(b) TERM LOAN. On the date of this Agreement, make (i) an advance
to Borrower computed with respect to the value of Borrower's Eligible Equipment
(the ("EQUIPMENT ADVANCE") in the principal amount, if any, set forth in Section
2(a)(i) of Schedule A, (ii) an advance to Borrower computed with respect to the
value of Borrower's Eligible Real Property (the "REAL PROPERTY ADVANCE") in the
principal amount, if any, set forth in Section 2(a)(ii) of Schedule A and (iii)
an advance to Borrower computed with respect to the value of Borrower's Eligible
Intellectual Property and Intangibles (the "INTELLECTUAL PROPERTY ADVANCE") in
the principal amount set forth in Section 2(a)(iii) of Schedule A. The Equipment
Advance, the Real Property Advance and the Intellectual Property Advance are
collectively referred to as the "TERM LOAN."
1.2 RESERVES. Lender may from time to time establish and revise such
reserves as Lender deems appropriate in the exercise of its customary credit
judgment ("RESERVES") to reflect (i) events, conditions, contingencies or risks
which affect or may affect (A) the Collateral or its value, or the security
interests and other rights of Lender in the Collateral or (B) the assets,
business or prospects of Borrower or any Obligor, (ii) Lender's good faith
concern that any Collateral report or financial information furnished by or on
behalf of Borrower or any Obligor to Lender is or may have been incomplete,
inaccurate or misleading in any material respect, (iii) any fact or circumstance
which Lender determines in good faith constitutes, or could constitute, a
Default or Event of Default or (iv) any other events or circumstances which
Lender determines in good faith make the establishment or revision of a Reserve
prudent in the exercise of Lender's customary credit judgment. Without limiting
the foregoing, Lender shall (x) in the case of each Credit Accommodation issued
for the purchase of Inventory (a) which meets the criteria for Eligible
Inventory set forth in clauses (i), (ii), (iii), (v) and (vi) of the definition
of Eligible Inventory, (b) which is or will be in transit to one of the
locations set forth in Section 9(d) of Schedule A, (c) which is fully insured in
a manner satisfactory to Lender and (d) with respect to which Lender is in
possession of all bills of lading and all other documentation which Lender has
requested, all in form and substance satisfactory to Lender in its sole
discretion, establish a Reserve equal to the cost of such Inventory (plus all
duties, freight, taxes, insurance, costs and other charges and expenses
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relating to such Credit Accommodation or such Eligible Inventory) multiplied by
a percentage equal to 100% minus the Inventory Advance Rate applicable to
Eligible Inventory and (y) in the case of any other Credit Accommodation issued
for any purpose, establish a Reserve equal to the full amount of such Credit
Accommodation plus all costs and other charges and expenses relating to such
Credit Accommodation. In addition, (x) Lender shall establish a permanent
Reserve in the amount set forth in Section 1(f) of Schedule A, and (y) if the
outstanding principal balance of the Term Loan advance with respect to Eligible
Equipment exceeds the percentage set forth in Section 2(a)(i) of Schedule A of
the appraised value of such Eligible Equipment, Lender may establish an
additional Reserve in the amount of such excess (and, for this purpose, if
payments of principal on the Term Loan advances against Eligible Equipment and
Intellectual Property are not calculated separately, payments of principal of
the Term Loan made by Borrower shall be deemed to apply to the Term Loan advance
with respect to Eligible Equipment and Intellectual Property, respectively, in
proportion to the original principal amounts of such advances). Lender may, in
the exercise of Lender's customary credit judgment, establish and revise
Reserves by deducting them in determining Availability or by reclassifying
Eligible Accounts or Eligible Inventory as ineligible. In no event shall the
establishment of a Reserve in respect of a particular actual or contingent
liability obligate Lender to make advances hereunder to pay such liability or
otherwise obligate Lender with respect thereto.
1.3 OTHER PROVISIONS APPLICABLE TO CREDIT ACCOMMODATIONS. Lender may, in
its sole discretion and on terms and conditions acceptable to Lender, make
Credit Accommodations available to Borrower either by issuing them, or by
causing other financial institutions to issue them supported by Lender's
guaranty or indemnification; PROVIDED, that after giving effect to each Credit
Accommodation, the Credit Accommodation Balance will not exceed the Credit
Accommodation Limit set forth in Section 1(e) of Schedule A. Any amounts paid by
Lender in respect of a Credit Accommodation will be treated for all purposes as
a Revolving Loan which shall be secured by the Collateral and bear interest, and
be payable, in the same manner as a Revolving Loan. Borrower agrees to execute
all documentation required by Lender or the issuer of any Credit Accommodation
in connection with any such Credit Accommodation.
1.4 REPAYMENT. Accrued interest on all monetary Obligations shall be
payable on the first day of each month. Principal of the Term Loan shall be
repaid as set forth in Section 2(b) of Schedule A. If at any time any of the
Loan Limits are exceeded, Borrower will immediately pay to Lender such amounts
(or provide cash collateral to Lender with respect to the Credit Accommodation
Balance in the manner set forth in Section 7.3), as shall cause Borrower to be
in full compliance with all of the Loan Limits. Notwithstanding the foregoing,
Lender may, in its sole discretion, make or permit Revolving Loans, the Term
Loan, any Credit Accommodations or any other monetary Obligations to be in
excess of any of the Loan Limits; PROVIDED, that Borrower shall, upon Lender's
demand, pay to Lender such amounts as shall cause Borrower to be in full
compliance with all of the Loan Limits. All
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unpaid monetary Obligations shall be payable in full on the Maturity Date (as
defined in Section 7.1) or, if earlier, the date of any early termination
pursuant to Section 7.2.
1.5 MINIMUM BORROWING. Subject to the terms and conditions of this
Agreement, Borrower agrees to (i) borrow sufficient amounts to cause the
outstanding principal balance of the Loans to equal or exceed, at all times
prior to the Maturity Date, the Minimum Loan Amount set forth in Section 4 of
Schedule A and (ii) maintain Availability sufficient to enable Borrower to do
so. However, Lender shall not be obligated to loan Borrower the Minimum Loan
Amount other than in accordance with all of the terms and conditions of this
Agreement.
2. INTEREST AND FEES.
2.1 INTEREST. All Loans and other monetary Obligations shall bear
interest at the Interest Rate(s) set forth in Section 3 of Schedule A, except
where expressly set forth to the contrary in this Agreement or another Loan
Document; PROVIDED, that after the occurrence of an Event of Default, all Loans
and other monetary Obligations shall, at Lender's option, bear interest at a
rate per annum equal to two percent (2%) in excess of the rate otherwise
applicable thereto (the "DEFAULT RATE") until paid in full (notwithstanding the
entry of any judgment against Borrower or the exercise of any other right or
remedy by Lender), and all such interest shall be payable on demand. Changes in
the Interest Rate shall be effective as of the date of any change in the Prime
Rate. Notwithstanding anything to the contrary contained in this Agreement, the
aggregate of all amounts deemed to be interest hereunder and charged or
collected by Lender is not intended to exceed the highest rate permissible under
any applicable law, but if it should, such interest shall automatically be
reduced to the extent necessary to comply with applicable law and Lender will
refund to Borrower any such excess interest received by Lender.
2.2 FEES AND WARRANTS. Borrower shall pay Lender the following fees, and
issue Lender the following warrants, which are in addition to all interest and
other sums payable by Borrower to Lender under this Agreement, and are not
refundable:
(a) CLOSING FEE. A closing fee in the amount set forth in Section
6(a) of Schedule A, which shall be deemed to be fully earned as of, and payable
on, the date hereof.
(b) FACILITY FEES. A facility fee for the Initial Term at the
rate set forth in Section 6(b)(i) of Schedule A (which shall be fully earned as
of the date of this Agreement and shall be payable in equal installments due,
respectively, on each anniversary of the date of this Agreement during the
Initial Term, other than the Maturity Date), and a facility fee for each Renewal
Term in the amount set forth in Section 6(b)(ii) of Schedule A (which shall be
fully earned as of the first day of such Renewal Term and shall be payable in
equal
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installments due, respectively, on the first day of such Renewal Term and on
each anniversary thereof during such Renewal Term, other than the Maturity
Date).
(c) SERVICING FEE. A monthly servicing fee in the amount set
forth in Section 6(c) of Schedule A, in consideration of Lender's administration
and other services for each month (or part thereof), which shall be fully earned
as of, and payable in advance on, the date of this Agreement and on the first
day of each month thereafter so long as any of the Obligations are outstanding.
(d) UNUSED LINE FEE. An unused line fee for Borrower and the
Other Borrower, in the aggregate, at a rate equal to the percentage per annum
set forth in Section 6(d) of Schedule A during the immediately preceding month
(or part thereof), which fee shall be payable, in arrears, on the first day of
each month so long as any of the Obligations are outstanding and on the Maturity
Date.
(e) MINIMUM BORROWING FEE. A minimum borrowing fee for Borrower
and the Other Borrower, in the aggregate, equal to the excess, if any, of (i)
interest which would have been payable in respect of each period set forth in
Section 6(e)(i) of Schedule A if, at all times during such period, the principal
balance of the Loans to Borrower and the Other Borrower, in the aggregate, was
equal to the Minimum Loan Amount over (ii) the actual interest payable in
respect of such period, payable by Borrower and the Other Borrower, which fee
shall be fully earned as of the last day of such period and payable on the date
set forth in Section 6(e)(ii) of Schedule A and on the Maturity Date, subject to
the terms of Section 6(e) of Schedule A.
(f) SUCCESS FEE. A success fee in the amount set forth in Section
6(f) of Schedule A, which shall be fully earned as of the date of this Agreement
and payable as set forth in Section 6(f) of Schedule A.
(g) WARRANTS. Warrants to acquire the capital stock of Borrower,
as summarized in Section 6(g) of Schedule A and as more fully set forth in a
separate warrant agreement executed by Borrower contemporaneously with this
Agreement.
(h) CREDIT ACCOMMODATION FEES. The fees relating to Credit
Accommodations set forth in Section 6(i) of Schedule A, payable, in arrears, on
the first day of each month so long as any of the Obligations are outstanding
and on the Maturity Date, plus all costs and fees charged by the issuer, payable
as and when such costs and fees are charged.
2.3 COMPUTATION OF INTEREST AND FEES. All interest and fees shall be
calculated daily on the closing balances in the Loan Account based on the actual
number of days elapsed in a year of 360 days. For purposes of calculating
interest and fees, if the outstanding daily principal balance of the Revolving
Loans is a credit balance, such balance shall be deemed to be zero.
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2.4 LOAN ACCOUNT; MONTHLY ACCOUNTINGS. Lender shall maintain a loan
account for Borrower reflecting all advances, charges, expenses and payments
made pursuant to this Agreement (the "LOAN ACCOUNT"), and shall provide Borrower
with a monthly accounting reflecting the activity in the Loan Account. Each
accounting shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by Lender), unless Borrower notifies Lender in
writing to the contrary within sixty days after such account is rendered,
describing the nature of any alleged errors or omissions. However, Lender's
failure to maintain the Loan Account or to provide any such accounting shall not
affect the legality or binding nature of any of the Obligations. Interest, fees
and other monetary Obligations due and owing under this Agreement (including
fees and other amounts paid by Lender to issuers of Credit Accommodations) may,
in Lender's discretion, be charged to the Loan Account, and will thereafter be
deemed to be Revolving Loans and will bear interest at the same rate as other
Revolving Loans.
3. SECURITY INTEREST.
3.1 To secure the full payment and performance of all of the
Obligations, Borrower hereby grants to Lender a continuing security interest in
all of Borrower's property and interests in property, whether tangible or
intangible, now owned or in existence or hereafter acquired or arising, wherever
located, including Borrower's interest in all of the following, whether or not
eligible for lending purposes: (i) all Accounts, Chattel Paper, Instruments,
Documents, Goods (including Inventory, Equipment, farm products and consumer
goods), Investment Property, General Intangibles, Deposit Accounts and money,
(ii) all proceeds and products of all of the foregoing (including proceeds of
any insurance policies, proceeds of proceeds and claims against third parties
for loss or any destruction of any of the foregoing) and (iii) all books and
records relating to any of the foregoing.
4. ADMINISTRATION.
4.1 LOCK BOXES AND BLOCKED ACCOUNTS. Borrower will, at its expense,
establish (and revise from time to time as Lender may require in the exercise of
Lender's customary credit judgment) collection procedures acceptable to Lender,
in the exercise of Lender's customary credit judgment, for the collection of
checks, wire transfers and other proceeds of Accounts ("ACCOUNT PROCEEDS"),
which may include (i) directing all Account Debtors to send all such proceeds
directly to a post office box designated by Lender either in the name of
Borrower (but as to which Lender has exclusive access) or, at Lender's option,
in the name of Lender (a "LOCK Box") or (ii) depositing all Account Proceeds
received by Borrower (exclusive of Account Proceeds received by Borrower from
any of its subsidiaries which are not Borrowers) into one or more bank accounts
maintained in Lender's name (each, a "BLOCKED ACCOUNT"), under an arrangement
acceptable to Lender with a depository bank acceptable to Lender, pursuant to
which all funds deposited into each Blocked Account are to be transferred to
Lender in such manner, and with such frequency, as Lender shall specify or (iii)
a
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combination of the foregoing. Borrower agrees to execute, and to cause its
depository banks to execute, such Lock Box and Blocked Account agreements and
other documentation as Lender shall require from time to time in connection with
the foregoing.
4.2 REMITTANCE OF PROCEEDS. Except as provided in Section 4.1, all
proceeds arising from the sale or other disposition of any Collateral shall be
delivered, in kind, by Borrower to Lender in the original form in which received
by Borrower not later than the following Business Day after receipt by Borrower.
Until so delivered to Lender, Borrower shall hold such proceeds separate and
apart from Borrower's other funds and property in an express trust for Lender.
Nothing in this Section 4.2 shall limit the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
4.3 APPLICATION OF PAYMENTS. Lender may, in its sole discretion, apply,
reverse and re-apply all cash and non-cash proceeds of Collateral or other
payments received with respect to the Obligations, in such order and manner as
Lender shall determine, whether or not the Obligations are due, and whether
before or after the occurrence of a Default or an Event of Default; provided,
however, if no Default or Event of Default has occurred, Lender shall apply
payments received relative to the Term Loan to the outstanding principal balance
of such Loan. For purposes of determining Availability, such amounts will be
credited to the Loan Account and the Collateral balances to which they relate
upon Lender's receipt of advice from Lender's Bank (set forth in Section 11 of
Schedule A) that such items have been credited to Lender's account at Lender's
Bank (or upon Lender's deposit thereof at Lender's Bank in the case of payments
received by Lender in kind), in each case subject to final payment and
collection. However, for purposes of computing interest on the Obligations, such
items shall be deemed applied by Lender two Business Days after Lender's receipt
of advice of deposit thereof at Lender's Bank.
4.4 NOTIFICATION; VERIFICATION. Lender or its designee may, from time to
time, whether or not a Default or Event of Default has occurred: (i) verify
directly with the Account Debtors the validity, amount and other matters
relating to the Accounts and Chattel Paper, by means of mail, telephone or
otherwise, either in the name of Borrower or Lender or such other name as Lender
may choose; (ii) notify Account Debtors that Lender has a security interest in
the Accounts and that payment thereof is to be made directly to Lender; and
(iii) demand, collect or enforce payment of any Accounts and Chattel Paper (but
without any duty to do so).
4.5 POWER OF ATTORNEY. Borrower hereby grants to Lender an irrevocable
power of attorney, coupled with an interest, authorizing and permitting Lender
(acting through officers, employees, attorneys or agents designated by Lender),
at any time (whether or not a Default or Event of Default has occurred and is
continuing, except as expressly provided below), at Lender's option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise: (i) execute on
behalf of Borrower any documents that Lender may, in its sole discretion, deem
advisable in
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order to perfect and maintain Lender's security interests in the Collateral, to
exercise a right of Borrower or Lender, or to fully consummate all the
transactions contemplated by this Agreement and the other Loan Documents
(including such financing statements and continuation financing statements, and
amendments thereto, as Lender shall deem necessary or appropriate) and to file
as a financing statement any copy of this Agreement or any financing statement
signed by Borrower; (ii) after the occurrence of a Default or Event of Default,
execute on behalf of Borrower any document exercising, transferring or assigning
any option to purchase, sell or otherwise dispose of or lease (as lessor or
lessee) any real or personal property which is part of the Collateral or in
which Lender has an interest; (iii) after the occurrence of a Default or Event
of Default, execute on behalf of Borrower any invoices relating to any Accounts,
any draft against any Account Debtor, any proof of claim in bankruptcy, any
notice of Lien or claim, and any assignment or satisfaction of mechanic's,
materialman's or other Lien; (iv) execute on behalf of Borrower any notice to
any Account Debtor; (v) receive and otherwise take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; (vi) endorse
Borrower's name on all checks and other forms of remittances received by Lender;
(vii) after the occurrence of a Default or Event of Default, pay, contest or
settle any Lien, charge, encumbrance, security interest and adverse claim in or
to any of the Collateral, or any judgment based thereon, or otherwise take any
action to terminate or discharge the same; (viii) after the occurrence of a
Default or Event of Default, grant extensions of time to pay, compromise claims
relating to, and settle Accounts, Chattel Paper and General Intangibles for less
than face value and execute all releases and other documents in connection
therewith; (ix) subject to Lender's right, at any time, to establish reserves in
exercise of Lender's customary credit judgment, after the occurrence of a
Default or Event of Default, pay any sums required on account of Borrower's
taxes or to secure the release of any Liens therefor; (x) pay any amounts
necessary to obtain, or maintain in effect, any of the insurance described in
Section 5.12; (xi) settle and adjust, and give releases of, any insurance claim
that relates to any of the Collateral and obtain payment therefor; (xii)
instruct any third party having custody or control of any Collateral or books or
records belonging to, or relating to, Borrower to give Lender the same rights of
access and other rights with respect thereto as Lender has under this Agreement;
and (xiii) after the occurrence of a Default or Event of Default, change the
address for delivery of Borrower's mail and receive and open all mail addressed
to Borrower. Any and all sums paid, and any and all costs, expenses,
liabilities, obligations and reasonable attorneys' fees incurred, by Lender with
respect to the foregoing shall be added to and become part of the Obligations,
shall be payable on demand, and shall bear interest at a rate equal to the
highest interest rate applicable to any of the Obligations. Borrower agrees that
Lender's rights under the foregoing power of attorney or any of Lender's other
rights under this Agreement or the other Loan Documents shall not be construed
to indicate that Lender is in control of the business, management or properties
of Borrower.
4.6 DISPUTES. Borrower shall promptly notify Lender of all disputes or
claims relating to Accounts and Chattel Paper in excess of $25,000, in the
aggregate. Borrower will not,
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without Lender's prior written consent, compromise or settle any Account or
Chattel Paper for less than the full amount thereof, grant any extension of time
of payment of any Account or Chattel Paper, release (in whole or in part) any
Account Debtor or other person liable for the payment of any Account or Chattel
Paper or grant any credits, discounts, allowances, deductions, return
authorizations or the like with respect to any Account or Chattel Paper; except
that prior to the occurrence of an Event of Default, Borrower may take any of
such actions in the ordinary course of its business, PROVIDED that Borrower
promptly reports the same to Lender.
4.7 INVOICES. At Lender's request, Borrower will cause all invoices and
statements which it sends to Account Debtors or other third parties to be
marked, in a manner reasonably satisfactory to Lender, to reflect Lender's
security interest therein.
4.8 INVENTORY.
(a) RETURNS. Provided that no Event of Default has occurred and
is continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower will promptly determine the reason for
such return and promptly issue a credit memorandum to the Account Debtor in the
appropriate amount (sending a copy to Lender). After the occurrence of an Event
of Default, Borrower will not accept any return without Lender's prior written
consent. Regardless of whether an Event of Default has occurred, Borrower will
(i) hold the returned Inventory in trust for Lender; and (ii) promptly notify
Lender of the return of such Inventory, specifying the reason for such return,
the location and condition of the returned Inventory and, at Lender's request,
deliver such returned Inventory to Lender at an address specified by Lender.
(b) OTHER COVENANTS. Borrower will not, without Lender's prior
written consent, (i) store any Inventory with any warehouseman or other third
party other than as set forth in Section 9(d) of Schedule A or (ii) sell any
Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent
basis, other than consigned goods not to exceed $500,000 in the aggregate,
provided that such consigned goods are subject to Lender's first priority
perfected security interest and to no other Liens. All of the Inventory has been
produced only in accordance with the Fair Labor Standards Act of 1938 and all
rules, regulations and orders promulgated thereunder.
4.9 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on
two (2) Business Days' notice, prior to the occurrence of a Default or an Event
of Default, and at any time and with or without notice after the occurrence of a
Default or an Event of Default, Lender or its agents shall have the right to
inspect the Collateral, and the right to examine and copy Borrower's books and
records. Lender shall take, and shall cause its agents to take, reasonable steps
to keep confidential all information obtained in any such inspection or
examination, but Lender shall have the right to disclose any such information to
its auditors, regulatory agencies, attorneys and participants, and pursuant to
any subpoena or other legal
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process. Borrower agrees to give Lender access to any or all of Borrower's
premises to enable Lender to conduct such inspections and examinations. Such
inspections and examinations shall be at Borrower's expense and the charge
therefor shall be $650 per person per day (or such higher amount as shall
represent Lender's then current standard charge), plus reasonable out-of-pocket
expenses. Lender may, at Borrower's expense, use Borrower's personnel, computer
and other equipment, programs, printed output and computer readable media,
supplies and premises for the collection, sale or other disposition of
Collateral to the extent Lender, in its sole discretion, deems appropriate.
Borrower hereby irrevocably authorizes all accountants and third parties to
disclose and deliver to Lender, at Borrower's expense, all financial
information, books and records, work papers, management reports and other
information in their possession regarding Borrower. Except as provided in
Section 14 of Schedule A, Borrower will not enter into any agreement with any
accounting firm, service bureau or third party to store Borrower's books or
records at any location other than Borrower's Address without first obtaining
Lender's written consent (which consent may be conditioned upon such accounting
firm, service bureau or other third party agreeing to give Lender the same
rights with respect to access to books and records and related rights as Lender
has under this Agreement).
4.10 UPDATE OF APPRAISALS. Lender shall be permitted, in its sole
discretion, at Borrower's expense, to obtain updated appraisals of the fair
market value of the Intellectual Property and Intangibles of Borrower every
eighteen months and updated appraisals of the orderly liquidation value of
Inventory of Borrower semi-annually.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
To induce Lender to enter into this Agreement, Borrower represents,
warrants and covenants as follows (it being understood that (i) each such
representation and warranty will be deemed remade as of the date on which each
Loan is made and each Credit Accommodation is provided and shall not be affected
by any knowledge of, or any investigation by, Lender, and (ii) the accuracy of
each such representation, warranty and covenant will be a condition to each Loan
and Credit Accommodation):
5.1 EXISTENCE AND AUTHORITY. Borrower is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation. Borrower is qualified and licensed to do business in
all jurisdictions in which any failure to do so would have a material adverse
effect on Borrower. The execution, delivery and performance by Borrower of this
Agreement and all of the other Loan Documents have been duly and validly
authorized, do not violate Borrower's articles or certificate of incorporation,
by-laws or other organizational documents, or any law or any agreement or
instrument or any court order which is binding upon Borrower or its property, do
not constitute grounds for acceleration of any indebtedness or obligation under
any agreement or instrument which is binding upon Borrower or its property, and
do not require the consent of any Person. This Agreement and such other Loan
Documents have been duly executed and delivered by, and are enforceable
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against, Borrower, and all other Obligors who have signed them, in accordance
with their respective terms. Sections 9(g) and 9(h) of Schedule A set forth the
ownership of Borrower and the names and ownership of Borrower's Subsidiaries as
of the date of this Agreement.
5.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct and complete legal name as of the date
hereof. Listed in Sections 9(a), 9(b) and 9(c) of Schedule A are all prior names
of Borrower and all of Borrower's present and prior trade names. Borrower shall
give Lender at least thirty days' prior written notice before changing its name
or doing business under any other name. Borrower has complied with all laws
relating to the conduct of business under a fictitious business name. Borrower
represents and warrants that (i) each trade name does not refer to another
corporation or other legal entity; (ii) all Accounts invoiced under any such
trade names are owned exclusively by Borrower and are subject to the security
interest of Lender and the other terms of this Agreement and (iii) all schedules
of Accounts, including any sales made or services rendered using any trade name
shall show Borrower's name as assignor.
5.3 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower has good and
marketable title to the Collateral. The Collateral now is and will remain free
and clear of any and all liens, charges, security interests, encumbrances and
adverse claims, except for Permitted Liens. Lender now has, and will continue to
have, a first-priority perfected and enforceable security interest in all of the
Collateral, subject only to the Permitted Liens, and Borrower will at all times
defend Lender and the Collateral against all claims of others. None of the
Collateral which is Equipment is or will be affixed to any real property in such
a manner, or with such intent, as to become a fixture. Except for leases or
subleases as to which Borrower has delivered to Lender a landlord's waiver in
form and substance satisfactory to Lender, subject to Section 15 of Schedule A,
Borrower is not a lessee or sublessee under any real property lease or sublease
pursuant to which the lessor or sublessor may obtain any rights in any of the
Collateral, and no such lease or sublease now prohibits, restrains, impairs or
conditions, or will prohibit, restrain, impair or condition, Borrower's right to
remove any Collateral from the premises. Whenever any Collateral is located upon
premises in which any third party has an interest (whether as owner, mortgagee,
beneficiary under a deed of trust, lien or otherwise), Borrower shall, whenever
requested by Lender, cause each such third party to execute and deliver to
Lender, in form and substance acceptable to Lender, such waivers and
subordinations as Lender shall specify, so as to ensure that Lender's rights in
the Collateral are, and will continue to be, superior to the rights of any such
third party, provided, that as of the Closing, it is agreed that the only
location for which Lender will require a Landlord Waiver is the location set
forth in Section 15 of Schedule A. Borrower will keep in full force and effect,
and will comply with all the terms of, any lease of real property where any of
the Collateral now or in the future may be located.
5.4 ACCOUNTS AND CHATTEL PAPER. As of each date reported by Borrower,
all Accounts which Borrower has reported to Lender as being Eligible Accounts
comply in all respects with the criteria for eligibility established by Lender
and in effect at such time. All
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Accounts and Chattel Paper are genuine and in all respects what they purport to
be, arise out of a completed, bona fide and unconditional and non-contingent
sale and delivery of goods or rendition of services by Borrower in the ordinary
course of its business and in accordance with the terms and conditions of all
purchase orders, contracts or other documents relating thereto, each Account
Debtor thereunder had the capacity to contract at the time any contract or other
document giving rise to such Accounts and Chattel Paper were executed, and the
transactions giving rise to such Accounts and Chattel Paper comply with all
applicable laws and governmental rules and regulations.
5.5 INVESTMENT PROPERTY. Borrower will take any and all actions required
or requested by Lender, from time to time, to (i) cause Lender to obtain
exclusive control of any Investment Property in a manner acceptable to Lender
and (ii) obtain from any issuers of Investment Property and such other Persons
as Lender shall specify, for the benefit of Lender, written confirmation of
Lender's exclusive control over such Investment Property and take such other
actions as Lender may request to perfect Lender's security interest in such
Investment Property. For purposes of this Section 5.5, Lender shall have
exclusive control of Investment Property if (A) such Investment Property
consists of certificated securities and Borrower delivers such certificated
securities to Lender (with appropriate endorsements if such certificated
securities are in registered form); (B) such Investment Property consists of
uncertificated securities and either (x) Borrower delivers such uncertificated
securities to Lender or (y) the issuer thereof agrees, pursuant to documentation
in form and substance satisfactory to Lender, that it will comply with
instructions originated by Lender without further consent by Borrower, or
Borrower otherwise complies with Article 8 of the UCC with respect to perfection
of a security interest in uncertificated securities and (C) such Investment
Property consists of security entitlements and either (x) Lender becomes the
entitlement holder thereof or (y) the appropriate securities intermediary
agrees, pursuant to documentation in form and substance satisfactory to Lender,
that it will comply with entitlement orders originated by Lender without further
consent by Borrower.
5.6 PLACE OF BUSINESS; LOCATION OF COLLATERAL. Borrower's Address is
Borrower's chief executive office and except as set forth in Section 14 of
Schedule A, the location of its books and records. In addition, except as
provided in the immediately following sentence, Borrower has places of business
and Collateral located only at the locations set forth on Sections 9(d) and 9(e)
of Schedule A. Borrower will give Lender at least thirty days' prior written
notice before opening any additional place of business, changing its chief
executive office or the location of its books and records, or moving any of the
Collateral to a location other than Borrower's Address or one of the locations
set forth in Sections 9(d) and 9(e) of Schedule A, and will execute and deliver
all financing statements and other agreements, instruments and documents which
Lender shall require as a result thereof.
5.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements delivered to Lender by or on behalf of Borrower have been prepared in
conformity with GAAP and completely and fairly reflect the financial condition
of Borrower, at the times and
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for the periods therein stated. Between the last date covered by any such
financial statement provided to Lender and the date hereof (or, with respect to
the remaking of this representation in connection with the making of any Loan or
the providing of any Credit Accommodation, the date such Loan is made or such
Credit Accommodation is provided), there has been no material adverse change in
the financial condition or business of Borrower. Borrower is solvent and able to
pay its debts as they come due, and has sufficient capital to carry on its
business as now conducted and as proposed to be conducted. All schedules,
reports and other information and documentation delivered by Borrower to Lender
with respect to the Collateral are, or will be, when delivered, true, correct
and complete as of the date delivered or the date specified therein.
5.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
timely filed all tax returns and reports or all extensions required by
applicable law, has timely paid all applicable taxes, assessments, deposits and
contributions owing by Borrower and will timely pay all such items in the future
as they became due and payable. Borrower may, however, defer payment of any
contested taxes; PROVIDED, that Borrower (i) in good faith contests Borrower's
obligation to pay such taxes by appropriate proceedings promptly and diligently
instituted and conducted; (ii) notifies Lender in writing of the commencement
of, and any material development in, the proceedings, except for sales and use
tax proceedings not to exceed $100,000 in the aggregate; (iii) posts bonds or
takes any other steps required to keep the contested taxes from becoming a Lien
upon any of the Collateral and (iv) maintains adequate reserves therefor in
conformity with GAAP. Borrower is unaware of any claims or adjustments proposed
for any of Borrower's prior tax years which could result in additional taxes
becoming due and payable by Borrower. Borrower has paid, and shall continue to
pay, all amounts necessary to fund all present and future pension, profit
sharing and deferred compensation plans in accordance with their terms, and
Borrower has not withdrawn from participation in, permitted partial or complete
termination of, or permitted the occurrence of any other event with respect to,
any such plan which could result in any liability of Borrower, including any
liability to the Pension Benefit Guaranty Corporation or any other governmental
agency.
5.9 COMPLIANCE WITH LAWS. Borrower has complied in all material
respects with all provisions of all applicable laws and regulations, including
those relating to Borrower's ownership of real or personal property, the conduct
and licensing of Borrower's business, the payment and withholding of taxes,
ERISA and other employee matters, safety and environmental matters.
5.10 LITIGATION. Section 9(f) of Schedule A discloses all claims,
proceedings, litigation or investigations pending or (to the best of Borrower's
knowledge) threatened against Borrower in excess of $100,000. There is no claim,
suit, litigation, proceeding or investigation pending or (to the best of
Borrower's knowledge) threatened by or against or affecting Borrower in excess
of $100,000 in any court or before any governmental agency (or any basis
therefor known to Borrower) which may result, either separately or in the
aggregate,
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in any material adverse change in the financial condition or business of
Borrower, or in any material impairment in the ability of Borrower to carry on
its business in substantially the same manner as it is now being conducted.
Borrower will promptly inform Lender in writing of any claim, proceeding,
litigation or investigation in excess of $100,000 in the future threatened or
instituted by or against Borrower.
5.11 USE OF PROCEEDS. All proceeds of all Loans will be used solely for
lawful business purposes.
5.12 INSURANCE. Borrower will at all times carry property, liability and
other insurance, with insurers acceptable to Lender, in such form and amounts,
and with such deductibles and other provisions, as Lender shall require, and
Borrower will provide evidence of such insurance to Lender, so that Lender is
satisfied that such insurance is, at all times, in full force and effect. Each
property insurance policy shall name Lender as loss payee and shall contain a
lender's loss payable endorsement in form acceptable to Lender, each liability
insurance policy shall name Lender as an additional insured, and each business
interruption insurance policy shall be collaterally assigned to Lender, all in
form and substance satisfactory to Lender. All policies of insurance shall
provide that they may not be cancelled or changed without at least thirty days'
prior written notice to Lender, shall contain breach of warranty coverage, and
shall otherwise be in form and substance satisfactory to Lender. Upon receipt of
the proceeds of any such insurance, Lender shall apply such proceeds in
reduction of the Obligations as Lender shall determine in its sole discretion.
Borrower will promptly deliver to Lender copies of all reports made to insurance
companies.
5.13 FINANCIAL AND COLLATERAL REPORTS. Borrower has kept and will keep
adequate records and books of account with respect to its business activities
and the Collateral in which proper entries are made in accordance with GAAP
reflecting all its financial transactions, and will cause to be prepared and
furnished to Lender the following (all to be prepared in accordance with GAAP,
unless Borrower's certified public accountants concur in any change therein and
such change is disclosed to Lender):
(a) COLLATERAL REPORTS. On or before the fifteenth day of each
month, an aging of Borrower's Accounts, Chattel Paper and notes receivable, and
weekly Inventory reports, all in such form, and together with such additional
certificates, schedules and other information with respect to the Collateral or
the business of Borrower or any Obligor, as Lender shall request; PROVIDED, that
Borrower's failure to execute and deliver the same shall not affect or limit
Lender's security interests and other rights in any of the Accounts, nor shall
Lender's failure to advance or lend against a specific Account affect or limit
Lender's security interest and other rights therein. Together with each such
schedule, Borrower shall furnish Lender with copies (or, at Lender's request,
originals) of all contracts, orders, invoices, and other similar documents, and
all original shipping instructions, delivery receipts, bills of lading, and
other evidence of delivery, for any goods the sale or disposition of which gave
rise to such Accounts, and Borrower warrants the genuineness of all of the
foregoing. In addition,
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Borrower shall deliver to Lender the originals of all Instruments, Chattel
Paper, security agreements, guaranties and other documents and property
evidencing or securing any Accounts, immediately upon receipt thereof and in the
same form as received, with all necessary endorsements. Lender may destroy or
otherwise dispose of all documents, schedules and other papers delivered to
Lender pursuant to this Agreement (other than originals of Instruments, Chattel
Paper, security agreements, guaranties and other documents and property
evidencing or securing any Accounts) six months after Lender receives them,
unless Borrower requests their return in writing in advance and arranges for
their return to Borrower at Borrower's expense.
(b) ANNUAL STATEMENTS. Not later than ninety days after the close
of each fiscal year of Borrower, unqualified (except for a qualification for a
change in accounting principles with which the accountant concurs) audited
financial statements of Borrower and its Subsidiaries as of the end of such
year, on a consolidated and consolidating basis, certified by a firm of
independent certified public accountants of recognized standing selected by
Borrower but reasonably acceptable to Lender, together with a copy of any
management letter issued in connection therewith;
(c) INTERIM STATEMENTS. Not later than twenty days after the end
of each month hereafter, and thirty days after the last month of Borrower's
fiscal year, unaudited interim financial statements of Borrower and its
Subsidiaries as of the end of such month and of the portion of Borrower's fiscal
year then elapsed, on a consolidated and consolidating basis, certified by the
principal financial officer of Borrower as prepared in accordance with GAAP and
fairly presenting the consolidated financial position and results of operations
of Borrower and its Subsidiaries for such month and period subject only to
changes from audit and year-end adjustments and except that such statements need
not contain notes;
(d) PROJECTIONS, ETC. Such business projections, Availability
projections, business plans, budgets and cash flow statements for Borrower and
its Subsidiaries as Lender shall request from time to time;
(e) SHAREHOLDER REPORTS, ETC. Promptly after the sending or
filing thereof, as the case may be, copies of any proxy statements, financial
statements or reports which Borrower has made available to its shareholders and
copies of any regular, periodic and special reports or registration statements
which Borrower files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any national
securities exchange;
(f) ERISA REPORTS. Upon request by Lender, copies of any annual
report to be filed pursuant to the requirements of ERISA in connection with each
plan subject thereto; and
(g) OTHER INFORMATION. Such other data and information (financial
and otherwise) as Lender, from time to time, may reasonably request, bearing
upon or related to
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the Collateral or Borrower's and each of its Subsidiary's financial condition or
results of operations.
5.14 LITIGATION COOPERATION. Should any third-party suit or proceeding
be instituted by or against Lender with respect to any Collateral or in any
manner relating to Borrower, Borrower shall, without expense to Lender, make
available Borrower and its officers, employees and agents, and Borrower's books
and records, without charge, to the extent that Lender may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
5.15 MAINTENANCE OF COLLATERAL, ETC. Borrower will maintain all of its
Equipment in good working condition, ordinary wear and tear excepted, and
Borrower will not use the Collateral for any unlawful purpose. Borrower will
immediately advise Lender in writing of any material loss or damage to the
Collateral and of any investigation, action, suit, proceeding or claim relating
to the Collateral or which may result in an adverse impact upon Borrower's
business, assets or financial condition.
5.16 NOTIFICATION OF CHANGES. Borrower will promptly notify Lender in
writing of any change in its officers or directors, the opening of any new bank
account or other deposit account, or any material adverse change in the business
or financial affairs of Borrower or the existence of any circumstance which
would make any representation or warranty of Borrower untrue in any material
respect or constitute a material breach of any covenant of Borrower.
5.17 FURTHER ASSURANCES. Borrower agrees, at its expense, to take all
actions, and execute or cause to be executed and delivered to Lender all
promissory notes, security agreements, agreements with landlords, mortgagees and
processors and other bailees, subordination and intercreditor agreements and
other agreements, instruments and documents as Lender may request from time to
time, to perfect and maintain Lender's security interests in the Collateral and
to fully effectuate the transactions contemplated by this Agreement.
5.18 NEGATIVE COVENANTS. Except as set forth in Section 13 of Schedule
A, Borrower will not, without Lender's prior written consent, (i) merge or
consolidate with another Person, form any new Subsidiary or acquire any interest
in any Person; (ii) acquire any assets except in the ordinary course of business
and as otherwise permitted by this Agreement and the other Loan Documents,
unless Borrower issues capital stock as consideration for the assets and there
is no change in control of the Borrower as a result of the issuance of capital
stock; (iii) enter into any transaction outside the ordinary course of business,
unless otherwise permitted by this Section 5.18; (iv) sell or transfer any
Collateral or other assets, except that Borrower may sell finished goods
Inventory and other Inventory to third-party manufacturers in the ordinary
course of its business; (v) make any loans to, or investments in, any Affiliate
or other Person in the form of money or other assets, except that Borrower may
make loans to or investments in its wholly-owned subsidiaries in the ordinary
course of business; (vi) incur any debt outside the ordinary course of business,
unless otherwise permitted by this Section 5.18;
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(vii) guaranty or otherwise become liable with respect to the obligations of
another party or entity, except (a) with respect to its wholly-owned
subsidiaries in the ordinary course of business and (b) with respect to its
indemnity obligations to its officers and directors pursuant to its Articles of
Incorporation or Bylaws; (viii) pay or declare any dividends or other
distributions on Borrower's stock, if Borrower is a corporation (except for
dividends payable solely in capital stock of Borrower) or with respect to any
equity interests, if Borrower is not a corporation; (ix) redeem, retire,
purchase or otherwise acquire, directly or indirectly, any of Borrower's capital
stock or other equity interests, except (a) in connection with any reverse stock
split, (b) the conversion of preferred stock into common stock or (c) the
redemption of up to $3,000,000 in the aggregate of preferred stock, so long as
before such redemption and immediately after giving effect to such redemption
(x) no Default or Event of Default shall exist or be continuing and (y) there is
at least $5,000,000 of unused Availability; (x) make any change in Borrower's
capital structure, except in a manner consistent with the conversion rights of
its preferred stock as in effect on the date hereof and subject to this Section
5.18, consistent with the redemption rights of its preferred stock as in effect
as of the date hereof; (xi) dissolve or elect to dissolve; (xii) pay any
principal or interest on any indebtedness owing to an Affiliate, (xiii) enter
into any transaction with an Affiliate other than on arms-length terms; or (xiv)
agree to do any of the foregoing unless any such agreement is expressly marked
as being subject to Lender's approval.
5.19 FINANCIAL COVENANTS.
(a) CAPITAL EXPENDITURES. Borrower will not expend or commit to
expend, directly or indirectly, for capital expenditures (including capital
lease obligations) in excess of the amount set forth in Section 8(a) of Schedule
A as the Capital Expenditure Limitation in any fiscal year.
(b) NET WORTH. Borrower will at all times maintain a net worth of
at least the amount set forth in Section 8(b) of Schedule A.
(c) TANGIBLE NET WORTH. Borrower will at all times maintain a
minimum tangible net worth of at least the amount set forth in Section 8(c) of
Schedule A.
(d) WORKING CAPITAL. Borrower will at all times maintain working
capital of at least the amount set forth in Section 8(d) of Schedule A.
(e) NET LOSSES. Borrower will not permit its cumulative net loss
to exceed the amount set forth in Section 8(e) of Schedule A.
(f) NET INCOME. Borrower will not permit its cumulative net
income to be less than the amount set forth in Section 8(f) of Schedule A.
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(g) LEVERAGE. Borrower will not permit the ratio of its total
liabilities to its net worth to exceed, at any time, the ratio set forth in
Section 8(g) of Schedule A.
(h) OTHER FINANCIAL COVENANTS. Borrower will comply with any
additional financial covenants set forth in Section 8(j) of Schedule A.
6. RELEASE AND INDEMNITY.
6.1 RELEASE. Borrower hereby releases Lender and its Affiliates and
their respective directors, officers, employees, attorneys and agents and any
other Person affiliated with or representing Lender (the "RELEASED PARTIES")
from any and all liability arising from acts or omissions under or pursuant to
this Agreement, whether based on errors of judgment or mistake of law or fact,
except for those arising from gross negligence or willful misconduct. However,
in no circumstance will any of the Released Parties be liable for lost profits
or other special or consequential damages. Such release is made on the date
hereof and remade upon each request for a Loan or Credit Accommodation by
Borrower. Without limiting the foregoing:
(a) Except for those arising from Lender's gross negligence or
willful misconduct, Lender shall not be liable for (i) any shortage or
discrepancy in, damage to, or loss or destruction of, any goods, the sale or
other disposition of which gave rise to an Account; (ii) any error, act,
omission, or delay of any kind occurring in the settlement, failure to settle,
collection or failure to collect any Account; (iii) settling any Account in good
faith for less than the full amount thereof; or (iv) any of Borrower's
obligations under any contract or agreement giving rise to an Account; and
(b) In connection with Credit Accommodations or any underlying
transaction, Lender shall not be responsible for the conformity of any goods to
the documents presented, the validity or genuineness of any documents, delay,
default or fraud by Borrower, shippers and/or any other Person. Borrower agrees
that any action taken by Lender, if taken in good faith, or any action taken by
an issuer of any Credit Accommodation, under or in connection with any Credit
Accommodation, shall be binding on Borrower and shall not create any resulting
liability to Lender. In furtherance thereof, Lender shall have the full right
and authority to clear and resolve any questions of non-compliance of documents,
to give any instructions as to acceptance or rejection of any documents or
goods, to execute for Borrower's account any and all applications for steamship
or airway guaranties, indemnities or delivery orders, to grant any extensions of
the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents, and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the Credit Accommodations or applications and other documentation pertaining
thereto.
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6.2 INDEMNITY. Borrower hereby agrees to indemnify the Released Parties
and hold them harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, costs and expenses
(including reasonable attorneys' fees), of every nature, character and
description, which the Released Parties may sustain or incur based upon or
arising out of any of the transactions contemplated by this Agreement or the
other Loan Documents or any of the Obligations, including any transactions or
occurrences relating to the issuance of any Credit Accommodation, the Collateral
relating thereto, any drafts thereunder and any errors or omissions relating
thereto (including any loss or claim due to any action or inaction taken by the
issuer of any Credit Accommodation) (and for this purpose any charges to Lender
by any issuer of Credit Accommodations shall be conclusive as to their
appropriateness and may be charged to the Loan Account), or any other matter,
cause or thing whatsoever occurred, done, omitted or suffered to be done by
Lender relating to Borrower or the Obligations (except any such amounts
sustained or incurred as the result of the willful misconduct or gross
negligence of the Released Parties). Notwithstanding any provision in this
Agreement to the contrary, the indemnity agreement set forth in this Section
shall survive any termination of this Agreement.
7. TERM.
7.1 MATURITY DATE. Lender's obligation to make Loans and to provide
Credit Accommodations under this Agreement shall initially continue in effect
until the Maturity Date (the "MATURITY DATE") set forth in Section 7 of Schedule
A (the "INITIAL TERM"). This Agreement and the other Loan Documents and Lender's
security interests in and Liens upon the Collateral, and all representations,
warranties and covenants of Borrower contained herein and therein, shall remain
in full force and effect after the Maturity Date until all of the monetary
Obligations are indefeasibly paid in full.
7.2 EARLY TERMINATION. Lender's obligation to make Loans and to provide
Credit Accommodations under this Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective thirty business days after
written notice of termination is given to Lender or (ii) by Lender at any time
after the occurrence of an Event of Default, without notice, effective
immediately; PROVIDED, that if any Affiliate of Borrower is also a party to a
financing arrangement with Lender, no such early termination shall be effective
unless such Affiliate simultaneously terminates its financing arrangement with
Lender. If so terminated under this Section 7.2, Borrower shall pay to Lender
(i) an early termination fee (the "EARLY TERMINATION FEE") in the amount set
forth in Section 6(h) of Schedule A plus (ii) any earned but unpaid Facility
Fee. Such fee shall be due and payable on the effective date of termination and
thereafter shall bear interest at a rate equal to the highest rate applicable to
any of the Obligations.
7.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay in full all Obligations,
whether or not all or any part of such Obligations are otherwise then due and
payable. Without limiting the generality of the
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foregoing, if, on the Maturity Date or on any earlier effective date of
termination, there are any outstanding Credit Accommodations, then on such date
Borrower shall provide to Lender cash collateral in an amount equal to 110% of
the Credit Accommodation Balance to secure all of the Obligations (including
estimated attorneys' fees and other expenses) relating to said Credit
Accommodations or such greater percentage or amount as Lender reasonably deems
appropriate, pursuant to a cash pledge agreement in form and substance
satisfactory to Lender.
7.4 EFFECT OF TERMINATION. No termination shall affect or impair any
right or remedy of Lender or relieve Borrower of any of the Obligations until
all of the monetary Obligations have been indefeasibly paid in full. Upon
indefeasible payment and performance in full of all of the monetary Obligations
(and the provision of cash collateral with respect to any Credit Accommodation
Balance as required by Section 7.3) and termination of this Agreement, Lender
shall promptly deliver to Borrower termination statements, requests for
reconveyances and such other documents as may be reasonably required to
terminate Lender's security interests in the Collateral.
8. EVENTS OF DEFAULT AND REMEDIES.
8.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "EVENT OF DEFAULT" under this Agreement, and Borrower shall
give Lender immediate written notice thereof: (i) if any warranty,
representation, statement, report or certificate made or delivered to Lender by
Borrower or any of Borrower's officers, employees or agents is untrue or
misleading in any material respect when made or deemed made; (ii) if Borrower
fails to pay when due any principal or interest on any Loan or any other
monetary Obligation; (iii) if Borrower fails or neglects to perform, keep or
observe (a) any covenant contained in Sections 4.1, 4.2, 4.3, 4.9, 4.10, 5.11,
5.12, 5.17 or 5.18; or (b) any other covenant contained in this Agreement (other
than a default the performance or observance of which is dealt with specifically
elsewhere in this Section 8.1 and other than a breach of the financial covenants
contained in Section 8(e) of Schedule A), and the breach of such other covenant
is not cured to Lender's satisfaction within fifteen (15) days after the sooner
to occur of Borrower's receipt of notice of such breach from Lender or the date
on which such failure or neglect first becomes known to any officer of the
Borrower, provided that such notice and opportunity to cure shall not apply in
the case of the failure to perform, keep or observe any covenant that is not
capable of being cured at all or within such fifteen (15) day period, or which
has been the subject of a prior failure within the preceding one hundred eighty
(180) days or which is a willful and knowing breach by Borrower; (iv) if any
levy, assessment, attachment, seizure, lien or encumbrance (other than a
Permitted Lien) is made or permitted to exist on all or any part of the
Collateral; (v) if one or more judgments aggregating in excess of $100,000, or
any injunction or attachment, is obtained against Borrower or any Obligor which
remains unstayed for more than twenty days or is enforced; (vi) any default or
event of default occurs on the part of Borrower under any agreement, document or
instrument to which Borrower is now or hereafter a party or by which Borrower or
any of its property is now or hereafter
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bound, creating or relating to any indebtedness for money borrowed by Borrower
from any person or entity other than lender in an amount exceeding $350,000, if
(A) payment of such indebtedness is not subordinated to the payment of the
Obligations pursuant to any agreement between each holder of such indebtedness
and Lender and (B) the effect of such default is to accelerate the maturity of
all or any part of such indebtedness, or all or any part of any such
indebtedness shall be declared to be due and payable or required to be prepaid
or any other reason, in either event prior to the stated maturity thereof; (vii)
the dissolution, death, termination of existence in good standing, insolvency or
business failure or suspension or cessation of business as usual of Borrower or
any Obligor (or of any general partner of Borrower or any Obligor if it is a
partnership) or the appointment of a receiver, trustee or custodian for all or
any part of the property of, or an assignment for the benefit of creditors by
Borrower or any Obligor, or the commencement of any proceeding by Borrower or
any Obligor under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, or if Borrower makes or sends a
notice of a bulk transfer or calls a meeting of its creditors; (viii) the
commencement of any proceeding against Borrower or any Obligor under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; (ix) the actual or attempted revocation or termination of, or
limitation or denial of liability upon, any guaranty of the Obligations, or any
security document securing the Obligations, by any Obligor; (x) if Borrower
makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such indebtedness
or obligations attempts to limit or terminate its subordination agreement; (xi)
if there is any actual indictment of Borrower or any Obligor under any criminal
statute or commencement or threatened commencement of criminal or civil
proceedings against Borrower or any Obligor, pursuant to which the potential
penalties or remedies sought or available include forfeiture of any property of
Borrower or such Obligor; (xii) if within a one year period there is any change
in any two of the following: the chief executive officer, chief operating
officer or chief financial officer of Borrower; (xii) if an Event of Default
occurs under any Loan and Security Agreement between Lender and an Affiliate of
Borrower; or (xiv) if Lender determines in good faith that the Collateral is
insufficient to fully secure the Obligations or that the prospect of payment or
performance of the Obligations is materially impaired.
8.2 REMEDIES. Upon the occurrence of any Default, and at any time
thereafter, Lender, at its option, may cease making Loans or otherwise extending
credit to Borrower under this Agreement or any other Loan Document. Upon the
occurrence of any Event of Default, and at any time thereafter, Lender, at its
option, and without notice or demand of any kind (all of which are hereby
expressly waived by Borrower), may do any one or more of the following: (i)
cease making Loans or otherwise extending credit to Borrower under this
Agreement or any other Loan Document; (ii) accelerate and declare all or any
part of the Obligations to be immediately due, payable and performable,
notwithstanding any deferred or
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installment payments allowed by any instrument evidencing or relating to any of
the Obligations; (iii) take possession of any or all of the Collateral wherever
it may be found, and for that purpose Borrower hereby authorizes Lender, without
judicial process, to enter onto any of Borrower's premises without interference
to search for, take possession of, keep, store, or remove any of the Collateral,
and remain (or cause a custodian to remain) on the premises in exclusive control
thereof, without charge for so long as Lender deems it reasonably necessary in
order to complete the enforcement of its rights under this Agreement or any
other agreement; PROVIDED, that if Lender seeks to take possession of any of the
Collateral by court process, Borrower hereby irrevocably waives (A) any bond and
any surety or security relating thereto required by law as an incident to such
possession, (B) any demand for possession prior to the commencement of any suit
or action to recover possession thereof and (C) any requirement that Lender
retain possession of, and not dispose of, any such Collateral until after trial
or final judgment; (iv) require Borrower to assemble any or all of the
Collateral and make it available to Lender at one or more places designated by
Lender which are reasonably convenient to Lender and Borrower, and to remove the
Collateral to such locations as Lender may deem advisable; (v) complete the
processing, manufacturing or repair of any Collateral prior to a disposition
thereof and, for such purpose and for the purpose of removal, Lender shall have
the right to use Borrower's premises, vehicles and other Equipment and all other
property without charge; (vi) sell, lease or otherwise dispose of any of the
Collateral, in its condition at the time Lender obtains possession of it or
after further manufacturing, processing or repair, at one or more public or
private sales, in lots or in bulk, for cash, exchange or other property, or on
credit (a "SALE"), and to adjourn any such Sale from time to time without notice
other than oral announcement at the time scheduled for Sale (and, in connection
therewith, (A) Lender shall have the right to conduct such Sale on Borrower's
premises without charge, for such times as Lender deems reasonable, on Lender's
premises, or elsewhere, and the Collateral need not be located at the place of
Sale; (B) Lender may directly or through any of its Affiliates purchase or lease
any of the Collateral at any such public disposition, and if permissible under
applicable law, at any private disposition and (C) any Sale of Collateral shall
not relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title, physical condition or otherwise at the time of sale);
(vii) demand payment of and collect any Accounts, Chattel Paper, Instruments and
General Intangibles included in the Collateral and, in connection therewith,
Borrower irrevocably authorizes Lender to endorse or sign Borrower's name on all
collections, receipts, Instruments and other documents, to take possession of
and open mail addressed to Borrower and remove therefrom payments made with
respect to any item of Collateral or proceeds thereof and, in Lender's sole
discretion, to grant extensions of time to pay, compromise claims and settle
Accounts, General Intangibles and the like for less than face value; and (viii)
demand and receive possession of any of Borrower's federal and state income tax
returns and the books and records utilized in the preparation thereof or
relating thereto. Upon the occurrence of any Event of Default resulting from a
breach of any of the financial covenants set forth in Section 5.19, Lender
shall, upon not less than ten days' prior notice to Borrower, reduce any or all
of the Advance Rates set forth in Section 1(b) of Schedule A as set forth in
Section 8(e)
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of Schedule A. In addition to the rights and remedies set forth above, Lender
shall have all the other rights and remedies accorded a secured party after
default under the UCC and under all other applicable laws, and under any other
Loan Document, and all of such rights and remedies are cumulative and
non-exclusive. Exercise or partial exercise by Lender of one or more of its
rights or remedies shall not be deemed an election or bar Lender from subsequent
exercise or partial exercise of any other rights or remedies. The failure or
delay of Lender to exercise any rights or remedies shall not operate as a waiver
thereof, but all rights and remedies shall continue in full force and effect
until all of the Obligations have been fully paid and performed. If notice of
any sale or other disposition of Collateral is required by law, notice at least
seven days prior to the sale designating the time and place of sale in the case
of a public sale or the time after which any private sale or other disposition
is to be made shall be deemed to be reasonable notice, and Borrower waives any
other notice. If any Collateral is sold or leased by Lender on credit terms or
for future delivery, the Obligations shall not be reduced as a result thereof
until payment is collected by Lender.
8.3 APPLICATION OF PROCEEDS. Subject to any application required by law,
all proceeds realized as the result of any Sale shall be applied by Lender to
the Obligations in such order as Lender shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled thereto;
but Borrower shall remain liable to Lender for any deficiency. If Lender, in its
sole discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any Sale, Lender shall have the option,
exercisable at any time, in its sole discretion, of either reducing the
Obligations by the principal amount of the purchase price or deferring the
reduction of the Obligations until the actual receipt by Lender of the cash
therefor.
9. GENERAL PROVISIONS.
9.1 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally, by reputable private delivery
service, by regular first-class mail or certified mail return receipt requested,
addressed to Lender or Borrower at the address shown in Section 9(j) of Schedule
A, or by facsimile to the facsimile number shown in Section 9(i) of Schedule A,
or at any other address (or to any other facsimile number) designated in writing
by one party to the other party in the manner prescribed in this Section 9.1.
All notices shall be deemed to have been given when received or when delivery is
refused by the recipient.
9.2 SEVERABILITY. If any provision of this Agreement, or the application
thereof to any party or circumstance, is held to be void or unenforceable by any
court of competent jurisdiction, such defect shall not affect the remainder of
this Agreement, which shall continue in full force and effect.
9.3 INTEGRATION. This Agreement and the other Loan Documents represent
the final, entire and complete agreement between Borrower and Lender and
supersede all prior and
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contemporaneous negotiations, oral representations and agreements, all of which
are merged and integrated into this Agreement. THERE ARE NO ORAL UNDERSTANDINGS,
REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES WHICH ARE NOT SET FORTH IN
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
9.4 WAIVERS. The failure of Lender at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other Loan Documents shall not waive or diminish any right of Lender later to
demand and receive strict compliance therewith. Any waiver of any default shall
not waive or affect any other default, whether prior or subsequent, and whether
or not similar. None of the provisions of this Agreement or any other Loan
Document shall be deemed to have been waived by any act or knowledge of Lender
or its agents or employees, but only by a specific written waiver signed by an
authorized officer of Lender and delivered to Borrower. Borrower waives demand,
protest, notice of protest and notice of default or dishonor, notice of payment
and nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, Instrument, Account, General Intangible, Document, Chattel
Paper, Investment Property or guaranty at any time held by Lender on which
Borrower is or may in any way be liable, and notice of any action taken by
Lender, unless expressly required by this Agreement, and notice of acceptance
hereof.
9.5 AMENDMENT. The terms and provisions of this Agreement may not be
amended or modified except in a writing executed by Borrower and a duly
authorized officer of Lender.
9.6 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement and the other Loan
Documents.
9.7 ATTORNEYS FEES AND COSTS. Borrower shall reimburse Lender for all
reasonable attorneys' and paralegals' fees (including in-house attorneys and
paralegals employed by Lender) and all filing, recording, search, title
insurance, appraisal, audit, and other costs incurred by Lender, pursuant to, in
connection with, or relating to this Agreement, including all reasonable
attorneys' fees and costs Lender incurs to prepare and negotiate this Agreement
and the other Loan Documents; to obtain legal advice in connection with this
Agreement and the other Loan Documents or Borrower or any Obligor; to administer
this Agreement and the other Loan Documents (including the cost of periodic
financing statement, tax lien and other searches conducted by Lender); to
enforce, or seek to enforce, any of its rights; prosecute actions against, or
defend actions by, Account Debtors; to commence, intervene in, or defend any
action or proceeding; to enforce and protect, or to seek to enforce and protect,
any of its rights and interests in any bankruptcy case of Borrower, including,
without limitation, by initiating and prosecuting any motion for relief from the
automatic stay and by initiating, prosecuting or defending any other contested
matter or adversary proceeding in bankruptcy; to file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; to examine, audit,
copy, and inspect any of the Collateral or any of Borrower's books and records;
to protect, obtain possession of, lease, dispose of, or otherwise enforce
Lender's
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security interests in, the Collateral; and to otherwise represent Lender in any
litigation relating to Borrower. If either Lender or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys'
fees, including reasonable attorneys' fees and costs incurred in the enforcement
of, execution upon or defense of any order, decree, award or judgment. All
attorneys' fees and costs to which Lender may be entitled pursuant to this
Section shall immediately become part of the Obligations, shall be due on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations.
9.8 BENEFIT OF AGREEMENT; ASSIGNABILITY.
(a) The provisions of this Agreement shall be binding upon and inure to
the benefit of the respective successors, assigns, heirs, beneficiaries and
representatives of Borrower and Lender; provided, that Borrower may not assign
or transfer any of its rights under this Agreement without the prior written
consent of Lender, and any prohibited assignment shall be void. No consent by
Lender to any assignment shall release Borrower from its liability for any of
the Obligations. Lender shall have the right to assign all or any of its rights
and obligations under the Loan Documents, and to sell participating interests
therein, to one or more other Persons, and Borrower agrees to execute all
agreements, instruments and documents requested by Lender in connection with
each such assignment and participation.
(b) Lender shall have the right to sell participating interests in the
Loan Document, so long as Lender remains the Lead Lender (as hereinafter
defined) under the Loan Documents, and, in connection with any such
participation, Borrower hereby agrees to execute all agreements, instruments and
documents reasonably requested by Lender. Lender shall have the right to assign
or transfer its rights under the Loan Documents to any wholly owned
NationsCredit or NationsBank entity, so long as Lender remains the Lead Lender
under the Loan Documents, and, in connection with such any such assignment or
transfer, Borrower hereby agrees to execute all agreements, instruments and
documents reasonably requested by Lender. During the first eighteen (18) months
immediately Closing, Lender shall not make any assignment or transfer of its
rights under the Loan Documents to any other Persons (except to a NationsCredit
or NationsBank entity as aforesaid or except a sale of participating interests
subject to the first sentence hereof) without the prior written consent of
Borrower. Thereafter, Lender shall have the right to assign or transfer its
rights under the Loan Documents (other than selling participating interests
subject to the first sentence hereof) to any Person; provided, however, that
Borrower shall have first received written notice from Lender of such proposed
assignment or transfer at least one hundred and twenty (120) days before the
assignment and/or transfer becomes effective, and Borrower shall have the right
to prepay the Obligations on or before the expiration of said 120-day period,
without penalty, and any portion of the Facility Fee attributable to the
remainder of the Initial Term shall be waived. In addition,
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if at any time during the Term there is a change in both the offices of Managing
Director/COO and President of Lender to new people, Borrower shall have the
right to prepay the Obligations on or before the expiration of one hundred
eighty (180) days after receiving written notice of such change, without
penalty, and any portion of the Facility Fee attributable to the remainder of
the Initial Term shall be waived. For the purposes hereof, "Lead Lender" shall
mean the holder of the Loan, or any rights thereunder, vested with the power and
authority to make credit, underwriting, management and servicing decisions,
including but not limited to the decision to declare a default or event of
default and acceleration of the Loan.
9.9 HEADINGS; CONSTRUCTION. Section and subsection headings are used in
this Agreement only for convenience. Borrower and Lender acknowledge that the
headings may not describe completely the subject matter of the applicable
Sections or subsections, and the headings shall not be used in any manner to
construe, limit, define or interpret any term or provision of this Agreement.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against Lender or Borrower under any rule of construction or
otherwise.
9.10 GOVERNING LAW; CONSENT TO FORUM, ETC. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED, AND SHALL BE DEEMED TO HAVE BEEN MADE, IN
NEW YORK, NEW YORK, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF SUCH STATE. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE AND
FEDERAL COURTS IN NEW YORK, NEW YORK OR THE STATE IN WHICH ANY OF THE COLLATERAL
IS LOCATED SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT, ANY
OTHER LOAN DOCUMENTS OR ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. BORROWER ALSO AGREES THAT
ANY CLAIM OR DISPUTE BROUGHT BY BORROWER AGAINST LENDER PURSUANT TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY MATTER ARISING OUT OF THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT EXCLUSIVELY IN THE STATE AND FEDERAL
COURTS OF NEW YORK. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE IN THE MANNER
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AND SHALL BE DEEMED RECEIVED AS SET FORTH IN SECTION 9.1 FOR NOTICES, TO THE
EXTENT PERMITTED BY LAW. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE THE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
9.11 WAIVER OF JURY TRIAL, ETC. BORROWER WAIVES (i) THE RIGHT TO TRIAL
BY JURY (WHICH LENDER ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL OR ANY CONDUCT, ACTS OR OMISSIONS OF LENDER OR
BORROWER OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR
AGENTS OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE; (ii) THE RIGHT TO INTERPOSE ANY CLAIMS,
DEDUCTIONS, SETOFFS OR COUNTERCLAIMS OF ANY KIND IN ANY ACTION OR PROCEEDING
INSTITUTED BY LENDER WITH RESPECT TO THE LOAN DOCUMENTS OR ANY MATTER RELATING
THERETO, EXCEPT FOR COMPULSORY COUNTERCLAIMS; (iii) NOTICE PRIOR TO LENDER'S
TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH
MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
LENDER'S REMEDIES AND (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND
EXEMPTION LAWS. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL
INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING
UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS
LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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IN WITNESS WHEREOF, Borrower and Lender have signed this Agreement as of
the date set forth in the heading.
BORROWER: LENDER:
XXXXX CORPORATION NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ Xxxxxx X. Xxxxx By /s/
-------------------------------- ---------------------------------
Its Chairman Its Authorized Signatory
----------------------------
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SCHEDULE A
DESCRIPTION OF CERTAIN TERMS
This Schedule is an integral part of the Loan and Security Agreement
between XXXXX CORPORATION and NATIONSCREDIT COMMERCIAL CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the "AGREEMENT").
1. Loan Limits for Revolving
Loans:
(a) Maximum Facility Amount: $42,500,000 minus the aggregate
amount of loans outstanding from
time to time under the Loan and
Security Agreement between Lender
and the Other Borrower
(b) Advance Rates:
(i) Accounts Advance 85%
Rate:
(ii) Inventory Advance
Rate(s):
(A) Finished 80%
goods:
(B) Raw 80%
materials:
(C) Work in 80%
process:
(c) Accounts Sublimit: None
(d) Inventory Sublimit(s):
(i) Overall sublimit The lesser of (i) $10,000,000 in
on advances the aggregate for Borrower and the
against Eligible Other Borrower and (ii) 200% of the
Inventory aggregate Accounts Availability of
Borrower and the Other Borrower
A-1
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(ii) Sublimit on N/A
advances against
finished goods
(iii) Sublimit on N/A
advances against
raw materials
(iv) Sublimit on $750,000
advances against
work in process
(e) Credit Accommodation $5,000,000 in the aggregate for
Limit: Borrower and the Other Borrower;
PROVIDED, that for Letters of
Credit for the purchase of Eligible
Inventory, Lender will reserve
against Availability an amount
equal to 20% of the appraised
orderly liquidation value of such
inventory plus duty and freight and
for standby letters of credit for
purposes approved by Lender, Lender
will reserve 100% of the face
amount of the letter of credit
against Availability
(f) Permanent Reserve Amount: N/A
(g) Overadvance Amount: N/A
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2. Loan Limits for Term Loan:
(a) Principal Amount:
(i) Equipment Advance $2,647,555 in the aggregate for
Borrower and the Other Borrower
(ii) Intellectual The lesser of (i) $7,000,000
Property Advance: (subject to reduction to $5,000,000
as provided in Section 8(e) of this
Schedule A) in the aggregate for
Borrower and the Other Borrower and
(ii) 25% of appraised fair market
value of Borrower's Intellectual
Property and Intangibles, amortized
over 60 months, PROVIDED, that the
event that at any time during the
Term the Lender determines that,
based on an updated appraisal as
provided for in Section 4.10 of the
Agreement, the fair market value of
the Intellectual Property and
Intangibles is less than 25% of the
determination of fair market value
of the Intellectual Property and
Intangibles upon which the
Intellectual Advance was
determined, the difference shall be
amortized and paid over the next 6
months (or, if there are fewer than
6 months remaining, the remaining
number of months) in addition to
the monthly payments provided for
herein.
3. Interest Rates:
(a) Revolving Loans: .75% per annum in excess of the
Prime Rate
(b) Term Loan: .75% per annum in excess of the
Prime Rate
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4. Minimum Loan Amount: $5,000,000 in the aggregate for
Borrower and the Other Borrower
5. Maximum Days:
(a) Maximum days after 90
original INVOICE DATE for
Eligible Accounts:
(b) Maximum days after N/A
original INVOICE DUE
DATE for Eligible
Accounts:
6. Fees:
(a) Closing Fee: .50% of the Maximum Facillity
Amount in the aggregate for
Borrower and the Other Borrower, of
which $87,500 has previously been
paid
(b) Facility Fee:
(i) Initial Term: .50% per annum of the Maximum
Facility Amount, provided that, if
the facility is repaid through
financing provided by NationsBank
after 18 months after the Closing,
any portion of the Facility Fee
attributable to the remainder of
the Initial Term shall be waived
(ii) Renewal Term(s): N/A
(c) Servicing Fee: N/A
X-0
00
(x) Unused Line Fee: If the average monthly loan balance
in the aggregate for Borrower and
the Other Borrower is less than
$10,000,000, for the first 6 months
after Closing, 2% per annum on the
difference between the average
monthly loan balance in the
aggregate for Borrower and the
Other Borrower and $10,000,000 and
thereafter, 2% of the lesser of (i)
$10,000,000 minus $5,000,000 and
(ii) the difference between
$10,000,000 and the average monthly
loan balance in the aggregate for
Borrower and the Other Borrower in
excess of $5,000,000
(e) Minimum Borrowing Fee: If the average monthly loan balance
in the aggregate for Borrower and
the Other Borrower is less than
$5,000,000, the difference between
the actual monthly average loan
balance in the aggregate for
Borrower and the Other Borrower and
$5,000,000 multiplied by the annual
interest rate; PROVIDED, that no
Minimum Borrowing Fee shall be
charged for the first six (6)
months after Closing
(i) Applicable period: Each month
(ii) Date payable: The first day of each month
(f) Success Fee: N/A
(g) Warrants: N/A
(h) Early Termination Fee: In the aggregate for Borrower and
the Other Borrower, $250,000 if
terminated during the first year of
the Initial Term and $100,000 if
terminated after the first year of
the Initial Term and prior to the
Maturity Date; PROVIDED, that no
Early Termination Fee shall be
payable if the facility is repaid
through financing provided by
NationsBank after 18 months after
the Closing
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(i) Fees for letters of .75% per annum of the face amount
credit and other of each open Credit Accommodation
Credit Accommodations
(or guaranties
thereof by Lender):
7. Maturity Date: February 19, 2002
8. Financial Covenants:
(a) Capital Expenditure N/A
Limitation:
(b) Minimum Net Worth N/A
Requirement:
(c) Minimum Tangible Net N/A
Worth:
(d) Minimum Working N/A
Capital:
(e) Maximum Cumulative $10,000,000 (excluding non-cash
Net Loss: extraordinary and non-cash unusual
items) on a cumulative basis for
Borrower and the Other Borrower on
a consolidated basis for the period
from Closing through the end of the
Initial Term, PROVIDED, that if
Borrowers violate the foregoing
covenant, Lender will reduce the
Intellectual Property Advances by
$2,000,000 in the aggregate until
the Cumulative Net Loss is reduced
to less than $10,000,000 and
PROVIDED FURTHER, that new equity
raised after Closing shall be
offset against losses for purposes
of this calculation.
(f) Minimum Cumulative N/A
Net Income:
A-6
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(g) Maximum Leverage N/A
Ratio:
(h) Limitation on Purchase N/A
Money Security
Interests:
(i) Limitation on N/A
Equipment Leases:
(j) Additional Financial N/A
Covenants:
9. Borrower Information:
(a) Prior Names of Access Beyond, Inc.
Borrower:
(b) Prior Trade Names of Access Beyond, Inc.
Borrower:
(c) Existing Trade Access Beyond, Inc.
Names of Borrower:
(d) Inventory Locations: 0000 Xxxxxx Xxxxxxx Xxxxxxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Shurgard
00000 Xxxxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
0000 Xxxxxxx Xxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Xxx Xxxxxx Xxxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
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(e) Other Locations: 0000 Xxxxxxxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Iron Mountain
000 Xxxxxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Borrower has several sales offices
located throughout the United
States at which small amount of
Collateral are located
(f) Litigation: See Attachment 9(f)
(g) Ownership of See Attachment 9(g)
Borrower:
(h) Subsidiaries (and See Attachment 9(h)
ownership thereof):
(i) Facsimile Numbers:
Borrower: (000) 000-0000
Attn: Contracts Administration
With a copy to:
(000) 000-0000
Attn: G. Xxxxxx Xxxxxxx, Esq.
(j) Address for Notice:
Borrower: If via personal or overnight
delivery:
0000 Xxxxxxxxx Xxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: Contracts Administration
If via U.S. Mail:
X.X. Xxx 000000
Xxxxxxx, XX 00000
Attn: Contracts Administration
10. Description of Real Property: None
X-0
00
00. Lender's Bank: The First National Bank of Chicago
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
12. Other Covenants: None
13. Exceptions to Negative
Covenants:
(a) Borrowers shall be permitted to
transfer European assets to a
UK subsidiary which will be
permitted to obtain separate
financing
(b) Borrower shall be permitted to
acquire or consolidate or merge
with or invest in another
Person or form a new
subsidiary; PROVIDED that:
(i) not more than $5,000,000
in cash is required,
(ii) immediately after
consummation of said
transactions, there is at
least $5,000,000 in
unused Availability;
(iii) either Borrower or the
Other Borrower is the
surviving entity; and
(iv) the acquired entity or
subsidiary issues a
secured guaranty of the
Obligations
14. Location of Books and Lender consents to the off-site
Records: storage of books and records at
Iron Mountain, 000 Xxxxxxxxxxxx
Xx., Xxxxxxx, Xxxxxxx 00000
X-0
00
00. Xxxxxxxx Xxxxxx: The only location for which Lender
requires a Landlord Waiver as of
Closing is 0000 Xxxxxxxxx Xxxxxxx
Xxxx, Xxxxxxxx, Xxxxxxx 00000
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule A as
of the date set forth in the heading to the Agreement.
BORROWER: LENDER:
XXXXX CORPORATION NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ Xxxxxx X. Xxxxx By /s/
-------------------------------- ---------------------------------
Its Chairman Its Authorized Signatory
----------------------------
A-10
39
ATTACHMENT 9(F) TO SCHEDULE A
-----------------------------
XXXXX CORPORATION
(Litigation Summary)
Attached is a listing of matters that are known to involve more than $100,000 in
controversy.
40
ACCESS BEYOND DISCLOSURE LETTER
Item 3.6
Litigation
----------
On December 24, 1994, Penril DataComm Networks, Inc. ("Penril") filed a
complaint against Network Systems Corporation of Minneapolis, Minnesota ("NSC")
in the Circuit Court of Maryland for Xxxxxxxxxx County. The litigation arises
out of a contract in which Penril agreed to develop certain computer hardware
and software to NSC's specifications. Penril alleged breach of contract,
fraudulent inducement and defamation and is seeking specific performance,
damages of $2,000,000 and punitive damages of $5,000,000. On March 25, 1995, NSC
filed an answer and counterclaim in which NSC alleges negligent
misrepresentation, fraud and breach of contract by Penril. NSC IS seeking
rescission of the contract, restitution of monies paid by NSC to be Penril,
compensatory damages of $5,000,000 and punitive damages in an unspecified
amount. The rights and obligations of Penril in connection with this litigation
were transferred to Access Beyond on November 18, 1996 as part of the sale of
Penril to Bay Networks, Inc. As of July 22, 1997 a mediation meeting has been
scheduled for August 1, 1997. Access Beyond believes that the counterclaim of
NSC is without merit.
Digital Equipment Corporation ("DEC") has claimed, through a series of
written communications, that Penril has violated DEC patents related to DEC LAT
technology. Peril has taken the position that Datability, Inc. prior to its
acquisition by Penril, had a relationship with DEC that involved the development
of LAT for which Datability has not collected. Both DEC and Penril have taken
the position that it is in the best interests of both parties to work toward a
fair resolution. The rights and obligations of Penril in connection with this
litigation were transferred to Access Beyond on November 18, 1996 as part of the
sale of Penril to Bay a Networks, Inc. As of July 22, 1997 no formal claims have
been filed and Access Beyond believes that it will have a settlement document
signed on or before July 31, 1997.
NASDAQ conducted a review of the trading in Penril's common stock in
connection with the spin-off of Access Beyond and the merger of Penril with Bay.
NASDAQ referred this review to the SEC. As of July 22, 1997 Access Beyond has
not received any notices or comments from the SEC.
41
ATTACHMENT 9(G) TO SCHEDULE A
-----------------------------
XXXXX CORPORATION
(Ownership of Borrower)
Xxxxx Corporation is publicly traded and has numerous shareholders. The
shareholders owning more than 5% of the outstanding common stock are listed
below:
Name Approximate Percent Owned Class of Shares
---- ------------------------ ---------------
Xxxxxx X. Xxxxx 38.8% Common
Rinzai Limited 23.0% Common
Kaifa Technologies (H.K) Limited 6.4% Common
Xxxxxx Partners, L.P. 5.2% Common
42
ATTACHMENT 9(H) TO SCHEDULE A
-----------------------------
XXXXX CORPORATION
(Subsidiaries)
The subsidiaries of Xxxxx Microcomputer Products, Inc. are listed below. Each
subsidiary is wholly owned by Xxxxx Microcomputer Products, Inc.
XXXXX MICROCOMPUTER PRODUCTS, INC.
ACCESS BEYOND TECHNOLOGIES, INC.
ACCESS BEYOND (U.K.), LTD.
43
SCHEDULE B
DEFINITIONS
This Schedule is an integral part of the Loan and Security Agreement
between XXXXX CORPORATION and NATIONSCREDIT COMMERCIAL CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the "AGREEMENT").
As used in the Agreement, the following terms have the following
meanings:
"ACCOUNT" means any right to payment for Goods sold or leased or
for services rendered which is not evidenced by an Instrument or Chattel Paper,
whether or not it has been earned by performance.
"ACCOUNT DEBTOR" means the obligor on an Account or Chattel
Paper.
"ACCOUNT PROCEEDS" has the meaning set forth in Section 4.1.
"AFFILIATE" means, with respect to any Person, a relative,
partner, shareholder, member, manager, director, officer, or employee of such
Person, any parent or subsidiary of such Person, or any Person controlling,
controlled by or under common control with such Person or any other Person
affiliated, directly or indirectly, by virtue of family membership, ownership,
management or otherwise.
"AGREEMENT" and "THIS AGREEMENT" mean the Loan and Security
Agreement of which this Schedule B is a part and the Schedules thereto.
"AVAILABILITY" has the meaning set forth in Section 1.1(a)
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11
U.S.C. ss. 101 et seq.).
"BLOCKED ACCOUNT" has the meaning set forth in Section 4.1.
"BORROWER" has the meaning set forth in the heading to the
Agreement.
"BORROWER'S ADDRESS" has the meaning set forth in the heading to
the Agreement.
"BUSINESS DAY" means a day other than a Saturday or Sunday or
any other day on which Lender or banks in New York are authorized to close.
"CHATTEL PAPER" has the meaning set forth in the UCC.
"CLOSING" or "CLOSING DATE" shall mean February 20, 1998.
"COLLATERAL" means all property and interests in property in or
upon which a security interest or other Lien is granted pursuant to this
Agreement or the other Loan Documents.
B-1
44
"CREDIT ACCOMMODATION" has the meaning set forth in Section
1.1(a).
"CREDIT ACCOMMODATION BALANCE" means the sum of (i) the
aggregate undrawn face amount of all outstanding Credit Accommodations and (ii)
all interest, fees and costs due or, in Lender's estimation, likely to become
due in connection therewith.
"DEFAULT" means any event which with notice or passage of time,
or both, would constitute an Event of Default.
"DEFAULT RATE" has the meaning set forth in Section 2.1.
"DEPOSIT ACCOUNT" has the meaning set forth in the UCC.
"DILUTION PERCENTAGE" means the gross amount of all returns,
allowances, discounts, credits, write-offs and similar items relating to
Borrower's Accounts computed as a percentage of Borrower's gross sales,
calculated on a ninety (90) day rolling average.
"DOCUMENT" has the meaning set forth in the UCC.
"EARLY TERMINATION FEE" has the meaning set forth in Section
7.2.
"ELIGIBLE ACCOUNT" means, at any time of determination, an
Account owned by Borrower which satisfies the general criteria set forth below
and which is otherwise acceptable to Lender (PROVIDED, that Lender may, in its
sole discretion, change the general criteria for acceptability of Eligible
Accounts upon at least fifteen days' prior notice to Borrower). An Account shall
be deemed to meet the current general criteria if (i) neither the Account Debtor
nor any of its Affiliates is an Affiliate, creditor or supplier of Borrower,
provided that Accounts which are affected by reason of this clause (i) shall be
considered Eligible Accounts to the extent of the amount thereof which is not
affected by such creditor or supplier relationship; (ii) it does not remain
unpaid more than the earlier to occur of (A) the number of days after the
original INVOICE DATE set forth in Section 5(a) of Schedule A or (B) the number
of days after the original INVOICE DUE DATE set forth in Section 5(b) of
Schedule A; (iii) the Account Debtor or its Affiliates are not past due on other
Accounts owing to Borrower comprising more than 25% of all of the Accounts owing
to Borrower by such Account Debtor or its Affiliates; (iv) all Accounts owing by
the Account Debtor or its Affiliates do not represent more than 25% of all
otherwise Eligible Accounts (PROVIDED, that Accounts which are deemed to be
ineligible solely by reason of this clause (iv) shall be considered Eligible
Accounts to the extent of the amount thereof which does not exceed 25% of all
otherwise Eligible Accounts); (v) no covenant, representation or warranty
contained in this Agreement with respect to such Account (including any of the
representations set forth in Section 5.4) has been breached; (vi) the Account is
not subject to any contra relationship, counterclaim, dispute or set-off
(PROVIDED, that Accounts which are deemed to be ineligible solely by reason of
this clause (vi) shall be considered Eligible Accounts to the extent of the
amount thereof which is not affected by such contra relationships,
counterclaims, disputes or set-offs); (vii) the Account Debtor's chief executive
office or principal place of business is located in the United States or
Provinces of Canada which have adopted the Personal Property Security Act or a
similar act, unless (A) the sale is fully backed by a letter of credit, guaranty
or acceptance
B-2
45
acceptable to Lender in its sole discretion, and if backed by a letter of
credit, such letter of credit has been issued or confirmed by a bank
satisfactory to Lender, is sufficient to cover such Account, and if required by
Lender, the original of such letter of credit has been delivered to Lender or
Lender's agent and the issuer thereof notified of the assignment of the proceeds
of such letter of credit to Lender or (B) such Account is subject to credit
insurance payable to Lender issued by an insurer and on terms and in an amount
acceptable to Lender; (viii) it is absolutely owing to Borrower and does not
arise from a sale on a xxxx-and-hold, guarantied sale, sale-or-return,
sale-on-approval, consignment, retainage or any other repurchase or return basis
or consist of progress xxxxxxxx; (ix) Lender shall have verified the Account in
a manner satisfactory to Lender; (x) the Account Debtor is not the United States
of America or any state or political subdivision (or any department, agency or
instrumentality thereof), unless Borrower has complied with the Assignment of
Claims Act of 1940 (31 U.S.C. ss.203 et seq.) or other applicable similar state
or local law in a manner satisfactory to Lender; (xi) it is at all times subject
to Lender's duly perfected, first priority security interest and to no other
Lien that is not a Permitted Lien, and the goods giving rise to such Account (A)
were not, at the time of sale, subject to any Lien except Permitted Liens and
(B) have been delivered to and accepted by the Account Debtor, or the services
giving rise to such Account have been performed by Borrower and accepted by the
Account Debtor; (xii) the Account is not evidenced by Chattel Paper or an
Instrument of any kind and has not been reduced to judgment; (xiii) the Account
Debtor's total indebtedness to Borrower does not exceed the amount of any credit
limit established by Borrower or Lender and the Account Debtor is otherwise
deemed to be creditworthy by Lender (PROVIDED, that Accounts which are deemed to
be ineligible solely by reason of this clause (xiii) shall be considered
Eligible Accounts to the extent the amount of such Accounts does not exceed the
lower of such credit limits); (xiv) there are no facts or circumstances
existing, or which could reasonably be anticipated to occur, which might result
in any adverse change in the Account Debtor's financial condition or impair or
delay the collectibility of all or any portion of such Account; (xv) Lender has
been furnished with all documents and other information pertaining to such
Account which Lender has requested, or which Borrower is obligated to deliver to
Lender, pursuant to this Agreement; (xvi) Borrower has not made an agreement
with the Account Debtor to extend the time of payment thereof beyond the time
periods set forth in clause (ii) above; and (xvii) Borrower has not posted a
surety or other bond in respect of the contract under which such Account arose.
"ELIGIBLE EQUIPMENT" means, at any time of determination,
Equipment owned by Borrower which Lender, in its sole discretion, deems to be
eligible for borrowing purposes.
"ELIGIBLE INVENTORY" means, at any time of determination,
Inventory owned by Borrower (other than packaging materials and supplies) which
satisfies the general criteria set forth below and which is otherwise acceptable
to Lender (PROVIDED, that Lender may, in its sole discretion, change the general
criteria for acceptability of Eligible Inventory upon at least fifteen days'
prior written notice to Borrower). Inventory shall be deemed to meet the current
general criteria if (i) it consists of raw materials or finished goods, or
work-in-process that is readily marketable in its current form; (ii) it is in
good, new and saleable condition; (iii) it is not slow-moving, obsolete,
unmerchantable, returned or repossessed; (iv) it is not in the possession of a
processor, consignee or bailee, or located on premises leased or subleased to
Borrower, or on premises subject to a mortgage in favor of a Person other than
Lender, unless such processor,
B-3
46
consignee, bailee or mortgagee or the lessor or sublessor of such premises, as
the case may be, has executed and delivered all documentation which Lender shall
require to evidence the subordination or other limitation or extinguishment of
such Person's rights with respect to such Inventory and Lender's right to gain
access thereto; (v) it meets all standards imposed by any governmental agency or
authority; (vi) it conforms in all respects to any covenants, warranties and
representations set forth in the Agreement; (vii) it is at all times subject to
Lender's duly perfected, first priority security interest and no other Lien
except a Permitted Lien; and (viii) it is situated at an Inventory Location
listed in Section 9(d) of Schedule A or other location of which Lender has been
notified as required by Section 5.6.
"ELIGIBLE REAL PROPERTY" means, at any time of determination,
Real Property owned by Borrower which Lender, in its sole discretion, deems to
be eligible for borrowing purposes.
"EQUIPMENT" means all Goods which are used or bought for use
primarily in business (including farming or a profession) or by a Person who is
a non-profit organization or governmental subdivision or agency and which are
not Inventory, farm products or consumer goods, including all machinery, molds,
machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dies and jigs, and all attachments,
accessories, accessions, replacements, substitutions, additions or improvements
to, or spare parts for, any of the foregoing.
"EQUIPMENT ADVANCE" has the meaning set forth in Section 1.1(b).
"ERISA" means the Employee Retirement Income Security Act of
1974 and all rules, regulations and orders promulgated thereunder.
"EVENT OF DEFAULT" has the meaning set forth in Section 8.1.
"GAAP" means generally accepted accounting principles as in
effect from time to time, consistently applied.
"GENERAL INTANGIBLES" has the meaning set forth in the UCC, and
includes all books and records pertaining to the Collateral and other business
and financial records in the possession of Borrower or any other Person,
inventions, designs, drawings, blueprints, patents, patent applications,
trademarks, trademark applications (other than "intent to use" applications
until a verified statement of use is filed with respect to such applications)
and the goodwill of the business symbolized thereby, names, trade names, trade
secrets, goodwill, copyrights, registrations, licenses, franchises, customer
lists, security and other deposits, causes of action and other rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, rights to purchase or sell real or personal property, rights as a
licensor or licensee of any kind, royalties, telephone numbers, internet
addresses, proprietary information, purchase orders, and all insurance policies
and claims (including life insurance, key man insurance, credit insurance,
liability insurance, property insurance and other insurance), tax refunds and
claims, letters of credit, banker's acceptances and guaranties, computer
programs, discs, tapes and tape files in the possession of Borrower or any
B-4
47
other Person, claims under guaranties, security interests or other security held
by or granted to Borrower, all rights to indemnification and all other
intangible property of every kind and nature.
"GOODS" means all things which are movable at the time the
security interest attaches or which are fixtures (other than money, Documents,
Instruments, Investment Property, Accounts, Chattel Paper, General Intangibles,
or minerals or the like (including oil and gas) before extraction), including
standing timber which is to be cut and removed under a conveyance or contract
for sale, the unborn young of animals, and growing crops.
"INITIAL TERM" has the meaning set forth in Section 7.1.
"INSTRUMENT" has the meaning set forth in the UCC.
"INTELLECTUAL PROPERTY" means patents and patent applications
(collectively, "PATENTS") and trademarks, trademark registrations, trademark
applications, tradenames and tradestyles, service marks, service xxxx
registrations and service xxxx registration applications (collectively,
"TRADEMARKS") and all license agreements with respect to any Patents or
Trademarks.
"INVENTORY" means all Goods held for sale or lease or furnished
or to be furnished under contracts of service, including all raw materials, work
in process, finished goods, goods in transit and materials and supplies which
are or might be used or consumed in a business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such Goods,
and all products of the foregoing, and shall include interests in goods
represented by Accounts, returned, reclaimed or repossessed goods and rights as
an unpaid vendor.
"INVESTMENT PROPERTY" shall mean all of Borrower's securities,
whether certificated or uncertificated, securities entitlements, securities
accounts, commodity contracts and commodity accounts.
"LENDER" has the meaning set forth in the heading to the
Agreement.
"LIEN" means any interest in property securing an obligation
owed to, or a claim by, a Person other than the owner of the property, whether
such interest is based on common law, statute or contract, including rights of
sellers under conditional sales contracts or title retention agreements and
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting property. For the purpose of this Agreement, Borrower shall be deemed
to be the owner of any property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person for security
purposes.
"LOAN ACCOUNT" has the meaning set forth in Section 2.4.
"LOAN DOCUMENTS" means the Agreement and all notes, guaranties,
security agreements, certificates, landlord's agreements, Lock Box and Blocked
Account agreements and all other agreements, documents and instruments now or
hereafter executed or delivered by
B-5
48
Borrower or any Obligor in connection with, or to evidence the transactions
contemplated by, this Agreement.
"LOAN LIMITS" means, collectively, the Availability limits and
all other limits on the amount of Loans and Credit Accommodations set forth in
this Agreement.
"LOANS" means, collectively, the Revolving Loans and any Term
Loan.
"LOCK BOX" has the meaning set forth in Section 4.1.
"MATURITY DATE" has the meaning set forth in Section 7.1.
"OBLIGATIONS" means all present and future Loans, advances,
debts, liabilities, obligations, guaranties, covenants, duties and indebtedness
at any time owing by Borrower to Lender, whether evidenced by this Agreement or
any other Loan Document, whether arising from an extension of credit, opening of
a Credit Accommodation, guaranty, indemnification or otherwise (including all
fees, costs and other amounts which may be owing to issuers of Credit
Accommodations and all taxes, duties, freight, insurance, costs and other
expenses, costs or amounts payable in connection with Credit Accommodations or
the underlying goods), whether direct or indirect (including those acquired by
assignment and any participation by Lender in Borrower's indebtedness owing to
others), whether absolute or contingent, whether due or to become due, and
whether arising before or after the commencement of a proceeding under the
Bankruptcy Code or any similar statute, including all interest, charges,
expenses, fees, attorney's fees, expert witness fees, audit fees, letter of
credit fees, Closing Fees, Facility Fees, Servicing Fees, Unused Line Fees,
Minimum Borrowing Fees, Success Fees, amounts owing under Warrants, Credit
Accommodation Fees and any other sums chargeable to Borrower under this
Agreement or under any other Loan Document.
"OBLIGOR" means any guarantor, endorser, acceptor, surety or
other person liable on, or with respect to, the Obligations or who is the owner
of any property which is security for the Obligations, other than Borrower.
"THE OTHER BORROWER" means Xxxxx Microcomputer Products, Inc., a
Georgia corporation.
"PERMITTED LIENS" means: (i) purchase money security interests
in specific items of Equipment in an aggregate amount not to exceed the limit
set forth in Section 8(h) of Schedule A; (ii) leases of specific items of
Equipment in an aggregate amount not to exceed the limit set forth in Section
8(i) of Schedule A; (iii) Liens for taxes not yet due and payable; (iv)
additional Liens which are fully subordinate to the security interests of Lender
and are consented to in writing by Lender; (v) security interests being
terminated concurrently with the execution of this Agreement; (vi) Liens of
materialmen, mechanics, warehousemen or carriers arising in the ordinary course
of business and securing obligations which are not delinquent; (vii) Liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by Liens of the type described in clause (i) or (ii) above;
PROVIDED, that any extension, renewal or replacement Lien is limited to the
property encumbered by the existing Lien and the principal amount of the
indebtedness being
B-6
49
extended, renewed or refinanced does not increase; (viii) Liens in favor of
customs and revenue authorities which secure payment of customs duties in
connection with the importation of goods; and (ix) security deposits posted in
connection with real property leases or subleases. Lender will have the right to
require, as a condition to its consent under clause (iv) above, that the holder
of the additional Lien sign an intercreditor agreement in form and substance
satisfactory to Lender, in its sole discretion, acknowledging that the Lien is
subordinate to the security interests of Lender, and agreeing not to take any
action to enforce its subordinate Lien so long as any Obligations remain
outstanding, and that Borrower agree that any uncured default in any obligation
secured by the subordinate Lien shall also constitute an Event of Default under
this Agreement.
"PERSON" means any individual, sole proprietorship, partnership,
joint venture, limited liability company, trust, unincorporated organization,
association, corporation, government or any agency or political division
thereof, or any other entity.
"PRIME RATE" means, at any given time, the prime rate as quoted
in The Wall Street Journal as the base rate on corporate loans posted as of such
time by at least 75% of the nation's 30 largest banks (which rate is not
necessarily the lowest rate offered by such banks).
"REAL PROPERTY" means the real property described in Section 10
of Schedule A.
"REAL PROPERTY ADVANCE" has the meaning set forth in Section
1.1(b).
"RELEASED PARTIES" has the meaning set forth in Section 6.1.
"RENEWAL TERM" has the meaning set forth in Section 7.1.
"RESERVES" has the meaning set forth in Section 1.2.
"REVOLVING LOANS" has the meaning set forth in Section 1.1(a).
"SALE" has the meaning set forth in Section 8.2.
B-7
50
"SUBSIDIARY" means any corporation or other entity of which a
Person owns, directly or indirectly, through one or more intermediaries, more
than 50% of the capital stock or other equity interest at the time of
determination.
"TERM" means the period commencing on the date of this Agreement
and ending on the Maturity Date.
"TERM LOAN" has the meaning set forth in Section 1.1(b).
"UCC" means, at any given time, the Uniform Commercial Code as
adopted and in effect at such time in the State of New York.
All accounting terms used in this Agreement, unless otherwise indicated,
shall have the meanings given to such terms in accordance with GAAP. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the UCC, to the extent such terms are defined therein. The
term "including," whenever used in this Agreement, shall mean "including but not
limited to." The singular form of any term shall include the plural form, and
vice versa, when the context so requires. References to Sections, subsections
and Schedules are to Sections and subsections of, and Schedules to, this
Agreement. All references to agreements and statutes shall include all
amendments thereto and successor statutes in the case of statutes.
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule B as
of the date set forth in the heading to the Agreement.
BORROWER: LENDER:
XXXXX CORPORATION NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ Xxxxxx X. Xxxxx By /s/
-------------------------------- ---------------------------------
Its Chairman Its Authorized Signatory
----------------------------
B-8
