LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this "Agreement"), dated as of December
22, 1998, is entered into by and among Century Electronics Manufacturing (NE),
Inc., a Massachusetts corporation ("CEM"), Y.M.C. Manufacturing Company, a
California corporation ("YMC"), and Quality Manufacturing Services, Inc., a
California corporation ("QMS") (CEM, YMC and QMS are sometimes referred to
individually as a "Company" and collectively as the "Companies"), and Fidelity
Funding, Inc., a Texas corporation ("Fidelity"). In consideration of the mutual
covenants and agreements contained herein, the Companies and Fidelity hereby
agree as follows:
Section 1. Definitions and Rules of Construction.
1.1 When used herein, the following terms shall have the following
meanings:
"Account" means the right of a Company to payment for goods sold or leased
or for services rendered by such Company which is not evidenced by an instrument
or chattel paper, whether or not earned by performance.
"Account Debtor" means the Person obligated to make payment on an Account.
"Advance" has the meaning given to it in Section 2.1.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, or is controlled by or under common control
with, such Person.
"Borrowing Base" means, with respect to any Company, an amount, determined
by Fidelity from time to time, equal to the sum of (a) 80% of the aggregate
outstanding face amount of the Eligible Accounts of such Company and (b) the
lesser of (i) 50% of the value of the Eligible Inventory of such Company, valued
at the lower of cost or market, or (ii) $3,000,000 less 50% of the value of the
Eligible Inventory of each other Company then included in each such other
Company's Borrowing Base valued at the lower of cost or market. Fidelity may
change the percentage of Eligible Accounts and/or Eligible Inventory
constituting the Borrowing Base of any Company from time to time based upon
dilution, net collectibility and other factors deemed appropriate by Fidelity.
"Borrowing Base Certificate" means a certificate in the form attached
hereto as Exhibit A, duly executed by the president or the chief financial
officer of the applicable Company.
"Cash Collateral" has the meaning given to it in Section 7.
"CEM Term Advance" has the meaning given to it in Section 2.6.
"Century" means Century Electronics Manufacturing. Inc., a Delaware
corporation.
"Century Documents" means the Century Guaranty (Fidelity), the Century
Guaranty (USA Funding) and all other documents or agreements executed by Century
in connection herewith or therewith.
"Century Guaranty (Fidelity)" means the General Continuing Guaranty, dated
as of the date hereof, made by Century for the benefit of Fidelity with respect
to the Companies, as amended, supplemented or otherwise modified from time to
time.
"Century Guaranty (USA Funding)" means the General Continuing Guaranty,
dated as of the date hereof, made by Century for the benefit of USA Funding with
respect to the Companies, as amended, supplemented or otherwise modified from
time to time.
"Collateral" has the meaning given to it in Section 6.
"Concentration Limit" means, as of any date and with respect to any
Account Debtor, an amount equal to 25% of the face amount of Eligible Accounts
under this Agreement and the Related Loan Agreement of all Companies outstanding
on such date or such higher amount as Fidelity shall approve in writing from
time to time; provided, however, that the "Concentration Limit" with respect to
3-Com, Lucent, Polaroid, Northern Telecom and any Affiliate of any the foregoing
Persons shall be 100% of the face amount of Eligible Accounts under this
Agreement and the Related Loan Agreement of all Companies outstanding on such
date.
"Contract Rate" means, prior to the occurrence of an Event of Default or
an event or circumstance that would, with the giving of notice, the passage of
time or both, constitute an Event of Default, a rate of interest equal to the
lesser of (a) the Prime Rate in effect from time to time plus 1.00% per annum
and (b) the maximum rate permitted by applicable law and means, after the
occurrence of an Event of Default or an event or circumstance that would, with
the giving of notice, the passage of time or both, constitute an Event of
Default, a rate of interest equal to the lesser of (x) the Prime Rate in effect
from time to time plus 6.00% per annum and (y) the maximum rate permitted by
applicable law. The Contract Rate shall be automatically increased or decreased,
as the case may be, without notice to the Companies from time to time as of the
effective date of each change in the Prime Rate.
"Current Assets" means, as of any date, only those assets of CEM that may,
in the ordinary course of business, be converted into cash within a period of
one year from such date, but excluding (a) amounts due from employees, officers,
shareholders or directors of CEM, (b) prepaid expenses for services or for
supplies that are not purchased for resale, and (c) amounts due from Affiliates
of CEM.
"Current Liabilities" means, as of any date and with respect to CEM, the
Advances outstanding to such CEM on such date and all other Obligations of CEM
that are due within one year from such date.
"Debt" means, with respect to any Person, all indebtedness, obligations
and liabilities of such Person, including without limitation (a) all liabilities
which would be reflected on a balance sheet of such Person prepared in
accordance with GAAP, (b) all obligations of such Person in respect of any
guaranty of any Debt of another Person, and (c) all obligations, indebtedness
and liabilities secured by any lien on or security interest in any property or
assets of such Person.
"Debt Service Coverage Ratio" means, as of any date, the ratio of EBITDA
for the twelve-month period ending on such date to the sum of (a) the Interest
Expense incurred by CEM during the twelve-month period ending on such date and
(b) all scheduled principal payments on all Debt for money borrowed or assets
financed under capitalized leases by CEM (including the Obligations) for the
twelve-month period beginning on such date (including all scheduled principal
payments on Debt expected to be incurred during such period).
"Eligible Accounts" means, at the time of determination thereof, all
Accounts other than (i) any Account which is payable more than 30 days from
invoice date, (ii) any Account which has been outstanding for more than 90 days
from invoice date, (iii) any Account as to which Fidelity does not have a valid
and perfected, first priority security interest, (iv) to the extent that the
aggregate outstanding Accounts owed by any single Account Debtor exceeds the
Concentration Limit, any Account owed by such Account Debtor, (v) any Account
that is owed by an Account Debtor that is an Affiliate of any Company or an
officer or employee of any Company, (vi) any Account that arises out of a sale
made or services performed outside of the United States or that is owed by an
Account Debtor located outside the United States, (vii) any Account that is owed
by a creditor or supplier of any Company or with respect to which any defense,
counterclaim or right of set off has been asserted, (viii) any Account owed by
an Account Debtor if more than 50% (in dollar amount) of such Account Debtor's
Accounts, have been outstanding more than 90 days from invoice date, (ix) any
Account that is owed by the United States or any department, agency or
instrumentality thereof, unless the right to payment under such Account is
assigned to Fidelity as Collateral in full compliance with the Assignment of
Claims Act of 1940, as amended (31 U.S.C. 3727), (x) any Account owed to a
Company by Northern Telecom or any Affiliate thereof, including, without
limitation, Lancity or Bay Networks; and (xi) any Account that has not been
approved by Fidelity for inclusion in the applicable Borrowing Base.
"Eligible Inventory" means, at the time of determination, all raw
materials that are part of a Company's Inventory that (i) are owned by such
Company, are located in the United States of America and, if located on leased
or mortgaged premises, are subject to the terms of a lien waiver letter executed
by the landlord or mortgagee of such premises if deemed necessary by Fidelity in
its sole discretion, (ii) are ready for sale, and are not, in the opinion of
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Fidelity, damaged, obsolete or otherwise not readily salable at full value,
(iii) have been held in Inventory for not more than 60 days, (iv) are not on
lease or consignment or furnished under any contract of service from or to any
Person, (v) are subject to an enforceable, first priority, perfected security
interest in favor of Fidelity, (vi) are not the subject of an invoice giving
rise to an Eligible Account, and (vii) have been approved by Fidelity for
inclusion in the Borrowing Base.
"Eligible Machinery and Equipment" means, with respect to any Company and
at the time of determination, all machinery and equipment that (i) are owned by
such Company, are located in the United States of America and, if located on
leased or mortgaged premises, are subject to the terms of a lien waiver letter
executed by the landlord or mortgagee of such premises if deemed necessary by
Fidelity in its sole discretion, (ii) are not on lease or consignment to any
Person, (iii) are subject to an enforceable, first priority, perfected security
interest in favor of Fidelity, (iv) are not, in the opinion of Fidelity, damaged
or obsolete, (v) are not fixtures, and (vi) have been approved by Fidelity as
Eligible Machinery and Equipment.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, regulations, rules, orders, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants or industrial, toxic or hazardous
substances into the environment, or otherwise relating to the manufacture,
processing, treatment, transport or handling of pollutants or industrial, toxic
or hazardous substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Plan" means any pension benefit plan subject to Title IV of ERISA
maintained by any Company or any Affiliate thereof with respect to which any
Company has a fixed or contingent liability.
"Event of Default" has the meaning given it in Section 9.
"Facility Limit" means $12,000,000.
"GAAP" means generally accepted accounting principles and practices as
promulgated by the American institute of Certified Public Accountants, applied
on basis consistent with past practices.
"Indemnified Claims" means any and all claims, demands, actions, causes of
action, judgments, liabilities, damages and consequential damages, penalties,
fines, costs, fees, expenses and disbursements (including, without limitation,
fees and expenses of attorneys and other professional consultants and experts in
connection with any investigation or defense) of every kind, known or unknown,
existing or hereafter arising, foreseeable or unforeseeable, which may be
imposed upon, threatened or asserted against or incurred or paid by any
Indemnified Person at any time and from time to time, because of, resulting
from, in connection with or arising out of any transaction, act, omission, event
or circumstance in any way connected with the Collateral or the Transaction
Documents (including but not limited to enforcement of Fidelity's rights
thereunder or the defense of Fidelity's actions thereunder), excluding with
respect to any Indemnified Persons, any of the foregoing resulting from such
Indemnified Person's gross negligence or willful misconduct.
"Indemnified Persons" means Fidelity and its officers, directors,
shareholders, employees, attorneys, representatives and Affiliates.
"Intangible Assets" means, with respect to any Company, such of such
Company's assets as are treated as intangible pursuant to GAAP, including,
without limitation: (a) obligations owing by officers, directors, shareholders,
employees, subsidiaries, Affiliates or any Person in which any such officer,
director, shareholder, employee, subsidiary, or Affiliate owns any interest
other than another Company (it being understood that obligations owing by
another Company to such Company shall not be treated as Intangible Assets) and
(b) any asset which is intangible or lacks intrinsic or marketable value or
collectibility, including, without limitation, goodwill, noncompetition
agreements, patents, copyrights, trademarks, franchises, organization or
research and development costs.
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"Inventory" means all goods, now owned or hereafter acquired by a Company,
wherever located, that are held for sale or lease or are to be furnished under
any contract of service (including, but not limited to raw materials, work in
process, finished goods and materials used or consumed in the manufacture or
production thereof, goods in which such Company has an interest in mass or a
joint or other interest or rights of any kind, and goods which have been
returned to or repossessed or stopped in transit by such Company).
"Net Profit" means, with respect to CEM and for any period, CEM's net
income before taxes for such period determined in accordance with GAAP, and
means with respect to QMS and YMC, the combined net income of QMS and YMC before
taxes for such period determined in accordance with GAAP as if QMS and YMC were
consolidated entities under GAAP.
"Net Profit Requirement" means (a) with respect to YMC and QMS combined,
$100,000 per fiscal year beginning with the fiscal beginning on July 1, 1999,
and (b) with respect to CEM, $600,000 per fiscal year.
"Obligations" means all indebtedness, obligations and liabilities of the
Companies to Fidelity arising under the Transaction Documents, and all other
indebtedness, obligations and liabilities of the Companies to Fidelity, whether
presently existing or hereafter arising, direct or indirect, primary or
secondary, joint or several, fixed or contingent, and whether originally payable
to Fidelity or to a third party and subsequently acquired by Fidelity.
"Person" means any individual, corporation, joint venture, partnership,
trust, unincorporated organization or governmental entity or agency.
"Prime Rate" means the rate per annum published from time to time by The
Wall Street Journal as the base rate for corporate loans at large commercial
banks (or, if more than one such rate is published, the higher or highest of the
rates so published). If such rate is no longer published by The Wall Street
Journal, then Fidelity shall, in its sole discretion substitute the base or
prime rate for corporate loans at a large commercial bank for the base rate
published in The Wall Street Journal. Such rate may not necessarily be the
lowest or best rate actually charged to any customer of such commercial bank.
"Proportionate Share" means, with respect to any Company and as of any
date, the ratio obtained by dividing (a) the outstanding principal balance of
the Advances, if any, and the Term Advance to such Company as of such date, by
(b) the sum of the outstanding principal balance of all Advances and Term
Advances as of such date.
"QMS Term Advance" has the meaning given to it in Section 2.6.
"Related Loan Agreement" means the Loan and Security Agreement, dated as
of the date hereof, among the Companies and USA Funding, as amended, modified or
supplemented from time to time.
"Remittance Address" means such addresses as Fidelity shall direct the
Companies from time to time in writing in accordance with the terms hereof.
"Shareholders Equity" means, respect to any Company and as of any date,
the shareholders' equity of such Company as of such date determined in
accordance with GAAP plus the principal balance of any Debt of such Company
subordinated to the Obligations pursuant to a written subordination agreement
satisfactory to Fidelity between Fidelity and the Person to whom such Debt is
owed.
"Solvent" means, with respect to any Company, that the debts of such
Company do not exceed the assets of such Company at a fair valuation and that
such Company generally is paying its debts as they become due.
"Tangible Net Worth" means, with respect to CEM and as of any date, the
amount obtained by subtracting CEM's Intangible Assets as of such date from
CEM's Shareholders' Equity as of such date, and means, respect to QMS and YMC
combined (determined as if they were consolidated entities under GAAP), the
amount obtained by subtracting the Intangible Assets of QMS and YMC as of such
date from the Shareholders' Equity of QMS and YMC as of such date.
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"Tangible Net Worth Requirement" means (a) with respect to YMC and QMS
combined, negative $300,000 until June 30,1999 and for each calendar month
thereafter means the Tangible Net Worth Requirement of YMC and QMS combined as
of the last day of the preceding calendar month plus $8,333, and (b) with
respect to CEM, means $3,750,000 until December 31, 1998 and for each calendar
month thereafter means the Tangible Net Worth Requirement of CEM as of the last
day of the preceding calendar month plus $50,000.
"Term" has the meaning given to it in Section 11.4.
"Term Advances" means the CEM Term Advance, the YMC Term Advance and the
QMS Term Advance.
"Termination Event" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) of ERISA or (ii)
any other reportable event described in Section 4043(b) of ERISA other than a
reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) of ERISA or (b) the withdrawal of any Company or any Affiliate
of any Company from any ERISA Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) any
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any ERISA
Plan.
"Term Limit" means $2,000,000.
"Transaction Documents" means this Agreement and all other documents and
instruments executed and delivered in connection herewith or therewith.
"UCC" means the Uniform Commercial Code as in effect in the applicable
jurisdiction.
"USA Funding" means USA Funding, Inc., a Delaware corporation.
"Working Capital" means, as of any date and with respect to CEM, the
excess of the Current Assets of CEM over the Current Liabilities of CEM as of
such date.
"Working Capital Requirement" means negative $1,500,000 until January 31,
1999 and for each calendar month thereafter means the Working Capital
Requirement as of the last day of the preceding calendar month plus $50,000.
"YMC Term Advance" has the meaning given to it in Section 2.6.
1.2 Terms defined in the UCC and used but not defined herein shall have
the meanings ascribed to them in the UCC.
1.3 References herein to a particular agreement, instrument or document
also shall be deemed to refer to and include all renewals, extensions and
modifications of such agreement, instrument or document. All addenda, exhibits
and schedules attached to this Agreement are a part hereof for all purposes.
Words in the singular form shall be construed to include the plural and vice
versa, unless the context otherwise requires.
1.4 All interest accruing hereunder shall be calculated on the basis of
actual days elapsed (including the first but excluding the last day) plus three
business days and a year of 360 days. Unless otherwise expressly provided herein
or unless Fidelity otherwise consents, all financial statements and reports
furnished to Fidelity hereunder shall be prepared, and all financial
computations and determinations pursuant hereto shall be made, in accordance
with GAAP. All payments received by Fidelity after its internally established
time for closing business on any business day shall be applied as of the next
succeeding business day. Any payment which is due on a day which is not a
business day shall instead be deemed to be due on the next succeeding business
day, and interest thereon shall accrue and be payable at the then applicable
rate during the time of such extension. Fidelity's records in respect of loans
advanced, accrued interest, payments received and applied and other matters in
respect of calculation of the amount of the Obligations shall be deemed
conclusive absent demonstration of error. All statements of account rendered by
Fidelity to any Companies relating to principal, accrued interest or costs owing
by any Company under this Agreement shall be
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presumed to be correct and accurate unless, within 30 days after receipt
thereof, the Companies shall notify Fidelity in writing of any claimed error
therein.
Section 2. Advances.
2.1 Subject to the terms of this Agreement, including, without limitation,
Section 3, Fidelity shall make advances to each Company (each an "Advance" and
collectively the "Advances") from time to time during the Term; provided,
however, that the aggregate principal amount of Advances outstanding at any time
to any Company shall not exceed such Company's Borrowing Base determined by
Fidelity from time to time; and provided, further, however, that the aggregate
principal amount of Advances outstanding at any time to all Companies shall not
exceed the Facility Limit less the amount of "Advances" then outstanding under
the Related Loan Agreement. Each Advance must be in a minimum amount of $5,000
or, if less, the unadvanced portion of the applicable Borrowing Base. The
Companies hereby agree to repay to Fidelity all Advances made to the Companies
hereunder, together with interest thereon, in the manner provided herein. The
principal owing hereunder in respect of the Advances at any given time shall
equal the aggregate amount of Advances made hereunder minus all principal
payments thereon received by Fidelity hereunder. Subject to the terms and
conditions hereof, the Companies may borrow, repay and reborrow under this
Agreement. The term "Advances" specifically excludes "Term Advances."
2.2 Each request by a Company to Fidelity for an Advance hereunder must be
in writing or promptly confirmed in writing. Each such written request or
confirmation shall be accompanied by a "Borrowing Base Certificate" in the form
attached hereto as Exhibit "A," together with such supporting information as
Fidelity shall request, signed by an authorized representative of such Company.
2.3 Promptly after receiving each Borrowing Base Certificate, Fidelity
shall, based upon such Borrowing Base Certificate and such other information
available to Fidelity, redetermine the applicable Borrowing Base, which
redetermination shall take effect immediately and remain in effect until the
next such redetermination. If all conditions precedent to any Advance requested
have been met, Fidelity will on the date requested make such Advance available
to the applicable Company by wire transfer to the account designated in writing
by such Company. In the event Fidelity does not receive an appropriately
completed Borrowing Base Certificate, Fidelity shall have no obligation to
redetermine any Borrowing Base or make any additional Advances hereunder.
2.4 If the aggregate unpaid principal balance of the Advances to any
Company exceeds such Company's Borrowing Base at any time, the Companies shall,
upon receipt of notice thereof from Fidelity, immediately repay the principal of
the Advances in an amount at least equal to such excess. Any principal repaid
pursuant to this Section 2.4 shall be in addition to, and not in lieu of, all
payments otherwise required to be paid under the Transaction Documents.
2.5 The aggregate unpaid principal balance of the Advances plus all
accrued but unpaid interest thereon shall be payable by the Companies to
Fidelity on demand, or if no demand is made, on the last day of the Term.
2.6 Subject to the terms and conditions hereof, including, without
limitation, Section 3, Fidelity agrees to make (a) a single advance (the "CEM
Term Advance") to CEM in an amount up to 80% of the forced liquidation value of
the Eligible Machinery and Equipment of CEM simultaneously with the first
Advance hereunder, (b) a single advance to YMC (the "YMC Term Advance") in an
amount up to 80% of the forced liquidation value of the Eligible Machinery and
Equipment of YMC on or prior to March 31, 1999, and (c) a single advance to QMS
(the "QMS Term Advance") in an amount up to 80% of the forced liquidation value
of the Eligible Machinery and Equipment of QMS on or prior to March 31, 1999;
provided, however, that the initial amount of all Term Advances shall not exceed
the Term Limit in the aggregate. The Companies hereby agree to repay to Fidelity
all Term Advances hereunder, together with interest thereon, in the manner
provided herein. The principal owing hereunder in respect of the Term Advances
at any given time shall equal the aggregate amount of Term Advances made
hereunder minus all principal payments thereon received by Fidelity hereunder.
Amounts repaid in respect of any Term Advance may not be reborrowed hereunder.
2.7 Each request for a Term Advance must be in writing. Provided that all
conditions precedent thereto have been satisfied, Fidelity will, on the date
requested, make each Term Advance available to the applicable Company in
immediately available funds by wire transfer to the account designated in
writing by such Company.
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2.8 The aggregate principal balance of the Term Advances plus all accrued
but unpaid interest thereon shall be due and payable by the Companies to
Fidelity on demand, or if no demand is made, as follows:
(a) The principal balance of the CEM Term Advance shall be repaid in
monthly installments equal to the initial principal balance of the CEM Term
Advance divided by 48, due and payable on the last day of each calendar month,
commencing on the last day of the calendar month following the calendar month in
which the CEM Term Advance is made and ending on November 30,2001, and a final
payment of the remaining outstanding principal balance of the CEM Term Advance,
due and payable on the third anniversary of the date hereof; provided, however,
that the remaining unpaid principal balance of the CEM Term Advance and all
accrued and unpaid interest thereon shall be due and payable on the earlier of
(i) the payment of the remaining unpaid principal balance of the Advances and
(ii) the last day of the Term.
(b) The principal balance of the YMC Term Advance shall be repaid in
equal monthly installments equal to the initial principal balance of the YMC
Term Advance divided by 48, due and payable on the last day of each calendar
month, commencing on the last day of the calendar month following the calendar
month in which the YMC Term Advance is made and ending on November 30,2001, and
a final payment of the remaining outstanding principal balance of the YMC Term
Advance, due and payable on the third anniversary of the date hereof; provided,
however, that the remaining unpaid principal balance of the YMC Term Advance and
all accrued and unpaid interest thereon shall be due and payable on the earlier
of (i) the payment of the remaining unpaid principal balance of the Advances and
(ii) the last day of the Term.
(c) The principal balance of the QMS Term Advance shall be repaid in
equal monthly installments equal to the initial principal balance of the QMS
Term Advance divided by 48, due and payable on the last day of each calendar
month, commencing on the last day of the calendar month following the calendar
month in which the QMS Term Advance is made and ending on November 30, 2001, and
a final payment of the remaining outstanding principal balance of the QMS Term
Advance, due and payable on the third anniversary of the date hereof; provided,
however, that the remaining unpaid principal balance of the QMS Term Advance and
all accrued and unpaid interest thereon shall be due and payable on the earlier
of (i) the payment of the remaining unpaid principal balance of the Advances and
(ii) the last day of the Term.
(d) The Term Advances may not be prepaid in part prior to maturity,
and may be prepaid in full only in accordance with the provisions of Section 2.9
or Section 11.4.
2.9 The Eligible Machinery and Equipment of each Company shall, at all
times, have an appraised forced liquidation value of not less than 125% of the
outstanding principal balance of the Term Advance to such Company. Fidelity may,
from time to time, have the Eligible Machinery and Equipment appraised by an
appraiser selected by Fidelity, and the Companies shall pay the costs of any
such appraisal. If any such appraisal indicates that the forced liquidation
value of the Eligible Machinery and Equipment of any Company is less than 125%
of the outstanding principal balance of the Term Advance to such Company, the
Companies shall, at Fidelity's option, either (a) grant a security interest to
Fidelity in additional collateral satisfactory to Fidelity having a force
liquidation value, which together with the forced liquidation value of the
Eligible Machinery and Equipment of such Company, equals or exceeds 125% of the
outstanding principal balance of the Term Advance to such Company or (b)
immediately pay down the outstanding principal balance of the Term Advance to
such Company, plus all accrued interest on the amount prepaid, to an amount
equal to 125% of the forced liquidation value of the Eligible Machinery and
Equipment of such Company. Any prepayment hereunder shall be applied to
installments due under Section 2.8 in the reverse order of due dates.
2.10 The aggregate unpaid principal balance of all Advances and the Term
Advances shall bear interest at the Contract Rite in effect from time to time.
Except as provided in Section 2.5 or Section 2.8, all accrued but unpaid
interest thereon shall be due and payable by the Companies to Fidelity on the
last day of each calendar month.
2.11 The Companies shall pay to Fidelity an annual facility fee in the
amount of 0.667% of the sum of (a) the Facility Limit and (b) the Term Limit,
payable on the date hereof and on each anniversary of the date hereof during the
Term. The Companies hereby authorize Fidelity, at its sole discretion, to deduct
any facility fee from any Advance or Term Advance hereunder.
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2.12 In the event that the income earned by Fidelity during any calendar
month pursuant to Section 2.10 (excluding any income earned on any Term Advance)
and by USA Funding pursuant to Section 2.6 of the Related Loan Agreement is less
than $45,000, the Companies shall pay to Fidelity a minimum usage fee equal to
the difference between the amount so earned by Fidelity and $45,000, regardless
of Fidelity's prior compensation. The minimum usage fee for each calendar month
shall be due and payable on the first day of the next calendar month, and shall
be prorated for any partial calendar month during the Term.
2.13 In addition to, and not in lieu of, any termination fee required by
Section 11.4, the Companies shall pay to Fidelity a liquidation fee (in this
section called the "Liquidation Fee") in the amount of 5.00% of the face amount
of each Eligible Account included in any Company's Borrowing Base that is
outstanding at any time during the Liquidation Period (as defined below). The
Liquidation Fee shall be payable on the earlier to occur of (i) the date on
which Fidelity collects the applicable Eligible Account and (ii) the ninetieth
day after the invoice date of the applicable Eligible Account. For purposes of
this section, the term "Liquidation Period" means a period beginning on the
earliest of (i) the date of commencement against or by any Company of any
voluntary or involuntary case under the federal Bankruptcy Code, (ii) the date
of any general assignment by any Company for the benefit of its creditors; (iii)
the date of any appointment or taking possession by a receiver, liquidator,
assignee, custodian or similar official of all or a substantial part of any
Company's assets, or (iv) the date of the cessation of business of any Company
(other than in connection with the sale of substantially all of the assets of
such Company, provided that Fidelity consented in writing to such sale prior
thereto), and ending on the date on which Fidelity has actually received all
fees, costs, expenses and other amounts owing to it hereunder.
2.14 Contemporaneously with the execution and delivery hereof, the
Companies shall pay to Fidelity a fee of $20,000 plus out-of-pocket expenses to
cover the charges of Fidelity's in-house counsel for the negotiation,
preparation, execution and delivery of the Transaction Documents and the Century
Documents. In addition, the Companies shall pay or reimburse Fidelity upon
demand for (a) all other costs and expenses incurred by Fidelity in connection
with its due diligence review of the Companies and the closing of the
transactions contemplated hereby, and (b) all reasonable attorney's fees, court
costs and other expenses incurred by Fidelity (whether or not litigation is
commenced or judgment issued, and if litigation is commenced whether at trial or
any appellate level) in connection with the enforcement by Fidelity of this
Agreement or any other Transaction Document, the protection or enforcement of
Fidelity's interest in the Collateral, the collection by Fidelity of the
Collateral, or the representation of Fidelity in connection with any bankruptcy
case or insolvency proceeding involving any Company, the Collateral, or any
Account Debtor, including, without limitation, any representation involving
relief from a stay motion, a cash collateral dispute, an assumption or rejection
motion or a dispute concerning any proposed disclosure statement and plan
proposed in any such proceeding. Fidelity acknowledges that it has received a
"good faith" deposit of $40,000 from the Companies. Such deposit shall be
applied to the obligations of the Companies hereunder.
2.15 Fidelity shall be entitled to collect upon demand its normal and
customary charges for the following routine services provided or obtained in the
course of performing its functions with respect to the Collateral: appraisals,
lock box charges, credit reports, wire transfers, overnight mail delivery and
UCC, judgment, litigation and tax lien searches and filings.
2.16 All interest, fees and other amounts due to Fidelity pursuant to this
Section 2 shall be payable on demand, and may, in Fidelity's sole discretion, be
deducted from any Advance or paid from the Cash Collateral.
2.17 In connection with the first Advance hereunder and provided that all
conditions contained in Section 3 have been satisfied, Fidelity shall pay (or
reimburse CEM for the payment of) $80,000 of the early termination fee payable
by CEM to Congress Financial Corporation - New England in connection with the
prepayment of CEM's credit facility with Congress Financial Corporation - New
England.
Section 3. Conditions Precedent to Advances.
3.1 Fidelity shall not be obligated to make any Advance or Term Advance
hereunder (including the first) until it shall have received the following
documents, duly executed in form and substance satisfactory to Fidelity and its
counsel:
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(a) lockbox agreements relating to the lockboxes at any Remittance
Address and the related deposit accounts, duly executed by the
financial institutions establishing and maintaining such lockboxes
and deposit accounts;
(b) certificates executed by the President and the Secretary of each
Company and Century certifying (i) the names and signatures of the
officers of such Company or Century, as the case maybe, authorized
to execute Transaction Documents or Century Documents, as the case
may be, (ii) the resolutions duly adopted by the Board of Directors
of such Company or Century, as the case may be, authorizing the
execution of the Transaction Documents or Century Documents, as the
case may be, to it which it is a party, and (iii) correctness and
completeness of the copy of the bylaws of such Company or Century,
as the case may be, attached thereto;
(c) a certificate executed by the President and the Chief Financial
Officer/Treasurer of each Company certifying the satisfaction of the
conditions set forth in Section 3.2;
(d) certificates regarding the due formation, valid existence and good
standing of each Company and Century in the state of its
organization issued by the appropriate governmental authorities in
such jurisdiction;
(e) landlord agreements subordinating the security interests of the
landlords for CEM's premises in Marlborough, Massachusetts, and
YMC's and QMS's premises in Santa Clara, California, in the
Collateral to the security interest therein of Fidelity granted
herein;
(f) a favorable opinion of counsel for the Companies and Century
covering such matters as Fidelity may request in its sole
discretion;
(g) endorsements naming Fidelity as an additional insured or loss payee,
as appropriate, on all liability insurance and all property
insurance policies of the Companies;
(h) the Century Documents, duly executed by all parties thereto;
(i) audited consolidated financial statements of Century for the two
most recent fiscal years ending prior to the date hereof;
(j) appraisals performed by appraisers satisfactory to Fidelity of the
forced liquidation value of the Eligible Machinery and Equipment of
each of CEM, YMC and QMS;
(k) release agreements executed by Congress Financial Corporation - New
England, The Sumitomo Bank of California and CitiBank Federal
Savings Bank, releasing any lien or security interest that any of
them may have in the Collateral;
(l) an intercreditor agreement with USA Funding pursuant to which it
subordinates its security interest in all Collateral other than
Accounts owed by Northern Telecom or any Affiliate thereof;
including, without limitation, Bay Networks and Lancity, to the
security interest therein of Fidelity granted herein; and
(m) the Related Loan Agreement, duly executed by the Companies.
3.2 Fidelity shall not be obligated to make any Advance or Term Advance
hereunder (including the first), unless: (i) all representations and warranties
made by each Company in the Transaction Document and by Century in the Century
Documents are true on and as of the date of such Advance or Term Advance as if
such representations and warranties had been made as of the date of such Advance
or Term Advance, (ii) each Company and Century have performed and complied with
all agreements and conditions required in the Transaction Documents and the
Century Documents to be performed or complied with by them on or prior to the
date of such Advance or Term Advance, (iii) no Event of Default or any event or
circumstance that, with the passage of time, the giving of notice or both, would
become an Event of Default shall have occurred, (iv) such Advance or Term
Advance shall not be prohibited by any law or any regulation or any order of any
court or governmental agency or authority, (v) none of any
9
Company or Century shall have repudiated or made any anticipatory breach of any
of its obligations under any Transaction Document or Century Document, as the
case may be, and (vi) Fidelity shall not have disapproved such Advance or Term
Advance in whole or in part.
Section 4. The Companies' Representations and Warranties. Each Company
jointly and severally represents and warrants to Fidelity on the date hereof,
and shall be deemed to represent and warrant to Fidelity on each date on which
an Advance or Term Advance is made to any Company hereunder, that:
4.1 Each Company is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, with all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement and the other Transaction Documents to which it is a party
and to conduct its business as presently conducted. Each Company is duly
qualified and authorized to do business as a foreign corporation and is in good
standing in all states in which such qualification and good standing are
necessary or desirable for the conduct by such Company of its business or the
performance by such Company of its obligations hereunder. The execution,
delivery and performance by each Company of this Agreement and the other
Transaction Documents to which it is a party do not and will not constitute (a)
a violation of any applicable law or such Company's articles or certificate of
incorporation and bylaws, or (b) a material breach of any other document,
agreement or instrument to which such Company is a party or by which such
Company is bound. This Agreement and the other Transaction Documents to which
any Company is a party have been duly authorized, executed and delivered by such
Company, and are legal, valid and binding obligations of such Company
enforceable against such Company in accordance with their terms. No consent of,
approval by, registration or filing with or authorization from any governmental
authority or agency is required in connection with the execution, delivery or
performance by any Company of this Agreement or the other Transaction Documents
to which it is a party.
4.2 Except as described on Schedule 4.2 attached hereto and except for
liens and security interests granted to USA Funding pursuant to the Related Loan
Agreement, none of the Collateral is subject to any lien, encumbrance, security
interest or other claim of any kind or nature, no Company has transferred, sold,
pledged or given a security interest in any of its Accounts, Inventory,
machinery or equipment to anyone other than Fidelity, and there are no financing
statements on file in any public office governing any property of any Company of
any kind, real or personal, in which such Company is named in or has signed as
the debtor.
4.3 Each Company is the sole owner and holder of, and has good and
marketable title to, all Collateral purported to be owned by it. This Agreement
creates a valid security interest in the Collateral in favor of Fidelity. Such
security interest is a perfected, first-priority security interest in the
Collateral other than Accounts owed by Northern Telecom or any Affiliate thereof
and any Collateral covered by the financing statements described in Schedule 4.2
superior to the rights of any other Persons therein, and a perfected,
second-priority security interest in the Collateral consisting of Accounts owed
by Northern Telecom and any Collateral covered by the financing statements
described in Schedule 4.2 superior to the rights of any other Persons therein
other than USA Funding and the Persons whose benefit the financing statements
described in Schedule 4.2 have been filed, as the case may be.
4.4 The amount of each Eligible Account of each Company is due and owing
to such Company and represents an accurate statement of a bona fide sale,
delivery and acceptance of Inventory or performance of service by such Company
to or for an Account Debtor. The terms for payment of the Eligible Accounts are
30 days from date of invoice and the payment of the Eligible Accounts is not
contingent upon the fulfillment by any Company of any further performance of any
nature whatsoever. There are no set-offs, allowances, discounts, deductions,
counterclaims against the Eligible Accounts or any claims by Account Debtors, of
any kind whatsoever, valid or invalid, that have been or may be asserted as a
basis for refusing to pay an Eligible Account, in whole or in part, either at
the time it is accepted by Fidelity for inclusion in any Borrowing Base or prior
to the date it is to be paid. To the best of each Company's knowledge, each
Account Debtor's business is solvent. The Companies have served or caused to be
served any and all preliminary notices required by law to perfect or enforce any
mechanic's lien or stop notice or bonded stop notice for the Eligible Accounts
and the information contained in those notices is true and correct to the best
of each Company's knowledge.
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4.5 The addresses set forth in the perfection certificates delivered by
the Companies to Fidelity in connection herewith are, and for at least the last
six months have been, the mailing addresses, the chief executive offices, the
principal places of business, the offices where all of the books and records
concerning the Eligible Accounts are maintained and the location of all
Collateral of each Company. No Company transacts business, or has transacted
business during the past five years, under any trade, fictitious or assumed name
other than those set forth under such Company's signature hereon. During the
past five years, no Company has not been a party to a merger or consolidation
and has not acquired all or substantially all of the assets of any Person except
as described on Schedule 4.5 attached hereto.
4.6 The Companies have filed all tax reports and returns required to be
filed by them and have paid all federal, state and local taxes and governmental
charges imposed upon the Companies; provided, however, that YMC has a payment
plan with the Internal Revenue Service for the payment of approximately $33,000
in past due federal withholding taxes.
4.7 Each Company is in compliance with ERISA, and is not required to
contribute to any "multiemployer plan" as defined in Section 4001 of ERISA. Each
Company has conducted its business in compliance with all applicable laws,
including but not limited to, applicable Environmental Laws, and maintains and
is in compliance with all licenses and permits required under any such laws to
conduct its business and perform its obligations hereunder. No Company has any
known material contingent liability under any Environmental Law.
4.8 The application made by the Companies and Century to Fidelity in
connection with this Agreement and the statements made therein and in any
materials furnished in connection therewith are true and correct as of the date
hereof. All financial statements furnished by the Companies and Century to
Fidelity in connection with such application or hereunder have been prepared in
accordance with GAAP and fairly present the financial condition and results of
operations of the Companies and Century, as the case may be, as of the dates and
for the periods indicated therein.
4.9 There is no fact which any Company has not disclosed to Fidelity in
writing which could materially adversely affect the properties, business or
financial condition of any Company or Century or any of the Collateral, or which
it is necessary to disclose in order to keep the foregoing representations and
warranties from being misleading.
Section 5. Covenants of the Companies. From the date hereof and until the
payment and performance in full of all of the Obligations, each Company jointly
and severally covenants with Fidelity that:
5.1 Each Company shall preserve and maintain its corporate existence, good
standing and authority to transact business in all jurisdictions where necessary
for the proper conduct of its business, and shall maintain all of its
properties, rights, privileges and franchises necessary or desirable in the
normal conduct of its business.
5.2 Each Company shall permit Fidelity and its representatives, including
any appraisers, auditors and accountants selected by Fidelity, to inspect any of
the Collateral at any time during normal business hours. In addition, Fidelity
shall have the right, from time to time, to perform a field examination of each
Company's books and records during normal business hours. The Companies shall
pay all costs associated with any such audits at the rate of $700 per day per
auditor plus reasonable out-of-pocket expenses; provided, however, that the
Companies' obligation to pay for any such field audits shall be limited to four
field audits per annum per Company so long as no Event of Default or event or
circumstance that would, with the giving of notice, the passage of time or both,
constitute an Event of Default, has occurred; otherwise, no limit shall apply.
5.3 Each Company shall maintain its books and records in accordance with
GAAP. Each Company shall furnish Fidelity, upon request, such information and
statements as Fidelity shall request from time to time regarding such Company's
business affairs, financial condition and results of its operations. Without
limiting the generality of the foregoing, each Company shall provide Fidelity,
on or prior to the last day of each month, unaudited financial statements with
respect to the prior month and, within 90 days after the end of each of such
Company's fiscal years, audited annual financial statements and such
certificates relating to the foregoing as Fidelity may request including,
without limitation, a monthly certificate from the president and chief financial
officer of such Company certifying the accuracy of such financial statements and
all Borrowing Base Certificates delivered to Fidelity during such month, stating
whether any Events of Default have occurred and stating in detail the nature of
any such Events of Default. Any
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such monthly officers' certificate shall be in the form attached hereto as
Exhibit B. Each Company shall provide Fidelity a Borrowing Base Certificate,
appropriately completed and with all attachments, at any time that Fidelity
shall request and on or before the last day of any calendar week in which such
Company does not request an Advance. In addition, each Company shall furnish to
Fidelity upon request a current listing of all open and unpaid accounts payable
and accounts receivable, names, addresses and contact persons for Account
Debtors, and such other items of information that Fidelity may deem necessary or
appropriate from time to time. The Companies immediately shall notify Fidelity
in writing upon becoming aware of the existence of any condition or circumstance
that constitutes an Event of Default or that would, with the giving of notice,
the passage of time or both, constitute an Event of Default. Any such written
notice shall be signed by the president and chief financial officer of each
Company and shall specify the nature of such condition or circumstance, the
period of the existence thereof and the action that the Companies propose to
take with respect thereto.
5.4 Each Company promptly shall notify Fidelity of any attachment or any
other legal process levied against such Company and any action, suit, proceeding
or other similar claim initiated against such Company.
5.5 The Companies shall keep and maintain adequate insurance by insurers
acceptable to Fidelity with respect to their business and all Collateral. Such
insurance shall cover loss, damages and liability of amounts not less than
reasonably requested by Fidelity and shall include, at a minimum, business
interruption insurance, insurance for workers compensation, general premises
liability, fire, casualty, theft and all risk. The Companies shall cause
Fidelity to be an additional insured and loss payee under all policies of
insurance covering any of the Collateral, to the extent of Fidelity's interest.
The Companies shall deliver copies of each insurance policy to Fidelity upon
request.
5.6 The Companies shall file all tax reports and returns required to be
filed by it in the manner and at the times required by applicable law, and shall
pay all federal, state and local taxes and charges imposed upon the Companies
when due.
5.7 Each Company shall maintain a Tangible Net Worth of at least the
applicable Tangible Net Worth Requirement. CEM shall maintain Working Capital of
at least the Working Capital Requirement at all times, and CEM shall maintain a
Debt Service Coverage Ratio of at least 1.20 to 1.00 at all times.
5.8 Each Company shall comply with ERISA and shall not become required to
contribute to any "multiemployee plan" as defined in Section 4001 of ERISA. Each
Company shall conduct its business in compliance with all applicable laws, and
shall maintain and comply with all licenses and permits required under any such
laws to conduct its business and perform its obligations hereunder. Without
limiting the generality of the foregoing, each Company shall comply with all
Environmental Laws now or hereafter applicable to such Company and shall obtain,
at or prior to the time required by applicable Environmental Laws, all
environmental, health and safety permits, licenses and other authorizations
necessary for its operations. Each Company promptly shall furnish to Fidelity
all written notices of violation, complaints, penalty assessments, suits or
other proceedings received by such Company with respect to any alleged violation
of or non-compliance with any Environmental Laws.
5.9 The Net Profit of each Company for each fiscal year of such Company
shall equal or exceed the applicable Net Profit Requirement. No Company's Net
Profit shall be negative for any three or more consecutive calendar months, with
the first such month commencing in the case of CEM, with January 1999, and in
the case of the other Companies, with July 1999.
5.10 No Company shall grant, create or allow to exist any security
interest, lien or other encumbrance on any of the Collateral other than (a) the
lien and security interest granted to Fidelity herein and to USA Funding in the
Related Loan Agreement, (b) the security interests, liens or other encumbrances
described on Schedule 4.2 attached hereto and any liens and security interests
granted to holders of Debt refinancing any Debt secured by such security
interests, liens or other encumbrances to the extent permitted by Section
5.12(c), (c) purchase money liens or security interests granted at a time when
no Event of Default or event or circumstance that would, with the giving of
notice, the passage of time or both, constitute an Event of Default, has
occurred, and (d) liens and security interests securing Debt permitted under
Section 5.12(d), and no Company shall execute any financing statement in favor
of any Person other than Fidelity, USA Funding, the Persons described on
Schedule 4.2 attached hereto and any Person to whom a purchase money lien or
security interest or other lien or security interest permitted above has been
granted. No Company shall change its mailing address, chief executive office,
principal place of business or place where such
12
records are maintained, open any new place of business, close any existing place
of business or change the location of any of the Collateral or transact business
under any trade, fictitious or assumed name other than those set forth under
such Company's signature hereon without providing at least 30 days' prior
written notice thereof to Fidelity.
5.11 No Company shall accept any returns or grant any allowance or credit
(other than those returns, allowances and credits accepted or granted in the
ordinary course of such Company's business) to any Account Debtor without notice
to and the prior written approval of Fidelity. The Companies shall provide to
Fidelity for each Account Debtor on Eligible Accounts a weekly report, in form
and substance satisfactory to Fidelity, itemizing all such returns and
allowances made during the previous week with respect to such Eligible Accounts.
5.12 No Company shall incur, directly, or indirectly, any Debt for
borrowed money or otherwise under any promissory note, bond, indenture or
similar instrument, or in connection with the obligations of any Person (whether
by guaranty, suretyship, purchase or repurchase agreement or agreement to make
investments or otherwise), other than (a) Debt incurred in favor of Fidelity or
USA Funding, (b) Debt secured by purchase money liens or security interests
permitted by Section 5.10, (c) Debt incurred to refinance any other Debt then
existing and permitted hereunder to the extent that such Debt does not exceed
the amount of Debt refinanced and such Debt is secured only by the properties
and assets that secured the Debt refinanced, (d) Debt subordinated to the
Obligations pursuant to a written subordination agreement satisfactory to
Fidelity between Fidelity and the Person to whom such Debt is owed, or (e) Debt
incurred in the normal and ordinary course of such Company's business.
5.13 The Companies shall not use any of the funds paid to the Companies
hereunder directly or indirectly for personal, family, household or agricultural
purposes.
5.14 No Company shall directly or indirectly become liable in connection
with the Debt of any Person, whether by guarantee, surety, endorsement (other
than endorsement of negotiable instruments for collection in the ordinary course
of business), agreement to purchase or repurchase, agreement to make
investments, agreement to provide funds or maintain working capital, or any
agreement to assure a creditor against loss, other than in favor of Fidelity or
USA Funding.
5.15 Except for the merger of QMS with and into YMC permitted by Section
5.20, no Company shall discontinue, or make any material change in, its business
as currently established, or enter any new or different line of business not
directly related to such Company's existing line of business.
5.16 Except for the merger of QMS with and into YMC permitted by Section
5.20, no Company shall declare, pay or issue any dividends or other
distributions in respect of its capital stock or distribute, reserve, secure, or
otherwise make or commit distributions on account of its capital stock, or make
any payment on account of the purchase, redemption or other acquisition or
retirement of any shares of its capital stock.
5.17 No Company shall make any loans or advances to or for the benefit of
any officer, director, shareholder or Affiliate of such Company; provided,
however, that each Company may make advances for routine expense allowances to
its officers and directors in the ordinary course of business; and provided,
further, however, that any Company may pay or reimburse Century for costs or
expenses incurred by Century directly on behalf of Century and overhead costs or
expenses incurred by Century and allocable to such Company in accordance with
Century's past practices; and, provided, further, however, that so long as
immediately prior thereto and after giving effect thereto, (a) no Event of
Default or any event or circumstance that, with the giving of notice, the
passage of time or both, would constitute an Event of Default, has occurred, and
(b) such Company is solvent, any Company may make loans or advances to another
Company for any purpose and to Century solely for the purpose of repurchasing
shares of Century's capital stock, provided that the amount of loans and
advances outstanding at any one time from CEM to the other Companies and Century
shall not in the aggregate exceed the difference obtained by subtracting
$1,250,000 from CEM's Tangible Net Worth. No Company shall make any payment on
any obligation owing to any officer, director, shareholder or Affiliate of such
Company; provided, however, that any Company may pay any obligations owed to
another Company as long as both prior, and after giving effect, to such payment,
(a) no Event of Default or event or circumstance that would, with the giving of
notice, the passage of time or both, constitute an Event of Default, has
occurred and (b) such Company is solvent; and, provided, further, however, that
any Company may pay or reimburse Century for costs or expenses incurred by
Century directly on
13
behalf of such Company and overhead costs or expenses incurred by Century and
reasonably allocated to such Company in accordance with Century's past
practices.
5.18 No Company shall purchase or otherwise acquire assets from any Person
outside the ordinary course of business of such Company.
5.19 No Company shall not invest in or otherwise purchase or acquire the
securities of any Person.
5.20 No Company shall or dispose of any of its assets other than the sale
of Inventory in the ordinary course of business, and no Company shall dissolve
or liquidate or become a party to any merger or consolidation with any Person;
provided, however, that QMS may merge with and into YMC as long as (a) the
Companies provide prior written notice of the merger to Fidelity, (b) YMC
acknowledges and confirms its obligations hereunder, including those of QMS, in
writing to Fidelity in connection with the consummation of such merger, and (c)
both prior, and after giving effect, to such merger, no Event of Default or
event or circumstance that would, with the giving of notice, the passage of time
or both, constitute an Event of Default, has occurred.
5.21 Each Company shall keep and maintain its furniture, fixtures
machinery and equipment in good operating condition and repair (normal wear and
tear excepted), and shall make all necessary repairs thereto so that the value
and operating efficiency thereof shall at all times be maintained and preserved.
Each Company shall notify Fidelity immediately in writing of any material loss
or damage to any item of its furniture, fixtures, machinery and equipment.
5.22 If any Company now owns or hereafter acquires any vehicles, aircraft,
watercraft or other machinery and equipment for which a certificate of title has
been issued or applied for, such Company immediately shall deliver to Fidelity,
properly endorsed, each certificate of title or application for title or other
evidence of ownership for each such item of machinery and equipment. The
Companies shall take all actions necessary to have Fidelity's security interest
properly recorded on each such certificate of title and shall take all other
actions necessary to perfect Fidelity's security interest in all such assets now
or hereafter acquired by such Company.
Section 6. Collateral. In order to secure the payment and performance of
all Obligations, each Company hereby grants to Fidelity a security interest in
and lien upon all of such Company's right, title and interest in and to (a) all
Accounts, contract rights and general intangibles, receivables and claims
whether now or hereafter arising, all guaranties and security therefor and all
of such Company's right title and interest in the goods purchased and
represented thereby, if any, including all of such Company's rights in and to
returned goods and rights of stoppage in transit, replevin and reclamation as
unpaid vendor; (b) all Inventory and all accessions thereto and products thereof
and documents therefor, (c) all furniture, fixtures, equipment and machinery,
including, without limitation, the furniture, fixtures, equipment and machinery
described on Schedule 6 attached hereto, wherever located and whether now or
hereafter existing, and all parts thereof, accessions thereto, and replacements
therefor and all documents and general intangibles covering or relating thereto;
(d) all books and records pertaining to the foregoing, including but not limited
to computer programs, data, certificates, records, circulation lists, subscriber
lists, advertiser lists, supplier lists, customer lists, customer and supplier
contracts, sales orders, and purchasing records; and (e) all proceeds of the
foregoing (collectively, the "Collateral"). The Companies agree to comply with
all appropriate laws in order and to take all actions necessary or desirable in
Fidelity's judgment to perfect Fidelity's security interest in and to the
Collateral, to execute any financing statement or additional documents as
Fidelity may request and to deliver to Fidelity a list of all locations of its
Inventory, equipment and machinery and landlord and or mortgagee lien waivers
with respect to each site where Inventory, equipment or machinery is located and
which is either leased by the Companies or has been mortgaged by the Companies,
upon request by Fidelity.
Section 7. Collection. Each invoice representing an Account shall state on
its face that amounts payable thereunder are payable only at the Remittance
Address. Fidelity shall have the right at any time, either before or after the
occurrence of an Event of Default and without notice to any Company, to notify
any or all Account Debtors on the Collateral of the assignment of the Collateral
to Fidelity and to direct such Account Debtors to make payment of all amounts
due or to become due to any Company directly to Fidelity, and to the extent
permitted by law, to enforce collection of any Collateral and to adjust, settle
or compromise the amount or payment thereof. So long as no Event of Default or
event that, with the passage of time, the giving of notice or both, would become
an Event of Default has occurred and is continuing, all collections of
Collateral of any Company received by Fidelity shall be applied by
14
Fidelity to the payment of the outstanding Advances of such Company, whether or
not then due, then to any interest due on any Advances or Term Advance to such
Company and any other fees or charges due hereunder and allocable or
attributable directly to such Company, then to such Company's Proportionate
Share of all other Obligations then due and any remaining funds shall be
delivered to such Company. Upon the occurrence of an Event of Default or an
event that, with the passage of time, the giving of notice or both, would become
an Event of Default, any such remaining funds may be applied to any of the
Obligations of the Companies, whether or not then due, or held by Fidelity as
cash collateral ("Cash Collateral") until all Obligations have been paid in full
and Fidelity has no further obligation to advance funds to the Companies. All
amounts and proceeds (including instruments and writings) received by any
Company in respect of the Collateral shall be received in trust for the benefit
of Fidelity hereunder, shall be segregated from other funds of such Company and
shall be immediately paid over to Fidelity in the same form as received (with
any necessary endorsement) to be applied in the same manner as payments received
directly by Fidelity. Notwithstanding anything to the contrary contained herein,
if Fidelity has received a request from USA Funding to deliver any amounts
otherwise distributable to a Company under this Section 7 to USA Funding to be
applied to Debt owed by the Companies to USA Funding, Fidelity hereby is
authorized to, and shall deliver, such amounts directly to USA Funding.
Section 8. Power of Attorney. Each Company grants to Fidelity an
irrevocable power of attorney coupled with an interest authorizing and
permitting Fidelity, at its option, with or without notice to such Company, to
do any or all of the following: (a) endorse the name of such Company on any
checks or other evidences of payment whatsoever that may come into the
possession of Fidelity regarding Collateral, including checks received by
Fidelity pursuant to Section 7 hereof; (b) receive, open and forward any mail
addressed to such Company and received at the Remittance Address; (c) pay,
settle, compromise, prosecute or defend any action, claim, conditional waiver
and release, or proceeding relating to Collateral; (d) upon the occurrence of an
Event of Default, notify, in the name of such Company, the U.S. Post Office to
change the address for delivery of mail addressed to such Company to such
address as Fidelity may designate (provided that Fidelity shall turn over to
such Company all such mail not relating to Collateral); and (e) execute and file
on behalf of such Company any financing statement, amendment thereto or
continuation thereof (i) deemed necessary or appropriate by Fidelity to protect
Fidelity's interest in and to the Collateral or (ii) required or permitted under
any provision of this Agreement. The authority granted to Fidelity herein is
irrevocable until this Agreement is terminated and all amounts due to Fidelity
hereunder have been paid in full. Each Company acknowledges that Fidelity may
verify or confirm the Eligible Accounts from time to time, by among other means,
contacting the related Account Debtors, and each Company consents to such
verification and confirmation.
Section 9. Default. An event of default ("Event of Default") shall be
deemed to have occurred hereunder, and Fidelity shall have no further obligation
to make any further Advances or Term Advance and may immediately exercise its
rights and remedies with respect to the Collateral under this Agreement, the UCC
and applicable law, upon the happening of one or more of the following:
(a) Any Company shall fail to pay on demand or otherwise as and when
required or due any amount required to be paid or owed by such Company to
Fidelity, whether hereunder or otherwise.
(b) Any Company shall breach any covenant or agreement made herein or in
any other Transaction Document (other than those covered by clause (a) above)
and the same shall not be cured to Fidelity's satisfaction within thirty days
after the earlier of (i) the date on which Company first obtains knowledge that
such covenant or agreement has been breached or (ii) the date on which Fidelity
notifies the Companies that such covenant or agreement has been breached.
(c) Any warranty or representation made herein or in any other Transaction
Document shall be untrue in any material respect when made or any report,
certificate, schedule, financial statement, profit and loss statement or other
statement furnished by any Company, or by any other Person on behalf of any
Company, to Fidelity is not true and correct in all material respects when
furnished.
(d) There shall be commenced by or against any Company any voluntary or
involuntary case under the federal Bankruptcy Code, or any Company shall make an
assignment for the benefit of its creditors, or of a receiver or custodian shall
be appointed for any Company for a substantial portion of its assets.
15
(e) Any Company other than YMC shall become insolvent in that its debts
are greater than the fair value of its assets, or any Company is generally not
paying its debts as they become due.
(f) Any involuntary lien, garnishment, attachment or the like in the
amount of $100,000 or more shall be issued against or shall attach to the
Collateral and the same is not released or bonded or insured to the satisfaction
of Fidelity within ten days.
(g) An event or circumstance shall have occurred which Fidelity believes
has or may result in a material adverse change in any Company's financial
condition, business or operations or the value of the Collateral.
(h) Any Company shall have a federal or state tax lien filed against any
of its properties, or shall fail to pay any federal or state tax when due, or
shall fail to file any federal or state tax form or report as and when due;
provided, however, that the failure of YMC to pay approximately $33,000 of past
due federal withholding taxes shall not constitute an "Event of Default" unless
YMC defaults under its payment plan with respect thereto with the Internal
Revenue Service.
(i) Either (i) any "accumulated funding deficiency" (as defined in Section
412(a) of the Internal Revenue Code of 1986, as amended) in excess of $100,000
exists with respect to any ERISA Plan, or (ii) any Termination Event occurs with
respect to any ERISA Plan and the then current value of such ERISA Plan's
benefit liabilities exceeds the then current value of such ERISA Plan's assets
available for the payment of such benefit liabilities by more than $100,000.
(j) Any Company suffers the entry against it a final judgment for the
payment of money in excess of $100,000, and either (i) such judgment is not paid
in full within 45 days after the entry of such judgment or (ii) such judgement
is not bonded or insured to the satisfaction of Fidelity.
(k) Fidelity shall believe that the prospect for payment or performance of
the Obligations has become impaired.
(l) Any guarantor of the Obligations shall repudiate his, her or its
obligations in respect of such guaranty.
(m) Century shall cease to own, directly or indirectly, 100% of the
outstanding capital stock of any Company.
(n) An "event of default" beyond any applicable cure period shall have
occurred under any Century Document or the Related Loan Agreement.
(o) An "event of default" beyond any applicable cure period shall have
occurred under any agreement, document or instrument evidencing any Debt
exceeding $100,000 of any Company and such "event of default" is not waived by
the holder of such Debt or otherwise cured by such Company, or any Debt
exceeding $100,000 of any Company is accelerated or called for payment prior to
the due date thereof.
Upon the occurrence of an Event of Default described in subsection (d) of this
section, all of the Obligations owing by the Companies to Fidelity under any of
the Transaction Documents shall thereupon be immediately due and payable,
without demand, presentment, notice of demand or of dishonor and nonpayment, or
any other notice or declaration of any kind, all of which are hereby expressly
waived by the Companies. During the continuation of any other Event of Default,
Fidelity, at any time and from time to time, may declare any or all of the
Obligations owing by the Companies to Fidelity under any of the Transaction
Documents immediately due and payable, all without notice, demand, presentment,
notice of demand or of dishonor and nonpayment, or any notice or declaration of
any kind, all of which are hereby expressly waived by the Companies. After any
such acceleration (whether automatic or due to declaration by Fidelity), any
obligation of Fidelity to make any further Advances or Term Advances or loans of
any kind under this Agreement or any other agreement with any Company shall
terminate.
The enumeration of Events of Default shall not impair the nature of the
Obligations as demand obligations, at all times payable upon demand pursuant
hereto.
16
Section 10. Remedies and application of Proceeds.
10.1 In addition to, and without limitation of, the foregoing provisions
of this Agreement, if an Event of Default shall have occurred and be continuing,
Fidelity may from time to time in its discretion, without limitation and without
notice except as expressly herein: (a) exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein, under the other
Transaction Documents or otherwise available to it, all the rights and remedies
of a secured party on default under the UCC (whether or not the UCC applies to
the affected Collateral); (b) require any Company to, and each Company hereby
agrees that it will at its expense, assemble all or part of the Collateral as
directed by Fidelity and make it available to Fidelity at a place to be
designated by Fidelity that is reasonably convenient to both parties; (c) reduce
its claim to judgment or foreclose or otherwise enforce, in whole or in part,
the security interest created hereby by any available judicial procedure; (d)
dispose of; at its office, on the premises or any Company or elsewhere, all or
any part of the Collateral, as a unit or in parcels, by public or private
proceedings; (e) buy the Collateral, or any part thereof; at any public sale, or
at any private sale if the Collateral is of a type customarily sold in a
recognized market or is of a type that is the subject to widely distributed
standard price quotations; (1) apply by appropriate judicial proceedings for
appointment of a receiver for the Collateral, or any part thereof, and each
Company hereby consents to any such appointment; and (g) at its discretion,
retain the Collateral in satisfaction of the Obligations whenever the
circumstances are such that Fidelity is entitled to do so under the UCC or
otherwise. Each Company agrees that, to the extent notice of sale shall be
required by law, at least five days' notice to such Company of the time and
place of any public sale of the Collateral or the time after which any private
sale of the Collateral is to be made shall constitute reasonable notification.
Fidelity shall not be obligated to make any sale of Collateral regardless of
whether any notice of sale has been given. Fidelity may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
10.2 If any Event of Default shall have occurred and be continuing,
Fidelity may in its discretion apply any Cash Collateral, and any cash proceeds
received by Fidelity in respect of any sale of; collection from, or other
realization upon all or any part of the Collateral, to any or all of the
following in such order as Fidelity may elect: (a) the repayment of all or any
portion of the Obligations; (b) the repayment of reasonable costs and expenses,
including reasonable attorneys' fees and legal expenses, incurred by Fidelity in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral, (iii) the exercise or enforcement of any of
the rights of Fidelity hereunder, or (iv) the failure of any Company to perform
or observe any of the provisions hereof; (c) the payment or other satisfaction
of any liens and other encumbrances upon any of the Collateral; (d) the
reimbursement of Fidelity for the amount of any obligations of any Company paid
or discharged by Fidelity, and of any expenses of Fidelity payable by any
Company hereunder or under the other Transaction Documents; (e) by holding the
same as Collateral; (I) the payment of any other amounts required by applicable
law (including, without limitation, Part 5 of Article 9 of the UCC or any
successor or similar applicable statutory provision); (g) after all Obligations
have been satisfied in full, at the request of USA Funding, by delivery to USA
Funding to be applied against Debt owed by the Companies to USA funding; and (h)
by delivery to such Company or to whomsoever shall be lawfully entitled to
receive the same or as a court of competent jurisdiction shall direct.
Section 11. Miscellaneous.
11.1 In the event that any Company commits any act or omission that
prevents or unreasonably interferes with (a) Fidelity's exercise of the rights
and privileges arising under the power of attorney granted in Section 8 of this
Agreement or (b) Fidelity's perfection of or levy upon the security interest
granted in the Collateral, including any seizure of any Collateral, such Company
acknowledges that such conduct will cause immediate, severe, incalculable and
irreparable harm and injury, and agrees that such conduct shall constitute
sufficient grounds to entitle Fidelity to an injunction, writ of possession, or
other applicable relief in equity, and to make such application for such relief
in any court of competent jurisdiction, without any prior notice to such
Company.
11.2 All rights, remedies and powers granted to Fidelity in this
Agreement, or in any other instrument or agreement given by any Company to
Fidelity or otherwise available to Fidelity in equity or at law, are cumulative
and may be exercised singularly or concurrently with such other rights as
Fidelity may have. These rights may be exercised from time to time as to all or
any part of the Collateral as Fidelity in its discretion may determine. No
waiver by Fidelity of its rights and remedies shall be effective unless the
waiver is in writing and signed by Fidelity. A waiver by
17
Fidelity of a right or remedy under this Agreement or any other Transaction
Document on one occasion shall not be deemed to be a waiver of such right or
remedy on any subsequent occasion. An Advance by Fidelity during the
continuation of an Event of Default shall not obligate Fidelity to make any
further Advances during the continuation of such Event of Default.
11.3 Any notice or communication with respect to this Agreement or any
other Transaction Document shall be given in writing, sent by (i) personal
delivery, (ii) expedited delivery service with proof of delivery, (iii) United
States mail, postage prepaid, registered or certified mail, or (iv) prepaid
telegram, telex or telecopy, addressed to each party hereto at its address set
forth below its signature hereon or to such other address or to the attention of
such other Person as hereafter shall be designated in writing by the applicable
party sent in accordance herewith. Any such notice or communication shall be
deemed to have been given either at the time of personal delivery or, in the
case of delivery service or mail, as of the date of first attempted delivery at
the address and in the manner provided herein, or in the case of telegram, telex
or telecopy, upon receipt. The Companies hereby agree that Fidelity may
publicize the transaction contemplated by this Agreement in newspapers, trade
and similar publications including, without limitation, the publication of a
"tombstone".
11.4 The term of this Agreement shall be for three years from the date
hereof (the original term and any extension thereof are herein called the
"Term") and from year to year thereafter unless either party hereto gives notice
to the other party hereto not more than 90 days or less than 60 days prior to
the end of the Term; provided, however, that Fidelity may terminate this
Agreement at any time effective immediately upon the occurrence of an Event of
Default; and provided, further, however, that the Companies may terminate this
Agreement upon the payment in full of the Obligations, including, without
limitation, any early termination fee required below. The Companies acknowledge
that termination of this Agreement at any time prior to the end of the Term
would result in the loss by Fidelity of the benefits of this Agreement and that
the damages incurred by Fidelity as a result of such termination would be
difficult and impractical to ascertain. Therefore, in the event this Agreement
is terminated prior to the end of the Term for any reason, the Companies shall
pay to Fidelity an early termination fee in an amount equal to (i) 3.00% of the
sum of the Facility Limit and the Term Limit if such termination occurs during
the first year of the Term, (ii) 2.00% of the sum of the Facility Limit and the
Term Limit if such termination occurs during the second year of the Term, or
(iii) 1.00% of the sum of the Facility Limit and the Term Limit if such
termination occurs thereafter during the Term, in each case to the maximum
extent permitted by applicable law. Any termination of this Agreement shall not
affect Fidelity's security interest in the Collateral, and this Agreement shall
continue to be effective, until all Obligations have been completed and
satisfied in full. No Company shall be entitled to terminate this Agreement as
to itself only, unless all Companies terminate this Agreement or Fidelity
consents to such termination. The Companies may not terminate this Agreement
unless they also simultaneously terminate the Related Loan Agreement in
accordance with the terms thereof.
11.5 Each and every provision, condition, covenant and representation
contained in this Agreement is, and shall be construed, to be a separate and
independent covenant and agreement. If any term or provision of this Agreement
shall to any extent be invalid or unenforceable, the remainder of the Agreement
shall not be affected thereby.
11.6 The Companies jointly and severally agree to indemnify, hold harmless
and defend all Indemnified Persons from and against any and all Indemnified
Claims other than those arising out of the gross negligence or willful
misconduct of the applicable Indemnified Person. THE FOREGOING INDEMNIFICATION
SHALL APPLY WHETHER OR NOT SUCH INDEMNIFIED CLAIMS ARE IN ANY WAY OR TO ANY
EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY,
OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY
INDEMNIFIED PERSON. Upon notification and demand, the Companies agree to provide
defense of any Indemnified Claim and to pay all costs and expenses of counsel
selected by any Indemnified Person in respect thereof. Any Indemnified Person
against whom any Indemnified Claim may be asserted reserves the right to settle
or compromise any such Indemnified Claim as such Indemnified Person may
determine in its sole discretion, and the obligations of such Indemnified
Person, if any, pursuant to any such settlement or compromise shall be deemed
included within the Indemnified Claims. Except as specifically provided in this
section, the Companies waive all notices from any Indemnified Person. The
provisions of this Section 11.6 shall survive the termination of this Agreement.
18
11.7 All grants, covenants and agreements contained in this Agreement
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Companies may not delegate
or assign any of their duties or obligations under this Agreement without the
prior written consent of Fidelity. FIDELITY RESERVES THE RIGHT TO ASSIGN ITS
RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT IN WHOLE OR IN PART TO ANY PERSON OR
ENTITY. Without limiting the generality of the foregoing, Fidelity may from time
to time grant participations in all or any part of the Obligations to any Person
on such terms and conditions as may be determined by Fidelity in its sole and
absolute discretion, provided that the grant of such participation shall not
relieve Fidelity of its obligations hereunder nor create any additional
obligation of the Companies.
11.8 Any action permitted or provided to be taken or omitted by Fidelity
hereunder may be taken or omitted, as the case may be, by Fidelity in its sole
and absolute discretion, and any consent or waiver required of Fidelity or
determination to be made by Fidelity hereunder may be given, withheld or made,
as the case may be, by Fidelity in its sole and absolute discretion.
11.9 ALL OBLIGATIONS HEREUNDER ARE THE JOINT AND SEVERAL OBLIGATION OF ALL
COMPANIES. ALL OBLIGATIONS AND INDEBTEDNESS NOW OR HEREAFTER OWING TO FIDELITY
BY THE COMPANIES JOINTLY AND SEVERALLY OR BY ANY COMPANY INDIVIDUALLY SHALL BE
SECURED BY ALL OF THE COLLATERAL, AND FIDELITY MAY HOLD AND APPLY AND REAPPLY
ALL MONIES, PROPERTY AND OTHER COLLATERAL OF ANY COMPANY IN PAYMENT OF ANY
INDEBTEDNESS, LIABILITIES OR OBLIGATIONS OF ANY OF THE COMPANIES UNDER THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT. NO COMPANY SHALL HAVE, AND EACH
COMPANY EXPRESSLY WAIVES, ANY, RIGHTS OF SUBROGATION, REIMBURSEMENT, INDEMNITY,
EXONERATION, CONTRIBUTION OR ANY SIMILAR CLAIM OR AGAINST ANY OTHER COMPANY OR
ANY OTHER PERSON DIRECTLY OR CONTINGENTLY LIABLE FOR THE OBLIGATIONS OR AGAINST
OR WITH RESPECT TO ANY OTHER COMPANY'S PROPERTY (INCLUDING, WITHOUT LIMITATION,
ALL OF SUCH COMPANY'S PROPERTY WHICH SERVES AS COLLATERAL FOR ITS OBLIGATIONS TO
FIDELITY). IN ADDITION, EACH COMPANY WAIVES ANY RIGHT TO ENFORCE ANY REMEDY
WHICH FIDELITY NOW HAS OR MAY HEREAFTER HAVE AGAINST ANY OTHER COMPANY.
NOTWITHSTANDING THE FOREGOING OR ANY OTHER PROVISION OF THIS AGREEMENT, IT IS
UNDERSTOOD AND AGREED THAT NO COMPANY SHALL BE LIABLE HEREUNDER FOR ANY PORTION
OF THE OBLIGATIONS IN EXCESS OF SUCH COMPANY'S "MAXIMUM LIABILITY AMOUNT." AS
USED HEREIN, THE TERM "MAXIMUM LIABILITY AMOUNT" SHALL MEAN, WITH RESPECT TO ANY
COMPANY, THE LESSER OF (a) THE AMOUNT OF THE OBLIGATIONS OR (b) THE SUM OF (I)
THE OUTSTANDING PRINCIPAL BALANCE OF THE ADVANCES TO SUCH COMPANY HEREUNDER,
ACCRUED AND UNPAID INTEREST THEREON, ANY OTHER FEES AND CHARGES HEREUNDER
ALLOCABLE OR ATTRIBUTABLE DIRECTLY TO SUCH COMPANY AND SUCH COMPANY'S
PROPORTIONATE SHARE OF ANY OTHER FEES AND CHARGES HEREUNDER AND (ii) THE MAXIMUM
ADDITIONAL AMOUNT THAT WOULD NOT RESULT IN SUCH COMPANY'S LIABILITY HEREUNDER
CONSTITUTING A FRAUDULENT TRANSFER OR CONVEYANCE UNDER APPLICABLE STATE OR
FEDERAL LAW AS DETERMINED BY A COURT OF COMPETENT JURISDICTION.
11.10 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO THE RULES
THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT ALL MATTERS OR
ISSUES PERTAINING TO USURY OR THE MAXIMUM ALLOWABLE CHARGE UNDER LAW FOR THE
USE, DETENTION OR FORBEARANCE OF MONEY SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF CALIFORNIA. EACH COMPANY HEREBY IRREVOCABLY SUBMITS ITSELF TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN DALLAS COUNTY,
TEXAS AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY
LEGAL PROCEEDING RELATING TO THIS AGREEMENT, ANY BORROWING HEREUNDER OR ANY
OTHER RELATIONSHIP BETWEEN FIDELITY AND EACH COMPANY BY ANY MEANS ALLOWED UNDER
STATE OR FEDERAL LAW. ANY LEGAL PROCEEDING ARISING OUT OF OR IN ANY WAY RELATED
TO THIS AGREEMENT, ANY
19
BORROWING HEREUNDER OR ANY OTHER RELATIONSHIP BETWEEN FIDELITY AND EACH COMPANY
SHALL BE BROUGHT AND LITIGATED EXCLUSIVELY IN ANY ONE OF THE STATE OR FEDERAL
COURTS LOCATED IN DALLAS COUNTY, TEXAS HAVING JURISDICTION. THE PARTIES HERETO
HEREBY WAIVE AND AGREE NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE, THAT ANY SUCH PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT
THE VENUE THEREOF IS IMPROPER.
11.11 EACH OF EACH COMPANY AND FIDELITY HEREBY (A) IRREVOCABLY WAIVES, TO
THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE To A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY OR ASSOCIATED HEREWITH; (B) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (C) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (I))
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS PARAGRAPH.
11.12 THIS AGREEMENT AND THE DOCUMENTS DESCRIBED HEREIN AND DELIVERED IN
CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT OF THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. NO MODIFICATION OR AMENDMENT OF OR SUPPLEMENT TO THIS AGREEMENT OR TO
ANY SUCH DOCUMENTS SHALL BE VALID OR EFFECTIVE UNLESS THE SAME IS IN WRITING AND
SIGNED BY THE PARTY AGAINST WHOM IT IS SOUGHT TO BE ENFORCED.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
20
The undersigned have entered into this Agreement as of the date first
written above.
FIDELITY FUNDING, INC., a Texas corporation
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxx
-----------------------------------
Title: President
----------------------------------
Mailing Address: 00000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Street Address: 00000 Xxxxx Xxxxx, Xxxx 000
Xxxxxx, Xxxxx 00000
CENTURY ELECTRONICS MANUFACTURING
(NE), INC., a Massachusetts corporation
By: /s/ Xxx XxXxxx
---------------------------------------
Name: Xxx XxXxxx
-----------------------------------
Title: President
----------------------------------
Mailing Address: 000 Xxxxx Xxxx Xxxx
Xxxxxxxxxxx, XX 00000
Street Address: 000 Xxxxx Xxxx Xxxx
Xxxxxxxxxxx, XX 00000
Other Places of Business:
None.
Trade, Fictitious and Assumed Names used:
Design Circuits, Inc.
Y.M.C. MANUFACTURING COMPANY,
a California corporation
By:
---------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Mailing Address: 0000 Xxxxx Xxxxxxxxx
Xxxxx Xxxxx, XX 00000
Street Address: 0000 Xxxxx Xxxxxxxxx
Xxxxx Xxxxx, XX 00000
Trade, Fictitious and Assumed Names used:
None.
The undersigned have entered into this Agreement as of the date first
written above.
FIDELITY FUNDING, INC., a Texas corporation
By:
---------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Mailing Address: 00000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Street Address: 00000 Xxxxx Xxxxx, Xxxx 000
Xxxxxx, Xxxxx 00000
CENTURY ELECTRONICS MANUFACTURING
(NE), INC., a Massachusetts corporation
By:
---------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Mailing Address: 000 Xxxxx Xxxx Xxxx
Xxxxxxxxxxx, XX 00000
Street Address: 000 Xxxxx Xxxx Xxxx
Xxxxxxxxxxx, XX 00000
Other Places of Business:
None.
Trade, Fictitious and Assumed Names used:
Design Circuits, Inc.
Y.M.C. MANUFACTURING COMPANY,
a California corporation
By: /s/ Xxxxxx Xxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxx
-----------------------------------
Title: President, West Coast Operations
----------------------------------
Mailing Address: 0000 Xxxxx Xxxxxxxxx
Xxxxx Xxxxx, XX 00000
Street Address: 0000 Xxxxx Xxxxxxxxx
Xxxxx Xxxx, XX 00000
Trade, Fictitious and Assumed Names used:
None.
21
QUALITY MANUFACTURING SERVICES,
INC., a California corporation
By: /s/ Xxxxxx Xxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxx
-----------------------------------
Title: President, West Coast Operations
----------------------------------
Mailing Address: 0000 Xxxxx Xxxxxxxxx
Xxxxx Xxxxx, XX 00000
Street Address: 0000 Xxxxx Xxxxxxxxx
Xxxxx Xxxxx, XX 00000
Trade, Fictitious and Assumed Names used:
None.
22
EXHIBIT A
FORM OF BORROWING BASE CERTIFICATE
[COMPANY NAME]
Date:__________
Report #:___________
-----------------------------------------------------------------------------------------------------------------------------------
A B C
-----------------------------------------------------------------------------------------------------------------------------------
COLLATERAL FIDELITY FIDELITY USA FUNDING
ACCOUNTS INVENTORY ACCOUNTS
RECEIVABLE RECEIVABLE
-----------------------------------------------------------------------------------------------------------------------------------
1. Gross Collateral as of last report
# __________ Dated: ______________
(line 6 from prior report)
-----------------------------------------------------------------------------------------------------------------------------------
2. ADD sales and inventory additions per
attached
-----------------------------------------------------------------------------------------------------------------------------------
3. ADD debit memos, other adjustments
per attached
-----------------------------------------------------------------------------------------------------------------------------------
4. LESS cash collections and inventory
reductions (received by Fidelity
since prior report)
-----------------------------------------------------------------------------------------------------------------------------------
5. LESS discounts, CMs, other
adjustments per attached
-----------------------------------------------------------------------------------------------------------------------------------
6. GROSS COLLATERAL PER THIS REPORT
-----------------------------------------------------------------------------------------------------------------------------------
7. Ineligible A/R (Fidelity) Ineligible Inventory/(Fidelity) Ineligible A/R (USA Funding)
-----------------------------------------------------------------------------------------------------------------------------------
a. Past due (over 90 a. Obsolete a. Past due (over 90
days from days from
invoice) invoice)
-------- ----------------- -------------------
b. Credit over 30 b. Slow moving b. Credit over 30
days from days from
invoice) invoice)
-------- ----------------- -------------------
c. Cross Aging 50% c. Packaging c. Cross Aging 50%
-------- ----------------- -------------------
d. COD Sales d. >60 days old d. COD Sales
-------- ----------------- -------------------
e. Foreign e. Consigned/Leased e. Foreign
-------- ----------------- -------------------
f. Interco., Contra f. Other f. Interco., Contra
Accounts Accounts
-------- ----------------- -------------------
g. Unreconciled A/R g. Unreconciled A/R
Overage Overage
-------- ----------------- -------------------
h. Nortel and h. Non-Nortel and
Affiliates Affiliates
-------- ----------------- -------------------
i. Other i Other
-----------------------------------------------------------------------------------------------------------------------------------
8. TOTAL INELIGIBLE PER THIS REPORT
(sum of 7a through h)
-----------------------------------------------------------------------------------------------------------------------------------
9. NET ELIGIBLE COLLATERAL (line 6 minus 8)
-----------------------------------------------------------------------------------------------------------------------------------
10. Advance Rate 80% 50% 80%
-----------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
11. Collateral Availability: Sum of (a) A/R
Availability and, if applicable, (b) lesser of
(i) Inventory Availability or (ii) $3,000,000
less Inventory in any other Company's
Borrowing Base = $_________
--------------------------------------------------------------------------------
12. Borrowing Base: ________ lesser of Collateral
Availability or Facility Limit ($10,000,000)
less Advances to other Companies and Advances
to Company under the Related Loan Agreement
--------------------------------------------------------------------------------
13. LESS Special Reserve
--------------------------------------------------------------------------------
14. NET AVAILABILITY BEFORE LOAN BALANCE
(line 12 minus 13)
--------------------------------------------------------------------------------
LOAN
--------------------------------------------------------------------------------
15. Loan balance per last report (line 22 from
prior report)
--------------------------------------------------------------------------------
16. LESS payments from collections (same as line 4)
--------------------------------------------------------------------------------
17. BALANCE per Fidelity report prior to new
activity
--------------------------------------------------------------------------------
18. LESS additional payments (other than
collections)
--------------------------------------------------------------------------------
19. ADD loan adjustments: specify _________
(Interest, Fees, NSF, etc.)
--------------------------------------------------------------------------------
20. ADD Line Maintenance Fee 0% of line 2
--------------------------------------------------------------------------------
21. ADD Advance requested per this report
--------------------------------------------------------------------------------
22. NEW LOAN BALANCE (not to exceed line 14)
--------------------------------------------------------------------------------
23. EXCESS AVAILABILITY (line 14 minus 22)
--------------------------------------------------------------------------------
The undersigned hereby certifies to Fidelity Funding, Inc. ("Fidelity")
and USA Funding, Inc. ("USA Funding") that:
1. He is the duly elected, qualified, and acting __________ of __________
(the "Company"), is familiar with the facts herein certified and is duly
authorized to certify such facts and make and deliver this Borrowing Base
Certificate for and on behalf of the Company, pursuant to that certain Loan and
Security Agreement (as from time to time supplemented or amended, the "Fidelity
Agreement"), dated as of December 22, 1998, among Century Electronics
Manufacturing (NE), Inc., Y.M.C. Manufacturing Company and Quality Manufacturing
Services, Inc. and Fidelity, and that certain Loan Agreement (as from time to
time supplemented or amended, the "USA Funding Agreement"), dated as of December
22, 1998, among Century Electronics Manufacturing (NE), Inc., Y.M.C.
Manufacturing Company and Quality Manufacturing Services, Inc. and USA Funding.
2. All representations and warranties made by the Company in the Fidelity
Agreement, the USA Funding Agreement or any other instrument, document,
certificate or other agreement executed in connection therewith (collectively,
the "Transaction Documents") delivered on or before the date hereof are true on
and as of the date hereof as if such representations and warranties had been
made as of the date hereof.
3. No Event of Default or any event that, with the giving of notice, the
passage of time or both, would constitute an Event of Default has occurred and
is existing.
4. The Company has performed and complied with all agreements and
conditions required in the Transaction Documents to be performed or complied
with by it on or prior to the funding of the Advances requested hereby.
5. After Fidelity makes the Advances requested hereby, the aggregate
amount of all outstanding Advances will not exceed Facility Limit and the
aggregate amount of all outstanding Advances to the Company will not exceed the
Company's Borrowing Base under either the Fidelity Agreement or the USA Funding
Agreement.
6. All information contained in this Borrowing Base Certificate is true,
correct and complete.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Agreement.
IN WITNESS WHEREOF, this instrument is executed by the undersigned as
of___________, ________.
COMPANY NAME:
----------------------------------------
By:
-------------------------------------
Name
---------------------------------
Title:
-------------------------------
SCHEDULE 4.2
YMC:
The following financing statements have been filed against YMC as debtor:
Filing office File Date File Number Secured Party
------------- --------- ----------- -------------
California Secretary of State 12/17/93 93253832 GECC
California Secretary of State 02/02/94 94018149 Copelco
California Secretary of State 06/12/95 9516560174 GECC
California Secretary of State 10/09/96 9628460927 GECC
California Secretary of State 12/02/96 9633960367 GECC
YMC is a defendant in a lawsuit filed by GECC related to breached
equipment leases (Action No. CV 773329 filed in the Superior Court of Santa
Xxxxx county, California).
OMS:
----
California Secretary of State 05/18/94 94099493 Copelco
California Secretary of State 03/17/95 9507961133 Orix
California Secretary of State 08/04/95 9522060032 AT&T
California Secretary of State 01/23/96 0000000000 Bank of West
California Secretary of State 03/25/96 9608561387 CIT
California Secretary of State 09/12/96 9626060737 Colonial
California Secretary of State 07(30/97 9721860048 Colonial
California Secretary of State 07/27/98 9820860816 CIT
CEM:
----
California Secretary of State 07/27/98 9820860816 CIT
Massachusetts Secretary of State 07/01/97 480057 Continental Resources
Massachusetts Secretary of State 04/10/98 542119 Copelco
Massachusetts Secretary of State 04/13/98 542677 AT&T Leasing
CEM Continued:
--------------
Marlborough Town Clerk 10/14/97 38094 NEC
Marlborough Town Clerk 04/17/98 38495 Copelco
Massachusetts Secretary of State 05/02/94 232379 Avnet
Massachusetts Secretary of State 10/20/94 268466 TAL Financial
Massachusetts Secretary of State 11/17/94 274390 TAL Financial
Massachusetts Secretary of State 12/13/94 279757 Charter Financial
Massachusetts Secretary of State 08/22/95 333568 Textron
Massachusetts Secretary of State 07/17/96 404008 AT&T Leasing
Massachusetts Secretary of State 10/14/97 503506 NEC
Massachusetts Secretary of State 11/12/93 197470 Textron
SCHEDULE 4.5
QMS used to be located at 0000 Xxxxxxxx Xxxxxx, Xxx Xxxx, Xxxxxxxxxx 00000.
SCHEDULE 6
--------------------------------------------------------------------------------
12/31/97
--------------------------------------------------------------------------------
CLIENT C1114
--------------------------------------------------------------------------------
DATE DATE
NO. DESCRIPTION ACQUIRED SOLD
--- ----------- -------- ----
FORM 1120
---------
AUTOMOBILES / TRANSPORTATION EQUIPMENT
--------------------------------------
51 AUTO 1/27/94
79 AUTO-GMC VENDURA VAN 12/17/96
FURNITURE AND FIXTURES
----------------------
7 TABLES & SHELVES 5/01/91
24 FIXTURES 5/18/92
38 FENCE 10/31/91
61 STORAGE/SHELVES/DIVIDERS 3/15/96
62 SHELVES 5/30/96
63 XXXXXXX OFFICE FURNITURE 9/19/96
MACHINERY AND EQUIPMENT
-----------------------
1 EQUIPMENT 1/01/90
2 XXXXXX COPIER 5/11/90
3 DIP LEAD CUTTIE 3/21/90
4 XXXXXX COPIER 9/10/90
5 N/C XXXXX STAT 2/11/91
6 ANSWERING MACHINE 3/15/91
8 SMT SYSTEMS 6/18/91
9 MONITOR 7/09/91
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
12/31/97
--------------------------------------------------------------------------------
CLIENT C1114
--------------------------------------------------------------------------------
DATE DATE
NO. DESCRIPTION ACQUIRED SOLD
--- ----------- -------- ----
FORM 1120 (CONT)
----------------
MACHINERY AND EQUIPMENT (CONT)
------------------------------
10 EMZ 745 7/23/91
11 FEEDER & WIRE 8/01/91
12 FURNITURE & WIRE 11/01/91
13 RVIDV & REVIE 12/03/91
14 COMPRESSOR 7/09/91
15 CUTTER/FORMING 10/25/91
16 COMPRESSOR 6/03/92
17 COLLECTOR 5/01/92
18 LEAD CUT MACHINE 11/01/92
19 COMPUTER 7/01/92
20 SOLDER 2/22/92
21 EQUIPMENT 3/31/92
22 TOOLS 7/22/92
23 EQUIP QUAD SYS 1/07/92
25 DISCS & LAMP 11/07/91
26 SCR PRINTER 6/04/93
27 R & C MACHINE 10/21/93
28 R & C REFLOW OVEN 11/16/93
29 FUJI EQUIPMENT 12/01/93
30 TEXTRON EQUIPMENT 12/01/93
31 COMPUTER 4/06/94
32 COMPUTER 4/08/94
33 COMPUTER 11/08/94
34 COMPUTER 12/05/94
35 COMPUTER 12/29/94
36 COMPUTER 12/29/94
37 FURNITURE 5/19/94
39 EQUIPMENT 2/01/94
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
12/31/97
--------------------------------------------------------------------------------
CLIENT C1114
--------------------------------------------------------------------------------
DATE DATE
NO. DESCRIPTION ACQUIRED SOLD
--- ----------- -------- ----
FORM 1120 (CONT)
----------------
MACHINERY AND EQUIPMENT (CONT)
------------------------------
40 TELEPHONE 6/21/94
41 EQUIPMENT 6/30/94
42 MACHINE 8/10/94
43 EQUIPMENT 9/29/94
44 EQUIPMENT 10/17/94
45 EQUIPMENT 11/08/94
46 MACHINE 11/28/94
47 MACHINE 12/15/94
48 EQUIPMENT 12/27/94
49 EQUIPMENT 12/27/94
50 MACHINE 9/12/94
52 MACHINE 11/08/94
53 EQUIPMENT 1/01/90
54 FIX MACHINE 3/06/95
55 CP VI & WAVE SO 6/05/95
56 MACHINERY 6/28/95
57 WATER CLEANER 7/10/95
58 DISPENSER 81/1/95
59 TRX I-MISER 8/11/95
60 FEEDER 9/11/95
64 CNC COMM. -PHONE INSTALL 10/28/96
65 CNC COMM. - PHONE 11/04/96
66 EQUIP CONCEPTRONICS 2/21/96
67 SCREEN PRINTER 3/07/96
68 TEST EQUIPMENT 3/13/96
69 EQUIPMENT 3/31/96
70 REFLOW OVEN 4/18/96
71 EQUIPMENT 5/08/96
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
12/31/97
--------------------------------------------------------------------------------
CLIENT C1114
--------------------------------------------------------------------------------
DATE DATE
NO. DESCRIPTION ACQUIRED SOLD
--- ----------- -------- ----
FORM 1120 (CONT)
----------------
MACHINERY AND EQUIPMENT (CONT)
------------------------------
72 EQUIPMENT - CONVEYOR TECH 8/07/96
73 NTI/AUTOPRINT STENCIL PEN 8/15/96
74 TOSHIBA COPIER 9/23/96
75 CDC4100/CONVEYOR 10/03/96
76 TAPE CUT MACHINE 10/30/96
77 TAPE CUT MACHINE 10/30/96
78 CHIP PACER/FEEDER 10/31/96
83 COMPUTER 1/13/97
84 COMPUTER NETWORKING 1/31/97
IMPROVEMENTS
------------
80 LNI-NEW BLDG DEMOLITION 6/22/96
81 LNI-ELECTRICAL 8/23/96
82 LNI-ARCHITECH DRAWING 9/04/96
GRAND TOTAL DEPRECIATION
--------------------------------------------------------------------------------
SCHEDULE 2
Legal Description of Leased Premises
All that certain real property situated in the City of Santa Xxxxx, County
of Santa Xxxxx, State of California, described as follows:
All of Parcel 1 as shown on that certain Parcel Map filed for record in
the Office of the Recorder of Santa Xxxxx County on May 22,1980 in Book 463 of
Maps, Page 42.
Record Owners of Leased Premises
Xxxxxxx Xxxxxxxxx, Trustee for the Xxx Xxxxxx
Xxxx Charitable Trust A, under Trust Agreement
dated June 25, 1980, as amended
Xxxxxxx Xxxxxxxxx, Trustee for the Xxx Xxxxxx
Xxxx Charitable Trust B, under Trust Agreement
dated June 25,1980, as amended
Xxxxxxx Xxxxxxxxx, Trustee for the Charitable
Lead Trust, under Trust Agreement dated
March 17,1987, as amended
Xxxxxxxx X. Xxxxx, Co-Trustee for the Buck
Trust for the benefit of Xxxx Xxxx under
Irrevocable Trust Agreement dated March 17,
1987, as amended
Xxxxxx X. Xxxxxx, Co-Trustee for the Buck
Trust for the benefit of Xxxx Xxxx under
Irrevocable Trust Agreement dated March 17,
1987, as amended
PACE PARTNERS,
a California limited partnership
THE BIANCHI JOINT VENTURE,
a California General Partnership
ONE SOUTH PARK INVESTORS,
a California General Partnership
FKLM PROPERTIES,
a California General Partnership
Supporting Schedules 1997
Company: Quality Manufacturing Services, Inc. EIN: 77-041173
********************************************************************************
Form 4562 Asset Listing, Electronics
--------------------------------------------
-----Asset---------- Acq. Pct. I
# Description T Date Used C
--------------------------------------------
1 FURNITURE & N 070190 100% N
2 MACHINERY/EQ N 070192 100% N
3 MACHINERY/EQ N 010193 100% N
4 FURNITURE & N 070193 100% N
5 MACHINERY/EQ N 100193 100% N
6 REFRIGERATOR N 013194 100% N
7 MICROWAVE N 013194 100% N
8 AQ PLASTIC T N 013194 100% N
9 REP MACHINE N 013194 100% N
10 TEST KIT S M N 013194 100% N
11 FURNITURE N 073194 100% N
12 QUAD SYSTEM N 073194 100% N
13 QU PLASTIC T N 073194 100% N
14 CAMERA LENS N 073194 100% N
15 (2) 486DX CO N 073194 100% N
16 (2) COMPUTER N 073194 100% N
17 QUAD IVC (LE N 090194 100% N
18 SHELVES N 093094 100% N
19 QA PLASTIC N 093094 100% N
20 DE HAART PRI N 093094 100% N
21 CAMERA LENS N 093094 100% N
22 QUAD SYSTEMS N 031095 100% N
23 QUAD IIC (LE N 031095 100% N
24 SHELVES/ACTI N 031495 100% N
25 QUAD SYSTEMS N 052095 100% N
00 X X XXXXXX X 060895 100% N
27 QUAD SYSTEMS N 060995 100% N
28 LEASEHELD IM N 071595 100% N
29 MANUAL SCREE N 081495 100% N
30 L/H - COSTEL N 083195 100% N
31 L/H AP I DES N 083195 100% N
32 SHELVES/ACTI N 090195 100% N
33 FGR-RIB TIT N 090595 100% N
34 WATER FILTER N 091195 100% N
35 BENCH/C & H N 092095 100% N
36 QUAD SYSTEMS N 120495 100% N
37 HEPOCO N 123195 100% N
38 HI-TECH N 123195 100% N
39 FURNITURE/MS N 010696 100% N
40 TONICS WATER N 012496 100% N
41 CLEANER/AMTS N 030196 100% N
42 FEEDER/REEL N 030696 100% N
43 QUAD QSP-W D N 031396 100% N
44 20 X 20 QUIC N 032096 100% N
45 WAVE SOLDER N 080296 100% N
46 AIR POWERED N 080596 100% N
47 WAVE SOLDER N 080696 100% N
48 AMISTAR AXIA N 090996 100% N
49 TESTER FOR T N 101496 100% N
50 TWO COMPUTER N 123196 100% N
Supporting Schedules 1997
Company: Quality Manufacturing Services, Inc. EIN: 77-041173
********************************************************************************
Form 4562 Asset Listing. Electronics
--------------------------------------------
-----Asset---------- Acq. Pct. I
# Description T Date Used C
--------------------------------------------
51 CHEVY VAN N 021397 100% N
52 MESH POLYPRO N 033197 100% N
53 WORK-HOLDER- N 040997 100% N
54 2 TECHMEDIA N 060597 100% N
55 QUAD IIC ASS N 071097 100% N
-------
Prior Year Totals
Current Year Totals
=======
Supporting Schedules 1997
Company: Quality Manufacturing Services, Inc. EIN: 77-041173
********************************************************************************
Form 4562 Schedules, Electronics
Alternative Minimum Tax/Tax Preferences
Depr. of property placed in service after 1986
--------------------------------------------------------------------------------
Acq.
# Description Date
--------------------------------
1 MACHINERY/EQ 010193
2 FURNITURE & 070193
3 MACHINERY/EQ 100193
4 QUAD IVC (LE 090194
5 QUAD SYSTEMS 031095
6 QUAD IIC (LE 031095
7 SHELVES/ACTI 031495
8 QUAD SYSTEMS 052095
9 X X XXXXXX 060895
10 QUAD SYSTEMS 060995
11 LEASEHOLD IM 071595
12 MANUAL SCREE 081495
13 L/H - COSTEL 083195
14 L/H AP I DES 083195
15 SHELVES/ACTI 090195
16 FGR-RIB TIT 090595
17 WATER FILTER 091195
18 BENCH/C & H 092095
19 QUAD SYSTEMS 120495
20 HEPOCO 123195
23 IONICS WATER 012496
24 CLEANER/AMTS 030196
25 FEEDER/REEL 030696
26 QUAD QSP-W D 031396
27 20 1 20 QUIC 032096
28 WAVE SOLDER 080296
29 AIR POWERED 080596
30 WAVE SOLDER 080696
31 AMISTAR AXIA 090996
32 TESTER FOR T 101496
33 TWO COMPUTER 123196
34 CHEVY VAN 19 021397
35 MESH POLYPRO 033197
36 WORK-HOLDER- 040997
37 2 TECHMEDIA 060597
38 QUAD IIC ASS 071097
Prior Year Totals
Current: Year Totals
Supporting Schedules 1997
Company: Quality Manufacturing Services, Inc. EIN: 77-041173
********************************************************************************
Form 4562 Schedules. Electronics
State Depreciation
--------------------------------------------------------------------------------
Asset Acq.
# Description Date
--------------------------------
1 FURNITURE & 070190
2 MACHINERY/EQ 070192
3 MACHINERY/EQ 010193
4 FURNITURE & 070193
5 MACHINERY/EQ 100193
6 REFRIGERATOR 013194
7 MICROWAVE 013194
8 AQ PLASTIC T 013194
9 REP MACHINE 013194
10 TEST KIT S M 013194
11 FURNITURE 073194
12 QUAD SYSTEM 073194
13 QU PLASTIC T 073194
14 CAMERA LENS 073194
15 (2) 486DX CO 073194
16 (2) COMPUTER 073194
00 XXXX XXX (XX 000000
18 SHELVES 093094
19 QA PLASTIC 093094
00 XX XXXXX XXX 000000
22 CAMERA LENS 093094
22 QUAD SYSTEMS 031095
00 XXXX XXX (XX 000000
24 SHELVES/ACTI 031495
25 QUAD SYSTEMS 052095
26 X X XXXXXX 060895
27 QUAD SYSTEMS 060995
28 LEASEHOLD IM 071595
29 MANUAL SCREE 081495
30 L/H - COSTEL 083195
31 L/H AP I DES 083195
32 SHELVES/ACTI 090195
33 FGR-RIB TIT 090595
34 WATER FILTER 091195
35 BENCH/C & H 092095
36 QUAD SYSTEMS 120495
37 HEPOCO 123195
38 HI-TECH 123195
39 FURNITURE/MS 010696
40 IONICS WATER 012496
41 CLEANER/AMTS 030196
42 FEEDER/REEL 030696
43 QUAD QSP-W D 031396
44 20 X 20 QUIC 032096
45 WAVE SOLDER 080296
46 AIR POWERED 080596
Supporting Schedules 1997
Company: Quality Manufacturing Services, Inc. EIN: 77-041173
********************************************************************************
Form 4562 Schedules. Electronics
State Depreciation
--------------------------------------------------------------------------------
Asset Acq.
# Description Date
--------------------------------
47 WAVE SOLDER 080696
48 AMISTAR AXIA 090996
49 TESTER FOR T 101496
50 TWO COMPUTER 123196
51 CHEVY VAN 19 021397
52 MESH POLYPRO 033197
53 WORK-HOLDER- 040997
54 2 TECHMEDIA 060597
55 QUAD IIC ASS 071097
Prior Year Totals
Current Year Totals
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
--------------------------------------------------------------------------------
1 LOT Tables, Hand & Power Tools, Vise, Parts $
Cabinets, Stack Chairs
2 1 Multiton MXL2760 Xxxxxxxxx Xxxxxx Xxxx, 00000
3 LOT Delta Double End Grinder, Drill Press,
Router, Bench, Electric Tools, Power Drill,
Skil Saw, Screw Gun
4 1 BMA TM-SC Environmental Test chamber, -000
Xxx. X - 000 Xxx. F, s/n 318
5 LOT Approx. 74' of 27" Roller Conveyor
6 XXX 0 Xxxxx, Xxxx, Xxxxxxxx, Xxxxx
0 XXX Xxxx, Table, Bookcase, Chair
8 LOT Desk, Table, File, Bookcase, Chairs
9 XXX 0 Xxxxx, Xxxxxxxx Xxxx, Xxxxx
00 XXX Xxxxxx Rack & 6 Sections of Shelving, Table,
Stairway, Wire Chrome Rack
11 1 Xxxxxxx Denver Electra-Screw Model EBBSDB,
15 Horsepower s/n U76540, w/Integrated
Dryer, Vertical Tank & Water Separator
12 8 Quad 44mm Feeders
13 1 West Kleen Formula 3M Plus Water Di System,
s/n 3M Plus/793/4CD3350, Aqueous Cleaning/
Filters System, 20" w/Vacuum Blower,
Prewash, Wash, Air Knives, Dryer, H20 180
Gal. Plastic Holding Tank v/Pump & Filtration
14 3 Vision Eng. Mantis Inspection Stations, s/n
H06767 & N/A
15 5 2-Sided Assembly Stations w/Mag Lamps,
Solderers, Hand Tools
16 LOT Approx. 2000 Black Totes
17 LOT Approx. 600 Black Board Trays
18 LOT Stools, Benches, Shelving, Folding Tables,
Refrigerator, Wire Chrome Racks, Supply
Cabinets
--------------------------------------------------------------------------------
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
--------------------------------------------------------------------------------
19 2 2-Sided Workstations $
20 LOT Shelving, Chairs, Pallet Rack, Blowers,
Heaters, 2 Temp. Controllers, Power Strips,
Totes
21 LOT Pallet Xxxx, Hand Truck, Desk, Tables, Pallet
Racks, Dock Plate, Furniture
22 1 Chemical Storage Room, 15'x8'x10' w/Exhaust
23 1 2-Dr. Chemical Cabinet
24 2 Presto Self-Charging Electric Stackers, 1000#
& 300# Cap.
25 3 Component Counting Meters
26 1 Genrad 1692 RLC Digi Bridge
27 LOT Floor Polisher, Vacuum, Band Truck, Supply
Cabinet
28 1 Blue M. Bench Top Oven
29 1 Mech-El Model 202 Wire Bonder, s/n 5507
30 1 Mech-El Model 9010 Wire Bonder, Aluminum, s/n
0140
31 1 Mech-El Model 907 Wedge Bonder, s/n 5496-1983
32 1 Mech-El Model 907 Wedge Bonder, s/n 3718 (No
Scope)
33 LOT 5 Folding Tables, File, Shelving, Chairs.
Refrigerator., Vacuum, Pump
34 LOT 2 Desks, Bookcases, File, Test Kit, Shelving,
Refrigerator, Supply Cabinet
35 1 23 1/2x13 3/4 Manual Screen Printer
36 LOT Approx. 120 Aluminum Screen Frames
37 2 Vision Mantis Inspection Stations
38 3 12"x12" Screen Printers
--------------------------------------------------------------------------------
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
--------------------------------------------------------------------------------
39 1 Ersa Model 300 12" Conveyor Tunnel Oven, $
8-Zone, s/n 4574-7, l-R
40 11 Workstations w/Mag Lumps, Solder Workstations
41 1 OK Ind. MTR5000 series Solder Rework
Stations w/OK SMW1000 Table
42 1 Universal Dyna/Pert System Sequencer, 40 Station
43 1 Universal Multi-Nodule Dip Inserter
44 1 Universal A-I Inserter VCD Single Read l8"X
18" Rotary Table
45 12 4' Steel 2-Sided Assembly Stations
46 1 Hewlett Packard 6236B Power Supply
47 1 Xxxxxx 16" Wave Solderer, Finger Type Model
20521-5, s/n AT11422
48 1 Electrovert Ultrapak 445 4" Wave Solderer,
3-Stage Preheat, Flux Type UPK-445 15" F,
Dual Wave, s/n UPK12466-0937-1990, 1800 Lb.
Cap., Finger Type
49 1 Blue M 10-Tray Elec. Oven, Model DC-246G, s/n
DC-5377, 360 Deg. C - 600 Deg. F
50 1 Kenco Model 500 Omega Meter Ionic Contamination
Test Systems, s/n 5035
51 LOT 2 AMP FPCTM Crimpers, s/n 121814 & 128171,
w/AMP Program
52 LOT Approx. 32 Assorted Benches, Tables w/Mag
Lamps, Solder Stations, Stools, Etc. in Area
53 1 Automated Production Super Dip Straightener,
s/n 18803131
54 1 Branson Model 2000 Smart ZSonic Ultrasonic
Board Cleaner w/Branson Series 7000 Ultrasonic
Generator
55 16 Metro Board Racks w/carts
--------------------------------------------------------------------------------
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
--------------------------------------------------------------------------------
56 LOT Desks, Chair, Piles, Bookcases, Shelving in $
Offices Along Wall
57 LOT G&D 15 Horsepower Rotary Screw conveyor &
Dryer
58 2 Xxxxx Vacuum Pumps, 3 & 5 Horsepower
59 LOT Desk, Tables, Files, Chairs, Bookcases
in 2 Offices
60 1 2-Door Chemical Cabinet
61 1 Tek 2225 O-Scope
62 1 Tekscope 100 Mhz Scope/DMM Digital Real Time,
Model THS-720STD
63 1 Alix Computer System, Ultima 1/120
64 1 Cam/Alot Systems Model 2800 Epoxy Dispenser
Dual Head, Vision Top System, s/n 2032, w/IBM
F75 Programmer
65 1 Cam/Alot 2800 Dual Epoxy Dispenser, Vision
System, s/nh 2015
66 1 Cam/Alot Model 2000 Epoxy Dispenser, 2 Head,
Downward Vision, s/n 2016
67 2 Quad Detachable Tray Carts
68 1 ATI Model 3110-2 Inspection Table, s/n
0000-00-0000, Scallop Table
69 2 JOT J206-01 Inspection Workstations, 5', s/n
75108A-3.2 & 75108A-3.1
70 1 Quad Profile HTD7 Solder Reflow Conveyor,
7-Zone, Nitrogen Capability, s/n 9702623,
20", Chain conveyor
71 1 1996 Quad QSP-2, High Speed Assembly, Pick &
Place Machine, No Vision, s/n 2942, 140-8mm
Stations
72 1 1996 Quad QSP-2 Pick & Place Machine, s/n
2909, w/Upward Vision System
--------------------------------------------------------------------------------
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
--------------------------------------------------------------------------------
73 1 Quad Profile-7 Model ORS-Profile, Solder
Reflow Oven, Nitrogen Capability, 7-Zone, s/n
9703631
74 1 SM Tech/Quad AVP 300 Auto Screen Printer, s/n
300159
75 1 1995 Quad QSP-2 Pick & Place Machine, s/n
2684, High Speed Assembler, 140-Sun Stations,
No Detachable Base, No Vision
76 1 1996 Quad QSP-2 Pick & Place Machine, s/n
2894, High Speed Assembler, 140-8mm Stations,
No Detachable Base w/VU-S Vision System
77 LOT Assorted Quad Feeders for Machines
78 1 1996 Quad QSP-2 High Speed Assembly Machine,
VU-8, s/n 2944, Detachable Base
79 1 Quad AVP300 Screen Printer, s/n 300155
80 1 Quad Detachable Cart, s/n 074
81 1 Fuji CPII Chip Shooters, CPII 4000, s/n 1307,
1989, 100-Station, Visual Centering, 2-Head,
12-Turret 14500 CPM, 150 Tape Feeders
82 1 Fuji CPII Chip Shooters, CPII 4000, s/n 800,
1988, 100-Station, Visual Centering, 2-Head,
12-Turret 14500 CPM 150 Tape Feeders
83 2 Small Refrigerators
84 1 Smart Sonic Ultrasonic Stencil Cleaner
95 4 Dynapack 3' Board Conveyors
86 1 Dynapack 5' Board Conveyor
87 1 Dynapack 90 Deg. Conveyor
88 1 Dynapack Shuttle Gate Conveyor
89 1 Electrovert Plus Finger Type Dual Wave
Wave Solderer, Model EPK-400/F, s/n
M0940121070, 1994, w/USI Ultra Spray Fluxer
--------------------------------------------------------------------------------
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
--------------------------------------------------------------------------------
90 1 Xxxxxx 1800 8-Zone Reflow Oven 24", s/n
0396274 1996
91 1 Cyber optics LSM/Large 110 Solder Paste
Measurer, s/n 5922, 1995, w/Sony PVM-134Q
92 2 Sony PVM-1342Q Monitors
93 1 Stencil Rack
94 1 B&S Microhite Electronic Gauge, s/n 60116
95 LOT Surface Plate, Mitutoyo Height Gauge
96 1 Unitron Neomet Microscope w/Surface Measurer
97 1 Panasonic CL-110 Color Camera
98 1 Mitutoyo Microscope
99 33 Blue Electrified Work Benches
100 55 Small Chrome Wire Racks
101 50 Swivel Chairs
102 3 Small Smoke-Eaters
103 1 Blue N Aerotronic Burn-In Chamber, s/n
870507-5164
104 1 Axil Ultima 1/170 Workstation, 128 KB
w/Lancast Network
105 2 Hewlett Packard Laserjet Printers
106 1 Hewlett Packard High Speed Laser Printer
107 7 486 PCs
108 10 Assorted Laptop PCs
109 6 Pentium 100 PCs
110 16 Hewlett Packard Deskjet Printers
111 1 Epson 800 Printer
--------------------------------------------------------------------------------
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
--------------------------------------------------------------------------------
112 1 Printronix P300 Printer
113 2 Logitech Scanner
114 20 Pentium 166 PCs
115 3 Hewlett Packard Color Printers
116 1 Hewlett Packard 6PSE Laserjet Printer
117 1 Laser Scanner
118 1 Stylus Color Printer
119 1 Micron Server
120 1 Lexmark Printer
121 6 Pentium 233 PCs
122 1 Xxxxxxx 000 XX
000 00 Micron PCs
124 1 Micron Dual 266 PC
125 8 Micron PC
126 1 BTU Conveyor Furnace VIP148A, s/n CZESM-1,
20", 10-Zone, Elec., 1997
127 1 Air Vac Rework Station, Model DRS22C, s/n
13022, 1997
128 LOT Assorted Fuji Feeders for 8mm x 4mm, Approx.
100
129 1 Nicolet Auto X-Ray Machine, s/n 1819700408,
Model 14001MZ, 1997
130 1 Fuji CP-111 5000 chip shooter:, s/n 0282,
1991, 140-Station, 12-Nozzle Turret
131 1 Fuji CP-111 5000 Chip Shooters, s/n 2236,
1993, 140-Station, 12-Nozzle Turret
132 1 Fjui CP-111 4000 Chip Shooter, s/n 1871,
1990
--------------------------------------------------------------------------------
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
--------------------------------------------------------------------------------
133 1 Dir Vac PCBRM-12 Reflow Station, s/n 1140
134 2 Zebra 105 Barcode Label Printers
135 LOT (6) Assorted Auto Screw Guns
136 LOT Special Built Burn-In Chamber w/HVAC System
& Power Supplies
137 1 ZEN Tempscan Omega Multiscan 1200, 1998
138 1 SRT Rework Station
139 20 Chrome Wire Racks
140 26 Nag Lamps
141 14 Microscopes
142 5 Metcal, Solderer.
143 1 Xxxxxxxxx Xxxx 3-stage Air Compressor
144 1 Onan Generator
145 TOTAL OWNED EQUIPMENT
146 LEASED EQUIPMENT
147 1 Executone Phone System w/PC
148 2 Quad Detachable Tray Carts
149 1 JOT Workstation, Type J206-10B, s/n
21532A-12, 5'
150 1 JOT J210-02 Board Destacker, s/n 75100A-1.2
151 1 JOT J204-021V Cue-Up Board Conveyor, s/n
41075A-8.4
152 1 SM Tech/Quad AVP300 Auto Screen Printer, 14x
18, s/n 136
153 1 JOT J204-02 Pass-Thru Conveyor, s/n
75096A-1.3
--------------------------------------------------------------------------------
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
--------------------------------------------------------------------------------
154 1 ATI/Quad Model 3110-2 Pass-Thru Conveyor, $
24", s/n 4111-2
155 1 1996 Quad QSP-2 Pick & Place Machine, Upward
Vision, s/n 2012, 4 Read, High Speed
Assembler, 2 Gantry, 136 8mm Cap.
156 1 1996 Quad QSP-2 Pick & Place Machine, Upward
Vision, s/n 3075, 4 Head, High Speed
Assembler, 2 Gantry, 136 8mm Cap.
157 1 6' ATI/Quad Model 3100-3 Conveyor, s/n
00-00000-0000
158 1 ATI/Quad 7510 6' Transfer Conveyor, s/n
412.1-6
159 1 4' XXX/Xxxx 0000-0 Xxxxxxxx, s/n 4106-2
160 1 Quad 3110-2 2' Pass-Thru Conveyor, s/n
4111-a
161 1 MI/Quad 32.00-2 4' Conveyor, s/n
00-00000-0000
162 2 JOT 5' Workstations, Model J206-01, s/n
75123A-1.1 & 75123A-1.2
163 1 ATI/Quad 6' Conveyro, Model 7510, s/n 41111-2
164 1 JOT J210-02 2' Board Destacker, s/n
75100A-1.1
165 1 JOT J204-02 Cue-Up Board Infeeder, s/n
75136B-1.3
166 1 JOT J204-02 Board Conveyor, s/n 75096A-1.5
167 1 ATI/Quad 3110-2 2' Transfer Conveyor, s/n
4065-1
168 1 ATI/Quad 3110-2 Transfer Conveyor, s/n
4111-9
169 1 JOT J206-01 5' Transfer Conveyor, s/n
75136B-2.1
170 1 Genrad Full Board Tester, 00000-0000-00,
000 Xxxx, x/x 000, x/Xxxx XXX-0000 Printer
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Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
--------------------------------------------------------------------------------
171 1 JOT J210-03 Board Destacker, s/n J5022A-1 $
172 1 JOT J204-02-1B Cue-Up Board Infeed, s/n
41075A-6.2
173 1 SM Tech AVP300 Screen Printer, Automatic, s/n
300165
174 1 ATI/Quad 3110-2 6' Conveyor, Scallop, s/n
4111-5
175 1 ATI 3110-2 Inspection Station, 6' Conveyor,
s/n 4106-3
176 1 Quad Profile-7 7-Zone Solder Reflow,
Nitrogen Capability, s/n 9702624
177 2 ATI 3110-2 2' Conveyors, s/n 4065-2 & 4111-3
178 2 1994 Quad IVC/QA High Speed Pick & Place
Machines, s/n 2450 & 2451, 68-Station, Upward
Vision
179 1 JOT J204-02 Conveyor. 2', s/n 75096A-1.2
180 1 ATI 3100-2 42", Conveyor, s/n 00-00000-0000
181 1 1994 Quad IVC/90 Pick & Place Machine.
90-Station, s/n 2128, Upward Vision
182 1 1994 Quad IVC/90 Pick & Place Machine,
90-Station, s/n 2129, Upward Vision w/(2)
Quad Feeders
183 5 Quad Fixed Cart Stations
184 LOT Quad Feeder Racks on Shelving & Benches
w/40 Bases
185 1 West Kleen II-MIL/SMT Conveyor 18" Wash
System, 3R-790-481-146, w/Separation Tech
ST1090 Aquacycler Filtration System, 3
Knives, 2 Wash, 1 Rinse
186 1 Genrad GR2286-VPC Full Board Tester, Model
2286-9778-ER, s/n 183, 1920 Pins
187 1 Quad AVX400 Auto Incline Screen Printer, s/n
400169, 1997 w/Dispenser
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Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
--------------------------------------------------------------------------------
188 1 Quad APS-1 Advanced Packaging Machine, s/n
2764, w/Waffle Tray Handler
189 1 Genrad 2287L-9744-00 Full Board Tester, s/n
141
190 TOTAL LEASED EQUIPMENT
================
APPRAISAL TOTAL:
EXHIBIT B
FORM
OF
MONTHLY OFFICERS' CERTIFICATE
Reference is made to the (a) Loan and Security Agreement (the "Fidelity
Agreement"), dated as of December 22,1998, among Century Electronics
Manufacturing (NE), Inc. ("CEM"), a Massachusetts corporation, Y.M.C.
Manufacturing Company ("YMC"), a California corporation, and Quality
Manufacturing Services, Inc. ("QMS"), a California corporation, and Fidelity
Funding, Inc., a Texas corporation ("Fidelity'), and (b) the Loan and Security
Agreement (the "USA Funding Agreement"), dated as of December 22, 1998, among
CEM, YMC, QMS and USA Funding. Inc., a Delaware corporation ("USA Funding").
Capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Fidelity Agreement and the USA Funding Agreement. The
undersigned, the President and Chief Financial Officer of _____________ (the
"Company"), hereby certify to Fidelity and USA Funding that, to the best of
their knowledge and belief:
1. The financial statements of the Company for and as of the end of the
month of_________ (the "Reporting Month") attached hereto have been prepared in
accordance with GAAP, are true, correct and accurate in all material respects
and fairly and accurately present the financial condition and results of
operations of the Company as of the dates and for the periods indicated therein.
2. They have reviewed all Borrowing Base Certificates and supporting
information relating thereto delivered by the Company to Fidelity or USA Funding
during the Reporting Month, and such Borrowing Base Certificates and supporting
information are complete, true, correct and accurate in all materials respects.
3. Except as indicated below, no Event of Default or event or circumstance
that would, with the giving of notice, the passage of time or both, constitute
an Event of Default, has occurred and is continuing:
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--------------------------------------------------------------------------------
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EXECUTED on______________
--------------------------------------
President
--------------------------------------
Chief Financial Officer
