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EXHIBIT 10.4
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
CONGRESS FINANCIAL CORPORATION (WESTERN)
AS LENDER
AND
STORAGE DIMENSIONS, INC.
AS BORROWER
DATED: MAY 16, 1996
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated May 16, 1996 is entered
into by and between Congress Financial Corporation (Western), a California
corporation ("Lender") and Storage Dimensions, Inc., a Delaware corporation
("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain
financing arrangements with Borrower pursuant to which Lender may make loans and
provide other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural. All
references to Borrower and Lender pursuant to the definitions set forth in the
recitals hereto, or to any other person herein, shall include their respective
successors and assigns. The words "hereof", "herein", "hereunder", "this
Agreement" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not any particular provision of this Agreement
and as this Agreement now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced. An Event of Default shall
exist or continue or be continuing until such Event of Default is waived in
accordance with Section 11.3 or cured with the consent of Lender. Any accounting
term used herein unless otherwise defined in this Agreement shall have the
meanings customarily given to such term in accordance with GAAP. For purposes of
this Agreement, the following terms shall have the respective meanings given to
them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish and revise
in good faith reducing the amount of
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Revolving Loans, Letter of Credit Accommodations and advances under the Capital
Expenditure Facility which would otherwise be available to Borrower under the
lending formula(s) provided for herein: (a) to reflect events, conditions,
contingencies or risks which, as reasonably determined by Lender in good faith,
do or is reasonably likely to adversely affect either (i) a material portion of
the Collateral or any other property which is security for the Obligations or
its value, (ii) a material portion of the assets of Borrower or any Obligor or
(iii) the security interests and other rights of Lender in the Collateral
(including the enforceability, perfection and priority thereof) or (b) to
reflect Lender's good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower or any Obligor to Lender is or
may have been incomplete, inaccurate or misleading in any material respect or
(c) in respect of any state of facts which Lender determines in good faith
constitutes an Event of Default or is reasonably likely to, with notice or
passage of time or both, constitute an Event of Default.
1.3 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.4 "Capital Expenditure Facility" shall have the meaning set forth in
Section 2.4 hereof.
1.5 "Capital Expenditure Loan Note" has the meaning set forth in
Section 2.4.
1.6 "Change of Control" shall be deemed to have occurred at such times
as a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of
the Securities and Exchange Act of 1934, as amended), with the exception of
Capital Partners Holdings, becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities and Exchange Act of 1934, as amended), directly or
indirectly, of more than fifty-one percent (51%) of the total voting power of
all classes of stock then outstanding of Borrower normally entitled to vote in
elections of directors.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.8 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.9 "Desktop Review" shall mean an appraisal of either Inventory or
Equipment, without the physical inspection thereof, based upon listings of the
Inventory or Equipment provided to the appraisal firm, and certified as accurate
and complete, by the Borrower.
1.10 "Dilution" shall mean, as of the date of determination, the ratio
of (i) the aggregate amount of reductions in Accounts other than as a result of
payments in cash to (ii) the aggregate amount of total sales, determined by
Lender on a four (4) month rolling basis.
1.11 "Eligible Accounts" shall mean Accounts created by Borrower which
are and continue to be acceptable to Lender based on the criteria set forth
below. In general, Accounts shall be Eligible Accounts if:
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(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than ninety (90) days
after the date of the original invoice for them;
(c) such Accounts comply with the terms and conditions
contained in Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent, with the
exception of Accounts in compliance with Borrower's policies and procedures with
respect to returns, restocking and price protection as set forth in that certain
letter and exhibit thereto from Borrower to Lender dated May 10, 1996 (the
"Policy Letter"), which Accounts shall be considered Eligible Accounts;
(e) the chief executive office of the account debtor with
respect to such Accounts is located in the United States of America or Canada,
or, at Lender's option, if either: (i) the account debtor has delivered to
Borrower an irrevocable letter of credit issued or confirmed by a bank
satisfactory to Lender, sufficient to cover such Account, in form and substance
satisfactory to Lender and, if required by Lender, the original of such letter
of credit has been delivered to Lender or Lender's agent and the issuer thereof
notified of the assignment of the proceeds of such letter of credit to Lender,
or (ii) such Account is subject to credit insurance payable to Lender issued by
an insurer and on terms and in an amount acceptable to Lender, or (iii) such
Account is otherwise acceptable in all respects to Lender (subject to such
lending formula with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress xxxxxxxx, xxxx
and hold invoices or retainage invoices, except as to xxxx and hold invoices, if
Lender shall have received an agreement in writing from the account debtor, in
form and substance satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay such
invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute, but in each such case, the
reduction in borrowing availability shall be only to the extent of the amount of
the counterclaim, defense or dispute asserted, and does not have, and does not
engage in transactions which may give rise to, any right of setoff against such
Accounts;
(h) there are no facts, events or occurrences which would
impair the validity, enforceability or collectability of such Accounts or reduce
the amount payable or delay payment thereunder;
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(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of
the account debtor with respect to such Accounts is an officer, employee or
agent of or affiliated with Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are not
any foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) there are no proceedings or actions which are threatened
or pending against the account debtors with respect to such Accounts which are
reasonably expected to result in any material adverse change in the financial
ability of such account debtor to fully pay all Accounts of such account debtor
as and when due and payable;
(m) such Accounts of a single account debtor or its affiliates
do not constitute more than twenty percent (20%) of all otherwise Eligible
Accounts, with the exception of Tech Data Corporation and CNA Insurance
Companies for which the applicable concentration percentage shall be twenty-five
percent (25%), and with the further exception of future adjustments to the
concentration percentages and the addition of account debtors with specific
concentration percentages, as consented to in writing by Lender at the request
of Borrower, from time to time, which consent shall not be unreasonably withheld
(but the portion of the Accounts not in excess of such percentage shall be
deemed Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has
Accounts unpaid more than ninety (90) days after the date of the original
invoice for them which constitute more than fifty percent (50%) of the total
Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit with respect to such
account debtors as determined by Lender from time to time in the exercise of its
reasonable credit judgment (but the portion of the Accounts not in excess of
such credit limit may still be deemed Eligible Accounts); and
(p) such Accounts are owed by account debtors deemed
creditworthy at all times by Lender, as determined by Lender in the exercise of
its reasonable credit judgment.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
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1.12 "Eligible Inventory" shall mean Inventory components consisting of
hard disks, tape drives or optical drives, and Eligible Used Inventory which are
acceptable to Lender based on the criteria set forth below. In general, Eligible
Inventory shall not include (a) work-in-process other than hard disks, tape
drives or optical disks; (b) components which are not part of finished goods
other than hard disks, tape drives or optical disks; (c) spare parts for
equipment other than hard disks, tape drives or optical disks; (d) packaging and
shipping materials; (e) supplies used or consumed in Borrower's business; (f)
Inventory at premises other than Borrower's facilities at 0000 XxXxxxxx
Xxxxxxxxx, Xxxxxxxx, Xxxxxxxxxx 00000, except if Lender shall have received an
agreement in writing from the person in possession of such Inventory and/or the
owner or operator of such premises in form and substance satisfactory to Lender
acknowledging Lender's first priority security interest in the Inventory,
waiving security interests and claims by such person against the Inventory and
permitting Lender access to, and the right to remain on, the premises so as to
exercise Lender's rights and remedies and otherwise deal with the Collateral;
(g) Inventory subject to a security interest or lien in favor of any person
other than Lender except those permitted in this Agreement; (h) xxxx and hold
goods; (i) unserviceable, obsolete or slow moving Inventory; (j) Inventory which
is not subject to the first priority, valid and perfected security interest of
Lender; (k) returned (except for Eligible Used Inventory), damaged and/or
defective Inventory; and (l) Inventory purchased or sold on consignment. General
criteria for Eligible Inventory may be established and revised from time to time
by Lender in good faith. Any Inventory which is not Eligible Inventory shall
nevertheless be part of the Collateral.
1.13 "Eligible Used Inventory" shall mean Inventory components
consisting of hard disks, tape drives or optical drives refurbished to first
quality or designated with the product code "U" in Inventory reports provided by
Borrower to Lender.
1.14 "Environmental Laws" shall mean all federal, state, district,
local and foreign laws, rules, regulations, ordinances, and consent decrees
relating to health, safety, hazardous substances, pollution and environmental
matters, as now or at any time hereafter in effect, applicable to Borrower's
business and facilities (whether or not owned by it), including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contamination, chemicals, or hazardous, toxic or dangerous substances, materials
or wastes into the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) or otherwise
relating to the generation, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
chemicals, or hazardous, toxic or dangerous substances, materials or wastes.
1.15 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.16 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
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1.17 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.18 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.19 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of: (i) the amount of
the Revolving Loans available to Borrower as of such time based on the
applicable lending formulas multiplied by the Net Amount of Eligible Accounts
and the Value of Eligible Inventory, as determined by Lender and subject to the
sublimits and Availability Reserves from time to time established by Lender
hereunder, and (ii) the Maximum Credit (less the sum of (x) the then outstanding
principal amount of the Term Loan, (y) the then outstanding principal amount of
any Capital Expenditure Loan Notes, and (z) the then outstanding balance of
Letter of Credit Accommodations), minus the sum of: (i) the amount of all then
outstanding and unpaid Obligations (but not including for this purpose the then
outstanding principal amount of the Term Loan, the outstanding principal amount
of any Capital Expenditure Loan Notes and the outstanding balance of Letter of
Credit Accommodations), plus (ii) the aggregate amount of all then outstanding
and unpaid trade payables of Borrower which are more than sixty (60) days past
due as of such time.
1.20 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by
Borrower or any Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.21 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.13 and 9.14 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
1.22 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without
limitation any that are or become classified as hazardous or toxic under any
Environmental Law).
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1.23 "Information Certificate" shall mean the Information Certificate
of Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.24 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.25 "Inventory Advance Rate" shall have the meaning set forth in
Section 2.1(a)(ii) hereof.
1.26 "Letter of Credit Accommodations" shall mean the letters of
credit, merchandise purchase or other guaranties which are from time to time
either (a) issued or opened by Lender for the account of Borrower or any Obligor
or (b) with respect to which Lender has agreed to indemnify the issuer or
guaranteed to the issuer the performance by Borrower of its obligations to such
issuer.
1.27 "Loans" shall mean the Revolving Loans, the Term Loan and any
advances under the Equipment Acquisition Facility.
1.28 "Maximum Credit" shall mean the amount of Eleven Million Dollars
($11,000,000).
1.29 "Maxtor" shall mean Maxtor Corporation, a Delaware corporation.
1.30 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, [available] or claimed with
respect thereto [will revise to reflect price protection policy].
1.31 "Obligations" shall mean any and all Revolving Loans, the Term
Loan, Letter of Credit Accommodations, advances under the Capital Expenditure
Facility, and all other obligations, liabilities and indebtedness of every kind,
nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
arising under this Agreement or under any other Financing Agreement, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to Borrower under the United States Bankruptcy Code or any
similar statute (including, without limitation, the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by Lender.
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1.32 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.
1.33 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.34 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Internal Revenue Code of
1986, as amended), business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.35 "Policy Letter" shall have the meaning set forth in Section
1.11(d) hereof.
1.36 "Prime Rate" shall mean the rate from time to time publicly
announced by CoreStates Bank, N.A., or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank, which rate shall be within the
range of the prime or base rates announced from time to time by United States
money center banks.
1.37 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.38 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.39 "Subordination Agreement" shall mean that certain Subordination
Agreement, dated as of May , 1996, executed by Maxtor and Borrower in favor of
Lender.
1.40 "Term Loan" shall mean the term loan made by Lender to Borrower as
provided for in Section 2.3 hereof.
1.41 "Term Note" shall have the meaning set forth in Section 2.3
hereof.
1.42 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) actual cost computed in accordance with
GAAP or (b) market value.
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SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to, and upon the terms and conditions contained
herein, Lender agrees to make Revolving Loans to Borrower from time to time in
amounts requested by Borrower up to the amount equal to the sum of:
(i) eighty percent (80%) of the Net Amount of
Eligible Accounts; provided, however, that the foregoing
initial advance rate of eighty percent (80%) shall be
subsequently increased to eighty-five percent (85%) at such
time as Dilution has been reduced to five percent (5%) or less
provided that no Event of Default shall have occurred and be
continuing at such time; and provided, further, however, that
the adjusted advance rate of eighty-five percent (85%) shall
revert to the initial advance rate of eighty percent (80%) at
such time as Dilution is greater than five percent (5%), and
the advance rate shall thereafter further adjust between
eighty percent (80%) and eighty-five percent (85%) from time
to time in similar manner depending upon whether Dilution is
greater, or equal to or less than, five percent (5%); plus
(ii) the lesser of: (A) eighty percent (80%) of
the orderly liquidation value of Eligible Inventory
(determined no less frequently than quarterly on the basis of
a Desktop Review, or more frequently as determined by Lender
in its reasonable credit judgment, by an appraisal firm
reasonably acceptable to Lender) to the extent that such
amount does not exceed sixty percent (60%) of the Value of
such Inventory (the percentage of the Value of Inventory equal
to eighty percent (80%) of the appraised orderly liquidation
value thereof is hereinafter referred to as the "Inventory
Advance Rate") (with the further understanding that no more
than Two Hundred Thousand Dollars ($200,000) will be advanced
by Lender against Eligible Used Inventory), or (B) the amount
equal to: (1) Two Million Dollars ($2,000,000) minus (2) the
product of the then undrawn amounts of the outstanding Letter
of Credit Accommodations for the purpose of purchasing goods
multiplied by the Inventory Advance Rate, less
(iii) any Availability Reserves.
(b) Lender may, in the exercise of its reasonable credit judgment, from
time to time, upon not less than ten (10) days prior notice to Borrower, (i)
reduce the lending formula with respect to Eligible Accounts to the extent that
Lender determines in good faith that: (A) the dilution with respect to the
Accounts for any period (based on the ratio of (1) the aggregate amount of
reductions in Accounts other than as a result of payments in cash to (2) the
aggregate amount of total sales) has increased in any material respect or may be
reasonably anticipated to increase in any material respect above historical
levels, or (B) the general creditworthiness of
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account debtors has declined or (ii) reduce the lending formula(s) with respect
to Eligible Inventory to the extent that Lender determines that: (A) the number
of days of the turnover or the mix of the Inventory for any period has changed
in any material respect or (B) the liquidation value of the Eligible Inventory
or Eligible Used Inventory, or any category thereof, has decreased in a material
amount, (C) the nature and quality of the Inventory has deteriorated to a
material extent or (D) the Value of Inventory has declined in a material amount
based upon the results of appraisals. In determining whether to reduce the
lending formula(s), Lender may consider events, conditions, contingencies or
risks which are also considered in determining Eligible Accounts, Eligible
Inventory, Eligible Used Inventory or in establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the
Loans and the Letter of Credit Accommodations outstanding at any time shall not
exceed the Maximum Credit. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans and
Letter of Credit Accommodations, exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set forth in Section
2.2(c) or the Maximum Credit, as applicable, such event shall not limit, waive
or otherwise affect any rights of Lender in that circumstance or on any future
occasions and Borrower shall, upon demand by Lender, which may be made at any
time or from time to time, immediately repay to Lender the entire amount of any
such excess(es) for which payment is demanded.
2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions contained
herein, at the request of Borrower, Lender agrees to provide or arrange for
Letter of Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by
any bank or issuer in connection with the Letter of Credit Accommodations,
Borrower shall pay to Lender a letter of credit fee at a rate equal to one and
one-half percent (1.5%) per annum on the daily outstanding balance of the Letter
of Credit Accommodations for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month. Such letter of
credit fee shall be calculated on the basis of a three hundred sixty (360) day
year and actual days elapsed and the obligation of Borrower to pay such fee
shall survive the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available
unless on the date of the proposed issuance of any Letter of Credit
Accommodations, the Revolving Loans available to Borrower (subject to the
Maximum Credit and any Availability Reserves) are equal to or greater than: (i)
if the proposed Letter of Credit Accommodation is for the purpose of purchasing
Eligible Inventory, the sum of (A) the product of the Value of such Eligible
Inventory multiplied by one minus the Inventory Advance Rate, plus (B) freight,
taxes, duty and other amounts which Lender estimates must be paid in connection
with such Inventory upon arrival and for delivery to
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one of Borrower's locations for Eligible Inventory within the United States of
America and (ii) if the proposed Letter of Credit Accommodation is for any other
purpose, an amount equal to one hundred (100%) percent of the face amount
thereof and all other commitments and obligations made or incurred by Lender
with respect thereto. Effective on the issuance of each Letter of Credit
Accommodation, the amount of Revolving Loans which might otherwise be available
to Borrower shall be reduced by the applicable amount set forth in Section
2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all
outstanding Letter of Credit Accommodations and all other commitments and
obligations made or incurred by Lender in connection therewith, shall not at any
time exceed One Million Dollars ($1,000,000). At any time an Event of Default
exists or has occurred and is continuing, upon Lender's request, Borrower will
either furnish cash collateral to secure the reimbursement obligations to the
issuer in connection with any Letter of Credit Accommodations or furnish cash
collateral to Lender for the Letter of Credit Accommodations, and in either
case, the Revolving Loans otherwise available to Borrower shall not be reduced
as provided in Section 2.2(c) to the extent of such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur, except as a result of Lender's gross
negligence or wilful misconduct, in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or correspondent with respect
to any Letter of Credit Accommodation. Borrower assumes all risks with respect
to the acts or omissions of the drawer under or beneficiary of any Letter of
Credit Accommodation and for such purposes the drawer or beneficiary shall be
deemed Borrower's agent. Borrower assumes all risks for, and agrees to pay, all
foreign, Federal, State and local taxes, duties and levies relating to any goods
subject to any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder. Borrower hereby releases and holds Lender harmless from
and against any acts, waivers, errors, delays or omissions, whether caused by
Borrower, by any issuer or correspondent or otherwise, but not if caused by the
gross negligence or wilful misconduct of Lender, with respect to or relating to
any Letter of Credit Accommodation. The provisions of this Section 2.2(e) shall
survive the payment of Obligations and the termination or non-renewal of this
Agreement.
(f) Nothing contained herein shall be deemed or construed to
grant Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter of
Credit Accommodation provided by an issuer other than Lender unless Lender has
duly executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrower shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower. With respect to any Letter of Credit Accommodation or
any documents, drafts or acceptance thereunder, Lender shall have the sole and
exclusive right and authority to, and Borrower shall not: (i) at any time an
Event of Default
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exists or has occurred and is continuing, (A) approve or resolve any questions
of non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Lender may take such actions either in its
own name or in Borrower's name.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Lender and to apply in all
respects to Borrower.
2.3 Term Loan. Lender is making a Term Loan to Borrower in the original
principal amount of Four Hundred Thousand Dollars ($400,000). The Term Loan is
(a) evidenced by a term promissory note in such original principal amount duly
executed and delivered by Borrower to Lender concurrently herewith in the form
of Exhibit 2.3 attached hereto and incorporated herein by this reference (the
"Term Note"); (b) to be repaid, together with interest and other amounts, in
accordance with this Agreement, the Term Note, and the other Financing
Agreements and (c) secured by all of the Collateral.
2.4 Capital Expenditure Facility. In addition to amounts advanced under
Section 2.1 above, and subject to the terms and conditions of this Agreement,
including, without limitation, the procedures and advance limitations
hereinafter set forth in this Section 2.4, and so long as no Event of Default
has occurred and is continuing, Lender agrees to extend non-revolving loans to
Borrower in an aggregate amount not to exceed One Million Dollars ($1,000,000)
to facilitate Borrower's acquisition of new Equipment for uses directly related
to Borrower's manufacturing and assembly operations as in effect as of the date
of this Agreement (the "Capital Expenditure Facility"). Each advance under this
Section 2.4 shall be in an amount of no less than Two Hundred Thousand Dollars
($200,000) and shall be evidenced by and repayable in accordance with individual
Secured Capital Expenditure Facility Promissory Notes, dated the date of each
such advance, executed by Borrower to the order of Lender in the form of Exhibit
2.4 attached hereto and incorporated herein by this reference (each, an "Capital
Expenditure Loan Note"). The Capital Expenditure Loan Notes shall provide for a
thirty-six (36) month amortization of equal monthly payments of principal with
all amounts due and payable at the end of the initial term hereof, unless this
Agreement is sooner terminated pursuant to the terms hereof. Obligations owing
under the Capital Expenditure Loan Notes shall constitute Obligations, and shall
be secured by all of the Collateral, and each Capital Expenditure Loan Note,
together with each amendment, extension, supplement, or replacement thereto,
shall each be deemed a Financing Agreement.
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Lender will make advances to Borrower under this Section 2.4
upon Borrower presenting to Lender, in form and substance reasonably
satisfactory to Lender, invoices for the specific items of Equipment to be
acquired and financed hereunder. Upon review and approval by Lender, Lender will
advance to Borrower up to eighty percent (80%) of the appraised orderly
liquidation value of the Equipment to be acquired, determined on the basis of a
Desktop Review by an appraisal firm reasonably acceptable to Lender, net of any
ancillary costs or expenses associated with the acquisition of such Equipment,
including, but not limited to, freight and other transportation charges,
installation and delivery charges, brokerage commissions and similar costs and
expenses.
Lender may, at any time and from time to time and in its
discretion for any purpose, consolidate one or more of the Capital Expenditure
Loan Notes issued under this Section 2.4 into a single note. All terms and
conditions of any such Notes so consolidated shall remain the same as
immediately prior to consolidation.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the rate of one (1)
percentage point per annum in excess of the Prime Rate, except that Borrower
shall pay to Lender interest, at Lender's option, without notice, at the rate of
three (3) percentage point per annum in excess of the Prime Rate: (i) on the
non-contingent Obligations for the period from and after the date of termination
or non-renewal hereof, or the date of the occurrence of an Event of Default, and
for so long as such Event of Default is continuing as determined by Lender and
until such time as Lender has received full and final payment of all such
Obligations (notwithstanding entry of any judgment against Borrower) and (ii) on
the Revolving Loans and advances under the Capital Expenditure Facility at any
time outstanding in excess of the amounts available to Borrower under Section 2
(whether or not such excess(es), arise or are made with or without Lender's
knowledge or consent and whether made before or after an Event of Default);
provided, however, that in the event Borrower's availability under Section 2 was
reduced as a direct result of Lender's application of additional Availability
Reserves, and such resulting reduction in availability caused the amounts
outstanding under the Revolving Loans and advances under the Capital Expenditure
Facility to exceed availability, the Event of Default interest rate applicable
under clause (ii) above shall not take effect until five (5) days after receipt
by Borrower of notice from Lender of the initiation of such additional
Availability Reserve. All interest accruing hereunder on and after the
occurrence of any of the events referred to in Sections 3.1(a)(i) or 3.1(a)(ii)
above shall be payable on demand.
(b) In the event Borrower's net income before tax equals or
exceeds Seven Hundred Thousand Dollars ($700,000) for Borrower's fiscal year
ended December 31, 1996 (as supported by the Borrower's audited annual financial
statements provided by Borrower to Lender pursuant to Section 9.6 hereof), the
non-Event of Default interest rate applicable to the Loans shall be reduced to
three-quarters (0.75%) of a percentage point in excess of the Prime Rate, such
reduction in the Interest Rate to be effective as of January 1, 1997, and any
interest paid by
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Borrower to Lender in excess of the interest payable as a result of the
aforedescribed reduction in the Interest Rate shall be applied by Lender to
reduce subsequent interest payable by Borrower.
(c) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the first day of the month
after any change in such Prime Rate is announced based on the Prime Rate in
effect on the last day of the month in which any such change occurs. In no event
shall charges constituting interest payable by Borrower to Lender exceed the
maximum amount or the rate permitted under any applicable law or regulation, and
if any part or provision of this Agreement is in contravention of any such law
or regulation, such part or provision shall be deemed amended to conform
thereto.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the
amount of Eighty-Two Thousand Five Hundred Dollars ($82,500), which shall be
fully earned as of and payable on the date hereof.
3.3 Servicing Fee. Borrower shall pay to Lender quarterly a servicing
fee in an amount equal to Seven Thousand Five Hundred Dollars ($7,500) in
respect of Lender's services for each quarter (or part thereof) while this
Agreement remains in effect and for so long thereafter as any of the Obligations
are outstanding, which fee shall be fully earned as of and payable in advance on
the date hereof and on the first day of each quarter hereafter.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans or providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other documents as
Lender may request to evidence and effectuate the termination by any supplier or
any existing lender or lenders to Borrower of their respective financing
arrangements with Borrower and the termination and release by it or them, as the
case may be, of any interest in and to any assets and properties of Borrower and
each Obligor, duly authorized, executed and delivered by it or each of them,
including, but not limited to, UCC termination statements for all UCC financing
statements previously filed by it or any of them or their predecessors, as
secured party, and Borrower or any Obligor, as debtor;
(b) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property which
is intended to be security for the Obligations or the liability of any Obligor
in respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;
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(c) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including, without limitation, records
of requisite corporate action and proceedings which Lender may have requested in
connection therewith, such documents where requested by Lender or its counsel to
be certified by appropriate corporate officers or governmental authorities;
(d) no material adverse change shall have occurred in the
assets, business or prospects of Borrower since the date of Lender's latest
field examination and no change or event shall have occurred which is reasonably
expected to impair the ability of Borrower or any Obligor to perform its
obligations hereunder or under any of the other Financing Agreements to which it
is a party or of Lender to enforce the Obligations or realize upon the
Collateral;
(e) Lender shall have completed a field review of the Records
and such other information with respect to the Collateral as Lender may require
to determine the amount of Revolving Loans available to Borrower, the results of
which shall be satisfactory to Lender, not more than five (5) business days
prior to the date hereof;
(f) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Financing Agreements, including, without limitation, acknowledgements
by lessors, mortgagees and warehousemen of Lender's security interests in the
Collateral, waivers by such persons of any security interests, liens or other
claims by such persons to the Collateral and agreements permitting Lender access
to, and the right to remain on, the premises to exercise its rights and remedies
and otherwise deal with the Collateral;
(g) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(h) the Excess Availability as determined by Lender, as of the
date hereof, shall be not less than One Million Dollars ($1,000,000) after
giving effect to the initial Loans made or to be made and Letter of Credit
Accommodations issued or to be issued in connection with the initial
transactions hereunder;
(i) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrower with respect
to the Financing Agreements and such other matters as Lender may reasonably
request;
(j) Lender shall have received, in form and substance
satisfactory to Lender, the Subordination Agreement, providing for the
subordination and permitted repayment of indebtedness, duly authorized, executed
and delivered by Maxtor and Borrower in favor of Lender;
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(k) Lender shall have received, in form and substance
satisfactory to Lender, Collateral Assignment of Patents (Security Agreement),
Collateral Assignment of Trademarks (Security Agreement) and Collateral
Assignment of Copyrights (Security Agreement) executed by Borrower in favor of
Lender;
(l) Lender shall have received the Xxxx-Xxxx Tech, Inc.
Inventory and Equipment appraisals acceptable in form and substance to Lender in
its sole discretion; and
(m) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
To secure payment and performance of all Obligations, Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Lender as security, the following
property and interests in property, whether now owned or hereafter acquired or
existing, and wherever located (collectively, the "Collateral"):
5.1 Accounts;
5.2 all present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, choses in
action and other claims and existing and future leasehold interests in
equipment, real estate and fixtures), chattel paper, documents, instruments,
letters of credit, bankers' acceptances and guaranties;
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5.3 all present and future monies, securities, credit balances,
deposits, deposit accounts and other property of Borrower now or hereafter held
or received by or in transit to Lender or its affiliates or at any other
depository or other institution from or for the account of Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all
present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including,
without limitation, (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (c) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Accounts or other Collateral, including, without limitation, returned,
repossessed and reclaimed goods, and (d) deposits by and property of account
debtors or other persons securing the obligations of account debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Records; and
5.7 all products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and all claims against third parties for
loss or damage to or destruction of any or all of the foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest. All entries in the loan account(s) shall
be made in accordance with Lender's customary practices as in effect from time
to time.
6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing to Lender by Borrower.
6.3 Collection of Accounts.
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(a) Borrower shall establish and maintain, at its expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Lender may specify, with such banks as are acceptable to
Lender into which Borrower shall promptly deposit and direct its account debtors
to directly remit all payments on Accounts and all payments constituting
proceeds of Inventory or other Collateral in the identical form in which such
payments are made, whether by cash, check or other manner. The banks at which
the Blocked Accounts are established shall enter into an agreement, in form and
substance reasonably satisfactory to Lender, providing that all items received
or deposited in the Blocked Accounts are the property of Lender, that the
depository bank has no lien upon, or right to setoff against, the Blocked
Accounts, the items received for deposit therein, or the funds from time to time
on deposit therein and that the depository bank will wire, or otherwise
transfer, in immediately available funds, on a daily basis, all funds received
or deposited into the Blocked Accounts to such bank account of Lender as Lender
may from time to time designate for such purpose ("Payment Account"). Borrower
agrees that all payments made to such Blocked Accounts or other funds received
and collected by Lender, whether on the Accounts or as proceeds of Inventory or
other Collateral or otherwise shall be the property of Lender.
(b) For purposes of calculating interest on the Obligations,
such payments or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) business days following the date of
receipt of immediately available funds by Lender in the Payment Account. For
purposes of calculating the amount of the Revolving Loans available to Borrower
such payments will be applied (conditional upon final collection) to the
Obligations on the business day of receipt by Lender in the Payment Account, if
such payments are received within sufficient time (in accordance with Lender's
usual and customary practices as in effect from time to time) to credit
Borrower's loan account on such day, and if not, then on the next business day.
(c) Borrower and all of its affiliates, subsidiaries,
shareholders, directors, employees or agents shall, acting as trustee for
Lender, receive, as the property of Lender, any monies, checks, notes, drafts or
any other payment relating to and/or proceeds of Accounts or other Collateral
which come into their possession or under their control and immediately upon
receipt thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to
Lender. In no event shall the same be commingled with Borrower's own funds.
Borrower agrees to reimburse Lender on demand for any amounts owed or paid to
any bank at which a Blocked Account is established or any other bank or person
involved in the transfer of funds to or from the Blocked Accounts arising out of
Lender's payments to or indemnification of such bank or person. The obligation
of Borrower to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement for a period of
three hundred and sixty-seven (367) days following the date of such termination
or non-renewal.
6.4 Payments. All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate from time
to time. Lender may apply payments received or collected from Borrower or for
the account of Borrower (including, without limitation, the monetary proceeds of
collections or of realization upon any Collateral) to such of the Obligations,
whether or not then due, in such order and manner as Lender determines. At
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Lender's option, all principal, interest, fees, costs, expenses and other
charges provided for in this Agreement or the other Financing Agreements may be
charged directly to the loan account(s) of Borrower. Borrower shall make all
payments to Lender on the Obligations free and clear of, and without deduction
or withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Lender is required
to surrender or return such payment or proceeds to any Person for any reason,
then the Obligations intended to be satisfied by such payment or proceeds shall
be reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Lender. Borrower
shall be liable to pay to Lender, and does hereby indemnify and hold Lender
harmless for the amount of any payments or proceeds surrendered or returned.
This Section 6.4 shall remain effective notwithstanding any contrary action
which may be taken by Lender in reliance upon such payment or proceeds. This
Section 6.4 shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement for a period of three hundred and sixty-seven
(367) days following the date of such termination or non-renewal.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of Borrower or
other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested advance
is to be made or Letter of Credit Accommodations established (which day shall be
a business day) and the amount of the requested Loan. Requests received after
10:30 a.m., Los Angeles time on any day shall be deemed to have been made as of
the opening of business on the immediately following business day. All Loans and
Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of,
Borrower when deposited to the credit of Borrower or otherwise disbursed or
established in accordance with the instructions of Borrower or in accordance
with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the
Loans provided by Lender to Borrower hereunder only for: (a) payments to each of
the persons listed in the disbursement direction letter furnished by Borrower to
Lender on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to Borrower pursuant to the provisions
hereof shall be used by Borrower only for general operating, working capital and
other proper corporate purposes of Borrower not otherwise prohibited by the
terms hereof. None of the proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of Regulation G
of the Board of Governors of the Federal Reserve System, as amended.
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SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrower shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender in its reasonable credit judgment, a schedule of Accounts;
(b) on a weekly basis or more frequently as Lender may request, in its
reasonable credit judgment, perpetual inventory reports; (c) on a monthly basis
or more frequently as Lender may request in its reasonable credit judgment, (i)
standard cost inventory reports by category with a detailed listing of all
drives and (ii) agings of accounts receivable and accounts payable, (c) upon
Lender's request, (i) copies of customer statements and credit memos, remittance
advices and reports, and copies of deposit slips and bank statements, (ii)
copies of shipping and delivery documents, and (iii) copies of purchase orders,
invoices and delivery documents for Inventory and Equipment acquired by
Borrower; and (d) such other reports as to the Collateral as Lender, in its
reasonable credit judgment, shall request from time to time. If any of
Borrower's records or reports of the Collateral are prepared or maintained by an
accounting service, contractor, shipper or other agent, Borrower hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of: (i) any material
delay in Borrower's performance of any of its obligations to any account debtor
or the assertion of any claims, offsets, defenses or counterclaims by any
account debtor, or any disputes with account debtors, or any settlement,
adjustment or compromise thereof, (ii) all material adverse information relating
to the financial condition of any account debtor and (iii) any event or
circumstance which, to Borrower's knowledge would cause Lender to consider any
then existing Accounts as no longer constituting Eligible Accounts. No credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor without Lender's consent, except in the ordinary
course of Borrower's business in accordance with practices and policies
previously disclosed in writing to Lender. So long as no Event of Default exists
or has occurred and is continuing, Borrower shall settle, adjust or compromise
any claim, offset, counterclaim or dispute with any account debtor. At any time
that an Event of Default exists or has occurred and is continuing, Lender shall,
at its option, have the exclusive right to settle, adjust or compromise any
claim, offset, counterclaim or dispute with account debtors or grant any
credits, discounts or allowances.
(b) Borrower shall promptly report to Lender any return of
Inventory by an account debtor having a sales price in excess of One Hundred
Thousand Dollars ($100,000). At any time that Inventory is returned, reclaimed
or repossessed, the related Account shall not be deemed an Eligible Account. In
the event any account debtor returns Inventory when an Event of Default exists
or has occurred and is continuing, Borrower shall, upon Lender's request, (i)
hold the returned Inventory in trust for Lender, (ii) segregate all returned
Inventory from all of its other property, (iii) dispose of the returned
Inventory solely according to Lender's instructions, and (iv) not issue any
credits, discounts or allowances with respect thereto without Lender's prior
written consent.
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(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of Borrower's business in
accordance with practices and policies previously disclosed to Lender, (iv)
there shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto except as reported to Lender
in accordance with the terms of this Agreement, (v) none of the transactions
giving rise thereto will violate any applicable State or Federal laws or
regulations, all documentation relating thereto will be legally sufficient under
such laws and regulations and all such documentation will be legally enforceable
in accordance with its terms.
(d) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender,
with appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments which Borrower now owns or may at any time acquire
immediately upon Borrower's receipt thereof, except as Lender may otherwise
agree.
(f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
that the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof nor for the negligence of its agents or attorneys with
respect thereto and (iv) take whatever other action Lender may, in the exercise
of its reasonable credit judgment, deem necessary or desirable for the
protection of its interests. At any time that an Event of Default exists or has
occurred and is continuing, at Lender's request, all invoices and statements
sent to any account debtor shall state that the Accounts and such other
obligations have been assigned to Lender and are payable directly and only to
Lender and Borrower shall deliver to Lender such originals of documents
evidencing the sale and delivery of goods or the performance of services giving
rise to any Accounts as Lender may, in the exercise of its reasonable credit
judgment, require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
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physical count of the Inventory at least once each year (which may be conducted
in cycles in a manner reasonably acceptable to Lender), but at any time or times
as Lender may request on or after the occurrence and during the continuance of
an Event of Default; and promptly following such physical inventory shall supply
Lender with a report in the form and with such specificity as may be reasonably
satisfactory to Lender concerning such physical count; (c) Borrower shall not
remove any Inventory from the locations set forth or permitted herein, without
the prior written consent of Lender, except for sales of Inventory in the
ordinary course of Borrower's business and except to move Inventory directly
from one location set forth or permitted herein to another such location; (d)
upon Lender's request, Borrower shall, at its expense, no less frequently than
quarterly, but at any time or times as Lender may, in the exercise of its
reasonable credit judgment, request on or after the occurrence and during the
continuance of an Event of Default, deliver or cause to be delivered to Lender
written reports or appraisals as to the Inventory in form, scope and methodology
acceptable to Lender and by an appraiser acceptable to Lender, addressed to
Lender or upon which Lender is expressly permitted to rely; (e) Borrower shall
produce, use, store and maintain the Inventory, with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including, but not limited to, the requirements
of the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (f) Borrower assumes all responsibility
and liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (g) Borrower shall not sell Inventory to any
customer on approval, or any other basis which entitles the customer to return
or may obligate Borrower to repurchase such Inventory except for such sales in
conformity with the Policy Letter; (h) Borrower shall keep the Inventory in good
and marketable condition; and (i) Borrower shall not, without prior written
notice to Lender, acquire or accept any Inventory on consignment or approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) at least
quarterly or more frequently as determined in Lender's reasonable credit
judgment, Borrower shall, at its expense, deliver or cause to be delivered to
Lender Desktop Review appraisals of the orderly liquidation value of the
Equipment in form, scope and methodology acceptable to Lender and by an
appraiser acceptable to Lender; (b) Borrower shall keep the Equipment in good
order, repair, running and marketable condition (ordinary wear and tear
excepted); (c) Borrower shall use the Equipment with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with all applicable laws; (d) the Equipment is and shall be used in
Borrower's business and not for personal, family, household or farming use; (e)
Borrower shall not remove any Equipment from the locations set forth or
permitted herein, except to the extent necessary to have any Equipment repaired
or maintained in the ordinary course of the business of Borrower or to move
Equipment directly from one location set forth or permitted herein to another
such location and except for the movement of motor vehicles used by or for the
benefit of Borrower in the ordinary course of business; (f) the Equipment is now
and shall remain personal property and Borrower shall not permit any of the
Equipment to be or become a part of or affixed to real property; and (g)
Borrower assumes all responsibility and liability arising from the use of the
Equipment.
7.5 Power of Attorney. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default or
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event which with notice or passage of time or both would constitute an Event of
Default exists or has occurred and is continuing (i) demand payment on Accounts
or other proceeds of Inventory or other Collateral, (ii) enforce payment of
Accounts by legal proceedings or otherwise, (iii) exercise all of Borrower's
rights and remedies to collect any Account or other Collateral, (iv) sell or
assign any Account upon such terms, for such amount and at such time or times as
the Lender deems advisable, (v) settle, adjust, compromise, extend or renew an
Account, (vi) discharge and release any Account, (vii) prepare, file and sign
Borrower's name on any proof of claim in bankruptcy or other similar document
against an account debtor, (viii) notify the post office authorities to change
the address for delivery of Borrower's mail to an address designated by Lender,
and open and dispose of all mail addressed to Borrower, and (ix) do all acts and
things which are necessary, in Lender's determination, to fulfill Borrower's
obligations under this Agreement and the other Financing Agreements and (b) at
any time to (i) take control in any manner of any item of payment or proceeds
thereof, (ii) have access to any lockbox or postal box into which Borrower's
mail is deposited, (iii) endorse Borrower's name upon any items of payment or
proceeds thereof and deposit the same in the Lender's account for application to
the Obligations, (iv) endorse Borrower's name upon any chattel paper, document,
instrument, invoice, or similar document or agreement relating to any Account or
any goods pertaining thereto or any other Collateral, (v) sign Borrower's name
on any verification of Accounts and notices thereof to account debtors and (vi)
execute in Borrower's name and file any UCC financing statements or amendments
thereto. Borrower hereby releases Lender and its officers, employees and
designees from any liabilities arising from any act or acts under this power of
attorney and in furtherance thereof, whether of omission or commission, except
as a result of Lender's own gross negligence or wilful misconduct.
7.6 Right to Cure. Lender may, at its option, (a) cure any default by
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Lender's reasonable credit judgment, is necessary or
appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Lender with respect thereto. Lender may add any amounts so expended to
the Obligations and charge Borrower's account therefor, such amounts to be
repayable by Borrower on demand. Lender shall be under no obligation to effect
such cure, payment or bonding and shall not, by doing so, be deemed to have
assumed any obligation or liability of Borrower. Any payment made or other
action taken by Lender under this Section shall be without prejudice to any
right to assert an Event of Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Lender, in
the exercise of its reasonable credit judgment, at the cost and expense of
Borrower, (a) Lender or its designee shall have complete access to all of
Borrower's premises during normal business hours and after reasonable notice to
Borrower, or at any time and without notice to Borrower if an Event of Default
exists or has occurred and is continuing, for the purposes of inspecting,
verifying and auditing the Collateral and all of Borrower's books and records,
including, without limitation, the Records, and (b) Borrower shall promptly
furnish to Lender such copies of such books and records or extracts therefrom as
Lender may request, and (c) use during normal business hours such of Borrower's
personnel, equipment, supplies and premises as may be reasonably necessary
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for the foregoing and if an Event of Default exists or has occurred and is
continuing for the collection of Accounts and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower is
a corporation duly organized and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on Borrower's financial condition,
results of operation or business or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of this Agreement, the other
Financing Agreements and the transactions contemplated hereunder and thereunder
are all within Borrower's corporate powers, have been duly authorized and are
not in contravention of law or the terms of Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
its property are bound. This Agreement and the other Financing Agreements
constitute legal, valid and binding obligations of Borrower enforceable in
accordance with their respective terms. Borrower does not have any subsidiaries
except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been or may hereafter be delivered by
Borrower to Lender have been prepared in accordance with GAAP and fairly present
the financial condition and the results of operation of Borrower as at the dates
and for the periods set forth therein. Except as disclosed in any interim
financial statements furnished by Borrower to Lender prior to the date of this
Agreement, there has been no material adverse change in the assets, liabilities,
properties and condition, financial or otherwise, of Borrower, since the date of
the most recent audited financial statements furnished by Borrower to Lender
prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Accounts are located only
at the address set forth below and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in the
Information Certificate, subject to the right of Borrower to establish new
locations in accordance with Section 9.2 below. The Information Certificate
correctly identifies any of such locations which are not owned by Borrower and
sets forth the owners and/or operators thereof and to the best of Borrower's
knowledge, the holders of any mortgages on such locations.
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8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Borrower has good
and marketable title to all of its properties and assets subject to no liens,
mortgages, pledges, security interests, encumbrances or charges of any kind,
except those granted to Lender and such others as are specifically listed on
Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by it (without requests for extension except as previously disclosed in writing
to Lender). All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Borrower has paid or caused to
be paid all taxes due and payable or claimed due and payable in any assessment
received by it, except taxes the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrower
and with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate,
there is no present investigation by any governmental agency pending, or to the
best of Borrower's knowledge threatened, against or affecting Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrower's knowledge threatened, against
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against Borrower
would result in any material adverse change in the assets, business or prospects
of Borrower or would impair the ability of Borrower to perform its obligations
hereunder or under any of the other Financing Agreements to which it is a party
or of Lender to enforce any Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. Borrower is
not in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party where such default is reasonably likely
to impair the ability of Borrower to perform its obligations hereunder or under
any of the other Financing Agreements to which it is a party or of Lender to
enforce the Obligations or realize on the Collateral, or by which it or any of
its assets are bound and Borrower is in compliance in all material respects with
all applicable provisions of laws, rules, regulations, licenses, permits,
approvals and orders of any foreign, Federal, State or local governmental
authority.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 hereto, Borrower has
not generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off its premises (whether
or not owned by it) in any manner which at any time violates any applicable
Environmental Law or any license, permit, certificate, approval or
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similar authorization thereunder and the operations of Borrower complies in all
material respects with all Environmental Laws and all licenses, permits,
certificates, approvals and similar authorizations thereunder.
(b) Except as set forth on Schedule 8.8 hereto, there has been
no investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any pending or
to the best of Borrower's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
Borrower or the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental, health or safety matter, which affects Borrower or its
business, operations or assets or any properties at which Borrower has
transported, stored or disposed of any Hazardous Materials.
(c) To the best of Borrower's knowledge, Borrower has no
material liability (contingent or otherwise) in connection with a release, spill
or discharge, threatened or actual, of any Hazardous Materials or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials.
(d) Borrower has all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or filed in
connection with the operations of Borrower under any Environmental Law and all
of such licenses, permits, certificates, approvals or similar authorizations are
valid and in full force and effect.
8.9 Employee Benefits.
(a) Borrower has not engaged in any transaction in connection
with which Borrower or any of its ERISA Affiliates could be subject to either a
civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code, including any accumulated funding deficiency described
in Section 8.9(c) hereof and any deficiency with respect to vested accrued
benefits described in Section 8.9(d) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation
has been or is expected by Borrower to be incurred with respect to any employee
pension benefit plan of Borrower or any of its ERISA Affiliates. There has been
no reportable event (within the meaning of Section 4043(b) of ERISA) or any
other event or condition with respect to any employee pension benefit plan of
Borrower or any of its ERISA Affiliates which presents a risk of termination of
any such plan by the Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which Borrower
or any of its ERISA Affiliates is required under Section 302 of ERISA and
Section 412 of the Code to have paid under the terms of each employee pension
benefit plan as contributions to such plan as of the last day of the most recent
fiscal year of such plan ended prior to the date hereof, and no accumulated
funding deficiency (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, exists with respect to any employee pension
benefit plan, including
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any penalty or tax described in Section 8.9(a) hereof and any deficiency with
respect to vested accrued benefits described in Section 8.9(d) hereof.
(d) The current value of all vested accrued benefits under all
employee pension benefit plans maintained by Borrower that are subject to Title
IV of ERISA does not exceed the current value of the assets of such plans
allocable to such vested accrued benefits, including any penalty or tax
described in Section 8.9(a) hereof and any accumulated funding deficiency
described in Section 8.9(c) hereof. The terms "current value" and "accrued
benefit" have the meanings specified in ERISA.
(e) Neither Borrower nor any of its ERISA Affiliates is or has
ever been obligated to contribute to any "multiemployer plan" (as such term is
defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.
8.10 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrower in writing to Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including, without limitation, all information
on the Information Certificate is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a material adverse affect on the business, assets or prospects of
Borrower, which has not been fully and accurately disclosed to Lender in
writing.
8.11 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto, and Borrower shall maintain in full force and
effect all permits, licenses, trademarks, trade names, approvals,
authorizations, leases and contracts necessary to carry on the business as
presently or proposed to be conducted except where the failure to maintain any
of the foregoing would not have a material adverse effect on the assets or
business prospects of Borrower or would not be reasonably likely to impair the
ability of Borrower to perform its obligations hereunder or under any of the
other Financing Agreements to which it is a party or of Lender to enforce the
Obligations or realize on the Collateral. Borrower shall give Lender thirty (30)
days prior written notice of any proposed change in its corporate name, which
notice shall set forth the new name
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and Borrower shall deliver to Lender a copy of the amendment to the Certificate
of Incorporation of Borrower providing for the name change certified by the
Secretary of State of the jurisdiction of incorporation of Borrower as soon as
it is available.
9.2 New Collateral Locations. Borrower may open any new location within
the continental United States provided Borrower (a) gives Lender thirty (30)
days prior written notice of the intended opening of any such new location and
(b) executes and delivers, or causes to be executed and delivered, to Lender
such agreements, documents, and instruments as Lender may deem reasonably
necessary or desirable to protect its interests in the Collateral at such
location, including, without limitation, UCC financing statements.
9.3 Compliance with Laws, Regulations.
(a) Borrower shall, at all times, comply in all material
respects with all laws, rules, regulations, licenses, permits, approvals and
orders applicable to it and duly observe all requirements of any Federal, State
or local governmental authority, including, without limitation, the Employee
Retirement Security Act of 1974, as amended, the Occupational Safety and Hazard
Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, and
all statutes, rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including, without
limitation, all of the Environmental Laws.
(b) Borrower shall establish and maintain, at its expense, a
system to assure and monitor its continued compliance with all Environmental
Laws in all of its operations. Copies of any environmental surveys, audits,
assessments, feasibility studies and results of remedial investigations shall be
promptly furnished, or caused to be furnished, by Borrower to Lender. Borrower
shall take prompt and appropriate action to respond to any non-compliance with
any of the Environmental Laws and shall regularly report to Lender on such
response.
(c) Borrower shall give both oral and written notice to Lender
immediately upon Borrower's receipt of any notice of, or Borrower's otherwise
obtaining actual knowledge of, (i) the occurrence of any event involving the
release, spill or discharge, threatened or actual, of any Hazardous Material or
(ii) any investigation, proceeding, complaint, order, directive, claims,
citation or notice with respect to: (A) any non-compliance with or violation of
any Environmental Law by Borrower or (B) the release, spill or discharge,
threatened or actual, of any Hazardous Material or (C) the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or (D) any other environmental, health or
safety matter, which affects Borrower or its business, operations or assets or
any properties at which Borrower transported, stored or disposed of any
Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is non-compliance, or any condition
which requires any action by or on behalf of Borrower in order to avoid any
material non-compliance, with any Environmental Law, Borrower shall prepare and
deliver to Lender a report as to such non-compliance setting forth a proposed
plan for responding to any environmental problems described therein.
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(e) Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including, without limitation, the costs of
any required or necessary repair, cleanup or other remedial work with respect to
any property of Borrower and the preparation and implementation of any closure,
remedial or other required plans except to the extent directly caused by
Lender's gross negligence or wilful misconduct. All representations, warranties,
covenants and indemnifications in this Section 9.3 shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Borrower shall duly pay and discharge
all taxes, assessments, contributions and governmental charges upon or against
it or its properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Borrower shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
9.5 Insurance. Borrower shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated. Said policies
of insurance shall be satisfactory to Lender as to form, amount and insurer.
Borrower shall furnish certificates, policies or endorsements to Lender as
Lender shall require as proof of such insurance, and, if Borrower fails to do
so, Lender is authorized, but not required, to obtain such insurance at the
expense of Borrower. All policies shall provide for at least thirty (30) days
prior written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrower in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrower shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrower shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by Borrower or any of its affiliates. If
no Event of Default has occurred and is continuing, Lender shall turn over to
Borrower any insurance proceeds received by Lender and Borrower shall apply such
proceeds to the repair or replacement of the Collateral to which the proceeds
relate. After the occurrence and during the continuance of any Event of Default,
Lender may, at its option, apply any insurance proceeds received by Lender at
any time
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to the cost of repairs or replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such manner as Lender
may determine or hold such proceeds as cash collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrower and its subsidiaries (if
any) in accordance with GAAP and Borrower shall furnish or cause to be furnished
to Lender: (i) within forty-five (45) days after the end of each fiscal month,
monthly unaudited consolidated financial statements, and, if Borrower has any
subsidiaries, unaudited consolidating financial statements (including in each
case balance sheets, statements of income and loss and statements of
shareholders' equity), all in reasonable detail, fairly presenting the financial
position and the results of the operations of Borrower and its subsidiaries as
of the end of and through such fiscal month and (ii) within ninety (90) days
after the end of each fiscal year, audited consolidated financial statements
and, if Borrower has any subsidiaries, audited consolidating financial
statements of Borrower and its subsidiaries (including in each case balance
sheets, statements of income and loss, statements of cash flow and statements of
shareholders' equity), and the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and the results of the
operations of Borrower and its subsidiaries as of the end of and for such fiscal
year, together with the opinion of independent certified public accountants,
which accountants shall be an independent accounting firm selected by Borrower
and reasonably acceptable to Lender, that such financial statements have been
prepared in accordance with GAAP, and present fairly the results of operations
and financial condition of Borrower and its subsidiaries as of the end of and
for the fiscal year then ended.
(b) Borrower shall promptly notify Lender in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for the
Obligations which is reasonably likely to result in any material adverse change
in the value of the Collateral or in Borrower's business, properties, assets,
goodwill or condition, financial or otherwise or impair Lender's ability to
enforce the Obligations or realize on the Collateral and (ii) the occurrence of
any Event of Default or event which, with the passage of time or giving of
notice or both, would constitute an Event of Default.
(c) Borrower shall promptly after the sending or filing
thereof furnish or cause to be furnished to Lender copies of all reports which
Borrower sends to its stockholders generally and copies of all reports and
registration statements which Borrower files with the Securities and Exchange
Commission, any national securities exchange or the National Association of
Securities Dealers, Inc.
(d) Borrower shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrower, as Lender may, from time to time,
request in its reasonable credit judgment. Lender is hereby authorized to
deliver a copy of any financial statement or any other information relating to
the business of Borrower to any court or other government agency or to any
participant or assignee or prospective participant or assignee. Borrower hereby
irrevocably authorizes and
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directs all accountants or auditors to deliver to Lender, at Borrower's expense,
copies of the financial statements of Borrower and any reports or management
letters prepared by such accountants or auditors on behalf of Borrower and to
disclose to Lender such information as they may have regarding the business of
Borrower. Any documents, schedules, invoices or other papers delivered to Lender
may be destroyed or otherwise disposed of by Lender one (1) year after the same
are delivered to Lender, except as otherwise designated by Borrower to Lender in
writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not, directly or indirectly, (a) merge into or with or consolidate with
any other Person or permit any other Person to merge into or with or consolidate
with it other than mergers or consolidations with respect to which (i) Borrower
is the surviving corporation, (ii) after giving effect to such merger or
consolidation, Borrower has a tangible net worth (determined in accordance with
GAAP) at least equal to the tangible net worth of Borrower immediately prior to
such merger or consolidation, and (iii) no Event of Default is then continuing
or would result from such merger or consolidation, or (b) sell, assign, lease,
transfer, abandon or otherwise dispose of any stock or indebtedness of any other
Person to any other Person or any of its assets to any other Person (except for
(i) sales of Inventory in the ordinary course of business and (ii) the
disposition of worn-out or obsolete Equipment or Equipment no longer used in the
business of Borrower so long as (A) if an Event of Default exists or has
occurred and is continuing, any proceeds are paid to Lender and (B) such sales
do not involve Equipment having an aggregate fair market value in excess of One
Hundred Fifty Thousand Dollars ($150,000) for all such Equipment disposed of in
any fiscal year of Borrower), or (c) form or acquire any subsidiaries, or (d)
wind up, liquidate or dissolve or (e) agree to do any of the foregoing except
for such agreement for which performance is expressly conditioned on the written
consent of Lender.
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including, without
limitation, the Collateral, except: (a) liens and security interests of Lender;
(b) liens securing the payment of taxes, either not yet overdue or the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Borrower's business to the extent: (i) such liens secure indebtedness which is
not overdue or (ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower, in each
case prior to the commencement of foreclosure or other similar proceedings and
with respect to which adequate reserves have been set aside on its books; (d)
zoning restrictions, easements, licenses, covenants and other restrictions
affecting the use of real property which do not interfere in any material
respect with the use of such real property or ordinary conduct of the business
of Borrower as presently conducted thereon; (e) purchase money security
interests in Equipment (including capital leases) so long as such security
interests do not apply to any property of Borrower other than the Equipment so
acquired, and the indebtedness secured thereby does not exceed the cost of the
Equipment so acquired; and (f) the security interests and liens set forth on
Schedule 8.4 hereto.
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9.9 Indebtedness. Borrower shall not incur, create, assume, become or
be liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except:
(a) the Obligations;
(b) trade obligations and normal accruals in the ordinary
course of business not yet due and payable, or with respect to which Borrower is
contesting in good faith the amount or validity thereof by appropriate
proceedings diligently pursued and available to Borrower and with respect to
which adequate reserves have been set aside on its books;
(c) purchase money indebtedness (including capital leases) to
the extent not incurred or secured by liens (including capital leases) in
violation of any other provision of this Agreement;
(d) unsecured indebtedness of Borrower to Maxtor evidenced by
that certain Subordinated Promissory Note, dated December 26, 1992, issued by
Borrower payable to Maxtor, as assignee of Storage Dimensions, Inc., a
California corporation, not to exceed the aggregate principal amount of
$4,000,000 (the "Maxtor Note") which indebtedness is subject to, and subordinate
in right of payment to, the right of Lender to receive the prior payment in full
of all of the Obligations pursuant to the terms of the Subordination Agreement;
provided, that: (i) Borrower shall not, directly or indirectly, make any
payments in respect of such indebtedness, including, but not limited to, any
prepayments or other non-mandatory payments, except that until an Event of
Default, or event which with notice or passage of time or both would constitute
an Event of Default, shall exist or have occurred and be continuing, Borrower
may make regularly scheduled payments of principal and interest in accordance
with the terms of the Maxtor Note as in effect on the date hereof; provided
further, however, that notwithstanding the foregoing, Borrower shall not make
any principal payments on the Maxtor Note if, after giving effect to any such
principal payment, Borrower shall not be in compliance with the following
financial conditions (it being agreed by the parties hereto that the failure, in
and of itself, to comply with any of the following financial covenants shall not
constitute an Event of Default hereunder):
(A) Borrower shall maintain, for each fiscal quarter,
commencing with the fiscal quarter ended March 31,
1996, a Fixed Charge Ratio of not less than
1.25:1.00;
(B) Borrower shall maintain, for each fiscal quarter,
commencing with the fiscal quarter ended March 31,
1996, Tangible Net Worth of not less than Six Million
Four Hundred Thousand Dollars ($6,400,000); and
(C) Borrower shall have Excess Availability of not less
than Two Million Dollars ($2,000,000);
(For the purposes only of these financial conditions:
(1) The Fixed Charge Ratio shall be defined as the ratio
of the following numbers:
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(a) Numerator: Earnings before interest and taxes
(EBIT) plus depreciation expense, less cash payments
for taxes, interest expense, management fees to
Capital Partners Holdings and principal payments on
senior debt. All of these numbers are on a
year-to-date basis.
(b) Denominator: The sum of the current portion of
long term debt (excluding the Maxtor Note and
year-to-date principal payment to Maxtor (including
the payment under consideration) and year-to-date
expenditures on capital equipment acquisitions.
(2) Tangible Net Worth shall mean, as of any particular
date, the difference between (a) Borrower's total
assets as they would normally be shown on the balance
sheet, but excluding the aggregate amount of all
Borrower's intangibles assets and (b) Borrower's
total liabilities and deferred charges as they would
normally be shown on the balance sheet, including as
liabilities any guarantees of the indebtedness of
affiliates or any other Person but excluding amounts
outstanding under the Maxtor Note),
(ii) Borrower shall not, directly or indirectly, (A) amend, modify, alter or
change any terms of such indebtedness or any agreement, document or instrument
related thereto, or (B) redeem, retire, defease, purchase or otherwise acquire
such indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and (iii) Borrower shall furnish to Lender all notices, demands or
other materials concerning such indebtedness either received by Borrower or on
its behalf, promptly after receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be;
(e) unsecured indebtedness of Borrower for borrowed money
owing to any person other than any shareholder, officer, director, agent,
employee or affiliate of Borrower on commercially reasonable rates and terms
pursuant to an arm's length transaction; provided, that, (i) Lender shall have
received not less than five (5) business days prior written notice of the
intention to incur such indebtedness, which notice shall set forth in reasonable
detail satisfactory to Lender, the amount of such indebtedness, the person to
whom such indebtedness will be owed, the interest rate, the schedule of
repayments and maturity date with respect thereto and such other information as
Lender may reasonably request with respect thereto, (ii) Lender shall have
received, upon its request, true, correct and complete copies of all agreements,
documents and instruments evidencing or otherwise related to such indebtedness,
(iii) the aggregate amount of such indebtedness at any time outstanding shall
not exceed Five Million Dollars ($5,000,000), (iv) on and before the date of
incurring such indebtedness and after giving effect thereto, no Event of
Default, or event which with the passage of time or both would constitute an
Event of Default, shall exist or have occurred and be continuing, (v) Borrower
may only make regularly scheduled payments of principal and interest in respect
of such indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such indebtedness as in effect on the date of the
execution thereof, and (vi) Borrower shall not, directly or indirectly, (A) make
any prepayments or other non-mandatory payments in respect of such indebtedness
if an Event of Default has occurred and is continuing hereunder or would result
from such prepayment or other non-mandatory payment, or (B) redeem, retire,
defease, purchase or otherwise acquire such
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indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and (vii) Borrower shall furnish to Lender a summary of the payment
terms of such Indebtedness and all notices of defaults or demands for payment or
performance in connection with such indebtedness either received by Borrower or
on its behalf, promptly after the receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, directly
or indirectly, make any loans or advance money or property to any person, or
invest in (by capital contribution, dividend or otherwise) or purchase or
repurchase the capital stock or indebtedness or all or a substantial part of the
assets or property of any person, or guarantee, assume, endorse, or otherwise
become responsible for (directly or indirectly) the indebtedness, performance,
obligations or dividends of any Person or agree to do any of the foregoing,
except: (a) the endorsement of instruments for collection or deposit in the
ordinary course of business; (b) investments in: (i) short-term direct
obligations of the United States Government, (ii) negotiable certificates of
deposit issued by any bank satisfactory to Lender, payable to the order of the
Borrower or to bearer and delivered to Lender, and (iii) commercial paper rated
A1 or P1; provided, that, as to any of the foregoing, unless waived in writing
by Lender, Borrower shall take such actions as are deemed necessary by Lender to
perfect the security interest of Lender in such investments; (c) the guarantees
set forth in the Information Certificate; and (d) provided no Event of Default
has occurred and is continuing or would result from the making of any such loan,
loans to employees not to exceed Two Hundred Fifty Thousand Dollars ($250,000)
outstanding at any one time.
9.11 Dividends and Redemptions. Borrower shall not, directly or
indirectly, declare or pay any dividends on account of any shares of class of
capital stock of Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing, except as set forth on Schedule 9.11
hereto; provided, however, that notwithstanding the foregoing and with the
further proviso that no Event of Default shall have occurred and is continuing
or would result from the repurchase of such capital stock, Borrower may
repurchase shares of its capital stock from former employees during any fiscal
year in an amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000),
net of any sales proceeds received by Borrower from the resale of such
repurchased capital stock.
9.12 Transactions with Affiliates. Borrower shall not enter into any
transaction for the purchase, sale or exchange of property or the rendering of
any service to or by any affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower than Borrower would obtain in
a comparable arm's length transaction with an unaffiliated person, with the
exception that Borrower may pay management fees to its majority shareholder,
Capital Partners Holdings, in an amount not to exceed Fifty Thousand Dollars
($50,000) per month plus reimbursement of reasonable out-of-pocket costs and
expenses.
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9.13 Compliance with ERISA. Borrower shall not with respect to any
"employee pension benefit plan" maintained by Borrower or any of its ERISA
Affiliates:
(a) (i) terminate any of such employee pension benefit plans so as
to incur any liability to the Pension Benefit Guaranty Corporation established
pursuant to ERISA, (ii) allow or suffer to exist any prohibited transaction
involving any of such employee pension benefit plans or any trust created
thereunder which would subject Borrower or such ERISA Affiliate to a tax or
penalty or other liability on prohibited transactions imposed under Section 4975
of the Code or ERISA, (iii) fail to pay to any such employee pension benefit
plan any contribution which it is obligated to pay under Section 302 of ERISA,
Section 412 of the Code or the terms of such plan, (iv) allow or suffer to exist
any accumulated funding deficiency, whether or not waived, with respect to any
such employee pension benefit plan, (v) allow or suffer to exist any occurrence
of a reportable event or any other event or condition which presents a material
risk of termination by the Pension Benefit Guaranty Corporation of any such
employee pension benefit plan that is a single employer plan, which termination
could result in any liability to the Pension Benefit Guaranty Corporation or
(vi) incur any withdrawal liability with respect to any multiemployer pension
plan.
(b) As used in this Section 9.15, the term "employee pension
benefit plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
Section 4975 of the Code and ERISA.
9.14 Costs and Expenses. Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including, but not limited to: (a)
all reasonable costs and expenses of filing or recording (including Uniform
Commercial Code financing statement filing taxes and fees, documentary taxes,
intangibles taxes and mortgage recording taxes and fees, if applicable); (b)
costs and expenses and fees for title insurance and other insurance premiums,
environmental audits, surveys, assessments, engineering reports and inspections,
appraisal fees and search fees; (c) costs and expenses of remitting loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining the Blocked Accounts, together with Lender's customary charges and
fees with respect thereto; (d) charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations; (e) costs and
expenses of preserving and protecting the Collateral; (f) costs and expenses
paid or incurred in connection with obtaining payment of the Obligations,
enforcing the security interests and liens of Lender, selling or otherwise
realizing upon the Collateral, and otherwise enforcing the provisions of this
Agreement and the other Financing Agreements or defending any claims made or
threatened against Lender arising out of the transactions contemplated hereby
and thereby (including, without limitation, preparations for and consultations
concerning any such matters); (g) all reasonable out-of-pocket expenses and
costs heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and Borrower's
operations; and (h) the fees
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and disbursements of counsel (including legal assistants) to Lender in
connection with any of the foregoing.
9.15 Further Assurances. At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such request by Lender, Lender may, at its option, cease to make any
further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, Borrower hereby
authorizes Lender to execute and file one or more UCC financing statements
signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) Borrower fails to pay any of the Obligations within two
(2) days after the same becomes due and payable or (ii) Borrower or any Obligor
fails to perform any of the terms, covenants, conditions or provisions contained
in this Agreement or any of the other Financing Agreements other than as
described in Section 10.1(a)(i) and such failure shall continue for ten (10)
days; provided, that;, such ten (10) day period shall not apply in the case of:
(A) any failure to observe any such term, covenant, condition or provision which
is not capable of being cured at all or within such ten (10) day period or which
has been the subject of a prior failure within a six (6) month period or (B) an
intentional breach by Borrower or any Obligor of any such term, covenant,
condition or provision, or (C) the failure to observe or perform any of the
covenants or provisions contained in Section 7.1, 9.1 or 9.5 of this Agreement
or any covenants or agreements covering substantially the same matter as such
sections in any of the other Financing Agreements;
(b) any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
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(d) any judgment for the payment of money is rendered against
Borrower or any Obligor in excess of Two Hundred Fifty Thousand Dollars
($250,000) in any one case or in excess of Three Hundred Thousand Dollars
($300,000) in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against Borrower or
any Obligor or any of their assets;
(e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or Borrower or any Obligor, which is a
partnership or corporation, dissolves or suspends or discontinues doing
business;
(f) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrower or any Obligor or all or any part of its
properties and such petition or application is not dismissed within sixty (60)
days after the date of its filing or Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or any Obligor or for all or any part of its
property; or
(i) any default by Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any case
in an amount in excess of Three Hundred Thousand Dollars ($300,000), which
default continues for more than the applicable cure period, if any, with respect
thereto, or any default by Borrower or any Obligor under any material contract,
lease, license or other obligation to any person other than Lender, which
default continues for more than the applicable cure period, if any, with respect
thereto;
(j) any Change of Control of Borrower; provided, however, in the
event of the occurrence of an Event of Default under this subsection (j), Lender
shall waive the applicable early termination fee under Section 12.1(c) hereof
should Borrower repay all outstanding Obligations and terminate this Agreement
as provided in Section 12.1(a) within sixty (60) days of the occurrence of the
Event of Default under this subsection (j);
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(k) the indictment of Borrower or any Obligor under any criminal
statute, or commencement of criminal or civil proceedings against Borrower or
any Obligor, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of any of the property of Borrower or
such Obligor;
(l) there shall be a material adverse change in the business,
assets or prospects of Borrower or any Obligor after the date hereof; or
(m) there shall be an event of default (after any applicable grace
period) under any of the other Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including, without limitation,
entering into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Lender or elsewhere) at such prices
or terms as Lender may deem reasonable, for cash, upon credit or for future
delivery, with the Lender having the right to purchase the whole or any part of
the Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of Borrower, which right or equity of redemption
is hereby expressly waived and released by Borrower and/or (vii) terminate this
Agreement. If any of the Collateral is sold or
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leased by Lender upon credit terms or for future delivery, the Obligations shall
not be reduced as a result thereof until payment therefor is finally collected
by Lender. If notice of disposition of Collateral is required by law, five (5)
days prior notice by Lender to Borrower designating the time and place of any
public sale or the time after which any private sale or other intended
disposition of Collateral is to be made, shall be deemed to be reasonable notice
thereof and Borrower waives any other notice. In the event Lender institutes an
action to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, Borrower waives the posting of any bond which might
otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrower shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrower and/or (ii) terminate any provision of this
Agreement providing for any future Loans or Letter of Credit Accommodations to
be made by Lender to Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of California
(without giving effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Superior Court of the State of California, for
the Counties of Los Angeles or Santa Xxxxx, and the United States District Court
for the Northern or Central Districts of California, and waive any objection
based on venue or forum non conveniens with respect to any action instituted
therein arising under this Agreement or any of the other Financing Agreements or
in any way connected with or related or incidental to the dealings of the
parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard
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only in the courts described above (except that Lender shall have the right to
bring any action or proceeding against Borrower or its property in the courts of
any other jurisdiction which Lender deems necessary or appropriate in order to
realize on the Collateral or to otherwise enforce its rights against Borrower or
its property).
(c) Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth on the
signature pages hereof with a copy of such service of process to its counsel,
Xxxxxxx X. Xxxxxx, Esq., Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx Xxxx,
Xxxx Xxxx, Xxxxxxxxxx 00000-0000 and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited in the U.S.
mails, or, at Lender's option, by service upon Borrower in any other manner
provided under the rules of any such courts. Within thirty (30) days after such
service, Borrower shall appear in answer to such process, failing which Borrower
shall be deemed in default and judgment may be entered by Lender against
Borrower for the amount of the claim and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER
EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR
LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to
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or demand on Borrower which Lender may elect to give shall entitle Borrower to
any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender and Borrower. Lender shall not, by any act, delay, omission or otherwise
be deemed to have expressly or impliedly waived any of its rights, powers and/or
remedies unless such waiver shall be in writing and signed by an authorized
officer of Lender. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Lender of any right, power and/or
remedy on any one occasion shall not be construed as a bar to or waiver of any
such right, power and/or remedy which Lender would otherwise have on any future
occasion, whether similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
reasonable fees and expenses of counsel, except as directly caused by their
gross negligence or wilful misconduct. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section may be unenforceable
because it violates any law or public policy, Borrower shall pay the maximum
portion which it is permitted to pay under applicable law to Lender in
satisfaction of indemnified matters under this Section. The foregoing indemnity
shall survive the payment of the Obligations and the termination or non-renewal
of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date two (2) years from the
date hereof (the "Renewal Date"), and from year to year thereafter, unless
terminated pursuant to the terms hereof. Lender or Borrower may terminate this
Agreement and the other Financing Agreements effective on the Renewal Date or on
the anniversary of the Renewal Date in any year by giving to the other party at
least sixty (60) days prior written notice; provided, that, this Agreement and
all other Financing Agreements must be terminated simultaneously. Upon the
effective date of termination or non-renewal of the
41
43
Financing Agreements, Borrower shall pay to Lender, in full, all outstanding and
unpaid Obligations and shall furnish cash collateral to Lender in such amounts
as Lender determines are reasonably necessary to secure Lender from loss, cost,
damage or expense, including reasonable attorneys' fees and legal expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and checks or other payments provisionally
credited to the Obligations and/or as to which Lender has not yet received final
and indefeasible payment. Such cash collateral shall be remitted by wire
transfer in Federal funds to such bank account of Lender, as Lender may, in its
discretion, designate in writing to Borrower for such purpose. Interest shall be
due until and including the next business day, if the amounts so paid by
Borrower to the bank account designated by Lender are received in such bank
account later than 10:30 a.m., Los Angeles time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the
end of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
Amount Period
(i) 3% of Maximum Credit from the date hereof to and
including May 15, 1997; and
(ii) 2% of Maximum Credit from May 16, 1997 to and
including May 15, 1998;
provided, however, that in the event termination of this Agreement occurs as a
result of the repayment of all Obligations from the proceeds of either (i) an
initial public offering of the equity of the Borrower or (ii) a strategic
alliance with an unaffiliated Person accompanied by a resulting Change of
Control, and (x) if such repayment occurs during the period from November 16,
1996 through May 15, 1997, the early termination fee for such period shall be
reduced from three percent (3%) of the Maximum Credit to two percent (2%) of the
Maximum Credit or (y) if such repayment occurs during the period from May 16,
1997 through May 15, 1998, the early termination fee for such period shall be
reduced from two percent (2%) of the Maximum Credit to one percent (1%) of the
Maximum Credit. Such early termination fee shall be presumed to be the amount of
damages sustained by Lender as a result of such early termination and Borrower
agrees that it is reasonable under the circumstances currently existing. The
early termination fee provided for in this Section 12.1 shall be deemed included
in the Obligations.
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12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower at
its chief executive office set forth below, or to such other address as either
party may designate by written notice to the other in accordance with this
provision, and (b) deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign all or
any part of the Loans, the Letter of Credit Accommodations or any other interest
herein to another financial institution or other person, in which event, the
assignee shall have, to the extent of such assignment, the same rights and
benefits as it would have if it were the Lender hereunder, except as otherwise
provided by the terms of such assignment. Borrower may, in the event Lender
assigns the Loans, the Letter of Credit Accommodations or any other interest
herein, terminate this Agreement on sixty (60) days written notice to Lender
without the payment of any early termination fee as set forth in Section
12.1(c); provided, however, Borrower shall be obligated to pay the applicable
early termination fee as set forth in Section 12.1(c) in connection with any
termination of this Agreement under the circumstances described in this sentence
if either (i) Lender's assignment of the Loans, the Letter of Credit
Accommodations or other interest herein occurs in connection with a sale of
substantially all of Lender's assets, or (ii) if after giving effect to Lender's
assignment of the Loans, the Letter of Credit Accommodations or other interest
herein, Lender continues to remain the lender hereunder. Lender shall not sell
participations in all or any part of the Loans, the Letter of Credit
Accommodations or any other interest therein.
12.5 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
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IN WITNESS WHEREOF, Lender and Borrower have caused these presents to
be duly executed as of the day and year first above written.
================================================================================
LENDER BORROWER
CONGRESS FINANCIAL CORPORATION STORAGE DIMENSIONS,
(WESTERN) INC.
By: By:
Title: Senior Vice President Title: Senior Vice President
Address: Chief Executive Office:
000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000 0000 XxXxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000 Xxxxxxxx, Xxxxxxxxxx 00000
================================================================================
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TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS................................................... 1
SECTION 2. CREDIT FACILITIES............................................. 9
2.1 Revolving Loans......................................... 9
2.2 Letter of Credit Accommodations......................... 10
2.3 Term Loan............................................... 12
2.4 Capital Expenditure Facility............................ 12
SECTION 3. INTEREST AND FEES............................................. 13
3.1 Interest................................................ 13
3.2 Closing Fee............................................. 14
3.3 Servicing Fee........................................... 14
SECTION 4. CONDITIONS PRECEDENT.......................................... 14
4.1 Conditions Precedent to Initial Loans and Letter
of Credit Accommodations................................ 14
4.2 Conditions Precedent to All Loans and Letter of
Credit Accommodations................................... 16
SECTION 5. GRANT OF SECURITY INTEREST.................................... 16
SECTION 6. COLLECTION AND ADMINISTRATION................................. 17
6.1 Borrower's Loan Account................................. 17
6.2 Statements.............................................. 17
6.3 Collection of Accounts.................................. 18
6.4 Payments................................................ 19
6.5 Authorization to Make Loans............................. 19
6.6 Use of Proceeds......................................... 19
SECTION 7. COLLATERAL REPORTING AND COVENANTS............................ 20
7.1 Collateral Reporting.................................... 20
7.2 Accounts Covenants...................................... 20
7.3 Inventory Covenants..................................... 22
7.4 Equipment Covenants..................................... 22
7.5 Power of Attorney....................................... 23
7.6 Right to Cure........................................... 23
7.7 Access to Premises...................................... 24
SECTION 8. REPRESENTATIONS AND WARRANTIES................................ 24
8.1 Corporate Existence, Power and Authority;
Subsidiaries............................................ 24
(i)
47
TABLE OF CONTENTS
(CONTINUED)
PAGE
8.2 Financial Statements; No Material Adverse
Change.................................................. 24
8.3 Chief Executive Office; Collateral Locations............ 25
8.4 Priority of Liens; Title to Properties.................. 25
8.5 Tax Returns............................................. 25
8.6 Litigation.............................................. 25
8.7 Compliance with Other Agreements and
Applicable Laws......................................... 26
8.8 Environmental Compliance................................ 26
8.9 Employee Benefits....................................... 26
8.10 Accuracy and Completeness of Information................ 27
8.11 Survival of Warranties; Cumulative...................... 27
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS............................ 28
9.1 Maintenance of Existence................................ 28
9.2 New Collateral Locations................................ 28
9.3 Compliance with Laws, Regulations....................... 28
9.4 Payment of Taxes and Claims............................. 29
9.5 Insurance............................................... 29
9.6 Financial Statements and Other Information.............. 30
9.7 Sale of Assets, Consolidation, Merger,
Dissolution, Etc........................................ 31
9.8 Encumbrances............................................ 31
9.9 Indebtedness............................................ 32
9.10 Loans, Investments, Guarantees, Etc..................... 34
9.11 Dividends and Redemptions............................... 34
9.12 Transactions with Affiliates............................ 35
9.13 Compliance with ERISA................................... 35
9.14 Costs and Expenses...................................... 35
9.15 Further Assurances...................................... 36
SECTION 10. EVENTS OF DEFAULT AND REMEDIES................................ 36
10.1 Events of Default....................................... 36
10.2 Remedies................................................ 39
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW...................... 40
11.1 Governing Law; Choice of Forum; Service of
Process; Jury Trial Waiver.............................. 40
11.2 Waiver of Notices....................................... 41
11.3 Amendments and Waivers.................................. 41
11.4 Waiver of Counterclaims................................. 42
(ii)
48
TABLE OF CONTENTS
(CONTINUED)
PAGE
11.5 Indemnification......................................... 42
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS.............................. 42
12.1 Term.................................................... 42
12.2 Notices................................................. 43
12.3 Partial Invalidity...................................... 44
12.4 Successors.............................................. 44
12.5 Entire Agreement........................................ 44
(iii)
49
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Exhibit 2.3 Term Note
Exhibit 2.4 Equipment Loan Note
Schedule 8.4 Existing Liens
Schedule 9.11 Permitted Dividends and Other Distributions on
Capital Stock
(iv)
50
SCHEDULE 8.4
EXISTING LIENS
None.
51
SCHEDULE 9.11
PERMITTED DIVIDENDS AND OTHER
DISTRIBUTIONS ON CAPITAL STOCK
None.
