EXHIBIT 10.01
LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT, dated as of August 1, 2005, among DEL
GLOBAL TECHNOLOGIES CORP., a New York corporation ("Del Global"), RFI
CORPORATION, a Delaware corporation ("RFI"), and DEL MEDICAL IMAGING CORP., a
Delaware corporation ("Del Medical") (each a "Borrower" and collectively the
"Borrowers"), and NORTH FORK BUSINESS CAPITAL CORPORATION, a New York
corporation (the "Lender").
W I T N E S S E T H :
WHEREAS, the Borrowers wish to obtain a revolving credit and term
loan facility; and
WHEREAS, upon the terms and subject to the conditions set forth
herein, the Lender is willing to make loans and other extensions of credit to
the Borrowers in an aggregate amount not to exceed $8,000,000;
NOW, THEREFORE, the Borrowers and the Lender hereby agree as
follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. GENERAL DEFINITIONS. As used herein, the following
terms shall have the meanings herein specified (to be equally applicable to both
the singular and plural forms of the terms defined):
"ADJUSTED EARNINGS" means, for any period, with respect to Del
Global and its Subsidiaries on a consolidated basis (i) net income (as that term
is determined in accordance with GAAP) for such period, PLUS (ii) the amount of
depreciation and amortization of fixed and intangible assets deducted in
determining such net income for such period, PLUS (iii) all Interest Expense and
all fees for the use of money or the availability of money, including
commitment, facility and like fees and charges upon Indebtedness (including
Indebtedness to the Lender) paid or payable during such period, PLUS (iv)
provision for income tax expense during such period, LESS (v) provision for
income tax benefit during such period, PLUS (vi) non-recurring unusual or
extraordinary losses (including, without limitation, losses arising from the
Outstanding Disputes not to exceed $1,000,000 in the aggregate for all periods)
as classified in accordance with GAAP (or LESS any non-recurring or
extraordinary gains), LESS (vii) the amount of all gains (or PLUS the amount of
all losses) realized during such period upon the sale or other disposition of
property or assets that are sold or otherwise disposed of outside the ordinary
course of business that is included in the calculation of net income for such
period.
"ADJUSTED U.S. EARNINGS" means Adjusted Earnings without giving
effect to the net income of Villa Sistemi or any adjustments thereto.
"ADMINISTRATIVE BORROWER" means Del Global or any other Borrower
agreed to in writing by the Borrowers and the Lender from time to time, acting
in its capacity as agent for the Borrowers under Section 11.9(a).
"ADVANCE" means a Base Rate Advance or a LIBOR Rate Advance.
"AFFILIATE" means, as to any Person, any other Person who directly
or indirectly controls, is under common control with, is controlled by or is a
director or officer of such Person. As used in this definition, "control"
(including its correlative meanings, "controlled by" and "under common control
with") means possession, directly or indirectly, of the power to direct or cause
the direction of management or policies (whether through ownership of voting
securities or partnership or other ownership interests, by contract or
otherwise), PROVIDED that, in any event, any Person who owns directly or
indirectly ten percent (10%) or more of the securities having ordinary voting
power for the election of the members of the board of directors or other
governing body of a corporation or ten percent (10%) or more of the partnership
or other ownership interests of any other Person (other than as a limited
partner of such other Person) will be deemed to control such corporation,
partnership or other Person.
"AGREEMENT" means this Loan and Security Agreement, as amended,
supplemented or otherwise modified from time to time.
"AUDITORS" means a nationally recognized firm of independent public
accountants selected by the Administrative Borrower and reasonably satisfactory
to the Lender.
"AVERAGE EXCESS AVAILABILITY" means, as of any date of
determination, the difference between (i) the average daily Borrowing Base and
(ii) the average daily aggregate outstanding amount of the Loans PLUS the
average daily aggregate undrawn amount of all unexpired Letters of Credit, in
each case as determined during the immediately preceding three months.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy," as that title may be amended from time to time, or any successor
statute.
"BASE RATE" means the higher of (i) the highest prime, base or
equivalent rate of interest publicly announced from time to time by North Fork
Bank, Citibank, N.A. or Bank of America or any successor to either of the
foregoing banks (which may not be the lowest rate of interest charged by such
bank) and (ii) the published annualized rate for ninety-day dealer commercial
paper that appears in the "Money Rates" section of THE WALL STREET JOURNAL.
"BASE RATE ADVANCE" means an Advance that bears interest as provided
in Section 4.1(a).
"BAY SHORE PROPERTY" means the Property owned by RFI located at 000
Xxxx-Xxxx Xxxxx, Xxx Xxxxx, Xxx Xxxx, Xxxxxx of Suffolk.
"BLOCKED ACCOUNT" has the meaning specified in Section 2.7(a).
"BORROWER" or "BORROWERS" has the meaning specified in the
introductory paragraph.
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"BORROWING" means a borrowing of Revolving Credit Loans under
Section 2.1(a) or of the Term Loan under Section 2.2(a).
"BORROWING BASE" has the meaning specified in Section 2.1(a).
"BORROWING BASE CERTIFICATE" has the meaning specified in Section
7.1(k)(v).
"BUSINESS DAY" means any day other than a Saturday, a Sunday or any
other day on which commercial banks in New York, New York are required or
permitted by law to close. When used in connection with any LIBOR Rate Advance,
a Business Day shall also exclude any day on which commercial banks are not open
for dealings in Dollar deposits in the London interbank market.
"BUSINESS PLAN" means a business plan of the Borrowers and their
Subsidiaries, consisting of consolidated and consolidating projected balance
sheets, related cash flow statements and related profit and loss statements, and
availability forecasts, together with appropriate supporting details and a
statement of the underlying assumptions, which covers a three-year period and
which is prepared on a monthly basis for the first year and an annual basis
thereafter.
"CAPITAL EXPENDITURES" means expenditures for any fixed assets or
improvements, replacements, substitutions or additions thereto or therefor which
have a useful life of more than one year, and shall include all commitments,
payments in respect of Capitalized Lease Obligations and leasehold improvements.
"CAPITALIZED LEASE OBLIGATIONS" means any rental obligation which,
under GAAP, is or will be required to be capitalized on the books of the lessee,
taken at the amount thereof accounted for as indebtedness (net of Interest
Expense) in accordance with GAAP.
"CASH EQUIVALENTS" means (i) securities issued, guaranteed or
insured by the United States or any of its agencies with maturities of not more
than one year from the date acquired; (ii) certificates of deposit with
maturities of not more than one year from the date acquired, issued by (A) the
Lender or its Affiliates; (B) any U.S. federal or state chartered commercial
bank of recognized standing which has capital and unimpaired surplus in excess
of $500,000,000; or (C) any bank or its holding company that has a short-term
commercial paper rating of at least A-1 or the equivalent by Standard & Poor's
Ratings Services or at least P-1 or the equivalent by Xxxxx'x Investors Service,
Inc.; (iii) repurchase agreements and reverse repurchase agreements with terms
of not more than seven days from the date acquired, for securities of the type
described in clause (i) above and entered into only with commercial banks having
the qualifications described in clause (ii) above or such other financial
institutions with a short-term commercial paper rating of at least A-1 or the
equivalent by Standard & Poor's Ratings Services or at least P-1 or the
equivalent by Xxxxx'x Investors Service, Inc.; (iv) commercial paper, other than
commercial paper issued by Del Global or any of its Affiliates, issued by any
Person incorporated under the laws of the United States or any state thereof and
rated at least A-1 or the equivalent thereof by Standard & Poor's Ratings
Services or at least P-1 or the equivalent thereof by Xxxxx'x Investors Service,
Inc., in each case with maturities of not more than one year from the date
acquired; (v) investments in money market funds registered under the Investment
Company Act of 1940, which have net assets of at least $500,000,000 and at least
eighty-five percent (85%) of whose assets consist of securities and other
obligations of the type described in clauses (i) through (iv) above; and (vi)
other instruments, commercial paper or investments acceptable to the Lender in
its sole discretion.
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"CLOSING DATE" means the date of execution and delivery of this
Agreement.
"CODE" has the meaning specified in Section 1.3.
"COLLATERAL" means all Receivables, Equipment, Property, Inventory
and Investment Property (other than the shares of capital stock of Villa Sistemi
owned by Del Global unless and until 66% of such shares are pledged to the
Lender in accordance with Section 7.1(t)) of the Borrowers and all other
collateral specified in this Agreement and in the Security Documents.
"COLLATERAL ACCESS AGREEMENT" means a landlord waiver, mortgagee
waiver, bailee letter or similar acknowledgment of any lessor, warehouseman or
processor in possession of any Collateral or on whose property any Collateral is
located, substantially in the form of Exhibit O.
"COLLATERALIZATION" and "COLLATERALIZE" each means, with respect to
any Letter of Credit, the deposit by the Borrowers in a cash collateral account
established and controlled by or on behalf of the Lender of an amount equal to
105% of the undrawn amount of such Letter of Credit.
"COLLECTIONS" means all cash, funds, checks, notes, instruments, any
other form of remittance tendered by account debtors in respect of payment of
Receivables of the Borrowers and any other payments received by the Borrowers
with respect to any Collateral.
"COMPLIANCE CERTIFICATE" has the meaning specified in Section
7.1(k)(iv).
"CONTINGENT OBLIGATION" means any direct, indirect, contingent or
non-contingent guaranty or obligation for the Indebtedness of another Person,
except endorsements in the ordinary course of business.
"CONTINUATION" has the meaning specified in Section 2.3(b).
"CONTRIBUTION AGREEMENT" means the contribution, subrogation and
indemnity agreement among the Borrowers, substantially in the form of Exhibit D,
as amended, supplemented or otherwise modified from time to time.
"CONTROL AGREEMENT" means a control agreement, in form and substance
satisfactory to the Lender, among one or more of the Borrowers or their
Subsidiaries, the Lender and the applicable securities intermediary or
depository bank with respect to the applicable Securities Account and related
Investment Property or deposit account, as the case may be.
"CONVERT," "CONVERSION" and "CONVERTED" each refers to conversion of
Advances of one Type into Advances of another Type pursuant to Section 2.3(c).
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"DEFAULT" means any of the events specified in Section 9.1, whether
or not any of the requirements for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"DEL GLOBAL" has the meaning specified in the introductory
paragraph.
"DEL MEDICAL" has the meaning specified in the introductory
paragraph.
"DOLLARS" and the sign "$" means freely transferable lawful currency
of the United States.
"ELIGIBLE INVENTORY" means only such Inventory of a Borrower located
in the United States consisting of raw materials or finished goods, which is
free from any claim of title or Lien in favor of any Person (other than Liens in
favor of the Lender) and with respect to which no event has occurred and no
condition exists which could reasonably be expected to impair substantially such
Borrower's ability to use or sell such Inventory in the ordinary course of its
business and which the Lender, in its sole discretion, shall deem eligible to
serve as collateral for Advances or Letters of Credit, based on such
considerations as the Lender may deem appropriate from time to time and LESS any
such reserves as the Lender, in its sole discretion, may require, including,
without limitation, reserves for special order goods. No Inventory of a Borrower
shall be Eligible Inventory unless the Lender has a perfected first priority
Lien thereon. The value of Eligible Inventory shall be computed at the lower of
cost (computed on a "first in, first out" basis) or market. Any Inventory of a
Borrower that is not in the control or possession of such Borrower and is
covered by a warehouse receipt, a xxxx of lading or other document of title
shall in no event be Eligible Inventory unless such warehouse receipt, xxxx of
lading or document of title is in the name of or held by the Lender. No
Inventory of a Borrower shall be Eligible Inventory unless (i) it is located on
property owned by such Borrower; or (ii) it is located on property leased by
such Borrower or in a contract warehouse which is subject to a Collateral Access
Agreement executed by the lessor or contract warehouseman, as the case may be,
and segregated or otherwise separately identifiable from goods of others, if
any, stored on the premises. No Inventory of a Borrower shall be Eligible
Inventory if it is in transit or it is consigned to or from such Borrower. In
addition, and without limitation of the foregoing, the Lender may treat any
Inventory as ineligible if:
(a) it is not owned solely by a Borrower or a Borrower does not have
sole and good, valid and marketable title thereto; or
(b) it is packing or shipping materials or maintenance supplies; or
(c) it is goods returned or rejected by a Borrower's customer; or
(d) it (i) is excess (as so reserved by a Borrower from time to time
or as otherwise determined by the Lender) or (ii) is obsolete, defective,
damaged, slow moving or unmerchantable, or (iii) is samples or inventory on hand
which is used for promotional and other sales activities, or (iv) does not
otherwise conform to the representations and warranties contained in the Loan
Documents; or
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(e) it is repossessed, attached, seized, made subject to a writ or
distress warrant, levied upon or brought within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors; or
(f) it is goods acquired by a Borrower in or as part of a "bulk"
transfer or sale of assets and such acquisition is not consummated in the
ordinary course of business unless such Borrower has complied with all
applicable bulk sales or bulk transfer laws in connection with such acquisition.
"ELIGIBLE RECEIVABLES" means and includes only those unpaid
Receivables of a Borrower, without duplication, which (i) arise out of a bona
fide sale of goods or rendition of services of the kind ordinarily sold or
rendered by such Borrower in the ordinary course of its business, (ii) are made
to a Person competent to contract therefor who is not an Affiliate or an
employee of such Borrower and is not controlled by an Affiliate of such
Borrower, (iii) are not subject to renegotiation or redating, (iv) are free and
clear of any Lien in favor of any Person other than Liens in favor of the Lender
and Liens permitted under clause (iii) of Section 7.2(i) and (v) mature as
stated in the invoice or other supporting data covering such sale or services.
No Receivable of a Borrower shall be an Eligible Receivable (i) unless the
Lender has a perfected first priority Lien thereon, (ii) if it is more than
ninety days past the date of the original invoice therefor or more than sixty
days past its due date or (iii) unless the delivery of the goods or the
rendition of the services giving rise to such Receivable has been completed. The
Lender may treat any Receivable as ineligible if:
(a) any warranty contained in this Agreement or in any other Loan
Document with respect to such Receivable or in any assignment or statement of
warranties or representations relating to such Receivable delivered by a
Borrower to the Lender has been breached or is untrue in any material respect or
a Borrower is not in compliance with all applicable laws with respect to such
Receivable; or
(b) the account debtor or any Affiliate of the account debtor has
disputed liability, has or has asserted a right of setoff or has made any claim
with respect to any other Receivable due from such account debtor or Affiliate
to a Borrower, to the extent of the amount of such dispute or claim, or the
amount of such actual or asserted right of setoff, as the case may be; or
(c) the account debtor or any of its assets or any Affiliate of the
account debtor or any of its assets is the subject of an Insolvency Event or, in
the sole discretion of the Lender, is likely to become the subject of an
Insolvency Event, unless such account debtor or Affiliate has been provided with
a debtor in possession credit facility pursuant to Section 364 of the Bankruptcy
Code or a similar arrangement reasonably acceptable to the Lender; or
(d) the account debtor or any Affiliate of the account debtor has
called a meeting of its creditors to obtain any general financial accommodation;
or
(e) the account debtor is also a supplier to or creditor of a
Borrower, to the extent of the aggregate amount owed by such Borrower to the
account debtor; or
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(f) the sale or rendition of services is to an account debtor
outside the United States or Canada, unless it is on letter of credit,
acceptance or other terms acceptable to the Lender; or
(g) fifty percent (50%) or more of the accounts of any account
debtor and its Affiliates to the Borrowers are unpaid more than ninety days past
the date of the original invoices therefor or more than sixty days past due; or
(h) the account debtor is the United States of America or any
department, agency or instrumentality thereof and such Receivable would cause
Eligible Receivables from the United States of America or any department, agency
or instrumentality thereof to exceed $250,000, unless the applicable Borrower
assigns its right to payment under such Receivable to the Lender as collateral
hereunder in full compliance with (including, without limitation, the filing of
a written notice of the assignment and a copy of the assignment with, and
receipt of acknowledgment thereof by, the appropriate contracting and disbursing
offices pursuant to) the Assignment of Claims Act of 1940, as amended (31 U.S.C.
ss. 3727; 41 U.S.C. ss. 15); or
(i) to the extent such Receivable would cause more than 25% of
Eligible Receivables to be payable by the same account debtor; or
(j) the Lender believes, in its sole discretion, that collection of
such Receivable is insecure or that such Receivable may not be paid by reason of
the account debtor's inability or unwillingness to pay.
"EMPLOYMENT DISPUTE" means any litigation, arbitration, settlement
negotiations or other dispute, negotiation or proceeding involving any of the
Borrowers with Xxxxxx Xxxx related to his employment with the Borrowers.
"ENVIRONMENTAL LAWS" means all federal, state and local statutes,
laws (including common or case law), rulings, regulations or governmental,
administrative or judicial policies, directives, orders or interpretations
applicable to the business or property of a Person relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata)
including, without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of any Hazardous Materials.
"EQUIPMENT" means all machinery, equipment, furniture, fixtures,
leasehold improvements, conveyors, tools, materials, storage and handling
equipment, hydraulic presses, cutting equipment, computer equipment and
hardware, including central processing units, terminals, drives, memory units,
embedded computer programs and supporting information, printers, keyboards,
screens, peripherals and input or output devices, molds, dies, stamps, and other
equipment of every kind and nature and wherever situated now or hereafter owned
by a Person or in which a Person may have any interest as lessee or otherwise
(to the extent of such interest), together with all additions and accessions
thereto, all replacements and all accessories and parts therefor, all manuals,
blueprints, know-how, warranties and records in connection therewith and all
rights against suppliers, warrantors, manufacturers, and sellers or others in
connection therewith, together with all substitutes for any of the foregoing.
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"EQUIVALENT AMOUNT" means, with respect to any two currencies, the
amount obtained in one such currency when an amount in the other currency is
translated into the first currency using the spot wholesale transactions buying
rate of Citibank, N.A. for the purchase of the applicable amount of the first
currency with the other currency in effect as of 12:00 Noon (New York time) in
the place where such translation occurs on the Business Day with respect to
which such computation is required for the purpose of this Agreement or, in the
absence of such a buying rate on such date, using such other rate as the Lender
may reasonably select.
"ERISA" means the Employee Retirement Income Security Act of 1974,
29 U.S.C. xx.xx. 1000 et seq., amendments thereto, successor statutes, and
regulations or guidelines promulgated thereunder.
"ERISA AFFILIATE" means any entity required to be aggregated with a
Borrower under Section 414(b), (c), (m) or (o) of the Internal Revenue Code.
"EVENT OF DEFAULT" means the occurrence of any of the events
specified in Section 9.1.
"EXCESS AVAILABILITY" means, as of any date of determination, the
difference between (i) the Borrowing Base and (ii) the aggregate outstanding
amount of the Revolving Credit Loans plus the aggregate undrawn amount of all
unexpired Letters of Credit.
"EXPIRATION DATE" means the earlier of (i) August 1, 2008 and (ii)
the date of termination of the Lender's obligations to make Loans or to use its
best efforts to cause Letters of Credit to be issued pursuant to the terms
hereof.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any Person succeeding to the functions thereof.
"FINANCIAL COVENANTS" means the covenants set forth in Article VIII.
"FINANCIAL STATEMENTS" means, with respect to the Borrowers and
their Subsidiaries, the balance sheets, profit and loss statements, statements
of cash flow, and statements of changes in intercompany accounts, if any, for
the period specified, prepared in accordance with GAAP and consistent with prior
practices.
"FIXED CHARGE COVERAGE RATIO" means (without duplication), for any
period, with respect to the Borrowers and their Subsidiaries on a consolidated
basis, as of the date of determination thereof, the ratio of (X) (i) Adjusted
U.S. Earnings for such period, LESS (ii) all Capital Expenditures paid or
payable during such period to the extent not financed with the proceeds of
Indebtedness permitted under Section 7.2(a)(iii), LESS (iii) all federal and
state income and franchise tax liabilities paid during such period to (Y) (i)
all principal amounts of Indebtedness (including Indebtedness to the Lender to
the extent such amounts may not be reborrowed) paid or payable during such
period, PLUS (ii) all Interest Expense and all fees for the use of money or the
availability of money, including commitment, facility and like fees and charges
upon Indebtedness (including Indebtedness to the Lender) paid or payable during
such period, PLUS (iii) without limitation of the restrictions specified in
Section 7.2(h), all loans and Investments to any Person made during such period.
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"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances as of the date of determination.
"GOVERNING DOCUMENTS" means, with respect to any Person, the
certificate of incorporation and bylaws or similar organizational documents of
such Person.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state
or other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions thereof or
pertaining thereto.
"HAZARDOUS MATERIALS" means any and all pollutants, contaminants and
toxic, caustic, radioactive and hazardous materials, substances and wastes
including, without limitation, petroleum or petroleum distillates, asbestos or
urea formaldehyde foam insulation or asbestos- containing materials, whether or
not friable, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature that are regulated under any
Environmental Laws.
"HEDGING AGREEMENT" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging agreement.
"INDEBTEDNESS" means, with respect to any Person, as of the date of
determination thereof (without duplication), (i) all obligations of such Person
for borrowed money of any kind or nature, including funded and unfunded debt,
and any Hedging Agreements or arrangements therefor, regardless of whether the
same is evidenced by any note, debenture, bond or other instrument, (ii) all
obligations of such Person to pay the deferred purchase price of property or
services (other than current trade accounts payable under normal trade terms and
which arise in the ordinary course of business), (iii) all obligations of such
Person to acquire or for the acquisition or use of any fixed asset, including
Capitalized Lease Obligations (other than, in any such case, any portion thereof
representing interest or deemed interest or payments in respect of taxes,
insurance, maintenance or service), or improvements which are payable over a
period longer than one year, regardless of the term thereof or the Person or
Persons to whom the same are payable, (iv) the then outstanding amount of
withdrawal or termination liability incurred under ERISA, (v) all Indebtedness
of others secured by (or for which the holder of such Indebtedness has an
existing right to be secured) a Lien on any asset of such Person whether or not
the Indebtedness is assumed by such Person, PROVIDED that for the purpose of
determining the amount of Indebtedness of the type described in this clause (v),
if recourse with respect to such Indebtedness is limited to the assets of such
Person, then the amount of Indebtedness shall be limited to the fair market
value of such assets, (vi) all Indebtedness of others to the extent guaranteed
by such Person and (vii) all obligations of such Person in respect of letters of
credit, bankers acceptances or similar instruments issued or accepted by banks
or other financial institutions for the account of such Person.
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"INSOLVENCY EVENT" means, with respect to any Person, the occurrence
of any of the following: (i) such Person shall be adjudicated insolvent or
bankrupt, or shall generally fail to pay or admit in writing its inability to
pay its debts as they become due, (ii) such Person shall seek dissolution or
reorganization or the appointment of a receiver, trustee, custodian or
liquidator for it or a substantial portion of its property, assets or business
or to effect a plan or other arrangement with its creditors, (iii) such Person
shall make a general assignment for the benefit of its creditors, or consent to
or acquiesce in the appointment of a receiver, trustee, custodian or liquidator
for a substantial portion of its property, assets or business, (iv) such Person
shall file a voluntary petition under any bankruptcy, insolvency or similar law
or take any corporate or similar act in furtherance thereof, or (v) such Person,
or a substantial portion of its property, assets or business shall become the
subject of an involuntary proceeding or petition for (A) its dissolution or
reorganization or (B) the appointment of a receiver, trustee, custodian or
liquidator, and (I) such proceeding shall not be dismissed or stayed within
sixty days or (II) such receiver, trustee, custodian or liquidator shall be
appointed; PROVIDED, HOWEVER, that the Lender shall have no obligation to make
any Advance or cause to be issued any Letter of Credit during the pendency of
any sixty-day period described in clauses (A) and (B).
"INTELLECTUAL PROPERTY SECURITY AGREEMENT" means the security
agreement made by Del Global and Del Medical in favor of the Lender,
substantially in the form of Exhibit E, as amended, supplemented or otherwise
modified from time to time.
"INTEREST EXPENSE" means, for any period, all interest with respect
to Indebtedness (including, without limitation, the interest component of
Capitalized Lease Obligations) accrued or capitalized during such period
(whether or not actually paid during such period) determined in accordance with
GAAP.
"INTEREST PERIOD" means the period commencing on the date a LIBOR
Rate Advance is made, is the subject of a Continuation or arises from a
Conversion and ending one, two or three months thereafter; PROVIDED, HOWEVER,
that (i) the Administrative Borrower may not select any Interest Period that
ends after the Expiration Date; (ii) whenever the last day of an Interest Period
would otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day,
except that, if such extension would cause the last day of such Interest Period
to occur in the next following calendar month, then the last day of such
Interest Period shall occur on the next preceding Business Day; and (iii) if
there is no corresponding date of the month that is one, two or three months, as
the case may be, after the first day of an Interest Period, such Interest Period
shall end on the last Business Day of such first, second or third month, as the
case may be.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, any
amendments thereto, any successor statute and any regulations and guidelines
promulgated thereunder.
"INTERNAL REVENUE SERVICE" or "IRS" means the United States Internal
Revenue Service and any successor agency.
"INVENTORY" means all present and future goods intended for sale,
lease or other disposition including, without limitation, all raw materials,
work in process, finished goods and other retail inventory, goods in the
possession of outside processors or other third parties, consigned goods (to the
extent of the consignee's interest therein), materials and supplies of any kind,
nature or description which are or might be used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of any such
goods, all documents of title or documents representing the same and all
records, files and writings with respect thereto.
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"INVESTMENT" in any Person means, as of the date of determination
thereof, (i) any payment or contribution, or commitment to make a payment or
contribution, by a Person including, without limitation, property contributed or
committed to be contributed by such Person for or in connection with its
acquisition of any stock, bonds, notes, debentures, partnership or other
ownership interest or any other security of the Person in whom such Investment
is made or (ii) any loan, advance or other extension of credit or guaranty of or
other surety obligation for any Indebtedness of such Person in whom the
Investment is made. In determining the aggregate amount of Investments
outstanding at any particular time, (i) a guaranty (or other surety obligation)
shall be valued at not less than the principal amount outstanding of the primary
obligation; (ii) returns of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution) shall
be deducted; (iii) earnings, whether as dividends, interest or otherwise, shall
not be deducted; and (iv) decreases in the market value shall not be deducted
unless such decreases are computed in accordance with GAAP.
"INVESTMENT PROPERTY" means all present and future investment
property, including without limitation, all (i) securities, whether certificated
or uncertificated, and including stocks, bonds, debentures, notes, bills,
certificates, warrants, options, rights and shares, (ii) security entitlements,
(iii) securities accounts, (iv) commodity contracts, (v) commodity accounts and
(vi) dividends and other distributions in respect of any of the foregoing.
"LENDER" has the meaning specified in the introductory paragraph.
"LETTERS OF CREDIT" means all letters of credit issued by North Fork
Bank or any other bank reasonably satisfactory to the Lender and the
Administrative Borrower for the account of the Borrowers under Section 2.10, and
all amendments, renewals, extensions or replacements thereof.
"LIABILITIES" of a Person as of the date of determination thereof
means the liabilities of such Person on such date as determined in accordance
with GAAP. Liabilities to Affiliates of such Person shall be treated as
Liabilities except where eliminated by consolidation in financial statements
prepared in accordance with GAAP or as otherwise provided herein.
"LIBOR RATE" means, with respect to each Interest Period, the
reserve adjusted rate PER ANNUM equal to the one, two or three-month London
Interbank Offered Rate, as applicable, that appears in the "Money Rates" section
of THE WALL STREET JOURNAL on the first day of such Interest Period; PROVIDED,
HOWEVER, that if THE WALL STREET JOURNAL no longer publishes such one, two or
three-month London Interbank Offered Rate, reference shall be made to the
Reuters Screen ISDA Page for such London Interbank Offered Rate.
"LIBOR RATE ADVANCE" means an Advance that bears interest as
provided in Section 4.1(b).
"LIEN" means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, lease, conditional sale,
retention of title or other preferential arrangement having substantially the
same economic effect as any of the foregoing, whether voluntary or imposed by
law.
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"LOAN ACCOUNT" has the meaning specified in Section 2.6.
"LOAN DOCUMENTS" means this Agreement and all documents and
instruments to be delivered by the Borrowers or any of their Affiliates under or
in connection with this Agreement, as each of the same may be amended,
supplemented or otherwise modified from time to time, including, without
limitation, the Notes, the Contribution Agreement, the Intellectual Property
Security Agreement, the Lockbox Agreement, the Pledge Agreement, the Mortgage,
any pledge agreement delivered to the Lender in accordance with Section 7.1(t)
and any Control Agreement.
"LOANS" means the loans and financial accommodations made by the
Lender hereunder including, without limitation, the Term Loan and the Revolving
Credit Loans.
"LOCKBOX" has the meaning specified in Section 2.7(a).
"LOCKBOX AGREEMENT" means the agreement entered into by the
Borrowers and North Fork Bank, substantially in the form of Exhibit J, as
amended, supplemented or otherwise modified from time to time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect on the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of a Borrower, (ii) the impairment of (A) a
Borrower's ability to perform its obligations under the Loan Documents to which
it is a party or (B) the ability of the Lender to enforce the Obligations or
realize upon the Collateral or (iii) a material adverse effect on the value of
the Collateral or the amount that the Lender would be likely to receive (after
giving consideration to delays in payment and costs of enforcement) in the
liquidation of the Collateral.
"MATERIAL CONTRACT" means any contract or other arrangement to which
a Borrower is a party (other than the Loan Documents) and (i) which involves an
amount in excess of $250,000 in the aggregate and has a term of performance by
the parties thereunder of more than six months or (ii) the termination of which
would require public disclosure by Del Global under any federal or state
securities law, rule or regulation.
"MATERIAL INDEBTEDNESS" means Indebtedness (other than the Loans),
or obligations in respect of one or more Hedging Agreements, of any Borrower in
an aggregate principal amount exceeding $250,000. For purposes of this
definition, the "principal amount" of the obligations of any Borrower in respect
of any Hedging Agreement at any time shall be the maximum aggregate amount
(giving effect to any netting agreements) that such Borrower would be required
to pay if such Hedging Agreement were terminated at such time.
"MAXIMUM AMOUNT OF THE REVOLVING FACILITY" means Six Million Dollars
($6,000,000).
"MORTGAGE" means the mortgage by RFI in favor of the Lender,
substantially in the form of Exhibit N, as amended, supplemented or otherwise
modified from time to time.
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"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which a Borrower or any ERISA Affiliate has
contributed within the past six years or with respect to which a Borrower or any
ERISA Affiliate may incur any liability.
"NET CASH PROCEEDS" means, the aggregate cash proceeds received by
any Borrower in respect of (i) any sale or issuance of capital stock of such
Borrower including, without limitation, in connection with any exercise of the
Warrants and (ii) any sale or other disposition of assets of such Borrower
(other than sales of Inventory in the ordinary course of business), in each case
net of (without duplication) (A) the amount required to repay any Indebtedness
(other than the Loans) under Capitalized Lease Obligations incurred with respect
to, or secured by a Permitted Lien on, any assets of a Borrower that are sold or
otherwise disposed of in connection with such asset sale, (B) the reasonable
out-of-pocket expenses incurred in effecting such issuance, sale or other
disposition and (C) any taxes reasonably attributable to such asset sale and
reasonably estimated by such Borrower to be actually payable.
"NOTES" means the Term Note and the Revolving Credit Note.
"OBLIGATIONS" means and includes all loans (including the Loans),
advances (including the Advances), debts, liabilities, obligations, covenants
and duties owing by the Borrowers to the Lender of any kind or nature, present
or future, whether or not evidenced by any note, guaranty or other instrument,
which may arise under, out of, or in connection with, this Agreement, the Notes,
the other Loan Documents or any other agreement executed in connection herewith
or therewith, whether or not for the payment of money, whether arising by reason
of an extension of credit, opening, guaranteeing or confirming of a letter of
credit (including, without limitation, the Letters of Credit), loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment, purchase, discount or otherwise), whether absolute
or contingent, due or to become due, and however acquired. The term includes,
without limitation, all interest (including interest accruing on or after an
Insolvency Event, whether or not such interest constitutes an allowed claim),
charges, expenses, commitment, facility, closing and collateral management fees,
letter of credit fees, attorneys' fees, and any other sum properly chargeable to
the Borrowers under this Agreement, the Notes, the other Loan Documents or any
other agreement executed in connection herewith or therewith.
"OUTSTANDING DISPUTES" means the Employment Dispute and the Sale
Disputes.
"PBGC" means the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.
"PENSION PLAN" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA (other than a Multiemployer Plan) which a
Borrower or any ERISA Affiliate sponsors or maintains, or to which it makes, is
making, or is obligated to make contributions, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made contributions
at any time during the immediately preceding five plan years.
"PERMITTED LIENS" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced and be continuing (unless such enforcement, collection, levy or
foreclosure is being contested by the applicable Borrower in good faith by
appropriate proceedings diligently conducted and for which adequate reserves are
being maintained in accordance with GAAP): (i) Liens for taxes, assessments and
other governmental charges or levies or the claims or demands of landlords,
carriers, warehousemen, mechanics, laborers, materialmen and other like Persons
arising by operation of law in the ordinary course of business for sums which
are not yet due and payable, (ii) deposits or pledges (other than Liens on
Receivables of a Borrower) to secure the payment of worker's compensation,
unemployment insurance or other social security benefits or obligations, public
or statutory obligations, surety or appeal bonds, bid or performance bonds, or
other obligations of a like nature incurred in the ordinary course of business,
(iii) zoning restrictions, easements, encroachments, licenses, restrictions or
covenants on the use of any Property which do not materially impair either the
use of such Property in the operation of the business of the applicable Borrower
or the value of such Property, (iv) inchoate Liens arising under ERISA to secure
current service pension liabilities as they are incurred under the provisions of
employee benefit plans from time to time in effect, and (v) rights of general
application reserved to or vested in any Governmental Authority to control or
regulate any Property, or to use any Property in a manner which does not
materially impair the use of such Property for the purposes for which it is held
by the applicable Borrower, PROVIDED that the foregoing Liens under clauses (i)
through (v) hereof do not secure liabilities in excess of $250,000 in the
aggregate at any time; and PROVIDED, FURTHER, that Permitted Liens shall not
include any Lien securing Indebtedness.
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"PERSON" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
joint stock company, association, corporation, institution, entity, party or
government (including any division, agency or department thereof) or any other
legal entity, whether acting in an individual, fiduciary or other capacity, and,
as applicable, the successors, heirs and assigns of each.
"PLAN" means any employee benefit plan, as defined in Section 3(3)
of ERISA, maintained or contributed to by a Borrower or any ERISA Affiliate or
with respect to which any of them may incur liability even if such plan is not
covered by ERISA pursuant to Section 4(b)(4) thereof.
"PLEDGE AGREEMENT" means the pledge agreement by Del Global in favor
of the Lender, substantially in the form of Exhibit C, as amended, supplemented
or otherwise modified from time to time.
"PRICING INCREMENT" means (i) 0.50% PER ANNUM for Base Rate Advances
comprising all or a part of the Revolving Credit Loans and 0.75% PER ANNUM for
Base Rate Advances comprising all or a part of the Term Loan and (ii) 2.50% PER
ANNUM for LIBOR Rate Advances comprising all or a part of the Revolving Credit
Loans and 2.75% PER ANNUM for LIBOR Rate Advances comprising all or a part of
the Term Loan.
"PROHIBITED TRANSACTION" has the meaning specified in Section
6.1(x)(v).
"PROPERTY" means any real property owned, leased or controlled by a
Borrower or any Subsidiary of a Borrower.
"QUALIFICATION" or "QUALIFIED" means, with respect to any report of
independent public accountants covering Financial Statements, a material
qualification to such report (i) resulting from a limitation on the scope of
examination of such Financial Statements or the underlying data, (ii) as to the
capability of a Borrower or any other Borrower to continue operations as a going
concern or (iii) which could be eliminated by changes in Financial Statements or
notes thereto covered by such report (such as by the creation of or increase in
a reserve or a decrease in the carrying value of assets) and which if so
eliminated by the making of any such change and after giving effect thereto
would result in a Default or an Event of Default.
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"RECEIVABLES" means all present and future accounts, contracts,
contract rights, promissory notes, chattel paper, documents, tax refunds, rights
to receive tax refunds, bonds, certificates, insurance policies (including,
without limitation, claims under health care insurance policies), insurance
proceeds, patents, patent applications, copyrights (registered and
unregistered), royalties, licenses, permits, franchise rights, authorizations,
customer and supplier lists, rights of indemnification, contribution and
subrogation, leases, computer tapes, programs, discs and software, trade
secrets, computer service contracts, trademarks, trade names, service marks,
service names, domain names, logos, goodwill, deposits, causes of action
(including, without limitation, commercial tort claims), choses in action,
judgments, designs, blueprints, plans, know-how, all other general intangibles,
claims against third parties of every kind or nature, drafts, acceptances,
letters of credit, rights to receive payments under letters of credit, book
accounts, deposit and other accounts and all money, balances, credits, deposits
or other financial assets therein or represented thereby, credits and reserves
and all forms of obligations whatsoever owing, instruments, documents of title,
leasehold rights in any goods, and books, ledgers, files and records with
respect to any collateral or security, together with all supporting obligations
and all right, title, security and guaranties with respect to any Receivable,
including any right of stoppage in transit.
"REPORTABLE EVENT" means any of the events described in Section 4043
of ERISA and the regulations thereunder, other than a reportable event for which
the thirty-day notice requirement to the PBGC has been waived.
"REQUIREMENT OF LAW" means (i) the Governing Documents, (ii) any
law, treaty, rule, regulation, order or determination of an arbitrator, court or
other Governmental Authority or (iii) any franchise, license, lease, permit,
certificate, authorization, qualification, easement, right of way, or other
right or approval binding on a Borrower or any of its property.
"RESPONSIBLE OFFICER" means the President, the Chief Executive
Officer, the Chief Financial Officer, the principal accounting officer or the
Chief Operating Officer of a Borrower.
"REVOLVING CREDIT LOANS" has the meaning specified in Section
2.1(a).
"REVOLVING CREDIT NOTE" has the meaning specified in Section 2.1(c).
"RFI" has the meaning specified in the introductory paragraph.
"SALE DISPUTE" means any litigation, arbitration, settlement
negotiations or other dispute, proceeding or negotiation involving terminated
sales processes related to Del Medical, RFI or Villa Sistemi.
"SECURITIES ACCOUNT" has the meaning specified in Section 8-501 of
the Code.
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"SECURITY DOCUMENTS" means the Lockbox Agreement, the Pledge
Agreement, the Intellectual Property Security Agreement, the Mortgage, any
Control Agreement and any other agreement delivered in connection herewith which
purports to xxxxx x Xxxx in favor of the Lender to secure all or any of the
Obligations.
"SHAREHOLDER CLASS ACTION LAWSUIT" means the action brought in the
United States District Court for the SOUTHERN DISTRICT of NEW YORK entitled
XXXXXX XXXXX, ET AL. V. DEL GLOBAL TECHNOLOGIES CORPORATION, ET AL., Case No. 00
Civ. 8495.
"SHAREHOLDER SUBORDINATED INDEBTEDNESS" means the indebtedness of
Del Global in favor of the plaintiffs in the Shareholder Class Action Lawsuit.
"SINKING FUND RESERVE" has the meaning specified in Section 2.1(a).
"SOLVENT" means, when used with respect to any Person, that as of
the date as to which such Person's solvency is to be measured:
(i) the fair saleable value of its assets is in excess of (A)
the total amount of its liabilities (including contingent,
subordinated, absolute, fixed, matured, unmatured, liquidated and
unliquidated liabilities) and (B) the amount that will be required
to pay the probable liability of such Person on its debts as such
debts become absolute and matured;
(ii) it has sufficient capital to conduct its business; and
(iii) it is able to meet its debts as they mature.
"SUBSIDIARY" means, as to any Person, a corporation or other entity
in which that Person directly or indirectly owns or controls the shares of stock
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other governing body, or to appoint the majority of
the managers of, such corporation or other entity.
"TANGIBLE NET WORTH" means, with respect to Del Global and its
Subsidiaries on a consolidated basis, (i) total assets, which shall be
determined in accordance with GAAP, except that there shall be excluded
therefrom (A) all obligations due to Del Global or any of its Subsidiaries from
another Subsidiary or other Affiliate thereof (LESS all Liabilities of Del
Global or any of its Subsidiaries to an Affiliate thereof) and (B) all
intangible assets including, without limitation, organizational expenses,
patents, trademarks, copyrights, goodwill, covenants not to compete, research
and development costs, training costs, treasury stock, deferred tax assets and
all unamortized debt discount and deferred charges, LESS (ii) total Liabilities.
"TERM LOAN" has the meaning specified in Section 2.2(a).
"TERM NOTE" has the meaning specified in Section 2.2(b).
"TERMINATION EVENT" means (i) a Reportable Event with respect to any
Pension Plan or Multiemployer Plan; (ii) the withdrawal of a Borrower or any
ERISA Affiliate from a Pension Plan during a plan year in which it was a
"substantial employer" (as defined in Section 4001(a)(2) of ERISA); (iii) the
providing of notice of intent to terminate a Pension Plan in a distress
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termination (as described in Section 4041(c) of ERISA); (iv) the institution by
the PBGC of proceedings to terminate a Pension Plan or Multiemployer Plan; (v)
any event or condition that is reasonably likely (A) to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan, or (B) to result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi)
the partial or complete withdrawal, within the meaning of Sections 4203 and 4205
of ERISA, of a Borrower or any ERISA Affiliate from a Multiemployer Plan.
"TYPE" means a Base Rate Advance or a LIBOR Rate Advance.
"VILLA EURO NOTE" means the Loan Agreement, dated as of September
23, 2004, by and between Del Global and Villa Sistemi, in a maximum principal
amount of (euro)500,000, as amended by the First Amendment to Loan Agreement,
dated as of October 22, 2004, and the Second Amendment to Loan Agreement, dated
as of August 1, 2005.
"VILLA NOTE" means any note or notes in an aggregate amount not to
exceed $1,900,000 at any time issued by Del Global to finance the acquisition of
the shares of capital stock of Villa Sistemi not owned by Del Global as of the
Closing Date.
"VILLA SISTEMI" means Villa Sistemi Medicali, S.p.A., an Italian
corporation.
"WARRANT" means a warrant to purchase common stock of Del Global at
an exercise price of $1.50 per share issued by Del Global in connection with the
Shareholder Class Action Lawsuit, substantially in the form of Exhibit P, as
amended, supplemented or otherwise modified from time to time.
SECTION 1.2. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
defined or specified herein, all accounting terms used in this Agreement shall
be construed in accordance with GAAP, applied on a basis consistent in all
material respects with the Financial Statements delivered to the Lender on or
before the Closing Date. All accounting determinations for purposes of
determining compliance with Article VIII shall be made in accordance with GAAP
as in effect on the Closing Date and applied on a basis consistent in all
material respects with the audited Financial Statements delivered to the Lender
on or before the Closing Date. The Financial Statements required to be delivered
hereunder from and after the Closing Date, and all financial records, shall be
maintained in accordance with GAAP. If GAAP shall change from the basis used in
preparing the audited Financial Statements delivered to the Lender on or before
the Closing Date, the Compliance Certificates required to be delivered pursuant
to Section 7.1 shall include calculations setting forth the adjustments
necessary to demonstrate how the Borrowers are in compliance with the Financial
Covenants based upon GAAP as in effect on the Closing Date.
SECTION 1.3. OTHER TERMS; HEADINGS. Unless otherwise defined herein,
terms used herein that are defined in the Uniform Commercial Code, from time to
time in effect in the State of New York (the "Code"), shall have the meanings
given in the Code. An Event of Default shall "continue" or be "continuing"
unless and until such Event of Default has been waived or cured within any grace
period specified therefor under Section 9.1. The headings and the Table of
Contents are for convenience only and shall not affect the meaning or
construction of any provision of this Agreement. Whenever the context may
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require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation". The word "will" shall be
construed to have the same meaning and effect as the word "shall". Unless the
context requires otherwise (i) any definition of or reference to any agreement,
instrument or other document herein or in any other Loan Document shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein
or in any other Loan Document), (ii) any reference herein to any Person shall be
construed to include such Person's successors and assigns, (iii) the words
"herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (iv) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement and (v) the words "asset" and "property" shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
ARTICLE II.
THE CREDIT FACILITIES
SECTION 2.1. THE REVOLVING CREDIT LOANS.
(a) The Lender agrees, subject to Section 2.5 and the other terms
and conditions of this Agreement, to make loans (the "Revolving Credit Loans")
to the Borrowers, from time to time from the Closing Date to but excluding the
Expiration Date, at the Administrative Borrower's request to the Lender, in an
aggregate principal amount at any one time outstanding which, when combined with
the aggregate undrawn amount of all unexpired Letters of Credit, does not exceed
(i) 85% of Eligible Receivables PLUS (ii) 40% of Eligible Inventory, all of the
foregoing LESS such reserves as the Lender may establish in its sole discretion
including, without limitation, (A) so long as the Shareholder Subordinated
Indebtedness has not (I) been refinanced with new subordinated debt on terms and
conditions satisfactory to the Lender or (II) had its maturity date extended to
a date that is at least ninety days after the Expiration Date, the Lender and
the Borrowers agree that, commencing March 1, 2006, there shall be an additional
reserve (the "Sinking Fund Reserve") of $100,000, which reserve shall increase
by $100,000 on the first Business Day of each month thereafter until September
1, 2006, at which time such reserve shall increase by $375,000 on the first
Business Day of each month thereafter commencing September 1, 2006 and (B) a
reserve in an amount equal to twice the amount of any dilution of the Borrower's
Receivables from time to time (the "Borrowing Base"); PROVIDED, HOWEVER, that in
no event shall the aggregate amount of the Revolving Credit Loans and the
Letters of Credit outstanding at any time (x) in respect of Eligible Inventory
exceed $2,000,000 or (y) exceed the Maximum Amount of the Revolving Facility.
(b) The Lender, at any time in the exercise of its reasonable
discretion, may (i) establish and increase or decrease reserves against Eligible
Receivables and Eligible Inventory, (ii) reduce the advance rates against
Eligible Receivables and Eligible Inventory, or thereafter increase such advance
rates to any level equal to or below the advance rates in effect on the Closing
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Date and (iii) impose additional restrictions (or eliminate the same) to the
standards of eligibility set forth in the definitions of "Eligible Receivables"
and "Eligible Inventory."
(c) The Revolving Credit Loans shall be evidenced by a promissory
note payable to the order of the Lender, substantially in the form of Exhibit A
(as amended, supplemented or otherwise modified from time to time, the
"Revolving Credit Note"), executed by the Borrowers and delivered to the Lender
on the Closing Date. The Revolving Credit Note shall be in a stated maximum
principal amount equal to the Maximum Amount of the Revolving Facility.
(d) The Revolving Credit Loans shall be payable in full, with all
interest accrued thereon, on the Expiration Date. The Borrowers may borrow,
repay and reborrow Revolving Credit Loans, in whole or in part, in accordance
with the terms hereof.
SECTION 2.2. THE TERM LOAN.
(a) The Lender agrees, subject to the terms and conditions of this
Agreement, to make a term loan to the Borrowers on the Closing Date in the
principal amount of $2,000,000 (the "Term Loan").
(b) The Term Loan shall be evidenced by a promissory note payable to
the order of the Lender, substantially in the form of Exhibit B (as amended,
supplemented or otherwise modified from time to time, the "Term Note"), executed
by the Borrowers and delivered to the Lender on the Closing Date. The Term Note
shall be payable to the order of the Lender in a stated principal amount equal
to $2,000,000.
(c) The principal amount of the Term Loan shall be payable in
thirty-six equal and consecutive monthly installments of $16,666.66, each of
which shall be payable on the first Business Day of each month, commencing with
the month immediately following the Closing Date, PROVIDED that the entire
outstanding principal amount of the Term Loan, together with all accrued and
unpaid interest thereon, shall become due and payable on the Expiration Date.
Amounts repaid on account of the Term Loan may not be reborrowed.
SECTION 2.3. PROCEDURE FOR BORROWING; NOTICES OF BORROWING; NOTICES
OF CONTINUATION; NOTICES OF CONVERSION.
(a) Each borrowing of Loans (each, a "Borrowing") shall be made on
notice, given not later than 12:00 Noon (New York time) on the third Business
Day prior to the date of the proposed Borrowing in the case of a LIBOR Rate
Advance, and not later than 12:00 Noon (New York time) on the date of the
proposed Borrowing in the case of a Base Rate Advance, by the Administrative
Borrower to the Lender. Each such notice of a Borrowing shall be by telephone,
confirmed immediately in writing (by telecopier or otherwise as permitted
hereunder), substantially in the form of Exhibit G (a "Notice of Borrowing"),
specifying therein the requested (i) date of such Borrowing, (ii) Type of
Advance comprising such Borrowing, (iii) aggregate principal amount of such
Borrowing and (iv) Interest Period, in the case of a LIBOR Rate Advance.
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(b) With respect to any Borrowing consisting of a LIBOR Rate
Advance, the Borrowers may, subject to the provisions of Section 2.3(d) and so
long as all the conditions set forth in Article V have been fulfilled, elect to
maintain such Borrowing or any portion thereof as a LIBOR Rate Advance by
selecting a new Interest Period for such Borrowing, which new Interest Period
shall commence on the last day of the Interest Period then ending. Each
selection of a new Interest Period (a "Continuation") shall be made by notice
given not later than 12:00 Noon (New York time) on the third Business Day prior
to the date of any such Continuation by the Administrative Borrower to the
Lender. Each notice by the Administrative Borrower of a Continuation shall be by
telephone, confirmed immediately in writing (by telecopier or otherwise as
permitted hereunder), substantially in the form of Exhibit H (a "Notice of
Continuation"), specifying whether the Advance subject to the requested
Continuation comprises part (or all) of the Revolving Credit Loans or the Term
Loan and the requested (i) date of such Continuation, (ii) Interest Period and
(iii) aggregate amount of the Advance subject to such Continuation, which shall
comply with all limitations on Loans hereunder. Unless, on or before 12:00 Noon
(New York time) of the third Business Day prior to the expiration of an Interest
Period, the Lender shall have received a Notice of Continuation from the
Administrative Borrower for the entire Borrowing consisting of the LIBOR Rate
Advance outstanding during such Interest Period, any amount of such Advance
comprising such Borrowing remaining outstanding at the end of such Interest
Period (or any unpaid portion of such Advance not covered by a timely Notice of
Continuation) shall, upon the expiration of such Interest Period, be Converted
to a Base Rate Advance.
(c) The Borrowers may on any Business Day upon notice (each such
notice, a "Notice of Conversion") given by the Administrative Borrower to the
Lender, and subject to the provisions of Section 2.3(d), Convert the entire
amount of or a portion of an Advance of one Type into an Advance of another
Type; PROVIDED, HOWEVER, that (i) the Borrowers may not Convert a Base Rate
Advance into a LIBOR Rate Advance if an Event of Default (or a Default under
clause (v) of the definition of Insolvency Event) has occurred and is
continuing, and (ii) any Conversion of a LIBOR Rate Advance into a Base Rate
Advance shall be made on, and only on, the last day of an Interest Period for
such LIBOR Rate Advance. Each such Notice of Conversion shall be given not later
than 12:00 Noon (New York time) on the Business Day prior to the date of any
proposed Conversion into a Base Rate Advance and on the third Business Day prior
to the date of any proposed Conversion into a LIBOR Rate Advance. Subject to the
restrictions specified above, each Notice of Conversion shall be by telephone,
confirmed immediately in writing (by telecopier or otherwise as permitted
hereunder), substantially in the form of Exhibit I, specifying (i) the requested
date of such Conversion, (ii) the Type of Advance to be Converted, (iii) the
requested Interest Period, in the case of a Conversion into a LIBOR Rate
Advance, and (iv) the amount of such Advance to be Converted and whether such
amount comprises part (or all) of the Revolving Credit Loans or the Term Loan.
Each Conversion shall be in an aggregate amount not less than $500,000 or an
integral multiple of $100,000 in excess thereof.
(d) Anything in subsection (b) or (c) above to the contrary
notwithstanding,
(i) if, at least one Business Day before the date of any
requested LIBOR Rate Advance, the introduction of or any change in
or in the interpretation of any law or regulation makes it unlawful,
or any central bank or other governmental authority asserts that it
is unlawful, for the Lender or any of its Affiliates to perform its
obligations hereunder to make a LIBOR Rate Advance or to fund or
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maintain a LIBOR Rate Advance hereunder (including in the case of a
Continuation or a Conversion), the Lender shall promptly give
written notice of such circumstance to the Administrative Borrower,
and the right of the Borrowers to select a LIBOR Rate Advance for
such Borrowing or any subsequent Borrowing (including a Continuation
or a Conversion) shall be suspended until the circumstances causing
such suspension no longer exist, and any Advance comprising such
requested Borrowing shall be a Base Rate Advance;
(ii) if, at least one Business Day before the first day of any
Interest Period, the Lender is unable to determine the LIBOR Rate
for LIBOR Rate Advances comprising any requested Borrowing,
Continuation or Conversion, the Lender shall promptly give written
notice of such circumstance to the Administrative Borrower, and the
right of the Borrowers to select or maintain LIBOR Rate Advances for
such Borrowing or any subsequent Borrowing shall be suspended until
the Lender shall notify the Administrative Borrower that the
circumstances causing such suspension no longer exist, and any
Advance comprising such Borrowing shall be a Base Rate Advance;
(iii) if the Lender shall, at least one Business Day before
the date of any requested Borrowing or Continuation of, or
Conversion into, a LIBOR Rate Advance, notify the Administrative
Borrower that the LIBOR Rate for Advances comprising such Borrowing,
Continuation or Conversion will not adequately reflect the cost to
the Lender of making or funding Advances for such Borrowing, the
right of the Borrowers to select LIBOR Rate Advances shall be
suspended until the Lender shall notify the Administrative Borrower
that the circumstances causing such suspension no longer exist, and
any Advance comprising such Borrowing shall be a Base Rate Advance;
(iv) there shall not be outstanding at any time more than five
Borrowings which consist of LIBOR Rate Advances;
(v) each Borrowing which consists of LIBOR Rate Advances shall
be in an amount equal to $500,000 or a whole multiple of $100,000 in
excess thereof;
(vi) not more than 80% of the principal amount of Loans
outstanding at any time shall consist of LIBOR Rate Advances;
(vii) the principal amount of the Term Loan amortizing within
ninety days of any date of determination shall not consist of LIBOR
Rate Advances; and
(viii) if an Event of Default has occurred and is continuing,
no LIBOR Rate Advances may be borrowed or continued as such and no
Base Rate Advance may be converted into a LIBOR Rate Advance.
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(e) Each Notice of Borrowing, Notice of Continuation and Notice of
Conversion shall be irrevocable and binding on the Borrowers. The Borrowers
agree, jointly and severally, to indemnify the Lender against any loss, cost or
expense incurred by the Lender as a result of (i) default by the Borrowers in
making a Borrowing of, Conversion into or Continuation of a LIBOR Rate Advance
after the Administrative Borrower has given notice requesting the same, (ii)
default by the Borrowers in payment when due of the principal amount of or
interest on any LIBOR Rate Advance or (iii) the making of a payment or
prepayment of a LIBOR Rate Advance on a day which is not the last day of an
Interest Period with respect thereto, including, without limitation, any loss
(including loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by the
Lender to fund such Advance.
SECTION 2.4. APPLICATION OF PROCEEDS. The proceeds of the Loans
shall be used by the Borrowers (i) to refinance their existing indebtedness with
GE Business Capital Corporation, (ii) for their general working capital
purposes, (iii) for expenses incurred by the Borrowers in connection herewith,
which expenses shall be subject to the Lender's approval, (iv) to permit the
establishment of a reserve to pay the Shareholder Subordinated Indebtedness upon
its maturity and (v) to fund settlement costs in connection with the Outstanding
Disputes.
SECTION 2.5. MAXIMUM AMOUNT OF THE REVOLVING FACILITY; MANDATORY
PREPAYMENTS; OPTIONAL PREPAYMENTS.
(a) In no event shall the sum of the aggregate outstanding principal
balances of the Revolving Credit Loans and the aggregate undrawn amount of all
unexpired Letters of Credit exceed the lesser of (i) the Borrowing Base and (ii)
the Maximum Amount of the Revolving Facility.
(b) In addition to any prepayment required as a result of an Event
of Default hereunder, the Loans shall be subject to mandatory prepayment as
follows:
(i) immediately upon discovery by or notice to the
Administrative Borrower that any of the lending limits set forth in
Section 2.1(a) or Section 2.5(a) has been exceeded, an amount
sufficient to reduce the outstanding balances of the Loans,
Collateralize outstanding Letters of Credit, or any combination
thereof, to the applicable maximum allowed amount shall become due
and payable by the Borrowers without the necessity of a demand by
the Lender;
(ii) the outstanding principal amount of the Loans shall be
immediately prepaid by an amount equal to 100% of all Net Cash
Proceeds which shall be applied FIRST, to the outstanding principal
amount of the Term Loan in inverse order of maturity and SECOND, to
the outstanding principal amount of the Revolving Credit Loans;
(iii) the maximum amount of the Term Loan was fixed by the
Lender based upon the Lender's determination, in its reasonable
discretion, of the fair market value of the Property secured by the
Mortgage as of the Closing Date and is subject to redetermination by
the Lender in its reasonable judgment, based on an updated appraisal
of the Property performed by a duly certified appraiser, on written
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notice to the Administrative Borrower; and the Borrowers shall
prepay the Term Loan upon the Lender's demand in an amount based
upon the difference (if positive) between the outstanding principal
amount of the Term Loan and such value as redetermined, any such
prepayment to be applied to the outstanding principal amount of the
Term Loan in inverse order of maturity;
(iv) if at any time a Sinking Fund Reserve exists and Excess
Availability is less than or equal to zero, the entire outstanding
principal amount of the Loans, together with all accrued and unpaid
interest thereon and all fees, costs and expenses payable by the
Borrowers hereunder, shall become due and payable on the date that
is thirty days before the maturity date of the Shareholder
Subordinated Indebtedness; and
(v) the entire outstanding principal amount of the Loans,
together with all accrued and unpaid interest thereon and all fees,
costs and expenses payable by the Borrowers hereunder, shall become
due and payable on the Expiration Date.
SECTION 2.6. MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF ACCOUNT. The
Lender shall maintain an account on its books in the name of the Borrowers
jointly (the "Loan Account") in which the Borrowers will be charged with all
loans and advances made by the Lender to the Borrowers or for the Borrowers'
account, including the Loans, interest, fees, expenses and any other
Obligations. The Loan Account will be credited with all amounts received by the
Lender from the Borrowers or for the Borrowers' account, including, as set forth
below, all amounts received from North Fork Bank. The Lender shall send the
Administrative Borrower a monthly statement reflecting the activity in the Loan
Account. Each such statement shall be an account stated and shall be final,
conclusive and binding on the Borrowers, absent manifest error.
SECTION 2.7. COLLECTION OF RECEIVABLES.
(a) At all times during the term of this Agreement, the Borrowers
shall maintain, pursuant to the Lockbox Agreement, lockboxes (collectively, the
"Lockbox") and a blocked account with North Fork Bank in the name of the Lender
as secured party (the "Blocked Account"). The Borrowers shall instruct their
account debtors to remit to a Lockbox all checks, drafts and other documents and
instruments evidencing remittances in payment (collectively, "Items of
Payment"). Items of Payment remitted to the Blocked Account will be processed in
accordance with the Lockbox Agreement.
(b) So long as no Event of Default has occurred and is continuing,
the Lender shall apply all amounts deposited in the Blocked Account FIRST, to
costs and expenses that are then due and payable by the Borrowers under the Loan
Documents, SECOND, to accrued and unpaid interest that is payable hereunder and
under the Notes, THIRD, to the outstanding principal amount of the Loans, and
FOURTH, for credit to the Borrowers' demand deposit account maintained at North
Fork Bank. All Collections and other amounts received by the Borrowers from any
account debtor, in addition to all other cash received by the Borrowers from any
other source, shall, upon receipt, be deposited into the Blocked Account. The
Borrowers will at all times (i) not commingle any Items of Payment with any of
their other funds or property, but will segregate them from their other assets
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and will hold them in trust and for the account and as the property of the
Lender and (ii) endorse any Item of Payment. The Lender will credit all such
payments to the Loan Account, conditional upon final collection; credit will be
given only for cleared funds received prior to 2:00 p.m. (New York time) by the
Lender. The Loan Account will be credited only with the net amounts actually
received by the Lender.
(c) Notwithstanding anything to the contrary in this Section 2.7,
upon the occurrence and during the continuance of an Event of Default, the
Lender may apply all amounts deposited in a Blocked Account to any of the
Obligations and in any order as it may elect in its sole and absolute
discretion.
SECTION 2.8. TERM. The term of this Agreement shall be for a period
from the Closing Date to but not including August 1, 2008 unless sooner
terminated in accordance with the terms of this Agreement. Notwithstanding the
foregoing, the Borrowers shall have no right to terminate this Agreement at any
time that any principal of or interest on any of the Loans is outstanding,
except upon prepayment of all Obligations and the satisfaction of all other
conditions set forth in the Loan Documents with respect thereto.
SECTION 2.9. PAYMENT PROCEDURES.
(a) The Borrowers hereby authorize the Lender to charge the Loan
Account with the amount of all interest, fees, expenses and other payments to be
made hereunder and under the other Loan Documents. The Lender may, but shall not
be obligated to, discharge the Borrowers' payment obligations hereunder by so
charging the Loan Account.
(b) Whenever any payment to be made hereunder shall be stated to be
due on a day that is not a Business Day, the payment may be made on the next
succeeding Business Day (except as specified in clause (ii) of the definition of
"Interest Period") and such extension of time shall be included in the
computation of the amount of interest due hereunder.
SECTION 2.10. LETTERS OF CREDIT. The Lender, upon the request of the
Administrative Borrower, shall use its best efforts to cause North Fork Bank or
another bank acceptable to the Lender to issue for the account of one or more of
the Borrowers Letters of Credit of a tenor and containing terms acceptable to
the Lender and the issuer of such Letter of Credit, in a maximum aggregate face
amount outstanding at any time not to exceed Two Million Dollars ($2,000,000),
PROVIDED that no Letter of Credit shall have an expiration date after the
Expiration Date. The term of any Letter of Credit shall not exceed three hundred
sixty days from the date of issuance, subject to renewal in accordance with the
terms thereof, but in no event to a date beyond the Expiration Date. All Letters
of Credit shall be subject to the limitations set forth in Section 2.5, and a
sum equal to the aggregate amount of all outstanding Letters of Credit shall be
included in calculating outstanding amounts for purposes of determining
compliance with Section 2.5. Upon each drawing or payment under a Letter of
Credit, the amount of such drawing or payment for all purposes under this
Agreement shall become and be deemed to be, without any further action on the
part of any Person, a Revolving Credit Loan made by the Lender on the date of
such drawing or payment (but without any requirement for compliance with the
conditions precedent to the making of Loans contained in this Agreement) which,
in the case of any Letter of Credit denominated in any currency other than
Dollars, shall be denominated in Dollars at the Equivalent Amount.
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SECTION 2.11. PUBLICITY. The Lender may, with the consent of the
Administrative Borrower (which shall not be unreasonably withheld or delayed),
publish a tombstone or similar advertising material relating to the financing
transactions contemplated by this Agreement. The Lender shall provide a draft of
any such tombstone or similar advertising material to the Administrative
Borrower for review and comment before the publication thereof. The Lender
reserves the right to provide to industry trade organizations information
necessary and customary for inclusion in league table measurements.
ARTICLE III.
SECURITY
SECTION 3.1. GENERAL. To secure the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of all of the Obligations, each of the Borrowers hereby grants to the Lender a
Lien on and security interest in all of its right, title and interest in and to
its Receivables, Equipment, Property, Inventory and Investment Property (other
than the shares of capital stock of Villa Sistemi owned by Del Global), wherever
located, whether now owned or hereafter acquired, and all additions and
accessions thereto and substitutions and replacements therefor and improvements
thereon, and all proceeds (whether in the form of cash or other property) and
products thereof including, without limitation, all proceeds of insurance
covering the same and all tort claims in connection therewith. As further
security for the Obligations, and to provide other assurances to the Lender, the
Lender shall receive, among other things:
(a) the Lockbox Agreement and any Control Agreement;
(b) the Pledge Agreement;
(c) the Mortgage; and
(d) the Intellectual Property Security Agreement.
This Agreement shall constitute a security agreement for purposes of the Code.
SECTION 3.2. FURTHER SECURITY. Each of the Borrowers also grants to
the Lender, as further security for all of the Obligations, a security interest
in all of its right, title and interest in and to all property of such Borrower
in the possession of or deposited with or in the custody of the Lender or any
Affiliate of the Lender or any representative, agent or correspondent of the
Lender and in all present and future deposit accounts as that term is defined in
the Code. For purposes of this Agreement, any property in which the Lender or
any such Affiliate has any security or title retention interest shall be deemed
to be in the custody of the Lender or of such Affiliate.
SECTION 3.3. RECOURSE TO SECURITY. Recourse to security shall not be
required for any Obligation hereunder and each Borrower hereby waives any
requirement that the Lender exhaust any right or take any action against any of
the Collateral before proceeding to enforce the Obligations against such
Borrower.
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SECTION 3.4. SPECIAL PROVISIONS RELATING TO INVENTORY.
(a) ALL INVENTORY. The security interest in the Inventory granted to
the Lender hereunder shall continue through all steps of manufacture and sale
and attach without further act to raw materials, work in process, finished
goods, returned goods, documents of title and warehouse receipts, and to
proceeds resulting from the sale or other disposition of such Inventory. Until
all of the Obligations have been satisfied, all Letters of Credit have been
terminated or Collateralized and the Lender has no obligation to make Loans or
to use its best efforts to cause Letters of Credit to be issued hereunder, the
Lender's security interest in such Inventory and in all proceeds thereof shall
continue in full force and effect and the Lender shall have, in its sole and
absolute discretion at any time if an Event of Default has occurred and is
continuing or the Lender believes that fraud has occurred, the right to take
physical possession of such Inventory and to maintain it on the premises of a
Borrower, in a public warehouse, or at such other place as the Lender may deem
appropriate. If the Lender exercises such right to take possession of such
Inventory, the Borrowers will, upon demand, and at the Borrowers' cost and
expense, assemble such Inventory and make it available to the Lender at a place
or places convenient to the Lender.
(b) NO LIENS. All Inventory of each Borrower shall be maintained at
the locations therefor shown on Schedule 6.1(b), except for Inventory moved from
such locations solely for the purpose of sale in the ordinary course of such
Borrower's business and Inventory in transit from one such location to another
such location in the ordinary course of such Borrower's business with an
aggregate value not greater than $100,000 at any time. If sales are made for
cash, the applicable Borrower shall immediately deliver to the Lender the checks
or other forms of payment which it receives, together with any necessary
endorsements.
(c) FURTHER ASSURANCES. Each Borrower will perform any and all steps
that the Lender may request to perfect the Lender's security interests in such
Borrower's Inventory including, without limitation, placing and maintaining
signs, executing and filing financing or continuation statements in form and
substance satisfactory to the Lender, maintaining stock records and conducting
lien searches. In each case, each Borrower shall take such action as promptly as
possible after requested by the Lender but in any event within five Business
Days after any such request is made except that such Borrower shall take such
action immediately upon the Lender's request following the occurrence of an
Event of Default. If any Borrower's Inventory is in the possession or control of
any Person other than a purchaser in the ordinary course of business or a public
warehouseman where the warehouse receipt is in the name of or held by the
Lender, such Borrower shall notify such Person of the Lender's security interest
therein and, upon request, instruct such Person to acknowledge in writing its
agreement to hold all such Inventory for the benefit of the Lender and subject
to the Lender's instructions. If so requested by the Lender, each Borrower (as
promptly as possible after requested by the Lender but in any event within five
Business Days after any such request is made) will deliver (i) to the Lender
warehouse receipts covering any of such Borrower's Inventory located in
warehouses showing the Lender as the beneficiary thereof and (ii) to the
warehouseman such agreements relating to the release of warehouse Inventory as
the Lender may request. A physical verification of all of each Borrower's
Inventory wherever located will be taken by such Borrower at least every twelve
months and, in any case, as often as reasonably requested by the Lender and a
copy of such physical verification shall be promptly thereafter submitted to the
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Lender. Each Borrower shall also submit to the Lender a copy of the summary
compilation of any physical inventories (which shall be taken annually unless an
Event of Default has occurred and is continuing, in which case such compilation
shall be submitted as frequently as reasonably requested by the Lender) of such
Borrower as observed and tested by its independent auditors in accordance with
generally accepted auditing standards and GAAP. If so requested by the Lender,
each Borrower shall execute and deliver to the Lender a confirmatory written
instrument, in form and substance satisfactory to the Lender, listing all its
Inventory, but any failure to execute or deliver the same shall not limit or
otherwise affect the Lender's security interest in and to such Inventory. Each
Borrower shall deliver a weekly report of its Inventory, based upon its
perpetual inventory, which shall describe such Inventory by category, item (in
reasonable detail) and location and report the then appraised value (at the
lower of cost or market) of such Inventory and its location.
(d) INVENTORY RECORDS. Each Borrower shall maintain full, accurate
and complete records of its Inventory describing the kind, type and quantity of
such Inventory and such Borrower's cost therefor, withdrawals therefrom and
additions thereto, including a perpetual inventory for raw materials, work in
process (to the extent available) and finished goods.
SECTION 3.5. SPECIAL PROVISIONS RELATING TO RECEIVABLES.
(a) INVOICES, ETC. On the Lender's request therefor, each Borrower
shall furnish to the Lender copies of invoices to customers and shipping and
delivery receipts or warehouse receipts thereof. Each Borrower shall deliver to
the Lender (i) the originals of all letters of credit, notes, and instruments in
its favor, in each case in an amount greater than $25,000, (ii) such
endorsements or assignments related thereto as the Lender may reasonably request
and (iii) the written consent of the issuer of any letter of credit to the
assignment of the proceeds of such letter of credit by such Borrower to the
Lender.
(b) RECORDS, COLLECTIONS, ETC. Each Borrower shall promptly report
all customer credits to the Lender. Each Borrower shall notify the Lender of all
returns and recoveries of merchandise and of all claims asserted with respect to
merchandise, in each case with a value in excess of $25,000. Each Borrower shall
promptly report to the Lender each such return, repossession or recovery of
merchandise, providing the Lender with a description of such merchandise. No
Borrower shall settle or adjust any dispute or claim, or grant any discount
(except ordinary trade discounts), credit or allowance or accept any return of
merchandise, except in the ordinary course of its business, without the Lender's
consent. Upon the occurrence and during the continuance of an Event of Default
or at any time that the Lender believes that fraud has occurred, the Lender may
(i) settle or adjust disputes or claims directly with account debtors for
amounts and upon terms which it considers advisable and (ii) notify account
debtors on a Borrower's Receivables that such Receivables have been assigned to
the Lender, and that payments in respect thereof shall be made directly to the
Lender. Where a Borrower receives collateral of any kind or nature by reason of
transactions between itself and its customers or account debtors, such Borrower
will hold the same on the Lender's behalf, subject to the Lender's instructions,
and as property forming part of such Borrower's Receivables. Where a Borrower
sells goods or services to a customer which also sells goods or services to it
or which may have other claims against it, such Borrower will so advise the
Lender immediately to permit the Lender to establish a reserve therefor. Each
Borrower hereby irrevocably authorizes and appoints the Lender, or any Person
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the Lender may designate, as its attorney-in-fact, at such Borrower's sole cost
and expense, to exercise, if an Event of Default has occurred and is continuing
or the Lender believes that fraud has occurred, all of the following powers,
which being coupled with an interest, shall be irrevocable until all of the
Obligations have been indefeasibly paid and satisfied in full in cash: (A) to
receive, take, endorse, sign, assign and deliver, all in the name of the Lender
or such Borrower, any and all checks, notes, drafts, and other documents or
instruments relating to the Collateral; (B) to receive, open and dispose of all
mail addressed to such Borrower and to notify postal authorities to change the
address for delivery thereof to such address as the Lender may designate; and
(C) to take or bring, in the name of the Lender or such Borrower, all steps,
actions, suits or proceedings deemed by the Lender necessary or desirable to
enforce or effect collection of such Borrower's Receivables or file and sign
such Borrower's name on a proof of claim in bankruptcy or similar document
against any obligor of such Borrower. Each Borrower shall maintain a record of
its electronic chattel paper that identifies the Lender as the assignee thereof
and otherwise in a manner such that the Lender has control over such chattel
paper for purposes of the Code.
SECTION 3.6. SPECIAL PROVISIONS RELATING TO EQUIPMENT.
(a) LOCATION. Each item of Equipment of each Borrower, now owned or
hereafter acquired, will be kept at a location specified in Schedule 6.1(b) and
may not be moved without the prior written consent of the Lender. Each Borrower
shall at all times hereafter keep correct and accurate records itemizing and
describing the location, kind, type, age and condition of its Equipment, such
Borrower's cost therefor and accumulated depreciation thereof, and retirements,
sales, or other dispositions thereof, all of which records shall be available
during such Borrower's usual business hours on demand to any of the officers,
employees or agents of the Lender.
(b) REPAIR. Each Borrower shall keep all of its Equipment in a
satisfactory state of repair and satisfactory operating condition in accordance
with industry standards, ordinary wear and tear excepted, and will, consistent
with the exercise of its reasonable business judgment, make all repairs and
replacements when and where necessary and practical, will not waste or destroy
it or any part thereof, and will not be negligent in the care or use thereof.
Each Borrower shall repair and maintain all of its Equipment in accordance with
industry practices in a manner sufficient to continue the operation of its
business as heretofore conducted. Each Borrower will use or cause its Equipment
to be used in accordance with law and the manufacturer's instructions. Each
Borrower shall keep its Equipment separate from, and will not annex or affix any
of its Equipment to, any part of any Property or any other realty.
(c) DISPOSAL. Where a Borrower is permitted to dispose of any of its
Equipment under this Agreement or by any consent thereto hereafter given by the
Lender, such Borrower shall do so at arm's length, in good faith and by
obtaining the maximum amount of recovery practicable therefor and without
impairing the operating integrity or value of its remaining Equipment.
SECTION 3.7. CONTINUATION OF LIENS, ETC. Each Borrower shall defend
the Collateral against all claims and demands of all Persons at any time
claiming any interest therein, other than claims relating to Liens permitted by
the Loan Documents. Each Borrower agrees to comply with the requirements of all
state and federal laws to grant to the Lender valid and perfected first priority
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security interests in the Collateral and shall, upon request of the Lender,
obtain a Control Agreement from any securities intermediary or depository bank
in possession of any of such Borrower's Investment Property or deposit accounts.
The Lender is hereby authorized by each Borrower to sign such Borrower's name on
any document or instrument as may be necessary or desirable to establish and
maintain the Liens covering the Collateral and the priority and continued
perfection thereof or file any financing or continuation statements or similar
documents or instruments covering the Collateral whether or not such Borrower's
signature appears thereon. Each Borrower agrees, from time to time, at the
Lender's request, to file notices of Liens, financing statements, similar
documents or instruments, and amendments, renewals and continuations thereof,
and cooperate with the Lender's representatives, in connection with the
continued perfection (and the priority status thereof) and protection of the
Collateral and the Lender's Liens thereon. Each Borrower agrees that the Lender
may file a carbon, photographic or other reproduction of this Agreement (or any
financing statement related hereto) as a financing statement.
SECTION 3.8. POWER OF ATTORNEY. In addition to all of the powers
granted to the Lender in this Article III, each Borrower hereby appoints and
constitutes the Lender as such Borrower's attorney-in-fact to sign such
Borrower's name on any financing statements or amendments thereto or
continuations thereof, or to request at any time from customers indebted on its
Receivables verification of information concerning such Receivables and the
amount owing thereon (provided that any verification prior to an Event of
Default shall not contain the Lender's name), and, upon the occurrence and
during the continuance of an Event of Default, (i) to convey any item of
Collateral to any purchaser thereof and (ii) to make any payment or take any act
necessary or desirable to protect or preserve any Collateral. The Lender's
authority hereunder shall include, without limitation, the authority to execute
and give receipt for any certificate of ownership or any document, to transfer
title to any item of Collateral and to take any other actions arising from or
incident to the powers granted to the Lender under this Agreement. This power of
attorney is coupled with an interest and is irrevocable.
ARTICLE IV.
INTEREST, FEES AND EXPENSES
SECTION 4.1. INTEREST. The Borrowers shall pay to the Lender
interest on the Advances, payable monthly in arrears on the first Business Day
of each month, commencing with the month immediately following the Closing Date,
and on the Expiration Date, at the following rates PER ANNUM:
(a) BASE RATE ADVANCES. If such Advance is a Base Rate Advance, at a
fluctuating rate which is equal to (i) the Base Rate then in effect PLUS (ii)
the Pricing Increment, each change in such fluctuating rate to take effect
simultaneously with the corresponding change in the Base Rate.
(b) LIBOR RATE ADVANCES. If such Advance is a LIBOR Rate Advance, at
a rate which is equal at all times during the Interest Period for such LIBOR
Rate Advance to (i) the LIBOR Rate PLUS (ii) the Pricing Increment.
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SECTION 4.2. INTEREST AND LETTER OF CREDIT FEES AFTER EVENT OF
DEFAULT. From the date of occurrence of any Event of Default until the earlier
of the date upon which (i) all Obligations shall have been paid and satisfied in
full and all Letters of Credit have expired or been terminated or (ii) such
Event of Default shall have been cured within any grace period specified
therefor in Section 9.1 or waived, interest on the Loans shall be payable on
demand at a rate PER ANNUM equal to the rate that would be otherwise applicable
thereto under Section 4.1 PLUS an additional two percent (2%) and the letter of
credit fee pursuant to Section 4.4(b) shall be payable at the rate that would
otherwise apply under Section 4.4(b) PLUS an additional two percent (2%).
SECTION 4.3. CLOSING FEE. On the Closing Date, the Borrowers shall
pay to the Lender a non-refundable closing fee in the amount of $37,500.
SECTION 4.4. UNUSED LINE FEE; MINIMUM LOAN FEE; LETTER OF CREDIT
FEES.
(a) The Borrowers shall pay to the Lender on the first Business Day
of each month, commencing with the month immediately following the Closing Date,
and on the Expiration Date, in arrears, an unused line fee equal to one-half of
one percent (.50%) PER ANNUM of the difference, if positive, between (i) the
Maximum Amount of the Revolving Facility and (ii) the average daily aggregate
outstanding amount of the Revolving Credit Loans PLUS the average daily
aggregate undrawn amount of all unexpired Letters of Credit during the
immediately preceding month or portion thereof.
(b) The Borrowers shall promptly pay to the Lender all fees charged
to the Lender by any issuer of a Letter of Credit which relate directly to the
opening, amending or drawing under Letters of Credit. In addition, the Borrowers
shall pay to the Lender on the first Business Day of each month, commencing with
the month immediately following the Closing Date, and on the Expiration Date, in
arrears, a fee equal to two and one-half percent (2.50%) PER ANNUM on the daily
average of the amount of the Letters of Credit outstanding during the preceding
month or during the interim period ending on the Expiration Date, as the case
may be.
SECTION 4.5. COLLATERAL MANAGEMENT FEE. The Borrowers shall pay to
the Lender on the first Business Day of each month commencing with the month
immediately following the Closing Date and on the Expiration Date, in arrears, a
collateral management fee in the amount of $1,000.
SECTION 4.6. EARLY TERMINATION FEE. The Borrowers shall have the
right to terminate this Agreement at any time on 120 days' prior written notice
by the Administrative Borrower to the Lender, PROVIDED that, on the date of such
termination, all Obligations, including all amounts required for the
Collateralization of Letters of Credit and interest, fees and expenses payable
to the date of such termination, shall be paid in full. If (a) the
Administrative Borrower gives such notice to terminate or (b)(i) the Loans are
paid in full or substantially in full and (ii) the Lender's obligation to make
Loans or to use its best efforts to cause Letters of Credit to be issued is
terminated, including as a result of the Lender terminating, in accordance with
Section 9.2(b), such obligation, the Borrowers shall pay a fee to the Lender in
an amount equal to (a) $160,000 if such termination or payment occurs prior to
the first anniversary of the Closing Date or (b) $40,000 if such termination or
payment occurs on or after the first anniversary but prior to the second
anniversary of the Closing Date.
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SECTION 4.7. CALCULATIONS. All calculations of interest and fees
hereunder shall be made by the Lender on the basis of a year of 360 days for the
actual number of days elapsed in the period for which such interest or fees are
payable. Each determination by the Lender of an interest rate, fee or other
payment hereunder shall be conclusive and binding for all purposes, absent
manifest error.
SECTION 4.8. INDEMNIFICATION IN CERTAIN EVENTS. If, after the
Closing Date, (i) any change in or in the interpretation of any law or
regulation is introduced including, without limitation, with respect to reserve
requirements, applicable to the Lender or any other banking or financial
institution from which the Lender borrows funds or obtains credit, (ii) the
Lender complies with any future guideline or request from any central bank or
other Governmental Authority or (iii) the Lender determines that the adoption of
any applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof has or would have the effect described
below, or the Lender complies with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, and in the case of any event set forth in this clause
(iii), such adoption, change or compliance has or would have the direct or
indirect effect of reducing the rate of return on the Lender's capital as a
consequence of its obligations hereunder to a level below that which the Lender
could have achieved but for such adoption, change or compliance (taking into
consideration the Lender's policies as the case may be with respect to capital
adequacy) by an amount deemed by the Lender to be material, and any of the
foregoing events described in clauses (i), (ii) and (iii) increases the cost to
the Lender of funding or maintaining the Loans, or reduces the amount receivable
in respect thereof by the Lender, then the Borrowers shall, upon demand, pay to
the Lender additional amounts sufficient to indemnify the Lender against such
increase in cost or reduction in amount receivable.
SECTION 4.9. TAXES.
(a) Any and all payments by the Borrowers hereunder or under the
Notes shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings
and penalties, interest and all other liabilities with respect thereto
("Taxes"), including any Taxes imposed under Section 7701(l) of the Internal
Revenue Code, excluding in the case of the Lender, taxes imposed on its net
income (including, without limitation, any taxes imposed on branch profits) and
franchise taxes imposed on it by any applicable jurisdiction. If the Borrowers
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder or under any Loan to or for the benefit of the Lender, (A) the
sum payable shall be increased as may be necessary so that after making all
required deductions of Taxes (including deductions of Taxes applicable to
additional sums payable under this Section 4.9) the Lender receives an amount
equal to the sum it would have received had no such deductions been made, (B)
the Borrowers shall make such deductions and (C) the Borrowers shall pay the
full amount so deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, each Borrower agrees to pay any present or future
stamp, documentary, excise, privilege, intangible or similar taxes or levies
that arise at any time or from time to time (i) from any payment made under any
and all Loan Documents, or (ii) from the execution or delivery by such Borrower
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of, or from the filing or recording or maintenance of, or otherwise with respect
to the exercise by the Lender of its rights under, any and all Loan Documents
(hereinafter referred to as "Other Taxes").
(c) Each Borrower indemnifies the Lender for the full amount of (i)
Taxes imposed on or with respect to amounts payable hereunder, (ii) Other Taxes
and (iii) any Taxes (other than Taxes imposed by any jurisdiction on amounts
payable under this Section 4.9) paid by the Lender and any liability (including
penalties, interest and expenses) arising solely therefrom or with respect
thereto.
(d) Within thirty days after the date of any payment of Taxes or
Other Taxes, the Administrative Borrower will, upon request, furnish to the
Lender the original or a certified copy of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Section 4.9 shall survive the indefeasible payment in full of the
Obligations.
ARTICLE V.
CONDITIONS OF LENDING
SECTION 5.1. CONDITIONS TO INITIAL LOAN OR LETTER OF CREDIT. The
obligation of the Lender to make the initial Loan or to use its best efforts to
cause to be issued the initial Letter of Credit is subject to the satisfaction
of the following conditions prior to or concurrent with such initial Loan or
Letter of Credit:
(a) the Lender shall have received the following, each dated the
date of the initial Loan or Letter of Credit or as of an earlier date acceptable
to the Lender, in form and substance satisfactory to the Lender and its counsel:
(i) the Notes, duly executed by each Borrower;
(ii) the Intellectual Property Security Agreement, duly
executed by Del Global and Del Medical;
(iii) the Lockbox Agreement, duly executed by each Borrower
and North Fork Bank;
(iv) the Pledge Agreement, duly executed by Del Global and
acknowledged by each of the other Borrowers, together with (A) the
original certificates representing the shares of stock or other
equity interests of RFI and Del Medical pledged thereunder and
undated transfer powers therefor, executed in blank, (B) a
securities account control agreement for any uncertificated
securities pledged thereunder, duly executed by Del Global and the
securities intermediary in whose account such securities are
maintained, and (C) the original promissory notes pledged thereunder
and undated note powers therefor, executed in blank;
(v) the Mortgage, duly executed by RFI;
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(vi) acknowledgment copies of Uniform Commercial Code
financing statements (naming the Lender as secured party and the
Borrowers as debtors) and duly authorized release or termination
statements, in form and substance satisfactory to the Lender, duly
filed in all jurisdictions that the Lender deems necessary or
desirable to perfect and protect the Liens created hereunder and
under the Security Documents;
(vii) completed requests for information, dated on or before
the date of the initial Loan or Letter of Credit, listing all
effective financing statements filed in the jurisdictions referred
to in clause (v) above and in all other jurisdictions that the
Lender deems necessary or desirable to confirm the priority of the
Liens created hereunder and under the Security Documents, that name
each of the Borrowers as debtor, together with copies of such
financing statements;
(viii) a completed perfection certificate, substantially in
the form of Exhibit M, signed by a Responsible Officer of each
Borrower;
(ix) the Contribution Agreement, duly executed by each
Borrower;
(x) a solvency certificate of the Chief Financial Officer or
principal accounting officer of each of the Borrowers, in the form
of Exhibit L;
(xi) a Borrowing Base Certificate, duly executed by the
Administrative Borrower's Chief Financial Officer or principal
accounting officer;
(xii) (A) the audited Financial Statements for the fiscal year
ended July 31, 2004, certified by the Auditors, and unaudited
Financial Statements for the eleven-month period ended July 2, 2005,
certified by the Borrowers' Chief Financial Officer or principal
accounting officer, (B) a pro forma consolidated and consolidating
balance sheet of Del Global and its Subsidiaries, after giving
effect to the consummation of the transactions contemplated hereby
reflecting a satisfactory tangible net worth of each of Del Global
and its Subsidiaries and otherwise in form and substance
satisfactory to the Lender and (C) a certificate executed by the
Borrowers' Chief Financial Officer or principal accounting officer
certifying that since April 30, 2005, no change, event, occurrence
or development or event involving a prospective change in the
business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of any Borrower
has occurred which has had or could reasonably be expected to have a
Material Adverse Effect, and that all information provided by or on
behalf of the Borrowers to the Lender hereunder or in connection
herewith is true and correct in all respects;
(xiii) the opinion of counsel for each Borrower covering such
matters incident to the transactions contemplated by this Agreement
as the Lender may reasonably require, which such counsel is hereby
requested by the Borrowers to provide;
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(xiv) certified copies of all policies of insurance required
by this Agreement and the other Loan Documents, together with loss
payee endorsements for all such policies naming the Lender as lender
loss payee and an additional insured;
(xv) a copy of the Business Plan for the period commencing
August 1, 2005, accompanied by a certificate executed by the Chief
Financial Officer or principal accounting officer of the
Administrative Borrower certifying to the Lender that the Business
Plan has been prepared in good faith based upon the assumptions
contained therein and all information available at the time of
preparation thereof and, as of the date of such certificate, such
Chief Financial Officer or principal accounting officer is not aware
of any information contained in the Business Plan which is false or
misleading or of any omission of information which causes the
Business Plan to be false or misleading;
(xvi) copies of the Governing Documents of each Borrower and a
copy of the resolutions of the Board of Directors of each Borrower
authorizing the execution, delivery and performance of this
Agreement, the other Loan Documents to which such Borrower is or is
to be a party, and the transactions contemplated hereby and thereby,
attached to which is a certificate of a Responsible Officer of such
Borrower certifying (A) that such copies of the Governing Documents
and resolutions (or similar evidence of authorization) of such
Borrower are true, complete and accurate copies thereof, have not
been amended or modified since the date of such certificate and are
in full force and effect and (B) the incumbency, names and true
signatures of the officers of such Borrower authorized to sign the
Loan Documents to which it is a party;
(xvii) a certified copy of a certificate of the Secretary of
State of the state of incorporation of each Borrower, dated within
fifteen days of the Closing Date, listing the certificate of
incorporation of such Borrower and each amendment thereto on file in
such official's office and certifying that (A) such amendments are
the only amendments to such certificate of incorporation on file in
that office, (B) such Borrower has paid all franchise taxes to the
date of such certificate and (C) such Borrower is in good standing
in that jurisdiction;
(xviii) a good standing certificate from the Secretary of
State of each state in which each Borrower is qualified as a foreign
corporation, each dated within fifteen days of the Closing Date;
(xix) a Collateral Access Agreement for each parcel of
Property specified in Schedule 6.1(b) leased by a Borrower and with
respect to any Collateral in the possession of any Person other than
a Borrower, duly executed by each Person (other than a Borrower) in
possession of such Collateral or with a Lien on or other interest in
such parcel of Property;
(xx) a copy of (A) an appraisal of the Bay Shore Property and
(B) an audit of the accounting systems, accounts receivables,
accounts payable and tax returns of the Borrowers, in each case
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conducted in accordance with sound appraisal and auditing standards
by appraisers and auditors satisfactory to the Lender;
(xxi) a letter from the Administrative Borrower to the
Auditors authorizing the Lender to discuss the financial condition
of Del Global and its Subsidiaries with the Auditors and their
personnel and directing the Auditors to cooperate with the Lender
with respect thereto;
(xxii) a Control Agreement for each deposit account not
covered by the Lockbox Agreement and for each Securities Account of
each Borrower, duly executed by such Borrower and the depository
bank or securities intermediary party thereto;
(xxiii) evidence that each Borrower maintains a record of its
electronic chattel paper that identifies the Lender as the assignee
thereof and otherwise in a manner such that the Lender has control
over such chattel paper for purposes of the Code;
(xxiv) (A) a report of a phase I environmental site assessment
of the Bay Shore Property, in form and substance reasonably
satisfactory to the Lender, performed by Laurel Environmental
Associates, Ltd. in accordance with ASTM E1527-00 "Standard Practice
for Environmental Site Assessments: Phase I Environmental Site
Assessment Process" and (B) a report of a phase II environmental
site assessment of the Bay Shore Property, in form and substance
reasonably satisfactory to the Lender, performed by Laurel
Environmental Associates, Ltd. in accordance with ASTM E1903-97
"Standard Practice for Environmental Site Assessments: Phase II
Environmental Site Assessment Process";
(xxv) a mortgagee's title policy (A) dated the date of
delivery of the Mortgage in an amount satisfactory to the Lender,
(B) insuring that the Mortgage creates a valid first Lien on the Bay
Shore Property free and clear of all Liens except the Lien in favor
of the Lender and other Liens that are satisfactory to the Lender,
(C) naming the Lender as the insured thereunder, (D) in the form of
ALTA Loan Policy 1992, and (E) containing revolving endorsements and
such other endorsements and effective coverage as the Lender may
request, together with evidence that all premiums in respect of such
policy have been paid by or on behalf of RFI;
(xxvi) a survey of the Property encumbered by the Mortgage,
satisfactory in form and substance to the Lender and certified
within thirty days before the date of delivery of the Mortgage by an
independent public surveyor satisfactory to the Lender, meeting the
minimum standard detail requirements for ALTA/ACSM surveys, and
showing (A) the exact location and dimensions of the Bay Shore
Property and the improvements thereon, (B) the exact location of all
lot and street lines, required height and setback lines, all means
of access to and all easements relating to the Bay Shore Property,
(C) the names of all streets and alleys abutting the Bay Shore
Property and (D) the absence of any encroachments, rights of way or
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easements of the Bay Shore Property or any encroachment by the
improvements thereon on adjoining property, or any other defects
except Liens permitted hereunder, together with a surveyor's
certificate satisfactory to the Lender;
(xxvii) a copy of the form of the notes that evidence the
Shareholder Subordinated Indebtedness, certified by a Responsible
Officer of the Administrative Borrower as true and correct in all
respects;
(xxviii) evidence that the Borrowers' internal accounting
systems reconcile accounts receivable, accounts payable and
Inventory to a general ledger, which reflects the Borrowers'
consolidated accounts receivable, accounts payable and Inventory, in
a manner and frequency satisfactory to the Lender; and
(xxix) such other agreements, instruments, documents and
evidence as the Lender deems necessary in its sole and absolute
discretion in connection with the transactions contemplated hereby.
(b) Other than listed on Schedule 6.1(r), there shall be no pending
or, to the knowledge of each Borrower after due inquiry, threatened litigation,
proceeding, inquiry or other action (i) seeking an injunction or other
restraining order, damages or other relief with respect to the transactions
contemplated by this Agreement or the other Loan Documents or (ii) which affects
or could affect the business, prospects, operations, assets, liabilities or
condition (financial or otherwise) of any Borrower, except, in the case of
clause (ii), where such litigation, proceeding, inquiry or other action could
not reasonably be expected to have a Material Adverse Effect.
(c) The Borrowers shall have paid (i) all reasonable fees and
expenses of the Lender in connection with the negotiation, preparation,
execution and delivery of the Loan Documents (including, without limitation, all
of the Lender's examination, audit, appraisal and travel expenses and the fees
and expenses of counsel to the Lender) and (ii) the closing fee payable under
Section 4.3 and all other fees referred to in this Agreement that are required
to be paid on the Closing Date.
(d) Except for (i) the filing of the financing and termination
statements under the Code specified in Section 5.1(a)(vi) and (ii) consents or
authorizations which have been obtained and are specified in Schedule 6.1(f), no
consent or authorization of, filing with or other act by or in respect of any
Governmental Authority or any other Person is required in connection with the
execution, delivery, performance, validity or enforceability of this Agreement,
the Notes or the other Loan Documents or the consummation of the transactions
contemplated hereby or thereby or the continuing operations of each Borrower
following the consummation of such transactions.
(e) No change, occurrence, event or development or event involving a
prospective change that could reasonably be expected to have a Material Adverse
Effect shall have occurred and be continuing.
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(f) The Lender and its counsel shall have performed (i) a review
satisfactory to the Lender of all of the Material Contracts and other assets
(including, without limitation, leases of operating facilities) of each
Borrower, the financial condition of each Borrower, including all of its tax,
litigation, environmental and other potential contingent liabilities, the
corporate and capital structure of each Borrower and the cash management and
management information systems of the Borrowers, (ii) a pre-closing audit and
collateral review and (iii) reviews and investigations of such other matters as
the Lender and its counsel deem appropriate, in each case with results
satisfactory to the Lender.
(g) The Borrowers shall be in compliance with all Requirements of
Law and Material Contracts, other than such noncompliance that could not
reasonably be expected to have a Material Adverse Effect.
(h) The Liens in favor of the Lender shall have been duly perfected
and shall constitute first priority Liens, and the Collateral shall be free and
clear of all Liens other than Liens in favor of the Lender and Permitted Liens.
(i) After giving effect to all Revolving Credit Loans to be made and
all Letters of Credit to be issued on the Closing Date, the Excess Availability
shall exceed $2,750,000.
SECTION 5.2. CONDITIONS PRECEDENT TO EACH LOAN AND EACH LETTER OF
CREDIT. The obligation of the Lender to make any Loan or to use its best efforts
to cause to be issued any Letter of Credit is subject to the satisfaction of the
following conditions precedent:
(a) all representations and warranties contained in this Agreement
and the other Loan Documents shall be true and correct on and as of the date of
such Loan or Letter of Credit as if then made, other than representations and
warranties that expressly relate solely to an earlier date, in which case they
shall have been true and correct as of such earlier date;
(b) no Default or Event of Default shall have occurred and be
continuing or would result from the making of the requested Loan or the issuance
of the requested Letter of Credit as of the date of such request; and
(c) no Material Adverse Effect shall have occurred.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
SECTION 6.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS;
RELIANCE BY LENDER. Each Borrower represents and warrants as follows:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. Such Borrower (i)
is a corporation duly organized, validly existing and in good standing under the
laws of the state of its organization, (ii) has the corporate power and
authority to own its properties and assets and to transact the businesses in
which it presently is, or proposes to be, engaged and (iii) is duly qualified,
authorized to do business and in good standing in each jurisdiction where it
presently is, or proposes to be, engaged in business, except to the extent that
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the failure to so qualify or be in good standing could not reasonably be
expected to have a Material Adverse Effect. Schedule 6.1(a) specifies the
jurisdiction in which each Borrower is organized and all jurisdictions in which
each Borrower is qualified to do business as a foreign corporation as of the
Closing Date.
(b) LOCATIONS OF OFFICES, RECORDS AND COLLATERAL. The address of the
principal place of business and chief executive office of each Borrower is, and
the books and records of each Borrower and all of its chattel paper and records
of Receivables are maintained exclusively in the possession of such Borrower at,
the address of such Borrower specified in Schedule 6.1(b). There is no location
at which a Borrower maintains any Collateral other than the locations specified
for it in Schedule 6.1(b). Schedule 6.1(b) specifies all Property of each
Borrower, and indicates whether each location specified therein is leased or
owned by such Borrower.
(c) AUTHORITY. It has the requisite corporate power and authority to
execute, deliver and perform its obligations under each of the Loan Documents to
which it is a party. All corporate action necessary for the execution, delivery
and performance by it of the Loan Documents to which it is a party (including
the consent of shareholders where required) has been taken.
(d) ENFORCEABILITY. This Agreement is and, when executed and
delivered, each other Loan Document to which it is a party, will be, the legal,
valid and binding obligation of such Borrower enforceable in accordance with its
terms, except as enforceability may be limited by (i) bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) general principles
of equity.
(e) NO CONFLICT. The execution, delivery and performance by it of
each Loan Document to which it is a party do not and will not contravene (i) any
of the Governing Documents of such Borrower, (ii) any Requirement of Law or
(iii) any Material Contract and will not result in the imposition of any Liens
upon any of its properties except in favor of the Lender.
(f) CONSENTS AND FILINGS. No consent, authorization or approval of,
or filing with or other act by, any shareholders of such Borrower, any
Governmental Authority or any other Person is required in connection with the
execution, delivery, performance, validity or enforceability of this Agreement
or any other Loan Document, the consummation of the transactions contemplated
hereby or thereby or the continuing operations of such Borrower following such
consummation, except (i) those that have been obtained or made and are specified
in Schedule 6.1(f) and (ii) the filing of financing and termination statements
under the Code.
(g) OWNERSHIP; SUBSIDIARIES. The capital stock of each of the
Subsidiaries of Del Global is owned by the Persons and in the amounts specified
in Schedule 6.1(g). Schedule 6.1(g) sets forth the exact correct legal name of
Del Global and each of its Subsidiaries, in each case as specified in the public
record of the jurisdiction of its organization, and, in the case of such
Subsidiaries, of the Persons that own the capital stock therein.
(h) SOLVENCY. It is Solvent and will be Solvent upon the completion
of all transactions contemplated to occur on or before the Closing Date
(including, without limitation, the Loans to be made on the Closing Date).
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(i) FINANCIAL DATA. It has provided to the Lender complete and
accurate copies of its annual audited Financial Statements for the fiscal year
ended July 31, 2004, and unaudited Financial Statements for the eleven-month
period ended July 2, 2005. Such Financial Statements have been prepared in
accordance with GAAP consistently applied throughout the periods involved and
fairly present the financial position, results of operations and cash flows of
each Borrower and its Subsidiaries for each of the periods covered. Except as
specified in Schedule 6.1(i), neither it nor any of its Subsidiaries has any
Contingent Obligation or liability for taxes, unrealized losses, unusual forward
or long-term commitments or long-term leases, which is not reflected in such
Financial Statements or the footnotes thereto. During the period from July 2,
2005 to and including the date hereof, there has been no sale, transfer or other
disposition by such Borrower or any of its Subsidiaries of any material part of
its business or property and no purchase or other acquisition of any business or
property (including any capital stock of any other Person) material in relation
to the financial condition of such Borrower and its Subsidiaries at July 2,
2005. Since July 2, 2005, (i) there has been no change, occurrence, development
or event which has had or could reasonably be expected to have a Material
Adverse Effect and (ii) none of the capital stock of such Borrower has been
redeemed, retired, purchased or otherwise acquired for value by such Borrower.
(j) ACCURACY AND COMPLETENESS OF INFORMATION. All data, reports and
information heretofore, contemporaneously or hereafter furnished by or on behalf
of such Borrower in writing to the Lender or the Auditors for purposes of or in
connection with this Agreement or any other Loan Document, or any transaction
contemplated hereby or thereby, are or will be true and accurate in all material
respects on the date as of which such data, reports and information are dated or
certified and not incomplete by omitting to state any material fact necessary to
make such data, reports and information not misleading at such time. There are
no facts now known to any Responsible Officer of such Borrower which
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect and which have not been specified herein, in the Financial
Statements, or in any certificate, opinion or other written statement previously
furnished by such Borrower to the Lender.
(k) NO JOINT VENTURES OR PARTNERSHIPS. Except as specified in
Schedule 6.1(k), it is not engaged in any joint venture or partnership with any
other Person.
(l) CORPORATE AND TRADE NAME. During the past five years, such
Borrower has not been known by or used any other corporate, partnership, trade
or fictitious name except for its name as set forth in the introductory
paragraph and on the signature page of this Agreement, which is the exact
correct legal name of such Borrower.
(m) NO ACTUAL OR PENDING MATERIAL MODIFICATION OF BUSINESS. There
exists no actual or, to the best of such Borrower's knowledge after due inquiry,
threatened termination, cancellation or limitation of, or any modification or
change in, the business relationship of such Borrower with any customer or group
of customers which individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect.
(n) NO BROKER'S OR FINDER'S FEES. No broker or finder brought about
the obtaining, making or closing of the Loans or financial accommodations
afforded hereunder or in connection herewith by the Lender or any of its
Affiliates. No broker's or finder's fees or commissions will be payable by such
Borrower to any Person in connection with the transactions contemplated by this
Agreement.
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(o) INVESTMENT COMPANY. It is not an "investment company," or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended. Neither the making of any Loans, the issuance of any Letters
of Credit or the application of the proceeds or repayment thereof by such
Borrower or the beneficiary of any Letter of Credit, nor the consummation of the
other transactions contemplated by this Agreement or the other Loan Documents,
will violate any provision of such Act or any rule, regulation or order of the
Securities and Exchange Commission thereunder.
(p) MARGIN STOCK. It does not own any "margin stock" as that term is
defined in Regulation U of the Federal Reserve Board, and the proceeds of Loans
will be used only for the purposes contemplated hereunder.
(q) TAXES AND TAX RETURNS.
(i) It has properly completed and timely filed all income tax
returns it is required to file. The information contained in such
filed returns, as amended and provided to field auditors of the IRS,
is complete and accurate in all material respects. All deductions
taken in such income tax returns are appropriate and in accordance
with applicable laws and regulations, except deductions that may
have been disallowed but are being challenged in good faith and for
which adequate reserves have been established in accordance with
GAAP.
(ii) All taxes, assessments, fees and other governmental
charges for periods beginning prior to the date hereof have been
timely paid (or, if not yet due, adequate reserves therefor have
been established) by it and such Borrower has no liability for taxes
in excess of the amounts so paid or reserves so established.
(iii) No deficiencies for taxes have been claimed, proposed or
assessed by any taxing or other Governmental Authority against such
Borrower and no tax Liens have been filed with respect thereto.
Except as specified in Schedule 6.1(q), there are no pending or
threatened audits, investigations or claims for or relating to any
liability of such Borrower for taxes and there are no matters under
discussion with any Governmental Authority which could result in an
additional liability for taxes. The federal income tax returns of
such Borrower have never been audited by the Internal Revenue
Service. No extension of a statute of limitations relating to taxes,
assessments, fees or other governmental charges is in effect with
respect to such Borrower.
(iv) It is not a party to, and has no obligations under, any
written tax sharing agreement or agreement regarding payments in
lieu of taxes.
(r) NO JUDGMENTS OR LITIGATION. Except as specified in Schedule
6.1(r), no judgments, orders, writs or decrees are outstanding against it, nor
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is there now pending or, to its knowledge after due inquiry, threatened
litigation, contested claim, investigation, arbitration, or governmental
proceeding by or against such Borrower that (i) individually or in the aggregate
could reasonably be expected to have a Material Adverse Effect or (ii) purports
to affect the legality, validity or enforceability of this Agreement, the Notes,
any other Loan Document or the consummation of the transactions contemplated
hereby or thereby.
(s) TITLE TO PROPERTY. It has (i) good and marketable fee simple
title to or valid leasehold interests in all of its Property and (ii) good and
marketable title to all of its other property, in each case free and clear of
Liens other than Liens permitted by Section 7.2(i).
(t) NO OTHER INDEBTEDNESS. On the Closing Date and after giving
effect to the transactions contemplated hereby, it has no Indebtedness other
than Indebtedness permitted under Section 7.2(a).
(u) INVESTMENTS; CONTRACTS. Such Borrower (i) has not committed to
make any Investment; (ii) is not a party to any indenture, agreement, contract,
instrument or lease, or subject to any charter, bylaw or other corporate,
partnership, limited liability company or similar restriction or any injunction,
order, restriction or decree, which could materially and adversely affect its
business, operations, assets or financial condition; (iii) is not a party to any
contract under which it is the purchaser where it is obligated to pay for goods
or services thereunder regardless of whether it has received such goods or
services; and (iv) has no material contingent or long-term liability, including
any management contracts, which could reasonably be expected to have a Material
Adverse Effect.
(v) COMPLIANCE WITH LAWS. On the Closing Date, after giving effect
to the transactions contemplated hereby, it is not in default under any term of
any Requirement of Law other than any default which, when taken together with
all other similar defaults, could not reasonably be expected to have a Material
Adverse Effect.
(w) RIGHTS IN COLLATERAL; PRIORITY OF LIENS. All of the Collateral
of such Borrower is owned or leased by it free and clear of any and all Liens in
favor of third parties, other than Liens in favor of the Lender and Permitted
Liens. Upon the proper filing of the financing and termination statements
specified in Section 5.1(a)(vi), the Liens granted by such Borrower pursuant to
the Loan Documents constitute valid, enforceable and perfected first priority
Liens on the Collateral.
(x) ERISA.
(i) Neither it nor any ERISA Affiliate maintains or
contributes to any Plan, other than those specified in Schedule
6.1(x).
(ii) Except as specified in Schedule 6.1(x), it and each ERISA
Affiliate have fulfilled all contribution obligations for each Plan
(including obligations related to the minimum funding standards of
ERISA and the Internal Revenue Code), and no application for a
funding waiver or an extension of any amortization period pursuant
to Sections 303 and 304 of ERISA or Section 412 of the Internal
Revenue Code has been made with respect to any Plan.
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(iii) Except as specified in Schedule 6.1(x), no Termination
Event has occurred nor has any other event occurred that is likely
to result in a Termination Event. Neither it or any ERISA Affiliate,
nor any fiduciary of any Plan, is subject to any direct or indirect
liability with respect to any Plan under any Requirement of Law or
agreement, except for ordinary funding obligations which are not
past due.
(iv) Neither it nor any ERISA Affiliate is required to or
reasonably expects to be required to provide security to any Plan
under Section 307 of ERISA or Section 401(a)(29) of the Internal
Revenue Code.
(v) Except as specified in Schedule 6.1(x), it and each ERISA
Affiliate are in compliance in all material respects with all
applicable provisions of ERISA and the Internal Revenue Code with
respect to all Plans. There has been no prohibited transaction as
defined in Section 406 of ERISA or Section 4975 of the Internal
Revenue Code (a "Prohibited Transaction") with respect to any Plan
or any Multiemployer Plan. It and each ERISA Affiliate have made
when due any and all payments required to be made under any
agreement relating to a Multiemployer Plan or any Requirement of Law
pertaining thereto. With respect to each Plan and Multiemployer
Plan, neither it nor any ERISA Affiliate has incurred any liability
to the PBGC or had asserted against it any penalty for failure to
fulfill the minimum funding requirements of ERISA other than for
payments of premiums in the ordinary course of business.
(vi) Each Plan which is intended to qualify under Section
401(a) of the Internal Revenue Code has received a favorable
determination letter from the IRS and no event has occurred which
would cause the loss of such qualification.
(vii) The aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Pension Plan,
determined on a plan termination basis, as disclosed in, and as of
the date of, the most recent actuarial report for such Pension Plan,
does not exceed the aggregate fair market value of the assets of
such Pension Plan.
(viii) Neither it nor any ERISA Affiliate has incurred or
reasonably expects to incur any liability (and no event has occurred
which, with the giving of notice under Section 4219 of ERISA, would
result in any such liability) under Section 4201 or 4243 of ERISA
with respect to any Multiemployer Plan.
(ix) To the extent that any Plan is funded with insurance, it
and each ERISA Affiliate have paid when due all premiums required to
be paid. To the extent that any Plan is funded other than with
insurance, it and each ERISA Affiliate have made when due all
contributions required to be paid.
(y) INTELLECTUAL PROPERTY. Set forth on Schedule 6.1(y) is a
complete and accurate list of all patents, trademarks, trade names, service
marks and copyrights, and all applications therefor and licenses thereof, of
such Borrower, showing as of the date hereof the jurisdiction in which
registered, the registration number, the date of registration and the expiration
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date. Such Borrower owns or licenses all patents, trademarks, service marks,
logos, trade names, trade secrets, know-how, copyrights, or licenses and other
rights with respect to any of the foregoing, which are necessary or advisable
for the operation of its business as presently conducted or proposed to be
conducted. Such Borrower has not infringed any patent, trademark, service xxxx,
trade name, copyright, license or other right owned by any other Person by the
sale or use of any product, process, method, substance, part or other material
presently contemplated to be sold or used, where such sale or use could
reasonably be expected to have a Material Adverse Effect and no claim or
litigation is pending, or, to the best of such Borrower's knowledge, threatened
against such Borrower that contests its right to sell or use any such product,
process, method, substance, part or other material.
(z) LABOR MATTERS. Schedule 6.1(z) accurately sets forth all labor
contracts to which such Borrower is a party as of the Closing Date, and their
dates of expiration. There are no existing or threatened strikes, lockouts or
other disputes relating to any collective bargaining or similar agreement to
which such Borrower is a party which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(aa) COMPLIANCE WITH ENVIRONMENTAL LAWS. (i) It is not the subject
of any judicial or administrative proceeding or investigation relating to the
violation of any Environmental Law or asserting potential liability arising from
the release or disposal by any Person of any Hazardous Materials, (ii) it has
not filed with or received from any Governmental Authority or other Person any
notice, order, stipulation or directive under any Environmental Law, nor is it
aware of any pending discussions within any Governmental Authority, concerning
the treatment, storage, disposal, spill or release or threatened release of any
Hazardous Materials at, on, beneath or adjacent to property owned or leased by
it, or the release or threatened release at any other location of any Hazardous
Material generated, used, stored, treated, transported or released by or on
behalf of such Borrower, (iii) it has disposed of all its waste in accordance
with all applicable laws and it has not improperly stored or disposed of any
waste at, on, beneath or adjacent to any of its property and none of its
property contains any waste fill, (iv) it has no knowledge of any contingent
liability for any release of any Hazardous Materials, and there has been no
spill or release of any Hazardous Materials at any of its property in violation
of Environmental Laws, (v) to the knowledge of such Borrower, all of its
property (including, without limitation, its Equipment) is free, and has at all
times been free, of Hazardous Materials (other than cleaning solvents and
materials that are and have been stored in accordance with applicable
Environmental Laws) and underground storage tanks and (vi) to the knowledge of
such Borrower, none of its Property has ever been used as a waste disposal site,
whether registered or unregistered.
(bb) LICENSES AND PERMITS. It has obtained and holds in full force
and effect all franchises, licenses, leases, permits, certificates,
authorizations, qualifications, easements, rights of way and other rights and
approvals which are necessary or advisable for the operation of its business as
presently conducted and as proposed to be conducted, except where the failure to
possess any of the foregoing (individually or in the aggregate) could not
reasonably be expected to have a Material Adverse Effect.
(cc) GOVERNMENT REGULATION. It is not subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or any other Requirement of Law that limits its ability
-43-
to incur Indebtedness or consummate the transactions contemplated by this
Agreement and the other Loan Documents.
(dd) MATERIAL CONTRACTS. Set forth on Schedule 6.1(dd) is a complete
and accurate list of all Material Contracts of such Borrower, showing as of the
date hereof the parties, subject matter and term thereof. Each such contract has
been duly authorized, executed and delivered by such Borrower and each other
party thereto. Except as specified in Schedule 6.1(dd), each Material Contract
of such Borrower is in full force and effect and is binding upon and enforceable
against all parties thereto in accordance with its terms, and there exists no
default under such contract of such Borrower by any party thereto.
(ee) BUSINESS AND PROPERTIES. No business of such Borrower is
affected by any fire, explosion, accident, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty (whether or not
covered by insurance) that could reasonably be expected to have a Material
Adverse Effect.
(ff) BUSINESS PLAN. The Business Plan and the Financial Statements
delivered to the Lender on the Closing Date were prepared in good faith on the
basis of assumptions which were fair in the context of the conditions existing
at the time of delivery thereof, and, with respect to the Business Plan,
represented, at the time of delivery, such Borrower's best estimate of its
future financial performance.
(gg) AFFILIATE TRANSACTIONS. Except as specified in Schedule
6.1(gg), such Borrower is not a party to or bound by any agreement or
arrangement (whether oral or written) to which any Affiliate of such Borrower is
a party except (i) in the ordinary course of and pursuant to the reasonable
requirements of the business of such Borrower and (ii) upon fair and reasonable
terms no less favorable to such Borrower than it could obtain in a comparable
arm's-length transaction with an unaffiliated Person.
(hh) PATRIOT ACT. Each Borrower acknowledges that the Lender has
notified it that the Lender is required, under the USA Patriot Act, 31 U.S.C.
ss.5318 (the "Patriot Act"), to obtain, verify and record information that
identifies such Borrower including, without limitation, the name and address of
such Borrower and such other information that will allow the Lender to identify
such Borrower in accordance with the Patriot Act.
All representations and warranties made by the Borrowers in this Agreement and
in each other Loan Document to which it is a party shall survive the execution
and delivery hereof and thereof and the closing of the transactions contemplated
hereby and thereby. The Borrowers acknowledge and confirm that the Lender is
relying on such representations and warranties without independent inquiry in
entering into this Agreement.
ARTICLE VII.
COVENANTS OF THE BORROWERS
SECTION 7.1. AFFIRMATIVE COVENANTS. Until termination of the
Lender's obligation to make any Loan or to use its best efforts to cause to be
issued any Letter of Credit under this Agreement, payment and satisfaction of
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all Obligations in full, and termination, Collateralization or expiration of all
Letters of Credit:
(a) CORPORATE EXISTENCE. Each Borrower shall, and shall cause each
of its Subsidiaries to, (i) maintain its corporate existence, (ii) maintain in
full force and effect all material licenses, bonds, franchises, leases,
trademarks, qualifications and authorizations to do business, and all material
patents, contracts and other rights necessary or advisable to the profitable
conduct of its businesses, and (iii) continue in the same lines of business as
presently conducted by it.
(b) MAINTENANCE OF PROPERTY. Each Borrower shall, and shall cause
each of its Subsidiaries to, keep all property useful and necessary to its
business in good working order and condition (ordinary wear and tear excepted)
in accordance with its past operating practices.
(c) AFFILIATE TRANSACTIONS. Each Borrower shall, and shall cause
each of its Subsidiaries to, conduct transactions with any of its Affiliates on
an arm's-length basis or other basis no less favorable to such Borrower or
Subsidiary than would apply in a transaction with a non-Affiliate and which are
approved by the board of directors of such Borrower or Subsidiary.
(d) TAXES. Each Borrower shall, and shall cause each of its
Subsidiaries to, pay, when due, (i) all tax assessments, and other governmental
charges and levies imposed against it or any of its property and (ii) all lawful
claims that, if unpaid, might by law become a Lien upon its property; PROVIDED,
HOWEVER, that, unless such tax assessment, charge, levy or claim has become a
Lien on any of the property of such Borrower or Subsidiary, it need not be paid
if it is being contested in good faith, by appropriate proceedings diligently
conducted and an adequate reserve or other appropriate provision shall have been
established therefor as required in accordance with GAAP.
(e) REQUIREMENTS OF LAW. Each Borrower shall, and shall cause each
of its Subsidiaries to, comply with all Requirements of Law applicable to it,
including, without limitation, all applicable federal, state, local or foreign
laws and regulations, including, without limitation, those relating to
environmental or employee matters (including the collection, payment and deposit
of employees' income, unemployment, Social Security and Medicare hospital
insurance taxes) and with respect to pension liabilities, PROVIDED that such
Borrower shall not be deemed in violation hereof if such Borrower's or any such
Subsidiary's failure to comply with any of the foregoing could not reasonably be
expected to have a Material Adverse Effect.
(f) INSURANCE. Each Borrower shall, and shall cause each of its
Subsidiaries to, maintain public liability insurance, business interruption
insurance, third party property damage insurance and replacement value insurance
on its assets (including the Collateral) under such policies of insurance, with
such insurance companies, in such amounts and covering such risks as are at all
times satisfactory to the Lender, all of which policies covering the Collateral
shall name the Lender as an additional insured and the lender loss payee in case
of loss, and contain other provisions as the Lender may require to protect fully
the Lender's interest in the Collateral and any payments to be made under such
policies.
-45-
(g) BOOKS AND RECORDS; INSPECTIONS. Each Borrower shall, and shall
cause each of its Subsidiaries to, (i) maintain books and records (including
computer records and programs) of account pertaining to the assets, liabilities
and financial transactions of such Borrower and its Subsidiaries in such detail,
form and scope as is consistent with good business practice and (ii) provide the
Lender and its agents access to the premises of such Borrower and its
Subsidiaries at any time and from time to time, during normal business hours and
upon reasonable notice under the circumstances, and at any time after the
occurrence and during the continuance of a Default or Event of Default, for the
purposes of (A) inspecting and verifying the Collateral, (B) inspecting and
copying (at the Borrowers' expense) any and all records pertaining thereto, and
(C) discussing the affairs, finances and business of such Borrower and its
Subsidiaries with any officer, employee or director thereof or with the
Auditors, all of whom are hereby authorized to disclose to the Lender all
financial statements, work papers, and other information relating to such
affairs, finances or business. The Borrowers shall reimburse the Lender for the
reasonable travel and related expenses of the Lender's employees or, at the
Lender's option, of such outside accountants or examiners as may be retained by
the Lender to verify or inspect Collateral, records or documents of the
Borrowers and their Subsidiaries on a regular basis or for a special inspection
if the Lender deems the same appropriate. If the Lender's own employees are
used, the Borrowers shall also pay such reasonable PER DIEM allowance as the
Lender may from time to time establish, or, if outside examiners or accountants
are used, the Borrowers shall also pay the Lender such sum as the Lender may be
obligated to pay as fees therefor. All such Obligations may be charged to the
Loan Account. Each Borrower hereby authorizes the Lender to communicate directly
with the Auditors to disclose to the Lender any and all financial information
regarding such Borrower including, without limitation, matters relating to any
audit and copies of any letters, memoranda or other correspondence related to
the business, financial condition or other affairs of such Borrower.
(h) NOTIFICATION REQUIREMENTS. The Administrative Borrower shall
timely give the Lender the following notices and other documents:
(i) NOTICE OF DEFAULTS. Promptly, and in any event within two
Business Days after becoming aware of the occurrence of a Default or
Event of Default, a certificate of a Responsible Officer specifying
the nature thereof and the applicable Borrower's proposed response
thereto, each in reasonable detail.
(ii) PROCEEDINGS OR CHANGES. Promptly, and in any event within
five Business Days after a Borrower becomes aware of (A) any
proceeding including, without limitation, any proceeding the subject
of which is based in whole or in part on a commercial tort claim
being instituted or threatened to be instituted by or against a
Borrower or any of its Subsidiaries in any federal, state, local or
foreign court or before any commission or other regulatory body
(federal, state, local or foreign) involving a sum, together with
the sum involved in all other similar proceedings, in excess of
$150,000 in the aggregate, (B) any order, judgment or decree
involving a sum, together with the sum of all other orders,
judgments or decrees, in excess of $150,000 in the aggregate being
entered against a Borrower or any of its Subsidiaries or any of
their respective property or assets, (C) any notice or
correspondence issued to any Borrower or Subsidiary thereof by a
Governmental Authority warning, threatening or advising of the
-46-
commencement of any investigation involving such Borrower or
Subsidiary or any of its property or assets other than those
specified in Schedule 6.1(r), (D) any actual or prospective change,
development or event which has had or could reasonably be expected
to have a Material Adverse Effect, (E) the cessation of the business
relationship with any customer of a Borrower whose purchases have
accounted for more than 10% of the sales of such Borrower in any
year since the fiscal year ended July 31, 2004, (F) a change in the
location of any Collateral from the locations specified in Schedule
6.1(b) or (G) a proposed or actual change of the name, identity,
corporate structure or jurisdiction of organization of any Borrower,
a written statement describing such proceeding, order, judgment,
decree, change, development or event and any action being taken by
any of the Borrowers with respect thereto.
(iii) ERISA NOTICES.
(A) Promptly, and in any event within ten Business Days
after a Termination Event has occurred, a written statement of
a Responsible Officer describing such Termination Event and
any action that is being taken with respect thereto by any
Borrower or ERISA Affiliate, and any action taken or
threatened by the Internal Revenue Service, the Department of
Labor or the PBGC;
(B) promptly, and in any event within three Business
Days after the filing thereof with the Internal Revenue
Service, a copy of each funding waiver request filed with
respect to any Plan subject to the funding requirements of
Section 412 of the Internal Revenue Code and all
communications received by any Borrower or ERISA Affiliate
with respect to such request;
(C) promptly, and in any event within three Business
Days after receipt by any Borrower or ERISA Affiliate of the
PBGC's intention to terminate a Pension Plan or to have a
trustee appointed to administer a Pension Plan, a copy of each
such notice;
(D) promptly, and in any event within three Business
Days after the occurrence thereof, notice (including the
nature of the event and, when known, any action taken or
threatened by the Internal Revenue Service or the PBGC with
respect thereto) of:
(1) except as specified in Schedule 6.1(x), any
Prohibited Transaction which could subject any Borrower
or ERISA Affiliate to a civil penalty assessed pursuant
to Section 502(i) of ERISA or a tax imposed by Section
4975 of the Internal Revenue Code in connection with any
Plan, or any trust created thereunder,
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(2) any cessation of operations (by any Borrower or
ERISA Affiliate) at a facility in the circumstances
described in Section 4062(e) of ERISA,
(3) a failure by any Borrower or ERISA Affiliate to
make a payment to a Plan required to avoid imposition of
a Lien under Section 302(f) of ERISA or Section 412(n)
of the Internal Revenue Code,
(4) the adoption of an amendment to a Plan
requiring the provision of security to such Plan
pursuant to Section 307 of ERISA or Section 401(a)(29)
of the Internal Revenue Code, or
(5) any change in the actuarial assumptions or
funding methods used for any Plan where the effect of
such change is to increase materially or reduce
materially the unfunded benefit liability or obligation
to make periodic contributions;
(E) promptly upon the request of the Lender, each annual
report (IRS Form 5500 series) and all accompanying schedules,
the most recent actuarial reports, the most recent financial
information concerning the financial status of each Plan
administered or maintained by any Borrower or ERISA Affiliate,
and schedules showing the amounts contributed to each Pension
Plan by or on behalf of any Borrower or ERISA Affiliate in
which any of its personnel participate or from which such
personnel may derive a benefit, and each Schedule B (Actuarial
Information) to the annual report filed by any Borrower or
ERISA Affiliate with the Internal Revenue Service with respect
to each such Plan;
(F) promptly upon the filing thereof, copies of any Form
5310, or any successor or equivalent form to Form 5310, filed
with the Internal Revenue Service in connection with the
termination of any Plan, and copies of any standard
termination notice or distress termination notice filed with
the PBGC in connection with the termination of any Pension
Plan;
(G) promptly, and in any event within three Business
Days after receipt thereof by any Borrower or ERISA Affiliate,
notice and demand for payment of withdrawal liability under
Section 4201 of ERISA with respect to a Multiemployer Plan;
(H) promptly, and in any event within three Business
Days after receipt thereof by any Borrower or ERISA Affiliate,
notice by the Department of Labor of any penalty, audit,
investigation or purported violation of ERISA with respect to
a Plan;
(I) promptly, and in any event within three Business
Days after receipt thereof by any Borrower or ERISA Affiliate,
notice by the Internal Revenue Service or the Treasury
-48-
Department of any income tax deficiency or delinquency, excise
tax penalty, audit or investigation with respect to a Plan;
and
(J) promptly, and in any event within three Business
Days after receipt thereof by any Borrower or ERISA Affiliate,
notice of any administrative or judicial complaint, or the
entry of a judgment, award or settlement agreement, in either
case with respect to a Plan that could reasonably be expected
to have a Material Adverse Effect.
(iv) MATERIAL CONTRACTS. Promptly, and in any event within ten
Business Days after any Material Contract is terminated or amended
in any material respect, or any new Material Contract is entered
into, a written statement describing such event, with copies of
amendments or new contracts, and an explanation of any actions being
taken with respect thereto.
(v) ENVIRONMENTAL MATTERS. Promptly, and in any event within
ten days after receipt by a Borrower thereof, copies of each (A)
written notice that any violation of any Environmental Law may have
been committed or is about to be committed by a Borrower which
violation could reasonably be expected to result in liability or
involve remediation costs in excess of $50,000, (B) written notice
that any administrative or judicial complaint or order has been
filed or is about to be filed against a Borrower alleging violations
of any Environmental Law or requiring a Borrower to take any action
in connection with the release of toxic or Hazardous Materials into
the environment which violation or action could reasonably be
expected to result in liability or involve remediation costs in
excess of $50,000, (C) written notice from a Governmental Authority
or other Person alleging that a Borrower may be liable or
responsible for costs associated with a response to or cleanup of a
release of a Hazardous Material into the environment or any damages
caused thereby which costs could reasonably be expected to exceed
$50,000 or (D) Environmental Law adopted, enacted or issued after
the date hereof of which a Borrower becomes aware which could
reasonably be expected to have a Material Adverse Effect.
(i) CASUALTY LOSS. Each Borrower shall, and shall cause each of its
Subsidiaries to, (i) provide written notice to the Lender, within ten Business
Days, of any material damage to, the destruction of or any other material loss
to any asset or property owned or used by such Borrower or any of its
Subsidiaries other than any such asset or property with a net book value
(individually or in the aggregate) less than $100,000 or any condemnation,
confiscation or other taking, in whole or in part, or any event that otherwise
diminishes so as to render impracticable or unreasonable the use of such asset
or property owned or used by such Borrower or any of its Subsidiaries together
with a statement of the amount of the damage, destruction, loss or diminution in
value (a "Casualty Loss") and (ii) diligently file and prosecute its claim for
any award or payment in connection with a Casualty Loss.
(j) QUALIFY TO TRANSACT BUSINESS. Each Borrower shall, and shall
cause each of its Subsidiaries to, qualify to transact business as a foreign
corporation in each jurisdiction where the nature or extent of its business or
-49-
the ownership of its property requires it to be so qualified or authorized and
where failure to qualify or be authorized could reasonably be expected to have a
Material Adverse Effect.
(k) FINANCIAL REPORTING. The Administrative Borrower shall deliver
to the Lender the following:
(i) ANNUAL FINANCIAL STATEMENTS. As soon as available, but not
later than 105 days after the end of each fiscal year, beginning
with the fiscal year ended July 30, 2005, (A) the annual audited and
certified consolidated and consolidating Financial Statements of Del
Global and its Subsidiaries; (B) a comparison in reasonable detail
to the prior year's audited Financial Statements; (C) the Auditors'
opinion without Qualification, copies of any written communication
from the auditors to Del Global's audit committee and a statement
indicating that the Auditors have not obtained knowledge of the
existence of any Default or Event of Default during their audit; and
(D) a narrative discussion of the financial condition and results of
operations and the liquidity and capital resources of Del Global and
its Subsidiaries for such fiscal year, prepared by the Chief
Financial Officer or principal accounting officer of the
Administrative Borrower.
(ii) PROJECTIONS. Not later than thirty days before the end of
each fiscal year of the Borrowers, the Business Plan of the
Borrowers certified by the Chief Financial Officer or principal
accounting officer of the Administrative Borrower for the one-year
period commencing with the following fiscal year.
(iii) MONTHLY FINANCIAL STATEMENTS. As soon as available, but
not later than thirty days after the end of each month, commencing
with the month ending July 31, 2005, (A) the interim consolidated
and consolidating Financial Statements of Del Global and its
Subsidiaries as of the end of such month and for the fiscal year to
date and (B) a certification by the Administrative Borrower's Chief
Financial Officer or principal accounting officer that such
Financial Statements have been prepared in accordance with GAAP and
are fairly stated in all material respects (subject to normal
year-end audit adjustments).
(iv) QUARTERLY COMPARATIVE STATEMENTS. As soon as available,
but not later than forty-five days after the end of each fiscal
quarter, (A) a comparison of the interim consolidated and
consolidating Financial Statements of Del Global and its
Subsidiaries as of the end of such quarter and for the fiscal year
to date to the projected Financial Statements set forth in the
Business Plan and to the Financial Statements of Del Global and its
Subsidiaries as of the end of and for the same period of the prior
year and (B) a compliance certificate, substantially in the form of
Exhibit F (a "Compliance Certificate"), signed by the Administrative
Borrower's Chief Financial Officer or principal accounting officer,
with an attached schedule of calculations demonstrating compliance
with the Financial Covenants as of the end of such quarter.
(v) BORROWING BASE CERTIFICATE. Weekly (or more frequently as
the Lender may from time to time request), not later than the fourth
Business Day of each week, a borrowing base certificate,
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substantially in the form of Exhibit K, detailing the Eligible
Receivables and the Eligible Inventory, containing a calculation of
availability and reflecting all sales, collections, and debit and
credit adjustments, as of the last day of (or for) the preceding
week (or as of a more recent date as the Lender may from time to
time request), which shall be prepared by or under the supervision
of the Chief Financial Officer or principal accounting officer of
the Administrative Borrower and certified by such officer (a
"Borrowing Base Certificate").
(vi) AGINGS. Monthly, not later than the tenth day of each
month, agings of the Borrowers' Receivables and accounts payable, in
scope and detail satisfactory to the Lender, as of the last day of
the preceding month.
(vii) SHAREHOLDER AND SEC REPORTS. As soon as available, but
not later than five days after the same are sent or filed, as the
case may be, copies of all financial statements and reports that any
Borrower sends to any of its shareholders or files with the
Securities and Exchange Commission or any other Governmental
Authority.
(viii) OTHER FINANCIAL INFORMATION. Promptly after the request
by the Lender therefor, such additional financial statements and
other related data and information as to the business, prospects,
operations, results of operations, assets, liabilities or condition
(financial or otherwise) of any Borrower as the Lender may from time
to time reasonably request.
(l) PAYMENT OF LIABILITIES. Each Borrower shall, and shall cause
each of its Subsidiaries to, pay and discharge, in the ordinary course of
business, all obligations and liabilities (including, without limitation, tax
liabilities and other governmental charges), except where the same may be
contested in good faith by appropriate proceedings and for which adequate
reserves with respect thereto have been established in accordance with GAAP.
(m) ERISA. Each Borrower shall, and shall cause each of its ERISA
Affiliates to, (i) maintain each Plan intended to qualify under Section 401(a)
of the Internal Revenue Code so as to satisfy the qualification requirements
thereof, (ii) contribute, or require that contributions be made, in a timely
manner (A) to each Plan in amounts sufficient (I) to satisfy the minimum funding
requirements of Section 302 of ERISA or Section 412 of the Internal Revenue
Code, if applicable, (II) to satisfy any other Requirements of Law and (III) to
satisfy the terms and conditions of each such Plan, and (B) to each Foreign Plan
in amounts sufficient to satisfy the minimum funding requirements of any
applicable law or regulation, without any application for a waiver from any such
funding requirements, (iii) cause each Plan or Foreign Plan to comply in all
material respects with applicable law (including all applicable statutes,
orders, rules and regulations) and (iv) pay in a timely manner, in all material
respects, all required premiums to the PBGC.
As used in this Section 7.1(m), "Foreign Plan" means a plan that
provides retirement or health benefits and that is maintained, or otherwise
contributed to, by a Borrower for the benefit of employees outside the United
States.
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(n) ENVIRONMENTAL MATTERS. Each Borrower shall, and shall cause each
of its Subsidiaries to, conduct its business so as to comply in all material
respects with all applicable Environmental Laws including, without limitation,
compliance in all material respects with the terms and conditions of all permits
and governmental authorizations.
(o) TRADEMARKS. Each Borrower shall, and shall cause each of its
Subsidiaries to, do and cause to be done all things necessary to preserve and
keep in full force and effect all of its material registrations of trademarks,
service marks and other marks, trade names and other trade rights.
(p) SOLVENCY. Each Borrower shall, and shall cause each of its
Subsidiaries to, be and remain Solvent at all times.
(q) BILLING PRACTICES. The Administrative Borrower shall notify the
Lender of any Receivable of any Borrower generated pursuant to the sale of goods
or the rendition of services on any basis other than on the terms specified in
Schedule 7.1(q).
(r) BANK ACCOUNTS. The Borrowers shall comply with the requirements
relating to their bank accounts as specified in Schedule 7.2(t) by the dates
specified therein.(1)
(s) BANK SECRECY ACT, ETC. Each Borrower is and shall remain in full
compliance with all laws and regulations applicable to it including, without
limitation, (i) ensuring that no Person who owns a controlling interest in or
otherwise controls such Borrower is or shall be (A) listed on the Specially
Designated Nationals and Blocked Person List maintained by the Office of Foreign
Assets Control ("OFAC"), Department of the Treasury, or any other similar list
maintained by the OFAC under any authorizing statute, Executive Order or
regulation or (B) a Person designated under Section 1(b), (c) or (d) of
Executive Order No. 13224 (September 23, 2001), any related enabling legislation
or any similar Executive Order and (ii) compliance with all applicable Bank
Secrecy Act ("BSA") laws, regulations and government guidance on BSA compliance
and on the prevention and detection of money laundering violations.
(t) VILLA SISTEMI. If Villa Sistemi becomes a wholly owned
subsidiary (direct or indirect) of any Borrower, such Borrower shall, within ten
days thereof, pledge 66% of Villa Sistemi's capital stock to the Lender as
Collateral under documentation satisfactory to the Lender in its sole
discretion.
(u) EXCESS AVAILABILITY. As long as the Outstanding Disputes have
not been settled or otherwise resolved to the Lender's satisfaction, the
Borrowers shall maintain Excess Availability of at least $1,000,000 (or such
lesser amount as determined by the Lender in its sole discretion).
SECTION 7.2. NEGATIVE COVENANTS. Until termination of the Lender's
obligation to make any Loan or to use its best efforts to cause to be issued any
-----------------------------
1 Bank One accounts to be closed by a specified date.
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Letter of Credit under this Agreement, payment and satisfaction of all
Obligations in full, and termination, Collateralization or expiration of all
Letters of Credit:
(a) INDEBTEDNESS. Each Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly, at any time create, incur, assume
or suffer to exist any Indebtedness other than:
(i) Indebtedness under the Loan Documents;
(ii) endorsement of negotiable instruments for deposit or
collection in the ordinary course of business;
(iii) Indebtedness (including Capitalized Lease Obligations)
incurred solely to finance the acquisition of fixed or capital
assets in an aggregate principal amount not to exceed, as to the
Borrowers and their Subsidiaries taken together, $250,000 at any
time outstanding;
(iv) Indebtedness of Villa Sistemi under its credit facilities
existing on the date hereof and refinancings thereof on terms and
conditions satisfactory to the Lender;
(v) Indebtedness under the Villa Note and the Villa Euro Note,
PROVIDED that payments on the Villa Note and the Villa Euro Note
shall only be made from the proceeds of dividends and management
fees paid by Villa Sistemi to the Borrowers; and
(vi) the Shareholder Subordinated Indebtedness.
(b) CONTINGENT OBLIGATIONS. Except as specified in Schedule 6.1(i),
each Borrower will not, directly or indirectly, incur, assume, or suffer to
exist any Contingent Obligation, excluding indemnities given in connection with
this Agreement or the other Loan Documents in favor of the Lender.
(c) CORPORATE CHANGES, ETC. Each Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly, merge or consolidate
with any Person or amend, alter or modify its Governing Documents or its legal
name, mailing address, chief executive office or principal places of business,
structure, status or existence, or liquidate or dissolve itself (or suffer any
liquidation or dissolution) or issue any capital stock or other equity interests
other than (i) the issuance of shares of capital stock by Del Global upon the
exercise of warrants for shares of capital stock of Del Global or the issuance
of any other capital stock of Del Global so long as all the Net Cash Proceeds
thereof are applied to the outstanding amount of the Loans within three Business
Days of receipt thereof and (ii) the issuance of shares of capital stock by Del
Global in exchange for shares of Villa Sistemi's capital stock not owned by Del
Global as of the Closing Date.
(d) CHANGE IN NATURE OF BUSINESS. Each Borrower will not, and will
not permit any of its Subsidiaries to, at any time make any material change in
the lines of its business as carried on at the date hereof or enter into any new
line of business.
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(e) SALES, ETC. OF ASSETS. Each Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly, in any fiscal year,
sell, transfer or otherwise dispose of any of its assets (other than sales of
Inventory in the ordinary course of business), or grant any option or other
right to purchase or otherwise acquire any of its assets, with an aggregate
value, as to all the Borrowers and their Subsidiaries taken together, in excess
of $100,000.
(f) USE OF PROCEEDS. Each Borrower will not (i) use any portion of
the proceeds of any Loan in violation of Section 2.4 or for the purpose of
purchasing or carrying any "margin stock" (as defined in Regulation U of the
Federal Reserve Board) in any manner which violates the provisions of Regulation
T, U or X of the Federal Reserve Board or for any other purpose in violation of
any applicable statute or regulation, or of the terms and conditions of this
Agreement, or (ii) take, or permit any Person acting on its behalf to take, any
action which could reasonably be expected to cause this Agreement or any
document or instrument delivered pursuant hereto to violate any regulation of
the Federal Reserve Board.
(g) CANCELLATION OF DEBT. Each Borrower will not, and will not
permit any of its Subsidiaries to, cancel any liability or debt owed to it,
except for consideration in the ordinary course of business.
(h) LOANS TO OTHER PERSONS. Each Borrower will not, and will not
permit any of its Subsidiaries to, at any time make loans or advance any credit
to any Affiliate or other Person at any time after the Closing Date.
(i) LIENS, ETC. Each Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly, at any time create, incur, assume
or suffer to exist any Lien on or with respect to any assets, other than:
(i) Liens created hereunder and by the Security Documents;
(ii) Liens securing Indebtedness permitted by Section
7.2(a)(iii) incurred to finance the acquisition of fixed or capital
assets or shares of capital stock of Villa Sistemi, PROVIDED that
(A) such Liens shall be created substantially simultaneously with
the acquisition of such assets, (B) such Liens do not at any time
encumber any assets other than the assets financed by such
Indebtedness, (C) such Liens are not modified to secure other
Indebtedness and the amount of Indebtedness secured thereby is not
increased, (D) the principal amount of Indebtedness secured by any
such Lien shall at no time exceed the original purchase price of
such assets and (E) in the case of the Villa Note, such Liens do not
encumber more than 10% of the outstanding shares of capital stock of
Villa Sistemi; and
(iii) Permitted Liens.
(j) DIVIDENDS, STOCK REDEMPTIONS, DISTRIBUTIONS, ETC. Each Borrower
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, pay any dividends or distributions on, purchase, redeem or retire
any shares of any class of its capital stock or other equity interests or any
warrants, options or rights to purchase any such capital stock or other equity
interests, whether now or hereafter outstanding ("Stock"), or make any payment
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on account of or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of its Stock,
or make any other distribution in respect thereof, either directly or
indirectly, whether in cash or property or in obligations of such Borrower or
any of its Subsidiaries except that a Subsidiary may pay dividends to a Borrower
or to another Subsidiary of a Borrower.
(k) INVESTMENTS. Each Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly, at any time make or hold any
Investment in any Person (whether in cash, securities or other property of any
kind) other than Investments in (i) Cash Equivalents so long as the Lender has a
perfected, first priority Lien on such Cash Equivalents and (ii) shares of
capital stock of Villa Sistemi not currently owned by Del Global.
(l) PARTNERSHIPS; SUBSIDIARIES; JOINT VENTURES; MANAGEMENT
CONTRACTS. Except for existing joint ventures of Villa Sistemi specified in
Schedule 6.1(k), each Borrower will not, and will not permit any of its
Subsidiaries to, at any time create any direct or indirect Subsidiary, enter
into any joint venture or similar arrangement or become a partner in any general
or limited partnership or enter into any management contract permitting third
party management rights with respect to the business of such Borrower or any of
its Subsidiaries.
(m) FISCAL YEAR. Each Borrower will not, and will not permit any of
its Subsidiaries to, change its fiscal year from a year ending July 30, 2005,
July 29, 2006 or July 28, 2007, respectively.
(n) ACCOUNTING CHANGES. Each Borrower will not, and will not permit
any of its Subsidiaries to, at any time make or permit any change in accounting
policies or reporting practices, except as required by GAAP.
(o) EXECUTIVE COMPENSATION. Each Borrower will not, and will not
permit any of its Subsidiaries to, pay any salary, management, director or other
fee or other direct or indirect remuneration or compensation to its executive
officers, directors or stockholders in excess of the amounts specified in
Schedule 7.2(o) plus annual increases of which the Administrative Borrower shall
give the Lender written notice at least annually.
(p) NO PROHIBITED TRANSACTIONS UNDER ERISA. Each Borrower will not,
and will not permit any of its ERISA Affiliates to, directly or indirectly:
(i) Engage in any Prohibited Transaction which could
reasonably be expected to result in a civil penalty or excise tax
described in Section 406 of ERISA or Section 4975 of the Internal
Revenue Code for which a statutory or class exemption is not
available or a private exemption has not been previously obtained
from the Department of Labor;
(ii) permit to exist with respect to any Pension Plan any
accumulated funding deficiency (as defined in Section 302 of ERISA
and Section 412 of the Internal Revenue Code), whether or not
waived;
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(iii) except as specified in Schedule 6.1(x), terminate any
Pension Plan where such event would result in any liability of any
Borrower or ERISA Affiliate under Title IV of ERISA;
(iv) fail to make any required contribution or payment to any
Multiemployer Plan;
(v) fail to pay any required installment or any other payment
required under Section 412 of the Internal Revenue Code on or before
the due date for such installment or other payment;
(vi) amend a Pension Plan resulting in an increase in current
liability for the plan year such that any Borrower or ERISA
Affiliate is required to provide security to such Plan under Section
307 of ERISA or Section 401(a)(29) of the Internal Revenue Code;
(vii) withdraw from any Multiemployer Plan where such
withdrawal is reasonably likely to result in any liability of any
such entity under Title IV of ERISA; or
(viii) take any action that would cause the imposition of an
excise tax under Section 4978 or Section 4979A of the Internal
Revenue Code.
(q) UNUSUAL TERMS OF SALE. Each Borrower will not, and will not
permit any of its Subsidiaries to, sell goods or products or render services on
extended or consignment terms or on a progress billing or xxxx and hold basis,
or on any other unusual terms.
(r) PREPAYMENTS AND AMENDMENTS OF MATERIAL CONTRACTS. Each Borrower
will not, and will not permit any of its Subsidiaries to, at any time (i) make
any prepayment of any Indebtedness, other than (A) the prepayment of the Loans
in accordance with the terms of this Agreement and (B) prepayments of the Villa
Note and the Villa Euro Note solely with the proceeds of dividends and
management fees paid by Villa Sistemi to the Borrowers, or (ii) amend, modify,
cancel or terminate, or permit the amendment, modification, cancellation or
termination of, (A) any Material Contract (other than the Villa Note and the
Villa Euro Note), except where such amendment or modification could not
reasonably be expected to have a Material Adverse Effect, (B) the Villa Note or
(C) the Villa Euro Note.
(s) LEASE OBLIGATIONS. Each Borrower will not, and will not permit
any of its Subsidiaries to, at any time create, incur or assume any obligations
as lessee for the rental or hire of real or personal property in connection with
any sale and leaseback transaction.
(t) BANK ACCOUNTS. Each Borrower will not, and will not permit any
of its Subsidiaries to, open, maintain or otherwise have any checking, savings
or other accounts at any bank or other financial institution, or any other
account where money is or may be deposited or maintained with any other Person,
other than (i) payroll accounts, (ii) accounts specified in Schedule 7.2(t) and
(iii) other accounts subject to a Control Agreement.
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(u) ACQUISITION OF STOCK OR ASSETS. Each Borrower will not, and will
not permit any of its Subsidiaries to, acquire or commit or agree to acquire any
stock, securities or assets of any other Person other than (i) shares of capital
stock of Villa Sistemi not owned by Del Global as of the Closing Date and (ii)
Equipment and Inventory acquired in the ordinary course of business.
(v) SECURITIES AND DEPOSIT ACCOUNTS. Each Borrower will not (i)
establish or maintain any Securities Account or deposit account (other than a
Blocked Account) unless the Lender shall have received a Control Agreement, duly
executed by such Borrower and the securities intermediary or depository bank
parties thereto and in full force and effect, in respect of such Securities
Account or deposit account or (ii) transfer any financial assets from any
Securities Account; PROVIDED, HOWEVER, that, in the case of Securities Accounts,
so long as no Event of Default has occurred and is continuing or would result
therefrom, such Borrower or any of its Subsidiaries may (A) use such assets to
the extent permitted by this Agreement, or (B) sell or trade such assets in the
ordinary course of business so long as the proceeds of such sales or trades are
deposited in a Blocked Account, any other deposit account or a Securities
Account, in each case in respect of which the Lender has received a Control
Agreement duly executed by such Borrower and the securities intermediary or
depository bank party thereto and that otherwise is in full force and effect.
(w) NEGATIVE PLEDGE. Each Borrower will not, and will not permit any
of its Subsidiaries to, enter into or suffer to exist any agreement (other than
in favor of the Lender) prohibiting or conditioning the creation or assumption
of any Lien upon any of its assets.
ARTICLE VIII.
FINANCIAL COVENANTS
Until termination of the Lender's obligations to make any Loan or to
use its best efforts to cause to be issued any Letters of Credit under this
Agreement, payment and satisfaction of all Obligations in full, and termination,
Collateralization or expiration of all Letters of Credit:
SECTION 8.1. ADJUSTED U.S. EARNINGS.
(a) Until the Lender receives the Financial Statements and other
documents required under Section 7.1(k)(i) with respect to the fiscal year ended
July 30, 2005 or at any time when a Default has occurred and is continuing or
Excess Availability is less than $500,000, the Adjusted U.S. Earnings for any
period set forth below shall not be less than the amount set forth below
opposite such period:
Minimum Adjusted U.S.
Period Earnings
------ ----------------------
August 1, 2005 through August 31, 2005 $223,300
August 1, 2005 through September 30, 2005 446,500
August 1, 2005 through October 31, 2005 669,800
August 1, 2005 through November 30, 2005 893,000
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Minimum Adjusted U.S.
Period Earnings
------ ----------------------
August 1, 2005 through December 31, 2005 1,116,300
August 1, 2005 through January 31, 2006 1,339,500
August 1, 2005 through February 28, 2006 1,562,800
August 1, 2005 through March 31, 2006 1,786,000
August 1, 2005 through April 30, 2006 2,009,300
August 1, 2005 through May 31, 2006 2,232,500
August 1, 2005 through June 30, 2006 2,455,800
August 1, 2005 through July 31, 2006 2,679,000
The four consecutive fiscal quarters ending October 31, 2006 2,902,000
The four consecutive fiscal quarters ending January 31, 2007 3,124,000
The four consecutive fiscal quarters ending April 30, 2007 3,347,900
Each period of four consecutive fiscal quarters ending
January 31, April 30, July 31 or October 31 of
each fiscal year thereafter 3,400,000
(b) After the Lender receives the Financial Statements and other
documents required under Section 7.1(k)(i) with respect to the fiscal year ended
July 30, 2005 and so long as no Default has occurred and is continuing and
Excess Availability is at least $500,000, the Adjusted U.S. Earnings for any
period set forth below shall not be less than the amount set forth below
opposite such period:
Minimum Adjusted U.S.
Period Earnings
------ ----------------------
August 1, 2005 through October 31, 2005 $ 669,800
August 1, 2005 through January 31, 2006 1,339,500
August 1, 2005 through April 30, 2006 2,009,300
August 1, 2005 through July 31, 2006 2,679,000
November 1, 2005 through October 31, 2006 2,902,000
February 1, 2006 through January 31, 2007 3,124,000
May 1, 2006 through April 30, 2007 3,347,900
Each period of four consecutive fiscal quarters
ending January 31, April 30, July 31 and
October 31 of each fiscal year thereafter 3,400,000
SECTION 8.2. ADJUSTED EARNINGS. The Adjusted Earnings for any period
set forth below shall not be less than the amount set forth below opposite
such period:
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Minimum Adjusted
Period Earnings
------ ----------------------
August 1, 2005 through October 31, 2005 $1,419,800
August 1, 2005 through January 31, 2006 2,839,500
August 1, 2005 through April 30, 2006 4,259,300
August 1, 2005 through July 31, 2006 5,679,000
The four consecutive fiscal quarters ending October 31, 2006 5,902,000
The four consecutive fiscal quarters ending January 31, 2007 6,124,900
The four consecutive fiscal quarters ending April 30, 2007 6,347,900
Each period of four consecutive fiscal quarters ending
January 31, April 30, July 31 or October 31 of
each fiscal year thereafter 6,400,000
SECTION 8.3. SENIOR U.S. DEBT RATIO.
(a) Until the Lender receives the financial statements and other
documents required under Section 7.1(k)(i) with respect to the fiscal year ended
July 30, 2005 or at any time when a Default has occurred and is continuing or
Excess Availability is less than $500,000, the ratio of (i) the outstanding
amount of all Loans and all outstanding Letters of Credit to (ii) Adjusted U.S.
Earnings (on an annualized basis) shall not, as of the last day of any period
set forth below, be greater than the ratio set forth below opposite such period:
Period Maximum Senior U.S. Debt Ratio
------ ------------------------------
August 1, 2005 through August 31, 2005 1.50:1.00
August 1, 2005 through September 30, 2005 1.50:1.00
August 1, 2005 through October 31, 2005 1.50:1.00
August 1, 2005 through November 30, 2005 1.25:1.00
August 1, 2005 through December 31, 2005 1.25:1.00
August 1, 2005 through January 31, 2006 1.25:1.00
August 1, 2005 through February 28, 2006 1.25:1.00
August 1, 2005 through March 31, 2006 1.25:1.00
August 1, 2005 through April 30, 2006 1.25:1.00
August 1, 2005 through May 31, 2006 1.25:1.00
August 1, 2005 through June 30, 2006 1.25:1.00
August 1, 2005 through July 31, 2006 1.25:1.00
Each period of four consecutive fiscal quarters ending
January 31, April 30, July 31 and October 31 of each
fiscal year thereafter 1.00:1.00
(b) After the Lender receives the financial statements and other
documents required under Section 7.1(k)(i) with respect to the fiscal year ended
July 30, 2005 and so long as no Default has occurred and is continuing and
Excess Availability is at least $500,000, the ratio of (i) the outstanding
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amount of all Loans and all outstanding Letters of Credit to (ii) Adjusted U.S.
Earnings (on an annualized basis) shall not, as of the last day of any period
set forth below, be greater than the ratio set forth below opposite such period:
Period Maximum Senior U.S. Debt Ratio
------ ------------------------------
August 1, 2005 through October 31, 2005 1.50:1.00
August 1, 2005 through January 31, 2006 1.25:1.00
August 1, 2005 through April 30, 2006 *1.25:1.00
August 1, 2005 through July 31, 2006 1.25:1.00
Each period of four consecutive fiscal quarters
ending January 31, April 30, July 31 and
October 31 of each fiscal year thereafter 1.00:1.00
SECTION 8.4. SENIOR DEBT RATIO. The ratio of (i) the outstanding
amount of all Loans and all outstanding Letters of Credit to (ii) Adjusted
Earnings (on an annualized basis) shall not, as of the last day of any period
set forth below, be greater than the ratio set forth below opposite such period:
Period Maximum Senior Debt Ratio
------ -------------------------
August 1, 2005 through October 31, 2005 2.00:1.00
August 1, 2005 through January 31, 2006 1.75:1.00
August 1, 2005 through April 30, 2006 1.75:1.00
August 1, 2005 through July 31, 2006 1.50:1.00
Each period of four consecutive fiscal quarters ending
January 31, April 30, July 31 and
October 31 of each fiscal year thereafter 1.50:1.00
SECTION 8.5. FIXED CHARGE COVERAGE RATIO.
(a) Until the Lender receives the Financial Statements and other
documents required under Section 7.1(k)(i) with respect to the fiscal year ended
July 30, 2005 or at any time when a Default has occurred and is continuing or
Excess Availability is less than $500,000, the Fixed Charge Coverage Ratio for
any period set forth below shall not be less than the ratio set forth below
opposite such period:
Minimum Fixed Charge
Period Coverage Ratio
------ ----------------------
August 1, 2005 through August 31, 2005 3.00:1.00
August 1, 2005 through September 30, 2005 3.00:1.00
August 1, 2005 through October 31, 2005 3.00:1.00
August 1, 2005 through November 30, 2005 3.00:1.00
August 1, 2005 through December 31, 2005 3.00:1.00
August 1, 2005 through January 31, 2006 3.00:1.00
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August 1, 2005 through February 28, 2006 3.00:1.00
August 1, 2005 through March 31, 2006 3.00:1.00
August 1, 2005 through April 30, 2006 3.00:1.00
August 1, 2005 through May 31, 2006 3.00:1.00
August 1, 2005 through June 30, 2006 3.00:1.00
August 1, 2005 through July 31, 2006 3.00:1.00
Each period of four consecutive fiscal quarters
ending January 31, April 30, July 31 and
October 31 of each fiscal year thereafter 3.00:1.00
(b) After the Lender receives the Financial Statements and other
documents required under Section 7.1(k)(i) with respect to the fiscal year ended
July 30, 2005 and so long as no Default has occurred and is continuing and
Excess Availability is at least $500,000, the Fixed Charge Coverage Ratio for
any period set forth below shall not be less than the ratio set forth below
opposite such period:
Minimum Fixed Charge
Period Coverage Ratio
------ ----------------------
August 1, 2005 through October 31, 2005 3.00:1.00
August 1, 2005 through January 31, 2006 3.00:1.00
August 1, 2005 through April 30, 2006 3.00:1.00
August 1, 2005 through July 31, 2006 3.00:1.00
Each period of four consecutive fiscal quarters
ending January 31, April 30, July 31 and
October 31 of each fiscal year thereafter 3.00:1.00
SECTION 8.6. TANGIBLE NET WORTH. The Tangible Net Worth of Del
Global and its Subsidiaries as of the last day of each month-end commencing July
31, 2005 shall not be less than $5,328,700 PLUS 50% of the cumulative net income
of Del Global and its Subsidiaries for the month then ended.
SECTION 8.7. CAPITAL EXPENDITURES. The aggregate amount of Del
Global's and its Subsidiaries' consolidated Capital Expenditures made or
committed to be made in any fiscal year commencing with the fiscal year ending
July 30, 2005, shall not exceed $400,000.
SECTION 8.8. BUSINESS PLAN. The Lender and the Borrowers acknowledge
that the foregoing financial covenants were established by the Lender and the
Borrowers on the basis of the Business Plan delivered to the Lender on the
Closing Date, after leaving a margin in favor of the Borrowers which the Lender
and the Borrowers have agreed is fair. Accordingly, the Lender and the Borrowers
have agreed that any failure by the Borrowers to comply with the terms of any
Financial Covenant shall be deemed material for purposes of this Agreement.
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ARTICLE IX.
EVENTS OF DEFAULT
SECTION 9.1. EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an "Event of Default":
(a) the Borrowers shall fail to pay any principal, interest, fees,
expenses or other Obligations when payable, whether at stated maturity, by
acceleration, or otherwise; or
(b) any Borrower shall (i) default in the performance or observance
of any agreement, covenant, condition, provision or term contained in Section
2.4, 2.5, 2.7, 7.1(a)(i), 7.1(f), 7.1(g)(ii), 7.1(h), 7.1(k), 7.1(r), 7.1(s),
7.1(t), 7.1(u), 7.2, 8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7 or 10.1 hereof, Section
4(c) of the Pledge Agreement, Section 2(b) of the Intellectual Property Security
Agreement or Section 2.6 of the Mortgage; or (ii) default in the performance or
observance of any agreement, covenant, condition, provision or term contained in
this Agreement or any other Loan Document (other than those referred to in
Sections 9.1(a) and (b)(i)) and such failure continues for a period of ten days
following the date on which such Borrower knew or should have known of such
default; or
(c) any Borrower shall dissolve, wind up or otherwise cease to
conduct its business; or
(d) any Borrower shall become the subject of an Insolvency Event; or
(e) (i) any Borrower shall fail to make any payment (whether of
principal, interest or otherwise and regardless of amount) in respect of any
Material Indebtedness when due (whether at scheduled maturity or by required
prepayment, acceleration, demand or otherwise), or (ii) any event or condition
occurs that results in any Material Indebtedness becoming due prior to its
scheduled maturity or that enables or permits the holder or holders (or a
trustee or agent on behalf of such holder or holders) to declare any Material
Indebtedness to be due, or to require the prepayment, repurchase, redemption or
defeasance thereof, prior to its scheduled maturity; or
(f) any representation or warranty made by any Borrower under or in
connection with any Loan Document or amendment or waiver thereof, or in any
Financial Statement, report, document or certificate delivered in connection
therewith, shall prove to have been incorrect in any material respect when made
or deemed made; or
(g) any judgment or order for the payment of money which, when taken
together with all other judgments and orders rendered against any of the
Borrowers taken together, exceeds $250,000 in the aggregate shall be rendered
against any of the Borrowers and shall not be stayed, vacated, bonded or
discharged within thirty days; or
(h) any penalty or fine for the payment of money which, when taken
together with all other penalties and fines issued against any of the Borrowers
taken together, exceeds $250,000 in the aggregate shall be rendered against any
of the Borrowers and shall not be stayed, vacated, bonded or discharged within
thirty days; or
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(i) (i) the chief executive officer or the chief financial officer
or principal accounting officer of any Borrower is terminated or resigns from
his or her office and is not replaced with a person reasonably acceptable to the
Lender, or (ii) the occurrence of any change in control or similar event with
respect to a Borrower as defined or described under any indenture or agreement
in respect of Indebtedness to which such Borrower is a party; or
(j) any material covenant, agreement or obligation of a Borrower
contained in or evidenced by any of the Loan Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms; a Borrower shall deny or disaffirm its obligations under any of the Loan
Documents or any Liens granted in connection therewith or shall otherwise
challenge any of its obligations under any of the Loan Documents; or any Liens
granted on any of the Collateral shall be determined to be void, voidable or
invalid, are subordinated or are not given the priority contemplated by this
Agreement or any other Loan Document; or
(k) a Security Document shall for any reason cease to create a valid
and perfected first priority Lien on the Collateral purported to be covered
thereby; or
(l) the independent public accountants for the Borrowers shall
deliver a Qualified opinion on any Financial Statement; or
(m) more than 15% of the Borrowers' vendors or suppliers (either in
number or volume of business) shall have ceased supplying goods or rendering
services to the Borrowers and the Borrowers shall not have obtained replacement
goods or services from other sources on terms at least as favorable to the
Borrowers; or
(n) the occurrence of any event or condition that, in the Lender's
judgment, could reasonably be expected to have a Material Adverse Effect.
SECTION 9.2. ACCELERATION, TERMINATION AND CASH COLLATERALIZATION.
Upon the occurrence and during the continuance of an Event of Default, the
Lender may take any or all of the following actions, without prejudice to the
rights of the Lender to enforce its claims against the Borrowers:
(a) ACCELERATION. To declare all Obligations immediately due and
payable (except with respect to any Event of Default with respect to a Borrower
specified in Section 9.1(d), in which case all Obligations shall automatically
become immediately due and payable) without presentment, demand, protest or any
other action or obligation of the Lender.
(b) TERMINATION OF COMMITMENT. To declare the Lender's obligation to
make Advances and to use its best efforts to cause the issuance of Letters of
Credit hereunder immediately terminated (except with respect to any Event of
Default with respect to a Borrower under Section 9.1(d), in which case such
obligation shall automatically terminate) and, at all times thereafter, any Loan
made by the Lender and the issuance of any Letter of Credit shall be in the
Lender's sole and absolute discretion. Notwithstanding any termination of this
Agreement, until all Obligations shall have been fully and indefeasibly paid and
satisfied, the Lender shall retain all security in all guaranties and in all
existing and future Receivables, Inventory and Equipment of the Borrowers and
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all other Collateral held by it hereunder and under the Security Documents, and
the Borrowers shall continue to turn over all Collections to the Lender.
(c) CASH COLLATERALIZATION. With respect to all Letters of Credit
outstanding at the time of the acceleration of the Obligations under Section
9.2(a) or otherwise at any time after the Expiration Date, the Borrowers shall
at such time deposit in a cash collateral account established by or on behalf of
the Lender an amount equal to 105% (or 110% in the case of Letters of Credit
denominated in any currency other than Dollars) of the aggregate then undrawn
and unexpired amount of such Letters of Credit. Amounts held in such cash
collateral account shall be under the sole dominion and control of the Lender
and applied by the Lender to the payment of drafts drawn under such Letters of
Credit, and the balance, if any, in such cash collateral account, after all such
Letters of Credit shall have expired or been fully drawn upon shall be applied
to repay the other Obligations. After all such Letters of Credit shall have
expired or been fully drawn upon and all Obligations shall have been satisfied,
the balance, if any, in such cash collateral account shall be returned to the
Borrowers or to such other Person as may be lawfully entitled thereto.
SECTION 9.3. OTHER REMEDIES.
(a) Upon the occurrence and during the continuance of an Event of
Default, the Lender shall have all rights and remedies with respect to the
Obligations and the Collateral under applicable law and the Loan Documents, and
the Lender may do any or all of the following:
(i) remove for copying all documents, instruments, files and
records (including the copying of any computer records) relating to
a Borrower's Receivables or use (at the expense of a Borrower) such
supplies or space of a Borrower at such Borrower's places of
business necessary to administer, enforce and collect such
Receivables including, without limitation, any supporting
obligations;
(ii) accelerate or extend the time of payment, compromise,
issue credits, or bring suit on a Borrower's Receivables (in the
name of such Borrower or the Lender) and otherwise administer and
collect such Receivables;
(iii) sell, assign and deliver a Borrower's Receivables with
or without advertisement, at public or private sale, for cash, on
credit or otherwise, subject to applicable law; and
(iv) foreclose the security interests created pursuant to the
Loan Documents by any available procedure, or take possession of any
or all of the Collateral, without judicial process and enter any
premises where any Collateral may be located for the purpose of
taking possession of or removing the same.
(b) The Lender may bid or become a purchaser at any sale, free from
any right of redemption, which right is expressly waived by each Borrower. If
notice of intended disposition of any Collateral is required by law, it is
agreed that ten days' notice shall constitute reasonable notification. Each
Borrower will assemble the Collateral in its possession and make it available at
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such locations as the Lender may specify, whether at the premises of such
Borrower or elsewhere, and will make available to the Lender the premises and
facilities of such Borrower for the purpose of the Lender's taking possession of
or removing the Collateral or putting the Collateral in saleable form. The
Lender may sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange, broker's board or at any of the
Lender's offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Lender may deem commercially reasonable. The Lender
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Lender may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Each Borrower hereby grants the Lender a license to enter and occupy
any of such Borrower's leased or owned premises and facilities, without charge,
to exercise any of the Lender's rights or remedies.
SECTION 9.4. LICENSE FOR USE OF SOFTWARE AND OTHER INTELLECTUAL
PROPERTY. Each Borrower hereby grants to the Lender a license or other right to
use, without charge, all computer software programs, data bases, processes,
trademarks, tradenames, copyrights, labels, trade secrets, service marks,
advertising materials and other rights, assets and materials used by such
Borrower in connection with its businesses or in connection with the Collateral.
SECTION 9.5. NO MARSHALLING; DEFICIENCIES; REMEDIES CUMULATIVE. The
Lender shall have no obligation to marshal any Collateral or to seek recourse
against or satisfaction of any of the Obligations from one source before seeking
recourse against or satisfaction from another source. The net cash proceeds
resulting from the Lender's exercise of any of the foregoing rights to liquidate
all or substantially all of the Collateral, including any and all Collections
(after deducting all of the Lender's expenses related thereto), shall be applied
by the Lender to such of the Obligations and in such order as the Lender shall
elect in its sole and absolute discretion, whether due or to become due. The
Borrowers shall remain liable to the Lender for any deficiencies, and the Lender
in turn agrees to remit to the applicable Borrower or its successor or assign
any surplus resulting therefrom. All of the Lender's remedies under the Loan
Documents shall be cumulative, may be exercised simultaneously against any
Collateral and any Borrower or in such order and with respect to such Collateral
or such Borrower as the Lender may deem desirable, and are not intended to be
exhaustive.
SECTION 9.6. WAIVERS. Except as may be otherwise specifically
provided herein or in any other Loan Document, each Borrower hereby waives any
right to a judicial or other hearing with respect to any action or prejudgment
remedy or proceeding by the Lender to take possession, exercise control over, or
dispose of any item of Collateral in any instance (regardless of where the same
may be located) where such action is permitted under the terms of this Agreement
or any other Loan Document or by applicable law or of the time, place or terms
of sale in connection with the exercise of the Lender's rights hereunder and
also waives any bonds, security or sureties required by any statute, rule or
other law as an incident to any taking of possession by the Lender of any
Collateral. Each Borrower also waives any damages (direct, consequential or
otherwise) occasioned by the enforcement of the Lender's rights under this
Agreement or any other Loan Document including the taking of possession of any
Collateral or the giving of notice to any account debtor or the collection of
any Receivable of such Borrower. Each Borrower also consents that the Lender may
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enter upon any premises owned by or leased to it without obligations to pay rent
or for use and occupancy, through self-help, without judicial process and
without having first obtained an order of any court. These waivers and all other
waivers provided for in this Agreement and the other Loan Documents have been
negotiated by the parties, and each Borrower acknowledges that it has been
represented by counsel of its own choice, has consulted such counsel with
respect to its rights hereunder and has freely and voluntarily entered into this
Agreement and the other Loan Documents as the result of arm's-length
negotiations.
SECTION 9.7. FURTHER RIGHTS OF THE LENDER.
(a) FURTHER ASSURANCES. Each Borrower shall do all things and shall
execute and deliver all documents and instruments reasonably requested by the
Lender to protect or perfect any Lien (and the priority thereof) of the Lender
on the Collateral. The Lender is authorized to describe the Collateral covered
by any financing statement filed by it under the Code as "all assets" or "all
personal property" of the applicable Borrower or by using a similar supergeneric
description.
(b) INSURANCE; ETC. If a Borrower shall fail to purchase or maintain
insurance (where applicable), or to pay any tax, assessment, governmental charge
or levy, except as the same may be otherwise permitted hereunder or which is
being contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP, or if any Lien
prohibited hereby shall not be paid in full or a Borrower shall fail to perform
or comply with any other covenant, promise or obligation to the Lender hereunder
or under any other Loan Document, the Lender may (but shall not be required to)
perform, pay, satisfy, discharge or bond the same for the account of such
Borrower, and all amounts so paid by the Lender shall be treated as a Base Rate
Advance hereunder and shall constitute part of the Obligations.
SECTION 9.8. INTEREST AND LETTER OF CREDIT FEES AFTER EVENT OF
DEFAULT. Each Borrower agrees and acknowledges that the additional interest and
fees that may be charged under Section 4.2: (a) are an inducement to the Lender
to make Advances and to use its best efforts to cause Letters of Credit to be
issued hereunder and that the Lender would not consummate the transactions
contemplated by this Agreement without the inclusion of such provisions, (b) are
fair and reasonable estimates of the Lender's costs of administering the credit
facility upon an Event of Default and (c) are intended to estimate the Lender's
increased risks upon an Event of Default.
ARTICLE X.
ASSIGNMENTS AND PARTICIPATIONS
SECTION 10.1. ASSIGNMENTS. No Borrower shall assign this Agreement
or any right or obligation hereunder without the prior written consent of the
Lender. The Lender may assign (without the consent of any Borrower) to one or
more Persons all or a portion of its rights and obligations under this
Agreement, the Notes and the other Loan Documents.
SECTION 10.2. PARTICIPATIONS. The Lender may sell participations in
or to all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of the Loans and the Notes);
PROVIDED, HOWEVER, that in such event the Lender's obligations under this
Agreement shall remain unchanged.
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SECTION 10.3. DISCLOSURE. The Lender may, in connection with any
permitted assignment or participation or proposed assignment or participation
pursuant to this Article X, disclose to the assignee or participant or proposed
assignee or participant any information relating to the Borrowers or their
Subsidiaries.
ARTICLE XI.
GENERAL PROVISIONS
SECTION 11.1. NOTICES. Except as otherwise provided herein, all
notices and other communications hereunder shall be in writing and sent by
certified or registered mail, return receipt requested, by overnight delivery
service, with all charges prepaid, by hand delivery, or by telecopier followed
by a hard copy sent by regular mail,
if to the Lender, then to:
North Fork Business Capital Corporation
000 Xxxxxxxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attn.: Regional Manager
with a copy to:
North Fork Business Capital Corporation
000 Xxxxxxxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attn.: General Counsel
and if to a Borrower, then c/o the Administrative Borrower, to:
Del Global Technologies Corp.
Xxx Xxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attn: Mr. Xxxx Xxxx
with a copy to:
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
Park Avenue Tower 00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: 212-451-2222
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
or, in each case, to such other address as the Administrative Borrower or the
Lender may specify to the other party in the manner required hereunder. All such
notices and correspondence shall be deemed given (i) if sent by certified or
registered mail, three Business Days after being postmarked, (ii) if sent by
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overnight delivery service or by hand delivery, when received at the above
stated addresses or when delivery is refused and (iii) if sent by telecopier
transmission, when such transmission is confirmed.
SECTION 11.2. DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or
omission of the Lender to exercise any right or remedy hereunder shall impair
any such right or operate as a waiver thereof. No single or partial exercise by
the Lender of any right or remedy shall preclude any other or further exercise
thereof, or preclude any other right or remedy.
SECTION 11.3. RIGHT OF SETOFF. In addition to and not in limitation
of all rights of offset that the Lender may have under applicable law, and
whether or not the Lender has made any demand or the Obligations of the
Borrowers have matured, the Lender shall have the right to set off and apply any
and all deposits (general or special, time or demand, provisional or final, or
any other type) at any time held and any other Indebtedness at any time owing by
the Lender or any of its Affiliates to or for the credit or the account of any
Borrower or any Borrower's Affiliate against any and all of the Obligations. In
the event that the Lender exercises any of its rights under this Section 11.3,
the Lender shall provide notice to the Administrative Borrower of such exercise,
PROVIDED that the failure to give such notice shall not affect the validity of
the exercise of such rights.
SECTION 11.4. INDEMNIFICATION; REIMBURSEMENT OF EXPENSES OF
COLLECTION.
(a) Each Borrower hereby agrees that, whether or not any of the
transactions contemplated by this Agreement or the other Loan Documents are
consummated, such Borrower will indemnify, defend and hold harmless (on an
after-tax basis) the Lender and its successors and assigns and their respective
directors, officers, agents, employees, advisors, shareholders, attorneys and
Affiliates (each, an "Indemnified Party") from and against any and all losses,
claims, damages, liabilities, deficiencies, obligations, fines, penalties,
actions (whether threatened or existing), judgments, suits (whether threatened
or existing) or expenses (including, without limitation, reasonable fees and
disbursements of counsel, experts, consultants and other professionals) incurred
by any of them (collectively, "Claims") (except, in the case of each Indemnified
Party, to the extent that any Claim is determined in a final and non-appealable
judgment by a court of competent jurisdiction to have directly resulted from
such Indemnified Party's gross negligence or willful misconduct) arising out of
or by reason of (i) any litigation, investigation, claim or proceeding related
to (A) this Agreement, any other Loan Document or the transactions contemplated
hereby or thereby, (B) any actual or proposed use by a Borrower of the proceeds
of the Loans, (C) the issuance of any Letter of Credit or the acceptance or
payment of any document or draft presented to any issuer thereof or any change
in the value of a foreign currency covered by any Letter of Credit or (D) the
Lender's entering into this Agreement, the other Loan Documents or any other
agreements and documents relating hereto (other than consequential damages and
loss of anticipated profits or earnings), including, without limitation, amounts
paid in settlement, court costs and the fees and disbursements of counsel
incurred in connection with any such litigation, investigation, claim or
proceeding, (ii) any remedial or other action taken or required to be taken by a
Borrower in connection with compliance by such Borrower, or any of its
properties, with any federal, state or local Environmental Laws and (iii) any
pending, threatened or actual action, claim, proceeding or suit by any
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shareholder or director of a Borrower or any actual or purported violation of a
Borrower's Governing Documents or any other agreement or instrument to which a
Borrower is a party or by which any of its properties is bound. In addition, the
Borrowers shall, upon demand, pay to the Lender all costs and expenses incurred
by the Lender (including the fees and disbursements of counsel and other
professionals) in connection with the preparation, execution, delivery,
administration, modification and amendment of the Loan Documents, and pay to the
Lender all costs and expenses (including the fees and disbursements of counsel
and other professionals) paid or incurred by the Lender in (A) enforcing or
defending its rights under or in respect of this Agreement, the other Loan
Documents or any other document or instrument now or hereafter executed and
delivered in connection herewith, (B) collecting the Obligations or otherwise
administering this Agreement and (C) foreclosing or otherwise realizing upon the
Collateral or any part thereof. If and to the extent that the obligations of the
Borrowers hereunder are unenforceable for any reason, the Borrowers hereby agree
to make the maximum contribution to the payment and satisfaction of such
obligations that is permissible under applicable law.
(b) The Borrowers' obligations under Sections 4.8 and 4.9 and this
Section 11.4 shall survive any termination of this Agreement and the other Loan
Documents, the termination, expiration or Collateralization of all Letters of
Credit and the payment in full of the Obligations, and are in addition to, and
not in substitution of, any of the other Obligations.
SECTION 11.5. AMENDMENTS AND WAIVERS. Any provision of this
Agreement or any other Loan Document may be amended or waived if, but only if,
such amendment or waiver is in writing and signed by the Lender and the
Borrowers party thereto, and then any such amendment or waiver shall be
effective only to the extent set forth therein.
SECTION 11.6. COUNTERPARTS; TELECOPIED SIGNATURES. This Agreement
and any waiver or amendment hereto may be executed in counterparts and by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together constitute one
and the same instrument. This Agreement and each of the other Loan Documents may
be executed and delivered by telecopier or other facsimile transmission all with
the same force and effect as if the same was a fully executed and delivered
original manual counterpart.
SECTION 11.7. SEVERABILITY. In case any provision in or obligation
under this Agreement, any Note or any other Loan Document shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
SECTION 11.8. MAXIMUM RATE. Notwithstanding anything to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the parties
hereto hereby agree that all agreements between them under this Agreement and
the other Loan Documents, whether now existing or hereafter arising and whether
written or oral, are expressly limited so that in no contingency or event
whatsoever shall the amount paid, or agreed to be paid, to the Lender for the
use, forbearance, or detention of the money loaned to the Borrowers and
evidenced hereby or thereby or for the performance or payment of any covenant or
obligation contained herein or therein, exceed the maximum non-usurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the Obligations, under the laws of the
State of New York (or the laws of any other jurisdiction whose laws may be
mandatorily applicable notwithstanding other provisions of this Agreement and
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the other Loan Documents), or under applicable federal laws which may presently
or hereafter be in effect and which allow a higher maximum non-usurious interest
rate than under the laws of the State of New York (or such other jurisdiction),
in any case after taking into account, to the extent permitted by applicable
law, any and all relevant payments or charges under this Agreement and the other
Loan Documents executed in connection herewith, and any available exemptions,
exceptions and exclusions (the "Highest Lawful Rate"). If due to any
circumstance whatsoever, fulfillment of any provision of this Agreement or any
of the other Loan Documents at the time performance of such provision shall be
due shall exceed the Highest Lawful Rate, then, automatically, the obligation to
be fulfilled shall be modified or reduced to the extent necessary to limit such
interest to the Highest Lawful Rate, and if from any such circumstance the
Lender should ever receive anything of value deemed interest by applicable law
which would exceed the Highest Lawful Rate, such excessive interest shall be
applied to the reduction of the principal amount then outstanding hereunder or
on account of any other then outstanding Obligations and not to the payment of
interest, or if such excessive interest exceeds the principal unpaid balance
then outstanding hereunder and such other then outstanding Obligations, such
excess shall be refunded to the Borrowers. All sums paid or agreed to be paid to
the Lender for the use, forbearance, or detention of the Obligations and other
Indebtedness of the Borrowers to the Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of such Indebtedness, until payment in full thereof, so that the actual
rate of interest on account of all such Indebtedness does not exceed the Highest
Lawful Rate throughout the entire term of such Indebtedness. The terms and
provisions of this Section shall control every other provision of this
Agreement, the other Loan Documents and all other agreements among the parties
hereto.
SECTION 11.9. ADMINISTRATIVE BORROWER; NATURE OF BORROWERS'
LIABILITIES.
(a) Each Borrower hereby appoints the Administrative Borrower
irrevocably for the term of this Agreement, to act as its agent,
attorney-in-fact and legal representative in all matters pertaining to the
administration of this Agreement and the other Loan Documents including, without
limitation, to execute and deliver to the Lender any notices, certificates and
the other documents permitted or required to be executed and delivered, and to
take any and all other actions as are permitted or required to be taken, under
or in connection with the Loan Documents. Any such action taken by the
Administrative Borrower shall bind each of the Borrowers.
(b) The Borrowers' liabilities in respect of the Obligations shall
at all times be joint and several.
SECTION 11.10. ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This
Agreement and the other Loan Documents constitute the entire agreement among the
parties, supersede any prior written and verbal agreements among them, and shall
bind and benefit the parties and their respective successors and permitted
assigns.
SECTION 11.11. LIMITATION OF LIABILITY. THE LENDER SHALL HAVE NO
LIABILITY TO ANY BORROWER (WHETHER SOUNDING IN CONTRACT, TORT OR EQUITY OR
OTHERWISE) FOR LOSSES SUFFERED BY ANY 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 THEREWITH,
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UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER
BINDING ON THE LENDER THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS
CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER. EACH BORROWER
HEREBY WAIVES ALL FUTURE CLAIMS AGAINST THE LENDER FOR SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES.
SECTION 11.12. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY DISPUTE
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, WHETHER SOUNDING IN CONTRACT, TORT OR EQUITY OR OTHERWISE, SHALL BE
GOVERNED BY THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW).
SECTION 11.13. SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN A
BORROWER AND THE LENDER, WHETHER SOUNDING IN CONTRACT, TORT OR EQUITY OR
OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN NEW
YORK, NEW YORK AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN;
PROVIDED, HOWEVER, THAT THE LENDER SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, TO PROCEED AGAINST EACH BORROWER OR ITS PROPERTY IN (A) ANY
COURTS OF COMPETENT JURISDICTION AND VENUE AND (B) ANY LOCATION SELECTED BY THE
LENDER TO ENABLE THE LENDER TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE LENDER. EACH BORROWER AGREES THAT
IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY
PROCEEDING BROUGHT BY THE LENDER. EACH BORROWER WAIVES ANY OBJECTION THAT IT MAY
HAVE TO THE LOCATION OF THE COURT IN WHICH THE LENDER HAS COMMENCED A
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON FORUM NON CONVENIENS.
SECTION 11.14. SERVICE OF PROCESS. THE BORROWERS HEREBY IRREVOCABLY
DESIGNATE NATIONAL CORPORATE RESEARCH, LTD., WITH AN OFFICE ON THE DATE HEREOF
AT 000 XXXX 00XX XXXXXX, XXXXX 000, XXX XXXX, XXX XXXX 00000, AS THE DESIGNEE
AND AGENT OF THE BORROWERS TO RECEIVE, FOR AND ON BEHALF OF EACH BORROWER,
SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH
PROCESS SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY FORWARDED BY MAIL
TO EACH BORROWER, BUT THE FAILURE OF A BORROWER TO RECEIVE SUCH COPY SHALL NOT
AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
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SECTION 11.15. JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES
TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO (I)
THIS AGREEMENT; (II) ANY OTHER LOAN DOCUMENT OR OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN A BORROWER AND THE LENDER; OR (III) ANY CONDUCT,
ACTS OR OMISSIONS OF A BORROWER OR THE LENDER OR ANY OF ITS RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR OTHER AFFILIATES, IN EACH
CASE WHETHER SOUNDING IN CONTRACT, TORT OR EQUITY OR OTHERWISE.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their proper and duly authorized officers as of the date first
set forth above.
DEL GLOBAL TECHNOLOGIES CORP.
By: /s/ Xxxx Xxxx
--------------------------------------
Xxxx Xxxx
Treasurer
DEL MEDICAL IMAGING CORP.
By: /s/ Xxxx Xxxx
--------------------------------------
Xxxx Xxxx
Treasurer
RFI CORPORATION
By: /s/ Xxxx Xxxx
--------------------------------------
Xxxx Xxxx
Treasurer
NORTH FORK BUSINESS CAPITAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------
Xxxxxxx X. Xxxxx
Senior Vice President
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EXECUTION COPY
================================================================================
LOAN AND SECURITY AGREEMENT
among
DEL GLOBAL TECHNOLOGIES CORP.,
RFI CORPORATION and
DEL MEDICAL IMAGING CORP.,
as Borrowers,
and
NORTH FORK BUSINESS CAPITAL CORPORATION,
as Lender
Dated as of August 1, 2005
================================================================================
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS.........................................................1
SECTION 1.1. GENERAL DEFINITIONS...........................................1
SECTION 1.2. ACCOUNTING TERMS AND DETERMINATIONS..........................17
SECTION 1.3. OTHER TERMS; HEADINGS........................................17
ARTICLE II. THE CREDIT FACILITIES.............................................18
SECTION 2.1. THE REVOLVING CREDIT LOANS...................................18
SECTION 2.2. THE TERM LOAN................................................19
SECTION 2.3. PROCEDURE FOR BORROWING; NOTICES OF BORROWING;
NOTICES OF CONTINUATION; NOTICES OF CONVERSION...............19
SECTION 2.4. APPLICATION OF PROCEEDS......................................22
SECTION 2.5. MAXIMUM AMOUNT OF THE REVOLVING FACILITY; MANDATORY
PREPAYMENTS; OPTIONAL PREPAYMENTS............................22
SECTION 2.6. MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF ACCOUNT...........23
SECTION 2.7. COLLECTION OF RECEIVABLES....................................23
SECTION 2.8. TERM.........................................................24
SECTION 2.9. PAYMENT PROCEDURES...........................................24
SECTION 2.10. LETTERS OF CREDIT............................................24
SECTION 2.11. PUBLICITY....................................................25
ARTICLE III. SECURITY.........................................................25
SECTION 3.1. GENERAL......................................................25
SECTION 3.2. FURTHER SECURITY.............................................25
SECTION 3.3. RECOURSE TO SECURITY.........................................25
SECTION 3.4. SPECIAL PROVISIONS RELATING TO INVENTORY.....................26
SECTION 3.5. SPECIAL PROVISIONS RELATING TO RECEIVABLES...................27
SECTION 3.6. SPECIAL PROVISIONS RELATING TO EQUIPMENT.....................28
SECTION 3.7. CONTINUATION OF LIENS, ETC...................................28
SECTION 3.8. POWER OF ATTORNEY............................................29
ARTICLE IV. INTEREST, FEES AND EXPENSES.......................................29
SECTION 4.1. INTEREST.....................................................29
SECTION 4.2. INTEREST AND LETTER OF CREDIT FEES AFTER EVENT OF DEFAULT....30
SECTION 4.3. CLOSING FEE..................................................30
SECTION 4.4. UNUSED LINE FEE; MINIMUM LOAN FEE; LETTER OF CREDIT FEES.....30
SECTION 4.5. COLLATERAL MANAGEMENT FEE....................................30
SECTION 4.6. EARLY TERMINATION FEE........................................30
SECTION 4.7. CALCULATIONS.................................................31
SECTION 4.8. INDEMNIFICATION IN CERTAIN EVENTS............................31
SECTION 4.9. TAXES........................................................31
ARTICLE V. CONDITIONS OF LENDING..............................................32
SECTION 5.1. CONDITIONS TO INITIAL LOAN OR LETTER OF CREDIT...............32
SECTION 5.2. CONDITIONS PRECEDENT TO EACH LOAN AND EACH LETTER OF CREDIT..37
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ARTICLE VI. REPRESENTATIONS AND WARRANTIES....................................37
SECTION 6.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS;
RELIANCE BY LENDER...........................................37
ARTICLE VII. COVENANTS OF THE BORROWERS.......................................44
SECTION 7.1. AFFIRMATIVE COVENANTS........................................44
SECTION 7.2. NEGATIVE COVENANTS...........................................52
ARTICLE VIII. FINANCIAL COVENANTS.............................................57
SECTION 8.1. ADJUSTED U.S. EARNINGS........................................57
SECTION 8.2. ADJUSTED EARNINGS.............................................58
SECTION 8.3. SENIOR U.S. DEBT RATIO........................................59
SECTION 8.4. SENIOR DEBT RATIO.............................................60
SECTION 8.5. FIXED CHARGE COVERAGE RATIO...................................60
SECTION 8.6. TANGIBLE NET WORTH............................................61
SECTION 8.7. CAPITAL EXPENDITURES..........................................61
SECTION 8.8. BUSINESS PLAN.................................................61
ARTICLE IX. EVENTS OF DEFAULT.................................................62
SECTION 9.1. EVENTS OF DEFAULT.............................................62
SECTION 9.2. ACCELERATION, TERMINATION AND CASH COLLATERALIZATION..........63
SECTION 9.3. OTHER REMEDIES................................................64
SECTION 9.4. LICENSE FOR USE OF SOFTWARE AND OTHER INTELLECTUAL PROPERTY...65
SECTION 9.5. NO MARSHALLING; DEFICIENCIES; REMEDIES CUMULATIVE.............65
SECTION 9.6. WAIVERS.......................................................65
SECTION 9.7. FURTHER RIGHTS OF THE LENDER..................................66
SECTION 9.8. INTEREST AND LETTER OF CREDIT FEES AFTER EVENT OF DEFAULT.....66
ARTICLE X. ASSIGNMENTS AND PARTICIPATIONS.....................................66
SECTION 10.1. ASSIGNMENTS...................................................66
SECTION 10.2. PARTICIPATIONS................................................66
SECTION 10.3. DISCLOSURE....................................................67
ARTICLE XI. GENERAL PROVISIONS................................................67
SECTION 11.1. NOTICES.......................................................67
SECTION 11.2. DELAYS; PARTIAL EXERCISE OF REMEDIES..........................68
SECTION 11.3. RIGHT OF SETOFF...............................................68
SECTION 11.4. INDEMNIFICATION; REIMBURSEMENT OF EXPENSES OF COLLECTION......68
SECTION 11.5. AMENDMENTS AND WAIVERS........................................69
SECTION 11.6. COUNTERPARTS; TELECOPIED SIGNATURES...........................69
SECTION 11.7. SEVERABILITY..................................................69
SECTION 11.8. MAXIMUM RATE..................................................69
SECTION 11.9. ADMINISTRATIVE BORROWER; NATURE OF BORROWERS' LIABILITIES.....70
SECTION 11.10. ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS......................70
SECTION 11.11. LIMITATION OF LIABILITY.......................................70
SECTION 11.12. GOVERNING LAW.................................................71
SECTION 11.13. SUBMISSION TO JURISDICTION....................................71
SECTION 11.14. SERVICE OF PROCESS............................................71
SECTION 11.15. JURY TRIAL....................................................72
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EXHIBITS
Exhibit A - Revolving Credit Note
Exhibit B - Term Note
Exhibit C - Pledge Agreement
Exhibit D - Contribution Agreement
Exhibit E - Intellectual Property Security Agreement
Exhibit F - Compliance Certificate
Exhibit G - Notice of Borrowing
Exhibit H - Notice of Continuation
Exhibit I - Notice of Conversion
Exhibit J - Lockbox Agreement
Exhibit K - Borrowing Base Certificate
Exhibit L - Solvency Certificate
Exhibit M - Perfection Certificate
Exhibit N - Mortgage
Exhibit O - Collateral Access Agreement
Exhibit P - Warrant
SCHEDULES
Schedule 6.1(a) Foreign Jurisdictions
Schedule 6.1(b) Locations of Collateral and Real Property
Schedule 6.1(f) Consents and Authorizations
Schedule 6.1(g) Ownership; Subsidiaries
Schedule 6.1(i) Contingent Obligations
Schedule 6.1(k) Joint Ventures and Partnerships
Schedule 6.1(q) Taxes and Tax Returns
Schedule 6.1(r) Judgments; Litigation
Schedule 6.1(x) ERISA Plans
Schedule 6.1(y) Intellectual Property
Schedule 6.1(z) Labor Contracts
Schedule 6.1(dd) Material Contracts
Schedule 6.1(gg) Affiliate Transactions
Schedule 7.1(q) Billing Practices
Schedule 7.2(o) Executive Compensation
Schedule 7.2(t) Bank Accounts
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