LOAN AND SECURITY AGREEMENT
by and between
SUMMIT COMMERCIAL/GIBRALTAR CORP.,
as Lender
and
MIDLAND USA, INC.,
as Borrower
Dated: December 24, 1997
TABLE OF CONTENTS
PAGE
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SECTION 1. DEFINITIONS AND RULES OF INTERPRETATION AND
CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. LOANS AND ADVANCES . . . . . . . . . . . . . . . . . . . . . . . 16
2.1 Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.2 Accounts Advances. . . . . . . . . . . . . . . . . . . . . . . . 16
2.3 Inventory Advances . . . . . . . . . . . . . . . . . . . . . . . 16
2.4 L/C Accommodations . . . . . . . . . . . . . . . . . . . . . . . 17
2.5 Term Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.6 Maximum Credit . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.7 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.8 Overline and Overformula Rights. . . . . . . . . . . . . . . . . 19
2.9 The Loan Accounts. . . . . . . . . . . . . . . . . . . . . . . . 19
2.10 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3. INTEREST, FEES AND CHARGES . . . . . . . . . . . . . . . . . . . 20
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.2 Facility Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.3 L/C Accommodation Charges. . . . . . . . . . . . . . . . . . . . 20
3.4 Account Servicing Fee. . . . . . . . . . . . . . . . . . . . . . 21
3.5 Minimum Borrowing Fee. . . . . . . . . . . . . . . . . . . . . . 21
3.6 Unused Line Fee. . . . . . . . . . . . . . . . . . . . . . . . . 21
3.7 Early Termination Fee. . . . . . . . . . . . . . . . . . . . . . 21
3.8 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . 22
3.9 Right to Charge Account. . . . . . . . . . . . . . . . . . . . . 23
SECTION 4. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.2 Early Termination. . . . . . . . . . . . . . . . . . . . . . . . 23
4.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5. COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1 Security Interests in Borrower's Assets. . . . . . . . . . . . . 23
5.2 Financing Statements and Mortgages; Further Assurances . . . . . 25
SECTION 6. CONDITIONS TO INITIAL EXTENSION OF CREDIT. . . . . . . . . . . . 25
6.1 Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2 Representations and Warranties . . . . . . . . . . . . . . . . . 25
(i)
6.3 Certified Copies of Corporate Documents. . . . . . . . . . . . . 25
6.4 Proof of Corporate Action. . . . . . . . . . . . . . . . . . . . 25
6.5 Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.6 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.7 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.8 Minimum Closing Availability . . . . . . . . . . . . . . . . . . 26
SECTION 7. CONDITIONS TO MAKING EACH LOAN . . . . . . . . . . . . . . . . . 26
7.1 Applications and Compliance. . . . . . . . . . . . . . . . . . . 26
7.2 Representations and Warranties . . . . . . . . . . . . . . . . . 27
7.3 Performance, etc . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 8. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 27
8.1 Corporate Existence: Good Standing . . . . . . . . . . . . . . . 27
8.2 Corporate Authority, etc . . . . . . . . . . . . . . . . . . . . 28
8.3 Binding Effect of Documents, etc . . . . . . . . . . . . . . . . 28
8.4 No Events of Default . . . . . . . . . . . . . . . . . . . . . . 28
8.5 No Governmental Consent Necessary. . . . . . . . . . . . . . . . 28
8.6 No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.7 No Violations of Laws. . . . . . . . . . . . . . . . . . . . . . 29
8.8 Use of Proceeds of the Loan. . . . . . . . . . . . . . . . . . . 29
8.9 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 29
8.10 Changes in Financial Condition . . . . . . . . . . . . . . . . . 30
8.11 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.12 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.13 Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.14 Taxes and Assessments. . . . . . . . . . . . . . . . . . . . . . 30
8.15 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.16 O.S.H.A. and Environmental Matters . . . . . . . . . . . . . . . 31
8.17 Location of Collateral . . . . . . . . . . . . . . . . . . . . . 31
8.18 Other Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.19 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . 32
8.20 Representations and Warranties: True, Accurate and Complete. . . 32
8.21 Location of Offices. . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 9. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . 32
9.1 Notify Lender. . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.2 Pay Taxes and Liabilities; Comply with Agreement . . . . . . . . 32
9.3 Observe Covenants, etc . . . . . . . . . . . . . . . . . . . . . 33
9.4 Maintain Corporate Existence and Qualifications. . . . . . . . . 33
9.5 Information and Documents to be Furnished to Lender. . . . . . . 33
(ii)
9.6 Access to Records and Property . . . . . . . . . . . . . . . . . 35
9.7 Comply with Laws . . . . . . . . . . . . . . . . . . . . . . . . 35
9.8 Insurance Required . . . . . . . . . . . . . . . . . . . . . . . 36
9.9 Condition of Collateral; No Liens. . . . . . . . . . . . . . . . 36
9.10 Payment of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 36
9.11 Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.12 Delivery of Documents. . . . . . . . . . . . . . . . . . . . . . 36
9.13 United States Contracts. . . . . . . . . . . . . . . . . . . . . 37
9.14 Name Changes; Location Changes . . . . . . . . . . . . . . . . . 37
9.15 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 37
9.16 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 37
9.17 Operating Accounts . . . . . . . . . . . . . . . . . . . . . . . 38
9.18 Tradestyles. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 10. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 39
10.1 No Consolidation, Merger, Acquisition. . . . . . . . . . . . . . 39
10.2 Disposition of Assets or Collateral. . . . . . . . . . . . . . . 39
10.3 Other Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.4 Other Liabilities. . . . . . . . . . . . . . . . . . . . . . . . 39
10.5 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.6 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.7 Remove Property. . . . . . . . . . . . . . . . . . . . . . . . . 40
10.8 Transfers of Notes or Accounts . . . . . . . . . . . . . . . . . 40
10.9 Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.10 Sale or Pledge of Shares . . . . . . . . . . . . . . . . . . . . 40
10.11 Modification of Documents. . . . . . . . . . . . . . . . . . . . 40
10.12 Change Business. . . . . . . . . . . . . . . . . . . . . . . . . 40
10.13 Settlements. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.14 Ratio of Debt to Tangible Net Worth. . . . . . . . . . . . . . . 40
10.15 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . 40
10.16 PAYMENTS TO PARENT AND AFFILIATES. . . . . . . . . . . . . . . . 41
SECTION 11. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 42
11.1 Failure to Pay . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.2 Failure of Insurance . . . . . . . . . . . . . . . . . . . . . . 42
11.3 Failure to Perform . . . . . . . . . . . . . . . . . . . . . . . 42
11.4 Cross Default. . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.5 False Representation or Warranty . . . . . . . . . . . . . . . . 42
11.6 Liquidation, Voluntary Bankruptcy, Dissolution, Assignment to
Creditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.7 Involuntary Petition Against Borrower or any of the Guarantors . 43
(iii)
11.8 Guarantor's Disclaimer of Liability . . . . . . . . . . . . . 43
11.9 Judgments; Levies . . . . . . . . . . . . . . . . . . . . . . 43
11.10 Change in Condition. . . . . . . . . . . . . . . . . . . . . . 43
11.11 Environmental Claims . . . . . . . . . . . . . . . . . . . . . 43
11.12 Failure to Notify. . . . . . . . . . . . . . . . . . . . . . . 43
11.13 Failure to Deliver Documentation . . . . . . . . . . . . . . . 43
11.14 Change in Ownership. . . . . . . . . . . . . . . . . . . . . . 44
11.15 Non-Payment of Debts . . . . . . . . . . . . . . . . . . . . . 44
11.16 Dissolution; Maintenance of Existence. . . . . . . . . . . . . 44
11.17 Indictment . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.18 Tax Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 12. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.1 Acceleration; Other Remedies. . . . . . . . . . . . . . . . . 44
12.2 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.3 Cumulative Remedies; Waivers. . . . . . . . . . . . . . . . . 46
12.4 Other Property. . . . . . . . . . . . . . . . . . . . . . . . 47
12.5 Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . 47
12.6 No Marshalling. . . . . . . . . . . . . . . . . . . . . . . . 47
12.7 No Implied Waivers; Rights Cumulative . . . . . . . . . . . . 47
12.8 Recision of Rights of Borrower. . . . . . . . . . . . . . . . 48
SECTION 13. OTHER RIGHTS OF LENDER. . . . . . . . . . . . . . . . . . . . 48
13.1 Collections . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.2 Repayment of Obligations. . . . . . . . . . . . . . . . . . . 49
13.3 Notification of Account Debtors and Bailees of Inventory. . . 49
13.4 Lender Appointed Attorney-in-Fact . . . . . . . . . . . . . . 50
13.5 Release of Lender . . . . . . . . . . . . . . . . . . . . . . 50
13.6 Uniform Commercial Code . . . . . . . . . . . . . . . . . . . 51
13.7 Preservation of Collateral. . . . . . . . . . . . . . . . . . 51
13.8 Lender's Right to Cure. . . . . . . . . . . . . . . . . . . . 51
13.9 Test Verifications. . . . . . . . . . . . . . . . . . . . . . 51
13.10 Inspection of Collateral. . . . . . . . . . . . . . . . . . . 52
SECTION 14. PROVISIONS OF GENERAL APPLICATION . . . . . . . . . . . . . . 52
14.1 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
14.2 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
14.3 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
14.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
14.5 Amendments; Waiver of Defaults. . . . . . . . . . . . . . . . 53
14.6 Binding on Successors . . . . . . . . . . . . . . . . . . . . 54
(iv)
14.7 Invalidity. . . . . . . . . . . . . . . . . . . . . . . . . . 54
14.8 Section or Paragraph Headings . . . . . . . . . . . . . . . . 54
14.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 54
14.10 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . 54
14.11 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . 54
14.12 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 55
14.13 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 55
(v)
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT dated this 24th day of December, 1997 by
and between MIDLAND USA, INC., a Delaware Corporation, with its principal place
of business located at 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxxxx 00000
(as further defined below, the "BORROWER") and SUMMIT COMMERCIAL/GIBRALTAR
CORP., having a place of business at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(as further defined below, the "LENDER").
R E C I T A L S:
WHEREAS, Borrower desires to enter into certain financing arrangements with
Lender pursuant to which Lender may make loans and provide other financial
accommodations to Borrower; and
WHEREAS, all loans, advances and other financial accommodations provided by
Lender to Borrower will benefit and are necessary and essential to Borrower in
the conduct of its business; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations provided that Borrower (a) undertakes and assumes the liability
for all loans, advances, extensions of credit and other financial accommodations
to be provided by Lender, whether provided for hereunder or otherwise, including
all principal, interest, fees and charges in connection therewith,(b) grants
security interests and liens to Lender for such undertakings as provided herein
and (c) agrees to the terms and conditions hereinafter set forth; and
WHEREAS, Borrower is willing to agree as aforesaid and to execute and
deliver all documents, agreements or instruments necessary or reasonable in
connection therewith as set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements herein contained and other good and valuable consideration, Lender
and Borrower mutually covenant, warrant and agree as follows:
SECTION 1. DEFINITIONS AND RULES OF INTERPRETATION AND
CONSTRUCTION.
SPECIFIC TERMS DEFINED. The following terms (including both the singular
and plurals thereof) shall have the following meanings unless the context
indicates otherwise:
1.1 "ACCOUNT DEBTOR" or "ACCOUNT DEBTOR" shall have the meaning ascribed
to such term in the UCC and shall also include a Person obligated for payment of
an Account.
1.2 "ACCOUNTS" shall mean all "accounts" as defined in the UCC, and, in
addition, any and all obligations of any kind at any time due and/or owing to
Borrower, whether now existing or hereafter arising, and all rights of Borrower
to receive payment or any other consideration (whether classified under the UCC
of the State of New York or any other State as accounts, accounts receivable,
contract rights, chattel paper, general intangibles or otherwise) including,
without limitation, invoices, contract rights, accounts receivable, general
intangibles, choses-in-action, notes, drafts, acceptances, instruments and all
other debts, obligations and liabilities in whatever form owing to Borrower from
any person, firm, governmental authority, corporation or any other entity, all
security therefor, and all Borrower's rights to goods sold (whether delivered,
undelivered, in transit or returned), which may be represented thereby, or with
respect thereto, including, but not limited to, all rights as an unpaid vendor
(including stoppage in transit, replevin or reclamation), all additional amounts
due from any Account Debtor irrespective of whether such additional amounts have
been specifically assigned to Lender, together with all Proceeds and products of
any and all of the foregoing.
1.3 "ACCOUNTS ADVANCES" shall have the meaning set forth in Section 2.2.
1.4 "ACCOUNTS AVAILABILITY" shall have the meaning set forth in
Section 2.2.
1.5 "AFFILIATE" shall mean, in relation to any corporation, any Person
that (directly or indirectly) controls or is controlled by or is under common
control with such corporation. For the purposes of this definition, the term
"control", as used with respect to any person, shall mean the possession
(directly or indirectly) of the power to direct or to cause the direction of the
management or the policies of such person, whether through the ownership of any
class of stock or equity of such person or by contract or otherwise.
1.6 "AGREEMENT" shall mean this Loan and Security Agreement (including all
Schedules and Exhibits annexed hereto) as originally executed or, if amended,
modified, supplemented, renewed or extended from time to time, as so amended,
modified, supplemented, renewed or extended.
1.7 "BANK" shall mean Summit Bank or its successor.
1.8 "BASE" or "BASE RATE" shall mean the fluctuating rate of interest that
the Bank adopts on a daily basis as its official Base Rate. The Base Rate is
not tied to any external rate of interest or index and does not necessarily
reflect the lowest rate of interest actually charged at any given time by the
Bank to any particular class or category of customers of the Bank. Any change
in the Base Rate shall be effective immediately when adopted by the Bank,
without notice to Borrower.
2
1.9 "BORROWER" shall mean MIDLAND USA, INC. and its successors.
1.10 "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or any
other day on which banks located in the State of New Jersey or New York City are
authorized or required to close under applicable banking laws.
1.11 "CAPITAL ASSETS" shall mean, in accordance with GAAP, fixed assets,
both tangible (such as land, buildings, fixtures, machinery and equipment) and
intangible (such as patents, copyrights, trademarks, franchises and goodwill)
PROVIDED, THAT, Capital Assets shall not include any item depreciated or
amortized over a useful life of 12 months or less.
1.12 "CAPITAL EXPENDITURES" shall mean expenditures or obligations incurred
for the acquisition of Capital Assets.
1.13 "COLLATERAL" shall have the meaning as set forth in Section 5.1
hereof.
1.14 "CURRENT ASSETS" shall mean the assets of Borrower that are classified
as current assets in accordance with GAAP.
1.15 "CURRENT LIABILITIES" shall mean all liabilities of Borrower that are
classified as current liabilities in accordance with GAAP, including, but not
limited to, all obligations payable on demand or within one (1) year after the
date on which the determination is made.
1.16 "DEBT" shall mean, with respect to any Person, at any applicable time,
the aggregate sum of the following items:(a) the unpaid principal balance of all
indebtedness and liabilities owed to any other Person from time to time
(including any renewals, extensions and refundings thereof), whether or not the
indebtedness or liability was heretofore or hereafter created, issued, incurred,
assumed or guarantied, as determined in accordance with GAAP;(b) the unpaid
principal balance of all indebtedness or liabilities for the deferred purchase
price of property or services rendered (including accounts payable);(c) all
obligations as lessee under leases which have been or should be, in accordance
with GAAP, recorded as capitalized lease liabilities,(d) all Current Liabilities
in respect of unfunded vested benefits under any Plan covered by Title IV of
ERISA,(e) all obligations, contingent or otherwise relative to the face amount
of all letters of credit issued for said Person's account, whether or not
drawn;(f) all obligations outstanding under banker's acceptance facilities
issued for the account of said Person,(g) all guarantees, endorsements and other
contingent obligations to purchase, to provide funds for payments, to supply
funds to invest in any Person or otherwise to assure a creditor against loss,
and (h) all obligations secured by any mortgage, lien, pledge, or security
3
interest or other charge or encumbrance on property of such Person, whether or
not the obligations have been assumed or there is liability for any deficiency.
1.17 "DEFAULT" shall mean any of the events of default as defined and
described in this Agreement, whether or not any requirement for the giving of
notice, passing of time, or both, or the happening of any other condition, has
been satisfied.
1.18 "DOCUMENTARY L/C ACCOMMODATION SUBLIMIT" shall have the meaning set
forth in Section 2.4(b).
1.19 "ELIGIBLE ACCOUNTS" shall mean the Accounts as to which Borrower has
furnished to Lender information adequate to identify the same, at such times and
in such form as has been or, from time to time may be, requested by Lender,
which meet all of the following criteria on the origination date of the said
Accounts and continuing thereafter until collected, and which is, in all other
respects, acceptable to Lender:
(a) Such Accounts shall be valid and legally enforceable, owing to
Borrower for the performance of services or the sale of goods arising in the
ordinary course of business for which Borrower has delivered, or, at the time of
origination of such Accounts, if required by Lender, will deliver to Lender,
invoices, xxxxxxxx and shipping documents and other documents evidencing the
obligation of Borrower's customer to pay such Accounts;
(b) Such Accounts are not unpaid more than ninety (90) days after the
date of the original invoice for them, PROVIDED THAT, in Lender's sole
discretion, with respect to certain Accounts for which dating has been given,
such Accounts are not unpaid more than one hundred twenty (120) days after the
date of the original invoice for them;
(c) Such Accounts do not arise from sales on consignment, progress
xxxxxxxx, guaranteed sale, sale and return, sale on approval, or other terms
under which payment by the account debtor may be conditional or contingent;
(d) Borrower is the sole owner of such Accounts and, other than
financing statements in favor of Lender, no financing statement covering such
Accounts or their proceeds is on file in any public office, and neither Borrower
nor Lender have received any notice of any proposed acquisition of any security
interest in such Accounts;
(e) The chief executive office of the account debtor with respect to
such Accounts is located in the United States of America, or, at Lender's
option, if either: (i) the account debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank satisfactory to
Lender, sufficient to cover such Account, in form and
4
substance satisfactory to Lender and, if required by Lender, the original of
such letter of credit has been delivered to Lender or Lender's agent and the
issuer thereof notified of the assignment of the proceeds of such letter of
credit to Lender, or (ii) such Account is subject to credit insurance payable to
Lender issued by an insurer and on terms and in an amount acceptable to Lender;
(f) Such Accounts do not consist of xxxx and hold invoices or
retainage invoices;
(g) Such Accounts are not subject to any counterclaim, defense or
dispute and the account debtor with respect to such Accounts does not have, and
does not engage in transactions which may give rise to, any right of setoff
against such Accounts (but, in the discretion of Lender, the portion of the
Accounts of such account debtor in excess of the amount at any time and from
time to time owed by Borrower to such account debtor or claimed owed by such
account debtor may be deemed Eligible Accounts);
(h) No facts, events or occurrences exist which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;
(i) Neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or agent of
or affiliated with Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise;
(j) The account debtor with respect to any such Account is not any
foreign government. If the account debtor is the United States of America, any
State, political subdivision, department, agency or instrumentality thereof,
upon Lender's request, the Federal Assignment of Claims Act of 1940, as amended
or any similar State or local law, if applicable, has been complied with in a
manner satisfactory to Lender;
(k) To the best knowledge of Borrower, after due investigation, there
are no proceedings or actions which are threatened or pending against the
account debtors with respect to such Accounts which might result in any material
adverse change in any such account debtor's financial condition;
(l) Such Accounts of a single account debtor or its affiliates do not
constitute more than twenty-five (25%) percent of all otherwise Eligible
Accounts (but the portion of the Accounts not in excess of such percentage may
be deemed Eligible Accounts);
5
(m) Such Accounts are not owed by an account debtor who has Accounts
unpaid more than ninety (90) days after the date of the original invoice for
them which constitute more than fifty (50%) percent of the total Accounts of
such account debtor; and
(n) Such Accounts are deemed creditworthy at all times by Lender, as
determined by Lender.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.20 "ELIGIBLE INVENTORY" shall mean the Inventory as to which Borrower has
furnished to Lender information adequate to identify the same at such times and
in such form as has been, or from time to time may be, requested by Lender,
which meets all of the following criteria on the date of any requested Inventory
Advance under this Agreement and while any Obligations are outstanding, and
which is, in all other respects, acceptable to Lender:
(a) Borrower is the sole owner of the Inventory, none of the
Inventory is being held by Borrower on a consignment basis, or on a xxxx and
hold basis, and Borrower has not sold, assigned, transferred, mortgaged or
hypothecated, nor released from Lender's security interest, all or any portion
thereof, nor are they subject to any claim or security interest of any Persons
(other than Lender);
(b) No Financing Statement covering any of the Inventory or its
proceeds is on file in any public office (other than the Financing Statement
filed by Lender), and neither Borrower nor Lender has received any notice of any
proposed acquisition of any security interest in the Inventory;
(c) If any of the goods are represented or covered by documents of
title, instruments or chattel paper, Borrower is the owner of all such
documents, instruments and chattel paper, and none of it has been sold or
transferred nor has any security interest in all or any portion thereof been
acquired or granted to any person;
(d) The Inventory is in good and marketable condition and meets all
standards imposed by any governmental agency, department or division thereof
having regulatory authority over such Inventory, its use or sale including, but
not limited to, the Federal Fair Labor Standards Act of 1938 as amended, and all
rules, regulations and orders thereunder;
6
(e) The Inventory is currently either usable or salable in the normal
course of Borrower's business;
(f) The Inventory consists of finished goods or spare parts held for
resale in the ordinary course of the business of Borrower acceptable to Lender;
(g) The Inventory is current and not out of date;
(h) The Inventory is not damaged, defective or returned Inventory;
(i) The Inventory is located at premises owned or controlled by
Borrower and is not in the control or possession of third parties;
(j) Eligible L/C Inventory; and
(k) The Inventory is not Linear Modulation Inventory.
General criteria for Eligible Inventory may be established and revised from time
to time by Lender in good faith. Any Inventory which is not Eligible Inventory
shall nevertheless be part of the Collateral.
1.21 "ELIGIBLE L/C INVENTORY" shall mean all Inventory owned by Borrower
and covered by an L/C Accommodation and which Inventory is or will be in transit
to one of the Borrower's addresses set forth in Schedule B and which Inventory
(a) is fully insured and evidence thereof is provided to Lender;(b) is subject
to a first and only Lien upon such goods in favor of Lender;(c) all documents,
notices, instruments, statements and bills of lading relating thereto, if any,
which Lender may deem necessary or desirable to evidence ownership by Borrower
and/or to give effect to and protect the liens, security interests and other
rights of Lender in connection therewith, are delivered to Lender; and (d) is
otherwise deemed to be "Eligible Inventory" pursuant to Section 1.20 of the
Agreement.
1.22 "ENVIRONMENTAL LAW" or "ENVIRONMENTAL LAWS" shall mean all federal,
state and local laws, statutes, ordinances and regulations now or hereafter in
effect, and in each case as amended or supplemented from time to time, and any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment relating to the regulation and
protection of human health, safety, the environment and natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation). Environmental
Laws include, but are not limited to, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601 ET
SEQ.) ("CERCLA"); the Hazardous Material Transportation Act, as amended (49
U.S.C.
7
Section 180 ET SEQ.); the Federal Insecticide, Fungicide, and Rodenticide
Act, as amended (7 U.S.C. Section 136 ET SEQ.); the Resource Conservation
and Recovery Act, as amended (42 U.S.C. Section 6901 ET SEQ.) ("RCRA"); the
Toxic Substance Control Act, as amended (42 U.S C. Section 7401 ET SEQ.);
the Clean Air Act, as amended (42 U.S.C. Section 740 ET SEQ.); the Federal
Pollution Control Act, as amended (33 U.S.C. Section 1251 ET SEQ); the
Occupational Safety and Health Act, as amended (29 U.S.C. Section 651 ET
SEQ.); the Safe Drinking Water Act, as amended (42 U.S.C. Section 300f ET
SEQ.); the Food, Drug and Cosmetic Act, as amended (21 U.S.C. Section 301 ET
SEQ.); the Medical Waste Tracking Act of 1988, Pub. L. No. 100-582, 102 Stat.
2950 (1988), and their state and local counterparts or equivalents.
1.23 "ENVIRONMENTAL LIABILITIES AND COSTS" shall mean, as to any Person,
all liabilities obligations, responsibilities, remedial actions, losses,
damages, punitive damages, consequential damages, treble damages, costs and
expenses (including all reasonable fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim or
demand by any other Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including any
Environmental Law, permit, order or agreement with any Governmental Authority or
other Person, and which arise from any environmental, health or safety
conditions, or a Release or conditions that are reasonably likely to result in a
Release, and result from the past, present or future operations of such Person
or any of its Subsidiaries.
1.24 "ENVIRONMENTAL LIEN" shall mean any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
1.25 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same now exists or may from time to time hereafter be amended,
modified, recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.
1.26 "EQUIPMENT" shall mean "equipment", as such term is defined in the
UCC, now owned or hereafter acquired by Borrower and, wherever located, and
shall include, without limitation, all equipment, machinery, furniture,
fixtures, computer equipment, telephone equipment, molds, tools, dies,
partitions, tooling, transportation equipment, all other tangible assets used in
connection with the manufacture, sale or lease of goods or rendition of
services, and Borrower's interests in any leased equipment, and all repairs,
modifications, alterations, additions, controls and operating accessories
thereof or thereto, and all substitutions and replacements therefor.
1.27 "EXCESS CASH FLOW" shall have the meaning set forth in Section 10.17.
8
1.28 "EVENT OF DEFAULT" shall mean the occurrence or existence of any event
or condition described in Section 11 of this Agreement.
1.29 "FINANCING STATEMENTS" shall mean the Uniform Commercial Code UCC-1
Financing Statements to be filed with applicable governmental authorities of
each State or Commonwealth or political subdivisions thereof where the
Collateral is or may hereafter be located pursuant to which Lender shall perfect
its security interest in the Collateral.
1.30 "FISCAL YEAR" shall mean that twelve (12) month period (or such other
twelve (12) month period as agreed upon by Borrower and Lender) commencing on
October 1 and ending on September 30 of each year.
1.31 "FOREIGN EXCHANGE LETTERS OF CREDIT" shall mean standby letters of
credit issued for the benefit of Borrower in the ordinary course of Borrower's
business as presently conducted in connection with currency hedging
transactions.
1.32 "FX L/C ACCOMMODATION SUBLIMIT" shall have the meaning set forth in
Section 2.4(b).
1.33 "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" OR "GAAP" shall mean
generally accepted principles and practices for financial statements as
promulgated and modified from time to time by the Accounting Principles Board,
American Institute of Certified Public Accountants and the Financial Accounting
Standards Board, which are applicable to the circumstances as of the date of any
determination, applied on a consistent basis.
1.34 "GOVERNMENTAL AUTHORITY" or "GOVERNMENTAL AUTHORITIES" shall mean any
federal, state, county or municipal governmental agency, board, commission,
officer, official or entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government whose
consent or approval is required as a prerequisite to (a) the continued
uninterrupted operation of Borrower's business operations, or (b) the
performance of any act or obligation or the observance of any agreement or
condition of Borrower under this Agreement or the other Loan Documents.
1.35 "GUARANTOR" shall mean any Person that now or hereafter guaranties any
of the Obligations of Borrower to Lender or executes a validity guaranty in
favor of Lender.
1.36 "GUARANTY" shall mean any guaranty, including, without limitation, any
validity guaranty, now or hereafter executed and delivered to Lender by any
Guarantor.
9
1.37 "INDEBTEDNESS" shall mean all of the obligations of Borrower which, in
accordance with GAAP, should be classified upon Borrower's balance sheet as
liabilities, or to which reference should be made by footnotes thereto,
including without limitation, in any event and whether or not so classified:
(a) all debt and similar monetary obligations of Borrower, whether
direct or indirect, including, without limitation, Subordinated Debt;
(b) all obligations of Borrower arising or incurred under or in
respect of any guaranties (whether direct or indirect) by Borrower of the
indebtedness, obligations or liabilities of any other Person; and
(c) all obligations of Borrower arising or incurred under or in
respect of any mortgage, lien, pledge, charge, security interest or other
encumbrance upon or in any property owned by such Person, even though such
Person has not assumed or become liable for the payment of such obligations.
1.38 "INVENTORY" shall mean any "inventory," as such term is defined in the
UCC, now owned or hereafter acquired by Borrower, wherever located, and, in any
event, shall include, without limitation, all raw materials, work-in-process,
finished and semi-finished Inventory including, without limitation, all
materials, parts, components and supplies relating to the manufacture or
assembly thereof, packaging and shipping supplies relating thereto, and all
other inventory, merchandise, goods and other personal property now or hereafter
owned by Borrower, which are held for sale, exchange or lease or are furnished
or are to be furnished under a contract of service or an exchange arrangement or
which constitute raw materials, work-in-process or materials used or consumed or
to be used or consumed in Borrower's business, or the processing, packaging,
delivery or shipping of the same, and all finished goods and the products of the
foregoing, whatever form and wherever located; and all names or marks affixed to
or to be affixed thereto for purposes of selling same by the seller,
manufacturer, lessor or licensor thereof and all right, title and interest of
Borrower therein and thereto;
1.39 "INVENTORY ADVANCES" shall have the meaning set forth in Section 2.3.
1.40 "INVENTORY AVAILABILITY" shall have the meaning set forth in Section
2.3.
1.41 "LENDER" shall mean SUMMIT COMMERCIAL/GIBRALTAR CORP. and its
successors and assigns.
1.42 "L/C ACCOMMODATIONS" shall have the meaning set forth in Section 2.4.
10
1.43 "LIEN" or "LIEN" shall mean any mortgage, deed of trust, pledge,
security interest, hypothecation, assignment, lien (statutory or other), charge,
or other encumbrance of any kind or nature whatsoever (including, without
limitation, pursuant to any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the UCC or comparable
law of any jurisdiction to evidence any of the foregoing) on personal or real
property or fixtures.
1.44 "LINEAR MODULATION INVENTORY" shall mean any finished goods inventory
owned by Borrower which is purchased from Securicor Radiocom Limited and which
consists of inventory utilizing linear modulation narrow band radio technology.
1.45 "LOAN" shall have the meaning set forth in Section 2.1.
1.46 "LOAN ACCOUNT" shall have the meaning set forth in Section 2.9.
1.47 "LOAN DOCUMENTS" shall mean this Agreement and any and all other
agreements, notes, documents, mortgages, financing statements, guaranties
certificates and instruments executed and/or delivered by Borrower or any other
Person to Lender pursuant to and in connection with the Loan and this Agreement,
together with any amendments, modifications, supplements, renewals and
extensions thereof or thereto.
1.48 "MAXIMUM CREDIT" shall mean the amount of $5,000,000.
1.49 "NET AMOUNT OF ELIGIBLE ACCOUNTS" shall mean the gross amount of
Eligible Accounts less sales, excise or similar taxes included in the amount
thereof and less returns, discounts, claims, credits and allowances of any
nature at any time issued, owing, granted, outstanding, available or claimed
with respect thereto.
1.50 "NET AVAILABILITY" shall mean the sum of the Accounts Availability and
Inventory Availability LESS any Reserves.
1.51 "NET INCOME" shall mean, for any applicable period, all revenues of
Borrower for such period derived from whatever source determined in accordance
with GAAP, reduced by all expenses of Borrower, whether operating, non-operating
or extraordinary.
1.52 "OBLIGATIONS" shall mean any and all Loans and all other obligations,
liabilities and indebtedness of every kind, nature and description owing by
Borrower to Lender and/or its Affiliates, including, without limitation,
principal, interest, charges, fees, costs and expenses, however evidenced,
whether as principal, surety, endorser, guarantor
11
or otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to Borrower under the United States Bankruptcy Code or any
similar statute (including, without limitation, the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by Lender.
1.53 "OBLIGATION" shall mean any one of the Obligations.
1.54 "PARTICIPANT" shall mean any Person or entity which at any time
participates with Lender in respect of all or any portion of the Obligations of
Borrower or any of them.
1.55 "PERMITTED ENCUMBRANCES" shall mean the following: (a)security
interests and liens granted to Lender or its Affiliates; (b) purchase money
security interests in favor of equipment vendors upon any Capital Assets
hereafter acquired (including, without limitation, capitalized or finance
leases); PROVIDED THAT,(i) no such purchase money or other mortgage, lien or
security interest (or capitalized or finance lease, as the case may be) with
respect to specific future Capital Assets or as refinanced shall extend to or
cover any other property, other than the specific Capital Assets so acquired,
and the proceeds thereof,(ii) such mortgage, lien or security interest only
secures the cost or obligation to pay the purchase price of such specific
Capital Assets (or the obligations under the capitalized or finance lease) and
(iii) the principal amount secured thereby shall not exceed one hundred (100%)
percent of the cost of the Capital Assets so acquired; and (c) the leases,
security interests, liens and other encumbrances as set forth on SCHEDULE A
annexed hereto and made a part hereof.
1.56 "PERSON" or "PERSON" shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, any corporation which
elects subchapter S status under the Internal Revenue Code of 1986, as amended),
limited liability company, limited liability partnership, business trust,
unincorporated association, joint stock corporation, trust, joint venture or
other entity or any government or any agency or instrumentality or political
subdivision thereof.
1.57 "PROCEEDS" shall have the meaning ascribed to such term in the UCC and
shall also include, but not be limited to, (a)any and all proceeds of any and
all insurance (including, without limitation, life insurance, business
interruption insurance and credit insurance), indemnity, warranty or guaranty
payable to Borrower from time to time with respect to any of the Collateral or
otherwise,(b) any and all payments (in any form
12
whatsoever) made or due and payable to Borrower from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral by any governmental body, authority, bureau or
agency or any other Person (whether or not acting under color of Governmental
Authority) and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
1.58 "RESERVES" shall mean, as of any date of determination, such amounts
as Lender may from time to time establish and revise in good faith reducing the
amount of Revolving Loans and L/C Accommodations which would otherwise be
available to Borrower under the lending formula(s) provided for herein: (a) to
reflect events, conditions, contingencies or risks which, as determined by
Lender in good faith, do or may affect either (i) the Collateral or any other
property which is security for the Obligations or its value,(ii) the assets,
business or prospects of Borrower or any Obligor or (iii) the security interests
and other rights of Lender in the Collateral (including the enforceability,
perfection and priority thereof); or (b) to reflect outstanding L/C
Accommodations as provided in Section 2.4; or (c) in respect of any state of
facts which Lender determines in good faith constitutes an Event of Default or
may, with notice or passage of time or both, constitute an Event of Default.
1.59 "REVOLVING LOANS" shall mean the Accounts Advances, Inventory Advances
and any other advance now or hereafter made by Lender to or for the benefit of
Borrower on a revolving basis (involving advances, repayments and readvances)
pursuant to the terms of this Agreement.
1.60 "STANDBY L/C ACCOMMODATION SUBLIMIT" shall have the meaning set forth
in Section 2.4(b).
1.61 "SUBORDINATED CREDITORS" shall have the meaning set forth in Section
10.16.
1.62 "SUBORDINATION AGREEMENT" shall have the meaning set forth in Section
10.16.
1.63 "SUBORDINATED DEBT" shall mean, at any particular time, all of the
Indebtedness of Borrower that shall be expressly subordinated upon written terms
and conditions, satisfactory to Lender, in right of payment to the prior payment
in full of all of the Obligations.
1.64 "SUBSIDIARY" shall mean, as to any Person, a corporation with respect
to which more than fifty (50%) percent of the outstanding shares of stock of
each class
13
having voting power is at the time owned by such Person or by one or more
Subsidiaries of such Person or by such Person.
1.65 "TANGIBLE NET WORTH" shall mean, as to Borrower, at any applicable
time, the excess of total assets over total liabilities each to be determined in
accordance with GAAP consistently applied excluding however from the
determination of total assets, all amounts due from any Affiliate, and all
assets which would be classified as intangible assets under GAAP including,
without limitation, goodwill, patents, trade names, trademarks, copyrights and
franchises and excluding from liabilities, indebtedness which is Subordinated
Debt.
1.66 "TERM" shall have the meaning set forth in Section 4.1.
1.67 "TERMINATION FEE DEFAULT" shall mean the occurrence of any one or more
of the following: the non-payment when due of any of the Obligations; or if any
warranty or representation or other statement furnished to Lender by Borrower
herein or in any of the other Loan Documents furnished in connection herewith,
proves to have been false or misleading in any material respect when made or
furnished; or the breach of those covenants contained herein or in the other
Loan Documents providing for the proper maintenance and insurance of the
Collateral, and providing for the Collateral to remain free from liens and
security interests except as permitted herein; or the occurrence of an Event of
Default specified in Sections 11.6, 11.7, 11.10, 11.16, 11.17 or 11.18.
1.68 "TERM LOAN" shall have the meaning set forth in Section 2.5.
1.69 "TERM NOTE" shall have the meaning set forth in Section 2.5.
1.70 "TRADESTYLE" AND "TRADESTYLES" shall have the meaning set forth in
Section 9.18.
1.71 "UCC" shall mean the Uniform Commercial Code as enacted in New York
(or any successor legislation thereto), as the same may be amended from time to
time, and the state counterparts thereof as may be enacted in such states or
jurisdictions where any of the Collateral is located or held.
1.72 "VALUE" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost or (b) market.
1.73 "WORKING CAPITAL" shall mean as to Borrower, at any applicable time,
the amount equal to the difference between: (a) the aggregate net book value of
all Current
14
Assets of Borrower and its subsidiaries, and (b) all Current Liabilities of
Borrower and its subsidiaries.
1.74 RULES OF INTERPRETATION AND CONSTRUCTION. In this Agreement unless
the context otherwise requires:
(a) All terms used herein which are defined in the UCC (as presently
in effect in the State of New York) shall have the meanings given therein unless
otherwise defined in this Agreement;
(b) Sections mentioned by number only are the respective Sections of
this Agreement as so numbered;
(c) Words importing a particular gender shall mean and include the
other gender and words importing the singular number mean and include the plural
number and vice versa;
(d) Words importing persons shall mean and include firms,
associations, partnerships (including limited partnerships), societies, trusts,
corporations or other legal entities, including public or governmental bodies,
as well as natural persons;
(e) Each reference in this Agreement to a particular person shall be
deemed to include a reference to such person's successors and permitted assigns;
(f) Any headings preceding the texts of any Section of this
Agreement, and any table of contents or marginal notes appended to copies hereof
are intended, solely for convenience of reference and shall not constitute a
part of this Agreement, nor shall they affect its meaning, construction or
effect;
(g) If any clause, provision or section of this Agreement shall be
ruled invalid or unenforceable by any court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any of the remaining
provisions thereof;
(h) The terms "herein", "hereunder", "hereby", "hereto", and any
similar terms as used in this Agreement refer to this agreement; the term
"heretofore" means before the date of execution of this Agreement; and the term
"hereafter" shall mean after the date of execution of this Agreement;
(i) This Agreement and all matters relating hereto shall be governed
by and construed and interpreted in accordance with the laws of the State of New
York (without reference to conflict of laws rules);
15
(j) If any clause, provision or section of this Agreement shall be
determined to be apparently contrary to or conflicting with any other clause,
provision or section of this Agreement, then the clause, provision or section
containing the more specific provisions shall control and govern with respect to
such apparent conflict;
(k) Unless otherwise specified,(i) all accounting terms used herein
or in any Loan Document shall be interpreted in accordance with GAAP,(ii) all
accounting determinations and computations hereunder or thereunder shall be made
in accordance with GAAP, and (iii) all financial statements required to be
delivered hereunder or thereunder shall be prepared in accordance with GAAP; and
(l) An Event of Default shall exist or continue or be continuing
unless such Event of Default is waived by Lender in accordance with the terms of
this Agreement.
(m) The word "and" when used from time to time herein shall mean "or"
or "and/or" if such meaning is expansive of the rights or interests of Lender in
the given context.
SECTION 2. LOANS AND ADVANCES.
2.1 COMMITMENT. Subject to the terms and conditions hereof and of the
other Loan Documents, Lender agrees to make available to Borrower a revolving
line of credit consisting of such loans, advances and other financial
accommodations as are described in Sections 2.2, 2.3 and 2.4 hereof and a term
loan as described in Section 2.5 hereof (collectively, the "LOAN").
2.2 ACCOUNTS ADVANCES.
(a) Lender agrees to make loans and advances to Borrower, from time
to time, in its sole discretion, in respect of Borrower's Eligible Accounts
("ACCOUNTS ADVANCES") in an amount equal to eighty-five (85%) percent (or such
lesser percentage as Lender may determine) of the Net Amount of Eligible
Accounts ("ACCOUNTS AVAILABILITY").
(b) Any Account which Lender determines to be ineligible or
unacceptable for borrowing purposes at any time shall nevertheless be and remain
at all times part of the Collateral (as defined below).
2.3 INVENTORY ADVANCES.
16
(a) In addition to the Accounts Advances, Lender agrees to make loans
and advances to Borrower, from time to time, in its sole discretion, in respect
of Borrower's Eligible Inventory ("INVENTORY ADVANCES") in an amount equal to
(i) fifty (50%) percent (or such lesser percentage as Lender may determine) of
the Value of Borrower's Eligible Inventory consisting of finished goods and, in
the case of Eligible L/C Inventory, net of all duty, freight, taxes, costs,
insurance and other charges and expenses which may pertain to such Eligible L/C
Inventory or (ii) twenty-five (25%) percent (or such lesser percentage as Lender
may determine) of the Value of Borrower's Eligible Inventory consisting of spare
parts ("INVENTORY AVAILABILITY"); EXCEPT THAT, in Lender's sole discretion, (x)
the aggregate principal amount of Inventory Advances made by Lender to Borrower
shall not, at any time outstanding, exceed $2,500,000 and (y) the aggregate
principal amount of Inventory Advances made by Lender to Borrower in respect of
Eligible Inventory consisting of spare parts shall not, at any time outstanding,
exceed $250,000.
(b) Any Inventory which Lender determines at any time to be
ineligible or unacceptable for borrowing purposes shall nevertheless be and
remain at all times part of the Collateral.
2.4 L/C ACCOMMODATIONS.
(a) Lender may, in its sole discretion, issue or cause to be issued,
from time to time at Borrower's request and on terms and conditions and for
purposes satisfactory to Lender, credit accommodations consisting of letters of
credit, bankers' acceptances, merchandise purchase guaranties or other
guaranties or indemnities for Borrower's account ("L/C ACCOMMODATIONS").
Borrower shall execute and perform additional agreements relating to the L/C
Accommodations in form and substance acceptable to Lender and the issuer of any
L/C Accommodations, all of which shall supplement the rights and remedies
granted herein. Any payments made by Lender or any affiliate of Lender in
connection with the L/C Accommodations shall constitute additional Revolving
Loans to Borrower.
(b) No L/C Accommodation will be issued unless the full amount of the
L/C Accommodation requested, plus fees and costs for issuance, is less than the
Net Availability existing immediately prior to the issuance of the requested L/C
Accommodation, but including within the calculation thereof any Eligible L/C
Inventory to be purchased or acquired by Borrower under such requested L/C
Accommodation, or if the requested L/C Accommodation would cause the outstanding
Obligations to exceed the Maximum Credit, or cause the open amount of all L/C
Accommodations to exceed, at any one time outstanding, the amount of (i)
$1,500,000 for standby letters of credit ("STANDBY L/C ACCOMMODATION
SUBLIMIT"),(ii) $2,000,000 for documentary letters of credit
17
("DOCUMENTARY L/C ACCOMMODATION SUBLIMIT"), and (iii) $300,000 for Foreign
Exchange Letters of Credit ("FX L/C ACCOMMODATION SUBLIMIT").
(c) All indebtedness, liabilities and obligations of any sort
whatsoever, however arising, whether present or future, fixed or contingent,
secured or unsecured, due or to become due, paid or incurred, arising or
incurred in connection with any L/C Accommodation shall be included in the
Obligations, and shall include, without limitation,(i) all amounts due or which
may become due under any L/C Accommodation; (ii)all amounts charged or
chargeable to Borrower or to Lender by any bank, other financial institution or
correspondent bank which opens, issues or is involved with such L/C
Accommodations; (iii)Lender's L/C Accommodation Charges and all fees, costs and
other charges of any issuer of any L/C Accommodation; and (iv) all duties,
freight, taxes, costs, insurance and all such other charges and expenses which
may pertain directly or indirectly to any Obligations or L/C Accommodations or
to the goods or documents relating thereto.
(d) Borrower unconditionally agrees to indemnify and hold Lender
harmless from any and all loss, claim or liability (including reasonable
attorneys' fees) arising from any transactions or occurrences relating to any
L/C Accommodation established or opened for Borrower's account, the Collateral
relating thereto and any drafts or acceptances thereunder, including any such
loss or claim due to any action taken by an issuer of any L/C Accommodation.
Borrower further agrees to indemnify and hold Lender harmless for any errors or
omissions in connection with the L/C Accommodations,(i) caused by Lender, unless
such error or omission is caused as a sole result of Lender's willful misconduct
or gross negligence or (ii) caused by the issuer of any L/C Accommodation or
otherwise. Borrower's unconditional obligation to indemnify and hold Lender
harmless under this provision shall not be modified or diminished for any reason
or in any manner whatsoever, except for Lender's willful misconduct or gross
negligence. Borrower agrees that any charges made to Lender by any issuer of
any L/C Accommodation shall be conclusive on Borrower and may be charged to
Borrower's account.
(e) Lender shall not be responsible for: the conformity of any goods
to the documents presented; the validity or genuineness of any documents; delay,
default, or fraud by Borrower or shipper and/or anyone else in connection with
the L/C Accommodations or any underlying transaction.
(f) Borrower agrees that any action taken by Lender, if taken in good
faith, or any action taken by an issuer of any L/C Accommodation, under or in
connection with any L/C Accommodation, shall be binding on Borrower and shall
not create any resulting liability to Lender. In furtherance thereof, Lender
shall have the full right and authority to clear and resolve any questions of
non-compliance of documents; to give any
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instructions as to acceptance or rejection of any documents or goods; to execute
for Borrower's account any and all applications for steamship or airway
guarantees, indemnities or delivery orders; to grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances, or documents; and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications or L/C Accommodations. All of the foregoing actions may be
taken in Lender's sole name, and the issuer thereof shall be entitled to comply
with and honor any and all such documents or instruments executed by or received
solely from Lender, all without any notice to or any consent from Borrower.
None of the foregoing actions described in this subsection (f) may be taken by
Borrower without Lender's express written consent, which consent shall not be
unreasonably withheld.
2.5 TERM LOAN. In addition to the Revolving Loans and L/C Accommodations,
Lender has contemporaneously herewith made an additional advance to Borrower in
the sum of $-0- (the "TERM LOAN"). The Term Loan shall be evidenced by a
Promissory Note (the "TERM NOTE"). The indebtedness evidenced by the Term Note
shall be payable as set forth therein. As of the date hereof, Borrower
acknowledges, confirms and agrees that Borrower has no right to request and
Lender has no obligation to make whatsoever any Term Loan to Borrower.
2.6 MAXIMUM CREDIT. Except in Lender's sole discretion, the aggregate
principal amount of the Loan shall not exceed the Maximum Credit.
2.7 RESERVES. Without limiting any other rights and remedies of Lender
hereunder or under the other Loan Documents, all loans, advances or financial
accommodations made or otherwise available to Borrower shall be subject to
Lender's continuing right, in its sole discretion, to withhold from Borrower's
availability under the Loan, a reserve, and to increase and decrease such
reserve from time to time, if and to the extent that, in Lender's sole judgment,
reasonably exercised, such reserve is necessary to protect the interests of
Lender against possible non-payment of Accounts, for any reason, by Account
Debtors, possible non-payment by Borrower of any Indebtedness owed to, or liens
held by, third parties, or to protect the interests of Lender against the
possible adverse effect of any state of facts which does or would, with notice
or passage of time or both, constitute an Event of Default hereunder.
2.8 OVERLINE AND OVERFORMULA RIGHTS. Lender may, from time to time, in
its sole discretion, permit the outstanding amounts of any components of, or the
aggregate outstanding amounts of, the loans, advances or other financial
accommodations to exceed the formulas or limitations set forth in Sections 2.2
through 2.6 hereof. In any such event, and without limiting the rights of
Lender to demand payment of the Loan in whole or in part at any time and from
time to time, Borrower shall, upon demand by Lender, which may be
19
made at any time and from time to time, immediately repay to Lender, and/or
furnish cash collateral to Lender for, such portion of the outstanding loans,
advances or other financial accommodations which equals the amount(s) by which
the formulas or the limitations set forth herein have been exceeded.
2.9 THE LOAN ACCOUNTS. Lender will open and maintain a loan account or
loan accounts (collectively, the "LOAN ACCOUNT") on its books in the name of
Borrower with respect to the Loan. Lender shall render to Borrower on or before
the tenth (10th) Business Day of each month a statement of the Loan Account
which statement shall be considered correct and accepted by Borrower and binding
upon Borrower unless Lender is notified to the contrary within ten (10) days
from the receipt of such statement; provided, however, that the failure of
Lender to render any such statement in a timely fashion shall not impair the
validity or binding nature of the Loan Account.
2.10 USE OF PROCEEDS. Borrower shall use the initial proceeds of loans and
advances made to it hereunder, together with other funds of Borrower, to pay any
and all outstanding Indebtedness of Borrower to those parties listed on the Pay
Proceeds Authorization executed and delivered by Borrower contemporaneously
herewith and for the payment of all fees, costs and expenses associated with or
related to the execution and delivery of this Agreement or any transaction
related hereto or contemplated herewith. Borrower shall use the proceeds of all
future loans, advances and other financial accommodations made to it hereunder,
for general operating and working capital purposes in the conduct of its
business.
SECTION 3. INTEREST, FEES AND CHARGES.
3.1 INTEREST. All Obligations, including the Loans made by Lender
pursuant to this Agreement, shall bear interest at the rate of one and one-half
(1 1/2%) percent per annum in excess of the Base Rate, and shall be calculated
on the basis of a 360-day year. Such interest shall be due and payable, in
arrears, at the close of each month in such interest, as well as any other fees
due and payable hereunder to Lender, may, at Lender's option, be charged to any
Loan Account maintained by Lender. On or after the occurrence of any Event of
Default, or termination or non-renewal of this Agreement, interest on all
outstanding unpaid Obligations shall accrue at a rate equal to two (2%) percent
per annum in excess of the pre-default rate set forth above from the date of
such Event of Default or termination or non-renewal, and all interest accruing
hereunder shall thereafter be payable on demand. No provision of this Agreement
shall require the payment or permit the collection of interest in excess of the
rate then permitted by applicable law, provided, that if any provision is so
limited by such applicable law, the interest shall be the maximum amount
permitted thereunder.
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3.2 FACILITY FEES.
(a) Borrower shall pay Lender a Closing Facility Fee in the amount of
one (1%) percent of the Maximum Credit, which Closing Facility Fee shall be
fully earned and payable on the date hereof.
(b) Borrower shall pay Lender an annual Facility Fee payable as
follows: (i) on the first anniversary of the date of this Agreement, Lender
shall receive a Facility Fee in the amount of one half of one (1/2%) percent of
the Maximum Credit, which Facility Fee shall be fully earned as of, and shall be
payable on, the first anniversary of the date hereof; and (ii) on the first
(1st) day of each renewal term of this Agreement, Lender shall receive a
Facility Fee in the amount of one-half (1/2%) percent of the Maximum Credit,
with such Facility Fee being fully earned as of, and shall be payable on, the
first (1st) day of each such renewal Term.
3.3 L/C ACCOMMODATION CHARGES. In addition to the customary fees and
costs of any issuing bank in connection with administering L/C Accommodations
(e.g., examining, wiring, set up and amendment fees), (a) with respect to any
L/C Accommodation which is a standby letter of credit, Borrower shall pay to
Lender, on the opening or issuance of such L/C Accommodation, a charge on such
open L/C Accommodation at a rate per annum equal to two (2%) percent per annum
of the face amount of any such L/C Accommodation but in no event shall such L/C
Accommodation charge be less than one (1%) percent of the face amount of such
L/C Accommodation; (b) with respect to any L/C Accommodation which is a
documentary letter of credit, Borrower shall pay to Lender on the opening or
issuance of such L/C Accommodation or if the original term is extended on the
extension thereof, a charge of three quarters of one (3/4%) percent of the face
amount of any such L/C Accommodation (other than drafts or acceptances) for up
to the initial ninety (90) days of the term thereof and an additional charge of
three quarters of one (3/4%) percent of such face amount for each additional
ninety (90) days, or any portion thereof; and (c) with respect to any L/C
Accommodation which is a Foreign Exchange Letter of Credit, Borrower shall pay
to Lender, on the opening or issuance of such L/C Accommodation, a charge on
such open L/C Accommodation at a rate per annum equal to one (1%) percent per
annum of the face amount of any such L/C Accommodation (collectively, the "L/C
ACCOMMODATION CHARGES"). Except for the opening or issuance fees set forth in
Section 3.3(a), (b) and (c) above, Borrower shall not be responsible for the
payment of any additional letter of credit issuance or opening fees of any
issuing bank.
3.4 ACCOUNT SERVICING FEE. Borrower shall pay to Lender an account
servicing fee in an amount equal to $1,000 on or before the first (1st) day of
each calendar month, in respect of Lender's services for the preceding calendar
month, during the term,
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including all renewal terms, of this Agreement or so long as any of the
Obligations are outstanding.
3.5 MINIMUM BORROWING FEE. No Minimum Borrowing Fee shall be payable
under this Agreement.
3.6 UNUSED LINE FEE. No Unused Line Fee shall be payable under this
Agreement.
3.7 EARLY TERMINATION FEE. If Lender terminates this Agreement upon or
after the occurrence of any Termination Fee Default, or if Borrower shall
terminate this Agreement as permitted herein effective prior to the end of the
initial term or the end of any renewal term, in addition to all other
Obligations, Borrower shall pay to Lender, upon the effective date of
termination, in view of the impracticality and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Lender's lost profits, an early termination fee equal
to:
(a) Three (3%) percent of the Maximum Credit if such termination
occurs after the date hereof, but on or prior to the first anniversary of the
date hereof; and
(b) One (1%) percent of the Maximum Credit if such termination occurs
after the first anniversary of the date hereof but prior to the second
anniversary of the date hereof; and
(c) One (1%) percent of the Maximum Credit if such termination occurs
at any time after the second anniversary of the date hereof but prior to any
anniversary of the date hereof;
EXCEPT THAT, no Early Termination Fee shall be payable by Borrower to
Lender if, and only if: (i) Borrower has requested in writing ("Notice") that
Lender increase the Maximum Credit to an amount not to exceed the sum of
Borrower's average Accounts Availability plus average Inventory Availability for
the immediately preceding sixty (60) consecutive days prior to the date of the
Notice (the "Proposed Increased Maximum Credit"), and Lender, in its sole
discretion, has elected not to increase the Maximum Credit; and (ii) Borrower
has provided Lender with sixty (60) days prior written notice of termination of
this Agreement solely as a result of Lender's refusal to increase the Maximum
Credit to the Proposed Increased Maximum Credit; and (iii) as of the date of
termination in accordance with clause (ii) hereof, no Event of Default exists.
3.8 FEES AND EXPENSES. Borrower shall pay, on Lender's demand, all costs,
expenses, filing fees and taxes payable in connection with the preparation,
execution,
22
delivery, recording, administration, collection, liquidation, enforcement and
defense of the Obligations, Lender's rights in the Collateral, this Agreement,
the other Loan Documents, and all other existing and future agreements or
documents contemplated herein or related hereto, including any amendments,
waivers, supplements or consents which may now or hereafter be made or entered
into in respect hereof, or in any way involving claims or defenses asserted by
Lender or claims or defenses against Lender asserted by Borrower, any Guarantor
or any third party directly or indirectly arising out of or related to the
relationship between Borrower and Lender or any Guarantor and Lender, including,
but not limited to the following, whether incurred before, during or after the
initial or any renewal Term or after the commencement of any case with respect
to Borrower or any Guarantor under the United States Bankruptcy Code or any
similar or successor statute:(a) all costs and expenses of filing or recording
(including UCC Financing Statement filing fees and taxes, documentary stamp
taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable);(b) all title insurance and other insurance premiums, appraisal
fees, fees incurred in connection with any environmental report and audit,
survey and search fees and charges;(c) all fees relating to the wire transfer of
loan proceeds and other funds and fees for returned checks;(d) all out-of-pocket
expenses and costs heretofore and from time to time hereafter incurred by Lender
during the course of periodic field examinations of the Collateral and
Borrower's operations, plus a per diem charge at the rate of $750 per person,
per day for Lender's examiners in the field and office PROVIDED THAT, prior to
the occurrence of the Event of Default, Borrower's obligation to reimburse
Lender for such per diem charges for Lender's examiners in the field and office
incurred by Lender during the course of periodic field examinations of the
Collateral and Borrower's operations shall not exceed in any one calendar year
the aggregate amount of $4,500 plus all out-of-pocket expenses and costs; and
(e) the costs, disbursements and reasonable fees of counsel to Lender.
3.9 RIGHT TO CHARGE ACCOUNT. At Lender's option, all principal, interest,
fees, costs, expenses and other charges provided for in this Agreement, or in
any other agreement now or hereafter existing between Lender and Borrower, shall
be deemed Obligations secured by the Collateral and may be charged to any Loan
Account of Borrower maintained by Lender. All interest, fees and charges
payable by Borrower to Lender based on a per annum rate shall be calculated on
the basis of actual days elapsed over a 360-day year.
SECTION 4. TERM.
4.1 TERM. This Agreement shall continue in full force and effect for a
term (the "TERM") of two (2) years from the date hereof and shall be deemed
automatically renewed for successive terms of one (1) year thereafter unless
terminated as of the end of the initial
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Term or any renewal Term by either party giving the other written notice at
least sixty (60) days' prior to the end of the then-current Term.
4.2 EARLY TERMINATION. Borrower may also terminate this Agreement by
giving Lender at least sixty (60) days prior written notice at any time upon
payment in full of all of the Obligations as provided herein, including the
early termination fee provided for in Section 3.7. Lender shall also have the
right to terminate this Agreement at any time upon or after the occurrence of an
Event of Default.
4.3 EFFECT OF TERMINATION. Upon termination of this Agreement by Borrower
as permitted herein, or upon termination by Lender upon or after the occurrence
of an Event of Default, in addition to payment of all Obligations which are not
contingent, Borrower shall deposit such amount of cash collateral as Lender
determines is necessary to secure Lender from loss, cost, damage or expense,
including reasonable attorneys' fees, in connection with any open L/C
Accommodations or remittance items or other payments provisionally credited to
the Obligations and/or to which Lender has not yet received final and
indefeasible payment.
SECTION 5. COLLATERAL.
5.1 SECURITY INTERESTS IN BORROWER'S ASSETS. As collateral security for
the payment and performance of the Obligations, Borrower hereby grants and
conveys to Lender a continuing security interest in and lien upon all now owned
and hereafter acquired property and assets of Borrower and the Proceeds and
products thereof (which property and assets, together with all other collateral
security for the Obligations now or hereafter granted to or otherwise acquired
by Lender, are referred to herein collectively as the "COLLATERAL"), including,
without limitation, all property of Borrower now or hereafter held or possessed
by Lender and including the following:
(a) All now owned and hereafter acquired: Accounts; contract rights;
chattel paper (including, but not limited to, rentals and other amounts payable
under leases of equipment to customers pursuant to which Borrower is the lessor
or assignee of any lessor); tax and duty refunds; general intangibles to the
extent relating to the Accounts and Inventory; goodwill; customer and mailing
lists; life insurance policies; licenses (whether as licensor or licensee),
franchises and permits; Documents (including, without limitation, all warehouse
receipts); instruments; all guaranties, letters of credit, steamship guaranties,
airway releases or other similar guaranties, agreements or property securing or
relating to any of the items referred to above (including, but not limited to,
purchase money security interests granted by Account Debtors in connection with
installment sales); all cash monies, investment properties, deposits,
securities, bank accounts, deposit
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accounts, credits and other property now or hereafter held in any capacity by
Lender or any Participant in the financing of Borrower;
(b) Inventory;
(c) All now owned and hereafter acquired right, title and interests
of Borrower in, to and in respect of any real or other personal property in or
upon which Lender has or may hereafter have a security interest, lien or right
of setoff;
(d) All of Borrower's existing and future leasehold interests in
premises or facilities leased from third parties by Borrower;
(e) All present and future books and records relating to any of the
above including, without limitation, all present and future books of account of
every kind or nature, purchase and sale agreements, invoices, ledger cards,
bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to any of
the foregoing maintained with or by any other person); and
(f) Any and all products and Proceeds of the foregoing in any form
including, without limitation, all insurance claims, warranty claims and
proceeds and claims against third parties for loss or destruction of or damage
to any or the foregoing.
(g) In addition to, and not in limitation of the foregoing, so long
as any of the Obligations remain outstanding, Borrower hereby unconditionally
and irrevocably grants in favor of Lender for the purpose of permitting Lender
to sell or otherwise dispose of Inventory, a royalty-free license to use any of
Borrower's patents, trademarks, tradenames, tradestyles, copyrights, trade
rights, discoveries, improvements, processor know-know, formulas, trade secrets,
service marks and other rights in intellectual property.
5.2 FINANCING STATEMENTS AND MORTGAGES; FURTHER ASSURANCES. Borrower has
executed or will contemporaneously herewith execute and deliver to Lender such
of the Loan Documents to which it is a party, Financing Statements with respect
to the Collateral in form acceptable to Lender and its counsel. Borrower shall,
at all times, do, make, execute, deliver and record, register or file all
Financing Statements and other instruments, acts, pledges, leasehold or other
mortgages, amendments, modifications, assignments and transfers (or cause the
same to be done) and will deliver to Lender such instruments and/or
documentation evidencing items of Collateral as may be requested by
25
Lender to better secure or perfect Lender's security interest in the Collateral
or any security interest, mortgage or Lien with respect thereto.
SECTION 6. CONDITIONS TO INITIAL EXTENSION OF CREDIT.
The obligation of Lender to make the initial Loans under this Agreement
shall be subject to the satisfaction or waiver by Lender, prior thereto or
concurrently therewith, of each of the following conditions precedent:
6.1 LOAN DOCUMENTS. Each of the Loan Documents shall have been duly and
properly authorized, executed and delivered by the parties hereto and shall be
in full force and effect on and as of the date hereof and shall have been duly
and properly authorized, executed and delivered by Borrower and the other
parties thereto and shall be in full force and effect on and as of the date
hereof.
6.2 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by or on behalf of Borrower or any Guarantor to Lender in this
Agreement or in other Loan Documents shall be true and correct in all material
respects on the date hereof.
6.3 CERTIFIED COPIES OF CORPORATE DOCUMENTS. Lender shall have received
from Borrower certified by a duly authorized officer to be true and complete on
and as of a date which is not more than ten (10) Business Days prior to the date
hereof, a copy of each of (a) the certificate of incorporation or such other
incorporation documents of Borrower in effect on such date of certification, and
(b) the by-laws of Borrower in effect on such date.
6.4 PROOF OF CORPORATE ACTION. Lender shall have received from Borrower a
copy, certified by a duly authorized officer to be true and complete on and as
of the date which is not more than ten (10) Business Days prior to the date
hereof, of the records of all corporate action taken by Borrower to authorize
(a) its execution and delivery of each of the Loan Documents to which it is or
is to become a party as contemplated or required by this Agreement,(b) its
performance of all of its agreements and obligations under each of such
documents, and (c) the incurring of the Obligations contemplated by this
Agreement.
6.5 LEGAL OPINIONS. Lender shall have received a written legal opinion,
addressed to Lender, dated the date hereof, from counsel for Borrower and, if
applicable, any Guarantor of the Obligations. Such legal opinion shall be
reasonably acceptable to Lender and its counsel.
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6.6 COLLATERAL.
(a) All of the Obligations of Borrower to Lender under or in respect
of this Agreement shall be entitled to all of the benefits of and be secured by
this Agreement and the Loan Documents, and Lender shall have obtained a first,
perfected security interest in the Collateral of Borrower, subject only to the
Permitted Encumbrances.
(b) The Loan Documents and all other documents in respect thereto,
which shall create and maintain a first perfected security interest in favor of
Lender and the appropriate Financing Statements in respect thereto and necessary
to enable Lender to perfect its security interests thereunder, shall have been
duly executed and delivered by Borrower to Lender.
6.7 INSURANCE. Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Loan Documents, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee as required hereunder.
6.8 MINIMUM CLOSING AVAILABILITY. As of the date of the hereof and after
giving effect to the initial Loan contemplated to be made hereunder in
connection with the closing of the transactions under this Agreement, Borrower
shall have Net Availability of not less than $250,000.
SECTION 7. CONDITIONS TO MAKING EACH LOAN.
The obligations of Lender to make Loans to Borrower shall be subject to the
satisfaction or waiver by Lender, prior thereto or concurrently therewith, of
each of the following conditions precedent:
7.1 APPLICATIONS AND COMPLIANCE. The application for such Loans shall
have been made by Borrower to Lender in accordance with the applicable
provisions of this Agreement and in compliance with all provisions of this
Agreement.
7.2 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by or on behalf of Borrower to Lender in this Agreement or in
other Loan Documents shall have been true and correct in all material respects
when made, shall, for all purposes of this Agreement, be deemed to be repeated
on and as of the date of each Loan by Lender hereunder and shall be true and
correct in all material respects on and as of each such date, except to the
extent that any of such representations and warranties relate, by the express
terms thereof, solely to a date prior to the date of each Loan by Lender
hereunder.
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7.3 PERFORMANCE, ETC. Borrower shall have duly and properly performed,
complied with and observed each of its covenants, agreements and obligations
contained in this Agreement, and shall have duly and properly performed,
complied with and observed in all material respects its covenants, agreements
and obligations in all other articles of this Agreement and any of the Loan
Documents to which it is a party or by which it is bound on the date of each
Loan by Lender hereunder. No event shall have occurred on or prior to the date
of each Loan by Lender hereunder and be continuing on the date of each Loan by
Lender hereunder, and no condition shall exist on the date of each Loan by
Lender hereunder, which constitutes an Event of Default or which would, with
notice or the lapse of time, or both, constitute an Event of Default under this
Agreement or any of the Loan Documents.
SECTION 8. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants to Lender, knowing and intending
that Lender shall rely thereon in making the Loan contemplated hereby (each of
which representations and warranties shall be continuing unless expressly made
in relation only to a specific date), that:
8.1 CORPORATE EXISTENCE: GOOD STANDING.
(a) Borrower (i) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware,(ii) is in good
standing in all other states in which it is required to be qualified to do
business as a foreign corporation, and (iii) has all requisite corporate power
and authority and full legal right to own or to hold under lease its properties
and to carry on the business as presently engaged.
(b) Borrower has adequate corporate power and authority and has full
legal rights to enter into each of the Loan Documents to which it is a party, to
perform, observe and comply with all of its agreements and obligations under
each of such documents, and to obtain all of the Loans contemplated by this
Agreement.
8.2 CORPORATE AUTHORITY, ETC.
(a) The execution and delivery by Borrower of the Loan Documents to
which it is a party, the performance by Borrower of all of its agreements and
obligations under each of such documents, and the incurring by Borrower of all
of the Obligations contemplated by this Agreement, have been duly authorized by
all necessary corporate actions on the part of Borrower and its shareholders and
do not and will not contravene any provision of Borrower's charter or bylaws or
this Agreement (each as from time to time in effect),(b) conflict with, or
result in a breach of the terms, conditions, or provisions of,
28
or constitute a default under, or result in the creation of any mortgage, lien,
pledge, charge, security interest or other encumbrance upon any of the property
of Borrower under any material agreement, mortgage or other instrument to which
Borrower is or may become a party,(c) violate or contravene any provision of any
law, regulation, order, ruling or interpretation thereunder or any decree, order
or judgment or any court or governmental or regulatory authority, bureau, agency
or official (all as from time to time in effect and applicable to such
entity),(d) require any waivers, consents or approvals by any of the creditors
or trustees for creditors of Borrower, or (e) require any approval, consent,
order, authorization, or license by, or giving notice to, or taking any other
action with respect to, any Governmental Authority.
8.3 BINDING EFFECT OF DOCUMENTS, ETC. Borrower has duly executed and
delivered each of the Loan Documents to which it is a party, and each of the
Loan Documents is valid, binding and in full force and effect. The agreements
and obligations of Borrower as contained in each of the Loan Documents
constitutes, or upon execution and delivery thereof will constitute, legal,
valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms, subject, as to the enforcement of
remedies only, to limitations imposed by federal and state laws regarding
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors' rights and remedies generally, and by general principles of law and
equity.
8.4 NO EVENTS OF DEFAULT.
(a) No Event of Default has occurred and is continuing and no event
has occurred and is continuing and no condition exists that would, with notice
or the lapse of time, or both, constitute an Event of Default.
(b) Borrower is not in default in any material respect under any
contract, agreement or instrument to which Borrower is a party or by which
Borrower or any of property of Borrower is bound, the consequence of which
default could materially or adversely affect the financial condition, assets,
operations or property of Borrower.
8.5 NO GOVERNMENTAL CONSENT NECESSARY. No consent or approval of, giving
of notice to, registration with or taking of any other action in respect of, any
Governmental Authority is required with respect to the execution, delivery and
performance by Borrower of this Agreement and the other Loan Documents to which
it is a party.
8.6 NO PROCEEDINGS. There are no actions, suits, or proceedings pending
or, to the best of Borrower's knowledge, threatened against or affecting
Borrower in any court or before any Governmental Authority which, if adversely
determined, would have an
29
adverse effect on the ability of Borrower to perform its obligations under this
Agreement or the other Loan Documents to which it is a party.
8.7 NO VIOLATIONS OF LAWS. Borrower has conducted, and is conducting, its
business, so as to comply in all material respects with all applicable federal,
state, county and municipal statutes and regulations. Borrower or any officer,
director or shareholder of Borrower is not charged with, or so far as is known
by Borrower, is not under investigation with respect to, any violation of any
such statutes, regulations or orders, which could have a material or adverse
effect on the financial condition, business or operations of Borrower;
8.8 USE OF PROCEEDS OF THE LOAN. Proceeds from the Loan shall be used
only for those purposes set forth in this Agreement. No part of the proceeds of
the Loan shall be used, directly or indirectly, for the purpose of purchasing or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System, or for the purpose of purchasing or
carrying or trading in any stock under such circumstances as to involve Borrower
in a violation of Regulation X of the Board of Governors of the Federal Reserve
System or Lender in a violation of Regulation G of said Board of Governors. In
particular, without limitation of the foregoing, no part of the proceeds from
the Loans are intended to be used to acquire any publicly-held stock of any
kind.
8.9 FINANCIAL STATEMENTS.
(a) Subject to any limitation stated therein, all balance sheets,
income statements and other financial data which have been or shall hereafter be
furnished to Lender to induce it to enter into this Agreement, and to continue
to provide financing under this Agreement or otherwise in connection herewith,
do and will truly and accurately represent the financial condition of Borrower
as at the periods for which the same are furnished to Lender. All other
information, reports and other papers and data furnished to Lender are, or will
be at the time the same are so furnished, true, accurate and complete in all
material respects. Unless provided otherwise herein, all such financial
statements and other information have been, or will have been at the time of
issuance, prepared on a certified basis by certified public accountants in
accordance with GAAP consistently applied during all periods.
(b) Except as shown on the most recent financial statements which
have been delivered to Lender, Borrower has no other indebtedness as of the date
hereof which would materially or adversely affect the financial condition of
Borrower or the Collateral.
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8.10 CHANGES IN FINANCIAL CONDITION. There has been no material change in
Borrower's financial condition since the date of its last financial statements
which have been delivered to Lender.
8.11 ACCOUNTS. The most recent list of Accounts of Borrower delivered to
Lender is complete, and contains an accurate aging thereof. All of said
Accounts are valid, are subject to no counterclaims or setoffs of any nature
whatsoever, and require no further act on Borrower's part to make such Accounts
owing by the account debtors. None of the Accounts include any conditional
sales, consignments or sales on any basis other than that of absolute sale in
the ordinary and usual course of business, except as otherwise set forth on said
list. No agreement has been made under which any deductions or discounts may be
claimed as to any such Account except customary discounts in the ordinary course
of business.
8.12 INVENTORY. Borrower's Inventory, as of the date hereof, consists of
items of quality and quantity suitable for sale, lease or use in the ordinary
course of its business. The value of obsolete items, items below standard
quality and items in the process of repair have been written down to realizable
market value, or adequate reserves have been provided therefore, and the values
carried on the Borrower's balance sheet are set at the lower of cost or market,
in accordance with GAAP.
8.13 EQUIPMENT. Borrower shall keep its equipment in good order and
repair, and in running and marketable condition, ordinary wear and tear
excepted.
8.14 TAXES AND ASSESSMENTS. Borrower has paid and discharged when due all
taxes, assessments and other governmental charges which may lawfully be levied
or assessed upon its income and profits, or upon all or any portion of any
property belonging to it, whether real, personal or mixed, to the extent that
such taxes, assessment and other charges have become due. Borrower has filed
all tax returns, federal, state and local, and all related information, required
to be filed by it.
8.15 ERISA.
(a) Borrower is in compliance in all respects with the applicable
provisions of ERISA and all regulations issued thereunder by the United States
Treasury Department, the Department of Labor and the Pension Benefit Guaranty
Corporation.
(b) No "Employee Benefit Plan", as defined in Section 3 of ERISA,
maintained by Borrower, as from time to time in effect (hereinafter called the
"Benefit Plans" or individually "Benefit Plan") nor any trusts created
thereunder, nor any trustee or administrator thereof has engaged in a
"prohibited transaction", as defined in Section 4975
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of the Internal Revenue Code of 1986, as amended, which could subject Borrower,
any Benefit Plan or any such trust, or any trustee or administrator thereof, or
any party dealing with any Benefit Plan, or any such trust to the tax or penalty
on prohibited transactions imposed by said Section 4975. Neither any of the
Benefit Plans nor any such trusts have been terminated, nor has there been any
"reportable event", as defined in Section 4043 of ERISA, or "accumulated funding
deficiency." Borrower has not incurred any liability to the Pension Benefit
Guaranty Corporation.
8.16 O.S.H.A. AND ENVIRONMENTAL MATTERS.
(a) Borrower has duly complied with, and its facilities, business
assets, property, leaseholds and equipment are in compliance in all material
respects with, the provisions of the federal Occupational Safety and Health Act,
the Environmental Protection Act, the Clean Air Act, the Water Pollution Control
(Clean Water) Act, the Resource Conservation and Recovery Act, and the
Comprehensive Environmental Response Compensation and Liability Act (including
the Superfund Amendment and Reauthorization Act of 1986), and all rules and
regulations thereunder and all similar state and local laws, rules and
regulations; and there have been no outstanding citations, notices or orders of
non-compliance issued to Borrower or relating to its business, assets, property,
leaseholds or equipment under any such laws, rules and regulations.
(b) Borrower has been issued all required federal, state and local
licenses, certificates or permits relating to the operation of its business; and
Borrower and its facilities, business, assets, property and equipment are in
compliance in all material respects with, all applicable federal, state and
local laws, rules and regulations relating to air emissions, water discharge,
noise emissions, solid or liquid waste disposal, hazardous waste or materials,
or other environmental, health or safety matters.
8.17 LOCATION OF COLLATERAL. As of the date hereof, none of the Collateral
is or will be located in or on any property other than those set forth in
SCHEDULE B of this Agreement.
8.18 OTHER LIENS. Borrower has good and marketable title to and owns all
of the Collateral free and clear of any and all liens, encumbrances or security
interests whatsoever, except the Permitted Encumbrances and in favor of Lender.
None of the Collateral is subject to any prohibition against encumbering,
pledging, hypothecating or assigning the same or requires notice or consent to
Borrower's doing of the same.
8.19 BOOKS AND RECORDS. Borrower maintains its chief executive office and
its books and records related to its Accounts, Inventory and all other
Collateral at its address or addresses set forth in SCHEDULE B of this
Agreement.
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8.20 REPRESENTATIONS AND WARRANTIES: TRUE, ACCURATE AND COMPLETE.
(a) None of the representations, certificates, reports, warranties or
statements now or hereafter made or delivered to Lender pursuant hereto or in
connection with this Agreement or the transactions contemplated hereby contains
or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary in order to make the statements contained
herein and therein, in light of the circumstances in which they are made, not
misleading.
(b) All warranties and representations made herein or in any the Loan
Documents by Borrower will be true and accurate at the time Borrower requests
Lender to make a Loan to it hereunder.
8.21 LOCATION OF OFFICES. SCHEDULE B hereto sets forth Borrower's chief
executive office, and further sets forth a complete and accurate list of all
offices and locations at or out of which Borrower conducts any of its business
or operations.
SECTION 9. AFFIRMATIVE COVENANTS.
Until payment and satisfaction in full of all Obligations and the
termination of this Agreement, Borrower hereby covenants and agrees as follows:
9.1 NOTIFY LENDER. Borrower shall promptly inform Lender if any one or
more of the representations and warranties made by Borrower in this Agreement or
in any document related hereto shall no longer be entirely true, accurate and
complete in any material respect.
9.2 PAY TAXES AND LIABILITIES; COMPLY WITH AGREEMENT. Borrower shall
promptly pay, when due, all indebtedness, sums and liabilities of any kind now
or hereafter owing by Borrower to any party however created, incurred,
evidenced, acquired, arising or payable, including without limitation the
Obligations, income taxes, excise taxes, sales and use taxes, license fees, and
all other taxes with respect to any of the Collateral, or any wages or salaries
paid by Borrower or otherwise, unless the validity of which are being contested
in good faith by Borrower by appropriate proceedings, provided that Borrower
shall have maintained reasonably adequate reserves and accrued the estimated
liability on Borrower's balance sheet for the payment of same.
9.3 OBSERVE COVENANTS, ETC. Borrower shall observe, perform and comply
with the covenants, terms and conditions of this Agreement, the Loan Documents
and any other agreement or document entered into between Borrower and Lender.
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9.4 MAINTAIN CORPORATE EXISTENCE AND QUALIFICATIONS. Borrower shall
maintain and preserve in full force and effect, its corporate existence and
rights, franchises, licenses and qualifications necessary to continue its
business, and comply with all applicable statutes, rules and regulations
pertaining to the operation, conduct and maintenance of its existence and
business including, without limitation, all federal, state and local laws
relating to benefit plans, environmental safety, or health matters, and
hazardous or liquid waste or chemicals or other liquids (including use, sale,
transport and disposal thereof).
9.5 INFORMATION AND DOCUMENTS TO BE FURNISHED TO LENDER. Borrower shall
deliver or cause to be delivered to Lender:
(a) ANNUAL FINANCIAL STATEMENTS. At its own cost, audited
consolidated and consolidating certified financial statements of Intek
Diversified Corporation which separately show the financial statements of the
Borrower as set forth in Section 9.5(a)(i), (ii) and (iii) below, as soon as
available, but in any event within one hundred twenty (120) days after the end
of its Fiscal Year during the term of the Loan. Such financial statements are
to include (i) a detailed balance sheet for it and its subsidiaries as at the
end of its Fiscal Year,(ii) a detailed statement of profit and loss for it for
the twelve (12) months then ended, and (iii) a detailed statement of changes in
cash or a statement of changes in funds for it as at the close of the Fiscal
Year then ended, all with respect to the operation of said Borrower. Such
financial statements shall be prepared in accordance with GAAP, and shall be
accompanied by a report prepared in conformity with GAAP, from an independent
certified public accountant acceptable to Lender stating that the consolidated
financial statements referred to present fairly, in all material respects, the
financial position of Borrower and its Subsidiaries as of the end of Borrower's
then ended Fiscal Year, and the results of their operations and their cash flows
for the year then ended.
(b) MONTHLY FINANCIAL STATEMENTS. On or before the thirtieth (30th)
day of each month, internally prepared interim financial statements for the
immediately preceeding month, certified as to its accuracy by an officer of the
Borrower, in such form, and together with such other information with respect to
the business of Borrower or any Guarantor, as Lender may request.
(c) SALES AND COLLECTIONS REPORTS. (i) Weekly, or more frequently as
may be requested by Lender from time to time, a schedule of all sales for such
period designated by Lender; and (ii) on or before the close of business of each
Business Day, a schedule of all collections for the immediately preceding
Business Day; together with such other information and documentation as Lender
may request.
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(d) ACCOUNTS AGING REPORTS. On or before the tenth (10th) day of
each month, a detailed aging report setting forth and certifying the amounts due
and owing on Accounts on Borrower's books as of the close of the preceding
month, together with a reconciliation report satisfactory to Lender setting
forth the aggregate amount of all sales, collections, payments and adjustments
to Accounts (including, without limitation, any and all offsets, deductions
and/or contras) on Borrower's books for the preceding month.
(e) ACCOUNTS PAYABLE AGING REPORTS. On or before the tenth (10th)
day of each month, a detailed aging report, in form, content and substance
reasonably acceptable to Lender, setting forth amounts due and payable on
accounts payable on Borrower's books as of the close of the preceding month,
together with a reconciliation report reasonably satisfactory to Lender showing
any and all adjustments to accounts payable on Borrower's books as of the close
of the preceding month.
(f) INVENTORY REPORTS. On or before the fifteenth (15th) day of each
month for the last day of the immediately preceding month and on or before the
last day of each month for the fifteenth (15th) day of such month,(i) a report
of Inventory, in form, substance and content reasonably satisfactory to Lender,
setting forth total Value of Borrower's Inventory; (ii)the location of the
Inventory; and (iii) a certified statement showing Inventory on hand, Inventory
represented or covered by warehouse receipts or bills of lading, Eligible
Inventory on hand and Inventory in possession of bailees, including the names
and addresses of such bailees.
(g) REJECTION, DELAY, CLAIMS. Borrower shall notify Lender promptly
of the rejection of goods, delays in performance, or claims made in regard to
Accounts.
(h) ERISA DOCUMENTS. Borrower shall deliver to Lender, as and when
filed, all ERISA reports, notices, returns and all other documents filed as
required by or in compliance with ERISA, whether to the Internal Revenue
Service, the Department of Labor, the Pension Benefit Guaranty Corporation or
any other appropriate agency, and all documents and information distributed to
participants in any Benefit Plan.
(i) NOTICE OF JUDGMENTS, ENVIRONMENTAL, HEALTH OR SAFETY COMPLAINTS.
(i) Within thirty (30) days thereafter, written notice to Lender
of the entry of any judgment or the institution of any lawsuit or of other legal
or equitable proceedings or the assertion of any crossclaim or counterclaim
seeking monetary damages from Borrower in an amount exceeding $25,000;
35
(ii) Within thirty (30) days thereafter, notice or copies if
written of all claims, complaints, orders, citations or notices, whether formal
or informal, written or oral, from a governmental body or private person or
entity, relating to air emissions, water discharge, noise emission, solid or
liquid waste disposal, hazardous waste or materials, or any other environmental,
health or safety matter, which adversely effect Borrower. Such notices shall
include, among other information, the name of the party who filed the claim, the
potential amount of the claim, and the nature of the claim.
(j) OTHER INFORMATION. Upon demand,
(i) Certificates of insurance for all policies of
insurance to be maintained by Borrower pursuant hereto;
(ii) An estoppel certificate executed by an authorized
officer of Borrower indicating that there then exists no Event of Default and
no event which, with the giving of notice or lapse of time, or both, would
constitute an Event of Default;
(iii) All information received by Borrower affecting the
financial status or condition of any account debtor or the payment of any
Account, including but not limited to, invoices, original orders, shipping and
delivery receipts; and
(iv) Assignments, in form acceptable to Lender, of all
Accounts, and of the monies due or to become due on specific contracts
relating to the same.
(k) ADDITIONAL INFORMATION. From time to time, such other
information as Lender may reasonably request, including financial projections
and cash flow analysis.
9.6 ACCESS TO RECORDS AND PROPERTY. At any time and from time to time,
Borrower shall give any representatives or designees of Lender reasonable access
to its properties, and permit any of them to, examine, audit, copy or make
extracts from, any and all books, records and documents in the possession of
Borrower or any independent contractor relating to Borrower's affairs and the
Collateral, and to inspect any of its properties wherever located, all at
Borrower's expense.
9.7 COMPLY WITH LAWS. Borrower shall comply with the requirements of all
applicable laws, rules, regulations and orders of any Governmental Authority,
compliance with which is necessary to maintain its corporate existence or the
conduct of its business or non-compliance with which would adversely affect in
any material respect its ability to perform its obligations or any security
given to secure its obligations.
36
9.8 INSURANCE REQUIRED.
(a) Borrower shall cause to be maintained, in full force and effect
on all property of Borrower including, without limitation, all Inventory and
Equipment, insurance in such amounts against such risks as is satisfactory to
Lender, including, but without limitation, fire, boiler, theft, burglary,
pilferage, vandalism, malicious mischief, loss in transit, and hazard insurance
and, if as of the date hereof, any of the real property of Borrower is in an
area that has been identified by the Secretary of Housing and Urban Development
as having special flood or mudslide hazards, and on which the sale of flood
insurance has been made available under the National Flood Insurance Act of
1968, then Borrower shall maintain flood insurance. Said policy or policies
shall be in form, substance and with insurers which are satisfactory to Lender
in all respects and Borrower will obtain non-contributory Lender's loss payable
endorsements to all insurance policies in form and substance satisfactory to
Lender;
(b) Borrower shall obtain such additional insurance as Lender may
reasonably require;
(c) Borrower shall, in the event of loss or damage, forthwith notify
Lender and file proofs of loss with the appropriate insurer. Borrower hereby
authorizes Lender to endorse any checks or drafts constituting insurance
proceeds;
(d) Borrower shall forthwith upon receipt of insurance proceeds
endorse and deliver the same to Lender; and
(e) In no event shall Lender be required either to (i) ascertain the
existence of or examine any insurance policy or (ii) advise Borrower in the
event such insurance coverage shall not comply with the requirements of this
Agreement.
9.9 CONDITION OF COLLATERAL; NO LIENS. Borrower shall maintain all
Collateral in good condition and repair at all times, and preserve it against
any loss, damage, or destruction of any nature whatsoever relating to said
Collateral or its use, and keep said Collateral free and clear of any Liens,
except the Permitted Encumbrances.
9.10 PAYMENT OF PROCEEDS. Borrower shall forthwith upon receipt of all
proceeds of Collateral, pay such proceeds over to Lender for application
against the Obligations in such order and manner as Lender may elect.
9.11 RECORDS. Borrower shall at all times keep accurate and complete
records of its operations, of the Collateral and the status of each Account.
37
9.12 DELIVERY OF DOCUMENTS. If any proceeds of Accounts shall include, or
any of the Accounts shall be evidenced by, notes, trade acceptances or
instruments or documents, or if any Inventory is covered by documents of title
or chattel paper, whether or not negotiable, then Borrower waives protest
regardless of the form of the endorsement. If Borrower fails to endorse any
instrument or document, Lender is authorized to endorse it on Borrower's behalf.
9.13 UNITED STATES CONTRACTS. If any of the Accounts arise out of
contracts with the United States or any of its departments, agencies or
instrumentalities, Borrower will notify Lender and execute, if requested by
Lender, any necessary instruments in order that all monies due or to become due
under such contract shall be assigned to Lender and proper notice of the
assignment given under the Federal Assignment of Claims Act.
9.14 NAME CHANGES; LOCATION CHANGES.
(a) Borrower shall promptly notify Lender if Borrower is known by or
conducting business under any names other than those set forth in this
Agreement; and
(b) Borrower shall deliver not less than thirty (30) Business Days
prior written notice to Lender if Borrower intends to conduct any of its
business or operations at or out of offices or locations other than those set
forth in this Agreement, or if it changes the location of its chief executive
office or the address at which it maintains its books and records or the
location of any of the Collateral.
9.15 FURTHER ASSURANCES. Borrower shall at any time or from time to time
upon request of Lender take such steps and execute and deliver such Financing
Statements and other documents all in the form of substance satisfactory to
Lender relating to the creation, validity or perfection of the security
interests provided for herein, under the UCC or other laws of the State of New
York or of another state or states in which the Collateral is located or which
are reasonably necessary to effectuate the purposes and provisions of this
Agreement.
9.16 INDEMNIFICATION. Borrower shall indemnify, protect, defend and save
harmless Lender, as well as Lender's directors, officers, trustees, employees,
agents, attorneys and shareholders (hereinafter referred to collectively as the
"Indemnified Parties" and individually as an "Indemnified Party") from and
against (a) any and all losses, damages, expenses or liabilities of any kind or
nature and from any suits, claims or demands, by third parties including
reasonable counsel fees incurred in investigating or defending such claim,
suffered by any of them and caused by, relating to, arising out of, resulting
from, or in any way connected with the Loans and the transactions contemplated
herein up to a maximum amount equivalent to the appraised value of the
Collateral, and
38
(b) any and all losses, damages, expenses or liabilities sustained by Lender in
connection with any Environmental Liabilities and Costs, provided, however,
Borrower shall not be obligated to indemnify, protect, defend and save harmless
an Indemnified Party, if the loss, damage, expense or liability was caused by or
resulted from the willful misconduct of that Indemnified Party as determined by
a final non-appealable order of a court or Governmental Authority of competent
jurisdiction. In case any action shall be brought against an Indemnified Party
based upon any of the above and in respect to which indemnity may be sought
against Borrower, the Indemnified Party against whom such action was brought,
shall promptly notify Borrower in writing, and Borrower shall assume the defense
thereof, including the employment of counsel selected by Borrower and reasonably
satisfactory to the Indemnified Party, the payment of all costs and expenses and
the right to negotiate and consent to settlement. Upon reasonable determination
made by the Indemnified Party, the Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof; provided, however that the Indemnified Party shall pay the costs and
expenses incurred in connection with the employment of separate counsel.
Borrower shall not be liable for any settlement of any such action effected
without its consent, but if settled with Borrower's consent, or if there be a
final judgment for the claimant in any such action, Borrower agrees to indemnify
and save harmless said Indemnified Party against whom such action was brought
from and against any loss or liability by reason of such settlement or judgment,
except as otherwise provided above. The provisions of this Section shall
survive the termination of this Agreement and the final repayment of the
Obligations.
9.17 OPERATING ACCOUNTS. Borrower, throughout the term of the Loan, shall
maintain an operating account with a bank acceptable to Lender.
9.18 TRADESTYLES. Certain Accounts may be and/or certain of Borrower's
invoices to Account Debtors may be, from time to time, rendered to customers
under the tradestyles of Borrower listed on SCHEDULE C annexed hereto (which,
together with any new tradestyles used after the date hereof are referred to
collectively as the "Tradestyles" and individually as a "Tradestyle"). As to
such Tradestyles and the related Accounts, Borrower hereby warrants and agrees
that:
(a) each Tradestyle is a trade name and style (and not the name
of an independent corporation or other legal entity) by which Borrower may
identify and sell certain of its goods or services and conduct a portion of its
business;
(b) all Accounts and Proceeds thereof and returned merchandise
which arise from the sale of goods invoiced under the Tradestyles are and shall
be (i) owned solely by Borrower and (ii) subject to the security interest and
other terms of this Agreement and the other Loan Documents;
39
(c) any dispute which may arise with customers with respect to
the products invoiced under the name of any of the Tradestyles are to be subject
to the terms of this Agreement and the other Loan Documents as though the
Tradestyle did not exist;
(d) all confirmation sheets on assignments of Accounts delivered
to Lender by Borrower, whether such accounts are invoiced in the name of any of
the Tradestyles or Borrower, shall be executed by Borrower as the owner of such
assigned accounts;
(e) new Tradestyles may only be used by Borrower after Lender is
given fifteen (15) days prior written notice of the use of any such new
Tradestyle, which notice shall set forth the name of such new Tradestyle; and
(f) Borrower does not currently use any Tradestyle other than
the Tradestyles listed on SCHEDULE C hereto.
SECTION 10. NEGATIVE COVENANTS.
Until payment and satisfaction in full of all Obligations and the
termination of this Agreement, Borrower hereby covenants and agrees as follows:
10.1 NO CONSOLIDATION, MERGER, ACQUISITION. Borrower will not
consolidate with, merge with, or acquire the stock or assets of any person,
firm, joint venture, partnership, corporation, or other entity, whether by
merger consolidation, purchase of stock or otherwise without the prior
written consent of Lender.
10.2 DISPOSITION OF ASSETS OR COLLATERAL. Borrower will not sell,
lease, transfer, convey, or otherwise dispose of any or all of its assets or
Collateral, other than the sale of Inventory in the ordinary course of
business and other than the sale of Borrower's Linear Modulation Inventory.
10.3 OTHER LIENS. Borrower will not incur, create or permit to exist
any Lien on any of its property or assets, whether now owned or hereafter
acquired, except (a) those Liens in favor of Lender created by this Agreement
and the other Loan Documents; and (b) the Permitted Encumbrances.
10.4 OTHER LIABILITIES. Borrower will not incur, create, assume or
permit to exist any Indebtedness or liability on account of either borrowed
money or the deferred purchase price of property, except (a) Obligations to
Lender; or (b) indebtedness
40
constituting Subordinated Debt or incurred in connection with any of the
Permitted Encumbrances.
10.5 LOANS. Borrower will not make any loans to any Person.
10.6 GUARANTIES. Borrower will not assume, guaranty, endorse,
contingently agree to purchase or otherwise become liable upon the obligation
of any Person, except by the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business.
10.7 REMOVE PROPERTY. Borrower will not remove, or cause or permit to
be removed, without Lender's prior written consent, any of its Collateral or
assets from those locations set forth on SCHEDULE B of in this Agreement,
except for sales of Inventory in the ordinary course of Borrower's business.
10.8 TRANSFERS OF NOTES OR ACCOUNTS. Borrower will not sell, assign,
transfer, discount or otherwise dispose of any Accounts or any promissory
note payable to it, with or without recourse, except for the Lien of Lender
therein.
10.9 DIVIDENDS. Borrower will not declare or pay any cash dividend,
make any distribution on, redeem, retire or otherwise acquire directly or
indirectly, any shares of its stock without the prior written consent of
Lender.
10.10 SALE OR PLEDGE OF SHARES. Borrower will not, at any time sell,
transfer, pledge, mortgage, assign or otherwise dispose of (a) any shares in
the capital of Borrower, (b) any securities exchangeable for or convertible
into or conveying any rights to acquire any shares in the capital of Borrower
or (c) any options, warrants or any other rights to acquire shares in the
capital of Borrower.
10.11 MODIFICATION OF DOCUMENTS. Borrower will not change, alter or
modify, or permit any material change, alteration or modification of its
certificate of incorporation, by-laws or other governing documents without
Lender's prior written consent.
10.12 CHANGE BUSINESS. Borrower will not materially change or alter the
nature of its business.
10.13 SETTLEMENTS. Other than in the ordinary course of its business,
Borrower will not comprise, settle or adjust any claims in a material amount
relating to any of the Collateral, without the prior written consent of
Lender.
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10.14 RATIO OF DEBT TO TANGIBLE NET WORTH. Borrower will maintain a
ratio of (a) the sum of Debt less Subordinated Debt to (b) Tangible Net Worth
of not more than 15 to 1.
10.15 TANGIBLE NET WORTH. Borrower will maintain a Tangible Net Worth of
not less than $1 million.
10.16 PAYMENTS TO PARENT AND AFFILIATES.
(a) Borrower will not, directly or indirectly: make any payment of
the principal amount of or interest on any indebtedness owing to any officer,
director, shareholder, or affiliate of Borrower (other than Securicor Radiocom
Limited) or Intek Diversified Corporation or any other person or entity with
outstanding loans to Borrower (collectively, the "Subordinated Creditors"),
EXCEPT THAT, with respect to any indebtedness owing to any Subordinated Creditor
and provided that such Subordinated Creditor has executed and delivered in favor
of Lender a Subordination Agreement in form and substance acceptable to Lender
("Subordination Agreement"), Borrower shall be permitted, notwithstanding
anything to the contrary contained herein, from and after the first anniversary
of the date hereof, provided no default or Event of Default then exists, to make
regularly scheduled payments or distributions, on an unmatured and unaccelerated
basis; to such Subordinated Creditors on a semi-annual and non-cumulative basis,
in an aggregate amount not to exceed fifty (50%) percent of Borrower's Excess
Cash Flow (as defined below) for the Borrower's immediately preceding
semi-annual period, PROVIDED THAT, after giving effect to such payments or
distributions, the Borrower has Net Availability of not less than $200,000.
Borrower agrees to provide Lender with no less than five (5) Business Days prior
written notice of any contemplated payment or disbursement to any Subordinated
Creditor permitted hereunder. Borrower shall not be permitted to make payments
or distributions to any Subordinated Creditor who fails to deliver in favor of
Lender a Subordination Agreement. For purposes of this Agreement, "Excess Cash
Flow" shall mean, for each semi-annual period of Borrower, the sum of (A) net
income (loss), PLUS (B) the sum of depreciation, amortization and any other
non-cash charges reported on Borrower's profit and loss statement, LESS (C)
regularly scheduled principal payments due on any of Borrower's outstanding
indebtedness, on an unmatured and unaccelerated basis, LESS (D) capital
expenditures.
(b) Borrower shall not make any payment to Securicor Radiocom
Limited, EXCEPT THAT, Borrower shall be permitted, notwithstanding anything to
the contrary contained herein, provided no default or Event of Default then
exists, to make payments to Securicor Radiocom Limited on an unmatured and
unaccelerated basis, solely from the proceeds received from the sale of
Borrower's Linear Modulation Inventory, PROVIDED, THAT, after giving effect to
such payments, the Borrower has a Net Availability of not less than
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$200,000. Borrower agrees to provide Lender with no less than five (5) Business
Days prior written notice of any contemplated payment to Securicor Radiocom,
Limited.
(c) Notwithstanding anything to the contrary contained in Section
10.16(a) and (b), Borrower may make payments to any Affiliate of Borrower for
services rendered or merchandise purchased, each in the ordinary course of
business, PROVIDED THAT, the aggregate amount of such payments shall not exceed
$25,000 per month.
SECTION 11. EVENTS OF DEFAULT.
The occurrence of any of the following shall constitute an event of default
(hereinafter referred to as an "EVENT OF DEFAULT"):
11.1 FAILURE TO PAY. The failure by Borrower or any Guarantor to pay, when
due, any payment of principal, interest or other charges due and owing to Lender
pursuant to any obligations of Borrower to Lender including, without limitation,
those Obligations arising pursuant to this Agreement or any Loan Document, or
under any other agreement for the payment of monies then due and payable to
Lender.
11.2 FAILURE OF INSURANCE. Failure on the part of Borrower to pay or cause
to be paid all premiums when due on the insurance policies pursuant to this
Agreement; failure to take such other action as may be requested by Borrower in
order to keep said policies of insurance in full force and effect until the
entire indebtedness represented by the Loan Documents, and interest thereon, has
been paid in full; and failure on the part of Borrower to execute any and all
documentation required by the insurance companies issuing said policies to
effectuate said assignments.
11.3 FAILURE TO PERFORM. Borrower's failure to perform or observe any
covenant, term or condition of this Agreement to be performed or observed by
Borrower.
11.4 CROSS DEFAULT.
(a) The occurrence of any Event of Default on any of the Obligations,
an Event of Default under any Loan Document or any default on any other
obligation or indebtedness of Borrower or any Guarantor to any third party so
that the holder of such obligation or indebtedness has accelerated or has a
right to accelerate such obligation or indebtedness because of Borrower's or a
Guarantor's default thereunder.
(b) The failure of any Guarantor to perform or observe any covenant,
term or condition of any of the Loan Documents to which any of them is a party.
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11.5 FALSE REPRESENTATION OR WARRANTY. Borrower or any Guarantor shall
have made any statement, representation or warranty in this Agreement or in any
of the other Loan Documents to which it is a party or in a certificate executed
by Borrower incident to this Agreement, which is at any time found to have been
false in any material respect at the time such representation or warranty was
made.
11.6 LIQUIDATION, VOLUNTARY BANKRUPTCY, DISSOLUTION, ASSIGNMENT TO
CREDITORS. Any petition or application for any relief is filed against Borrower
under applicable insolvency or bankruptcy laws now or hereafter existing
(including the United States Bankruptcy Code) or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity).
11.7 INVOLUNTARY PETITION AGAINST BORROWER. Any petition or application
for any relief is filed against Borrower under applicable insolvency or
bankruptcy laws now or hereafter existing (including the United States
Bankruptcy Code) or under any insolvency, reorganization, receivership,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at law or in equity), EXCEPT
THAT, the commencement against Borrower of an involuntary action or case for
relief under any bankruptcy law shall not constitute an Event of Default unless
the same remains undismissed for thirty (30) days from commencement, PROVIDED
THAT, Borrower has not admitted the allegations and is contesting the same
diligently, and further provided that the relief requested therein has not been
sooner granted; during any such period within which such involuntary action or
case remains undismissed, Lender shall have no obligation to make loans,
advances or other financial accommodations to Borrower under this Agreement or
the other Loan Documents without an Order of the United States Bankruptcy Court
or other Court of competent jurisdiction, acceptable in form and substance
satisfactory to Lender.
11.8 GUARANTOR'S DISCLAIMER OF LIABILITY. Any Guarantor makes a disclaimer
of liability or terminates its or his or her liability under its or his or her
Guaranty or the Guarantor breaches any covenant, condition warranty,
representation or other provision of such Guaranty unless, contemporaneously
therewith, an officer or director of Borrower, acceptable to Lender, in its
discretion, reasonably exercised, executes and delivers in favor of Lender a
validity guaranty in form and substance acceptable to Lender.
11.9 JUDGMENTS; LEVIES. Any judgment or judgments aggregating in excess of
$50,000 or any injunction or attachment is obtained against Borrower or any
Guarantor which remains unstayed for a period of ten (10) days or is enforced.
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11.10 CHANGE IN CONDITION. There occurs any event or a change in the
condition or affairs, financial or otherwise, of Borrower or of any Guarantor
which, in the reasonable opinion of Lender, impairs the Collateral.
11.11 ENVIRONMENTAL CLAIMS. At any time Lender determines that any
Environmental Liabilities and Costs or Environmental Lien with respect to
Borrower or any Guarantor will have a potentially material or adverse effect
on the financial condition of Borrower or any Guarantor or on the Collateral.
11.12 FAILURE TO NOTIFY. If at any time Borrower fails to provide Lender
immediately with notice or copies, if written, of all complaints, orders,
citations or notices with respect to environmental, health or safety
complaints.
11.13 FAILURE TO DELIVER DOCUMENTATION. Borrower or any Guarantor shall
fail to obtain and deliver to Lender any other documentation required to be
signed or obtained as part of this Agreement or shall have failed to take any
reasonable action requested by Lender to perfect, protect, preserve and
maintain the security interests and Lien on the Collateral provided for
herein.
11.14 CHANGE IN OWNERSHIP. Any change in the controlling ownership of
Borrower.
11.15 NON-PAYMENT OF DEBTS. Any default by Borrower or any Guarantor
under any agreement, document or instrument relating to any indebtedness for
borrowed money owing to any person other than Lender, or any capitalized
lease obligations, contingent indebtedness in connection with any guarantee,
letter of credit, indemnity or similar type of instrument in favor of any
person other than Lender, in any case in an amount in excess of $25,000,
which default continues for more than the applicable cure period, if any,
with respect thereto, or any default by Borrower or any Guarantor under any
material contract, lease, license or other obligation to any Person other
than Lender, which materially affects its business or the Collateral or other
property which is security for the Obligations and which default continues
for more than the applicable cure period, if any, with respect thereto.
11.16 DISSOLUTION; MAINTENANCE OF EXISTENCE. Borrower fails to maintain
its corporate existence in good standing, or the usual business of Borrower
ceases or is suspended in any material respect.
11.17 INDICTMENT. The indictment of Borrower, or any of its officers and
directors, under any criminal statute, or commencement of criminal or civil
proceedings against Borrower, or any of its officers and directors, pursuant
to which statute or proceedings the
45
penalties or remedies sought or available include forfeiture of any material
portion of the property of Borrower.
11.18 TAX LIENS. The filing of a lien for any taxes filed by any
Governmental Authority against Borrower or any of its assets.
SECTION 12. REMEDIES.
12.1 ACCELERATION; OTHER REMEDIES. Upon the occurrence of an Event of
Default and at any time thereafter:
(a) Lender shall have all rights and remedies provided in this
Agreement, any of the other Loan Documents, the UCC or other applicable law, all
of which rights and remedies may be exercised without notice to Borrower, all
such notices being hereby waived, except such notice as is expressly provided
for hereunder or is not waivable under applicable law. All rights and remedies
of Lender are cumulative and not exclusive and are enforceable, in Lender's
discretion, alternatively, successively, or concurrently on any one or more
occasions and in any order Lender may determine. Without limiting the
foregoing, Lender may (i)accelerate the payment of all Obligations and demand
immediate payment thereof to Lender,(ii) with or without judicial process or the
aid or assistance of others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(iii) require Borrower, at Borrower's expense, to assemble and make available to
Lender any part or all of the Collateral at any place and time designated by
Lender,(iv) collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral,(v) extend the time of payment of, compromise or settle
for cash, credit, return of merchandise, and upon any terms or conditions, any
and all Accounts or other Collateral which includes a monetary obligation and
discharge or release the account debtor or other obligor, without affecting any
of the Obligations,(vi) sell, lease, transfer, assign, deliver or otherwise
dispose of any and all Collateral (including, without limitation, entering into
contracts with respect thereto, by public or private sales at any exchange,
broker's board, any office of Lender or elsewhere) at such prices or terms as
Lender may deem reasonable, for cash, upon credit or for future delivery, with
Lender having the right to purchase the whole or any part of the Collateral at
any such public sale, all of the foregoing being free from any right or equity
of redemption of Borrower, which right or equity of redemption is hereby
expressly waived and released by Borrower. If any of the Collateral or other
security the Obligations is sold or leased by Lender upon credit terms or for
future delivery, the Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Lender. If notice of disposition of
Collateral is required by law, seven (7) days prior notice by Lender to Borrower
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of
46
Collateral is to be made, shall be deemed to be reasonable notice thereof and
Borrower waives any other notice. In the event Lender institutes an action to
recover any Collateral or seeks recovery of any Collateral by way of prejudgment
remedy, Borrower waives the posting of any bond which might otherwise be
required.
(b) Lender may apply the cash proceeds of Collateral or other
security for the Obligations actually received by Lender from any sale, lease,
foreclosure or other disposition of the Collateral to payment of any of the
Obligations, in whole or in part (including reasonable attorneys' fees and legal
expenses incurred by Lender with respect thereto or otherwise chargeable to
Borrower) and in such order as Lender may elect, whether or not then due.
Borrower and each Guarantor shall remain liable to Lender for the payment on
demand of any deficiency together with interest at the highest rate provided for
herein and all costs and expenses of collection or enforcement, including
reasonable attorneys' fees and legal expenses.
(c) If Borrower or any Guarantor shall default in the performance of
any of the provisions of this Agreement or any other Loan Document to which it
is a party, Lender may (but without any obligation to do so) perform same for
Borrower's account or such Guarantor's account and any monies expended in doing
so shall be chargeable with interest to Borrower, repayable by Borrower on
demand and added to the Obligations.
(d) Lender may, at its option, cure any default by Borrower under any
agreement with a third party or pay or bond on appeal any judgment entered
against Borrower, discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
and pay any amount, incur any expense or perform any act which, in Lender's sole
judgment, is necessary or appropriate to preserve, protect, insure, maintain, or
realize upon the Collateral. Lender may charge Borrower's loan account for any
amounts so expended, such amounts to be repayable by Borrower on demand. Lender
shall be under no obligation to effect such cure, payment, bonding or discharge,
and shall not, by doing so, be deemed to have assumed any obligation or
liability of Borrower.
12.2 SET-OFF. Lender shall have the right, immediately and without notice
of other action, to set-off against any of Borrower's liabilities to Lender any
money or other liability owed by Lender or any Affiliate of Lender (and such
Affiliate of Lender is hereby authorized to effect such set-off) in any capacity
to Borrower, whether or not due, and Lender or such Affiliate shall be deemed to
have exercised such right of set-off and to have made a charge against any such
money or other liability immediately upon the occurrence of such Event of
Default even though the actual book entries may be made at a time subsequent
thereto. The right of set-off granted hereunder shall be effective irrespective
of whether Lender shall have made demand under or in connection with the
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Loan. Lender is hereby granted a security interest in all money and property of
Borrower being held by it or any Affiliate of Lender, which security interest
shall be a first priority perfected security interest in favor of Lender as a
result of Lender's or Affiliates of Lender's possession thereof. None of the
rights of Lender described in this Section 12.2 are intended to diminish or
limit in any way Lender's or Affiliates of Lender's common-law set-off rights.
12.3 CUMULATIVE REMEDIES; WAIVERS. No remedy referred to in this Agreement
or the other Loan Documents is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to above or otherwise
available to Lender at law or in equity. No express or implied waiver by Lender
of any default or Event of Default hereunder shall be effective unless in a
writing signed by an officer of Lender and shall not in any way be, or be
construed to be, a waiver of any future or subsequent default or Event of
Default, whether similar in kind or otherwise. The failure, delay or waiver of
Lender in exercising any rights granted it hereunder or under the other Loan
Documents upon the occurrence of any of the contingencies set forth herein shall
not constitute a waiver of any such right upon the continuation or recurrence of
any such contingency or similar contingency and any single or partial exercise
of any particular right by Lender shall not exhaust the same or constitute a
waiver of any other right provided herein. The Events of Default and remedies
set forth herein are not restrictive of and shall be in addition to any and all
other rights and remedies of Lender provided for by this Agreement and
applicable law.
12.4 OTHER PROPERTY. Lender shall have a security interest in any other
property, tangible or intangible, owned by or in which Borrower has an interest
which is or may hereafter be in the possession of Lender.
12.5 COSTS AND EXPENSES. Borrower shall be liable for all costs, charges
and expenses, including reasonable attorney's fees and disbursements, incurred
by Lender by reason of the occurrence of any Event of Default or the exercise of
Lender's remedies with respect thereto, each of which shall be repayable by
Borrower on demand with interest, and added to the Obligations.
12.6 NO MARSHALLING. Lender shall be under no obligation whatsoever to
proceed first against any of the Collateral or other property which is security
for the Obligations before proceeding against any other of the Collateral. It
is expressly understood and agreed that all of the Collateral or other property
which is security for the Obligations stands as equal security for all
Obligations, and that Lender shall have the right to proceed against any or all
of the Collateral or other property which is security for the Obligations in any
order, or simultaneously, as in its sole and absolute discretion it shall
determine. It is further understood and agreed that Lender shall have the
right, as
48
it in its sole and absolute discretion shall determine, to sell any or all of
the Collateral or other property which is security for the Obligations in any
order or simultaneously, as Lender shall determine in its sole and absolute
discretion.
12.7 NO IMPLIED WAIVERS; RIGHTS CUMULATIVE. No delay on the part of Lender
in exercising any right, remedy, power or privilege hereunder or under any of
the Loan Documents or provided by statute or at law or in equity or otherwise
shall impair, prejudice or constitute a waiver of any such right, remedy, power
or privilege or be construed as a waiver of any Event of Default or as an
acquiescence therein. No right, remedy, power or privilege conferred on or
reserved to Lender hereunder or under any of the Loan Documents or otherwise is
intended to be exclusive of any other right, remedy, power or privilege. Each
and every right, remedy, power or privilege conferred on or reserved to Lender
under this Agreement or under any of the other Loan Documents or otherwise shall
be cumulative and in addition to each and every other right, remedy, power or
privilege so conferred on or reserved to Lender and may be exercised by Lender
at such time or times and in such order and manner as Lender shall (in its sole
and complete discretion) deem expedient.
12.8 RECISION OF RIGHTS OF BORROWER. Upon the occurrence of an Event of
Default:
(a) With respect to any obligations owing to Borrower, all rights of
Borrower to receive the principal and interest payments which it would otherwise
be authorized to receive and retain pursuant to this Agreement shall cease, and
all such rights shall thereupon become vested in Lender, so long as an Event of
Default shall continue, who shall thereupon have the sole right to receive and
hold as collateral such principal and interest payments;
(b) All rights of Borrower to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant to
this Agreement shall cease, and all such rights shall thereupon become vested in
Lender who shall thereupon have the sole right to exercise such voting and other
consensual rights;
(c) All rights of Borrower to receive the dividends which it would
otherwise be authorized to receive and retain pursuant to this Agreement shall
cease, and all such rights shall thereupon become vested in Lender who shall
thereupon have the sole right to receive and hold as collateral such dividends;
and
(d) Any and all principal, interest and dividends which are received
by Borrower contrary to the provisions of this Agreement shall be received in
trust for the benefit of Lender, shall be segregated from other funds of
Borrower, and shall be forthwith
49
paid over to Lender as Collateral in the same form so received (with any
necessary endorsement).
In order to permit Lender to exercise the voting and other rights which it
may be entitled to exercise pursuant to this Agreement, and to receive all
dividends and distributions which it may be entitled to receive under this
Agreement, Borrower shall, if necessary, upon notice from Lender, from time to
time execute and deliver to Lender appropriate dividend payment orders and other
instruments, including, without limitation, proxies, as Lender may reasonably
request.
SECTION 13. OTHER RIGHTS OF LENDER.
13.1 COLLECTIONS. Borrower shall, at Borrower's expense and in the manner
requested by Lender from time to time,(a) direct that remittances and all other
proceeds of accounts and other Collateral shall be (i) sent to a post office box
designated by and/or in the name of Lender, or in the name of Borrower, but as
to which access is limited to Lender and/or (ii) deposited into a bank account
maintained in the name of Lender and/or a blocked bank account under
arrangements with the depository bank under which all funds deposited to such
blocked bank account are required to be transferred solely to Lender, and/or (b)
immediately remit in kind to Lender, in whatever forms, all collections or other
proceeds of accounts and other Collateral received by Borrower. In connection
therewith, Borrower shall execute such post office box and/or blocked bank
account agreements as Lender shall specify. Lender may modify or terminate any
authority of the Borrower regarding the Accounts and other monetary obligations
included in the Collateral at any time, whether or not an Event of Default has
occurred, and Lender may directly collect the Accounts and other monetary
obligations included in the Collateral.
13.2 REPAYMENT OF OBLIGATIONS. All Obligations shall be payable at
Lender's office set forth below or at a bank or such other place as Lender may
expressly designate from time to time for purposes of this Section. Lender
shall apply all proceeds of Accounts or other Collateral received by Lender and
all other payments in respect of the Obligations to the Revolving Loans whether
or not then due or to any other Obligations then due, in whatever order or
manner Lender shall determine. For purposes of determining Net Availability,
remittances and other payments with respect to the Collateral and Obligations
will be treated as credited to the loan account of Borrower maintained by Lender
and Collateral balances to which they relate, upon the date of Lender's receipt
of advice from Lender's bank that such remittances or other payments have been
credited to Lender's account or in the case of remittances or other payments
received directly in kind by Lender, upon the date of Lender's deposit thereof
at Lender's bank, subject to final payment and collection. In computing
interest charges, the Loan Account of Borrower maintained by Lender will be
credited with remittances and other payments three (3)
50
Business Days after the day Lender has received advice of receipt of remittances
in Lender's account at Lender's Bank.
13.3 NOTIFICATION OF ACCOUNT DEBTORS AND BAILEES OF INVENTORY. Lender may,
at any time, whether or not an Event of Default has occurred, without notice to
or assent of Borrower, (a) notify any account debtor that the accounts and other
Collateral which includes a monetary obligation have been assigned to Lender by
Borrower and that payment thereof is to be made to the order of and directly to
Lender,(b) send, or cause to be sent by its designee, requests (which may
identify the sender by a pseudonym) for verification of accounts and other
Collateral directly to any account debtor or any other obligor or any bailee
with respect thereto, and (c) demand, collect or enforce payment of any accounts
or such other Collateral, but without any duty to do so, and Lender shall not be
liable for any failure to collect or enforce payment thereof. At Lender's
request, all invoices and statements sent to any account debtor, other obligor
or bailee, shall state that the accounts and such other Collateral have been
assigned to Lender and are payable directly and only to Lender. At any time,
Lender may, in its sole and absolute discretion, notify the bailee of any
Inventory of its security interest therein.
13.4 LENDER APPOINTED ATTORNEY-IN-FACT.
(a) Borrower hereby irrevocably constitutes and appoints Lender, with
full power of substitution, as its true and lawful attorney-in-fact, with full
irrevocable power and authority in its place and stead and in its name or
otherwise, from time to time in Lender's discretion, at Borrower's sole cost and
expense, take any and all appropriate action and to execute and deliver any and
all documents and instruments which Lender may deem reasonably necessary or
advisable to accomplish the purposes of this Agreement, including, without
limiting the generality of the foregoing,(i) to receive, take, endorse, assign,
deliver, accept and deposit, in the name of Lender or Borrower, any and all
cash, checks, commercial paper, drafts, remittances and other instruments and
documents relating to the Collateral or the proceeds thereof,(ii) to transmit to
account debtors, other obligors or any bailees notice of the interest of Lender
in the Collateral or request from account debtors or such other obligors or
bailees at any time, in the name of Borrower or Lender or any designee of
Lender, information concerning the Collateral and any amounts owing with respect
thereto,(iii) to notify account debtors or other obligors to make payment
directly to Lender, or notify bailees as to the disposition of Collateral,
(iv)to take or bring, in the name of Lender or Borrower, all steps, actions,
suits or proceedings deemed by Lender necessary or desirable to effect
collection of or other realization upon the accounts and other Collateral,(v) to
after an Event of Default, change the address for delivery of mail to Borrower
and to receive and open mail addressed to Borrower,(vi) after an Event of
Default, to extend the time of payment of, compromise or settle for cash,
credit, return of merchandise, and upon any terms or conditions, any and all
accounts or other Collateral
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which includes a monetary obligation and discharge or release the account debtor
or other obligor, without affecting any of the Obligations,(vii) to execute in
the name of Borrower and file against Borrower in favor of Lender Financing
Statements or amendments with respect to the Collateral, or record a copy or an
excerpt hereof in the United States Copyright Office or the United States Patent
and Trademark Office and to take all other steps as are necessary in the
reasonable opinion of Lender under applicable law to perfect the security
interests granted herein, (viii)to obtain and adjust insurance required pursuant
to this Agreement and to pay all or any part of the premiums therefor and the
costs thereof, and (ix) to pay or discharge taxes, liens, security interests or
other encumbrances levied or placed on or threatened against the Collateral.
(b) Borrower hereby ratifies, to the extent permitted by law, all
that Lender shall lawfully and in good faith do or cause to be done by virtue of
and in compliance with this Agreement. The powers of attorney granted pursuant
to this Agreement are each a power coupled with an interest and shall be
irrevocable until the Obligations are paid indefeasibly in fully.
13.5 RELEASE OF LENDER. Borrower hereby releases and exculpates Lender,
its officers, directors, employees, agents and designees, from any liability
arising from any acts under this Agreement or in furtherance thereof, whether as
attorney-in-fact or otherwise, whether of omission or commission, and whether
based upon any error of judgment or mistake of law or fact, except for gross
negligence or willful misconduct as determined by a final and non-appealable
order from a court of competent jurisdiction. In no event will Lender have any
liability to Borrower for lost profits or other special or consequential
damages.
13.6 UNIFORM COMMERCIAL CODE. At all times prior and subsequent to an
Event of Default hereinafter, Lender shall be entitled to all the rights and
remedies of a secured party under the UCC with respect to all Collateral.
13.7 PRESERVATION OF COLLATERAL. At all times prior and subsequent to an
Event of Default hereinafter, Lender may (but without any obligation to do so)
take any and all action which in its sole and absolute discretion is necessary
and proper to preserve its interest in the Collateral, including without
limitation the payment of debts of Borrower which might, in Lender's sole and
absolute discretion, impair the Collateral or Lender's security interest
therein, purchasing insurance on the Collateral, repairing the Collateral, or
paying taxes or assessments thereon, and the sums so expended by Lender shall be
secured by the Collateral, shall be added to the amount of the Obligations due
Lender and shall be payable on demand with interest at the rate set forth in
Section 3.1 hereof from the date expended by Lender until repaid by Borrower.
After written notice by Lender to Borrower and automatically, without notice,
after an Event of Default, Borrower shall not,
52
without the prior written consent of Lender in each instance, (a) grant any
extension of time of payment of any of the accounts or any other Collateral
which includes a monetary obligation, (b) compromise or settle any of the
accounts or any such other Collateral for less than the full amount thereof,(c)
release in whole or in part any account debtor or other person liable for the
payment of any of the accounts or any such other Collateral, or (d) grant any
credits, discounts, allowances, deductions, return authorizations or the like
with respect to any of the accounts or any such other Collateral except for
customary discounts granted in the ordinary course of business.
13.8 LENDER'S RIGHT TO CURE. In the event Borrower shall fail to perform
any of its Obligations hereunder or under any of the Loan Documents, then
Lender, in addition to all of its rights and remedies hereunder, may perform the
same, but shall not be obligated to do so, at the cost and expense of Borrower.
In any such event, Borrower shall promptly reimburse Lender together with
interest at the rate set forth in Section 3.1 hereof from the date such sums
are expended until repaid by Borrower.
13.9 TEST VERIFICATIONS. Lender or its designees shall have the right to
make test verifications of any and all Accounts and other Collateral in any
manner and through any medium Lender considers advisable, and Borrower shall
render any necessary assistance to Lender. At such times as Lender may request
and in the manner specified by Lender, Borrower shall deliver to Lender or
Lender's representative original invoices, agreements, proofs of rendition of
services and delivery of goods and other documents evidencing or relating to the
transactions which gave rise to Accounts or other Collateral, together with a
schedule of the names and addresses of Borrower's customers, customer
statements, schedules describing the Accounts or other Collateral and/or
statements of Account and confirmatory assignments to Lender of the Accounts or
other Collateral, in form and substance satisfactory to Lender and duly executed
by Borrower. Without limiting the provisions of this Agreement contained
elsewhere, Borrower's granting of credits, discounts, allowances, deductions,
return authorizations or the like will be promptly reported to Lender in
writing. In no event shall any such schedule or confirmatory assignment (or the
absence thereof or omission of any of the Accounts or other Collateral
therefrom) limit or in any way be construed as a waiver, limitation or
modification of the security interests or rights of Lender or the warranties,
representations and covenants of Borrower under this Agreement.
13.10 INSPECTION OF COLLATERAL. From time to time as requested by
Lender, at the sole expense of Borrower, subject, however, with respect to
such expenses, to the provisions of Section 3.8(d), Lender or its designee
shall have access, prior to an Event of Default during reasonable business
hours and on or after an Event of Default at any time, to all of the premises
where Collateral is located for the purposes of inspecting, disposing and
realizing upon the Collateral, and all Borrower's books and records, and
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Borrower shall permit Lender or its designee to make such copies of such books
and records or extracts therefrom as Lender may request. Without expense to
Lender, Lender may use such of Borrower's personnel, equipment, including
computer equipment, programs, printed output and computer readable media,
supplies and premises for the collection of Accounts and realization on other
Collateral as Lender, in its sole discretion, deems appropriate. Borrower
hereby irrevocably authorizes all accountants and third parties to disclose and
deliver to Lender at Borrower's expense all financial information, books and
records, work papers, management reports and other information in their
possession regarding Borrower.
SECTION 14. PROVISIONS OF GENERAL APPLICATION.
14.1 WAIVERS. Borrower waives demand, presentment, notice of dishonor
protest and notice of protest of any instrument either of Borrower or others
which may be included in the Collateral.
14.2 CONSENTS. Borrower consents:
(a) to any extension, postponement of time of payment, indulgence or
to any substitution, exchange or release of Collateral.
(b) to any addition to, or release of, any party or persons primarily
or secondarily liable, or acceptance of partial payments on any Accounts or
instruments and the settlement, compromising or adjustment thereof.
14.3 SURVIVAL. All covenants, agreements, representations and warranties
made by Borrower herein or in any of the Loan Documents or in any certificate,
report or instrument contemplated hereby shall survive any independent
investigation made by Lender and the execution and delivery of this Agreement,
and such certificates, reports or instruments and shall continue so long as any
Obligations are outstanding and unsatisfied, applicable statutes of limitations
to the contrary notwithstanding.
14.4 NOTICES. All notices, requests and demands to or upon the
respective parties hereto shall be deemed to have been duly given or made:
(a) if by hand, immediately upon delivery; (b)if by telex, telecopy,
facsimile transmission or telegram, immediately upon sending, PROVIDED it is
sent on a Business Day, but if not, then immediately upon the beginning of
the first Business Day after being sent and provided further that such telex,
telecopy, facsimile transmission or telegram is promptly confirmed by
delivery of a copy by personal delivery or by United States Mail as otherwise
provided in this Section 14.4; (c) if by Federal Express, Express Mail or any
other overnight delivery service for next day delivery, one (1) Business Day
after dispatch; and (d) if mailed by
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certified mail, return receipt requested, five (5) days after mailing. All
notices, requests and demands are to be given or made to the respective parties
at the following addresses (or to such other addresses as either party may
designate by notice in accordance with the provisions of this paragraph):
If to Borrower: MIDLAND USA, INC.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxxx Xxxxxxxx
Telephone No. 000-000-0000
Facsimile No. 000-000-0000
If to Gibraltar: SUMMIT COMMERCIAL/GIBRALTAR CORP.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Telephone No. 000 000-0000
Facsimile No. 000 000-0000
14.5 AMENDMENTS; WAIVER OF DEFAULTS. The terms of this Agreement shall not
be amended, waived, altered, modified, supplemented or terminated in any manner
whatsoever except by a written instrument signed by Lender and Borrower. Any
default or Event of Default by a party hereto may only be waived by a written
instrument specifically describing such default or Event of Default and signed
by the other party hereto.
14.6 BINDING ON SUCCESSORS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
(including any Participant or Participants of Lender), EXCEPT THAT, Borrower may
not assign any of its rights under this Agreement or the other Loan Documents to
any Person without the prior written consent of Lender.
14.7 INVALIDITY. Any provision of this Agreement which may be determined
by competent authority to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
14.8 SECTION OR PARAGRAPH HEADINGS. Section and paragraph headings are for
convenience only and shall not be construed as part of this Agreement.
55
14.9 GOVERNING LAW. This Agreement shall be construed in accordance with,
and shall be governed by, the laws of the State of New York (without giving
effect to conflict of law rules).
14.10 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE ANY AND ALL
RIGHTS THAT THEY MAY NOW OR HEREAFTER HAVE UNDER THE LAWS OF THE UNITED
STATES OF AMERICA OR ANY STATE TO A TRIAL BY JURY OF ANY AND ALL ISSUES
ARISING EITHER DIRECTLY OR INDIRECTLY IN ANY ACTION OR PROCEEDING BETWEEN
BORROWER, LENDER OR ITS SUCCESSORS AND ASSIGNS, OUT OF OR IN ANY WAY
CONNECTED WITH THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE OBLIGATIONS
AND/OR THE COLLATERAL. IT IS INTENDED THAT SAID WAIVER SHALL APPLY TO ANY
AND ALL DEFENSES, RIGHTS, AND/OR COUNTERCLAIMS IN ANY ACTION OR PROCEEDINGS
BETWEEN BORROWER AND LENDER. BORROWER WAIVES ALL RIGHTS TO INTERPOSE ANY
CLAIMS, DEDUCTIONS, SETOFFS OR COUNTERCLAIMS OF ANY KIND, NATURE OR
DESCRIPTION IN ANY ACTION OR PROCEEDING INSTITUTED BY LENDER WITH RESPECT TO
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE OBLIGATIONS, THE COLLATERAL OR
ANY MATTER ARISING THEREFROM OR RELATING THERETO, EXCEPT COMPULSORY
COUNTERCLAIMS.
14.11 CONSENT TO JURISDICTION. Borrower and Lender each hereby (a)
irrevocably submits and consents to the nonexclusive jurisdiction of the
Supreme Court for New York County, State of New York, and the United State
District Court for the Southern District of New York with respect to any
action or proceeding arising out of this Agreement, the Notes, the other
Obligations, the other Loan Documents, the Collateral or any matter arising
therefrom or relating thereto and (b) waives any objection based on venue or
FORUM NON CONVENIENS with respect thereto. In any such action or proceeding,
Borrower waives personal service of the summons and complaint or other
process and papers therein and agrees that the service thereof may be made by
mail directed to Borrower at its chief executive office set forth herein or
other address thereof of which Lender has received notice as provided herein,
service to be deemed complete as permitted under the rules of either of said
Courts. Any such action or proceeding commenced by Borrower against Lender
will be litigated only in the New York Supreme Court for New York County,
State of New York, and the United States District Court for the Southern
District of New York.
14.12 ENTIRE AGREEMENT. This Agreement, the other Loan Documents, any
supplements or amendments hereto or thereto, and any instruments or documents
delivered or to be delivered in connection herewith or therewith represents
the entire agreement and understanding concerning the subject matter hereof
and thereof between the parties hereto, and supersede all other prior
agreements, understandings, negotiations
56
and discussions, representations, warranties, commitments, proposals, offers and
contracts concerning the subject matter hereof, whether oral or written. In the
event of any inconsistency between the terms of this Agreement and any schedule
or exhibit hereto, the terms of this Agreement shall govern.
14.13 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which when so executed, shall be deemed an original,
but all of which shall constitute but one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first above written.
MIDLAND USA, INC.
By:
---------------------------------
Title:
-----------------------------
SUMMIT COMMERCIAL/GIBRALTAR CORP.
By:
---------------------------------
Title:
------------------------------
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SCHEDULE A
TO
LOAN AND SECURITY AGREEMENT
PERMITTED ENCUMBRANCES
58
SCHEDULE B
TO
LOAN AND SECURITY AGREEMENT
CHIEF EXECUTIVE XXXXXX
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
PRINCIPAL PLACE OF BUSINESS
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
LOCATIONS OF COLLATERAL
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
LOCATIONS OF BOOKS AND RECORD
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
59
SCHEDULE C
TO
LOAN AND SECURITY AGREEMENT
TRADESTYLES
60
