[LOGO OF COMERICA]
CREDIT AGREEMENT
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THIS CREDIT AGREEMENT is made and delivered to be effective as of November 1,
2003, by GVI SECURITY, INC., a Delaware corporation, d/b/a SAMSUNG CCTV (herein
referred to with all successors, assigns and/or personal representatives as the
"Borrower"), and COMERICA BANK (herein referred to with its successors and
assigns as the "Bank"). For and in consideration of the mutual promises herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Borrower and Bank agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. The following terms, as used in this Agreement, shall
have the meanings set forth below. The singular number shall be deemed
to include the plural, the masculine gender shall include the feminine
and neuter genders, and vice versa.
"Accounts," "Chattel Paper," "Documents," "General Intangibles,"
"Goods," "Instruments" shall have the meanings assigned to them in the
UCC on the date of this Agreement.
"Affiliate" shall mean, when used with respect to any Person, any other
Person which, directly or indirectly, controls or is controlled by or
is under common control with such Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), with respect to any
Person, shall mean possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract
or otherwise.
"Agreement" shall mean this Credit Agreement, including all addenda,
exhibits and schedules now or hereafter made a part hereof, as the same
may be amended from time to time.
"Applicable Interest Rate" shall mean, with respect to the Indebtedness
from time to time outstanding under any promissory note or other Loan
Document evidencing the Indebtedness, the rate or rates provided in
such note as the applicable interest rate.
"Business Day" shall mean a day on which the Bank is open to carry on
its normal commercial lending business.
"Collateral" shall mean all property, assets and rights in which a Lien
or other encumbrance in favor of or for the benefit of Bank is or has
been granted or arises or has arisen, or may hereafter be granted or
arise, under or in connection with any Loan Document, or otherwise, to
secure the payment or performance of any portion of the Indebtedness.
"Debt" shall mean, as of any applicable date of determination thereof,
all liabilities of a Person that should be classified as liabilities in
accordance with GAAP. In the case of Borrower, the term "Debt" shall
include, without limitation, the Indebtedness.
"Debt-to-Tangible Net Worth Ratio" shall mean, with respect to any
Person, and as of any applicable date of determination thereof, the
ratio of (a) the total Debt of such Person less the total Subordinated
Debt of such Person to (b) the Tangible Net Worth of such Person.
"Default" shall mean any condition or event which, with the giving of
notice or the passage of time, or both, would constitute an Event of
Default.
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"Disbursement Date" shall mean each date upon which the Bank makes a
loan to the Borrower under Section 2.1 of this Agreement.
"Environmental Law(s)" shall mean all laws, codes, ordinances, rules,
regulations, orders, decrees and directives issued by any federal,
state, local, foreign or other governmental or quasi governmental
authority or body (or any agency, instrumentality or political
subdivision thereof) pertaining to Hazardous Materials or otherwise
intended to regulate or improve health, safety or the environment,
including, without limitation, any hazardous materials or wastes, toxic
substances, flammable, explosive or radioactive materials, asbestos,
and/or other similar materials; any so-called "superfund" or
"superlien" law, pertaining to Hazardous Materials on or about any of
the Collateral, or any other property at any time owned, leased or
otherwise used by any Loan Party, or any portion thereof, including,
without limitation, those relating to soil, surface, subsurface ground
water conditions and the condition of the ambient air; and any other
federal, state, foreign or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to, or imposing
liability or standards of conduct concerning, any hazardous, toxic,
radioactive, flammable or dangerous waste, substance or material, as
now or at anytime hereafter in effect.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, or any successor act or code.
"Event of Default" shall mean any of those conditions or events listed
in Section 6.1 of this Agreement.
"Financial Statements" shall mean all those balance sheets, earnings
statements and other financial data (whether of the Borrower, any
Subsidiary, any Guarantor or otherwise) which have been furnished to
the Bank for the purpose of, or in connection with, this Agreement and
the transactions contemplated hereby.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Governmental Authority" shall mean the United States, each state, each
county, each city, and each other political subdivision in which all or
any portion of the Collateral is located, and each other political
subdivision, agency, or instrumentality exercising jurisdiction over
Bank, any Loan Party, any of the Indebtedness or any Collateral.
"Governmental Requirements" shall mean all laws, ordinances, rules, and
regulations of any Governmental Authority applicable to any Loan Party,
any of the Indebtedness or any Collateral.
"Guarantor(s)" shall mean, as the context dictates, any Person(s)
(other than the Borrower) who shall, at any time, guarantee or
otherwise be or become obligated for the repayment of all or any part
of the Indebtedness, if any.
"Hazardous Material" shall mean and include any hazardous, toxic or
dangerous waste, substance or material defined as such in, or for
purposes of, any Environmental Law(s).
"Indebtedness" shall mean all obligations and liabilities of any Loan
Party to Bank under this Agreement or any Loan Document, together with
all other indebtedness, obligations and liabilities whatsoever of
Borrower to Bank, whether matured or unmatured, liquidated or
unliquidated, direct or indirect, absolute or contingent, joint or
several, due or to become due, now existing or hereafter arising,
voluntary or involuntary, known or unknown, or originally payable to
Bank or to a third party and subsequently acquired by Bank including,
without limitation, any: late charges; loan fees or charges; overdraft
indebtedness; costs incurred by Bank in establishing, determining,
continuing or defending the validity or priority of any Lien or in
pursuing any of its rights or remedies under this Agreement or any Loan
Document or in connection with any proceeding involving Bank as a
result of any financial accommodation to Borrower; debts, obligations
and liabilities for which Borrower would otherwise be liable to the
Bank were it not for the invalidity or enforceability of them by reason
of any bankruptcy, insolvency or other law or for any other reason; and
reasonable costs and expenses of attorneys and paralegals, whether any
suit or other action is instituted, and to court costs if suit or
action is instituted, and whether any such fees, costs or expenses are
incurred at the trial court level or on appeal, in bankruptcy, in
administrative proceedings, in probate proceedings or otherwise;
provided, however, that the term Indebtedness shall not include any
consumer loan to the extent treatment of such loan as part of the
Indebtedness would violate any Governmental Requirement.
"Inventory" means all of the Borrower's now owned and hereafter
acquired inventory, goods, merchandise, and other personal property,
wherever located, to be furnished under any contract of service or held
for sale or lease, all raw materials, work-in-process, finished goods,
returned and repossessed goods, and materials and supplies of any kind,
nature or description which are or might be used or consumed in the
Borrower's business or used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such inventory
goods, merchandise and such other personal property, and all documents
of title or other documents representing them, and all proceeds thereof
(including, but not limited to, all proceeds of insurance with respect
thereto, including the proceeds of any casualty insurance); and any
lists, information and records prepared or kept in relation to the
foregoing and including, without limitation, any of the foregoing
constituting in-transit inventory at the FOB Shipping Point, following
acquisition thereof by Borrower.
"Letter of Credit" shall mean a letter of credit issued by the Bank for
the account of and/or upon the application of the Borrower in
accordance with this Agreement, as such Letter of Credit may be
amended, supplemented, extended or confirmed from time to time.
"Letter of Credit Liabilities" shall mean, at any time and in respect
of all Letters of Credit, the sum of (a) the aggregate amount available
to be drawn under all such Letters of Credit plus (b) the aggregate
unpaid amount of all Reimbursement Obligations then due and payable in
respect of previous drawings under such Letters of Credit.
"Lien" shall mean any valid and enforceable interest in any property,
whether real, personal or mixed, securing an indebtedness, obligation
or liability owed to or claimed by any Person other than the owner of
such property, whether such indebtedness is based on the common law or
any statute or contract and including, but not limited to, a security
interest, pledge, mortgage, assignment, conditional sale, trust
receipt, lease, consignment or bailment for security purposes.
"Loan Documents" shall mean collectively, this Agreement, any
promissory notes evidencing Indebtedness, any approved subordination
agreement, any reimbursement agreement or other documentation executed
in connection with any Letter of Credit, and any other documents,
instruments or agreements evidencing, governing, securing, guaranteeing
or otherwise relating to or executed pursuant to or in connection with
any of the Indebtedness or any Loan Document (whether executed and
delivered prior to, concurrently with or subsequent to this Agreement),
as such documents may have been or may hereafter be amended from time
to time.
"Loan Party" shall mean Borrower, each of its Subsidiaries (whether or
not a party to any Loan Document) and each other Person who or which
shall be liable for the payment or performance of all or any portion of
the Indebtedness or who or which shall own any property that is subject
to (or purported to be subject to) a Lien which secures all or any
portion of the Indebtedness.
"Material Adverse Effect" shall mean any act, event, condition or
circumstance which could materially and adversely affect the business,
operations, condition (financial or otherwise), performance or assets
of any Loan Party, the ability of any Loan Party to perform its
obligations under any Loan Document to which it is a party or by which
it is bound or the enforceability of any Loan Document.
"Maximum Legal Rate" shall mean the maximum rate of nonusurious
interest per annum permitted to be paid by Borrower or, if applicable,
another Loan Party or received by Bank with respect to the applicable
portion of the Indebtedness from time to time under applicable state or
federal law as now or as may be hereafter in effect, including Chapter
1 D of Title 79 Vernon's Texas Civil Statutes (and as the same may be
incorporated by reference in other Texas statutes), but otherwise
without limitation, that rate based upon the "weekly ceiling rate" from
time to time in effect under Chapter 303 of the Texas Finance Code, as
amended.
"Net Income" shall mean the net income (or loss) of a Person for any
applicable period of determination, determined in accordance with GAAP,
but excluding, in any event:
(a) any gains or losses on the sale or other disposition, not in
the ordinary course of business, of investments or fixed or
capital assets, and any taxes on the excluded gains and any
tax deductions or credits on account of any excluded losses;
and
(b) in the case of Borrower, net earnings of any Person in which
Borrower has an ownership interest, unless such net earnings
shall have actually been received by Borrower in the form of
cash distributions.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
Person succeeding to the present powers and functions of the Pension
Benefit Guaranty Corporation.
"Pension Plan(s)" shall mean any and all employee benefit pension plans
of Borrower and/or any of its Subsidiaries in effect from time to time,
as such term is defined in ERISA.
"Permitted Encumbrances" shall mean: (a) Liens in favor of the Bank;
(b) Liens for taxes, assessments or other governmental charges which
are not yet due and payable, incurred in the ordinary course of
business and for which no interest, late charge or penalty is attaching
or which are being contested in good faith by appropriate proceedings
and, if requested by Bank, bonded in an amount and manner satisfactory
to Bank; (c) Liens, not delinquent, arising in the ordinary course of
business and created by statute in connection with worker's
compensation, unemployment insurance, social security and similar
statutory obligations; (d) Liens of mechanics, materialmen, carriers,
warehousemen or other like statutory or common law Liens securing
obligations incurred in good faith in the ordinary course of business
without violation of any Loan Document that are not yet due and
payable; (e) Liens existing as of the date hereof identified on Exhibit
A attached hereto; and (f) Liens placed upon fixed assets hereafter
acquired to secure a portion of the purchase price thereof, provided
that any such Lien shall not encumber any other property of Borrower.
"Person" or "person" shall mean any individual, corporation,
partnership, joint venture, limited liability company, association,
trust, unincorporated association, joint stock company, government,
municipality, political subdivision or agency, or other entity.
"Reimbursement Obligations" shall mean, at any time and in respect of
all Letters of Credit, the aggregate obligations of the Borrower, then
outstanding or which may thereafter arise, to reimburse the Bank for
any amount paid or incurred by the Bank in respect of any and all
drawings under such Letters of Credit, together with any and all other
Indebtedness, obligations and liabilities of any Loan Party to Bank
related to such Letters of Credit arising under this Agreement, any
Letter of Credit application or any other Loan Document.
"Revolving Credit Maturity Date" shall mean the Termination Date or
such earlier date on which the entire unpaid principal amount of all
Revolving Loans becomes due and payable whether by the lapse of time,
demand for payment, acceleration or otherwise; provided, however, if
any such date is not a business day, then the Revolving Credit Maturity
Date shall be the next succeeding business day.
"Revolving Credit Maximum Amount" shall mean the lesser of (a)
$10,000,000.00 or (b) the maximum amount permitted by that certain
Advance Formula Agreement ("Advance Formula Agreement"), dated of even
date herewith, executed by Borrower and Bank.
"Revolving Credit Note" shall mean the Revolving Credit Note dated of
even date herewith in the maximum original principal amount of
$10,000,000.00 made by Borrower payable to the order of the Bank, as
the same may be renewed, extended, modified, increased or restated from
time to time.
"Revolving Loan" shall mean an advance made, or to be made, under the
revolving credit facility to or for the credit of Borrower by the Bank
pursuant to this Agreement.
"Subordinated Debt" shall mean any Debt of Borrower (other than the
Indebtedness) which has been subordinated to the Indebtedness pursuant
to a subordination agreement in form and content satisfactory to the
Bank.
"Subsidiary" shall mean as to any particular parent entity, any
corporation, partnership, limited liability company or other entity
(whether now existing or hereafter organized or acquired) in which more
than fifty percent (50%) of the outstanding equity ownership interests
having voting rights as of any applicable date of determination, shall
be owned directly, or indirectly through one or more Subsidiaries, by
such parent entity. As of the date of this Agreement, Borrower's only
Subsidiaries are: None
"Tangible Net Worth" shall mean, with respect to any Person and as of
any applicable date of determination, (a) the net book value of all
assets of such Person (excluding accounts receivables from any
Affiliate, patent rights, trademarks, trade names, franchises,
copyrights, licenses, goodwill, and all other intangible assets of such
Person), after all appropriate deductions in accordance with GAAP
(including, without limitation, reserves for doubtful receivables,
obsolescence, depreciation and amortization), less (b) all Debt of such
Person at such time, plus (c) the Subordinated Debt of such Person.
"Termination Date" shall mean November 1, 2005.
"UCC" shall mean the Uniform Commercial Code as adopted and in force in
the State of Texas, as amended.
1.2 Accounting Terms. All accounting terms not specifically defined in this
Agreement shall be determined and construed in accordance with GAAP.
SECTION 2. FUNDING LOANS, PAYMENTS, RECOVERIES AND COLLECTIONS
2.1 Funding Loans. Subject to the terms, conditions and procedures of this
Agreement and each other Loan Document and to the satisfaction of all
conditions precedent to the making and funding of any loan as set forth
in any Loan Document, Bank shall make the proceeds of any such loan
available to Borrower on the Disbursement Date agreed upon by Bank and
Borrower by depositing such proceeds into an account maintained by
Borrower with Bank or as otherwise agreed to in writing by Borrower and
Bank.
2.2 Revolving Loans. Subject to the terms and conditions of the Loan
Documents and to the satisfaction of all conditions precedent to the
making and funding of any loan as set forth in any Loan Document, the
Bank agrees to make Revolving Loans to Borrower at any time and from
time to time from the effective date hereof until (but not including)
the Revolving Credit Maturity Date. The proceeds of Revolving Loans
shall be used solely to finance the working capital needs of Borrower.
Except as hereinafter provided, Borrower may request a Revolving Loan
by submitting to Bank a request for advance by an authorized officer or
other representative of Borrower, subject to the following: (a) each
such request for advance shall include, without limitation, the
proposed amount of such revolving loan and the proposed Disbursement
Date, which date must be a Business Day; (b) each such request for
advance shall be communicated to Bank by 12:00 noon (Dallas, Texas
time) three (3) business days prior to the proposed Disbursement Date;
(c) a request for advance, once communicated to Bank, shall not be
revocable by Borrower; and (d) each request for advance, once
communicated to Bank, shall constitute a representation, warranty and
certification by Borrower as of the date thereof that: (i) both before
and after the making of such Revolving Loan, the obligations set forth
in the Loan Documents are and shall be valid, binding and enforceable
obligations of each Loan Party, as applicable; (ii) all terms and
conditions precedent to the making of such Revolving Loan have been
satisfied, and shall remain satisfied through the date of such
Revolving Loan; (iii) the making of such Revolving Loan will not cause
the aggregate outstanding principal amount of all Revolving Loans plus
the Letter of Credit Liabilities, if applicable, to exceed the
Revolving Credit Maximum Amount; (iv) no Default or Event of Default
shall have occurred or be in existence, and none will exist or arise
upon the making of such Revolving Loan; (v) the representations and
warranties contained in the Loan Documents are true and correct in all
material respects and shall be true and correct in all material
respects as of the making of such Revolving Loan; and (vi) the request
for advance will not violate the terms or conditions of any contract,
indenture, agreement or other borrowing of any Loan Party.
Bank may elect (but without any obligation to do so) to make a
Revolving Loan upon the telephonic or facsimile request of Borrower,
provided that Borrower has first executed and delivered to Bank a
telephone notice authorization in form and content satisfactory to
Bank. If any such Revolving Loan based upon a telephonic or facsimile
request is made by Borrower, Bank may require Borrower to confirm said
telephonic or facsimile request in writing by delivering to Bank, on or
before 11:00 a.m. (Dallas, Texas time) on the next business day
following the Disbursement Date of such Revolving Loan, a duly executed
written request for advance, and all other provisions of this Section
2.2 shall be applicable with respect to such Revolving Loan. In
addition, Borrower may authorize the Bank to automatically make
revolving loans pursuant to such other written agreements as may be
entered into by Bank and Borrower.
Notwithstanding anything contained in this Agreement to the contrary,
the aggregate principal amount of all Revolving Loans at any time
outstanding plus the Letter of Credit Liabilities, if applicable, shall
not exceed the Revolving Credit Maximum Amount. If said limitations are
exceeded at anytime, Borrower shall immediately, without demand by
Bank, pay to Bank an amount not less than such excess, or, if Bank, in
its sole discretion, shall so agree, Borrower shall provide Bank cash
collateral in an amount not less than such excess, and Borrower hereby
pledges and grants to Bank a security interest in such cash collateral
so provided to Bank. Unless otherwise expressly provided in a Loan
Document, all sums payable by Borrower to Bank under or pursuant to any
Loan Document, whether principal, interest, or otherwise, shall be
paid, when due, directly to Bank at any office of Bank located in the
State of Texas in immediately available United States funds, and
without setoff, deduction or counterclaim. Bank may, in its discretion,
charge any and all deposit or other accounts (including, without
limitation, any account evidenced by a certificate of deposit or time
deposit) of Borrower maintained with Bank for all or any part of any
Indebtedness then due and payable; provided, however, that such
authorization shall not affect Borrower's obligations to pay all
Indebtedness, when due, whether or not any such account balances
maintained by Borrower with Bank are insufficient to pay any amounts
then due.
Borrower shall pay to Bank an unused commitment fee in an amount equal
to the product of (a) one quarter of one percent (.25%) multiplied by
(b) the difference between (i) the maximum face amount of the Revolving
Credit Note and (ii) the average daily aggregate principal balance of
all Revolving Loans outstanding during each of Borrower's fiscal
quarters. Such fee shall be computed and shall be payable quarterly in
arrears as of the end of each of Borrower's fiscal quarters. Bank shall
invoice Borrower for such fees, which invoice shall be due and payable
within fifteen (15) days after receipt.
The provisions of Chapter 346 of the Texas Finance Code are
specifically declared by the parties not to be applicable to any of the
Loan Documents or the transactions contemplated thereby.
2.3 Letters of Credit. Subject to the terms and conditions of this
Agreement and the other Loan Documents, the Bank shall, upon request
from Borrower from time to time prior to the Revolving Credit Maturity
Date, issue one or more Letters of Credit. The Letter of Credit
Liabilities shall not exceed $1,000,000.00 and the sum of (a) the
outstanding principal balance of all Revolving Loans plus (b) the
Letter of Credit Liabilities shall not exceed the Revolving Credit
Maximum Amount. Letters of Credit may be issued solely as commercial
letters of credit related to trade financing. Each Letter of Credit
issued pursuant to this Agreement shall be in a minimum amount of $
-0-. No Letter of Credit shall have a stated expiration date later than
the Revolving Credit Maturity Date.
Borrower shall give the Bank written notice requesting each issuance of
a Letter of Credit hereunder not less than ten (10) business days prior
to the requested issuance date and shall furnish such additional
information regarding such transaction as Bank may request. The
issuance by Bank of each Letter of Credit shall, in addition to the
conditions precedent set forth elsewhere in this Agreement, be subject
to the conditions precedent that (i) such Letter of Credit shall be in
form and substance satisfactory to Bank, (ii) Borrower shall have
executed and delivered such applications and other instruments and
agreements relating to such Letter of Credit as Bank shall have
requested and are not inconsistent with the terms of this Agreement,
(iii) each of the statements in Section 2.2 (d) above are true as of
the date of issuance of such Letter of Credit with respect to issuance
of such Letter of Credit (as opposed to making a Revolving Loan), and
the submission of an application for issuance of a Letter of Credit
shall constitute a representation, warranty and certification of
Borrower to that effect, and (iv) no Letter of Credit may be issued if
after giving effect thereto, the sum of the aggregate outstanding
principal balance of all Revolving Loans plus the Letter of Credit
Liabilities would exceed the Revolving Credit Maximum Amount. With
respect to the issuance or renewal of each Letter of Credit, Borrower
shall pay to Bank an origination fee for each Letter of Credit in the
amount of one percent (1%) of the amount of such Letter of Credit and
such other fees and expenses customarily charged by Bank in connection
with the issuance or renewals of letters of credit.
Borrower shall be irrevocably and unconditionally obligated forthwith
to reimburse Bank for any amount paid by Bank upon any drawing under
any Letter of Credit, without presentment, demand, protest or other
formalities of any kind, all of which are hereby waived. Unless
Borrower shall elect to otherwise satisfy such Reimbursement
Obligation, such reimbursement shall, subject to satisfaction of any
conditions provided herein for the making of Revolving Loans and to the
Revolving Credit Maximum Amount, automatically be made by advancing to
Borrower a Revolving Loan in the amount of such Reimbursement
Obligation.
2.4 Maximum Interest Rate. At no time shall any Applicable Interest Rate or
default rate in respect of any Indebtedness hereunder, exceed the
Maximum Legal Rate. In the event that any interest is charged or
otherwise received by Bank in excess of the Maximum Legal Rate,
Borrower hereby acknowledges and agrees that any such excess interest
shall be the result of an accidental and bona fide error, and any such
excess shall be deemed to have been payment of principal, and not of
interest, and shall be applied, first, to reduce the principal
Indebtedness then outstanding, second, any remaining excess, if any,
shall be applied to reduce any other Indebtedness, and third, any
remaining excess, if any, shall be returned to Borrower.
Notwithstanding the foregoing or anything to the contrary contained in
this Agreement or any other Loan Document, but subject to all
limitations contained in this Section, if at anytime any Applicable
Interest Rate or default rate or other rate of interest applicable to
any portion of the Indebtedness is computed on the basis of the Maximum
Legal Rate, any subsequent reduction in the Applicable Interest Rate,
default rate or such other rate of interest shall not reduce such
interest rate thereafter payable below the Maximum Legal Rate until the
aggregate amount of interest accrued equals the total amount of
interest that would have accrued if interest had, at all times, been
computed solely on the basis of the Applicable Interest Rate, default
rate or such other interest rate. This Section shall control all
agreements between the Borrower and the Bank.
2.5 Receipt of Payments by Bank. Any payment by Borrower of any of the
Indebtedness made by mail will be deemed tendered and received by Bank
only upon actual receipt thereof by Bank at the address designated for
such payment, whether or not Bank has authorized payment by mail or in
any other manner, and such payment shall not be deemed to have been
made in a timely manner unless actually received by Bank on or before
the date due for such payment, time being of the essence. Borrower
expressly assumes all risks of loss or liability resulting from
non-delivery or delay of delivery of any item of payment transmitted by
mail or in any other manner. Acceptance by Bank of any payment in an
amount less than the amount then due shall be deemed an acceptance on
account only, and any failure to pay the entire amount then due shall
constitute and continue to be an Event of Default. Prior to the
occurrence of any Default, Borrower shall have the right to direct the
application of any and all payments made to Bank hereunder to the
Indebtedness evidenced by the respective notes evidencing the
Indebtedness. Borrower waives the right to direct the application of
any and all payments received by Bank hereunder at any time or times
after the occurrence and during the continuance of any Default.
Borrower further agrees that after the occurrence and during the
continuance of any Default, or prior to the occurrence of any Default
if Borrower has failed to direct such application, Bank shall have the
continuing exclusive right to apply and to reapply any and all payments
received by Bank at any time or times, whether as voluntary payments,
proceeds from any Collateral, offsets, or otherwise, against the
Indebtedness in such order and in such manner as Bank may, in its sole
discretion, deem advisable, notwithstanding any entry by Bank upon any
of its books and records. Borrower hereby expressly agrees that, to the
extent that Bank receives any payment or benefit of or otherwise upon
any of the Indebtedness, and such payment or benefit, or any part
thereof, is subsequently invalidated, declared to be fraudulent or
preferential, set aside, or required to be repaid to a trustee,
receiver, or any other Person under any bankruptcy act, state or
federal law, common law, equitable cause or otherwise, then to the
extent of such payment or benefit, the Indebtedness, or part thereof,
intended to be satisfied shall be revived and continued in full force
and effect as if such payment or benefit had not been made or received
by Bank, and, further, any such repayment by Bank shall be added to and
be deemed to be additional Indebtedness.
2.6 Conditions Precedent to Loans and Letters of Credit. The obligation of
the Bank to issue any Letter of Credit, if applicable, or to make any
loan under or pursuant to this Agreement shall be subject to the
following conditions precedent:
a. Borrower shall have executed and delivered to Bank, or caused
to have been executed and delivered to Bank, all such
instruments, agreements, certificates, opinions, financial
statements, appraisals, evidence of title, evidence of
insurance, environmental audits, and other information and
other documents as the Bank shall require, and all of the
foregoing shall be in form and content acceptable to Bank and
all instruments and agreements shall be in full force and
effect and binding and enforceable obligations of Borrower
and, to the extent that it is a party thereto or otherwise
bound thereby, of each other Person who may be a party thereto
or bound thereby including without limitation: (i) evidence of
existence, good standing, qualification to conduct business
and authority for each Loan Party and signatory on behalf of
each Loan Party; (ii) all notes, guaranties, security
agreements, mortgages, deeds of trust, pledge agreements,
assignments, financing statements and other documents
requested by Bank to evidence the Indebtedness or to create,
protect or perfect Liens upon the Collateral required by Bank
as security for the Indebtedness and to accord Bank a
perfected security position in the Collateral, subject only to
Permitted Encumbrances; (iii) if applicable, a guaranty
agreement from each Guarantor required by Bank; (iv) such
other documents or agreements of security, assurances of Loan
Document validity, legality and enforceability, and
appropriate assurances of validity, perfection and priority of
Lien as Bank may request, including, without limitation,
delivery to the Bank of landlord waivers satisfactory to Bank,
and Bank shall have received proof that appropriate security
agreements, financing statements, mortgages, deeds of trust,
collateral and other documents covering the Collateral shall
have been executed and delivered by the appropriate Persons
and recorded or filed in such jurisdictions and such other
steps shall have been taken as necessary to perfect and
protect, subject only to Permitted Encumbrances, the Liens
granted thereby.
b. All actions, proceedings, instruments and documents required
to carry out the borrowings and transactions contemplated by
this Agreement or any other Loan Document or incidental
thereto, and all other related legal matters, shall have been
satisfactory to and approved by Bank.
c. Each Loan Party shall have performed and complied with all
agreements and conditions contained in the Loan Documents
applicable to it and which are then in effect.
d. Each of the representations and warranties of each Loan Party
under any Loan Document shall be true and correct in all
material respects as if made on each loan Disbursement Date.
e. No Default or Event of Default shall have occurred and be
continuing; there shall have been no material adverse change
in the condition (financial or otherwise), properties,
business, or operations of any Loan Party since the date of
the financial statements most recently delivered to Bank prior
to the date of this Agreement; and no provision of law, any
order of any Governmental Authority, or any regulation, rule
or interpretation thereof, shall have had any Material Adverse
Effect on the validity or enforceability of any Loan Document.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants, and such representations and warranties shall
be deemed to be continuing representations and warranties during the entire life
of this Agreement, and so long as Bank shall have any commitment or obligation
to make any loans or issue any Letters of Credit, if applicable and so long as
any Indebtedness remains unpaid and outstanding under any Loan Document, as
follows:
3.1 Authority. Each Loan Party and, if applicable, each of its partners and
members who is not a natural Person is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
organization and is duly qualified and authorized to do business in
each other jurisdiction in which the character of its assets or the
nature of its business makes such qualification necessary.
3.2 Due Authorization. Each Loan Party has all requisite power and
authority to execute, deliver and perform its obligations under each
Loan Document to which it is a party or is otherwise bound, all of
which have been duly authorized by all necessary action, and are not in
contravention of law or the terms of any Loan Party's organizational or
other governing documents.
3.3 Title to Property. Each Loan Party has good title to all property and
assets purported to be owned by it, including those assets identified
on the financial statements most recently delivered to Bank.
3.4 Encumbrances. There are no security interests or other Liens or
encumbrances on, and no financing statements on file with respect to,
any of the property or assets of any Loan Party, except for Permitted
Encumbrances.
3.5 Subsidiaries. Borrower has no Subsidiaries except those specifically
disclosed in the Defined Terms.
3.6 Taxes. Each Loan Party has filed, on or before their respective due
dates, all federal, state, local and foreign tax returns which are
required to be filed, or has obtained extensions for filing such tax
returns, and is not delinquent in filing such returns in accordance
with such extensions, and has paid all taxes which have become due
pursuant to those returns or pursuant to any assessments received by
any such party, as the case may be, to the extent such taxes have
become due, except to the extent such tax payments are being actively
and diligently contested in good faith by appropriate proceedings, and
if requested by Bank, have been bonded or reserved in an amount and
manner satisfactory to Bank.
3.7 No-Defaults. There exists no default (or event which, with the giving
of notice or passage of time, or both, would result in a default) under
the provisions of any instrument or agreement evidencing, governing,
securing or otherwise relating to any Debt of any Loan Party or
pertaining to any of the Permitted Encumbrances.
3.8 Enforceability of Agreement and Loan Documents. Each Loan Document has
been duly executed and delivered by duly authorized officer(s) or other
representative(s) of each Loan Party and constitutes the valid and
binding obligation of each Loan Party, enforceable in accordance with
its terms, except to the extent that enforcement thereof may be limited
by applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally
at the time in effect.
3.9 Non-contravention. The execution, delivery and performance by each Loan
Party of the Loan Documents to which such Loan Party is a party or
otherwise bound, are not in contravention of the terms of any
indenture, agreement or undertaking to which any such Loan Party is a
party or by which it is bound, except to the extent that such terms
have been waived or that failure to comply with any such terms would
not have a Material Adverse Effect.
3.10 Actions, Suits, Litigation or Proceedings. There are no actions, suits,
litigation or proceedings, at law or in equity, and no proceedings
before any arbitrator or by or before any Governmental Authority,
pending, or, to the best knowledge of Borrower, threatened against or
affecting any Loan Party, which, if adversely determined, could
materially impair the right of any Loan Party to carry on its business
substantially as now conducted or could have a Material Adverse Effect.
No Loan Party is under investigation by, or is operating under any
restrictions imposed by, any Governmental Authority.
3.11 Compliance with Laws. Each Loan Party has complied with all
Governmental Requirements, including, without limitation, Environmental
Laws, to the extent that failure to so comply could have a Material
Adverse Effect.
3.12 Consents, Approvals and Filings, Etc. Except as have been previously
obtained or as otherwise expressly provided in this Agreement, no
authorization, consent, approval, license, qualification or formal
exemption from, or any filing, declaration or registration with, any
Governmental Authority and no material authorization, consent or
approval from any other Person, is required in connection with the
execution, delivery and performance by any Loan Party of any Loan
Document to which it is a party. All such authorizations, consents,
approvals, licenses, qualifications, exemptions, filings, declarations
and registrations which have previously been obtained or made, as the
case may be, are in full force and effect and are not the subject of
any attack, or to the knowledge of Borrower, any threatened attack, in
any material respect, by appeal, direct proceeding or otherwise.
3.13 Environmental Representations. No Loan Party has used Hazardous
Materials on, in, under or otherwise affecting any real or personal
property now or at any time owned, occupied or operated by such Person
or upon which such Person has a place of business which, in any manner,
violates any Environmental Law, to the extent any such violation could
result in a Material Adverse Effect, and to the best of Borrower's
knowledge, no prior or current owner, occupant or operator of any of
such property does or has used any Hazardous Materials on or affecting
such property in any manner which violates any Environmental Law to the
extent that any such violation could result in a Material Adverse
Effect. No Loan Party has received any notice of any violation of any
Environmental Law, and to the best knowledge of the Borrower, there
have been no actions commenced or threatened by any Person against any
such property or against any Loan Party for non-compliance with any
Environmental Law which could result in a Material Adverse Effect.
3.14 Accuracy of Information. All financial statements previously furnished
to Bank have been prepared in accordance with GAAP and fairly present
the financial condition of Borrower and, as applicable, the
consolidated financial condition of Borrower and such other Person(s)
as such financial statements purport to present, and the results of
their respective operations as of the dates and for the periods covered
thereby; and since the date(s) of said financial statements, there has
been no material adverse change in the financial condition of Borrower
or any other Person covered by such financial statements.
Each Loan Party is solvent, able to pay its debts as they mature, has
capital sufficient to carry on its business and has assets the fair
market value of which exceed its liabilities, and no Loan Party will be
rendered insolvent, under-capitalized or unable to pay debts generally
as they become due by the execution or performance of any Loan Document
to which it is a party or by which it is otherwise bound.
SECTION 4. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until all instruments and agreements
evidencing each and every loan, Letter of Credit and other financial
accommodation by the Bank to the Borrower or any Loan Party are fully discharged
and terminated, and thereafter, so long as any Indebtedness remains outstanding,
it will, and, as applicable, it will cause each Loan Party within its control or
under common control to:
4.1 Preservation of Existence, Etc. Preserve and maintain its existence and
preserve and maintain such of its rights, licenses, and privileges as
are material to the business and operations conducted by it; qualify
and remain qualified to do business in each jurisdiction in which such
qualification is material to its business and operations or ownership
of its properties, continue to conduct and operate its business
substantially as conducted and operated during the present and
preceding calendar year; at all times maintain, preserve and protect
all of its franchises and trade names and preserve all the remainder of
its property and keep the same in good repair, working order and
condition; and from time to time make, or cause to be made, all needed
and proper repairs, renewals, replacements, betterments and
improvements thereto.
4.2 Keeping of Books; Audits of Collateral; Fees. Keep proper books of
record and account in which full and correct entries shall be made of
all of its financial transactions and its assets and businesses so as
to permit the presentation of financial statements prepared in
accordance with GAAP; and permit Bank, or its representatives, at
reasonable times and intervals, at Borrower's cost and expense, to
examine its books and records and to discuss its financial matters with
its officers, employees and independent certified public accountants;
and permit Bank from time to time to audit Borrower's accounts,
inventory, or other Collateral, provided that such audits will be
conducted upon reasonable notice. Borrower agrees to reimburse Bank, on
demand, for customary and reasonable fees and costs incurred by Bank
for such audits, and for each appraisal of Collateral and financial
analysis and examination of Borrower performed from time to time by its
agents.
4.3 Reporting Requirements. Furnish to Bank, or cause to be furnished to
Bank, the following:
a. as soon as possible, and in any event within three (3)
calendar days after becoming aware of the occurrence or
existence of each Default or Event of Default hereunder or any
material adverse change in the financial condition of any Loan
Party, a written statement of the chief financial officer of
Borrower (or in his or her absence, a responsible senior
officer of Borrower), setting forth details of such Default,
Event of Default or change, and the action which Borrower has
taken, or has caused to be taken, or proposes to take, or to
cause to be taken, with respect thereto;
b. as soon as available, and in any event within ninety (90) days
after and as of the end of each fiscal year of Borrower,
audited financial statements of Borrower and such other of the
Loan Parties as may be required by the Bank, consolidated, as
applicable, including a balance sheet, income statement,
statement of profit and loss, surplus reconciliation statement
and statement of cash flows, for and as of such fiscal year
then ending and including such other comments and financial
details as are usually included in similar reports. Such
financial statements shall be - prepared in accordance with
GAAP by independent certified public accountants of recognized
standing selected by Borrower and approved by Bank and
containing unqualified opinions as to the fairness of the
statements therein contained.
c. as soon as available, and in any event within thirty (30) days
after and as of the end of each calendar month including the
last such reporting period of each of Borrower's fiscal years,
financial statements of Borrower and such of the other Loan
Parties as may be required by the Bank, for and as of such
reporting period, including a balance sheet, income statement,
statement of profit and loss, surplus reconciliation statement
and statement of cash flows for and as of such reporting
period then ending and for and as of that portion of the
fiscal year then ending, in each case, prepared and certified
by the chief financial officer of Borrower (or in his or her
absence, a responsible senior officer of Borrower) and, as
applicable, each other Loan Party as to consistency with prior
financial reports and accounting periods, accuracy and
fairness of presentation
d. as soon as available, and in any event within thirty (30) days
prior to end of each fiscal year of Borrower, an annual
proposed budget prepared and certified by the chief financial
officer of Borrower, and completed in such detail as Bank
shall require, in Bank's sole discretion.
e. as soon as available, and in any event within twenty (20) days
after and as of the end of each calendar month, monthly
accounts payable aging and accounts receivable aging reports
prepared and certified by the chief financial officer of
Borrower, and completed in such detail as Bank shall require,
in Bank's sole discretion.
f. concurrently with each delivery of the Financial Statements
required by this section, furnish to the Bank a certificate of
its chief executive or financial officer stating that no Event
of Default or Default has occurred, or if any such Event of
Default or Default exists, stating the nature thereof, the
period of existence thereof and what action the Borrower
proposes to take with respect thereto.
g. twenty (20) days after the end of each calendar month, (i) an
Inventory report as of the end of the preceding month in a
form satisfactory to the Bank, in Bank's sole discretion, and
(ii) a certificate in the form required by Bank and as
otherwise set forth in the Advance Formula Agreement,
confirming that the aggregate unpaid principal amount of all
Revolving Loans and Reimbursement Obligations does not exceed
the limitations as then in effect pursuant to the Advance
Formula Agreement (or, if such is not the case, accompanied by
a prepayment of the Revolving Credit Note sufficient in amount
to reduce the aggregate unpaid principal amount of all
Revolving Loans and Reimbursement Obligations to or below the
amount of any such limitations as set forth in the Advance
Formula Agreement) and confirming that the aggregate unpaid
principal balance of the Revolving Loans and Reimbursement
Obligations does not exceed the Maximum Revolving Credit Loan.
4.4 Financial Covenants. Maintain all financial covenants set forth below
(for purposes of the financial covenants, definitions for capitalized
terms not otherwise defined in this Agreement follow the covenants):
(a) Tangible Net Worth.
(i) Maintain a minimum Tangible Net Worth from the date
of this Agreement through December 2003 of $2,200,000.00; and
(ii) Commencing January 2004, and continuing each fiscal
quarter thereafter through the Termination Date, maintain a
Tangible Net Worth equal to the minimum required Tangible Net
Worth for the preceding fiscal quarter, plus fifty percent
(50%) of Net Income of Borrower for the preceding fiscal
quarter.
(b) Debt-to-Tangible Net Worth Ratio. Maintain a maximum
Debt-to-Tangible Net Worth Ratio at all times of not more than
the ratio set forth below during the corresponding period set
forth below:
Period Ratio
From the date hereof through November 2003 6.00:1
December 2003 through February 2004 5.50:1
March 2004 through May 2004 5.10:1
June 2004 through August 2004 4.70:1
September 2004 through November 2004 4.30:1
December 2004 through February 2004 3.90:1
March 2005 through May 2005 3.60:1
June 2005 through August 2005 3.30:1
September 2005 to November 2005 3.00:1
(c) Net Income. Maintain a minimum quarterly Net Income from the
date of this Agreement through the Termination Date for each
quarter beginning with the quarter ending September 30, 2003
of $-0-.
4.5 Further Assurances; Financing Statements. Furnish Bank, at Borrower's
cost and expense, upon Bank's request and in form satisfactory to Bank
(and execute and deliver or cause to be executed and delivered), such
additional pledges, assignments, mortgages, Lien instruments or other
security instruments, consents, acknowledgments, subordinations and
financing statements covering any or all of the Collateral required by
Bank to secure any Indebtedness together with such other documents or
instruments as Bank may require to effectuate more fully the purposes
of any Loan Document.
4.6 Insurance. Maintain insurance coverage by insurers acceptable to Bank
on its physical assets and against other business risks in such amounts
and of such types as are customarily carried by companies similar in
size and nature or as may otherwise be required by Bank, and in the
event of acquisition of additional property, real or personal, or of
the incurrence of additional risks of any nature, increase such
insurance coverage in such manner and to such extent as prudent
business judgment and present practice would dictate; and in the case
of all policies covering property subject to any Loan Document or
property in which the Bank shall have a Lien of any kind whatsoever,
other than those policies protecting against casualty liabilities to
strangers, all such insurance policies shall provide that the loss
payable thereunder shall be payable to Borrower (or other Person
providing Collateral) and Bank, with mortgagee's clauses in favor of
and satisfactory to Bank for all such policies, and such policies shall
also provide that they may not be canceled or changed without thirty
(30) days' prior written notice to Bank. Upon the request of Bank, all
of said policies, or copies thereof, including all endorsements thereon
and those required hereunder, shall be deposited with Bank.
4.7 Compliance with ERISA. In the event that any Loan Party or any of its
Subsidiaries maintain(s) or establish(es) a Pension Plan subject to
ERISA, (a) comply in all material respects with all requirements
imposed by ERISA as presently in effect or hereafter promulgated,
including, but not limited to, the minimum funding requirements
thereof; (b) promptly notify Bank upon the occurrence of a "reportable
event" or "prohibited transaction" within the meaning of ERISA, or that
the PBGC or any Loan Party has instituted or will institute proceedings
to terminate any Pension Plan, together with a copy of any proposed
notice of such event which may be required to be filed with the PBGC;
and (c) furnish to Bank (or cause the plan administrator to furnish
Bank) a copy of the annual return (including all schedules and
attachments) for each Pension Plan covered by ERISA, and filed with the
Internal Revenue Service by any Loan Party not later than ten (10) days
after such report has been so filed.
4.8 Environmental Covenants. Comply with all applicable Environmental Laws,
and maintain all permits, licenses and approvals required under
applicable Environmental Laws, where the failure to do so could have a
Material Adverse Effect. Promptly notify Bank, in writing, as soon as
Borrower becomes aware of any condition or circumstance which makes any
of the environmental representations or warranties set forth in this
Agreement incomplete, incorrect or inaccurate in any material respect
as of any date; and promptly provide to Bank, immediately upon receipt
thereof, copies of any material correspondence, notice, pleading,
citation, indictment, complaint, order, decree, or other document from
any source asserting or alleging a violation of any Environmental Law
by any Loan Party, or of any circumstance or condition which requires
or may require, a financial contribution by any Loan Party, or a
clean-up, removal, remedial action or other response by or on behalf of
any Loan Party, under applicable Environmental Law, or which seeks
damages or civil, criminal or punitive penalties from any Loan Party or
any violation or alleged violation of any Environmental Law. Borrower
hereby agrees to indemnify, defend and hold Bank, and any of Bank's
past, present and future officers, directors, shareholders, employees,
representatives and consultants, harmless from any and all claims,
losses, damages, suits, penalties, costs, liabilities, obligations and
expenses (including, without limitation, reasonable legal expenses and
attorneys' fees, whether inside or outside counsel is used) incurred or
arising out of any claim, loss or damage of any property, injuries to
or death of any persons, contamination of or adverse effects on the
environment, or other violation of any applicable Environmental Law, in
any case, caused by any Loan Party or in any way related to any
property owned or operated by any Loan Party or due to any acts of any
Loan Party or any of its officers, directors, shareholders, employees,
consultants and/or representatives INCLUDING ANY CLAIMS, LOSSES,
DAMAGES, SUITS, PENALTIES, COSTS, LIABILITIES, OBLIGATIONS OR EXPENSES,
RESULTING FROM BANK'S OWN NEGLIGENCE; provided however, that the
foregoing indemnification shall not be applicable, and Borrower shall
not be liable for any such claims, losses, damages, suits, penalties,
costs, liabilities, obligations or expenses, to the extent (but only to
the extent) the same arise or result from any gross negligence or
willful misconduct of Bank or any of its agents or employees.
SECTION 5. NEGATIVE COVENANTS
Borrower covenants and agrees that, until all instruments and agreements
evidencing each and every loan, Letter of Credit and other financial
accommodation by the Bank to the Borrower or any Loan Party are fully discharged
and terminated, and thereafter, so long as any Indebtedness remains outstanding,
it will not, and it will not allow any Loan Party within its control or under
common control to, without the prior written consent of the Bank:
5.1 Capital Structure; Business Objects or Purpose; Mergers; Asset
Disposition; Acquisitions. Purchase, acquire or redeem any of its
equity ownership interests; or enter into any reorganization or
recapitalization; or reclassify its equity ownership interests; or make
any material change in its capital structure or general business
objects or purpose; or change its name, or enter into any merger or
consolidation, whether or not the surviving entity thereunder; or sell,
lease, transfer, relocate or dispose of all, substantially all, or any
material part of its assets (whether in a single transaction or in a
series of transactions); or purchase or otherwise acquire or become
obligated for the purchase of all or substantially all of the assets or
business interests of any Person or any shares of stock or other
ownership interests of any Person or in any other manner effectuate or
attempt to effectuate an expansion of present business by acquisition.
Notwithstanding the foregoing, nothing in this Section 5.1 shall
prohibit or otherwise restrict Borrower from issuing common stock,
preferred stock (including a newly designated series of preferred
stock), options, warrants and other equity securities to raise capital
or as consideration in connection with a business transaction entered
into in the ordinary course of business; provided, however, that any
such action by Borrower (i) does not result in a violation of any
covenants, representations or warranties contained in this Agreement or
any other Loan Document and (ii) does not result in any material change
in ownership of Borrower unless Bank is notified by Borrower in writing
at least thirty (30) days prior to any such action by Borrower.
5.2 Guaranties. Guarantee, endorse, or otherwise become secondarily liable
for or upon the obligations or Debt of others (whether directly or
indirectly), except guaranties in favor of and satisfactory to Bank and
endorsements for deposit or collection in the ordinary course of
business.
5.3 Debt. Become or remain obligated for any Debt, except: Indebtedness and
other Debt from time to time outstanding and owing to Bank; unsecured
trade, utility or non-extraordinary accounts payable arising in the
ordinary course of business; Subordinated Debt; purchase money
indebtedness incurred for the purpose of purchasing or acquiring fixed
assets; and Debt (including, without limitation, capitalized lease
obligations) outstanding as of the date hereof if specifically
disclosed in the most recent financial statements delivered to the Bank
prior to the date hereof.
5.4 Encumbrances. Create, incur, assume or suffer to exist any Lien upon
any of its property or assets, whether now owned or hereafter acquired,
except for Permitted Encumbrances.
5.5 Investments; Extensions of Credit. Make or allow to remain outstanding
any investment (whether such investment shall be of the character of
investment in shares of stock, evidences of indebtedness or other
securities or otherwise) in, or any loans, advances or extensions of
credit to, any Person, other than (a) Borrower's current ownership
interests in those Subsidiaries of Borrower, if any, which are
specifically disclosed in the definition of Subsidiaries, and (b) any
investment in direct obligations of the United States of America or any
agency thereof, or in certificates of deposit issued by Bank,
maintained consistent with Borrower's or such Subsidiary's business
practices prior to the date hereof; provided, that no such investment
shall mature more than one (1) year after the date when made or the
issuance thereof, and (c) marketable, traded stock and other securities
issued by entities organized under the laws of the United States or a
state thereof.
5.6 Pension Plans. Except in compliance with this Agreement, enter into,
maintain, or make contribution to, directly or indirectly, any Pension
Plan that is subject to ERISA.
5.7 Subordinate Indebtedness. Subordinate any indebtedness due to it from
any Person to indebtedness of other creditors of such Person.
SECTION 6. EVENTS OF DEFAULT
6.1 Events of Default. The occurrence or existence of any of the following
conditions or events shall constitute an "Event of Default" hereunder:
(a) non-payment of any principal, interest or other sums due upon
the Indebtedness within five (5) days following the date due
by maturity, acceleration or otherwise, or failure to pay any
Indebtedness owing on a demand basis upon demand;
(b) any failure or neglect by Borrower or any Loan Party to comply
with, or breach of or default under, any of the terms,
conditions, covenants or agreements set forth in this
Agreement or any other Loan Document, and such failure, breach
or default is not cured within ten (10) days following written
demand by Bank;
(c) any representation, warranty, financial statement, or other
information made, given or furnished to Bank by or on behalf
of any Loan Party in any Loan Document shall be, or prove to
have been, untrue or incorrect in any material respect when
made, given or furnished;
(d) any change in the executive management (i.e., the chief
executive officer, chief operating officer or chief financial
officer), or any change in the majority ownership or control
of Borrower, whether by reason of incapacity, death,
resignation, termination or otherwise which, in Bank's sole
judgment, could become a Material Adverse Effect;
(e) any expiration, or termination by Samsung Corporation
("Samsung") of, that certain Distribution Agreement ("Samsung
Agreement"), dated August 30, 1999, by and between Borrower
and Samsung Corporation, unless (i) Samsung continues to
operate and honor the terms of the Samsung Agreement,
notwithstanding any such termination or expiration, and (ii)
the Samsung Agreement is renewed, extended or replaced with a
comparable agreement within thirty (30) days following the
termination or expiration thereof ;
(f) any termination or breach of any guaranty, pledge, collateral
assignment or subordination agreement relating to all or any
part of the Indebtedness;
(g) any failure by Borrower to pay when due any of its
indebtedness (other than to the Bank) or in the observance or
performance of any term, covenant or condition in any document
evidencing, securing or relating to such indebtedness;
(h) any levy or writ of attachment or garnishment or other like
judicial process is filed or issued upon the Borrower or any
of the Collateral, including without limit, any accounts of
Borrower with the Bank, involving any indebtedness in an
amount in excess of $50,000.00, which is not stayed or lifted
within sixty (60) days following the date filed or levied;
provided, however, that Borrower shall provide Bank with
written notice of any such filing or issuance notwithstanding
the foregoing limitation on the amount of indebtedness
involved;
(i) any loss, theft, substantial damage or destruction to, or of,
any Collateral, which in Bank's sole judgment, could become a
Material Adverse Effect;
(j) any sale or other disposition by Borrower of any substantial
portion of its assets or property or voluntary suspension of
the transaction of business by Borrower or any Loan Party, or
dissolution, termination of existence, merger or consolidation
by Borrower, or any Loan Party;
(k) if Bank deems the margin of Collateral insufficient or itself
insecure, in good faith believing that the prospect of payment
of the Indebtedness or performance of this Agreement is
impaired or shall fear deterioration, removal, or waste of
Collateral; or
(l) if (i) Borrower applies for or consents to the appointment of,
or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its
property, (ii) admits in writing its inability, or be
generally unable, to pay its debts as they become due or cease
operations of its present business, (iii) makes a general
assignment for the benefit of creditors, (iv) commences a
voluntary case under any state or Federal bankruptcy laws (as
now or hereafter in effect), (v) is adjudicated a bankrupt or
insolvent, (vi) files a petition seeking to take advantage of
any other law providing for the relief of debtors, (vii)
acquiesces to, or fails to have dismissed, within ninety (90)
days, any petition filed against it in any involuntary case
under such bankruptcy laws, or (viii) takes any action for the
purpose of effecting any of the foregoing.
6.2 Remedies Upon Event of Default. Upon the occurrence and at any time
during the existence or continuance of any Event of Default, but
without impairing or otherwise limiting the Bank's right to demand
payment of all or any portion of the Indebtedness which is payable on
demand, at Bank's option, Bank may give notice to Borrower declaring
all or any portion of the Indebtedness remaining unpaid and
outstanding, whether under the notes evidencing the Indebtedness or
otherwise, to be due and payable in full without presentation, demand,
protest, notice of dishonor, notice of intent to accelerate, notice of
acceleration or other notice of any kind, all of which are hereby
expressly waived, whereupon all such Indebtedness shall immediately
become due and payable. Furthermore, upon the occurrence of a Default
or Event of Default and at any time during the existence or continuance
of any Default or Event of Default, but without impairing or otherwise
limiting the right of Bank, if reserved under any Loan Document, to
make or withhold financial accommodations at its discretion, to the
extent not yet disbursed, any commitment by Bank to make any further
loans or, if applicable, issue any further Letters of Credit shall
automatically terminate. The foregoing rights and remedies are in
addition to any other rights, remedies and privileges Bank may
otherwise have or which may be available to it, whether under this
Agreement, any other Loan Document, by law, or otherwise.
6.3 Waiver of Defaults. No Default or Event of Default shall be waived by
Bank except in a written instrument specifying the scope and terms of
such waiver and signed by an authorized officer of Bank, and such
waiver and shall be effective only for the specific time(s) and
purpose(s) given. No single or partial exercise of any right, power or
privilege hereunder, or any delay in the exercise thereof, shall
preclude other or further exercise of Bank's rights. No waiver of any
Default or Event of Default shall extend to any other or further
Default or Event of Default. No forbearance on the part of Bank in
enforcing any of Bank's rights or remedies under any Loan Document
shall constitute a waiver of any of its rights or remedies. Borrower
expressly agrees that this Section may not be waived or modified by
Bank by course of performance, estoppel or otherwise.
6.4 Discretionary Credit and Credit Payable Upon Demand. TO THE EXTENT THAT
ANY OF THE INDEBTEDNESS SHALL, AT ANY TIME, BE PAYABLE UPON DEMAND,
NOTHING CONTAINED IN THIS AGREEMENT, OR ANY OTHER LOAN DOCUMENT, SHALL
BE CONSTRUED TO PREVENT BANK FROM MAKING DEMAND, WITHOUT NOTICE AND
WITH OR WITHOUT REASON, FOR IMMEDIATE PAYMENT OF ALL OR ANY PART OF
SUCH INDEBTEDNESS AT ANY TIME OR TIMES, WHETHER OR NOT A DEFAULT OR
EVENT OF DEFAULT HAS OCCURRED OR EXISTS. IN THE EVENT THAT SUCH DEMAND
IS MADE UPON ANY PORTION OF THE INDEBTEDNESS, THE BANK, AT ITS
ELECTION, MAY TERMINATE ANY COMMITMENT TO MAKE ANY FURTHER LOANS OR, IF
APPLICABLE, ISSUE ANY FURTHER LETTERS OF CREDIT UNDER THIS AGREEMENT OR
OTHERWISE. FURTHERMORE, TO THE EXTENT ANY LOAN DOCUMENT AUTHORIZES THE
BANK, AT ITS DISCRETION, TO MAKE OR TO DECLINE TO MAKE FINANCIAL
ACCOMMODATIONS TO THE BORROWER, NOTHING CONTAINED IN THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT SHALL BE CONSTRUED TO LIMIT OR IMPAIR SUCH
DISCRETION OR TO COMMIT OR OTHERWISE OBLIGATE THE BANK TO MAKE ANY SUCH
FINANCIAL ACCOMMODATION.
SECTION 7. MISCELLANEOUS
7.1 Governing Law. Each Loan Document shall be deemed to have been
delivered in and shall be governed by and construed and enforced in
accordance with the laws of the State of Texas, except to the extent
that the UCC, other personal property law or real property law of
another jurisdiction where Collateral is located is applicable, and
except to the extent expressed to the contrary in any Loan Document.
7.2 Costs and Expenses. Borrower shall pay Bank, on demand, all costs and
expenses, including, without limitation, reasonable attorneys' fees and
legal expenses (whether inside or outside counsel is used), incurred by
Bank in perfecting, revising, protecting or enforcing any of its rights
or remedies against any Loan Party or any Collateral, or otherwise
incurred by Bank in connection with any Default or Event of Default or
the enforcement of the Loan Documents or the Indebtedness. Following
Bank's demand upon Borrower for the payment of any such costs and
expenses, and until the same are paid in full, the unpaid amount of
such costs and expenses shall constitute Indebtedness and shall bear
interest at the highest default rate of interest provided in any Loan
Document.
7.3 Successors and Assigns; Participation. This Agreement shall be binding
upon and shall inure to the benefit of Borrower and Bank and their
respective successors and assigns. The foregoing shall not authorize
any assignment or transfer by Borrower of any of its respective rights,
duties or obligations hereunder, such assignments or transfers being
expressly prohibited. Bank, however, may freely assign, whether by
assignment, participation or otherwise, its rights and obligations
hereunder, and is hereby authorized to disclose to any such assignee or
participant (or proposed assignee or participant) any financial or
other information in its knowledge or possession regarding any Loan
Party or the Indebtedness.
7.4 Reliance on and Survival of Various Provisions. All terms, covenants,
agreements, representations and warranties of any Loan Party made in
any Loan Document, or in any certificate, report, financial statement
or other document furnished by or on behalf of any Loan Party in
connection with any Loan Document, shall be deemed to have been relied
upon by Bank, notwithstanding any investigation heretofore or hereafter
made by Bank or on Bank's behalf, and those covenants and agreements of
Borrower set forth in Section 4.8 hereof (together with any other
indemnities of Borrower contained elsewhere in any Loan Document) shall
survive the termination of this Agreement and the repayment in full of
the Indebtedness.
7.5 Complete Agreement; Conflicts. This Agreement, the other Loan
Documents, and any commitment letter previously issued by Bank with
respect thereto (provided that in the event of any inconsistency or
conflict between this Agreement and the other Loan Documents, on one
hand, and such commitment letter, on the other hand, this Agreement and
the Loan Documents shall control), contain the entire agreement of the
parties thereto and supercede all prior agreements and understandings
related to the subject matter hereof, and none of the parties shall be
bound by anything not expressed in writing. In the event that, and to
the extent that, any of the terms, conditions or provisions of any of
the other Loan Documents are inconsistent with or in conflict with any
of the terms, conditions or provisions of this Agreement, the
applicable terms, conditions and provisions of this Agreement shall
govern and control. Any amendments or modifications hereto shall be in
writing signed by all parties.
7.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the
same agreement.
7.7 WAIVER OF JURY TRIAL. BANK AND BORROWER EACH ACKNOWLEDGE THAT THE RIGHT
TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED.
EACH OF THEM, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO
CONSULT, WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY
JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF ANY LOAN DOCUMENT
OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS OR ANY
COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR
ACTION OF EITHER OF THEM. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE
BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK OR BORROWER,
EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.
7.8 NO ORAL AGREEMENTS. THIS AGREEMENT AND THE OTHER "LOAN AGREEMENTS" (AS
DEFINED IN SECTION 26.02(A)(2) OF THE TEXAS BUSINESS & COMMERCE CODE,
AS AMENDED) REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THIS
AGREEMENT AND THE OTHER WRITTEN LOAN AGREEMENTS MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
(The balance of this page intentionally left blank)
WITNESS the due execution hereof as of the day and year first above written.
BANK: BORROWER:
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COMERICA BANK GVI SECURITY, INC.,
D/B/A/ Samsung CCTV
a Delaware corporation
By: /s/ Xxxx Xxxxx By: /s/ Xxxxxx Xxxx
----------------------------------------- -----------------------------------------
Xxxx Xxxxx Xxxxxx Xxxx
Assistant Vice President - Texas Division President, CEO and Chairman
of the Board
ADDRESS: ADDRESS:
------- -------
P.O. Box 650282 0000 Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000 Suite 104
Mail Code 6596 Xxxxxxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxx Attn: /s/ Xxxx X Xxxxxxx
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Facsimile: 000-000-0000 Facsimile 000-000-0000
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EXHIBIT A
EXISTING LIENS
NONE
