Exhibit 99.01
LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT, dated as of June 10, 2002, among
DEL GLOBAL TECHNOLOGIES CORP., a New York corporation ("Del Global"), BERTAN
HIGH VOLTAGE CORP., a New York corporation ("Bertan"), RFI CORPORATION, a
Delaware corporation ("RFI"), and DEL MEDICAL IMAGING CORP., a Delaware
corporation ("Del Medical") (each a "Borrower" and collectively the
"Borrowers"), and TRANSAMERICA BUSINESS CAPITAL CORPORATION, a Delaware
corporation (the "Lender").
W I T N E S S E T H :
WHEREAS, the Borrowers wish to obtain a revolving credit
facility; and
WHEREAS, upon the terms and subject to the conditions set
forth herein, the Lender is willing to make revolving credit loans and other
extensions of credit to the Borrowers in an aggregate amount not to exceed
$10,000,000;
NOW, THEREFORE, the Borrowers and the Lender hereby agree as
follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. General Definitions. As used herein, the
following terms shall have the meanings herein specified (to be equally
applicable to both the singular and plural forms of the terms defined):
"Acoma Lawsuit" means the action brought in the Supreme Court
of the State of New York, County of Nassau, entitled Del Medical Imaging Corp.
v. Acoma Medical Imaging Corp., Index No. 02/005486.
"Adjusted Earnings" means, for any period, with respect to Del
Global and its Subsidiaries on a consolidated basis (i) net income (as that term
is determined in accordance with GAAP) for such period, plus (ii) the amount of
depreciation and amortization of fixed and intangible assets deducted in
determining such net income for such period, plus (iii) all Interest Expense and
all fees for the use of money or the availability of money, including
commitment, facility and like fees and charges upon Indebtedness (including
Indebtedness to the Lender) paid or payable during such period, plus (iv)
provision for income tax expense during such period, less (v) provision for
income tax benefit during such period, plus (vi) non-recurring unusual or
extraordinary losses (including, without limitation, losses attributable to the
settlement of the Shareholder Class Action Lawsuit and restructuring charges
related to the Business Consolidation) as classified in accordance with GAAP (or
less any non-recurring or extraordinary gains), less (vii) the amount of all
gains (or plus the amount of all losses) realized during such period upon the
sale or other disposition of property or assets that are sold or otherwise
disposed of outside the ordinary course of business that is included in the
calculation of net income for such period.
"Adjusted U.S. Earnings" means, for any period, with respect
to the Borrowers and their Subsidiaries (other than Del Electronics and Villa
Sistemi) on a consolidated basis (i) net income (as that term is determined in
accordance with GAAP) for such period, plus (ii) the amount of depreciation and
amortization of fixed and intangible assets deducted in determining such net
income for such period, plus (iii) all Interest Expense and all fees for the use
of money or the availability of money, including commitment, facility and like
fees and charges upon Indebtedness (including Indebtedness to the Lender) paid
or payable during such period, plus (iv) provision for income tax expense during
such period, less (v) provision for income tax benefit during such period, plus
(vi) non-recurring unusual or extraordinary losses (including, without
limitation, losses attributable to the settlement of the Shareholder Class
Action Lawsuit and restructuring charges related to the Business Consolidation)
as classified in accordance with GAAP (or less any non-recurring or
extraordinary gains), less (vii) the amount of all gains (or plus the amount of
all losses) realized during such period upon the sale or other disposition of
property or assets that are sold or otherwise disposed of outside the ordinary
course of business that is included in the calculation of net income for such
period.
"Administrative Borrower" means Del Global or any other
Borrower agreed to in writing by the Borrowers and the Lender from time to time,
acting in its capacity as agent for the Borrowers under Section 11.9(a).
"Advance" means a Base Rate Advance or a LIBOR Rate Advance.
"Affiliate" means, as to any Person, any other Person who
directly or indirectly controls, is under common control with, is controlled by
or is a director or officer of such Person. As used in this definition,
"control" (including its correlative meanings, "controlled by" and "under common
control with") means possession, directly or indirectly, of the power to direct
or cause the direction of management or policies (whether through ownership of
voting securities or partnership or other ownership interests, by contract or
otherwise), provided that, in any event, any Person who owns directly or
indirectly ten percent (10%) or more of the securities having ordinary voting
power for the election of the members of the board of directors or other
governing body of a corporation or ten percent (10%) or more of the partnership
or other ownership interests of any other Person (other than as a limited
partner of such other Person) will be deemed to control such corporation,
partnership or other Person.
"Agreement" means this Loan and Security Agreement, as
amended, supplemented or otherwise modified from time to time.
"Auditors" means a nationally recognized firm of independent
public accountants selected by the Administrative Borrower and reasonably
satisfactory to the Lender.
"Average Excess Availability" means, as of any date of
determination, the difference between (i) the average daily Borrowing Base and
(ii) the average daily aggregate outstanding amount of the Loans plus the
average daily aggregate undrawn amount of all unexpired Letters of Credit, in
each case as determined during the immediately preceding three months.
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"Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy," as that title may be amended from time to time, or any
successor statute.
"Base Rate" means the higher of (i) the highest prime, base or
equivalent rate of interest publicly announced from time to time by Citibank,
N.A., Bank of America of Illinois and Bank One, Chicago or any successor to
either of the foregoing banks (which may not be the lowest rate of interest
charged by such bank) and (ii) the published annualized rate for 90-day dealer
commercial paper that appears in the "Money Rates" section of The Wall Street
Journal.
"Base Rate Advance" means an Advance that bears interest as
provided in Section 4.1(a).
"Bay Shore Property" means the Property owned by RFI located
at 000 Xxxx-Xxxx Xxxxx, Xxx Xxxxx, Xxx Xxxx, Xxxxxx of Suffolk.
"Bay Shore Sale Leaseback" means the sale of the Bay Shore
Property to JSD Realty LLC for net proceeds of not less than $1,500,000 and the
subsequent leasing of the Bay Shore Property by RFI from JSD Realty LLC or any
other sale leaseback transaction on terms and subject to documentation
satisfactory to the Lender.
"Bertan" has the meaning specified in the introductory
paragraph.
"Blocked Account" has the meaning specified in Section 2.6.
"Borrower" or "Borrowers" has the meaning specified in the
introductory paragraph.
"Borrowing" has the meaning specified in Section 2.2(a).
"Borrowing Base" has the meaning specified in Section 2.1(a).
"Borrowing Base Certificate" has the meaning specified in
Section 7.1(k)(v).
"Business Consolidation" means the consolidation of the
business and assets of Del Global and Bertan at a location of a Borrower
specified in Schedule 6.1(b) that is either owned by such Borrower or leased by
such Borrower and subject to a Collateral Access Agreement, in connection with
which Del Global is the surviving corporation and Bertan is eventually
dissolved.
"Business Day" means any day other than a Saturday, a Sunday
or any other day on which commercial banks in New York, New York or Chicago,
Illinois are required or permitted by law to close. When used in connection with
any LIBOR Rate Advance, a Business Day shall also exclude any day on which
commercial banks are not open for dealings in Dollar deposits in the London
interbank market.
"Business Plan" means a business plan of the Borrowers and
their Subsidiaries, consisting of consolidated and consolidating projected
balance sheets, related cash flow statements and related profit and loss
statements, and availability forecasts, together with appropriate supporting
details and a statement of the underlying assumptions, which covers a three-year
period and which is prepared on a monthly basis for the first year and an annual
basis thereafter.
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"Capital Expenditures" means expenditures for any fixed assets
or improvements, replacements, substitutions or additions thereto or therefor
which have a useful life of more than one year, and shall include all
commitments, payments in respect of Capitalized Lease Obligations and leasehold
improvements.
"Capitalized Lease Obligations" means any rental obligation
which, under GAAP, is or will be required to be capitalized on the books of the
lessee, taken at the amount thereof accounted for as indebtedness (net of
Interest Expense) in accordance with GAAP.
"Cash Equivalents" means (i) securities issued, guaranteed or
insured by the United States or any of its agencies with maturities of not more
than one year from the date acquired; (ii) certificates of deposit with
maturities of not more than one year from the date acquired, issued by (A) the
Lender or its Affiliates; (B) any U.S. federal or state chartered commercial
bank of recognized standing which has capital and unimpaired surplus in excess
of $500,000,000; or (C) any bank or its holding company that has a short-term
commercial paper rating of at least A-1 or the equivalent by Standard & Poor's
Ratings Services or at least P-1 or the equivalent by Xxxxx'x Investors Service,
Inc.; (iii) repurchase agreements and reverse repurchase agreements with terms
of not more than seven days from the date acquired, for securities of the type
described in clause (i) above and entered into only with commercial banks having
the qualifications described in clause (ii) above or such other financial
institutions with a short-term commercial paper rating of at least A-1 or the
equivalent by Standard & Poor's Ratings Services or at least P-1 or the
equivalent by Xxxxx'x Investors Service, Inc.; (iv) commercial paper, other than
commercial paper issued by Del Global or any of its Affiliates, issued by any
Person incorporated under the laws of the United States or any state thereof and
rated at least A-1 or the equivalent thereof by Standard & Poor's Ratings
Services or at least P-1 or the equivalent thereof by Xxxxx'x Investors Service,
Inc., in each case with maturities of not more than one year from the date
acquired; (v) investments in money market funds registered under the Investment
Company Act of 1940, which have net assets of at least $500,000,000 and at least
eighty-five percent (85%) of whose assets consist of securities and other
obligations of the type described in clauses (i) through (iv) above; and (vi)
other instruments, commercial paper or investments acceptable to the Lender in
its sole discretion.
"Chase Account" means Del Global's account with The Chase
Manhattan Bank in White Plains, New York, account number 000-0-000000.
"Closing Date" means the date of execution and delivery of
this Agreement.
"Code" has the meaning specified in Section 1.3.
"Collateral" means all Receivables, Equipment, Property,
Inventory and Investment Property (other than the shares of capital stock of Del
Electronics, Dynarad and Villa Sistemi owned by Del Global) of the Borrowers and
all other collateral specified in this Agreement and in the Security Documents.
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"Collateral Access Agreement" means a landlord waiver,
mortgagee waiver, bailee letter or similar acknowledgment of any lessor,
warehouseman or processor in possession of any Collateral or on whose property
any Collateral is located, substantially in the form of Exhibit O.
"Collateralization" and "Collateralize" each means, with
respect to any Letter of Credit, the deposit by the Borrowers in a cash
collateral account established and controlled by or on behalf of the Lender of
an amount equal to 105% of the undrawn amount of such Letter of Credit.
"Collections" means all cash, funds, checks, notes,
instruments, any other form of remittance tendered by account debtors in respect
of payment of Receivables of the Borrowers and any other payments received by
the Borrowers with respect to any Collateral.
"Compliance Certificate" has the meaning specified in Section
7.1(k)(iv).
"Contingent Obligation" means any direct, indirect, contingent
or non-contingent guaranty or obligation for the Indebtedness of another Person,
except endorsements in the ordinary course of business.
"Continuation" has the meaning specified in Section 2.2(b).
"Contribution Agreement" means the contribution, subrogation
and indemnity agreement among the Borrowers, substantially in the form of
Exhibit C, as amended, supplemented or otherwise modified from time to time.
"Control Agreement" means a control agreement, in form and
substance satisfactory to the Lender, among one or more of the Borrowers or
their Subsidiaries, the Lender and the applicable securities intermediary or
depository bank with respect to the applicable Securities Account and related
Investment Property or deposit account, as the case may be.
"Convert," "Conversion" and "Converted" each refers to
conversion of Advances of one Type into Advances of another Type pursuant to
Section 2.2(c).
"Default" means any of the events specified in Section 9.1,
whether or not any of the requirements for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Del Electronics" means Del Electronics Foreign Sales
Corporation, a U.S. Virgin Islands corporation.
"Del Global" has the meaning specified in the introductory
paragraph.
"Del Medical" has the meaning specified in the introductory
paragraph.
"Dollars" and the sign "$" means freely transferable lawful
currency of the United States.
"Dynarad" means Dynarad Corp., a New York corporation.
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"Eligible Inventory" means only such Inventory of a Borrower
located in the United States consisting of raw materials or finished goods,
which is free from any claim of title or Lien in favor of any Person (other than
Liens in favor of the Lender) and with respect to which no event has occurred
and no condition exists which could reasonably be expected to impair
substantially such Borrower's ability to use or sell such Inventory in the
ordinary course of its business and which the Lender, in its sole discretion,
shall deem eligible to serve as collateral for Advances, based on such
considerations as the Lender may deem appropriate from time to time and less any
such reserves as the Lender, in its sole discretion, may require, including,
without limitation, reserves for special order goods. No Inventory of a Borrower
shall be Eligible Inventory unless the Lender has a perfected first priority
Lien thereon. The value of Eligible Inventory shall be computed at the lower of
cost (computed on a "first in, first out" basis) or market. Any Inventory of a
Borrower that is not in the control or possession of such Borrower and is
covered by a warehouse receipt, a xxxx of lading or other document of title
shall in no event be Eligible Inventory unless such warehouse receipt, xxxx of
lading or document of title is in the name of or held by the Lender. No
Inventory of a Borrower shall be Eligible Inventory unless (i) it is located on
property owned by such Borrower; or (ii) it is located on property leased by
such Borrower or in a contract warehouse which is subject to a Collateral Access
Agreement executed by the lessor or contract warehouseman, as the case may be,
and segregated or otherwise separately identifiable from goods of others, if
any, stored on the premises. No Inventory of a Borrower shall be Eligible
Inventory if it is in transit or it is consigned to or from such Borrower. In
addition, and without limitation of the foregoing, the Lender may treat any
Inventory as ineligible if:
(a) it is not owned solely by a Borrower or a Borrower does
not have sole and good, valid and marketable title thereto; or
(b) it is packing or shipping materials or maintenance
supplies; or
(c) it is goods returned or rejected by a Borrower's customer;
or
(d) it (i) is excess (as so reserved by a Borrower from time
to time or as otherwise determined by the Lender) or (ii) is obsolete,
defective, damaged, slow moving or unmerchantable, or (iii) is samples or
inventory on hand which is used for promotional and other sales activities, or
(iv) does not otherwise conform to the representations and warranties contained
in the Loan Documents; or
(e) it is repossessed, attached, seized, made subject to a
writ or distress warrant, levied upon or brought within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors; or
(f) it is goods acquired by a Borrower in or as part of a
"bulk" transfer or sale of assets and such acquisition is not consummated in the
ordinary course of business unless such Borrower has complied with all
applicable bulk sales or bulk transfer laws in connection with such acquisition.
"Eligible Receivables" means and includes only those unpaid
Receivables of a Borrower, without duplication, which (i) arise out of a bona
fide sale of goods or rendition of services of the kind ordinarily sold or
rendered by such Borrower in the ordinary course of its business, (ii) are made
to a Person competent to contract therefor who is not an Affiliate or an
employee of such Borrower and is not controlled by an Affiliate of such
Borrower, (iii) are not subject to renegotiation or redating, (iv) are free and
clear of any Lien in favor of any Person other than Liens in favor of the Lender
and Liens permitted under Section 7.2(i) and (v) mature as stated in the invoice
or other supporting data covering such sale or services. No Receivable of a
Borrower shall be an Eligible Receivable (i) unless the Lender has a perfected
first priority Lien thereon, (ii) if it is more than ninety days past the date
of the original invoice therefor or more than sixty days past its due date or
(iii) unless the delivery of the goods or the rendition of the services giving
rise to such Receivable has been completed. The Lender may treat any Receivable
as ineligible if:
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(a) any warranty contained in this Agreement or in any other
Loan Document with respect to such Receivable or in any assignment or statement
of warranties or representations relating to such Receivable delivered by a
Borrower to the Lender has been breached or is untrue in any material respect or
a Borrower is not in compliance with all applicable laws with respect to such
Receivable; or
(b) the account debtor or any Affiliate of the account debtor
has disputed liability, has or has asserted a right of setoff or has made any
claim with respect to any other Receivable due from such account debtor or
Affiliate to a Borrower, to the extent of the amount of such dispute or claim,
or the amount of such actual or asserted right of setoff, as the case may be; or
(c) the account debtor or any of its assets or any Affiliate
of the account debtor or any of its assets is the subject of an Insolvency Event
or, in the sole discretion of the Lender, is likely to become the subject of an
Insolvency Event, unless such account debtor or Affiliate has been provided with
a debtor in possession credit facility pursuant to Section 364 of the Bankruptcy
Code or a similar arrangement reasonably acceptable to the Lender; or
(d) the account debtor or any Affiliate of the account debtor
has called a meeting of its creditors to obtain any general financial
accommodation; or
(e) the account debtor is also a supplier to or creditor of a
Borrower, to the extent of the aggregate amount owed by such Borrower to the
account debtor; or
(f) the sale or rendition of services is to an account debtor
outside the United States or Canada, unless it is on letter of credit,
acceptance or other terms acceptable to the Lender; or
(g) fifty percent (50%) or more of the accounts of any account
debtor and its Affiliates to the Borrowers are unpaid more than ninety days past
the date of the original invoices therefor or more than sixty days past due; or
(h) the account debtor is the United States of America or any
department, agency or instrumentality thereof, unless the applicable Borrower
assigns its right to payment under such Receivable to the Lender as collateral
hereunder in full compliance with (including, without limitation, the filing of
a written notice of the assignment and a copy of the assignment with, and
receipt of acknowledgment thereof by, the appropriate contracting and disbursing
offices pursuant to) the Assignment of Claims Act of 1940, as amended (31 U.S.C.
ss. 3727; 41 U.S.C. ss. 15); or
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(i) the Lender believes, in its sole discretion, that
collection of such Receivable is insecure or that such Receivable may not be
paid by reason of the account debtor's inability or unwillingness to pay.
"Environmental Laws" means all federal, state and local
statutes, laws (including common or case law), rulings, regulations or
governmental, administrative or judicial policies, directives, orders or
interpretations applicable to the business or property of a Person relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) including, without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of Hazardous Materials,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any Hazardous Materials.
"Equipment" means all machinery, equipment, furniture,
fixtures, leasehold improvements, conveyors, tools, materials, storage and
handling equipment, hydraulic presses, cutting equipment, computer equipment and
hardware, including central processing units, terminals, drives, memory units,
embedded computer programs and supporting information, printers, keyboards,
screens, peripherals and input or output devices, molds, dies, stamps, and other
equipment of every kind and nature and wherever situated now or hereafter owned
by a Person or in which a Person may have any interest as lessee or otherwise
(to the extent of such interest), together with all additions and accessions
thereto, all replacements and all accessories and parts therefor, all manuals,
blueprints, know-how, warranties and records in connection therewith and all
rights against suppliers, warrantors, manufacturers, and sellers or others in
connection therewith, together with all substitutes for any of the foregoing.
"Equivalent Amount" means, with respect to any two currencies,
the amount obtained in one such currency when an amount in the other currency is
translated into the first currency using the spot wholesale transactions buying
rate of Citibank, N.A. for the purchase of the applicable amount of the first
currency with the other currency in effect as of 12:00 Noon (Chicago time) in
the place where such translation occurs on the Business Day with respect to
which such computation is required for the purpose of this Agreement or, in the
absence of such a buying rate on such date, using such other rate as the Lender
may reasonably select.
"ERISA" means the Employee Retirement Income Security Act of
1974, 29 X.X.X.xx.xx. 1000 et seq., amendments thereto, successor statutes, and
regulations or guidelines promulgated thereunder.
"ERISA Affiliate" means any entity required to be aggregated
with a Borrower under Section 414(b), (c), (m) or (o) of the Internal Revenue
Code.
"Event of Default" means the occurrence of any of the events
specified in Section 9.1.
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"Excess Availability" means, as of any date of determination,
the difference between (i) the Borrowing Base and (ii) the aggregate outstanding
amount of the Loans plus the aggregate undrawn amount of all unexpired Letters
of Credit.
"Expiration Date" means the earlier of (i) June 10, 2005 and
(ii) the date of termination of the Lender's obligations to make Loans or to use
its best efforts to cause Letters of Credit to be issued pursuant to the terms
hereof.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System or any Person succeeding to the functions thereof.
"Financial Covenants" means the covenants set forth in Article
VIII.
"Financial Statements" means, with respect to the Borrowers
and their Subsidiaries, the balance sheets, profit and loss statements,
statements of cash flow, and statements of changes in intercompany accounts, if
any, for the period specified, prepared in accordance with GAAP and consistent
with prior practices.
"Fixed Charge Coverage Ratio" means (without duplication), for
any period, with respect to the Borrowers and their Subsidiaries on a
consolidated basis (except in the case of clause (Y)(iv) hereof), as of the date
of determination thereof, the ratio of (X) (i) Adjusted Earnings for such
period, less (ii) all Capital Expenditures paid or payable during such period to
the extent not financed with the proceeds of Indebtedness permitted under
Section 7.2(a)(iii), less (iii) all federal and state income and franchise tax
liabilities paid during such period to (Y) (i) all principal amounts of
Indebtedness (including Indebtedness to the Lender to the extent such amounts
may not be reborrowed) paid or payable during such period, plus (ii) all
Interest Expense and all fees for the use of money or the availability of money,
including commitment, facility and like fees and charges upon Indebtedness
(including Indebtedness to the Lender) paid or payable during such period, plus
(iii) all loans and Investments to any Person made during such period plus (iv)
without limitation of the restrictions specified in Section 7.2(j), all
dividends, stock repurchases or other distributions paid or payable in cash on
account of any Borrower's capital stock or other equity interests during such
period.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances as of the date of determination.
"Governing Documents" means, with respect to any Person, the
certificate of incorporation and bylaws or similar organizational documents of
such Person.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions thereof or
pertaining thereto.
"Government Contract Proceeding" means any proceeding
instituted against or involving, directly or indirectly, any Borrower or any
Borrower's Subsidiary in any federal, state or local court or before any
commission or any regulatory body the subject of which is related in whole or in
part to the subject of the Subpoena to Testify Before Grand Jury dated March 6,
2002 issued to RFI upon application to the United States District Court for the
Eastern District of New York.
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"Hazardous Materials" means any and all pollutants,
contaminants and toxic, caustic, radioactive and hazardous materials, substances
and wastes including, without limitation, petroleum or petroleum distillates,
asbestos or urea formaldehyde foam insulation or asbestos- containing materials,
whether or not friable, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature that are
regulated under any Environmental Laws.
"Hedging Agreement" means any interest rate protection
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price hedging
agreement.
"Indebtedness" means, with respect to any Person, as of the
date of determination thereof (without duplication), (i) all obligations of such
Person for borrowed money of any kind or nature, including funded and unfunded
debt, and any Hedging Agreements or arrangements therefor, regardless of whether
the same is evidenced by any note, debenture, bond or other instrument, (ii) all
obligations of such Person to pay the deferred purchase price of property or
services (other than current trade accounts payable under normal trade terms and
which arise in the ordinary course of business, which shall be deemed to include
any liability incurred in connection with the Acoma Lawsuit), (iii) all
obligations of such Person to acquire or for the acquisition or use of any fixed
asset, including Capitalized Lease Obligations (other than, in any such case,
any portion thereof representing interest or deemed interest or payments in
respect of taxes, insurance, maintenance or service), or improvements which are
payable over a period longer than one year, regardless of the term thereof or
the Person or Persons to whom the same are payable, (iv) the then outstanding
amount of withdrawal or termination liability incurred under ERISA, (v) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right to be secured) a Lien on any asset of such Person whether
or not the Indebtedness is assumed by such Person, provided that for the purpose
of determining the amount of Indebtedness of the type described in this clause
(v), if recourse with respect to such Indebtedness is limited to the assets of
such Person, then the amount of Indebtedness shall be limited to the fair market
value of such assets, (vi) all Indebtedness of others to the extent guaranteed
by such Person and (vii) all obligations of such Person in respect of letters of
credit, bankers acceptances or similar instruments issued or accepted by banks
or other financial institutions for the account of such Person.
"Insolvency Event" means, with respect to any Person, the
occurrence of any of the following: (i) such Person shall be adjudicated
insolvent or bankrupt, or shall generally fail to pay or admit in writing its
inability to pay its debts as they become due, (ii) such Person shall seek
dissolution or reorganization or the appointment of a receiver, trustee,
custodian or liquidator for it or a substantial portion of its property, assets
or business or to effect a plan or other arrangement with its creditors, (iii)
such Person shall make a general assignment for the benefit of its creditors, or
consent to or acquiesce in the appointment of a receiver, trustee, custodian or
liquidator for a substantial portion of its property, assets or business, (iv)
such Person shall file a voluntary petition under any bankruptcy, insolvency or
similar law or take any corporate or similar act in furtherance thereof, or (v)
such Person, or a substantial portion of its property, assets or business shall
become the subject of an involuntary proceeding or petition for (A) its
dissolution or reorganization or (B) the appointment of a receiver, trustee,
custodian or liquidator, and (I) such proceeding shall not be dismissed or
stayed within sixty days or (II) such receiver, trustee, custodian or liquidator
shall be appointed; provided, however, that the Lender shall have no obligation
to make any Advance or cause to be issued any Letter of Credit during the
pendency of any sixty-day period described in clauses (A) and (B).
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"Intellectual Property Security Agreement" means the security
agreement made by Del Global and Del Medical in favor of the Lender,
substantially in the form of Exhibit D, as amended, supplemented or otherwise
modified from time to time.
"Interest Expense" means, for any period, all interest with
respect to Indebtedness (including, without limitation, the interest component
of Capitalized Lease Obligations) accrued or capitalized during such period
(whether or not actually paid during such period) determined in accordance with
GAAP.
"Interest Period" means the period commencing on the date of a
LIBOR Rate Advance and ending one, two or three months thereafter; provided,
however, that (i) the Administrative Borrower may not select any Interest Period
that ends after the Expiration Date; (ii) whenever the last day of an Interest
Period would otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding Business
Day, except that, if such extension would cause the last day of such Interest
Period to occur in the next following calendar month, then the last day of such
Interest Period shall occur on the next preceding Business Day; and (iii) if
there is no corresponding date of the month that is one, two or three months, as
the case may be, after the first day of an Interest Period, such Interest Period
shall end on the last Business Day of such first, second or third month, as the
case may be.
"Internal Revenue Code" means the Internal Revenue Code of
1986, any amendments thereto, any successor statute and any regulations and
guidelines promulgated thereunder.
"Internal Revenue Service" or "IRS" means the United States
Internal Revenue Service and any successor agency.
"Inventory" means all present and future goods intended for
sale, lease or other disposition including, without limitation, all raw
materials, work in process, finished goods and other retail inventory, goods in
the possession of outside processors or other third parties, consigned goods (to
the extent of the consignee's interest therein), materials and supplies of any
kind, nature or description which are or might be used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of any such
goods, all documents of title or documents representing the same and all
records, files and writings with respect thereto.
"Investment" in any Person means, as of the date of
determination thereof, (i) any payment or contribution, or commitment to make a
payment or contribution, by a Person including, without limitation, property
contributed or committed to be contributed by such Person for or in connection
with its acquisition of any stock, bonds, notes, debentures, partnership or
other ownership interest or any other security of the Person in whom such
Investment is made or (ii) any loan, advance or other extension of credit or
guaranty of or other surety obligation for any Indebtedness of such Person in
whom the Investment is made. In determining the aggregate amount of Investments
outstanding at any particular time, (i) a guaranty (or other surety obligation)
shall be valued at not less than the principal amount outstanding of the primary
obligation; (ii) returns of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution) shall
be deducted; (iii) earnings, whether as dividends, interest or otherwise, shall
not be deducted; and (iv) decreases in the market value shall not be deducted
unless such decreases are computed in accordance with GAAP.
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"Investment Property" means all present and future investment
property, including without limitation, all (i) securities, whether certificated
or uncertificated, and including stocks, bonds, debentures, notes, bills,
certificates, warrants, options, rights and shares, (ii) security entitlements,
(iii) securities accounts, (iv) commodity contracts, (v) commodity accounts and
(vi) dividends and other distributions in respect of any of the foregoing.
"Lender" has the meaning specified in the introductory
paragraph.
"Letter of Credit Agreement" means the collective reference to
any and all agreements from time to time entered into by the Lender and a bank
or financial institution (each, an "issuing bank") pursuant to which the Lender
causes such issuing bank to issue Letters of Credit for the account of a
Borrower in accordance with the terms of this Agreement.
"Letters of Credit" means all letters of credit issued for the
account of the Borrowers under Section 2.9, and all amendments, renewals,
extensions or replacements thereof.
"Liabilities" of a Person as of the date of determination
thereof means the liabilities of such Person on such date as determined in
accordance with GAAP. Liabilities to Affiliates of such Person shall be treated
as Liabilities except where eliminated by consolidation in financial statements
prepared in accordance with GAAP or as otherwise provided herein.
"LIBOR Rate" means, with respect to each Interest Period, the
reserve adjusted rate per annum equal to the one, two or three-month London
Interbank Offered Rate, as applicable, that appears in the "Money Rates" section
of The Wall Street Journal on the first day of such Interest Period; provided,
however, that if The Wall Street Journal no longer publishes such one, two or
three-month London Interbank Offered Rate, reference shall be made to the
Reuters Screen ISDA Page for such London Interbank Offered Rate.
"LIBOR Rate Advance" means an Advance that bears interest as
provided in Section 4.1(b).
"Lien" means any lien, claim, charge, pledge, security
interest, assignment, hypothecation, deed of trust, mortgage, lease, conditional
sale, retention of title or other preferential arrangement having substantially
the same economic effect as any of the foregoing, whether voluntary or imposed
by law.
"Loan Account" has the meaning specified in Section 2.5.
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"Loan Documents" means this Agreement and all documents and
instruments to be delivered by the Borrowers or any of their Affiliates under or
in connection with this Agreement, as each of the same may be amended,
supplemented or otherwise modified from time to time, including, without
limitation, the Note, the Contribution Agreement, the Intellectual Property
Security Agreement, the Lockbox Agreement, the Pledge Agreement, the Mortgage,
the Letter of Credit Agreement and any Control Agreement.
"Loans" has the meaning specified in Section 2.1(a).
"Lockbox" has the meaning specified in Section 2.6(a).
"Lockbox Agreement" means an agreement entered into by a
Borrower, the Lender and a Lockbox Bank, substantially in the form of Exhibit I,
as amended, supplemented or otherwise modified from time to time.
"Lockbox Bank" means Bank One, N.A. or any successor or any
other bank acceptable to the Lender to act as such.
"Material Adverse Effect" means (i) a material adverse effect
on the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of a Borrower, (ii) the
impairment of (A) a Borrower's ability to perform its obligations under the Loan
Documents to which it is a party or (B) the ability of the Lender to enforce the
Obligations or realize upon the Collateral or (iii) a material adverse effect on
the value of the Collateral or the amount that the Lender would be likely to
receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of the Collateral.
"Material Contract" means any contract or other arrangement to
which a Borrower is a party (other than the Loan Documents) and (i) which
involves an amount in excess of $500,000 in the aggregate and has a term of
performance by the parties thereunder of more than six months or (ii) the
termination of which would require public disclosure by Del Global under any
federal or state securities law, rule or regulation.
"Material Indebtedness" means Indebtedness (other than the
Loans), or obligations in respect of one or more Hedging Agreements, of any
Borrower in an aggregate principal amount exceeding $100,000. For purposes of
this definition, the "principal amount" of the obligations of any Borrower in
respect of any Hedging Agreement at any time shall be the maximum aggregate
amount (giving effect to any netting agreements) that such Borrower would be
required to pay if such Hedging Agreement were terminated at such time.
"Maximum Amount of the Facility" means Ten Million Dollars
($10,000,000).
"Mortgage" has the meaning specified in Section 7.1(t).
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which a Borrower or any ERISA Affiliate has
contributed within the past six years or with respect to which a Borrower or any
ERISA Affiliate may incur any liability.
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"Net Cash Proceeds" means, the aggregate cash proceeds
received by any Borrower in respect of (i) any sale or issuance of capital stock
of such Borrower including, without limitation, in connection with any exercise
of the Warrants and (ii) any sale or other disposition of assets of such
Borrower (other than sales of Inventory in the ordinary course of business), in
each case net of (without duplication) (A) the amount required to repay any
Indebtedness (other than the Loans) under Capitalized Lease Obligations incurred
with respect to, or secured by a Permitted Lien on, any assets of a Borrower
that are sold or otherwise disposed of in connection with such asset sale, (B)
the reasonable out-of-pocket expenses incurred in effecting such issuance, sale
or other disposition and (C) any taxes reasonably attributable to such asset
sale and reasonably estimated by such Borrower to be actually payable.
"Note" has the meaning specified in Section 2.1(c).
"Obligations" means and includes all loans (including the
Loans), advances (including the Advances), debts, liabilities, obligations,
covenants and duties owing by the Borrowers to the Lender of any kind or nature,
present or future, whether or not evidenced by any note, guaranty or other
instrument, which may arise under, out of, or in connection with, this
Agreement, the Note, the other Loan Documents or any other agreement executed in
connection herewith or therewith, whether or not for the payment of money,
whether arising by reason of an extension of credit, opening, guaranteeing or
confirming of a letter of credit (including, without limitation, the Letters of
Credit), loan, guaranty, indemnification or in any other manner, whether direct
or indirect (including those acquired by assignment, purchase, discount or
otherwise), whether absolute or contingent, due or to become due, and however
acquired. The term includes, without limitation, all interest (including
interest accruing on or after an Insolvency Event, whether or not such interest
constitutes an allowed claim), charges, expenses, commitment, facility, closing
and collateral management fees, letter of credit fees, attorneys' fees, and any
other sum properly chargeable to the Borrowers under this Agreement, the Note,
the other Loan Documents or any other agreement executed in connection herewith
or therewith.
"PBGC" means the Pension Benefit Guaranty Corporation and any
Person succeeding to the functions thereof.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA (other than a Multiemployer Plan)
which a Borrower or any ERISA Affiliate sponsors or maintains, or to which it
makes, is making, or is obligated to make contributions, or in the case of a
multiple employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five plan years.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced and be continuing (unless such enforcement, collection, levy or
foreclosure is being contested by the applicable Borrower in good faith by
appropriate proceedings diligently conducted and for which adequate reserves are
being maintained in accordance with GAAP): (i) Liens for taxes, assessments and
other governmental charges or levies or the claims or demands of landlords,
carriers, warehousemen, mechanics, laborers, materialmen and other like Persons
arising by operation of law in the ordinary course of business for sums which
are not yet due and payable, (ii) deposits or pledges (other than Liens on
Receivables of a Borrower) to secure the payment of worker's compensation,
unemployment insurance or other social security benefits or obligations, public
or statutory obligations, surety or appeal bonds, bid or performance bonds, or
other obligations of a like nature incurred in the ordinary course of business,
(iii) zoning restrictions, easements, encroachments, licenses, restrictions or
covenants on the use of any Property which do not materially impair either the
use of such Property in the operation of the business of the applicable Borrower
or the value of such Property, (iv) inchoate Liens arising under ERISA to secure
current service pension liabilities as they are incurred under the provisions of
employee benefit plans from time to time in effect, and (v) rights of general
application reserved to or vested in any Governmental Authority to control or
regulate any Property, or to use any Property in a manner which does not
materially impair the use of such Property for the purposes for which it is held
by the applicable Borrower, provided that the foregoing Liens under clauses (i)
through (v) hereof do not secure liabilities in excess of $100,000 in the
aggregate at any time, and provided, further, that Permitted Liens shall not
include any Lien securing Indebtedness.
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"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, joint stock company, association, corporation, institution,
entity, party or government (including any division, agency or department
thereof) or any other legal entity, whether acting in an individual, fiduciary
or other capacity, and, as applicable, the successors, heirs and assigns of
each.
"Plan" means any employee benefit plan, as defined in Section
3(3) of ERISA, maintained or contributed to by a Borrower or any ERISA Affiliate
or with respect to which any of them may incur liability even if such plan is
not covered by ERISA pursuant to Section 4(b)(4) thereof.
"Pledge Agreement" means the pledge agreement by Del Global in
favor of the Lender, substantially in the form of Exhibit B, as amended,
supplemented or otherwise modified from time to time.
"Pricing Increment" means (i) from the date hereof until the
Lender's receipt of the Financial Statements for the month ended January 31,
2003 in accordance with Section 7.1(k)(iii), (A) 0.75% per annum for Base Rate
Advances and (B) 3.00% per annum for LIBOR Rate Advances and (ii) thereafter, a
percentage per annum determined by reference to the Fixed Charge Coverage Ratio
and Average Excess Availability as set forth below:
Fixed Charge
Tier Coverage Ratio Base Rate Advances LIBOR Rate Advances
-------------- ------------------ -------------------
I less than 1.10 1.25% 3.50%
II greater than or equal to 1.10 1.00% 3.25%
but less than 1.75
III greater than or equal to 1.75 0.75% 3.00%
but less than 2.50
IV greater than or equal to 2.50 0.50% 2.75%
but less than 3.00
V greater than or equal to 3.00 0.25% 2.50%
The Pricing Increment shall be determined semi-annually based on the most recent
Financial Statements delivered by the Administrative Borrower under Section
7.1(k)(i) or (iii) determined for the twelve-month period ending on the
applicable July 31 or January 31, as the case may be, provided that (i) the
Pricing Increment shall not change from (A) Tier I to Tier II unless Average
Excess Availability was greater than or equal to $1,000,000 during the three
full calendar months immediately preceding the month in which the applicable
audited Financial Statements were delivered, (B) Tier II to Tier III unless
Average Excess Availability was greater than or equal to $2,000,000 during the
three full calendar months immediately preceding the month in which the
applicable audited Financial Statements were delivered or (C) Tier III to Tier
IV or Tier IV to Tier V unless Average Excess Availability was greater than or
equal to $2,500,000 during the three full calendar months immediately preceding
the month in which the applicable audited Financial Statements were delivered,
(ii) each change in the Pricing Increment shall be effective three Business Days
after the date on which the Lender receives the relevant Financial Statements
and a duly executed Compliance Certificate demonstrating such ratio (including
during any Interest Period), (iii) the Pricing Increment shall be determined on
the basis of a Fixed Charge Coverage Ratio of less than 1.10 to 1.00 for so long
as the Lender has not received the information described in clause (ii) of this
proviso as and when required under Section 7.1(k)(i) or (iii), as the case may
be, (without prejudice to the Lender's right to charge interest as provided in
Section 4.2), (iv) the Pricing Increment shall not be reduced more than one time
during any fiscal year of the Borrowers and (v) the Pricing Increment shall not
be reduced more than .25% during any semi-annual period ending January 31 or
July 31.
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"Prohibited Transaction" has the meaning specified in Section
6.1(x)(v).
"Property" means any real property owned, leased or controlled
by a Borrower or any Subsidiary of a Borrower.
"Qualification" or "Qualified" means, with respect to any
report of independent public accountants covering Financial Statements, a
material qualification to such report (i) resulting from a limitation on the
scope of examination of such Financial Statements or the underlying data, (ii)
as to the capability of a Borrower or any other Borrower to continue operations
as a going concern or (iii) which could be eliminated by changes in Financial
Statements or notes thereto covered by such report (such as by the creation of
or increase in a reserve or a decrease in the carrying value of assets) and
which if so eliminated by the making of any such change and after giving effect
thereto would result in a Default or an Event of Default.
"Receivables" means all present and future accounts,
contracts, contract rights, promissory notes, chattel paper, documents, tax
refunds, rights to receive tax refunds, bonds, certificates, insurance policies
(including, without limitation, claims under health care insurance policies),
insurance proceeds, patents, patent applications, copyrights (registered and
unregistered), royalties, licenses, permits, franchise rights, authorizations,
customer and supplier lists, rights of indemnification, contribution and
subrogation, leases, computer tapes, programs, discs and software, trade
secrets, computer service contracts, trademarks, trade names, service marks,
service names, domain names, logos, goodwill, deposits, causes of action
(including, without limitation, commercial tort claims), choses in action,
judgments, designs, blueprints, plans, know-how, all other general intangibles,
claims against third parties of every kind or nature, drafts, acceptances,
letters of credit, rights to receive payments under letters of credit, book
accounts, deposit and other accounts and all money, balances, credits, deposits
or other financial assets therein or represented thereby, credits and reserves
and all forms of obligations whatsoever owing, instruments, documents of title,
leasehold rights in any goods, and books, ledgers, files and records with
respect to any collateral or security, together with all supporting obligations
and all right, title, security and guaranties with respect to any Receivable,
including any right of stoppage in transit.
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"Reportable Event" means any of the events described in
Section 4043 of ERISA and the regulations thereunder, other than a reportable
event for which the thirty-day notice requirement to the PBGC has been waived.
"Requirement of Law" means (i) the Governing Documents, (ii)
any law, treaty, rule, regulation, order or determination of an arbitrator,
court or other Governmental Authority or (iii) any franchise, license, lease,
permit, certificate, authorization, qualification, easement, right of way, or
other right or approval binding on a Borrower or any of its property.
"Responsible Officer" means the President, the Chief Executive
Officer, the Chief Financial Officer or the Chief Operating Officer of a
Borrower.
"RFI" has the meaning specified in the introductory paragraph.
"RFI Loan" means any loan obtained by RFI from a third party
lender that is not secured by any assets of the Borrowers other than the Bay
Shore Property, the terms of which do not and would not reasonably be expected
to cause a Default.
"Securities Account" has the meaning specified in Section
8-501 of the Code.
"Security Documents" means the Lockbox Agreement, the Pledge
Agreement, the Intellectual Property Security Agreement, the Mortgage, any
Control Agreement and any other agreement delivered in connection herewith which
purports to xxxxx x Xxxx in favor of the Lender to secure all or any of the
Obligations.
"Shareholder Class Action Lawsuit" means the action brought in
the United States District Court for the Southern District of New York entitled
Xxxxxx Xxxxx, et al. v. Del Global Technologies Corporation, et al., Case No. 00
Civ. 8495.
"Solvent" means, when used with respect to any Person, that as
of the date as to which such Person's solvency is to be measured:
(i) the fair saleable value of its assets is in excess of
(A) the total amount of its liabilities (including contingent,
subordinated, absolute, fixed, matured, unmatured, liquidated
and unliquidated liabilities) and (B) the amount that will be
required to pay the probable liability of such Person on its
debts as such debts become absolute and matured;
(ii) it has sufficient capital to conduct its business;
and
(iii) it is able to meet its debts as they mature.
"Subordinated Note" means a Subordinated Note made by Del
Global in favor of a shareholder party to the Shareholder Class Action Lawsuit,
substantially in the form of Exhibit J, as amended, supplemented or otherwise
modified from time to time.
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"Subsidiary" means, as to any Person, a corporation or other
entity in which that Person directly or indirectly owns or controls the shares
of stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other governing body, or to appoint the
majority of the managers of, such corporation or other entity.
"Tangible Net Worth" means, with respect to Del Global and its
Subsidiaries on a consolidated basis, (i) total assets, which shall be
determined in accordance with GAAP, except that there shall be excluded
therefrom (A) all obligations due to Del Global or any of its Subsidiaries from
another Subsidiary or other Affiliate thereof (less all Liabilities of Del
Global or any of its Subsidiaries to an Affiliate thereof) and (B) all
intangible assets including, without limitation, organizational expenses,
patents, trademarks, copyrights, goodwill, covenants not to compete, research
and development costs, training costs, treasury stock, deferred tax assets and
all unamortized debt discount and deferred charges, less (ii) total Liabilities.
"Termination Event" means (i) a Reportable Event with respect
to any Pension Plan or Multiemployer Plan; (ii) the withdrawal of a Borrower or
any ERISA Affiliate from a Pension Plan during a plan year in which it was a
"substantial employer" (as defined in Section 4001(a)(2) of ERISA); (iii) the
providing of notice of intent to terminate a Pension Plan in a distress
termination (as described in Section 4041(c) of ERISA); (iv) the institution by
the PBGC of proceedings to terminate a Pension Plan or Multiemployer Plan; (v)
any event or condition that is reasonably likely (A) to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan, or (B) to result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi)
the partial or complete withdrawal, within the meaning of Sections 4203 and 4205
of ERISA, of a Borrower or any ERISA Affiliate from a Multiemployer Plan.
"Type" means a Base Rate Advance or a LIBOR Rate Advance.
"Villa Sistemi" means Villa Sistemi Medicali, S.p.A., an
Italian corporation.
"Warrant" means a warrant to purchase common stock of Del
Global at an exercise price of $2.00 per share issued by Del Global in
connection with the Shareholder Class Action Lawsuit, substantially in the form
of Exhibit W, as amended, supplemented or otherwise modified from time to time.
SECTION 1.2. Accounting Terms and Determinations. Unless
otherwise defined or specified herein, all accounting terms used in this
Agreement shall be construed in accordance with GAAP, applied on a basis
consistent in all material respects with the Financial Statements delivered to
the Lender on or before the Closing Date. All accounting determinations for
purposes of determining compliance with Article VIII shall be made in accordance
with GAAP as in effect on the Closing Date and applied on a basis consistent in
all material respects with the audited Financial Statements delivered to the
Lender on or before the Closing Date. The Financial Statements required to be
delivered hereunder from and after the Closing Date, and all financial records,
shall be maintained in accordance with GAAP. If GAAP shall change from the basis
used in preparing the audited Financial Statements delivered to the Lender on or
before the Closing Date, the Compliance Certificates required to be delivered
pursuant to Section 7.1 shall include calculations setting forth the adjustments
necessary to demonstrate how the Borrowers are in compliance with the Financial
Covenants based upon GAAP as in effect on the Closing Date.
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SECTION 1.3. Other Terms; Headings. Unless otherwise defined
herein, terms used herein that are defined in the Uniform Commercial Code, from
time to time in effect in the State of Illinois (the "Code"), shall have the
meanings given in the Code. An Event of Default shall "continue" or be
"continuing" unless and until such Event of Default has been waived or cured
within any grace period specified therefor under Section 9.1. The headings and
the Table of Contents are for convenience only and shall not affect the meaning
or construction of any provision of this Agreement. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation". The word "will" shall be
construed to have the same meaning and effect as the word "shall". Unless the
context requires otherwise (i) any definition of or reference to any agreement,
instrument or other document herein or in any other Loan Document shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein
or in any other Loan Document), (ii) any reference herein to any Person shall be
construed to include such Person's successors and assigns, (iii) the words
"herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (iv) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement and (v) the words "asset" and "property" shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
ARTICLE II.
THE CREDIT FACILITIES
SECTION 2.1. The Loans.
(a) The Lender agrees, subject to Section 2.4 and the other
terms and conditions of this Agreement, to make loans (the "Loans") to the
Borrowers, from time to time from the Closing Date to but excluding the
Expiration Date, at the Administrative Borrower's request to the Lender, in an
aggregate principal amount at any one time outstanding which, when combined with
the aggregate undrawn amount of all unexpired Letters of Credit, does not exceed
(i) 85% of Eligible Receivables plus (ii) 40% of Eligible Inventory, all of the
foregoing less such reserves as the Lender may establish in its sole discretion
including, without limitation, (A) a reserve in the amount of $238,000 until a
final order has been entered in the Acoma Lawsuit with respect to which no
appeal is pending granting the relief requested by Del Global therein or the
Acoma Lawsuit is otherwise resolved favorably to Del Global as determined by the
Lender in its commercially reasonable judgment, (B) a reserve in the amount of
the lesser of (I) $383,000 and (II) 40% of Eligible Inventory located at 000 Xxx
Xxxxx Xxxx, Xxxxxxxxxx, Xxx Xxxx and (C) a reserve in the amount of $300,000
until such time as the Del Electronics Corp. Pension Trust has been terminated
and the Borrowers have no further liability with respect thereto as determined
by the Lender (the "Borrowing Base"); provided, however, that in no event shall
the aggregate amount of the Loans and the Letters of Credit outstanding at any
time (x) in respect of Eligible Inventory exceed $4,000,000 or (y) exceed the
Maximum Amount of the Facility.
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(b) The Lender, at any time in the exercise of its sole
discretion, may (i) establish and increase or decrease reserves against Eligible
Receivables and Eligible Inventory, (ii) reduce the advance rates against
Eligible Receivables and Eligible Inventory, or thereafter increase such advance
rates to any level equal to or below the advance rates in effect on the Closing
Date and (iii) impose additional restrictions (or eliminate the same) to the
standards of eligibility set forth in the definitions of "Eligible Receivables"
and "Eligible Inventory."
(c) The Loans shall be evidenced by a promissory note payable
to the order of the Lender, substantially in the form of Exhibit A (as amended,
supplemented or otherwise modified from time to time, the "Note"), executed by
the Borrowers and delivered to the Lender on the Closing Date. The Note shall be
in a stated maximum principal amount equal to the Maximum Amount of the
Facility.
(d) The Loans shall be payable in full, with all interest
accrued thereon, on the Expiration Date. The Borrowers may borrow, repay and
reborrow Loans, in whole or in part, in accordance with the terms hereof.
SECTION 2.2. Procedure for Borrowing; Notices of Borrowing;
Notices of Continuation; Notices of Conversion.
(a) Each borrowing of Loans (each, a "Borrowing") shall be
made on notice, given not later than 12:00 Noon (Chicago time) on the third
Business Day prior to the date of the proposed Borrowing in the case of a LIBOR
Rate Advance, and not later than 12:00 Noon (Chicago time) on the date of the
proposed Borrowing in the case of a Base Rate Advance, by the Administrative
Borrower to the Lender. Each such notice of a Borrowing shall be by telephone,
confirmed immediately in writing (by telecopier or otherwise as permitted
hereunder), substantially in the form of Exhibit F (a "Notice of Borrowing"),
specifying therein the requested (i) date of such Borrowing, (ii) Type of
Advance comprising such Borrowing, (iii) aggregate principal amount of such
Borrowing and (iv) Interest Period, in the case of a LIBOR Rate Advance.
(b) With respect to any Borrowing consisting of a LIBOR Rate
Advance, the Borrowers may, subject to the provisions of Section 2.2(d) and so
long as all the conditions set forth in Article V have been fulfilled, elect to
maintain such Borrowing or any portion thereof as a LIBOR Rate Advance by
selecting a new Interest Period for such Borrowing, which new Interest Period
shall commence on the last day of the Interest Period then ending. Each
selection of a new Interest Period (a "Continuation") shall be made by notice
given not later than 12:00 Noon (Chicago time) on the third Business Day prior
to the date of any such Continuation by the Administrative Borrower to the
Lender. Such notice by the Administrative Borrower of a Continuation shall be by
telephone, confirmed immediately in writing (by telecopier or otherwise as
permitted hereunder), substantially in the form of Exhibit G (a "Notice of
Continuation"), specifying whether the Advance subject to the requested
Continuation comprises part (or all) of the Loans and the requested (i) date of
such Continuation, (ii) Interest Period and (iii) aggregate amount of the
Advance subject to such Continuation, which shall comply with all limitations on
Loans hereunder. Unless, on or before 12:00 Noon (Chicago time) of the third
Business Day prior to the expiration of an Interest Period, the Lender shall
have received a Notice of Continuation from the Administrative Borrower for the
entire Borrowing consisting of the LIBOR Rate Advance outstanding during such
Interest Period, any amount of such Advance comprising such Borrowing remaining
outstanding at the end of such Interest Period (or any unpaid portion of such
Advance not covered by a timely Notice of Continuation) shall, upon the
expiration of such Interest Period, be Converted to a Base Rate Advance.
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(c) The Borrowers may on any Business Day upon notice (each
such notice, a "Notice of Conversion") given by the Administrative Borrower to
the Lender, and subject to the provisions of Section 2.2(d), Convert the entire
amount of or a portion of an Advance of one Type into an Advance of another
Type; provided, however, that (i) the Borrowers may not Convert a Base Rate
Advance into a LIBOR Rate Advance if an Event of Default (or a Default under
clause (v) of the definition of Insolvency Event) has occurred and is
continuing, and (ii) any Conversion of a LIBOR Rate Advance into a Base Rate
Advance shall be made on, and only on, the last day of an Interest Period for
such LIBOR Rate Advance. Each such Notice of Conversion shall be given not later
than 12:00 Noon (Chicago time) on the Business Day prior to the date of any
proposed Conversion into a Base Rate Advance and on the third Business Day prior
to the date of any proposed Conversion into a LIBOR Rate Advance. Subject to the
restrictions specified above, each Notice of Conversion shall be by telephone,
confirmed immediately in writing (by telecopier or otherwise as permitted
hereunder), substantially in the form of Exhibit H, specifying (i) the requested
date of such Conversion, (ii) the Type of Advance to be Converted, (iii) the
requested Interest Period, in the case of a Conversion into a LIBOR Rate
Advance, and (iv) the amount of such Advance to be Converted and whether such
amount comprises part (or all) of the Loans. Each Conversion shall be in an
aggregate amount not less than $500,000 or an integral multiple of $100,000 in
excess thereof.
(d) Anything in subsection (b) or (c) above to the contrary
notwithstanding,
(i) if, at least one Business Day before the date of any
requested LIBOR Rate Advance, the introduction of or any
change in or in the interpretation of any law or regulation
makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for the Lender or any
of its Affiliates to perform its obligations hereunder to make
a LIBOR Rate Advance or to fund or maintain a LIBOR Rate
Advance hereunder (including in the case of a Continuation or
a Conversion), the Lender shall promptly give written notice
of such circumstance to the Administrative Borrower, and the
right of the Borrowers to select a LIBOR Rate Advance for such
Borrowing or any subsequent Borrowing (including a
Continuation or a Conversion) shall be suspended until the
circumstances causing such suspension no longer exist, and any
Advance comprising such requested Borrowing shall be a Base
Rate Advance;
(ii) if, at least one Business Day before the first day of
any Interest Period, the Lender is unable to determine the
LIBOR Rate for LIBOR Rate Advances comprising any requested
Borrowing, Continuation or Conversion, the Lender shall
promptly give written notice of such circumstance to the
Administrative Borrower, and the right of the Borrowers to
select or maintain LIBOR Rate Advances for such Borrowing or
any subsequent Borrowing shall be suspended until the Lender
shall notify the Administrative Borrower that the
circumstances causing such suspension no longer exist, and any
Advance comprising such Borrowing shall be a Base Rate
Advance;
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(iii) if the Lender shall, at least one Business Day before
the date of any requested Borrowing or Continuation of, or
Conversion into, a LIBOR Rate Advance, notify the
Administrative Borrower that the LIBOR Rate for Advances
comprising such Borrowing, Continuation or Conversion will not
adequately reflect the cost to the Lender of making or funding
Advances for such Borrowing, the right of the Borrowers to
select LIBOR Rate Advances shall be suspended until the Lender
shall notify the Administrative Borrower that the
circumstances causing such suspension no longer exist, and any
Advance comprising such Borrowing shall be a Base Rate
Advance;
(iv) there shall not be outstanding at any time more than
five Borrowings which consist of LIBOR Rate Advances;
(v) each Borrowing which consists of LIBOR Rate Advances
shall be in an amount equal to $500,000 or a whole multiple of
$100,000 in excess thereof;
(vi) not more than 90% of the principal amount of Loans
outstanding at any time shall consist of LIBOR Rate Advances;
and
(vii) if an Event of Default has occurred and is
continuing, no LIBOR Rate Advances may be borrowed or
continued as such and no Base Rate Advance may be converted
into a LIBOR Rate Advance.
(e) Each Notice of Borrowing, Notice of Continuation and
Notice of Conversion shall be irrevocable and binding on the Borrowers. The
Borrowers agree, jointly and severally, to indemnify the Lender against any
loss, cost or expense incurred by the Lender as a result of (i) default by the
Borrowers in making a Borrowing of, Conversion into or Continuation of a LIBOR
Rate Advance after the Administrative Borrower has given notice requesting the
same, (ii) default by the Borrowers in payment when due of the principal amount
of or interest on any LIBOR Rate Advance or (iii) the making of a payment or
prepayment of a LIBOR Rate Advance on a day which is not the last day of an
Interest Period with respect thereto, including, without limitation, any loss
(including loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by the
Lender to fund such Advance.
SECTION 2.3. Application of Proceeds. The proceeds of the
Loans shall be used by the Borrowers (i) to refinance their existing
indebtedness, (ii) for their general working capital purposes, (iii) for capital
expenditures and (iv) for expenses incurred by the Borrowers in connection
herewith.
SECTION 2.4. Maximum Amount of the Facility; Mandatory
Prepayments; Optional Prepayments.
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(a) In no event shall the sum of the aggregate outstanding
principal balances of the Loans and the aggregate undrawn amount of all
unexpired Letters of Credit exceed the lesser of (i) the Borrowing Base and (ii)
the Maximum Amount of the Facility.
(b) In addition to any prepayment required as a result of an
Event of Default hereunder, the Loans shall be subject to mandatory prepayment
as follows:
(i) immediately upon discovery by or notice to the
Administrative Borrower that any of the lending limits set
forth in Section 2.1(a) or Section 2.4(a) has been exceeded,
an amount sufficient to reduce the outstanding balances of the
Loans, Collateralize outstanding Letters of Credit, or any
combination thereof, to the applicable maximum allowed amount
shall become due and payable by the Borrowers without the
necessity of a demand by the Lender;
(ii) the outstanding principal amount of the Loans shall
be immediately prepaid by an amount equal to 100% of all Net
Cash Proceeds which shall be applied to the outstanding
principal amount of the Loans; and
(iii) the entire outstanding principal amount of the Loans,
together with all accrued and unpaid interest thereon and all
fees, costs and expenses payable by the Borrowers hereunder,
shall become due and payable on the Expiration Date.
SECTION 2.5. Maintenance of Loan Account; Statements of
Account. The Lender shall maintain an account on its books in the name of the
Borrowers jointly (the "Loan Account") in which the Borrowers will be charged
with all loans and advances made by the Lender to the Borrowers or for the
Borrowers' account, including the Loans, interest, fees, expenses and any other
Obligations. The Loan Account will be credited with all amounts received by the
Lender from the Borrowers or for the Borrowers' account, including, as set forth
below, all amounts received from the Blocked Account Bank. The Lender shall send
the Administrative Borrower a monthly statement reflecting the activity in the
Loan Account. Each such statement shall be an account stated and shall be final,
conclusive and binding on the Borrowers, absent manifest error.
SECTION 2.6. Collection of Receivables.
(a) At all times during the term of this Agreement, the
Borrowers shall maintain, pursuant to one or more Lockbox Agreements, a lockbox
(each, a "Lockbox") and a blocked account in the name of the Lender as secured
party (each, a "Blocked Account"). The Borrowers shall instruct their account
debtors to remit to a Lockbox all checks, drafts and other documents and
instruments evidencing remittances in payment (collectively, "Items of
Payment"). Items of Payment remitted to a Blocked Account will be processed in
accordance with the applicable Lockbox Agreement.
(b) So long as no Event of Default has occurred and is
continuing, the Lender shall apply all amounts received by it from each Lockbox
Bank deposited in a Blocked Account first, to costs and expenses that are then
due and payable by the Borrowers under the Loan Documents, second, to accrued
and unpaid interest that is payable hereunder and under the Note, and third, to
the outstanding principal amount of the Loans. All Collections and other amounts
received by the Borrowers from any account debtor, in addition to all other cash
received by the Borrowers from any other source, shall, upon receipt, be
deposited into a Blocked Account. The Borrowers will at all times (i) not
commingle any Items of Payment with any of their other funds or property, but
will segregate them from their other assets and will hold them in trust and for
the account and as the property of the Lender and (ii) endorse any Item of
Payment. The Lender will credit all such payments to the Loan Account,
conditional upon final collection; credit will be given only for cleared funds
received prior to 2:00 p.m. (Chicago time) by the Lender. The Loan Account will
be credited only with the net amounts actually received by the Lender.
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(c) Notwithstanding anything to the contrary in this Section
2.6, upon the occurrence and during the continuance of an Event of Default, the
Lender may apply all amounts deposited in a Blocked Account to any of the
Obligations and in any order as it may elect in its sole and absolute
discretion.
SECTION 2.7. Term. The term of this Agreement shall be for a
period from the Closing Date to but not including June 10, 2005 unless sooner
terminated in accordance with the terms of this Agreement. Notwithstanding the
foregoing, the Borrowers shall have no right to terminate this Agreement at any
time that any principal of or interest on any of the Loans is outstanding,
except upon prepayment of all Obligations and the satisfaction of all other
conditions set forth in the Loan Documents with respect thereto.
SECTION 2.8. Payment Procedures.
(a) The Borrowers hereby authorize the Lender to charge the
Loan Account with the amount of all interest, fees, expenses and other payments
to be made hereunder and under the other Loan Documents. The Lender may, but
shall not be obligated to, discharge the Borrowers' payment obligations
hereunder by so charging the Loan Account.
(b) Whenever any payment to be made hereunder shall be stated
to be due on a day that is not a Business Day, the payment may be made on the
next succeeding Business Day (except as specified in clause (ii) of the
definition of "Interest Period") and such extension of time shall be included in
the computation of the amount of interest due hereunder.
SECTION 2.9. Letters of Credit. The Lender, upon the request
of the Administrative Borrower, shall use its best efforts to cause a bank or
other financial institution acceptable to the Lender to issue for the account of
one or more of the Borrowers Letters of Credit of a tenor and containing terms
acceptable to the Lender and the issuer of such Letter of Credit, in a maximum
aggregate face amount outstanding at any time not to exceed Two Million Dollars
($2,000,000), provided that no Letter of Credit shall have an expiration date
after the Expiration Date. The term of any Letter of Credit shall not exceed
three hundred sixty days from the date of issuance, subject to renewal in
accordance with the terms thereof, but in no event to a date beyond the
Expiration Date. All Letters of Credit shall be subject to the limitations set
forth in Section 2.4, and a sum equal to the aggregate amount of all outstanding
Letters of Credit shall be included in calculating outstanding amounts for
purposes of determining compliance with Section 2.4. Upon each drawing or
payment under a Letter of Credit, the amount of such drawing or payment for all
purposes under this Agreement shall become and be deemed to be, without any
further action on the part of any Person, a Revolving Credit Loan made by the
Lender on the date of such drawing or payment (but without any requirement for
compliance with the conditions precedent to the making of Loans contained in
this Agreement) which, in the case of any Letter of Credit denominated in any
currency other than Dollars, shall be denominated in Dollars at the Equivalent
Amount.
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ARTICLE III.
SECURITY
SECTION 3.1. General. To secure the prompt and complete
payment and performance when due (whether at stated maturity, by acceleration or
otherwise) of all of the Obligations, each of the Borrowers hereby grants to the
Lender a Lien on and security interest in all of its right, title and interest
in and to its Receivables, Equipment, Property, Inventory and Investment
Property (other than the shares of capital stock of Del Electronics, Dynarad and
Villa Sistemi owned by Del Global), wherever located, whether now owned or
hereafter acquired, and all additions and accessions thereto and substitutions
and replacements therefor and improvements thereon, and all proceeds (whether in
the form of cash or other property) and products thereof including, without
limitation, all proceeds of insurance covering the same and all tort claims in
connection therewith. As further security for the Obligations, and to provide
other assurances to the Lender, the Lender shall receive, among other things:
(a) the Lockbox Agreement and any Control Agreement;
(b) the Pledge Agreement; and
(c) the Intellectual Property Security Agreement.
This Agreement shall constitute a security agreement for purposes of the Code.
SECTION 3.2. Further Security. Each of the Borrowers also
grants to the Lender, as further security for all of the Obligations, a security
interest in all of its right, title and interest in and to all property of such
Borrower in the possession of or deposited with or in the custody of the Lender
or any Affiliate of the Lender or any representative, agent or correspondent of
the Lender and in all present and future deposit accounts as that term is
defined in the Code. For purposes of this Agreement, any property in which the
Lender or any such Affiliate has any security or title retention interest shall
be deemed to be in the custody of the Lender or of such Affiliate.
SECTION 3.3. Recourse to Security. Recourse to security shall
not be required for any Obligation hereunder and each Borrower hereby waives any
requirement that the Lender exhaust any right or take any action against any of
the Collateral before proceeding to enforce the Obligations against such
Borrower.
SECTION 3.4. Special Provisions Relating to Inventory.
(a) All Inventory. The security interest in the Inventory
granted to the Lender hereunder shall continue through all steps of manufacture
and sale and attach without further act to raw materials, work in process,
finished goods, returned goods, documents of title and warehouse receipts, and
to proceeds resulting from the sale or other disposition of such Inventory.
Until all of the Obligations have been satisfied, all Letters of Credit have
been terminated or Collateralized and the Lender has no obligation to make Loans
or to use its best efforts to cause Letters of Credit to be issued hereunder,
the Lender's security interest in such Inventory and in all proceeds thereof
shall continue in full force and effect and the Lender shall have, in its sole
and absolute discretion at any time if an Event of Default has occurred and is
continuing or the Lender believes that fraud has occurred, the right to take
physical possession of such Inventory and to maintain it on the premises of a
Borrower, in a public warehouse, or at such other place as the Lender may deem
appropriate. If the Lender exercises such right to take possession of such
Inventory, the Borrowers will, upon demand, and at the Borrowers' cost and
expense, assemble such Inventory and make it available to the Lender at a place
or places convenient to the Lender.
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(b) No Liens. All Inventory of each Borrower shall be
maintained at the locations therefor shown on Schedule 6.1(b), except for
Inventory moved from such locations solely for the purpose of sale in the
ordinary course of such Borrower's business and Inventory in transit from one
such location to another such location in the ordinary course of such Borrower's
business with an aggregate value not greater than $100,000 at any time. If sales
are made for cash, the applicable Borrower shall immediately deliver to the
Lender the checks or other forms of payment which it receives, together with any
necessary endorsements.
(c) Further Assurances. Each Borrower will perform any and all
steps that the Lender may request to perfect the Lender's security interests in
such Borrower's Inventory including, without limitation, placing and maintaining
signs, executing and filing financing or continuation statements in form and
substance satisfactory to the Lender, maintaining stock records and conducting
lien searches. In each case, each Borrower shall take such action as promptly as
possible after requested by the Lender but in any event within five Business
Days after any such request is made except that such Borrower shall take such
action immediately upon the Lender's request following the occurrence of an
Event of Default. If any Borrower's Inventory is in the possession or control of
any Person other than a purchaser in the ordinary course of business or a public
warehouseman where the warehouse receipt is in the name of or held by the
Lender, such Borrower shall notify such Person of the Lender's security interest
therein and, upon request, instruct such Person to acknowledge in writing its
agreement to hold all such Inventory for the benefit of the Lender and subject
to the Lender's instructions. If so requested by the Lender, each Borrower (as
promptly as possible after requested by the Lender but in any event within five
Business Days after any such request is made) will deliver (i) to the Lender
warehouse receipts covering any of such Borrower's Inventory located in
warehouses showing the Lender as the beneficiary thereof and (ii) to the
warehouseman such agreements relating to the release of warehouse Inventory as
the Lender may request. A physical verification of all of each Borrower's
Inventory wherever located will be taken by such Borrower at least every twelve
months and, in any case, as often as reasonably requested by the Lender and a
copy of such physical verification shall be promptly thereafter submitted to the
Lender. Each Borrower shall also submit to the Lender a copy of the summary
compilation of any physical inventories (which shall be taken no less frequently
than annually) of such Borrower as observed and tested by its independent
auditors in accordance with generally accepted auditing standards and GAAP. If
so requested by the Lender, each Borrower shall execute and deliver to the
Lender a confirmatory written instrument, in form and substance satisfactory to
the Lender, listing all its Inventory, but any failure to execute or deliver the
same shall not limit or otherwise affect the Lender's security interest in and
to such Inventory. Each Borrower shall deliver a monthly report of its
Inventory, based upon its perpetual inventory, which shall describe such
Inventory by category, item (in reasonable detail) and location and report the
then appraised value (at the lower of cost or market) of such Inventory and its
location.
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(d) Inventory Records. Each Borrower shall maintain full,
accurate and complete records of its Inventory describing the kind, type and
quantity of such Inventory and such Borrower's cost therefor, withdrawals
therefrom and additions thereto, including a perpetual inventory for raw
materials, work in process (to the extent available) and finished goods.
SECTION 3.5. Special Provisions Relating to Receivables.
(a) Invoices, Etc. On the Lender's request therefor, each
Borrower shall furnish to the Lender copies of invoices to customers and
shipping and delivery receipts or warehouse receipts thereof. Each Borrower
shall deliver to the Lender (i) the originals of all letters of credit, notes,
and instruments in its favor, in each case in an amount greater than $25,000,
(ii) such endorsements or assignments related thereto as the Lender may
reasonably request and (iii) the written consent of the issuer of any letter of
credit to the assignment of the proceeds of such letter of credit by such
Borrower to the Lender.
(b) Records, Collections, Etc. Each Borrower shall promptly
report all customer credits to the Lender. Each Borrower shall notify the Lender
of all returns and recoveries of merchandise and of all claims asserted with
respect to merchandise, in each case with a value in excess of $25,000. Each
Borrower shall promptly report to the Lender each such return, repossession or
recovery of merchandise, providing the Lender with a description of such
merchandise. No Borrower shall settle or adjust any dispute or claim, or grant
any discount (except ordinary trade discounts), credit or allowance or accept
any return of merchandise, except in the ordinary course of its business,
without the Lender's consent. Upon the occurrence and during the continuance of
an Event of Default or at any time that the Lender believes that fraud has
occurred, the Lender may (i) settle or adjust disputes or claims directly with
account debtors for amounts and upon terms which it considers advisable and (ii)
notify account debtors on a Borrower's Receivables that such Receivables have
been assigned to the Lender, and that payments in respect thereof shall be made
directly to the Lender. Where a Borrower receives collateral of any kind or
nature by reason of transactions between itself and its customers or account
debtors, such Borrower will hold the same on the Lender's behalf, subject to the
Lender's instructions, and as property forming part of such Borrower's
Receivables. Where a Borrower sells goods or services to a customer which also
sells goods or services to it or which may have other claims against it, such
Borrower will so advise the Lender immediately to permit the Lender to establish
a reserve therefor. Each Borrower hereby irrevocably authorizes and appoints the
Lender, or any Person the Lender may designate, as its attorney-in-fact, at such
Borrower's sole cost and expense, to exercise, if an Event of Default has
occurred and is continuing or the Lender believes that fraud has occurred, all
of the following powers, which being coupled with an interest, shall be
irrevocable until all of the Obligations have been indefeasibly paid and
satisfied in full in cash: (A) to receive, take, endorse, sign, assign and
deliver, all in the name of the Lender or such Borrower, any and all checks,
notes, drafts, and other documents or instruments relating to the Collateral;
(B) to receive, open and dispose of all mail addressed to such Borrower and to
notify postal authorities to change the address for delivery thereof to such
address as the Lender may designate; and (C) to take or bring, in the name of
the Lender or such Borrower, all steps, actions, suits or proceedings deemed by
the Lender necessary or desirable to enforce or effect collection of such
Borrower's Receivables or file and sign such Borrower's name on a proof of claim
in bankruptcy or similar document against any obligor of such Borrower. Each
Borrower shall maintain a record of its electronic chattel paper that identifies
the Lender as the assignee thereof and otherwise in a manner such that the
Lender has control over such chattel paper for purposes of the Code.
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SECTION 3.6. Special Provisions Relating to Equipment.
(a) Location. Each item of Equipment of each Borrower, now
owned or hereafter acquired, will be kept at a location specified in Schedule
6.1(b) and may not be moved without the prior written consent of the Lender
except in connection with the Business Consolidation. Each Borrower shall at all
times hereafter keep correct and accurate records itemizing and describing the
location, kind, type, age and condition of its Equipment, such Borrower's cost
therefor and accumulated depreciation thereof, and retirements, sales, or other
dispositions thereof, all of which records shall be available during such
Borrower's usual business hours on demand to any of the officers, employees or
agents of the Lender.
(b) Repair. Each Borrower shall keep all of its Equipment in a
satisfactory state of repair and satisfactory operating condition in accordance
with industry standards, ordinary wear and tear excepted, and will, consistent
with the exercise of its reasonable business judgment, make all repairs and
replacements when and where necessary and practical, will not waste or destroy
it or any part thereof, and will not be negligent in the care or use thereof.
Each Borrower shall repair and maintain all of its Equipment in accordance with
industry practices in a manner sufficient to continue the operation of its
business as heretofore conducted. Each Borrower will use or cause its Equipment
to be used in accordance with law and the manufacturer's instructions. Each
Borrower shall keep its Equipment separate from, and will not annex or affix any
of its Equipment to, any part of any Property or any other realty.
(c) Disposal. Where a Borrower is permitted to dispose of any
of its Equipment under this Agreement or by any consent thereto hereafter given
by the Lender, such Borrower shall do so at arm's length, in good faith and by
obtaining the maximum amount of recovery practicable therefor and without
impairing the operating integrity or value of its remaining Equipment.
SECTION 3.7. Continuation of Liens, Etc. Each Borrower shall
defend the Collateral against all claims and demands of all Persons at any time
claiming any interest therein, other than claims relating to Liens permitted by
the Loan Documents. Each Borrower agrees to comply with the requirements of all
state and federal laws to grant to the Lender valid and perfected first priority
security interests in the Collateral and shall, upon request of the Lender,
obtain a Control Agreement from any securities intermediary or depository bank
in possession of any of such Borrower's Investment Property or deposit accounts.
The Lender is hereby authorized by each Borrower to sign such Borrower's name on
any document or instrument as may be necessary or desirable to establish and
maintain the Liens covering the Collateral and the priority and continued
perfection thereof or file any financing or continuation statements or similar
documents or instruments covering the Collateral whether or not such Borrower's
signature appears thereon. Each Borrower agrees, from time to time, at the
Lender's request, to file notices of Liens, financing statements, similar
documents or instruments, and amendments, renewals and continuations thereof,
and cooperate with the Lender's representatives, in connection with the
continued perfection (and the priority status thereof) and protection of the
Collateral and the Lender's Liens thereon. Each Borrower agrees that the Lender
may file a carbon, photographic or other reproduction of this Agreement (or any
financing statement related hereto) as a financing statement.
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SECTION 3.8. Power of Attorney. In addition to all of the
powers granted to the Lender in this Article III, each Borrower hereby appoints
and constitutes the Lender as such Borrower's attorney-in-fact to sign such
Borrower's name on any of the documents, instruments and other items described
in Section 3.7, to request at any time from customers indebted on its
Receivables verification of information concerning such Receivables and the
amount owing thereon (provided that any verification prior to an Event of
Default shall not contain the Lender's name), and, upon the occurrence and
during the continuance of an Event of Default, (i) to convey any item of
Collateral to any purchaser thereof and (ii) to make any payment or take any act
necessary or desirable to protect or preserve any Collateral. The Lender's
authority hereunder shall include, without limitation, the authority to execute
and give receipt for any certificate of ownership or any document, to transfer
title to any item of Collateral and to take any other actions arising from or
incident to the powers granted to the Lender under this Agreement. This power of
attorney is coupled with an interest and is irrevocable.
ARTICLE IV.
INTEREST, FEES AND EXPENSES
SECTION 4.1. Interest. The Borrowers shall pay to the Lender
interest on the Advances, payable monthly in arrears on the first Business Day
of each month, commencing with the month immediately following the Closing Date,
and on the Expiration Date, at the following rates per annum:
(a) Base Rate Advances. If such Advance is a Base Rate
Advance, at a fluctuating rate which is equal to (i) the Base Rate then in
effect plus (ii) the Pricing Increment, each change in such fluctuating rate to
take effect simultaneously with the corresponding change in the Base Rate.
(b) LIBOR Rate Advances. If such Advance is a LIBOR Rate
Advance, at a rate which is equal at all times during the Interest Period for
such LIBOR Rate Advance to (i) the LIBOR Rate plus (ii) the Pricing Increment.
SECTION 4.2. Interest and Letter of Credit Fees After Event of
Default. From the date of occurrence of any Event of Default until the earlier
of the date upon which (i) all Obligations shall have been paid and satisfied in
full and all Letters of Credit have expired or been terminated or (ii) such
Event of Default shall have been cured within any grace period specified
therefor in Section 9.1 or waived, interest on the Loans shall be payable on
demand at a rate per annum equal to the rate that would be otherwise applicable
thereto under Section 4.1 plus an additional two percent (2%) and the letter of
credit fee pursuant to Section 4.4(c) shall be payable at the rate that would
otherwise apply under Section 4.4(c) plus an additional two percent (2%).
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SECTION 4.3. Closing Fee. On the Closing Date, the Borrowers
shall pay to the Lender a non-refundable closing fee in the amount of $175,000.
SECTION 4.4. Unused Line Fee; Minimum Loan Fee; Letter of
Credit Fees.
(a) The Borrowers shall pay to the Lender on the first
Business Day of each month, commencing with the month immediately following the
Closing Date, and on the Expiration Date, in arrears, an unused line fee equal
to three-eighths of one percent (.375%) per annum of the difference, if
positive, between (i) the Maximum Amount of the Facility and (ii) the average
daily aggregate outstanding amount of the Loans plus the average daily aggregate
undrawn amount of all unexpired Letters of Credit during the immediately
preceding month or portion thereof.
(b) The Borrowers agree that, to induce the Lender to enter
into this Agreement, the Borrowers shall at all times during the term of this
Agreement have an aggregate average outstanding principal amount of the Loans
(including the unpaid face amount of outstanding Letters of Credit) of at least
Five Million Dollars ($5,000,000) (the "Minimum Loan Amount"). If, in any
calendar month, the average daily outstanding principal amount of the Loans
(including the unpaid face amount of outstanding Letters of Credit) does not
equal or exceed the Minimum Loan Amount, the Borrowers, in addition to the
payment of interest on the Obligations pursuant to Section 4.1, shall pay to the
Lender on the date such interest is due, a fee equal to the difference between
(x) the amount of interest that would have been payable by the Borrowers to the
Lender during such month pursuant to Section 4.1 if such average daily
outstanding principal amount had been equal to the Minimum Loan Amount and if
all Advances during such month were Base Rate Advances, and (y) the amount of
interest actually paid by the Borrowers to the Lender for such month pursuant to
Section 4.1.
(c) The Borrowers shall promptly pay to the Lender all fees
charged to the Lender by any issuer of a Letter of Credit which relate directly
to the opening, amending or drawing under Letters of Credit. In addition, the
Borrowers shall pay to the Lender on the first Business Day of each month,
commencing with the month immediately following the Closing Date, and on the
Expiration Date, in arrears, a fee equal to two and one-half percent (2.50%) per
annum on the daily average of the amount of the Letters of Credit outstanding
during the preceding month or during the interim period ending on the Expiration
Date, as the case may be.
SECTION 4.5. Collateral Management Fee. The Borrowers shall
pay to the Lender on the first Business Day of each month commencing with the
month immediately following the Closing Date and on the Expiration Date, in
arrears, a collateral management fee in the amount of $1,500.
SECTION 4.6. Early Termination Fee. The Borrowers shall have
the right to terminate this Agreement at any time on 120 days' prior written
notice by the Administrative Borrower to the Lender, provided that, on the date
of such termination, all Obligations, including all amounts required for the
Collateralization of Letters of Credit and interest, fees and expenses payable
to the date of such termination, shall be paid in full. If (a) the
Administrative Borrower gives such notice to terminate or (b)(i) the Loans are
paid in full or substantially in full and (ii) the Lender's obligation to make
Loans or to use its best efforts to cause Letters of Credit to be issued is
terminated, including as a result of the Lender terminating, in accordance with
Section 9.2(b), such obligation, the Borrowers shall pay a fee to the Lender in
an amount equal to (a) $300,000 if such termination or payment occurs prior to
the first anniversary of the Closing Date, (b) $200,000 if such termination or
payment occurs on or after the first anniversary but prior to the second
anniversary of the Closing Date or (c) $100,000 if such termination or payment
occurs on or after the second anniversary of the Closing Date.
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SECTION 4.7. Calculations. All calculations of interest and
fees hereunder shall be made by the Lender on the basis of a year of 360 days
for the actual number of days elapsed in the period for which such interest or
fees are payable. Each determination by the Lender of an interest rate, fee or
other payment hereunder shall be conclusive and binding for all purposes, absent
manifest error.
SECTION 4.8. Indemnification in Certain Events. If, after the
Closing Date, (i) any change in or in the interpretation of any law or
regulation is introduced including, without limitation, with respect to reserve
requirements, applicable to the Lender or any other banking or financial
institution from which the Lender borrows funds or obtains credit, (ii) the
Lender complies with any future guideline or request from any central bank or
other Governmental Authority or (iii) the Lender determines that the adoption of
any applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof has or would have the effect described
below, or the Lender complies with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, and in the case of any event set forth in this clause
(iii), such adoption, change or compliance has or would have the direct or
indirect effect of reducing the rate of return on the Lender's capital as a
consequence of its obligations hereunder to a level below that which the Lender
could have achieved but for such adoption, change or compliance (taking into
consideration the Lender's policies as the case may be with respect to capital
adequacy) by an amount deemed by the Lender to be material, and any of the
foregoing events described in clauses (i), (ii) and (iii) increases the cost to
the Lender of funding or maintaining the Loans, or reduces the amount receivable
in respect thereof by the Lender, then the Borrowers shall, upon demand, pay to
the Lender additional amounts sufficient to indemnify the Lender against such
increase in cost or reduction in amount receivable.
SECTION 4.9. Taxes.
(a) Any and all payments by the Borrowers hereunder or under
the Note shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings
and penalties, interest and all other liabilities with respect thereto
("Taxes"), including any Taxes imposed under Section 7701(l) of the Internal
Revenue Code, excluding in the case of the Lender, taxes imposed on its net
income (including, without limitation, any taxes imposed on branch profits) and
franchise taxes imposed on it by any applicable jurisdiction. If the Borrowers
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder or under any Loan to or for the benefit of the Lender, (A) the
sum payable shall be increased as may be necessary so that after making all
required deductions of Taxes (including deductions of Taxes applicable to
additional sums payable under this Section 4.9) the Lender receives an amount
equal to the sum it would have received had no such deductions been made, (B)
the Borrowers shall make such deductions and (C) the Borrowers shall pay the
full amount so deducted to the relevant taxation authority or other authority in
accordance with applicable law.
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(b) In addition, each Borrower agrees to pay any present or
future stamp, documentary, excise, privilege, intangible or similar taxes or
levies that arise at any time or from time to time (i) from any payment made
under any and all Loan Documents, or (ii) from the execution or delivery by such
Borrower of, or from the filing or recording or maintenance of, or otherwise
with respect to the exercise by the Lender of its rights under, any and all Loan
Documents (hereinafter referred to as "Other Taxes").
(c) Each Borrower indemnifies the Lender for the full amount
of (i) Taxes imposed on or with respect to amounts payable hereunder, (ii) Other
Taxes and (iii) any Taxes (other than Taxes imposed by any jurisdiction on
amounts payable under this Section 4.9) paid by the Lender and any liability
(including penalties, interest and expenses) arising solely therefrom or with
respect thereto.
(d) Within thirty days after the date of any payment of Taxes
or Other Taxes, the Administrative Borrower will, upon request, furnish to the
Lender the original or a certified copy of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement
of the Borrowers hereunder, the agreements and obligations of the Borrowers
contained in this Section 4.9 shall survive the indefeasible payment in full of
the Obligations.
ARTICLE V.
CONDITIONS OF LENDING
SECTION 5.1. Conditions to Initial Loan or Letter of Credit.
The obligation of the Lender to make the initial Loan or to use its best efforts
to cause to be issued the initial Letter of Credit is subject to the
satisfaction of the following conditions prior to or concurrent with such
initial Loan or Letter of Credit:
(a) the Lender shall have received the following, each dated
the date of the initial Loan or Letter of Credit or as of an earlier date
acceptable to the Lender, in form and substance satisfactory to the Lender and
its counsel:
(i) the Note, duly executed by each Borrower;
(ii) the Intellectual Property Security Agreement, duly
executed by Del Global and Del Medical;
(iii) the Lockbox Agreement, duly executed by each Borrower
and the Lockbox Bank party thereto;
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(iv) the Pledge Agreement, duly executed by Del Global and
acknowledged by each of the other Borrowers, together with (A)
the original certificates representing the shares of stock or
other equity interests pledged thereunder and undated transfer
powers therefor, executed in blank, (B) a securities account
control agreement for any uncertificated securities pledged
thereunder, duly executed by Del Global and the securities
intermediary in whose account such securities are maintained,
and (C) the original promissory notes pledged thereunder and
undated note powers therefor, executed in blank;
(v) acknowledgment copies of Uniform Commercial Code
financing statements (naming the Lender as secured party and
the Borrowers as debtors) and duly authorized release or
termination statements, in form and substance satisfactory to
the Lender, duly filed in all jurisdictions that the Lender
deems necessary or desirable to perfect and protect the Liens
created hereunder and under the Security Documents;
(vi) completed requests for information, dated on or
before the date of the initial Loan or Letter of Credit,
listing all effective financing statements filed in the
jurisdictions referred to in clause (v) above and in all other
jurisdictions that the Lender deems necessary or desirable to
confirm the priority of the Liens created hereunder and under
the Security Documents, that name each of the Borrowers as
debtor, together with copies of such financing statements;
(vii) a completed perfection certificate, substantially in
the form of Exhibit M, signed by a Responsible Officer of each
Borrower;
(viii) the Contribution Agreement, duly executed by each
Borrower;
(ix) a solvency certificate of the Chief Financial Officer
of each of the Borrowers, in the form of Exhibit L;
(x) a copy of the form of each of the Subordinated Note
and the Warrant, certified by the Secretary or an Assistant
Secretary of the Administrative Borrower;
(xi) a Borrowing Base Certificate, duly executed by the
Administrative Borrower's Chief Financial Officer;
(xii) (A) the audited Financial Statements for the fiscal
year ended July 31, 2001, certified by the Auditors, and
unaudited Financial Statements for the nine-month period ended
April 30, 2002, certified by the Borrowers' Chief Financial
Officer, (B) a pro forma consolidated and consolidating
balance sheet of Del Global and its Subsidiaries, after giving
effect to the consummation of the transactions contemplated
hereby reflecting a satisfactory tangible net worth of each of
Del Global and its Subsidiaries and otherwise in form and
substance satisfactory to the Lender and (C) a certificate
executed by the Borrowers' Chief Financial Officer certifying
that since April 30, 2002, no change, event, occurrence or
development or event involving a prospective change in the
business, prospects, operations, results of operations,
assets, liabilities or condition (financial or otherwise) has
occurred which has had or could reasonably be expected to have
a Material Adverse Effect, and that all information provided
by or on behalf of the Borrowers to the Lender hereunder or in
connection herewith is true and correct in all respects;
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(xiii) the opinion of counsel for each Borrower covering
such matters incident to the transactions contemplated by this
Agreement as the Lender may reasonably require, which such
counsel is hereby requested by the Borrowers to provide;
(xiv) certified copies of all policies of insurance
required by this Agreement and the other Loan Documents,
together with loss payee endorsements for all such policies
naming the Lender as lender loss payee and an additional
insured;
(xv) a copy of the Business Plan for the period commencing
August 1, 2001, accompanied by a certificate executed by the
Chief Financial Officer of the Administrative Borrower
certifying to the Lender that the Business Plan has been
prepared in good faith based upon the assumptions contained
therein and all information available at the time of
preparation thereof and, as of the date of such certificate,
such Chief Financial Officer is not aware of any information
contained in the Business Plan which is false or misleading or
of any omission of information which causes the Business Plan
to be false or misleading;
(xvi) copies of the Governing Documents of each Borrower
and a copy of the resolutions of the Board of Directors of
each Borrower authorizing the execution, delivery and
performance of this Agreement, the other Loan Documents to
which such Borrower is or is to be a party, and the
transactions contemplated hereby and thereby, attached to
which is a certificate of the Secretary or an Assistant
Secretary of such Borrower certifying (A) that such copies of
the Governing Documents and resolutions (or similar evidence
of authorization) of such Borrower are true, complete and
accurate copies thereof, have not been amended or modified
since the date of such certificate and are in full force and
effect and (B) the incumbency, names and true signatures of
the officers of such Borrower authorized to sign the Loan
Documents to which it is a party;
(xvii) a certified copy of a certificate of the Secretary of
State of the state of incorporation of each Borrower, dated
within fifteen days of the Closing Date, listing the
certificate of incorporation of such Borrower and each
amendment thereto on file in such official's office and
certifying that (A) such amendments are the only amendments to
such certificate of incorporation on file in that office, (B)
such Borrower has paid all franchise taxes to the date of such
certificate and (C) such Borrower is in good standing in that
jurisdiction;
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(xviii) a good standing certificate from the Secretary of
State of each state in which each Borrower is qualified as a
foreign corporation, each dated within fifteen days of the
Closing Date;
(xix) a Collateral Access Agreement for each parcel of
Property specified in Schedule 6.1(b) (other than the Property
leased by Bertan and the Property owned by RFI) and with
respect to any Collateral in the possession of any Person
other than a Borrower, duly executed by each Person (other
than a Borrower) in possession of such Collateral or with a
Lien on or other interest in such parcel of Property;
(xx) a copy of (A) an appraisal of the Bay Shore Property
and (B) an audit of the accounting systems, accounts
receivables, accounts payable and tax returns of the
Borrowers, in each case conducted in accordance with sound
appraisal and auditing standards by appraisers and auditors
satisfactory to the Lender;
(xxi) a letter from the Administrative Borrower to the
Auditors authorizing the Lender to discuss the financial
condition of Del Global and its Subsidiaries with the Auditors
and their personnel and directing the Auditors to cooperate
with the Lender with respect thereto;
(xxii) a Control Agreement for each deposit account not
covered by a Lockbox Agreement and for each Securities Account
of each Borrower, duly executed by such Borrower and the
depository bank or securities intermediary party thereto;
(xxiii) a consent to the assignment to the Lender of the
proceeds of each letter of credit issued in favor of a
Borrower, duly executed by the issuer thereof;
(xxiv) evidence that each Borrower maintains a record of its
electronic chattel paper that identifies the Lender as the
assignee thereof and otherwise in a manner such that the
Lender has control over such chattel paper for purposes of the
Code;
(xxv) (A) a report of a phase I environmental site
assessment of the Bay Shore Property, in form and substance
reasonably satisfactory to the Lender and upon which the
Lender has been expressly permitted to rely, performed by
Laurel Environmental Associates, Ltd. in accordance with ASTM
E1527-00 "Standard Practice for Environmental Site
Assessments: Phase I Environmental Site Assessment Process"
and (B) a report of a phase II environmental site assessment
of the Bay Shore Property, in form and substance reasonably
satisfactory to the Lender and upon which the Lender has been
expressly permitted to rely, performed by Laurel Environmental
Associates, Ltd. in accordance with ASTM E1903-97 "Standard
Practice for Environmental Site Assessments: Phase II
Environmental Site Assessment Process";
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(xxvi) evidence of the settlement of the Shareholder Class
Action Lawsuit under terms, conditions and documentation
satisfactory to the Lender;
(xxvii) evidence that the Borrowers' internal accounting
systems reconcile accounts receivable, accounts payable and
Inventory to a general ledger, which reflects the Borrowers'
consolidated accounts receivable, accounts payable and
Inventory, in a manner and frequency satisfactory to the
Lender; and
(xxviii) such other agreements, instruments, documents and
evidence as the Lender deems necessary in its sole and
absolute discretion in connection with the transactions
contemplated hereby.
(b) There shall be no pending or, to the knowledge of each
Borrower after due inquiry, threatened litigation, proceeding, inquiry or other
action (i) seeking an injunction or other restraining order, damages or other
relief with respect to the transactions contemplated by this Agreement or the
other Loan Documents or (ii) which affects or could affect the business,
prospects, operations, assets, liabilities or condition (financial or otherwise)
of any Borrower, except, in the case of clause (ii), where such litigation,
proceeding, inquiry or other action could not reasonably be expected to have a
Material Adverse Effect.
(c) The Borrowers shall have paid (i) all reasonable fees and
expenses of the Lender in connection with the negotiation, preparation,
execution and delivery of the Loan Documents (including, without limitation, all
of the Lender's examination, audit, appraisal and travel expenses and the fees
and expenses of counsel to the Lender) and (ii) the closing fee payable under
Section 4.3 and all other fees referred to in this Agreement that are required
to be paid on the Closing Date.
(d) Except for (i) the filing of the financing and termination
statements under the Code specified in Section 5.1(a)(v) and (ii) consents or
authorizations which have been obtained and are specified in Schedule 6.1(f), no
consent or authorization of, filing with or other act by or in respect of any
Governmental Authority or any other Person is required in connection with the
execution, delivery, performance, validity or enforceability of this Agreement,
the Note or the other Loan Documents or the consummation of the transactions
contemplated hereby or thereby or the continuing operations of each Borrower
following the consummation of such transactions.
(e) No change, occurrence, event or development or event
involving a prospective change that could reasonably be expected to have a
Material Adverse Effect shall have occurred and be continuing.
(f) The Lender and its counsel shall have performed (i) a
review satisfactory to the Lender of all of the Material Contracts and other
assets (including, without limitation, leases of operating facilities) of each
Borrower, the financial condition of each Borrower, including all of its tax,
litigation, environmental and other potential contingent liabilities, the
corporate and capital structure of each Borrower and the cash management and
management information systems of the Borrowers, (ii) a pre-closing audit and
collateral review and (iii) reviews and investigations of such other matters as
the Lender and its counsel deem appropriate, in each case with results
satisfactory to the Lender.
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(g) The Borrowers shall be in compliance with all Requirements
of Law and Material Contracts, other than such noncompliance that could not
reasonably be expected to have a Material Adverse Effect.
(h) The Liens in favor of the Lender shall have been duly
perfected and shall constitute first priority Liens, and the Collateral shall be
free and clear of all Liens other than Liens in favor of the Lender and
Permitted Liens.
(i) After giving effect to all Loans to be made and all
Letters of Credit to be issued on the Closing Date, the Excess Availability
shall exceed $1,000,000.
SECTION 5.2. Conditions Precedent to Each Loan and Each Letter
of Credit. The obligation of the Lender to make any Loan or to use its best
efforts to cause to be issued any Letter of Credit is subject to the
satisfaction of the following conditions precedent:
(a) all representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct on and as of
the date of such Loan or Letter of Credit as if then made, other than
representations and warranties that expressly relate solely to an earlier date,
in which case they shall have been true and correct as of such earlier date;
(b) no Default or Event of Default shall have occurred and be
continuing or would result from the making of the requested Loan or the issuance
of the requested Letter of Credit as of the date of such request; and
(c) no Material Adverse Effect shall have occurred.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
SECTION 6.1. Representations and Warranties of the Borrowers;
Reliance by Lender. Each Borrower represents and warrants as follows:
(a) Organization, Good Standing and Qualification. Such
Borrower (i) is a corporation duly organized, validly existing and in good
standing under the laws of the state of its organization, (ii) has the corporate
power and authority to own its properties and assets and to transact the
businesses in which it presently is, or proposes to be, engaged and (iii) is
duly qualified, authorized to do business and in good standing in each
jurisdiction where it presently is, or proposes to be, engaged in business,
except to the extent that the failure to so qualify or be in good standing could
not reasonably be expected to have a Material Adverse Effect. Schedule 6.1(a)
specifies the jurisdiction in which each Borrower is organized and all
jurisdictions in which each Borrower is qualified to do business as a foreign
corporation as of the Closing Date.
(b) Locations of Offices, Records and Collateral. The address
of the principal place of business and chief executive office of each Borrower
is, and the books and records of each Borrower and all of its chattel paper and
records of Receivables are maintained exclusively in the possession of such
Borrower at, the address of such Borrower specified in Schedule 6.1(b). There is
no location at which a Borrower maintains any Collateral other than the
locations specified for it in Schedule 6.1(b). Schedule 6.1(b) specifies all
Property of each Borrower, and indicates whether each location specified therein
is leased or owned by such Borrower.
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(c) Authority. It has the requisite corporate power and
authority to execute, deliver and perform its obligations under each of the Loan
Documents to which it is a party. All corporate action necessary for the
execution, delivery and performance by it of the Loan Documents to which it is a
party (including the consent of shareholders where required) has been taken.
(d) Enforceability. This Agreement is and, when executed and
delivered, each other Loan Document to which it is a party, will be, the legal,
valid and binding obligation of such Borrower enforceable in accordance with its
terms, except as enforceability may be limited by (i) bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) general principles
of equity.
(e) No Conflict. The execution, delivery and performance by it
of each Loan Document to which it is a party do not and will not contravene (i)
any of the Governing Documents of such Borrower, (ii) any Requirement of Law or
(iii) any Material Contract and will not result in the imposition of any Liens
upon any of its properties except in favor of the Lender.
(f) Consents and Filings. No consent, authorization or
approval of, or filing with or other act by, any shareholders of such Borrower,
any Governmental Authority or any other Person is required in connection with
the execution, delivery, performance, validity or enforceability of this
Agreement or any other Loan Document, the consummation of the transactions
contemplated hereby or thereby or the continuing operations of such Borrower
following such consummation, except (i) those that have been obtained or made
and are specified in Schedule 6.1(f) and (ii) the filing of financing and
termination statements under the Code.
(g) Ownership; Subsidiaries; Immaterial Subsidiaries. The
capital stock of each of the Subsidiaries of Del Global is owned by the Persons
and in the amounts specified in Schedule 6.1(g). Schedule 6.1(g) sets forth the
exact correct legal name of Del Global and each of its Subsidiaries, in each
case as specified in the public record of the jurisdiction of its organization,
and, in the case of such Subsidiaries, of the Persons that own the capital stock
therein. Each of Dynarad and Del Electronics has assets (other than deferred
charges and goodwill) with a value of less than $5,000.
(h) Solvency. It is Solvent and will be Solvent upon the
completion of all transactions contemplated to occur on or before the Closing
Date (including, without limitation, the Loans to be made on the Closing Date).
(i) Financial Data. It has provided to the Lender complete and
accurate copies of its annual audited Financial Statements for the fiscal year
ended July 31, 2001, and unaudited Financial Statements for the nine-month
period ended April 30, 2002. Such Financial Statements have been prepared in
accordance with GAAP consistently applied throughout the periods involved and
fairly present the financial position, results of operations and cash flows of
each Borrower and its Subsidiaries for each of the periods covered. Except as
specified in Schedule 6.1(i), neither it nor any of its Subsidiaries has any
Contingent Obligation or liability for taxes, unrealized losses, unusual forward
or long-term commitments or long-term leases, which is not reflected in such
Financial Statements or the footnotes thereto. During the period from April 30,
2002 to and including the date hereof, there has been no sale, transfer or other
disposition by such Borrower or any of its Subsidiaries of any material part of
its business or property and no purchase or other acquisition of any business or
property (including any capital stock of any other Person) material in relation
to the financial condition of such Borrower and its Subsidiaries at April 30,
2002. Since April 30, 2002, (i) there has been no change, occurrence,
development or event which has had or could reasonably be expected to have a
Material Adverse Effect and (ii) none of the capital stock of such Borrower has
been redeemed, retired, purchased or otherwise acquired for value by such
Borrower.
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(j) Accuracy and Completeness of Information. All data,
reports and information heretofore, contemporaneously or hereafter furnished by
or on behalf of such Borrower in writing to the Lender or the Auditors for
purposes of or in connection with this Agreement or any other Loan Document, or
any transaction contemplated hereby or thereby, are or will be true and accurate
in all material respects on the date as of which such data, reports and
information are dated or certified and not incomplete by omitting to state any
material fact necessary to make such data, reports and information not
misleading at such time. There are no facts now known to any Responsible Officer
of such Borrower which individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect and which have not been specified
herein, in the Financial Statements, or in any certificate, opinion or other
written statement previously furnished by such Borrower to the Lender.
(k) No Joint Ventures or Partnerships. Except as specified in
Schedule 6.1(k), it is not engaged in any joint venture or partnership with any
other Person.
(l) Corporate and Trade Name. During the past five years, such
Borrower has not been known by or used any other corporate, partnership, trade
or fictitious name except for its name as set forth in the introductory
paragraph and on the signature page of this Agreement, which is the exact
correct legal name of such Borrower.
(m) No Actual or Pending Material Modification of Business.
There exists no actual or, to the best of such Borrower's knowledge after due
inquiry, threatened termination, cancellation or limitation of, or any
modification or change in, the business relationship of such Borrower with any
customer or group of customers which individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect.
(n) No Broker's or Finder's Fees. No broker or finder brought
about the obtaining, making or closing of the Loans or financial accommodations
afforded hereunder or in connection herewith by the Lender or any of its
Affiliates. No broker's or finder's fees or commissions will be payable by such
Borrower to any Person in connection with the transactions contemplated by this
Agreement.
(o) Investment Company. It is not an "investment company," or
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended. Neither the making of any Loans, the issuance of any Letters
of Credit or the application of the proceeds or repayment thereof by such
Borrower or the beneficiary of any Letter of Credit, nor the consummation of the
other transactions contemplated by this Agreement or the other Loan Documents,
will violate any provision of such Act or any rule, regulation or order of the
Securities and Exchange Commission thereunder.
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(p) Margin Stock. It does not own any "margin stock" as that
term is defined in Regulation U of the Federal Reserve Board, and the proceeds
of Loans will be used only for the purposes contemplated hereunder.
(q) Taxes and Tax Returns.
(i) It has properly completed and timely filed all income
tax returns it is required to file. The information contained
in such filed returns, as amended and provided to field
auditors of the IRS, is complete and accurate in all material
respects. All deductions taken in such income tax returns are
appropriate and in accordance with applicable laws and
regulations, except deductions that may have been disallowed
but are being challenged in good faith and for which adequate
reserves have been established in accordance with GAAP.
(ii) All taxes, assessments, fees and other governmental
charges for periods beginning prior to the date hereof have
been timely paid (or, if not yet due, adequate reserves
therefor have been established) by it and such Borrower has no
liability for taxes in excess of the amounts so paid or
reserves so established.
(iii) No deficiencies for taxes have been claimed, proposed
or assessed by any taxing or other Governmental Authority
against such Borrower and no tax Liens have been filed with
respect thereto. Except as specified in Schedule 6.1(q), there
are no pending or threatened audits, investigations or claims
for or relating to any liability of such Borrower for taxes
and there are no matters under discussion with any
Governmental Authority which could result in an additional
liability for taxes. The federal income tax returns of such
Borrower have never been audited by the Internal Revenue
Service. No extension of a statute of limitations relating to
taxes, assessments, fees or other governmental charges is in
effect with respect to such Borrower.
(iv) It is not a party to, and has no obligations under,
any written tax sharing agreement or agreement regarding
payments in lieu of taxes.
(r) No Judgments or Litigation. Except as specified in
Schedule 6.1(r), no judgments, orders, writs or decrees are outstanding against
it, nor is there now pending or, to its knowledge after due inquiry, threatened
litigation, contested claim, investigation, arbitration, or governmental
proceeding by or against such Borrower that (i) individually or in the aggregate
could reasonably be expected to have a Material Adverse Effect or (ii) purports
to affect the legality, validity or enforceability of this Agreement, the Note,
any other Loan Document or the consummation of the transactions contemplated
hereby or thereby.
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(s) Title to Property. It has (i) good and marketable fee
simple title to or valid leasehold interests in all of its Property and (ii)
good and marketable title to all of its other property, in each case free and
clear of Liens other than Liens permitted by Section 7.2(i).
(t) No Other Indebtedness. On the Closing Date and after
giving effect to the transactions contemplated hereby, it has no Indebtedness
other than Indebtedness permitted under Section 7.2(a).
(u) Investments; Contracts. Such Borrower (i) has not
committed to make any Investment; (ii) is not a party to any indenture,
agreement, contract, instrument or lease, or subject to any charter, bylaw or
other corporate, partnership, limited liability company or similar restriction
or any injunction, order, restriction or decree, which could materially and
adversely affect its business, operations, assets or financial condition; (iii)
is not a party to any contract under which it is the purchaser where it is
obligated to pay for goods or services thereunder regardless of whether it has
received such goods or services; and (iv) has no material contingent or
long-term liability, including any management contracts, which could reasonably
be expected to have a Material Adverse Effect.
(v) Compliance with Laws. On the Closing Date, after giving
effect to the transactions contemplated hereby, it is not in default under any
term of any Requirement of Law other than any default which, when taken together
with all other similar defaults, could not reasonably be expected to have a
Material Adverse Effect.
(w) Rights in Collateral; Priority of Liens. All of the
Collateral of such Borrower is owned or leased by it free and clear of any and
all Liens in favor of third parties, other than Liens in favor of the Lender and
Permitted Liens. Upon the proper filing of the financing and termination
statements specified in Section 5.1(a)(v), the Liens granted by such Borrower
pursuant to the Loan Documents constitute valid, enforceable and perfected first
priority Liens on the Collateral.
(x) ERISA.
(i) Neither it nor any ERISA Affiliate maintains or
contributes to any Plan, other than those specified in
Schedule 6.1(x).
(ii) Except as specified in Schedule 6.1(x), it and each
ERISA Affiliate have fulfilled all contribution obligations
for each Plan (including obligations related to the minimum
funding standards of ERISA and the Internal Revenue Code), and
no application for a funding waiver or an extension of any
amortization period pursuant to Sections 303 and 304 of ERISA
or Section 412 of the Internal Revenue Code has been made with
respect to any Plan.
(iii) Except as specified in Schedule 6.1(x), no
Termination Event has occurred nor has any other event
occurred that is likely to result in a Termination Event.
Neither it or any ERISA Affiliate, nor any fiduciary of any
Plan, is subject to any direct or indirect liability with
respect to any Plan under any Requirement of Law or agreement,
except for ordinary funding obligations which are not past
due.
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(iv) Neither it nor any ERISA Affiliate is required to or
reasonably expects to be required to provide security to any
Plan under Section 307 of ERISA or Section 401(a)(29) of the
Internal Revenue Code.
(v) Except as specified in Schedule 6.1(x), it and each
ERISA Affiliate are in compliance in all material respects
with all applicable provisions of ERISA and the Internal
Revenue Code with respect to all Plans. There has been no
prohibited transaction as defined in Section 406 of ERISA or
Section 4975 of the Internal Revenue Code (a "Prohibited
Transaction") with respect to any Plan or any Multiemployer
Plan. It and each ERISA Affiliate have made when due any and
all payments required to be made under any agreement relating
to a Multiemployer Plan or any Requirement of Law pertaining
thereto. With respect to each Plan and Multiemployer Plan,
neither it nor any ERISA Affiliate has incurred any liability
to the PBGC or had asserted against it any penalty for failure
to fulfill the minimum funding requirements of ERISA other
than for payments of premiums in the ordinary course of
business.
(vi) Each Plan which is intended to qualify under Section
401(a) of the Internal Revenue Code has received a favorable
determination letter from the IRS and no event has occurred
which would cause the loss of such qualification.
(vii) The aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Pension Plan,
determined on a plan termination basis, as disclosed in, and
as of the date of, the most recent actuarial report for such
Pension Plan, does not exceed the aggregate fair market value
of the assets of such Pension Plan.
(viii) Neither it nor any ERISA Affiliate has incurred or
reasonably expects to incur any liability (and no event has
occurred which, with the giving of notice under Section 4219
of ERISA, would result in any such liability) under Section
4201 or 4243 of ERISA with respect to any Multiemployer Plan.
(ix) To the extent that any Plan is funded with insurance,
it and each ERISA Affiliate have paid when due all premiums
required to be paid. To the extent that any Plan is funded
other than with insurance, it and each ERISA Affiliate have
made when due all contributions required to be paid.
(y) Intellectual Property. Set forth on Schedule 6.1(y) is a
complete and accurate list of all patents, trademarks, trade names, service
marks and copyrights, and all applications therefor and licenses thereof, of
such Borrower, showing as of the date hereof the jurisdiction in which
registered, the registration number, the date of registration and the expiration
date. Such Borrower owns or licenses all patents, trademarks, service marks,
logos, trade names, trade secrets, know-how, copyrights, or licenses and other
rights with respect to any of the foregoing, which are necessary or advisable
for the operation of its business as presently conducted or proposed to be
conducted. Such Borrower has not infringed any patent, trademark, service xxxx,
trade name, copyright, license or other right owned by any other Person by the
sale or use of any product, process, method, substance, part or other material
presently contemplated to be sold or used, where such sale or use could
reasonably be expected to have a Material Adverse Effect and no claim or
litigation is pending, or, to the best of such Borrower's knowledge, threatened
against such Borrower that contests its right to sell or use any such product,
process, method, substance, part or other material.
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(z) Labor Matters. Schedule 6.1(z) accurately sets forth all
labor contracts to which such Borrower is a party as of the Closing Date, and
their dates of expiration. There are no existing or threatened strikes, lockouts
or other disputes relating to any collective bargaining or similar agreement to
which such Borrower is a party which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(aa) Compliance with Environmental Laws. (i) It is not the
subject of any judicial or administrative proceeding or investigation relating
to the violation of any Environmental Law or asserting potential liability
arising from the release or disposal by any Person of any Hazardous Materials,
(ii) it has not filed with or received from any Governmental Authority or other
Person any notice, order, stipulation or directive under any Environmental Law,
nor is it aware of any pending discussions within any Governmental Authority,
concerning the treatment, storage, disposal, spill or release or threatened
release of any Hazardous Materials at, on, beneath or adjacent to property owned
or leased by it, or the release or threatened release at any other location of
any Hazardous Material generated, used, stored, treated, transported or released
by or on behalf of such Borrower, (iii) it has disposed of all its waste in
accordance with all applicable laws and it has not improperly stored or disposed
of any waste at, on, beneath or adjacent to any of its property and none of its
property contains any waste fill, (iv) it has no knowledge of any contingent
liability for any release of any Hazardous Materials, and there has been no
spill or release of any Hazardous Materials at any of its property in violation
of Environmental Laws, (v) to the knowledge of such Borrower, all of its
property (including, without limitation, its Equipment) is free, and has at all
times been free, of Hazardous Materials (other than cleaning solvents and
materials that are and have been stored in accordance with applicable
Environmental Laws) and underground storage tanks and (vi) to the knowledge of
such Borrower, none of its Property has ever been used as a waste disposal site,
whether registered or unregistered.
(ab) Licenses and Permits. It has obtained and holds in full
force and effect all franchises, licenses, leases, permits, certificates,
authorizations, qualifications, easements, rights of way and other rights and
approvals which are necessary or advisable for the operation of its business as
presently conducted and as proposed to be conducted, except where the failure to
possess any of the foregoing (individually or in the aggregate) could not
reasonably be expected to have a Material Adverse Effect.
(ac) Government Regulation. It is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or any other Requirement of Law that limits its ability
to incur Indebtedness or consummate the transactions contemplated by this
Agreement and the other Loan Documents.
(ad) Material Contracts. Set forth on Schedule 6.1(ad) is a
complete and accurate list of all Material Contracts of such Borrower, showing
as of the date hereof the parties, subject matter and term thereof. Each such
contract has been duly authorized, executed and delivered by such Borrower and
each other party thereto. Except as specified in Schedule 6.1(ad), each Material
Contract of such Borrower is in full force and effect and is binding upon and
enforceable against all parties thereto in accordance with its terms, and there
exists no default under such contract of such Borrower by any party thereto.
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(ae) Business and Properties. No business of such Borrower is
affected by any fire, explosion, accident, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty (whether or not
covered by insurance) that could reasonably be expected to have a Material
Adverse Effect.
(af) Business Plan. The Business Plan and the Financial
Statements delivered to the Lender on the Closing Date were prepared in good
faith on the basis of assumptions which were fair in the context of the
conditions existing at the time of delivery thereof, and, with respect to the
Business Plan, represented, at the time of delivery, such Borrower's best
estimate of its future financial performance.
(ag) Affiliate Transactions. Except as specified in Schedule
6.1(ag), such Borrower is not a party to or bound by any agreement or
arrangement (whether oral or written) to which any Affiliate of such Borrower is
a party except (i) in the ordinary course of and pursuant to the reasonable
requirements of the business of such Borrower and (ii) upon fair and reasonable
terms no less favorable to such Borrower than it could obtain in a comparable
arm's-length transaction with an unaffiliated Person.
All representations and warranties made by the Borrowers in this Agreement and
in each other Loan Document to which it is a party shall survive the execution
and delivery hereof and thereof and the closing of the transactions contemplated
hereby and thereby. The Borrower acknowledges and confirms that the Lender is
relying on such representations and warranties without independent inquiry in
entering into this Agreement.
ARTICLE VII.
COVENANTS OF THE BORROWERS
SECTION 7.1. Affirmative Covenants. Until termination of the
Lender's obligation to make any Loan or to use its best efforts to cause to be
issued any Letter of Credit under this Agreement, payment and satisfaction of
all Obligations in full, and termination, Collateralization or expiration of all
Letters of Credit:
(a) Corporate Existence. Each Borrower shall, and shall cause
each of its Subsidiaries to, (i) maintain its corporate existence, (ii) maintain
in full force and effect all material licenses, bonds, franchises, leases,
trademarks, qualifications and authorizations to do business, and all material
patents, contracts and other rights necessary or advisable to the profitable
conduct of its businesses, and (iii) continue in the same lines of business as
presently conducted by it.
(b) Maintenance of Property. Each Borrower shall, and shall
cause each of its Subsidiaries to, keep all property useful and necessary to its
business in good working order and condition (ordinary wear and tear excepted)
in accordance with its past operating practices.
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(c) Affiliate Transactions. Each Borrower shall, and shall
cause each of its Subsidiaries to, conduct transactions with any of its
Affiliates on an arm's-length basis or other basis no less favorable to such
Borrower or Subsidiary than would apply in a transaction with a non-Affiliate
and which are approved by the board of directors of such Borrower or Subsidiary.
(d) Taxes. Each Borrower shall, and shall cause each of its
Subsidiaries to, pay, when due, (i) all tax assessments, and other governmental
charges and levies imposed against it or any of its property and (ii) all lawful
claims that, if unpaid, might by law become a Lien upon its property; provided,
however, that, unless such tax assessment, charge, levy or claim has become a
Lien on any of the property of such Borrower or Subsidiary, it need not be paid
if it is being contested in good faith, by appropriate proceedings diligently
conducted and an adequate reserve or other appropriate provision shall have been
established therefor as required in accordance with GAAP.
(e) Requirements of Law. Each Borrower shall, and shall cause
each of its Subsidiaries to, comply with all Requirements of Law applicable to
it, including, without limitation, all applicable federal, state, local or
foreign laws and regulations, including, without limitation, those relating to
environmental or employee matters (including the collection, payment and deposit
of employees' income, unemployment, Social Security and Medicare hospital
insurance taxes) and with respect to pension liabilities, provided that such
Borrower shall not be deemed in violation hereof if such Borrower's or any such
Subsidiary's failure to comply with any of the foregoing could not reasonably be
expected to have a Material Adverse Effect.
(f) Insurance. Each Borrower shall, and shall cause each of
its Subsidiaries to, maintain public liability insurance, business interruption
insurance, third party property damage insurance and replacement value insurance
on its assets (including the Collateral) under such policies of insurance, with
such insurance companies, in such amounts and covering such risks as are at all
times satisfactory to the Lender, all of which policies covering the Collateral
shall name the Lender as an additional insured and the lender loss payee in case
of loss, and contain other provisions as the Lender may require to protect fully
the Lender's interest in the Collateral and any payments to be made under such
policies.
(g) Books and Records; Inspections. Each Borrower shall, and
shall cause each of its Subsidiaries to, (i) maintain books and records
(including computer records and programs) of account pertaining to the assets,
liabilities and financial transactions of such Borrower and its Subsidiaries in
such detail, form and scope as is consistent with good business practice and
(ii) provide the Lender and its agents access to the premises of such Borrower
and its Subsidiaries at any time and from time to time, during normal business
hours and upon reasonable notice under the circumstances, and at any time after
the occurrence and during the continuance of a Default or Event of Default, for
the purposes of (A) inspecting and verifying the Collateral, (B) inspecting and
copying (at the Borrowers' expense) any and all records pertaining thereto, and
(C) discussing the affairs, finances and business of such Borrower and its
Subsidiaries with any officer, employee or director thereof or with the
Auditors, all of whom are hereby authorized to disclose to the Lender all
financial statements, work papers, and other information relating to such
affairs, finances or business. The Borrowers shall reimburse the Lender for the
reasonable travel and related expenses of the Lender's employees or, at the
Lender's option, of such outside accountants or examiners as may be retained by
the Lender to verify or inspect Collateral, records or documents of the
Borrowers and their Subsidiaries on a regular basis or for a special inspection
if the Lender deems the same appropriate. If the Lender's own employees are
used, the Borrowers shall also pay such reasonable per diem allowance as the
Lender may from time to time establish, or, if outside examiners or accountants
are used, the Borrowers shall also pay the Lender such sum as the Lender may be
obligated to pay as fees therefor. All such Obligations may be charged to the
Loan Account or any other account of the Borrowers with the Lender or any of its
Affiliates. Each Borrower hereby authorizes the Lender to communicate directly
with the Auditors to disclose to the Lender any and all financial information
regarding such Borrower including, without limitation, matters relating to any
audit and copies of any letters, memoranda or other correspondence related to
the business, financial condition or other affairs of such Borrower.
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(h) Notification Requirements. The Administrative Borrower
shall timely give the Lender the following notices and other documents:
(i) Notice of Defaults. Promptly, and in any event within
two Business Days after becoming aware of the occurrence of a
Default or Event of Default, a certificate of a Responsible
Officer specifying the nature thereof and the applicable
Borrower's proposed response thereto, each in reasonable
detail.
(ii) Proceedings or Changes. (A) Promptly, and in any
event within five Business Days after a Borrower becomes aware
of (I) any proceeding including, without limitation, any
proceeding the subject of which is based in whole or in part
on a commercial tort claim being instituted or threatened to
be instituted by or against a Borrower or any of its
Subsidiaries in any federal, state, local or foreign court or
before any commission or other regulatory body (federal,
state, local or foreign) involving a sum, together with the
sum involved in all other similar proceedings, in excess of
$150,000 in the aggregate or which constitutes a Government
Contract Proceeding, (II) any order, judgment or decree
involving a sum, together with the sum of all other orders,
judgments or decrees, in excess of $150,000 in the aggregate
being entered against a Borrower or any of its Subsidiaries or
any of their respective property or assets, (III) any notice
or correspondence issued to any Borrower or Subsidiary thereof
by a Governmental Authority warning, threatening or advising
of the commencement of any investigation involving such
Borrower or Subsidiary or any of its property or assets other
than those specified in Schedule 6.1(r), (IV) any actual or
prospective change, development or event which has had or
could reasonably be expected to have a Material Adverse
Effect, (V) the cessation of the business relationship with
any customer of a Borrower whose purchases have accounted for
more than 10% of the sales of such Borrower in any year since
the fiscal year ended July 31, 2001, (VI) a change in the
location of any Collateral from the locations specified in
Schedule 6.1(b) or (VII) a proposed or actual change of the
name, identity, corporate structure or jurisdiction of
organization of any Borrower, a written statement describing
such proceeding, order, judgment, decree, change, development
or event and any action being taken by any of the Borrowers
with respect thereto.
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(B) Monthly, not later than the fifth Business Day of
each month, a written summary of any developments or
proceedings relating in any way to the Subpoena to Testify
Before Grand Jury dated March 6, 2002 issued to RFI upon
application to the United States District Court for the
Eastern District of New York in form and detail satisfactory
to the Lender, together with copies of all correspondence,
pleadings, subpoenas or other documents related thereto from
time to time requested by the Lender.
(iii) ERISA Notices.
(A) Promptly, and in any event within ten Business
Days after a Termination Event has occurred, a written
statement of a Responsible Officer describing such Termination
Event and any action that is being taken with respect thereto
by any Borrower or ERISA Affiliate, and any action taken or
threatened by the Internal Revenue Service, the Department of
Labor or the PBGC;
(B) promptly, and in any event within three Business
Days after the filing thereof with the Internal Revenue
Service, a copy of each funding waiver request filed with
respect to any Plan subject to the funding requirements of
Section 412 of the Internal Revenue Code and all
communications received by any Borrower or ERISA Affiliate
with respect to such request;
(C) promptly, and in any event within three Business
Days after receipt by any Borrower or ERISA Affiliate of the
PBGC's intention to terminate a Pension Plan or to have a
trustee appointed to administer a Pension Plan, a copy of each
such notice;
(D) promptly, and in any event within three Business
Days after the occurrence thereof, notice (including the
nature of the event and, when known, any action taken or
threatened by the Internal Revenue Service or the PBGC with
respect thereto) of:
(1) except as specified in Schedule 6.1(x), any
Prohibited Transaction which could subject any
Borrower or ERISA Affiliate to a civil penalty
assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Internal Revenue Code
in connection with any Plan, or any trust created
thereunder,
(2) any cessation of operations (by any Borrower
or ERISA Affiliate) at a facility in the
circumstances described in Section 4062(e) of ERISA,
(3) a failure by any Borrower or ERISA Affiliate
to make a payment to a Plan required to avoid
imposition of a Lien under Section 302(f) of ERISA or
Section 412(n) of the Internal Revenue Code,
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(4) the adoption of an amendment to a Plan
requiring the provision of security to such Plan
pursuant to Section 307 of ERISA or Section
401(a)(29) of the Internal Revenue Code, or
(5) any change in the actuarial assumptions or
funding methods used for any Plan where the effect of
such change is to increase materially or reduce
materially the unfunded benefit liability or
obligation to make periodic contributions;
(E) promptly upon the request of the Lender, each
annual report (IRS Form 5500 series) and all accompanying
schedules, the most recent actuarial reports, the most recent
financial information concerning the financial status of each
Plan administered or maintained by any Borrower or ERISA
Affiliate, and schedules showing the amounts contributed to
each Pension Plan by or on behalf of any Borrower or ERISA
Affiliate in which any of its personnel participate or from
which such personnel may derive a benefit, and each Schedule B
(Actuarial Information) to the annual report filed by any
Borrower or ERISA Affiliate with the Internal Revenue Service
with respect to each such Plan;
(F) promptly upon the filing thereof, copies of any
Form 5310, or any successor or equivalent form to Form 5310,
filed with the Internal Revenue Service in connection with the
termination of any Plan, and copies of any standard
termination notice or distress termination notice filed with
the PBGC in connection with the termination of any Pension
Plan;
(G) promptly, and in any event within three Business
Days after receipt thereof by any Borrower or ERISA Affiliate,
notice and demand for payment of withdrawal liability under
Section 4201 of ERISA with respect to a Multiemployer Plan;
(H) promptly, and in any event within three Business
Days after receipt thereof by any Borrower or ERISA Affiliate,
notice by the Department of Labor of any penalty, audit,
investigation or purported violation of ERISA with respect to
a Plan;
(I) promptly, and in any event within three Business
Days after receipt thereof by any Borrower or ERISA Affiliate,
notice by the Internal Revenue Service or the Treasury
Department of any income tax deficiency or delinquency, excise
tax penalty, audit or investigation with respect to a Plan;
and
(J) promptly, and in any event within three Business
Days after receipt thereof by any Borrower or ERISA Affiliate,
notice of any administrative or judicial complaint, or the
entry of a judgment, award or settlement agreement, in either
case with respect to a Plan that could reasonably be expected
to have a Material Adverse Effect.
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(iv) Material Contracts. Promptly, and in any event within
ten Business Days after any Material Contract is terminated or
amended in any material respect, or any new Material Contract
is entered into, a written statement describing such event,
with copies of amendments or new contracts, and an explanation
of any actions being taken with respect thereto.
(v) Environmental Matters. Promptly, and in any event
within ten days after receipt by a Borrower thereof, copies of
each (A) written notice that any violation of any
Environmental Law may have been committed or is about to be
committed by a Borrower which violation could reasonably be
expected to result in liability or involve remediation costs
in excess of $50,000, (B) written notice that any
administrative or judicial complaint or order has been filed
or is about to be filed against a Borrower alleging violations
of any Environmental Law or requiring a Borrower to take any
action in connection with the release of toxic or Hazardous
Materials into the environment which violation or action could
reasonably be expected to result in liability or involve
remediation costs in excess of $50,000, (C) written notice
from a Governmental Authority or other Person alleging that a
Borrower may be liable or responsible for costs associated
with a response to or cleanup of a release of a Hazardous
Material into the environment or any damages caused thereby
which costs could reasonably be expected to exceed $50,000 or
(D) Environmental Law adopted, enacted or issued after the
date hereof of which a Borrower becomes aware which could
reasonably be expected to have a Material Adverse Effect.
(i) Casualty Loss. Each Borrower shall, and shall cause each
of its Subsidiaries to, (i) provide written notice to the Lender, within ten
Business Days, of any material damage to, the destruction of or any other
material loss to any asset or property owned or used by such Borrower or any of
its Subsidiaries other than any such asset or property with a net book value
(individually or in the aggregate) less than $100,000 or any condemnation,
confiscation or other taking, in whole or in part, or any event that otherwise
diminishes so as to render impracticable or unreasonable the use of such asset
or property owned or used by such Borrower or any of its Subsidiaries together
with a statement of the amount of the damage, destruction, loss or diminution in
value (a "Casualty Loss") and (ii) diligently file and prosecute its claim for
any award or payment in connection with a Casualty Loss.
(j) Qualify to Transact Business. Each Borrower shall, and
shall cause each of its Subsidiaries to, qualify to transact business as a
foreign corporation in each jurisdiction where the nature or extent of its
business or the ownership of its property requires it to be so qualified or
authorized and where failure to qualify or be authorized could reasonably be
expected to have a Material Adverse Effect.
(k) Financial Reporting. The Administrative Borrower shall
deliver to the Lender the following:
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(i) Annual Financial Statements. As soon as available,
but not later than ninety days after the end of each fiscal
year, beginning with the fiscal year ended August 3, 2002, (A)
the annual audited and certified consolidated and
consolidating Financial Statements of Del Global and its
Subsidiaries; (B) a comparison in reasonable detail to the
prior year's audited Financial Statements; (C) the Auditors'
opinion without Qualification, copies of any written
communication from the auditors to Del Global's audit
committee and a statement indicating that the Auditors have
not obtained knowledge of the existence of any Default or
Event of Default during their audit; and (D) a narrative
discussion of the financial condition and results of
operations and the liquidity and capital resources of Del
Global and its Subsidiaries for such fiscal year, prepared by
the Chief Financial Officer of the Administrative Borrower.
(ii) Projections. Not later than thirty days before the
end of each fiscal year of the Borrowers, the Business Plan of
the Borrowers certified by the Chief Financial Officer of the
Administrative Borrower for the one-year period commencing
with the following fiscal year.
(iii) Monthly Financial Statements. As soon as available,
but not later than thirty days after the end of each month,
commencing with the month ending May 31, 2002, (A) the interim
consolidated and consolidating Financial Statements of Del
Global and its Subsidiaries as at the end of such month and
for the fiscal year to date and (B) a certification by the
Administrative Borrower's Chief Financial Officer that such
Financial Statements have been prepared in accordance with
GAAP and are fairly stated in all material respects (subject
to normal year-end audit adjustments).
(iv) Quarterly Comparative Statements. As soon as
available, but not later than forty-five days after the end of
each fiscal quarter, (A) a comparison of the interim
consolidated and consolidating Financial Statements of Del
Global and its Subsidiaries as of the end of such quarter and
for the fiscal year to date to the projected Financial
Statements set forth in the Business Plan and to the Financial
Statements of Del Global and its Subsidiaries as of the end of
and for the same period of the prior year and (B) a compliance
certificate, substantially in the form of Exhibit E (a
"Compliance Certificate"), signed by the Administrative
Borrower's Chief Financial Officer, with an attached schedule
of calculations demonstrating compliance with the Financial
Covenants as of the end of such quarter.
(v) Borrowing Base Certificate. Weekly (or more
frequently as the Lender may from time to time request), not
later than the fourth Business Day of each week, a borrowing
base certificate, substantially in the form of Exhibit K,
detailing the Eligible Receivables and the Eligible Inventory,
containing a calculation of availability and reflecting all
sales, collections, and debit and credit adjustments, as of
the last day of (or for) the preceding week (or as of a more
recent date as the Lender may from time to time request),
which shall be prepared by or under the supervision of the
Chief Financial Officer of the Administrative Borrower and
certified by such officer (a "Borrowing Base Certificate").
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(vi) Agings. Monthly, not later than the tenth day of
each month, agings of the Borrowers' Receivables and accounts
payable, in scope and detail satisfactory to the Lender, as of
the last day of the preceding month.
(vii) Shareholder and SEC Reports. As soon as available,
but not later than five days after the same are sent or filed,
as the case may be, copies of all financial statements and
reports that any Borrower sends to any of its shareholders or
files with the Securities and Exchange Commission or any other
Governmental Authority.
(viii) Communications with Auditors. Within thirty days of
the Closing Date, drafts, and within 180 days of the Closing
Date, final copies, of any written communications from the
auditors to Del Global's audit committee with respect to the
fiscal year ended July 28, 2001.
(ix) Other Financial Information. Promptly after the
request by the Lender therefor, such additional financial
statements and other related data and information as to the
business, prospects, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of
any Borrower as the Lender may from time to time reasonably
request.
(l) Payment of Liabilities. Each Borrower shall, and shall
cause each of its Subsidiaries to, pay and discharge, in the ordinary course of
business, all obligations and liabilities (including, without limitation, tax
liabilities and other governmental charges), except where the same may be
contested in good faith by appropriate proceedings and for which adequate
reserves with respect thereto have been established in accordance with GAAP.
(m) ERISA. Each Borrower shall, and shall cause each of its
ERISA Affiliates to, (i) maintain each Plan intended to qualify under Section
401(a) of the Internal Revenue Code so as to satisfy the qualification
requirements thereof, (ii) contribute, or require that contributions be made, in
a timely manner (A) to each Plan in amounts sufficient (I) to satisfy the
minimum funding requirements of Section 302 of ERISA or Section 412 of the
Internal Revenue Code, if applicable, (II) to satisfy any other Requirements of
Law and (III) to satisfy the terms and conditions of each such Plan, and (B) to
each Foreign Plan in amounts sufficient to satisfy the minimum funding
requirements of any applicable law or regulation, without any application for a
waiver from any such funding requirements, (iii) cause each Plan or Foreign Plan
to comply in all material respects with applicable law (including all applicable
statutes, orders, rules and regulations) and (iv) pay in a timely manner, in all
material respects, all required premiums to the PBGC.
As used in this Section 7.1(m), "Foreign Plan" means a plan
that provides retirement or health benefits and that is maintained, or otherwise
contributed to, by a Borrower for the benefit of employees outside the United
States.
(n) Environmental Matters. (i) Each Borrower shall, and shall
cause each of its Subsidiaries to, conduct its business so as to comply in all
material respects with all applicable Environmental Laws including, without
limitation, compliance in all material respects with the terms and conditions of
all permits and governmental authorizations.
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(ii) On or before August 1, 2002, the Borrowers shall
cause EEA Inc. or Carnow, Conibear & Assoc., Ltd. or another
environmental surveyor reasonably satisfactory to the Lender
to perform an updated phase I environmental investigation (the
"Phase I Investigations") at each Property of the Borrowers
(other than the Bay Shore Property) and shall submit to the
Lender the results of the Phase I Investigations by such date.
On or before September 30, 2002, the Borrowers shall, except
as the Lender may previously agree otherwise in writing,
submit to the Lender evidence that they have undertaken any
further investigation, reporting or monitoring recommended by
the Phase I Investigations.
(o) Trademarks. Each Borrower shall, and shall cause each of
its Subsidiaries to, do and cause to be done all things necessary to preserve
and keep in full force and effect all of its material registrations of
trademarks, service marks and other marks, trade names and other trade rights.
(p) Solvency. Each Borrower shall, and shall cause each of its
Subsidiaries to, be and remain Solvent at all times except that Bertan may cease
to remain Solvent upon the consummation of the Business Consolidation so long as
Del Global has assumed all third party liabilities of Bertan at such time.
(q) Billing Practices. The Administrative Borrower shall
notify the Lender of any Receivable of any Borrower generated pursuant to the
sale of goods or the rendition of services on any basis other than on the terms
specified in Schedule 7.1(q).
(r) Dissolution of Subsidiary. Not later than December 31,
2002, Del Global shall (i) cause Dynarad to be dissolved in accordance with all
applicable Requirements of Law or (ii) pledge all of the outstanding shares of
capital stock of Dynarad to the Lender as security for the Obligations under an
amendment to the Pledge Agreement.
(s) Proceeds from Bay Shore Property. Unless Del Global shall
have received, after the Closing Date, federal income tax refunds with respect
to tax years 1998 and 1999 in an aggregate amount not less than $1,200,000, the
proceeds of which have been applied to the outstanding Loans, RFI shall, on or
before September 30, 2002, either (i) consummate the Bay Shore Sale Leaseback or
(ii) obtain a non-recourse loan, or a loan with respect to which the rights of
the lender to enforce repayment of such loan are subordinated to the Lender's
right to enforce repayment of the Obligations on terms and under documentation
satisfactory to the Lender, in each case that is not secured by any assets of
the Borrowers other than the Bay Shore Property, in each case resulting in RFI's
receipt of net proceeds, which shall be applied to the outstanding Loans, of not
less than $1,500,000.
(t) Bay Shore Mortgage. RFI shall, on or before June 30, 2002,
deliver a mortgage on the Bay Shore Property in favor of the Lender,
substantially in the form of Exhibit N (as amended, supplemented or otherwise
modified from time to time, the "Mortgage"), together with (i) a mortgagee's
title policy (A) dated the date of delivery of the Mortgage in an amount
satisfactory to the Lender, (B) insuring that the Mortgage creates a valid first
Lien on the Bay Shore Property free and clear of all Liens except the Lien in
favor of the Lender and other Liens that are satisfactory to the Lender, (C)
naming the Lender as the insured thereunder, (D) in the form of ALTA Loan Policy
1992, and (E) containing revolving endorsements and such other endorsements and
effective coverage as the Lender may request, together with evidence that all
premiums in respect of such policy have been paid by or on behalf of RFI; and
(ii) a survey of the Property encumbered by the Mortgage, satisfactory in form
and substance to the Lender and certified within thirty days before the date of
delivery of the Mortgage by an independent public surveyor satisfactory to the
Lender, meeting the minimum standard detail requirements for ALTA/ACSM surveys,
and showing (A) the exact location and dimensions of the Bay Shore Property and
the improvements thereon, (B) the exact location of all lot and street lines,
required height and setback lines, all means of access to and all easements
relating to the Bay Shore Property, (C) the names of all streets and alleys
abutting the Bay Shore Property and (D) the absence of any encroachments, rights
of way or easements of the Bay Shore Property or any encroachment by the
improvements thereon on adjoining property, or any other defects except Liens
permitted hereunder, together with a surveyor's certificate satisfactory to the
Lender; provided that RFI may, at any time after the delivery by RFI of the
Mortgage to the Lender, (i) consummate the Bay Shore Sale Leaseback or (ii)
obtain a loan that is not secured by any assets of the Borrowers other than the
Bay Shore Property, in each case resulting in RFI's receipt of net proceeds,
which shall be applied to the outstanding Loans, of not less than $1,500,000,
and that, in each case, the Lender shall, if requested by RFI, assign, at RFI's
expense and without recourse to or representation or warranty by the Lender, the
Mortgage to any subsequent mortgagee in connection with any such loan or any
other appropriate party upon the completion of such transaction.
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(u) Tax Refund. (i) Unless Del Global has deposited or caused
to be deposited proceeds of federal income tax refunds received by it after the
Closing Date in an aggregate amount of not less than $1,200,000 to a Blocked
Account or the Chase Account, on or before June 30, 2002, Del Global shall
deliver to the Lender (A) evidence that it has instructed the Internal Revenue
Service to pay all amounts of federal tax refunds payable to Del Global by wire
transfer to a Blocked Account or to the Chase Account and (B) an agreement from
The Chase Manhattan Bank to forward to a Blocked Account all amounts received by
it in respect of such federal tax refunds.
(ii) Del Global shall deposit to a Blocked Account or the
Chase Account within one Business Day of it receipt thereof
all proceeds of federal income tax refunds with respect to tax
years 1998 and 1999 received by it after the Closing Date.
(v) Bank Accounts. The Borrowers shall comply with the
requirements relating to their bank accounts as specified in Schedule 7.2(t) by
the dates specified therein.
SECTION 7.2. Negative Covenants. Until termination of the
Lender's obligation to make any Loan or to use its best efforts to cause to be
issued any Letter of Credit under this Agreement, payment and satisfaction of
all Obligations in full, and termination, Collateralization or expiration of all
Letters of Credit:
(a) Indebtedness. Each Borrower will not, and will not permit
any of its Subsidiaries to, directly or indirectly, at any time create, incur,
assume or suffer to exist any Indebtedness other than:
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(i) Indebtedness under the Loan Documents;
(ii) endorsement of negotiable instruments for deposit or
collection in the ordinary course of business;
(iii) Indebtedness (including Capitalized Lease
Obligations) incurred solely to finance the acquisition of
fixed or capital assets in an aggregate principal amount not
to exceed, as to the Borrowers and their Subsidiaries taken
together, $250,000 at any time outstanding; or
(iv) Indebtedness of Villa Sistemi under its credit
facilities.
(b) Contingent Obligations. Except as specified in Schedule
6.1(i), each Borrower will not, directly or indirectly, incur, assume, or suffer
to exist any Contingent Obligation, excluding indemnities given in connection
with this Agreement or the other Loan Documents in favor of the Lender.
(c) Corporate Changes, Etc. Each Borrower will not, and will
not permit any of its Subsidiaries to, directly or indirectly, merge or
consolidate with any Person or amend, alter or modify its Governing Documents or
its legal name, mailing address, chief executive office or principal places of
business, structure, status or existence, or liquidate or dissolve itself (or
suffer any liquidation or dissolution) or issue any capital stock or other
equity interests other than (i) the Business Consolidation, (ii) the issuance of
shares of capital stock by Del Global upon the exercise of warrants for shares
of capital stock of Del Global or the issuance of any other capital stock of Del
Global so long as all the Net Cash Proceeds thereof are applied to the
outstanding amount of the Loans within three Business Days of receipt thereof
and (iii) the liquidation or dissolution of Dynarad and Del Electronics.
(d) Change in Nature of Business. Each Borrower will not, and
will not permit any of its Subsidiaries to, at any time make any material change
in the lines of its business as carried on at the date hereof or enter into any
new line of business.
(e) Sales, Etc. of Assets. Each Borrower will not, and will
not permit any of its Subsidiaries to, directly or indirectly, in any fiscal
year, sell, transfer or otherwise dispose of any of its assets (other than (i)
sales of Inventory in the ordinary course of business or in connection with the
Business Consolidation and (ii) the Bay Shore Sale Leaseback), or grant any
option or other right to purchase or otherwise acquire any of its assets, with
an aggregate value, as to all the Borrowers and their Subsidiaries taken
together, in excess of $100,000.
(f) Use of Proceeds. Each Borrower will not (i) use any
portion of the proceeds of any Loan in violation of Section 2.3 or for the
purpose of purchasing or carrying any "margin stock" (as defined in Regulation U
of the Federal Reserve Board) in any manner which violates the provisions of
Regulation T, U or X of the Federal Reserve Board or for any other purpose in
violation of any applicable statute or regulation, or of the terms and
conditions of this Agreement, or (ii) take, or permit any Person acting on its
behalf to take, any action which could reasonably be expected to cause this
Agreement or any document or instrument delivered pursuant hereto to violate any
regulation of the Federal Reserve Board.
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(g) Cancellation of Debt. Each Borrower will not, and will not
permit any of its Subsidiaries to, cancel any liability or debt owed to it,
except for consideration in the ordinary course of business.
(h) Loans to Other Persons. Each Borrower will not, and will
not permit any of its Subsidiaries to, at any time make loans or advance any
credit to any Affiliate or other Person other than loans or advances to Villa
Sistemi of up to (euro) 460,000 or arising from sales of goods in the ordinary
course of business.
(i) Liens, Etc. Each Borrower will not, and will not permit
any of its Subsidiaries to, directly or indirectly, at any time create, incur,
assume or suffer to exist any Lien on or with respect to any assets, other than:
(i) Liens created hereunder and by the Security
Documents;
(ii) Liens securing Indebtedness permitted by Section
7.2(a)(iii) incurred to finance the acquisition of fixed or
capital assets, provided that (A) such Liens shall be created
substantially simultaneously with the acquisition of such
assets, (B) such Liens do not at any time encumber any assets
other than the assets financed by such Indebtedness, (C) such
Liens are not modified to secure other Indebtedness and the
amount of Indebtedness secured thereby is not increased and
(D) the principal amount of Indebtedness secured by any such
Lien shall at no time exceed the original purchase price of
such assets; and
(iii) Permitted Liens.
(j) Dividends, Stock Redemptions, Distributions, Etc. Each
Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, pay any dividends or distributions on, purchase, redeem or retire
any shares of any class of its capital stock or other equity interests or any
warrants, options or rights to purchase any such capital stock or other equity
interests, whether now or hereafter outstanding ("Stock"), or make any payment
on account of or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of its Stock,
or make any other distribution in respect thereof, either directly or
indirectly, whether in cash or property or in obligations of such Borrower or
any of its Subsidiaries except that (i) a Subsidiary may pay dividends to a
Borrower or to another Subsidiary of a Borrower and (ii) Del Global may redeem
the Warrants for $.25 per Warrant in accordance with the terms thereof so long
as (A) the amount of cash consideration paid therefor does not exceed $250,000
in the aggregate, (B) no Default has occurred and is continuing and (C) after
giving effect to such redemption, Excess Availability is not less than
$1,000,000.
(k) Investments. Each Borrower will not, and will not permit
any of its Subsidiaries to, directly or indirectly, at any time make or hold any
Investment in any Person (whether in cash, securities or other property of any
kind) other than Investments in Cash Equivalents so long as the Lender has a
perfected, first priority Lien on such Cash Equivalents.
(l) Partnerships; Subsidiaries; Joint Ventures; Management
Contracts. Except for existing joint ventures of Villa Sistemi specified in
Schedule 7.2(l), each Borrower will not, and will not permit any of its
Subsidiaries to, at any time create any direct or indirect Subsidiary, enter
into any joint venture or similar arrangement or become a partner in any general
or limited partnership or enter into any management contract permitting third
party management rights with respect to the business of such Borrower or any of
its Subsidiaries.
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(m) Fiscal Year. Each Borrower will not, and will not permit
any of its Subsidiaries to, change its fiscal year from a year ending August 3,
2002, August 2, 2003 or July 31, 2004, respectively.
(n) Accounting Changes. Each Borrower will not, and will not
permit any of its Subsidiaries to, at any time make or permit any change in
accounting policies or reporting practices, except as required by GAAP.
(o) Executive Compensation. Each Borrower will not, and will
not permit any of its Subsidiaries to, pay any salary, management, director or
other fee or other direct or indirect remuneration or compensation to its
executive officers, directors or stockholders in excess of the amounts specified
in Schedule 7.2(o) plus annual increases of which the Borrower shall give the
Lender written notice at least annually.
(p) No Prohibited Transactions Under ERISA. Each Borrower will
not, and will not permit any of its ERISA Affiliates to, directly or indirectly:
(i) Engage in any Prohibited Transaction which could
reasonably be expected to result in a civil penalty or excise
tax described in Section 406 of ERISA or Section 4975 of the
Internal Revenue Code for which a statutory or class exemption
is not available or a private exemption has not been
previously obtained from the Department of Labor;
(ii) permit to exist with respect to any Pension Plan any
accumulated funding deficiency (as defined in Section 302 of
ERISA and Section 412 of the Internal Revenue Code), whether
or not waived;
(iii) except as specified in Schedule 6.1(x), terminate
any Pension Plan where such event would result in any
liability of any Borrower or ERISA Affiliate under Title IV of
ERISA;
(iv) fail to make any required contribution or payment to
any Multiemployer Plan;
(v) fail to pay any required installment or any other
payment required under Section 412 of the Internal Revenue
Code on or before the due date for such installment or other
payment;
(vi) amend a Pension Plan resulting in an increase in
current liability for the plan year such that any Borrower or
ERISA Affiliate is required to provide security to such Plan
under Section 307 of ERISA or Section 401(a)(29) of the
Internal Revenue Code;
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(vii) withdraw from any Multiemployer Plan where such
withdrawal is reasonably likely to result in any liability of
any such entity under Title IV of ERISA; or
(viii) take any action that would cause the imposition of
an excise tax under Section 4978 or Section 4979A of the
Internal Revenue Code.
(q) Unusual Terms of Sale. Each Borrower will not, and will
not permit any of its Subsidiaries to, sell goods or products or render services
on extended or consignment terms or on a progress billing or xxxx and hold
basis, or on any other unusual terms.
(r) Prepayments and Amendments of Material Contracts. Each
Borrower will not, and will not permit any of its Subsidiaries to, at any time
(i) make any prepayment of any Indebtedness, other than (A) the prepayment of
the Loans in accordance with the terms of this Agreement and (B) the prepayment
of the Subordinated Notes in full satisfaction thereof if (I) the aggregate
amount of such prepayment does not exceed $150,000 in any twelve-month period,
(II) no Default has occurred and is continuing and (III) after giving effect to
such prepayment, Excess Availability is not less than $2,000,000, or (ii) amend,
modify, cancel or terminate, or permit the amendment, modification, cancellation
or termination of, any Material Contract or any Subordinated Note, except where
such amendment or modification could not reasonably be expected to have a
Material Adverse Effect.
(s) Lease Obligations. Each Borrower will not, and will not
permit any of its Subsidiaries to, at any time create, incur or assume any
obligations as lessee for the rental or hire of real or personal property in
connection with any sale and leaseback transaction other than the Bay Shore Sale
Leaseback.
(t) Bank Accounts. Each Borrower will not, and will not permit
any of its Subsidiaries to, open, maintain or otherwise have any checking,
savings or other accounts at any bank or other financial institution, or any
other account where money is or may be deposited or maintained with any other
Person, other than (i) payroll accounts, (ii) accounts specified in Schedule
7.2(t) and (iii) other accounts subject to a Control Agreement.
(u) Acquisition of Stock or Assets. Each Borrower will not,
and will not permit any of its Subsidiaries to, acquire or commit or agree to
acquire any stock, securities or assets of any other Person other than Equipment
and Inventory acquired in the ordinary course of business.
(v) Securities and Deposit Accounts. Each Borrower will not
(i) establish or maintain any Securities Account or deposit account (other than
a Blocked Account) unless the Lender shall have received a Control Agreement,
duly executed by the Borrower and the securities intermediary or depository bank
parties thereto and in full force and effect, in respect of such Securities
Account or deposit account or (ii) transfer any financial assets from any
Securities Account; provided, however, that, in the case of Securities Accounts,
so long as no Event of Default has occurred and is continuing or would result
therefrom, such Borrower or any of its Subsidiaries may (A) use such assets to
the extent permitted by this Agreement, or (B) sell or trade such assets in the
ordinary course of business so long as the proceeds of such sales or trades are
deposited in a Blocked Account, any other deposit account or a Securities
Account, in each case in respect of which the Lender has received a Control
Agreement duly executed by the Borrower and the securities intermediary or
depository bank party thereto and that otherwise is in full force and effect.
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(w) Negative Pledge. Each Borrower will not, and will not
permit any of its Subsidiaries to, enter into or suffer to exist any agreement
(other than in favor of the Lender) prohibiting or conditioning the creation or
assumption of any Lien upon any of its assets.
ARTICLE VIII.
FINANCIAL COVENANTS
Until termination of the Lender's obligations to make any Loan
or to use its best efforts to cause to be issued any Letters of Credit under
this Agreement, payment and satisfaction of all Obligations in full, and
termination, Collateralization or expiration of all Letters of Credit:
SECTION 8.1. Adjusted Earnings. The Adjusted Earnings for any
period set forth below shall not be less than the amount set forth below
opposite such period:
Minimum Adjusted
Period Earnings
------ ----------------
May 1, 2002 through August 3, 2002 $1,350,000
May 1, 2002 through November 3, 2002 2,600,000
May 1, 2002 through February 2, 2003 4,000,000
May 1, 2002 through May 4, 2003 5,600,000
August 1, 2002 through August 2, 2003 and each period of four consecutive
fiscal quarters thereafter 6,000,000
SECTION 8.2. Adjusted U.S. Earnings. The Adjusted U.S.
Earnings for any period set forth below shall not be less than the amount set
forth below opposite such period:
Minimum Adjusted U.S.
Period Earnings
------ ---------------------
May 1, 2002 through August 3, 2002 $950,000
May 1, 2002 through November 3, 2002 2,250,000
May 1, 2002 through February 2, 2003 3,500,000
May 1, 2002 through May 4, 2003 4,100,000
August 1, 2002 through August 2, 2003 and each period of four consecutive
fiscal quarters thereafter 5,250,000
SECTION 8.3. Senior Debt Ratio. The ratio of (a) the
outstanding amount of all Loans and all outstanding Letters of Credit to (b)
Adjusted Earnings determined for the twelve-month period ending on the last day
of each quarter-end commencing August 3, 2002 (or in the case of each fiscal
quarter-end through February 2, 2003, the period of one, two or three
consecutive fiscal quarters ending August 3, 2002, November 3, 2002, or February
2, 2003, respectively, determined on an annualized basis), shall not, as of the
last day of such quarter-end, be greater than 1.50:1.00.
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SECTION 8.4. Fixed Charge Coverage Ratio. The Fixed Charge
Coverage Ratio for any period set forth below shall not be less than the ratio
set forth below opposite such period:
Minimum Fixed Charge
Period Coverage Ratio
------ --------------------
May 1, 2002 through August 3, 2002 2.50:1.00
May 1, 2002 through November 3, 2002 2.75:1.00
May 1, 2002 through February 2, 2003 3.00:1.00
May 1, 2002 through May 4, 2003 3.00:1.00
August 1, 2002 through August 2, 2003 and each period of four
consecutive fiscal quarters thereafter 3.00:1.00
SECTION 8.5. Tangible Net Worth. The Tangible Net Worth of Del
Global and its Subsidiaries as of the last day of each fiscal quarter-end
commencing August 3, 2002 shall not be less than $24,000,000 plus 50% of the
cumulative net income of Del Global and its Subsidiaries for the fiscal quarter
then ended.
SECTION 8.6. Capital Expenditures. The aggregate amount of Del
Global's and its Subsidiaries' consolidated Capital Expenditures made or
committed to be made (a) in the fiscal year ending August 3, 2002, shall not
exceed $2,000,000 and (b) in any fiscal year thereafter commencing with the
fiscal year thereafter ending August 2, 2003, shall not exceed $2,500,000.
SECTION 8.7. Business Plan. The Lender and the Borrowers
acknowledge that the foregoing financial covenants were established by the
Lender and the Borrowers on the basis of the Business Plan delivered to the
Lender on the Closing Date, after leaving a margin in favor of the Borrowers
which the Lender and the Borrowers have agreed is fair. Accordingly, the Lender
and the Borrowers have agreed that any failure by the Borrowers to comply with
the terms of any Financial Covenant shall be deemed material for purposes of
this Agreement.
ARTICLE IX.
EVENTS OF DEFAULT
SECTION 9.1. Events of Default. The occurrence of any of the
following events shall constitute an "Event of Default":
(a) the Borrowers shall fail to pay any principal, interest,
fees, expenses or other Obligations when payable, whether at stated maturity, by
acceleration, or otherwise; or
(b) any Borrower shall (i) default in the performance or
observance of any agreement, covenant, condition, provision or term contained in
Section 2.3, 2.4, 2.6, 7.1(a)(i), 7.1(f), 7.1(g)(ii), 7.1(h), 7.1(k), 7.1(r),
7.1(s), 7.1(t), 7.1(u), 7.1(v), 7.2, 8.1, 8.2, 8.3, 8.4, 8.5, 8.6 or 10.1
hereof, Section 4(c) of the Pledge Agreement, Section 2(b) of the Intellectual
Property Security Agreement or Section 2.6 of the Mortgage; or (ii) default in
the performance or observance of any agreement, covenant, condition, provision
or term contained in this Agreement or any other Loan Document (other than those
referred to in Sections 9.1(a) and (b)(i)) and such failure continues for a
period of ten days; or
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(c) any Borrower shall dissolve, wind up or otherwise cease to
conduct its business; or
(d) any Borrower shall become the subject of an Insolvency
Event; or
(e) (i) any Borrower shall fail to make any payment (whether
of principal, interest or otherwise and regardless of amount) in respect of any
Material Indebtedness when due (whether at scheduled maturity or by required
prepayment, acceleration, demand or otherwise), or (ii) any event or condition
occurs that results in any Material Indebtedness becoming due prior to its
scheduled maturity or that enables or permits the holder or holders (or a
trustee or agent on behalf of such holder or holders) to declare any Material
Indebtedness to be due, or to require the prepayment, repurchase, redemption or
defeasance thereof, prior to its scheduled maturity; or
(f) any representation or warranty made by any Borrower under
or in connection with any Loan Document or amendment or waiver thereof, or in
any Financial Statement, report, document or certificate delivered in connection
therewith, shall prove to have been incorrect in any material respect when made
or deemed made; or
(g) any judgment or order for the payment of money which, when
taken together with all other judgments and orders rendered against any of the
Borrowers taken together, exceeds $100,000 in the aggregate shall be rendered
against any of the Borrowers and shall not be stayed, vacated, bonded or
discharged within thirty days; or
(h) any penalty or fine for the payment of money which, when
taken together with all other penalties and fines issued against any of the
Borrowers taken together, exceeds $500,000 in the aggregate shall be rendered
against any of the Borrowers and shall not be stayed, vacated, bonded or
discharged within thirty days; or
(i) (i) the chief executive officer or the chief financial
officer of the Borrower is terminated or resigns from his or her office and is
not replaced with a person reasonably acceptable to the Lender, or (ii) the
occurrence of any change in control or similar event with respect to a Borrower
as defined or described under any indenture or agreement in respect of
Indebtedness to which such Borrower is a party; or
(j) any material covenant, agreement or obligation of a
Borrower contained in or evidenced by any of the Loan Documents shall cease to
be enforceable, or shall be determined to be unenforceable, in accordance with
its terms; a Borrower shall deny or disaffirm its obligations under any of the
Loan Documents or any Liens granted in connection therewith or shall otherwise
challenge any of its obligations under any of the Loan Documents; or any Liens
granted on any of the Collateral shall be determined to be void, voidable or
invalid, are subordinated or are not given the priority contemplated by this
Agreement or any other Loan Document; or
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(k) a Security Document shall for any reason cease to create a
valid and perfected first priority Lien on the Collateral purported to be
covered thereby; or
(l) the independent public accountants for the Borrowers shall
deliver a Qualified opinion on any Financial Statement; or
(m) more than 15% of the Borrowers' vendors or suppliers
(either in number or volume of business) shall have ceased supplying goods or
rendering services to the Borrowers and the Borrowers shall not have obtained
replacement goods or services from other sources on terms at least as favorable
to the Borrowers; or
(n) the occurrence of any event or condition that, in the
Lender's judgment, could reasonably be expected to have a Material Adverse
Effect, including, without limitation, the criminal conviction of any Borrower
(other than by the acceptance of a guilty plea or any other consent to a
conviction) in any Government Contract Proceeding.
SECTION 9.2. Acceleration, Termination and Cash
Collateralization. Upon the occurrence and during the continuance of an Event of
Default, the Lender may take any or all of the following actions, without
prejudice to the rights of the Lender to enforce its claims against the
Borrowers:
(a) Acceleration. To declare all Obligations immediately due
and payable (except with respect to any Event of Default with respect to a
Borrower specified in Section 9.1(d), in which case all Obligations shall
automatically become immediately due and payable) without presentment, demand,
protest or any other action or obligation of the Lender.
(b) Termination of Commitment. To declare the Lender's
obligation to make Advances and to use its best efforts to cause the issuance of
Letters of Credit hereunder immediately terminated (except with respect to any
Event of Default with respect to a Borrower set forth in Section 9.1(d), in
which case such obligation shall automatically terminate) and, at all times
thereafter, any Loan made by the Lender and the issuance of any Letter of Credit
shall be in the Lender's sole and absolute discretion. Notwithstanding any
termination of this Agreement, until all Obligations shall have been fully and
indefeasibly paid and satisfied, the Lender shall retain all security in all
guaranties and in all existing and future Receivables, Inventory and Equipment
of the Borrowers and all other Collateral held by it hereunder and under the
Security Documents, and the Borrowers shall continue to turn over all
Collections to the Lender.
(c) Cash Collateralization. With respect to all Letters of
Credit outstanding at the time of the acceleration of the Obligations under
Section 9.2(a) or otherwise at any time after the Expiration Date, the Borrowers
shall at such time deposit in a cash collateral account established by or on
behalf of the Lender an amount equal to 105% (or 110% in the case of Letters of
Credit denominated in any currency other than Dollars) of the aggregate then
undrawn and unexpired amount of such Letters of Credit. Amounts held in such
cash collateral account shall be under the sole dominion and control of the
Lender and applied by the Lender to the payment of drafts drawn under such
Letters of Credit, and the balance, if any, in such cash collateral account,
after all such Letters of Credit shall have expired or been fully drawn upon
shall be applied to repay the other Obligations. After all such Letters of
Credit shall have expired or been fully drawn upon and all Obligations shall
have been satisfied, the balance, if any, in such cash collateral account shall
be returned to the Borrowers or to such other Person as may be lawfully entitled
thereto.
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SECTION 9.3. Other Remedies.
(a) Upon the occurrence and during the continuance of an Event
of Default, the Lender shall have all rights and remedies with respect to the
Obligations and the Collateral under applicable law and the Loan Documents, and
the Lender may do any or all of the following:
(i) remove for copying all documents, instruments, files
and records (including the copying of any computer records)
relating to a Borrower's Receivables or use (at the expense of
a Borrower) such supplies or space of a Borrower at such
Borrower's places of business necessary to administer, enforce
and collect such Receivables including, without limitation,
any supporting obligations;
(ii) accelerate or extend the time of payment,
compromise, issue credits, or bring suit on a Borrower's
Receivables (in the name of such Borrower or the Lender) and
otherwise administer and collect such Receivables;
(iii) sell, assign and deliver a Borrower's Receivables
with or without advertisement, at public or private sale, for
cash, on credit or otherwise, subject to applicable law; and
(iv) foreclose the security interests created pursuant to
the Loan Documents by any available procedure, or take
possession of any or all of the Collateral, without judicial
process and enter any premises where any Collateral may be
located for the purpose of taking possession of or removing
the same.
(b) The Lender may bid or become a purchaser at any sale, free
from any right of redemption, which right is expressly waived by each Borrower.
If notice of intended disposition of any Collateral is required by law, it is
agreed that ten days' notice shall constitute reasonable notification. Each
Borrower will assemble the Collateral in its possession and make it available at
such locations as the Lender may specify, whether at the premises of such
Borrower or elsewhere, and will make available to the Lender the premises and
facilities of such Borrower for the purpose of the Lender's taking possession of
or removing the Collateral or putting the Collateral in saleable form. The
Lender may sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange, broker's board or at any of the
Lender's offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Lender may deem commercially reasonable. The Lender
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Lender may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Each Borrower hereby grants the Lender a license to enter and occupy
any of such Borrower's leased or owned premises and facilities, without charge,
to exercise any of the Lender's rights or remedies.
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SECTION 9.4. License for Use of Software and Other
Intellectual Property. Each Borrower hereby grants to the Lender a license or
other right to use, without charge, all computer software programs, data bases,
processes, trademarks, tradenames, copyrights, labels, trade secrets, service
marks, advertising materials and other rights, assets and materials used by such
Borrower in connection with its businesses or in connection with the Collateral.
SECTION 9.5. No Marshalling; Deficiencies; Remedies
Cumulative. The Lender shall have no obligation to marshal any Collateral or to
seek recourse against or satisfaction of any of the Obligations from one source
before seeking recourse against or satisfaction from another source. The net
cash proceeds resulting from the Lender's exercise of any of the foregoing
rights to liquidate all or substantially all of the Collateral, including any
and all Collections (after deducting all of the Lender's expenses related
thereto), shall be applied by the Lender to such of the Obligations and in such
order as the Lender shall elect in its sole and absolute discretion, whether due
or to become due. The Borrowers shall remain liable to the Lender for any
deficiencies, and the Lender in turn agrees to remit to the applicable Borrower
or its successor or assign any surplus resulting therefrom. All of the Lender's
remedies under the Loan Documents shall be cumulative, may be exercised
simultaneously against any Collateral and any Borrower or in such order and with
respect to such Collateral or such Borrower as the Lender may deem desirable,
and are not intended to be exhaustive.
SECTION 9.6. Waivers. Except as may be otherwise specifically
provided herein or in any other Loan Document, each Borrower hereby waives any
right to a judicial or other hearing with respect to any action or prejudgment
remedy or proceeding by the Lender to take possession, exercise control over, or
dispose of any item of Collateral in any instance (regardless of where the same
may be located) where such action is permitted under the terms of this Agreement
or any other Loan Document or by applicable law or of the time, place or terms
of sale in connection with the exercise of the Lender's rights hereunder and
also waives any bonds, security or sureties required by any statute, rule or
other law as an incident to any taking of possession by the Lender of any
Collateral. Each Borrower also waives any damages (direct, consequential or
otherwise) occasioned by the enforcement of the Lender's rights under this
Agreement or any other Loan Document including the taking of possession of any
Collateral or the giving of notice to any account debtor or the collection of
any Receivable of such Borrower. Each Borrower also consents that the Lender may
enter upon any premises owned by or leased to it without obligations to pay rent
or for use and occupancy, through self-help, without judicial process and
without having first obtained an order of any court. These waivers and all other
waivers provided for in this Agreement and the other Loan Documents have been
negotiated by the parties, and each Borrower acknowledges that it has been
represented by counsel of its own choice, has consulted such counsel with
respect to its rights hereunder and has freely and voluntarily entered into this
Agreement and the other Loan Documents as the result of arm's-length
negotiations.
SECTION 9.7. Further Rights of the Lender.
(a) Further Assurances. Each Borrower shall do all things and
shall execute and deliver all documents and instruments reasonably requested by
the Lender to protect or perfect any Lien (and the priority thereof) of the
Lender on the Collateral. The Lender is authorized to describe the Collateral
covered by any financing statement filed by it under the Code as "all assets" or
"all personal property" of the applicable Borrower or by using a similar
supergeneric description.
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(b) Insurance; Etc. If a Borrower shall fail to purchase or
maintain insurance (where applicable), or to pay any tax, assessment,
governmental charge or levy, except as the same may be otherwise permitted
hereunder or which is being contested in good faith by appropriate proceedings
and for which adequate reserves have been established in accordance with GAAP,
or if any Lien prohibited hereby shall not be paid in full or a Borrower shall
fail to perform or comply with any other covenant, promise or obligation to the
Lender hereunder or under any other Loan Document, the Lender may (but shall not
be required to) perform, pay, satisfy, discharge or bond the same for the
account of such Borrower, and all amounts so paid by the Lender shall be treated
as a Base Rate Advance hereunder and shall constitute part of the Obligations.
SECTION 9.8. Interest and Letter of Credit Fees After Event of
Default. Each Borrower agrees and acknowledges that the additional interest and
fees that may be charged under Section 4.2 (a) are an inducement to the Lender
to make Advances and to use its best efforts to cause Letters of Credit to be
issued hereunder and that the Lender would not consummate the transactions
contemplated by this Agreement without the inclusion of such provisions, (b) are
fair and reasonable estimates of the Lender's costs of administering the credit
facility upon an Event of Default and (c) are intended to estimate the Lender's
increased risks upon an Event of Default.
ARTICLE X.
ASSIGNMENTS AND PARTICIPATIONS
SECTION 10.1. Assignments. No Borrower shall assign this
Agreement or any right or obligation hereunder without the prior written consent
of the Lender. The Lender may assign (without the consent of any Borrower) to
one or more Persons all or a portion of its rights and obligations under this
Agreement, the Note and the other Loan Documents.
SECTION 10.2. Participations. The Lender may sell
participations in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of the Loans and
the Note); provided, however, that in such event the Lender's obligations under
this Agreement shall remain unchanged.
SECTION 10.3. Disclosure. The Lender may, in connection with
any permitted assignment or participation or proposed assignment or
participation pursuant to this Article X, disclose to the assignee or
participant or proposed assignee or participant any information relating to the
Borrowers or their Subsidiaries.
ARTICLE XI.
GENERAL PROVISIONS
SECTION 11.1. Notices. Except as otherwise provided herein,
all notices and other communications hereunder shall be in writing and sent by
certified or registered mail, return receipt requested, by overnight delivery
service, with all charges prepaid, by hand delivery, or by telecopier followed
by a hard copy sent by regular mail,
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if to the Lender, then to:
Transamerica Business Capital Corporation
000 Xxxxxxxx Xxxxx Xxxxxx, Xxxxx X-000
Xxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attn.: Xx. Xxxxxxx X. Xxxxx, Senior Vice President,
with a copy to:
Transamerica Business Capital Corporation
0000 Xxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attn.: General Counsel,
and if to a Borrower, then c/o the Administrative Borrower,
to:
Del Global Technologies Corp.
Xxx Xxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attn: Xx. Xxxxxx X. Xxxxxx,
with a copy to:
Tashlik, Kreutzer, Goldwyn & Xxxxxxxx P.C.
00 Xxxxxxxxxx Xxxx
Xxxxx Xxxx, Xxx Xxxx 00000-0000
Telecopy: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.,
or, in each case, to such other address as the Administrative Borrower or the
Lender may specify to the other party in the manner required hereunder. All such
notices and correspondence shall be deemed given (i) if sent by certified or
registered mail, three Business Days after being postmarked, (ii) if sent by
overnight delivery service or by hand delivery, when received at the above
stated addresses or when delivery is refused and (iii) if sent by telecopier
transmission, when such transmission is confirmed.
SECTION 11.2. Delays; Partial Exercise of Remedies. No delay
or omission of the Lender to exercise any right or remedy hereunder shall impair
any such right or operate as a waiver thereof. No single or partial exercise by
the Lender of any right or remedy shall preclude any other or further exercise
thereof, or preclude any other right or remedy.
SECTION 11.3. Right of Setoff. In addition to and not in
limitation of all rights of offset that the Lender may have under applicable
law, and whether or not the Lender has made any demand or the Obligations of the
Borrowers have matured, the Lender shall have the right to set off and apply any
and all deposits (general or special, time or demand, provisional or final, or
any other type) at any time held and any other Indebtedness at any time owing by
the Lender or any of its Affiliates to or for the credit or the account of any
Borrower or any Borrower's Affiliate against any and all of the Obligations. In
the event that the Lender exercises any of its rights under this Section 11.3,
the Lender shall provide notice to the Administrative Borrower of such exercise,
provided that the failure to give such notice shall not affect the validity of
the exercise of such rights.
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SECTION 11.4. Indemnification; Reimbursement of Expenses of
Collection.
(a) Each Borrower hereby agrees that, whether or not any of
the transactions contemplated by this Agreement or the other Loan Documents are
consummated, such Borrower will indemnify, defend and hold harmless (on an
after-tax basis) the Lender and its successors and assigns and their respective
directors, officers, agents, employees, advisors, shareholders, attorneys and
Affiliates (each, an "Indemnified Party") from and against any and all losses,
claims, damages, liabilities, deficiencies, obligations, fines, penalties,
actions (whether threatened or existing), judgments, suits (whether threatened
or existing) or expenses (including, without limitation, reasonable fees and
disbursements of counsel, experts, consultants and other professionals) incurred
by any of them (collectively, "Claims") (except, in the case of each Indemnified
Party, to the extent that any Claim is determined in a final and non-appealable
judgment by a court of competent jurisdiction to have directly resulted from
such Indemnified Party's gross negligence or willful misconduct) arising out of
or by reason of (i) any litigation, investigation, claim or proceeding related
to (A) this Agreement, any other Loan Document or the transactions contemplated
hereby or thereby, (B) any actual or proposed use by a Borrower of the proceeds
of the Loans, (C) the issuance of any Letter of Credit or the acceptance or
payment of any document or draft presented to any issuer thereof or any change
in the value of a foreign currency covered by any Letter of Credit or (D) the
Lender's entering into this Agreement, the other Loan Documents or any other
agreements and documents relating hereto (other than consequential damages and
loss of anticipated profits or earnings), including, without limitation, amounts
paid in settlement, court costs and the fees and disbursements of counsel
incurred in connection with any such litigation, investigation, claim or
proceeding, (ii) any remedial or other action taken or required to be taken by a
Borrower in connection with compliance by such Borrower, or any of its
properties, with any federal, state or local Environmental Laws and (iii) any
pending, threatened or actual action, claim, proceeding or suit by any
shareholder or director of a Borrower or any actual or purported violation of a
Borrower's Governing Documents or any other agreement or instrument to which a
Borrower is a party or by which any of its properties is bound. In addition, the
Borrowers shall, upon demand, pay to the Lender all costs and expenses incurred
by the Lender (including the fees and disbursements of counsel and other
professionals) in connection with the preparation, execution, delivery,
administration, modification and amendment of the Loan Documents, and pay to the
Lender all costs and expenses (including the fees and disbursements of counsel
and other professionals) paid or incurred by the Lender in (A) enforcing or
defending its rights under or in respect of this Agreement, the other Loan
Documents or any other document or instrument now or hereafter executed and
delivered in connection herewith, (B) collecting the Obligations or otherwise
administering this Agreement and (C) foreclosing or otherwise realizing upon the
Collateral or any part thereof. If and to the extent that the obligations of the
Borrowers hereunder are unenforceable for any reason, the Borrowers hereby agree
to make the maximum contribution to the payment and satisfaction of such
obligations that is permissible under applicable law.
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(b) The Borrowers' obligations under Sections 4.8 and 4.9 and
this Section 11.4 shall survive any termination of this Agreement and the other
Loan Documents, the termination, expiration or Collateralization of all Letters
of Credit and the payment in full of the Obligations, and are in addition to,
and not in substitution of, any of the other Obligations.
SECTION 11.5. Amendments and Waivers. Any provision of this
Agreement or any other Loan Document may be amended or waived if, but only if,
such amendment or waiver is in writing and signed by the Lender and the
Borrowers party thereto, and then any such amendment or waiver shall be
effective only to the extent set forth therein.
SECTION 11.6. Counterparts; Telecopied Signatures. This
Agreement and any waiver or amendment hereto may be executed in counterparts and
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all of which shall together constitute
one and the same instrument. This Agreement and each of the other Loan Documents
may be executed and delivered by telecopier or other facsimile transmission all
with the same force and effect as if the same was a fully executed and delivered
original manual counterpart.
SECTION 11.7. Severability. In case any provision in or
obligation under this Agreement, any Note or any other Loan Document shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 11.8. Maximum Rate. Notwithstanding anything to the
contrary contained elsewhere in this Agreement or in any other Loan Document,
the parties hereto hereby agree that all agreements between them under this
Agreement and the other Loan Documents, whether now existing or hereafter
arising and whether written or oral, are expressly limited so that in no
contingency or event whatsoever shall the amount paid, or agreed to be paid, to
the Lender for the use, forbearance, or detention of the money loaned to the
Borrowers and evidenced hereby or thereby or for the performance or payment of
any covenant or obligation contained herein or therein, exceed the maximum
non-usurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Obligations, under
the laws of the State of Illinois (or the laws of any other jurisdiction whose
laws may be mandatorily applicable notwithstanding other provisions of this
Agreement and the other Loan Documents), or under applicable federal laws which
may presently or hereafter be in effect and which allow a higher maximum
non-usurious interest rate than under the laws of the State of Illinois (or such
other jurisdiction), in any case after taking into account, to the extent
permitted by applicable law, any and all relevant payments or charges under this
Agreement and the other Loan Documents executed in connection herewith, and any
available exemptions, exceptions and exclusions (the "Highest Lawful Rate"). If
due to any circumstance whatsoever, fulfillment of any provision of this
Agreement or any of the other Loan Documents at the time performance of such
provision shall be due shall exceed the Highest Lawful Rate, then,
automatically, the obligation to be fulfilled shall be modified or reduced to
the extent necessary to limit such interest to the Highest Lawful Rate, and if
from any such circumstance the Lender should ever receive anything of value
deemed interest by applicable law which would exceed the Highest Lawful Rate,
such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to the Borrowers.
All sums paid or agreed to be paid to the Lender for the use, forbearance, or
detention of the Obligations and other Indebtedness of the Borrowers to the
Lender shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such Indebtedness, until
payment in full thereof, so that the actual rate of interest on account of all
such Indebtedness does not exceed the Highest Lawful Rate throughout the entire
term of such Indebtedness. The terms and provisions of this Section shall
control every other provision of this Agreement, the other Loan Documents and
all other agreements among the parties hereto.
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SECTION 11.9. Administrative Borrower; Nature of Borrowers'
Liabilities.
(a) Each Borrower hereby appoints the Administrative Borrower
irrevocably for the term of this Agreement, to act as its agent,
attorney-in-fact and legal representative in all matters pertaining to the
administration of this Agreement and the other Loan Documents including, without
limitation, to execute and deliver to the Lender any notices, certificates and
the other documents permitted or required to be executed and delivered, and to
take any and all other actions as are permitted or required to be taken, under
or in connection with the Loan Documents. Any such action taken by the
Administrative Borrower shall bind each of the Borrowers.
(b) The Borrowers' liabilities in respect of the Obligations
shall at all times be joint and several.
SECTION 11.10. Entire Agreement; Successors and Assigns. This
Agreement and the other Loan Documents constitute the entire agreement among the
parties, supersede any prior written and verbal agreements among them, and shall
bind and benefit the parties and their respective successors and permitted
assigns.
SECTION 11.11. LIMITATION OF LIABILITY. THE LENDER SHALL HAVE
NO LIABILITY TO ANY BORROWER (WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE)
FOR LOSSES SUFFERED BY ANY BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN
ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER
BINDING ON THE LENDER THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS
CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER. EACH BORROWER
HEREBY WAIVES ALL FUTURE CLAIMS AGAINST THE LENDER FOR SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES.
SECTION 11.12. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY DISPUTE
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS)
AND DECISIONS OF THE STATE OF ILLINOIS.
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SECTION 11.13. SUBMISSION TO JURISDICTION. ALL DISPUTES
BETWEEN A BORROWER AND THE LENDER, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR
OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN XXXX
COUNTY, ILLINOIS AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN;
PROVIDED, HOWEVER, THAT THE LENDER SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, TO PROCEED AGAINST EACH BORROWER OR ITS PROPERTY IN (A) ANY
COURTS OF COMPETENT JURISDICTION AND VENUE AND (B) ANY LOCATION SELECTED BY THE
LENDER TO ENABLE THE LENDER TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE LENDER. EACH BORROWER AGREES THAT
IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY
PROCEEDING BROUGHT BY THE LENDER. EACH BORROWER WAIVES ANY OBJECTION THAT IT MAY
HAVE TO THE LOCATION OF THE COURT IN WHICH THE LENDER HAS COMMENCED A
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON FORUM NON CONVENIENS.
SECTION 11.14. SERVICE OF PROCESS. THE BORROWERS HEREBY
IRREVOCABLY DESIGNATE CT CORPORATION, WITH AN OFFICE ON THE DATE HEREOF AT 000
XXXXXX XXXXXX, XXX XXXX, XXX XXXX 00000, AS THE DESIGNEE AND AGENT OF THE
BORROWERS TO RECEIVE, FOR AND ON BEHALF OF EACH BORROWER, SERVICE OF PROCESS IN
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT AT
ITS ADDRESS WILL BE PROMPTLY FORWARDED BY MAIL TO EACH BORROWER, BUT THE FAILURE
OF A BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF
SUCH PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 11.15. JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO
(I) THIS AGREEMENT; (II) ANY OTHER LOAN DOCUMENT OR OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN A BORROWER AND THE LENDER; OR (III) ANY CONDUCT,
ACTS OR OMISSIONS OF A BORROWER, THE LENDER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR OTHER AFFILIATES, IN EACH CASE WHETHER SOUNDING
IN CONTRACT, TORT, EQUITY OR OTHERWISE.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their proper and duly authorized officers as of the
date first set forth above.
DEL GLOBAL TECHNOLOGIES CORP.
By:/s/ Xxxxxx X. Xxxxxx
--------------------------------------------------
Xxxxxx X. Xxxxxx
Chief Financial Officer, Treasurer and Secretary
BERTAN HIGH VOLTAGE CORP.
By:/s/ Xxxxxx X. Xxxxxx
--------------------------------------------------
Xxxxxx X. Xxxxxx
Chief Financial Officer, Treasurer and Secretary
RFI CORPORATION
By:/s/ Xxxxxx X. Xxxxxx
--------------------------------------------------
Xxxxxx X. Xxxxxx
Chief Financial Officer, Treasurer and Secretary
DEL MEDICAL IMAGING CORP.
By:/s/ Xxxxxx X. Xxxxxx
--------------------------------------------------
Xxxxxx X. Xxxxxx
Chief Financial Officer, Treasurer and Secretary
TRANSAMERICA BUSINESS CAPITAL CORPORATION
By:/s/ Xxxxxxx Xxxxx
--------------------------------------------------
Name:Xxxxxxx Xxxxx
Title: Vice President
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================================================================================
LOAN AND SECURITY AGREEMENT
among
DEL GLOBAL TECHNOLOGIES CORP.,
BERTAN HIGH VOLTAGE CORP.,
RFI CORPORATION and
DEL MEDICAL IMAGING CORP.,
as Borrowers,
and
TRANSAMERICA BUSINESS CAPITAL CORPORATION,
as Lender
Dated as of June 12, 2002
================================================================================
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS............................................................................................1
SECTION 1.1. General Definitions....................................................................1
SECTION 1.2. Accounting Terms and Determinations...................................................18
SECTION 1.3. Other Terms; Headings.................................................................19
ARTICLE II. THE CREDIT FACILITIES................................................................................19
SECTION 2.1. The Loans.............................................................................19
SECTION 2.2. Procedure for Borrowing; Notices of Borrowing; Notices of Continuation; Notices of
Conversion............................................................................20
SECTION 2.3. Application of Proceeds...............................................................22
SECTION 2.4. Maximum Amount of the Facility; Mandatory Prepayments; Optional Prepayments...........22
SECTION 2.5. Maintenance of Loan Account; Statements of Account....................................23
SECTION 2.6. Collection of Receivables.............................................................23
SECTION 2.7. Term..................................................................................24
SECTION 2.8. Payment Procedures....................................................................24
SECTION 2.9. Letters of Credit.....................................................................24
ARTICLE III. SECURITY............................................................................................25
SECTION 3.1. General...............................................................................25
SECTION 3.2. Further Security......................................................................25
SECTION 3.3. Recourse to Security..................................................................25
SECTION 3.4. Special Provisions Relating to Inventory..............................................25
SECTION 3.5. Special Provisions Relating to Receivables............................................27
SECTION 3.6. Special Provisions Relating to Equipment..............................................28
SECTION 3.7. Continuation of Liens, Etc............................................................28
SECTION 3.8. Power of Attorney.....................................................................29
ARTICLE IV. INTEREST, FEES AND EXPENSES..........................................................................29
SECTION 4.1. Interest..............................................................................29
SECTION 4.2. Interest and Letter of Credit Fees After Event of Default.............................29
SECTION 4.3. Closing Fee...........................................................................29
SECTION 4.4. Unused Line Fee; Minimum Loan Fee; Letter of Credit Fees..............................30
SECTION 4.5. Collateral Management Fee.............................................................30
SECTION 4.6. Early Termination Fee.................................................................30
SECTION 4.7. Calculations..........................................................................31
SECTION 4.8. Indemnification in Certain Events.....................................................31
SECTION 4.9. Taxes.................................................................................31
ARTICLE V. CONDITIONS OF LENDING.................................................................................32
SECTION 5.1. Conditions to Initial Loan or Letter of Credit........................................32
SECTION 5.2. Conditions Precedent to Each Loan and Each Letter of Credit...........................37
ARTICLE VI. REPRESENTATIONS AND WARRANTIES.......................................................................37
SECTION 6.1. Representations and Warranties of the Borrowers; Reliance by Lender...................37
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ARTICLE VII. COVENANTS OF THE BORROWERS..........................................................................44
SECTION 7.1. Affirmative Covenants.................................................................44
SECTION 7.2. Negative Covenants....................................................................53
ARTICLE VIII. FINANCIAL COVENANTS................................................................................58
SECTION 8.1. Adjusted Earnings.....................................................................58
SECTION 8.2. Adjusted U.S. Earnings................................................................58
SECTION 8.3. Senior Debt Ratio.....................................................................58
SECTION 8.4. Fixed Charge Coverage Ratio...........................................................59
SECTION 8.5. Tangible Net Worth....................................................................59
SECTION 8.6. Capital Expenditures..................................................................59
SECTION 8.7. Business Plan.........................................................................59
ARTICLE IX. EVENTS OF DEFAULT....................................................................................59
SECTION 9.1. Events of Default.....................................................................59
SECTION 9.2. Acceleration, Termination and Cash Collateralization..................................61
SECTION 9.3. Other Remedies........................................................................62
SECTION 9.4. License for Use of Software and Other Intellectual Property...........................63
SECTION 9.5. No Marshalling; Deficiencies; Remedies Cumulative.....................................63
SECTION 9.6. Waivers...............................................................................63
SECTION 9.7. Further Rights of the Lender..........................................................63
SECTION 9.8. Interest and Letter of Credit Fees After Event of Default.............................64
ARTICLE X. ASSIGNMENTS AND PARTICIPATIONS........................................................................64
SECTION 10.1. Assignments...........................................................................64
SECTION 10.2. Participations........................................................................64
SECTION 10.3. Disclosure............................................................................64
ARTICLE XI. GENERAL PROVISIONS...................................................................................64
SECTION 11.1. Notices...............................................................................64
SECTION 11.2. Delays; Partial Exercise of Remedies..................................................65
SECTION 11.3. Right of Setoff.......................................................................65
SECTION 11.4. Indemnification; Reimbursement of Expenses of Collection..............................66
SECTION 11.5. Amendments and Waivers................................................................67
SECTION 11.6. Counterparts; Telecopied Signatures...................................................67
SECTION 11.7. Severability..........................................................................67
SECTION 11.8. Maximum Rate..........................................................................67
SECTION 11.9. Administrative Borrower; Nature of Borrowers' Liabilities.............................68
SECTION 11.10. Entire Agreement; Successors and Assigns..............................................68
SECTION 11.11. LIMITATION OF LIABILITY...............................................................68
SECTION 11.12. GOVERNING LAW.........................................................................68
SECTION 11.13. SUBMISSION TO JURISDICTION............................................................69
SECTION 11.14. SERVICE OF PROCESS....................................................................69
SECTION 11.15. JURY TRIAL............................................................................69
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Exhibits
Exhibit A - Note
Exhibit B - Pledge Agreement
Exhibit C - Contribution Agreement
Exhibit D - Intellectual Property Security Agreement
Exhibit E - Compliance Certificate
Exhibit F - Notice of Borrowing
Exhibit G - Notice of Continuation
Exhibit H - Notice of Conversion
Exhibit I - Lockbox Agreement
Exhibit J - Subordinated Note
Exhibit K - Borrowing Base Certificate
Exhibit L - Solvency Certificate
Exhibit M - Perfection Certificate
Exhibit N - Mortgage
Exhibit O - Collateral Access Agreement
Exhibit P - Warrant
Schedules
Schedule 6.1(a) Foreign Jurisdictions
Schedule 6.1(b) Locations of Collateral and Real Property
Schedule 6.1(f) Consents and Authorizations
Schedule 6.1(g) Ownership; Subsidiaries
Schedule 6.1(i) Contingent Obligations
Schedule 6.1(k) Joint Ventures and Partnerships
Schedule 6.1(q) Taxes and Tax Returns
Schedule 6.1(r) Judgments; Litigation
Schedule 6.1(x) ERISA Plans
Schedule 6.1(y) Intellectual Property
Schedule 6.1(z) Labor Contracts
Schedule 6.1(ad) Material Contracts
Schedule 6.1(ag) Affiliate Transactions
Schedule 7.1(q) Billing Practices
Schedule 7.2(o) Executive Compensation
Schedule 7.2(t) Bank Accounts
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