REVOLVING CREDIT, TERM LOAN
AND SECURITY AGREEMENT
among
TII INDUSTRIES, INC., and
TII CORPORATION,
as Borrowers,
and
BNY FINANCIAL CORPORATION,
as Lender
Dated: April 30, 1998
TABLE OF CONTENTS
Page
----
1. DEFINITIONS......................................................... 1
1.1 Accounting Terms........................................... 1
1.2 General Terms.............................................. 1
1.3 Uniform Commercial Code Terms.............................. 16
2. ADVANCES, PAYMENT, INTEREST AND FEES................................ 16
2.1 Revolving Advances......................................... 16
2.2 Cap/Ex Loans............................................... 17
2.3 Appointment of Industries as Agent for Borrowing........... 20
2.4 Request for Advances....................................... 20
2.5 Disbursement of Advance Proceeds........................... 22
2.6 Repayment of Advances...................................... 22
2.7 Repayment of Overformula Amounts........................... 23
2.8 Statement of Account....................................... 23
2.9 Letters of Credit.......................................... 23
2.10 Issuance of Letters of Credit.............................. 24
2.11 Requirements For Issuance of Letters of Credit............. 24
2.12 Additional Payments........................................ 25
3. INTEREST AND FEES................................................... 25
3.1 Interest................................................... 25
3.2 Letters of Credit.......................................... 26
3.3 Closing Fee................................................ 26
3.4 Collateral Monitoring Fee.................................. 26
3.5 Unused Facility Fees....................................... 27
3.6 Computation of Interest and Fees........................... 27
3.7 Maximum Charges............................................ 27
3.8 Increased Costs............................................ 27
3.9 Capital Adequacy........................................... 28
3.10 Survival................................................... 29
4. COLLATERAL: GENERAL TERMS........................................... 29
4.1 Security Interest in the Collateral........................ 29
4.2 Perfection of Security Interest............................ 29
4.3 Disposition of Collateral.................................. 29
4.4 Preservation of Collateral................................. 30
4.5 Ownership of Collateral.................................... 30
4.6 Defense of Lender's Interests.............................. 31
4.7 Books and Records.......................................... 31
4.8 Financial Disclosure....................................... 32
4.9 Compliance with Laws....................................... 32
4.10 Inspection of Premises..................................... 32
(i)
4.11 Insurance.................................................. 32
4.12 Failure to Pay Insurance................................... 34
4.13 Payment of Taxes........................................... 34
4.14 Payment of Leasehold Obligations........................... 35
4.15 Receivables................................................ 35
4.16 Inventory.................................................. 37
4.17 Maintenance of Equipment................................... 37
4.18 Exculpation of Liability................................... 37
4.19 Environmental Matters...................................... 38
5. REPRESENTATIONS AND WARRANTIES...................................... 40
5.1 Authority.................................................. 40
5.2 Formation and Qualification................................ 40
5.3 Survival of Representations and Warranties................. 40
5.4 Tax Returns................................................ 41
5.5 Financial Statements....................................... 41
5.6 Corporate Name............................................. 42
5.7 O.S.H.A. and Environment Compliance........................ 42
5.8 Solvency; No Litigation; Violation......................... 43
5.9 Patents, Trademarks, Copyrights and Licenses............... 44
5.10 Licenses and Permits....................................... 44
5.11 Default of Indebtedness.................................... 44
5.12 No Default................................................. 44
5.13 No Burdensome Restrictions................................. 44
5.14 No Labor Disputes.......................................... 45
5.15 Margin Regulations......................................... 45
5.16 Investment Company Act..................................... 45
5.17 Disclosure................................................. 45
5.18 Swaps...................................................... 45
6. AFFIRMATIVE COVENANTS............................................... 45
6.1 Payment of Fees............................................ 45
6.2 Conduct of Business and Maintenance of
Existence and Assets....................................... 46
6.3 Violations................................................. 46
6.4 Government Receivables..................................... 46
6.5 Net Worth.................................................. 46
6.6 Pledge of Credit........................................... 46
6.7 Execution of Supplemental Instruments...................... 46
6.8 Payment of Indebtedness.................................... 47
6.9 Standards of Financial Statements.......................... 47
7. NEGATIVE COVENANTS.................................................. 47
7.1 Merger, Consolidation, Acquisition and Sale of Assets...... 47
7.2 Creation of Liens.......................................... 47
7.3 Guarantees................................................. 47
(ii)
7.4 Investments................................................ 47
7.5 Loans...................................................... 48
7.6 Capital Expenditures....................................... 48
7.7 Dividends.................................................. 48
7.8 Indebtedness............................................... 48
7.9 Nature of Business......................................... 49
7.10 Transactions with Affiliates............................... 49
7.11 Operating Leases........................................... 49
7.12 Subsidiaries............................................... 49
7.13 Fiscal Year and Accounting Changes......................... 49
7.14 Prepayment of Indebtedness................................. 49
8. CONDITIONS PRECEDENT................................................ 50
8.1 Conditions to Initial Advances............................. 50
8.2 Conditions to Each Advance................................. 52
9. INFORMATION AS TO BORROWERS......................................... 53
9.1 Disclosure of Material Matters............................. 53
9.2 Schedules.................................................. 53
9.3 Environmental Reports...................................... 54
9.4 Litigation................................................. 54
9.5 Occurrence of Defaults, etc................................ 54
9.6 Government Receivables..................................... 54
9.7 Annual Financial Statements................................ 54
9.8 Quarterly Financial Statements............................. 55
9.9 Monthly Financial Statements............................... 55
9.10 Other Reports.............................................. 55
9.11 Additional Information..................................... 55
9.12 Projected Operating Budget................................. 55
9.13 Variances From Operating Budget............................ 56
9.14 Additional Documents....................................... 56
10. EVENTS OF DEFAULT................................................... 56
11. LENDER'S RIGHTS AND REMEDIES AFTER DEFAULT.......................... 58
11.1 Rights and Remedies........................................ 58
11.2 Lender's Discretion........................................ 59
11.3 Setoff..................................................... 59
11.4 Rights and Remedies not Exclusive.......................... 59
12. WAIVERS AND JUDICIAL PROCEEDINGS.................................... 59
12.1 Waiver of Notice........................................... 59
12.2 Delay...................................................... 60
12.3 Jury Waiver................................................ 60
(iii)
13. EFFECTIVE DATE AND TERMINATION...................................... 60
13.1 Term....................................................... 60
13.2 Termination................................................ 61
14. MISCELLANEOUS....................................................... 62
14.1 Governing Law.............................................. 62
14.2 Entire Understanding....................................... 62
14.3 Successors and Assigns; Participations; New Lenders........ 63
14.4 Application of Payments.................................... 63
14.5 Indemnity.................................................. 63
14.6 Notice..................................................... 64
14.7 Survivability.............................................. 64
14.8 Expenses................................................... 65
14.9 Injunctive Relief.......................................... 65
14.10 Captions................................................... 65
14.11 Counterparts............................................... 65
(iv)
List of Exhibits
Exhibit 1.2
Exhibit 2.2(d)
Exhibit 4.5
Exhibit 5.2
Exhibit 5.6
Exhibit 5.8(b)
Exhibit 5.9
Exhibit 5.10
Exhibit 5.12
Exhibit 5.14
Exhibit 7.8
(v)
REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
Revolving Credit, Term Loan and Security Agreement dated April 30, 1998
among TII INDUSTRIES, INC., a corporation organized under the laws of the State
of Delaware ("Industries"), TII CORPORATION, a corporation organized under the
laws of the State of Delaware ("Corporation"), and BNY FINANCIAL CORPORATION
("BNY"), a corporation organized under the laws of the State of New York.
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrowers and Lender hereby agree as follows:
1. DEFINITIONS.
1.1 Accounting Terms. As used in this Agreement or any certificate,
report or other document made or delivered pursuant to this Agreement,
accounting terms not defined in Section 1.2 or elsewhere in this Agreement and
accounting terms partly defined in Section 1.2 to the extent not defined, shall
have the respective meanings given to them under GAAP.
1.2 General Terms. For purposes of this Agreement the following terms
shall have the following meanings:
"Advances" shall mean and include the Revolving Advances,
Letters of Credit and Cap/Ex Loans under Article 2 hereof.
"Advance Rates" shall have the meaning set forth in Section
2.1(a) hereof.
"Affiliate" of any Person shall mean (a) any Person (other
than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person, or (b) any Person
who is a director or officer (i) of such Person, (ii) of any Subsidiary of such
Person or (iii) of any Person described in clause (a) above. For purposes of
this definition, control of a Person shall mean the power, directly or
indirectly, (x) to vote ten percent (10%) or more of the securities having
ordinary voting power for the election of directors of such Person, or (y) to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Affiliate Loan Agreements" shall mean that certain Revolving
Credit, Term Loan and Security Agreement dated the date hereof between Lender
and Ditel, that certain Revolving Credit, Term Loan and Security Agreement dated
the date hereof between Lender and Crown, and all notes, instruments, mortgages,
agreements, guaranties and other documents executed and/or delivered in
connection therewith, as the same now exist
1
or may hereafter be amended, restated, renewed, replaced, extended or otherwise
modified.
"Affiliated Borrowers" shall mean, individually and
collectively, Ditel and Crown.
"Alternate Base Rate" shall mean, for any day, a rate per
annum equal to the higher of (a) the Prime Rate in effect on such day and (b)
the Federal Funds Rate in effect on such day plus one half of one percent
(0.50%).
"Alternate Base Rate Advances" shall mean any Advances or
portion thereof on which interest is payable based on the Alternate Base Rate in
accordance with the terms hereof.
"Annual Audited Financial Statements" shall have the meaning
set forth in Section 9.7 hereof.
"Applicable Cap/Ex Amount" shall have the meaning set forth in
Section 3.5(b) hereof.
"Applicable Revolver Amount" shall have the meaning set forth
in Section 3.5(a) hereof.
"Authority" shall have the meaning set forth in Section 4.19
(d) hereof.
"Average Daily Closing Cap/Ex Balances" shall have the meaning
set forth in Section 3.5(b) hereof.
"Average Daily Closing Revolver Balances" shall have the
meaning set forth in Section 3.5(a) hereof.
"Average Eurodollar Rate" shall mean, as to any one month
interest period, the daily average of the "one month" London Interbank Offered
Rate as published in The Wall Street Journal averaged on a monthly basis for
actual days elapsed over a 360 day year.
"Average Eurodollar Rate Advances" shall mean any Advances or
portion thereof on which interest is payable based on the Average Eurodollar
Rate in accordance with the terms hereof.
"Bank" shall mean The Bank of New York.
"Blocked Accounts" shall have the meaning set forth in
Section 4.15(h)hereof.
2
"Borrowers" shall mean, individually and collectively,
Industries and Corporation, and their respective successors and assigns. All
references to Borrower and Borrowers shall mean each of them, jointly and
severally, individually and collectively, and the respective successors and
assigns of each.
"Business Day" shall mean any day other than a day on which
commercial banks in New York are authorized or required by law to close except
that if a determination of a Business Day shall relate to any Eurodollar Rate
Advances, the term Business Day shall also exclude any day on which banks are
closed for dealings in dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.
"Cap/Ex Line Loans" shall have the meaning set forth in
Section 2.2(a) hereof.
"Cap/Ex Line Sublimit" shall have the meaning set forth in
Section 2.2(a) hereof.
"Cap/Ex Line Termination Date" shall have the meaning set
forth in Section 2.2(a) hereof.
"Cap/Ex Loan Interest Rate" shall mean the per annum rate of
interest on all Cap/Ex Loans equal to:
(a) with respect to all Cap/Ex Loans which are Alternate Base
Rate Advances, the Alternate Base Rate plus one half of one percent (0.50%);
(b) with respect to all Cap/Ex Loans which are Eurodollar Rate
Advances, the Eurodollar Rate plus two and three-quarters of one percent
(2.75%); and
(c) with respect to all Cap/Ex Loans which are Average
Eurodollar Rate Advances, the Average Eurodollar Rate plus two and
three-quarters of one percent (2.75%).
"Cap/Ex Loans" shall mean from the date hereof up to the
Cap/Ex Line Termination Date, the aggregate outstanding principal amount of all
Cap/Ex Line Loans, and from and after the Cap/Ex Line Termination Date, the
Cap/Ex Term Loan.
"Cap/Ex Mandatory Prepayment" shall have the meaning set forth
in Section 2.2(e) hereof.
"Cap/Ex Note" shall have the meaning set forth in Section
2.2(d) hereof.
"Cap/Ex Reserve" shall mean, in addition to all other
Reserves, a reserve established by Lender in an amount determined from time to
time by Lender, in its sole discretion, equal to the amount by which the
aggregate principal amount of Cap/Ex Loans
3
outstanding from time to time exceeds seventy-five percent (75%) of the value of
Borrowers' Eligible Equipment in Lender's sole judgment.
"Cap/Ex Term Loan" shall have the meaning set forth in Section
2.2(d) hereof.
"Cash Flow" for any period, shall mean the sum of (a) Net
Income for such period plus (b) interest, income taxes, depreciation and
amortization and all other non-cash charges which were deducted in determining
Net Income for such period, minus (c)(i) scheduled and mandatory repayments of
Indebtedness to the extent actually paid during the period, (ii) non cash
credits which were taken into account in determining Net Income for such period,
(iii) interest expense (including all imputed interest on capital lease
obligations) to the extent actually paid during the period, (iv) income taxes to
the extent actually paid during the period, (v) dividends or other distributions
to the extent permitted hereunder made by Borrowers to holders of their
respective shares of capital stock, and (vi) any non-financed payments made in
respect of any capital or fixed assets actually paid during the period.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. 9601 et seq.
"Change of Ownership" shall mean with respect to Corporation,
the failure of TII International, Inc. to beneficially own all of the issued and
outstanding shares of capital stock of Corporation.
"Charges" shall mean all taxes, charges, fees, imposts, levies
or other assessments, including, without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation
and property taxes, custom duties, fees, assessments, Liens, Claims and charges
of any kind whatsoever, together with any interest and any penalties, additions
to tax or additional amounts, imposed by any taxing or other authority, domestic
or foreign (including, without limitation, the Pension Benefit Guaranty
Corporation or any environmental agency or superfund), upon the Collateral, the
Borrowers or any of their respective Affiliates or Subsidiaries.
"Claims" shall mean all security interests, Liens, claims or
encumbrances held or asserted by any Person against any or all of the
Collateral, other than (a) Charges and (b) Permitted Encumbrances.
"Closing Date" shall mean April 30, 1998 or such other date as
may be agreed to by the parties hereto.
"Collateral" shall mean and include:
4
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Real Property;
(f) all Subsidiary Stock;
(g) all Leasehold Interests;
(h) all of the Borrowers' right, title and interest in and to
(i) investment property, contract rights, instruments, documents and chattel
paper; (ii) its goods and other property including, but not limited to all
merchandise returned or rejected by Customers, relating to or securing any of
the Receivables; (iii) all of the Borrowers' rights as a consignor, a consignee,
an unpaid vendor, mechanic, artisan, or other lienor, including stoppage in
transit, set off, detinue, replevin, reclamation and repurchase; (iv) all
additional amounts due to the Borrowers from any Customer relating to the
Receivables; (v) other property, including warranty claims relating to any goods
securing this Agreement; (vi) if and when obtained by the Borrowers, all real
and personal property of third parties in which Borrowers have been granted a
lien or security interest as security for the payment or enforcement of
Receivables; and (vii) any other goods, personal property or real property now
owned or hereafter acquired in which the Borrowers have expressly granted a
security interest or may in the future grant a security interest to the Lender
hereunder, or in any amendment or supplement hereto, or under any other
agreement between the Lender and the Borrowers;
(i) all of the Borrowers' ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers, computer
software (owned by the Borrowers or in which it has an interest), computer
programs, tapes, disks and documents relating to clauses (a), (b), (c), (d),
(e), (f), (g), or (h) above; and
(j) all proceeds and products of clauses (a), (b), (c), (d),
(e), (f), (g) and (h) above in whatever form, including, but not limited to:
cash, deposit accounts (whether or not comprised solely of proceeds),
certificates of deposit, insurance proceeds (including hazard, flood and credit
insurance), negotiable instruments and other instruments for the payment of
money, chattel paper, security agreements or documents.
"Contract Rate" shall have the meaning set forth in Section
3.1 hereof.
5
"Crown" shall mean Crown Tool & Die Company, Inc., a
corporation organized under the laws of the Commonwealth of Puerto Rico, and its
successors and assigns.
"Customer" shall mean and include the account debtor with
respect to any of the Receivables and/or the prospective purchaser of goods,
services or both with respect to any contract or other arrangement with the
Borrowers, pursuant to which the Borrowers are to deliver any personal property
or perform any services.
"Default Rate" shall have the meaning set forth in Section 3.1
hereof.
"Depository Accounts" shall have the meaning set forth in
Section 4.15(h) hereof.
"Ditel" shall mean TII-Ditel, Inc., a corporation organized
under the laws of the State of North Carolina, and its successors and assigns.
"Documents" shall have the meaning set forth in Section 8.1(c)
hereof.
"Dollar" and the sign "$" shall mean lawful money of the
United States of America.
"Eligible Equipment" shall mean Equipment that meets all of
the following criteria:
(a) the Equipment shall be described (by model, make,
manufacturer, serial no. and/or such other identifying information as may be
appropriate, as determined by Lender) in a schedule to be submitted by Borrowers
to Lender;
(b) Lender shall have a perfected first priority lien on and
security interest in such Equipment;
(c) such Equipment shall be located at premises owned or
leased by Borrowers in the United States or Puerto Rico; provided that, if such
Equipment is located at premises leased by Borrowers, Borrowers have delivered
to Lender a landlord waiver in form and substance acceptable to Lender in its
sole discretion;
(d) such Equipment is acceptable as Collateral to Lender in
Lender's discretion, reasonably exercised; and
(e) Borrowers shall have delivered to Lender a copy of a xxxx
of sale, invoice or other instrument evidencing that the vendor of such
Equipment has transferred good and absolute title thereto to Borrowers for the
purchase price set forth therein, and if applicable, any deferred payment terms
given to Borrowers in connection with such sale.
6
Such bills of sale, invoices or other instruments shall be subject to desk top
appraisal, the results of which shall be acceptable to Lender in its sole
discretion, by an appraisal firm acceptable to Lender in its sole discretion.
The criteria for Eligible Equipment shall be subject to Lender's continuing
satisfaction and may be revised by Lender from time to time in its sole
judgment. Notwithstanding anything to the contrary contained herein, Eligible
Equipment shall not include any of Borrowers' Equipment located in the Dominican
Republic. Any Equipment that is not Eligible Equipment shall nevertheless be and
remain at all times part of the Collateral.
"Eligible Inventory" shall mean and include Inventory,
excluding work in process, valued at the lower of cost or market value (and, in
the case of Eligible L/C Inventory, net of all duty, freight, taxes, costs,
insurance and other charges and expenses which may pertain to such Eligible L/C
Inventory), determined on a first-in-first-out basis, which is not, in Lender's
opinion, obsolete, slow moving or unmerchantable and which Lender, in its sole
discretion, shall not deem ineligible Inventory, based on such considerations as
Lender may from time to time deem appropriate including, without limitation,
whether the Inventory is subject to a perfected, first priority security
interest in favor of Lender and whether the Inventory conforms to all standards
imposed by any governmental agency, division or department thereof which has
regulatory authority over such goods or the use or sale thereof. Eligible
Inventory shall include all Eligible L/C Inventory. Notwithstanding anything to
the contrary contained herein, Eligible Inventory shall not include any of
Borrowers' Inventory located in the Dominican Republic.
"Eligible L/C Inventory" shall mean all raw material and
finished goods Inventory owned by Borrowers and covered by Letters of Credit,
and which raw material and finished goods Inventory are or will be in transit to
one of the Borrowers' locations (other than the Dominican Republic), and which
raw material and finished goods Inventory (a) as of the date such Inventory is
owned by one of the Borrowers (i) are fully insured, (ii) are subject to a first
priority security interest in and lien upon such goods in favor of Lender
(except for any possessory lien upon such goods in the possession of a freight
carrier or shipping company securing only the freight charges for the
transportation of such goods to such Borrowers) and (iii) all documents,
notices, instruments, statements and bills of lading relating thereto, if any,
which Lender may deem necessary or desirable to evidence ownership by such
Borrowers and/or to give effect to and protect the liens, security interests and
other rights of Lender in connection therewith, are delivered to Lender; and (b)
are and remain acceptable to Lender for lending purposes.
"Eligible Receivables" shall mean each Receivable arising in
the ordinary course of Borrowers' business and which Lender, in its sole credit
judgment, shall deem to be an Eligible Receivable, based on such considerations
as Lender may from time to time deem appropriate. In general, a Receivable shall
not be deemed eligible unless such Receivable is subject to Lender's perfected
security interest and no other Lien other than Permitted Encumbrances, and is
evidenced by an invoice or other documentary evidence satisfactory to Lender. In
addition, no Receivable shall be an Eligible Receivable if:
7
(a) it arises out of a sale made by Borrowers to an Affiliate
of Borrowers, or to a Person controlled by an Affiliate of Borrowers;
(b) it is due or unpaid more than sixty (60) days after the
original due date or ninety (90) days past the invoice date:
(c) fifty percent (50%) or more of the Receivables from the
account debtor are not deemed Eligible Receivables hereunder. Such percentage
may, in Lender's sole discretion, be increased or decreased from time to time;
(d) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached;
(e) the account debtor is also Borrowers' creditor or
supplier, or the account debtor has disputed liability, or the account debtor
has made any claim with respect to any other Receivable due from such account
debtor to Borrowers, or the Receivable otherwise is or may become subject to any
right of setoff by the account debtor; except that, in Lender's discretion, in
the event an account debtor has disputed liability, Lender may, in accordance
with and subject to the other terms hereof, deem any Receivable which is not
disputed as an Eligible Receivable;
(f) the account debtor has commenced a voluntary case under
the federal bankruptcy laws, as now constituted or hereafter amended, or made an
assignment for the benefit of creditors, or if a decree or order for relief has
been entered by a court having jurisdiction in the premises in respect of the
account debtor in an involuntary case under any state or federal bankruptcy
laws, as now constituted or hereafter amended, or if any other petition or other
application for relief under any state or federal bankruptcy law has been filed
against the account debtor, or if the account debtor has failed, suspended
business, ceased to be solvent, called a meeting of its creditors, or consented
to or suffered a receiver trustee, liquidator or custodian to be appointed for
it or for all or a significant portion of its assets or affairs;
(g) the sale is to an account debtor outside the United
States, Canada or Puerto Rico, unless the sale is on letter of credit, guaranty
or acceptance terms, in each case acceptable to Lender in its sole discretion,
or the Receivable arising from such sale is insured by a foreign credit
insurance policy in form, substance and amount acceptable to Lender in its sole
discretion, which policy, together with the proceeds thereof, has been duly
assigned to Lender;
(h) the sale to the account debtor is on a xxxx-and-hold,
guaranteed sale, sale-and-return, sale on approval, consignment or any other
repurchase or return basis or is evidenced by chattel paper;
8
(i) Lender believes, in its sole judgment, that collection of
such Receivable is insecure or that such Receivable may not be paid by reason of
the account debtor's financial inability to pay;
(j) the account debtor is the United States of America, any
state or any department, agency or instrumentality of any of them, unless
Borrowers assign Borrowers' right to payment of such Receivable to Lender
pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C.
Sub-Section 203 et seq.) or has otherwise complied with other applicable
statutes or ordinances;
(k) the goods giving rise to such Receivable have not been
shipped and delivered to and accepted by the account debtor or the services
giving rise to such receivable have not been performed by Borrowers and accepted
by the account debtor or the Receivable otherwise does not represent a final
sale;
(l) the Receivables of the account debtor exceed a credit
limit determined by Lender, in its sole discretion, to the extent such
Receivable exceeds such limit;
(m) the Receivable is subject to any offset, deduction,
defense, dispute, or counterclaim or if the Receivable is contingent in any
respect or for any reason;
(n) Borrowers have made any agreement with any account debtor
for any deduction therefrom, except for discounts or allowances made in the
ordinary course of business for prompt payment, all of which discounts or
allowances are reflected in the calculation of the face value of each respective
invoice related thereto;
(o) shipment of the merchandise or the rendition of services
has not been completed;
(p) any return, rejection or repossession of the merchandise
has occurred;
(q) such Receivable is not payable to a Borrower; or
(r) such Receivable is not otherwise satisfactory to the
Lender as determined in good faith by the Lender in the exercise of its
discretion in a reasonable manner.
"Environmental Complaint" shall have the meaning set forth in
Section 4.19(d) hereof.
"Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
9
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"Equipment" shall mean and include all of the Borrowers' goods
(excluding Inventory) whether now owned or hereafter acquired and wherever
located including, without limitation, all equipment, machinery, apparatus,
motor vehicles, fittings, furniture, furnishings, fixtures, parts, accessories
and all replacements and substitutions therefor or accessions thereto.
"Equipment Purchase Price" shall be the purchase price of any
Eligible Equipment as set forth in the xxxx of sale, invoice or other instrument
evidencing the purchase of such Equipment by Borrowers, net of all taxes,
transportation, installation, delivery and other soft costs of such purchase.
"Eurodollar Rate" shall mean with respect to the Interest
Period for a Eurodollar Rate Advance, the interest rate per annum equal to the
arithmetic average of the rates of interest per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one percent (1%)) at which the
Bank is offered deposits of United States Dollars in the London interbank market
(or other Eurodollar Rate market selected by Borrowers and approved by Lender)
on or about 9:00 a.m. (New York time) two (2) Business Days prior to the
commencement of such Interest Period in amounts substantially equal to the
principal amount of the Eurodollar Rate Advances requested by and available to
Borrowers in accordance with this Agreement, with a maturity of comparable
duration to the Interest Period selected by Borrowers.
"Eurodollar Rate Advances" shall mean any Advances or portion
thereof on which interest is payable based on the Eurodollar Rate in accordance
with the terms hereof.
"Event of Default" shall mean the occurrence of any of the
events set forth in Article 10 hereof.
"Facility Amount" shall mean $12,500,000.
"Federal Funds Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, of if such rate is not so published for
any day which is a Business Day, the average of quotations for such day on such
transactions received by the Bank from three Federal funds brokers of recognized
standing selected by the Bank.
"Formula Amount" shall have the meaning set forth in Section
2.1(a) hereof.
10
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"General Intangibles" shall mean and include all of the
Borrowers' general intangibles, whether now owned or hereafter acquired
including, without limitation, all choses in action, causes of action, corporate
or other business records, inventions, designs, patents, patent applications,
equipment formulations, manufacturing procedures, quality control procedures,
trademarks, trade secrets, goodwill, copyrights, registrations, licenses,
franchises, customer lists, tax refunds, tax refund claims, computer programs,
all claims under guaranties, security interests or other security held by or
granted to Borrowers to secure payment of any of the Receivables by an account
debtor, all rights of indemnification and all other intangible property of every
kind and nature (other than Receivables).
"Guarantor" shall mean individually and collectively, Ditel,
TII Dominicana, Inc., TII International, Inc. and Telecommunications Industries,
Inc.
"Guaranty" shall mean the guaranty of the obligations of
Borrowers executed by each Guarantor, respectively, in favor of Lender.
"Hazardous Discharge" shall have the meaning set forth in
Section 4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation, any
flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated byphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New York State Environmental Conversation Law or any other applicable
Environmental Law and in the regulations adopted pursuant hereto.
"Hazardous Wastes" includes all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
"Incipient Event of Default" shall mean an event which, with
the giving of notice or passage of time or both, would constitute an Event of
Default.
"Indebtedness" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except capital stock and surplus earned or
otherwise) and in any event, without limitation by reason of enumeration, shall
include all indebtedness, debt and other similar monetary obligations of such
Person whether direct or guaranteed, and all premiums, if any, due at the
required prepayment dates of such indebtedness, and all indebtedness secured by
11
a Lien on assets owned by such Person, whether or not such indebtedness
actually shall have been created, assumed or incurred by such Person. Any
indebtedness of such Person resulting from the acquisition by such Person of any
assets subject to any Lien shall be deemed, for the purposes hereof, to be the
equivalent of the creation, assumption and incurring of the indebtedness secured
thereby, whether or not actually so created, assumed or incurred.
"Interest Period" shall mean for any Eurodollar Rate Advance,
a period of approximately one (1), two (2), three (3) or six (6) months duration
as Borrowers may elect, the exact duration to be determined in accordance with
the customary practice in the applicable Eurodollar Rate market; provided, that,
Borrowers may not elect an Interest Period which (i) with respect to Cap/Ex Line
Loans, will end after the Cap/Ex Line Termination Date, and (ii) with respect to
all Advances, will end after the last day of the then-current term of this
Agreement.
"Inventory" shall mean all of Borrowers' now owned or
hereafter acquired inventory, goods, merchandise and other personal property,
wherever located, to be furnished under any contract of service or held for sale
or lease, all raw materials, work in process, finished goods and materials and
supplies of any kind, nature or description which are or might be used or
consumed in Borrowers' business or used in selling or furnishing such goods,
merchandise and other personal property, and all documents of title or other
documents representing them.
"Inventory Advance Rate" shall have the meaning set forth in
Section 2.1(a) hereof.
"Leasehold Interests" shall mean all of Borrowers' right,
title and interest in and to the premises located at (a) with respect to
Corporation, (i) 0000 Xxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000, and (ii) 0000
Xxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000, and (b) with respect to Industries, (i)
Xxxx 000, Xxxxxxxxx 1.06, Toa Alta, Puerto Rico, and (11) 0000 Xxxxx Xxxx Xxxx,
Xxxxxxx Xxxxxxx, Xxxxxx.
"Lender" shall mean BNY and its successor and assigns.
"Letters of Credit" shall have the meaning set forth in
Section 2.9 hereof.
"Letter of Credit Fees" shall have the meaning set forth in
Section 3.2(a) hereof.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien, charge, Claim or
encumbrance, or preference, priority or other security agreement or preferential
arrangement in respect of any asset of the Borrowers or any Subsidiary of the
Borrowers of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or
12
agreement to give, any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction.
"Maximum Revolving Advance Amount" shall mean $6,000,000.
"Monthly Advances" shall have the meaning set forth in Section
3.1 hereof.
"Net Income" shall mean the net income of Industries and its
Subsidiaries on a consolidated basis.
"Net Worth" at a particular date, shall mean for Industries
and its Subsidiaries on a consolidated basis, (a) the aggregate amount of all
assets as may properly be classified as such in accordance with GAAP
consistently applied, less (b) any of such assets as are properly classified as
"intangible assets," less (c) the aggregate amount of all Indebtedness.
"Obligations" shall mean and include any and all of the
Borrowers' joint and several Indebtedness and/or liabilities to the Lender or
any corporation that directly or indirectly controls or is controlled by or is
under common control with Lender of every kind, nature and description, direct
or indirect, secured or unsecured, joint, several, joint and several, absolute
or contingent, due or to become due, now existing or hereafter arising,
contractual or tortious, liquidated or unliquidated, regardless of how such
indebtedness or liabilities arise or by what agreement or instrument they may be
evidenced or whether evidenced by any agreement or instrument, including, but
not limited to, any and all of the Borrowers' Indebtedness and/or liabilities
under this Agreement or under any other agreement between the Lender and the
Borrowers and all obligations of the Borrowers to the Lender to perform acts or
refrain from taking any action.
"OPIC Stock" shall have the meaning set forth in Section 10(p)
hereof.
"Orderly Liquidation Value" shall mean the orderly liquidation
value of the Borrowers' Equipment as determined by an independent appraiser
acceptable to Lender and as reflected in a desk top appraisal prepared by such
appraiser, at Borrowers' cost and expense, and delivered to Lender.
"Other Documents" shall mean the Questionnaire and any and all
other agreements, instruments and documents, including, without limitation,
guaranties, pledges, powers of attorney, consents, and all other writings
heretofore, now or hereafter executed by Borrowers and/or delivered to Lender in
respect of the transactions contemplated by this Agreement.
"Overformula Amount" shall have the meaning set forth in
Section 2.1(b) hereof.
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"Overformula Rate" shall mean a per annum rate equal to one
half of one percent (0.5%) in excess of the applicable Contract Rate.
"Parent" of any Person shall mean a corporation or other
entity owning, directly or indirectly at least fifty percent (50%) of the shares
of stock or other ownership interests having ordinary voting power to elect a
majority of the directors of the Person, or other Persons performing similar
functions for any such Person.
"Payment Office" shall mean initially 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000; thereafter, such other office of Lender, if
any, which Lender may designate by notice to the Borrowers to be the Payment
Office.
"Permitted Encumbrances" shall mean (a) liens in favor of
Lender; (b) liens for taxes, assessments or other governmental charges not
delinquent, or, being contested in good faith and by appropriate proceedings and
with respect to which proper reserves have been taken by Borrowers; (c) liens
disclosed in the financial statements referred to in Section 5.5, the existence
of which Lender has consented to in writing; (d) deposits or pledges to secure
obligations under workmen's compensation, social security or similar laws, or
under unemployment insurance; (e) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in the ordinary course of Borrowers' business; (f) judgment liens that
have been stayed or bonded and mechanics', workmen's, materialmen's, carriers'
or other like liens arising in the ordinary course of Borrowers' business with
respect to obligations which are not due or which are being contested in good
faith by Borrowers; (g) liens placed upon fixed or capital assets hereafter
acquired to secure a portion of the purchase price thereof, provided that (x)
any such lien shall not encumber any other property of the Borrowers and (y) the
aggregate amount of Indebtedness secured by such liens incurred as a result of
such purchases during any fiscal year shall not exceed the amount provided for
in Section 7.6; and (h) liens disclosed on Exhibit 1.2.
"Person" shall mean an individual, a partnership, a
corporation, a business trust, a joint stock company, a trust, an unincorporated
association, a joint venture, a governmental authority or any other entity of
whatever nature.
"Positive Cash Flow" shall have the meaning set forth in
Section 2.2(e)(i) hereof.
"Prime Rate" for the purpose of this Agreement means the rate
of interest publicly announced from time to time by the Bank at its principal
office in New York as its prime rate or prime lending rate. This rate of
interest is determined from time to time by the Bank as a means of pricing some
loans to its customers and is neither tied to any external rate of interest or
index nor does it necessarily reflect the lowest rate of interest actually
charged by the Bank to any particular class or category of customers of the
Bank.
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"Pro Forma Financial Statements" shall have the meaning set
forth in Section 5.5(b) hereof.
"Questionnaire" shall mean each Questionnaire dated March 10,
1998 executed by each of the Borrowers, Affiliated Borrowers and Guarantor and
delivered to Lender under a cover letter dated April 17, 1998, as supplemented
by a letter dated April 24, 1998.
"RCRA" shall mean the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all of Borrowers' right, title and
interest in and to any now owned or hereafter acquired real property and all
buildings and improvements located thereon.
"Receivables" shall mean and include all of the Borrowers'
accounts, contract rights, instruments, documents, chattel paper, general
intangibles relating to accounts, drafts and acceptances, and all other forms of
obligations owing to Borrowers arising out of or in connection with the sale or
lease of Inventory or the rendition of services, all guarantees and other
security therefor, whether secured or unsecured, now existing or hereafter
created, and whether or not specifically sold or assigned to the Lender
hereunder.
"Receivables Advance Rate" shall have the meaning set forth in
Section 2.1(a) hereof.
"Releases" shall have the meaning set forth in Section
5.7(c)(i) hereof.
"Reserves" shall mean all Obligations then chargeable to any
account of Borrowers, as well as Obligations which may, in Lender's sole
discretion, be chargeable to Borrowers' account thereafter, by reason of or in
connection with any of the following: Receivables which are not Eligible
Receivables; Inventory which is not Eligible Inventory; disputed items;
deductions; allowances; credits; xxxx and hold sales; consignment sales; Letters
of Credit; steamship guarantees; airway releases; offsets asserted by or granted
to account debtors; sales calling for payment in currencies other than United
States Dollars; to adjust for audit/examination of Borrowers' accounts(s) or for
any documentation correction; such additional reserves as Lender in its sole
discretion, reasonably exercised, deems appropriate, including, but not limited
to, to adjust for any condition or prospect of the Borrowers or the Borrowers'
industry; and Cap/Ex Reserves.
"Revolving Advances" shall mean Advances made other than
Letters of Credit and the Cap/Ex Loans.
"Revolving Advance Interest Rate" shall mean the per annum
rate of interest on all Revolving Advances equal to:
15
(i) With respect to all Revolving Advances which are Alternate
Base Rate Advances, the Alternate Base Rate plus one quarter of one percent
(0.25%);
(ii) With respect to all Revolving Advances which are
Eurodollar Rate Advances, the Eurodollar Rate plus two and one half of one
percent (2.5%); and
(iii) With respect to all Revolving Advances which are Average
Eurodollar Rate Advances, the Average Eurodollar Rate plus two and one half of
one percent (2.5%).
"Subsidiary" of any Person shall mean a corporation or other
entity whose shares of stock or other ownership interests having ordinary voting
power (other than stock or other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the directors
of such corporation, or other Persons performing similar functions for such
entity, are owned, directly or indirectly, by such Person.
"Subsidiary Stock" shall mean (i) with respect to Industries,
sixty-five percent (65%) of the issued and outstanding shares of stock of Crown
and all of the issued and outstanding shares of stock of TII International, Inc.
and (ii) with respect to Corporation, all of the issued and outstanding stock of
Telecommunications Industries, Inc.
"Term" shall have the meaning set forth in Section 13.1 hereof.
"Toxic Substance" shall mean and include any material present
on the Real Property or the Leasehold Interests which has been shown to have
significant adverse effect on human health or which is subject to regulation
under the Toxic Substances Control Act (TSCA), 15 U.S.C. Section 2601 et seq.,
applicable state law, or any other applicable Federal or state laws now in force
or hereafter enacted, relating to toxic substances. "Toxic Substance" includes
but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based
paints.
"Transactions" shall have the meaning set forth in Section 5.5
hereof.
1.3 Uniform Commercial Code Terms. All terms used herein and defined in
the Uniform Commercial Code as adopted in the State of New York shall have the
meaning given therein unless otherwise defined herein.
2. ADVANCES, PAYMENT, INTEREST AND FEES.
2.1 Revolving Advances. (a) Subject to the terms and conditions set
forth in this Agreement, Lender will make from time to time, Revolving Advances
to the Borrowers not to exceed at any one time an aggregate outstanding amount
equal to the sum of (i) the lesser of (x) the Maximum Revolving Advance Amount
and (y) the Formula Amount; less (ii) the aggregate amount of all outstanding
Revolving Advances, provided that, the aggregate amount of all outstanding
Revolving Advances hereunder, plus all issued and
16
outstanding Letters of Credit hereunder, plus the aggregate amount of all
outstanding Revolving Advances under the Affiliate Loan Agreements, plus all
issued and outstanding Letters of Credit under the Affiliate Loan Agreements
shall not exceed the Maximum Revolving Advance Amount. The "Formula Amount"
shall mean the sum of the following amounts at any time and from time to time:
(i) eighty-five percent (85%) of Eligible
Receivables ("Receivables Advance Rate"),
plus
(ii) fifty percent (50%) of Eligible Inventory
("Inventory Advance Rate; together with the
Receivables Advance Rate", collectively the
"Advance Rates"), provided, however, that
the maximum amount of outstanding Revolving
Advances against Eligible Inventory to
Borrowers hereunder and to Affiliated
Borrowers under the Affiliate Loan
Agreements, shall not exceed $3,000,000 at
any one time, less
(iii) Reserves (including, without limitation,
Cap/Ex Reserves and Reserves for Letters of
Credit), less
(iv) $2,000,000 (less any portion thereof
allocated from time to time by Lender, in
its sole discretion, under the Affiliate
Loan Agreements).
(b) Discretionary Overformula Revolving Advances.
Notwithstanding anything to the contrary contained herein, the aggregate amount
of all Revolving Advances and amounts due under Letters of Credit at any time
and from time to time outstanding hereunder and under the Affiliate Loan
Agreements shall not exceed the formulas and limitations as set forth in Section
2.1(a) hereof (any such excess amount, an "Overformula Amount"). Any Revolving
Advances constituting an Overformula Amount are made available by Lender or
otherwise permitted to exist in the sole and absolute discretion of Lender and
are subject to Section 2.7 hereof.
(c) Discretionary Rights. The Advance Rates may be increased
or decreased by Lender at any time and from time to time in the exercise of its
reasonable discretion. Borrowers consent to any such increases or decreases and
acknowledge that decreasing the Advance Rates may limit or restrict Advances
requested by Borrowers.
2.2 Cap/Ex Loans.
(a) In addition to all Revolving Advances, Letters of Credit
and any other loans and financial accommodations to be made by Lender pursuant
to this Agreement and subject to the terms and conditions set forth herein,
Lender agrees, from the date hereof up to December 31, 1998 (the "Cap/Ex Line
Termination Date"), to make loans to Borrowers, upon Borrowers' written request,
for the purpose of purchasing or acquiring
17
Eligible Equipment, or for the purpose of refinancing any existing Indebtedness
or making new loans, with respect to any Equipment which Lender, in its sole
discretion deems to be Eligible Equipment (the "Cap/Ex Line Loans"). Each Cap/Ex
Line Loan shall be in an amount not to exceed seventy-five percent (75%) of the
Equipment Purchase Price in respect of Eligible Equipment which is, at the time
acquired by Borrowers, new Equipment, and seventy-five percent (75%) of the
Orderly Liquidation Value in respect of Eligible Equipment which is, as of the
date of such requested Cap/Ex Line Loan, used Equipment, provided, however, that
after giving effect to a Cap/Ex Line Loan requested by Borrowers, the sum of (i)
such requested Cap/Ex Line Loan plus (ii) the aggregate original principal
amount of all Cap/Ex Line Loans which have been made to Borrowers, plus (iii)
the aggregate original principal amount of all Cap/Ex Line Loans which have been
made to Affiliated Borrowers under the Affiliate Loan Agreements shall in no
event exceed $6,500,000 ("Cap/Ex Line Sublimit"). Borrowers shall provide Lender
with not less than ten (10) days prior written notice of each requested Cap/Ex
Line Loan. Each Cap/Ex Line Loan shall bear interest from the date such Cap/Ex
Line Loan is made at the applicable Contract Rate set forth in Section 3.1 and
such interest shall be payable in accordance with Section 3.1. In addition to
the foregoing and subject to the Cap/Ex Line Sublimit, Lender may, in its sole
discretion, make additional Cap/Ex Line Loans to Borrowers in respect of
Eligible Equipment, which is, at the time acquired by Borrowers, used Equipment,
in an amount determined by Lender in its sole discretion.
(b) Each Cap/Ex Line Loan shall be in an amount of not less
than $250,000.
(c) Borrowers shall have no right to request, and Lender shall
have no obligation to make whatsoever, any Cap/Ex Line Loan after the Cap/Ex
Line Termination Date.
(d) The aggregate principal amount of all Cap/Ex Line Loans
made from the Closing Date through and including June 30, 1998 (the "June 30
Principal Balance"), shall be repaid in seven (7) consecutive monthly principal
installments (or earlier as herein provided) commencing July 31, 1998, and on
the last day of each month thereafter, of which the first six (6) installments
shall each be in an amount equal to a quotient of the June 30 Principal Balance
divided by eighty-four (84), and the seventh (7th) installment shall be in an
amount equal to the entire then unpaid principal balance of the June 30
Principal Balance ("Unpaid June 30 Principal Balance"). The Unpaid June 30
Principal Balance and the aggregate principal amount of all Cap/Ex Line Loans
made from July 1, 1998 through and including the Cap/Ex Line Termination Date
(the "Cap/Ex Term Loan") shall be consolidated and repaid in fifty-one (51)
consecutive monthly principal installments (or earlier as herein provided)
commencing on the last day of the first calendar month next following the Cap/Ex
Line Termination Date and monthly thereafter on the last day of each successive
month until paid, of which the first fifty (50) principal installments shall
each be in an amount equal to the quotient of the principal amount of the Cap/Ex
Term Loan divided by eighty-four (84), and the last and fifty-first (51st)
principal installment shall be in an amount of the entire unpaid balance of such
Cap/Ex Term Loan.
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The Cap/Ex Term Loan shall be evidenced by and subject to the terms and
conditions of a promissory note (the "Cap/Ex Note"), which Cap/Ex Note shall be
in form and substance satisfactory to Lender and shall be dated as of the last
day of the first calendar month next following the Cap/Ex Line Termination Date.
Notwithstanding anything to the contrary contained herein, if the Term of this
Agreement is extended beyond the initial Term, the amortization schedule of
principal payments of the Cap/Ex Term Loan may, in Lender's sole discretion, be
extended, and Borrowers shall execute an amended and restated promissory note in
favor of Lender, in form and substance acceptable to Lender, reflecting such
revised schedule of principal installment payments with respect to the Cap/Ex
Term Loan, provided that, the final principal installment of such Cap/Ex Term
Loan shall be due and payable not later than the seventh (7th) anniversary of
the Closing Date. In addition to all other rights and remedies under this
Agreement, the Cap/Ex Term Loan, together with all accrued and unpaid interest
thereon and the early termination fee in respect thereof, shall, at Lender's
option, be immediately due and payable if this Agreement shall be terminated or
not renewed for any reason whatsoever, or upon the occurrence of any Event of
Default hereunder.
(e) (i) In addition to, and not in limitation of, any
provision contained herein or in the Cap/Ex Note, and except as otherwise
provided in Section 4.3 and Section 4.11 hereof, Borrowers shall remit to Lender
the following mandatory prepayments in respect of the Cap/Ex Loans (each, a
"Cap/Ex Mandatory Prepayment"):
(x) Commencing with Borrowers' fiscal year
ending June, 1999, and for each of Borrowers' fiscal years thereafter, if the
Cash Flow of Borrowers for such applicable fiscal year is greater than $1.00
("Positive Cash Flow"), Borrowers shall pay to Lender an aggregate amount equal
to fifty percent (50%) of such Positive Cash Flow without duplication of any
such Positive Cash Flow payments, or portion thereof, attributable to Ditel
under that certain Revolving Credit, Term Loan and Security Agreement dated the
date hereof between Lender and Ditel, and without duplication of any Positive
Cash Flow payments, or portion thereof, attributable to Crown under that certain
Revolving Credit, Term Loan and Security Agreement dated the date hereof between
Lender and Crown. The Cap/Ex Mandatory Prepayment payable pursuant to this
Section 2.2(e)(i) shall be due and payable five (5) days after delivery to
Lender of the Annual Audited Financial Statements for such fiscal year. At
Lender's option, in addition to all other Obligations, Lender may charge any
account of Borrowers for any Cap/Ex Mandatory Prepayment due under this Section
2.2(e)(i);
(y) Subject to the terms of Section 4.3
hereof, Borrowers shall pay to Lender the net proceeds of sale or other
disposition of Equipment; and
(z) Subject to the terms of Section 4.11
hereof, Borrowers shall pay to Lender all proceeds of insurance with respect to
any Equipment.
(ii) Each Cap/Ex Mandatory Prepayment shall be
applied against the unpaid principal balance of the Cap/Ex Line Loans in such
order and manner as
19
Lender shall elect and, from and after the Cap/Ex Line Termination Date, against
the unpaid principal balance of the Cap/Ex Term Loan in the inverse order of
maturities thereof.
(f) The Cap/Ex Loans shall (i) constitute a part of the
Advances and a part of the Obligations, (ii) be secured by the Collateral; and
(iii) be subject to the continued compliance with the terms and provisions of
this Agreement.
(g) The making of any Cap/Ex Line Loans is further subject to
the satisfaction of each of the following conditions precedent in a manner
satisfactory to Lender:
(i) Evidence that Borrowers have disbursed, in
connection with the purchase of the Equipment, all the proceeds received by
Borrowers to the vendors of such Equipment; and
(ii) no Event of Default or Incipient Event of
Default shall have occurred and be continuing.
2.3 Appointment of Industries as Agent for Borrowing. Each of the
Borrowers hereby irrevocably appoint Industries, and each officer thereof, as
their agent and attorney-in-fact to request Advances on their behalf, and, at
Lender's option, to receive disbursements of Advances on their behalf (which may
be made to the same account of Industries to which disbursements of Advances to
Industries are made), to receive notices and statements of account from Lender,
to take such other actions on their behalf as is provided hereunder or under any
of the Other Documents and generally to deal with Lender on their behalf, for
all matters pertaining to the financing arrangements under this Agreement and
the Other Documents.
2.4 Request for Advances.
(a) Borrowers may, from time to time, request Lender to make
Alternate Base Rate Advances, Eurodollar Rate Advances or Average Eurodollar
Rate Advances, convert Alternate Base Rate Advances, Eurodollar Rate Advances or
Average Eurodollar Rate Advances, or request that any existing Eurodollar Rate
Advances continue for an additional Interest Period. In the event that Borrowers
desire Lender to make Alternate Base Rate Advances or Average Eurodollar Rate
Advances, Borrowers shall notify Lender prior to 11:00 a.m. on a Business Day of
its request to incur such Alternate Base Rate Advance or Average Eurodollar Rate
Advances, as the case may be, on that day and the amount thereof. In the event
that Borrowers desire Lender to make Eurodollar Rate Advances, convert Alternate
Base Rate Advances to Eurodollar Rate Advances, convert Average Eurodollar Rate
Advances to Eurodollar Rate Advances or continue Eurodollar Rate Advances for an
additional Interest Period, Borrowers shall give Lender at least three (3)
Business Days' prior written notice, no later than 10:00 a.m. (New York City
time) on the day such notice is given, specifying the amount and the date (which
shall be a
20
Business Day) of the proposed making of any such Eurodollar Rate Advance,
conversion of any such Alternate Base Rate Advance into a Eurodollar Rate
Advance, conversion of any such Average Eurodollar Rate Advance into a
Eurodollar Rate Advance, or continuance of existing Eurodollar Rate Advances for
an additional Interest Period. Such request from Borrowers shall specify the
amount of the Advances which will constitute Eurodollar Rate Advances (subject
to the limits set forth below) and the Interest Period to be applicable to such
Eurodollar Rate Advances. Subject to the terms and conditions contained herein,
three (3) Business Days after receipt by Lender of such a request from
Borrowers, such Eurodollar Rate Advances, shall be made, or such Alternate Base
Rate Advances shall be converted to Eurodollar Rate Advances or such Average
Eurodollar Rate Advances shall be converted to Eurodollar Rate Advances, or such
Eurodollar Rate Advances shall continue, provided, that, as of each such date,
each of the following conditions is satisfied as determined by Lender in its
sole discretion: (i) no Event of Default or Incipient Event of Default exists or
has occurred and is continuing, (ii) no party hereto shall have sent any notice
of termination or non-renewal of this Agreement, (iii) Borrowers shall have
complied with such customary procedures as are established by Lender and
specified by Lender to Borrowers from time to time for requests by Borrowers for
Eurodollar Rate Advances, (iv) no more than five (5) Interest Periods in the
aggregate for Borrower and Affiliated Borrowers may be in effect at any one
time, (v) the amount of each Eurodollar Rate Advance must be, in each case, in
an amount of not less than $1,000,000 or an integral multiple of $100,000 in
excess thereof, (vi) the maximum amount of the Eurodollar Rate Advances at any
time requested by Borrowers shall not exceed the amount equal to eighty percent
(80%) of the lowest principal amount of the Advances which it is anticipated
will be outstanding during the applicable Interest Period, in each case as
determined by Lender (but with no obligation of Lender to make such Advances)
and (vii) Lender shall have determined that the Interest Period or Eurodollar
Rate is available to Lender through the Bank and can be readily determined as of
the date of the request for such Eurodollar Rate Advances by Borrowers. Any
request by Borrowers to convert Alternate Base Rate Advances to Eurodollar Rate
Advances, or to convert Average Eurodollar Rate Advances to Eurodollar Rate
Advances, or to continue any existing Eurodollar Rate Advances shall be
irrevocable. Notwithstanding anything to the contrary contained herein, Lender
and Bank shall not be required to purchase United States Dollar deposits in the
London interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Advances, but the provisions hereof shall be deemed to apply as
if Lender and Bank had purchased such deposits to fund the Eurodollar Rate
Advances.
(b) Any Eurodollar Rate Advances shall automatically convert
to Alternate Base Rate Advances upon the last day of the applicable Interest
Period, unless Lender has received and approved a request to continue such
Eurodollar Rate Advance at least three (3) Business Days prior to such last day
in accordance with the terms hereof. Borrowers shall pay to Lender, upon demand
by Lender (or Lender may, at its option, charge any loan account of Borrowers)
any amounts required to compensate Lender, the Bank or any participant with
Lender for any loss (including loss of reasonably anticipated profits), cost or
expense incurred by such person, as a result of the conversion of
21
Eurodollar Rate Advances or Average Eurodollar Rate Advances, as the case may
be, to Alternate Base Rate Advances pursuant to any of the foregoing. Any
Eurodollar Rate Advances shall bear interest at the Default Rate in the event
that (i) an Event of Default shall exist or have occurred, (ii) this Agreement
shall terminate or not be renewed, or (iii) the aggregate principal amount of
the Alternate Base Rate Advances which have previously been converted to
Eurodollar Rate Advances, or which existing Eurodollar Rate Advances have been
continued, as the case may be, at the beginning of an Interest Period shall at
any time during such Interest Period exceed either (x) the aggregate principal
amount of the Advances then outstanding, or (y) the Advances then available to
Borrowers under Section 2.1 hereof. Any Average Eurodollar Rate Advances shall
automatically convert to Alternate Base Rate Advances in the event that an Event
of Default or an Incipient Event of Default shall exist or have occurred or this
Agreement shall terminate or not be renewed and such Alternate Base Rate
Advances shall bear interest at the Default Rate.
(c) Should any amount required to be paid as interest
hereunder, or as fees or other charges under this Agreement or any other
agreement with Lender, or with respect to any other Obligation, become due, same
shall be deemed a request for a Revolving Advance as of the date such payment is
due, in the amount required to pay in full such interest, fee, charge or
Obligation under this Agreement or any other agreement with Lender, and such
request shall be irrevocable.
2.5 Disbursement of Advance Proceeds. All Advances shall be disbursed
from whichever office or other place the Lender may designate from time to time
and, together with any and all other Obligations of Borrowers to Lender, shall
be charged to any account of the Borrowers on the Lender's books. During the
Term, Borrowers may use the Revolving Advances by borrowing, repaying and
reborrowing, all in accordance with the terms and conditions hereof. The
proceeds of each Revolving Advance requested by the Borrowers or deemed to have
been requested by the Borrowers under Section 2.4(c) hereof shall, with respect
to requested Revolving Advances to the extent the Lender makes such Revolving
Advances, subject to Section 2.3 hereof, be made available to the Borrowers on
the day so requested by way of credit to Industries' operating account at such
bank as Industries may designate following notification to Lender, in
immediately available federal or other immediately available funds or, with
respect to Revolving Advances deemed to have been requested, be disbursed to the
Lender in payment of outstanding Obligations.
2.6 Repayment of Advances.
(a) The Revolving Advances shall be due and payable in full on
the last day of the Term subject to earlier prepayment as herein provided. The
Cap/Ex Loans shall be due and payable as provided in Section 2.2 hereof and in
the Cap/Ex Note.
(b) The Borrowers recognize that the amounts evidenced by
checks, notes, drafts or any other items of payment relating to and/or proceeds
of Collateral may
22
not be collectible by the Lender on the date received. In consideration of the
Lender's agreement to conditionally credit any account of Borrowers as of the
Business Day on which the Lender receives from the Blocked Account bank or the
Depository Account bank those items of payment, Borrowers agree that, in
computing the charges under this Agreement, all items of payment shall be deemed
applied by Lender on account of the Obligations one (1) Business Day after
confirmation to Lender by the Blocked Account bank or the Depository Account
bank as provided for in Section 4.15(h), that such items of payment have been
collected in good funds and finally credited by Lender to any account of
Borrowers. The Lender is not, however, required to credit any account of
Borrowers for the amount of any item of payment which is unsatisfactory to the
Lender and the Lender may charge any account of Borrowers for the amount of any
item of payment which is returned to the Lender unpaid.
(c) All payments of principal, interest and other amounts
payable hereunder, or under any of the related agreements shall be made to the
Lender at the Payment Office not later than 1:00 P.M. (New York Time) on the due
date therefor in lawful money of the United States of America in Federal or
other funds immediately available to the Lender. Lender shall have the right to
effectuate payment on any and all Obligations due and owing hereunder by
charging any account of Borrowers or by making Advances as provided in Section
2.5 hereof.
(d) The Borrowers shall pay principal, interest, and all other
amounts payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
2.7 Repayment of Overformula Amounts. The aggregate balance of all
Revolving Advances constituting an Overformula Amount shall be immediately due
and payable without the necessity of any demand, at the place designated by
Lender, whether or not an Incipient Event of Default or Event of Default has
occurred, unless otherwise expressly agreed to in writing by Lender.
2.8 Statement of Account. Lender shall maintain, in accordance with its
customary procedures, a loan account in the name of Borrowers in which shall be
recorded the date and amount of each Advance made by Lender and the date and
amount of each payment in respect thereof; provided, however, the failure by
Lender to record the date and amount of any Advance shall not adversely affect
Lender. For each month, Lender shall send to the Borrowers a statement showing
the accounting for the Advances made, payments made or credited in respect
thereof, and other transactions between Lender and the Borrowers, during such
month. The monthly statements shall be deemed correct and binding upon the
Borrowers in the absence of manifest error and shall constitute an account
stated between Lender and the Borrowers unless Lender receives a written
statement of the Borrowers' specific exceptions thereto within thirty (30) days
after such statement is received by the Borrowers. The records of Lender with
respect to the loan account shall be prima facie evidence of the amounts of
Advances and other changes thereto and of payments applicable thereto.
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2.9 Letters of Credit. Subject to the terms and conditions hereof,
Lender shall issue or cause the issuance of Letters of Credit ("Letters of
Credit"); provided, however, that Lender will not be required to issue or cause
to be issued any Letters of Credit to the extent that the face amount of such
Letters of Credit would then cause: (i) the sum of (A) the aggregate amount of
all outstanding Revolving Advances hereunder, plus (B) all issued and
outstanding Letters of Credit hereunder to exceed the lesser of (x) the Maximum
Revolving Advance Amount and (y) the Formula Amount (exclusive of, for the
purposes of calculating the Formula Amount, any Reserves established for Letters
of Credit); or (ii) the sum of (A) the aggregate amount of all outstanding
Revolving Advances hereunder, plus (B) all issued and outstanding Letters of
Credit hereunder, plus (C) the aggregate amount of all Revolving Advances under
the Affiliate Loan Agreements, plus (D) all issued and outstanding Letters of
Credit under the Affiliate Loan Agreements to exceed the lesser of (x) the
Maximum Revolving Advance Amount and (y) the aggregate Formula Amount hereunder
and under the Affiliate Loan Agreements (in each case, exclusive of, for the
purposes of calculating the Formula Amount, any Reserves established for Letters
of Credit). The maximum amount of outstanding Letters of Credit hereunder and
under the Affiliate Loan Agreements shall not exceed $1,000,000 in the aggregate
at any time. All disbursements or payments related to Letters of Credit shall be
deemed to be a Revolving Advance which is an Alternate Base Rate Advance and
shall bear interest at the applicable Revolving Advance Interest Rate set forth
in Section 1.2 hereof.
2.10 Issuance of Letters of Credit.
(a) Borrowers may request Lender to issue or cause the
issuance of a Letter of Credit or by delivering to Lender at the Payment Office,
Lender's standard form of Letter of Credit and Security Agreement together with
Bank's standard form of Letter of Credit Application (collectively, the "Letter
of Credit Application") and any draft, if applicable, completed to the
satisfaction of Lender; and, such other certificates, documents and other papers
and information as Lender may reasonably request.
(b) Each Letter of Credit shall, among other things, (i)
provide for the payment of sight drafts when presented for honor thereunder in
accordance with the terms thereof and when accompanied by the documents
described therein and (ii) have an expiry date not later than six months after
such Letter of Credit's date of issuance and in no event later than the last day
of the Term. Each Letter of Credit Application and each Letter of Credit shall
be subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500, and any
amendments or revisions thereof and, to the extent not inconsistent therewith,
the laws of the State of New York.
2.11 Requirements For Issuance of Letters of Credit
(a) In connection with the issuance of any Letter of Credit,
Borrowers shall indemnify, save and hold Lender harmless from any loss, cost,
expense or liability,
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including, without limitation, payments made by Lender, and expenses and
reasonable attorneys' fees incurred by Lender arising out of, or in connection
with, any Letter of Credit to be issued or created for Borrowers. Borrowers
shall be bound by Lender's or any issuing or accepting bank's regulations and
good faith interpretations of any Letter of Credit issued or created for
Borrowers' account, although this interpretation may be different from
Borrowers' own, and, neither Lender, the bank which opened the Letter of Credit
nor any of its correspondents shall be liable for any error, negligence, or
mistakes, whether by omission or commission, in following Borrowers'
instructions or those contained in any Letter of Credit or of any modifications,
amendments or supplements thereto or in creating or paying any Letter of Credit,
except for Lender's gross negligence or willful misconduct or such issuing
banks' or correspondents' willful misconduct.
(b) Borrowers shall authorize and direct any bank which issues
a Letter of Credit to name the applicable Borrower as the "Account Party"
therein and to deliver to Lender all instruments, documents, and other writings
and property received by the bank pursuant to the Letter of Credit or in
connection with any acceptance and to accept and rely upon Lender's instructions
and agreements with respect to all matters arising in connection with the Letter
of Credit, the application therefor or any acceptance therefor.
(c) In connection with all Letters of Credit issued or created
by Lender under this Agreement, Borrowers hereby appoint Lender, or its
designee, as its attorney-in-fact, with full power and authority (a) to sign
and/or endorse the applicable Borrower's name upon any warehouse or other
receipts, letter of credit applications and acceptances; (b) to sign the
applicable Borrower's name on bills of lading; (c) to clear Inventory through
customs in the name of the applicable Borrower or Lender or Lender's designee,
and to sign and deliver to Customs Officials powers of attorney in the name of
the applicable Borrower for such purpose; and (d) to complete in the applicable
Borrower's name or Lender's, or in the name of Lender's designee, any order,
sale or transaction, obtain the necessary documents in connection therewith, and
collect the proceeds thereof. Neither Lender nor its attorneys will be liable
for any acts or omissions nor for any error of judgment or mistakes of fact or
law, except for Lender's or its attorney's gross negligence or willful
misconduct. This power, being coupled with an interest, is irrevocable as long
as any Letters of Credit remain outstanding.
2.12 Additional Payments. Any sums expended by Lender due to the
Borrowers failure to perform or comply with its obligations under this Agreement
including, without limitation, Borrowers' obligations under Sections 4.2, 4.4,
4.10, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to any account of the
Borrowers' as a Revolving Advance and added to the Obligations. Any sums
expended by Lender or any amounts charged to any account of Borrowers as a
Revolving Advance shall be an Alternate Base Rate Advance and shall bear
interest at the applicable Revolving Advance Interest Rate as set forth in
Section 1.2 hereof.
25
3. INTEREST AND FEES.
3.1 Interest. Interest on Advances shall be payable in arrears on the
last day of each month, except that, interest with respect to Eurodollar Rate
Advances shall be payable on the last day of the Interest Period with respect
thereto. Interest charges shall be computed on the actual average of such daily
Advances outstanding during the month (the "Monthly Advances") at a rate per
annum equal to (i) with respect to Revolving Advances, the Revolving Advance
Interest Rate, and (ii) with respect to Cap/Ex Loans, the Cap/Ex Loan Interest
Rate (as applicable, the "Contract Rate"). Whenever, subsequent to the date
hereof, the Alternate Base Rate or the Average Eurodollar Rate is increased or
decreased, the applicable Contract Rate shall be similarly changed without
notice or demand of any kind by an amount equal to the amount of such change in
the Alternate Base Rate or Average Eurodollar Rate, as the case may be, during
the time such change or changes remain in effect. If an Overformula Amount
exists for five (5) or more days in any month during the Term, Advances (other
than Cap/Ex Loans) for that month shall bear interest at the Overformula Rate.
Upon and after the occurrence of an Event of Default, and during the
continuation thereof, the Obligations shall bear interest at the applicable
Contract Rate plus two percent (2%) per annum (the "Default Rate").
3.2 Letters of Credit.
(a) Borrowers shall pay Lender (i) (A) for issuing or causing
the issuance of a standby Letter of Credit, a fee computed at a rate per annum
of three percent (3%) on the outstanding amount thereof from time to time, and
(B) for issuing or causing the issuance of a Letter of Credit that is not a
standby Letter of Credit, a fee equal to one-quarter of one percent (.25%) of
the original and each increase in the face amount thereof for each 30 days or
part thereof of its term (the fees set forth in (A) and (B) are hereinafter
referred to as "Letter of Credit Fees"), and (ii) issuing bank's other customary
charges payable in connection with Letters of Credit as in effect from time to
time (which charges shall be furnished to Borrowers by Lender upon request).
Such fees and charges shall be payable (i) in the case of any Letter of Credit,
monthly thereafter in advance, (ii) in the case of a standby Letter of Credit,
(A) monthly thereafter in advance and (B) upon each increase in the outstanding
amount thereof, and (iii) in the case of any Letter of Credit that is not a
standby Letter of Credit, at the time of each increase in face amount thereof.
All Letter of Credit Fees payable hereunder shall be deemed earned in full on
the date when the same are due and payable hereunder and shall not be subject to
rebate or proration upon the termination of this Agreement for any reason.
(b) On demand, Borrowers will cause cash to be deposited and
maintained in an account with Lender, as cash collateral, in an amount equal to
outstanding Letters of Credit and Borrowers hereby irrevocably authorize Lender,
in its discretion, on Borrowers' behalf and in each Borrowers' name, to open
such an account and to make and maintain deposits therein, or in an account
opened by Borrowers, in the amounts required to be made by Borrowers, out of the
proceeds of Receivables or other Collateral or out of any other funds of
Borrowers coming into Lender's possession at any
26
time. Borrowers may not withdraw amounts credited to any such account except
upon payment and performance in full of all Obligations and termination of this
Agreement. In the event Borrower shall deposit with Lender cash collateral as
provided herein, Lender agrees to release any Reserve established in respect of
such outstanding Letters of Credit to the extent of such cash collateral.
3.3 Closing Fee. Upon the execution of this Agreement, Borrowers,
jointly and severally with Ditel, shall pay to Lender a closing fee of $75,000,
less that portion of the commitment fee in the amount of $37,500 heretofore paid
by Borrowers and Ditel to Lender.
3.4 Collateral Monitoring Fee. Borrowers, jointly and severally with
Ditel, shall pay to Lender monthly, on the first day of each month a collateral
monitoring fee in an amount equal to $1,500 per month.
3.5 Unused Facility Fees. (a) Borrowers, jointly and severally with
Ditel, shall pay to Lender monthly, on the first day of the month for the
immediately preceding month, if the sum of (i) the average closing daily balance
of all Revolving Advances and amounts due under Letters of Credit outstanding
during any such calendar month, and (ii) the average closing daily balance of
all "Revolving Advances" and amounts due under "Letters of Credit" outstanding
during any such calendar month under, and as said quoted terms are defined in
the Affiliate Loan Agreements (for each month, collectively, the "Average Daily
Closing Revolver Balances") is, in the aggregate, less than the Maximum
Revolving Advance Amount (such difference for each month, the "Applicable
Revolver Amount"), an unused facility fee at a rate equal to one eighth of one
percent (.125%) per annum of the Applicable Revolver Amount.
(b) From the date hereof up to January 1, 1999, Borrowers,
jointly and severally with Ditel, shall pay to Lender monthly, on the first day
of the month for the immediately preceding month, if the sum of (i) the average
closing daily balance of all Cap/Ex Loans outstanding during any such calendar
month, and (ii) the average closing daily balance of all "Cap/Ex Loans" under,
and as said quoted term is defined in the Affiliate Loan Agreements (for each
month, collectively, the "Average Daily Closing Cap/Ex Balances") is, in the
aggregate, less than $6,500,000 (the "Applicable Cap/Ex Amount"), an unused
facility fee at a rate equal to one eighth of one percent (.125%) per annum by
which the Applicable Cap/Ex Amount exceeds such Average Daily Closing Cap/Ex
Balances.
3.6 Computation of Interest and Fees. Interest and fees hereunder shall
be computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the applicable
Contract Rate during such extension.
27
3.7 Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law which a
court of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that a court determines that Lender has received interest
and other charges hereunder in excess of the highest rate applicable hereto,
such excess interest shall be first applied to any unpaid principal balance owed
by Borrowers, and if the then remaining excess interest is greater than the
previously unpaid principal balance, the Lender shall promptly refund such
excess amount to Borrowers and the provisions hereof shall be deemed amended to
provide for such permissible rate.
3.8 Increased Costs. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by the Lender (for purposes of this Section
3.8, the term "Lender" shall include Lender or any corporation or bank
controlling Lender) with any request or directive (whether or not having the
force of law) from any central bank or other financial, monetary or other
authority, shall:
(a) subject the Lender to any tax of any kind whatsoever with
respect to this Agreement or any Advance or change the basis of taxation of
payments to the Lender of principal, fees, interest or any other amount payable
hereunder or under any Other Documents (except for changes in the rate of tax on
the overall net income of the Lender by the jurisdiction in which it maintains
its principal office);
(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by, any
office of the Lender, including (without limitation) pursuant to Regulation D of
the Board of Governors of the Federal Reserve System; or
(c) impose on the Lender any other condition with respect to
this Agreement, any Other Documents or any other Advances; and the result of any
of the foregoing is to increase the cost to the Lender of making, renewing or
maintaining its Advances hereunder by an amount that Lender deems to be material
or to reduce the amount of any payment (whether of principal, interest or
otherwise) in respect of any of the Advances by an amount that the Lender deems
to be material, then, in any case the Borrowers shall promptly pay the Lender,
upon its demand, such additional amount as will compensate the Lender for such
additional cost or such reduction, as the case may be. The Lender shall certify
the amount of such additional cost or reduced amount to the Borrowers, and such
certification shall be conclusive absent manifest error.
3.9 Capital Adequacy.
(a) In the event that the Lender shall have determined that
any applicable law, rule, regulation or guideline regarding capital adequacy, or
any change therein, or any change in the interpretation or administration
thereof by any governmental authority,
28
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Lender (for purposes of this
Section 3.9, the term "Lender" shall include Lender and any corporation or bank
controlling Lender) and the office or branch where Lender (as so defined) makes
or maintains any Advances 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, has or would have the 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 with
respect to capital adequacy) by an amount deemed by the Lender to be material,
then, from time to time, the Borrowers shall pay upon demand to the Lender such
additional amount or amounts as will compensate the Lender for such reduction.
In determining such amount or amounts, the Lender may use any reasonable
averaging attribution methods. The protection of this Section 3.9 shall be
available to the Lender regardless of any possible contention of invalidity or
inapplicability of the law, regulation or condition which shall have been
imposed.
(b) A certificate of the Lender setting forth such amount or
amounts as shall be necessary to compensate the Lender as specified in this
Section 3.9 shall be delivered to the Borrowers and shall be conclusive absent
manifest error.
3.10 Survival. The obligations of the Borrowers under this Article 3
shall survive termination of this Agreement and the Other Documents.
4. COLLATERAL: GENERAL TERMS.
4.1 Security Interest in the Collateral. To secure the prompt payment
and performance to Lender of the Obligations, Borrowers hereby assign, pledge
and grant to Lender a continuing security interest in and to all of the
Collateral, whether now owned or existing or hereafter acquired or arising and
wheresoever located. Borrowers shall xxxx their books and records as may be
necessary and appropriate to evidence, protect and perfect Lender's security
interest and shall cause its financial statements to reflect such security
interest.
4.2 Perfection of Security Interest. Borrowers shall take all action
that may be necessary or desirable, or that Lender may request, so as at all
time to maintain the validity, perfection, enforceability and priority of
Lender's security interest in the Collateral or to enable Lender to protect,
exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining landlords' or mortgagees' lien waivers, (iii)
delivering to Lender, endorsed or accompanied by such instruments of assignment
as Lender may specify, and stamping or marking, in such manner as Lender may
specify, any and all chattel paper, instruments, letters of credit and advices
thereof and documents evidencing or forming a part of the Collateral, (iv)
entering into warehousing, lockbox and other custodial arrangements satisfactory
to Lender, and (v) executing and delivering
29
financing statements, instruments of pledge, mortgages, notices and assignments,
in each case in form and substance satisfactory to Lender, relating to the
creation, validity, perfection, maintenance or continuation of Lender's security
interest under the Uniform Commercial Code or other applicable law. All charges,
expenses and fees the Lender may incur in doing any of the foregoing, and any
local taxes relating thereto, shall be charged to any account of the Borrowers
and added to the Obligations, or at the Lender's option, shall be paid to the
Lender immediately upon demand.
4.3 Disposition of Collateral. The Borrowers will safeguard and protect
all Collateral for the Lender's general account and make no disposition thereof
whether by sale, lease or otherwise except (a) the sale of Inventory in the
ordinary course of business and (b) the disposition or transfer of obsolete and
worn-out Equipment in the ordinary course of business during any fiscal year
having an aggregate fair market value of not more than $150,000 (net of taxes
and expenses) and only to the extent that (i) the proceeds for any such
disposition are used to acquire replacement Equipment which is subject to
Lender's first priority security interest or (ii) the proceeds of which are
remitted to Lender as a prepayment on the Cap/Ex Term Loan. Borrowers shall
remit to Lender the net proceeds of any such sale or disposition immediately
upon receipt thereof. Borrowers shall only be permitted to use the proceeds of
any such disposition to acquire replacement Equipment if Borrowers provide
Lender with notice of its intent to acquire replacement Equipment within thirty
(30) days after the receipt of such proceeds by Borrowers. In the event such
notice is not received by Lender within such thirty (30) day period, or such
replacement Equipment is not purchased within ninety (90) days after such notice
is received by Lender, said proceeds shall be immediately applied by Lender in
respect of the Cap/Ex Term Loan.
4.4 Preservation of Collateral. In addition to the rights and remedies
set forth in Section 11.1 hereof, the Lender: (a) may at any time take such
steps as the Lender deems necessary to protect the Lender's interest in and to
preserve the Collateral, including after the occurrence of an Event of Default
and during its continuance, the hiring of such security guards for the placing
of such security protection measures as the Lender may deem appropriate; (b) may
employ and maintain at any of the Borrowers' premises a custodian who shall have
full authority to do all acts necessary in Lender's good faith judgment to
protect the Lender's interests in the Collateral; (c) after the occurrence of an
Event of Default and during its continuance, may lease warehouse facilities to
which the Lender may move all or part of the Collateral; (d) after the
occurrence of an Event of Default and during its continuance, may use any of the
Borrowers' owned or leased lifts, hoists, trucks and other facilities or
equipment for handling or removing the Collateral; and (e) shall have, and is
hereby granted, a right of ingress and egress to the places where the Collateral
is located, and may proceed over and through any of the Borrowers' owned or
leased property. The Borrowers shall cooperate fully with all of the Lender's
efforts to preserve the Collateral and will take such actions to preserve the
Collateral as the Lender may direct. All of the Lender's expenses of preserving
the Collateral, including any expenses relating to the bonding of a custodian,
shall be charged to the Borrowers' account and added to the Obligations.
30
4.5 Ownership of Collateral. With respect to the Collateral, at the
time the Collateral becomes subject to the Lender's security interest: (a) the
Borrowers shall be the sole owner of and fully authorized and able to sell,
transfer, pledge and/or grant a first security interest in each an every item of
the Collateral to the Lender; and, except for Permitted Encumbrances the
Collateral shall be free and clear of all Liens, Claims, Charges and
encumbrances whatsoever; (b) each document and agreement executed by Borrowers
or delivered to Lender in connection with this Agreement shall be true and
correct in all respects; (c) all signatures and endorsements of Borrowers that
appear on such documents and agreements shall be genuine and Borrowers shall
have full capacity to execute same; and (d) Borrowers' Equipment and Inventory
is located as set forth on Exhibit 4.5 and shall not be removed from such
location(s) without the prior written consent of the Lender except (i) with
respect to the sale of Inventory in the ordinary course of business and
Equipment to the extent permitted in Section 4.3 hereof, (ii) the relocation of
Inventory and/or Equipment to any of the locations set forth in Exhibit 4.5
(other than the relocation to processors which shall be governed by the
provisions of Section 4.5(d)(iii) below), provided that, with respect to the
relocation of Equipment, Lender receives not less than thirty (30) days prior
written notice of any intended relocation, except that, Borrowers shall not be
permitted to relocate or move any Equipment to the Dominican Republic from the
United States, the Commonwealth of Puerto Rico or otherwise without Lender's
prior written consent, and (iii) the relocation of any of the Borrower's molds,
tools, dies and goods to any location specified in Exhibit 4.5 as a processor
location, provided that, in connection therewith, at Lender's option, Industries
and Ditel shall use their best efforts to cause any such processor designated by
Lender to execute and deliver in favor of Lender an acknowledgment and waiver in
form and substance satisfactory to Lender and the aggregate amount of all such
molds, tools and dies delivered to such processors shall not, without Lender's
prior written consent, exceed at any given time an aggregate original cost of
$600,000, subject to adjustment from time to time in Lender's sole discretion.
4.6 Defense of Lender's Interests. Until (a) payment and performance in
full of all of Obligations and (b) termination of this Agreement, the Lender's
interests in the Collateral hereby granted to the Lender shall continue in full
force and effect. During such period, the Borrowers shall not, without the
Lender's prior written consent, pledge, sell or transfer (except Inventory in
the ordinary course of business and Equipment to the extent permitted in Section
4.3 hereof, and except as otherwise expressly permitted by this Agreement and
the Other Documents), pledge, assign, create or suffer to exist a security
interest in, Lien, Claim or Charge upon or encumber or allow or suffer to be
encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. The Borrowers shall defend the Lender's interests in the Collateral
against any and all persons whatsoever. In connection with the exercise of its
rights under Section 11 hereof, Lender shall have the right to take possession
of the indicia of the Collateral and the Collateral in whatever physical form
contained, including without limitation: labels, stationery, documents,
instruments and advertising materials. If Lender exercises this right to take
possession of the Collateral, Borrowers shall, upon demand, assemble it in the
best manner possible and make it available to Lender at a place reasonably
convenient to
31
Lender. In addition, with respect to all Collateral, Lender shall be entitled to
all of the rights and remedies set forth herein and further provided by the
Uniform Commercial Code or other applicable law. Borrowers shall, and Lender
may, at its option, instruct all suppliers, carriers, forwarders, warehouses or
others receiving or holding cash, checks, Inventory, documents or instruments in
which Lender holds a security interest to deliver same to Lender and/or subject
to Lender's order and if they shall come into Borrowers' possession, they, and
each of them, shall be held by Borrowers in trust as Lender's trustee, and
Borrowers will immediately deliver them to Lender in their original form
together with any necessary endorsement.
4.7 Books and Records. The Borrowers (a) shall keep proper books of
record and account in which full, true and correct entries will be made of all
dealings or transactions of or in relation to its business and affairs; (b) set
up on their books, accruals with respect to all taxes, assessments, charges,
levies and claims; and (c) on a reasonably current basis set up on their books,
from their earnings, allowances against doubtful Receivables, advances and
investments and all other proper accruals (including without limitation by
reason of enumeration, accruals for premiums, if any, due on required payments
and accruals for depreciation, obsolescence, or amortization of properties),
which should be set aside from such earnings in connection with its business.
All determinations pursuant to this subsection shall be made in accordance with,
or as required by, GAAP consistently applied and, to the extent applicable, in
the opinion of such independent public accountant as shall then be regularly
engaged by Borrowers.
4.8 Financial Disclosure. The Borrowers hereby irrevocably authorize
and direct all accountants and auditors employed by the Borrowers at any time
during the term of this Agreement to exhibit and deliver to Lender copies of any
of the Borrowers' financial statements, trial balances or other accounting
records of any sort in the accountant's or auditor's possession, and to disclose
to Lender any information such accountants may have concerning the Borrowers'
financial status and business operations. The Borrowers hereby authorize all
federal, state and municipal authorities to furnish to Lender copies of reports
or examinations relating to the Borrowers, whether made by the Borrowers or
otherwise; however, Lender will attempt to obtain such information or materials
directly from the Borrowers prior to obtaining such information or materials
from such accountants.
4.9 Compliance with Laws. The Borrowers shall comply in all materials
respects with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official applicable to the Collateral or any
part thereof or to the operation of the Borrowers' business the non-compliance
with which would have a material adverse effect on the Collateral, or the
operations, business or condition (financial or otherwise) of the Borrowers. The
Borrowers may, however, contest or dispute any acts, rules, regulations, orders
and directions of those bodies or officials in any reasonable manner, provided
that any related lien is inchoate or stayed and sufficient reserves are
established to the reasonable satisfaction of the Lender to protect the Lender's
lien on or security interest in the Collateral.
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4.10 Inspection of Premises. At all reasonable times, Lender shall have
full access to and the right to audit, check, inspect and make abstracts and
copies from the Borrowers' books, records, audits, correspondence and all other
papers relating to the Collateral and the operation of Borrowers' business. Such
audits, checks, inspections and the making of abstracts shall be at Borrowers'
expense, except that, prior to an Event of Default or an unsatisfactory
inspection, as determined by Lender in its sole discretion, Borrowers shall only
be required to reimburse Lender for Lender's costs and expenses incurred in
connection with not more than three such audits, checks, inspections or making
of abstracts per annum. Lender and its agents may enter upon any of the
Borrowers' premises at any time during business hours and at any other
reasonable time, and from time to time, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of
Borrowers' business.
4.11 Insurance. Borrowers shall bear the full risk of loss from any
loss of any nature whatsoever with respect to the Collateral. At the Borrowers'
own cost and expense in amounts and with carriers acceptable to Lender, the
Borrowers shall (a) keep all its insurable properties and properties in which
the Borrowers have an interest insured against the hazards of fire, flood,
sprinkler leakage, those hazards covered by extended coverage insurance and such
other hazards, and for such amounts, as is customary in the case of companies
engaged in businesses similar to Borrowers' including, without limitation,
business interruption insurance; (b) maintain a bond in such amounts as is
customary in the case of companies engaged in business similar to Borrowers'
insuring against larceny, embezzlement or other criminal misappropriation of
insured's officers and employees who may either singly or jointly with others at
any time have access to the assets or funds of Borrowers either directly or
through authority to draw upon such funds or to direct generally the disposition
of such assets; (c) maintain public and product liability insurance against
claims for personal injury, death or property damage suffered by others; (d)
maintain all such workmen's compensation or similar insurance as may be required
under the laws of any state or jurisdiction in which Borrowers are engaged in
business; (e) furnish Lender with (i) copies of all policies and evidence of the
maintenance of such policies by the renewal thereof at least ten (10) days
before any expiration date, and (ii) appropriate loss payable endorsements in
form and substance satisfactory to the Lender, naming the Lender as loss payee
as its interests may appear with respect to all insurance coverage referred to
in clauses (a), and (b) above, and providing (A) that all proceeds thereunder
shall be payable to the Lender, (B) no such insurance shall be affected by any
act or neglect of the insured or owner of the property described in such policy,
and (C) that such policy and loss payable clauses may not be cancelled, amended
or terminated unless at least thirty (30) days' prior written notice is given to
the Lender. In the event of any loss thereunder, the carriers named therein
hereby are directed by the Lender and Borrowers to make payment for such loss to
the Lender and not to the Borrowers and the Lender jointly. If any insurance
losses are paid by check, draft or other instrument payable to the Borrowers and
the Lender jointly, the Lender may endorse the applicable Borrower's name
thereon and do such other things as the Lender may deem advisable to reduce the
same to cash. The Lender in its discretion, reasonably exercised, is hereby
authorized to adjust and compromise claims under insurance coverage referred to
in clauses (a) and (b) above;
33
except that, so long as no Event of Default exists and is continuing, Borrower,
with Lender's consent, which consent shall not be unreasonably withheld, shall
adjust and compromise claims under insurance coverage referred to in clauses (a)
and (b) above. All loss recoveries received by Lender upon any such insurance
may be applied to the Obligations, in such order as Lender in its sole
discretion shall determine. Any surplus shall be paid by the Lender to the
Borrowers or applied as may be otherwise required by law. Any deficiency thereon
shall be paid by the Borrowers to the Lender in respect of any then due
Obligations. Anything hereinabove to the contrary notwithstanding, and subject
to the fulfillment of the conditions set forth below, Lender shall remit to
Borrowers insurance proceeds received by Lender during any calendar year under
insurance policies procured and maintained by Borrowers which insure Borrowers'
insurable properties to the extent such insurance proceeds do not exceed
$100,000 in the aggregate during such calendar year or $25,000 per occurrence.
In the event the amount of insurance proceeds received by the Lender for any
occurrence exceeds $25,000, then the Lender shall not be obligated to remit the
insurance proceeds to Borrowers unless Borrowers shall provide Lender with
evidence reasonably satisfactory to Lender that the insurance proceeds will be
used by Borrowers to repair, replace or restore the insured property which was
the subject of the insurable loss. In the event Borrowers have previously
received (or, after giving effect to any proposed remittance by Lender to
Borrowers would receive) insurance proceeds which equal or exceed $100,000 in
the aggregate during any calendar year, and provided no Event of Default shall
exist, then upon Borrowers' written request, which request shall be made within
thirty (30) days from the receipt of any such proceeds, Lender shall remit such
insurance proceeds to Borrowers upon Borrowers providing Lender with evidence
reasonably satisfactory to Lender that the insurance proceeds will be used by
Borrowers to repair, replace or restore the insured property which was the
subject of the insurable loss. In the event Lender fails to receive any request
within such thirty (30) day period or Borrowers fail to repair, replace or
restore the insured property within ninety (90) days from the date Lender
receives such insurance proceeds, then Lender shall immediately apply such
insurance proceeds in respect of the Cap/Ex Loans in accordance with Section 2.2
(e) hereof.
4.12 Failure to Pay Insurance. If the Borrowers fail to obtain
insurance as hereinabove provided, or to keep the same in force, the Lender, if
the Lender so elects, may obtain such insurance and pay the premium therefor for
the Borrowers' account, and charge any account of Borrowers therefore and such
expenses so paid shall be part of the Obligations.
4.13 Payment of Taxes. The Borrowers will pay, when due, all taxes,
assessments and other Charges or Claims lawfully levied or assessed upon
Borrowers or any of the Collateral including, without limitation, real and
personal property taxes, assessments and charges and all franchise, income,
employment, old age benefits, withholding, and sales taxes. If any tax by any
governmental authority is or may be imposed on or as a result of any transaction
between Borrowers and Lender with Lender may be required to withhold or pay or
if any taxes, assessments, or other Charges remain unpaid after the date fixed
for their payment, or if any Claim shall be made which, in the
34
Lender's opinion, may possibly create a valid Lien, Charge or Claim on the
Collateral, the Lender may without notice to Borrowers pay the taxes,
assessments, Liens, Charges or Claims and Borrowers hereby indemnify and hold
Lender harmless in respect thereof. The Lender will not pay any taxes,
assessments, Liens, Charges or Claims to the extent that Borrowers have
contested or disputed those Liens, Charges and Claims in good faith, by
expeditious protest, administrative or judicial appeal or similar proceeding
provided that any related tax lien is stayed and sufficient reserves are
established to the reasonable satisfaction of the Lender to protect the Lender's
security interest in or Lien on the Collateral. The amount of any payment by
Lender under this Section 4.13 shall be deemed to be a Revolving Advance and
shall be charged to any account of the Borrowers as an Alternate Base Rate
Advance and added to the Obligations and, until Borrowers shall furnish Lender
with an indemnity therefore (or supply Lender with evidence satisfactory to
Lender that due provision for the payment thereof has been made), Lender may
hold without interest any balance standing to Borrowers' credit and Lender shall
retain its security interest in any and all Collateral held by Lender. Nothing
contained herein shall require or be deemed to require Borrowers to pay any
income tax of Lender or any income tax which may be payable by Lender for income
earned by Lender in respect of the loans made hereunder.
4.14 Payment of Leasehold Obligations. The Borrowers shall at all times
pay, when and as due, their rental obligations under all real estate leases
under which they are tenants, and shall otherwise comply, in all material
respects, with all other terms of such leases and keep them in full force and
effect and, at the Lender's request will provide evidence of having done so.
4.15 Receivables.
(a) Nature of Receivables. Each of the Receivables shall be a
bona fide and valid account representing a bona fide indebtedness incurred by
the Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of the Borrowers, or work, labor or services theretofore
rendered by the Borrowers and as of the date each Receivable is created, same
shall be due and owing in accordance with Borrowers' standard terms of sale
without dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by the Borrowers to the Lender.
(b) Solvency of Customers. Each Customer, to the best of the
Borrowers' knowledge, as of the date each Receivable with respect to such
Customer is created, is and will be solvent and able to pay all Receivables on
which the Customer is obligated in full when due. With respect to such Customers
of Borrowers who are not solvent, the Borrowers have set up on its books and in
its financial records bad debt reserves adequate to cover such Receivables.
35
(c) Location of Borrowers. The Borrowers' chief executive
office is located at 0000 Xxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000. Until written
notice is given to the Lender by Borrowers of any other office at which
Borrowers keeps records pertaining to Receivables, all such records shall be
kept at such executive office or at any of the other locations listed on Exhibit
4.5.
(d) Collection of Receivables. Until the Borrowers' authority
to do so is terminated by the Lender (which notice the Lender may give at any
time following the occurrence of an Event of Default or when the Lender in its
sole discretion reasonably exercised deems it to be in the Lender's best
interest to do so), the Borrowers will, at the Borrowers' sole cost and expense,
but on the Lender's behalf and for the Lender's account, collect as proceeds of
the Lender's Collateral and in trust for the Lender all amounts received on
Receivables, and shall not commingle such collections with the Borrowers' funds
or use the same except to pay Obligations. The Borrowers shall, upon request,
deliver to the Lender in original form and on the date of receipt thereof, all
checks, drafts, notes, money orders, acceptances, cash and other evidences of
Indebtedness.
(e) Notification of Assignment of Receivables. At any time
after the occurrence of an Event of Default or Incipient Event of Default,
Lender shall have the right to send notice of the assignment of, and the
Lender's security interest in, the Receivables to any and all Customers or any
third party holding or otherwise concerned with any of the Collateral.
Thereafter, the Lender shall have the sole right to collect the Receivables,
take possession of the Collateral, or both. All costs, fees and expenses,
including stationery and postage, telephone and telegraph, secretarial and
clerical expenses and the salaries of any collection personnel used for
collection, may be charged to the Borrowers' account and added to the
Obligations.
(f) Power of Lender to Act on Borrowers' Behalf. The Lender
shall have the right to receive, endorse, assign and/or deliver in the name of
the Lender or the Borrowers any and all checks, drafts and other instruments for
the payment of money relating to the Receivables, and the Borrowers hereby waive
notice of presentment, protest and non-payment of any instrument so endorsed.
The Borrowers hereby constitute the Lender or the Lender's designee as the
Borrowers' attorney-in-fact with power (i) to endorse the applicable Borrower's
name upon any notes, acceptances, checks, drafts, money orders or other
evidences of payment or Collateral; (ii) to sign the applicable Borrower's name
on any invoice or xxxx of lading relating to any of the Receivables; (iii) to
send verifications of Receivables, drafts against Customers, assignments and
verifications of Receivables; (iv) to send verifications of Receivables to any
Customer; (v) to sign the applicable Borrower's name on all financing statements
or any other documents or instruments deemed necessary or appropriate by the
Lender to preserve, protect, or perfect the Lender's interest in the Collateral
and to file same; (vi) upon the occurrence of an Event of Default and during its
continuance, to demand payment of the Receivables; (vii) upon the occurrence of
an Event of Default and during its continuance, to enforce payment of the
Receivables by legal proceedings or otherwise; (viii) upon the occurrence of an
Event of Default and during its continuance, to exercise all of Borrowers'
rights and
36
remedies with respect to the collection of the Receivables and any other
Collateral; (ix) upon the occurrence of an Event of Default and during its
continuance, to settle, adjust, compromise, extend or renew the Receivables; (x)
upon the occurrence of an Event of Default and during its continuance, to
settle, adjust or compromise any legal proceedings brought to collect
Receivables; (xi) upon the occurrence of an Event of Default and during its
continuance, to prepare, file and sign the applicable Borrower's name on a proof
of claim in bankruptcy or similar document against any account debtor; (xii) to
prepare, file and sign the applicable Borrower's name on any notice of Lien,
assignment or satisfaction of Lien or similar document in connection with the
Receivables; and (xiii) to do all other acts and things necessary to carry out
this Agreement. All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designee shall not be liable for any acts of
omission or commission nor for any error of judgment or mistake of fact or of
law, unless done maliciously or with gross negligence; this power being coupled
with an interest is irrevocable while any of the Obligations remain unpaid. The
Lender shall have the right at any time following the occurrence of an Event of
Default to change the address for delivery of mail addressed to the Borrowers to
such address as the Lender may designate.
(g) No Liability. The Lender shall not, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Receivables or any instrument received in payment thereof, or for
any damage resulting therefrom other than due to Lender's gross negligence or
willful misconduct, except that, in no event shall Lender be liable for lost
profits or other special or consequential damages. Upon the occurrence of an
Event of Default and during its continuance, the Lender may, without notice or
consent from the Borrowers, xxx upon or otherwise collect, extend the time of
payment of, compromise or settle for cash, credit or upon any terms any of the
Receivables or any other securities, instruments or insurance applicable thereto
and/or release any obligor thereof. The Lender is authorized and empowered to
accept following the occurrence of an Event of Default the return of the goods
represented by any of the Receivables, without notice to or consent by the
Borrowers, all without discharging or in any way affecting the Borrowers'
liability hereunder.
(h) Establishment of a Lockbox Account, Dominion Account. All
proceeds of Receivables shall, at the direction of Lender, be deposited by the
Borrowers into a lockbox account, dominion account or such other "blocked
account" ("Blocked Accounts") as Lender may require pursuant to an arrangement
with such bank as may be selected by Borrowers and be acceptable to Lender. The
Borrowers shall issue to any such bank, an irrevocable letter of instruction
directing said bank to transfer such funds so deposited to the Lender, either to
any account maintained by the Lender at said bank or by wire transfer to
appropriate account(s) of the Lender. All funds deposited in such "blocked
account" shall immediately become subject to Lender's first priority security
interest and the Borrowers shall obtain the agreement by such bank to waive any
offset rights against the funds so deposited. Lender assumes no responsibility
for such "blocked account" arrangement, including without limitation, any claim
of accord and satisfaction or release
37
with respect to deposits accepted by any bank thereunder. Alternatively, Lender
may establish depository accounts ("Depository Accounts") in the name of Lender
at a bank or banks for the deposit for such funds and Borrowers shall deposit
all proceeds of Receivables or cause same to be deposited, in kind, in such
Depository Accounts of Lender in lieu of depositing same to the Blocked
Accounts.
4.16 Inventory. All Inventory has been, and will be produced by
Borrowers in accordance with the Federal Fair Labor Standards Act of 1938, as
amended, and all rules, regulations and orders thereunder.
4.17 Maintenance of Equipment. The Equipment shall be maintained in
good operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved.
Borrowers shall have the right to sell Equipment to the extent set forth in
Section 4.3 hereof.
4.18 Exculpation of Liability. Nothing herein contained shall be
construed to constitute the Lender as the Borrowers' agent for any purpose
whatsoever, nor shall the Lender be responsible or liable for any shortage,
discrepancy, damage, loss or destruction of any part of the Collateral wherever
the same may be located and regardless of the cause thereof other than any
damage, loss or destruction to the Collateral actually arising as a direct and
sole result of Lender's gross negligence or willful misconduct. The Lender does
not, whether by anything herein or in any assignment or otherwise, assume any of
the Borrowers' obligations under any contract or agreement assigned to the
Lender, and the Lender shall not be responsible in any way for the performance
by the Borrowers of any of the terms and conditions thereof.
4.19 Environmental Matters. (a) Borrowers will ensure that the Real
Property remains in substantial compliance with all Environmental Laws and
Borrowers will not place or permit to be placed any Hazardous Substances on any
Real Property except as not prohibited by applicable law and appropriate
governmental authorities.
(b) Borrowers will establish and maintain a system to assure
and monitor continued compliance with all applicable Environmental Laws which
system shall include periodic review of such compliance.
(c) Borrowers will (i) employ in connection with its use of
the Real Property appropriate technology necessary to maintain compliance with
any applicable Environmental Laws and (ii) dispose of any and all Hazardous
Waste generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrowers shall use their best efforts to obtain certificates of disposal, such
as hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by the Borrowers in connection with
the transport or disposal of any Hazardous Waste generated at the Real Property.
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(d) In the event the Borrowers obtain, give or receive notice
of any Release of Release of a reportable quantity of any Hazardous Substances
at the Real Property (any such even being hereinafter referred to as a
"Hazardous Discharge") or receives any notice of violation, request for
information or notification that Borrowers are potentially responsible for
investigation or cleanup of environmental conditions at the Real Property,
demand letter or complaint, order, citation, or other written notice with regard
to any Hazardous Discharge or violation of Environmental Laws affecting the Real
Property or Borrowers' interest therein (any of the foregoing is referred to
herein as an "Environmental Complaint") from any Person or entity, including any
state agency responsible in whole or in part for environmental matters in the
state in which the Real Property is located or the United States Environmental
Protection Agency (any such person or entity hereinafter the "Authority"), then
the Borrowers shall, within five (5) Business Days, give written notice of same
to the Lender detailing non-privileged and non-confidential facts and
circumstances of which the Borrowers are aware giving rise to the Hazardous
Discharge or Environmental Complaint. Such information is to be provided to
allow the Lender to protect its security interest in the Real Property and is
not intended to create nor shall it create any obligation upon the Lender with
respect thereto.
(e) Borrowers shall promptly forward to the Lender copies of
any request for information, notification of potential liability, demand letter
relating to potential responsibility with respect to the investigation or
cleanup of Hazardous Substances at any other site owned, operated or used by
Borrowers to dispose of Hazardous Substances and shall continue to forward
copies of correspondence between the Borrowers and the Authority regarding such
claims to the Lender until the claim is settled. The Borrowers shall promptly
forward to the Lender copies of all documents and reports concerning a hazardous
Discharge at the Real Property that the Borrowers are required to file under any
Environmental Laws. Such information is to be provided solely to allow the
Lender to protect Lender's security interest in the Real Property and the
Collateral.
(f) Borrowers shall respond promptly to any Hazardous
Discharge or Environmental Complaint and take all necessary action in order to
safeguard to health of any Person and to avoid subjecting the Collateral or Real
Property to any Lien. If Borrowers shall fail to respond promptly to any
Hazardous Discharge or Environmental Complaint or Borrowers shall fail to comply
with any of the requirements of any Environmental Laws, the Lender may, but
without the obligation to do so, for the sole purpose of protecting the Lender's
interest in Collateral: (A) give such notices or (B) enter onto the Real
Property (or authorize third parties to enter onto the Real Property) and take
such actions as the Lender (or such third parties as directed by the Lender)
deem reasonably necessary or advisable, to clean up, remove, mitigate or
otherwise deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by the Lender (or such third parties) in
the exercise of any such rights, including any sums pain in connection with any
judicial or administrative investigation or proceedings, fines and penalties,
together with interest thereon from the date expended at the Default Rate for
Revolving Advances shall be paid upon demand by the Borrowers, and until paid
shall be added to and become a part of the Obligations secured by the Liens
39
created by the terms of this Agreement or any other agreement between Lender and
Borrowers.
(g) Promptly upon the written request of the Lender from time
to time, Borrowers shall provide Lender, at the Borrowers' expense, with an
Environmental site assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of the
Lender, to assess with a reasonable degree of certainty the existence of a
Hazardous Discharge and the potential costs in connection with abatement,
cleanup and removal of any Hazardous Substances found on, under, at or within
the Real Property. Any report or investigation of such Hazardous Discharge
proposed and acceptable to an appropriate Authority that is charged to oversee
the clean-up of such Hazardous Discharge shall be acceptable to the Lender. If
such estimates, individually or in the aggregate, exceed $100,000, the Lender
shall have the right to require the Borrowers to post a bond, letter of credit
or other security reasonably satisfactory to the Lender to secure payment of
these costs and expenses.
(h) Borrowers shall defend and indemnify the Lender and hold
the Lender harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including attorney's fees, suffered or
incurred by the Lender under or on account of any Environmental Laws, including
without limitation, the assertion of any lien thereunder, with respect to any
Hazardous Discharge, the presence of any Hazardous Substances affecting the Real
Property, whether or not the same originates or engages from the Real Property
or any contiguous real estate, including any loss of value of the Real Property
as a result of the foregoing except to the extent such loss, liability, damage
and expenses is attributable to any Hazardous Discharge resulting from actions
on the part of the Lender. The Borrowers' obligations under this Section 4.19
shall arise upon the discovery of the presence of any Hazardous Substances at
the Real Property, whether or not any federal, state, or local environmental
agency has taken or threatened any action in connection with the presence of any
Hazardous Substances. The Borrowers' obligation and the indemnifications
hereunder shall survive the termination of this Agreement.
(i) For purposes of this Section 4.19, all references to Real
Property shall be deemed to include all of Borrowers' right, title and interest
in and to leased premises.
5. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants as follows:
5.1 Authority. Each Borrower has full power, authority and legal right
to enter into this Agreement and the Other Documents and perform all obligations
hereunder. The execution, delivery and performance hereof and of the Other
Documents are within such Borrower's corporate powers, have been duly
authorized, are not in contravention of law or the terms of such Borrower's
by-laws, certificate of incorporation or other applicable documents relating to
such Borrower's formation or to the conduct of such Borrower's business or of
any material agreement or undertaking to which the Borrower is a party or
40
by which the Borrower is bound, and will not conflict with nor result in any
breach in any of the provisions of or constitute a default under or result in
the creation of any Lien except Permitted Encumbrances upon any asset of the
Borrower under the provisions of any agreement, charter, instrument, by-law of
other instrument to which the Borrower is a party or by which it may be bound.
5.2 Formation and Qualification. Each Borrower is duly incorporated and
in good standing under the laws of the State of Delaware and is qualified to do
business and is in good standing in the states listed on Exhibit 5.2 which
constitute all states in which qualification and good standing are necessary for
the Borrower to conduct its business and own its properties and where the
failure to so qualify would have a material adverse effect on Borrower or its
business. Borrower has delivered to Lender true and complete copies of its
certificate of incorporation and by-laws and will promptly notify Lender of any
amendment or changes thereto.
5.3 Survival of Representations and Warranties. All representations and
warranties of each Borrower contained in this Agreement and the Other Documents
shall be true at the time of Borrower's execution of this Agreement and the
Other Documents, and shall survive the execution, delivery and acceptance
thereof by Lender and the parties thereto and the closing of the transactions
described therein or related thereto.
5.4 Tax Returns. Industries' federal tax identification number is
00-0000000, and Corporation's federal tax identification number is 00-0000000.
Each Borrower has filed all federal, state and local tax returns and other
reports it is required by law to file and has paid all taxes, assessments, fees
and other governmental charges that are due and payable (unless the same is
being contested as permitted under this Agreement). The provision for taxes on
the books of each Borrower are adequate for all years not closed by applicable
statutes, and for such Borrower's current fiscal year, and Borrower has no
knowledge of any deficiency or additional assessment in connection therewith not
provided for on its books.
5.5 Financial Statements.
(a) The preliminary pro forma consolidated and consolidating
balance sheet of Industries and its Subsidiaries prepared as of March 27, 1998
(the "Pro Forma Balance Sheet") furnished to Lender on the Closing Date reflects
the consummation of the transactions contemplated under this Agreement (the
"Transactions") and is, to the best of Borrowers' knowledge, accurate, complete
and correct in all material respects and fairly reflects Industries' and its
Subsidiaries' consolidated and consolidating financial condition in all material
respects as of the last Friday of the month immediately preceding the Closing
Date after giving effect to the Transactions, and has been prepared in
accordance with GAAP, consistently applied (except for the absence of footnote
or as otherwise disclosed therein). The Pro Forma Balance Sheet has been
certified as accurate, complete and correct in all material respects by the
President and Chief Financial Officer of Industries and its Subsidiaries, to the
best of their knowledge. All financial statements referred to in this Section
5.5(a), including the related schedules and notes thereto, have
41
been prepared, in accordance with GAAP, except as may be disclosed in such
financial statements.
(b) The twelve-month consolidated cash flow projections of
Industries and its Subsidiaries, and projected balance sheets, each prepared as
of March 27, 1998, copies of which have been delivered to Lender, were prepared
by the Chief Financial Officer of Industries and its Subsidiaries, are based on
underlying assumptions which provide a reasonable basis for the projections
contained therein and reflect as of such date the judgment of Industries and its
Subsidiaries, based on then present circumstances of the most likely set of
conditions and course of action for the project period. The cash flow
projections and the projected balance sheets referred to in this Section 5.5(b),
together with the Pro Forma Balance Sheet, are referred to as the "Pro Forma
Financial Statements".
(c) (i) The consolidated and consolidating balance sheets of
Industries and its Subsidiaries and such other Persons described therein
(including the accounts of all Subsidiaries for the respective periods during
which a subsidiary relationship existed) as of June 27, 1997, and the related
statements of income, stockholder's equity, and cash flows for the period ended
on such date, all accompanied by reports thereon containing opinions without
qualification by independent certified public accountants, copies of which have
been delivered to Lender, have been prepared in accordance with GAAP, practices
and procedures, consistently applied (except for changes in application in which
such accountants concur, and any absence of footnotes and as otherwise disclosed
therein) and present fairly the consolidated financial position of Industries
and its Subsidiaries at such date and the consolidated results of their
operations for such period. (ii) Since January 30, 1998, and as certified as to
its accuracy by the Chief Financial Officer of Industries and its Subsidiaries,
there has been no material adverse change in the consolidated condition,
financial or otherwise, of Industries and its Subsidiaries as shown on the
consolidated balance sheet as of such date and no change in the aggregate value
of machinery, equipment and Real Property owned by Industries and its
Subsidiaries, except changes in the ordinary course of business.
(d) As of the Closing Date, each of the Borrowers' fiscal
quarters and fiscal months end on the last Friday of each fiscal quarter and
fiscal month, respectively.
5.6 Corporate Name. Each of the Borrowers has not been known by any
other corporate name in the past five years and does not sell Inventory under
any other name except as set forth on Exhibit 5.6, nor have either of the
Borrowers been the surviving corporation of a merger or consolidation or
acquired all or substantially all of the assets of any person during the
preceding five (5) years.
5.7 O.S.H.A. and Environment Compliance.
(a) Each of the Borrowers have duly complied with, and its
facilities, business assets, property, leaseholds and equipment are in
compliance in all material
42
respects with, the provisions, of the Federal Occupational Safety and Health
Act, the Environmental Protection Act, RCRA and all other Environmental Laws;
there have been no outstanding citations, notices or orders of non-compliance
issued to Borrowers or relating to their respective business, assets, property,
leaseholds or equipment under any such laws, rules or regulations.
(b) Each of the Borrowers has been issued all required
federal, state and local licenses, certificates or permits relating to, and each
of the Borrowers and their facilities, businesses, assets, property, leaseholds
and equipment are in compliance in all material respects with, all applicable
Environmental Laws.
(c) (i) There are no visible signs of releases, spills,
discharges, leaks or disposal (collectively referred to as "Releases") of
Hazardous Substances at, upon, under or within any Real Property or any premises
leased by Borrowers; (ii) there are no underground storage tanks or
polychlorinated biphenyls on the Real Property or any premises leased by
Borrowers; (iii) neither the Real Property nor any premises leased by Borrowers
have ever been used as a treatment, storage or disposal facility of Hazardous
Waste; and (iv) no Hazardous Substances are present on the Real Property or any
premises leased by Borrowers, excepting such quantities as are handled in
accordance with all applicable manufacturer's instructions and governmental
regulations and in proper storage containers and as are necessary for the
operation of the commercial business of the Borrowers or of its tenants.
(d) Each of the Borrowers hereby indemnifies and holds Lender
harmless from and against any liability, loss, damage, suit, action or
proceeding pertaining to Hazardous Wastes or Toxic Substances at, upon, under or
within any Real Property or any premises leased by Borrowers, including, but not
limited to, claims of any federal, state or municipal government or
quasi-governmental agency or any third person, whether arising under CERCLA,
RCRA, or any other federal, state or municipal law or regulation, or tort,
contract or common law.
5.8 Solvency; No Litigation; Violation.
(a) Each of the Borrowers is solvent, able to pay its debts as
they mature, has capital sufficient to carry on its business and all businesses
in which it is about to engage, and (i) as of the Closing Date, the fair present
saleable value of its assets, calculated on a going concern basis, is in excess
of the amount of its liabilities and (ii) subsequent to the Closing Date, the
fair saleable value of its assets (calculated on a going concern basis) will be
in excess of the amount of its liabilities.
(b) Except as disclosed in Exhibit 5.8(b), or otherwise
disclosed to Lender from time to time in writing, each of the Borrowers has (i)
no pending or threatened litigations, actions or proceedings which involve the
possibility of materially and adversely affecting its business, assets,
operations, condition or prospects, financial or otherwise, or the Collateral,
or the ability of each such Borrower to perform this Agreement, and (ii)
43
no liabilities nor indebtedness other than the Obligations, or otherwise as
permitted hereunder.
(c) Each of the Borrowers is not in violation of any
applicable statute, regulation or ordinance in any respect materially and
adversely affecting the Collateral or its business, assets, operations or
condition or prospects, financial or otherwise, nor is such Borrower in
violation of any order of any court, governmental authority or arbitration board
or tribunal.
(d) Each of the Borrowers has received no notice that it is
not in full compliance with any of the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and its regulations and, (i)
it has not engaged in any Prohibited Transactions as defined in Section 406 of
ERISA and Section 4975 of the Internal Revenue Code as amended, (ii) it has met
all applicable minimum funding requirements under Section 302 of ERISA in
respect of their plans and no funding requirements have been postponed or
delayed, (iii) it has no knowledge of any event or occurrence which would cause
the Pension Benefit Guaranty Corporation to institute proceedings under Title IV
of ERISA to terminate any of the employee benefit plans, (iv) there exists no
event described in Section 4043 of ERISA, excluding subsections 4043(b)(2) and
4043(b)(3) thereof, for which the thirty (30) day notice period contained in 12
CFR Section 2615.3 has not been waived, (v) it does not have any fiduciary
responsibility for investments with respect to any plan existing for the benefit
of persons other than its employees or former employees, and (vi) it has not
withdrawn, completely or partially, from any multi-employer pension plans so as
to incur liability under the Multi-Employer Pension Plan Amendments of 1980.
5.9 Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, copyrights, copyright
applications, tradenames, trade secrets and licenses owned or utilized by each
of the Borrowers are set forth on Exhibit 5.9 (or, if acquired or created after
the Closing Date, are disclosed to Lender in writing), are valid and (to the
extent applicable) have been duly registered or filed with all appropriate
governmental authorities; there is no objection or pending challenge to the
validity of any patent, trademark, copyright, trade name, trade secret or
license which is material to the conduct of Borrowers' business as presently
conducted, and Borrowers are not aware of any grounds for any challenge, except
as set forth in Exhibit 5.9 hereto (or, if acquired or created after the Closing
Date, as disclosed to Lender in writing).
5.10 Licenses and Permits. Except as set forth in Exhibit 5.10, each of
the Borrowers (a) is in compliance with and (b) has procured and is now in
possession of, all material licenses or permits required by any applicable
federal, state or local law or regulation for the operation of its business in
each jurisdiction wherein it is now conducting or proposes to conduct business
and where the failure to procure such licenses or permits would have a material
adverse effect on the business, properties, condition (financial or
44
otherwise) or operations, present or prospective, of Industries and its
Subsidiaries on a consolidated basis.
5.11 Default of Indebtedness. Except as disclosed to the Lender in
writing, each of the Borrowers is not in default in the payment of the principal
of or interest on any Indebtedness or under any instrument or agreement under or
subject to which any Indebtedness has been issued and no event has occurred
under the provisions of any such instrument or agreement which with or without
the lapse of time or the giving of notice, or both, constitutes or would
constitute an event of default thereunder.
5.12 No Default. Except as set forth in Exhibit 5.12, or as disclosed
to the Lender from time to time in writing, each of the Borrowers is not in
default in the payment or performance of any of its contractual obligations and
no Incipient Event of Default has occurred.
5.13 No Burdensome Restrictions. Each of the Borrowers is not party to
any contract or agreement the performance of which would affect the business,
assets, operations, condition or prospects (financial or otherwise) of
Industries and its Subsidiaries on a consolidated basis. Each of the Borrowers
has not agreed or consented to cause or permit in the future (upon the happening
of a contingency or otherwise) any of its Property, whether now owned or
hereafter acquired, to be subject to a Lien which is not a Permitted
Encumbrance.
5.14 No Labor Disputes. Each of the Borrowers is not involved in any
labor dispute; there are no strikes or walkouts or union organization of any of
its employees threatened or in existence and no labor contract is scheduled to
expire during the Term; in each case, other than as set forth on Exhibit 5.14
hereto, or as disclosed to the Lender from time to time in writing.
5.15 Margin Regulations. Each of the Borrowers is not engaged, nor will
it engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U or Regulation G of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect. No part of the proceeds
of any Loan will be used for "purchasing" or "carrying" "margin stock" as
defined in Regulation U of such Board of Governors.
5.16 Investment Company Act. Each of the Borrowers is not an
"investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, nor is it controlled by such a
company.
5.17 Disclosure. No representation or warranty made by any Borrower in
this Agreement, or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of fact
or omits to state any fact necessary to make the statements herein or therein
not misleading. There is no
45
fact known to any Borrower or which reasonably should be known to any Borrower
which such Borrower has not disclosed to Lender in writing with respect to the
transactions contemplated by this Agreement which adversely affects the assets
of such Borrower or adversely affects, in any material respect, the condition
(financial or otherwise), results of operations or business of such Borrower.
5.18 Swaps. Each of the Borrowers is not a party to, nor will it be a
party to, any swap agreement whereby such Borrowers has agreed or will agree to
swap interest rates or currencies unless same provides that damages upon
termination following an event of default thereunder are payable on an unlimited
"two-way basis" without regard to fault on the part of either party.
6. AFFIRMATIVE COVENANTS.
Each of the Borrowers covenants and agrees that it shall, until payment
in full of the Obligations and termination of this Agreement:
6.1 Payment of Fees. Pay to Lender on demand all usual and customary
fees and expenses which Lender incurs in connection with (a) the forwarding of
Advance proceeds and (b) the establishment and maintenance of any Blocked
Accounts or Depository Accounts as provided for in Section 4.15(h). Lender may,
without making demand, charge the account of Borrower for all such fees and
expenses.
6.2 Conduct of Business and Maintenance of Existence and Assets. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
tradenames, trade secrets and trademarks; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of business where the failure to do so would have a
material adverse effect on Borrower or its business; and (c) make all such
reports and pay all such franchise and other taxes and license fees and do all
such other acts and things as may be lawfully required to maintain its rights,
licenses, leases, powers and franchises under the laws of the United States or
any political subdivision thereof where the failure to do so would have a
material adverse effect on Borrower or its business.
6.3 Violations. Promptly notify the Lender in writing of any violation
of any law, statute, regulation or ordinance of any governmental entity, or of
any agency thereof, applicable to the Borrower which may adversely affect the
Collateral or may adversely affect, in any material respect, the Borrowers'
business, assets, operations, condition or prospects (financial or otherwise).
6.4 Government Receivables. Take all steps necessary to protect
Lender's interest in the Collateral under the Federal Assignment of Claims Act
or other applicable
46
state or local statutes or ordinances and deliver to the Lender appropriately
endorsed, any instrument or chattel paper connected with any Receivable arising
out of contracts between Borrower and the United States, any state or any
department, agency or instrumentality of any of them.
6.5 Net Worth. Cause to be maintained at all times a consolidated Net
Worth in an amount not less than $30,000,000 ("Minimum Net Worth"). For each of
the Borrowers' fiscal quarters during the Term commencing with the fiscal
quarter beginning June 27, 1998, Minimum Net Worth shall be increased by an
amount equal to fifty percent (50%) of Net Income for each such quarter.
6.6 Pledge of Credit. Not now or hereafter pledge the Lender's credit
on any purchases or for any purpose whatsoever or use any portion of any Advance
in or for any business other than the Borrowers' business as conducted on the
date of this Agreement or as permitted under Section 7.9 hereof.
6.7 Execution of Supplemental Instruments. Execute and deliver to the
Lender from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as the Lender may reasonably request, in
order that the full intent of this Agreement may be carried into effect.
6.8 Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all of its
obligations and liabilities of whatsoever nature, except when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and Borrower shall have provided for such reserves as Lender may
reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement in favor of Lender.
6.9 Standards of Financial Statements. Cause all financial statements
referred to in Section 9.7, 9.8 and 9.9 to be complete and correct in all
material respects (subject, in the case of interim statements, to the absence of
footnotes and to normal year-end audit adjustments) and to be prepared in
reasonable detail and in accordance with GAAP applied consistently throughout
the periods reflected therein (except as concurred in by such reporting
accountants or officer, as the case may be, and disclosed therein).
47
7. NEGATIVE COVENANTS.
Each of the Borrowers covenants and agrees that Borrowers shall not,
until satisfaction in full of the Obligations and termination of this Agreement:
7.1 Merger, Consolidation, Acquisition and Sale of Assets.
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person or acquire all or a substantial
portion of the assets or stock of any Person or permit any other Person to
consolidate with or merge with Borrowers, without the prior written consent of
Lender.
(b) Sell, lease, transfer or otherwise dispose of any of
Borrowers' properties or assets, except in the ordinary course of its business
or except as expressly permitted under this Agreement or any Other Document.
7.2 Creation of Liens. Create or suffer to exist any Lien, Charge,
Claim or transfer upon or against any of its properties or assets now owned or
hereafter acquired, except Permitted Encumbrances.
7.3 Guarantees. Become liable upon the obligations of any person, firm
or corporation by assumption, endorsement or guaranty thereof or otherwise
(other than to Lender), except the endorsement of checks in the ordinary course
of business or, in the case of Industries only, guarantees of the obligations of
any Subsidiary of Industries to any trade creditors, provided that, such
guarantees are executed and delivered in connection with Indebtedness incurred
or to be incurred by such Subsidiary in the ordinary course of business and the
aggregate amount of such Indebtedness shall not exceed $100,000.
7.4 Investments. Purchase or acquire obligations or stock of, or any
other interest in, any Person, except (a) obligations issued or guaranteed by
the United States of America or any agency thereof, (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating), (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency, (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof, and (e) subject to the provisions of Section 10(p) hereof, (i)
Series C Convertible Preferred Stock of Industries, and (ii) OPIC Stock.
7.5 Loans. Make advances, loans or extensions of credit to any Person,
including without limitation, any Parent, Subsidiary or Affiliate except with
respect to (a) the extension of commercial trade credit in connection with the
sale of Inventory in the
48
ordinary course of its business, (b) advances made to employees in the ordinary
course of business for valid business purposes in an aggregate amount not to
exceed $50,000 outstanding at any given time, and (c) intercompany loans among
Borrowers and Affiliated Borrowers, provided that, such loans are for valid
business purposes and the maximum outstanding amount of all loans to Crown shall
not, at any time, exceed $50,000.
7.6 Capital Expenditures. Purchase or make any expenditure or
commitments for fixed or capital assets in any fiscal year (including the
purchase price of capital assets that will be subject to capitalized leases but
excluding payments due under capitalized leases during any such fiscal year) in
an aggregate amount (exclusive of any capital expenditures permitted under
Sections 4.3 and 4.11 hereof but inclusive of all capital expenditures
contracted for, purchased or made by Affiliated Borrowers) in excess of (a)
$6,000,000 for the fiscal year ending in June, 1998, (b) $5,000,000 for the
fiscal year ending in June, 1999, (c) $5,800,000 for the fiscal year ending in
June, 2000, and (d) $5,800,000 for the fiscal year ending in June, 2001 and for
each fiscal year thereafter.
7.7 Dividends. Declare, pay or make any dividend or distribution on any
shares of the common stock or preferred stock of Borrower (other than dividends
or distributions payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any common or preferred stock, or of any options to
purchase or acquire any such shares of common or preferred stock of Borrower;
except that, Industries shall be permitted to redeem, repurchase or convert
Industries' Series C Convertible Preferred Stock and/or OPIC Stock, in each case
subject to Section 10(p) hereof.
7.8 Indebtedness. Except as set forth in Exhibit 7.8, create, incur,
assume or suffer to exist any Indebtedness (exclusive of trade debt) of Borrower
except in respect of (i) Indebtedness to Lender; (ii) Indebtedness incurred for
asset purchases or capitalized leases permitted under Section 7.6 hereof; (iii)
other Indebtedness in a maximum aggregate amount outstanding at any time of not
greater than $250,000; (iv) capitalized leases existing as of the Closing Date;
(v) guarantees permitted under Section 7.3; and (vi) intercompany indebtedness
permitted under Section 7.5.
7.9 Nature of Business. Substantially change the nature of the
business, in which Borrower is presently engaged, including engaging any Person
to manufacture goods for the Borrowers, nor except as specifically permitted
hereby purchase or invest, directly or indirectly, in any assets or property
other than in the ordinary course of business for assets or property which are
useful in, necessary for and are to be used in its business.
7.10 Transactions with Affiliates. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, any Affiliate, except leases and other transactions (to
the extent permitted under the other provisions of this Agreement) among
Borrowers, Affiliated Borrowers and any guarantor of the Obligations hereunder
for valid business purposes and made in the ordinary course of business, all in
accordance with the terms hereof, or transactions made with any other
49
Affiliate in the ordinary course of business, on an arm's-length basis on terms
no less favorable than terms which would have been obtainable from a Person
other than an Affiliate, including, that certain equipment lease with PRC
Leasing, Inc.
7.11 Operating Leases. Except for those leases in effect on the date
hereof and as disclosed to Lender from time to time in writing, enter as lessee
into any lease arrangement for real or personal property (unless capitalized and
permitted under Section 7.6 hereof) if after giving effect thereto, aggregate
annual rental payments for all leased property (other than payments made in
respect of capital leases) would exceed, inclusive of (without duplication) all
annual rental payments of Affiliated Borrowers, $750,000 in any one fiscal year.
7.12 Subsidiaries.
(a) Form any Subsidiary.
(b) Enter into any partnership, joint venture or similar
arrangement.
7.13 Fiscal Year and Accounting Changes. Change Borrower's fiscal year
from the last Friday in June of each calendar year or make any significant
change (i) in accounting treatment and reporting practices except as required by
GAAP or (ii) in tax reporting treatment except as required by law.
7.14 Prepayment of Indebtedness. At any time, directly or indirectly,
prepay any Indebtedness (other than to Lender), or repurchase, redeem, retire or
otherwise acquire any Indebtedness of Borrower other than in the ordinary course
of business or except as expressly permitted hereunder. Nothing contained in
this Section 7.14 shall prohibit or restrict the prepayment of any Indebtedness
due and owing to or from any Borrower or any Affiliated Borrowers which may be
outstanding from time to time.
7.15 Payment of Royalties. During any twelve (12) month period during
which this Agreement is in effect, incur royalty payments arising from the sale
of Inventory payable to (i) Citel S.A. in excess of $100,000 for any such twelve
(12) month period, or (ii) Georgia Tech Research Corporation in excess of
$50,000 for any such twelve (12) month period, provided that, if royalty
payments arising from the sale of Inventory payable to Citel S.A. or Georgia
Tech Research Corporation, as the case may be, exceeds the above limits, upon
Lender's request, Industries shall cause Citel S.A. or Georgia Tech Research
Corporation, as the case may be, to execute and deliver to Lender a licensor's
waiver in form and content satisfactory to Lender.
8. CONDITIONS PRECEDENT.
8.1 Conditions to Initial Advances. The agreement of Lender to make the
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or
50
waiver by Lender, immediately prior to or concurrently with the making of such
Advances, of the following conditions precedent:
(a) Other Loan Agreements. The Lender shall have
received:
(i) The Revolving Credit, Term Loan and Security
Agreement duly executed by Crown;
(ii) The Revolving Credit, Term Loan and Security
Agreement duly executed by Ditel;
(iii) Each Guaranty duly executed by Guarantors;
and
(iv) Such other certificates, documents, notes,
instruments, and agreements as Lender shall
require, in form and content satisfactory to
Lender.
(b) Filings Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any related agreement or under law or reasonably
requested by the Lender to be filed, registered or recorded in order to create,
in favor of the Lender, a perfected security interest in or lien upon the
Collateral shall have been properly filed, registered or recorded in each
jurisdiction in which the filing, registration or recordation thereof is so
required or requested, and the Lender shall have received an acknowledgment
copy, or other evidence satisfactory to it, or each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary fee, tax
or expense relating thereto;
(c) Corporate Proceedings of the Borrowers. The Lender shall
have received a copy of the resolutions in form and substance reasonably
satisfactory to Lender, of the Board of Directors of each of the Borrowers
authorizing (i) the execution, delivery and performance of this Agreement, and
any related agreements, (collectively the "Documents") and (ii) the granting by
each of Borrowers of the security interests in and liens upon the Collateral in
each case certified by the Secretary or an Assistant Secretary of each of the
Borrowers as of the Closing Date; and, such certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded as of the date of such certificate;
(d) Incumbency Certificates of the Borrowers. The Lender shall
have received a certificate of the Secretary or any Assistant Secretary of each
of the Borrowers, dated the Closing Date, as to the incumbency and signature of
the officers of each of the Borrowers executing this Agreement, any certificate
or other documents to be delivered by it pursuant hereto, together with evidence
of the incumbency of such Secretary or Assistant Secretary;
51
(e) Legal Opinion. The Lender shall have received the executed
legal opinions of counsel satisfactory to Lender in form and substance
satisfactory to the Lender which shall cover such matters incident to the
transactions contemplated by this Agreement, the Cap/Ex Note, the Affiliate Loan
Agreements and related agreements as the Lender may reasonably require;
(f) No Litigation. (i) No litigation, investigation or
proceeding before or by any arbitrator or governmental authority shall be
continuing or threatened against the Borrower or against the officers or
directors of any Borrower (A) in connection with the Documents or any of the
transactions contemplated thereby and which, in the reasonable opinion of the
Lender, is deemed material or (B) which if adversely determined, would, in the
reasonable opinion of the Lender, have a material adverse effect on the
business, assets, operations or condition (financial or otherwise) of the
Borrower; and (iii) no injunction, writ, restraining order or other order of any
nature materially adverse to any Borrower or the conduct of any Borrower's
business or inconsistent with the due consummation of the Transactions shall
have been issued by any governmental authority;
(g) Financial Condition Opinions. The Lender shall have
received executed Officers Certificates of each of the Borrowers satisfactory in
form and substance to it, certifying the solvency of each such Borrower after
giving effect to the Indebtedness contemplated hereby and as to each such
Borrower's financial resources and its ability to meet its obligations and
liabilities as they become due; to the effect that as of the Closing Date and
after giving effect to the Transactions:
(i) the assets of each Borrower, at a fair
valuation, exceed the total liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities of each such Borrower;
(ii) current projections which are based on
underlying assumptions which provide a reasonable basis for the projections and
which reflect each Borrower's judgment based on present circumstances, the most
likely set of conditions and such Borrower's most likely course of action for
the period projected, demonstrate that each Borrower will have sufficient cash
flow to enable each Borrower to pay such Borrower's debts as they mature; and
(iii) Each Borrower does not have an unreasonably
small capital base with which to engage in its anticipated business.
For purposes of this subsection (i), the "fair valuation" of the assets of each
of the Borrowers shall be determined on the basis of the amount which may be
realized within a reasonable time, whether through collection or sale of such
assets at market value, conceiving the latter as the amount which could be
obtained for the property in question within such period by a capable and
diligent businessman from an interested buyer who is willing to purchase under
ordinary selling conditions.
52
(h) Collateral Examination. The Lender shall have completed
Collateral examinations and received appraisals, the results of which shall be
satisfactory in form and substance to the Lender, of the Receivables, Inventory,
General Intangibles, each Property Leasehold Interest and Equipment of the
Borrowers and all books and records in connection therewith;
(i) Fees. The Lender shall have received all fees payable to
the Lender on or prior to the Closing Date pursuant to Article 3 hereof;
(j) Pro Forma Financial Statements. Lender shall have received
a copy of the Pro Forma Financial Statements (including, without limitation, a
statement of Borrowers' sources and uses of cash as of the Closing Date and an
aging of Borrowers' accounts payable) each of which shall be satisfactory in all
respects to Lender; and
(k) Other. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
Transactions shall be satisfactory in form and substance to the Lender and its
counsel.
8.2 Conditions to Each Advance. The agreement of Lender to make any
Advance requested to be made on any date (including, without limitation, its
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) Representations and Warranties. Each of the
representations and warranties made by the Borrowers in or pursuant to this
Agreement, and any related agreements to which Borrowers are parties, and each
of the representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date;
(b) No Default. No Event of Default or Incipient Event of
Default shall have occurred and be continuing on such date, or would exist after
giving effect to the Advances requested to be made, on such date; provided,
however, that Lender in its sole discretion, may continue to make Advances
notwithstanding the existence of an Event of Default or Incipient Event of
Default; and
(c) Maximum Advances. In the case of any Revolving Advances
requested to be made, after giving effect thereto, the aggregate Revolving
Advances shall not exceed the maximum Revolving Advances permitted under Section
2.1 hereof.
Each request for an Advance by the Borrowers hereunder shall constitute
a representation and warranty by the Borrowers as of the date of such Advance
that the conditions contained in this subsection shall have been satisfied.
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9. INFORMATION AS TO BORROWERS.
Each of the Borrowers covenants and agrees that each such Borrower
shall, until satisfaction in full of the Obligations and the termination of this
Agreement;
9.1 Disclosure of Material Matters. Immediately upon learning thereof,
report to the Lender all matters materially affecting the value, enforceability
or collectibility of the Collateral including, without limitation, any
Borrower's reclamation of repossession of, or the return to any Borrower of a
material amount of goods or claims or disputes asserted by any Customer or other
obligor. Each Borrower will not, without the Lender's consent, compromise or
adjust any material amount of the Receivables (or extend the time for payment
thereof) or accept any material returns of merchandise or grant any additional
discounts, allowances or credits thereon except for those compromises,
adjustments, returns, discounts, credits and allowances as have been heretofore
customary in the business of each Borrower.
9.2 Schedules. Deliver to the Lender on or before the fifteenth (15th)
day of each month as and for the prior month, or more frequently as Lender may,
in its sole discretion require, (a) accounts receivable aging, (b) accounts
payable aging and (c) Inventory reports. In addition, each Borrower will deliver
to Lender at such intervals as the Lender may require: (i) confirmatory
assignment schedules, (ii) copies of Customer's invoices, (iii) evidence of
shipment or delivery, and (iv) such further schedules, documents and/or
information regarding the Collateral as the Lender may require including,
without limitation, trial balances and test verifications. The Lender shall have
the right to confirm and verify all Receivables by any manner and through any
medium it considers advisable and do whatever it may deem reasonably necessary
to protect its interests hereunder. The items to be provided under this Section
are to be in form satisfactory to the Lender and executed by each Borrower and
delivered to the Lender from time to time solely for the Lender's convenience in
maintaining records of the Collateral, and the failure to deliver any of such
items to the Lender shall not affect, terminate, modify or otherwise limit the
Lender's lien on or security interest in the Collateral.
9.3 Environmental Reports. Furnish Lender, concurrently with the
delivery of the financial statements referred to in Sections 9.7 and 9.8,
accompanied by a certificate of each of the Borrowers signed by the President of
each of Borrowers stating, to the best of his knowledge, that such Borrowers are
in compliance in all material respects with all federal, state and local laws
relating to environmental protection and control and occupational safety and
health. To the extent any Borrower is not in compliance with the foregoing laws,
the certificate shall set forth with specificity all areas of non-compliance and
the proposed action such Borrower will implement in order to achieve full
compliance.
9.4 Litigation. Promptly notify the Lender in writing of any litigation
affecting any Borrower, whether or not the claim is covered by insurance, and of
any suit or administrative proceeding, which may affect the Collateral or may
affect, in a material
54
respect, any Borrower's business, assets, operations, condition or prospects
(financial or otherwise).
9.5 Occurrence of Defaults, etc. Promptly notify the Lender in writing
upon the occurrence of (a) any Event of Default or Incipient Event of Default;
(b) any event, development or circumstance whereby the financial statements most
recently furnished to the Lender fail in any material respect to present fairly,
in accordance with GAAP consistently applied, the financial condition and
operating results of the Borrowers as of the date of such financial statements;
(c) any accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971
of the Internal Revenue Code; (d) each and every default by any Borrower which
might result in the acceleration of the maturity of any Indebtedness with
respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Indebtedness;
and (e) any other development in the business or affairs of any Borrower which
would reasonably be expected to be materially adverse; in each case describing
the nature thereof and in the case of notification under clause (a), (b), or (c)
the action Borrowers propose to take with respect thereto.
9.6 Government Receivables. Notify the Lender immediately if any of its
Receivables arise out of contracts between any Borrower and the United States,
any state, or any department, agency or instrumentally of any of them.
9.7 Annual Financial Statements. Furnish the Lender within ninety (90)
days after the end of each fiscal year of Borrowers, financial statements of
Industries and its Subsidiaries, on a consolidating and consolidated basis,
including, but not limited to, statements of income, stockholders' equity and
cash flows from the beginning of the current fiscal year to the end of such
fiscal year and the balance sheet as at the end of such fiscal year
(collectively, the "Annual Audited Financial Statements"), all prepared in
accordance with GAAP applied on a basis consistent with prior practices (except
as noted therein), and in reasonable detail and (as to consolidated statements
only) reported upon without qualification by an independent certified public
accounting firm selected by Borrowers and satisfactory to Lender (the
"Accountants"), it being acknowledged that as of the date hereof, Xxxxxx
Xxxxxxxx LLP is acceptable to Lender. The report of such accounting firm shall
be accompanied by a certificate of each of the Borrowers, signed by the Chief
Financial Officer of each of the Borrowers, which shall state whether, to their
knowledge, after due investigation, an Event of Default as specified in Article
10 hereof or an Incipient Event of Default has occurred.
9.8 Quarterly Financial Statements. Furnish the Lender within
forty-five (45) days after the end of each of the first three (3) fiscal
quarters, an unaudited balance sheet and income statement of Industries and its
Subsidiaries, on a consolidated basis and, if requested, on a consolidating
basis, and unaudited consolidated statements of cash flow and stockholders'
equity of Industries and its Subsidiaries, reflecting results of operations from
the beginning of the fiscal year to the end of such quarter and for such
quarter,
55
prepared on a basis consistent with prior practices and complete and correct in
all material respects, subject to normal year end adjustments.
9.9 Monthly Financial Statements. Furnish the Lender within thirty (30)
days after the end of each month, an unaudited balance sheet and income
statement of Industries and its Subsidiaries, on a consolidated basis and, if
requested, on a consolidating basis, and an unaudited consolidated cash flow and
stockholders' equity of Industries and its Subsidiaries, reflecting results of
operations from the beginning of the fiscal year to the end of such month and
for such month, prepared on a basis consistent with prior practices and complete
and correct in all material respects, subject to normal year end adjustments.
The reports shall be accompanied by a certificate of Industries, signed by the
Chief Financial Officer of Industries, which shall state whether, to the best of
their knowledge, after due investigation, an Event of Default as specified in
Article 10 hereof or an Incipient Event of Default has occurred.
9.10 Other Reports. Furnish the Lender as soon as available, but in any
event within ten (10) days after the issuance thereof, with copies of such
financial statements, reports, returns, mailing, press releases or other
information that Industries sends or causes to be sent to its stockholders.
9.11 Additional Information. Furnish the Lender with additional
information as the Lender shall reasonably request in order to enable Lender to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Cap/Ex Note have been complied with by Borrowers including,
without limitation and without the necessity of any request by Lender, (a)
copies of all environmental audits and reviews, (b) at least thirty (30) days
prior thereto, of any Borrower's opening of any new office or place of business
or any Borrower's closing of any existing office or place of business, and (c)
promptly upon any Borrower's learning thereof, of any labor dispute to which any
Borrower may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to which
any Borrower is a party or by which any Borrower is bound.
9.12 Projected Operating Budget. Furnish Lender, no less than thirty
(30) days prior to the beginning of each of the Borrowers' fiscal years
beginning with the fiscal year ending the last Friday in June, 1998, a month by
month projected operating budget and cash flow (prepared both on an accrued
basis and cash basis) of Industries and its Subsidiaries, on a consolidated
basis and, if requested, on a consolidating basis, for such fiscal year
(including an income statement for each month and a balance sheet as at the end
of the last month in each fiscal quarter), in form and content acceptable to
Lender, such projections to be accompanied by a certificate signed by the
President or Chief Financial Officer of Industries to the effect that such
projections have been approved by the Borrowers' Board of Directors and prepared
on the basis of sound financial planning practice consistent with past budgets
and financial statements and that such officer has no reason to question the
reasonableness of any material assumptions on which such projections were
prepared. Lender reserves the right to require, in its sole discretion, that
56
such projections be reviewed by the Accountants or such other Person acceptable
to Lender.
9.13 Variances From Operating Budget. Furnish Lender, concurrently with
the delivery of the financial statements referred to in Section 9.7 and each
quarterly and monthly report, a written report summarizing all material
variances from budgets submitted by the Borrowers pursuant to Section 9.12 and a
discussion and analysis by management with respect to such variances.
9.14 Additional Documents. Execute and deliver to Lender, upon request,
such documents and agreements as Lender may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
10. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default" :
(a) failure by any Borrower to pay any principal or interest
on the Obligations when due, whether at maturity or by reason of acceleration
pursuant to the terms of this agreement or by notice of intention to prepay, or
by required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due;
(b) the occurrence of an "Event of Default" under, and as such
quoted term is defined in, the Affiliate Loan Agreements;
(c) any representation or warranty made or deemed made by the
Borrowers in this Agreement or any related agreement or in any certificate,
document of financial or other statement furnished at any time in connection
herewith or therewith shall prove to have been misleading in any material
respect on the date when made or deemed to have been made;
(d) failure by Borrowers to (i) furnish financial information
when due or when requested which is unremedied for a period of five (5) days, or
(ii) permit the inspection of their books or records;
(e) issuance of a notice of Lien, Charge, Claim, levy
assessment, injunction or attachment against a material portion of the
Borrowers' property which is not stayed or lifted within thirty (30) days;
(f) (i) failure or neglect of the Borrowers to perform, keep
or observe any term, provision, condition, covenant contained in Section 4.7,
4.9, 6.3, 6.4, 9.4 or 9.11, and such failure shall continue for ten (10) days;
57
(ii) failure or neglect of the Borrowers to
perform, keep or observe any term, provision, condition, covenant herein
contained (other than those Sections expressly set forth in Section 10.(f)(i)
above) or contained in any other agreement or arrangement, now or hereafter
entered into between the Borrowers and the Lender;
(g) any judgment is rendered or judgment liens filed against
the Borrowers for an amount in excess of $100,000 which within thirty (30) days
of such rendering or filing is not either satisfied, stayed or discharged of
record;
(h) any Borrower, Affiliated Borrower, Subsidiary of
Industries, or any Guarantor shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of all or a substantial part of its property, (ii) admit in writing
its inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business, (iii) make a general assignment for
the benefit of creditors, (iv) commence a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a
bankrupt or insolvent, (vi) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vii) acquiesce to, or fail to
have dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;
(i) any change in any Borrower's condition or affairs
(financial or otherwise) which in Lender's good faith opinion materially impairs
the Collateral or the ability of any Borrower to perform its Obligations under
this Agreement;
(j) if any Lien created hereunder or provided for hereby or
under any related agreement for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest;
(k) a default of the obligations of any Borrower under any
other agreement with any Person (other than Lender) to which it is a party shall
occur which adversely affects, in any material respect, its condition, affairs
or prospects (financial or otherwise) which default is not cured within any
applicable grace period;
(l) termination or breach, after giving effect to any
applicable grace period, of any Guaranty or similar agreement executed and
delivered to Lender in connection with the Obligations of any Borrower, or if
any Guarantor attempts to terminate, challenges the validity of, or its
liability under, any such Guaranty or similar agreement;
(m) any Change of Ownership;
(n) any material provision of this Agreement shall, for any
reason, cease to be valid and binding on any Borrower, or any Borrower shall so
claim in writing to Lender;
58
(o) failure by Borrowers to deliver to Lender on or before
April 30, 1998, a physical count of Borrowers' Inventory, the results of which
physical count of Inventory shall be acceptable to Lender in its sole
discretion, together with adjustments to Borrowers' books and records, if any,
as a result of such physical count of Inventory, which adjustments, if any,
shall be acceptable to Lender in its sole discretion; or
(p) if Industries or any of its Subsidiaries shall purchase,
redeem or acquire any outstanding shares of Series C Convertible Preferred Stock
issued by Industries or any outstanding shares of common stock issued by
Industries in favor of Overseas Private Investment Corporation ("OPIC Stock")
unless: (i)(A) no other Event of Default or Incipient Event of Default is
continuing, (B) Lender receives not less than thirty (30) days prior written
notice of any such purchase, acquisition or redemption by Industries and (C)
after giving effect to such purchase, acquisition or redemption by Industries,
the Formula Amount less the aggregate amount of all outstanding Revolving
Advances hereunder and under the Affiliated Loan Agreements shall not be less
than $1,000,000 in each instance; or (ii) such purchase, acquisition or
redemption is effected by Industries by way of a non-cash exchange or other
equity conversion.
11. LENDER'S RIGHTS AND REMEDIES AFTER DEFAULT.
11.1 Rights and Remedies. Upon the occurrence of an Event of Default
pursuant to Section 10(i), all Obligations shall be immediately due and payable
and this Agreement shall be deemed terminated; and, upon the occurrence of any
of the other Events of Default and at any time thereafter (such default not
having previously been cured), at the option of Lender all Obligations shall be
immediately due and payable and the Lender shall have the right to terminate
this Agreement. In any such event, the Lender shall have the right to exercise
any and all other rights and remedies provided for herein, under the Uniform
Commercial Code and at law or equity generally, including, without limitation,
the right to foreclose the security interests granted herein and to realize upon
any Collateral by any available judicial procedure and/or to take possession of
and sell any or all of the Collateral with or without judicial process. The
Lender may enter any Borrower's premises or other premises without legal process
and without incurring liability to such Borrower therefor, and the Lender may
thereupon, or at any time thereafter, in its discretion without notice or
demand, take the Collateral and remove the same to such place as the Lender may
deem advisable and the Lender may require such Borrower to make the Collateral
available to the Lender at a convenient place. With or without having the
Collateral at the time or place of sale, the Lender may sell the Collateral, or
any part thereof, at public or private sale, at any time or place, in one or
more sales, at such price or prices, and upon such terms, either for cash,
credit or future delivery, as the Lender may elect. Except as to that part of
the Collateral which is perishable or threatens to decline speedily in value or
is of a type customarily sold on a recognized market, the Lender shall give such
Borrower reasonable notification of such sale or sales, it being agreed that in
all events written notice mailed to such Borrower at least five (5) Business
Days prior to such sale or sales is reasonable notification. At any public sale
the Lender may bid for and become the purchaser, and Lender or any other
purchaser at any such sale thereafter shall hold
59
the Collateral sold absolutely free from any claim or right of whatsoever kind,
including any equity of redemption and such right and equity are hereby
expressly waived and released by each of the Borrowers. In connection with the
exercise of the foregoing remedies, the Lender is granted permission to use each
of the Borrower's trademarks, trade styles, trade names, patents, patent
applications, licenses, franchises and other proprietary rights which are used
in connection with (a) Inventory for the purpose of disposing of such Inventory
and (b) Equipment for the purpose of completing the manufacture of unfinished
goods. The proceeds realized from the sale of any Collateral shall be applied
first to the reasonable costs, expenses and attorneys' fees and expenses
incurred by Lender for collection and for acquisition, completion, protection,
removal, storage, sale and delivery of the Collateral; secondly to interest due
upon any of the Obligations; and thirdly to the principal of the Obligations. If
any deficiency shall arise, Borrowers shall remain liable to Lender therefor.
11.2 Lender's Discretion. The Lender shall have the right in its sole
discretion to determine which rights, Liens, security interests or remedies the
Lender may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of the Lender's rights hereunder.
11.3 Setoff. In addition to any other rights which the Lender may have
under applicable law, upon the occurrence of any Event of Default hereunder, the
Lender shall have a right to apply any of Borrowers' property held by the Lender
or by the Bank to reduce the Obligations.
11.4 Rights and Remedies not Exclusive. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any right or remedy shall not preclude the exercise of any other right or
remedies, all of which shall be cumulative and not alternative.
12. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1 Waiver of Notice. Each of the Borrowers hereby waives notice of
non-payment of any of the Receivables, demand, presentment, protest and notice
thereof with respect to any and all instruments, notice of acceptance hereof,
notice of loans or advances made, credit extended, Collateral received or
delivered, or any other action taken in reliance hereon, and all other demands
and notices of any description, except such as are expressly provided for
herein.
12.2 Delay. No delay or omission on the Lender's part in exercising any
right, remedy or option shall operate as a waiver of such or any other right,
remedy or option or of any default.
12.3 Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
60
CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE: AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO
TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
13. EFFECTIVE DATE AND TERMINATION.
13.1 Term. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of each of
the Borrowers and the Lender, shall become effective on the date hereof and
shall continue in full force and effect until April __, 2003 (the "Term") unless
sooner terminated as herein provided. The Term shall be automatically extended
for successive periods of one (1) year each unless terminated by either party at
the end of such initial Term or any successive Term by giving the other party
sixty (60) days prior written notice. Borrowers may terminate this Agreement at
any time upon thirty (30) days' prior written notice to Lender ("Termination
Notice"), upon payment in full of the Obligations ("Termination Date"); and
provided further that, the Affiliated Borrowers each simultaneously terminate
the Affiliate Loan Agreements and, provided further that, Borrowers, jointly and
severally with Ditel, pay an early termination fee in an amount equal to:
(a) if such termination occurs on or prior to the Cap/Ex Line
Termination Date, three percent (3%) of the Facility Amount;
(b) if such termination occurs after the Cap/Ex Line
Termination Date but on or prior to the first anniversary of this Agreement,
three percent (3%) of the sum of (i) the Maximum Revolving Advance Amount and
(ii) the principal amount of the Cap/Ex Loans hereunder plus the principal
amount of the Cap/Ex Loans under the Affiliate Loan Agreements, outstanding, in
each instance, as of the date Lender receives the Termination Notice;
(c) if such termination occurs after the first anniversary but
on or prior to the second anniversary of this Agreement, two percent (2%) of the
sum of (i) the Maximum Revolving Advance Amount and (ii) the principal amount of
the Cap/Ex Loans hereunder plus the principal amount of the Cap/Ex Loans under
the Affiliate Loan Agreements, outstanding, in each instance, as of the date
Lender receives the Termination Notice;
61
(d) if such termination occurs after the second anniversary
but prior to the fifth anniversary of this Agreement, one percent (1%) of the
sum of (i) the Maximum Revolving Advance Amount and (ii) the principal amount of
the Cap/Ex Loans hereunder plus the principal amount of the Cap/Ex Loans under
the Affiliate Loan Agreements, outstanding, in each instance, as of the date
Lender receives the Termination Notice; and
(e) if such termination occurs after the fifth anniversary of
this Agreement but prior to any anniversary of this Agreement, one percent (1%)
of the sum of (i) the Maximum Revolving Advance Amount and (ii) the principal
amount of the Cap/Ex Loans hereunder plus the principal amount of the Cap/Ex
Loans under the Affiliate Loan Agreements, outstanding, in each instance, as of
the date Lender receives the Termination Notice.
Borrowers shall have no right to terminate this Agreement as aforesaid unless
the Affiliate Loan Agreements are being simultaneously terminated by the
Affiliated Borrowers. In the event Borrowers elect to terminate this Agreement
on the fifth (5th) anniversary of this Agreement or, if this Agreement is
renewed, Borrowers elect to terminate this Agreement on an anniversary of this
Agreement, Borrowers shall not be required to pay Lender an early termination
fee, provided that, Borrowers have provided Lender with appropriate notice and
payment is received by Lender of obligations payable hereunder on such
anniversary date or within fifteen (15) days before such anniversary date or
within fifteen (15) days after such anniversary date. If Borrowers repay their
Obligations to Lender more than fifteen (15) days prior to or more than fifteen
(15) days after such anniversary date, Borrowers acknowledge, confirm and agree
that Borrowers shall pay Lender the applicable early termination fee as set
forth above.
13.2 Termination. The termination of the Agreement shall not affect any
of the Borrowers' or the Lender's rights, or any of the Obligations having their
inception prior to the effective date of such termination, and the provisions
hereof shall continue to be fully operative until all transactions entered into,
rights or interests created or Obligations have been full disposed of, concluded
or liquidated. The security interests, Liens and rights granted to the Lender
hereunder and the financing statements filed hereunder shall continue in full
force and effect, notwithstanding the termination of this Agreement or the fact
that any account of the Borrowers may from time to time be temporarily in a zero
or credit position, until all of the Obligations of each of the Borrowers have
been paid or performed in full after the termination of this Agreement or each
of the Borrowers have furnished the Lender with an indemnification satisfactory
to the Lender with respect thereto. Accordingly, each of the Borrowers waives
any rights which it may have under Section 9-404(1) of the Uniform Commercial
Code to demand the filing of termination statement with respect to the
Collateral, and Lender shall not be required to send such termination statements
to any Borrower, or to file them with any filing office, unless and until this
Agreement shall have been terminated in accordance with its terms and all
Obligations paid in full in immediately available funds. All representations,
warranties, covenants, waivers and agreements contained herein shall survive
termination hereof until all Obligations are repaid or performed in full unless
otherwise provided.
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14. MISCELLANEOUS.
14.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York (without giving effect to
its conflict of laws rules). Any judicial proceeding brought by or against any
Borrower with respect to any of the Obligations, this Agreement or any related
agreement may be brought in any court of competent jurisdiction in the State of
New York, United States of America, and, by execution and delivery of this
Agreement, each of the Borrowers accepts for itself and in connection with its
properties, generally and unconditionally the non-exclusive jurisdiction of he
aforesaid courts, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement. Nothing herein shall affect the right
to serve process in any manner permitted by law or shall limit the right of the
Lender to bring proceedings against any Borrower in the courts of any other
jurisdiction. Each of the Borrowers waives any objection to jurisdiction and
venue of any action instituted hereunder and shall not assert any defense based
on lack of jurisdiction or venue or based upon forum non conveniens. Any
judicial proceedings by any Borrower against the Lender involving, directly or
indirectly, any matter or claim in any way arising out of, related to or
connected with this Agreement or any related agreement, shall be brought only in
a federal or state court located in the City of New York, State of New York.
14.2 Entire Understanding. This Agreement and the documents executed
concurrently herewith contain the entire understanding between each of the
Borrowers and the Lender and supersedes all prior agreements and understandings,
if any, relating to the subject matter hereof. Any promises, representations,
warranties or guarantees not herein contained and hereinafter made shall have no
force and effect unless in writing, signed by each of the Borrowers' and
Lender's respective officers. Neither this Agreement nor any portion or
provisions hereof may be changed, modified, amended, waived, supplemented,
discharged, cancelled or terminated orally or by any course of dealing, or in
any manner other than by an agreement in writing, signed by the party to be
charged. Borrowers acknowledge that they have been advised by counsel in
connection the execution of this Agreement and Other Documents and is not
relying upon oral representations or statements inconsistent with the terms and
provisions of this Agreement.
14.3 Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to the
benefit of each of the Borrowers, the Lender, all future holders of the Cap/Ex
Note and their respective successors and assigns, except that the Borrowers may
not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of Lender.
(b) Lender may sell, assign or transfer all or any part of its
rights under this Agreement, the Cap/Ex Note and all related agreements,
instruments and documents provided Borrowers are given notice of such sale as
soon as practicable and the transferee agrees to perform the obligations of the
transferor, In addition to the foregoing, each of the Borrowers acknowledges
that in the regular course of commercial banking
63
business the Lender may at any time and from time to time sell participating
interests in the Advances to other financial institutions (each such transferee
or purchaser of a participating interest, a "Transferee"). Each Transferee may
exercise all rights of payment (including without limitation rights of set-off)
with respect to the portion of such Advances held by it or other Obligations
payable hereunder as fully as if such Transferee were the direct holder thereof.
Each of the Borrowers hereby grants to any Transferee a continuing security
interest in any deposits, moneys or other property actually or constructively
held by such Transferee as security for the Transferee's interest in the
Advances and such security interest shall be a Permitted Encumbrance hereunder.
14.4 Application of Payments. Lender shall have the continuing and
exclusive right to apply or reverse and reapply any and all proceeds of
Collateral to any portion of the Obligations then due. To the extent that any
Borrower makes a payment or Lender receives any payment or proceeds of the
Collateral for Borrowers' benefit, which are subsequently invalidated, declared
to the fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver, custodian or any other party under any
bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Lender.
14.5 Indemnity. Each of the Borrowers shall indemnify Lender from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, fees and disbursements of
counsel) which may be imposed on, incurred by, or asserted against Lender in any
litigation, proceeding or investigation instituted or conducted by any
governmental agency or instrumentality or any other Person with respect to any
aspect of, or any transaction contemplated by, or referred to in, or any matter
related to, this Agreement, whether or not the Lender is a party thereto, except
to the extent that any of the foregoing arises out of the gross negligence or
willful misconduct of Lender.
14.6 Notice. Any notice or request hereunder may be given to Borrowers
and to Lender at their respective addresses set forth below or at such other
address as may hereafter be specified in a notice designated as a notice of
change of address under this Section. Any notice or request hereunder shall be
given by (a) hand delivery, (b) registered or certified mail, return receipt
requested, (c) telex or telegram, subsequently confirmed by registered or
certified mail, or (d) telefax to the number set out below (or such other number
as may hereafter be specified in a notice designated as a notice of change of
address) with telephone communication to a duly authorized officer of the
recipient confirming its receipt as subsequently confirmed by registered or
certified mail. Notices and requests shall, in the case of those by mail or
telegram, be deemed to have been given three (3) Business Days after mailing, or
when delivered to the telegraph office addresses as provided in this Section.
64
(A) If to Lender, at: BNY FINANCIAL CORPORATION
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxx
Telephone: (000) 000-0000
FAX: (000) 000-0000
With copy to: BNY FINANCIAL CORPORATION
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxx
Telephone: (000) 000-0000
FAX: (000) 000-0000
OTTERBOURG, STEINDLER, HOUSTON
& XXXXX, PC.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxxx X. Brand, Esq.
Telephone: (000) 000-0000
FAX: (000) 000-0000
(B) If to Borrowers, at: TII INDUSTRIES, INC.
TII CORPORATION,
c/o TII Industries, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
FAX: (000) 000-0000
14.7 Survivability. If any or part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
14.8 Expenses. All costs and reasonable expenses including, without
limitation reasonable attorneys' fees incurred by the Lender (a) in all efforts
made to enforce payment of any Obligation or effect collection of any
Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement or any consents or
waivers hereunder and all related agreements, documents and instruments, or (c)
in connection with the instituting, maintaining, preserving, enforcing and
foreclosing of or on the Lender's security interest or Lien in any of the
Collateral, whether through judicial proceedings or otherwise, or (d) in
defending or prosecuting any
65
actions or proceedings arising out of or relating to the Lender's transactions
with any Borrower, or (e) in connection with any advice given to Lender with
respect to its rights and obligations under this Agreement and all related
agreements, or (f) subject to Section 4.10 hereof, during the course of audits,
checks or inspections of the Collateral and Borrowers' operations, plus a per
diem charge for Lender's examiners and auditors at Lender's then current rates,
and costs and expenses of examiners and auditors retained by Lender at the rates
charged to auditors may be charged to any account of the Borrowers and shall be
part of the Obligations.
14.9 Injunctive Relief. Each of the Borrowers recognizes that, in the
event any Borrower fails to perform, observe or discharge any of its obligations
or liabilities under this Agreement, any remedy at law may prove to be
inadequate relief to Lender; therefore, Lender if Lender so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
14.10 Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
14.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which taken together shall constitute one and the same
instrument.
[Remainder of Page Intentionally Left Blank]
66
Each of the parties has signed this Agreement as of the 30th day of
April, 1998.
TII INDUSTRIES, INC.
By: /s/ Xxxx Xxxxxxx
-------------------------
Its: Vice President-Finance
0000 Xxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
TII CORPORATION
By: /s/ Xxxx Xxxxxxx
-------------------------
Its: Vice President-Finance
0000 Xxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
BNY FINANCIAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------
Its: President
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
67
ACKNOWLEDGEMENT AND AGREEMENT
The undersigned, being an "Affiliated Borrower" referred to
and as defined in the within and foregoing Revolving Credit, Term Loan and
Security Agreement ("Loan Agreement"), hereby acknowledges each of the terms and
provisions of the foregoing Loan Agreement and agrees to be bound by the terms
and provisions thereof expressly applying to the undersigned.
The undersigned acknowledges and agrees that although it may
acknowledge this Loan Agreement, it is not a party thereto and does not and will
not receive any right, benefit, priority or interest under or because of the
existence of the Loan Agreement.
TII-DITEL, INC.
By: /s/ Xxxx Xxxxxxx
-------------------------
Title: Vice President-Finance
00
XXXXX XX XXX XXXX )
) ss.
COUNTY OF NEW YORK)
On this _____ day of April, 1998, before me personally came
________________________, to me known, who, being by me duly sworn, did depose
and say that he resides at ______________________________ and that he is the
__________________ of TII INDUSTRIES, INC., the corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the board of directors of said corporation.
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK)
On this _____ day of April, 1998, before me personally came
________________________, to me known, who, being by me duly sworn, did depose
and say that he resides at _______________________________ and that he is the
__________________ of TII CORPORATION, the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the board of directors of said corporation.
NOTARY PUBLIC
69
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK)
On this _____ day of April, 1998, before me personally came
________________________, to me known, who, being by me duly sworn, did depose
and say that he resides at _______________________________ and that he is the
__________________ of TII-DITEL, INC., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the board of directors of said corporation.
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK)
On this _____ day of __________, 19__, before me personally came
_________________________, to me known, who, being by me duly sworn, did depose
and say that he resides at _______________________________________________ and
that he is the _______________ of BNY FINANCIAL CORPORATION, the corporation
described in and which executed the foregoing instrument and that he signed his
name thereto by order of the board of directors of said corporation.
NOTARY PUBLIC
70
