EXHIBIT 10.5
LOAN AND SECURITY AGREEMENT
between
ACCOM, INC.,
A Delaware Corporation
Borrower
and
THE PROVIDENT BANK,
An Ohio Banking Institution
Lender
$2,000,000.00 REVOLVING LINE OF CREDIT
Dated: February 10, 2000
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TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS....................................................................1
Section 1.1. Account Debtor.............................................1
Section 1.2. Accounts, Chattel Paper, Documents, Equipment, Fixtures,
General Intangibles, Goods, Instruments and Investment
Property...................................................1
Section 1.3. Affiliate. ................................................2
Section 1.4. Agreement. ................................................2
Section 1.5. Borrowing Base.............................................2
Section 1.6. Business Day. .............................................2
Section 1.7. Capital Adequacy Requirement. .............................2
Section 1.8. Capital Expenditures.......................................2
Section 1.9. Capital Lease. ............................................3
Section 1.10. Capital Lease Obligations. ................................3
Section 1.11. Closing. ..................................................3
Section 1.12. Code. .....................................................3
Section 1.13. Collateral. ...............................................3
Section 1.14. Collection Account. .......................................3
Section 1.15. Commercial Account. .......................................3
Section 1.16. Default. ..................................................3
Section 1.17. Dollar Cap. ...............................................4
Section 1.18. EBITDA.....................................................4
Section 1.19. Eligible Accounts. ........................................4
Section 1.20. Employee Benefit Plan. ....................................5
Section 1.21. Environmental Laws. .......................................5
Section 1.22. EPA Permit. ...............................................6
Section 1.23. ERISA. ....................................................6
Section 1.24. ERISA Affiliate. ..........................................6
Section 1.25. ERISA Liabilities. ........................................6
Section 1.26. Event Of Default. .........................................6
Section 1.27. Facilities. ...............................................6
Section 1.28. Fiscal Year. ..............................................6
Section 1.29. G.A.A.P. ..................................................6
Section 1.30. Guaranteed Pension Plan. ..................................6
Section 1.31. Indebtedness. .............................................7
Section 1.32. Insolvency Proceedings. ...................................7
Section 1.33. Interest Rate Protection Agreement. .......................7
Section 1.34. Interest Coverage Ratio....................................7
Section 1.35. Interest Expense...........................................7
Section 1.36. Inventory. ................................................7
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Section 1.37. Laws. .....................................................8
Section 1.38. Lender Expenses. ..........................................8
Section 1.39. Letters Of Credit. ........................................8
Section 1.40. Loan. .....................................................8
Section 1.41. Loan Documents. ...........................................8
Section 1.42. Lock Box. .................................................9
Section 1.43. Material Adverse Event. ...................................9
Section 1.44. Maximum Revolving Loan Amount. ............................9
Section 1.45. Multiemployer Plan. .......................................9
Section 1.46. Note. .....................................................9
Section 1.47. Obligations. ..............................................9
Section 1.48. Permitted Liens. .........................................10
Section 1.49. Person. ..................................................10
Section 1.50. Receivables. .............................................10
Section 1.51. Records. .................................................10
Section 1.52. Regulated Substance. .....................................10
Section 1.53. Release. .................................................10
Section 1.54. Restricted Payment. ......................................11
Section 1.55. Revolving Loan. ..........................................11
Section 1.56. Revolving Loan Note. .....................................11
Section 1.57. Solvent. .................................................11
Section 1.58. Subordinated Debt.........................................11
Section 1.59. Subsidiary. ..............................................11
Section 1.60. Tangible Net Worth........................................12
Section 1.61. Termination Event. .......................................12
ARTICLE 2
TERMS OF LOAN.................................................................12
Section 2.1. Agreement To Extend Revolving Loan........................12
Section 2.1.1. Conditions Precedent To Each Advance....................13
Section 2.1.2. Interest And Lender's Records...........................13
Section 2.1.3. Commitment Fee..........................................14
Section 2.1.4. Facility Fee............................................14
Section 2.1.5. Monitoring Fee. ........................................14
Section 2.1.6. Term....................................................14
Section 2.1.7. Purpose.................................................14
Section 2.2. Letters Of Credit.........................................14
Section 2.2.1. Issuance Of Letters Of Credit. .........................14
Section 2.2.2. Rights And Remedies Of The Lender. .....................15
Section 2.2.3. Indemnification. .......................................15
Section 2.2.4. Reimbursement Obligations. .............................15
Section 2.2.5. Fees, Charges And Other Terms. .........................16
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Section 2.3. Capital Adequacy. ........................................16
Section 2.4. Payments. ................................................16
Section 2.5. Advancements. ............................................16
Section 2.6. Termination. .............................................17
ARTICLE 3
SECURITY FOR THE OBLIGATIONS..................................................17
Section 3.1. Grant Of Security Interest. ..............................17
Section 3.2. Proceeds And Products. ...................................18
Section 3.3. Priority Of Security Interests. ..........................18
Section 3.4. Future Advances. .........................................18
Section 3.5. Receivable Collections. ..................................18
Section 3.6. Collection Of Receivables By Lender. .....................18
Section 3.7. Maintenance Of Principal Accounts.........................19
Section 3.8. Further Assurances. ......................................19
Section 3.9. Fair Labor Standards Act. ................................20
ARTICLE 4
REPRESENTATIONS AND WARRANTIES................................................20
Section 4.1. Accuracy Of Information. .................................20
Section 4.2. No Litigation. ...........................................20
Section 4.3. No Liability Or Adverse Change. ..........................20
Section 4.4. Title To Collateral. .....................................21
Section 4.5. Authority; Approvals And Consents.........................21
Section 4.5.1. Authority. .............................................21
Section 4.5.2. Approvals. .............................................21
Section 4.5.3. Consents. ..............................................21
Section 4.6. Binding Effect Of Documents, Etc. ........................21
Section 4.7. Other Names. .............................................22
Section 4.8. No Events Of Default. ....................................22
Section 4.9. Taxes. ...................................................22
Section 4.10. Compliance With Laws. ....................................22
Section 4.11. Chief Place Of Business. .................................22
Section 4.12. Location Of Inventory. ...................................22
Section 4.13. No Subsidiaries. .........................................22
Section 4.14. No Labor Agreements. .....................................22
Section 4.15. Eligible Accounts. .......................................23
Section 4.16. Approvals. ...............................................23
Section 4.17. Financial Statements. ....................................23
Section 4.18. Solvency. ................................................23
Section 4.19. Fair Labor Standards Act. ................................23
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Section 4.20. Employee Benefit Plans....................................23
Section 4.20.1. Compliance. ............................................23
Section 4.20.2. Absence Of Termination Event. ..........................23
Section 4.20.3. Actuarial Value. .......................................24
Section 4.20.4. No Withdrawal Liability. ...............................24
Section 4.21. Environmental Conditions..................................24
Section 4.21.1. Existence Of Permits. ..................................24
Section 4.21.2. Compliance With Permits. ...............................24
Section 4.21.3. No Litigation. .........................................24
Section 4.21.4. No Releases. ...........................................24
Section 4.21.5. Transportation. ........................................24
Section 4.21.6. No Violation Notices. ..................................25
Section 4.21.7. No Notice Of Violations. ...............................25
ARTICLE 5
AFFIRMATIVE COVENANTS.........................................................25
Section 5.1. Payment. .................................................25
Section 5.2. Insurance. ...............................................25
Section 5.3. Books And Records. .......................................25
Section 5.4. Collection Of Accounts; Sale Of Inventory. ...............26
Section 5.5. Notice Of Litigation And Proceedings. ....................26
Section 5.6. Payment Of Liabilities To Third Persons. .................26
Section 5.7. Notice Of Change Of Business Location.....................26
Section 5.8. Payment Of Taxes. ........................................26
Section 5.9. Inspections Of Records. ..................................27
Section 5.10. Notice Of Events Affecting Collateral; Compromise Of
Receivables; Returned Or Repossessed Goods. ..............27
Section 5.11. Documentation Of Collateral. .............................27
Section 5.12. Reporting Requirements. ..................................28
Section 5.12.1. Receivables And Accounts Payable Reports. ..............28
Section 5.12.2. Borrowing Base Report. .................................28
Section 5.12.3. Quarterly Financial Statements. ........................28
Section 5.12.4. Monthly Financial Statements. ..........................28
Section 5.12.5. Annual Financial Statements. ...........................28
Section 5.12.6. SEC And Other Filings...................................29
Section 5.12.7. Management Letters. ....................................29
Section 5.12.8. Certificates Of No Default. ............................29
Section 5.12.9. Reports To Other Creditors. ............................29
Section 5.12.10. Management Changes. ....................................30
Section 5.12.11. General Information.....................................30
Section 5.13. Employee Benefit Plans And Guaranteed Pension Plans. .....30
Section 5.14. Maintenance Of Fixed Assets. .............................30
Section 5.15. Consignments. ............................................30
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Section 5.16. Federal Assignment Of Claims Act. ........................31
Section 5.17. Compliance With Laws. ....................................31
Section 5.18. Tangible Net Worth........................................32
Section 5.19. EBITDA....................................................32
Section 5.20. Interest Coverage Ratio...................................32
ARTICLE 6
NEGATIVE COVENANTS............................................................32
Section 6.1. No Change Of Name, Merger, Etc. ..........................32
Section 6.2. No Sale Or Transfer Of Assets. ...........................33
Section 6.3. No Encumbrance Of Assets. ................................33
Section 6.4. No Indebtedness. .........................................33
Section 6.5. Restricted Payments. .....................................33
Section 6.6. Transactions With Affiliates. ............................33
Section 6.7. Loans, Investments And Sale-Leasebacks. ..................33
Section 6.8. No Acquisition Of Equity In Or Assets Of Third Persons. ..33
Section 6.9. No Assignment. ...........................................33
Section 6.10. No Alteration Of Structure Or Operations..................33
Section 6.11. Unpermitted Uses Of Loan Proceeds. .......................33
Section 6.12. Long Term Contracts. .....................................34
Section 6.13. Changes In Fiscal Year. ..................................34
Section 6.14. Limitation On Issuance Of Equity Interests. ..............34
Section 6.15. Capital Expenditures......................................34
ARTICLE 7
EVENTS OF DEFAULT.............................................................34
Section 7.1. Failure To Pay. ..........................................34
Section 7.2. Violation Of Covenants. ..................................34
Section 7.3. Representation Or Warranty. ..............................35
Section 7.4. Default Under Loan Documents. ............................35
Section 7.5. Cross-Default. ...........................................35
Section 7.6. Judgments.................................................35
Section 7.7. Levy By Judgment Creditor. ...............................35
Section 7.8. Failure To Pay Liabilities................................35
Section 7.9. Involuntary Insolvency Proceedings. ......................35
Section 7.10. Voluntary Insolvency Proceedings. ........................35
Section 7.11. Material Adverse Event. ..................................35
Section 7.12. ERISA. ...................................................35
Section 7.13. Transfer Of Equity Interests. ............................36
Section 7.14. Indictment Of Borrower. ..................................36
Section 7.15. Injunction. ..............................................36
Section 7.16. Notice And Cure Rights. ..................................36
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ARTICLE 8
RIGHTS AND REMEDIES ON THE OCCURRENCEOF AN EVENT OF DEFAULT...................36
Section 8.1. Lender's Specific Rights And Remedies. ...................36
Section 8.2. Automatic Acceleration. ..................................37
Section 8.3. Sale Of Collateral. ......................................37
Section 8.4. Letters Of Credit. .......................................38
Section 8.5. Remedies Cumulative. .....................................38
ARTICLE 9
GENERAL CONDITIONS AND TERMS..................................................38
Section 9.1. Obligations Are Unconditional. ...........................38
Section 9.2. Indemnity. ...............................................38
Section 9.3. Lender Expenses. .........................................39
Section 9.4. Authorization To Obtain Financial Information. ...........39
Section 9.5. Incorporation; Construction Of Inconsistent Provisions. ..39
Section 9.6. Waivers. .................................................39
Section 9.7. Continuing Obligation Of Borrower. .......................39
Section 9.8. Choice Of Law. ...........................................39
Section 9.9. Submission To Jurisdiction; Venue; Actions Against Lender.39
Section 9.9.1. Jurisdiction. ..........................................40
Section 9.9.2. Venue. 40
Section 9.9.3. Waiver Of Objections To Venue. .........................40
Section 9.10. Notices. .................................................40
Section 9.11. Participations. ..........................................41
Section 9.12. Miscellaneous Provisions. ................................41
Section 9.13. Waiver Of Trial By Jury. .................................42
Schedules
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Schedule 1.48 Permitted Liens
Schedule 4.2 Pending Litigation
Schedule 4.7 Other Names
Schedule 4.11 Chief Place Of Business
Schedule 4.12 Location Of Inventory
Schedule 4.13 No Subsidiaries
Schedule 4.17 Liabilities And Obligations Not Disclosed In Financial
Statements
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is dated as of February 10, 2000 by
and between ACCOM, INC., a Delaware corporation ("BORROWER") and THE PROVIDENT
BANK, an Ohio chartered banking institution ("LENDER").
RECITALS
The BORROWER has requested that the LENDER extend various credit
accommodations to the BORROWER. The LENDER is willing to provide the requested
credit accommodations upon the terms and conditions of this Loan And Security
Agreement, and upon the granting by the BORROWER to the LENDER of the security
interests, liens, and other assurances of payment provided for in this Loan And
Security Agreement.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Loan And Security Agreement, the terms set forth in
this Article 1 have the meanings set forth below, unless the specific context of
this Loan And Security Agreement clearly requires a different meaning. Terms
defined in this Article 1 or elsewhere in this Loan And Security Agreement are
in all capital letters throughout this Loan And Security Agreement. The singular
use of any defined term includes the plural and the plural use includes the
singular.
Section 1.1. Account Debtor. The term "ACCOUNT DEBTOR" means
collectively each PERSON: (a) to or for whom the BORROWER has provided or has
agreed to provide any goods or services; or (b) which owes the BORROWER any sum
of money as a result of goods sold or services provided by the BORROWER; or (c)
which is the maker or endorser on any INSTRUMENT payable to the BORROWER or
otherwise owes the BORROWER any sum of money on account of any loan or other
payment obligation. With respect to each RECEIVABLE which is payable by any
governmental authority, "ACCOUNT DEBTOR" includes, without limitation, the
agency, instrumentality or official which has the duty of remitting or causing
the remittance of the amounts owing on such ACCOUNT or other RECEIVABLE.
Section 1.2. Accounts, Chattel Paper, Documents, Equipment, Fixtures,
General Intangibles, Goods, Instruments and Investment Property. The terms
"ACCOUNTS," "CHATTEL PAPER," "DOCUMENTS," "EQUIPMENT," "GENERAL INTANGIBLES,"
"GOODS," "INSTRUMENTS," and "INVESTMENT PROPERTY" shall have the same respective
meanings as are given to those terms in the Uniform Commercial Code-Secured
Transactions, Title 9, Commercial Law Article, Annotated Code of Maryland, as
amended. The term "FIXTURES" shall have the meaning provided by the common law
of the state in which the fixtures are located.
Section 1.3. Affiliate. The term "AFFILIATE" means collectively any
PERSON: (a) that directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with the BORROWER,
including, without limitation, the officers, managers and directors of the
BORROWER; (b) that directly or beneficially owns or holds ten percent (10%) or
more of any equity interests in the BORROWER; or (c) ten percent (10%) or more
of whose equity interests are owned directly or controlled by the BORROWER. As
used herein, the term "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of the power to direct the management or policies of a PERSON,
whether through ownership of equity interests, by contract or otherwise.
Section 1.4. Agreement. The term "AGREEMENT" means this Loan And
Security Agreement, as amended, extended, or modified from time to time by the
parties hereto, as well as all schedules, exhibits and attachments hereto.
Section 1.5. Borrowing Base. The term "BORROWING BASE" means an amount
equal to: (a) eighty percent (80%) of the face amount (less maximum discounts,
credits and allowances which may be taken by or are granted to ACCOUNT DEBTORS
in connection therewith) of billed ELIGIBLE ACCOUNTS; minus (b) the aggregate
stated amount of all outstanding LETTERS OF CREDIT and unsatisfied reimbursement
obligations of the BORROWER arising out of LETTERS OF CREDIT and such reserves
as the LENDER deems appropriate from time to time, including without limitation,
reserves determined by the LENDER to be appropriate with respect to bankers'
acceptances, GUARANTY INDEBTEDNESS, INTEREST RATE PROTECTION AGREEMENTS, and
other obligations of the BORROWER.
Section 1.6. Business Day. The term "BUSINESS DAY" means any day other
than a Saturday, Sunday, or other day on which commercial banking institutions
in the State of Maryland are required to be closed.
Section 1.7. Capital Adequacy Requirement. The term "CAPITAL ADEQUACY
REQUIREMENT" means any LAW imposing any capital adequacy requirement or any
other similar requirement (including but not limited to the capital adequacy
regulations contained in Parts 3, 208 and 225 of Title 12 of the Code of Federal
Regulations, as amended), any change in such LAWS or in the interpretation or
application thereof, and any request or directive regarding capital adequacy
(whether or not having the force of law) from any central bank or government
authority.
Section 1.8. Capital Expenditures. The term "CAPITAL EXPENDITURES"
means, for any period, the aggregate of all expenditures (whether paid in cash
or accrued as liabilities and including expenditures for CAPITAL LEASE
OBLIGATIONS) by the BORROWER during such period that are required by G.A.A.P. to
be included in or reflected by the property, plant, equipment or similar capital
asset accounts in the consolidated balance sheet of the BORROWER.
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Section 1.9. Capital Lease. The term "CAPITAL LEASE" means a lease with
respect to which the lessee's obligations thereunder should, in accordance with
G.A.A.P., be capitalized and reflected as a liability on the balance sheet of
the lessee.
Section 1.10. Capital Lease Obligations. The term "CAPITAL LEASE
OBLIGATIONS" means any indebtedness incurred as a lessee pursuant to a CAPITAL
LEASE.
Section 1.11. Closing. The term "CLOSING" means the execution and
delivery of this AGREEMENT, the NOTES, and various other LOAN DOCUMENTS. The
date of CLOSING is the date written above as the date of this AGREEMENT.
Section 1.12. Code. The term "CODE" means the Internal Revenue Code of
1986, as amended, and all Treasury regulations, revenue rulings, revenue
procedures or announcements issued thereunder.
Section 1.13. Collateral. The term "COLLATERAL" means all of the
tangible and intangible assets of the BORROWER, wherever located, whether now
owned or hereafter acquired by the BORROWER, together with all substitutions
therefor, and all replacements and renewals thereof, and all accessions,
additions, replacement parts, manuals, warranties and packaging relating
thereto, including but not limited to the following tangible and intangible
assets and property rights of the BORROWER: (a) ACCOUNTS; (b) CHATTEL PAPER; (c)
DOCUMENTS; (d) EQUIPMENT; (e) FIXTURES; (f) GENERAL INTANGIBLES; (g) GOODS; (h)
INSTRUMENTS; (i) INVENTORY, including returned, rejected, or repossessed
INVENTORY and rights of reclamation and stoppage in transit with respect to
INVENTORY; (j) INVESTMENT PROPERTY; (k) RECEIVABLES; (l) deposit accounts; (m)
letter of credit rights; (n) copyrights, trademarks, patents, and all pending
applications thereof; and (o) all RECORDS relating to or pertaining to any of
the above listed COLLATERAL.
Section 1.14. Collection Account. The term "COLLECTION ACCOUNT" means a
bank account designated by the LENDER from which the LENDER alone has power of
access and withdrawal.
Section 1.15. Commercial Account. The term "COMMERCIAL ACCOUNT" means
the commercial checking account to be established and maintained by the BORROWER
with the LENDER and which may be utilized as the means of advancing funds under
the LOAN.
Section 1.16. Default. The term "DEFAULT" means any event, occurrence
or omission which, with the giving of notice, the passage of time, or both,
would constitute an EVENT OF DEFAULT.
Section 1.17. Dollar Cap. The term "DOLLAR CAP" shall mean the sum of
One Million Five Hundred Thousand Dollars ($1,500,000.00); provided that the
DOLLAR CAP shall increase from One Million Five Hundred Thousand Dollars
3
($1,500,000.00) to Two Million Dollars ($2,000,000.00) after March 31, 2000, if
the BORROWER'S financial statements for the quarter ending March 31, 2000
submitted pursuant to Section 5.12 demonstrates that the BORROWER'S EBITDA for
the quarter ending March 31, 2000 was not less than One Hundred Thousand Dollars
($100,000.00). The DOLLAR CAP shall not increase until such time after March 31,
000 as the LENDER has received the quarterly financial statements of the
BORROWER, together with any supporting statements and information, as required
by the LENDER to verify that the BORROWER'S EBITDA for the quarter ending March
31, 2000 has not been less than One Hundred Thousand Dollars ($100,000.00), and
the LENDER has confirmed in writing that the condition to the increase in the
DOLLAR CAP has been satisfied.
Section 1.18. EBITDA. The term "EBITDA" means, with respect to any
period of determination, the earnings of the referenced PERSON for such period
of determination before interest, taxes, depreciation, and amortization, and
without regard to gains or losses arising from asset sales not in the ordinary
course of business (including, without limitation, the sale of the virtual
production line in January, 2000), all as determined in accordance with G.A.A.P.
Section 1.19. Eligible Accounts. The term "ELIGIBLE ACCOUNTS" means
those ACCOUNTS which are acceptable to the LENDER. The criteria for eligibility
may be fixed and revised from time to time by the LENDER in its discretion. An
ACCOUNT in no event shall be deemed eligible unless: (a) the ACCOUNT arises from
goods sold or leased or from services performed in the ordinary course of
business of the BORROWER; (b) the delivery of the goods or the performance of
the services has been completed; (c) no return, rejection, or repossession has
occurred; (d) the goods delivered or the services performed have been finally
and unconditionally accepted by the ACCOUNT DEBTOR without dispute, objection,
complaint, offset, defense, counterclaim, adjustment or allowance; (e) the
ACCOUNT DEBTOR'S obligation to pay the ACCOUNT is not subject to any repurchase
obligation or return right, as with sales made on a xxxx-and-hold, guaranteed
sale, sale-and-return, sale on approval (except with respect to ACCOUNTS in
connection with which ACCOUNT DEBTORS are entitled to return INVENTORY solely on
the basis of the quality of such INVENTORY) or consignment basis; (f) no more
than ninety (90) days have elapsed from the billing or invoice date and no more
than sixty (60) days have elapsed from the due date unless such ACCOUNT has the
benefit of credit insurance and is owed by an ACCOUNT DEBTOR located outside of
the United States of America, in which case the ACCOUNT shall not be more than
one hundred fifty (150) days due from the date of invoice; (g) no prior,
contemporaneous, or subsequent assignment, claim, lien, or security interest,
other than that of the LENDER, applies to the ACCOUNT; (h) no bankruptcy or
insolvency proceedings or payment moratoriums of any kind apply to the ACCOUNT;
(i) the ACCOUNT DEBTOR is not, in the LENDER'S sole opinion, unlikely to pay
because of death, incompetency, disappearance, potential bankruptcy, insolvency,
damage to or disposition of the goods, default, or any other reason whatsoever;
(j) the LENDER has not, by notice to the BORROWER, in the LENDER'S sole
discretion, deemed the ACCOUNT unsatisfactory for any reason; (k) no bonding
company or surety asserts or has the ability to assert any claim based upon the
legal doctrine of equitable subrogation, or under any other right to claim a
lien into or right to payment of the ACCOUNT; (l) the ACCOUNT does not arise
4
from or pertain to any transaction with any AFFILIATE; (m) the ACCOUNT is not
payable from any ACCOUNT DEBTOR located outside of the geographic boundaries of
the United States of America (unless or to the extent such ACCOUNT is secured by
a letter of credit or credit insurance acceptable to the LENDER); (n) the
BORROWER is legally empowered to collect the ACCOUNT against the ACCOUNT DEBTOR
in the jurisdiction in which the ACCOUNT DEBTOR is located; (o) the ACCOUNT is
not payable by an ACCOUNT DEBTOR with respect to which more than twenty-five
percent (25%) of the dollar amount of that ACCOUNT DEBTOR'S RECEIVABLES to the
BORROWER fail to comply with Subsection 1.19.(f) above; (p) the ACCOUNT does not
arise from any contract or agreement with any federal, state, local or foreign
government unless such governmental authority is the United States of America or
an agency or representative thereof and the LENDER has obtained full compliance
to its complete satisfaction with all provisions necessary to protect the
LENDER'S interests under The Assignment of Claims Act of 1940, as amended, and
all regulations promulgated thereunder, and all other applicable federal
procurement laws and regulations; and (q) the LENDER has a perfected first
priority security interest therein. An ACCOUNT which otherwise satisfies the
LENDER'S criteria for eligibility shall also be subject to the following
eligibility limitations: (i) if the ACCOUNT is payable by an ACCOUNT DEBTOR to
whom the BORROWER owes money, only the portion of the ACCOUNT in excess of the
amount owed by the BORROWER to the ACCOUNT DEBTOR may be eligible; (ii) if the
ACCOUNT is due from an ACCOUNT DEBTOR whose ACCOUNTS in the aggregate constitute
in excess of ten percent (10%) of all of the ACCOUNTS of the BORROWER, only the
portion of the aggregate amount of the ACCOUNTS from that ACCOUNT DEBTOR which
does not exceed ten percent (10%) of all of the ACCOUNTS of the BORROWER may be
eligible; and (iii) to the extent the ACCOUNT includes a separately billed
finance charges, such finance charges are not eligible.
Section 1.20. Employee Benefit Plan. The term "EMPLOYEE BENEFIT PLAN"
means an "employee benefit plan" as defined in Section 3(3) of ERISA.
Section 1.21. Environmental Laws. The term "ENVIRONMENTAL LAWS" means
individually or collectively any local, state or federal LAW, statute, rule,
regulation, order, ordinance, common law, permit or license term or condition,
or state superlien or environmental clean-up or disclosure statutes pertaining
to the environment or to environmental contamination, regulation, management,
control, treatment, storage, disposal, containment, removal, clean-up,
reporting, or disclosure, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as now or
hereafter amended (including, but not limited to, the Superfund Amendments and
Reauthorization Act); the Resource Conservation and Recovery Act, as now or
hereafter amended (including, but not limited to, the Hazardous and Solid Waste
Amendments of 1984); the Toxic Substances Control Act, as now or hereafter
amended; the Clean Water Act, as now or hereafter amended; the Safe Drinking
Water Act, as now or hereafter amended; or the Clean Air Act, as now or
hereafter amended.
Section 1.22. EPA Permit. The term "EPA PERMIT" has the meaning given
that term in Section 4.21 of this AGREEMENT.
5
Section 1.23. ERISA. The term "ERISA" means the Employee Retirement
Income Security Act of 1974 and regulations issued thereunder, as amended from
time to time and any successor statute.
Section 1.24. ERISA Affiliate. The term "ERISA AFFILIATE" means, in
relation to any PERSON, any trade or business (whether or not incorporated)
which is a member of a group of which that PERSON is a member and which is under
common control within the meaning of the regulations promulgated under Section
414 of the CODE.
Section 1.25. ERISA Liabilities. The term "ERISA LIABILITIES" means the
aggregate of all unfunded vested benefits under any employee pension benefit
plan, within the meaning of Section 3(2) of ERISA, of the BORROWER or any ERISA
AFFILIATE of the BORROWER under any plan covered by ERISA that is not a
MULTIEMPLOYER PLAN and all potential withdrawal liabilities of the BORROWER or
any ERISA AFFILIATE under all MULTIEMPLOYER PLANS.
Section 1.26. Event Of Default. The term "EVENT OF DEFAULT" means any
of the events set forth in Article 7 of this AGREEMENT, provided that any
requirement for the giving of notice, the lapse of time, or both, or any other
expressly stated condition, has been satisfied.
Section 1.27. Facilities. The term "FACILITIES" means all real property
and the improvements thereon used or occupied or leased by the BORROWER or
otherwise used at any time by the BORROWER in the operation of its business or
for the manufacture, storage, or location of any of the COLLATERAL.
Section 1.28. Fiscal Year. The term "FISCAL YEAR" means the fiscal year
of the BORROWER which is the twelve (12) month accounting period commencing
January 1 and ending December 31 of each calendar year.
Section 1.29. G.A.A.P. The term "G.A.A.P." means, with respect to any
date of determination, generally accepted accounting principles as used by the
Financial Accounting Standards Board and/or the American Institute of Certified
Public Accountants consistently applied and maintained throughout the periods
indicated.
Section 1.30. Guaranteed Pension Plan. The term "GUARANTEED PENSION
PLAN" means any pension plan maintained by the BORROWER or an ERISA AFFILIATE of
the BORROWER, or to which the BORROWER or an ERISA AFFILIATE contributes, some
or all of the benefits under which are guaranteed by the United States Pension
Benefit Guaranty Corporation.
Section 1.31. Indebtedness. The term "INDEBTEDNESS" means, as to any
referenced PERSON (determined without duplication): (a) indebtedness of such
PERSON for borrowed money (whether by loan or the issuance and sale of debt
securities), or for the deferred purchase or acquisition price of property or
services (other than accounts payable incurred in the ordinary course of
business); (b) obligations of such PERSON in respect of letters of credit or
similar instruments issued or accepted by financial institutions for the account
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of such PERSON (whether or not such obligations are contingent); (c) CAPITAL
LEASE OBLIGATIONS of such PERSON; (d) obligations of such PERSON to redeem or
otherwise retire equity interests in such PERSON; and (e) indebtedness of others
of the type described in clause (a), (b), (c) or (d) above secured by a lien on
any of the property of such PERSON, whether or not the respective obligation so
secured has been assumed by such PERSON.
Section 1.32. Insolvency Proceedings. The term "INSOLVENCY PROCEEDINGS"
means, with respect to any referenced PERSON, any case or proceeding commenced
by or against such PERSON, under any provision of the United States Bankruptcy
Code, as amended, or under any other federal or state bankruptcy or insolvency
law, or any assignments for the benefit of creditors, formal or informal
moratoriums, receiverships, compositions or extensions with some or all
creditors with respect to any indebtedness of such PERSON.
Section 1.33. Interest Rate Protection Agreement. The term "INTEREST
RATE PROTECTION AGREEMENT" means, with respect to any referenced PERSON, an
interest rate swap, hedge, cap or collar agreement or similar arrangement
between such PERSON and one or more financial institutions providing for the
transfer or mitigation of interest risks either generally or under specific
contingencies.
Section 1.34. Interest Coverage Ratio. The term "INTEREST COVERAGE
RATIO" means the ratio of EBITDA to INTEREST EXPENSE.
Section 1.35. Interest Expense. The term "INTEREST EXPENSE" means, as
of any determination date, all interest paid or accrued by the BORROWER and its
SUBSIDIARIES on any INDEBTEDNESS during the fiscal year of the BORROWER through
the fiscal quarter ending on such date.
Section 1.36. Inventory. The term "INVENTORY" shall have the same
meaning as provided to such term in the Uniform Commercial Code - Secured
Transactions, Title 9, Commercial Law Article, Annotated Code of Maryland, as
amended, together with all of the BORROWER'S goods, merchandise, materials, raw
materials, goods in process, finished goods, work in progress, bindings or
component materials, packaging and shipping materials and other tangible or
intangible personal property, now owned or hereafter acquired and held for sale
or lease or furnished or to be furnished under contracts of service or which
contribute to the finished products or the sale, promotion, storage and shipment
thereof, whether located at facilities owned or leased by the BORROWER, in the
course of transport to or from ACCOUNT DEBTORS, used for demonstration, placed
on consignment, or held at storage locations.
Section 1.37. Laws. The term "LAWS" means all ordinances, statutes,
rules, regulations, orders, injunctions, writs or decrees of any government or
political subdivision or agency thereof, or any court or similar entity
established by any thereof.
Section 1.38. Lender Expenses. The term "LENDER EXPENSES" means the
out-of-pocket expenses or costs incurred by the LENDER arising out of,
pertaining to, or in any way connected with this AGREEMENT, any of the other
LOAN DOCUMENTS or the OBLIGATIONS, or any documents executed in connection
7
herewith or transactions hereunder. The term "LENDER EXPENSES" shall include,
without limitation: (a) the costs or expenses required to be paid by the
BORROWER pursuant to this AGREEMENT or any of the LOAN DOCUMENTS; (b) taxes and
insurance premiums advanced or otherwise paid by the LENDER in connection with
the COLLATERAL or on behalf of the BORROWER; (c) filing, recording, title
insurance, environmental and consulting fees, audit fees, search fees and other
expenses paid or incurred by the LENDER in connection with the LENDER'S
transactions with the BORROWER; (d) costs and expenses incurred by the LENDER in
the collection of the ACCOUNTS (with or without the institution of legal
action), or to enforce any provision of this AGREEMENT, or in gaining possession
of, maintaining, handling, evaluating, preserving, storing, shipping, selling,
preparing for sale and/or advertising to sell the COLLATERAL or any other
property of the BORROWER whether or not a sale is consummated; (e) costs and
expenses of litigation incurred by the LENDER, or any participant of the LENDER
in any of the OBLIGATIONS, in enforcing or defending this AGREEMENT or any
portion hereof or in collecting any of the OBLIGATIONS; (f) reasonable
attorneys' fees and expenses incurred by the LENDER in obtaining advice or the
services of its attorneys with respect to the structuring, drafting,
negotiating, reviewing, amending, terminating, enforcing or defending of this
AGREEMENT, or any portion hereof or any agreement or matter related hereto,
whether or not litigation is instituted; (g) reasonable travel expenses related
to any of the foregoing; and (h) audit and examination fees and expenses in the
amount of Seven Hundred Fifty Dollars ($750.00) per person per day, plus
reasonable out-of-pocket expenses for travel, hotel costs, and meals.
Section 1.39. Letters Of Credit. The term "LETTERS OF CREDIT" means
collectively letters of credit issued from time to time by the LENDER for the
account or benefit of the BORROWER.
Section 1.40. Loan. The term "LOAN" means the REVOLVING LOAN.
Section 1.41. Loan Documents. The term "LOAN DOCUMENTS" means all
agreements, instruments and documents, including without limitation each
document listed as a "Loan Document" on a Closing Index of even date herewith,
together with all other loan agreements (including without limitation this
AGREEMENT), notes (including without limitation the NOTE), guarantees,
subordination agreements, intercreditor agreements, pledges, affidavits, powers
of attorney, consents, assignments, landlord and mortgage waivers, opinions,
collateral assignments, reimbursement agreements, contracts, notices, leases,
financing statements, mortgages, deeds of trusts, assignments of rents or
contract proceeds, intellectual property security agreements, pledges, letter of
credit applications, INTEREST RATE PROTECTION AGREEMENTS, and all other written
matter, whether heretofore, now or hereafter executed by or on behalf of the
BORROWER, any of the GUARANTORS, or by any other PERSON in connection with any
of the OBLIGATIONS.
Section 1.42. Lock Box. The term "LOCK BOX" has the meaning given that
term in Section 3.5 of this AGREEMENT.
8
Section 1.43. Material Adverse Event. The term "MATERIAL ADVERSE EVENT"
means the occurrence of any event, condition, or omission which the LENDER in
the good faith reasonable exercise of the LENDER'S discretion determines could
be expected to have a material adverse effect upon: (a) the condition (financial
or otherwise), results of operations, properties, assets, liabilities
(including, without limitation, tax liabilities, liabilities under ENVIRONMENTAL
LAWS, and ERISA LIABILITIES), businesses, operations, capitalization, equity,
licenses, franchises or prospects of the BORROWER; (b) the ability of the
BORROWER to perform any of the OBLIGATIONS when and as required by the terms of
the LOAN DOCUMENTS; (c) the rights and remedies of the LENDER as provided by the
LOAN DOCUMENTS; or (d) the value, condition, use, or availability of any of the
COLLATERAL or upon any of the LENDER'S liens and security interests securing the
OBLIGATIONS.
Section 1.44. Maximum Revolving Loan Amount. The term "MAXIMUM
REVOLVING LOAN AMOUNT" means the lesser of the BORROWING BASE or the DOLLAR CAP.
Section 1.45. Multiemployer Plan. The term "MULTIEMPLOYER PLAN" means a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA which is
maintained for employees of the BORROWER, or any ERISA AFFILIATE of the
BORROWER.
Section 1.46. Note. The term "NOTE" means the REVOLVING LOAN NOTE.
Section 1.47. Obligations. The term "OBLIGATIONS" means collectively
all of the obligations of the BORROWER to pay to the LENDER: (a) sums due to the
LENDER arising out of or in connection with the LOAN or otherwise pursuant to
the terms of the LOAN DOCUMENTS; (b) indemnification obligations owed by the
BORROWER to the LENDER in accordance with the terms of the LOAN DOCUMENTS; (c)
LENDER EXPENSES; (d) overdrafts of the BORROWER upon any accounts with the
LENDER; (e) payments, duties or obligations owed to the LENDER arising from or
with respect to INTEREST RATE PROTECTION AGREEMENTS, foreign exchange facilities
or currency transactions, existing or arising from time to time; (f) any sums
owed to the LENDER arising out of or relating to any LETTERS OF CREDIT
including, without limitation, all reimbursement and indemnification
obligations, and obligations to pay fees; (g) all other indebtedness or
liability of the BORROWER to the LENDER, whether direct or indirect, joint or
several, absolute or contingent, contemplated or not presently contemplated, now
existing or hereafter arising; and (h) any indebtedness or liability which may
exist or arise as a result of any payment made by or for the benefit of the
BORROWER being avoided or set aside for any reason including, without
limitation, any payment being avoided as a preference under Sections 547 and 550
of the United States Bankruptcy Code, as amended, or under any state law
governing insolvency or creditors' rights.
Section 1.48. Permitted Liens. The term "PERMITTED LIENS" means: (a)
liens for taxes, assessments, or similar charges incurred in the ordinary course
of business that are not yet due and payable; (b) liens in favor of the LENDER;
(c) any existing liens specifically described on Schedule 1.48 hereof; (d) any
lien on specifically allocated money or securities to secure payments under
workmen's compensation, unemployment insurance, social security and other
9
similar LAWS, or to secure the performance of bids, tenders or contracts (other
than for the repayment of borrowed money) or to secure statutory obligations or
appeal bonds, or to secure indemnity, performance or other similar bonds in the
ordinary course of business; (e) purchase money security interests for EQUIPMENT
not to exceed in aggregate amount outstanding at any one time the sum of Fifty
Thousand Dollars ($50,000.00), provided that such purchase money security
interests do not attach to any assets other than the specific item(s) of
EQUIPMENT acquired with the proceeds of the loan secured by such purchase money
security interests; and (f) subsequently arising liens which are expressly
approved in advance of the creation of any such liens by the LENDER in writing.
Section 1.49. Person. The term "PERSON" means any individual,
corporation, partnership, limited liability company, association, joint-stock
company, trust, estate, unincorporated organization, joint venture, court,
government or political subdivision or agency thereof, or other legal entity.
Section 1.50. Receivables. The term "RECEIVABLES" means all of the
ACCOUNTS, INSTRUMENTS, DOCUMENTS, GENERAL INTANGIBLES, CHATTEL PAPER, notes,
notes receivable, drafts, acceptances, and choses in action, of the BORROWER,
now existing or hereafter created or acquired, and all proceeds and products
thereof, and all rights thereto, arising from the sale or lease of or the
providing of INVENTORY, GOODS, or services by the BORROWER to ACCOUNT DEBTORS,
as well as all other rights, contingent or non-contingent, of any kind of the
BORROWER to receive payment, benefit, or credit from any PERSON.
Section 1.51. Records. The term "RECORDS" means correspondence,
memoranda, tapes, discs, papers, books and other documents, or transcribed
information of any type, whether expressed in ordinary, computer or machine
language.
Section 1.52. Regulated Substance. The term "REGULATED SUBSTANCE" means
any substance which, pursuant to any ENVIRONMENTAL LAW, is identified as a
hazardous substance (or other term having similar import) or is otherwise
subject to special requirements in connection with the use, storage,
transportation, disposition or other handling thereof.
Section 1.53. Release. The term "RELEASE" means a "release" as defined
in Section 101(22) of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as now or hereafter amended.
Section 1.54. Restricted Payment. The term "RESTRICTED PAYMENT" means
collectively: (a) any dividend or other payment or distribution, direct or
indirect, on account of any equity interest in the BORROWER now or hereafter
outstanding, except a dividend or distribution payable solely in the same class
or type of equity interest to the holders of that class or type; (b) any
redemption, conversion, exchange, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, by the BORROWER of
any equity interest in the BORROWER now or hereafter outstanding; (c) any
payment made by the BORROWER to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire equity interests in the
BORROWER now or hereafter outstanding; or (d) any payment by the BORROWER of any
10
management, consulting or similar fees which are not salary payments in amounts
comparable to sums paid in the marketplace for similar services to unrelated
employees for services actually performed.
Section 1.55. Revolving Loan. The term "REVOLVING LOAN" means the
revolving credit facility extended by the LENDER to the BORROWER in accordance
with the terms set forth in this AGREEMENT.
Section 1.56. Revolving Loan Note. The term "REVOLVING LOAN NOTE"
means, the Revolving Loan Promissory Note of even date herewith from the
BORROWER as maker thereof which is payable to the order of the LENDER in the
stated principal amount of Two Million Dollars ($2,000,000.00).
Section 1.57. Solvent. The term "SOLVENT" means, as to any referenced
PERSON, that as of the date of determination both: (a) (i) the then fair
saleable value of the property of such PERSON is greater than the total amount
of liabilities (including contingent liabilities) of such PERSON and is not less
than the amount that will be required to pay the probable liabilities on such
PERSON'S then existing debts as they become absolute and matured considering all
financing alternatives and potential asset sales reasonably available to such
PERSON; (ii) such PERSON'S capital is not unreasonably small in relation to its
business or any contemplated or undertaken transaction; and (iii) such PERSON
does not intend to incur, or believe (nor should it reasonably believe) that it
will incur, debts beyond its ability to pay such debts as they become due; and
(b) such PERSON is "solvent" within the meaning given that term and similar
terms under applicable laws relating to fraudulent transfers and conveyances.
For purposes of this definition, the amount of any contingent liability at any
time shall be computed as the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
Section 1.58. Subordinated Debt. The term "SUBORDINATED DEBT" means the
BORROWER'S INDEBTEDNESS which has been subordinated to the OBLIGATIONS pursuant
to a written agreement which has either been executed by the LENDER or approved
by the LENDER in writing.
Section 1.59. Subsidiary. The term "SUBSIDIARY" means, with respect to
any PERSON, any other PERSON of which securities or other ownership interests
representing an aggregate of fifty percent (50%) of more of the equity or the
ordinary voting power are, at the time as of which any determination is being
made, owned or controlled directly, or indirectly through one or more
intermediaries, by such PERSON.
Section 1.60. Tangible Net Worth. The term "TANGIBLE NET WORTH" means,
as of the date of determination, the amount equal to: (a) the BORROWER'S net
worth as of December 31, 1999, as determined in accordance with G.A.A.P. and as
set forth in the BORROWER'S audited fiscal year-end financial statements
delivered to the LENDER; plus (b) ninety percent (90%) of the BORROWER'S pre-tax
income (if such income is positive) for the period between January 1, 2000 and
the date of determination; plus (c) SUBORDINATED DEBT; minus (d) intangible
11
assets of the BORROWER; and minus (e) the gain on the sale of assets of the
BORROWER outside of the ordinary course of business at any time after December
31, 1999 (including, but not limited to, the gain from the sale of the virtual
production line in January, 2000).
Section 1.61. Termination Event. The term "TERMINATION EVENT" means:
(a) a "Reportable Event" described in Section 4043 of ERISA and the regulations
issued thereunder, but not including any such event for which the 30-day notice
requirement has been waived by applicable regulation; (b) the withdrawal of the
BORROWER or an ERISA AFFILIATE of the BORROWER from a GUARANTEED PENSION PLAN
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA; (c) the filing of a notice of intent to terminate a
GUARANTEED PENSION PLAN or the treatment of a GUARANTEED PENSION PLAN amendment
as a termination under Section 4041 of ERISA; (d) the institution of proceedings
to terminate a GUARANTEED PENSION PLAN by the Pension Benefit Guaranty
Corporation; (e) the withdrawal or partial withdrawal of the BORROWER or an
ERISA AFFILIATE of the BORROWER from a MULTIEMPLOYER PLAN; or (f) any other
event or condition which might reasonably be expected to constitute grounds
under ERISA for the termination of, or the appointment of a trustee to
administer, any GUARANTEED PENSION PLAN.
ARTICLE 2
TERMS OF LOAN
Section 2.1. Agreement To Extend Revolving Loan. Subject to the terms
and conditions stated herein, the LENDER agrees to extend the REVOLVING LOAN to
the BORROWER. The LENDER shall advance proceeds of the REVOLVING LOAN to the
BORROWER by depositing into the COMMERCIAL ACCOUNT or in accordance with such
other procedures as may be agreed to between the LENDER and the BORROWER, such
sums as the BORROWER may request, provided that the aggregate outstanding
principal balance of the REVOLVING LOAN shall never exceed at any time the
MAXIMUM REVOLVING LOAN AMOUNT. The BORROWER shall not request or permit any
advance of proceeds of the REVOLVING LOAN which would cause the aggregate amount
of advances made to or for the BORROWER and outstanding under the LOAN DOCUMENTS
to exceed the MAXIMUM REVOLVING LOAN AMOUNT. In the event that the principal
balance outstanding under the REVOLVING LOAN ever exceeds the MAXIMUM REVOLVING
LOAN AMOUNT, the BORROWER shall immediately, upon the demand of the LENDER,
reduce the principal balance of the REVOLVING LOAN to an amount which is not in
excess of the MAXIMUM REVOLVING LOAN AMOUNT. Any termination of the REVOLVING
LOAN by the LENDER shall relieve the LENDER of the LENDER'S obligation to lend
money or to make financial accommodations to or for the BORROWER and the
BORROWER'S accounts, and shall in no way release, terminate, discharge or excuse
the BORROWER from its absolute duty to pay or perform the OBLIGATIONS.
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Section 2.1.1. Conditions Precedent To Each Advance. The
obligation of the LENDER to make any advances under the REVOLVING LOAN,
including the initial advance, shall be subject to each of the following
conditions precedent:
a . No Defaults Or Events Of Default. No event shall have
occurred on or prior to such date and be continuing on such date, and no
condition shall exist on such date, which constitutes a DEFAULT or EVENT OF
DEFAULT.
b . Continuing Accuracy Of Representations And Warranties.
Each of the representations and warranties made by or on behalf of the BORROWER
and the GUARANTORS to the LENDER in the LOAN DOCUMENTS shall be true and correct
in all material respects when made and shall be deemed to be repeated as true,
accurate and complete as of the date of the BORROWER'S request for each advance.
c . Receipt Of Reports. The LENDER shall be in receipt of all
reports, financial statements, financial information and financial disclosures
required by the LOAN DOCUMENTS, except to the extent that the LENDER has waived
the receipt thereof.
d . No Illegalities. It shall not be unlawful for the LENDER
to perform any of the agreements or obligations imposed upon the LENDER by any
of the LOAN DOCUMENTS or for the BORROWER to perform any of its agreements or
obligations as provided by the LOAN DOCUMENTS.
e . No Material Adverse Event. No MATERIAL ADVERSE EVENT
shall have occurred and be then continuing.
Section 2.1.2. Interest And Lender's Records. All sums advanced
under the REVOLVING LOAN shall be evidenced by, and shall be repaid with
interest in accordance with, the provisions of the REVOLVING NOTE, the terms and
conditions of which are incorporated herein by reference. The date and amounts
of each advance made by the LENDER and each payment made by the BORROWER shall
be recorded by the LENDER on the books and records of the LENDER, but any
failure to record such dates or amounts shall not relieve the BORROWER of its
duties and obligations under the LOAN DOCUMENTS. Interest accrued upon the
REVOLVING LOAN shall be computed on outstanding balances as reflected on the
LENDER'S books and records.
Section 2.1.3. Commitment Fee. For each calendar year or portion
thereof during which the REVOLVING LOAN is in existence and has not been
terminated, until the termination of the REVOLVING LOAN, the BORROWER shall pay
to the LENDER a commitment fee of one-half of one percent (.5%) per annum on
that sum obtained by subtracting the average daily disbursed principal balance
of the REVOLVING LOAN during such calendar year or portion thereof from the
DOLLAR CAP. The commitment fee shall be payable monthly in arrears, on the first
day of each succeeding month or on the last day of a portion of a month
commencing with the first of such payments to be made on March 1, 2000. The
commitment fee is not to be considered a fee being paid by the BORROWER to the
LENDER as an inducement to the LENDER to make advances, nor shall it be
13
considered to modify or limit the ability of the LENDER to terminate in
accordance with the provisions of this AGREEMENT the ability of the BORROWER to
borrow under the REVOLVING LOAN, but is instead intended as part of the
compensation which is earned by the LENDER for agreeing to provide the REVOLVING
LOAN in accordance with the terms of the LOAN DOCUMENTS.
Section 2.1.4. Facility Fee. The BORROWER shall pay to the LENDER
on or before CLOSING a non-refundable and unconditional facility fee of Ten
Thousand Dollars ($10,000.00), which shall be the absolute property of the
LENDER upon payment. The facility fee shall not be considered to be a payment of
any of the LENDER'S expenses incurred in connection with the REVOLVING LOAN and
shall be paid independent of the amount of proceeds of the REVOLVING LOAN
ultimately advanced to the BORROWER, even if that amount is less than the stated
principal amount of the REVOLVING LOAN.
Section 2.1.5. Monitoring Fee. The BORROWER shall pay to the
LENDER a monthly monitoring fee of One Thousand Dollars ($1,000.00) for each
calendar month or portion thereof during which the REVOLVING LOAN is in
existence and has not been terminated, until the termination of the REVOLVING
LOAN. The monitoring fee shall be payable monthly in arrears, on the first day
of each succeeding month or on the last day of a portion of a month commencing
with the first of such payments to be made on March 1, 2000.
Section 2.1.6. Term. All sums due under the REVOLVING LOAN shall
be paid in full on March 1, 2003.
Section 2.1.7. Purpose. The proceeds of the REVOLVING LOAN shall
be used by the BORROWER solely for refinancing existing debt and funding the
general working capital needs of the BORROWER.
Section 2.2. Letters Of Credit.
Section 2.2.1. Issuance Of Letters Of Credit. The LENDER may in
its discretion issue LETTERS OF CREDIT as requested by the BORROWER, provided
that no DEFAULT or EVENT OF DEFAULT has occurred and is continuing and provided
that the aggregate amount of all LETTERS OF CREDIT issued and outstanding and
any reimbursement obligations owed to the LENDER arising out of any LETTERS OF
CREDIT do not exceed Two Hundred Thousand Dollars ($200,000.00). No LETTER OF
CREDIT shall have an expiry date which occurs after the stated maturity date or
termination date of either of the LOANS. Any amounts paid by the LENDER in
connection with any LETTER OF CREDIT shall be treated as an advance of proceeds
of the REVOLVING LOAN, shall be secured by all of the COLLATERAL, and shall bear
interest (including the default rate of interest) and be payable at the same
rate and in the same manner as the REVOLVING LOAN.
Section 2.2.2. Rights And Remedies Of The Lender. In the event
that, coincident with or subsequent to the occurrence of, and during the
continuance of, a DEFAULT or an EVENT OF DEFAULT, the LENDER becomes aware of
the possibility of a draw, or enforcement of the LENDER'S obligations, under a
14
LETTER OF CREDIT, the LENDER, at its option, may, but shall not be required to,
pay the BORROWER'S obligations to the beneficiary or holder of such LETTER OF
CREDIT directly to such beneficiary or holder, and, in such event, the amount of
any such payment made by the LENDER shall be treated for all purposes and shall
have the same force and effect as if such amount had been loaned by the LENDER
to the BORROWER as an advance of proceeds of the REVOLVING LOAN, shall be
secured by all of the COLLATERAL and shall bear interest and be payable at the
same rate (including the default rate of interest) and in the same manner as the
REVOLVING LOAN. If any LETTER OF CREDIT is drawn upon to discharge any
obligation of the BORROWER to the beneficiary of such LETTER OF CREDIT, in whole
or in part, the LENDER shall be fully subrogated to the rights of such
beneficiary with respect to the obligations owed by the BORROWER to such
beneficiary discharged with the proceeds of the LETTER OF CREDIT.
Section 2.2.3. Indemnification. The BORROWER unconditionally and
irrevocably agrees to indemnify the LENDER and to hold the LENDER harmless from
any and all losses, claims or liabilities arising from any transactions or
occurrences relating to LETTERS OF CREDIT issued, established, opened or
accepted for the account of the BORROWER, and any drafts or acceptances
thereunder, and all OBLIGATIONS incurred in connection therewith, other than
losses, claims or liabilities arising from the gross negligence or wanton
misconduct of the LENDER.
Section 2.2.4. Reimbursement Obligations. The BORROWER agrees to
reimburse the LENDER on the day of drawing (or upon such later date as the
BORROWER receives notice of the payment of the presented draft by the LENDER)
upon any LETTER OF CREDIT (either with the proceeds of the REVOLVING LOAN
obtained hereunder or otherwise) in same day funds in the amount of the drawing.
If the BORROWER fails to reimburse the LENDER as provided herein or as provided
in any separate letter of credit application agreements or other LOAN DOCUMENTS,
the unreimbursed amount of such drawing shall bear interest at a per annum rate
equal to the highest interest rate (including the default rate of interest)
applicable to the REVOLVING LOAN. The BORROWER'S reimbursement obligations
hereunder shall be absolute and unconditional under all circumstances
irrespective of any rights of set-off, counterclaim or defense to payment the
BORROWER may claim or have against the LENDER, the beneficiary of the LETTER OF
CREDIT or any other PERSON, including, without limitation, any defense based on
any failure of the BORROWER to receive consideration or the legality, validity,
regularity or unenforceability of the LETTER OF CREDIT or any irregularities in
the presentment of the draft presented upon the LETTER OF CREDIT.
Section 2.2.5. Fees, Charges And Other Terms. The BORROWER shall
pay to the LENDER such issuance, amendment, extension and other fees as the
LENDER quotes from time to time with respect to each LETTER OF CREDIT, and shall
execute such applications, reimbursement agreements, or other documents as the
LENDER requires from time to time with respect to the issuance, extension,
amendment, or any other requested or required action concerning a LETTER OF
CREDIT.
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Section 2.3. Capital Adequacy. If the LENDER determines at any time
that the adoption or implementation of any CAPITAL ADEQUACY REQUIREMENT, or the
compliance therewith by the LENDER or any corporation or other PERSON
controlling the LENDER, affects the amount of capital to be maintained by the
LENDER or any PERSON controlling the LENDER as a result of its obligations
hereunder, or reduces the effective rate of return on the LENDER'S or such
controlling PERSON'S capital to a level below that which the LENDER or such
controlling PERSON would have achieved but for such CAPITAL ADEQUACY REQUIREMENT
as a consequence of its obligations hereunder (taking into consideration the
LENDER'S or such controlling PERSON'S policies with respect to capital
adequacy), then after submission by the LENDER to the BORROWER of a written
request therefor and a statement of the basis for such determination, the
BORROWER shall pay to the LENDER such additional amounts as will compensate the
LENDER or the controlling PERSON for the cost of maintaining the increased
capital or for the reduction in the rate of return on capital, together with
interest thereon at the highest rate of interest then in effect under the NOTE
from the date the LENDER requests such additional amounts until those amounts
are paid in full.
Section 2.4. Payments. All payments received by the LENDER which are to
be applied to reduce the OBLIGATIONS shall be credited to the balances due from
the BORROWER pursuant to the normal and customary practices of the LENDER, but
shall be provisional and shall not be considered final unless and until such
payment is not subject to avoidance under any provision of the United States
Bankruptcy Code, as amended, including Sections 547 and 550, or any state law
governing insolvency or creditors' rights. If any payment is avoided or set
aside under any provision of the United States Bankruptcy Code, including
Sections 547 and 550, or any state law governing insolvency or creditors'
rights, the payment shall be considered not to have been made for all purposes
of this AGREEMENT and the LENDER shall adjust its records to reflect the fact
that the avoided payment was not made and has not been credited against the
OBLIGATIONS. The BORROWER irrevocably authorizes the LENDER to automatically
debit from either the COMMERCIAL ACCOUNT or the COLLATERAL ACCOUNT all sums owed
by the BORROWER to the LENDER under the LOAN and the LOAN DOCUMENTS when and as
such sums are due and payable.
Section 2.5. Advancements. If the BORROWER fails to perform any of its
agreements or covenants contained in this AGREEMENT or if the BORROWER fails to
protect or preserve the COLLATERAL or the status and priority of the security
interest of the LENDER in the COLLATERAL, the LENDER may make advances to
perform the same on behalf of the BORROWER to protect or preserve the COLLATERAL
or the status and priority of the security interest of the LENDER in the
COLLATERAL, and all sums so advanced shall immediately upon advance become
secured by the security interests granted in this AGREEMENT, and shall become
part of the principal amount owed to the LENDER with interest to be assessed at
the applicable rate thereon and subject to the terms and provisions of this
AGREEMENT and all of the LOAN DOCUMENTS. The BORROWER shall repay on demand all
sums so advanced on the BORROWER'S behalf, plus all expenses or costs incurred
by the LENDER, including reasonable legal fees, with interest thereon at the
highest rate authorized in the NOTE. The provisions of this Section shall not be
construed to prevent the institution of the rights and remedies of the LENDER
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upon the occurrence of an EVENT OF DEFAULT. The authorization contained in this
Section is not intended to impose any duty or obligation on the LENDER to
perform any action or make any advancement on behalf of the BORROWER and is
intended to be for the sole benefit and protection of the LENDER.
Section 2.6. Termination. In the event the BORROWER repays the
REVOLVING LOAN with the intention of making no further borrowings under the
REVOLVING LOAN (which intention shall be presumed if the BORROWER has not made
any borrowings under the REVOLVING LOAN for six (6) consecutive months) at any
time prior to March 1, 2003, the BORROWER shall pay a termination fee of Twenty
Thousand Dollars ($20,000.00)
ARTICLE 3
SECURITY FOR THE OBLIGATIONS
The payment, performance and satisfaction of the OBLIGATIONS shall be
secured by the following assurances of payment and security.
Section 3.1. Grant Of Security Interest. In order to secure the
repayment and performance of all OBLIGATIONS, both currently existing and
arising in the future, the BORROWER grants to the LENDER an immediate and
continuing security interest in and to the COLLATERAL. The BORROWER further
pledges, hypothecates and grants to the LENDER a continuing security interest in
and to, all amounts that may be owing at any time and from time to time by the
LENDER to the BORROWER in any capacity, including but not limited to any balance
or share belonging to the BORROWER of any deposit or other account with the
LENDER, which security interest shall be independent of and in addition to any
right of set-off to which the LENDER may be entitled. The LENDER shall have the
right to require the BORROWER to pledge and grant a security interest to the
LENDER in such additional security as the LENDER may request from time to time
in the event that the LENDER deems itself to be insecure.
Section 3.2. Proceeds And Products. The LENDER'S security interests
provided for herein shall apply to the proceeds, including but not limited to
insurance proceeds, and the products of the COLLATERAL.
Section 3.3. Priority Of Security Interests. Each of the security
interests, pledges, and liens granted by the BORROWER to the LENDER pursuant to
any of the LOAN DOCUMENTS shall be perfected first priority security interests,
pledges, and liens.
Section 3.4. Future Advances. The security interests, liens, and
pledges granted by the BORROWER to the LENDER pursuant to the LOAN DOCUMENTS
shall secure all current and all future advances made by the LENDER to the
BORROWER, or for the account or benefit of the BORROWER, and the LENDER may
advance or readvance upon repayment by the BORROWER all or any portion of the
sums loaned to the BORROWER and any such advance or readvance shall be fully
secured by the security interests, liens, and pledges created by the LOAN
DOCUMENTS.
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Section 3.5. Receivable Collections. The BORROWER shall deposit into
the COMMERCIAL ACCOUNT, immediately upon receipt thereof, all cash, checks,
drafts, and other instruments for the payment of money, properly endorsed, which
have been received by the BORROWER in full or partial payment of any RECEIVABLE;
provided, the BORROWER shall, if requested in writing by the LENDER at any time,
deposit or cause to be deposited into the COLLECTION ACCOUNT all of such items
of payment immediately upon receipt thereof. Prior to any such deposit by the
BORROWER into either the COMMERCIAL ACCOUNT or the COLLECTION ACCOUNT, as the
case may be, the BORROWER will not commingle such items of payment with any of
its other funds or property but will hold them separate and apart. Upon the
written request of the LENDER the BORROWER shall instruct all of its ACCOUNT
DEBTORS to make all payments on the BORROWER'S RECEIVABLES to a post office box
in which the LENDER alone shall have sole access ("LOCK BOX"). If payment of the
BORROWER'S RECEIVABLES is paid into the LOCK BOX the LENDER shall, on each
BUSINESS DAY, withdraw the items of payment from the LOCK BOX and deposit them
into either the COLLECTION ACCOUNT or the COMMERCIAL ACCOUNT, as determined by
the LENDER. The LENDER, from time to time, shall apply all of the collected
funds held in the COLLECTION ACCOUNT toward payment of all or any part of the
OBLIGATIONS, whether or not then due, in such order of application as the LENDER
may determine. The LENDER shall have no obligation to provide any provisional or
other credit for any deposited funds which are not collected funds free of any
rights of return.
Section 3.6. Collection Of Receivables By Lender. The LENDER shall have
the right during any continuing DEFAULT or EVENT OF DEFAULT to send notices of
assignment or notices of the LENDER'S security interest to any and all ACCOUNT
DEBTORS or any third party holding or otherwise concerned with any of the
COLLATERAL, and thereafter the LENDER shall have the sole right to collect the
RECEIVABLES and to take possession of the COLLATERAL and RECORDS relating
thereto. All of the LENDER'S collection expenses shall be charged to the
BORROWER'S accounts and added to the OBLIGATIONS. During any continuing DEFAULT
or EVENT OF DEFAULT the LENDER shall have the right to receive, indorse, assign
and deliver in the LENDER'S name or the BORROWER'S name any and all checks,
drafts and other instruments for the payment of money relating to the
RECEIVABLES, and the BORROWER hereby waives notice of presentment, protest and
non-payment of any instrument so endorsed. If the LENDER is collecting the
RECEIVABLES, the BORROWER hereby constitutes the LENDER or the LENDER'S designee
as its attorney-in-fact with power with respect to the RECEIVABLES: (a) to
indorse its name upon all notes, acceptances, checks, drafts, money orders or
other evidences of payment of COLLATERAL that may come into the LENDER'S
possession; (b) to sign its name on any invoices relating to any of the
RECEIVABLES, drafts against ACCOUNT DEBTORS, assignments and verifications of
RECEIVABLES and notices to ACCOUNT DEBTORS; (c) to send verifications of
RECEIVABLES to any ACCOUNT DEBTOR; (d) to notify the Post Office to change the
address for delivery of mail addressed to it to such address as the LENDER may
designate; (e) to receive and open all mail addressed to it and to remove
therefrom all cash, checks, drafts and other payments of money; and (f) to do
all other acts and things necessary, proper, or convenient to carry out the
terms and conditions and purposes and intent of this AGREEMENT. All acts of such
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attorney or designee are hereby ratified and approved, and such 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 law in accordance with this AGREEMENT,
with the exception of acts arising from actual fraud or gross and wanton
negligence. The power of attorney hereby granted, being coupled with an
interest, is irrevocable while any of the OBLIGATIONS remain unpaid. The LENDER,
without notice to or consent from the BORROWER, may xxx upon or otherwise
collect, extend the time of payment of or compromise or settle for cash, credit
or otherwise upon any terms, any of the RECEIVABLES or any securities,
instruments or insurances applicable thereto or release the obligor thereon. The
LENDER is authorized and empowered to accept the return of the goods represented
by any of the RECEIVABLES, without notice to or consent by the BORROWER, all
without discharging or in any way affecting the liability of the BORROWER under
the LOAN DOCUMENTS. The LENDER does not, by anything herein or in any assignment
or otherwise, assume any of the obligations of the BORROWER under any contract
or agreement assigned to the LENDER, and the LENDER shall not be responsible in
any way for the performance by the BORROWER of any of the terms and conditions
thereof.
Section 3.7. Maintenance Of Principal Accounts. As further security for
the OBLIGATIONS, the BORROWER shall maintain its principal transaction accounts
with the LENDER.
Section 3.8. Further Assurances. The BORROWER will, at its expense,
promptly execute and deliver all further instruments and documents and take all
further action that may be necessary or desirable or that the LENDER may request
from time to time in order: (a) to perfect and protect the security interests to
be created hereby; (b) to enable the LENDER to exercise and enforce its rights
and remedies hereunder in respect of the COLLATERAL; or (c) otherwise to effect
the purposes of this AGREEMENT, including, without limitation: (i) upon the
BORROWER'S acquisition thereof, delivering to the LENDER each item of CHATTEL
PAPER of the BORROWER, (ii) if any RECEIVABLES are evidenced by an INSTRUMENT
delivering and pledging to the LENDER such INSTRUMENT duly endorsed and
accompanied by executed instruments of transfer or assignment, all in form and
substance satisfactory to the LENDER, (iii) executing and filing such financing
statements or amendments thereto as may be necessary or desirable or that the
LENDER may request in order to perfect and preserve the security interests
purported to be created hereby, (iv) upon the acquisition after the date hereof
by the BORROWER of any EQUIPMENT covered by a certificate of title or ownership,
cause the LENDER to be listed as the lienholder on such certificate of title and
within sixty (60) days of the acquisition thereof deliver evidence of the same
to the LENDER, and (v) upon the acquisition after the date hereof of any asset
for which an assignment, pledge, mortgage, or other document is required to be
filed in order to grant or perfect a lien therein for the benefit of the LENDER,
execute and deliver to the LENDER such assignment, pledge, mortgage, or other
INSTRUMENT within thirty (30) days of the acquisition thereof. If the BORROWER
fails to execute any instrument or document described above within five (5)
BUSINESS DAYS of being requested to do so by the LENDER, the BORROWER hereby
appoints the LENDER or any officer of the LENDER as the BORROWER'S attorney in
fact for purposes of executing such instruments or documents in the BORROWER'S
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name, place and stead, which power of attorney shall be considered as coupled
with an interest and irrevocable.
Section 3.9. Fair Labor Standards Act. As further security for the
OBLIGATIONS, the BORROWER shall comply in all material respects with the Fair
Labor Standards Act of 1938, as amended.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
To induce the LENDER to extend the LOAN and to enter into this
AGREEMENT, the BORROWER makes the representations and warranties set forth in
this Article 4. The BORROWER acknowledges the LENDER'S justifiable right to rely
upon these representations and warranties.
Section 4.1. Accuracy Of Information. All information submitted by or
on behalf of the BORROWER in connection with any of the OBLIGATIONS is true,
accurate and complete in all material respects as of the date made and contain
no knowingly false, incomplete or misleading statements.
Section 4.2. No Litigation. There are no actions, suits,
investigations, or proceedings pending or, to the knowledge of the BORROWER,
threatened against the BORROWER or the assets of the BORROWER, except as
specifically disclosed on Schedule 4.2 attached hereto.
Section 4.3. No Liability Or Adverse Change. The BORROWER has no direct
or contingent liability known to the BORROWER and not previously disclosed to
the LENDER, nor does the BORROWER know of or have any reason to expect any
material adverse change in the BORROWER'S assets, liabilities, properties,
business, or condition, financial or otherwise.
Section 4.4. Title To Collateral. The BORROWER has good and marketable
title to the COLLATERAL. The liens granted by the BORROWER to the LENDER in the
COLLATERAL will have the priority required by the LOAN DOCUMENTS.
Section 4.5. Authority; Approvals And Consents.
Section 4.5.1. Authority. The BORROWER has the legal authority to
enter into each of the LOAN DOCUMENTS and to perform, observe and comply with
all of the BORROWER'S agreements and obligations thereunder, including, without
limitation the borrowings contemplated hereby.
Section 4.5.2. Approvals. The execution and delivery by the
BORROWER of each of the LOAN DOCUMENTS, the performance by the BORROWER of all
of its agreements and obligations under the LOAN DOCUMENTS, and the borrowings
contemplated by this AGREEMENT, have been duly authorized by all necessary
action on the part of the BORROWER and do not and will not (i) contravene any
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provision of the organizational documents of the BORROWER; (ii) conflict with,
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in the creation of any lien upon any of the property of
the BORROWER under any agreement, trust deed, indenture, mortgage or other
instrument to which the BORROWER is a party or by which the BORROWER or any
property of the BORROWER is bound or affected (except for liens created for the
benefit of the LENDER); (iii) violate or contravene any provision of any LAW,
rule or regulation (including, without limitation, Regulations G, T, U or X of
the Board of Governors of the Federal Reserve System) or any order, ruling or
interpretation thereunder or any decree, order of judgment of any court or
governmental or regulatory authority, bureau, agency or official (all as from
time to time in effect and applicable to the BORROWER); or (iv) require any
waivers, consents or approvals by any of the creditors of the BORROWER.
Section 4.5.3. Consents. Other than filings and recordings
required to perfect the security interests and liens granted hereunder, no
approval, consent, order, authorization or license by, or giving notice to, or
taking any other action with respect to, any governmental or regulatory
authority or agency is required for the execution and delivery by the BORROWER
of the LOAN DOCUMENTS or for the performance by the BORROWER of any of the
agreements and obligations thereunder.
Section 4.6. Binding Effect Of Documents, Etc. Each of the LOAN
DOCUMENTS which the BORROWER has executed and delivered as contemplated and
required to be executed and delivered as of the date of CLOSING by this
AGREEMENT, has been duly executed and delivered by the BORROWER and is the
legal, valid and binding obligation of the BORROWER and is enforceable against
the BORROWER in accordance with all stated terms.
Section 4.7. Other Names. The BORROWER has not changed its name, been
the surviving entity in a merger, or changed the location of its chief executive
office within the last twelve (12) years, except as is disclosed on Schedule 4.7
attached hereto. The BORROWER does not trade under any trade or fictitious names
except as set forth on Schedule 4.7.
Section 4.8. No Events Of Default. There is not currently existing any
action, event, or condition which presently constitutes a DEFAULT or an EVENT OF
DEFAULT
Section 4.9. Taxes. The BORROWER: (a) has filed all federal, state and
local tax returns and other reports which the BORROWER is required by LAW to
file prior to the date hereof and which are material to the conduct of the
business of the BORROWER; (b) has paid or caused to be paid all taxes,
assessments and other governmental charges that are due and payable prior to the
date hereof; and (c) has made adequate provision for the payment of such taxes,
assessments or other charges accruing but not yet payable. The BORROWER has no
knowledge of any deficiency or additional assessment in connection with any
taxes, assessments or charges not provided for on the BORROWER'S books of
account or reflected in the BORROWER'S financial statements.
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Section 4.10. Compliance With Laws. The BORROWER has complied in all
material respects with all applicable LAWS, including, but not limited to, all
LAWS with respect to: (a) all restrictions, specifications, or other
requirements pertaining to products that it sells or to the services it
performs; (b) the conduct of its business; and (c) the use, maintenance, and
operation of the real and personal properties owned or leased by it in the
conduct of its business.
Section 4.11. Chief Place Of Business. The chief executive office,
chief place of business, and the place where the BORROWER keeps its RECORDS
concerning the COLLATERAL is set forth on Schedule 4.11 attached hereto.
Section 4.12. Location Of Inventory. The INVENTORY is and shall be kept
solely at the BORROWER'S locations set forth on Schedule 4.12 attached hereto,
and shall not be moved, sold or otherwise disposed of without prior notification
to the LENDER, except for sales of INVENTORY to ACCOUNT DEBTORS in the ordinary
course of the BORROWER'S business. None of the INVENTORY is stored with or in
the possession of any bailee, warehouseman, or other similar PERSON, except as
specifically disclosed on Schedule 4.12 attached hereto.
Section 4.13. No Subsidiaries. The BORROWER has no SUBSIDIARIES, except
as specifically disclosed on Schedule 4.13 attached hereto.
Section 4.14. No Labor Agreements. The BORROWER is not subject to any
collective bargaining agreement or any agreement, contract, decree or order
requiring it to recognize, deal with or employ any PERSONS organized as a
collective bargaining unit or other form of organized labor.
Section 4.15. Eligible Accounts. Each ACCOUNT which the BORROWER
contends should be included in the calculation of the BORROWING BASE from time
to time will be an ELIGIBLE ACCOUNT. At the time each ELIGIBLE ACCOUNT is listed
on or included in (whether singularly or in the aggregate with other ELIGIBLE
ACCOUNTS) a schedule or report delivered to the LENDER to be included in the
calculation of the BORROWING BASE, all of such ELIGIBLE ACCOUNTS will have been
generated in compliance with the BORROWER'S normal credit policies as
historically in effect (or as modified from time to time on prior written notice
of the LENDER), or on such other reasonable terms disclosed in writing to the
LENDER in advance of the creation of such ACCOUNTS, and such terms shall be
expressly set forth on the face of all invoices.
Section 4.16. Approvals. The BORROWER possesses all franchises,
approvals, licenses, contracts, merchandising agreements, merchandising
contracts and governmental approvals, registrations and exemptions necessary for
it lawfully to conduct its business and operation as presently conducted and as
anticipated to be conducted after CLOSING.
Section 4.17. Financial Statements. The financial statements of the
BORROWER which have been delivered to the LENDER prior to the date of this
AGREEMENT, fairly present the financial condition of the BORROWER as of the
respective dates thereof and the results and operations of the BORROWER for the
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fiscal periods ended on such respective dates, all in accordance with G.A.A.P.
The BORROWER has no direct or contingent liability or obligation known to the
BORROWER and not disclosed on the financial statements delivered to the LENDER
or disclosed on Schedule 4.17 hereto. There has been no adverse change in the
financial condition of the BORROWER since the audited financial statements of
the BORROWER dated December 31, 1998, and the BORROWER does not know of or have
any reason to expect any material adverse change in the assets, liabilities,
properties, business, or condition, financial or otherwise, of the BORROWER.
Section 4.18. Solvency. The BORROWER will be SOLVENT both before and
after CLOSING, after giving full effect to the OBLIGATIONS and all of the
BORROWER'S liabilities.
Section 4.19. Fair Labor Standards Act. The BORROWER has complied in
all material respects with the Fair Labor Standards Act of 1938, as amended.
Section 4.20. Employee Benefit Plans.
Section 4.20.1. Compliance. The BORROWER and its ERISA AFFILIATES
are in compliance in all material respects with all applicable provisions of
ERISA and the regulations thereunder and of the CODE with respect to all
EMPLOYEE BENEFIT PLANS.
Section 4.20.2. Absence Of Termination Event. No TERMINATION EVENT
has occurred or is reasonably expected to occur with respect to any GUARANTEED
PENSION PLAN.
Section 4.20.3. Actuarial Value. The actuarial present value (as
defined in Section 4001 of ERISA) of all benefit commitments (as defined in
Section 4001 of ERISA) under each GUARANTEED PENSION PLAN does not exceed the
assets of that plan.
Section 4.20.4. No Withdrawal Liability. Neither the BORROWER nor
any of its ERISA AFFILIATES has incurred or reasonably expects to incur any
withdrawal liability under ERISA in connection with any MULTIEMPLOYER PLANS.
Section 4.21. Environmental Conditions.
Section 4.21.1. Existence Of Permits. The BORROWER has obtained
all legally required permits, licenses, variances, clearances and all other
necessary approvals (collectively, the "EPA PERMITS") for use of the FACILITIES
and the operation and conduct of its business from all applicable federal,
state, and local governmental authorities, utility companies or
development-related entities including, but not limited to, any and all
appropriate Federal or State environmental protection agencies and other county
or city departments, public water works and public utilities in regard to the
use of the FACILITIES, the operation and conduct of its business, and the
handling, transporting, treating, storage, disposal, discharge, or RELEASE of
REGULATED SUBSTANCES, if any, into, on or from the environment (including, but
not limited to, any air, water, or soil).
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Section 4.21.2. Compliance With Permits. Each issued EPA PERMIT is
in full force and effect, has not expired or been suspended, denied or revoked,
and is not under challenge by any PERSON. The BORROWER is in compliance in all
material aspects with each issued EPA PERMIT.
Section 4.21.3. No Litigation. Neither the BORROWER nor any of the
FACILITIES are subject to any private or governmental litigation, or to the
knowledge of the BORROWER, threatened litigation, lien or judicial or
administrative notice, order or action involving the BORROWER or any of the
FACILITIES relating to REGULATED SUBSTANCES or environmental problems,
impairments or liabilities.
Section 4.21.4. No Releases. To the best knowledge of the
BORROWER, there has been no RELEASE into, on or from any of the FACILITIES and
no REGULATED SUBSTANCES are located on or have been treated, stored, processed,
disposed of, handled or transported to or from, any of the FACILITIES in
violation of any ENVIRONMENTAL LAWS. To the best knowledge of the BORROWER, no
REGULATED SUBSTANCES have been treated, stored, disposed, RELEASED, located,
discharged, possessed, managed, processed, or otherwise handled in the operation
or conduct of the BORROWER'S business in violation of any ENVIRONMENTAL LAWS.
The BORROWER has complied in all material respects with all ENVIRONMENTAL LAWS
affecting the FACILITIES and the BORROWER'S businesses.
Section 4.21.5. Transportation. The BORROWER does not transport,
in any manner, any REGULATED SUBSTANCES except in the ordinary course of the
BORROWER'S business in material compliance with all ENVIRONMENTAL LAWS.
Section 4.21.6. No Violation Notices. The BORROWER has not
received any notices that any REGULATED SUBSTANCES transported from any FACILITY
have been disposed of in violation of any ENVIRONMENTAL LAWS.
Section 4.21.7. No Notice Of Violations. The BORROWER has not
received written notice of any circumstances which would be likely to result in
any obligation under any ENVIRONMENTAL LAW to investigate or remediate any
REGULATED SUBSTANCES in, on or under any of the FACILITIES.
ARTICLE 5
AFFIRMATIVE COVENANTS
The BORROWER agrees during the term of this AGREEMENT and while any
OBLIGATIONS are outstanding and unpaid to do and perform each of the acts and
promises set forth in this Article 5:
Section 5.1. Payment. All OBLIGATIONS shall be paid in full when and as
due.
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Section 5.2. Insurance. The BORROWER shall obtain and maintain such
insurance coverages as are reasonable, customary and prudent for businesses
engaged in activities similar to the business activities of the BORROWER.
Without limitation to the foregoing, the BORROWER shall maintain for all of its
assets and properties, whether real, personal, or mixed and including but not
limited to the COLLATERAL, fire and extended coverage casualty insurance in
amounts satisfactory to the LENDER and sufficient to prevent any co-insurance
liability (which amount shall be the full insurable value of the assets and
properties insured unless the LENDER in writing agrees to a lesser amount),
naming the LENDER as sole loss payee with respect to the COLLATERAL, with
insurance companies and upon policy forms containing standard mortgagee clauses
which are acceptable to and approved by the LENDER. The BORROWER shall submit to
the LENDER the originals of the casualty insurance policies and paid receipts
evidencing payment of the premiums due on the same. The casualty insurance
policies shall be endorsed so as to make them noncancellable unless thirty (30)
days prior notice of cancellation is provided to the LENDER. The proceeds of any
insured loss shall be applied by the LENDER to the OBLIGATIONS, in such order of
application as determined by the LENDER, unless the LENDER in its sole
discretion permits the use thereof to repair or replace damaged or destroyed
COLLATERAL.
Section 5.3. Books And Records. The BORROWER shall notify the LENDER in
writing if the BORROWER modifies or changes its method of accounting or enters
into, modifies, or terminates any agreement presently existing, or at any time
hereafter entered into with any third party accounting firm for the preparation
and/or storage of the BORROWER'S accounting records.
Section 5.4. Collection Of Accounts; Sale Of Inventory. The BORROWER
shall only collect its RECEIVABLES and sell its INVENTORY in the ordinary course
of the BORROWER'S business.
Section 5.5. Notice Of Litigation And Proceedings. The BORROWER shall
give prompt notice to the LENDER of any action, suit, citation, violation,
direction, notice or proceeding before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the BORROWER, or the assets or properties thereof, which, if
determined adversely to the BORROWER: (a) could require the BORROWER to pay over
more than Fifty Thousand Dollars ($50,000.00) or deliver assets the value of
which exceeds that sum (whether or not the claim is considered to be covered by
insurance); or (b) could reasonably be expected to have a material adverse
effect upon the financial condition or business operations of the BORROWER.
Section 5.6. Payment Of Liabilities To Third Persons. The BORROWER
shall pay when and as due, or within applicable grace periods, all liabilities
due to third persons, except when the amount thereof is being contested in good
faith by appropriate proceedings and with adequate reserves therefor being set
aside by the BORROWER.
Section 5.7. Notice Of Change Of Business Location. The BORROWER shall
notify the LENDER thirty (30) days in advance of: (a) any change in the location
of its existing offices or place of business; (b) the establishment of any new,
or the discontinuation of any existing, place of business; and (c) any change in
25
or addition to the locations at which the COLLATERAL is kept. Prior to moving
any COLLATERAL to any location not owned by the BORROWER (other than deliveries
to ACCOUNT DEBTORS of sold or leased items), the BORROWER shall obtain and
deliver to the LENDER an agreement, in form and substance acceptable to the
LENDER, pursuant to which the owner of such location shall: (a) subordinate any
rights which it may have, or thereafter may obtain, in any of the COLLATERAL to
the rights and security interests of the LENDER in the COLLATERAL; and (b) allow
the LENDER access to the COLLATERAL in order to remove the COLLATERAL from such
location. In the event any COLLATERAL is stored with a warehousemen or other
bailee, and the COLLATERAL is evidenced by a negotiable document of title, the
BORROWER shall immediately deliver the document of title to the LENDER.
Section 5.8. Payment Of Taxes. The BORROWER shall pay or cause to be
paid when and as due all taxes, assessments and charges or levies imposed upon
it or on any of its property or which it is required to withhold and pay over to
the taxing authority or which it must pay on its income, except where contested
in good faith, by appropriate proceedings and at its own cost and expense;
provided, however, that the BORROWER shall not be deemed to be contesting in
good faith by appropriate proceedings unless: (a) such proceedings operate to
prevent the taxing authority from attempting to collect the taxes, assessments
or charges; (b) the COLLATERAL is not subject to sale, forfeiture or loss during
such proceedings; (c) the BORROWER'S contest does not subject the LENDER to any
claim by the taxing authority or any other person; (d) the BORROWER establishes
appropriate reserves, satisfactory to the LENDER in its sole discretion, for the
payment of all taxes, assessments, charges, levies, legal fees, court costs and
other expenses for which the BORROWER would be liable if unsuccessful in the
contest; (e) the BORROWER prosecutes the contest continuously to its final
conclusion; and (f) at the conclusion of the proceedings, the BORROWER promptly
pays all amounts determined to be payable, including but not limited to all
taxes, assessments, charges, levies, legal fees and court costs.
Section 5.9. Inspections Of Records. The BORROWER shall permit
representatives of the LENDER access to the BORROWER'S places of business, at
intervals and at such times as determined by the LENDER, to inspect the
COLLATERAL and to review and make extracts from or photocopies of the books and
records of the BORROWER. The BORROWER agrees to pay to the LENDER the audit fees
and other expenses incurred by the LENDER in connection with such inspections.
Section 5.10. Notice Of Events Affecting Collateral; Compromise Of
Receivables; Returned Or Repossessed Goods. The BORROWER shall promptly report
to the LENDER: (a) any reclamation, return or repossession of goods; (b) all
claims or disputes asserted by any ACCOUNT DEBTOR or other obligor involving in
excess of Fifty Thousand Dollars ($50,000.00); and (c) all matters materially
affecting the value, enforceability or collectibility of any of the COLLATERAL.
Without the LENDER'S consent, the BORROWER shall not compromise or adjust any of
the RECEIVABLES which have been included by the BORROWER in the determination of
the BORROWING BASE, extend the time for payment thereof, or grant any additional
discounts, allowances or credits thereon; provided, however, that the BORROWER
26
may grant, in the ordinary course of business, to any party obligated on any of
the RECEIVABLES, any rebate, refund, or adjustment to which such party may be
lawfully entitled, and may accept, in connection therewith, the return of goods,
sale, or lease of which shall have given rise to such RECEIVABLES. If any goods,
the sale of which has resulted in RECEIVABLES included in determining the
BORROWING BASE, are returned by the ACCOUNT DEBTOR for credit or repossessed by
the BORROWER, the BORROWER shall receive and hold such goods as trustee for the
LENDER and as additional security for the payment of the OBLIGATIONS, and make
disposition thereof as required by the LENDER.
Section 5.11. Documentation Of Collateral. The BORROWER agrees that
upon the request of the LENDER, the BORROWER will provide the LENDER with: (a)
written statements or schedules identifying and describing the COLLATERAL, and
all additions, substitutions, and replacements thereof, in such detail as the
LENDER may require; (b) copies of ACCOUNT DEBTORS' invoices or billing
statements; (c) evidence of shipment or delivery of goods or merchandise to or
performance of services for ACCOUNT DEBTORS; and (d) such other schedules and
information as the LENDER reasonably may require. The items to be provided under
this Section shall be in form satisfactory to the LENDER and are to be executed
and delivered to the LENDER from time to time solely for the LENDER'S
convenience in maintaining RECORDS of the COLLATERAL. The failure of the
BORROWER to give any of such items to the LENDER shall not affect, terminate,
modify or otherwise limit the LENDER'S security interests in the COLLATERAL. The
LENDER shall have the right, at any time and from time to time, to verify the
eligibility of the BORROWER'S RECEIVABLES, including obtaining verification of
the RECEIVABLES directly from ACCOUNT DEBTORS.
Section 5.12. Reporting Requirements. The BORROWER shall submit the
following items to the LENDER:
Section 5.12.1. Receivables And Accounts Payable Reports. On or
before the tenth (10th) day of each calendar month: (i) a RECEIVABLES report and
aging; and (ii) an accounts payable report and aging, both in form reasonably
acceptable to the LENDER and containing such information as the LENDER may
specify from time to time. Such reports shall be accompanied by such reports,
copies of sales journals, remittance reports, and other documentation as the
LENDER may reasonably request from time to time.
Section 5.12.2. Borrowing Base Report. Once each calendar week, or
more frequently if requested by the LENDER, a collateral and loan report in such
form and context as may be specified by the LENDER from time to time.
Section 5.12.3. Quarterly Financial Statements. As soon as
available and in any event within forty-five (45) calendar days after the end of
each of the first three quarters of each FISCAL YEAR, the BORROWER shall submit
to the LENDER a consolidated and consolidating balance sheet of the BORROWER and
its SUBSIDIARIES as of the end of such quarter, a consolidated and consolidating
statement of income and retained earnings of the BORROWER and its SUBSIDIARIES
for the period commencing at the end of the previous FISCAL YEAR and ending with
the end of such quarter, and a consolidated and consolidating statement of cash
27
flow of the BORROWER and its SUBSIDIARIES for the portion of the FISCAL YEAR
ended with the last day of such quarter, all in reasonable detail and stating in
comparative form the respective consolidated and consolidating figures for the
corresponding date and period in the previous FISCAL YEAR and all prepared in
accordance with G.A.A.P. and certified by the chief financial officer of the
BORROWER (subject to year-end adjustments).
Section 5.12.4. Monthly Financial Statements. As soon as available
and in any event within thirty (30) calendar days after the end of each calendar
month, the BORROWER shall submit to the LENDER a consolidated and consolidating
balance sheet of the BORROWER and its SUBSIDIARIES as of the end of such month
and a consolidated and consolidating statement of income and retained earnings
of the BORROWER and its SUBSIDIARIES for such month, and a consolidated and
consolidating statement of cash flow of the BORROWER and its SUBSIDIARIES for
such month, all in reasonable detail and stating in comparative form the
respective consolidated and consolidating figures for the corresponding date and
period in the previous FISCAL YEAR and all prepared in accordance with G.A.A.P.
and certified by the Chief Financial Officer of the BORROWER (subject to
year-end adjustment).
Section 5.12.5. Annual Financial Statements. As soon as
available and in any event within ninety (90) calendar days after the end of
each FISCAL YEAR of the BORROWER, the BORROWER shall submit to the LENDER a
consolidated and consolidating balance sheet of the BORROWER and its
SUBSIDIARIES as of the end of such FISCAL YEAR and a consolidated and
consolidating statement of income and retained earnings of the BORROWER and its
SUBSIDIARIES for such FISCAL YEAR, and a consolidated and consolidating
statement of cash flow of the BORROWER and its SUBSIDIARIES for such FISCAL
YEAR, all in reasonable detail and stating in comparative form the respective
consolidated and consolidating figures for the corresponding date and period in
the prior FISCAL YEAR and all prepared in accordance with G.A.A.P. and
accompanied by an audited opinion thereon acceptable to the LENDER by
independent accountants selected by the BORROWER and acceptable to the LENDER.
Section 5.12.6. SEC And Other Filings. Within five (5) days
after the sending, filing, or receipt thereof, copies of: (a) all financial
statements, reports, notices and proxy statements that the BORROWER sends to its
shareholders; and (b) all regular, periodic and special reports, registration
statements and prospectuses that the BORROWER renders to or files with the
Securities And Exchange Commission or any national securities exchange,
including without limitation each of the Forms 10-K and 10-Q filed by the
BORROWER with the Securities And Exchange Commission.
Section 5.12.7. Management Letters. Promptly upon receipt thereof,
the BORROWER shall submit to the LENDER copies of any reports submitted to the
BORROWER or any SUBSIDIARY by independent certified public accountants in
connection with the examination of the financial statements of the BORROWER or
any SUBSIDIARY made by such accountants.
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Section 5.12.8. Certificates Of No Default. Within thirty (30)
calendar days after the end of each of the quarters of each FISCAL YEAR of the
BORROWER, the BORROWER shall submit to the LENDER a certificate of the chief
financial officer of the BORROWER in the form of Exhibit 5.12.8 attached hereto,
certifying that: (i) there exists no DEFAULT or EVENT OF DEFAULT, or if a
DEFAULT or an EVENT OF DEFAULT exists, specifying the nature thereof, the period
of existence thereof and what action the BORROWER proposes to take with respect
thereto; (ii) no material adverse change in the condition, financial or
otherwise, business, property or results of operations of the BORROWER has
occurred since the previous certificate was sent to the LENDER by the BORROWER
or, if any such change has occurred, specifying the nature thereof and what
action the BORROWER has taken or proposes to take with respect thereto; (iii)
all insurance premiums then due have been paid; (iv) all taxes then due have
been paid or, for those taxes which have not been paid, a statement of the taxes
not paid and a description of the BORROWER'S rationale therefor; (v) no
litigation, investigation or proceedings, or injunction, writ or restraining
order is pending or threatened or, if any such litigation, investigation,
proceeding, injunction, writ or order is pending, describing the nature thereof;
and (vi) stating whether or not the BORROWER is in compliance with the covenants
in this AGREEMENT, including a calculation of the financial covenants in the
schedule attached to such officers' certificates in form satisfactory to the
LENDER.
Section 5.12.9. Reports To Other Creditors. Promptly after the
furnishing thereof, the BORROWER shall submit to the LENDER copies of any
statement or report furnished to any other PERSON pursuant to the terms of any
indenture, loan, or credit or similar agreement and not otherwise required to be
furnished to the LENDER pursuant to any other provisions of this AGREEMENT.
Section 5.12.10. Management Changes. The BORROWER shall notify the
LENDER immediately of any changes in the personnel holding the positions of
either President or Chief Financial Officer of the BORROWER.
Section 5.12.11. General Information. In addition to the items set
forth in subparagraphs 5.12.1 through 5.12.10 above, the BORROWER agrees to
submit to the LENDER such other information respecting the condition or
operations, financial or otherwise, of the BORROWER as the LENDER may reasonably
request from time to time.
Section 5.13. Employee Benefit Plans And Guaranteed Pension Plans. The
BORROWER will, and will cause each of its ERISA AFFILIATES to: (a) comply with
all requirements imposed by ERISA and the CODE, applicable from time to time to
any of its GUARANTEED PENSION PLANS or EMPLOYEE BENEFIT PLANS; (b) make full
payment when due of all amounts which, under the provisions of EMPLOYEE BENEFIT
PLANS or under applicable LAW, are required to be paid as contributions thereto;
(c) not permit to exist any material accumulated funding deficiency, whether or
not waived; (d) file on a timely basis all reports, notices and other filings
required by any governmental agency with respect to any of its EMPLOYEE BENEFITS
PLANS; (e) make any payments to MULTIEMPLOYER PLANS required to be made under
any agreement relating to such MULTIEMPLOYER PLANS, or under any LAW pertaining
thereto; (f) not amend or otherwise alter any GUARANTEED PENSION PLAN if the
effect would be to cause the actuarial present value of all benefit commitments
29
under any GUARANTEED PENSION PLAN to be less than the current value of the
assets of such GUARANTEED PENSION PLAN allocable to such benefit commitments;
(g) furnish to all participants, beneficiaries and employees under any of the
EMPLOYEE BENEFIT PLANS, within the periods prescribed by LAW, all reports,
notices and other information to which they are entitled under applicable LAW;
and (h) take no action which would cause any of the EMPLOYEE BENEFIT PLANS to
fail to meet any qualification requirement imposed by the CODE. As used in this
Section, the term "accumulated funding deficiency" has the meaning specified in
Section 302 of ERISA and Section 412 of the CODE, and the terms "actuarial
present value", "benefit commitments" and "current value" have the meaning
specified in Section 4001 of ERISA.
Section 5.14. Maintenance Of Fixed Assets. The BORROWER shall maintain
and preserve all of its fixed assets in a state of good and efficient working
order.
Section 5.15. Consignments. The BORROWER shall advise the LENDER of all
PERSONS to whom it has consigned or assigned INVENTORY for sale or distribution,
and the location of the INVENTORY subject to any such consignment or assignment
arrangement. The BORROWER shall: (a) duly and properly file financing statements
in all applicable places of public record with respect to each of such
consignments or assignments, which filings shall comply with Section 9-114 of
the 1972 version of the Uniform Commercial Code and with all other requirements
necessary for the BORROWER to protect its interests therein under applicable
LAWS; (b) supply the LENDER with prior evidence of such filing and with a
financing statement, judgment and tax lien search in the name of the consignee
or assignee in all applicable places of public record; and (c) provide written
notification to any holder of any security interests in the inventory of the
consignee or assignee who has filed a financing statement before the BORROWER
files its financing statement, which notice shall state that the BORROWER
expects to deliver goods or assignments, shall describe the goods by item or
type and which notification shall be received by any such holder within five (5)
years before the consignee receives possession of the goods and at five (5) year
intervals thereafter.
Section 5.16. Federal Assignment Of Claims Act. The BORROWER shall
notify the LENDER if any RECEIVABLE arises out of a contract with the United
States of America, or any department, agency or instrumentality thereof, and
shall execute all documents or instruments and shall take all steps or actions
required by the LENDER so that all monies due or to become due under such
contract are assigned to the LENDER and notice given thereof to the United
States in accordance with the requirements of the Federal Assignment of Claims
Act, as amended.
Section 5.17. Compliance With Laws. The BORROWER shall comply in all
material respects with all applicable LAWS, including, but not limited to, all
LAWS with respect to: (a) all restrictions, specifications, or other
requirements pertaining to products that it sells or to the services it
performs; (b) the conduct of its business; (c) the use, maintenance, and
operation of the real and personal properties owned or leased by it in the
conduct of its business; and (d) the obtaining and maintenance of all necessary
licenses, franchises, permits and governmental approvals, registrations and
30
exemptions necessary to engage in its business. Without limiting the generality
of the preceding Section, the BORROWER shall: (i) comply in all material
respects with, and ensure such compliance by all tenants and subtenants, if any,
with, all applicable ENVIRONMENTAL LAWS and obtain and comply in all material
respects with and maintain, and ensure that all tenants and subtenants obtain
and comply with and maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable ENVIRONMENTAL LAWS; (ii) conduct
and complete all investigations, studies, sampling and testing, and all
remedial, removal and other actions required under ENVIRONMENTAL LAWS, and
promptly comply with all lawful orders and directives of any governmental
authority regarding ENVIRONMENTAL LAWS; and (iii) defend, indemnify and hold
harmless the LENDER, and its employees, agents, officers and directors, from and
against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the violation
of, noncompliance with or liability under any ENVIRONMENTAL LAWS applicable to
the operations of the BORROWER, or any orders, requirements or demands of
governmental authorities related thereto, including, without limitation,
reasonable attorney's and consultant's fees, investigation and laboratory fees,
response costs, court costs and litigation expenses, except to the extent that
any of the foregoing directly result from the gross negligence or willful
misconduct of the party seeking indemnification therefor. The BORROWER agrees to
promptly notify the LENDER of any RELEASE of a REGULATED SUBSTANCE on, to or
from any FACILITY in violation of any ENVIRONMENTAL LAWS or of any notice
received by the BORROWER that the BORROWER or any FACILITY is not in compliance
with any ENVIRONMENTAL LAWS.
Section 5.18. Tangible Net Worth. The BORROWER shall maintain a
TANGIBLE NET WORTH of not less than: (a) Two Million Dollars ($2,000,000.00) as
of March 31, 2000; (b) Two Million Six Hundred Thousand Dollars ($2,600,000.00)
as of June 30, 2000; (c) Three Million Four Hundred Thousand Dollars
($3,400,000.00) as of September 30, 2000; (d) Four Million Eight Hundred
Thousand Dollars ($4,800,000.00) as of December 31, 2000 and as of the last day
of each calendar quarter after December 31, 2000.
Section 5.19. EBITDA. The BORROWER shall have an EBITDA of not less
than: (a) One Hundred Thousand Dollars ($100,000.00) for the three (3) month
period ending March 31, 2000; (b) One Hundred Thousand Dollars ($100,000.00) for
the four (4) month period ending April 30, 2000; (c) Two Hundred Thousand
Dollars ($200,000.00) for the five (5) month period ending May 31, 2000; (d)
Seven Hundred Thousand Dollars ($700,000.00) for the six (6) month period ending
June 30, 2000; (e) Eight Hundred Thousand Dollars ($800,000.00) for the seven
(7) month period ending July 31, 2000; (f) One Million Two Hundred Thousand
Dollars ($1,200,000.00) for the eight (8) month period ending August 31, 2000;
(g) Two Million Dollars ($2,000,000.00) for the nine (9) month period ending
September 30, 2000; (h) Two Million Five Hundred Thousand Dollars
($2,500,000.00) for the ten (10) month period ending October 31, 2000; (i) Three
Million Dollars ($3,000,000.00) for the eleven (11) month period ending November
30, 2000; (j) Four Million Dollars ($4,000,000.00) for the twelve (12) month
period ending December 31, 2000; and (k) Four Million Dollars ($4,000,000.00)
for each twelve (12) month period ending on the last day of a calendar month
after December 31, 2000.
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Section 5.20. Interest Coverage Ratio. The BORROWER shall maintain an
INTEREST COVERAGE RATIO of not less than: (a) 1.0 to 1.0 for the three (3) month
period ending March 31, 2000; (b) 2.0 to 1.0 for the six (6) month period ending
June 30, 2000; (c) 5.0 to 1.0 for the nine (9) month period ending September 30,
2000; (d) 5.0 to 1.0 for the twelve (12) month period ending December 31, 2000;
and (e) 5.0 to 1.0 for each twelve (12) month period ending on the last day of a
fiscal quarter after December 31, 2000.
ARTICLE 6
NEGATIVE COVENANTS
The BORROWER covenants while any OBLIGATIONS are outstanding and unpaid
not to do or to permit to be done or to occur any of the acts or occurrences set
forth in this Article 6 without the prior written authorization of the LENDER.
Section 6.1. No Change Of Name, Merger, Etc. The BORROWER shall not
change its name or enter into any merger, consolidation, reorganization or
recapitalization.
Section 6.2. No Sale Or Transfer Of Assets. The BORROWER shall not
sell, transfer, lease or otherwise dispose of all or any part of the COLLATERAL,
or all or any part of any of its other assets, except that: (a) INVENTORY may be
sold to ACCOUNT DEBTORS in the ordinary course of the BORROWER'S business; and
(b) whether or not there is a DEFAULT, the BORROWER may use the "MONEY MARKET
FUNDS" to pay (i) up to Three Hundred Thousand Dollars ($300,000.00) of the
expenses relating to the sale of the BORROWER'S virtual production line, and
(ii) up to Eight Hundred Thousand Dollars ($800,000.00) in final payment of the
note issued in connection with the acquisition of the assets of Scitex Digital
Video, Inc. As used herein, the term "MONEY MARKET FUNDS" means the monies held
by the BORROWER in Account Number 1890670308 at Comerica Bank.
Section 6.3. No Encumbrance Of Assets. The BORROWER shall not mortgage,
pledge, grant or permit to exist a security interest in or lien upon any of its
assets of any kind, now owned or hereafter acquired, except for PERMITTED LIENS.
Section 6.4. No Indebtedness. The BORROWER shall not incur, create,
assume, or permit to exist any INDEBTEDNESS except: (a) the OBLIGATIONS; and (b)
INDEBTEDNESS secured by PERMITTED LIENS.
Section 6.5. Restricted Payments. The BORROWER shall not make any
RESTRICTED PAYMENTS.
Section 6.6. Transactions With Affiliates. The BORROWER shall not make
any contract for the purchase of any items from any AFFILIATE or the performance
of any services (including employment services) by any AFFILIATE, unless such
contract is on terms which fairly represent generally available terms to be
obtained in transactions of a similar nature with independent third PERSONS.
32
Section 6.7. Loans, Investments And Sale-Leasebacks. The BORROWER shall
not make any advance, loan, investment, or material acquisition of assets or
enter into any sale-leaseback transactions.
Section 6.8. No Acquisition Of Equity In Or Assets Of Third Persons.
The BORROWER shall not acquire any equity interests in, or all or substantially
all of the assets of, any PERSON.
Section 6.9. No Assignment. The BORROWER shall not assign or attempt to
assign its rights under this AGREEMENT.
Section 6.10. No Alteration Of Structure Or Operations. The BORROWER
shall not amend or change materially its capital structure or its line or scope
of business, nor shall it engage in business ventures other than those in which
it is presently engaged.
Section 6.11. Unpermitted Uses Of Loan Proceeds. The BORROWER shall not
use any part of the proceeds of the LOAN hereunder for any purpose which
constitutes a violation of, or is inconsistent with, regulations of the Board of
Governors of the Federal Reserve System, including without limitation, the
purchase or carrying of (or refinancing of indebtedness originally incurred to
purchase or carry) margin securities.
Section 6.12. Long Term Contracts. The BORROWER shall not enter into
any management contract, employment contract, consulting contract,
non-competition contract, service contract or the like, having a term in excess
of thirteen (13) months or requiring the payment of any monies by the BORROWER
on a date occurring more than thirteen (13) months after the date of such
contract with any AFFILIATE.
Section 6.13. Changes In Fiscal Year. The BORROWER shall not change its
FISCAL YEAR.
Section 6.14. Limitation On Issuance Of Equity Interests. The BORROWER
shall not issue or sell any equity interest in the BORROWER that, by its terms
or by the terms of any security into which it is convertible or exchangeable,
is, or upon the happening of an event or passage of time would be: (a)
convertible or exchangeable into a liability of the BORROWER; or (b) required to
be redeemed or repurchased, including at the option of the holder, in whole or
in part, or has, or upon the happening of an event or passage of time would
have, a redemption or similar payment due.
Section 6.15. Capital Expenditures. The BORROWER shall not make any
CAPITAL EXPENDITURES in excess of: (a) Three Hundred Fifty Thousand Dollars
($350,000.00) in the aggregate during the three (3) month period ending March
31, 2000; (b) Six Hundred Thousand Dollars ($600,000.00) in the aggregate during
the six (6) month period ending June 30, 2000; (c) Seven Hundred Fifty Thousand
Dollars ($750,000.00) in the aggregate during the nine (9) month period ending
September 30, 2000; (d) Nine Hundred Thousand Dollars ($900,000.00) in the
33
aggregate during the twelve (12) month period ending December 31, 2000; or (e)
Nine Hundred Thousand Dollars ($900,000.00) in the aggregate during any twelve
(12) month period ending on the last day of a fiscal quarter after December 31,
2000.
ARTICLE 7
EVENTS OF DEFAULT
Subject to the notice and cure provisions set forth in Section 7.16,
the occurrence of any of the following events shall constitute an EVENT OF
DEFAULT.
Section 7.1. Failure To Pay. The failure by the BORROWER to pay any of
the OBLIGATIONS when and as due.
Section 7.2. Violation Of Covenants. The failure by the BORROWER to
perform or a violation of any of the covenants or agreements provided in this
AGREEMENT or in any of the other LOAN DOCUMENTS.
Section 7.3. Representation Or Warranty. The failure of any
representation or warranty made by the BORROWER to be true in any material
respect, as of the date made.
Section 7.4. Default Under Loan Documents. A breach of or default by
the BORROWER under the terms, covenants, and conditions set forth in any other
LOAN DOCUMENT.
Section 7.5. Cross-Default. A breach of or default under the terms,
covenants, or conditions of any agreement, loan, guaranty, or other transaction
of the BORROWER with the LENDER or with any other lender.
Section 7.6. Judgments. The BORROWER shall suffer final judgments for
the payment of money aggregating in excess of Fifty Thousand Dollars
($50,000.00) and shall not discharge the same within a period of thirty (30)
days unless, pending further proceedings, execution has not been commenced or if
commenced has been effectively stayed.
Section 7.7. Levy By Judgment Creditor. A judgment creditor of the
BORROWER shall obtain possession of any of the COLLATERAL by any means,
including but not limited to levy, distraint, replevin or self-help, and the
BORROWER shall not remedy same within thirty (30) days thereof; or a writ of
garnishment is served on the LENDER relating to any of the accounts of the
BORROWER maintained by the LENDER.
Section 7.8. Failure To Pay Liabilities. The BORROWER shall fail to pay
any of its debts, in any material amount, due any third PERSON and such failure
shall continue beyond any applicable grace period, unless the applicable
BORROWER holds a good faith defense to payment and has set aside reasonable
reserves for the payment thereof.
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Section 7.9. Involuntary Insolvency Proceedings. The institution of
involuntary INSOLVENCY PROCEEDINGS against the BORROWER and the failure of any
such INSOLVENCY PROCEEDINGS to be dismissed before the earliest to occur of: (a)
the date which is ninety (90) days after the institution of such INSOLVENCY
PROCEEDINGS; (b) the entry of any order for relief in the INSOLVENCY PROCEEDING
or any order adjudicating the BORROWER insolvent; or (c) the impairment (as to
validity, priority or otherwise) of any security interest or lien of the LENDER
in any of the COLLATERAL.
Section 7.10. Voluntary Insolvency Proceedings. The commencement by the
BORROWER of INSOLVENCY PROCEEDINGS.
Section 7.11. Material Adverse Event. The occurrence of a MATERIAL
ADVERSE EVENT.
Section 7.12. ERISA. If any TERMINATION EVENT shall occur and as of the
date thereof or any subsequent date, the sum of the various liabilities of the
BORROWER and its ERISA AFFILIATES (such liabilities to include, without
limitation, any liability to the Pension Benefit Guaranty Corporation (or any
successor thereto) or to any other party under Sections 4062, 4063, or 4064 of
ERISA or any other provision of LAW and to be calculated after giving effect to
the tax consequences thereof) resulting from or otherwise associated with such
event exceeds Fifty Thousand Dollars ($50,000.00); or the BORROWER or any of its
ERISA AFFILIATES as an employer under any MULTIEMPLOYER PLAN shall have made a
complete or partial withdrawal from such MULTIEMPLOYER PLANS and the plan
sponsors of such MULTIEMPLOYER PLANS shall have notified such withdrawing
employer that such employer has incurred a withdrawal liability requiring a
payment in an amount exceeding Fifty Thousand Dollars ($50,000.00).
Section 7.13. Transfer Of Equity Interests. The transfer of any equity
interests in the BORROWER from the ownership existing as of CLOSING, the
dissolution of the BORROWER, the pledge of any equity interests of the BORROWER
except to the LENDER, or the issuance of additional equity interests in the
BORROWER which issuance has the effect of diluting the existing interests of the
existing equity holders in the BORROWER.
Section 7.14. Indictment Of Borrower. The indictment of the BORROWER
for a felony under any federal, state or other LAW.
Section 7.15. Injunction. The issuance of any injunction against the
BORROWER which enjoins or restrains the BORROWER from continuing to conduct any
material part of the BORROWER'S business affairs.
Section 7.16. Notice And Cure Rights. Notwithstanding any provision to
the contrary set forth in any of the LOAN DOCUMENTS, an EVENT OF DEFAULT shall
not be deemed to have occurred with respect to: (a) the failure to pay a
monetary amount due to the LENDER pursuant to the terms of the LOAN DOCUMENTS
until five (5) calendar days after the LENDER has forwarded notice of such
failure to pay to the BORROWER and the BORROWER has failed to pay such unpaid
35
amount; and (b) with respect to the violation of any other covenant or
requirement of the LOAN DOCUMENTS, excepting the specific provisions of this
AGREEMENT excluded in the next succeeding sentence of this Section, until after
the LENDER has forwarded notice of such violation to the BORROWER and the
BORROWER has failed to correct such violation within thirty (30) calendar days
after the date of the sending of such notice. A violation of any of the
following Sections of this AGREEMENT shall immediately constitute an EVENT OF
DEFAULT without the BORROWER having any notice or cure rights: Sections 7.3,
7.6, 7.7, 7.8, 7.9, 7.10, 7.11, 7.13, and 7.15.
ARTICLE 8
RIGHTS AND REMEDIES ON THE OCCURRENCE
OF AN EVENT OF DEFAULT
Section 8.1. Lender's Specific Rights And Remedies. In addition to all
other rights and remedies provided by LAW and the LOAN DOCUMENTS, upon the
occurrence of any EVENT OF DEFAULT, the LENDER may: (a) accelerate and call
immediately due and payable all or any part of the OBLIGATIONS; (b) seek
specific performance or injunctive relief to enforce performance of the
undertakings, duties, and agreements provided in the LOAN DOCUMENTS, whether or
not a remedy at law exists or is adequate; and (c) exercise any rights of a
secured creditor under the Uniform Commercial Code, as adopted and amended in
Maryland, including the right to take possession of the COLLATERAL without the
use of judicial process or hearing of any kind and the right to require the
BORROWER to assemble the COLLATERAL at such place as the LENDER may specify.
Section 8.2. Automatic Acceleration. Upon the occurrence of an EVENT OF
DEFAULT as described in Sections 7.9 or 7.10 of this AGREEMENT, the OBLIGATIONS
shall be automatically accelerated and due and payable without any notice,
demand or action of any type on the part of the LENDER.
Section 8.3. Sale Of Collateral. In addition to any other remedy
provided herein, upon the occurrence of an EVENT OF DEFAULT, the LENDER, in a
commercially reasonable fashion, may sell at public or private sale or otherwise
realize upon, in Baltimore, Maryland, or elsewhere, the whole or, from time to
time, any part of all COLLATERAL which is personal property, or any interest
which the BORROWER may have therein. Pending any such action, the LENDER may
collect and liquidate the COLLATERAL. After deducting from the proceeds of sale
or other disposition of such COLLATERAL all expenses, including all expenses for
legal services, the LENDER shall apply such proceeds toward the satisfaction of
the OBLIGATIONS. Any remainder of the proceeds after satisfaction in full of the
OBLIGATIONS shall be distributed as required by applicable LAW. Notice of any
sale or other disposition (other than sales or other dispositions of COLLATERAL
which is perishable or threatens to decline speedily in value or of a type
customarily sold on a recognized market) shall be given to the BORROWER not less
than ten (10) calendar days before the time of any intended public sale or of
the time after which any intended private sale or other disposition of the
COLLATERAL is to be made, which the BORROWER hereby agrees shall be commercially
reasonable notice of such sale or other disposition. The BORROWER shall
36
assemble, or shall cause to be assembled, at the BORROWER'S own expense, the
COLLATERAL at such place or places as the LENDER shall designate. At any such
sale or other disposition, the LENDER may, to the extent permissible under
applicable law, purchase the whole or any part of the COLLATERAL, free from any
right of redemption on the part of the BORROWER, which right is hereby waived
and released to the extent lawfully permitted. Without limiting the generality
of any of the rights and remedies conferred upon the LENDER under this Section,
the LENDER may, to the full extent permitted by applicable law: (a) enter upon
the premises of the BORROWER, exclude therefrom the BORROWER or any PERSON
connected therewith, and take immediate possession of the COLLATERAL, either
personally or by means of a receiver appointed by a court of competent
jurisdiction, using all necessary force to do so; (b) at the LENDER'S option,
use, operate, manage, and control the COLLATERAL in any lawful manner; (c)
collect and receive all income, revenue, earnings, issues, and profits
therefrom; and (d) maintain, alter or remove the COLLATERAL as the LENDER may
determine in the LENDER'S discretion.
Section 8.4. Letters Of Credit. Upon the request of the LENDER, at any
time after the occurrence of an EVENT OF DEFAULT, the BORROWER shall immediately
deposit in a cash collateral account at the LENDER, over which the LENDER has
sole access, an amount equal to the aggregate then undrawn and unexpired amount
of all LETTERS OF CREDIT. Amounts held in such cash collateral account shall be
applied by the LENDER to the payment of drafts drawn under LETTERS OF CREDIT,
and the unused portion thereof after all LETTERS OF CREDIT shall have expired or
been fully drawn upon shall be applied to repay the other OBLIGATIONS. After all
LETTERS OF CREDIT shall have expired or have been fully drawn upon and all other
OBLIGATIONS shall have been paid in full, the balance, if any, in such cash
collateral account shall be returned to the BORROWER. In the event the BORROWER
fails to deposit into the cash collateral account an amount equal to the then
undrawn and unexpired amount of all LETTERS OF CREDIT, the LENDER shall be
authorized to deposit into such cash collateral account proceeds from the
liquidation of the COLLATERAL until the balance in such account equals the
aggregate then undrawn and unexpired amount of all LETTERS OF CREDIT.
Section 8.5. Remedies Cumulative. The rights and remedies provided in
this AGREEMENT and in the other LOAN DOCUMENTS or otherwise under applicable
LAWS shall be cumulative and the exercise of any particular right or remedy
shall not preclude the exercise of any other rights or remedies in addition to,
or as an alternative of, such right or remedy.
ARTICLE 9
GENERAL CONDITIONS AND TERMS
Section 9.1. Obligations Are Unconditional. The payment and performance
of the OBLIGATIONS shall be the absolute and unconditional duty and obligation
of the BORROWER, and shall be independent of any defense or any rights of
set-off, recoupment or counterclaim which the BORROWER might otherwise have
against the LENDER. The BORROWER shall pay the payments of the principal and
interest to be made upon the OBLIGATIONS, free of any deductions and without
37
abatement, diminution or set-off other than those herein expressly provided.
Until such time as the OBLIGATIONS have been fully paid and performed, the
BORROWER shall not: (a) suspend or discontinue any payments required by the LOAN
DOCUMENTS; and (b) fail to perform and observe all of the BORROWER'S covenants
and agreements set forth in the LOAN DOCUMENTS.
Section 9.2. Indemnity. The BORROWER agrees to defend, indemnify and
hold harmless the LENDER and the entities affiliated with the LENDER and all of
the LENDER'S and its affiliated entities' employees, agents, officers and
directors, from and against any losses, penalties, fines, liabilities,
settlements, damages, costs and expenses, suffered in connection with any claim,
investigation, litigation or other proceeding (whether or not the LENDER or an
affiliated entity is a party thereto) and the prosecution and defense thereof,
arising out of or in any way connected with any LOAN DOCUMENT, including without
limitation reasonable attorneys' and consultant's fees, except to the extent
that any of the foregoing directly result from the gross negligence or willful
misconduct of the party seeking indemnification therefor. Notwithstanding any
termination of this AGREEMENT or payment and performance of the OBLIGATIONS, the
indemnities provided for herein shall continue in full force and effect and
shall protect all of the above-described PERSONS against events arising after
such termination, payment or performance as well as before.
Section 9.3. Lender Expenses. All LENDER EXPENSES shall be paid by the
BORROWER, whether incurred prior to or after CLOSING, such that the subject
transactions shall at all times be cost free to the LENDER.
Section 9.4. Authorization To Obtain Financial Information. The
BORROWER hereby irrevocably authorizes its accounting firm to provide the LENDER
from time to time with such information as may be requested by the LENDER, and
hereby authorizes the LENDER to contact directly such accounting firm in order
to obtain such information.
Section 9.5. Incorporation; Construction Of Inconsistent Provisions.
The terms and conditions of the LOAN DOCUMENTS are incorporated by reference and
made a part hereof, as if fully set forth herein. In the event of any
inconsistency between this AGREEMENT and any other LOAN DOCUMENT, such
inconsistency shall be construed, interpreted, and resolved so as to benefit the
LENDER, independent of whether this AGREEMENT or another LOAN DOCUMENT controls,
and the LENDER'S election of which interpretation or construction is for the
LENDER'S benefit shall govern.
Section 9.6. Waivers. The LENDER at any time or from time to time may
waive all or any rights under this AGREEMENT or any other LOAN DOCUMENT, but any
waiver or indulgence by the LENDER at any time or from time to time shall not
constitute a future waiver of performance or exact performance by the BORROWER.
Section 9.7. Continuing Obligation Of Borrower. The terms, conditions,
and covenants set forth herein and in the LOAN DOCUMENTS shall survive CLOSING
and shall constitute a continuing obligation of the BORROWER during the course
of the transactions contemplated herein. The security interests, liens and other
security provided by this AGREEMENT shall remain in effect so long as any
OBLIGATION, whether direct or contingent, is outstanding, unpaid or unsatisfied.
38
Section 9.8. Choice Of Law. The laws of the State of Maryland
(excluding, however, conflict of law principles) shall govern and be applied to
determine all issues relating to this AGREEMENT and the rights and obligations
of the parties hereto, including the validity, construction, interpretation, and
enforceability of this AGREEMENT and its various provisions and the consequences
and legal effect of all transactions and events which resulted in the execution
of this AGREEMENT or which occurred or were to occur as a direct or indirect
result of this AGREEMENT having been executed.
Section 9.9. Submission To Jurisdiction; Venue; Actions Against Lender.
For purposes of any action, in law or in equity, which is based directly or
indirectly on this AGREEMENT, any other LOAN DOCUMENT or any matter related to
this AGREEMENT or any other LOAN DOCUMENT, including any action for recognition
or enforcement of any of the LENDER'S rights under the LOAN DOCUMENTS or any
judgment obtained by the LENDER in respect thereof, the BORROWER hereby:
Section 9.9.1. Jurisdiction. Irrevocably submits to the
non-exclusive general jurisdiction of the courts of the State of Maryland and,
if a basis for federal jurisdiction exists at any time, the courts of the United
States of America for the District of Maryland.
Section 9.9.2. Venue. Agrees that venue shall be proper in the
Circuit Court for Baltimore City, Maryland, the Circuit Court for any county in
the state of Maryland, as selected by the LENDER, and, if a basis for federal
jurisdiction exists, the courts of the United States of America for the District
of Maryland.
Section 9.9.3. Waiver Of Objections To Venue. Waives any right to
object to the maintenance of any suit in any of the courts specified in Section
9.9.2 above on the basis of improper venue or convenience of forum. The BORROWER
further agrees that it shall not institute any suit or other action against the
LENDER, in law or in equity, which is based directly or indirectly on this
AGREEMENT, any other LOAN DOCUMENT or any matter related to this AGREEMENT or
any other LOAN DOCUMENT, in any court other than a court specified in Section
9.9.2 above; provided, that in any instance in which there is then pending a
suit instituted by the LENDER against the BORROWER in a court other than a court
specified in Section 9.9.2 above, the BORROWER may file in such suit any
counterclaim which it has against the LENDER but only if such counterclaim is a
compulsory counterclaim and would be barred if not filed as a counterclaim in
such suit. The BORROWER agrees that any suit brought by it against the LENDER
not in accordance with this paragraph should be forthwith dismissed or
transferred to a court specified in Section 9.9.2 above.
Section 9.10. Notices. Any notice required or permitted by or in
connection with this AGREEMENT shall be in writing and shall be made by
facsimile (confirmed on the date the facsimile is sent by one of the other
methods of giving notice provided for in this Section) or by hand delivery, by
Federal Express, or other similar overnight delivery service, or by certified
39
mail, unrestricted delivery, return receipt requested, postage prepaid,
addressed to the LENDER or the BORROWER at the appropriate address set forth
below or to such other address as may be hereafter specified by written notice
by the LENDER or the BORROWER. Notice shall be considered given as of the date
of the facsimile or the hand delivery, one (1) calendar day after delivery to
Federal Express or similar overnight delivery service, or three (3) calendar
days after the date of mailing, independent of the date of actual delivery or
whether delivery is ever in fact made, as the case may be, provided the giver of
notice can establish the fact that notice was given as provided herein. If
notice is tendered pursuant to the provisions of this Section and is refused by
the intended recipient thereof, the notice, nevertheless, shall be considered to
have been given and shall be effective as of the date herein provided.
If to the LENDER: THE PROVIDENT BANK
Xxx Xxxx Xxxxxx Xxxxxx, 000X
Xxxxxxxxxx, Xxxx 00000
Attn: Xxxx X. Xxxxx, Vice President
Facsimile: (000) 000-0000
If to the BORROWER: ACCOM, INC.
0000 X'Xxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxx XxXxxxxx, CFO
Facsimile: _____________________
With A Courtesy Copy To: Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn.: Xxxxxxx Toll Davidson
Fax No.: (____) _______________
The failure of the LENDER to send the above courtesy copy shall not impair the
effectiveness of notice given to the BORROWER in the manner provided herein.
Section 9.11. Participations. The LENDER reserves the right to assign
all or any portion of its interests in any of the OBLIGATIONS or the LOAN
DOCUMENTS or to participate with other lending institutions any of the
OBLIGATIONS and the LOAN DOCUMENTS on such terms and at such times as the LENDER
may determine from time to time, all without any consent thereto or notice
thereof to the BORROWER. The BORROWER hereby grants to each participating
lending institution, to the full extent of the OBLIGATIONS, the right to set off
deposit accounts maintained by the BORROWER with such institution, and the
BORROWER agrees to pay the LENDER EXPENSES of any such participating lending
institution which arise or are incurred as a result of the occurrence of an
EVENT OF DEFAULT.
Section 9.12. Miscellaneous Provisions. The parties agree that: (a)
this AGREEMENT shall be effective as of the date first above written,
independent of the date of execution or delivery hereof; (b) this AGREEMENT
shall be binding upon the parties and their successors and assigns, contains the
40
final and entire agreement and understanding of the parties, and may neither be
amended or altered except by a writing signed by the parties; (c) time is
strictly of the essence of this AGREEMENT; (d) as used herein, the singular
includes the plural and the plural includes the singular, the use of any gender
applies to all genders; (e) the captions contained herein are for purposes of
convenience only and are not a part of this AGREEMENT; (f) a carbon,
photographic, photocopy or other reproduction of a security agreement or
financing statement shall be sufficient as a financing statement; (g) this
AGREEMENT may be delivered by facsimile, and a facsimile of any party's
signature to this AGREEMENT shall be deemed an original signature for all
purposes; and (h) this AGREEMENT may be executed in several counterparts, each
of which shall be an original, but all of which, when taken together, shall
constitute one and the same document.
Section 9.13. Waiver Of Trial By Jury. Each party to this AGREEMENT
agrees that any suit, action, or proceeding, whether claim or counterclaim,
brought or instituted by either party hereto or any successor or assign of any
party on or with respect to this AGREEMENT or any other LOAN DOCUMENT or which
in any way relates, directly or indirectly, to the OBLIGATIONS or any event,
transaction, or occurrence arising out of or in any way connected with any of
the OBLIGATIONS, or the dealings of the parties with respect thereto, shall be
tried only by a court and not by a jury. EACH PARTY HEREBY EXPRESSLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR PROCEEDING.
IN WITNESS WHEREOF, the LENDER and the BORROWER have duly executed this
AGREEMENT under seal as of the date first above written.
WITNESS/ATTEST: THE PROVIDENT BANK,
An Ohio Chartered Banking Institution
By: /s/ J.XXXXX XXXXXXXX (SEAL)
--------------------
J. Xxxxx Xxxxxxxx,
Vice President
ACCOM, INC.,
A Delaware Corporation
By: /s/ XXXXXX X. XXXXXXXX (SEAL)
------------------------------- ----------------------
Xxxxxx X. XxXxxxxx,
Senior Vice President and CFO
Schedule 1.48
Permitted Liens
Schedule 4.2
Pending Litigation
Niaid Environmental Corporation v. Accom, Inc. and Does 1 to 50, inclusive Xxxx
Xx. 000000 filed on June 1, 1999 in the Superior Court of the State of
California, County of San Mateo
Schedule 4.7
Other Names
Accom of California
Merged Into Borrower
Axial Corporation
Scitex Digital Video, Inc.
Schedule 4.11
Chief Place Of Business
0000 X'Xxxxx Xxxxx,
Xxxxx Xxxx, Xxxxxxxxxx 00000
Collateral Records
0000 X'Xxxxx Xxxxx,
Xxxxx Xxxx, Xxxxxxxxxx 00000
000 Xxxxx Xxxxx Xxxxxx, #000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Schedule 4.12
Location Of Inventory
0000 X'Xxxxx Xxxxx,
Xxxxx Xxxx, Xxxxxxxxxx 00000
000 Xxxxx Xxxxx Xxxxxx, #000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Schedule 4.13
Subsidiaries
Accom Europe Ltd.
Accom International, Inc.
Accom Virtual Studio, Inc.
Accom Asia-Pacific
Schedule 4.17
Liabilities And Obligations Not Disclosed In Financial Statements
Baltimore, Maryland $2,000,000.00
February 10, 2000
REVOLVING LOAN PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, ACCOM, INC., a Delaware
corporation ("BORROWER"), promises to pay to the order of THE PROVIDENT BANK, an
Ohio Chartered Banking Institution, ("LENDER"), at the LENDER'S offices at Xxx
Xxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxx 00000 or at such other places as the holder
of this Promissory Note may from time to time designate, the principal sum of
Two Million Dollars ($2,000,000.00), or so much as may have been advanced to the
BORROWER as proceeds of the "REVOLVING LOAN," as such term is defined and
described in the Loan And Security Agreement ("AGREEMENT") of even date herewith
between the LENDER and the BORROWER, together with interest thereon at the rate
or rates hereafter specified until paid in full and any and all other sums which
may be owing to the holder of this Promissory Note by the BORROWER pursuant to
this Promissory Note. The following terms shall apply to this Promissory Note.
1. Interest Rate. Interest shall accrue on the unpaid principal balance of this
Promissory Note until paid in full at the annual fluctuating rate of interest
which shall equal the rate obtained by adding One and One-Quarter percent
(1.25%) to the "Prime Rate, " in effect from time to time. As used in this
Promissory Note, the term "PRIME RATE" means the rate of interest announced from
time to time by the LENDER as its prime commercial lending rate of interest, it
being understood that such announced rate bears no inference, implication,
representation, or warranty that such announced rate is charged to any
particular customer or customers of the LENDER. Changes in the applicable
interest rate shall be made as of the occurrence of each change in the PRIME
RATE.
2. Calculation Of Interest. Interest shall be calculated on the basis of a three
hundred sixty (360) days per year factor applied to the actual days on which
there exists an unpaid balance hereunder.
3. Repayment. Accrued and unpaid interest, plus any then due applicable late
payment charges or default interest, shall be paid in consecutive monthly
payments beginning on March 1, 2000, and continuing on the first calendar day of
each succeeding month until March 1, 2003, which is the final and absolute
maturity date of this Promissory Note, at which time all sums due hereunder that
remain unpaid, including principal, interest, charges and fees, shall be paid in
full.
4. Late Payment Charge. If any payment due hereunder, including any final
installment, is not received by the holder within fifteen (15) calendar days
after its due date, the BORROWER shall pay a late payment charge equal to five
percent (5%) of the amount then due (including both principal and interest). The
late payment charge shall be due whether or not the holder declares this
Promissory Note in default or accelerates and demands immediate payment of the
sums due hereunder. The existence of the right by the holder to receive a late
payment charge shall not constitute a grace period or provide any right in the
BORROWER to make a payment other than on its due date.
5. Application Of Payments. All payments made hereunder shall be applied first
to late payment charges or other sums owed to the holder, next to accrued
interest, and then to principal, or in such other order or proportion as the
holder, in the holder's sole discretion, may elect from time to time.
6. Prepayment. The BORROWER may prepay this Promissory Note in whole or in part
at any time without premium or additional interest. All prepayments made upon
the unpaid principal balance of this Promissory Note shall be applied to the
unpaid principal balance in the inverse order of scheduled maturities.
7. Rights Upon Occurrence Of An Event Of Default. Upon the occurrence of an
"EVENT OF DEFAULT," as such term is defined in the AGREEMENT, the holder of this
Promissory Note shall have the following rights in addition to such other rights
and remedies as are authorized by the AGREEMENT or otherwise available to the
holder under applicable laws:
7.1 Acceleration. The holder of this Promissory Note, in the holder's
sole discretion and without notice or demand, may accelerate and declare due and
immediately owing the entire unpaid principal balance plus accrued interest and
all other sums payable to the holder in accordance with the terms of any of the
"LOAN DOCUMENTS," as such term is defined in the AGREEMENT.
7.2 Default Interest Rate. The holder of this Promissory Note, in the
holder's sole discretion and without notice or demand, may raise the rate of
interest accruing on the unpaid principal balance by two (2) percentage points
above the rate of interest otherwise applicable, independent of whether the
holder elects to accelerate the unpaid principal balance as a result of such
default, unless prior to the imposition of the default rate of interest, the
BORROWER cures such event to the satisfaction of the holder hereof. Any
individual waiver of the holder's right to impose the default rate of interest
shall not be considered a waiver of this section or any future right of the
holder to impose the default rate of interest pursuant to this Section.
7.3 Confession Of Judgment. The BORROWER authorizes any attorney
admitted to practice before any court of record in the United States to appear
on its behalf in any court in one or more proceedings, or before any clerk
thereof or prothonotary or other court official, and to confess judgment against
the BORROWER in favor of the holder of this Promissory Note in the full amount
due on this Promissory Note (including principal, accrued interest and any and
all charges, fees and costs) plus attorneys' fees equal to fifteen percent (15%)
of the amount due, plus court costs, all without prior notice or opportunity of
the BORROWER for prior hearing. The BORROWER agrees and consents that venue and
jurisdiction shall be proper in the Circuit Court of any County of the State of
Maryland or of Baltimore City, Maryland, or in the United States District Court
for the District of Maryland. The BORROWER waives the benefit of any and every
statute, ordinance, or rule of court which may be lawfully waived conferring
upon it any right or privilege of exemption, homestead rights, stay of
execution, or supplementary proceedings, or other relief from the enforcement or
immediate enforcement of a judgment or related proceedings on a judgment. The
authority and power to appear for and enter judgment against the BORROWER shall
not be exhausted by one or more exercises thereof, or by any imperfect exercise
thereof, and shall not be extinguished by any judgment entered pursuant thereto;
such authority and power may be exercised on one or more occasions from time to
time, in the same or different jurisdictions, as often as the holder shall deem
necessary, convenient, or proper. In the event that the holder receives, as a
result of execution on a judgment confessed hereunder, attorneys' fees which
exceed the actual legal fees incurred by the holder in connection with the
unpaid balance due to the holder pursuant to this Promissory Note, then, upon
full and final payment of all other sums due and owing to the holder pursuant to
this Promissory Note and payment of the actual attorneys' fees incurred by the
holder, the holder shall remit such excess amount of attorneys' fees to the
BORROWER.
8. Expenses Of Collection And Attorneys' Fees. Should this Promissory Note be
referred to an attorney for collection, whether or not judgment has been
confessed or suit has been filed, the BORROWER shall pay all of the holder's
costs, fees and expenses, including attorneys' fees, resulting from such
referral.
9. Waiver Of Defenses. In the event any one or more holders of this Promissory
Note transfer this Promissory Note for value, the BORROWER agrees that all
subsequent holders of this Promissory Note who take for value and without actual
knowledge of a claim or defense of the BORROWER against a prior holder shall not
be subject to any claims or defenses which the BORROWER may have against a prior
holder, all of which are waived as to the subsequent holder, and that all such
subsequent holders shall have all rights of a holder in due course with respect
to the BORROWER even though the subsequent holder may not qualify, under
applicable law, absent this section, as a holder in due course. The BORROWER
shall retain all rights and claims which the BORROWER may have against prior
holders despite any such transfers and the waiver of defenses provided in this
section as to subsequent holders.
10. Waiver Of Protest. The BORROWER, and all other parties to this Promissory
Note, whether maker, indorser, or guarantor, waive presentment, notice of
dishonor and protest.
11. Extensions Of Maturity. All parties to this Promissory Note, whether maker,
indorser, or guarantor, agree that the maturity of this Promissory Note, or any
payment due hereunder, may be extended at any time or from time to time without
releasing, discharging, or affecting the liability of such party.
12. Manner And Method Of Payment. All payments called for in this Promissory
Note shall be made in lawful money of the United States of America. If made by
check, draft, or other payment instrument, such check, draft, or other payment
instrument shall represent immediately available funds. In the holder's
discretion, any payment made by a check, draft, or other payment instrument
shall not be considered to have been made until such time as the funds
represented thereby have been collected by the holder. Should any payment date
fall on a non-banking day, the BORROWER shall make the payment on the next
succeeding banking day.
13. Maximum Rate Of Interest. Any provision contained in any of the LOAN
DOCUMENTS to the contrary notwithstanding, the holder of this Promissory Note
shall not be entitled to receive or collect, nor shall the BORROWER be obligated
to pay, interest hereunder in excess of the maximum rate of interest permitted
by the laws of any state determined to be applicable thereto or the laws of the
United States of America applicable to loans in such applicable state or states,
and if any provisions of this Promissory Note or of any of the other LOAN
DOCUMENTS shall ever be construed or held to permit or require the charging,
collection or payment of any amount of interest in excess of that permitted by
such laws applicable thereto, the provisions of this paragraph shall control and
shall override any contrary or inconsistent provision. The intention of the
parties is to at all times conform strictly with all applicable usury laws, and
other applicable laws regulating the rates of interest which may be lawfully
charged upon the credit facility evidenced by this Promissory Note. The interest
to be paid in accordance with the terms of this Promissory Note shall be held
subject to reduction to the amount allowed under any usury or other laws as now
or hereafter construed by the courts having jurisdiction, and any sums of money
paid in excess of the interest rate allowed by law shall be applied in reduction
of the principal amounts owing under this Promissory Note.
14. Notices. Any notice or demand required or permitted by or in connection with
this Promissory Note shall be given in the manner specified in the AGREEMENT for
the giving of notices under the AGREEMENT. Notwithstanding anything to the
contrary, all notices and demands for payment from the holder actually received
in writing by the BORROWER shall be considered to be effective upon the receipt
thereof by the BORROWER regardless of the procedure or method utilized to
accomplish delivery thereof to the BORROWER.
15. Assignability. This Promissory Note may be assigned by the LENDER or any
holder at any time or from time to time without notice to or consent from the
BORROWER.
16. Binding Nature. This Promissory Note shall inure to the benefit of and be
enforceable by the LENDER and the LENDER'S successors and assigns and any other
person to whom the LENDER or any holder may grant an interest in the BORROWER'S
obligations hereunder, and shall be binding and enforceable against the BORROWER
and the BORROWER'S successors and assigns.
17. Invalidity Of Any Part. If any provision or part of any provision of this
Promissory Note shall for any reason be held invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Promissory Note and this Promissory Note shall be
construed as if such invalid, illegal or unenforceable provision or part thereof
had never been contained herein, but only to the extent of its invalidity,
illegality, or unenforceability.
18. Choice Of Law. The laws of the State of Maryland (excluding, however,
conflict of law principles) shall govern and be applied to determine all issues
relating to this Promissory Note and the rights and obligations of the parties
hereto, including the validity, construction, interpretation, and enforceability
of this Promissory Note and its various provisions and the consequences and
legal effect of all transactions and events which resulted in the issuance of
this Promissory Note or which occurred or were to occur as a direct or indirect
result of this Promissory Note having been executed.
19. Consent To Jurisdiction; Agreement As To Venue. The BORROWER irrevocably
consents to the non-exclusive jurisdiction of the courts of the State of
Maryland and of the United States District Court for the District of Maryland,
if a basis for federal jurisdiction exists. The BORROWER agrees that venue shall
be proper in any circuit court of the State of Maryland selected by the LENDER
or in the United States District Court for the District of Maryland if a basis
for federal jurisdiction exists and waives any right to object to the
maintenance of a suit in any of the state or federal courts of the State of
Maryland on the basis of improper venue or of inconvenience of forum.
20. Unconditional Obligations. The BORROWER'S obligations under this Promissory
Note shall be the unconditional duty and obligation of the BORROWER and shall be
independent of any rights of set-off, recoupment or counterclaim which the
BORROWER might otherwise have against the holder of this Promissory Note. The
BORROWER shall pay absolutely the payments of principal, interest, fees and
expenses required hereunder, free of any deductions and without abatement,
diminution or set-off.
21. Seal And Effective Date. This Promissory Note is an instrument executed
under seal and is to be considered effective and enforceable as of the date set
forth on the first page hereof, independent of the date of actual execution and
delivery.
22. Tense; Gender; Defined Terms; Section Headings. As used herein, the singular
includes the plural and the plural includes the singular. A reference to any
gender also applies to any other gender. Defined terms are entirely capitalized
throughout. The section headings are for convenience only and are not part of
this Promissory Note.
23. Actions Against Lender. Any action brought by the BORROWER against the
LENDER which is based, directly or indirectly, on this Promissory Note or any
matter in or related to this Promissory Note, including but not limited to the
making of the loan evidenced hereby or the administration or collection thereof,
shall be brought only in the courts of the State of Maryland. The BORROWER may
not file a counterclaim against the LENDER in a suit brought by the LENDER
against the BORROWER in a state other than the State of Maryland unless under
the rules of procedure of the court in which the LENDER brought the action the
counterclaim is mandatory, and not merely permissive, and will be considered
waived unless filed as a counterclaim in the action instituted by the LENDER.
The BORROWER agrees that any forum other than the State of Maryland is an
inconvenient forum and that a suit brought by the BORROWER against the LENDER in
a court of any state other than the State of Maryland should be forthwith
dismissed or transferred to a court located in the State of Maryland by that
Court.
24. Waiver Of Jury Trial. The BORROWER (by execution of this Promissory Note)
and the LENDER (by acceptance of this Promissory Note) agree that any suit,
action, or proceeding, whether claim or counterclaim, brought or instituted by
or against the BORROWER or the LENDER, or any successor or assign of the
BORROWER or the LENDER, on or with respect to this Promissory Note or any of the
other LOAN DOCUMENTS, or which in any way relates, directly or indirectly, to
the obligations of the BORROWER to the LENDER under this Promissory Note or any
of the other LOAN DOCUMENTS, or the dealings of the parties with respect
thereto, shall be tried only by a court and not by a jury. THE BORROWER AND THE
LENDER HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT,
ACTION, OR PROCEEDING.
IN WITNESS WHEREOF, the BORROWER has duly executed this Promissory Note
under seal as of the date first above written.
WITNESS/ATTEST: THE BORROWER:
ACCOM, INC.
A Delaware Corporation
By: /s/ XXXXXX X. XXXXXXXX (SEAL)
---------------------------------- ----------------------
Name: Xxxxxx X. XxXxxxxx
Title: Senior Vice President
[Acknowledge on following page.]
ACKNOWLEDGMENT
STATE OF Maryland, CITY/COUNTY OF Baltimore, TO WIT:
I HEREBY CERTIFY that on this 10th day of February, 2000 before me, the
undersigned Notary Public of the aforesaid State, personally appeared Xxxxxx X.
XxXxxxxx, and acknowledged himself to be the Senior VP of Accom, Inc., a
Delaware corporation, and that he, as such Senior VP, being authorized so to do,
executed the foregoing instrument for the purposes therein contained by signing
the name of Accom, Inc. by himself as Senior VP.
IN WITNESS MY Hand and Notarial Seal.
XXXXX XXXX (SEAL)
----------------
NOTARY PUBLIC
My Commission Expires:
3/1/2004
