LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (the "AGREEMENT"), dated as of the
27th day of March, 1998, is made and entered into on the terms and
conditions hereinafter set forth, by and among TAVA TECHNOLOGIES, INC., a
Colorado corporation ("TAVA"), ADVANCED CONTROL TECHNOLOGY, INC., an Oregon
corporation, VISIONEERING HOLDING CORP., a California corporation,
MANAGEMENT DESIGN AND CONSULTING SERVICES, INC., a Georgia corporation, ALL
CONTROL SYSTEMS, INC., a Pennsylvania corporation, TECH SALES, INC., a
Colorado corporation, TOPRO SYSTEMS INTEGRATION, INC., a Colorado
corporation, SHARP ELECTRIC CONSTRUCTION COMPANY, INC., a Colorado
corporation TAVA ALABAMA, INC., a Colorado corporation; and TAVA Y2K ONE,
INC., a Colorado corporation (each such corporation, together with any
entity that becomes a party to this Agreement pursuant to Section 4.27
hereof, individually, a "BORROWER" and collectively, the "BORROWERS," as
defined in Section 1.5 herein); and SIRROM CAPITAL CORPORATION d/b/a TANDEM
CAPITAL, a Tennessee corporation ("LENDER").
RECITALS:
Borrowers have requested that Lender make available to Borrowers a
loan in the original principal amount of $4,000,000 (the "ORIGINAL LOAN")
and an additional contingent loan in the original principal amount of
$2,000,000 (the "ADDITIONAL LOAN"), upon the terms and conditions
hereinafter set forth, and for the purposes hereinafter set forth (each,
sometimes, a "LOAN" and collectively the "LOANS").
NOW, THEREFORE, in consideration of the agreement of Lender to make
the Loans, the mutual covenants and agreements hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrowers and Lender hereby agree as follows:
ARTICLE I
THE LOANS
Section 1.1 EVIDENCE OF LOAN INDEBTEDNESS AND REPAYMENT.
The Original Loan shall be evidenced by a Senior Secured Promissory
Note substantially in the form attached hereto as EXHIBIT A-1 executed by
Borrowers in favor of Lender (the "ORIGINAL NOTE"). The Additional Loan
shall be evidenced by a Senior Secured Promissory Note substantially in the
form attached hereto as EXHIBIT A-1 executed by Borrowers in favor of
Lender, but containing such terms as to rate of interest, maturity and
other repayment terms as shall be mutually agreed upon by Lender and
Borrowers (the "ADDITIONAL NOTE"). The Original Note and the Additional
Note are each sometimes referred to as a "NOTE" or collectively, the
"NOTES". Each Loan shall be in the original principal amount indicated in
the Note, shall be payable in accordance with the terms of each such Note,
and shall be prepayable at any time, in whole or in part, without penalty
or premium, except as otherwise provided therein.
1
Section 1.2 TIMING; CONDITIONS.
If the conditions in Section 5.1 herein are met and subject to other
terms and conditions of this Agreement, the Original Loan shall be made on
the date of this Agreement (the "INITIAL CLOSING DATE") and shall be in the
amount of $4,000,000, net of the Processing Fee (as defined in Section 1.3)
and net of up to $35,000 of reasonable fees and expenses of Lender,
including, without limitation, the reasonable fees and expenses of counsel
to Lender. If the conditions in Section 5.2 herein are met and subject to
other terms and conditions of this Agreement, the Additional Loan shall be
made no later than May 15, 1998 (the date on which such Additional Loan is
made is hereinafter referred to as the "SECOND CLOSING DATE"). The
Additional Loan, if any, shall be in the amount of $2,000,000, net of the
Processing Fee and net of reasonable fees and expenses of Lender,
including, without limitation, the reasonable fees and expenses of counsel
to Lender.
Section 1.3 PROCESSING FEE.
In connection with the making of the Original Loan, Borrowers shall
pay to Lender a processing fee in the amount of $80,000, and in connection
with the making of the Additional Loan, if any, Borrowers shall pay to
Lender a processing fee in the amount of $40,000 (each, a "PROCESSING
FEE"), which amount, together with the expenses of Lender set forth in
Section 1.2 above, shall be deducted in each case from the loan proceeds.
Section 1.4 STOCK PURCHASE WARRANTS.
(a) ISSUANCE OF WARRANTS. In consideration for Lender's entering
into this Agreement and for the performance of its obligations hereunder,
TAVA shall deliver to Lender (i) at the closing of the Original Loan as
provided in Section 5.1, a Stock Purchase Warrant substantially in the form
attached hereto as EXHIBIT B (the "Original Warrant") to purchase 155,000
shares of common stock, par value $.0001 per share, of TAVA ("TAVA COMMON
STOCK") at an exercise price per share of the lower of (A) $6.25 or (B) the
average bid price of TAVA's Common Stock for the twenty (20) consecutive
trading days immediately prior to the six month anniversary of the issuance
date of the Original Warrant, and (ii) additional warrants to purchase
shares of TAVA Common Stock as provided in Section 4.26 below.
(b) REGISTRATION RIGHTS. The holder(s) of shares of TAVA Common
Stock issued or issuable upon exercise of the Warrants (as defined in
Section 4.26) shall be entitled to registration rights pursuant to a
Registration Rights Agreement, dated the date of this Agreement and
substantially in the form attached hereto as EXHIBIT C, between TAVA and
Lender (the "REGISTRATION RIGHTS AGREEMENT").
(c) INVESTMENT REPRESENTATIONS. Lender represents and warrants to
TAVA that (i) Lender is and will be at the date of initial delivery of each
Warrant, a registered investment company under the Investment Company Act
of 1940, as amended (the "INVESTMENT COMPANY ACT"), and as such is, an
"accredited investor" under Rule 501(a) under the Securities Act of 1933,
as amended (the "SECURITIES ACT"); (ii) Lender is, and will be, acquiring
each Warrant for its own account, for investment, and not with a view to
the distribution or resale thereof, in whole or in part, in violation of
the Securities Act or any applicable state securities law, and Lender has
no present intention of selling, negotiating or otherwise disposing of the
Warrants, it being understood that Lender intends to transfer and assign,
without consideration, the Warrants and all of Lender's rights and
obligations under the Warrants and the Registration Rights Agreement to one
or more wholly-owned subsidiaries of Lender, which
2
subsidiaries are and will also be "accredited investors" under rule 501(a);
and (iii) lender is and will be at the date of initial delivery of each
Warrant an "institutional investor" as defined under Section 48-2-102 of
the Tennessee Securities Act of 1980 for purposes of the exemption set
forth under Section 48-2-103(b)(3) of such act.
Section 1.5 DEFINITION.
For purposes of this Agreement, the terms "Borrower" and "Borrowers"
shall include each of the Borrowers specifically listed in the introductory
paragraph herein and (except for Article III hereof), shall also include
each Subsidiary (as defined in Section 3.1(b)), formed or acquired by any
Borrower subsequent to the date hereof.
ARTICLE II
SECURITY
Section 2.1 SECURITY.
As security for the Secured Obligations (as defined in Section 2.2),
each Borrower hereby grants to Lender (or will grant to Lender, in the
event that a Borrower is a company acquired by any current Borrower
subsequent to the date hereof) a first priority security interest in the
following described property, and any and all proceeds and products thereof
(collectively, the "COLLATERAL"):
(a) EQUIPMENT. All machinery and equipment, all data processing and
office equipment, all computer equipment, hardware, firmware and software,
all furniture, fixtures, appliances and all other goods of every type and
description, whether now owned or hereafter acquired and wherever located,
together with all parts, accessories and attachments and all replacements
thereof and additions thereto;
(b) INVENTORY. All inventory and goods, whether held for lease, sale
or furnishing under contracts of service, all agreements for lease of same
and rentals therefrom, whether now in existence or owned or hereafter
acquired and wherever located;
(c) GENERAL INTANGIBLES. All rights, interests, choses in action,
causes of action, claims and all other intangible property of every kind
and nature, in each instance whether now owned or hereafter acquired,
including, but not limited to, all corporate and business records; all
loans, royalties, and other obligations receivable; all trade secrets,
inventions, designs, patents, patent applications, registered or
unregistered service marks, trade names, trademarks, copyrights and the
goodwill associated therewith and incorporated therein, and all
registrations and applications for registration related thereto; all
goodwill, licenses, permits, franchises, customer lists and credit files;
all customer and supplier contracts, firm sale orders, rights under license
and franchise agreements, and other contracts and contract rights; all
right, title and interest under leases, subleases, licenses and concessions
and other agreements relating to real or personal property and any security
agreements relating thereto; all rights to indemnification; all proceeds of
insurance of which any Borrower is beneficiary; all letters of credit,
guarantees, liens, security interests and other security held by or granted
to any Borrower; and all other intangible property, whether or not similar
to the foregoing;
(d) ACCOUNTS, CHATTEL PAPER, INSTRUMENTS AND DOCUMENTS. All
accounts, accounts receivable, chattel paper, instruments and documents,
whether now in existence or owned or hereafter acquired,
3
entered into, created or arising, and wherever located (provided that the
parties agree that except and until an Event and Default hereunder,
Borrowers shall be entitled to collect all accounts receivable and use the
proceeds collected for their own purposes and in their sole discretion,
except as otherwise restricted by the provisions of this Agreement); and
(e) OTHER PROPERTY. All other personal property or interests in
property now owned or hereafter acquired.
Section 2.2 SECURED OBLIGATIONS.
Without limiting any of the provisions thereof, the Security
Instruments (as defined in Section 2.3) shall secure the following
indebtedness and obligations (the "SECURED OBLIGATIONS"):
(a) the full and timely payment of the indebtedness evidenced by the
Notes, together with interest thereon, and any extensions, modifications,
consolidations or renewals thereof, and any promissory notes given in
payment thereof;
(b) the full and prompt performance of all of the obligations of any
Borrower to Lender under the Loan Documents (as defined in Section 2.3) to
which any Borrower is a party;
(c) the full and prompt payment of all court costs and other costs
and expenses of whatever kind reasonably incurred in the collection of the
indebtedness evidenced by the Notes, the enforcement or protection of the
security interests of the Security Instruments (as defined in Section 2.3)
or the exercise of any rights or remedies of Lender with respect to the
indebtedness evidenced by the Notes, including without limitation the
reasonable attorney fees and costs incurred by Lender, all of which
Borrowers agrees to pay to Lender upon demand; and
(d) the full and prompt payment and performance of any and all other
indebtedness and other obligations of any Borrower to Lender, direct or
contingent, however evidenced or denominated, and however and whenever
incurred, including but not limited to indebtedness incurred pursuant to
any present or future commitment to lend money of Lender to any Borrower,
together with interest thereon, and any extensions, modifications,
consolidations and/or renewals thereof and any notes given in payment
thereof.
Section 2.3 SECURITY INSTRUMENTS.
The Secured Obligations shall also be secured by (i) the pledge by
TAVA of all shares of capital stock owned by it in its Subsidiaries (as
defined in Section 3.1 below) pursuant to the Stock Pledge Agreement in
substantially the form attached hereto as EXHIBIT D (the "STOCK PLEDGE
AGREEMENT") and (ii) the assets of each Borrower in which a security
interest is granted pursuant to that certain Trademark and Patent Security
Agreement in substantially the form attached hereto as EXHIBIT E (the
"TRADEMARK AND PATENT SECURITY AGREEMENT"). This Agreement, the Stock
Pledge Agreement, the Trademark and Patent Security Agreement and any other
instruments, documents or agreements now or hereafter securing the Secured
Obligations are herein collectively referred to as the "SECURITY
INSTRUMENTS". The Security Instruments, together with the Notes and any
other instruments and documents now or hereafter evidencing, securing or in
any way related to the indebtedness evidenced by the Notes are herein
individually referred to as a "LOAN DOCUMENT" and collectively referred to
as the "LOAN DOCUMENTS."
4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
Each of the Borrowers, jointly and severally, hereby represents and
warrants to Lender as follows:
Section 3.1 CORPORATE STATUS.
(a) Each Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation and
has the corporate power to own and operate its properties, to carry on its
business as now conducted and to enter into and to perform its obligations
under this Agreement and the other Loan Documents. Each Borrower is duly
qualified to do business and is in good standing in each state or other
jurisdiction in which a failure to be so qualified could give rise to a
Material Adverse Event, as hereinafter defined. The states or other
jurisdictions in which any Borrower is so qualified are set forth on
SCHEDULE 3.1(a). For purposes of this Agreement, "MATERIAL ADVERSE EVENT"
means any event or circumstance, or set of events or circumstances,
individually or collectively, that reasonably could be expected to result
in any (i) adverse effect upon the validity or enforceability of any Loan
Document, or (ii) material and adverse effect on the condition (financial
or otherwise) or business operations, properties or prospects of a
Borrower, or (iii) default hereunder or thereunder.
(b) No Borrower owns, directly or indirectly, any capital stock or
other equity interest of any corporation, partnership, joint venture,
limited liability company or other business organization, except that TAVA
owns all of the outstanding capital stock of the subsidiaries set forth on
SCHEDULE 3.1(b)(i) (the "SUBSIDIARIES") and has entered into joint venture
arrangements in connection with Y2K projects with the entities set forth on
SCHEDULE 3.1(b)(ii).
(c) The authorized capital stock of each of the Borrowers, the number
of shares of each of Borrowers issued and outstanding and, in the case of
each of the Borrowers other than TAVA, the holder(s) of all such issued and
outstanding shares, is set forth on SCHEDULE 3.1(c).
(d) Except as specified in SCHEDULE 3.1(d), there are no outstanding
options, warrants or rights to purchase or acquire from any Borrower any
securities of any Borrower, there are no securities outstanding or
committed to be issued by any Borrower which are convertible into or
exchangeable for any shares of capital stock or other securities of any
Borrower, and there are no contracts, commitments, agreements,
understandings, arrangements or restrictions relating to any shares of
capital stock or other securities of any Borrower, whether or not
outstanding, to which any Borrower is a party or by which it is bound or,
to the best knowledge of each Borrower, to which any of its shareholders is
a party or by which any such shareholder is bound. All of the shares of
capital stock of each of the Borrowers are validly issued, fully paid and
non-assessable and were not issued in violation of any statutory or
contractual preemptive rights, rights of first refusal, anti-dilution
rights or any similar rights held by any party. Since January 1, 1995,
TAVA has not violated any federal or state securities laws in connection
with the issuance of any securities, and no other Borrower has violated any
federal or state securities laws in connection with the issuance of any
securities by it subsequent to the date of TAVA's acquisition of such
Borrower.
(e) Except as set forth on SCHEDULE 3.1(e), none of the Borrowers is
under any obligation
5
to register under the Securities Act, any state securities law or the Trust
Indenture Act of 1939, as amended, any of its presently outstanding
securities or any of its securities that may subsequently be issued.
Section 3.2 AUTHORIZATION.
Each Borrower has full legal right, power and authority to enter into
and perform its obligations under the Loan Documents, without the consent
or approval of any other person, firm, governmental agency or other legal
entity, other than consents listed on SCHEDULE 3.2, which consents have
previously been obtained. Each Borrower has all necessary right, power and
authority to grant to Lender a valid and enforceable security interest in
the Collateral. The execution and delivery of this Agreement, the
borrowing hereunder, the execution and delivery of each Loan Document to
which any Borrower is a party, and the performance by each Borrower of its
obligations hereunder and thereunder are within the corporate powers of
such Borrower and have been duly authorized by all necessary corporate
action properly taken, have received all necessary governmental approvals,
if any were required, and do not and will not contravene or conflict with
(a) the articles of incorporation or bylaws of such Borrower, (b) any
material agreement to which any Borrower is a party or which is binding
upon such Borrower or its properties, or (c) or violate, any provision of
law, any applicable judgment, ordinance, regulation or order of any court
or governmental agency. The officers executing this Agreement, the Notes
and all of the other Loan Documents to which any Borrower is a party, are
duly authorized to act on behalf of each such Borrower.
Section 3.3 VALIDITY AND BINDING EFFECT.
This Agreement and the other Loan Documents are the legal, valid and
binding obligations of each Borrower, enforceable in accordance with their
respective terms.
Section 3.4 PRIORITY OF LIENS; TITLE TO PROPERTY.
Except as disclosed on SCHEDULE 3.4, there are no outstanding loans,
liens, pledges, security interests, agreements or other financings which
provide any third person with a lien against any of the collateral securing
the Secured Obligations, whether such collateral is pledged pursuant to
this Agreement or any other Security Instruments. Except as disclosed on
SCHEDULE 3.4, each Borrower has good and marketable title to all of its
property, free and clear of any and all claims, liens, encumbrances,
equities and restrictions, except such claims, liens, encumbrances,
equities and restrictions which would not, in the aggregate, cause a
Material Adverse Event.
Section 3.5 LOCATION OF COLLATERAL.
The location of the chief executive office and principal place of
business of each Borrower is set forth on SCHEDULE 3.5, and all records or
documents with respect to intangible personal property comprising the
Collateral are maintained at one of such addresses. All of the Collateral
comprised of tangible personal property is located at one of the addresses
set forth on SCHEDULE 3.5 or one of the addresses set forth on SCHEDULE 3.5.
Section 3.6 LITIGATION.
6
Except as set forth on SCHEDULE 3.6, there are no actions, suits or
proceedings pending or threatened in writing to which any Borrower is a
party or to which any of its respective properties or assets is the
subject, or involving the validity or enforceability of any of the Loan
Documents or the priority of the liens thereof, at law or in equity, or
before any governmental or administrative agency, except actions, suits and
proceedings that are fully covered by insurance or adequately reserved
against on TAVA's unaudited consolidated balance sheet at December 31,
1997, and that, if adversely determined, would not impair materially the
ability of any Borrower to perform each and every one of its obligations
under and by virtue of the Loan Documents; and to each Borrower's
knowledge, no Borrower is in default with respect to any order, writ,
injunction, decree or demand of any court or any governmental authority.
Section 3.7 FINANCIAL STATEMENTS.
The consolidated financial statements of TAVA and its Subsidiaries,
including each Borrower, for the fiscal years ended June 30, 1995, June 30,
1996, and June 30, 1997, and the unaudited consolidated financial
statements as of and for the six (6) months ended December 31, 1997, and
the related notes, copies of which Borrowers previously have delivered to
Lender, fairly present the financial position, results of operations, cash
flows and changes in stockholders' equity of TAVA and its Subsidiaries, at
the respective dates of and for the periods to which they apply in such
financial statements and have been prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied throughout the
periods indicated, subject, in the case of interim financial statements, to
normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, cause a Material Adverse Event). No
material adverse change has occurred in the condition (financial or
otherwise) or business operations or properties of any Borrower since
December 31, 1997, and no additional indebtedness or obligations have been
incurred by any Borrower since the date(s) thereof, other than trade
payables incurred in the ordinary course of business and except as set
forth on SCHEDULE 3.7.
Section 3.8 SEC REPORTS.
TAVA's Common Stock is listed on the NASDAQ SmallCap Market and has
been duly registered with the Securities and Exchange Commission ("SEC")
under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT").
The trading symbol for the TAVA Common Stock is "TAVA." Since January 1,
1997, TAVA has timely filed all reports, registrations, proxy or
information statements and all other documents, together with any
amendments required to be made thereto, required to be filed with the SEC
under the Securities Act and the Exchange Act (collectively, the "SEC
REPORTS"). TAVA previously has furnished to Lender true copies of all the
SEC Reports, together with all exhibits thereto that Lender has requested,
and TAVA's annual report to stockholders for the fiscal year ended June 30,
1997, which annual report meets the requirements of Rule 14a-3 or 14e-3
under the Exchange Act (the "ANNUAL REPORT"). The financial statements
contained in the SEC Reports fairly presented the financial position of
TAVA and its Subsidiaries as of the dates mentioned and the results of
operations, changes in stockholders' equity and changes in financial
position or cash flows for the periods then ended in conformity with GAAP
applied on a consistent basis throughout the periods involved. As of their
respective dates, the SEC Reports complied in all material respects with
all rules and regulations promulgated by the SEC and did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
7
Section 3.9 ABSENCE OF CHANGES.
Except as set forth on SCHEDULE 3.9, since December 31, 1997, (i)
neither TAVA nor any of its Subsidiaries has incurred any liabilities or
obligations, direct or contingent, or entered into any transactions, not in
the ordinary course of business, that are material to TAVA or any of its
Subsidiaries, (ii) neither TAVA nor any of its Subsidiaries has purchased
any of its outstanding capital stock or declared, or paid any dividend or
other distribution or payment in respect of its capital stock, (iii) there
has not been any change in the authorized or issued capital stock,
long-term debt or short-term debt of any Borrower, and (iv) there has not
been any Material Adverse Event in or affecting the business, operations,
properties, prospects, assets, or condition (financial or otherwise) of the
Company or any Subsidiary, and no event has occurred or circumstance exists
that may result in a Material Adverse Event.
Section 3.10 NO DEFAULTS.
Consummation of the transactions hereby contemplated and the
performance of the obligations of each Borrower under and by virtue of the
Loan Documents will not result in any breach of, contravene, conflict with,
or constitute a default under, (i) the articles or certificate of
incorporation or bylaws of any Borrower, (ii) any provision of law, any
applicable judgment, ordinance, regulation, or under order of any court or
governmental agency which breach, contravention, conflict or default could
give rise to a Material Adverse Event, or (iii) any mortgage, security deed
or agreement, deed of trust, lease, loans or credit agreement, partnership
agreement, license, franchise or any other material instrument or agreement
to which any Borrower is a party or by which any Borrower or its properties
is bound or, to the knowledge of any Borrower, affected.
Section 3.11 COMPLIANCE WITH LAW.
To the best of each Borrower's knowledge, each Borrower is in
compliance with all federal, state and local laws, regulations, decrees and
orders applicable to it (including but not limited to occupational and
health standards and controls, antitrust, monopoly, restraint of trade or
unfair competition), except to the extent that noncompliance, in the
aggregate, would not give rise to a Material Adverse Event.
Section 3.12 ENVIRONMENTAL MATTERS.
No Borrower has knowledge of (i) the presence, except in compliance
with Applicable Environmental Laws, of any Hazardous Substances (as
defined below) on any property owned, leased or otherwise controlled by any
Borrower (collectively, the "PROPERTY"); (ii) any spills, releases,
discharges, or disposal of Hazardous Substances that have occurred or are
presently occurring on or onto any of the Property; (iii) the presence on
any of the Property of underground or above-ground storage tanks or
pipelines which are required to be licensed by any local, state or federal
agency; (iv) any spills or disposal of Hazardous Substances that have
occurred or are occurring off the Property as a result of any construction
on or operation and use of the Property; (v) any failure by any Borrower to
comply with any Material Applicable Environmental Laws (as defined below);
(vi) any notices related to any Borrower or any of the Property claiming a
violation of any Applicable Environmental Laws, or the commencement of any
action or proceeding against any Borrower or related to any of the Property
alleging a violation of Material Applicable Environmental Laws; (vii) any
notices related to any Borrower or any of the Property requiring compliance
with Applicable Environmental Laws, or
8
demanding payment or contribution for injury to the environment or human
health; or (viii) any outstanding notices or citations relating to
violations by any former owner or operator of any of the Property. For the
purposes of this Agreement, (A) "HAZARDOUS SUBSTANCES" means any substance
or material defined or designated as a hazardous or toxic waste, material
or substance, or other similar term, by any federal, state, or local
environmental statute, regulation, or ordinance presently in effect,
including, without limitation, asbestos in any form, urea formaldehyde foam
insulation, petroleum products, and polychlorinated biphenyls; and (B)
"MATERIAL APPLICABLE ENVIRONMENTAL LAWS" means any and all local, state,
and federal environmental laws, regulations, ordinances, and administrative
and judicial orders relating to the generation, recycling, reuse, sale,
storage, handling, transport, or disposal of any Hazardous Substances which
are applicable to the Borrowers and the violation of which would result in
a Material Adverse Event.
Section 3.13 TAXES.
Except as set forth on SCHEDULE 3.13, each Borrower has filed or
caused to be filed all federal, state and local income, excise and
franchise tax returns required to be filed (except for returns that have
been appropriately extended), and has paid, or provided for the payment of,
all taxes shown to be due and payable on said returns and all other taxes,
impositions, assessments, fees or other charges imposed on it by any
governmental authority, agency or instrumentality, prior to any delinquency
with respect thereto (other than taxes, impositions, assessments, fees and
charges currently being contested in good faith by appropriate proceedings,
for which appropriate amounts have been reserved), and no Borrower knows of
any proposed assessment for additional taxes or any basis therefor. No tax
liens have been filed against any Borrower or any of Borrower's properties.
Borrower's federal income tax liability has been finally determined by the
Internal Revenue Service and satisfied for all taxable years up to and
including the taxable year ended June 30, 1991, or closed by applicable
statutes of limitation.
Section 3.14 CERTAIN TRANSACTIONS.
Except as set forth on SCHEDULE 3.14, (i) no Borrower is indebted,
directly or indirectly, to any of its respective officers or directors, or
to their respective spouses or children, and (ii) none of said officers or
directors or any members of their immediate families are indebted to any
Borrower or have any direct or indirect ownership interest in any firm or
corporation with which any Borrower is affiliated or with which any
Borrower has a business relationship, or any firm or corporation which
competes with any Borrower, except that an officer and/or director of any
Borrower may own no more than 1% of the outstanding stock of any publicly
traded company which competes directly with such Borrower. Except as set
forth on SCHEDULE 3.14, no officer or director of any Borrower or any
member of their immediate families is, directly or indirectly, interested
in any material contract with any Borrower. Except as set forth on
SCHEDULE 3.14, no Borrower is a guarantor or indemnitor of any indebtedness
of any other person, firm or corporation.
Section 3.15 CORPORATE OR TRADE NAMES.
Except as set forth on SCHEDULE 3.15, in the preceding five (5) years,
no Borrower has been known as or conducted business under any name other
than the name used by such Borrower in executing this Agreement.
Section 3.16 INTELLECTUAL PROPERTY.
9
To the best of each Borrower's knowledge, each Borrower is the lawful
owner or licensee of all proprietary information used by it in the
operation of its business except to the extent that the failure to own or
license such proprietary information could not give rise to a Material
Adverse Event, and all proprietary information owned by each Borrower is
owned free and clear of any claim, right, trademark, patent or copyright
protection of any third party. As used herein, "PROPRIETARY INFORMATION"
includes without limitation (i) any computer software and related
documentation, inventions, technical data and nontechnical data related
thereto, and (ii) other documentation, inventions and data related to
patterns, plans, methods, techniques, drawings, finances, customer lists,
suppliers, products, special pricing and cost information, designs,
processes, procedures, formulas, research data owned or used by any
Borrower or marketing studies conducted by any Borrower, all of which is
commercially important and competitively sensitive and which generally has
not been disclosed to third parties other than customers in the ordinary
course of business. Each Borrower has good title or has a valid and
enforceable license or right to use all patents, trademarks, trade names,
service marks, copyrights or other intangible property rights, and
registrations or applications for registration thereof, owned by such
Borrower or used or required by such Borrower in the operation of its
business as presently being conducted, which are listed on SCHEDULE 3.16,
except as set forth on SCHEDULE 3.16. No Borrower has any knowledge of any
infringement or conflict with asserted rights of others with respect to
copyrights, patents, trademarks, service marks, trade names, trade secrets
or other intangible property rights or know-how utilized by any Borrower.
To the knowledge of each Borrower, no products or processes of any Borrower
infringe or conflict with any rights of patent or copyright, or any
discovery, invention, product or process, that is the subject of a patent
or copyright application or registration known to any Borrower. Each
Borrower has adopted and follows such procedures as are necessary to
provide reasonable protection of such Borrower's trade secrets and
proprietary rights in intellectual property of all kinds. To the knowledge
of each Borrower, no person employed by or affiliated with any Borrower has
employed or proposes to employ any trade secret or any information or
documentation proprietary to any former employer and, to the knowledge of
each Borrower, no person employed by or affiliated with any Borrower has
violated any confidential relationship that such person may have had with
any third person, in connection with the development, manufacture, sale or
lease of any product or proposed product or the development or sale of any
service or proposed service of any Borrower.
Section 3.17 DEBT.
SCHEDULE 3.17 sets forth (i) a complete and correct list of all loans,
credit agreements, indentures, purchase agreements, promissory notes and
other evidences of indebtedness, Guaranties, capital leases and other
instruments, agreements and arrangements presently in effect providing for
or relating to extensions of credit (including agreements and arrangements
for the issuance of letters of credit or for acceptance financing) in
respect of which the Borrowers or any of their properties is in any manner
directly or contingently obligated; (ii) a correct statement of the maximum
principal or face amounts of the credit in question that are outstanding
and that can be outstanding; and (iii) a correct statement of all liens,
pledges or security interests of any nature given or agreed to be given as
security therefor or in connection therewith. Consummation of the
transactions hereby contemplated and the performance of the obligations of
the Borrowers under the Loan Documents will not result in any breach of, or
constitute a default under, or require the consent of any person under, any
loan, credit agreement, indenture, purchase agreement, promissory note or
other evidences of indebtedness, Guaranty, capital lease or other
instrument, agreement or arrangement set forth on SCHEDULE 3.17 except as
set forth on SCHEDULE 3.17.
10
Section 3.18 MATERIAL CONTRACTS.
SCHEDULE 3.18 sets forth a complete and correct list of (a) all
contracts, agreements and other documents pursuant to which any Borrower
either (i) receives revenues or (ii) makes payment to any third Person(s),
in excess of $1,000,000 per fiscal year, and (b) contracts or other
agreements required to be filed by TAVA with the SEC as an exhibit pursuant
to Item 601(b)(10) of Regulation S-K under the Securities Act (each
instrument identified in SCHEDULE 3.18 individually being an "APPLICABLE
CONTRACT" and collectively the "APPLICABLE CONTRACTS"). To the best of
each Borrower's knowledge, each Applicable Contract is in full force and
effect as of the date hereof and no Borrower knows of any reason why such
Applicable Contracts would not remain in full force and effect pursuant to
the terms thereof, except as set forth on SCHEDULE 3.18. Consummation of
the transactions hereby contemplated and the performance of the obligations
of the Borrowers under the Operative Documents will not result in any
breach of, or constitute a default under, or require the consent of any
person under, any Applicable Contract set forth on SCHEDULE 3.18 except as
set forth on SCHEDULE 3.18.
Section 3.19 LICENSES, PERMITS, ETC.
Except where failure to do so does not and would not constitute a
Material Adverse Event, each Borrower has obtained all licenses, permits
and governmental approvals and authorizations necessary or proper in order
to conduct its business and affairs as heretofore conducted and as
hereafter intended to be conducted and as necessary for the conduct of its
business and for the ownership, maintenance and operation of its properties
and assets. All such licenses, permits and authorizations are set forth on
SCHEDULE 3.19 and are in full force and effect.
Section 3.20 EMPLOYEES.
SCHEDULE 3.20(a) sets forth the number of full-time employees and
full-time equivalent employees of and each Borrower as of the most recent
payroll date, which date is set forth therein. To the best of each
Borrower's knowledge, there is no strike, labor dispute or union
organization activities pending or threatened between it and its employees.
None of the employees of any Borrower belongs to any union or collective
bargaining unit. To the best of its knowledge, each Borrower has complied
in all material respects with all applicable state and federal equal
opportunity and other laws related to employment. Set forth on SCHEDULE
3.20(b) is a description of all pending claims or those threatened in
writing relating to employment matters. To the best of each Borrower's
knowledge, no employee of each Borrower is or will be in violation of any
judgment, decree, or order, or any term of any employment contract, patent
disclosure agreement, or other contract or agreement relating to the
relationship of any such employee with the Borrower, or any other party,
because of the nature of the business conducted or presently proposed to be
conducted by the Borrower or to the use by the employee of his or her best
efforts with respect to such business. Except as disclosed in SCHEDULE
3.20(c), no Borrower is a party to or bound by any employment contract,
deferred compensation agreement, bonus plan, incentive plan, profit sharing
plan, retirement agreement, or other employee compensation agreement. No
Borrower is aware that any officer or key employee, or that any group of
key employees, intends to terminate their employment with such Borrower,
nor does such Borrower have a present intention to terminate the employment
of any of the foregoing. Except as disclosed on SCHEDULE 3.20(a) and
subject to general principles related to wrongful termination of employees,
the employment of each officer and employee of the Company is terminable at
the will of the Company.
11
Section 3.21 ERISA.
With respect to the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder ("ERISA"):
(a) PLANS. SCHEDULE 3.21(a) sets forth any and all "employee benefit
plans" maintained by or on behalf of any Borrower or any ERISA Affiliate
(as defined below) of any Borrower (a "PLAN"), including, but not limited
to, any defined benefit pension plan, profit sharing plan, money purchase
pension plan, savings or thrift plan, stock bonus plan, employee stock
ownership plan, Multiemployer Plan, as defined below, or any plan, fund,
program, arrangement or practice providing for medical (including
post-retirement medical), hospitalization, accident, sickness, disability,
or life insurance benefits. For purposes of this Agreement, (A) "ERISA
AFFILIATE" shall mean each trade or business (whether or not incorporated)
which, together with any Borrower, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder (the "CODE"); and (B) "MULTIEMPLOYER PLAN" shall mean a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA. Neither
any Borrower nor any ERISA Affiliate maintains or contributes to, or has
maintained or contributed to, any defined benefit pension plan or
Multiemployer Plan.
(b) COMPLIANCE. Except as set forth on SCHEDULE 3.21(b), each Plan
has at all times been maintained, by its terms and in operation, in
accordance in all material respects with all applicable laws or has, prior
to December 31, 1997, been brought into such compliance including payment
of interest and assessed penalties, and no fact that might constitute
grounds for the involuntary termination of the Plan, or for the appointment
by the appropriate United States District Court of a trustee to administer
the Plan, exists at the time of execution of this Agreement.
(c) LIABILITIES. Except for liabilities and expenses which become
payable and are timely paid pursuant to the terms and usual operations of
the Plans, no Borrower is currently and no Borrower will become subject to
any material liability (including withdrawal liability), tax or penalty
whatsoever to any person whomsoever with respect to any Plan including, but
not limited to, any material tax, penalty or liability arising under Title
I or Title IV of ERISA or Chapter 43 of the Code.
(d) FUNDING. Each Borrower and each ERISA Affiliate has made full
payment of all amounts (I) required to be contributed under the terms of
each Plan and applicable law, and (II) required to be paid as expenses of
each Plan. No Plan or Plans have an "amount of unfunded benefit
liabilities" (as defined in Section 4001(a)(18) of ERISA) which, in the
aggregate, exceed $100,000.
Section 3.22 REGULATIONS G, T, U AND X.
No Borrower is engaged in the business of extending credit for the
purposes of purchasing or carrying margin stock, and no proceeds of the
Loans will be used for a purpose which violates, or would be inconsistent
with, Regulations G, T, U or X of the Board of Governors of the Federal
Reserve System.
Section 3.23 GOVERNMENT REGULATION.
No Borrower is an "investment company" within the meaning of the
Investment Company Act,
12
or a "holding company" or a "subsidiary company" of a "holding company" or
an "affiliate" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or subject to regulation
under the Federal Power Act, the Interstate Commerce Act or any other
federal law or state laws limiting its ability to incur indebtedness or to
execute, deliver or perform the Loan Documents.
Section 3.24 ACCOUNTING MATTERS.
The books of account, minute books, stock record books and other
records of each Borrower are complete and correct, have been maintained in
accordance with sound business practices and accurately and fairly reflect
the transactions and dispositions of the assets of such Borrower. Each
Borrower maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for the
assets of each Borrower; (iii) access to the assets of each Borrower is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets of each
Borrower are compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
Section 3.25 INSURANCE.
Each Borrower has maintained insurance coverage by financially sound
and reputable insurers with respect to their respective properties and
business in such forms and amounts and against such risks, casualties and
contingencies as are customary for corporations of comparable size and
condition (financial and otherwise) engaged in the same or a similar
business and owning and operating similar properties.
Section 3.26 FEES/COMMISSIONS.
Borrowers have not agreed to pay any finder's fee, commission,
origination fee or other fee or charge to any person or entity with respect
to or as a result of the consummation of the transactions contemplated
hereunder, except for the processing fee due to Lender pursuant to Section
1.3 hereof and as disclosed on SCHEDULE 3.26.
Section 3.27 DISTRIBUTIONS TO COMPANY.
No Subsidiary of TAVA is currently prohibited, directly or indirectly,
from paying any dividends to TAVA, from making any other distributions on
such Subsidiary's capital stock, from repaying to TAVA any loans or
advances to such Subsidiary or from transferring any of such Subsidiary's
property or assets to TAVA or any other Subsidiary of TAVA.
Section 3.28 PRIOR SALES.
All offers and sales by TAVA of its capital stock since January 1,
1995, were (i) exempt from the registration requirements of the Securities
Act or were duly registered under the Securities Act, and (ii) were duly
registered or were the subject of an available exemption from the
registration requirements of all applicable state securities or Blue Sky
laws.
13
Section 3.29 FINANCING STATEMENT.
That certain Financing Statement filed in the Office of the Secretary
of State of California on February 3, 1997 (File No. 9703860412) does not
perfect a security interest in any of the assets of any Borrower.
Section 3.30 STATEMENTS NOT FALSE OR MISLEADING.
No representation or warranty given as of the date hereof by any
Borrower contained in this Agreement or any schedule attached hereto or any
statement in any document, certificate or other instrument furnished or to
be furnished to Lender pursuant hereto, taken as a whole, contains or will
(as of the time so furnished) contain any untrue statement of a material
fact, or omits or will (as of the time so furnished) omit to state any
material fact which is necessary in order to make the statements contained
therein not misleading.
Section 3.31 SURVIVAL.
The representations and warranties of each Borrower contained in this
Agreement or any schedule attached hereto or any statement in any document,
certificate or other instrument furnished or to be furnished to Lender
pursuant hereto, shall survive until this Agreement terminates in
accordance with Article VII hereof.
ARTICLE IV
COVENANTS AND AGREEMENTS OF BORROWER
Each of the Borrowers, jointly and severally, hereby covenants and
agrees as follows:
Section 4.1 USE OF PROCEEDS.
Borrowers shall use the proceeds of the Loans solely for the purposes
set forth on SCHEDULE 4.1 hereto.
Section 4.2 CORPORATE EXISTENCE, NO DISSOLUTION, ETC.
Each Borrower will preserve and keep in force and effect its corporate
existence and good standing in the state of incorporation thereof, its
qualification and good standing as a foreign corporation in each
jurisdiction in which failure to so qualify would have a Material Adverse
Effect and will obtain, preserve and keep in force and effect all licenses
and permits necessary for the conduct of its business except where failure
to do so would not have a Material Adverse Effect. No Borrower will permit
dissolution or liquidation of such Borrower or any other Borrower.
Section 4.3 MAINTENANCE OF ASSETS, ETC.
Each Borrower will maintain, preserve and keep its properties and
assets which are used or useful in the conduct of its business (whether
owned in fee or pursuant to a leasehold interest) in good repair and
working order and from time to time will make all repairs, replacements,
renewals and
14
additions necessary in the business judgment of such Borrower.
Section 4.4 NATURE OF BUSINESS.
No Borrower will engage in any line of business other than the
business conducted by such Borrower and the other Borrowers as of the date
of this Agreement.
Section 4.5 INSURANCE.
Without limiting any of the requirements of any of the other Loan
Documents, each Borrower shall maintain, in amounts customary for entities
engaged in comparable business activities, fire, liability and other forms
of insurance on its properties (including but not limited to the collateral
now or hereafter securing payment and performance of the Secured
Obligations), against such hazards and in at least such amounts as is
customary for corporations of comparable size and condition (financial and
otherwise) engaged in the same or a similar business and operating similar
properties. Lender shall be named as an additional insured with respect to
liability insurance and loss payee with respect to hazard insurance. Each
such insurance policy shall require the insurer to notify Lender in writing
at least thirty (30) days prior to any cancellation or material alteration
of such policy. At the request of Lender, each Borrower promptly will
deliver a certificate specifying the details of such insurance in effect.
Section 4.6 TAXES, CLAIMS FOR LABOR AND MATERIALS.
Each Borrower shall (i) file all tax returns and appropriate schedules
thereto that are required to be filed under applicable law, prior to the
date of delinquency, (ii) pay and discharge all taxes, assessments and
governmental charges or levies imposed upon such Borrower, upon its income
and profits or upon any properties belonging to it, which are known to
Borrower and undisputed prior to the date on which penalties attach
thereto, and (iii) pay all taxes, assessments and governmental charges or
levies that, if unpaid, might become a lien or charge upon any of its
properties; provided that each Borrower shall have the right to contest in
good faith and by appropriate proceedings the applicability or validity of
any such tax, assessment, charge or levy without paying such tax,
assessment, charge or levy so long as adequate reserves with respect
thereto are set aside and maintained in accordance with GAAP.
Section 4.7 COMPLIANCE WITH LAW AND AGREEMENTS.
Except where failure to do so does not and would not constitute a
Material Adverse Event, each Borrower shall (a) maintain its business
operations and property owned or used in connection therewith in compliance
with (i) all applicable federal, state and local laws, regulations and
ordinances, and such laws, regulations and ordinances of foreign
jurisdictions, governing such business operations and the use and ownership
of such property, and (ii) all agreements, licenses, franchises, indentures
and mortgages to which such Borrower is a party or by which such Borrower
or any of its properties is bound and (b) pay all of its indebtedness
promptly and substantially in accordance with the terms thereof.
Section 4.8 ERISA MATTERS.
If any Borrower has in effect, or hereafter institutes, a Plan, then
the following covenants shall be applicable during such period as any such
Plan shall be in effect: (i) throughout the existence of the
15
Plan, such Borrower's contributions under the Plan will meet the minimum
funding standards required by ERISA and the Borrower will not institute a
distress termination of the Plan; and (ii) such Borrower will send to
Lender a copy of any notice of a reportable event (as defined in ERISA)
required by ERISA to be filed with the Labor Department or the Pension
Benefit Guaranty Corporation, at the time that such notice is so filed.
Section 4.9 BOOKS AND RECORDS; RIGHTS OF INSPECTION.
Each Borrower shall keep proper books of record and account in which
full and correct entries will be made of all dealings or transactions of or
in relation to the business and affairs of the Borrower, in accordance with
GAAP consistently maintained. Each Borrower shall permit a representative
of Lender to visit any of its properties and inspect its properties
(including, but not limited to, the Collateral and the other items of
collateral described in the Security Instruments), corporate books and
financial records, and will discuss its accounts, affairs and finances with
such Borrower or the principal officers of such Borrower, during reasonable
business hours, at all such times as Lender may reasonably request.
Section 4.10 REPORTS.
TAVA, and where indicated, the other Borrowers, shall furnish to
Lender the following:
(a) MONTHLY STATEMENTS. Within thirty (30) days of the end of each
month, beginning the month of March 1998, monthly internal financial
reports which at a minimum shall consist of a consolidating balance sheet
of TAVA and its Subsidiaries as of the close of such month and related
consolidated statements of income and cash flows for the one-month period
then ended and for the prior months of the current fiscal year (on a year
to date basis), each compared to the same period in the previous fiscal
year, all in reasonable detail, and unaudited but prepared on the basis of
GAAP consistently applied (except for the absence of footnotes and subject
to year-end adjustments, as well as any additional financial reports for
such period routinely prepared with respect to the Borrowers;
(b) QUARTERLY STATEMENTS. As soon as available and in any event
within forty-five (45) days after the end of each quarterly fiscal period
(except the last) of each fiscal year, copies of:
(i) consolidated and consolidating balance sheets of TAVA and its
Subsidiaries as of the close of the three-month period then ended,
setting forth in comparative form the consolidated figures at the
end of the preceding fiscal year,
(ii) consolidated and consolidating statements of income and
retained earnings of TAVA and its Subsidiaries for the three-month
period then ended, setting forth in comparative form the
consolidated figures for the corresponding period of the preceding
fiscal year, and
(iii) consolidated and consolidating statements of cash flows of
TAVA and its Subsidiaries for the portion of the fiscal year ending
with such three-month period, setting forth in comparative form the
consolidated figures for the corresponding period of the preceding
fiscal year,
all in reasonable detail and certified as complete and correct by an authorized
financial officer of
16
Borrowers;
(c) ANNUAL STATEMENTS. As soon as available and in any event within
ninety (90) days after the close of each fiscal year of TAVA, copies of:
(i) consolidated and consolidating balance sheets of TAVA and its
Subsidiaries as of the close of such fiscal year, and
(ii) consolidated and consolidating statements of income and
retained earnings and cash flows of TAVA and its Subsidiaries for
such fiscal year,
in each case setting forth in comparative form the consolidated figures for
the preceding fiscal year, all in reasonable detail and accompanied by an
unqualified report thereon of a firm of independent public accountants of
recognized national standing;
(d) AUDIT REPORTS. Promptly upon receipt thereof, one copy of each
interim or special audit made by independent accountants of the books of
any Borrower;
(e) SEC AND OTHER REPORTS. Promptly upon their becoming available,
one copy of each financial statement, report, notice or proxy statement
sent by TAVA to stockholders generally and of each periodic or current
report, and any registration statement or prospectus filed by TAVA or any
Borrower with any securities exchange or the SEC or any successor agency,
and copies of any orders in any proceedings to which TAVA or any Borrower
is a party, issued by any governmental agency, federal or state, having
jurisdiction over the Borrowers. All such filings or reports shall be true
and correct in all material respects and shall not omit to state a fact or
facts, the absence of which would make any such filing or report false or
misleading. TAVA and Borrowers specifically covenant that TAVA will timely
file each such item required to be filed with the SEC;
(f) PRESS RELEASES. Promptly upon its release, a copy of each press
release issued by any Borrower;
(g) OFFICERS' COMPLIANCE CERTIFICATE. Within ninety (90) days after
the end of each fiscal year of Borrowers, a certificate executed by the
chief executive or chief financial officer of each Borrower stating that,
(A) each Borrower has kept, observed, performed and fulfilled each
covenant, term and condition of this Agreement and the other Loan Documents
during the preceding fiscal year, and (B) no Event of Default hereunder has
occurred and is continuing (or if such officer has knowledge that an Event
of Default has occurred and is continuing, specifying the nature of same,
the period of existence of same and the action such Borrowers propose to
take in connection therewith); and
(h) REQUESTED INFORMATION. With reasonable promptness, such
financial data and other information relating to the business of the
Borrowers as Lender may from time to time reasonably request.
Section 4.11 LIMITATIONS ON DEBT AND OBLIGATIONS.
No Borrower shall issue, assume, guarantee or otherwise become liable
or permit to exist any Debt except: (i) Debt existing on the date hereof
and reflected on (a) TAVA's unaudited consolidated
17
balance sheet as of December 31, 1997, and (b) SCHEDULE 4.11, as the same
Debt may be extended, renewed, refunded, amended or modified (but the
principal amount thereof not increased); (ii) the Debt incurred pursuant to
the Notes; (iii) accounts payable and other trade payables incurred in the
ordinary course of business; (iv) obligations of the Borrowers pursuant to
capitalized leases and/or purchase money financing of equipment; (v) Debt
that refinances secured Debt under clause (i) above, provided that the
collateral for such new indebtedness is the collateral from the refinanced
secured Debt and the aggregate principal amount of such Debt does not
exceed the principal amount outstanding under the refinanced Debt; or
(VI) Debt incurred in connection with the acquisition of a business
(including the assets of a business) provided such Debt is secured solely
by the assets of the business so acquired. Notwithstanding the foregoing,
the aggregate principal amount of any Debt secured by the accounts
receivable and/or inventory of the Borrowers (whether such Debt is
permitted under clause (i) or in clause (v)), may be increased based upon
the amount of the accounts receivable and/or inventory eligible as
collateral, so long as the ratio of outstanding principal amount of such
Debt to "eligible receivables" (howsoever defined) and/or "inventory"
remains the same. For purposes of this Agreement, "DEBT" of any person
means (a) all obligations of such person for borrowed money and all
obligations of such person evidenced by bonds, debentures, notes or other
similar instruments on which interest charges are customarily paid, (b) all
obligations, contingent or otherwise, relative to the face amount of all
letters of credit, whether or not drawn, and banker's acceptances issued
for the account of such person, and (c) all obligations of such person
(contingent or otherwise) to guarantee the obligations of, purchase or
otherwise acquire, or otherwise assure a creditor against loss in respect
of, another person.
Section 4.12 LIABILITY FOR OTHER PARTIES.
Other than guaranties or endorsements by Borrowers or any Subsidiary
of TAVA in favor of TAVA or any Subsidiary of TAVA not otherwise prohibited
by the provisions of Section 4.11 hereof, no Borrower will become liable,
directly or indirectly, for any obligation of any other person, by
guaranty, endorsement, or otherwise, except by endorsement in the ordinary
course of business of negotiable instruments payable at sight for deposit
or collection.
Section 4.13 SALES OF COLLATERAL; LIMITATIONS ON LIENS.
Without Lender's prior written consent (a) other than in the ordinary
course of its business, no Borrower will sell, exchange, lease or otherwise
dispose of any Collateral, and (b) no Borrower will create or incur, or
suffer to be incurred or to exist, any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (collectively, "LIENS") on its
property or assets, whether now owned or hereafter acquired, or upon any
income or profits therefrom, or transfer any property for the purpose of
subjecting the same to the payment of obligations in priority to the
payment of its or their general creditors, or acquire or agree to acquire,
any property or assets upon conditional sales agreement or other title
retention devices, except (i) those Liens which exist as of the date
hereof; (ii) Liens hereafter created on Debt which is permitted under
Section 4.11(v) or (vi); (iii) purchase money security interests on
property acquired by any Borrower in an amount not to exceed in the
aggregate 10% more than the amount approved by the Board of Directors of
TAVA for such expenditures in the Annual Plan (as defined in Section 4.20);
or (iv) Liens imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens and other similar liens arising in the
ordinary course of business and securing obligations (other than
indebtedness for borrowed money) that (A) are not overdue for a period of
more than 60 days, or (B) are being contested in good faith by proper
proceedings and as to which appropriate reserves are being maintained in
accordance with GAAP on the books of such Borrower.
18
Section 4.14 RESTRICTED PAYMENTS.
Without the prior written consent of Lender and except as hereinafter
provided, no Borrower will:
(a) declare or pay any dividends, either in cash or property, on any
shares of its capital stock of any class except (i) dividends or other
distributions by TAVA payable solely in shares of capital stock of TAVA,
and (ii) cash dividends payable by any wholly-owned Subsidiary to TAVA;
(b) except for the publicly held Redeemable Common Stock Purchase
Warrants of TAVA, directly or indirectly purchase, redeem or retire any
shares of its capital stock of any class or any warrants, rights or options
to purchase or acquire any shares of its capital stock; or
(c) make any other payment or distribution, either directly or
indirectly, in respect of its capital stock.
Section 4.15 LOANS AND INVESTMENTS.
No Borrower will make any Investments outside the ordinary course of
business for such Borrower without the prior written consent of Lender,
except:
(a) Investments in direct obligations of the United States of
America, or any agency or instrumentality of the United States of America,
the payment or guaranty of which constitutes a full faith and credit
obligation of the United States of America, in either case maturing in
twelve months or less from the date of acquisition thereof;
(b) Investments in certificates of deposit maturing within one year
from the date of origin, issued by a bank or trust company organized under
the laws of the United States or any state thereof, having capital, surplus
and undivided profits aggregating either (i) at least $25,000,000, in which
case such Investments shall not exceed $1,000,000 in the aggregate in all
such banks or trust companies, or (ii) $100,000,000;
(c) Investments in commercial paper maturing in 270 days or less from
the date of issuance which, at the time of acquisition by such Borrower or
Subsidiary, is accorded the highest rating by Standard & Poor's
Corporation, Xxxxx'x Investors Service, Inc. or another nationally
recognized credit rating agency of similar standing;
(d) loans or advances in the usual and ordinary course of business to
officers, directors and employees for expenses (including moving expenses
related to a transfer) incidental to carrying on the business of such
Borrower or Subsidiary;
(e) receivables arising from the sale of goods and services in the
ordinary course of business of such Borrower and its Subsidiaries; and
(f) up to two (2) acquisitions per year (measured from the date
hereof) of operating companies in the current line of business of TAVA, in
an amount of no greater than $2,000,000 per acquisition, so long as each
acquisition is accretive to earnings on a twelve-month basis.
19
The term "INVESTMENTS" shall mean all investments, in cash or by
delivery of property made, directly or indirectly, in any entity, whether
by acquisition of shares of capital stock, indebtedness or other
obligations or securities or by loan, advance, capital contribution or
otherwise; PROVIDED, HOWEVER that "Investments" shall not mean or include
routine investments in property to be used or consumed in the ordinary
course of business. .
Section 4.16 MERGERS, CONSOLIDATIONS AND SALES OF ASSETS.
(a) Without the prior written consent of Lender, which consent shall
not unreasonably be withheld, TAVA will not, and will not permit any
Subsidiary to (1) consolidate with or be a party to a merger or share
exchange with any other corporation or (2) sell, lease or otherwise dispose
of all or any substantial part of the assets of TAVA and its Subsidiaries;
PROVIDED, HOWEVER, that:
(i) any Subsidiary may merge or consolidate with or into TAVA or
any wholly-owned Subsidiary so long as in any merger or
consolidation involving TAVA, TAVA shall be the surviving or
continuing corporation;
(ii) any Subsidiary may sell, lease or otherwise dispose of all or
any substantial part of its assets to TAVA or any other
wholly-owned Subsidiary; and
(b) Without the prior written consent of Lender, which consent shall
not unreasonably be withheld, TAVA will not sell, transfer or otherwise
dispose of any shares of stock in any Subsidiary or any indebtedness of any
Subsidiary, and will not permit any Subsidiary to sell, transfer or
otherwise dispose of (except to TAVA or a wholly-owned Subsidiary) any
shares of stock or any indebtedness of any other Subsidiary, unless all of
the following conditions are met:
(i) simultaneously with such sale, transfer or disposition, all
shares of stock and all indebtedness of such Subsidiary at the time
owned by TAVA and by every other Subsidiary shall be sold,
transferred or disposed of as an entirety;
(ii) the Board of Directors of TAVA shall have determined, as
evidenced by a resolution thereof, that the retention of such stock
and indebtedness is no longer in the best interests of the Company;
(iii) such stock and Indebtedness is sold, transferred or otherwise
disposed of to a person, for consideration and on terms reasonably
deemed by the Board of Directors of TAVA to be adequate and
satisfactory;
(iv) the Subsidiary being disposed of shall not have any continuing
investment in TAVA or any other Subsidiary not being simultaneously
disposed of; and
(v) such sale or other disposition does not involve a substantial
part of the assets of TAVA and its Subsidiaries taken as a whole.
(c) The parties agree that it is not unreasonable for Lender to
decline to consent to any transaction described in this Section 4.16 that
would jeopardize Lender's investment in any Borrower
20
to any degree, in Lender's sole discretion, or jeopardize the financial
position of any Borrower, in Lender's sole discretion.
Section 4.17 ISSUANCE OF STOCK.
(a) Upon the issuance of additional shares of capital stock of TAVA
or securities or other rights convertible into or exchangeable or
exercisable for shares of capital stock of TAVA (other than pursuant to
employee stock option plans), TAVA shall promptly disclose to Lender, in
writing, the number of shares (or the amount of other securities) so
issued, the price therefor, and such other information as Lender may from
time to time request.
(b) No Borrower (other than TAVA) shall issue any additional shares
of its capital stock, other than to TAVA or a wholly-owned Subsidiary of
TAVA.
Section 4.18 TRANSACTIONS WITH AFFILIATES.
Without the prior written consent of Lender, no Borrower will enter
into or be a party to any transaction or arrangement with any officer,
director or Affiliate (including, without limitation, the purchase from,
sale to or exchange of property with, or the rendering of any service by or
for, any Affiliate), except pursuant to the reasonable requirements of such
Borrower's business and upon fair and reasonable terms no less favorable to
such Borrower than could be obtained in a comparable arm's-length
transaction with a person other than an Affiliate, in each case as
determined in good faith by a majority of the disinterested directors of
the Borrower. For purposes of this Agreement, "AFFILIATE" shall mean any
person (a) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with a Borrower,
(b) which beneficially owns or holds 5% or more of any class of the voting
stock of a Borrower, or (c) 5% or more of the voting stock (or in the case
of a person which is not a corporation, 5% or more of the equity interest)
of which is beneficially owned or held by a Borrower.
Section 4.19 NOTICE OF CERTAIN EVENTS.
Each Borrower shall, promptly upon the discovery thereof, give written
notice to Lender of (i) the occurrence of any default or Event of Default
or event which, with the passage of time, would constitute an Event of
Default, under this Agreement or a default under any other Loan Document,
(ii) the occurrence of any event of default under any other agreement
between a Borrower and any other person providing for Debt or securing any
indebtedness, or under a capitalized lease obligation, (iii) any material
actions, suits or proceedings instituted by any person against any Borrower
or materially affecting any of the assets of any Borrower, or (iv) any
investigation initiated by, or any dispute between and any governmental
regulatory body, on the one hand, and any Borrower, on the other hand,
which dispute might materially interfere with the normal operations of such
Borrower.
Section 4.20 ANNUAL PLAN.
The Board of Directors of TAVA shall adopt and TAVA will furnish to
Lender, in such manner and form as approved by the Board of Directors, no
later than the first day of each fiscal year, a financial plan for TAVA and
its Subsidiaries, which shall include at least a projection of income and
expenses (including capital expenditures) and a projected cash flows
statement for each month in such fiscal year,
21
and a projected balance sheet as of the end of each month in such fiscal
year (the "ANNUAL PLAN"). The Annual Plan may only be amended or revised,
in any material manner, with the approval of the Chief Executive Officer
and Chief Financial Officer of TAVA. TAVA shall promptly furnish to Lender
each amendment or revision to the Annual Plan. The Annual Plan is intended
as a performance goal and is not intended by TAVA to be and shall not be
construed by Lender to any extent to be a guarantee or assurance of
performance.
Section 4.21 BOARD OF DIRECTORS; OBSERVER RIGHTS.
TAVA shall invite one representative of Lender to attend, at
Borrowers' expense, all meetings of the Board of Directors of TAVA and all
committees of its Board of Directors in a nonvoting capacity and, in this
respect, shall give such representative copies of all notices and meeting
agenda in advance of such meetings and shall permit such representative to
review all documents and other materials provided to directors at such
meetings. TAVA shall also provide Lender, in advance, with copies of all
actions proposed to be taken by the Board of Directors of TAVA in lieu of
meeting.
Section 4.22 KEY EXECUTIVES.
The officers and key employees of the Borrowers whose names and
current positions are set forth on SCHEDULE 4.22 hereto shall continue to
be employed by such Borrower in such position and with the current duties
and responsibilities for at least that position unless (i) such employment
ceases because of death, or (ii) such Borrower replaces such officer or key
employee within ninety (90) days of the person's notice of resignation with
another executive who shall be reasonably acceptable to Lender.
Section 4.23 ENVIRONMENTAL REQUIREMENTS.
In addition to, and not in derogation of, the requirements of Section
4.7, each Borrower will comply with all laws, governmental standards and
regulations applicable to such Borrower or to properties owned or leased by
such Borrower, in respect of occupational health and safety and Material
Applicable Environmental Laws (unless such laws, standards or regulations
are being contested in good faith by appropriate proceedings and adequate
reserves therefor have been established), promptly notify Lender of its
receipt of any notice of a violation of any such law, standard or
regulation, and indemnify and hold Lender harmless from all loss, cost,
damage, liability, claim and expense incurred by or imposed upon Lender on
account of such Borrower's failure to perform its obligations under this
Section 4.23.
Section 4.24 NAME CHANGE.
No Borrower will change its name without providing Lender with at
least thirty (30) days prior written notice thereof.
Section 4.25 LOCATION OF BUSINESS AND COLLATERAL.
Each Borrower shall give written notice to Lender (i) fifteen (15)
days prior to the opening of any new business office, setting forth the
address (including county) of such new location, (ii) fifteen (15) days
prior to changing the location of records with respect to intangible
personal property
22
constituting collateral security for the Secured Obligations, and
(iii) whenever any Collateral comprised of tangible personal property with
a value of $50,000 or more in the aggregate will be located in a county or
state that is not set forth on SCHEDULE 3.5 hereof for a period of four
(4) months or longer. Prior to establishing any new business office
location or locating any collateral in a county or state that is not set
forth on SCHEDULE 3.5 hereof with a value of $10,000 or more in the
aggregate for a period of four (4) months or longer, each Borrower shall
have (i) executed and delivered to Lender all financing statements and
financing statement amendments which Lender may reasonably request in
connection therewith in order to perfect and protect the security interests
and priority of Lender in such Collateral, (ii) paid in full all filing
fees and taxes, if any, payable in connection with such filings and
(iii) complied with any other requirement in this Agreement or any other
Loan Document relating to the location of any Collateral.
Section 4.26 ADDITIONAL AND CONTINGENT WARRANTS.
(a) In the event that any amount of principal or interest remains
outstanding under the Original Note on December 31, 1998, TAVA agrees that
it shall grant and issue to Lender on such date its Stock Purchase Warrant
to purchase 20,000 shares of TAVA Common Stock at an exercise price per
share of the lower of (A) $6.25 or (B) the average bid price of TAVA's
Common Stock for the twenty (20) consecutive trading days immediately prior
to the six month anniversary of the issuance date of such warrant (the
"ADDITIONAL WARRANT").
(b) In the event that the full amount of the Debt evidenced by the
Original Note remains outstanding on the date which is (i) fifteen (15)
months from the date of funding the Original Loan or (ii) twenty-four (24)
months from the date of funding the Original Loan, TAVA agrees that on each
such date it shall grant and issue to Purchaser a Stock Purchase Warrant to
purchase an additional 125,000 shares of TAVA Common Stock or, if a portion
of the Debt evidenced by the Original Note remains outstanding on any such
date, TAVA shall grant and issue to Purchaser a Stock Purchase Warrant to
purchase that number of shares of TAVA Common Stock which is equal to
125,000 multiplied by the fraction which is the average daily amount of
Debt outstanding under the Original Note for the prior twelve-month period
divided by the full amount of the Debt evidenced by the Original Note (such
warrant, together with any contingent warrant, if any, which might be
issued pursuant to subsection (d)(ii), a "CONTINGENT WARRANT").
(c) Each Stock Purchase Warrant to be issued to TAVA pursuant to this
Section 4.26 shall be identical in terms to EXHIBIT B hereto except that
(i) each such Stock Purchase Warrant shall be exercisable in whole or in
part at any time during a five (5) year period beginning on the respective
date of issuance, and (ii) the per share exercise price of each of the
Contingent Warrants specified in subsection (b) or (d) above shall be equal
to the average bid price of TAVA's Common Stock for the twenty (20)
consecutive trading days immediately preceding the respective date of
issuance. The number of shares set forth in subsections (a) or (b) hereof
shall be adjusted proportionately for any stock split, stock dividend,
recapitalization, combination of shares of other similar event affecting
shares of TAVA's Common Stock generally, occurring after the date of this
Agreement.
(d) At the closing of the Additional Loan as provided in Section 5.2,
TAVA (i) shall deliver to Lender a Stock Purchase Warrant substantially in
the form of EXHIBIT B hereto to purchase at least 77,500 shares of TAVA
Common Stock at an exercise price per share of the lower of (A) $6.25 or
(B) the average bid price of TAVA's Common Stock for the twenty (20)
consecutive trading days
23
immediately prior to the six month anniversary of the issuance date of such
Warrant (the "ADDITIONAL LOAN WARRANT"), and such other compensation as
shall be mutually agreed upon by Lender and Borrowers, and (ii) shall
modify this Agreement to provide for such additional contingent warrants
with respect to the Additional Loan as shall be mutually agreed upon by
Lender and Borrowers.
Section 4.27 FUTURE SUBSIDIARIES.
Each Subsidiary formed or acquired by any Borrower subsequent to the
date of this Agreement shall become a party to this Agreement as of the
date of such formation or acquisition and shall execute and deliver to
Lender a Supplemental Signature Page in the form of EXHIBIT P hereto,
together with all financing statements or other Security Instruments as
Lender shall request in order to give effect to the purposes of this
Agreement, including Article II hereof. Failure to execute and deliver a
Supplemental Signature Page shall not affect the status of such Subsidiary
as a Borrower, or any rights of Lender hereunder or under any of the other
Loan Documents.
Section 4.28 RESTRICTED SALES.
So long as any amount of principal or interest remains outstanding
under the Original Loan or any Additional Loan, Xxxx X. Xxxxxxx shall not
sell more than the number of shares of TAVA Common Stock specified in the
lock-up agreement in the form of EXHIBIT N hereto (the "LOCK UP AGREEMENT").
Section 4.29 FURTHER ASSURANCES.
Borrowers will take all actions reasonably requested by Lender to
create and maintain in Lender's favor valid liens upon and perfected
security interests in any Collateral secured pursuant to this Agreement or
the other Security Instruments and all other security for the Secured
Obligations now or hereafter held by or for Lender. Without limiting the
foregoing, Borrowers agree to execute such further instruments (including
financing statements and continuation statements) as may be required or
permitted by any law relating to notices of, or affidavits in connection
with, the perfection of Lender's liens and security interests, and to
cooperate with Lender in the filing or recording and renewal thereof.
ARTICLE V
CONDITIONS TO CLOSING
Section 5.1 CONDITIONS OF LENDER'S OBLIGATIONS.
The obligation of Lender to make the Original Loan is subject to the
receipt by Lender of the following documents, each of which shall be
satisfactory to Lender in form and substance, and to the fulfillment of
each of the other following conditions:
(a) CORPORATE DOCUMENTS. A copy of the articles or certificate of
incorporation, as appropriate, of each Borrower, as certified by the
Secretary of State of the jurisdiction of incorporation thereof, and
certificates of legal existence and good standing from the Secretary of
State or other appropriate official of the jurisdiction of incorporation
thereof and each jurisdiction in which any Borrower is legally required to
qualify to transact business as a foreign corporation, each as of a date
within ten (10) days of the date of closing.
24
(b) SECURITY INSTRUMENTS. Each of the Security Instruments, duly
executed by each Borrower, as applicable, as follows:
(i) the Stock Pledge Agreement, accompanied by
(a) all stock certificates evidencing TAVA's ownership of the
stock of each of its Subsidiaries; and
(b) stock powers, undated and duly executed by TAVA in blank;
and
(ii) the Trademark and Patent Security Agreement.
(c) OFFICERS' CERTIFICATE. The certificate of the president and chief
executive officer of each Borrower, substantially in the form of EXHIBIT F
hereto, certifying that, after giving effect to this Agreement, all
representations and warranties herein are true and correct and there is no
default or Event of Default in existence as of such date, nor any event
which, given the passage of time, would constitute an Event of Default.
(d) SECRETARY'S CERTIFICATE. A certificate of the Secretary of each
Borrower in the form of EXHIBIT G hereto.
(e) OPINION OF COUNSEL. The opinion of Key & Xxxxxxxxx, P.C.,
counsel to the Borrowers, addressed to Lender, in form satisfactory to
Lender, and covering the matters set forth in EXHIBIT H hereto.
(f) THE ORIGINAL NOTE. The Original Note, duly completed and
executed by each Borrower.
(g) WARRANT. TAVA shall have duly executed and delivered (i) the
Original Warrant, and (ii) a Warrant Valuation Letter in the form attached
hereto as EXHIBIT I.
(h) LOCK-UP AGREEMENT. TAVA shall have delivered the Lock-Up
Agreements in the form attached as EXHIBIT N executed by Xxxx X. Xxxxxxx.
(i) UCC-1 FINANCING STATEMENTS. Financing statements on Form UCC-1,
duly completed and executed by each Borrower, perfecting the security
interest of Lender in the Collateral.
(j) GOVERNMENTAL CONSENTS AND APPROVALS. All consents and true
copies of required governmental approvals, if any, necessary to the
execution, delivery and performance of the Loan Documents and the
transactions contemplated hereby and thereby.
(k) DEBIT AUTHORIZATION AGREEMENT. An Authorization Agreement for
Pre-Authorized Payments (Debit), executed by a duly authorized officer(s)
of each Borrower, in the form attached hereto as EXHIBIT J.
(l) PAY-OFF LETTER AND RELEASE OF LIEN. Pay-Off Letters, in the form
of EXHIBIT K attached hereto, executed by the entities set forth on
SCHEDULE 5.1(l) (each, a "RELEASEE") to the effect that upon payment of the
amount stated therein (which amount shall include related accrued interest
and fees and a per diem charge for each additional day of outstanding
indebtedness) by Borrowers or any of them to
25
Releasee, such Releasee shall (i) promptly terminate or cause to be
terminated any security interest of Releasee in all Collateral of
Borrowers, or any of them, other than Collateral consisting of accounts
receivable or inventory of Borrowers, (ii) file or cause to be filed UCC-3
termination statements or amendments to filing statements and any and all
other appropriate releases of or amendments to any mortgages, deed of
trust, security agreement or financing statements securing or perfecting
liens on all such Collateral released (including the financing statements
described on SCHEDULE 3.4 hereto) and (iii) take such other actions as
Lender may request to release Releasee's security interest in and lien on
all Collateral other than accounts receivable or inventory of Borrowers.
(m) REQUIRED CONSENTS. Any consents or approvals required to be
obtained from any third party, and any amendments of agreements which shall
be necessary to permit the consummation of the transactions contemplated by
this Agreement, including the consent set forth on SCHEDULE 3.2, shall have
been obtained and all such consents or amendments shall be satisfactory in
form and substance to Lender and Lender's counsel.
(n) EXPENSES. The Borrowers shall have reimbursed Lender for all
fees and expenses as provided in Section 1.2 and 8.3 hereof.
Section 5.2 CONDITIONS TO ADDITIONAL LOAN. The obligation of
Lender to make the Additional Loan shall be subject to satisfaction of the
following conditions and to the receipt by Lender of the following
documents, each of which shall be satisfactory to Lender in form and
substance:
(a) MUTUAL AGREEMENT. Borrowers and Lender shall have agreed upon
economic and other terms of the Additional Loan and the warrants to be
granted by TAVA to Lender in connection with the Additional Loan.
(b) NO DEFAULTS. No Event of Default (as defined in Section 6.1)
shall have occurred and be continuing, and no event shall have occurred
that, with the giving of notice or the passage of time or both, would
constitute an Event of Default.
(c) CORPORATE DOCUMENTS. Certificates of legal existence and good
standing from the Secretary of State or other appropriate official of the
jurisdiction of incorporation thereof and each jurisdiction in which any
Borrower is legally required to qualify to transact business as a foreign
corporation, each as of a date within ten (10) days of the date of closing.
(d) OFFICERS' CERTIFICATE. The certificate of the president and chief
executive officer of each Borrower, substantially in the form of EXHIBIT L
hereto, certifying that: (i) after giving effect to this Agreement, all
representations and warranties herein and in the Loan Documents were true
and correct as of the date made, and shall be true and correct in all
material respects of the date of such Additional Loan, (ii) each Borrower
shall have complied with and fully performed its respective obligations
hereunder and under the Loan Documents, and (iii) there is no default or
Event of Default in existence as of such date, nor any event which, given
the passage of time, would constitute an Event of Default.
(e) SECRETARY'S CERTIFICATE. A certificate of the Secretary of each
Borrower in the form of EXHIBIT M hereto.
(f) EXPENSES. Payment of all fees and expenses Borrowers are
obligated to pay pursuant
26
to the terms hereof.
(g) NO MATERIAL ADVERSE EVENT. In the opinion of Lender, no Material
Adverse Event shall have occurred or be in existence.
(h) ADDITIONAL NOTE. Borrowers shall have delivered the Additional
Note, duly completed and executed by each Borrower.
(i) ADDITIONAL LOAN WARRANT. TAVA shall have duly executed and
delivered (i) the Additional Loan Warrant and such additional contingent
warrants as are agreed upon by TAVA and Lender, and (ii) a Warrant
Valuation Letter in the form attached hereto as EXHIBIT I with respect to
such Additional Loan Warrant.
ARTICLE VI
DEFAULT AND REMEDIES
Section 6.1 EVENTS OF DEFAULT.
The occurrence of any of the following shall constitute an Event of
Default hereunder:
(a) Default in the payment when due of any portion of the principal
amount of the indebtedness evidenced by either of the Notes, or default in
the payment within five (5) days following the due date of any interest on
the indebtedness evidenced by either of the Notes;
(b) Any representation by any Borrower hereunder or under any of the
other Loan Documents, or delivery by any Borrower of any schedule,
statement, resolution, report, certificate, notice or writing to Lender, is
untrue in any material respect on the date as of which made, stated or
certified;
(c) A default or event of default shall occur, or there shall occur
such other failure by any Borrower to perform its obligations under, any of
the Loan Documents (other than as set forth in Section 6.1(a) above) upon
the earlier of (i) the discovery of such default or failure by Lender or
(ii) five (5) days after written notice thereof from TAVA to Lender, in
which period TAVA has failed to cure such default or failure;
(d) Any Borrower (i) shall admit in writing its inability to pay its
debts generally as they become due; or (ii) shall make an assignment for
the benefit of creditors or petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for it or a substantial
part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, whether now or hereafter
in effect; or (iv) shall have had any such petition or application filed or
any such proceeding commenced against it in which an order for relief is
entered or an adjudication or appointment is made; or (v) shall indicate,
by any act or omission, its consent to, approval of, or acquiescence in any
such petition, application, proceeding or order for relief or the
appointment of a custodian, receiver or trustee for it or a substantial
part of its assets; or (vi) shall suffer any such custodianship,
receivership or trusteeship to continue undischarged for a period of
sixty (60) days or more;
27
(e) Any Borrower shall be liquidated, dissolved, partitioned or
terminated, or the articles or certificate of incorporation of Borrower
shall expire or be revoked;
(f) Any Borrower shall default in the timely payment or performance
of any obligation now or hereafter owed to Lender in connection with any
indebtedness of any Borrower now or hereafter owed to Lender, other than
the Loans, subject to any applicable grace period; or
(g) (i) Any Borrower shall fail to pay any principal of or premium or
interest on any indebtedness owed by Borrower (other than the Loans), which
is outstanding in a principal amount of at least $100,000 in the aggregate,
when the same becomes due and payable (whether by scheduled maturity,
acceleration, demand or otherwise), and such failure shall continue after
any cure period applicable thereto; or (ii) any other event shall occur or
condition shall exist under any agreement or instrument relating to any
such indebtedness and shall continue after any applicable cure period, if
the effect of such event or condition is to accelerate or permit the
acceleration of such indebtedness; or (iii) any such indebtedness shall be
accelerated or otherwise declared to be due and payable prior to the stated
maturity thereof; or (iv) any such indebtedness shall be required to be
prepaid, redeemed, purchased or defeased, or an offer to repay, redeem,
purchase or defease such indebtedness shall be required to be made, in each
case prior to the stated maturity thereof; or
(h) Any person set forth on SCHEDULE 4.22 attached hereto shall cease
to hold the office set forth thereto and devote substantially all of his or
her professional time and attention to the business and affairs of
Borrowers (unless a successor or successors reasonably acceptable to Lender
shall be appointed within ninety (90) days of any announcement of
resignation of any such person).
Section 6.2 ACCELERATION OF MATURITY; REMEDIES.
Upon the occurrence of any Event of Default described in Section
6.1(d), the indebtedness evidenced by the Notes as well as any and all
other indebtedness of any Borrower to Lender shall be immediately due and
payable in full; and upon the occurrence of any other Event of Default
described in Section 6.1, Lender at any time thereafter may at its option
accelerate the maturity of the indebtedness evidenced by the Notes as well
as any and all other indebtedness of any Borrower to Lender, whereupon such
indebtedness shall be and become immediately due and payable; all without
notice of any kind. Upon the occurrence of any such Event of Default and
the acceleration of the maturity of the indebtedness evidenced by the Notes:
(a) Lender shall be immediately entitled to exercise any and all
rights and remedies possessed by Lender pursuant to the terms of the
Security Instruments and all of the other Loan Documents.
(b) Lender shall have all of the rights and remedies of a secured
party under the Uniform Commercial Code as adopted in the respective states
pursuant to which security interests in the Collateral are governed.
(c) Lender shall have any and all other rights and remedies that
Lender may now or hereafter possess at law, in equity or by statute.
Section 6.3 REMEDIES CUMULATIVE; NO WAIVER.
28
No right, power or remedy conferred upon or reserved to Lender by this
Agreement or any of the other Loan Documents is intended to be exclusive of
any other right, power or remedy, but each and every such right, power and
remedy shall be cumulative and concurrent and shall be in addition to any
other right, power and remedy given hereunder, under any of the other Loan
Documents or now or hereafter existing at law, in equity or by statute. No
delay or omission by Lender to exercise any right, power or remedy accruing
upon the occurrence of any Event of Default shall exhaust or impair any
such right, power or remedy or shall be construed to be a waiver of any
such Event of Default or an acquiescence therein, and every right, power
and remedy given by this Agreement and the other Loan Documents to Lender
may be exercised from time to time and as often as may be deemed expedient
by Lender.
Section 6.4 PROCEEDS OF REMEDIES.
Any or all proceeds resulting from the exercise of any or all of the
foregoing remedies shall be applied as set forth in the Loan Document(s)
providing the remedy or remedies exercised; if none is specified, or if the
remedy is provided by this Agreement, then as follows:
(a) FIRST, to the costs and expenses, including reasonable attorney
fees and costs, incurred by Lender in connection with the exercise of its
remedies;
(b) SECOND, to the expenses of curing the default that has occurred,
in the event that Lender elects, in its sole discretion, to cure the
default that has occurred;
(c) THIRD, to the payment of accrued and unpaid interest on the
indebtedness evidenced by the Notes;
(d) FOURTH, to the payment of the unpaid principal of the Notes;
(e) FIFTH, to the payment of all other Secured Obligations; and
(f) SIXTH, the remainder, if any, to the Borrowers or to any other
person lawfully thereunto entitled.
ARTICLE VII
TERMINATION
This Agreement shall remain in full force and effect until the payment
in full by Borrowers of all amounts owed to Lender under the Loan
Documents, promptly upon which Lender shall take such actions as necessary
to release its security interests in the Collateral, including the filing
of appropriate UCC-3 termination statements.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 PERFORMANCE BY LENDER.
29
If any Borrower shall default in the payment, performance or
observance of any covenant, term or condition of this Agreement, Lender
may, at its option, pay, perform or observe the same, and all payments made
or reasonable costs or expenses incurred by Lender in connection therewith
(including but not limited to reasonable attorney fees and costs), with
interest thereon at the highest default rate provided in each such Note,
shall be immediately repaid to Lender by Borrowers and shall constitute a
part of the Secured Obligations and be secured hereby until fully repaid.
Lender, in its commercially reasonable discretion and without any liability
therefor, shall determine the necessity for any such actions and of the
amounts, if any, to be paid.
Section 8.2 SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES.
Whenever in this Agreement one of the parties hereto is named or
referred to, the heirs, legal representatives, successors,
successors-in-title and assigns of such parties shall be included, and all
covenants and agreements contained in this Agreement by or on behalf of
Borrowers or by or on behalf of Lender shall bind and inure to the benefit
of their respective heirs, legal representatives, successors-in-title and
assigns, whether so expressed or not.
Section 8.3 COSTS AND EXPENSES.
Each Borrower agrees to pay all costs and expenses incurred by Lender
in connection with the making of the Loans (limited in connection with the
making of the Original Loan as set forth in Section 1.2 herein), including
but not limited to filing fees, recording taxes and reasonable attorney
fees and costs, promptly upon demand of Lender. Each Borrower further
agrees to pay all of the reasonable out-of-pocket costs and reasonable
expenses incurred by Lender in connection with the maintenance of its
security interest in the Collateral, protection of the Collateral and
collection of the Loans, including but not limited to reasonable attorney
fees and costs related thereto (including any such incurred in connection
with any appellate litigation) promptly upon demand of Lender.
Section 8.4 ASSIGNMENT.
The Notes, this Agreement and the other Loan Documents may be
endorsed, assigned and transferred in whole or in part by Lender, and any
such subsequent holder or assignee of the same shall succeed to and be
possessed of the rights and powers of Lender under all of the same to the
extent transferred and assigned. Lender may grant participations in the
Notes, this Agreement and the other Loan Documents (or any portion
thereof). Lender shall notify Borrowers in writing of any such
endorsement, assignment or transfer by Lender. No Borrower shall assign
any of its rights or delegate any of its duties hereunder or under any of
the other Loan Documents without the prior express written consent of
Lender.
Section 8.5 TIME OF THE ESSENCE.
Except as specifically provided herein, time is of the essence with
respect to each and every covenant, agreement and obligation of each
Borrower hereunder and under all of the other Loan Documents.
30
Section 8.6 SEVERABILITY.
If any provisions of this Agreement or the application thereof to any
person or circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such provisions to other
persons or circumstances shall not be affected thereby nor shall the
validity and enforceability thereof be affected.
Section 8.7 INTEREST AND LOAN CHARGES NOT TO EXCEED MAXIMUM ALLOWED BY LAW.
Anything in this Agreement, the Notes, the Security Instruments or any
of the other Loan Documents to the contrary notwithstanding, in no event
whatsoever, whether by reason of advancement of proceeds of the Loans,
acceleration of the maturity of the unpaid balance of the Loans or
otherwise, shall the interest and other consideration agreed to be paid to
Lender for the use of the money advanced or to be advanced hereunder exceed
the maximum amounts collectible under applicable laws in effect from time
to time. It is understood and agreed by the parties that, if for any
reason whatsoever the interest or other consideration paid or contracted to
be paid by Borrowers in respect of the indebtedness evidenced by the Notes
shall exceed the maximum amounts collectible under applicable laws in
effect from time to time, then IPSO FACTO, the obligation to pay such
interest and other consideration shall be reduced to the maximum amounts
collectible under applicable laws in effect from time to time, and any
amounts collected by Lender that exceed such maximum amounts shall be
applied to the reduction of the principal balance of the indebtedness
evidenced by the Notes or refunded to Borrowers, in Lender's sole
discretion, so that at no time shall the interest and other consideration
paid or payable in respect of the indebtedness evidenced by the Notes
exceed the maximum amounts permitted from time to time by applicable law.
Section 8.8 ARTICLE AND SECTION HEADINGS; DEFINED TERMS.
Numbered and titled article and section headings and defined terms are
for convenience only and shall not be construed as amplifying or limiting
any of the provisions of this Agreement.
Section 8.9 NOTICES.
Any and all notices, elections or demands permitted or required to be
made under this Agreement shall be in writing, signed by the party giving
such notice, election or demand and shall be delivered personally, faxed
(provided that such notice is mailed to the other party promptly
thereafter), or sent by certified mail or nationally recognized overnight
courier service (such as Federal Express) to the other party at the address
set forth below, or at such other address as may be supplied in writing and
of which receipt has been acknowledged in writing. The date of personal
delivery, the date of successful fax transmission, the third day after the
date of mailing, or the business day after the date of delivery to such
courier service, as the case may be, shall be the date of such notice,
election or demand. For the purposes of this Agreement, notices, elections
or demands made pursuant hereto shall be made to the following addresses:
31
If to Lender: Tandem Capital, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Fax: (000) 000-0000
with a copy to: Xxxxxxxx & Xxx, PLC
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxx I.N. XxXxxxxx
Fax: 000-000-0000
if to any Borrower, TAVA Technologies, Inc.
addressed to 0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx or Chief Financial
Officer
Copy: Xxxxx X. Key, Esq., General Counsel
Fax: (000) 000-0000
Section 8.10 ENTIRE AGREEMENT.
This Agreement and the other written agreements between Borrowers and
Lender executed contemporaneously herewith represent the entire agreement
between the parties concerning the subject matter hereof, and all oral
discussions and prior agreements are merged herein.
Section 8.11 COUNTERPARTS.
This Agreement may be executed in multiple originals or counterparts,
each of which shall be deemed an original and all or which when taken
together shall constitute but one and the same instrument.
Section 8.12 GOVERNING LAW.
This Agreement shall be construed and enforced under the internal laws
of the State of Tennessee, without reference to the conflict of laws
principles thereof.
Section 8.13 AMENDMENTS; INCORPORATION.
No amendment or modification hereof shall be effective except in a
writing executed by each of the parties hereto. All schedules, exhibits,
riders, and other documents and instruments referenced herein shall be
deemed to be incorporated herein and made a part hereof.
32
Section 8.14 WAIVER OF JURY TRIAL.
LENDER AND EACH BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE (TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT
TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER, RELATING TO, OR CONNECTED
WITH THIS AGREEMENT, THE COLLATERAL OR ANY OTHER AGREEMENT, INSTRUMENT OR
DOCUMENT CONTEMPLATED HEREBY OR DELIVERED IN CONNECTION HEREWITH AND AGREE
THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER INTO THIS
AGREEMENT.
Section 8.15 CONFIDENTIALITY.
Lender agrees that it shall keep confidential all material non-public
information provided by TAVA or any Borrower to Lender from time to time.
IN WITNESS WHEREOF, the parties hereto have executed this Loan and
Security Agreement, or have caused this Agreement to be executed by their
duly authorized officers, as of the day and year first above written.
BORROWERS:
TAVA TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxx, President
Attest: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Secretary
ADVANCED CONTROL TECHNOLOGY, INC.
By: /s/ Xxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxx, President
Attest: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Secretary
33
VISIONEERING HOLDING CORP.
By: /s/ Xxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxx, President
Attest: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Secretary
MANAGEMENT DESIGN AND CONSULTING SERVICES, INC.
By: /s/ Xxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxx, President
Attest: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Secretary
ALL CONTROL SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Xxxx X. Xxxxxxx, Chief Executive Officer
Attest: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Assistant Secretary
TECH SALES, INC.
By: /s/ Xxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxx, President
Attest: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Secretary
34
TOPRO SYSTEMS INTEGRATION, INC.
By: /s/ Xxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxx, President
Attest: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Secretary
SHARP ELECTRIC CONSTRUCTION
COMPANY, INC.
By: /s/ XXXX X. XXXXXXX
-----------------------------------
Xxxx X. Xxxxxxx, President
Attest: /s/ XXXXXXX X. XXXXXXX
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Secretary
TAVA ALABAMA, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxx, Vice President
Attest: /s/ Xxxxxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxxxxx X. Xxxxx
Title: Assistant Secretary
TAVA Y2K ONE, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxx, Vice President
Attest: /s/ Xxxxxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxxxxx X. Xxxxx
Title: Assistant Secretary
35
LENDER:
SIRROM CAPITAL CORPORATION
d/b/a TANDEM CAPITAL
By: /s/ Xxxxx Xxxxxx
-----------------------------------
Xxxxx Xxxxxx, Vice-President
36
[THE FOLLOWING SCHEDULES AND EXHIBITS ARE NOT FILED WITH THIS FORM 10-QSB.
THEY WILL BE PROVIDED TO THE COMMISSION UPON REQUEST.]
INDEX OF ATTACHMENTS
Exhibit A-1 Form of Senior Secured Promissory Note ("Original Note")
Exhibit B Warrant
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Stock Pledge Agreement
Exhibit E Form of Trademark and Patent Security Agreement
Exhibit F Form of Officer's Certificate/Borrower
Exhibit G Form of Secretary's Certificate/Borrower
Exhibit H Form of Opinion of Borrower's Counsel
Exhibit I Form of Warrant Valuation Letter
Exhibit J Form of Debit Authorization Agreement/Loans
Exhibit K Form of Pay-Off Letter for existing Lenders
Exhibit L Form of Officer's Certificate (Additional Loan)
Exhibit M Form of Secretary's Certificate (Additional Loan)
Exhibit N Form of Lock-Up Agreement
Exhibit P Form of Supplemental Signature Page
Schedule 3.1(a) Jurisdictions in Which Borrower is Qualified
Schedule 3.1(b)(i) Subsidiaries
Schedule 3.1(b)(ii) Joint Venture Arrangements
Schedule 3.1(c) Authorized and Outstanding Stock
Schedule 3.1(d) Options
Schedule 3.1(e) Obligations to Register
Schedule 3.2 Required Consents
Schedule 3.4 Outstanding Loans, Liens, Security Interests, Etc.
Schedule 3.5(a) Chief Executive Office/Principal Place of Business
Schedule 3.6 Litigation
Schedule 3.9 Absence of Changes
Schedule 3.13 Taxes
Schedule 3.14 Certain Transactions
Schedule 3.15 Corporate or Trade Name
Schedule 3.16 Intellectual Property
Schedule 3.17 Debt
Schedule 3.18 Material Contracts
Schedule 3.19 Licenses, Permits and Authorizations
Schedule 3.20(a) Employees
Schedule 3.20(b) Employment Litigation
Schedule 3.20(c) Termination of Employment
Schedule 3.21(a) Employee Benefit Plans
Schedule 3.21(b) Compliance with Plans
Schedule 4.1 Use of Proceeds
Schedule 4.11 Existing Debt
Schedule 4.22 Key Executives
Schedule 5.1(l) Releases
37
