LOAN AND SECURITY AGREEMENT
Dated as of January 12, 1998
Among
BANKAMERICA BUSINESS CREDIT, INC.
as the Lender
and
INTELLICELL CORP.
as the Borrower
TABLE OF CONTENTS
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1. DEFINITIONS ........................................................... 1
1.1 Accounting Terms ................................................ 16
1.2 Other Terms ..................................................... 17
2. LOANS AND LETTERS OF CREDIT ........................................... 17
2.1 Total Facility .................................................. 17
2.2 Revolving Loans ................................................. 17
2.3 Letters of Credit ............................................... 18
2.4 Automated Clearing House Transfers and Overdrafts ............... 22
3. INTEREST AND OTHER CHARGES............................................. 22
3.1 Interest ........................................................ 22
3.2 Conversion and Continuation Elections ........................... 23
3.3 Maximum Interest Rate ........................................... 24
3.4 Closing Fee ..................................................... 25
3.5 Letter of Credit Fee ............................................ 25
4. PAYMENTS AND PREPAYMENTS.............................................. 25
4.1 Revolving Loans ................................................. 25
4.2 Place and Form of Payments; Extension of Time ................... 25
4.3 Application and Reversal of Payments ............................ 25
4.4 Indemnity for Returned Payments ................................. 25
5. LENDER'S BOOKS AND RECORDS; MONTHLY STATEMENTS......................... 26
6. TAXES, YIELD PROTECTION AND ILLEGALITY................................. 26
6.1 Taxes ........................................................... 26
6.2 Illegality ...................................................... 27
6.3 Increased Costs and Reduction of Return ......................... 28
6.4 Funding Losses .................................................. 28
6.5 Inability to Determine Rates .................................... 28
6.6 Survival ........................................................ 29
7. COLLATERAL............................................................. 29
7.1 Grant of Security Interest ...................................... 29
7.2 Perfection and Protection of Security Interest .................. 29
7.3 Location of Collateral .......................................... 30
7.4 Title to, Liens on, and Sale and Use of Collateral .............. 31
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TABLE OF CONTENTS
(cont'd)
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7.5 Appraisals ...................................................... 31
7.6 Access and Examination .......................................... 31
7.7 Insurance ....................................................... 31
7.8 Collateral Reporting ............................................ 32
7.9 Accounts ........................................................ 32
7.10 Collection of Accounts; Payments ................................ 34
7.11 Inventory ....................................................... 34
7.12 Equipment ....................................................... 35
7.13 Documents, Instruments, and Chattel Paper ....................... 35
7.14 Right to Cure ................................................... 36
7.15 Power of Attorney ............................................... 36
7.16 Lender's Rights, Duties, and Liabilities ........................ 36
8. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES...................... 37
8.1 Books and Records ............................................... 37
8.2 Financial Information ........................................... 37
8.3 Notices to Lender ............................................... 39
9. GENERAL WARRANTIES AND REPRESENTATIONS................................. 40
9.1 Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents ............................ 40
9.2 Validity and Priority of Security Interest ...................... 41
9.3 Organization and Qualification .................................. 41
9.4 Corporate Name; Prior Transactions .............................. 41
9.5 Subsidiaries and Affiliates ..................................... 41
9.6 Financial Statements and Projections ............................ 41
9.7 Capitalization .................................................. 42
9.8 Solvency ........................................................ 42
9.9 Debt ............................................................ 42
9.10 Distributions ................................................... 42
9.11 Title to Property ............................................... 42
9.12 Adequate Assets ................................................. 42
9.13 Real Property; Leases ........................................... 42
9.14 Proprietary Rights .............................................. 42
9.15 Trade Names and Terms of Sale ................................... 43
9.16 Litigation ...................................................... 43
9.17 Restrictive Agreements .......................................... 43
9.18 Labor Disputes .................................................. 43
9.19 Environmental Laws .............................................. 43
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TABLE OF CONTENTS
(cont'd)
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9.20 No Violation of Law ............................................. 44
9.21 No Default ...................................................... 44
9.22 ERISA Compliance ................................................ 45
9.23 Taxes ........................................................... 45
9.24 Use of Proceeds ................................................. 45
9.25 Private Offerings ............................................... 46
9.26 Broker's Fees ................................................... 46
9.27 No Material Adverse Change ...................................... 46
9.28 Disclosure ...................................................... 46
10. AFFIRMATIVE AND NEGATIVE COVENANTS..................................... 46
10.1 Taxes and Other Obligations ..................................... 46
10.2 Corporate Existence and Good Standing ........................... 46
10.3 Compliance with Law and Agreements .............................. 47
10.4 Maintenance of Property and Insurance ........................... 47
10.5 Environmental Laws .............................................. 47
10.6 ERISA ........................................................... 47
10.7 Mergers, Consolidations, Acquisitions, or Sales ................. 47
10.8 Distributions; Capital Changes .................................. 48
10.9 Transactions Affecting Collateral or Obligations ................ 48
10.10 Guaranties ...................................................... 48
10.11 Debt ............................................................ 48
10.12 Prepayment ...................................................... 48
10.13 Transactions with Affiliates .................................... 48
10.14 Management Compensation ......................................... 48
10.15 Business Conducted .............................................. 49
10.16 Liens ........................................................... 49
10.17 Sale and Leaseback Transactions ................................. 49
10.18 New Subsidiaries ................................................ 49
10.19 Restricted Investments .......................................... 49
10.20 Capital Expenditures ............................................ 49
10.21 Operating Lease Obligations ..................................... 49
10.22 EBITDA .......................................................... 49
10.23 Adjusted Tangible Net Worth ..................................... 50
10.24 Further Assurances .............................................. 50
11. CLOSING; CONDITIONS TO CLOSING ........................................ 50
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TABLE OF CONTENTS
(cont'd)
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11.1 Conditions Precedent to Making of Loans and Issuance of Letters of
Credit on the Closing Date .................................. 50
11.2 Conditions Precedent to Each Loan ............................... 52
12. DEFAULT; REMEDIES ..................................................... 52
12.1 Events of Default ............................................... 52
13. REMEDIES .............................................................. 54
14. TERM AND TERMINATION................................................... 55
15. MISCELLANEOUS.......................................................... 56
15.1 Cumulative Remedies; No Prior Recourse to Collateral ............ 56
15.2 No Implied Waivers .............................................. 56
15.3 Severability .................................................... 56
15.4 Governing Law ................................................... 56
15.5 Consent to Jurisdiction and Venue; Service of Process ........... 56
15.6 Waiver of Jury Trial ............................................ 57
15.7 Arbitration; Reference Proceeding ............................... 57
15.8 Survival of Representations and Warranties ...................... 58
15.9 Other Security and Guaranties ................................... 58
15.10 Fees and Expenses ............................................... 58
15.11 Notices ......................................................... 59
15.12 Indemnification ................................................. 60
15.13 Waiver of Notices ............................................... 61
15.14 Binding Effect; Assignment ...................................... 61
15.15 Modification .................................................... 61
15.16 Counterparts .................................................... 61
15.17 Captions ........................................................ 61
15.18 Right of Set-Off ................................................ 61
15.19 Participating Lender's Security Interests ....................... 62
15.20 Confidentiality ................................................. 62
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LOAN AND SECURITY AGREEMENT, dated as of January 12, 1998, by and
between BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, with offices
at 00 Xxxxx Xxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000 (the "Lender"),
and INTELLICELL CORP., a Delaware corporation, with offices at 0000 Xxxxxxxxxxx
Xxxxxx, Xxx Xxxx, Xxxxxxxxxx 00000 (the "Borrower")
W I T N E S S E T H
WHEREAS, the Borrower has requested the Lender to make available to
the Borrower a revolving line of credit for loans and letters of credit in an
amount not to exceed $12,000,000, which extensions of credit the Borrower will
use to repay certain existing indebtedness and for its working capital needs and
general business purposes;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Agreement, and for good and valuable consideration,
the receipt of which is hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
1. DEFINITIONS. As used herein:
"Account" means the Borrower's right to payment for a sale or lease
and delivery of goods or rendition of services.
"Account Debtor" means each Person obligated in any way on or in
connection with an Account.
"ACH Settlement Risk Reserve" means any and all reserves which the
Lender from time to time establishes, in its sole discretion, with respect to
ACH Transactions.
"ACH Transactions" means all debts, liabilities, and obligations now
or hereafter owing from the Borrower to the Bank arising from or related to the
automatic clearing house transfer of funds by the Bank for the account of the
Borrower pursuant to agreement or overdrafts.
"Adjusted Tangible Assets" means all of the Borrower's assets
except: (a) deferred assets, other than prepaid insurance and prepaid taxes; (b)
patents, copyrights, trademarks, trade names, franchises, goodwill, and other
similar intangibles; (c) Restricted Investments; (d) unamortized debt discount
and expense; (e) assets of the Borrower constituting Intercompany Accounts; (f)
fixed assets to the extent of any write-up in the book value thereof resulting
from a revaluation effective after the Closing Date; and (g) notes receivable
owing from customers of the Borrower.
"Adjusted Tangible Net Worth" means, at any date: (a) the book value
(after deducting related depreciation, obsolescence, amortization, valuation,
and other proper reserves as determined in accordance with GAAP) at which the
Adjusted Tangible Assets would be shown on a balance sheet of the Borrower at
such date prepared in accordance with GAAP less (b) the amount at which the
Borrower's liabilities would be shown on such balance sheet, including as
liabilities all
reserves for contingencies and other potential liabilities which would be shown
on such balance sheet or disclosed in the notes thereto.
"Affiliate" means: (a) a Person which, directly or indirectly,
controls, is controlled by or is under common control with, the Borrower; (b) a
Person which beneficially owns or holds, directly or indirectly, five percent or
more of any class of voting stock of the Borrower; or (c) a Person in which five
percent of any class of the voting stock is beneficially owned or held, directly
or indirectly, by the Borrower. The term "control" (including the terms
"controlled by" and "under common control with"), means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of the Person in question.
"Anniversary Date" means each anniversary of the Closing Date.
"Availability" means at any time the lesser of:
(a) The amount of Twelve Million and 00/100 Dollars
($12,000,000.00) (the "Maximum Revolving Credit Line") or
(b) The sum of
(i) up to eighty percent (80%) of the Net Amount of
Eligible Accounts, and
(ii) the lesser of
a) Six Million and 00/100 ($6,000,000.00); or
b) up to fifty percent (50%) of the value of
Eligible Inventory;
provided, however, that at all times Availability shall be reduced by the sum
of:
(a) the unpaid balance of Revolving Loans at that time;
(b) the aggregate undrawn face amount of all outstanding
Letters of Credit which the Lender has caused to be issued or obtained for the
Borrower's account;
(c) reserves for accrued interest on the Revolving Loans and
reserves for accounts payable 30 days or more past due date;
(d) the Environmental Compliance Reserve;
(e) the ACH Settlement Risk Reserve; and
(f) all other reserves which the Lender in its reasonable
discretion
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deems necessary or desirable to maintain with respect to the Borrower's account,
including, without limitation, with respect to any amounts which the Lender may
be obligated to pay in the future for the account of the Borrower.
"Bank" means Bank of America National Trust and Savings Association
in San Francisco, California.
"Borrowing" means a borrowing hereunder consisting of Revolving
Loans made by the Lender to the Borrower or the issuance of Letters of Credit
hereunder.
"Business Day" means (a) any day that is not a Saturday, Sunday, or
a day on which banks in San Francisco, California, are required or permitted to
be closed, and (b) with respect to all notices, determinations, fundings and
payments in connection with the LIBOR Rate or LIBOR Revolving Loans, any day
that is a Business Day pursuant to clause (a) above and that is also a day on
which trading is carried on by and between banks in the London interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Public Authority, or any other law, rule
or regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Capital Expenditures" means all payments due (whether or not paid)
during a Fiscal Year in respect of the cost of any fixed asset or improvement,
or replacement, substitution, or addition thereto, which has a useful life of
more than one year, including, without limitation, those arising in connection
with the direct or indirect acquisition of such assets by way of increased
product or service charges or offset items or in connection with Capital Leases.
"Capital Lease" means any lease of Property by the Borrower that, in
accordance with GAAP, should be reflected as a liability on the balance sheet of
the Borrower.
"Closing Date" means the date of this Agreement.
"Closing Fee" has the meaning specified in Section 3.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" has the meaning given to such term in Section 7.1
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or other substance or material, the handling, release, or possession
of which is regulated to protect health, safety, or the environment, or any
constituent of any such substance or waste.
"Debt" means all liabilities, obligations and indebtedness of the Borrower
to any
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Person, of any kind or nature, now or hereafter owing, arising, due or payable,
howsoever evidenced, created, incurred, acquired or owing, whether primary,
secondary, direct, contingent, fixed or otherwise, and including, without in any
way limiting the generality of the foregoing: (a) the Borrower's liabilities and
obligations to trade creditors; (b) all Obligations; (c) all obligations and
liabilities of any Person secured by any Lien on the Borrower's Property, even
though the Borrower shall not have assumed or become liable for the payment
thereof; provided, however, that all such obligations and liabilities which are
limited in recourse to such Property shall be included in Debt only to the
extent of the book value of such Property as would be shown on a balance sheet
of the Borrower prepared in accordance with GAAP; (d) all obligations or
liabilities created or arising under any Capital Lease or conditional sale or
other title retention agreement with respect to Property used or acquired by the
Borrower, even if the rights and remedies of the lessor, seller or lender
thereunder are limited to repossession of such Property; provided, however, that
all such obligations and liabilities which are limited in recourse to such
Property shall be included in Debt only to the extent of the book value of such
Property as would be shown on a balance sheet of the Borrower prepared in
accordance with GAAP; (e) all accrued pension fund and other employee benefit
plan obligations and liabilities; (f) all obligations and liabilities under
Guaranties; and (g) deferred taxes.
"Default" means any event or condition which, with notice, the
passage of time, the happening of any other condition or event or any
combination thereof, would constitute an Event of Default.
"Distribution" means, in respect of any corporation: (a) the payment
or making of any dividend or other distribution of Property in respect of
capital stock of such corporation, other than distributions in capital stock of
the same class; or (b) the redemption or other acquisition by such corporation
of any capital stock of such corporation.
"DOL" means the United States Department of Labor or any successor
department or agency.
"EBITDA" means, for any period of Borrower, earnings of Borrower
before interest expense, taxes, depreciation and amortization, determined in
accordance with GAAP.
"Eligible Accounts" means those Accounts which are not ineligible as
the basis for Revolving Loans, based on the following criteria and on such other
criteria as the Lender may from time to time establish in its reasonable
commercial discretion. Without intending to limit the Lender's discretion to
establish other criteria of eligibility, Eligible Accounts shall not include any
Account:
(a) with respect to which more than 90 days have elapsed since
the date of the original invoice therefor or if it is more than 60 days past
due;
(b) with respect to which any of the representations,
warranties, covenants, and agreements contained in this Agreement are not or
have ceased to be complete and correct or have been breached;
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(c) with respect to which, in whole or in part, a check,
draft, trade acceptance or other instrument for the payment of money has been
received, presented for payment and returned uncollected for any reason;
(d) which represents a progress billing (as hereinafter
defined) or as to which the Borrower has extended the time for payment without
the consent of the Lender; for the purposes hereof, "progress billing" means any
invoice for goods sold or leased or services rendered under a contract or
agreement pursuant to which the Account Debtor's obligation to pay such invoice
is conditioned upon the Borrower's completion of any further performance under
the contract or agreement;
(e) as to which any one or more of the following events has
occurred with respect to the Account Debtor on such Account: death or judicial
declaration of incompetency of an Account Debtor who is an individual; the
filing by or against the Account Debtor of a request or petition for
liquidation, reorganization, arrangement, adjustment of debts, adjudication as a
bankrupt, winding-up, or other relief under the bankruptcy, insolvency, or
similar laws of the United States, any state or territory thereof, or any
foreign jurisdiction, now or hereafter in effect; the making of any general
assignment by the Account Debtor for the benefit of creditors; the appointment
of a receiver or trustee for the Account Debtor or for any of the assets of the
Account Debtor, including, without limitation, the appointment of or taking
possession by a "custodian," as defined in the Federal Bankruptcy Code; the
institution by or against the Account Debtor of any other type of insolvency
proceeding (under the bankruptcy laws of the United States or otherwise) or of
any formal or informal proceeding for the dissolution or liquidation of,
settlement of claims against, or winding up of affairs of, the Account Debtor;
the sale, assignment, or transfer of all or any material part of the assets of
the Account Debtor; the nonpayment generally by the Account Debtor of its debts
as they become due; or the cessation of the business of the Account Debtor as a
going concern;
(f) owed by an Account Debtor if the aggregate dollar amount
of all Accounts owed by such Account Debtor exceeds a credit limit determined by
Lender in its sole discretion, but only to the extent such Accounts exceed such
limit;
(g) owed by an Account Debtor which: (i) does not maintain its
chief executive office in the United States; or (ii) is not organized under the
laws of the United States or any state thereof; or (iii) is the government of
any foreign country or sovereign state, or of any state, province, municipality,
or other political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof; except to the extent that payment
of such Account is secured or supported by (A) a letter of credit issued by, or
confirmed by a bank acceptable to, Lender, or (B) foreign credit insurance
provided by an insurer acceptable to Lender (provided that advances against
Accounts supported by foreign credit insurance shall not exceed $1,000,000 at
any time), in each case in amounts and on terms acceptable to Lender in its
discretion;
(h) owed by an Account Debtor which is an Affiliate or
employee of
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the Borrower;
(i) except as provided in clause (k) below, as to which either
the perfection, enforceability, or validity of the Security Interest in such
Account, or the Lender's right or ability to obtain direct payment to the Lender
of the Proceeds of such Account, is governed by any federal, state, or local
statutory requirements other than those of the UCC;
(j) which is owed by an Account Debtor to which the Borrower
is indebted in any way, or which is subject to any right of setoff or recoupment
by the Account Debtor, unless the Account Debtor has entered into an agreement
acceptable to the Lender to waive setoff and recoupment rights; or if the
Account Debtor thereon has disputed liability or made any claim with respect to
any other Account due from such Account Debtor; but in each such case only to
the extent of such indebtedness, setoff, recoupment, dispute, or claim;
(k) which is owed by the government of the United States of
America, or any department, agency, public corporation, or other instrumentality
thereof, unless the Federal Assignment of Claims Act of 1940, as amended, and
any other steps necessary to perfect the Security Interest and protect the
Lender's rights therein, have been complied with to the Lender's satisfaction
with respect to such Account;
(l) which is owed by any state, municipality, or other
political subdivision of the United States of America, or any department,
agency, public corporation, or other instrumentality thereof and as to which the
Lender determines that its Security Interest therein is not or cannot be
perfected;
(m) which arises out of a sale to an Account Debtor on a
xxxx-and-hold, guaranteed sale, sale and return, sale on approval, consignment,
or other repurchase or return basis;
(n) which is evidenced by a promissory note or other
instrument or by chattel paper, or which is owing from an Account Debtor any
portion of whose obligations to the Borrower is evidenced by a promissory note;
(o) if fifty percent (50%) or more of the aggregate dollar
amount of outstanding Accounts owed at such time by the Account Debtor thereon
is classified as ineligible under the other criteria set forth herein;
(p) with respect to which the Account Debtor is located in any
state requiring the filing of a Notice of Business Activities Report or similar
report in order to permit the Borrower to seek judicial enforcement in such
state of payment of such Account, unless such Borrower has qualified to do
business in such state or has filed a Notice of Business Activities Report or
equivalent report for the then current year;
(q) which arises out of a sale not made in the ordinary course
of the
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Borrower's business;
(r) with respect to which the goods giving rise to such
Account have not been shipped and delivered to and accepted by the Account
Debtor or the services giving rise to such Account have not been performed by
the Borrower, and, if applicable, accepted by the Account Debtor, or the Account
debtor revokes its acceptance of such goods or services;
(s) which is not subject to a first priority and perfected
security interest in favor of the Lender;
(t) if the terms of such Account are cash-on-delivery (C.O.D.)
(not to exceed $500,000 at any one time, subject to all other criteria for
eligibility), or if the account debtor thereon has a credit with Borrower, to
the extent of such credit;
(u) if Lender believes in its reasonable credit judgment that
the prospect of collection of such Account is impaired or that the Account may
not be paid by reason of the Account Debtor's financial inability to pay; or
(v) which is owed by an Account Debtor which the Lender, in
its reasonable credit judgment, otherwise deems to be uncreditworthy.
If any Account at any time ceases to be an Eligible Account by
reason of any of the foregoing exclusions or any failure to meet any other
eligibility criteria established by the Lender in the exercise of its reasonable
discretion then such Account shall promptly be excluded from the calculation of
Eligible Accounts.
"Eligible Inventory" means Inventory, valued at the lower of cost
(on a first-in, first-out basis) or market, that constitutes first quality
finished goods and that: (a) is not, in the Lender's reasonable opinion, Slow
Moving, obsolete or unmerchantable; (b) is located at Premises owned or leased
by the Borrower or on Premises otherwise reasonably acceptable to the Lender,
provided, however, that Inventory located on Premises leased to the Borrower
shall not be Eligible Inventory unless the Borrower shall have delivered to the
Lender a written waiver, duly executed on behalf of the appropriate landlord and
in form and substance acceptable to the Lender, of all Liens which the landlord
for such Premises may be entitled to assert against such Eligible Inventory; (c)
is subject to the Lender's first priority perfected security interest; (d) is
not work-in-process, spare parts (other than finished goods held for sale as
accessories), packaging and shipping materials, supplies, xxxx- and-hold
Inventory, returned, defective or damaged Inventory, or refurbished Inventory to
the extent the aggregate value thereof is in excess of $200,000, or Inventory
delivered to the Borrower on consignment; and (e) the Lender, in the exercise of
its reasonable discretion, deems eligible as the basis for Revolving Loans based
on such collateral and credit criteria as the Lender may from time to time
establish. If any Inventory at any time ceases to be Eligible Inventory, such
Inventory shall promptly be excluded from the calculation of Eligible Inventory.
"Environmental Compliance Reserve" means all reserves which the
Lender from time
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to time establishes for amounts that are reasonably required to be expended in
order for the Borrower and the Borrower's operations and Property to comply with
Environmental Laws or in order to correct any violation by the Borrower or the
Borrower's operations or Property of Environmental Laws.
"Environmental Laws" means all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidance, orders and consent decrees
relating to health, safety, hazardous substances, and environmental matters
applicable to the Borrower's business and facilities (whether or not owned by
it). Such laws and regulations include but are not limited to the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., as amended; the
Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C.
ss. 9601 et seq., as amended; the Toxic Substances Control Act, 15 U.S.C. ss.
2601 et seq., as amended; the Clean Water Act, 33 U.S.C. ss. 466 et seq., as
amended; the Clean Air Act, 42 U.S.C. ss. 7401 et seq., as amended; state and
federal lien and environmental cleanup programs; and U.S. Department of
Transportation regulations.
"Environmental Lien" means a Lien in favor of any Public Authority
for (a) any liability under any Environmental Laws, or (b) damages arising from,
or costs incurred by such Public Authority in response to, a Release or
threatened Release of a Contaminant into the environment.
"Equipment" means all of the Borrower's now owned and hereafter
acquired machinery, equipment, furniture, furnishings, fixtures, and other
tangible personal property (except Inventory), including, without limitation,
data processing hardware and software, motor vehicles, aircraft, dies, tools,
jigs, and office equipment, as well as all of such types of property leased by
the Borrower and all of the Borrower's rights and interests with respect thereto
under such leases (including, without limitation, options to purchase); together
with all present and future additions and accessions thereto, replacements
therefor, component and auxiliary parts and supplies used or to be used in
connection therewith, and all substitutes for any of the foregoing, and all
manuals, drawings, instructions, warranties and rights with respect thereto;
wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Borrower within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means, with respect to the Borrower, any ERISA
Affiliate or any Pension Plan, the occurrence of any of the following: (a) a
Reportable Event; (b) a withdrawal by a substantial employer (as defined in
Section 4001 (a)(12) of ERISA) subject to Section 4063 of ERISA; (c) a cessation
of operations which is treated as a withdrawal under Section 4062(e) of ERISA;
(d) a complete or partial withdrawal under Section 4203 or 4205 of ERISA from a
Multiemployer Plan; (e) a notification that a Multiemployer Plan is in
reorganization under
-8-
Section 4242 of ERISA; (f) the filing of a notice of intent to terminate a
Pension Plan under 4041 of ERISA; (g) the treatment of an amendment of a Pension
Plan as a termination under 4041 of ERISA; (h) the termination of a
Multiemployer Plan under Section 4041A of ERISA; (i) the commencement of
proceedings by the PBGC to terminate a Pension Plan under 4042 of ERISA; (j) an
event or condition which could reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, a Pension Plan; or (k) the imposition of any liability
under Title IV of ERISA, other than PBGC premiums due but not delinquent under
Section 4007 of ERISA.
"Event of Default" has the meaning specified in Section 12.1.
"Financial Statements" means, according to the context in which it
is used, the financial statements attached hereto as Exhibit X-x, or any
financial statements required to be given to the Lender pursuant to Sections
8.2(a), (b) and (c), or any combination thereof.
"Fiscal Year" means the Borrower's fiscal year for financial
accounting purposes. The current Fiscal Year of the Borrower will end on
December 31, 1998.
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means at any particular time generally accepted accounting
principles in the United States as in effect at such time.
"Guaranty" by any Person means all obligations of such Person which
in any manner directly or indirectly guarantee or assure, or in effect guarantee
or assure, the payment or performance of any indebtedness, dividend or other
obligation of any other Person (the "guaranteed obligations"), or assure or in
effect assure the holder of the guaranteed obligations against loss in respect
thereof, including, without limitation, any such obligations incurred through an
agreement, contingent or otherwise: (a) to purchase the guaranteed obligations
or any Property constituting security therefor; (b) to advance or supply funds
for the purchase or payment of the guaranteed obligations or to maintain a
working capital or other balance sheet condition; or (c) to lease Property or to
purchase any debt or equity securities or other Property or services.
"Intercompany Accounts" means all assets and liabilities, however
arising, which are due to the Borrower from, which are due from the Borrower to,
or which otherwise arise from any transaction by the Borrower with, any
Affiliate.
"Interest Period" means, as to any LIBOR Revolving Loan, the period
commencing on the Funding Date of such Loan or on the Conversion/Continuation
Date on which the Loan is converted into or continued as a LIBOR Revolving Loan,
and ending on the date one, two, or three months thereafter as selected by the
Borrower in its Notice of Borrowing or Notice of Conversion/Continuation;
provided, however, that:
(i) if any Interest Period would otherwise end on a day
that is
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not a Business Day, that Interest Period shall be extended to the
following Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding Business Day;
(ii) any Interest Period pertaining to a LIBOR Revolving
Loan that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the
last Business Day of the calendar month at the end of such Interest
Period; and
(iii) no Interest Period shall extend beyond the Stated
Termination Date or any renewal term.
"Inventory" means all of the Borrower's now owned and hereafter
acquired inventory, goods, merchandise, and other personal property, wherever
located, to be furnished under any contract of service or held for sale or
lease, all raw materials, work-in-process, finished goods, returned goods, and
materials and supplies of any kind, nature or description which are or might be
used or consumed in the Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise and such other personal property, and all documents of title or
other documents representing them.
"IRS" means the Internal Revenue Service or any successor agency.
"Latest Projections" means: (a) on the Closing Date and thereafter
until the Lender receives new projections pursuant to Section 8.2(f), the
projections of the Borrower's monthly financial condition, results of
operations, and cash flow for the one-year period ending December 31, 1998,
attached hereto as Exhibit B-2; and (b) thereafter, the projections most
recently received by the Lender pursuant to Section 8.2(f).
"Letters of Credit" has the meaning specified in Section 2.3.
"Letter of Credit Fee" has the meaning specified in Section 3.5.
"LIBOR Interest Rate Determination Date" means each date of
calculating the LIBOR Rate for purposes of determining the interest rate with
respect to an Interest Period. The LIBOR Interest Rate Determination Date for
any LIBOR Revolving Loan shall be the second Business Day prior to the first day
of the related Interest Period for such LIBOR Revolving Loan.
"LIBOR Rate" means, for any Interest Period, with respect to LIBOR
Revolving Loans comprising part of the same Borrowing, the rate of interest per
annum (rounded upward to the next 1/1000th of 1.0%) determined as follows:
LIBOR Rate =__________ LIBOR
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1.00 - Eurodollar Reserve
Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1.0%) in effect on
such day (whether or not applicable to the Lender) under regulations
issued from time to time by the Federal Reserve Board for
determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) with
respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum (rounded upward
to the next 1/16 of 1%) notified to the Lender by Bank as the rate
of interest at which United States Dollar deposits in the
approximate amount of the Loan to be made or continued as, or
converted into, a LIBOR Revolving Loan and having a maturity
comparable to such Interest Period would be offered by Bank's
applicable lending office to major banks in the London interbank
market at their request at approximately 11:00 a.m. (London time)
two Business Days prior to the commencement of such Interest Period.
"LIBOR Revolving Loan" means a Revolving Loan during any period in
which it bears interest based on the LIBOR Rate.
"Lien" means: (a) any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute, or contract, and including
without limitation, a security interest, charge, claim, or lien arising from a
mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, agreement, security agreement, conditional sale or trust receipt or
a lease, consignment or bailment for security purposes; and (b) to the extent
not included under clause (a), any reservation, exception, encroachment,
easement, right-of-way, covenant, condition, restriction, lease or other title
exception or encumbrance affecting Property.
"Loans" means, collectively, all loans and advances provided for in
Section 2.
"Loan Documents" means this Agreement, the Term Note, the Patent and
Trademark Assignments, and all other agreements, instruments, and documents
heretofore, now or hereafter evidencing, securing, guaranteeing or otherwise
relating to the Obligations, the Collateral, the Security Interest, or any other
aspect of the transactions contemplated by this Agreement.
"Maximum Rate" has the meaning specified in Section 3.3.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3)
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of ERISA to which the Borrower or any ERISA Affiliate makes, is making, made, or
was at any time during the current year or the immediately preceding six (6)
years obligated to make contributions.
"Net Amount of Eligible Accounts" means the gross amount of Eligible
Accounts less sales, excise or similar taxes, and less returns, discounts,
claims, credits and allowances of any nature at any time issued, owing, granted,
outstanding, available or claimed in respect of such Eligible Accounts.
"Notice of Borrowing" has the meaning specified in Section 2.2(b).
"Notice of Conversion/Continuation" has the meaning specified in
Section 3.2(b).
"Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and Debt owing by the Borrower to
the Lender, whether or not arising under this Agreement, whether or not
evidenced by any note, or other instrument or document, whether arising from an
extension of credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment from others, and any participation by
the Lender in the Borrower's debts owing to others), whether absolute or
contingent, due or to become due, primary or secondary, as principal or
guarantor, and including, without limitation, all interest, charges, expenses,
fees, attorneys' fees, filing fees and any other sums chargeable to the Borrower
hereunder, under another Loan Document, or under any other agreement or
instrument with the Lender. "Obligations" includes, without limitation, (a) all
debts, liabilities, and obligations now or hereafter owing from Borrower to
Lender under or in connection with the Letters of Credit and (b) all debts,
liabilities and obligations now or hereafter owing from the Borrower to the
Lender arising from or related to ACH Transactions.
"Other Taxes" means any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or from the execution, delivery or registration
of, or otherwise with respect to, this Agreement or any other Loan Documents.
"Participating Lender" means any Person who shall have been granted
the right by the Lender to participate in the Loans and who shall have entered
into a participation agreement in form and substance satisfactory to the Lender.
"Patent and Trademark Assignment" means, collectively, the Security
Agreement (Intellectual Property) dated as of the date hereof, between the
Borrower and the Lender and the various documents and agreements executed in
connection therewith, all to further evidence and further perfect the Lender's
Security Interest in the Borrower's present and future Proprietary Rights
specified therein.
"Payment Account" means each blocked bank account or bank account
associated with a lock box, established pursuant to Section 7.10, to which the
funds of the Borrower (including, without limitation, Proceeds of Accounts and
other Collateral) are deposited or credited, and which
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is maintained in the name of the Lender or the Borrower, as the Lender may
determine, on terms acceptable to the Lender.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the functions thereof.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which the Borrower or an ERISA Affiliate
sponsors, maintains, or to which it makes, is making, or is obligated to make
contributions or, in the case of a Multiemployer Plan, has made contributions at
any time during the current year or the immediately preceding six (6) plan
years.
"Permitted Liens" means: (a) Liens for taxes not yet delinquent or
Liens for taxes in an amount not to exceed $100,000 being contested in good
faith by appropriate proceedings diligently pursued, provided that a reserve or
other appropriate provision, if any, as shall be required by GAAP shall have
been made therefor on the applicable Financial Statements and that a stay of
enforcement of any such Lien is in effect; (b) Liens in favor of the Lender; (c)
Liens arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, employees or suppliers, incurred in the
ordinary course of business of the Borrower and not in connection with the
borrowing of money, for sums not yet delinquent or which are being contested in
good faith and by proper proceedings diligently pursued, provided that a reserve
or other appropriate provision, if any, required by GAAP shall have been made
therefor on the applicable Financial Statements and a stay of enforcement of any
such Lien is in effect; (d) Liens in connection with workers' compensation or
other unemployment insurance incurred in the ordinary course of the Borrower's
business; (e) Liens created by deposits of cash to secure performance of bids,
tenders, leases (to the extent permitted under this Agreement), or trade
contracts, incurred in the ordinary course of business of the Borrower and not
in connection with the borrowing of money; (f) Liens arising by reason of cash
deposit for surety or appeal bonds in the ordinary course of business of the
Borrower; (g) Liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which has not yet expired, or in respect of
which the Borrower is in good faith prosecuting an appeal or proceeding for a
review, and in respect of which a stay of execution pending such appeal or
proceeding for review has been secured; (h) with respect to any Premises:
easements, rights of way, zoning and similar covenants and restrictions and
similar encumbrances which customarily exist on properties of corporations
engaged in similar activities and similarly situated and which in any event do
not materially interfere with or impair the use or operation of the Collateral
by the Borrower or the value of the Lender's Security Interest therein, or
materially interfere with the ordinary conduct of the business of the Borrower;
(i) purchase money security interests and liens of lessors under capital leases
to the extent that the acquisition or lease of the underlying asset was
permitted under Section 10.20, the security interest or lien only encumbers the
asset purchased or leased, and so long as the security interest or lien only
secures the purchase price of the asset; and (j) such Liens as are set forth on
Exhibit A hereto.
"Permitted Rentals" has the meaning specified in Section 10.21.
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"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, limited liability company
association, corporation, Public Authority, or any other entity.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which the Borrower or an ERISA Affiliate sponsors or maintains or to
which the Borrower or an ERISA Affiliate makes, is making, or is obligated to
make contributions and includes any Pension Plan.
"Premises" means the land identified by addresses on Schedule 9.13
together with all buildings, improvements, and fixtures thereon and all
tenements, hereditaments, and appurtenances belonging or in any way appertaining
thereto, and which constitutes all of the real property in which the Borrower
has any interests on the Closing Date and any land added to Schedule 9.13 from
time to time.
"Proceeds" means all products and proceeds of any Collateral, and
all proceeds of such proceeds and products, including, without limitation, all
cash and credit balances, all payments under any indemnity, warranty or guaranty
payable with respect to any Collateral, all awards for taking by eminent domain,
all proceeds of fire or other insurance, and all money and other Property
obtained as a result of any claims against third parties or any legal action or
proceeding with respect to Collateral.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Proprietary Rights" means all of the Borrower's now owned and
hereafter arising or acquired: licenses, franchises, permits, patents, patent
rights, copyrights, works which are the subject matter of copyrights,
trademarks, trade names, trade styles, patent and trademark applications and
licenses and rights thereunder, including without limitation those patents,
trademarks and copyrights set forth on Schedule 9.14, and all other rights under
any of the foregoing, all extensions, renewals, reissues, divisions,
continuations and continuations-in-part of any of the foregoing, and all rights
to xxx for past, present, and future infringement of any of the foregoing;
inventions, trade secrets, formulae, processes, compounds, drawings, designs,
blueprints, surveys, reports, manuals, and operating standards; goodwill;
customer and other lists in whatever form maintained; and trade secret rights,
copyright rights, rights in works of authorship, and contract rights relating to
computer software programs, in whatever form created or maintained.
"Public Authority" means the government of any country or sovereign
state, or of any state, province, municipality, or other political subdivision
thereof, or any department, agency, public corporation or other instrumentality
of any of the foregoing.
"Receivables" means all of the Borrower's now owned and hereafter
arising or acquired: Accounts (whether or not earned by performance), including
Accounts owed to the Borrower by any of its Subsidiaries or Affiliates, together
with all interest, late charges, penalties, collection fees, and other sums
which shall be due and payable in connection with any Account;
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proceeds of any letters of credit naming the Borrower as beneficiary; contract
rights, chattel paper, instruments, documents, investment property, general
intangibles (including without limitation choses in action, causes of action,
tax refunds, tax refund claims, and Reversions and other amounts payable to the
Borrower from or with respect to any Plan) and all forms of obligations owing to
the Borrower (including, without limitation, in respect of loans, advances, and
extensions of credit by the Borrower to its Subsidiaries and Affiliates);
guarantees and other security for any of the foregoing; goods represented by or
the sale, lease or delivery of which gave rise to any of the foregoing;
merchandise returned to or repossessed by the Borrower and rights of stoppage in
transit, replevin, and reclamation; and other rights or remedies of an unpaid
vendor, lienor, or secured party.
"Reference Rate" means the rate of interest publicly announced from
time to time by the Bank as its reference rate. It is a rate set by the Bank
based upon various factors including the Bank's costs and desired return,
general economic conditions, and other factors, and is used as a reference point
for pricing some loans. However, the Bank may price loans at, above, or below
such announced rate. Any changes in the Reference Rate shall take effect on the
day specified in the public announcement of such change.
"Reference Rate Revolving Loans" means a Revolving Loan during any
period in which it bears interest based on the Reference Rate.
"Release" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any real
estate or other property, including the movement of Contaminants through or in
the air, soil, surface water, groundwater or real estate or other property.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
"Requirement of Law" means any law (statutory or common), treaty,
rule or regulation or determination of an arbitrator or of a Public Authority.
"Restricted Investment" means any acquisition of Property by the
Borrower or any of its Subsidiaries in exchange for cash or other Property,
whether in the form of an acquisition of stock, debt security, or other
indebtedness or obligation, or the purchase or acquisition of any other
Property, or a loan, advance, capital contribution, or subscription, except
acquisitions of the following: (a) fixed assets to be used in the business of
the Borrower, so long as the acquisition costs thereof constitute Capital
Expenditures permitted hereunder; (b) current assets arising from the sale or
lease of goods or rendition of services in the ordinary course of business of
the Borrower; (c) direct obligations of the United States of America, or any
agency thereof, or obligations guaranteed by the United States of America,
provided that such obligations mature within one year from the date of
acquisition thereof; (d) certificates of deposit maturing within one year from
the date of acquisition, banker's acceptances, Eurodollar bank deposits, or
overnight bank deposits, in each case issued by, created by, or with a bank or
trust company organized under the laws of the
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United States or any state thereof having capital and surplus aggregating at
least $100,000,000; and (e) commercial paper given the highest rating by a
national credit rating agency and maturing not more than 270 days from the date
of creation thereof.
"Reversions" means any funds which may become due to the Borrower in
connection with the termination of any Plan or other employee benefit plan.
"Revolving Loans" has the meaning specified in Section 2.2.
"Security Interest" means collectively the Liens granted to the
Lender in the Collateral pursuant to this Agreement, the other Loan Documents,
or any other agreement or instrument.
"Slow Moving" means with respect to Inventory of Borrower, the
amount of Inventory in any SKU in excess of the prior six months' sales of such
SKU, with allowance for new products as determined by Lender.
"Solvent" shall mean when used with respect to any Person that: (a)
the fair value of all its Property is in excess of the total amount of its debts
(including contingent liabilities); (b) it is able to pay its debts as they
mature; and (c) it does not have unreasonably small capital for the business in
which it is engaged or for any business or transaction in which it is about to
engage.
"Stated Termination Date" has the meaning specified in Section 14.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than 50% of
the voting stock or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the Person, or
one or more of the Subsidiaries of the Person, or a combination thereof. Unless
the context otherwise clearly requires, references herein to a "Subsidiary"
refer to a Subsidiary of the Borrower.
"Supporting Letter of Credit" has the meaning specified in Section
2.3(g).
"Taxes" means any and all present or future taxes, assessments,
levies, imposts, impositions, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of the Lender, such
taxes (including income taxes or franchise taxes) as are imposed on or measured
by the Lender's net income by the jurisdiction (or any political subdivision
thereof) under the laws of which the Lender is organized or maintains a lending
office.
"Total Facility" has the meaning specified in Section 2.1.
"UCC" means the Uniform Commercial Code (or any successor statute)
of the State of California or of any other state the laws of which are required
by Section 9103 thereof to be applied in connection with the issue of perfection
of security interests.
"Unused Line Fee" has the meaning specified in Section 3.1(c).
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1.1 Accounting Terms. Any accounting term used in this Agreement
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the Financial Statements.
1.2 Other Terms. All other undefined terms contained in this
Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein.
Wherever appropriate in the context, terms used herein in the singular also
include the plural, and vice versa, and each masculine, feminine, or neuter
pronoun shall also include the other genders.
2. LOANS AND LETTERS OF CREDIT.
2.1 Total Facility. Subject to all of the terms and conditions of
this Agreement, the Lender shall make available a total credit facility of up to
$12,000,000 (the "Total Facility") for the Borrower's use from time to time
during the term of this Agreement. The Total Facility shall be comprised of a
revolving line of credit up to the limits of the Availability, consisting of
revolving loans and letters of credit as described in Sections 2.2 and 2.3.
2.2 Revolving Loans.
(a) The Lender shall, upon the Borrower's request from time to
time, make revolving loans (the "Revolving Loans") to the Borrower up to the
limits of the Availability. The Lender, in its discretion, may elect to exceed
the limits of the Availability on one or more occasions, but if it does so, the
Lender shall not be deemed thereby to have changed the limits of the
Availability or to be obligated to exceed the limits of the Availability on any
other occasion. If the unpaid balance of the Revolving Loans exceeds the
Availability (with Availability determined for this purpose as if the amount of
the Revolving Loans were zero), then the Lender may refuse to make or may
otherwise restrict Revolving Loans on such terms as the Lender determines until
such excess has been eliminated, and the amount of such excess shall be due upon
demand by the Lender. The Borrower may request Revolving Loans either
telephonically or in writing. Each oral request for a Revolving Loan shall be
conclusively presumed to be made by a person authorized by the Borrower to do so
and the crediting of a Revolving Loan to the Borrower's deposit account, or
transmittal to such Person as the Borrower shall direct, shall conclusively
establish the obligation of the Borrower to repay such Revolving Loan as
provided herein. The Lender will charge all Revolving Loans and other
Obligations to a loan account of the Borrower maintained with the Lender. All
fees, commissions, costs, expenses, and other charges under or pursuant to the
Loan Documents, and all payments made and out-of-pocket expenses incurred by the
Lender pursuant to the Loan Documents, will be charged as Revolving Loans to the
Borrower's loan account as of the date due from the Borrower or the date paid or
incurred by the Lender, as the case may be.
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(b) Procedure for Borrowing.
(i) Each Borrowing shall be made upon the Borrower's
irrevocable written notice ("Notice of Borrowing") delivered to the Lender
(which notice must be received by the Lender (1) prior to 10:30 a.m. (Los
Angeles time) three Business Days prior to the requested Funding Date, in the
case of LIBOR Revolving Loans and (2) no later than 10:00 a.m. on the requested
Funding Date, in the case of Reference Rate Revolving Loans), specifying:
(A) the amount of the Borrowing;
(B) the requested Funding Date, which shall be a
Business Day;
(C) whether the Revolving Loans requested are to
be Reference Rate Revolving Loans or LIBOR Revolving Loans or a combination
thereof; and
(D) the duration of the Interest Period if all or
part of the requested Revolving Loans are to be LIBOR Revolving Loans. If the
Notice of Borrowing fails to specify the duration of the Interest Period for any
Borrowing comprised of LIBOR Revolving Loans, such Interest Period shall be
three months; provided, however, that with respect to the Borrowings to be made
on the Closing Date, such Borrowings will consist of Reference Rate Revolving
Loans only.
(ii) After giving effect to any Borrowing, there may not
be more than two (2) different Interest Periods in effect.
(iii) With respect to any request for Reference Rate
Revolving Loans, in lieu of delivering the above-described Notice of Borrowing
the Borrower may give the Lender telephonic notice of such request by the
required time, with such telephonic notice to be confirmed in writing within 24
hours of the giving of such notice but Lender shall be entitled to rely on the
telephonic notice in making such Revolving Loans.
2.3 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, the
Lender shall, upon the Borrower's request from time to time, cause merchandise
or standby letters of credit to be issued for the Borrower's account (the
"Letters of Credit"). The Lender will not cause to be issued any Letter of
Credit if: (i) the maximum face amount of the requested Letter of Credit, plus
the aggregate undrawn face amount of all outstanding Letters of Credit, would
exceed $2,000,000; (ii) the maximum face amount of the requested Letter of
Credit, and all commissions, fees, and charges due from Borrower to Lender in
connection with the issuance thereof, would cause the Availability to be
exceeded at such time; or (iii) the expiration date of the Letter of Credit
would exceed the Stated Termination Date or any renewal term or be greater
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than twelve (12) months from the date of issuance. All payments made and
expenses incurred by the Lender pursuant to or in connection with the Letters of
Credit will be charged to the Borrower's loan account as Revolving Loans.
(b) Other Conditions. In addition to being subject to the
satisfaction of the applicable conditions precedent contained in Section 11, the
obligation of the Lender to cause to be issued any Letter of Credit is subject
to the following conditions precedent having been satisfied in a manner
satisfactory to the Lender:
(i) The Borrower shall have delivered to the proposed
issuer of such Letter of Credit, at such times and in such manner as such
proposed issuer may prescribe, an application in form and substance satisfactory
to such proposed issuer and the Lender for the issuance of the Letter of Credit
and such other documents as may be required pursuant to the terms thereof, and
the form and terms of the proposed Letter of Credit shall be satisfactory to the
Lender and such proposed issuer; and
(ii) As of the date of issuance, no order of any court,
arbitrator or Public Authority shall purport by its terms to enjoin or restrain
money center banks generally from issuing letters of credit of the type and in
the amount of the proposed Letter of Credit, and no law, rule or regulation
applicable to money center banks generally and no request or directive (whether
or not having the force of law) from any Public Authority with jurisdiction over
money center banks generally shall prohibit, or request that the proposed issuer
of such Letter of Credit refrain from, the issuance of letters of credit
generally or the issuance of such Letters of Credit.
(c) Issuance of Letters of Credit.
(i) Request for Issuance. The Borrower shall give the
Lender two (2) Business Days' prior written notice of the Borrower's request for
the issuance of a Letter of Credit. Such notice shall be irrevocable and shall
specify the original face amount of the Letter of Credit requested, the
effective date (which date shall be a Business Day) of issuance of such
requested Letter of Credit, whether such Letter of Credit may be drawn in a
single or in partial draws, the date on which such requested Letter of Credit is
to expire (which date shall be a Business Day), the purpose for which such
Letter of Credit is to be issued, and the beneficiary of the requested Letter of
Credit. The Borrower shall attach to such notice the proposed form of the Letter
of Credit that the Lender is requested to cause to be issued.
(ii) No Extensions or Amendment. The Lender shall not
be obligated to cause any Letter of Credit to be extended or amended unless the
requirements of this Section 2.3 are met as though a new Letter of Credit were
being requested and issued.
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(d) Payments Pursuant to Letters of Credit.
(i) Payment of Letter of Credit Obligations. The
Borrower agrees to reimburse the issuer for any draw under any Letter of Credit
immediately upon demand, and to pay the issuer of the Letter of Credit the
amount of all other obligations and other amounts payable to such issuer under
or in connection with any Letter of Credit immediately when due, irrespective of
any claim, setoff, defense or other right which the Borrower may have at any
time against such issuer or any other Person.
(ii) Revolving Loans to Satisfy Reimbursement
Obligations. In the event that the issuer of any Letter of Credit honors a draw
under such Letter of Credit and the Borrower shall not have repaid such amount
to the issuer of such Letter of Credit pursuant to Section 2.3(d)(i), the Lender
shall pay the issuer and such amount when paid shall constitute a Reference Rate
Revolving Loan which shall be deemed to have been requested by the Borrower.
(e) Compensation for Letters of Credit.
(i) Letter of Credit Fee. The Borrower agrees to pay to
the Lender with respect to each Letter of Credit, the Letter of Credit Fee
specified in, and in accordance with the terms of, Section 3.5.
(ii) Issuer Fees and Charges. The Borrower shall pay to
the issuer of any Letter of Credit, or to the Lender, for the account of the
issuer of any such Letter of Credit, solely for such issuer's account, such fees
and other charges as are charged by such issuer for letters of credit issued by
it, including, without limitation, its standard fees from time to time for
issuing, administering, amending, renewing, paying and canceling letters of
credit and all other fees associated with issuing or servicing letters of
credit, as and when assessed.
(f) Indemnification; Exoneration; Power of Attorney
(i) Indemnification. In addition to amounts payable as
elsewhere provided in this Section 2.3, the Borrower hereby agrees to protect,
indemnify, pay and save the Lender harmless from and against any and all claims,
demands, liabilities, damages, losses, costs, charges and expenses (including
reasonable attorneys' fees) which the Lender may incur or be subject to as a
consequence, direct or indirect, of the issuance of any Letter of Credit or the
provision of any credit support or enhancement in connection therewith. The
agreement in this Section 2.3(f)(i) shall survive payments of all Obligations
and the termination of this Agreement.
(ii) Assumption of Risk by the Borrower. As among the
Borrower and the Lender, the Borrower assumes all risks of the acts and
omissions of, or misuse of any of the Letters of Credit by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, the Lender shall not be responsible for: (A) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document
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submitted by any Person in connection with the application for and issuance of
and presentation of drafts with respect to any of the Letters of Credit, even if
it should prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (C) the
failure of the beneficiary of any Letter of Credit to comply duly with
conditions required in order to draw upon such Letter of Credit; (D) errors,
omissions, interruptions, or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher;
(E) errors in interpretation of technical terms; (F) any loss or delay in the
transmission or otherwise of any document required in order make a drawing under
any Letter of Credit or of the proceeds thereof; (G) the misapplication by the
beneficiary of any Letter of Credit of the proceeds of any drawing under such
Letter of Credit; or (H) any consequences arising from causes beyond the control
of the Lender, including, without limitation, any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto Public
Authority. None of the foregoing shall affect, impair or prevent the vesting of
any rights or powers of the Lender under this Section 2.3.
(iii) Exoneration. In furtherance and extension, and not
in limitation, of the specific provisions set forth above, any action taken or
omitted by the Lender under or in connection with any of the Letters of Credit
or any related certificates, if taken or omitted in the absence of gross
negligence or willful misconduct, shall not put the Lender under any resulting
liability to the Borrower or relieve the Borrower of any of its obligations
hereunder to any such Person.
(iv) Power of Attorney. In connection with all Inventory
financed by Letters of Credit, the Borrower hereby appoints the Lender, or the
Lender's designee, as its attorney, with full power and authority: (a) to sign
and/or endorse the Borrower's name upon any warehouse or other receipts; (b) to
sign the Borrower's name on bills of lading and other negotiable and
non-negotiable documents; (c) to clear Inventory through customs in the Lender's
or the Borrower's name, and to sign and deliver to customs officials powers of
attorney in the Borrower's name for such purpose; (d) to complete in the
Borrower's or the Lender's name, any order, sale or transaction, obtain the
necessary documents in connection therewith, and collect the proceeds thereof;
and (e) to do such other acts and things as are necessary in order to enable the
Lender to obtain possession of the Inventory and to obtain payment of the
Obligations. Neither the Lender nor its designee, as the Borrower's attorney,
will be liable for any acts or omissions, nor for any error of judgment or
mistakes of fact or law. This power, being coupled with an interest, is
irrevocable until all Obligations have been paid and satisfied.
(v) Account Party. The Borrower hereby authorizes and
directs any issuer of a Letter of Credit to name the Borrower as the "Account
Party" therein and to deliver to the Lender all instruments, documents and other
writings and property received by the issuer pursuant to the Letter of Credit,
and to accept and rely upon the Lender's instructions
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and agreements with respect to all matters arising in connection with the Letter
of Credit or the application therefor.
(vi) Control of Inventory. In connection with all
Inventory financed by Letters of Credit, the Borrower will, at the Lender's
request, instruct all suppliers, carriers, forwarders, warehouses or others
receiving or holding cash, checks, Inventory, documents or instruments in which
the Lender holds a security interest to deliver them to the Lender and/or
subject to the Lender's order, and if they shall come into the Borrower's
possession, to deliver them, upon request, to the Lender in their original form.
The Borrower shall also, at the Lender's request, designate the Lender as the
consignee on all bills of lading and other negotiable and non-negotiable
documents.
(g) Supporting Letter of Credit; Cash Collateral. If,
notwithstanding the provisions of this Section 2.3 and Section 14, any Letter of
Credit is outstanding upon the termination of this Agreement, then upon such
termination the Borrower shall deposit with the Lender, at its discretion, with
respect to each Letter of Credit then outstanding, either (A) a standby letter
of credit (a "Supporting Letter of Credit") in form and substance satisfactory
to the Lender, issued by an issuer satisfactory to the Lender in an amount equal
to the greatest amount for which such Letter of Credit may be drawn, under which
Supporting Letter of Credit the Lender is entitled to draw amounts necessary to
reimburse the Lender for payments made by the Lender under such Letter of Credit
or under any credit support or enhancement provided through the Lender with
respect thereto, or (B) cash in an amount necessary to reimburse the Lender for
payments made by the Lender under such Letter of Credit or under any credit
support or enhancement provided through the Lender. Such Supporting Letter of
Credit or deposit of cash shall be held by the Lender, as security for, and to
provide for the payment of, the aggregate undrawn amount of such Letters of
Credit remaining outstanding.
2.4 Automated Clearing House Transfers and Overdrafts. The Borrower
may request and the Lender may, in its sole and absolute discretion, arrange for
the Borrower to obtain from the Bank ACH Transactions. The Borrower agrees to
indemnify and hold the Lender harmless from all losses, liabilities, costs,
expenses and claims incurred by the Lender arising from or related to such ACH
Transactions. The Borrower acknowledges and agrees that the obtaining of ACH
Transactions from the Bank (a) is in the sole and absolute discretion of the
Bank, (b) is subject to all rules and regulations of the Bank, and (c) is due to
the Bank relying on the indemnity of the Lender to the Bank with respect to all
risks of loss associated with the ACH Transactions.
3. INTEREST AND OTHER CHARGES.
3.1 Interest.
(a) All Obligations shall bear interest on the unpaid
principal amount thereof from the date made until paid in full in cash at a rate
determined by reference to the Reference Rate or the LIBOR Rate and Sections
3.1(a)(i) or (ii), as applicable, but not to exceed
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the Maximum Rate. Subject to the provisions of Section 3.2, any of the Loans may
be converted into, or continued as, Reference Rate Revolving Loans or LIBOR
Revolving Loans in the manner provided in Section 3.2. If at any time Loans are
outstanding with respect to which notice has not been delivered to Lender in
accordance with the terms of this Agreement specifying the basis for determining
the interest rate applicable thereto, then those Loans shall be Reference Rate
Revolving Loans and shall bear interest at a rate determined by reference to the
Reference Rate until notice to the contrary has been given to the Lender and
such notice has become effective. Except as otherwise provided herein, the
Obligations shall bear interest as follows:
(i) For all Obligations, other than LIBOR Revolving
Loans, then at a fluctuating per annum rate equal to one-half of one percent
(0.50%) (the "Reference Rate Margin") plus the Reference Rate; and
(ii) If the Loans are LIBOR Revolving Loans, then at a
per annum rate equal to two and three-quarters percent (2.75%) (the "LIBOR
Margin") plus the LIBOR Rate determined for the applicable Interest Period.
Each change in the Reference Rate shall be reflected in the interest rate
described in (i) above as of the effective date of such change. All interest
charges shall be computed on the basis of a year of three hundred sixty (360)
days and actual days elapsed. All interest shall be payable to Lender on the
first day of each month hereafter.
(b) If any Event of Default occurs, then, from the date such
Event of Default occurs until it is cured, or if not cured until all Obligations
are paid and performed in full, the Borrower will pay interest on the unpaid
principal balance from time to time of the Revolving Loans at a per annum rate
2.0% greater than the rate of interest otherwise specified herein for Reference
Rate Revolving Loans, and the Letter of Credit Fee shall be increased to three
and one-half percent (3.5%) per annum. During the continuance of an Event of
Default, Borrower shall not be entitled to request or convert to LIBOR Revolving
Loans.
(c) Unused Line Fee. For every month during the term of this
Agreement, the Borrower shall pay the Lender a fee (the "Unused Line Fee") in an
amount equal to three-eighths of one percent (0.375%) per annum, multiplied by
the average daily amount by which the Maximum Revolving Credit Line exceeds the
sum of (i) the average daily outstanding amount of Revolving Loans during such
month and (ii) the average daily undrawn face amount of all outstanding Letters
of Credit during such month, with the unpaid balance calculated for this purpose
by applying payments immediately upon receipt. Such a fee, if any, shall be
calculated on the basis of a year of three hundred sixty (360) days and actual
days elapsed, and shall be payable to the Lender on the first day of each month
with respect to the prior month.
3.2 Conversion and Continuation Elections.
(a) The Borrower may, upon irrevocable written notice to the
Lender
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in accordance with Section 3.2(b):
(i) elect, as of any Business Day, in the case of
Reference Rate Revolving Loans to convert any such Loans (or any part thereof in
an amount not less than $1,000,000, or that is in an integral multiple of
$1,000,000 in excess thereof) into LIBOR Revolving Loans; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any LIBOR Revolving Loans having Interest Periods
expiring on such day (or any part thereof in an amount not less than $1,000,000,
or that is in an integral multiple of $1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of LIBOR Revolving Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $1,000,000, such LIBOR Revolving Loans shall
automatically convert into Reference Rate Revolving Loans, and on and after such
date the right of the Borrower to continue such Loans as, and convert such Loans
into, LIBOR Revolving Loans, as the case may be, shall terminate.
(b) The Borrower shall deliver a notice ("Notice of
Conversion/Continuation") to be received by the Lender not later than 10:30 a.m.
(Los Angeles time) at least two Business Days in advance of the date of
conversion or continuing, if the Loans are to be converted into or continued as
LIBOR Revolving Loans and not later than 10:30 a.m. (Los Angeles time) on the
date of conversion, in the case of conversion to Reference Rate Revolving Loans,
and specifying:
(i) the proposed Conversion/Continuation Date;
(ii) the aggregate amount of Loans to be converted or
continued;
(iii) the type of Loans resulting from the proposed
conversion or continuation; and
(iv) with respect to LIBOR Revolving Loans, the duration
of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable
to LIBOR Revolving Loans, the Borrower has failed to select timely a new
Interest Period to be applicable to LIBOR Revolving Loans or if any Default or
Event of Default then exists, the Borrower shall be deemed to have elected to
convert such LIBOR Revolving Loans into Reference Rate Revolving Loans effective
as of the expiration date of such Interest Period.
(d) During the existence of a Default or Event of Default, the
Borrower may not request a LIBOR Revolving Loan or elect to have a Loan
converted into or
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continued as a LIBOR Revolving Loan.
(e) After giving effect to any conversion or continuation of
Loans, there may not be more than two (2) different Interest Periods in effect.
3.3 Maximum Interest Rate. In no event shall any interest rate
provided for hereunder exceed the maximum rate permissible for corporate
borrowers under applicable law for loans of the type provided for hereunder (the
"Maximum Rate"). If, in any month, any interest rate, absent such limitation,
would have exceeded the Maximum Rate, then the interest rate for that month
shall be the Maximum Rate, and, if in future months, that interest rate would
otherwise be less than the Maximum Rate, then that interest rate shall remain at
the Maximum Rate until such time as the amount of interest paid hereunder equals
the amount of interest which would have been paid if the same had not been
limited by the Maximum Rate. In the event that, upon payment in full of the
Obligations under this Agreement, the total amount of interest paid or accrued
under the terms of this Agreement is less than the total amount of interest
which would, but for this Section 3.3, have been paid or accrued if the interest
rates otherwise set forth in this Agreement had at all times been in effect,
then the Borrower shall, to the extent permitted by applicable law, pay the
Lender, an amount equal to the difference between (a) the lesser of (i) the
amount of interest which would have been charged if the Maximum Rate had, at all
times, been in effect or (ii) the amount of interest which would have accrued
had the interest rates otherwise set forth in this Agreement, at all times, been
in effect and (b) the amount of interest actually paid or accrued under this
Agreement. In the event that a court determines that the Lender has received
interest and other charges hereunder in excess of the Maximum Rate, such excess
shall be deemed received on account of, and shall automatically be applied to
reduce, the Obligations other than interest, in the inverse order of maturity,
and if there are no Obligations outstanding, the Lender shall refund to the
Borrower such excess.
3.4 Closing Fee. The Borrower will pay the Lender on the Closing
Date a closing fee in the amount of $90,000 (the "Closing Fee").
3.5 Letter of Credit Fee. The Borrower agrees to pay to the Lender a
fee (the "Letter of Credit Fee") equal to one and one-half percent (1.5%) per
annum of the undrawn face amount of each Letter of Credit issued for the
Borrower's account at the Borrower's request, plus all out-of-pocket costs, fees
and expenses incurred by the Lender in connection with the application for,
issuance of, or amendment to any Letter of Credit, which costs, fees and
expenses could include a "fronting fee" required to be paid by the Lender to
such issuer for the assumption of the settlement risk in connection with the
issuance of such Letter of Credit. The Letter of Credit Fee shall be payable
monthly in arrears on the first day of each month following any month in which a
Letter of Credit was issued and/or in which a Letter of Credit remains
outstanding. The Letter of Credit Fee shall be computed on the basis of a
360-day year for the actual number of days elapsed.
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4. PAYMENTS AND PREPAYMENTS.
4.1 Revolving Loans. The Borrower shall repay the outstanding
principal balance of the Revolving Loans, plus all accrued but unpaid interest
thereon, upon the termination of this Agreement for any reason. In addition, and
without limiting the generality of the foregoing, the Borrower shall pay to the
Lender, on demand, the amount by which the unpaid principal balance of the
Revolving Loans at any time exceeds the Availability at such time (with
Availability determined for this purpose as if the amount of the Revolving Loans
were zero).
4.2 Place and Form of Payments; Extension of Time. All payments of
principal, interest, premium, and other sums due to the Lender shall be made at
the Lender's address set forth in Section 15.11. Except for Proceeds received
directly by the Lender, all such payments shall be made in immediately available
funds. If any payment of principal, interest, premium, or other sum to be made
hereunder becomes due and payable on a day other than a Business Day, the due
date of such payment shall be extended to the next succeeding Business Day and
interest thereon shall be payable at the applicable interest rate during such
extension.
4.3 Application and Reversal of Payments. The Lender shall determine
in its sole discretion the order and manner in which Proceeds of Collateral and
other payments that the Lender receives are applied to the Revolving Loans,
interest thereon, and the other Obligations, and the Borrower hereby irrevocably
waives the right to direct the application of any payment or Proceeds. The
Lender shall have the continuing and exclusive right to apply and reverse and
reapply any and all such Proceeds and payments to any portion of the
Obligations.
4.4 Indemnity for Returned Payments. IF AFTER RECEIPT OF ANY PAYMENT
WHICH IS APPLIED TO THE PAYMENT OF ALL OR ANY PART OF THE OBLIGATIONS, THE
LENDER IS FOR ANY REASON COMPELLED TO SURRENDER SUCH PAYMENT TO ANY PERSON
BECAUSE SUCH PAYMENT IS INVALIDATED, DECLARED FRAUDULENT, SET ASIDE, DETERMINED
TO BE VOID OR VOIDABLE AS A PREFERENCE, IMPERMISSIBLE SETOFF, OR A DIVERSION OF
TRUST FUNDS, OR FOR ANY OTHER REASON, THEN: THE OBLIGATIONS OR PART THEREOF
INTENDED TO BE SATISFIED SHALL BE REVIVED AND CONTINUE AND THIS AGREEMENT SHALL
CONTINUE IN FULL FORCE AS IF SUCH PAYMENT HAD NOT BEEN RECEIVED BY THE LENDER
AND THE BORROWER SHALL BE LIABLE TO PAY TO THE LENDER AND HEREBY DOES INDEMNIFY
THE LENDER AND HOLD THE LENDER HARMLESS FOR THE AMOUNT OF SUCH PAYMENT
SURRENDERED. The provisions of this Section 4.4 shall be and remain effective
notwithstanding any contrary action which may have been taken by the Lender in
reliance upon such payment, and any such contrary action so taken shall be
without prejudice to the Lender's rights under this Agreement and shall be
deemed to have been conditioned upon such payment having become final and
irrevocable. The provisions of this Section 4.4 shall survive the termination of
this Agreement.
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5. LENDER'S BOOKS AND RECORDS; MONTHLY STATEMENTS. The Borrower agrees
that the Lender's books and records showing the Obligations and the transactions
pursuant to this Agreement and the other Loan Documents shall be admissible in
any action or proceeding arising therefrom, and shall constitute prima facie
proof thereof, irrespective of whether any Obligation is also evidenced by a
promissory note or other instrument. The Lender will provide to the Borrower a
monthly statement of Loans, payments, and other transactions pursuant to this
Agreement. Such statement shall be deemed correct, accurate, and binding on the
Borrower and as an account stated (except for reversals and reapplications of
payments made as provided in Section 4.3 and corrections of errors discovered by
the Lender), unless the Borrower notifies the Lender in writing to the contrary
within thirty (30) days after such statement is rendered. In the event a timely
written notice of objections is given by the Borrower, only the items to which
exception is expressly made will be considered to be disputed by the Borrower.
6. TAXES, YIELD PROTECTION AND ILLEGALITY
6.1 Taxes.
(a) Any and all payments by the Borrower to the Lender under
this Agreement and any other Loan Document shall be made free and clear of, and
without deduction or withholding for any Taxes. In addition, the Borrower shall
pay all Other Taxes.
(b) The Borrower agrees to indemnify and hold harmless the
Lender for the full amount of Taxes or Other Taxes (including any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this Section) paid by
the Lender and any liability (including penalties, interest, additions to tax
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date the Lender makes
written demand therefor.
(c) If the Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to Lender, then:
(i) the sum payable shall be increased as necessary so
that after making all required deductions and withholdings (including deductions
and withholdings applicable to additional sums payable under this Section) the
Lender receives an amount equal to the sum it would have received had no such
deductions or withholdings been made;
(ii) the Borrower shall make such deductions and
withholdings;
(iii) the Borrower shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in accordance with
applicable law; and
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(iv) the Borrower shall also pay to the Lender at the
time interest is paid, all additional amounts which the Lender specifies as
necessary to preserve the after-tax yield the Lender would have received if such
Taxes or Other Taxes had not been imposed.
(d) Within 30 days after the date of any payment by the
Borrower of Taxes or Other Taxes, the Borrower shall furnish the Lender the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Lender.
6.2 Illegality.
(a) If the Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Public Authority has asserted that
it is unlawful, for the Lender or its applicable lending office to make LIBOR
Revolving Loans, then, on notice thereof by the Lender to the Borrower, any
obligation of the Lender to make, convert or continue LIBOR Revolving Loans
shall be suspended until the Lender notifies the Borrower that the circumstances
giving rise to such determination no longer exist.
(b) If the Lender determines that it is unlawful to maintain
any LIBOR Revolving Loan, the Borrower shall, upon its receipt of notice of such
fact and demand from the Lender, prepay in full such LIBOR Revolving Loans then
outstanding, together with interest accrued thereon and amounts required under
Section 6.4, either on the last day of the Interest Period thereof, if the
Lender may lawfully continue to maintain such LIBOR Revolving Loans to such day,
or immediately, if the Lender may not lawfully continue to maintain such LIBOR
Revolving Loans. If the Borrower is required to so prepay any LIBOR Revolving
Loan, then concurrently with such prepayment, the Borrower shall borrow from the
Lender, in the amount of such repayment, a Reference Rate Revolving Loan.
6.3 Increased Costs and Reduction of Return.
(a) If the Lender determines that, due to either (i) the
introduction of or any change in the interpretation of any law or regulation or
(ii) the compliance by the Lender with any guideline or request from any central
bank or other Public Authority (whether or not having the force of law), there
shall be any increase in the cost to the Lender of agreeing to make or making,
funding or maintaining any LIBOR Revolving Loans, then the Borrower shall be
liable for, and shall from time to time, upon demand, pay to the Lender,
additional amounts as are sufficient to compensate the Lender for such increased
costs.
(b) If the Lender shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any Capital Adequacy Regulation by any central bank or other Public Authority
charged with the interpretation or administration thereof, or
-28-
(iv) compliance by the Lender or any corporation controlling the Lender with any
Capital Adequacy Regulation, affects or would affect the amount of capital,
reserves, or special deposits required or expected to be maintained by the
Lender or any corporation controlling the Lender and (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy
and such Lender's desired return on capital) determines that the amount of such
capital, reserves, or special deposits is increased as a consequence of its
loans, credits or obligations under this Agreement, then, upon demand of the
Lender to the Borrower, the Borrower shall pay to the Lender, from time to time
as specified by the Lender, additional amounts sufficient to compensate the
Lender for such increase. Notwithstanding the foregoing, all such amounts shall
be subject to the provisions of Section 3.3.
6.4 Funding Losses. The Borrower shall reimburse the Lender and hold
the Lender harmless from any loss or expense which the Lender may sustain or
incur as a consequence of:
(a) the failure of the Borrower to make on a timely basis any
payment of principal of any LIBOR Revolving Loan;
(b) the failure of the Borrower to borrow, continue or convert
a Loan after the Borrower has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/Continuation;
(c) the prepayment or other payment (including after
acceleration thereof) of any LIBOR Revolving Loan on a day that is not the last
day of the relevant Interest Period; including any such loss or expense arising
from the liquidation or re-employment of funds obtained by it to maintain its
LIBOR Revolving Loans or from fees payable to terminate the deposits from which
such funds were obtained.
6.5 Inability to Determine Rates. If the Lender determines that for
any reason adequate and reasonable means do not exist for determining the LIBOR
Rate for any requested Interest Period with respect to a proposed LIBOR
Revolving Loan, or that the LIBOR Rate for any requested Interest Period with
respect to a proposed LIBOR Revolving Loan does not adequately and fairly
reflect the cost to the Lender of funding such Loan, the Lender will promptly so
notify the Borrower. Thereafter, the obligation of the Lender to make or
maintain LIBOR Revolving Loans hereunder shall be suspended until the Lender
revokes such notice in writing. Upon receipt of such notice, the Borrower may
revoke any Notice of Borrowing or Notice of Conversion/Continuation then
submitted by it. If the Borrower does not timely revoke such Notice, the Lender
shall make, convert or continue the Loans, as proposed by the Borrower, in the
amount specified in the applicable notice submitted by the Borrower, but such
Loans shall be made, converted or continued as Reference Rate Revolving Loans
instead of LIBOR Revolving Loans.
6.6 Survival. The agreements and obligations of the Borrower in this
Section 6 shall survive the payment of all other Obligations.
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7. COLLATERAL.
7.1 Grant of Security Interest.
(a) As security for the Obligations, the Borrower hereby
grants to the Lender a continuing security interest in, lien on, and assignment
of: (i) all Receivables, Inventory, Equipment, Proprietary Rights and Proceeds,
wherever located and whether now existing or hereafter arising or acquired; (ii)
all moneys, securities and other property and the Proceeds thereof, now or
hereafter held or received by, or in transit to, the Lender from or for the
Borrower, whether for safekeeping, pledge, custody, transmission, collection or
otherwise, including, without limitation, all of the Borrower's deposit
accounts, credits, and balances with the Lender and all claims of the Borrower
against the Lender at any time existing; (iii) all of Borrower's deposit
accounts with any financial institutions with which Borrower maintains deposits;
and (iv) all books, records and other Property relating to or referring to any
of the foregoing, including, without limitation, all books, records, ledger
cards, data processing records, computer software and other property and general
intangibles at any time evidencing or relating to the Receivables, Inventory,
Equipment, Proprietary Rights, Proceeds, and other property referred to above
(all of the foregoing, and all other property in which the Lender may at any
time be granted a Lien, being herein collectively referred to as the
"Collateral"). The Lender shall have all of the rights of a secured party with
respect to the Collateral under the UCC and other applicable laws.
(b) All Obligations shall constitute a single loan secured by
the Collateral. The Lender may, in its sole discretion, (i) exchange, waive, or
release any of the Collateral, (ii) apply Collateral and direct the order or
manner of sale thereof as the Lender may determine, and (iii) settle,
compromise, collect, or otherwise liquidate any Collateral in any manner, all
without affecting the Obligations or the Lender's right to take any other action
with respect to any other Collateral.
7.2 Perfection and Protection of Security Interest. The Borrower
shall, at its expense, perform all steps requested by the Lender at any time to
perfect, maintain, protect, and enforce the Security Interest including, without
limitation: (a) executing and recording of the Patent and Trademark Assignment
and executing and filing financing or continuation statements, and amendments
thereof, in form and substance satisfactory to the Lender; (b) delivering to the
Lender the original certificates of title for motor vehicles with the Security
Interest properly endorsed thereon; (c) delivering to the Lender the originals
of all instruments, documents, and chattel paper, and all other Collateral of
which the Lender determines it should have physical possession in order to
perfect and protect the Security Interest therein, duly endorsed or assigned to
the Lender without restriction; (d) delivering to the Lender warehouse receipts
covering any portion of the Collateral located in warehouses and for which
warehouse receipts are issued; (e) transferring Inventory to warehouses
designated by the Lender; (f) placing notations on the Borrower's books of
account to disclose the Security Interest; (g) executing and delivering to the
Lender a security agreement relating to the Reversions in form and substance
satisfactory to the Lender; (h) delivering to the Lender all letters of credit
on which the Borrower
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is named beneficiary; and (i) taking such other steps as are deemed necessary by
the Lender to maintain the Security Interest. To the extent permitted by
applicable law, the Lender may file, without the Borrower's signature, one or
more financing statements disclosing the Security Interest. The Borrower agrees
that a carbon, photographic, photostatic, or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement. If
any Collateral is at any time in the possession or control of any warehouseman,
bailee or any of the Borrower's agents or processors, then the Borrower shall
notify the Lender thereof and shall notify such Person of the Security Interest
in such Collateral and, upon the Lender's request, instruct such Person to hold
all such Collateral for the Lender's account subject to the Lender's
instructions. If at any time any Collateral is located on any Premises that are
not owned by the Borrower, then the Borrower shall obtain written waivers, in
form and substance satisfactory to the Lender, of all present and future Liens
to which the owner or lessor or any mortgagee of such Premises may be entitled
to assert against the Collateral. From time to time, the Borrower shall, upon
Lender's request, execute and deliver confirmatory written instruments pledging
to the Lender the Collateral, but the Borrower's failure to do so shall not
affect or limit the Security Interest or the Lender's other rights in and to the
Collateral. So long as this Agreement is in effect and until all Obligations
have been fully satisfied in accordance with the terms hereof, the Security
Interest shall continue in full force and effect in all Collateral (whether or
not deemed eligible for the purpose of calculating the Availability or as the
basis for any advance, loan, extension of credit, or other financial
accommodation).
7.3 Location of Collateral. The Borrower represents and warrants to
the Lender that: (a) Schedule 7.3 hereto is a correct and complete list of the
Borrower's chief executive office, the location of its books and records, the
locations of the Collateral, and the locations of all of its other places of
business and (b) Schedule 7.3 correctly identifies any of such facilities and
locations that are not owned by the Borrower and sets forth the names of the
owners and lessors or sublessors of, and, to the best of the Borrower's
knowledge, the holders of any mortgages on, such facilities and locations. The
Borrower covenants and agrees that it will not maintain any Collateral at any
location other than those listed on Schedule 7.3, and it will not otherwise
change or add to any of such locations, unless it gives the Lender at least 30
days prior written notice thereof and executes any and all financing statements
and other documents that the Lender requests in connection therewith.
7.4 Title to, Liens on, and Sale and Use of Collateral. The Borrower
represents and warrants to the Lender that: (a) all Collateral is and will
continue to be owned by the Borrower free and clear of all Liens whatsoever,
except for the Security Interest and other Permitted Liens; (b) the Security
Interest will not be subject to any prior Lien except for the Liens described in
(b), (c), (e), (f), (h) and (i) of the definition of Permitted Liens; (c) the
Borrower will use, store, and maintain the Collateral with all reasonable care
and will use the Collateral for lawful purposes only; and (d) the Borrower will
not, without the Lender's prior written approval, sell, lease, or dispose of or
permit the sale, lease or disposition of the Collateral or any portion thereof,
except for sales of Inventory in the ordinary course of business and as
permitted by Section 7.12. The inclusion of Proceeds in the Collateral shall not
be deemed the
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Lender's consent to any sale or other disposition of the Collateral except as
expressly permitted herein.
7.5 Appraisals. Whenever a Default or Event of Default exists, and
at such other times as the Lender requests (not more than once prior to the
Stated Termination Date, unless there is an Event of Default or an adverse audit
finding in the judgment of Lender, reasonably exercised), the Borrower shall, at
its expense and upon the Lender's request, provide the Lender with appraisals or
updates thereof (with such scope and detail as the Lender shall require) of any
or all of the Collateral from an appraiser acceptable to the Lender.
7.6 Access and Examination. The Lender may at all reasonable times
have access to, examine, audit, make extracts from and inspect the Borrower's
records, files, and books of account and the Collateral and may discuss the
Borrower's affairs with the Borrower's officers and management. The Borrower
will deliver to the Lender any instrument necessary for the Lender to obtain
records from any service bureau maintaining records for the Borrower. The Lender
may, at any time when an Event of Default exists and at the Borrower's expense,
make copies of all of the Borrower's books and records, or require the Borrower
to deliver such copies to the Lender. The Lender may, without expense to the
Lender, use such of the Borrower's personnel, supplies, and Premises as may be
reasonably necessary for maintaining or enforcing the Security Interest. The
Lender shall have the right, at any time, in the Lender's name or in the name of
a nominee of the Lender, to verify the validity, amount or any other matter
relating to the Accounts, by mail, telephone, or otherwise.
7.7 Insurance. The Borrower shall insure the Collateral against loss
or damage by fire with extended coverage, theft, burglary, pilferage, loss in
transit, and such other hazards as the Lender shall specify, in amounts, under
policies and by insurers acceptable to the Lender. Upon Lender's request,
Borrower shall also maintain flood insurance for any Equipment and Inventory
located in an area designated as "flood prone" or a "flood risk area,"
(hereinafter "SFHA") as defined by the Flood Disaster Protection Act of 1973, in
an amount to be reasonably determined by the Lender, and shall comply with the
additional requirements of the National Flood Insurance Program as set forth
therein. The Borrower shall cause the Lender to be named in each such policy as
secured party or mortgagee and loss payee or additional insured, in a manner
acceptable to the Lender. Each policy of insurance shall contain a clause or
endorsement requiring the insurer to give not less than thirty (30) days prior
written notice to the Lender in the event of cancellation of the policy for any
reason whatsoever and a clause or endorsement stating that the interest of the
Lender shall not be impaired or invalidated by any act or neglect of the
Borrower or the owner of any premises where Collateral is located nor by the
occupation of such premises for purposes more hazardous than are permitted by
such policy. The Borrower shall pay, upon Lender's request, all fees incurred by
the Lender to determine whether any of the Collateral is located in a SFHA. The
Borrower shall also pay all premiums for such insurance when due, and shall
deliver to the Lender certificates of insurance and, if requested, photocopies
of the policies. If the Borrower fails to pay such fees or to procure such
insurance or the premiums therefor when due, the Lender may (but shall not be
required to) do so and charge the
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costs thereof to the Borrower's loan account as a Revolving Loan. The Borrower
shall promptly notify the Lender of any loss, damage or destruction to the
Collateral or arising from its use, whether or not covered by insurance. The
Lender is hereby authorized to collect all insurance proceeds directly. After
deducting from such proceeds the expenses, if any, incurred by Lender in the
collection or handling thereof, the Lender may apply such proceeds to the
reduction of the Obligations in such order as Lender determines, or at the
Lender's option may permit or require the Borrower to use such money, or any
part thereof, to replace, repair, restore or rebuild the Collateral in a
diligent and expeditious manner with materials and workmanship of substantially
the same quality as existed before the loss, damage or destruction.
7.8 Collateral Reporting. The Borrower will provide the Lender with
the following documents at the following times in form satisfactory to the
Lender: (a) on a daily basis, a schedule of Accounts created since the last such
schedule, a schedule of collections of accounts receivable and a schedule of
credit memos and reports; (b) upon request, copies of invoices, credit memos,
shipping and delivery documents; (c) monthly agings of accounts receivable no
later than the 10th day of the following month; (d) monthly, a report of the
inventory balance (by location, including Inventory turnover analysis by SKU and
a reconciliation) based on the perpetual inventory reports by category, no later
than the 15th day of the following month; (e) monthly agings of accounts payable
no later than the 10th day of the following month; (f) upon request, copies of
purchase orders, invoices, and delivery documents for Inventory and Equipment
acquired by the Borrower; (g) such other reports as to the Collateral as the
Lender shall request from time to time; and (h) certificates of an officer of
the Borrower certifying as to the foregoing. If any of the Borrower's records or
reports of the Collateral are prepared by an accounting service or other agent,
the Borrower hereby authorizes such service or agent to deliver such records,
reports, and related documents to the Lender.
7.9 Accounts.
(a) The Borrower hereby represents and warrants to the Lender
and agrees with the Lender that: (i) each existing Account represents, and each
future Account will represent, a bona fide sale or lease and delivery of goods
by the Borrower, or rendition of services by the Borrower, in the ordinary
course of the Borrower's business; (ii) each existing Account is, and each
future Account will be, for a liquidated amount payable by the Account Debtor
thereon on the terms set forth in the invoice therefor or in the schedule
thereof delivered to the Lender, without offset, deduction, defense, or
counterclaim; (iii) no payment will be received with respect to any Account, and
no credit, discount, or extension, or agreement therefor will be granted on any
Account, except as reported to the Lender in accordance with this Agreement;
(iv) each copy of an invoice delivered to the Lender by the Borrower will be a
genuine copy of the original invoice sent to the Account Debtor named therein;
and (v) all goods described in each invoice will have been delivered to the
Account Debtor and all services of the Borrower described in each invoice will
have been performed.
(b) The Borrower shall not redate any invoice or sale or make
sales on extended dating beyond that customary in the Borrower's business or
extend or modify any
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Account. If the Borrower becomes aware of any matter affecting any Account,
including information regarding the Account Debtor's creditworthiness, the
Borrower will promptly so advise the Lender.
(c) The Borrower shall not accept any note or other instrument
in excess of $50,000 per occurrence or $100,000 in the aggregate (except a check
or other instrument for the immediate payment of money) with respect to any
Account without the Lender's prior written consent, which consent shall be in
the reasonable credit judgment of Lender. If the Lender consents to the
acceptance of any such note or other instrument, it shall be considered as
evidence of the Account and not payment thereof, and the Borrower will promptly
deliver such note or instrument to the Lender appropriately endorsed. Without
limiting the foregoing, prior to the Closing Date the Borrower shall deliver to
the Lender all notes receivable and similar instruments, appropriately endorsed,
to be held by the Lender as additional Collateral hereunder. Regardless of the
form of presentment, demand, notice of dishonor, protest, and notice of protest
with respect thereto, the Borrower will remain liable thereon until such note or
instrument is paid in full.
(d) The Borrower shall notify the Lender promptly of all
disputes and claims with Account Debtors and settle or adjust them at no expense
to the Lender, but no discount, credit or allowance shall be granted to any
Account Debtor without the Lender's consent, except for discounts, credits and
allowances made or given in the ordinary course of the Borrower's business when
no Event of Default exists hereunder. Upon request, the Borrower shall send the
Lender a copy of each credit memorandum . The Lender may at all times when an
Event of Default exists hereunder settle or adjust disputes and claims directly
with customers or Account Debtors for amounts and upon terms which the Lender
considers advisable and, in all cases, the Lender will credit the Borrower's
loan account with only the net amounts received by the Lender in payment of any
Accounts.
(e) If an Account Debtor returns any Inventory to the Borrower
when no Event of Default exists, then the Borrower shall promptly determine the
reason for such return and shall issue a credit memorandum to the Account Debtor
in the appropriate amount. Upon request, the Borrower shall immediately report
to the Lender any return. Each such report shall indicate the reasons for the
returns and the locations and condition of the returned Inventory. In the event
any Account Debtor returns Inventory to the Borrower when an Event of Default
exists, the Borrower shall: (i) hold the returned Inventory in trust for the
Lender; (ii) segregate all returned Inventory from all of its other Property;
(iii) dispose of the returned Inventory solely according to the Lender's written
instructions; and (iv) not issue any credits or allowances with respect thereto
without the Lender's prior written consent. All returned Inventory shall remain
subject to the Security Interest. Whenever any Inventory is returned, the
related Account shall be deemed ineligible, and Availability shall be adjusted
accordingly.
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7.10 Collection of Accounts; Payments.
(a) Until the Lender notifies the Borrower to the contrary,
the Borrower shall make collection of all Accounts and other Collateral for the
Lender, shall receive all payments as the Lender's trustee, and shall
immediately deliver all payments to the Lender in their original form duly
endorsed in blank or deposit them into a Payment Account established at the
Lender's request, as the Lender may direct. Prior to the Closing Date, the
Borrower shall establish a lock-box service for collections of Accounts at a
bank mutually acceptable to the Lender and the Borrower and pursuant to
documentation satisfactory to the Lender. The Borrower shall instruct all
Account Debtors to make all payments directly to the address established for
such service. If, notwithstanding such instructions, the Borrower receives any
Proceeds of Accounts, it shall receive such payments as the Lender's trustee,
and shall immediately deliver such payments to the Lender in their original form
duly endorsed in blank or deposit them into a Payment Account, as the Lender may
direct. All collections received in any such lock-box or Payment Account or
directly by the Borrower or the Lender, and all funds in any Payment Account or
other account to which such collections are deposited, shall be the sole
property of the Lender and subject to the Lender's sole control. The Lender or
the Lender's designee may, at any time, notify obligors that the Accounts have
been assigned to the Lender and of the Security Interest therein, and may
collect them directly and charge the collection costs and expenses to the
Borrower's loan account as a Revolving Loan. At the Lender's request, the
Borrower shall execute and deliver to the Lender such documents as the Lender
shall require to grant the Lender access to any post office box in which
collections of Accounts are received.
(b) If sales of Inventory are made for cash, the Borrower
shall immediately deliver to the Lender the identical checks, cash, or other
forms of payment which the Borrower receives.
(c) All payments received by the Lender on account of Accounts
or as Proceeds of other Collateral will be the Lender's sole property and will
be credited to the Borrower's loan account (conditional upon final collection)
after allowing one (1) Business Day for collection.
(d) In the event the Borrower repays all of the Obligations
upon the termination of this Agreement, other than through the Lender's receipt
of payments on account of Accounts or Proceeds of other Collateral, such payment
will be credited (conditional upon final collection) to the Borrower's loan
account one (1) Business Day after the Lender's receipt thereof.
7.11 Inventory. The Borrower represents and warrants to the Lender
that all of the Inventory is and will be held for sale or lease, or to be
furnished in connection with the rendition of services in the ordinary course of
the Borrower's business and is and will be fit for such purposes. The Borrower
will keep the Inventory in good and marketable condition, at its own expense.
The Borrower will not, without prior written notice to the Lender, acquire or
accept any Inventory on consignment or approval. The Borrower agrees that all
Inventory will
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be produced and sold in accordance with the Federal Fair Labor Standards Act of
1938, as amended, and all rules, regulations, and orders thereunder, and if the
Lender determines that any Inventory of the Borrower was produced or sold not in
accordance with such Act, the Lender may (in addition to its other rights and
remedies) establish reserves against Availability equal to the value of such
Inventory, as determined by the Lender. The Borrower will maintain a perpetual
inventory reporting system at all times. The Borrower will conduct a physical
count of the Inventory at least once per Fiscal Year, and at such other times as
the Lender requests, and shall promptly supply the Lender with a copy of such
count accompanied by a report of the value of such Inventory (valued at the
lower of cost, on an average weighted cost basis, or market value). The Borrower
will not, without the Lender's prior written consent, sell any Inventory on a
xxxx-and-hold, guaranteed sale, sale and return, sale on approval, consignment,
or other repurchase or return basis.
7.12 Equipment. The Borrower represents and warrants to the Lender
that all of the Equipment is and will be used or held for use in the Borrower's
business and is and will be fit for such purposes. The Borrower shall keep and
maintain the Equipment in good operating condition and repair (ordinary wear and
tear excepted) and shall make all necessary replacements thereof. The Borrower
shall promptly inform the Lender of any material additions to or deletions from
the Equipment. The Borrower shall not permit any Equipment to become a fixture
to real property or an accession to other personal property, unless the Lender
has a valid, perfected, and first priority Security Interest in such real or
personal property. The Borrower will not, without the Lender's prior written
consent, alter or remove any identifying symbol or number on the Equipment. The
Borrower shall not, without the Lender's prior written consent, sell, lease as a
lessor, or otherwise dispose of any of the Equipment; provided, however, that
the Borrower may dispose of obsolete or unusable Equipment having an orderly
liquidation value no greater than $10,000 individually and $50,000 in the
aggregate in any Fiscal Year, without the Lender's consent, subject to the
conditions set forth below. In the event any of the Equipment is sold,
transferred or otherwise disposed of with the Lender's prior written consent or
as otherwise permitted hereby and: (a) such sale, transfer or disposition is
effected without replacement of such Equipment, or such Equipment is replaced by
Equipment leased by the Borrower, or by Equipment purchased by the Borrower
subject to a lien or other right constituting a Permitted Lien, then the
Borrower shall deliver all of the cash proceeds of any such sale, transfer or
disposition to the Lender, which proceeds shall be applied to the repayment of
the Obligations; or (b) such sale, transfer or disposition is made in connection
with the purchase by the Borrower of replacement Equipment (other than subject
to a Permitted Lien), then the Borrower shall use the proceeds of such sale,
transfer or disposition to finance the purchase by the Borrower of replacement
Equipment and shall deliver to the Lender written evidence of the use of the
proceeds for such purchase. All replacement Equipment purchased by the Borrower
shall be free and clear of all liens, claims and encumbrances, except for the
Security Interest and other Permitted Liens.
7.13 Documents, Instruments, and Chattel Paper. The Borrower
represents and warrants to the Lender that: (a) all documents, instruments, and
chattel paper describing,
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evidencing, or constituting Collateral, and all signatures and endorsements
thereon, are and will be complete, valid, and genuine; and (b) all goods
evidenced by such documents, instruments, and chattel paper are and will be
owned by the Borrower free and clear of all Liens other than Permitted Liens.
7.14 Right to Cure. The Lender may, in its sole discretion and at
any time, pay any amount or do any act required of the Borrower hereunder to
preserve, protect, maintain or enforce the Obligations, the Collateral or the
Security Interest, and which the Borrower fails to pay or do, including, without
limitation, payment of any judgment against the Borrower, any insurance premium,
any warehouse charge, any finishing or processing charge, any landlord's claim,
and any other Lien upon or with respect to the Collateral. All payments that the
Lender makes under this Section 7.14 and all out-of-pocket costs and expenses
that the Lender pays or incurs in connection with any action taken by it
hereunder shall be charged to the Borrower's loan account as a Revolving Loan.
Any payment made or other action taken by the Lender under this Section 7.14
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed thereafter as herein provided.
7.15 Power of Attorney. The Borrower hereby appoints the Lender and
the Lender's designees as the Borrower's attorney, with power: (a) to endorse
the Borrower's name on any checks, notes, acceptances, money orders, or other
forms of payment or security that come into the Lender's possession; (b) to sign
the Borrower's name on any invoice, xxxx of lading, or other document of title
relating to any Collateral, on drafts against customers, on assignments of
Accounts, on notices of assignment, financing statements and other public
records, on verifications of Accounts and on notices to Account Debtors and to
file any such financing statements by electronic means with or without a
signature as authorized or required by applicable law or filing procedure; (c)
to notify the post office authorities, when an Event of Default exists, to
change the address for delivery of the Borrower's mail to an address designated
by the Lender and to receive, open and dispose of all mail addressed to the
Borrower; (d) to send requests for verification of Accounts to Account Debtors;
and (e) to do all things necessary to carry out this Agreement. The Borrower
ratifies and approves all acts of such attorney. Neither the Lender nor the
attorney will be liable for any acts or omissions or for any error of judgment
or mistake of fact or law. This power, being coupled with an interest, is
irrevocable until this Agreement has been terminated and the Obligations have
been fully satisfied.
7.16 Lender's Rights, Duties, and Liabilities. The Borrower assumes
all responsibility and liability arising from or relating to the use, sale, or
other disposition of the Collateral. The Obligations shall not be affected by
any failure of the Lender to take any steps to perfect the Security Interest or
to collect or realize upon the Collateral, nor shall loss of or damage to the
Collateral release the Borrower from any of the Obligations. The Lender may (but
shall not be required to), without notice to or consent from the Borrower, xxx
upon or otherwise collect, extend the time for payment of, modify or amend the
terms of, compromise or settle for cash, credit, or otherwise upon any terms,
grant other indulgences, extensions, renewals, compositions, or releases, and
take or omit to take any other action with respect to the Collateral,
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any security therefor, any agreement relating thereto, any insurance applicable
thereto, or any Person liable directly or indirectly in connection with any of
the foregoing, without discharging or otherwise affecting the liability of the
Borrower for the Obligations or under this Agreement or any other agreement now
or hereafter existing between the Lender and the Borrower.
8. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.
8.1 Books and Records. The Borrower shall maintain, at all times,
correct and complete books, records and accounts in which complete, correct and
timely entries are made of its transactions in accordance with GAAP consistent
with those applied in the preparation of the Financial Statements. The Borrower
shall, by means of appropriate entries, reflect in such books, records and
accounts and in all Financial Statements proper liabilities and reserves for all
taxes and proper provision for depreciation and amortization of Property and bad
debts, all in accordance with GAAP. The Borrower shall maintain at all times
books and records pertaining to the Collateral in such detail, form, and scope
as the Lender shall reasonably require, including without limitation records of:
(a) all payments received and all credits and extensions granted with respect to
the Accounts; (b) the return, rejection, repossession, stoppage in transit,
loss, damage, or destruction of any Inventory; and (c) all other dealings
affecting the Collateral.
8.2 Financial Information. The Borrower shall promptly furnish to
the Lender or its agents all such financial information as the Lender shall
reasonably request, and notify its auditors and accountants that the Lender is
authorized to obtain such information directly from them. Without limiting the
foregoing, the Borrower and its Subsidiaries will furnish to the Lender, in such
detail as the Lender shall request, the following:
(a) As soon as available, but in any event not later than 90
days after the close of each Fiscal Year, consolidated and consolidating audited
balance sheets, a report of Capital Expenditures, and statements of income and
expense, retained earnings, cash flow and changes in financial position and
stockholders equity for the Borrower and its consolidated Subsidiaries, if any,
for such Fiscal Year, and the accompanying notes thereto, setting forth in each
case in comparative form figures for the previous Fiscal Year, all in reasonable
detail, fairly presenting the financial position and the results of operations
of the Borrower and its consolidated Subsidiaries, if any, as at the date
thereof and for the Fiscal Year then ended, and prepared in accordance with
GAAP. Such statements shall be examined in accordance with generally accepted
auditing standards and accompanied by a report thereon unqualified as to scope
by independent certified public accountants selected by the Borrower and
reasonably satisfactory to the Lender.
(b) As soon as available, but in any event not later than 45
days after the close of each fiscal quarter other than the fourth quarter of a
Fiscal Year, consolidated and consolidating unaudited balance sheets of the
Borrower and its consolidated Subsidiaries, if any, as at the end of such
quarter, a report of Capital Expenditures, and consolidated and consolidating
unaudited statements of income and expense, cash flow and changes in financial
position for the Borrower and its consolidated Subsidiaries, if any, for such
quarter and for the
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period from the beginning of the Fiscal Year to the end of such quarter,
together with the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and results of operation of the Borrower and
its consolidated Subsidiaries, if any, as at the date thereof and for such
periods, prepared in accordance with GAAP consistent with the audited Financial
Statements required pursuant to Section 8.2(a). Such statements shall be
certified to be correct and complete by the chief financial or accounting
officer of the Borrower, subject to normal year-end adjustments.
(c) As soon as available, but in any event not later than 30
days after the end of each month, consolidated and consolidating unaudited
balance sheets of the Borrower and its consolidated Subsidiaries, if any, as at
the end of such month, a report of Capital Expenditures, and consolidated and
consolidating unaudited statements of income and expenses and cash flow for the
Borrower and its consolidated Subsidiaries, if any, for such month and for the
period from the beginning of the Fiscal Year to the end of such month, all in
reasonable detail, fairly presenting the financial position and results of
operation of the Borrower and its consolidated Subsidiaries, if any, as at the
date thereof and for such periods, and prepared in accordance with GAAP
consistent with the audited Financial Statements required pursuant to Section
8.2(a). Such statements shall be certified to be correct and complete by the
chief financial or accounting officer of the Borrower, subject to normal
year-end adjustments.
(d) With each of the audited Financial Statements delivered
pursuant to Section 8.2(a), a certificate of the independent certified public
accountants that examined such statements to the effect that they have reviewed
and are familiar with the Loan Documents and that, in examining such Financial
Statements, they did not become aware of any fact or condition which then
constituted a Default or Event of Default, except for those, if any, described
in reasonable detail in such certificate.
(e) With each of the annual audited and quarterly unaudited
Financial Statements delivered pursuant to Sections 8.2(a) and 8.2(b), a
certificate of the chief executive or chief financial officer of the Borrower
(i) setting forth in reasonable detail the calculations required to establish
that the Borrower was in compliance with its covenants set forth in Sections
10.20 through 10.24 during the period covered in such Financial Statements, and
(ii) stating that, except as explained in reasonable detail in such certificate,
(A) all of the representations and warranties of the Borrower contained in this
Agreement and the other Loan Documents are correct and complete as at the date
of such certificate as if made at such time, (B) no Default or Event of Default
then exists or existed during the period covered by such Financial Statements
and (iii) describing and analyzing in reasonable detail all material trends,
changes and developments in such Financial Statements. If such certificate
discloses that a representation or warranty is not correct or complete, or that
a covenant has not been complied with, or that a Default or Event of Default
existed or exists, such certificate shall set forth what action the Borrower has
taken or proposes to take with respect thereto.
(f) No sooner than 90 days and no later than 30 days prior to
the beginning of each Fiscal Year, consolidated and consolidating projected
balance sheets,
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statements of income and expense, and statements of cash flow for the Borrower
and its Subsidiaries, if any, as at the end of and for each month of such Fiscal
Year.
(g) Promptly after their preparation, copies of any and all
proxy statements, financial statements, and reports which the Borrower makes
available to its stockholders and copies of any regular, periodic and special
reports or registration statements (including without limitation Forms 10-K and
10-Q) which the Borrower files with the Securities and Exchange Commission or
any governmental authority which may be substituted therefor, or any national
securities exchange.
(h) Promptly after filing with the PBGC, DOL, or IRS, a copy
of each annual report or other filing or notice filed with respect to each Plan
of the Borrower or any ERISA Affiliate.
(i) Such additional information as the Lender may from time to
time reasonably request regarding the financial and business affairs of the
Borrower or a Subsidiary, if any, including, without limitation, projections of
future operations on both a consolidated and consolidating basis.
8.3 Notices to Lender. The Borrower shall notify the Lender in
writing of the following matters at the following times:
(a) Immediately after becoming aware of the existence of any
Default or Event of Default.
(b) Immediately after becoming aware that the holder of any
capital stock of the Borrower or of any Debt has given notice or taken any
action with respect to a claimed default.
(c) Immediately after becoming aware of any material adverse
change in the Borrower's Property, business, operations, or condition (financial
or otherwise).
(d) Immediately after becoming aware of any pending or
threatened action, suit, proceeding, or counterclaim by any Person, or any
pending or threatened investigation by a Public Authority, which may materially
and adversely affect the Collateral, the repayment of the Obligations, the
Lender's rights under the Loan Documents, or the Borrower's Property, business,
operations, or condition (financial or otherwise).
(e) Immediately after becoming aware of any pending or
threatened strike, work stoppage, material unfair labor practice claim, or other
material labor dispute affecting the Borrower or any of its Subsidiaries, if
any.
(f) Immediately after becoming aware of any violation of any
law, statute, regulation, or ordinance of a Public Authority applicable to
Borrower, any Subsidiary, if
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any, or their respective Properties which may materially and adversely affect
the Collateral, the repayment of the Obligations, the Lender's rights under the
Loan Documents, or the Borrower's Property, business, operations, or condition
(financial or otherwise).
(g) Immediately after becoming aware of any violation by the
Borrower of Environmental Laws or immediately upon receipt of any notice that a
Public Authority has asserted that the Borrower is not in compliance with
Environmental Laws or that its compliance is being investigated.
(h) Thirty (30) days prior to the Borrower changing its name
or the address of its chief executive office.
(i) Immediately after becoming aware of any ERISA Event,
accompanied by any materials required to be filed with the PBGC with respect
thereto; immediately after the Borrower's receipt of any notice concerning the
imposition of any withdrawal liability under Section 4042 of ERISA with respect
to a Plan; immediately upon the establishment of any Pension Plan not existing
at the Closing Date or the commencement of contributions by the Borrower to any
Pension Plan to which the Borrower was not contributing at the Closing Date; and
immediately upon becoming aware of any other event or condition regarding a Plan
or the Borrower's or an ERISA Affiliate's compliance with ERISA, which may
materially and adversely affect the Borrower's Property, business, operation, or
condition (financial or otherwise).
Each notice given under this Section 8.3 shall describe the subject matter
thereof in reasonable detail and shall set forth the action that the Borrower
has taken or proposes to take with respect thereto.
9. GENERAL WARRANTIES AND REPRESENTATIONS.
The Borrower continuously warrants and represents to the Lender, at
all times during the term of this Agreement and until all Obligations have been
satisfied, that, except as hereafter disclosed to and accepted by the Lender in
writing:
9.1 Authorization, Validity, and Enforceability of this Agreement
and the Loan Documents. The Borrower has the corporate power and authority to
execute, deliver and perform this Agreement and the other Loan Documents, to
incur the Obligations, and to grant the Security Interest. The Borrower has
taken all necessary corporate action (including, without limitation, obtaining
approval of its stockholders, if required) to authorize its execution, delivery,
and performance of this Agreement and the other Loan Documents. No consent,
approval, or authorization of, or declaration or filing with, any Public
Authority, and no consent of any other Person, is required in connection with
the Borrower's execution, delivery, and performance of this Agreement and the
other Loan Documents, except for those already duly obtained. This Agreement and
the other Loan Documents have been duly executed and delivered by the Borrower
and constitute the legal, valid and binding obligations of the Borrower,
enforceable
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against the Borrower in accordance with their respective terms without defense,
setoff, or counterclaim. The Borrower's execution, delivery, and performance of
this Agreement and the other Loan Documents do not and will not conflict with,
or constitute a violation or breach of, or constitute a default under, or result
in the creation or imposition of any Lien upon the Property of the Borrower or
any of its Subsidiaries (except as contemplated by this Agreement and the other
Loan Documents) by reason of the terms of (a) any mortgage, lease, agreement, or
instrument to which the Borrower or any of its Subsidiaries is a party or which
is binding upon it, (b) any judgment, law, statute, rule or governmental
regulation applicable to the Borrower or any of its Subsidiaries, or (c) the
Certificate or Articles of Incorporation or Bylaws of the Borrower or any of its
Subsidiaries.
9.2 Validity and Priority of Security Interest. The provisions of
this Agreement and the other Loan Documents create legal and valid Liens on all
the Collateral in the Lender's favor, and when all proper filings, recordings,
and other actions necessary to perfect such Liens have been made or taken, such
Liens will constitute perfected and continuing Liens on all the Collateral,
having priority over all other Liens on the Collateral except for the Permitted
Liens identified in Section 7.4 and enforceable against the Borrower and all
third parties.
9.3 Organization and Qualification. The Borrower: (a) is duly
incorporated and organized and validly existing in good standing under the laws
of the State of Delaware; (b) is qualified to do business as a foreign
corporation and is in good standing in the States of Florida (under the name
Cellular Telecom Corporation) and California, which are the only states in which
qualification is necessary in order for it to own or lease its Property and
conduct its business; and (c) has all requisite power and authority to conduct
its business and to own its Property.
9.4 Corporate Name; Prior Transactions. The Borrower has not, during
the past five years, been known by or used any other corporate or fictitious
name, or been a party to any merger or consolidation, or acquired all or
substantially all of the assets of any Person, or acquired any of its Property
out of the ordinary course of business, except as set forth on Schedule 9.4.
9.5 Subsidiaries and Affiliates. Schedule 9.5 is a correct and
complete list of the name and relationship to the Borrower of each and all of
the Borrower's Subsidiaries and other Affiliates. Each Subsidiary is (a) duly
incorporated and organized and validly existing in good standing under the laws
of its state of incorporation set forth on Schedule 9.5, and (b) qualified to do
business as a foreign corporation and in good standing in the states set forth
opposite its name on Schedule 9.5, which are the only states in which such
qualification is necessary in order for it to own or lease its Property and
conduct its business.
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9.6 Financial Statements and Projections.
(a) The Borrower has delivered to the Lender the audited
balance sheet and related statements of income, retained earnings, changes in
financial position, and changes in stockholders equity for the Borrower as of
December 31, 1996 and for the Fiscal Year then ended, accompanied by the report
thereon of the Borrower's independent certified public accountants, BDO Xxxxxxx.
The Borrower has also delivered to the Lender the unaudited balance sheet and
related statements of income and changes in financial position for the Borrower,
as at October 31, 1997 and for the 10 months then ended. Such financial
statements are attached hereto as Exhibit X-x. All such financial statements
have been prepared in accordance with GAAP and present accurately and fairly the
Borrower's financial position as at the dates thereof and its results of
operations for the periods then ended.
(b) The Latest Projections represent the Borrower's best
estimate of the Borrower's future financial performance for the periods set
forth therein. The Latest Projections have been prepared on the basis of the
assumptions set forth therein, which the Borrower believes are fair and
reasonable in light of current and reasonably foreseeable business conditions.
9.7 Capitalization. The Borrower's authorized capital stock consists
of 15,000,000 shares of common stock, par value $0.01 per share, of which
4,415,902 shares are validly issued and outstanding, fully paid and
nonassessable, and of which 40% is owned beneficially and of record by Xxx Xxxxx
with the balance of such shares owned publicly with no other known ownership
concentration in excess of 10%.
9.8 Solvency. The Borrower is Solvent prior to and after giving
effect to the making of each Revolving Loan.
9.9 Debt. The Borrower has no Debt, except (a) the Obligations, (b)
Debt set forth in the most recent Financial Statements delivered to the Lender,
or the notes thereto, (c) trade payables and other contractual obligations
arising in the ordinary course of Borrower's business since the date of such
Financial Statements, and (d) Debt incurred since the date of such Financial
Statements to finance Capital Expenditures permitted hereby.
9.10 Distributions. Since January 1, 1997, no Distribution has been
declared, paid, or made upon or in respect of any capital stock or other
securities of the Borrower except as set forth on Schedule 9.10.
9.11 Title to Property. Except for Property which the Borrower
leases, the Borrower has good and marketable title in fee simple to the Premises
and good, indefeasible, and merchantable title to all of its other Property
including, without limitation, the assets reflected on the most recent Financial
Statements delivered to the Lender, except as disposed of since the date thereof
in the ordinary course of Borrower's business.
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9.12 Adequate Assets. The Borrower possesses adequate assets for the
conduct of its business.
9.13 Real Property; Leases. Schedule 9.13 is a correct and complete
list of all real property owned by the Borrower, all leases and subleases of
real or personal property by the Borrower as lessee or sublessee, and all leases
and subleases of real or personal property by the Borrower as lessor or
sublessor. Each of such leases and subleases is valid and enforceable in
accordance with its terms and is in full force and effect and no default by any
party to any such lease or sublease exists.
9.14 Proprietary Rights. Schedule 9.14 is a correct and complete
list of all the Borrower's Proprietary Rights. None of the Proprietary Rights is
subject to any licensing agreement or similar arrangement except as set forth on
Schedule 9.14. None of the Proprietary Rights infringes on or conflicts with any
other Person's Property and no other Person's Property infringes on or conflicts
with the Proprietary Rights. The Proprietary Rights described on Schedule 9.14
constitute all of the Property of such type necessary to the current and
anticipated future conduct of the Borrower's business.
9.15 Trade Names and Terms of Sale. All trade names or styles under
which the Borrower will sell Inventory or create Accounts, or to which
instruments in payment of Accounts may be made payable, are listed on Schedule
9.15.
9.16 Litigation. Except as set forth on Schedule 9.16, there is no
pending or, to the best of the Borrower's knowledge, threatened action, suit,
proceeding, or counterclaim by any Person, or investigation by any Public
Authority, or any basis for any of the foregoing, which may materially and
adversely affect the Collateral, the repayment of the Obligations, the Lender's
rights under the Loan Documents, or the Borrower's Property, business,
operations, or condition (financial or otherwise).
9.17 Restrictive Agreements. The Borrower is not a party to any
contract or agreement, and is not subject to any charter or other corporate
restriction, which affects its ability to execute, deliver, and perform the Loan
Documents and repay the Obligations or which materially and adversely affects
the Borrower's Property, business, operations, or condition (financial or
otherwise).
9.18 Labor Disputes. Except as set forth on Schedule 9.18: (a) there
is no collective bargaining agreement or other labor contract covering employees
of the Borrower or any of its Subsidiaries; (b) no such collective bargaining
agreement or other labor contract is scheduled to expire during the term of this
Agreement; (c) no union of other labor organization is seeking to organize, or
to be recognized as, a collective bargaining unit of employees of the Borrower
or any of its Subsidiaries or for any similar purpose; and (d) there is no
pending or, to the best of the Borrower's knowledge, threatened strike, work
stoppage, material unfair labor practice claims, or other material labor dispute
against or affecting the Borrower or any of its Subsidiaries or their respective
employees.
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9.19 Environmental Laws.
(a) The Borrower and its Subsidiaries have complied in all
material respects with all Environmental Laws applicable to their respective
Premises and businesses, and neither the Borrower nor any Subsidiary nor any of
their respective present Premises or operations, nor their past property or
operations, is subject to any enforcement order from or liability agreement with
any Public Authority or private Person respecting (i) compliance with any
Environmental Law or (ii) any potential liabilities and costs or remedial action
arising from the Release or threatened Release of a Contaminant.
(b) The Borrower and its Subsidiaries have obtained all
permits necessary for their current operations under Environmental Laws, and all
such permits are in good standing and the Borrower and its Subsidiaries are in
compliance with all terms and conditions of such permits.
(c) Neither the Borrower nor any of its Subsidiaries, nor, to
the best of the Borrower's knowledge, any of its predecessors in interest, has
stored, treated or disposed of any hazardous waste, as defined pursuant to 40
CFR Part 261 or any equivalent Environmental Law, on any Premises.
(d) Neither the Borrower nor any of its Subsidiaries has
received any summons, complaint, order or similar written notice that it is not
currently in compliance with, or that any Public Authority is investigating its
compliance with, any Environmental Laws or that it is or may be liable to any
other Person as a result of a Release or threatened Release of a Contaminant.
(e) None of the present or past operations of the Borrower and
its Subsidiaries is the subject of any investigation by any Public Authority
evaluating whether any remedial action is needed to respond to a Release or
threatened Release of a Contaminant.
(f) There is not now, nor to the best of the Borrower's
knowledge has there ever been on or in the Premises:
(i) any underground storage tanks or surface
impoundments,
(ii) any asbestos containing material, or
(iii) any polychlorinated biphenyls (PCB's) used in
hydraulic oils, electrical transformers or other equipment.
(g) Neither the Borrower nor any of its Subsidiaries has filed
any notice under any requirement of Environmental Law reporting a spill or
accidental and unpermitted release or discharge of a Contaminant into the
environment.
(h) Neither the Borrower nor any of its Subsidiaries has
entered into
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any negotiations or settlement agreements with any Person (including, without
limitation, the prior owner of its property) imposing material obligations or
liabilities on the Borrower or any of its Subsidiaries with respect to any
remedial action in response to the Release of a Contaminant or environmentally
related claim.
(i) None of the products manufactured, distributed or sold by
the Borrower or any of its Subsidiaries contains asbestos material.
(j) No Environmental Lien has attached to any Premises of the
Borrower or any of its Subsidiaries.
9.20 No Violation of Law. The Borrower is not in violation of any
law, statute, regulation, ordinance, judgment, order, or decree applicable to it
which violation would in any respect materially and adversely affect the
Collateral, the repayment of the Obligations, the Lender's rights under the Loan
Documents, or the Borrower's Property, business, operations, or condition
(financial or otherwise).
9.21 No Default. The Borrower is not in default with respect to any
note, indenture, loan agreement, mortgage, lease, deed, or other agreement to
which the Borrower is a party or bound, which default could reasonably be
expected to materially and adversely affect the Collateral, the repayment of the
Obligations, the Lender's rights under the Loan Documents, or the Borrower's
Property, business, operations, or condition (financial or otherwise).
9.22 ERISA Compliance.
(a) Each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other applicable federal and
state law. Each Plan which is intended to qualify under Section 401(a) of the
Code has received a favorable determination letter from the IRS and to the best
knowledge of the Borrower, nothing has occurred which would cause the loss of
such qualification. The Borrower and each ERISA Affiliate have made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of
Borrower, threatened claims, actions or lawsuits, or action by any Public
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a material adverse effect on the Borrower's business or
operations. There has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan which has resulted or
could reasonably be expected to result in a material adverse effect on the
Borrower's business or operations.
(c) (i) No ERISA Event has occurred or is reasonably expected
to occur; (ii) no Pension Plan has any unfunded pension liability; (iii) neither
the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of
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ERISA with respect to any Pension Plan (other than premiums due and not
delinquent under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA
Affiliate has incurred, or reasonably expects to incur, any liability (and no
event has occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Section 4201 or 4243 of ERISA with respect
to a Multiemployer Plan; and (v) neither the Borrower nor any ERISA Affiliate
has engaged in a transaction that could subject any Person to Section 4069 or
4212(c) of ERISA.
9.23 Taxes. The Borrower and its Subsidiaries have filed all tax
returns and other reports required to be filed and have paid all Taxes,
assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets that are otherwise due and payable.
9.24 Use of Proceeds. None of the transactions contemplated in this
Agreement (including, without limitation, the use of proceeds from the Loans)
will violate or result in the violation of Section 7 of the Securities Exchange
Act of 1934, as amended, or any regulations issued pursuant thereto, including
without limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System ("Federal Reserve Board"), 12 CFR, Chapter II. Borrower
does not own or intend to carry or purchase any "margin stock" within the
meaning of said Regulation U or G. None of the proceeds of the loans will be
used, directly or indirectly, to purchase or carry (or refinance any borrowing,
the proceeds of which were used to purchase or carry) any "security" within the
meaning of the Securities Exchange Act of 1934, as amended.
9.25 Private Offerings. Borrower has not, directly or indirectly,
offered the Loans for sale to, or solicited offers to buy part thereof from, or
otherwise approached or negotiated with respect thereto with any prospective
purchaser other than Lender. Borrower hereby agrees that neither it nor anyone
acting on its behalf has offered or will offer the Loans or any part thereof or
any similar securities for issue or sale to or solicit any offer to acquire any
of the same from anyone so as to bring the issuance thereof within the
provisions of Section 5 of the Securities Act of 1933, as amended.
9.26 Broker's Fees. No Person is entitled to any brokerage or
finder's fee with respect to the transactions described in this Agreement.
9.27 No Material Adverse Change. No material adverse change has
occurred in the Borrower's Property, business, operations, or condition
(financial or otherwise) since the date of the Financial Statements delivered to
the Lender. On the basis of a comprehensive review and assessment undertaken by
Borrower of Borrower's computer applications and inquiry made of Borrower's
material suppliers, vendors and customers Borrower reasonably believes that the
"Year 2000 problem" (that is, the risk that computer applications used by any
person may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999) will not
result in a material adverse change in the operations, business, properties, or
condition (financial or otherwise) of the Borrower.
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9.28 Disclosure. Neither this Agreement nor any document or
statement furnished to the Lender by or on behalf of the Borrower hereunder
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein or therein not
misleading.
10. AFFIRMATIVE AND NEGATIVE COVENANTS. The Borrower covenants that, so
long as any of the Obligations remain outstanding or this Agreement is in
effect, unless otherwise consented to in writing by Lender in its sole
discretion:
10.1 Taxes and Other Obligations. The Borrower and each of its
Subsidiaries shall: (a) file when due all tax returns and other reports which it
is required to file, pay, or provide for the payment, when due, of all Taxes,
fees, assessments and other governmental charges against it or upon its
Property, income, and franchises, make all required withholding and other tax
deposits, and establish adequate reserves for the payment of all such items, and
shall provide to the Lender, upon request, satisfactory evidence of its timely
compliance with the foregoing; and (b) pay when due all Debt owed by it and
perform and discharge in a timely manner all other obligations undertaken by it;
provided, however that the Borrower and its Subsidiaries need not pay any tax,
fee, assessment, governmental charge, or Debt, or perform or discharge any other
obligation, that it is contesting in good faith by appropriate proceedings
diligently pursued.
10.2 Corporate Existence and Good Standing. The Borrower and each of
its Subsidiaries shall maintain its corporate existence and its qualification
and good standing in all states necessary to conduct its business and own its
Property, and shall obtain and maintain all licenses, permits, franchises and
governmental authorizations necessary to conduct its business and own its
Property.
10.3 Compliance with Law and Agreements. The Borrower and each of
its Subsidiaries shall comply with the terms and provisions of each judgment,
law, statute, rule, and governmental regulation applicable to it and each
contract, mortgage, lien, lease, indenture, order, instrument, agreement, or
document to which it is a party or by which it is bound.
10.4 Maintenance of Property and Insurance. The Borrower and each of
its Subsidiaries shall: (a) maintain all of its Property necessary and useful in
its business in good operating condition and repair, ordinary wear and tear
excepted; and (b) in addition to the insurance required by Section 7.7, maintain
with financially sound and reputable insurers such other insurance with respect
to its Property and business against casualties and contingencies of such types
(including, without limitation, business interruption, environmental liability,
public liability, product liability, and larceny, embezzlement or other criminal
misappropriation) and in such amounts as is customary for Persons of established
reputation engaged in the same or a similar business and similarly situated,
naming the Lender as additional insured under each such policy.
10.5 Environmental Laws. The Borrower shall conduct its business in
full
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compliance with all Environmental Laws applicable to it, including, without
limitation, those relating to the Borrower's generation, handling, use, storage,
and disposal of hazardous and toxic wastes and substances. The Borrower shall
take prompt and appropriate action to respond to any noncompliance with
Environmental Laws and shall regularly report to the Lender on such response.
Without limiting the generality of the foregoing, whenever the Borrower gives
notice to the Lender pursuant to Section 8.3(g) the Borrower shall, at the
Lender's request and the Borrower's expense: (a) cause an independent
environmental engineer acceptable to the Lender to conduct such tests of the
site where the Borrower's noncompliance or alleged noncompliance with
Environmental Laws has occurred and prepare and deliver to the Lender a report
setting forth the results of such tests, a proposed plan for responding to any
environmental problems described therein, and an estimate of the costs thereof;
and (b) provide to the Lender a supplemental report of such engineer whenever
the scope of the environmental problems, or the Borrower's response thereto or
the estimated costs thereof, shall change.
10.6 ERISA. The Borrower shall cause each Plan, which has been
designated to be so, to be qualified within the meaning of Section 401(a) of the
Code and to be administered in all respects in compliance with Section 401(a) of
the Code. The Borrower shall cause each Plan to be administered in all respect
in compliance with ERISA.
10.7 Mergers, Consolidations, Acquisitions, or Sales. Neither the
Borrower nor any of its Subsidiaries shall enter into any transaction of merger,
reorganization, or consolidation, or transfer, sell, assign, lease, or otherwise
dispose of all or any part of its Property, or wind up, liquidate or dissolve,
or agree to do any of the foregoing, except sales of Inventory in the ordinary
course of its business and dispositions of equipment otherwise permitted hereby.
10.8 Distributions; Capital Changes. Neither the Borrower nor any of
its Subsidiaries shall: (a) directly or indirectly declare or make, or incur any
liability to make, any Distribution, except Distributions to the Borrower by a
Subsidiary wholly owned by the Borrower; or (b) make any change in its capital
structure which could adversely affect the repayment of the Obligations.
10.9 Transactions Affecting Collateral or Obligations. Neither the
Borrower nor any of its Subsidiaries shall enter into any transaction which
materially and adversely affects the Collateral or the Borrower's ability to
repay the Obligations.
10.10 Guaranties. Neither the Borrower nor any of its Subsidiaries
shall make, issue, or become liable on any Guaranty, except Guaranties in favor
of the Lender and endorsements of instruments for deposit.
10.11 Debt. Neither the Borrower nor any of its Subsidiaries shall
incur or maintain any Debt, other than: (a) the Obligations; (b) trade payables
and contractual obligations to suppliers and customers incurred in the ordinary
course of business; and (c) other Debt existing on the Closing Date and
reflected in the Financial Statements attached as Exhibit X-x.
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10.12 Prepayment. Neither the Borrower nor any of its Subsidiaries
shall voluntarily prepay any Debt, except the Obligations in accordance with
their terms.
10.13 Transactions with Affiliates. Except as set forth below,
neither the Borrower nor any of its Subsidiaries shall: sell, transfer,
distribute, or pay any money or Property to any Affiliate, or lend or advance
money or Property to any Affiliate, or invest in (by capital contribution or
otherwise) or purchase or repurchase any stock or indebtedness or any Property
of any Affiliate, or become liable on any Guaranty of the indebtedness,
dividends, or other obligations of any Affiliate. Notwithstanding the foregoing,
if no Event of Default has occurred and is continuing, the Borrower and its
Subsidiaries may engage in transactions with Affiliates in the ordinary course
of business in amounts and upon terms fully disclosed to the Lender and no less
favorable to the Borrower or such Subsidiary than would obtain in a comparable
arm's length transaction with a third party who is not an Affiliate; provided,
that (i) the aggregate amount of Receivables and other obligations owing from
Affiliates to Borrower shall not exceed $500,000 at any one time and (ii) all
Receivables and other obligations owing from Affiliates to Borrower shall be
paid within 30 days of the date of invoice.
10.14 Management Compensation. Neither the Borrower nor any of its
Subsidiaries shall, directly or indirectly: (a) pay any compensation in any form
(including, without limitation, salary, bonuses, commissions, fees, and
incentive compensation) to any Management Person (as hereinafter defined) in
excess of the amounts for such Person set forth on Schedule 10.14, which amounts
represent annual salaries for 1998, except for reasonable fees for professional
services rendered in the ordinary course of Borrower's business on an arm's
length basis or (b) pay any such compensation to any Management Person in
respect of any subsequent Fiscal Year which exceeds 15% of such Person's
compensation in respect of the immediately preceding Fiscal Year. For the
purposes hereof, "Management Person" means: (x) Xxx Xxxxx, Xxxxx Xxxxxxx and
Xxxx Xxxxxx, and each director of the Borrower and (y) any Person succeeding to
any or all of the positions or duties of a Person listed in clause (x).
10.15 Business Conducted. The Borrower and its Subsidiaries shall
not engage, directly or indirectly, in any line of business other than the
businesses in which the Borrower and its Subsidiaries are engaged on the Closing
Date.
10.16 Liens. Neither the Borrower nor any of its Subsidiaries shall
create, incur, assume, or permit to exist any Lien on any Property now owned or
hereafter acquired by any of them, except Permitted Liens.
10.17 Sale and Leaseback Transactions. Neither the Borrower nor any
of its Subsidiaries shall, directly or indirectly, enter into any arrangement
with any Person providing for the Borrower or a Subsidiary to lease or rent
Property that the Borrower or a Subsidiary has or will sell or otherwise
transfer to such Person.
10.18 New Subsidiaries. The Borrower shall not, directly or
indirectly, organize or acquire any Subsidiary other than those listed on
Schedule 10.18.
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10.19 Restricted Investments. Neither the Borrower nor any of its
Subsidiaries shall make any Restricted Investment.
10.20 Capital Expenditures. Neither the Borrower nor any of its
Subsidiaries shall make or incur any Capital Expenditure if, after giving effect
thereto, the aggregate amount of all Capital Expenditures by the Borrower and
its Subsidiaries in any Fiscal year would exceed $200,000.
10.21 Operating Lease Obligations. Neither the Borrower nor any of
its Subsidiaries shall enter into any lease of real or personal property as
lessee or sublessee (other than Capital Leases), if, after giving effect
thereto, the aggregate amount of Rentals (as hereinafter defined) payable by the
Borrower and its Subsidiaries in any Fiscal Year in respect of such lease and
all other such leases would exceed $330,000 (such amount being referred to
herein as "Permitted Rentals"). The term "Rentals" means all payments due from
the lessee or sublessee under a lease, including, without limitation, basic
rent, percentage rent, property taxes, utility or maintenance costs, and
insurance premiums.
10.22 EBITDA. The Borrower will achieve EBITDA of not less than the
following amounts as of the end of the corresponding periods, calculated on a
cumulative fiscal year-to-date basis:
Period Amount
------ ------
fiscal quarter ended 03/31/98 $125,000
fiscal quarter ended 06/30/98 250,000
fiscal quarter ended 09/30/98 375,000
fiscal quarter ended 12/31/98 500,000
fiscal quarter ended 03/31/99 187,500
fiscal quarter ended 06/30/99 375,000
fiscal quarter ended 09/30/99 562,500
fiscal quarter ended 12/31/99 750,000
fiscal quarter ended 03/31/00 and each first 250,000
fiscal quarter thereafter
fiscal quarter ended 06/30/00 and each second 500,000
fiscal quarter thereafter
fiscal quarter ended 09/30/00 and each third 750,000
fiscal quarter thereafter
fiscal quarter ended 12/31/00 and each fiscal
year-end thereafter 1,000,000
10.23 Adjusted Tangible Net Worth. The Borrower will maintain
Adjusted Tangible Net Worth of not less than the following amounts during the
following periods:
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Period Amount
------ ------
fiscal quarter ended 12/31/97 $5,500,000
fiscal quarter ended 03/31/98 5,500,000
fiscal quarter ended 06/30/98 5,500,000
fiscal quarter ended 09/30/98 5,500,000
fiscal quarter ended 12/31/98 5,600,000
fiscal quarter ended 03/31/99 5,600,000
fiscal quarter ended 06/30/99 5,850,000
fiscal quarter ended 09/30/99 5,850,000
fiscal quarter ended 12/31/99 6,100,000
fiscal quarter ended 03/31/00 6,100,000
fiscal quarter ended 06/30/00 6,400,000
fiscal quarter ended 09/30/00 6,400,000
fiscal quarter ended 12/31/00 and thereafter 6,750,000
10.24 Further Assurances. The Borrower shall execute and deliver, or
cause to be executed and delivered, to the Lender such documents and agreements,
and shall take or cause to be taken such actions, as the Lender may, from time
to time, request to carry out the terms and conditions of this Agreement and the
other Loan Documents.
11. CLOSING; CONDITIONS TO CLOSING. The Lender will not be obligated to
make the initial Loans or to obtain any Letters of Credit on the Closing Date,
unless the following conditions precedent have been satisfied in a manner
satisfactory to Lender:
11.1 Conditions Precedent to Making of Loans and Issuance of Letters
of Credit on the Closing Date.
(a) Representations and Warranties; Covenants. The Borrower's
representations and warranties contained in this Agreement and the other Loan
Documents shall be correct and complete; the Borrower shall have performed and
complied with all covenants, agreements, and conditions contained herein and in
the other Loan Documents which are required to have been performed or complied
with.
(b) Delivery of Documents. The Borrower shall have delivered,
or caused to be delivered, to the Lender such documents, instruments and
agreements as the Lender shall request in connection herewith, duly executed by
all parties thereto other than the Lender, and in form and substance
satisfactory to the Lender and its counsel.
(c) Termination of Liens. The Lender shall have received duly
executed UCC-3 Termination Statements and other instruments, in form and
substance satisfactory to the Lender, as shall be necessary to terminate and
satisfy all Liens on the Property of the Borrower and its Subsidiaries except
Permitted Liens.
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(d) Closing Fee. The Borrower shall have paid in full the
Closing Fee.
(e) Payment of Fees and Expenses. The Borrower shall have paid
all fees and expenses of the Lender's outside counsel, Xxxxxx, Xxxxxxxxxx &
Xxxxxxxxx LLP, and all other fees and expenses of the Lender incurred in
connection with any of the Loan Documents and the transactions contemplated
thereby.
(f) Required Approvals. The Lender shall have received
certified copies of all consents or approvals of any Public Authority or other
Person which the Lender determines is required in connection with the
transactions contemplated by this Agreement.
(g) No Material Adverse Change. There shall have occurred no
material adverse change in the Borrower's business or financial condition or in
the Collateral since September 30, 1997, and the Lender shall have received a
certificate of Borrower's chief executive officer to such effect.
(h) Proceedings. All proceedings to be taken in connection
with the transactions contemplated by this Agreement, and all documents,
contemplated in connection herewith, shall be satisfactory in form and substance
to the Lender and its counsel.
(i) Projections. The Lender shall have received and approved
the Borrower's Latest Projections.
(j) Opinion. The Lender shall have received the opinion of
Borrower's counsel, which opinion shall be in form and substance acceptable to
the Lender and its counsel.
(k) Dominion of Funds. The lock-box account required pursuant
to Section 7.10(a) hereof shall have been established.
(l) Excess Availability. After taking into account the
Revolving Loans and the Letters of Credit issued on the Closing Date and with
all obligations of the Borrower being current, there shall be remaining
Availability of at least $1,500,000.
11.2 Conditions Precedent to Each Loan. The obligation of the Lender
to make each Loan or to provide for the issuance of any Letter of Credit shall
be subject to the conditions precedent that on the date of any such extension of
credit the following statements shall be true, and the acceptance by the
Borrower of any extension of credit shall be deemed to be a statement to the
effect set forth in clauses (a) and (b), with the same effect as the delivery to
the Lender of a certificate signed by the chief executive officer and chief
financial officer of the Borrower, dated the date of such extension of credit,
stating that:
(a) The representations and warranties contained in this
Agreement and the other Loan Documents are correct in all material respects on
and as of the date of such
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extension of credit as though made on and as of such date, except to the extent
the Lender has been notified by the Borrower that any representation or warranty
is not correct and the Lender has explicitly waived in writing compliance with
such representation or warranty; and
(b) No Default or Event of Default has occurred and is
continuing, or would result from such extension of credit.
12. DEFAULT; REMEDIES.
12.1 Events of Default. It shall constitute an event of default
("Event of Default") if any one or more of the following shall occur for any
reason:
(a) failure to make payment of principal, interest, fees or
premium on any of the Obligations when due;
(b) any representation or warranty made or deemed made by the
Borrower in this Agreement, any of the other Loan Documents, any Financial
Statement, or any certificate furnished by the Borrower or any Subsidiary at any
time to the Lender shall prove to be untrue in any material respect as of the
date when made, deemed made, or furnished;
(c) default shall occur in the observance or performance of
any of the covenants and agreements contained in this Agreement, the other Loan
Documents, or any other agreement entered into at any time to which the Borrower
and the Lender are party, or if any such agreement or document shall terminate
(other than in accordance with its terms or with the written consent of the
Lender) or become void or unenforceable without the written consent of the
Lender;
(d) default shall occur in the payment of any principal or
interest on any indebtedness for borrowed money (other than the Obligations)
beyond any period of grace provided with respect thereto;
(e) the Borrower or any Subsidiary shall: (i) file a voluntary
petition in bankruptcy or file a voluntary petition or an answer or otherwise
commence any action or proceeding seeking reorganization, arrangement or
readjustment of its debts or for any other relief under the Federal Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency act or law, state
or federal, now or hereafter existing, or consent to, approve of, or acquiesce
in, any such petition, action or proceeding; (ii) apply for or acquiesce in the
appointment of a receiver, assignee, liquidator, sequestrator, custodian,
trustee or similar officer for it or for all or any part of its Property; (iii)
make an assignment for the benefit of creditors; or (iv) be unable generally to
pay its debts as they become due;
(f) an involuntary petition shall be filed or an action or
proceeding otherwise commenced seeking reorganization, arrangement or
readjustment of the Borrower's or any Subsidiary's debts or for any other relief
under the Federal Bankruptcy Code, as amended, or
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under any other bankruptcy or insolvency act or law, state or federal, now or
hereafter existing;
(g) a receiver, assignee, liquidator, sequestrator, custodian,
trustee or similar officer for the Borrower or any Subsidiary or for all or any
part of their Property shall be appointed involuntarily; or a warrant of
attachment, execution or similar process shall be issued against any part of the
Property of the Borrower or any Subsidiary;
(h) the Borrower or any Subsidiary shall file a certificate of
dissolution under applicable state law or shall be liquidated, dissolved or
wound-up or shall commence or have commenced against it any action or proceeding
for dissolution, winding-up or liquidation, or shall take any corporate action
in furtherance thereof;
(i) all or any part of the Property of the Borrower shall be
nationalized, expropriated or condemned, seized or otherwise appropriated, or
custody or control of such Property or of the Borrower shall be assumed by any
Public Authority or any court of competent jurisdiction at the instance of any
Public Authority, except where contested in good faith by proper proceedings
diligently pursued where a stay of enforcement is in effect;
(j) one or more final judgments for the payment of money
aggregating in excess of $100,000 (whether or not covered by insurance) shall be
rendered against the Borrower or any Subsidiary and the Borrower or such
Subsidiary shall fail to discharge the same within thirty (30) days from the
date of notice of entry thereof or to appeal therefrom;
(k) any loss, theft, damage or destruction of any item or
items of Collateral occurs which: (i) materially and adversely affects the
operation of the Borrower's business or (ii) is material in amount and is not
adequately covered by insurance;
(l) Xxx Xxxxx ceases to own or have the right to control the
voting of at least 33% of the voting stock of Borrower;
(m) any event or condition shall occur or exist with respect
to a Plan that could, in the Lender's reasonable judgment, subject the Borrower
or any Subsidiary to any tax, penalty or liability under ERISA, the Code or
otherwise which in the aggregate is material in relation to the business,
operations, Property or financial or other condition of the Borrower; or
(n) there occurs any material adverse change in the Borrower's
Property, business, operations, or condition (financial or otherwise).
13. REMEDIES.
(a) If an Event of Default exists, the Lender may, without
notice to or demand on the Borrower, do one or more of the following at any time
or times and in any order: (i) reduce the Availability or one or more of the
elements thereof; (ii) restrict the amount of or refuse to make Revolving Loans
and restrict or refuse to arrange for Letters of Credit;
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(iii) terminate this Agreement; (iv) declare any or all Obligations to be
immediately due and payable (provided however that upon the occurrence of any
Event of Default described in Sections 12.1(e). 12.1(f), 12.1(g), or 12.1(h),
all Obligations shall automatically become immediately due and payable without
declaration or demand); and (v) pursue its other rights and remedies under the
Loan Documents and applicable law.
(b) If an Event of Default exists: (i) the Lender shall have,
in addition to all other rights, the rights and remedies of a secured party
under the UCC; (ii) the Lender may, at any time, take possession of the
Collateral and keep it on the Borrower's premises, at no cost to the Lender, or
remove any part of it to such other place or places as the Lender may desire, or
the Borrower shall, upon the Lender's demand, at the Borrower's cost, assemble
the Collateral and make it available to the Lender at a place reasonably
convenient to the Lender; and (iii) the Lender may sell and deliver any
Collateral at public or private sales, for cash, upon credit or otherwise, at
such prices and upon such terms as the Lender deems advisable, in its sole
discretion, and may, if the Lender deems it reasonable, postpone or adjourn any
sale of the Collateral by an announcement at the time and place of sale or of
such postponed or adjourned sale without giving a new notice of sale. Without in
any way requiring notice to be given in the following manner, the Borrower
agrees that any notice by the Lender of sale, disposition or other intended
action hereunder or in connection herewith, whether required by the UCC or
otherwise, shall constitute reasonable notice to the Borrower if such notice is
mailed by registered or certified mail, return receipt requested, postage
prepaid, or is delivered personally against receipt, at least five (5) days
prior to such action to the Borrower's address specified in or pursuant to
Section 15.11. If any Collateral is sold on terms other than payment in full at
the time of sale, no credit shall be given against the Obligations until the
Lender receives payment, and if the buyer defaults in payment, the Lender may
resell the Collateral without further notice to the Borrower. In the event the
Lender seeks to take possession of all or any portion of the Collateral by
judicial process, the Borrower irrevocably waives: (a) the posting of any bond,
surety or security with respect thereto which might otherwise be required; (b)
any demand for possession prior to the commencement of any suit or action to
recover the Collateral; and (c) any requirement that the Lender retain
possession and not dispose of any Collateral until after trial or final
judgment. The Borrower agrees that the Lender has no obligation to preserve
rights to the Collateral or marshal any Collateral for the benefit of any
Person. The Lender is hereby granted a license or other right to use, without
charge, the Borrower's labels, patents, copyrights, name, trade secrets, trade
names, trademarks, and advertising matter, or any similar property, in
completing production of, advertising or selling any Collateral, and the
Borrower's rights under all licenses and all franchise agreements shall inure to
the Lender's benefit. The proceeds of sale shall be applied first to all
expenses of sale, including attorneys' fees, and second, in whatever order the
Lender elects, to all Obligations. The Lender will return any excess to the
Borrower or such other Person as shall be legally entitled thereto and the
Borrower shall remain liable for any deficiency.
(c) If an Event of Default occurs, the Borrower hereby waives
(i) all rights to notice and hearing prior to the exercise by the Lender of the
Lender's rights to repossess the Collateral without judicial process or to
replevy, attach or levy upon the Collateral without
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notice or hearing, and (ii) all rights of setoff and counterclaim against the
Lender.
(d) If the Lender terminates this Agreement upon an Event of
Default, the Borrower shall pay the Lender, immediately upon termination, a fee
equal to the early termination fee that would have been payable under Section 14
if this Agreement had been terminated on that date pursuant to the Borrower's
election.
14. TERM AND TERMINATION. This Agreement shall expire on January __, 2001
(the "Stated Termination Date") unless earlier terminated or automatically
extended as provided in this Section. This Agreement shall automatically be
renewed on the Stated Termination Date for successive one-year terms, unless
this Agreement is terminated as provided below. The Lender and the Borrower
shall have the right to terminate this Agreement, without premium or penalty, on
the Stated Termination Date or at the end of any renewal term by giving the
other written notice not less than sixty (60) days prior to the end of such term
by registered or certified mail. The Borrower may also terminate this Agreement
at any time prior to the Stated Termination Date or any renewal term if: (a) it
gives the Lender sixty (60) days prior written notice of termination by
registered or certified mail; (b) it pays and performs all Obligations on or
prior to the effective date of termination; and (c) it pays the Lender, on or
prior to the effective date of termination, and in addition to any other
prepayment premium required hereunder and the fees required by Section 6.4, (i)
three percent (3.0%) of the average amount of the Revolving Loans and Letters of
Credit outstanding during the prior 180 day period (or lesser period if within
180 days of the Closing Date) if such termination is made on or prior to the
first Anniversary Date; (ii) two percent (2.0%) of the average amount of the
Revolving Loans and Letters of Credit outstanding during the prior 180 day
period if such termination is after the first Anniversary Date but prior to the
second Anniversary Date; and (iii) one percent (1.0%) of the average amount of
the Revolving Loans and Letters of Credit outstanding during the prior 180 day
period if such termination is after the second Anniversary Date, but prior to
the third Anniversary Date or any subsequent Anniversary Date. Notwithstanding
the foregoing, if, after the first Anniversary Date, the Obligations are repaid
in full as the result of a refinancing by Bank or one of Bank's Affiliates,
Borrower will not be obligated to pay the prepayment premiums set forth in
clauses (ii) or (iii) above. In addition, if Borrower prepays the Obligations in
full within 60 days after Lender has charged Borrower additional amounts
pursuant to Section 6.3(b), the prepayment premiums set forth above shall be
reduced by one-half. The Lender may also terminate this Agreement without notice
upon and at any time during the continuation of an Event of Default. Upon the
effective date of termination of this Agreement for any reason whatsoever, all
Obligations shall become immediately due and payable and Borrower shall
immediately arrange for the cancellation of Letters of Credit then outstanding.
Notwithstanding the termination of this Agreement, until all Obligations are
paid and performed in full, the Lender shall retain all its rights and remedies
hereunder (including, without limitation, in all then existing and after-arising
Collateral).
15. MISCELLANEOUS.
15.1 Cumulative Remedies; No Prior Recourse to Collateral. The
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enumeration herein of the Lender's rights and remedies is not intended to be
exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that the Lender may have under the
UCC or other applicable law. The Lender shall have the right, in its sole
discretion, to determine which rights and remedies are to be exercised and in
which order. The exercise of one right or remedy shall not preclude the exercise
of any others, all of which shall be cumulative. The Lender may, without
limitation, proceed directly against the Borrower to collect the Obligations
without any prior recourse to the Collateral.
15.2 No Implied Waivers. No act, failure or delay by the Lender
shall constitute a waiver of any of its rights and remedies. No single or
partial waiver by the Lender of any provision of this Agreement or any other
Loan Document, or of breach or default hereunder or thereunder, or of any right
or remedy which the Lender may have, shall operate as a waiver of any other
provision, breach, default, right or remedy or of the same provision, breach,
default, right or remedy on a future occasion. No waiver by the Lender shall
affect its rights to require strict performance of this Agreement.
15.3 Severability. If any provision of this Agreement shall be
prohibited or invalid, under applicable law, it shall be ineffective only to
such extent, without invalidating the remainder of this Agreement.
15.4 Governing Law. This Agreement shall be deemed to have been made
in the State of California and shall be governed by and interpreted in
accordance with the laws of such state, except that no doctrine of choice of law
shall be used to apply the laws of any other state or jurisdiction.
15.5 Consent to Jurisdiction and Venue; Service of Process. The
Borrower agrees that, in addition to any other courts that may have jurisdiction
under applicable laws, any action or proceeding to enforce or arising out of
this Agreement or any of the other Loan Documents may be commenced in the
Superior Court of the State of California for Los Angeles County, or in the
United States District Court for the Central District of California, and the
Borrower consents and submits in advance to such jurisdiction and agrees that
venue will be proper in such courts on any such matter. The Borrower hereby
waives personal service of process and agrees that a summons and complaint
commencing an action or proceeding in any such court shall be properly served
and shall confer personal jurisdiction if served by registered or certified mail
to the Borrower. Should the Borrower fail to appear or answer any summons,
complaint, process or papers so served within thirty (30) days after the mailing
or other service thereof, it shall be deemed in default and an order or judgment
may be entered against it as demanded or prayed for in such summons, complaint,
process or papers. The choice of forum set forth in this section shall not be
deemed to preclude the enforcement of any judgment obtained in such forum, or
the taking of any action under this Agreement to enforce the same, in any
appropriate jurisdiction.
15.6 Waiver of Jury Trial. THE BORROWER HEREBY WAIVES
TRIAL BY JURY, RIGHTS OF SETOFF, AND THE RIGHT TO IMPOSE
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COUNTERCLAIMS IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE
OBLIGATIONS OR THE COLLATERAL, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT
HERETO OR THERETO, OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING, BETWEEN THE
BORROWER AND THE LENDER. THE BORROWER CONFIRMS THAT THE FOREGOING WAIVERS ARE
INFORMED AND FREELY MADE.
15.7 Arbitration; Reference Proceeding.
(a) ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES,
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY AGREEMENTS OR INSTRUMENTS RELATING HERETO OR DELIVERED IN CONNECTION
HEREWITH AND ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL AT THE
REQUEST OF ANY PARTY BE DETERMINED BY ARBITRATION. THE ARBITRATION SHALL BE
CONDUCTED IN ACCORDANCE WITH THE UNITED STATES ARBITRATION ACT (TITLE 9, U.S.
CODE), NOTWITHSTANDING ANY CHOICE OF LAW PROVISION IN THIS AGREEMENT, AND UNDER
THE COMMERCIAL RULES OF THE AMERICAN ARBITRATION ASSOCIATION ("AAA"). THE
ARBITRATION SHALL BE CONDUCTED WITHIN LOS ANGELES COUNTY, CALIFORNIA. THE
ARBITRATOR(S) SHALL GIVE EFFECT TO STATUTES OF LIMITATION IN DETERMINING ANY
CLAIM. ANY CONTROVERSY CONCERNING WHETHER AN ISSUE IS ARBITRABLE SHALL BE
DETERMINED BY THE ARBITRATOR(S). JUDGMENT UPON THE ARBITRATION AWARD MAY BE
ENTERED IN ANY COURT HAVING JURISDICTION. THE INSTITUTION AND MAINTENANCE OF AN
ACTION FOR JUDICIAL RELIEF OR PURSUIT OF A PROVISIONAL OR ANCILLARY REMEDY SHALL
NOT CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE PLAINTIFF, TO
SUBMIT THE CONTROVERSY OR CLAIM TO ARBITRATION IF ANY OTHER PARTY CONTESTS SUCH
ACTION FOR JUDICIAL RELIEF.
(b) Notwithstanding the provisions of subparagraph (a), no
controversy or claim shall be submitted to arbitration without the consent of
all parties if, at the time of the proposed submission, such controversy or
claim arises from or relates to an obligation to the Lender which is secured by
real property collateral located in California. If all parties do not consent to
submission of such a controversy or claim to arbitration, the controversy or
claim shall be determined as provided in subparagraph (c).
(c) A controversy or claim which is not submitted to
arbitration as provided and limited in subparagraphs (a) and (b) shall, at the
request of any party, be determined by a reference in accordance with California
Code of Civil Procedure Section 638 et seq. If such an election is made, the
parties shall designate to the court a referee or referees selected under the
auspices of the AAA in the same manner as arbitrators are selected in
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AAA-sponsored proceedings. The presiding referee of the panel, or the referee if
there is a single referee, shall be an active attorney or retired judge.
Judgment upon the award rendered by such referee or referees shall be entered in
the court in which such proceeding was commenced in accordance with California
Code of Civil Procedure Sections 644 and 645.
(d) No provision of this paragraph shall limit the right of
either party to this Agreement to exercise self-help remedies such as setoff, to
foreclose against or sell any real or personal property collateral or security,
or to obtain provisional or ancillary remedies from a court of competent
jurisdiction before, after, or during the pendency of any arbitration or other
proceeding. The exercise of a remedy does not waive the right of either party to
resort to arbitration or reference. At the Lender's option, foreclosure under a
deed of trust or mortgage may be accomplished either by exercise of power of
sale under the deed of trust or mortgage or by judicial foreclosure.
15.8 Survival of Representations and Warranties. All of the
Borrower's representations and warranties contained in this Agreement shall
survive the execution, delivery, and acceptance thereof by the parties,
notwithstanding any investigation by the Lender or its agents.
15.9 Other Security and Guaranties. The Lender may, without notice
or demand and without affecting the Borrower's obligations hereunder, from time
to time: (a) take from any Person and hold collateral (other than the
Collateral) for the payment of all or any part of the Obligations and exchange,
enforce or release such collateral or any part thereof; and (b) accept and hold
any endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations, or any other Person in any way obligated to pay all or
any part of the Obligations.
15.10 Fees and Expenses. The Borrower shall pay to the Lender on
demand all costs and expenses that the Lender pays or incurs in connection with
the negotiation, preparation, consummation, administration, enforcement, and
termination of this Agreement and the other Loan Documents, including, without
limitation: (a) attorneys' and paralegals' fees and disbursements of counsel to
the Lender (including, without limitation, a reasonable estimate of the
allocable cost of in-house counsel and staff); (b) costs and expenses including
attorneys' and paralegals' fees and disbursements (including, without
limitation, a reasonable estimate of the allocable cost of in-house counsel and
staff) for any amendment, supplement, waiver, consent, or subsequent closing in
connection with the Loan Documents and the transactions contemplated thereby;
(c) costs and expenses of lien and title searches and title insurance; (d)
Taxes, fees and other charges for filing financing statements and continuations,
and other actions to perfect, protect, and continue the Security Interest; (e)
sums paid or incurred to pay any amount or take any action required of the
Borrower under the Loan Documents that the Borrower fails to pay or take; (f)
costs of appraisals, inspections, and verifications of the Collateral,
including, without limitation, travel, lodging, and meals together with an
allocated charge of $600 per day for each auditor employed by the Lender for
inspections of the Collateral and the Borrower's operations;
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(g) costs and expenses of forwarding loan proceeds, collecting checks and other
items of payment, and establishing and maintaining Payment Accounts and lock
boxes; (h) all amounts that the Borrower is required to pay in connection with
the Letters of Credit; (i) costs and expenses of preserving and protecting the
Collateral; and (j) costs and expenses including attorneys' and paralegals' fees
and disbursements (including, without limitation, a reasonable estimate of the
allocable cost of in-house counsel and staff) paid or incurred to obtain payment
of the Obligations, enforce the Security Interest, sell or otherwise realize
upon the Collateral, and otherwise enforce the provisions of the Loan Documents,
or to defend any claims made or threatened against the Lender arising out of the
transactions contemplated hereby (including without limitation, preparations for
and consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by the Borrower. All of the foregoing costs and expenses
shall be charged to the Borrower's loan account as Revolving Loans. In any
arbitration between the parties conducted pursuant to Section 15.7, the
prevailing party shall be entitled to reimbursement of its reasonable attorneys'
fees and costs in connection therewith in addition to all other relief to which
the prevailing party or parties may be entitled.
15.11 Notices. Except as otherwise provided herein, all notices,
demands, and requests that either party is required or elects to give to the
other shall be in writing, shall be delivered personally against receipt, or
sent by recognized overnight courier services, or mailed by registered or
certified mail, return receipt requested, postage prepaid, and shall be
addressed to the party to be notified as follows:
If to the Lender: BankAmerica Business Credit, Inc.
00 Xxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Portfolio Manager
with a copy to: Bank of America N.T. & S.A., Legal Department
00000 Xxx Xxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxxx, Esq.
and a copy to: Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
If to the Borrower: Intellicell Corp.
0000 Xxxxxxxxxxx Xxx.
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
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with a copy to: Sharma & Xxxxxx
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
or to such other address as each party may designate for itself by like notice.
Any such notice, demand, or request shall be deemed given when received if
personally delivered or sent by overnight courier, or when deposited in the
United States mails, postage paid, if sent by registered or certified mail.
15.12 Indemnification. BORROWER HEREBY INDEMNIFIES, DEFENDS AND
HOLDS LENDER, AND ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND COUNSEL,
HARMLESS FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES,
DEFICIENCIES, JUDGMENTS, PENALTIES OR EXPENSES IMPOSED ON, INCURRED BY OR
ASSERTED AGAINST ANY OF THEM, WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL ARISING
OUT OF OR BY REASON OF ANY LITIGATION, INVESTIGATIONS, CLAIMS, OR PROCEEDINGS
(WHETHER BASED ON ANY FEDERAL, STATE OR LOCAL LAWS OR OTHER STATUTES OR
REGULATIONS, INCLUDING, WITHOUT LIMITATION, SECURITIES, ENVIRONMENTAL, OR
COMMERCIAL LAWS AND REGULATIONS, UNDER COMMON LAW OR AT EQUITY, OR ON CONTRACT
OR OTHERWISE) COMMENCED OR THREATENED, WHICH ARISE OUT OF OR ARE IN ANY WAY
BASED UPON THE NEGOTIATION, PREPARATION, EXECUTION, DELIVERY, ENFORCEMENT,
PERFORMANCE OR ADMINISTRATION OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY
UNDERTAKING OR PROCEEDING RELATED TO ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY
OR ANY ACT, OMISSION TO ACT, EVENT OR TRANSACTION RELATED OR ATTENDANT THERETO,
INCLUDING, WITHOUT LIMITATION, AMOUNTS PAID IN SETTLEMENT, COURT COSTS, AND THE
FEES AND EXPENSES OF COUNSEL REASONABLY INCURRED IN CONNECTION WITH ANY SUCH
LITIGATION, INVESTIGATION, CLAIM OR PROCEEDING AND FURTHER INCLUDING, WITHOUT
LIMITATION, ALL LOSSES, DAMAGES (INCLUDING CONSEQUENTIAL DAMAGES), EXPENSES OR
LIABILITIES SUSTAINED BY THE LENDER IN CONNECTION WITH ANY ENVIRONMENTAL
INSPECTION, MONITORING, SAMPLING, OR CLEANUP OF THE ENCUMBERED REAL ESTATE
REQUIRED OR MANDATED BY ANY ENVIRONMENTAL LAW; PROVIDED, HOWEVER, THAT BORROWER
SHALL NOT INDEMNIFY LENDER, ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND
COUNSEL FROM SUCH DAMAGES RESULTING FROM THEIR GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. Without limiting the foregoing, if, by reason of any suit or
proceeding of any kind, nature, or description against Borrower, or by Borrower
or any other party against Lender, which in Lender's sole discretion makes it
advisable
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for Lender to seek counsel for protection and preservation of its liens and
security assets, or to defend its own interest, such expenses and counsel fees
shall be allowed to Lender. To the extent that the undertaking to indemnify, pay
and hold harmless set forth in this Section 15.12 may be unenforceable because
it is violative of any law or public policy, Borrower shall contribute the
maximum portion which it is permitted to pay and satisfy under applicable law,
to the payment and satisfaction of all indemnified matters incurred by Lender.
The foregoing indemnity shall survive the payment of the Obligations and the
termination of this Agreement. All of the foregoing costs and expenses shall be
part of the Obligations and secured by the Collateral.
15.13 Waiver of Notices. Unless otherwise expressly provided herein,
the Borrower waives presentment, protest and notice of demand or dishonor and
protest as to any instrument, as well as any and all other notices to which it
might otherwise be entitled. No notice to or demand on the Borrower which the
Lender may elect to give shall entitle the Borrower to any or further notice or
demand in the same, similar or other circumstances.
15.14 Binding Effect; Assignment. The provisions of this Agreement
shall be binding upon and inure to the benefit of the respective
representatives, successors and assigns of the parties hereto; provided,
however, that no interest herein may be assigned by the Borrower without the
prior written consent of the Lender. The rights and benefits of the Lender
hereunder shall, if the Lender so agrees, inure to any party acquiring any
interest in the Obligations or any part thereof.
15.15 Modification. This Agreement is intended by the Borrower and
the Lender to be the final, complete, and exclusive expression of the agreement
between them. This Agreement supersedes any and all prior oral or written
agreements relating to the subject matter hereof and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral agreements of the parties.
There are no oral agreements between the parties. No modification, rescission,
waiver, release, or amendment of any provision of this Agreement shall be made,
except by a written agreement signed by the Borrower and a duly authorized
officer of the Lender.
15.16 Counterparts. This Agreement may be executed in any number of
counterparts, and by the Lender and the Borrower in separate counterparts, each
of which shall be an original, but all of which shall together constitute one
and the same agreement.
15.17 Captions. The captions contained in this Agreement are for
convenience only, are without substantive meaning and should not be construed to
modify, enlarge, or restrict any provision.
15.18 Right of Set-Off. Whenever an Event of Default exists, the
Lender is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Lender or any affiliate of the Lender to
or for the credit or the account of the Borrower against any and all of the
Obligations,
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whether or not then due and payable. Lender agrees promptly to notify Borrower
after any such set-off and application made by Lender, provided that the failure
to give such notice shall not affect the validity of such set-off and
application.
15.19 Participating Lender's Security Interests. The Lender may,
without notice to or consent by the Borrower, grant one or more participations
in the Loans to Participating Lenders. If a Participating Lender shall at any
time with the Borrower's knowledge participate with the Lender in the Loans, the
Borrower hereby grants to such Participating Lender, and the Lender and such
Participating Lender shall have and are hereby given, a continuing lien on and
security interest in any money, securities and other property of the Borrower in
the custody or possession of the Participating Lender, including the right of
setoff, to the extent of the Participating Lender's participation in the
Obligations, and such Participating Lender shall be deemed to have the same
right of set-off to the extent of Participating Lender's participation in the
Obligations under this Agreement as it would have it were a direct lender.
15.20 Confidentiality. The Borrower agrees that, subject to the
Borrower's and the Lender's prior written consent for uses other than in a
traditional tombstone (disclosing in such tombstone, however, only the amount of
the credit facility provided by, and the parties to, this Agreement), which
consents shall not be unreasonably withheld or delayed, the Lender may use the
Borrower's name in advertising and promotional material and in conjunction
therewith disclose the general terms of this Agreement. The Lender agrees to
take normal and reasonable precautions and exercise due care to maintain the
confidentiality of all confidential information provided to the Lender by or on
behalf of the Borrower, under this Agreement or any other Loan Document, and
neither the Lender nor any of its Affiliates shall use any such information
other than in connection with or in enforcement of this Agreement and the other
Loan Documents, except to the extent that such information (i) was or becomes
generally available to the public other than as a result of disclosure by the
Lender, or (ii) was or becomes available on a nonconfidential basis from a
source other than the Borrower, provided that such source is not bound by a
confidentiality agreement with the Borrower known to the Lender; provided,
however, that the Lender may disclose such information (1) at the request of or
pursuant to any requirement of any governmental authority to which the Lender is
subject or in connection with an examination of the Lender by any such
governmental authority; (2) pursuant to subpoena or other court process; (3)
when required to do so in accordance with the provisions of any applicable
requirement of law; (4) to the extent reasonably required in connection with any
litigation or proceeding (including, but not limited to, any bankruptcy
proceeding) to which the Lender or any of its Affiliates may be party (or a
party in interest with respect to any bankruptcy proceeding), (5) to the extent
reasonably required in connection with the exercise of any remedy hereunder or
under any other Loan Document; (6) to the Lender's independent auditors,
accountants, attorneys and other professional advisors; (7) to any prospective
Participating Lender or assignee under any assignment and acceptance, actual or
potential, provided that such prospective Participating Lender or assignee
agrees to keep such information confidential to the same extent required of the
Lender hereunder; (8) as expressly permitted under the terms of any other
document or agreement regarding confidentiality to which the Borrower is party
or is
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deemed party with the Lender, and (9) to its Affiliates.
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IN WITNESS WHEREOF, the parties have entered into this Agreement on
the date first above written.
INTELLICELL CORP.
By:.............................
Title:
BANKAMERICA BUSINESS
CREDIT INC.
By:..............................
Title:
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List of Exhibits/Schedules
Exhibit A Permitted Liens
Exhibit B Financial Statements and Projections
_____ Exhibit B-1 Financial Statement
_____ Exhibit B-2 Projections
Schedule 7.3 Location of Collateral, etc.
Schedule 9.4 Corporate Name; Prior Transactions
Schedule 9.5 Subsidiaries and Affiliates
Schedule 9.10 Distributions
Schedule 9.13 Real Property and Leases
Schedule 9.14 Proprietary Rights Collateral (patents, trademarks, and
copyrights)
Schedule 9.15 Trade Names and Styles
Schedule 9.16 Litigation
Schedule 9.18 Labor Disputes
Schedule 10.14 Management Compensation
Schedule 10.18 New Subsidiaries
-1-
EXHIBIT A
PERMITTED LIENS
None
-2-
EXHIBIT B-1
FINANCIAL STATEMENTS
See attached.
-3-
EXHIBIT B-2
PROJECTIONS
See attached.
-4-
SCHEDULE 7.3
LOCATION OF COLLATERAL, ETC.
0000 Xxxxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
0000-0000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
00000 X.X. 00xx Xxxxxx, #000
Xxxxx, XX 00000
-5-
SCHEDULE 9.4
CORPORATE NAME; PRIOR TRANSACTIONS
Cellular Telecom Corporation, a California corporation organized under
Subchapter S of the Internal Revenue Code, was merged into Intellicell Corp. on
October 18, 1996.
-6-
SCHEDULE 9.5
SUBSIDIARIES AND AFFILIATES
SUBSIDIARIES: Intellicell Acquisition, Inc., a Delaware corporation
Intellicell International Acquisition, Inc., a Cayman Islands
corporation
AFFILIATES: Cellular Specialists, Inc.
Xxx Xxxxx
-7-
SCHEDULE 9.10
DISTRIBUTIONS
On November 18, 1997, the Board of Directors of Intellicell Corp. (the
"Company") declared the payment of a dividend to its shareholders in the form of
1,261,732 warrants to purchase Common Stock of the Company. Record owners of
Common Stock as of December 10, 1997, are entitled to one warrant for every two
shares of Common Stock held. Xxx Xxxxx, Chairman, CEO and President has waived
his rights to receive the warrants that would be issued on the shares of Common
Stock held by him. No fractional warrants shall be issuable in connection with
the payment of the dividend.
Each warrant will entitle the holder to purchase one share of Common Stock
at a price of $4.00 per share for a three year period, subject to adjustment in
certain circumstances. The warrants shall redeemable by the Company, upon notice
of not less than 30 days, at a price of $.10 per warrant in the event the
closing bid quotation of the Common Stock on all 20 of the trading days ending
on the third day prior to the day on which the Company gives notice has been at
least $7.00 per share; provided, however, that no such right of redemption shall
exist prior to the time that such shares of Common Stock underlying the warrants
have been registered under the Securities Act of 1933, as amended. The Company
intends to make an application for warrants to be listed and traded on the
NASDAQ SmallCap Market.
-8-
SCHEDULE 9.13
REAL PROPERTY AND LEASES
REAL PROPERTY: 1. 0000 Xxxxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
2. 0000-0000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
3. 00000 X.X. 00xx Xxxxxx, #000
Xxxxx, XX 00000
PERSONAL PROPERTY: 1993 Isuzu NPR
Hasel Leasing
Lease dated 2/95 (48 months)
-9-
SCHEDULE 9.14
PROPRIETARY RIGHTS COLLATERAL
REGISTERED TRADEMARKS:
Trademark Jurisdiction Reg. Date Registration No.
INTELLICELL United States 10/01/96 2,004,710
TRADEMARK APPLICATIONS:
Trademark Jurisdiction Date Filed Registration No.
INTELLICELL United States 10/02/95 75-000,622
THE INTELLIGENT CHOICE United States 01/13/95 74-621,992
REGISTERED COPYRIGHTS: None.
COPYRIGHT APPLICATIONS: None.
REGISTERED PATENTS: None.
PATENT APPLICATIONS: None.
LICENSES BY BORROWER: None.
LICENSES TO BORROWER: None.
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SCHEDULE 9.15
TRADE NAMES AND STYLES
Cellular Telecom Corporation (in Florida)
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SCHEDULE 9.16
LITIGATION
Arraycom Inc. v. Intellicell (as described in Borrower's 10Q for September 30,
1997)
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SCHEDULE 9.18
LABOR DISPUTES
LABOR CONTRACTS: None.
ORGANIZING ACTIVITY: None.
DISPUTES: None.
-13-
SCHEDULE 10.14
MANAGEMENT COMPENSATION
Xxx Xxxxx $150,000
Xxx Xxxxxxx $140,000
Xxxx Xxxxxx $120,000
-14-
SCHEDULE 10.18
NEW SUBSIDIARIES
Intellicell Acquisition, Inc., a Delaware corporation
Intellicell International Acquisition, Inc., a Cayman Islands corporation
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