ARTICLE I DEFINITIONS 1
Exhibit
10.32
Execution
Version
BY
AND BETWEEN
AIRGATE
INTERNATIONAL CORPORATION,
AIRGATE
INTERNATIONAL CORPORATION (CHICAGO)
PARADIGM
INTERNATIONAL, INC.
AND
XXXXX
FARGO BANK,
NATIONAL ASSOCIATION
Acting
through its Xxxxx Fargo Business Credit operating division
April
6, 2007
TABLE
OF CONTENTS
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ARTICLE
I DEFINITIONS
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1
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Section
1.1
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Definitions
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1
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Section
1.2
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Other
Definitional Terms; Rules of Interpretation
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10
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ARTICLE
II AMOUNT AND TERMS OF THE CREDIT FACILITY
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11
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Section
2.1
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Revolving
Advances
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11
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Section
2.2
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Procedures
for Requesting Advances
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11
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Section
2.3
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Reserved
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12
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Section
2.4
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Reserved
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12
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Section
2.5
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Joint
and Several Liability of Borrowers
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12
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Section
2.6
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Interest;
Default Interest Rate; Application of Payments; Participations;
Usury
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14
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Section
2.7
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Fees
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15
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Section
2.8
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Time
for Interest Payments; Payment on Non-Business Days; Computation
of
Interest and Fees
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16
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Section
2.9
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Lockbox
and Collateral Account; Sweep of Funds
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17
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Section
2.10
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Discretionary
Nature of this Facility; Termination by the Lender; Automatic
Renewal
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17
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Section
2.11
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Voluntary
Prepayment; Termination of the Credit Facility by the
Borrowers
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17
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Section
2.12
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Mandatory
Prepayment
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18
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Section
2.13
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Revolving
Advances to Pay Indebtedness
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18
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Section
2.14
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Use
of Proceeds
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18
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Section
2.15
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Liability
Records
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29
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ARTICLE
III SECURITY INTEREST; OCCUPANCY; SETOFF
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19
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Section
3.1
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Grant
of Security Interest
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19
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Section
3.2
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Notification
of Account Debtors and Other Obligors
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19
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Section
3.3
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Assignment
of Insurance
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19
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Section
3.4
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Occupancy
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20
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Section
3.5
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License
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20
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Section
3.6
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Financing
Statement
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20
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Section
3.7
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Setoff
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21
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Section
3.8
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Collateral
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21
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ARTICLE
IV CONDITIONS OF WILLINGNESS TO CONSIDER LENDING
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22
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Section
4.1
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Conditions
Precedent to Lender's Willingness to Consider Making the Initial
Advances
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22
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Section
4.2
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Conditions
Precedent to All Advances
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24
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-i-
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ARTICLE
V REPRESENTATIONS AND WARRANTIES
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24
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Section
5.1
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Existence
and Power; Name; Chief Executive Office; Inventory and Equipment
Locations; Federal Employer Identification Number and Organizational
Identification Number
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24
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Section
5.2
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Capitalization
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25
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Section
5.3
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Authorization
of Borrowing; No Conflict as to Law or Agreements
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25
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Section
5.4
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Legal
Agreements
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25
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Section
5.5
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Subsidiaries
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25
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Section
5.6
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Financial
Condition; No Adverse Change
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25
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Section
5.7
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Litigation
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25
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Section
5.8
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Regulation U
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26
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Section
5.9
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Taxes
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26
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Section
5.10
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Titles
and Liens
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26
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Section
5.11
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Intellectual
Property Rights
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26
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Section
5.12
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Plans
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27
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Section
5.13
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Default
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27
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Section
5.14
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Environmental
Matters
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28
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Section
5.15
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Submissions
to Lender
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28
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Section
5.16
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Financing
Statements
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28
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Section
5.17
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Rights
to Payment
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29
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Section
5.18
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[_Financial
Solvency_]
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29
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ARTICLE
VI COVENANTS
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29
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Section
6.1
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Reporting
Requirements
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29
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Section
6.2
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Financial
Covenants
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32
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Section
6.3
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Permitted
Liens; Financing Statements
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34
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Section
6.4
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Indebtedness
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34
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Section
6.5
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Guaranties
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35
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Section
6.6
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Investments
and Subsidiaries
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35
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Section
6.7
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Dividends
and Distributions
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35
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Section
6.8
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Salaries
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36
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Section
6.9
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Reserved.
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36
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Section
6.10
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Books
and Records; Collateral Examination; Inspection and
Appraisals
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36
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Section
6.11
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Account
Verification
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36
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Section
6.12
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Compliance
with Laws
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36
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Section
6.13
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Payment
of Taxes and Other Claims
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37
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Section
6.14
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Maintenance
of Properties
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37
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Section
6.15
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Insurance
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38
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Section
6.16
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Preservation
of Existence
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38
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Section
6.17
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Delivery
of Instruments, etc.
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38
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Section
6.18
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Sale
or Transfer of Assets; Suspension of Business Operations
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38
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Section
6.19
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Consolidation
and Merger; Asset Acquisitions
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38
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Section
6.20
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Sale
and Leaseback
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38
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Section
6.21
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Restrictions
on Nature of Business
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39
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Section
6.22
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Accounting
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39
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Section
6.23
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Discounts,
etc.
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39
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Section
6.24
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Plans
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39
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Section
6.25
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Place
of Business; Name
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39
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Section
6.26
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Constituent
Documents; S Corporation Status
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39
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Section
6.27
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Affiliate
Transactions
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39
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Section
6.28
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Performance
by the Lender
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39
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-ii-
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ARTICLE
VII EVENTS OF DEFAULT, RIGHTS AND REMEDIES
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40
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Section
7.1
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Events
of Default
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40
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Section
7.2
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Rights
and Remedies
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42
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Section
7.3
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Certain
Notices
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43
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ARTICLE
VIII MISCELLANEOUS
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43
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Section
8.1
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No
Waiver; Cumulative Remedies; Compliance with Laws
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43
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Section
8.2
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Amendments,
Etc.
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43
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Section
8.3
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Notices;
Communication of Confidential Information; Requests for
Accounting
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44
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Section
8.4
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Further
Documents
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44
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Section
8.5
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Costs
and Expenses
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44
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Section
8.6
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Indemnity
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45
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Section
8.7
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Participants
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45
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Section
8.8
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Execution
in Counterparts; Telefacsimile Execution
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45
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Section
8.9
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Retention
of Borrowers’ Records
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46
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Section
8.10
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Binding
Effect; Assignment; Complete Agreement; Sharing
Information
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46
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Section
8.11
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Severability
of Provisions
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46
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Section
8.12
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Headings
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46
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Section
8.13
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Governing
Law; Jurisdiction, Venue; Waiver of Jury Trial
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46
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-iii-
Dated
as
of April 6, 2007
AIRGATE
INTERNATIONAL CORPORATION, a New York corporation (“Airgate NY”), AIRGATE
INTERNATIONAL CORPORATION (CHICAGO), an Illinois corporation (“Airgate
Chicago”), PARADIGM INTERNATIONAL, INC., a Florida corporation (“Paradigm”)
(Airgate NY, Airgate Chicago and Paradigm are each individually a “Borrower” and
collectively and individually the “Borrowers”), and XXXXX FARGO BANK, NATIONAL
ASSOCIATION (as more fully defined in Article I herein, the “Lender”) through
its Xxxxx Fargo Business Credit operating division, hereby agree as
follows:
ARTICLE
I
DEFINITIONS
Section
1.1 Definitions.
Except
as otherwise expressly provided in this Agreement, the following terms shall
have the meanings given them in this Section:
“Accounts”
shall have the meaning given it under the UCC.
“Accounts
Advance Rate” means up to eighty-five percent (85%), or such lesser rate as the
Lender in its sole discretion may deem appropriate from time to time; provided
that, as of any date of determination, the Accounts Advance Rate shall be
reduced by one (1) percentage point for each percentage by which Dilution is
in
excess of five percent (5%).
“Advance”
means a Revolving Advance.
“Affiliate”
or “Affiliates” means Parent, Pacific CMA, and any other Person controlled by,
controlling or under common control with the Borrowers, including any Subsidiary
of the Borrowers. For purposes of this definition, “control,” when used with
respect to any specified Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise.
“Agreement”
means this Credit and Security Agreement.
“Availability”
means the amount, if any, by which the Borrowing Base exceeds the outstanding
principal balance of the Revolving Note.
“Book
Net
Worth” means the aggregate of the Owners’ equity in the Borrowers, determined in
accordance with GAAP.
“Borrowing
Base” means at any time the lesser of:
(a) The
Maximum Line Amount; or
(b) Subject
to change from time to time in the Lender’s sole discretion, the sum
of:
(i) The
product of the Accounts Advance Rate times Eligible Accounts,
less
(ii) The
Borrowing Base Reserve, less
(iii) Indebtedness
that the Borrowers owe to the Lender that has not yet been advanced on the
Revolving Note, including, without limitation, the dollar amount that the Lender
in its discretion believes is a reasonable determination of the Borrowers’
credit exposure with respect to any swap, derivative, foreign exchange, hedge,
deposit, treasury management or other similar transaction or arrangement offered
to Borrowers by Lender that is not described in Article II of this Agreement
obligations owed to Xxxxx Fargo Merchant Services, LLC.
“Borrowing
Base Reserve” means, as of any date of determination, such amounts (expressed as
either a specified amount or as a percentage of a specified category or item)
as
the Lender may from time to time establish and adjust in reducing Availability
(a) to reflect events, conditions, contingencies or risks which, as determined
by the Lender, do or may affect (i) the Collateral or its value, (ii) the
assets, business or prospects of the Borrowers, or (iii) the security interests
and other rights of the Lender in the Collateral (including the enforceability,
perfection and priority thereof), or (b) to reflect the Lender’s judgment that
any collateral report or financial information furnished by or on behalf of
the
Borrowers to the Lender is or may have been incomplete, inaccurate or misleading
in any material respect, or (c) in respect of any state of facts that the Lender
determines constitutes a Default or an Event of Default.
"Business
Day" means a day on which the Federal Reserve Bank of New York is open for
business.
“Capital
Expenditures” means for a period, any expenditure of money during such period
for the lease, purchase or other acquisition of any capital asset, or for the
lease of any other asset whether payable currently or in the
future.
“Change
of Control” means the occurrence of any of the following events:
(a) Any
Person or “group” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934) who is not an Owner on the Funding Date is
or
becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that a Person will be deemed to have
“beneficial ownership” of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than ten percent (10%) of the voting
power of all classes of Owners of the Borrowers;
(b) Any
Person or “group” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934) is or becomes the “beneficial owner” (as
defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
except that a Person will be deemed to have “beneficial ownership” of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than ten percent (10%) of the voting power of all classes
of
Owners of Parent;
-2-
(c) Any
Person or “group” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934) is or becomes the “beneficial owner” (as
defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
except that a Person will be deemed to have “beneficial ownership” of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than [fifty-one percent (51%)] of the voting power of all
classes of Owners of Pacific CMA;
(d) During
any consecutive two-year period, individuals who at the beginning of such period
constituted the board of Directors of the Borrowers (together with any new
Directors whose election to such board of Directors, was approved by a vote
of
the Owners;
(e) During
any consecutive two-year period, any change in the manager; or
(f) During
any consecutive two-year period, individuals who at the beginning of such period
constituted the board of Directors of Pacific CMA (together with any new
Directors whose election to such board of Directors, or whose nomination for
election by the Owners of Pacific CMA, was approved by a vote of two thirds
of
the Directors then still in office who were either Directors at the beginning
of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the board of
Directors of Pacific CMA then in office; or
(g) Any
one
or more of Xxxxxx Xxx, Xxxxx Xxxxxx, Xxxx Xxxx, or Xxx Xxxx Xxx shall cease
to
actively manage the Borrowers’ day-to-day business activities.
“Collateral”
means all of the Borrowers’ Accounts, chattel paper and electronic chattel
paper, deposit accounts, documents, Equipment, General Intangibles, goods,
instruments, Inventory, Investment Property, letter-of-credit rights, letters
of
credit, all sums on deposit in any Collateral Account, and any items in any
Lockbox; together with (i) all substitutions and replacements for and
products of any of the foregoing; (ii) in the case of all goods, all
accessions; (iii) all accessories, attachments, parts, equipment and
repairs now or hereafter attached or affixed to or used in connection with
any
goods; (iv) all warehouse receipts, bills of lading and other documents of
title now or hereafter covering such goods; (v) all collateral subject to
the Lien of any Security Document; (vi) any money, or other assets of the
Borrowers that now or hereafter come into the possession, custody, or control
of
the Lender; (vii) proceeds of any and all of the foregoing; (viii) books
and records of the Borrowers, including all mail or electronic mail addressed
to
the Borrowers; and (ix) all of the foregoing, whether now owned or existing
or
hereafter acquired or arising or in which the Borrowers now have or hereafter
acquire any rights.
“Collateral
Account” means, collectively and individually, (a) the “Lender Account” as
defined in the Wholesale Lockbox and Collection Account Agreement, and (b)
the
“Collection Accounts” as defined in the Collection Account
Agreements.
“Collection
Account Agreement” means collectively and individually, (a) the Collection
Account Agreement by and between Airgate NY, JPMorgan Chase Bank and the Lender,
dated the same date as this Agreement, and (b) the Collection Account Agreement
by and between Airgate Chicago, JPMorgan Chase Bank and the Lender.
-3-
“Constituent
Documents” means with respect to any Person, as applicable, such Person’s
certificate of incorporation, articles of incorporation, by-laws, certificate
of
formation, articles of organization, limited liability company agreement,
management agreement, operating agreement, shareholder agreement, partnership
agreement or similar document or agreement governing such Person’s existence,
organization or management or concerning disposition of ownership interests
of
such Person or voting rights among such Person’s owners.
“Credit
Facility” means the discretionary credit facility under which Revolving Advances
may be made available to the Borrowers by the Lender under Article
II.
“Debt”
means of a Person as of a given date, all items of indebtedness or liability
which in accordance with GAAP would be included in determining total liabilities
as shown on the liabilities side of a balance sheet for such Person and shall
also include the aggregate payments required to be made by such Person at any
time under any lease that is considered a capitalized lease under
GAAP.
“Default”
means an event that, with giving of notice or passage of time or both, would
constitute an Event of Default.
“Default
Period” means any period of time beginning on the day a Default or Event of
Default occurs and ending on the date identified by the Lender in writing as
the
date that such Default or Event of Default has been cured or
waived.
“Default
Rate” means an annual interest rate in effect during a Default Period or
following the Termination Date, which interest rate shall be equal to three
percent (3%) over the applicable Floating Rate, as such rate may change from
time to time.
“Dilution”
means, as of any date of determination, a percentage, based upon the experience
of the trailing six (6) month period ending on the date of determination, which
is the result of dividing (a) actual bad debt write-downs, discounts,
advertising allowances, credits, or other dilutive items with respect to the
Accounts as determined by Lender in its sole discretion during such period,
by
(b) the Borrowers’ net sales during such period (excluding extraordinary items)
plus the amount of clause (a).
“Director”
means a director if the applicable Borrower is a corporation, a governor or
manager if the applicable Borrower is a limited liability company, or a general
partner if the applicable Borrower is a partnership.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from
time
to time.
“ERISA
Affiliate” means any trade or business (whether or not incorporated) that is a
member of a group which includes the Borrowers and which is treated as a single
employer under Section 414 of the IRC.
-4-
“Eligible
Accounts” means all unpaid Accounts of the Borrowers arising from the sale or
lease of goods or the performance of services, net of any credits, but excluding
any such Accounts having any of the following characteristics:
(i) That
portion of Accounts unpaid 90 days or more after the invoice date or more
than 60 days past the invoice date;
(ii) That
portion of Accounts related to goods or services with respect to which the
Borrowers have received notice of a claim or dispute, which are subject to
a
claim of offset or a contra account, or which reflect a reasonable reserve
for
warranty claims or returns;
(iii) That
portion of Accounts not yet earned by the final delivery of goods or rendition
of services, as applicable, by the Borrowers to the customer, including progress
xxxxxxxx, and that portion of Accounts for which an invoice has not been sent
to
the applicable account debtor;
(iv) Accounts
constituting (i) proceeds of copyrightable material unless such copyrightable
material shall have been registered with the United States Copyright Office,
or
(ii) proceeds of patentable inventions unless such patentable inventions have
been registered with the United States Patent and Trademark Office;
(v) Accounts
owed by any unit of government, whether foreign or domestic (provided,
however,
that
there shall be included in Eligible Accounts that portion of Accounts owed
by
such units of government for which the Borrowers have provided evidence
satisfactory to the Lender that (A) the Lender has a first priority
perfected security interest and (B) such Accounts may be enforced by the
Lender directly against such unit of government under all applicable
laws);
(vi) Accounts
denominated in any currency other than United States dollars;
(vii) Accounts
owed by an account debtor located outside the United States which are not
(A) backed by a bank letter of credit naming the Lender as beneficiary or
assigned to the Lender, in the Lender’s possession or control, and with respect
to which a control agreement concerning the letter-of-credit rights is in
effect, and acceptable to the Lender in all respects, in its sole discretion,
or
(B) covered by a foreign receivables insurance policy acceptable to the
Lender in its sole discretion;
(viii) Accounts
owed by an account debtor that is insolvent, the subject of bankruptcy
proceedings or has gone out of business;
(ix) Accounts
owed by an Owner, Subsidiary, Affiliate, Officer or employee of the
Borrowers;
(x) Accounts
not subject to a duly perfected security interest in the Lender’s favor or which
are subject to any Lien in favor of any Person other than the
Lender;
-5-
(xi) That
portion of Accounts that has been restructured, extended, amended or
modified;
(xii) That
portion of Accounts that constitutes advertising, finance charges, service
charges or sales or excise taxes;
(xiii) Accounts
owed by an account debtor, regardless of whether otherwise eligible, to the
extent that the aggregate balance of such Accounts exceeds 15% of the aggregate
amount of all Accounts;
(xiv) Accounts
owed by an account debtor, regardless of whether otherwise eligible, if
twenty-five percent (25%) or more of the total amount of Accounts due from
such
debtor is ineligible under clauses (i), (ii), or (xi) above;
and
(xv) Accounts,
or portions thereof, otherwise deemed ineligible by the Lender in its sole
discretion.
“Equipment”
shall have the meaning given it under the UCC.
“Event
of
Default” is defined in Section 7.1.
“Financial
Covenants” means the covenants set forth in Section 6.2.
“Floating
Rate” means an annual interest rate equal to the sum of the Prime Rate plus
three quarters of one percent (0.75%), which interest rate shall change when
and
as the Prime Rate changes.
“Floating
Rate Advance” means an Advance bearing interest at the Floating Rate.
“Funding
Date” is defined in Section 2.1.
“GAAP”
means generally accepted accounting principles, applied on a basis consistent
with the accounting practices applied in the financial statements described
in
Section 5.6.
“General
Intangibles” shall have the meaning given it under the UCC.
“Guarantor”
means (a) Pacific CMA, (b) Parent, (c) Xxxxxx Xxx and
(d)
every other Person now or in the future who agrees to guaranty the
Indebtedness.
“Guaranty”
means each unconditional continuing guaranty executed by a Guarantor in favor
of
the Lender.
“Hazardous
Substances” means pollutants, contaminants, hazardous substances, hazardous
wastes, petroleum and fractions thereof, and all other chemicals, wastes,
substances and materials listed in, regulated by or identified in any
Environmental Law.
“Indebtedness”
is used herein in its most comprehensive sense and means any and all advances,
debts, obligations and liabilities of the Borrowers to the Lender, heretofore,
now or hereafter made, incurred or created, whether voluntary or involuntary
and
however arising, whether due or not due, absolute or contingent, liquidated
or
unliquidated, determined or undetermined, including under any swap, derivative,
foreign exchange, hedge, deposit, treasury management or other similar
transaction or arrangement at any time entered into by the Borrowers with the
Lender or with Xxxxx Fargo Merchant Services, L.L.C., and whether the Borrowers
may be liable individually or jointly with others, or whether recovery upon
such
Indebtedness may be or hereafter becomes unenforceable.
-6-
“Indemnified
Liabilities” is defined in Section 8.6
“Indemnitees”
is defined in Section 8.6.
“IRC”
means the Internal Revenue Code of 1986, as amended from time to
time.
“Infringement”
or “Infringing” when used with respect to Intellectual Property Rights means any
infringement or other violation of Intellectual Property Rights.
“Intellectual
Property Rights” means all actual or prospective rights arising in connection
with any intellectual property or other proprietary rights, including all rights
arising in connection with copyrights, patents, service marks, trade dress,
trade secrets, trademarks, trade names or mask works.
“Interest
Payment Date” is defined in Section 2. 8(a).
“Inventory”
shall have the meaning given it under the UCC.
“Investment
Property” shall have the meaning given it under the UCC.
“Lender”
means Xxxxx Fargo Bank, National Association in its broadest and most
comprehensive sense as a legal entity, and is not limited in its meaning to
Lender’s Xxxxx Fargo Business Credit operating division, or to any other
operating division of Lender.
“Licensed
Intellectual Property” is defined in Section 5.11(c) .
“Lien”
means any security interest, mortgage, deed of trust, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument or device,
including the interest of each lessor under any capitalized lease and the
interest of any bondsman under any payment or performance bond, in, of or on
any
assets or properties of a Person, whether now owned or subsequently acquired
and
whether arising by agreement or operation of law.
“Loan
Documents” means this Agreement, the Revolving Note, each Guaranty, each
Subordination Agreement, and the other Security Documents, together with every
other agreement, note, document, contract or instrument to which the Borrowers
now or in the future may be a party and which is required by the
Lender.
“Loan
Year” is defined in Section 2.6(c).
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“Lockbox”
means, collectively and individually, the “Lockbox” as defined in the (a)
Wholesale Lockbox and Collection Account Agreement and (b) the Collection
Account Agreement.
“Material
Adverse Effect” means any of the following:
(i) A
material adverse effect on the business, operations, results of operations,
prospects, assets, liabilities or financial condition of the
Borrowers;
(ii) A
material adverse effect on the ability of the Borrowers to perform their
obligations under the Loan Documents;
(iii) A
material adverse effect on the ability of the Lender to enforce the Indebtedness
or to realize the intended benefits of the Security Documents, including a
material adverse effect on the validity or enforceability of any Loan Document
or of any rights against any Guarantor, or on the status, existence, perfection,
priority (subject to Permitted Liens) or enforceability of any Lien securing
payment or performance of the Indebtedness; or
(iv) Any
claim
against the Borrowers or threat of litigation which if determined adversely
to
the Borrowers would cause the Borrowers to be liable to pay an amount exceeding
$100,000 or would result in the occurrence of an event described in
clauses (i), (ii) and (iii) above.
“Maturity
Date” is defined in Section 2.10.
“Maximum
Line Amount” means $10,000,000 unless this amount is reduced pursuant to Section
2.11, in which event it means such lower amount.
“Multiemployer
Plan” means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to
which the Borrowers or any ERISA Affiliate contributes or is obligated to
contribute.
“Net
Cash
Proceeds” means in connection with any asset sale, the cash proceeds (including
any cash payments received by way of deferred payment whether pursuant to a
note, installment receivable or otherwise, but only as and when actually
received) from such asset sale, net of (i) attorneys’ fees, accountants’ fees,
investment banking fees, brokerage commissions and amounts required to be
applied to the repayment of any portion of the Debt secured by a Lien not
prohibited hereunder on the asset which is the subject of such sale, and (ii)
taxes paid or reasonably estimated to be payable as a result of such asset
sale.
“Net
Income” means fiscal year-to-date after-tax net
income from continuing operations, including
extraordinary losses but excluding extraordinary gains, all as determined in
accordance with GAAP.
“Net
Loss” means fiscal year-to-date after-tax net loss from continuing operations as
determined in accordance with GAAP.
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“Net
Orderly Liquidation Value” means a professional opinion of the estimated most
probable Net Cash Proceeds which could typically be realized at a properly
advertised and professionally managed liquidation sale, conducted under orderly
sale conditions for an extended period of time (usually six to nine months),
under the economic trends existing at the time of the appraisal.
“Officer”
means with respect to the Borrowers, an officer if the applicable Borrower
is a
corporation, a manager if the applicable Borrower is a limited liability
company, or a partner if the applicable Borrower is a partnership.
“OFAC”
is
defined in Section 6.12(c).
“Original
Maturity Date” means April ___, 2009.
"Overadvance"
means the amount, if any, by which the outstanding principal balance of the
Revolving Note is in excess of the then-existing Borrowing Base.
“Owned
Intellectual Property” is defined in Section 5.11(a).
“Owner”
means with respect to the Borrowers, each Person having legal or beneficial
title to an ownership interest in the Borrowers or a right to acquire such
an
interest.
“Pacific
CMA” means Pacific CMA, Inc., a Delaware corporation.
“Parent”
means Pacific CMA International, LLC, a Colorado limited liability
company.
“Pension
Plan” means a pension plan (as defined in Section 3(2) of ERISA) maintained for
employees of the Borrowers or any ERISA Affiliate and covered by Title IV of
ERISA.
“Permitted
Lien” and “Permitted Liens” are defined in Section 6.3(a) .
“Person”
means any individual, corporation, partnership, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization
or
government or any agency or political subdivision thereof.
“Plan”
means an employee benefit plan (as defined in Section 3(3) of ERISA) maintained
for employees of the Borrowers or any ERISA Affiliate.
“Premises”
means all locations where the Borrowers conduct their business or have any
rights of possession, including the locations legally described in Exhibit
C
attached hereto.
“Prime
Rate” means at any time the rate of interest most recently announced by the
Lender at its principal office as its Prime Rate, with the understanding that
the Prime Rate is one of the Lender’s base rates, and serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto, and is evidenced by the recording thereof in such internal
publication or publications as the Lender may designate. Each change in the
rate
of interest shall become effective on the date each Prime Rate change is
announced by the Lender.
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“Reportable
Event” means a reportable event (as defined in Section 4043 of ERISA), other
than an event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the Pension Benefit Guaranty
Corporation.
“Revolving
Advance” is defined in Section 2.1.
“Revolving
Note” means the Borrowers’ revolving promissory note, payable to the order of
the Lender in substantially the form of Exhibit A hereto, as same may be renewed
and amended from time to time, and all replacements thereto.
“Security
Documents” means this Agreement, the Wholesale Lockbox and Collection Account
Agreement, and any other document delivered to the Lender from time to time
to
secure the Indebtedness.
“Security
Interest” is defined in Section 3.1.
“Subordinated
Creditor” means (a) BHC Interim Funding, L.P. and (b) every other Person now or
in the future who agrees to subordinate indebtedness of the Borrowers held
by
that Person to the payment of the Indebtedness.
“Subordination
Agreement” means a subordination agreement executed by a Subordinated Creditor
in favor of the Lender and acknowledged by the Borrowers.
“Subsidiary”
means any Person of which more than fifty percent (50%) of the outstanding
ownership interests having general voting power under ordinary circumstances
to
elect a majority of the board of directors or the equivalent of such Person,
regardless of whether or not at the time ownership interests of any other class
or classes shall have or might have voting power by reason of the happening
of
any contingency, is at the time directly or indirectly owned by the Borrowers,
by the Borrowers and one or more other Subsidiaries, or by one or more other
Subsidiaries.
“Termination
Date” means the earliest of (i) the Maturity Date, (ii) the date the Borrowers
terminate the Credit Facility, or (iii) the date the Lender demands payment
of
the Indebtedness.
“UCC”
means the Uniform Commercial Code as in effect in the state designated in this
Agreement as the state whose laws shall govern this Agreement, or in any other
state whose laws are held to govern this Agreement or any portion of this
Agreement.
“Wholesale
Lockbox and Collection Account Agreement” means the Wholesale Lockbox and
Collection Account Agreement by and between the Borrowers and the Lender, dated
the same date as this Agreement.
Section
1.2 Other
Definitional Terms; Rules of Interpretation.
The
words “hereof”, “herein” and “hereunder” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All accounting terms not otherwise
defined herein have the meanings assigned to them in accordance with GAAP.
All
terms defined in the UCC and not otherwise defined herein have the meanings
assigned to them in the UCC. References to Articles, Sections, subsections,
Exhibits, Schedules and the like, are to Articles, Sections and subsections
of,
or Exhibits or Schedules attached to, this Agreement unless otherwise expressly
provided. The words “include”, “includes” and “including” shall be deemed to be
followed by the phrase “without limitation”. Unless the context in which used
herein otherwise clearly requires, “or” has the inclusive meaning represented by
the phrase “and/or”. Defined terms include in the singular number the plural and
in the plural number the singular. Reference to any agreement (including the
Loan Documents), document or instrument means such agreement, document or
instrument as amended or modified and in effect from time to time in accordance
with the terms thereof (and, if applicable, in accordance with the terms hereof
and the other Loan Documents), except where otherwise explicitly provided,
and
reference to any promissory note includes any promissory note which is an
extension or renewal thereof or a substitute or replacement therefor. Reference
to any law, rule, regulation, order, decree, requirement, policy, guideline,
directive or interpretation means as amended, modified, codified, replaced
or
reenacted, in whole or in part, and in effect on the determination date,
including rules and regulations promulgated thereunder.
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ARTICLE
II
AMOUNT
AND TERMS OF THE CREDIT FACILITY
Section
2.1 Revolving
Advances.
The
Lender may, in its sole discretion, subject to the terms and conditions of
this
Agreement, make advances (“Revolving Advances”) to the Borrowers from time to
time from the date that all of the conditions set forth in 4.1 are satisfied
(the “Funding Date”) to and until (but not including) the Termination Date in an
amount not in excess of the Maximum Line Amount. The Lender shall not consider
any request for a Revolving Advance to the extent that the amount of the
requested Revolving Advance exceeds Availability. The Borrowers’ obligation to
repay the Revolving Advances shall be the joint and several liability of
Borrowers (as set forth in more detail in Section 2.5), shall be evidenced
by
the Revolving Note and shall be secured by the Collateral. Within the limits
set
forth in this Section 2.1, the Borrowers may request Revolving Advances, prepay
pursuant to Section 2.11, and request additional Revolving
Advances.
Section
2.2 Procedures
for Requesting Advances.
The
Borrowers shall comply with the following procedures in requesting Revolving
Advances:
(a) Advances.
Each
Advance shall be funded as a Floating Rate Advance.
(b) Time
for Requests.
The
Borrowers shall request each Advance not later than the Cut-off Time on the
Business Day on which the
Advance is to be made.
Each
request that conforms to the terms of this Agreement shall be effective upon
receipt by the Lender, shall be in writing or by telephone or telecopy
transmission, and shall be confirmed in writing by the Borrowers if so requested
by the Lender,
by
(i) an Officer of the Borrowers; or (ii) a Person designated as the
Borrowers’ agent by an Officer of the Borrowers in a writing delivered to the
Lender; or (iii) a Person whom the Lender reasonably believes to be an
Officer of the Borrowers or such a designated agent.
The
Borrowers shall repay all Advances even if the Lender does not receive such
confirmation and even if the Person requesting an Advance was not in fact
authorized to do so. Any request for an Advance, whether written or telephonic,
shall be deemed to be a representation by the Borrowers that the conditions
set
forth in Section 4.2 have been satisfied as of the time of the
request.
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(c) Disbursement.
Upon
fulfillment of the applicable conditions set forth in Article IV and the
Lender’s determination to make the Advance, the Lender shall disburse the
proceeds of the requested Advance by crediting the same to the Borrowers’ demand
deposit account maintained with the Lender unless the Lender and the Borrowers
shall agree in writing to another manner of disbursement.
Section
2.3 Reserved.
Section
2.4 Reserved.
Section
2.5 Joint
and Several Liability of Borrowers.
(a) Each
Borrower is accepting joint and several liability hereunder and under the other
Loan Documents in consideration of the financial accommodations to be provided
by the Lender under this Agreement, for the mutual benefit, directly and
indirectly, of each Borrower and in consideration of the undertakings of the
other Borrower to accept joint and several liability for the
Indebtedness.
(b) Each
Borrower, jointly and severally, hereby irrevocably and unconditionally accepts,
not merely as a surety but also as a co-debtor, joint and several liability
with
the other Borrower, with respect to the payment and performance of all of the
Indebtedness (including any Indebtedness arising under this Section 2.5), it
being the intention of the parties hereto that all of the Indebtedness shall
be
the joint and several obligations of each Borrower without preferences or
distinction among them.
(c) If
and to
the extent that any Borrower shall fail to make any payment with respect to
any
of the Indebtedness as and when due or to fully repay and satisfy any of the
Indebtedness in accordance with the terms of this Agreement, then in each such
event the other Borrower shall make such payment with respect to, such
Indebtedness.
(d) The
Indebtedness of each Borrower under the provisions of this Section 2.5
constitute the absolute and unconditional, full recourse Indebtedness of each
Borrower enforceable against each Borrower to the full extent of its properties
and assets, irrespective of the validity, regularity or enforceability of this
Agreement or any other circumstances whatsoever.
(e) Except
as
otherwise expressly provided in this Agreement, each Borrower hereby waives
notice of acceptance of its joint and several liability, notice of the
occurrence of any Default, Event of Default, or of any demand for any payment
under this Agreement, notice of any action at any time taken or omitted by
Lender under or in respect of the Indebtedness, any requirement of diligence
or
to mitigate damages and, generally, to the extent permitted by applicable law,
all demands, notices and other formalities of every kind in connection with
this
Agreement (except as otherwise provided in this Agreement). Each Borrower hereby
assents to, and waives notice of, any extension or postponement of the time
for
the payment of the Indebtedness, the acceptance of any payment of the
Indebtedness, the acceptance of any partial payment thereon, any waiver, consent
or other action or acquiescence by Lender at any time or times in respect of
any
default by any Borrower in the performance or satisfaction of any term,
covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by Lender in respect of any of the Indebtedness, and
the
taking, addition, substitution or release, in whole or in part, at any time
or
times, of any security for any of the Indebtedness or the addition, substitution
or release, in whole or in part, of any Borrower. Without limiting the
generality of the foregoing, each Borrower assents to any other action or delay
in acting or failure to act on the part of Lender with respect to the failure
by
any Borrower to comply with any of its respective Indebtedness, including any
failure strictly or diligently to assert any right or to pursue any remedy
or to
comply fully with applicable laws or regulations thereunder, which might, but
for the provisions of this Section 2.5 afford grounds for terminating,
discharging or relieving any Borrower, in whole or in part, from any of its
Indebtedness under this Section 2.5, it being the intention of each Borrower
that, so long as any of the Indebtedness hereunder remain unsatisfied, the
Indebtedness of each Borrower under this Section 2.5 shall not be discharged
except by performance and then only to the extent of such performance. The
Indebtedness of each Borrower under this Section 2.5 shall not be diminished
or
rendered unenforceable by any winding up, reorganization, arrangement,
liquidation, reconstruction or similar proceeding with respect to any Borrower
or Lender.
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(f) Each
Borrower represents and warrants to Lender that such Borrower is currently
informed of the financial condition of itself and the other Borrowers and of
all
other circumstances which a diligent inquiry would reveal and which bear upon
the risk of nonpayment of the Indebtedness. Each Borrower further represents
and
warrants to Lender that such Borrower has read and understands the terms and
conditions of the Loan Documents. Each Borrower hereby covenants that such
Borrower will continue to keep informed of Borrower's financial condition,
the
financial condition of other guarantors, if any, and of all other circumstances
which bear upon the risk of nonpayment or nonperformance of the
Indebtedness.
(g) Each
Borrower waives all rights and defenses arising out of an election of remedies
by Lender, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
Lender's rights of subrogation and reimbursement against such
Borrower.
(h) The
provisions of this Section 2.5 are made for the benefit of Lender and its
respective successors and assigns, and may be enforced by it or them from time
to time against each Borrower as often as occasion therefor may arise and
without requirement on the part of Lender, successors or assigns first to
marshal any of its or their claims or to exercise any of its or their rights
against any Borrower or to exhaust any remedies available to it or them against
any Borrower or to resort to any other source or means of obtaining payment
of
any of the Indebtedness hereunder or to elect any other remedy. The provisions
of this Section 2.5 shall remain in effect until the Indebtedness shall have
been paid in full or otherwise fully satisfied. If at any time, any payment,
or
any part thereof, made in respect of the Indebtedness, is rescinded or must
otherwise be restored or returned by Lender upon the insolvency, bankruptcy
or
reorganization of any Borrower, or otherwise, the provisions of this Section
2.5
will forthwith be reinstated in effect, as though such payment had not been
made.
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(i) Each
Borrower hereby agrees that it will not enforce any of its rights of
contribution or subrogation against any other Borrower with respect to any
liability incurred by it hereunder or under any of the other Loan Documents,
any
payments made by it to Lender with respect to any of the Indebtedness or any
collateral security therefor until such time as all of the Indebtedness has
been
paid in full in cash. Any claim which any Borrower may have against any other
Borrower with respect to any payments to any Lender hereunder or under any
other
Loan Documents are hereby expressly made subordinate and junior in right of
payment, without limitation as to any increases in the Indebtedness arising
hereunder or thereunder, to the prior payment in full in cash of the
Indebtedness and, in the event of any insolvency, bankruptcy, receivership,
liquidation, reorganization or other similar proceeding under the laws of any
jurisdiction relating to any Borrower, its debts or its assets, whether
voluntary or involuntary, the Indebtedness shall be paid in full in cash before
any payment or distribution of any character, whether in cash, securities or
other property, shall be made to any other Borrower therefor.
Section
2.6 Interest;
Default Interest Rate; Application of Payments; Participations;
Usury.
(a) Interest.
Except
as provided in Section 2.6(d) and Section 2.6(g), the principal amount of each
Advance shall bear interest as a Floating Rate Advance.
(b) Reserved.
(c) Reserved.
(d) Default
Interest Rate.
At any
time during any Default Period or following the Termination Date, in the
Lender’s sole discretion and without waiving any of its other rights or
remedies, the principal of the Revolving Note shall bear interest at the Default
Rate or such lesser rate as the Lender may determine, effective as of the first
day of the month in which any Default Period begins through the last day of
such
Default Period, or any shorter time period that the Lender may determine. The
decision of the Lender to impose a rate that is less than the Default Rate
or to
not impose the Default Rate for the entire duration of the Default Period shall
be made by the Lender in its sole discretion and shall not be a waiver of any
of
its other rights and remedies, including its right to retroactively impose
the
full Default Rate for the entirety of any such Default Period or following
the
Termination Date.
(e) Application
of Payments. Payments
shall be applied to the Indebtedness on the Business Day of receipt by the
Lender in the Lender’s general account, but the amount of principal paid shall
continue to accrue interest at the interest rate applicable under the terms
of
this Agreement from the calendar day the Lender receives the payment, and
continuing through the end of the second Business Day following receipt of
the
payment.
(f) Participations.
If any
Person shall acquire a participation in the Advances the Borrowers shall be
obligated to the Lender to pay the full amount of all interest calculated under
this Section 2.6, along with all other fees, charges and other amounts due
under
this Agreement, regardless if such Person elects to accept interest with respect
to its participation at a lower rate than that calculated under this Section
2.6, or otherwise elects to accept less than its prorata share of such fees,
charges and other amounts due under this Agreement.
-14-
(g) Usury.
In any
event no rate change shall be put into effect which would result in a rate
greater than the highest rate permitted by law. Notwithstanding anything to
the
contrary contained in any Loan Document, all agreements which either now are
or
which shall become agreements between the Borrowers and the Lender are hereby
limited so that in no contingency or event whatsoever shall the total liability
for payments in the nature of interest, additional interest and other charges
exceed the applicable limits imposed by any applicable usury laws. If any
payments in the nature of interest, additional interest and other charges made
under any Loan Document are held to be in excess of the limits imposed by any
applicable usury laws, it is agreed that any such amount held to be in excess
shall be considered payment of principal hereunder, and the indebtedness
evidenced hereby shall be reduced by such amount so that the total liability
for
payments in the nature of interest, additional interest and other charges shall
not exceed the applicable limits imposed by any applicable usury laws, in
compliance with the desires of the Borrowers and the Lender. This provision
shall never be superseded or waived and shall control every other provision
of
the Loan Documents and all agreements between the Borrowers and the Lender,
or
their successors and assigns.
Section
2.7 Fees.
(a) Origination
Fee.
The
Borrowers shall pay the Lender a fully earned and non-refundable origination
fee
of $50,000, due and payable upon the execution of this Agreement.
(b) Unused
Line Fee.
For the
purposes of this Section 2.7(b), “Unused Amount” means the Maximum Line Amount
reduced by outstanding Revolving Advances. The Borrowers agree to pay to the
Lender an unused line fee at the rate of three-eighths of one percent (0.375%)
per annum on the average daily Unused Amount from the date of this Agreement
to
and including the Termination Date, due and payable monthly in arrears on the
first day of the month and on the Termination Date.
(c) Collateral
Monitoring Service.
The
Lender may, from time to time, engage a third party to calculate ineligible
collateral for the purposes of the Borrowing Base and to perform certain other
collateral monitoring services. The Lender currently utilizes Collateral
Services, Inc. for such purpose. The Borrowers shall pay the Lender an initial
set-up fee of $1,000 for such service and shall, in addition, pay the Lender
a
monthly fee at the rates established from time to time by Collateral Services,
Inc. to cover the cost thereof (which
fees are currently $100).
(d) Monthly
Monitoring Fee.
The
Borrowers shall pay the Lender a monthly monitoring fee in the amount of $750
each month, due and payable in arrears on the first day of each month and on
the
Termination Date.
(e) Collateral
Exam Fees.
The
Borrowers shall pay the Lender fees in connection with any collateral exams,
audits or inspections conducted by or on behalf of the Lender of any Collateral
or the Borrowers’ operations or business at the rates established from time to
time by the Lender as its collateral exam fees (which fees are currently $950
per day per collateral examiner), together with all actual out-of-pocket costs
and expenses incurred in conducting any such collateral examination or
inspection.
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(f) Termination
and Line Reduction Fees.
If (i)
the Lender terminates the Credit Facility during a Default Period, or if (ii)
the Borrowers terminate or reduce the Credit Facility on a date prior to the
Maturity Date, then the Borrowers shall pay the Lender as liquidated damages
and
not as a penalty a termination fee in an amount equal to a percentage of the
Maximum Line Amount (or the reduction of the Maximum Line Amount, as the case
may be) calculated as follows: (A) two percent (2%) if the termination or
reduction occurs on or before the first anniversary of the Funding Date;
(B) one percent (1%) if the termination or reduction occurs after the first
anniversary of the Funding Date.
The
Borrowers acknowledge that termination or reduction of the Credit Facility
may
result in the Lender incurring additional costs, expenses or liabilities, and
that it is difficult to ascertain the full extent of such costs, expenses or
liabilities. The Borrowers therefore agree to pay the above-described
termination and line reduction fees and agree that said amounts represent a
reasonable estimate of the expenses and/or liabilities of the
Lender.
(g) Overadvance
Fees.
The
Borrowers shall pay an Overadvance fee in the amount of $500.00 for each day
or
portion thereof during which an Overadvance exists, regardless of how the
Overadvance arises or whether or not the Overadvance has been agreed to in
advance by the Lender. The acceptance of payment of an Overadvance fee by the
Lender shall not be deemed to constitute either consent to the Overadvance
or a
waiver of the resulting Event of Default, unless the Lender specifically
consents to the Overadvance in writing and waives the Event of Default on
whatever conditions the Lender deems appropriate.
(h) Other
Fees and Charges.
The
Lender may from time to time impose additional fees and charges as consideration
for Advances made in excess of Availability or for other events that constitute
an Event of Default or a Default hereunder, including fees and charges for
the
administration of Collateral by the Lender, and fees and charges for the late
delivery of reports, which may be assessed in the Lender’s sole discretion on
either an hourly, periodic, or flat fee basis, and in lieu of or in addition
to
imposing interest at the Default Rate.
Section
2.8 Time
for Interest Payments; Payment on Non-Business Days; Computation of Interest
and
Fees.
(a) Time
For Interest Payments.
Accrued
and unpaid interest shall be due and payable on the first day of each month
and
on the Termination Date (each an "Interest Payment Date"), or if any such day
is
not a Business Day, on the next succeeding Business Day. Interest will accrue
from the most recent date to which interest has been paid or, if no interest
has
been paid, from the date of advance to the Interest Payment Date. If an Interest
Payment Date is not a Business Day, payment shall be made on the next succeeding
Business Day.
(b) Payment
on Non-Business Days.
Whenever any payment to be made hereunder shall be stated to be due on a day
which is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in
the
computation of interest on the Advances or the fees hereunder, as the case
may
be.
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(c) Computation
of Interest and Fees.
Interest accruing on the outstanding principal balance of the Advances and
fees
hereunder outstanding from time to time shall be computed on the basis of actual
number of days elapsed in a year of 360 days.
Section
2.9 Lockbox
and Collateral Account; Sweep
of Funds.
(a) Lockbox
and Collateral Account.
(i) The
Borrowers shall instruct all account debtors to pay all Accounts directly to
the
Lockbox. If, notwithstanding such instructions, the Borrowers receive any
payments on Accounts, the Borrowers shall deposit such payments into the
Collateral Account. The Borrowers shall also deposit all other cash proceeds
of
Collateral regardless of source or nature directly into the Collateral Account.
Until so deposited, the Borrowers shall hold all such payments and cash proceeds
in trust for and as the property of the Lender and shall not commingle such
property with any of its other funds or property. All deposits in the Collateral
Account shall constitute proceeds of Collateral and shall not constitute payment
of the Indebtedness.
(ii) All
items
deposited in the Collateral Account shall be subject to final payment. If any
such item is returned uncollected, the Borrowers will immediately pay the
Lender, or, for items deposited in the Collateral Account, the bank maintaining
such account, the amount of that item, or such bank at its discretion may charge
any uncollected item to the Borrowers’ commercial account or other account. The
Borrowers shall be liable as an endorser on all items deposited in the
Collateral Account, whether or not in fact endorsed by the
Borrowers.
(b) Sweep
of Funds.
The
Lender shall from time to time, in accordance with the Wholesale Lockbox and
Collection Account Agreement, cause funds in the Collateral Account to be
transferred to the Lender’s general account for payment of the Indebtedness.
Amounts deposited in the Collateral Account shall not be subject to withdrawal
by the Borrowers, except after payment in full and discharge of all
Indebtedness.
Section
2.10 Discretionary
Nature of this Facility; Termination by the Lender; Automatic
Renewal.
This
Agreement contains the terms and conditions upon which the Lender presently
expects to make Advances to the Borrowers. Each Advance shall be in the Lender’s
sole discretion, and the Lender need not show that an adverse change has
occurred in the Borrowers’ condition, financial or otherwise, or that any of the
conditions of Article IV have not been met, in order to refuse to make any
requested Advance or to demand payment of the Indebtedness. The Lender may
at
any time terminate the Credit Facility whereupon the Lender shall no longer
consider requests for Advances under this Agreement. Unless terminated by the
Lender at any time or by the Borrowers pursuant to Section 2.11, the Credit
Facility shall remain in effect until the Original Maturity Date and,
thereafter, shall automatically renew for successive one year periods (the
Original Maturity Date and each anniversary date thereof to which the Credit
Facility has been automatically renewed, is herein referred to as a “Maturity
Date”).
-17-
Section
2.11 Voluntary
Prepayment; Termination of the Credit Facility by the Borrowers. Except as
otherwise provided herein, the Borrowers may prepay the Advances in whole at
any
time or from time to time in part. The Borrowers may terminate the Credit
Facility or reduce the Maximum Line Amount at any time if it (i) gives the
Lender at least 90 days advance written notice prior to the proposed Termination
Date, and (ii) pays the Lender applicable termination and Maximum Line
Amount reduction fees in accordance with the terms of this Agreement. Any
reduction in the Maximum Line Amount shall be in multiples of $100,000, and
with
a minimum reduction of at least $500,000. If the Borrowers terminate the Credit
Facility or reduce the Maximum Line Amount to zero, all Indebtedness shall
be
immediately due and payable, and if the Borrowers give the Lender less than
the
required 90 days advance written notice, then the interest rate applicable
to
borrowings evidenced by Revolving Note shall be the Default Rate for the period
of time commencing 90 days prior to the proposed Termination Date through the
date that the Lender actually receives such written notice. If the Borrowers
do
not wish the Lender to consider renewal of the Credit Facility on the next
Maturity Date, then the Borrowers shall give the Lender at least 90 days written
notice prior to the Maturity Date that it will not be requesting renewal. If
the
Borrowers fail to give the Lender such timely notice, then the interest rate
applicable to borrowings evidenced by the Revolving Note shall be the Default
Rate for the period of time commencing 90 days prior to the Maturity Date
through the date that the Lender actually receives such written
notice.
Section
2.12 Mandatory
Prepayment.
Without
notice or demand, if the sum of the outstanding principal balance of the
Revolving Advances shall at any time exceed the Borrowing Base, the Borrowers
shall immediately prepay the Revolving Advances to the extent necessary to
eliminate such excess. Any voluntary or mandatory prepayment received by the
Lender under this Agreement may be applied to the Indebtedness, in such order
and in such amounts as the Lender in its sole discretion may determine from
time
to time.
Section
2.13 Revolving
Advances to Pay Indebtedness.
Notwithstanding the terms of Section 2.1, the Lender may, in its discretion
at
any time or from time to time, without the Borrowers’ request and even if the
conditions set forth in Section 4.2 would not be satisfied, make a Revolving
Advance in an amount equal to the portion of the Indebtedness from time to
time
due and payable,
and may
deliver the proceeds of any such Revolving Advance to Xxxxx Fargo Merchant
Services, L.L.C. in satisfaction of any unpaid obligations due to Xxxxx Fargo
Merchant Services, L.L.C.
Section
2.14 Use
of
Proceeds.
The
Borrowers shall use the proceeds of Advances to repay its obligations to Laurus
Master Fund and to redeem stock held by certain Series A Preferred stock holders
and for costs of closing and shall thereafter use the proceeds of Advances
for
ordinary working capital purposes.
Section
2.15 Liability
Records.
The
Lender may maintain from time to time, at its discretion, records as to the
Indebtedness. All entries made on any such record shall be presumed correct
until the Borrowers establish the contrary. Upon the Lender’s demand, the
Borrowers will admit and certify in writing the exact principal balance of
the
Indebtedness that the Borrowers then assert to be outstanding. Any billing
statement or accounting rendered by the Lender shall be conclusive and fully
binding on the Borrowers unless the Borrowers give the Lender specific written
notice of exception within 30 days after receipt.
-18-
ARTICLE
III
SECURITY
INTEREST; OCCUPANCY; SETOFF
Section
3.1 Grant
of Security Interest.
The
Borrowers hereby pledge, assign and grant to the Lender for the benefit of
itself and as agent for Xxxxx Fargo Merchant Services, L.L.C., a lien and
security interest (collectively referred to as the “Security Interest”) in the
Collateral, as security for the payment and performance of (a) all present
and
future Indebtedness of the Borrowers to the Lender; (b) all obligations of
the
Borrowers and rights of the Lender under this Agreement; and (c) all present
and
future obligations of the Borrowers to the Lender of other kinds. Upon request
by the Lender, the Borrowers will grant to the Lender, for the benefit of itself
and as agent for Xxxxx Fargo Merchant Services, L.L.C., a security interest
in
all commercial tort claims that the Borrowers may have against any
Person.
Section
3.2 Notification
of Account Debtors and Other Obligors.
The
Lender may at any time (whether or not a Default Period then exists) notify
any
account debtor or other Person obligated to pay the amount due that such right
to payment has been assigned or transferred to the Lender for security and
shall
be paid directly to the Lender. The Borrowers will join in giving such notice
if
the Lender so requests. At any time after the Borrowers or the Lender give
such
notice to an account debtor or other obligor, the Lender may, but need not,
in
the Lender’s name or in the Borrowers’ name, demand, xxx for, collect or receive
any money or property at any time payable or receivable on account of, or
securing, any such right to payment, or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or
change the obligations (including collateral obligations) of any such account
debtor or other obligor. The Lender may, in the Lender’s name or in the
Borrowers’ name, as the Borrowers’ agent and attorney-in-fact, notify the United
States Postal Service to change the address for delivery of the Borrowers’ mail
to any address designated by the Lender, otherwise intercept the Borrowers’
mail, and receive, open and dispose of the Borrowers’ mail, applying all
Collateral as permitted under this Agreement and holding all other mail for
the
Borrowers’ account or forwarding such mail to the Borrowers’ last known
address.
Section
3.3 Assignment
of Insurance.
As
additional security for the payment and performance of the Indebtedness, the
Borrowers hereby assign to the Lender any and all monies (including proceeds
of
insurance and refunds of unearned premiums) due or to become due under, and
all
other rights of the Borrowers with respect to, any and all policies of insurance
now or at any time hereafter covering the Collateral or any evidence thereof
or
any business records or valuable papers pertaining thereto, and the Borrowers
hereby direct the issuer of any such policy to pay all such monies directly
to
the Lender. At any time, whether or not a Default Period then exists, the Lender
may (but need not), in the Lender’s name or in the Borrowers’ name, execute and
deliver proof of claim, receive all such monies, endorse checks and other
instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such
policy.
Any
monies received as payment for any loss under any insurance policy mentioned
above (other than liability insurance policies) or as payment of any award
or
compensation for condemnation or taking by eminent domain, shall be paid over
to
the Lender to be applied, at the option of the Lender, either to the prepayment
of the Indebtedness or shall be disbursed to the Borrowers under staged payment
terms reasonably satisfactory to the Lender for application to the cost of
repairs, replacements, or restorations. Any such repairs, replacements, or
restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items or property destroyed prior
to
such damage or destruction.
-19-
Section
3.4 Occupancy.
(a) The
Borrowers hereby irrevocably grant to the Lender the right to take exclusive
possession of the Premises at any time during a Default Period without notice
or
consent.
(b) The
Lender may use the Premises only to hold, process, manufacture, sell, use,
store, liquidate, realize upon or otherwise dispose of goods that are Collateral
and for other purposes that the Lender may in good xxxxx xxxx to be related
or
incidental purposes.
(c) The
Lender’s right to hold the Premises shall cease and terminate upon the earlier
of (i) payment in full and discharge of all Indebtedness and termination of
the Credit Facility, and (ii) final sale or disposition of all goods
constituting Collateral and delivery of all such goods to
purchasers.
(d) The
Lender shall not be obligated to pay or account for any rent or other
compensation for the possession, occupancy or use of any of the Premises;
provided,
however,
that if
the Lender does pay or account for any rent or other compensation for the
possession, occupancy or use of any of the Premises, the Borrowers shall
reimburse the Lender promptly for the full amount thereof. In addition, the
Borrowers will pay, or reimburse the Lender for, all taxes, fees, duties,
imposts, charges and expenses at any time incurred by or imposed upon the Lender
by reason of the execution, delivery, existence, recordation, performance or
enforcement of this Agreement or the provisions of this Section
3.4.
Section
3.5 License.
Without
limiting the generality of any other Security Document, the Borrowers hereby
grant to the Lender a non-exclusive, worldwide and royalty-free license to
use
or otherwise exploit all Intellectual Property Rights of the Borrowers for
the
purpose of: (a) completing the manufacture of any in-process materials during
any Default Period so that such materials become saleable Inventory, all in
accordance with the same quality standards previously adopted by the Borrowers
for their own manufacturing and subject to the Borrowers’ reasonable exercise of
quality control; and (b) selling, leasing or otherwise disposing of any or
all Collateral during any Default Period.
-20-
Section
3.6 Financing
Statement.
The
Borrowers authorize the Lender to file from time to time, such financing
statements against collateral described as “all personal property” or “all
assets” or describing specific items of collateral including commercial tort
claims as the Lender deems necessary or useful to perfect the Security Interest.
All financing statements filed before the date hereof to perfect the Security
Interest were authorized by the Borrowers and are hereby re-authorized. A
carbon, photographic or other reproduction of this Agreement or of any financing
statements signed by the Borrowers is sufficient as a financing statement and
may be filed as a financing statement in any state to perfect the security
interests granted hereby. For this purpose, the Borrowers represent and warrant
that the following information is true and correct:
Name
and
address of Debtors:
Airgate
International Corporation
000-00
Xxxxxxxx Xxxxxxxxx
Xxxxxxx,
Xxx Xxxx 00000
Federal
Employer Identification No. 00-0000000
Organizational
Identification No. None
Airgate
International Corporation (Chicago)
0000
Xxxxxxx Xxxxx
Xxxxxxx,
Xxxxxxxx
Federal
Employer Identification No. 00-0000000
Organizational
Identification No. 0000-000-0
Paradigm
International, Inc.
00000
X.
Xxxxxx Xxxxxx, 0xx
Xxxxx
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Federal
Employer Identification No. 00-0000000
Organizational
Identification No. P99000093272
Name
and
address of Secured Party:
Xxxxx
Fargo Bank, National Association
000
Xxxx
00xx
Xxxxxx,
00xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000-0000
Section
3.7 Setoff.
The
Lender may at any time or from time to time, at its sole discretion and without
demand and without notice to anyone, setoff any liability owed to the Borrowers
by the Lender, whether or not due, against any Obligation, whether or not due.
In addition, each other Person holding a participating interest in any
Indebtedness shall have the right to appropriate or setoff any deposit or other
liability then owed by such Person to the Borrowers, whether or not due, and
apply the same to the payment of said participating interest, as fully as if
such Person had lent directly to the Borrowers the amount of such participating
interest.
Section
3.8 Collateral.
This
Agreement does not contemplate a sale of accounts, contract rights or chattel
paper, and, as provided by law, the Borrowers are entitled to any surplus and
shall remain liable for any deficiency. The Lender’s duty of care with respect
to Collateral in its possession (as imposed by law) shall be deemed fulfilled
if
it exercises reasonable care in physically keeping such Collateral, or in the
case of Collateral in the custody or possession of a bailee or other third
Person, exercises reasonable care in the selection of the bailee or other third
Person, and the Lender need not otherwise preserve, protect, insure or care
for
any Collateral. The Lender shall not be obligated to preserve any rights the
Borrowers may have against prior parties, to realize on the Collateral at all
or
in any particular manner or order or to apply any cash proceeds of the
Collateral in any particular order of application. The Lender has no obligation
to clean-up or otherwise prepare the Collateral for sale. The Borrowers waive
any right they may have to require the Lender to pursue any third Person for
any
of the Indebtedness.
-21-
ARTICLE
IV
CONDITIONS
OF WILLINGNESS TO CONSIDER LENDING
Section
4.1 Conditions
Precedent to Lender’s Willingness to Consider Making the Initial
Advances.
The
Lender’s willingness to consider making the initial Advances shall be subject to
the condition precedent that the Lender shall have received all of the
following, each properly executed by the appropriate party and in form and
substance satisfactory to the Lender:
(a) This
Agreement.
(b) The
Revolving Note.
(c) A
true
and correct copy of any and all leases pursuant to which the Borrowers are
leasing the Premises, together with a landlord’s disclaimer and consent with
respect to each such lease.
(d) A
true
and correct copy of any and all mortgages pursuant to which the Borrowers have
mortgaged the Premises, together with a mortgagee’s disclaimer and consent with
respect to each such mortgage.
(e) A
true
and correct copy of any and all agreements pursuant to which the Borrowers’
property is in the possession of any Person other than the Borrowers, together
with, in the case of any goods held by such Person for resale, (i) a
consignee’s acknowledgment and waiver of Liens, (ii) UCC financing
statements sufficient to protect the Borrowers’ and the Lender’s interests in
such goods, and (iii) UCC searches showing that no other secured party has
filed a financing statement against such Person and covering property similar
to
the Borrowers’ other than the Borrowers, or if there exists any such secured
party, evidence that each such secured party has received notice from the
Borrowers and the Lender sufficient to protect the Borrowers’ and the Lender’s
interests in the Borrowers’ goods from any claim by such secured
party.
(f) An
acknowledgment and waiver of Liens from each warehouse in which the Borrowers
are storing Inventory.
(g) A
true
and correct copy of any and all agreements pursuant to which the Borrowers’
property is in the possession of any Person other than the Borrowers, together
with, (i) an acknowledgment and waiver of Liens from each subcontractor who
has possession of the Borrowers’ goods from time to time, (ii) UCC
financing statements sufficient to protect the Borrowers’ and the Lender’s
interests in such goods, and (iii) UCC searches showing that no other
secured party has filed a financing statement covering such Person’s property
other than the Borrowers, or if there exists any such secured party, evidence
that each such secured party has received notice from the Borrowers and the
Lender sufficient to protect the Borrowers’ and the Lender’s interests in the
Borrowers’ goods from any claim by such secured party.
-22-
[(h) An
acknowledgment and agreement from each licensor in favor of the Lender, together
with a true, correct and complete copy of all license agreements.]
(i) The
Wholesale Lockbox and Collection Account Agreement.
(j) The
Collection Account Agreements.
(k) Control
agreements with each bank at which the Borrowers maintain deposit
accounts.
(l) The
Subordination Agreements.
(m) Current
searches of appropriate filing offices showing that (i) no Liens have been
filed and remain in effect against the Borrowers except Permitted Liens or
Liens
held by Persons who have agreed in writing that upon receipt of proceeds of
the
initial Advances, they will satisfy, release or terminate such Liens in a manner
satisfactory to the Lender, and (ii) the Lender has duly filed all
financing statements necessary to perfect the Security Interest, to the extent
the Security Interest is capable of being perfected by filing.
(n) A
certificate of the Borrowers’ Secretary or Assistant Secretary certifying that
attached to such certificate are (i) the resolutions of the Borrowers’
Directors and, if required, Owners, authorizing the execution, delivery and
performance of the Loan Documents, (ii) true, correct and complete copies
of the Borrowers’ Constituent Documents, and (iii) examples of the
signatures of the Borrowers’ Officers or agents authorized to execute and
deliver the Loan Documents and other instruments, agreements and certificates,
including Advance requests, on the Borrowers’ behalf.
(o) A
current
certificate issued by the Secretary of State of each jurisdiction where the
Borrower are organized, certifying that the Borrowers are in compliance with
all
applicable organizational requirements of that State.
(p) Evidence
that the Borrowers are duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the nature
of the business transacted by it makes such licensing or qualification
necessary.
(q) A
certificate of an Officer of the Borrowers confirming, in his personal capacity,
the representations and warranties set forth in Article V.
(r) Certificates
of the insurance required hereunder, with all hazard insurance containing a
lender’s loss payable endorsement in the Lender’s favor and with all liability
insurance naming the Lender as an additional insured.
(s) The
separate Guaranty of each Guarantor, pursuant to which each Guarantor
unconditionally guarantees the full and prompt payment of all
Indebtedness.
(t) A
waiver
of interest issued by the spouse of each individual Guarantor, waiving any
and
all interest he or she may have in the assets disclosed to the Lender in the
financial statements of that Guarantor and in any future earnings or assets
acquired by that Guarantor.
-23-
(u) An
opinion of counsel of Borrowers and each Guarantor that is an entity, addressed
to the Lender.
(v) Payment
of all fees due under the terms of this Agreement through the date of the
initial Advance hereunder, and payment of all expenses incurred by the Lender
through such date and that are required to be paid by the Borrowers under this
Agreement.
(w) Evidence
that after making the initial Revolving Advance, satisfying all obligations
owed
to the Borrowers’ prior lender, satisfying all trade payables older than
60 days from invoice date, book overdrafts and closing costs, Availability
shall be not less than $1,500,000.
(x) A
Customer Identification Information form and such other forms and verification
as the Lender may need to comply with the U.S.A. Patriot Act.
(y) Such
other documents as the Lender in its sole discretion may require.
Section
4.2 Conditions
Precedent to All Advances. The Lender will not consider any request for an
Advance unless:
(a) the
representations and warranties contained in Article V are correct on and as
of the date of such Advance as though made on and as of such date, except to
the
extent that such representations and warranties relate solely to an earlier
date; and
(b) no
event
has occurred and is continuing, or would result from such Advance which
constitutes a Default or an Event of Default.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES
The
Borrowers represent and warrant to the Lender as follows:
Section
5.1 Existence
and Power; Name; Chief Executive Office; Inventory and Equipment Locations;
Federal Employer Identification Number and Organizational Identification
Number.
Each
Borrower is a corporation, duly organized, validly existing and in good standing
under the laws of the State of its organization as set forth on Schedule 5.1
and
is duly licensed or qualified to transact business in all jurisdictions where
the character of the property owned or leased or the nature of the business
transacted by it makes such licensing or qualification necessary. The Borrowers
have all requisite power and authority to conduct their business, to own their
properties and to execute and deliver, and to perform all of their obligations
under, the Loan Documents. During their existence, the Borrowers have done
business solely under the names set forth in Schedule 5.1. The Borrowers’ chief
executive office and principal place of business is located at the address
set
forth in Schedule 5.1, and all of the Borrowers’ records relating to their
business or the Collateral are kept at that location. All Inventory and
Equipment is located at that location or at one of the other locations listed
in
Schedule 5.1. The Borrowers’ federal employer identification numbers and
organization identification numbers are correctly set forth in Section
3.6.
-24-
Section
5.2 Capitalization.
Schedule
5.2 constitutes a correct and complete list of all ownership interests of the
Borrowers and rights to acquire ownership interests including the record holder,
number of interests and percentage interests on a fully diluted basis, and
an
organizational chart showing the ownership structure of all Subsidiaries of
the
Borrowers.
Section
5.3 Authorization
of Borrowing; No Conflict as to Law or Agreements.
The
execution, delivery and performance by the Borrowers of the Loan Documents
and
the borrowings from time to time hereunder have been duly authorized by all
necessary corporate action and do not and will not (i) require any consent
or approval of the Borrowers’ Owners; (ii) require any authorization,
consent or approval by, or registration, declaration or filing with, or notice
to, any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice
as
has been obtained, accomplished or given prior to the date hereof;
(iii) violate any provision of any law, rule or regulation (including
Regulation X of the Board of Governors of the Federal Reserve System) or of
any order, writ, injunction or decree presently in effect having applicability
to the Borrowers or of the Borrowers’ Constituent Documents; (iv) result in
a breach of or constitute a default under any indenture or loan or credit
agreement or any other material agreement, lease or instrument to which the
Borrowers are a party or by which they or their properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any
Lien (other than the Security Interest) upon or with respect to any of the
properties now owned or hereafter acquired by the Borrowers.
Section
5.4 Legal
Agreements.
This
Agreement constitutes and, upon due execution by the Borrowers, the other Loan
Documents will constitute the legal, valid and binding obligations of the
Borrowers, enforceable against the Borrowers in accordance with their respective
terms.
Section
5.5 Subsidiaries.
Except
as set forth in Schedule 5.5 hereto, the Borrowers have no
Subsidiaries.
Section
5.6 Financial
Condition; No Adverse Change.
The
Borrowers have furnished to the Lender their unaudited financial statements
for
the fiscal year ended December 31, 2005 and those statements fairly present
the
Borrowers’ financial condition on the dates thereof and the results of their
operations and cash flows for the periods then ended and were prepared in
accordance with GAAP. Since the date of the most recent financial statements,
there has been no change in the Borrowers’ business, properties or condition
(financial or otherwise) which has had a Material Adverse Effect.
Section
5.7 Litigation.
Except
as set forth in Schedule 5,7 to the Borrower’s knowledge, after due inquiry and
diligence, there are no actions, suits or proceedings pending or, to the
Borrowers’ knowledge, threatened against or affecting the Borrowers or any of
their Affiliates or the properties of the Borrowers or any of their Affiliates
before any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, which, if determined adversely to
the
Borrowers or any of their Affiliates, would have a Material Adverse Effect
on
the financial condition, properties or operations of the Borrowers or any of
their Affiliates.
-25-
Section
5.8 Regulation U.
The
Borrowers are not engaged in the business of extending credit for the purpose
of
purchasing or carrying margin stock (within the meaning of Regulation U of
the
Board of Governors of the Federal Reserve System), and no part of the proceeds
of any Advance will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin
stock.
Section
5.9 Taxes.
The
Borrowers and their Affiliates have paid or caused to be paid to the proper
authorities when due all federal, state and local taxes required to be withheld
by each of them. The Borrowers and their Affiliates have filed all federal,
state and local tax returns which to the knowledge of the Officers of the
Borrowers or any Affiliate, as the case may be, are required to be filed, and
the Borrowers and their Affiliates have paid or caused to be paid to the
respective taxing authorities all taxes as shown on said returns or on any
assessment received by any of them to the extent such taxes have become
due.
Section
5.10 Titles
and Liens.
The
Borrowers have good and absolute title to all Collateral free and clear of
all
Liens other than Permitted Liens. No financing statement naming the Borrowers
as
debtor is on file in any office except to perfect only Permitted
Liens.
Section
5.11 Intellectual
Property Rights.
(a) Owned
Intellectual Property.
Schedule 5.11 is a complete list of all patents, applications for patents,
trademarks, applications to register trademarks, service marks, applications
to
register service marks, mask works, trade dress and copyrights for which the
Borrowers are the owner of record (the “Owned Intellectual Property”). Except as
disclosed on Schedule 5.11, (i) the Borrowers own the Owned Intellectual
Property free and clear of all restrictions (including covenants not to xxx
a
third party), court orders, injunctions, decrees, writs or Liens, whether by
written agreement or otherwise, (ii) no Person other than the Borrowers
owns or has been granted any right in the Owned Intellectual Property,
(iii) all Owned Intellectual Property is valid, subsisting and enforceable
and (iv) the Borrowers have taken all commercially reasonable action
necessary to maintain and protect the Owned Intellectual Property.
(b) Agreements
with Employees and Contractors.
The
Borrowers have entered into a legally enforceable agreement with each of their
employees and subcontractors obligating each such Person to assign to the
Borrowers, without any additional compensation, any Intellectual Property Rights
created, discovered or invented by such Person in the course of such Person’s
employment or engagement with the Borrowers (except to the extent prohibited
by
law), and further requiring such Person to cooperate with the Borrowers, without
any additional compensation, in connection with securing and enforcing any
Intellectual Property Rights therein; provided,
however,
that
the foregoing shall not apply with respect to employees and subcontractors
whose
job descriptions are of the type such that no such assignments are reasonably
foreseeable.
(c) Intellectual
Property Rights Licensed from Others.
Schedule 5.11 is a complete list of all agreements under which the Borrowers
have licensed Intellectual Property Rights from another Person (“Licensed
Intellectual Property”) other than readily available, non-negotiated licenses of
computer software and other intellectual property used solely for performing
accounting, word processing and similar administrative tasks (“Off-the-shelf
Software”) and a summary of any ongoing payments the Borrowers are obligated to
make with respect thereto. Except as disclosed on Schedule 5.11 and in written
agreements, copies of which have been given to the Lender, the Borrowers’
licenses to use the Licensed Intellectual Property are free and clear of all
restrictions, Liens, court orders, injunctions, decrees, or writs, whether
by
written agreement or otherwise. Except as disclosed on Schedule 5.11, the
Borrowers are not obligated or under any liability whatsoever to make any
payments of a material nature by way of royalties, fees or otherwise to any
owner of, licensor of, or other claimant to, any Intellectual Property
Rights.
-26-
(d) Other
Intellectual Property Needed for Business.
Except
for Off-the-shelf Software and as disclosed on Schedule 5.11, the Owned
Intellectual Property and the Licensed Intellectual Property constitute all
Intellectual Property Rights used or necessary to conduct the Borrowers’
business as it is presently conducted or as the Borrowers reasonably foresee
conducting it.
(e) Infringement.
Except
as disclosed on Schedule 5.11, the Borrowers have no knowledge of, and has
not
received any written claim or notice alleging, any Infringement of another
Person’s Intellectual Property Rights (including any written claim that the
Borrowers must license or refrain from using the Intellectual Property Rights
of
any third party) nor, to the Borrowers’ knowledge, is there any threatened claim
or any reasonable basis for any such claim.
Section
5.12 Plans.
Except
as disclosed to the Lender in writing prior to the date hereof, neither the
Borrowers nor any ERISA Affiliate (a) maintains or has maintained any Pension
Plan, (b) contributes or has contributed to any Multiemployer Plan or (c)
provides or has provided post-retirement medical or insurance benefits with
respect to employees or former employees (other than benefits required under
Section 601 of ERISA, Section 4980B of the IRC or applicable state law). Neither
the Borrowers nor any ERISA Affiliate has received any notice or has any
knowledge to the effect that it is not in full compliance with any of the
requirements of ERISA, the IRC or applicable state law with respect to any
Plan.
No Reportable Event exists in connection with any Pension Plan. Each Plan which
is intended to qualify under the IRC is so qualified, and no fact or
circumstance exists which may have an adverse effect on the Plan’s tax-qualified
status. Neither the Borrowers nor any ERISA Affiliate has (i) any
accumulated funding deficiency (as defined in Section 302 of ERISA and Section
412 of the IRC) under any Plan, whether or not waived, (ii) any liability
under Section 4201 or 4243 of ERISA for any withdrawal, partial withdrawal,
reorganization or other event under any Multiemployer Plan or (iii) any
liability or knowledge of any facts or circumstances which could result in
any
liability to the Pension Benefit Guaranty Corporation, the Internal Revenue
Service, the Department of Labor or any participant in connection with any
Plan
(other than routine claims for benefits under the Plan).
Section
5.13 Default.
The
Borrowers are in compliance with all provisions of all agreements, instruments,
decrees and orders to which it is a party or by which it or its property is
bound or affected, the breach or default of which could have a Material Adverse
Effect.
-27-
Section
5.14 Environmental
Matters.
(a) Except
as
disclosed on Schedule 5.14, there are not present in, on or under the Premises
any Hazardous Substances in such form or quantity as to create any material
liability or obligation for either the Borrowers or the Lender under the common
law of any jurisdiction or under any Environmental Law, and no Hazardous
Substances have ever been stored, buried, spilled, leaked, discharged, emitted
or released in, on or under the Premises in such a way as to create any such
material liability.
(b) Except
as
disclosed on Schedule 5.14, the Borrowers have not disposed of Hazardous
Substances in such a manner as to create any material liability under any
Environmental Law.
(c) Except
as
disclosed on Schedule 5.14, there have not existed in the past, nor are there
any threatened or impending requests, claims, notices, investigations, demands,
administrative proceedings, hearings or litigation relating in any way to the
Premises or the Borrowers, alleging material liability under, violation of,
or
noncompliance with any Environmental Law or any license, permit or other
authorization issued pursuant thereto.
(d) Except
as
disclosed on Schedule 5.14, the Borrowers’ businesses are and have in the past
always been conducted in accordance with all Environmental Laws and all
licenses, permits and other authorizations required pursuant to any
Environmental Law and necessary for the lawful and efficient operation of such
businesses are in the Borrowers’ possession and are in full force and effect,
nor have the Borrowers been denied insurance on grounds related to potential
environmental liability. No permit required under any Environmental Law is
scheduled to expire within 12 months and there is no threat that any such permit
will be withdrawn, terminated, limited or materially changed.
(e) Except
as
disclosed on Schedule 5.14, the Premises are not and never have been listed
on
the National Priorities List, the Comprehensive Environmental Response,
Compensation and Liability Information System or any similar federal, state
or
local list, schedule, log, inventory or database.
(f) The
Borrowers have delivered to the Lender all environmental assessments, audits,
reports, permits, licenses and other documents describing or relating in any
way
to the Premises or the Borrowers’ businesses.
Section
5.15 Submissions
to Lender.
All
financial and other information provided to the Lender by or on behalf of the
Borrowers in connection with the Borrowers’ request for the credit facilities
contemplated hereby (i) is true and correct in all material respects,
(ii) does not omit any material fact necessary to make such information not
misleading and, (iii) as to projections, valuations or proforma financial
statements, present a good faith opinion as to such projections, valuations
and
proforma condition and results.
Section
5.16 Financing
Statements.
The
Borrowers have authorized the filing of financing statements sufficient when
filed to perfect the Security Interest and the other security interests created
by the Security Documents. When such financing statements are filed in the
offices noted therein, the Lender will have a valid and perfected security
interest in all Collateral which is capable of being perfected by filing
financing statements. None of the Collateral is or will become a fixture on
real
estate, unless a sufficient fixture filing is in effect with respect
thereto.
-28-
Section
5.17 Rights
to Payment.
Each
right to payment and each instrument, document, chattel paper and other
agreement constituting or evidencing Collateral is (or, in the case of all
future Collateral, will be when arising or issued) the valid, genuine and
legally enforceable obligation, subject to no defense, setoff or counterclaim,
of the account debtor or other obligor named therein or in the Borrowers’
records pertaining thereto as being obligated to pay such
obligation.
Section
5.18 Financial
Solvency.
Both
before and after giving effect to the and all of the transactions contemplated
in the Loan Documents, none of the Borrowers or their Affiliates:
(a) Was
or
will be “insolvent”, as that term is used and defined in Section 101(32) of the
United States Bankruptcy Code and Section 2 of the Uniform Fraudulent Transfer
Act;
(b) Has
unreasonably small capital or is engaged or about to engage in a business or
a
transaction for which any remaining assets of the Borrowers or such Affiliate
are unreasonably small;
(c) By
executing, delivering or performing its obligations under the Loan Documents
or
other documents to which it is a party or by taking any action with respect
thereto, intends to, nor believes that it will, incur debts beyond its ability
to pay them as they mature;
(d) By
executing, delivering or performing its obligations under the Loan Documents
or
other documents to which it is a party or by taking any action with respect
thereto, intends to hinder, delay or defraud either its present or future
creditors; and
(e) At
this
time contemplates filing a petition in bankruptcy or for an arrangement or
reorganization or similar proceeding under any law of any jurisdiction, nor,
to
the best knowledge of the Borrowers, is the subject of any actual, pending
or
threatened bankruptcy, insolvency or similar proceedings under any law of any
jurisdiction.
ARTICLE
VI
COVENANTS
So
long
as the Indebtedness shall remain unpaid, or the Credit Facility shall remain
outstanding, the Borrowers will comply with the following requirements, unless
the Lender shall otherwise consent in writing:
Section
6.1 Reporting
Requirements.
The
Borrowers will deliver, or cause to be delivered, to the Lender each of the
following, which shall be in form and detail acceptable to the
Lender:
(a) Annual
Financial Statements.
As soon
as available, and in any event within 90 days after the end of each fiscal
year of Pacific CMA, Pacific CMA’s audited financial statements with the
unqualified opinion of independent certified public accountants selected by
Pacific CMA and acceptable to the Lender, which annual financial statements
shall include Pacific CMA’s balance sheet as at the end of such fiscal year and
the related statements of Pacific CMA’s income, retained earnings and cash flows
for the fiscal year then ended, prepared on a consolidating and consolidated
basis to include the Borrowers and any Affiliates, all in reasonable detail
and
prepared in accordance with GAAP, together with (i) copies of all
management letters prepared by such accountants; (ii) a report signed by
such accountants stating that in making the investigations necessary for said
opinion they obtained no knowledge, except as specifically stated, of any
Default or Event of Default and all relevant facts in reasonable detail to
evidence, and the computations as to, whether or not the Borrowers are in
compliance with the Financial Covenants; and (iii) a certificate of the
Borrowers’ chief financial officer stating that such financial statements have
been prepared in accordance with GAAP, fairly represent the Borrowers’ financial
position and the results of its operations, and whether or not such Officer
has
knowledge of the occurrence of any Default or Event of Default and, if so,
stating in reasonable detail the facts with respect thereto.
-29-
(b) Monthly
Financial Statements.
As soon
as available and in any event within 30 days after the end of each month,
the unaudited/internal balance sheet and statements of income and retained
earnings of the Borrowers as at the end of and for such month and for the year
to date period then ended, prepared on a consolidating and consolidated basis
to
include any Affiliates, in reasonable detail and stating in comparative form
the
figures for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, subject to year-end audit adjustments and
which fairly represent the Borrowers’ financial position and the results of its
operations; and accompanied by a certificate of the Borrowers’ chief financial
officer, substantially in the form of Exhibit B hereto stating (i) that
such financial statements have been prepared in accordance with GAAP, subject
to
year-end audit adjustments, and fairly represent the Borrowers’ financial
position and the results of its operations, (ii) whether or not such
Officer has knowledge of the occurrence of any Default or Event of Default
not
theretofore reported and remedied and, if so, stating in reasonable detail
the
facts with respect thereto, and (iii) all relevant facts in reasonable
detail to evidence, and the computations as to, whether or not the Borrowers
are
in compliance with the Financial Covenants.
(c) Collateral
Reports.
Within
15 days after the end of each month or more frequently if the Lender so
requires, the Borrowers’ accounts receivable and its accounts payable, and a
calculation of the Borrowers’ Accounts and Eligible Accounts as at the end of
such month or shorter time period.
(d) Projections.
No
later than 30 days prior to the last day of each fiscal year, the Borrowers’
projected balance sheets, income statements, statements of cash flow and
projected Availability for each month of the succeeding fiscal year, each in
reasonable detail. Such items will be certified by the Officer who is the
Borrowers’ chief financial officer as being the most accurate projections
available and identical to the projections used by the Borrowers for internal
planning purposes and be delivered with a statement of underlying assumptions
and such supporting schedules and information as the Lender may in its
discretion require.
-30-
(e) Supplemental
Reports.
Daily,
the Borrowers’ “daily collateral reports”, receivables schedules, collection
reports, copies of invoices to account debtors in excess of $20,000, signed
and
dated shipment documents and delivery receipts for goods sold to said account
debtors in excess of $20,000.
(f) Litigation.
Immediately after the commencement thereof, notice in writing of all litigation
and of all proceedings before any governmental or regulatory agency affecting
the Borrowers (i) of the type described in Section 5.14(c), or
(ii) which seek a monetary recovery against the Borrowers in excess of
$10,000.
(g) Defaults.
When
any Officer of the Borrowers becomes aware of the probable occurrence of any
Default or Event of Default, and no later than 3 days after such Officer becomes
aware of such Default or Event of Default, notice of such occurrence, together
with a detailed statement by a responsible Officer of the Borrowers of the
steps
being taken by the Borrowers to cure the effect thereof.
(h) Plans.
As soon
as possible, and in any event within 30 days after the Borrowers know or
have reason to know that any Reportable Event with respect to any Pension Plan
has occurred, a statement signed by the Officer who is the Borrowers’ chief
financial officer setting forth details as to such Reportable Event and the
action which the Borrowers propose to take with respect thereto, together with
a
copy of the notice of such Reportable Event to the Pension Benefit Guaranty
Corporation. As soon as possible, and in any event within 10 days after the
Borrowers fail to make any quarterly contribution required with respect to
any
Pension Plan under Section 412(m) of the IRC, the Borrowers will deliver to
the
Lender a statement signed by the Officer who is the Borrowers’ chief financial
officer setting forth details as to such failure and the action which the
Borrowers propose to take with respect thereto, together with a copy of any
notice of such failure required to be provided to the Pension Benefit Guaranty
Corporation. As soon as possible, and in any event within ten days after the
Borrowers know or have reason to know that they have or are reasonably expected
to have any liability under Sections 4201 or 4243 of ERISA for any withdrawal,
partial withdrawal, reorganization or other event under any Multiemployer Plan,
the Borrowers will deliver to the Lender a statement of the Borrowers’ chief
financial officer setting forth details as to such liability and the action
which the Borrowers propose to take with respect thereto.
(i) Disputes.
Promptly upon knowledge thereof, notice of (i) any disputes or claims by
the Borrowers’ customers exceeding $5,000 individually or $10,000 in the
aggregate during any fiscal year; (ii) credit memos; and (iii) any
goods returned to or recovered by the Borrowers.
(j) Officers
and Directors.
Promptly upon knowledge thereof, notice of any change in the persons
constituting the Borrowers’ Officers and Directors.
(k) Collateral.
Promptly upon knowledge thereof, notice of any loss of or material damage to
any
Collateral or of any substantial adverse change in any Collateral or the
prospect of payment thereof.
(l) Commercial
Tort Claims.
Promptly upon knowledge thereof, notice of any commercial tort claims it may
bring against any Person, including the name and address of each defendant,
a
summary of the facts, an estimate of the Borrowers’ damages, copies of any
complaint or demand letter submitted by the Borrowers, and such other
information as the Lender may request.
-31-
(m) Intellectual
Property.
(i) 30
days
prior written notice of Borrowers’ intent to acquire material Intellectual
Property Rights; except for transfers permitted under Section 6.18, the
Borrowers will give the Lender 30 days prior written notice of its intent to
dispose of material Intellectual Property Rights and upon request shall provide
the Lender with copies of all proposed documents and agreements concerning
such
rights.
(ii) Promptly
upon knowledge thereof, notice of (A) any Infringement of its Intellectual
Property Rights by others, (B) claims that the Borrowers are Infringing
another Person’s Intellectual Property Rights and (C) any threatened
cancellation, termination or material limitation of its Intellectual Property
Rights.
(iii) Promptly
upon receipt, copies of all registrations and filings with respect to its
Intellectual Property Rights.
(n) Reports
to Owners.
Promptly upon their distribution, copies of all financial statements, reports
and proxy statements which the Borrowers shall have sent to their
Owners.
(o) SEC
Filings.
Promptly after the sending or filing thereof, copies of all regular and periodic
reports which Pacific CMA shall file with the Securities and Exchange Commission
or any national securities exchange.
(p) Tax
Returns.
As soon
as possible, and in any event no later than five days after they are due to
be filed, copies of the state and federal income tax returns and all schedules
thereto of Pacific CMA.
(q) Tax
Returns and Personal Financial Statements of individual
Guarantor.
As soon
as possible and in any event no later than April 30th
of each
year, the current personal financial statement and state and federal income
tax
returns and all schedules thereto of Xxxxxx Xxx.
(r) Violations
of Law.
Promptly upon knowledge thereof, notice of the Borrowers’ violation of any law,
rule or regulation, the non-compliance with which could have a Material Adverse
Effect on the Borrowers.
(s)
Other
Reports.
From
time to time, with reasonable promptness, any and all receivables schedules,
collection reports, deposit records, equipment schedules, copies of invoices
to
account debtors, and such other material, reports, records or information as
the
Lender may request.
-32-
Section
6.2 Financial
Covenants.
(a) Minimum
Book Net Worth (Borrowers).
The
Borrowers, on a consolidated basis, will maintain, during each period described
below, Book Net Worth, determined as of the end of each month, in an amount
not
less than the amount set forth for each such period (numbers appearing between
“< >” are negative):
|
Period
Ending
|
Minimum
Book Net Worth
|
|||
|
Funding
Date through March 31, 2007
|
$
|
435,000
|
||
|
April
1, 2007 through June 30, 2007
|
$
|
600,000
|
||
|
July
1, 2007 through September 30, 2007
|
$
|
1,000,000
|
||
|
October
1, 2007 through December 31, 2007
|
$
|
1,635,000
|
||
(b) Minimum
Book Net Worth (Consolidated with Pacific CMA).
The
Borrowers and Pacific CMA, on a consolidated basis, will maintain, during each
period described below, Book Net Worth, determined as of the end of each month,
in an amount not less than the amount set forth for each such period (numbers
appearing between “< >” are negative):
|
Period
Ending
|
Minimum
Book Net Worth
|
|||
|
Funding
Date through March 31, 2007
|
$
|
5,538,500
|
||
|
April
1, 2007 through June 30, 2007
|
$
|
7,090,000
|
||
|
July
1, 2007 through September 30, 2007
|
$
|
9,750,000
|
||
|
October
1, 2007 through December 31, 2007
|
$
|
10,850,000
|
||
(c) Minimum
Net Income (Borrowers).
The
Borrowers, on a consolidated basis, will achieve, for each period described
below, Net Income of not less than the amount set forth for each such period
(numbers appearing between “< >” are negative):
|
Quarter
Ending
|
Minimum
Net Income
|
|||
|
Three
months ending March 31, 2007
|
$
|
155,000
|
||
|
Six
months ending June 30, 2007
|
$
|
315,000
|
||
|
Nine
months ending September 30, 2007
|
$
|
725,000
|
||
|
Twelve
months ending December 31, 2007
|
$
|
1,350,000
|
||
-33-
(d) Minimum
Net Income (Consolidated with Pacific CMA).
The
Borrowers and Pacific CMA, on a consolidated basis, will achieve, for each
period described below, Net Income of not less than the amount set forth for
each such period (numbers appearing between “< >” are
negative):
|
Quarter
Ending
|
Minimum
Net Income
|
|||
|
Six
months ending June 30, 2007
|
$
|
765,000
|
||
|
Nine
months ending September 30, 2007
|
$
|
1,875,000
|
||
|
Twelve
months ending December 31, 2007
|
$
|
3,000,000
|
||
(e) Establishing
Future Financial Covenants.
The
Borrowers acknowledge and agree that, upon Lender’s receipt of projections,
satisfactory to Lender in its discretion, for the fiscal year ending December
31, 2008 and each fiscal year thereafter from Borrowers, Lender shall reset
the
foregoing Financial Covenants in its reasonable discretion. Borrowers agree
to
comply with such Financial Covenants, as reset.
Section
6.3 Permitted
Liens; Financing Statements.
(a) The
Borrowers will not create, incur or suffer to exist any Lien upon or of any
of
their assets, now owned or hereafter acquired, to secure any indebtedness;
excluding,
however,
from
the operation of the foregoing, the following (each a “Permitted Lien”;
collectively, “Permitted Liens”):
(i) In
the
case of any of the Borrowers’ property which is not Collateral, covenants,
restrictions, rights, easements and minor irregularities in title which do
not
materially interfere with the Borrowers’ business or operations as presently
conducted;
(ii) Liens
in
existence on the date hereof and listed in Schedule 6.3 hereto, securing
indebtedness for borrowed money permitted under this Agreement;
(iii) The
Security Interest and Liens created by the Security Documents; and
(iv) Purchase
money Liens relating to the acquisition of machinery and equipment of the
Borrowers not exceeding the lesser of cost or fair market value thereof[, not
exceeding $20,000 for any one purchase or $30,000 in the aggregate during any
fiscal year, and so long as no Default Period is then in existence and none
would exist immediately after such acquisition.
(b) The
Borrowers will not amend any financing statements in favor of the Lender except
as permitted by law.
Any
authorization by the Lender to any Person to amend financing statements in
favor
of the Lender shall be in writing.
Section
6.4 Indebtedness.
The
Borrowers will not incur, create, assume or permit to exist any indebtedness
or
liability on account of deposits or advances or any indebtedness for borrowed
money or letters of credit issued on the Borrowers’ behalf, or any other
indebtedness or liability evidenced by notes, bonds, debentures or similar
obligations, except:
(a) Any
existing or future Indebtedness or any other obligations of the Borrowers to
the
Lender;
-34-
(b) Any
indebtedness of the Borrowers in existence on the date hereof and listed in
Schedule 6.4 hereto; and
(c) Any
indebtedness relating to Permitted Liens.
Section
6.5 Guaranties.
The
Borrowers will not assume, guarantee, endorse or otherwise become directly
or
contingently liable in connection with any obligations of any other Person,
except:
(a) The
endorsement of negotiable instruments by the Borrowers for deposit or collection
or similar transactions in the ordinary course of business; and
(b) Guaranties,
endorsements and other direct or contingent liabilities in connection with
the
obligations of other Persons, in existence on the date hereof and listed in
Schedule 6.4 hereto.
Section
6.6 Investments
and Subsidiaries.
The
Borrowers will not make or permit to exist any loans or advances to, or make
any
investment or acquire any interest whatsoever in, any other Person or Affiliate,
including any partnership or joint venture, nor purchase or hold beneficially
any stock or other securities or evidence of indebtedness of any other Person
or
Affiliate, except:
(a) Investments
in direct obligations of the United States of America or any agency or
instrumentality thereof whose obligations constitute full faith and credit
obligations of the United States of America having a maturity of one year or
less, commercial paper issued by U.S. corporations rated “A-1” or “A-2” by
Standard & Poor’s Ratings Services or “P-1” or “P-2” by Xxxxx’x
Investors Service or certificates of deposit or bankers’ acceptances having a
maturity of one year or less issued by members of the Federal Reserve System
having deposits in excess of $100,000,000 (which certificates of deposit or
bankers’ acceptances are fully insured by the Federal Deposit Insurance
Corporation);
(b) Travel
advances or loans to the Borrowers’ Officers and employees not exceeding at any
one time an aggregate of $15,000;
(c) Prepaid
rent not exceeding one month or security deposits; and
(d) Current
investments in the Subsidiaries in existence on the date hereof and listed
in
Schedule 5.5 hereto.
Section
6.7 Dividends
and Distributions.
The
Borrowers will not declare or pay any dividends (other than dividends payable
solely in stock of the Borrowers) on any class of its stock, or, except as
permitted by Section 2.14 hereof, make any payment on account of the purchase,
redemption or other retirement of any shares of such stock, or other securities
or evidence of its indebtedness or make any distribution in respect thereof,
either directly or indirectly.
-35-
Section
6.8 Reserved.
Section
6.9 Reserved.
Section
6.10 Books
and Records; Collateral
Examination, Inspection and Appraisals.
(a) The
Borrowers will keep accurate books of record and account for themselves
pertaining to the Collateral and pertaining to the Borrowers’ business and
financial condition and such other matters as the Lender may from time to time
request in which true and complete entries will be made in accordance with
GAAP
and, upon the Lender’s request, will permit any officer, employee, attorney,
accountant or other agent of the Lender to audit, review, make extracts from
or
copy any and all company and financial books and records of the Borrowers at
all
times during ordinary business hours, to send and discuss with account debtors
and other obligors requests for verification of amounts owed to the Borrowers,
and to discuss the Borrowers’ affairs with any of its Directors, Officers,
employees or agents.
(b) The
Borrowers hereby irrevocably authorize all accountants and third parties to
disclose and deliver to the Lender or its designated agent, at the Borrowers’
expense, all financial information, books and records, work papers, management
reports and other information in their possession regarding the Borrowers.
(c) The
Borrowers will permit the Lender or its employees, accountants, attorneys or
agents, to examine and inspect any Collateral or any other property of the
Borrowers at any time during ordinary business hours.
(d) The
Lender may also, from time to time, obtain at the Borrowers’ expense an
appraisal of Collateral by an appraiser acceptable to the Lender in its sole
discretion._]
Section
6.11 Account
Verification.
(a) The
Lender or its agent may at any time and from time to time send or require the
Borrowers to send requests for verification of accounts or notices of assignment
to account debtors and other obligors. The Lender or its agent may also at
any
time and from time to time telephone account debtors and other obligors to
verify accounts.
(b) The
Borrowers shall pay when due each account payable due to a Person holding a
Permitted Lien (as a result of such payable) on any Collateral.
Section
6.12 Compliance
with Laws.
(a) The
Borrowers shall (i) comply, and cause each Subsidiary to comply, with the
requirements of applicable laws and regulations, the non-compliance with which
would materially and adversely affect its business or its financial condition
and (ii) use and keep the Collateral, and require that others use and keep
the Collateral, only for lawful purposes, without violation of any federal,
state or local law, statute or ordinance.
-36-
(b) Without
limiting the foregoing undertakings, the Borrowers specifically agree that
they
will comply, and cause each Subsidiary to comply, with all applicable
Environmental Laws and obtain and comply with all permits, licenses and similar
approvals required by any Environmental Laws, and will not generate, use,
transport, treat, store or dispose of any Hazardous Substances in such a manner
as to create any material liability or obligation under the common law of any
jurisdiction or any Environmental Law.
(c) The
Borrowers
shall (i) ensure, and cause Pacific CMA and each Subsidiary to ensure, that
no
Owner shall be listed on the Specially Designated Nationals and Blocked Person
List or other similar lists maintained by the Office of Foreign Assets Control
("OFAC"), the Department of the Treasury or included in any Executive Orders,
(ii) not use or permit the use of the proceeds of the Credit Facility or any
other financial accommodation from the Lender to violate any of the foreign
asset control regulations of OFAC or other applicable law, (iii) comply, and
cause Pacific CMA and each Subsidiary to comply, with all applicable Bank
Secrecy Act laws and regulations, as amended from time to time, and (iv)
otherwise comply with the USA Patriot Act as required by federal law and the
Lender's policies and practices.
Section
6.13 Payment
of Taxes and Other Claims.
The
Borrowers will pay or discharge, when due, (a) all taxes, assessments and
governmental charges levied or imposed upon it or upon its income or profits,
upon any properties belonging to it (including the Collateral) or upon or
against the creation, perfection or continuance of the Security Interest, prior
to the date on which penalties attach thereto, (b) all federal, state and
local taxes required to be withheld by it, and (c) all lawful claims for
labor, materials and supplies which, if unpaid, might by law become a Lien
upon
any properties of the Borrowers; provided, that the Borrowers shall not be
required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which proper reserves have been made.
Section
6.14 Maintenance
of Properties.
(a) The
Borrowers will keep and maintain the Collateral and all of their other
properties necessary or useful in their business in good condition, repair
and
working order (normal wear and tear excepted) and will from time to time replace
or repair any worn, defective or broken parts; provided,
however,
that
nothing in this covenant shall prevent the Borrowers from discontinuing the
operation and maintenance of any of their properties if such discontinuance
is,
in the Borrowers’ judgment, desirable in the conduct of the Borrowers’ business
and not disadvantageous in any material respect to the Lender. The Borrowers
will take all commercially reasonable steps necessary to protect and maintain
their Intellectual Property Rights.
(b) The
Borrowers will defend the Collateral against all Liens, claims or demands of
all
Persons (other than the Lender) claiming the Collateral or any interest therein.
The Borrowers will keep all Collateral free and clear of all Liens except
Permitted Liens. The Borrowers will take all commercially reasonable steps
necessary to prosecute any Person Infringing its Intellectual Property Rights
and to defend itself against any Person accusing it of Infringing any Person’s
Intellectual Property Rights.
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Section
6.15 Insurance.
The
Borrowers will obtain and at all times maintain insurance with insurers
acceptable to the Lender, in such amounts, on such terms (including any
deductibles) and against such risks as may from time to time be required by
the
Lender, but in all events in such amounts and against such risks as is usually
carried by companies engaged in similar business and owning similar properties
in the same general areas in which the Borrowers operate. Without limiting
the
generality of the foregoing, the Borrowers will at all times maintain business
interruption insurance including coverage for force majeure and keep all
tangible Collateral insured against risks of fire (including so-called extended
coverage), theft, collision (for Collateral consisting of motor vehicles) and
such other risks and in such amounts as the Lender may reasonably request,
with
any loss payable to the Lender to the extent of its interest, and all policies
of such insurance shall contain a lender’s loss payable endorsement for the
Lender’s benefit. All policies of liability insurance required hereunder shall
name the Lender as an additional insured.
Section
6.16 Preservation
of Existence.
The
Borrowers will preserve and maintain their existence and all of their rights,
privileges and franchises necessary or desirable in the normal conduct of their
business and shall conduct their business in an orderly, efficient and regular
manner.
Section
6.17 Delivery
of Instruments, etc.
Upon
request by the Lender, the Borrowers will promptly deliver to the Lender in
pledge all instruments, documents and chattel paper constituting Collateral,
duly endorsed or assigned by the Borrowers.
Section
6.18 Sale
or Transfer of Assets; Suspension of Business Operations.
The
Borrowers will not sell, lease, assign, transfer or otherwise dispose of
(i) the stock of any Subsidiary, (ii) all or a substantial part of its
assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than
the
sale of Inventory in the ordinary course of business and will not liquidate,
dissolve or suspend business operations. The Borrowers will not transfer any
part of their ownership interest in any Intellectual Property Rights and will
not permit any agreement under which they have licensed Licensed Intellectual
Property to lapse, except that the Borrowers may transfer such rights or permit
such agreements to lapse if they shall have reasonably determined that the
applicable Intellectual Property Rights are no longer useful in their business.
If the Borrowers transfer any Intellectual Property Rights for value, the
Borrowers will pay over the proceeds to the Lender for application to the
Indebtedness. The Borrowers will not license any other Person to use any of
the
Borrowers’ Intellectual Property Rights, except that the Borrowers may grant
licenses in the ordinary course of their business in connection with sales
of
Inventory or provision of services to its customers.
Section
6.19 Consolidation
and Merger; Asset Acquisitions.
The
Borrowers will not consolidate with or merge into any Person, or permit any
other Person to merge into them, or acquire (in a transaction analogous in
purpose or effect to a consolidation or merger) all or substantially all the
assets of any other Person.
Section
6.20 Sale
and Leaseback.
The
Borrowers will not enter into any arrangement, directly or indirectly, with
any
other Person whereby the Borrowers shall sell or transfer any real or personal
property, whether now owned or hereafter acquired, and then or thereafter rent
or lease as lessee such property or any part thereof or any other property
which
the Borrowers intend to use for substantially the same purpose or purposes
as
the property being sold or transferred.
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Section
6.21 Restrictions
on Nature of Business.
The
Borrowers will not engage in any line of business materially different from
that
presently engaged in by the Borrowers and will not purchase, lease or otherwise
acquire assets not related to their business.
Section
6.22 Accounting.
The
Borrowers will not adopt any material change in accounting principles other
than
as required by GAAP. The Borrowers will not adopt, permit or consent to any
change in their fiscal year.
Section
6.23 Discounts,
etc.
After
notice from the Lender, the Borrowers will not grant any discount, credit or
allowance to any customer of the Borrowers or accept any return of goods sold.
The Borrowers will not at any time modify, amend, subordinate, cancel or
terminate the obligation of any account debtor or other obligor of the
Borrowers.
Section
6.24 Plans.
Except
as disclosed to the Lender in writing prior to the date hereof, neither the
Borrowers nor any ERISA Affiliate will (i) adopt, create, assume or become
a
party to any Pension Plan, (ii) incur any obligation to contribute to any
Multiemployer Plan, (iii) incur any obligation to provide post-retirement
medical or insurance benefits with respect to employees or former employees
(other than benefits required by law) or (iv) amend any Plan in a manner that
would materially increase its funding obligations.
Section
6.25 Place
of Business; Name.
The
Borrowers will not transfer their chief executive office or principal place
of
business, or move, relocate, close or sell any business location. The Borrowers
will not permit any tangible Collateral or any records pertaining to the
Collateral to be located in any state or area in which, in the event of such
location, a financing statement covering such Collateral would be required
to
be, but has not in fact been, filed in order to perfect the Security Interest.
The Borrowers will not change their names or jurisdiction of
organization.
Section
6.26 Constituent
Documents; S Corporation Status.
The
Borrowers will not amend their Constituent Documents. The Borrowers will not
become S Corporations.
Section
6.27 Affiliate
Transactions. The Borrowers shall not enter into or be a party to any
agreement or transaction with any Affiliate except in the ordinary course of,
and pursuant to the reasonable requirements of, Borrowers’ business and upon
fair and reasonable terms that are no less favorable to Borrowers than they
would obtain in a comparable arms length transaction with a Person not an
Affiliate.
Section
6.28 Performance
by the Lender.
If the
Borrowers at any time fail to perform or observe any of the foregoing covenants
contained in this Article VI or elsewhere herein, and if such failure shall
continue for a period of ten calendar days after the Lender gives the Borrowers
written notice thereof (or in the case of the agreements contained in Section
6.13 and Section 6.15, immediately upon the occurrence of such failure, without
notice or lapse of time), the Lender may, but need not, perform or observe
such
covenant on behalf and in the name, place and stead of the Borrowers (or, at
the
Lender’s option, in the Lender’s name) and may, but need not, take any and all
other actions which the Lender may reasonably deem necessary to cure or correct
such failure (including the payment of taxes, the satisfaction of Liens, the
performance of obligations owed to account debtors or other obligors, the
procurement and maintenance of insurance, the execution of assignments, security
agreements and financing statements, and the endorsement of instruments); and
the Borrowers shall thereupon pay to the Lender on demand the amount of all
monies expended and all costs and expenses (including reasonable attorneys’ fees
and legal expenses) incurred by the Lender in connection with or as a result
of
the performance or observance of such agreements or the taking of such action
by
the Lender, together with interest thereon from the date expended or incurred
at
the Default Rate. To facilitate the Lender’s performance or observance of such
covenants of the Borrowers, the Borrowers hereby irrevocably appoint the Lender,
or the Lender’s delegate, acting alone, as the Borrowers’ attorney in fact
(which appointment is coupled with an interest) with the right (but not the
duty) from time to time to create, prepare, complete, execute, deliver, endorse
or file in the name and on behalf of the Borrowers any and all instruments,
documents, assignments, security agreements, financing statements, applications
for insurance and other agreements and writings required to be obtained,
executed, delivered or endorsed by the Borrowers hereunder.
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ARTICLE
VII
EVENTS
OF DEFAULT, RIGHTS AND REMEDIES
Section
7.1. Events
of Default. Notwithstanding that the Lender may demand immediate payment of
any Indebtedness at any time, whether or not a Default Period then exists,
and
without waiving or limiting in any respect the Lender’s right to so demand
payment of the Indebtedness at any time, this Agreement sets forth a
non-exclusive list of certain critical events after the occurrence of which
the
Lender expects that it would demand immediate payment of the Indebtedness and
exercise its remedies. “Event of Default”, wherever used herein, means any one
of the following events:
(a) Default
in the payment of the Revolving Note or any default with respect to any other
Indebtedness due from Borrowers to Lender as such Indebtedness becomes due
and
payable;
(b) Default
in the performance, or breach, of any covenant or agreement of the Borrowers
contained in this Agreement;
(c) An
Overadvance arises as the result of any reduction in the Borrowing Base, or
arises in any manner on terms not otherwise approved of in advance by the Lender
in writing;
(d) A
Change
of Control shall occur;
(e) Any
Financial Covenant shall become inapplicable due to the lapse of time and the
failure of the Lender and the Borrowers to come to an agreement to amend any
such covenant to cover future periods that is acceptable to the Lender in the
Lender’s sole discretion;
(f) The
Borrowers or any Guarantor shall be or become insolvent, or admit in writing
its
or his inability to pay its or his debts as they mature, or make an assignment
for the benefit of creditors; or the Borrowers or any Guarantor shall apply
for
or consent to the appointment of any receiver, trustee, or similar officer
for
it or him or for all or any substantial part of its or his property; or such
receiver, trustee or similar officer shall be appointed without the application
or consent of the Borrowers or such Guarantor, as the case may be; or the
Borrowers or any Guarantor shall institute (by petition, application, answer,
consent or otherwise) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding relating
to
it or him under the laws of any jurisdiction; or any such proceeding shall
be
instituted (by petition, application or otherwise) against the Borrowers or
any
such Guarantor; or any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against a substantial part of the
property of the Borrowers or any Guarantor;
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(g) A
petition shall be filed by or against the Borrowers or any Guarantor under
the
United States Bankruptcy Code or the laws of any other jurisdiction naming
the
Borrowers or such Guarantor as debtor;
(h) Reserved;
(i) Any
representation or warranty made by the Borrowers in this Agreement, by any
Guarantor in any Guaranty delivered to the Lender, or by the Borrowers (or
any
of its Officers) or any Guarantor in any agreement, certificate, instrument
or
financial statement or other statement contemplated by or made or delivered
pursuant to or in connection with this Agreement or any such Guaranty shall
be
incorrect in any material respect;
(j) The
rendering against the Borrowers of final judgment, decree or order for the
payment of money in excess of $50,000 and the continuance of such judgment,
decree or order unsatisfied and in effect for any period of 30 consecutive
days without a stay of execution;
(k) A
default
under any bond, debenture, note or other evidence of material indebtedness
of
the Borrowers owed to any Person other than the Lender, or under any indenture
or other instrument under which any such evidence of indebtedness has been
issued or by which it is governed, or under any material lease or other
contract, and the expiration of the applicable period of grace, if any,
specified in such evidence of indebtedness, indenture, other instrument, lease
or contract;
(l) Any
Reportable Event, which the Lender determines in good faith might constitute
grounds for the termination of any Pension Plan or for the appointment by the
appropriate United States District Court of a trustee to administer any Pension
Plan, shall have occurred and be continuing 30 days after written notice to
such effect shall have been given to the Borrowers by the Lender; or a trustee
shall have been appointed by an appropriate United States District Court to
administer any Pension Plan; or the Pension Benefit Guaranty Corporation shall
have instituted proceedings to terminate any Pension Plan or to appoint a
trustee to administer any Pension Plan; or the Borrowers or any ERISA Affiliate
shall have filed for a distress termination of any Pension Plan under Title
IV
of ERISA; or the Borrowers or any ERISA Affiliate shall have failed to make
any
quarterly contribution required with respect to any Pension Plan under Section
412(m) of the IRC, which the Lender determines in good faith may by itself,
or
in combination with any such failures that the Lender may determine are likely
to occur in the future, result in the imposition of a Lien on the Borrowers’
assets in favor of the Pension Plan; or any withdrawal, partial withdrawal,
reorganization or other event occurs with respect to a Multiemployer Plan which
results or could reasonably be expected to result in a material liability of
the
Borrowers to the Multiemployer Plan under Title IV of ERISA;
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(m) An
event
of default shall occur under any Security Document;
(n) Default
in the payment of any amount owed by the Borrowers to the Lender other than
any
Indebtedness arising hereunder;
(o) Any
Guarantor shall repudiate, purport to revoke or fail to perform any obligation
under such Guaranty in favor of the Lender, any individual Guarantor shall
die
or any other Guarantor shall cease to exist;
(p) The
Borrowers shall take or participate in any action which would be prohibited
under the provisions of any Subordination Agreement or make any payment with
respect to indebtedness that has been subordinated pursuant to any Subordination
Agreement;
(q) The
Lender believes in good faith that the prospect of payment in full of any part
of the Indebtedness, or that full performance by the Borrowers under the Loan
Documents is impaired, or that there has occurred any material adverse change
in
the business or financial condition of the Borrowers;
(r) There
has
occurred any breach, default or event of default by or attributable to, any
Affiliate under any agreement between the Affiliate and the Lender;
or
(s) The
indictment of any Director, Officer, Guarantor, or any Owner of the Borrowers
for a felony offence under state or federal law.
(t) The
Borrowers fail to enter into the $5,000,000 loan from BHC Interim Funding LP,
on
terms acceptable to Lender by June _____, 2007.
Section
7.2 Rights
and Remedies.
As
provided in Section 2.10, the Lender may, at any time, refuse to make any
requested Advance, demand payment of the Advances or terminate the Credit
Facility, whether or not a Default Period then exists. In addition, during
any
Default Period, the Lender may exercise any or all of the following rights
and
remedies:
(a) The
Lender may, by notice to the Borrowers, declare the Indebtedness to be forthwith
due and payable, whereupon all Indebtedness shall become and be forthwith due
and payable, without presentment, notice of dishonor, protest or further notice
of any kind, all of which the Borrowers hereby expressly waive;
(b) The
Lender may, without notice to the Borrowers and without further action, apply
any and all money owing by the Lender to the Borrowers to the payment of the
Indebtedness;
(c) The
Lender may exercise and enforce any and all rights and remedies available upon
default to a secured party under the UCC, including the right to take possession
of Collateral, or any evidence thereof, proceeding without judicial process
or
by judicial process (without a prior hearing or notice thereof, which the
Borrowers hereby expressly waive) and the right to sell, lease or otherwise
dispose of any or all of the Collateral (with or without giving any warranties
as to the Collateral, title to the Collateral or similar warranties), and,
in
connection therewith, the Borrowers will on demand assemble the Collateral
and
make it available to the Lender at a place to be designated by the Lender which
is reasonably convenient to both parties;
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(d) Reserved;
(e) The
Lender may exercise and enforce its rights and remedies under the Loan
Documents;
(f) The
Lender may without regard to any waste, adequacy of the security or solvency
of
the Borrowers, apply for the appointment of a receiver of the Collateral, to
which appointment the Borrowers hereby consent, whether or not foreclosure
proceedings have been commenced under the Security Documents and whether or
not
a foreclosure sale has occurred; and
(g) The
Lender may exercise any other rights and remedies available to it by law or
agreement.
Notwithstanding
the foregoing, upon the occurrence of an Event of Default described in Section
7.1(f) or (g), the Indebtedness shall be immediately due and payable
automatically without presentment, demand, protest or notice of any kind. If
the
Lender sells any of the Collateral on credit, the Indebtedness will be reduced
only to the extent of payments actually received. If the purchaser fails to
pay
for the Collateral, the Lender may resell the Collateral and shall apply any
proceeds actually received to the Indebtedness.
Section
7.3 Certain
Notices.
If
notice to the Borrowers of any intended disposition of Collateral or any other
intended action is required by law in a particular instance, such notice shall
be deemed commercially reasonable if given (in the manner specified in Section
8.3) at least ten calendar days before the date of intended disposition or
other
action.
ARTICLE
VIII
MISCELLANEOUS
Section
8.1 No
Waiver; Cumulative Remedies; Compliance with Laws.
No
failure or delay by the Lender in exercising any right, power or remedy under
the Loan Documents shall operate as a waiver thereof; nor shall any single
or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under the Loan Documents. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law. The Lender may
comply with any applicable state or federal law requirements in connection
with
a disposition of the Collateral and such compliance will not be considered
adversely to affect the commercial reasonableness of any sale of the
Collateral.
Section
8.2 Amendments,
Etc.
No
amendment, modification, termination or waiver of any provision of any Loan
Document or consent to any departure by the Borrowers therefrom or any release
of a Security Interest shall be effective unless the same shall be in writing
and signed by the Lender, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
No
notice to or demand on the Borrowers in any case shall entitle the Borrowers
to
any other or further notice or demand in similar or other
circumstances.
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Section
8.3 Notices;
Communication of Confidential Information; Requests for
Accounting.
Except
as otherwise expressly provided herein, all notices, requests, demands and
other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United
States mail, (c) sent by overnight courier of national reputation,
(d) transmitted by telecopy, or (e) sent as electronic mail, in each case
delivered or sent to the party to whom notice is being given to the business
address, telecopier number, or e mail address set forth below next to its
signature or, as to each party, at such other business address, telecopier
number, or e mail address as it may hereafter designate in writing to the other
party pursuant to the terms of this Section. All such notices, requests, demands
and other communications shall be deemed to be an authenticated record
communicated or given on (a) the date received if personally delivered,
(b) when deposited in the mail if delivered by mail, (c) the date
delivered to the courier if delivered by overnight courier, or (d) the date
of transmission if sent by telecopy or by e mail, except that notices or
requests delivered to the Lender pursuant to any of the provisions of
Article II shall not be effective until received by the Lender. All
notices, financial information, or other business records sent by either party
to this Agreement may be transmitted, sent, or otherwise communicated via such
medium as the sending party may deem appropriate and commercially reasonable;
provided,
however,
that
the risk that the confidentiality or privacy of such notices, financial
information, or other business records sent by either party may be compromised
shall be borne exclusively by the Borrowers. All requests for an accounting
under Section 9-210 of the UCC (i) shall be made in a writing signed by a
Person authorized under Section 2.2(b), (ii) shall be personally delivered,
sent by registered or certified mail, return receipt requested, or by overnight
courier of national reputation, (iii) shall be deemed to be sent when
received by the Lender and (iv) shall otherwise comply with the requirements
of
Section 9-210. The Borrowers request that the Lender respond to all such
requests which on their face appear to come from an authorized individual and
releases the Lender from any liability for so responding. The Borrowers shall
pay the Lender the maximum amount allowed by law for responding to such
requests.
Section
8.4 Further
Documents.
The
Borrowers will from time to time execute, deliver, endorse and authorize the
filing of any and all instruments, documents, conveyances, assignments, security
agreements, financing statements, control agreements and other agreements and
writings that the Lender may reasonably request in order to secure, protect,
perfect or enforce the Security Interest or the Lender’s rights under the Loan
Documents (but any failure to request or assure that the Borrowers execute,
deliver, endorse or authorize the filing of any such item shall not affect
or
impair the validity, sufficiency or enforceability of the Loan Documents and
the
Security Interest, regardless of whether any such item was or was not executed,
delivered or endorsed in a similar context or on a prior occasion).
Section
8.5 Costs
and Expenses.
The
Borrowers shall pay on demand all costs and expenses, including reasonable
attorneys’ fees, incurred by the Lender in connection with the Indebtedness,
this Agreement, the Loan Documents and any other document or agreement related
hereto or thereto, and the transactions contemplated hereby, including all
such
costs, expenses and fees incurred in connection with the negotiation,
preparation, execution, amendment, administration, performance, collection
and
enforcement of the Indebtedness and all such documents and agreements and the
creation, perfection, protection, satisfaction, foreclosure or enforcement
of
the Security Interest.
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Section
8.6 Indemnity.
In
addition to the payment of expenses pursuant to Section 8.5, the Borrowers
shall
indemnify, defend and hold harmless the Lender, and any of its participants,
parent corporations, subsidiary corporations, affiliated corporations, successor
corporations, and all present and future officers, directors, employees,
attorneys and agents of the foregoing (the “Indemnitees”) from and against any
of the following (collectively, “Indemnified Liabilities”):
(i) Any
and
all transfer taxes, documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery of the Loan
Documents or the making of the Advances;
(ii) Any
claims, loss or damage to which any Indemnitee may be subjected if any
representation or warranty contained in Section 5.14 proves to be incorrect
in
any respect or as a result of any violation of the covenant contained in Section
6.12(b) ; and
(iii) Any
and
all other liabilities, losses, damages, penalties, judgments, suits, claims,
costs and expenses of any kind or nature whatsoever (including the reasonable
fees and disbursements of counsel) in connection with the foregoing and any
other investigative, administrative or judicial proceedings, whether or not
such
Indemnitee shall be designated a party thereto, which may be imposed on,
incurred by or asserted against any such Indemnitee, in any manner related
to or
arising out of or in connection with the making of the Advances and the Loan
Documents or the use or intended use of the proceeds of the
Advances.
If
any
investigative, judicial or administrative proceeding arising from any of the
foregoing is brought against any Indemnitee, upon such Indemnitee’s request, the
Borrowers, or counsel designated by the Borrowers and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrowers’ sole cost and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because
it
violates any law or public policy, the Borrowers shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrowers’ obligation
under this Section 8.6 shall survive the termination of this Agreement and
the
discharge of the Borrowers’ other obligations hereunder.
Section
8.7 Participants.
The
Lender and its participants, if any, are not partners or joint venturers, and
the Lender shall not have any liability or responsibility for any obligation,
act or omission of any of its participants. All rights and powers specifically
conferred upon the Lender may be transferred or delegated to any of the Lender’s
participants, successors or assigns.
Section
8.8 Execution
in Counterparts; Telefacsimile Execution.
This
Agreement and other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed
to be
an original and all of which counterparts, taken together, shall constitute
but
one and the same instrument. Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver
an
original executed counterpart of this Agreement but the failure to deliver
an
original executed counterpart shall not affect the validity, enforceability,
and
binding effect of this Agreement.
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Section
8.9 Retention
of Borrowers’ Records.
The
Lender shall have no obligation to maintain any electronic records or any
documents, schedules, invoices, agings, or other papers delivered to the Lender
by the Borrowers or in connection with the Loan Documents for more than 30
days
after receipt by the Lender.
If there
is a special need to retain specific records, the Borrowers must inform the
Lender of their need to retain those records with particularity, which must
be
delivered in accordance with the notice provisions of Section 8.3 within 30
days
of the Lender taking control of same.
Section
8.10 Binding
Effect; Assignment; Complete Agreement; Sharing Information.
The Loan
Documents shall be binding upon and inure to the benefit of the Borrowers and
the Lender and their respective successors and assigns, except that the
Borrowers shall not have the right to assign their rights thereunder or any
interest therein without the Lender’s prior written consent. To the extent
permitted by law, the Borrowers waive and will not assert against any assignee
any claims, defenses or set-offs which the Borrowers could assert against the
Lender. This Agreement shall also bind all Persons who become a party to this
Agreement as a borrower. This Agreement, together with the Loan Documents,
comprises the complete and integrated agreement of the parties on the subject
matter hereof and supersedes all prior agreements, written or oral, on the
subject matter hereof. To the extent that any provision of this Agreement
contradicts other provisions of the Loan Documents, this Agreement shall
control. Without limiting the Lender’s right to share information regarding the
Borrowers and their Affiliates with the Lender’s participants, accountants,
lawyers and other advisors, the Lender and Xxxxx Fargo Bank may share any and
all information they may have in their possession regarding the Borrowers and
their Affiliates, and the Borrowers waive any right of confidentiality they
may
have with respect to such sharing of information.
Section
8.11 Severability
of Provisions.
Any
provision of this Agreement which is prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof.
Section
8.12 Headings.
Article,
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
Section
8.13 Governing
Law; Jurisdiction, Venue; Waiver of Jury Trial.
The Loan
Documents shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of New York. The parties hereto
hereby (i) consent to the personal jurisdiction of the state and federal
courts located in the State of New York in connection with any controversy
related to this Agreement; (ii) waive any argument that venue in any such
forum is not convenient; (iii) agree that any litigation initiated by the
Lender or the Borrowers in connection with this Agreement or the other Loan
Documents may be venued in either the state or federal courts located in the
County of New York, State of New York; and (iv) agree that a final judgment
in any such suit, action or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on the judgment or in any other manner provided
by law.
-46-
THE
BORROWERS AND THE LENDER WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION AT
LAW
OR IN EQUITY OR IN ANY OTHER PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by
their respective officers thereunto duly authorized as of the date first above
written.
|
Airgate
International Corporation
Airgate
International Corporation (Chicago)
Paradigm
International, Inc.
000-00
Xxxxxxxx Xxxxxxxxx
Xxxxxxx,
Xxx Xxxx 00000
Telecopier:
_______________________
Attention:
________________________
e-mail:
___________________________
|
AIRGATE
INTERNATIONAL CORPORATION
By:
/s/
Xxxxx Xxxxxx
Name: Xxxxx
Xxxxxx
Title: President
|
|
|
AIRGATE
INTERNATIONAL CORPORATION (CHICAGO)
By:
/s/
Xxxxx Xxxxxx
Name: Xxxxx
Xxxxxx
Title: Vice
President
|
||
|
PARADIGM
INTERNATIONAL, INC.
By:
/s/
Xxxxx Xxxxxx
Name: Xxxxx
Xxxxxx
Title: Vice
President
|
||
|
Xxxxx
Fargo Bank, National Association
Xxxxx
Fargo Business
Credit
000 Xxxx 00xx
Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Telecopier:
(000) 000-0000
Attention:
Relationship Manager - Airgate International Corporation
e-mail:
______________@xxxxxxxxxx.xxx
|
XXXXX
FARGO BANK, NATIONAL ASSOCIATION
By:
/s/
Xxxxxxxx Xxxxxxx
Name: Xxxxxxxx
Xxxxxxx
Title: Vice
President
|
Table
of Exhibits and Schedules
|
Exhibit
A
|
Form
of Revolving Note
|
|
|
Exhibit
B
|
Compliance
Certificate
|
|
|
Exhibit
C
|
Premises
|
|
|
Schedule
5.1
|
Trade
Names, Chief Executive Office, Principal Place of Business, and
Locations
of Collateral
|
|
|
Schedule
5.2
|
Capitalization
and Organizational Chart
|
|
|
Schedule
5.5
|
Subsidiaries
|
|
|
Schedule
5.7
|
Litigation
Matters
|
|
|
Schedule
5.11
|
Intellectual
Property Disclosures
|
|
|
Schedule
5.14
|
Environmental
Matters
|
|
|
Schedule
6.3
|
Permitted
Liens
|
|
|
Schedule
6.4
|
Permitted
Indebtedness and Guaranties
|
Exhibit
A to Credit and Security Agreement
REVOLVING
NOTE
| $10,000,000 |
April
___,
2007
|
For
value
received, the undersigned, AIRGATE INTERNATIONAL CORPORATION, a New York
corporation, AIRGATE INTERNATIONAL CORPORATION (CHICAGO), an Illinois
corporation, and PARADIGM INTERNATIONAL, INC., a Florida corporation
(collectively and individually the “Borrowers”), hereby jointly and severally
promise to pay ON DEMAND, and if demand is not made, then as provided in the
Credit Agreement (defined below), to the order of XXXXX FARGO BANK, NATIONAL
ASSOCIATION (the “Lender”), acting through its Xxxxx Fargo Business Credit
operating division, on the Termination Date referenced in the Credit and
Security Agreement dated the same date as this Revolving Note that was entered
into by the Lender and the Borrowers (as amended from time to time, the “Credit
Agreement”), at Lender’s office located at 000 Xxxx 00xx
Xxxxxx,
00xx
Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Ten Million Dollars
($10,000,000) or the aggregate unpaid principal amount of all Revolving Advances
made by the Lender to the Borrowers under the Credit Agreement, together with
interest on the principal amount hereunder remaining unpaid from time to time,
computed on the basis of the actual number of days elapsed and a 360-day year,
from the date hereof until this Revolving Note is fully paid at the rate from
time to time in effect under the Credit Agreement.
This
Revolving Note is the Revolving Note referenced in the Credit Agreement, and
is
subject to the terms of the Credit Agreement, which provides, among other
things, for acceleration hereof. Principal and interest due hereunder shall
be
payable as provided in the Credit Agreement, and this Revolving Note may be
prepaid only in accordance with the terms of the Credit Agreement. This
Revolving Note is secured, among other things, pursuant to the Credit Agreement
and the Security Documents as therein defined, and may now or hereafter be
secured by one or more other security agreements, mortgages, deeds of trust,
assignments or other instruments or agreements.
This
Note
is issued pursuant, and is subject, to the Credit Agreement, which provides,
among other things, for acceleration hereof. This Note is the Revolving Note
referred to in the Credit Agreement. This Note is secured, among other things,
pursuant to the Credit Agreement and the Security Documents as therein defined,
and may now or hereafter be secured by one or more other security agreements,
mortgages, deeds of trust, assignments or other instruments or
agreements.
The
Borrowers shall pay all costs of collection, including reasonable attorneys’
fees and legal expenses if this Revolving Note is not paid when due, whether
or
not legal proceedings are commenced.
REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK
A-1
Presentment
or other demand for payment, notice of dishonor and protest are expressly
waived.
|
AIRGATE
INTERNATIONAL CORPORATION
By:
Name:
Title:
|
|
|
AIRGATE
INTERNATIONAL CORPORATION (CHICAGO)
By:
Name:
Title:
|
|
|
PARADIGM
INTERNATIONAL, INC.
By:
Name:
Title:
|
A-2
Exhibit
B to Credit and Security Agreement
COMPLIANCE
CERTIFICATE
|
To:
|
Xxxxx
Fargo Bank, National Association
|
|
Date:
|
[___________________,
200____]
|
|
Subject:
|
Financial
Statements
|
In
accordance with our Credit and Security Agreement dated as of Mach ___, 2007
(as
amended from time to time, the “Credit Agreement”), attached are the financial
statements of Airgate International Corporation, a New York corporation, Airgate
International Corporation (Chicago), an Illinois corporation, and Paradigm
International, Inc., a Florida corporation (collectively and individually,
the
“Borrowers”) and of Pacific CMA, Inc., a Delaware corporation (“Pacific CMA”) as
of and for [_________________,
200__ _](the
“Reporting Date”) and the year-to-date period then ended (the “Current
Financials”). All terms used in this certificate have the meanings given in the
Credit Agreement.
I
certify
that the Current Financials have been prepared in accordance with GAAP, subject
to year-end audit adjustments, and fairly present the Borrowers’ financial
condition as of the date thereof.
I
further
hereby certify as follows: Events
of Default.
(Check
one):
| o |
The
undersigned does not have knowledge of the occurrence of a Default
or
Event of Default under the Credit Agreement except as previously
reported
in writing to the Lender.
|
| o |
The
undersigned has knowledge of the occurrence of a Default or Event
of
Default under the Credit Agreement not previously reported in writing
to
the Lender and attached hereto is a statement of the facts with respect
to
thereto. The Borrowers
acknowledge that pursuant to Section 2.6(d) of the Credit Agreement,
the
Lender may impose the Default Rate at any time during the resulting
Default Period.
|
Material
Adverse Change in Litigation Matters of the Borrowers.
I
further hereby certify as follows (check one):
| o |
The
undersigned has no knowledge of any material adverse change to the
litigation exposure of the Borrowers or any of their Affiliates or
of any
Guarantor.
|
| o |
The
undersigned has knowledge of material adverse changes to the litigation
exposure of the Borrowers or any of their Affiliates or of any Guarantor
not previously disclosed in Schedule 5.7. Attached to this Certificate
is
a statement of the facts with respect
thereto.
|
B-1
Financial
Covenants.
I
further hereby certify as follows (check and complete each of the
following):
1. Minimum
Book Net Worth (Borrowers).
Pursuant to Section 6.2(a) of the Credit Agreement, as of the Reporting Date,
the Borrowers’ Book Net Worth, on a consolidated basis, was $____________ ,
which osatisfies odoes
not
satisfy the requirement that such amount be not less than the applicable amount
set forth in the table below (numbers appearing between “< >“ are
negative) on the Reporting Date:
|
Period
Ending
|
Minimum
Book Net Worth
|
|||
|
Funding
Date through March 31, 2007
|
$
|
435,000
|
||
|
April
1, 2007 through June 30, 2007
|
$
|
600,000
|
||
|
July
1, 2007 through September 30, 2007
|
$
|
1,000,000
|
||
|
October
1, 2007 through December 31, 2007
|
$
|
1,635,000
|
||
2. Minimum
Book Net Worth (Consolidated with Pacific CMA).
Pursuant to Section 6.2(b) of the Credit Agreement, as of the Reporting Date,
the Borrowers’ Book Net Worth, on a consolidated basis with Pacific CMA, Inc., a
Delaware corporation (“Pacific CMA”), was $____________ , which osatisfies
o does
not
satisfy the requirement that such amount be not less than the applicable amount
set forth in the table below (numbers appearing between “< >” are
negative) on the Reporting Date:
|
Period
Ending
|
Minimum
Book Net Worth
|
|||
|
Funding
Date through March 31, 2007
|
$
|
5,538,500
|
||
|
April
1, 2007 through June 30, 2007
|
$
|
7,090,000
|
||
|
July
1, 2007 through September 30, 2007
|
$
|
9,750,000
|
||
|
October
1, 2007 through December 31, 2007
|
$
|
10,850,000
|
||
3. Minimum
Net Income (Borrowers).
Pursuant to Section 6.2(c) of the Credit Agreement, the Borrowers’ Net Income,
on a consolidated basis, for the monthly period ending on the Reporting Date,
was [_$_____________],
which o satisfies o does
not satisfy the requirement that such amount be not less than the applicable
amount set forth in the table below (numbers appearing between “< >” are
negative) on the Reporting Date:
B-2
|
Quarter
Ending
|
Minimum
Net Income
|
|||
|
March
31, 2007
|
$
|
155,000
|
||
|
June
30, 2007
|
$
|
315,000
|
||
|
September
30, 2007
|
$
|
725,000
|
||
|
December
31, 2007
|
$
|
1,350,000
|
||
4. Minimum
Net Income (Consolidated with Pacific CMA).
Pursuant to Section 6.2(c) of the Credit Agreement, the Borrowers’ Net Income,
on a consolidated basis with Pacific CMA, for the monthly period ending on
the
Reporting Date, was [_$_____________],
which
satisfies
does
not
satisfy the requirement that such amount be not less than the applicable amount
set forth in the table below (numbers appearing between “< >” are
negative) on the Reporting Date:
|
Quarter
Ending
|
Minimum
Net Income
|
|||
|
June
30, 2007
|
$
|
950,000
|
||
|
September
30, 2007
|
$
|
1,875,000
|
||
|
December
31, 2007
|
$
|
3,000,000
|
||
REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK
B-3
Attached
hereto are all relevant facts in reasonable detail to evidence, and the
computations of the financial covenants referred to above. These computations
were made in accordance with GAAP.
|
AIRGATE
INTERNATIONAL CORPORATION
By:
Name:
Title: Chief
Financial Officer
|
|
|
|
|
|
AIRGATE
INTERNATIONAL CORPORATION
(CHICAGO) By:
Name:
Title: Chief
Financial Officer
|
|
|
|
|
|
PARADIGM
INTERNATIONAL, INC.
By:
Name:
Title: Chief
Financial Officer
|
B-4
Exhibit
C to Credit and Security Agreement
PREMISES
The
Premises referred to in the Credit and Security Agreement are legally described
as follows:
|
Airgate
International Corp
|
|||||||||
|
Landlord
name
|
Property
Address
|
Monthly
amount
|
Term
|
||||||
|
1
|
Xxxxx
Management Inc.
|
2/F.,
000-00 Xxxxxxxx Xxxxxxxxx,
|
$ |
6,917.00
|
June
2006 to May 2008
|
||||
|
Xxxxxxx,
XX 00000
|
|
||||||||
|
|
|||||||||
|
2
|
Xxxxx
Management Inc.
|
1/F.,
Office and Warehouse of
|
$ |
8,583.00
|
Dec
2003 to Nov 2006
|
||||
|
000-00
Xxxxxxxx Xxxxxxxxx,
|
$ |
9,417.00
|
Dec
2006 to Nov 2008
|
||||||
|
Xxxxxxx,
XX 00000
|
|||||||||
|
3
|
Xxxxx
Management Inc.
|
1/F.,
Office and Warehouse of
|
$ |
2,000.00
|
Mar
2005 to Feb 2007
|
||||
|
000-00
Xxxxxxxx Xxxxxxxxx,
|
$ |
2,200.00
|
Mar
2007 to Feb 2010
|
||||||
|
Xxxxxxx,
XX 00000
|
|||||||||
|
Airgate
International Corp (Chicago)
|
|||||||||
|
1
|
KFS
Inc.
|
0000
Xxxxxxx Xxxxx.
|
$ |
3,800.00
|
Aug
1, 2006 to Dec 31, 2006
|
||||
|
Xxxxxxx,
XX 00000
|
$ |
4,425.00
|
Jan
1, 2007 to Dec 31, 2007
|
||||||
| $ |
5,027.50
|
Jan
1, 2008 to Dec 31, 2008
|
|||||||
| $ |
5,540.00
|
Jan
1, 2009 to Jun 30, 2009
|
|||||||
|
Paradigm
International Inc.
|
|||||||||
|
Fair
Oak LLC
|
00000
Xxxxxx Xxxxxx, Xxxx X, Xxx Xxxxxxx, XX
|
$ |
12,587.50
|
Jan
1, 2007 - Sep 30, 2007
|
|||||
|
Office
|
$ |
12,962.92
|
Oct
1, 2007 - Sep 30, 2008
|
||||||
| $ |
13,349.38
|
Oct
1, 2008 - Sep 30, 2009
|
|||||||
| $ |
13,757.92
|
|
Oct
1, 2009 - Sep 30, 2010
|
||||||
| $ |
14,166.46
|
Oct
1, 2010 - Jun 30, 2011
|
|||||||
|
Pacific
CMA International LLC
|
|||||||||
|
No
lease
|
|||||||||
|
No
lease
|
|||||||||
C-1
SCHEDULE
5.1
to
Airgate
International Corporation (“Airgate NY),
Airgate
International Corporation (Chicago) (“Airgate Chicago”),
Paradigm
International, Inc. (“PII”), Pacific CMA International, LLC
(“LLC”)
and
Xxxxx Fargo Bank, National Association.
Tradenames,
Chief Executive Office,
Principal
Place of Business and Locations of Collateral
|
Name
|
Tradename
|
Principal
Place of Business and Location
of Collateral
|
||
|
Airgate
International Corporation
|
None
|
000-00
Xxxxxxxx Xxxxxxxxx Xxxxxxx, XX 00000
|
||
|
Airgate
International Corporation
(Chicago)
|
None
|
0000
Xxxxxxx Xxxxx
Xxxxxxx,
XX 00000
|
||
|
Paradigm
International Inc.
|
“PDA”
and
“Paradigm
Global Logistics”
|
00000
Xxxxxx Xxxxxx, Xxxx X
Xxx
Xxxxxxx, XX
|
||
|
Pacific
CMA International LLC
|
None
|
000-00
Xxxxxxxx Xxxxxxxxx Xxxxxxx, XX 00000
|
||
|
Pacific
CMA, Inc.
|
None
|
000-00
Xxxxxxxx Xxxxxxxxx Xxxxxxx, XX
00000
|
S-5.1-2
SCHEDULE
5.2
to
Credit
and Security Agreement among
Airgate
International Corporation (“Airgate NY),
Airgate
International Corporation (Chicago) (“Airgate Chicago”),
Paradigm
International, Inc. (“PII”), Pacific CMA International, LLC
(“LLC”)
and
Xxxxx Fargo Bank, National Association.
Capitalization
|
Name
of Company
|
The
Owners
|
%
of Ownership
|
||
|
Airgate
International Corp.
|
Pacific
CMA International LLC
|
99.11
|
||
|
|
||||
|
Airgate
International Corp.
|
Airgate
International Corp.
|
100
|
||
|
(Chicago)
|
|
|||
|
|
||||
|
Paradigm
International Inc.
|
Pacific
CMA International LLC
|
000
|
||
|
|
||||
|
Xxxxxxx
XXX Xxxxxxxxxxxxx
|
Xxxxxxx
XXX Inc.
|
100
|
||
|
LLC
|
|
|||
|
|
||||
|
Public
|
38
|
|||
|
“we,”
or “our”)
|
Xxx
Xxxx Xx, Xxxxxx*
|
62
|
* Includes
shares held in his name and in the name of Xxxxxx Services Corp., an entity
in
which he advises that he is the sole beneficial owner.
At
the
close of business on March 15, 2007, there were 28,619,271 issued and
outstanding shares of common stock which were held by approximately 231
stockholders of record as of the end of March 2007.
We
are
authorized to issue up to 100,000,000 shares of common stock and 10,000,000
shares of Preferred Stock. There is currently one series of preferred stock
issued and outstanding: A Preferred Stock, with 10,000 shares being authorized
and 3,000 shares being issued and outstanding.
Description
of A Preferred Stock. Definitions of certain terms used in this description
of
the features of our A Preferred Stock under the subheading "Certain Definitions"
below.
|
Stated
Amount Per Share:
|
$1,000
|
|
|
Par
Value Per Share:
|
$0.001
|
|
|
Dividends:
|
Cumulative:
6% per annum on the stated value of $1,000 payable in arrears beginning
June 1, 2004 payable in cash or in shares of common stock at our
election
(in the event certain conditions are
met).
|
S-5.2-1
|
Liquidation
Preference:
|
Prior
to common stock; a liquidation payment of $1,000 per share outstanding
plus any outstanding unpaid dividends and damages.
|
|
|
Voting
Rights:
|
None,
except as required by Delaware law or if we alter or change adversely
the
powers, preferences or privileges of the A Preferred Stock or alter
or
amend the Certificate of Designation or similar events
|
|
|
Conversion
Price:
|
$0.88
per share, subject to adjustment.
|
|
|
Adjustments
to Conversion Price:
|
The
conversion price is subject to adjustment for stock splits, stock
dividends and similar events. In addition, if we sell common stock
or
securities convertible into or exchangeable for common stock at
a price
less than the conversion price in effect (the "Lower Price"), the
conversion price will be adjusted to equal the Lower
Price.
|
|
|
Mandatory
Redemption on Fourth Anniversary:
|
In
or about April and May 2008, the Company is required to redeem
all
outstanding shares of our A Preferred Stock for an amount equal
to the
stated value of said shares, plus all accrued and unpaid dividends
and
liquidated damages.
|
|
|
Mandatory
Redemption:
|
Certain
events, such as our filing a petition under the federal bankruptcy
laws, a
change in Control of the Company, our failure to timely deliver
shares
upon an investor's conversion or maintain our common stock's listing
or
quotation for more than ten days and other specified events, we
will be
required to pay an amount equal to the greater of 110% of the Stated
Value
of the outstanding shares of A Preferred Stock or VWAP at the time,
plus
all accrued and unpaid dividends and liquidated
damages.
|
|
|
|
||
|
Liquidated
Damages for Failure to Meet Registration Deadlines:
|
If
sales of our common stock cannot be made pursuant to a Registration
Statement for specified periods of time, a penalty of two (2%)
percent per
month on the Stated Value of any shares of A Preferred Stock issued
and
outstanding until any such failure is cured.
|
|
|
Other:
|
No
issuances of common stock that would cause any holder to own more
than
4.9% of our total common stock at any given
time;
|
S-5.2-2
Certain
Definitions.
"Change
of Control" includes the following: (a) a change in ownership of in excess
of
40% of our voting securities within a year; (b) the replacement within a year
of
more than one-half of the members of the Board of Directors which is not
approved by a majority of the members of the Board on April 8, 2004; or (c)
our
entering into an agreement providing for either (a) or (b).
"Principal
Market" means the AMEX and shall also include the New York Stock Exchange,
the
NASDAQ Small-Cap Market or the NASDAQ National Market, whichever is at the
time
the principal trading exchange or market for our common stock, based upon share
volume.
"Registration
Statement" means the registration statement covering the shares of common stock
underlying the shares of A Preferred Stock and the warrants sold to the
investor.
"VWAP"
means, for any date, the price determined by the first of the following clauses
that applies: (a) if the common stock is then listed or quoted on a Principal
Market, the daily volume weighted average price of the common stock for such
date (or the nearest preceding date) on the Principal Market on which the common
stock is then listed or quoted as reported by Bloomberg Financial L.P. (based
on
a trading day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if
the
common stock is not then listed or quoted on a Principal Market and if prices
for the common stock are then quoted on the OTC Bulletin Board, the volume
weighted average price of the common stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the common stock is not then
listed or quoted on the OTC Bulletin Board and if prices for the common stock
are then reported in the "Pink Sheets" published by the Pink Sheets LLC (or
a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the common stock so reported; or (d)
in
all other cases, the fair market value of a share of common stock as determined
by an independent appraiser selected in good faith by the investors and
reasonably acceptable to the Company.
OPTIONS,
OTHER RIGHTS AND WARRANTS
We
have
issued to the persons and entities identified below the indicated number of
warrants set forth opposite their names
|
Common
Stock Purchase Warrants
|
||
|
1.
Max
Communications
|
31,056
Warrants1
|
|
|
2.
Castle
Creek Technology
Partners, LLC
|
77,640
Warrants1
|
|
|
3.
Stone
Street, L.P.
|
62,112
Warrants1
|
S-5.2-3
|
Common
Stock Purchase Warrants
|
||
|
4.
Gamma
Opportunity
Capital Partners, LP
|
31,056
Warrants1
|
|
|
5.
Alpha
Capital A.G.
|
31,056
Warrants1
|
|
|
6.
Otape
Investments, LLC
|
62,112
Warrants1
|
|
|
7.
Bristol
Investment Fund, Ltd.
|
93,168
Warrants1
|
|
|
8.
Polaris
Partners, LP
|
46,584
Warrants1
|
|
|
9.
Insider
Trend Fund, LP
|
38,820
Warrants1
|
|
|
10.
Xxx
X. Xxxxxx, Non-GST
Exempt Family Trust II
|
38,820
Warrants1
|
|
|
11.
Cornell
Capital
|
31,056
Warrants1
|
|
|
12.
Whalehaven
Fund, Ltd.
|
31,056
Warrants1
|
|
|
13.
Greenwich
Growth
Fund, Ltd.
|
31,056
Warrants
|
|
|
14.
Bridges
& Pipes, LLC
|
15,528
Warrants1
|
| 1 |
One-half
of said Warrants are exercisable at $1.61 per share with the remaining
one-half of said Warrants exercisable at $2.17 per Share.
|
In
connection with the warrants described above, Pacific also issued warrants
to
purchase 186,358 shares at an exercise price of $1.93 per share to Rockwood,
Inc.
XXX
has
issued warrants to purchase 50,000 shares to Xxxxxx Capital LLC ("Xxxxxx").
One-half of the warrants issued to Xxxxxx are exercisable at $0.80 per share
and
one-half are exercisable at $1.20 per share.
XXX
has
issued warrants to purchase 30,000 shares to Strategic Growth International,
Inc.
We
had
sold to Crestview Capital Master, LLC (“Crestview”) and Midsummer Investment,
Ltd. (“Midsummer”), $3,000,000 in aggregate amount of our A Preferred Stock
(2,000 and 1,000 shares of A Preferred Stock, respectively). In connection
with
that sale, we also issued to these two investors warrants to purchase an
aggregate of 937,500 shares of common stock at per share exercise price of
$0.88
per share. We also issued warrants to purchase 145,833 shares of common stock
to
Pacific Summit Capital and/or Pacific Summit Securities. Crestview has converted
its 2,000 shares of Shares of A Preferred Stock into common stock.
Also,
we
later sold to Midsummer $2,000,000 aggregate amount of our A Preferred Stock
and
issued to Midsummer warrants to purchase an aggregate of 625,000 shares of
common stock at per share exercise price of $0.88 and issued warrants to
purchase 70,000 shares of our common stock to entities also believed to be
SEC
and NASD registered broker-dealers or their affiliates.
S-5.2-4
We
had
issued 100,000 warrants to a financial services provider’s
affiliate.
As
of
March 15, 2007, there was $3,120,000 outstanding under the Laurus Credit
Facility.
The
Laurus Credit Facility includes a secured convertible note (the "Convertible
Note") in the maximum principal amount of $4 million, which is convertible
into
shares of PAM’s common stock (the "Common Stock") at fixed conversion rates of
$0.88 per share with respect to the first $3,750,000 and $1.05 per share with
respect to the remaining $250,000.
As
part
of the Laurus Credit Facility and restructuring of same, XXX issued warrants
to
Laurus providing Laurus the right to purchase up to 1,500,000 shares of common
stock at an exercise price of $1.00 per share.
XXX
has
an equity compensation plan with options to purchase 1,092,450 shares of PAM’s
common stock available for issuance.
Attached
hereto are organizational charts for XXX and its affiliates.
If
all
outstanding warrants and options were exercised, all shares of our Series A
Preferred converted and the Laurus note were to be converted in full, we would
have approximately 41,886,082 shares issued and outstanding.
See
attached list of recordholders from PAM’s transfer agent.
S-5.2-5
S-5.2-6
SCHEDULE
5.5
to
Credit
and Security Agreement among
Airgate
International Corporation (“Airgate NY),
Airgate
International Corporation (Chicago) (“Airgate Chicago”),
Paradigm
International, Inc. (“PII”), Pacific CMA International, LLC
(“LLC”)
and
Xxxxx Fargo Bank, National Association.
Subsidiaries
|
Name
of Company
|
List
of Subsidiaries
|
|
|
Airgate
International Corp.
|
Airgate
International Corp. (Chicago)
|
|
|
Airgate
International Corp. (Chicago)
|
None
|
|
|
Paradigm
International Inc.
|
None
|
|
|
Pacific
CMA International LLC
|
Airgate
International Corp.
|
|
|
Airgate
International Corp. (Chicago)
|
||
|
Paradigm
International Inc.
|
||
|
AGI
Freight Singapore Pte Ltd.
|
||
|
Seabridge
International Pte Ltd.
|
||
|
Airgate
International Corp.
|
||
|
Airgate
International Corp. (Chicago)
|
||
|
Paradigm
International Inc.
|
||
|
Pacific
CMA International, LLC
|
||
|
(Sole
Member)
|
||
|
AGI
Freight Singapore Pte Ltd.
|
||
|
Seabridge
International Pte Ltd.
|
||
|
AGI
Logistics (Hong Kong) Limited
|
||
|
Careship
International Transportation Limited
|
||
|
Pacific
CMA Limited
|
||
|
WCL
Global Logistics Limited
|
||
|
AIO
Global Logistics Limited
|
||
|
SDA
Forwarding Co. Limited
|
||
|
Parco
Shipping Co. Limited
|
S-5.5-1
SCHEDULE
5.7
to
Credit
and Security Agreement among
Airgate
International Corporation (“Airgate NY),
Airgate
International Corporation (Chicago) (“Airgate Chicago”),
Paradigm
International, Inc. (“PII”), Pacific CMA International, LLC
(“LLC”)
and
Xxxxx Fargo Bank, National Association.
Litigation
On
December 1, 2006, the staff of the American Stock Exchange (the “AMEX”) sent
Pacific CMA, Inc. (“XXX”) a letter advising that the AMEX staff had determined
to file an application with the SEC to strike our common stock from listing
and
registration on the AMEX, based upon assertions of alleged events that occurred
in 2003 relating to PAM’s initial listing application. Following our demand, a
hearing has been scheduled to be heard before a Listing Qualifications Panel
of
the AMEX on April 12, 2006. The AMEX staff alleges that PAM’s common stock
should be delisted because we did not meet the AMEX’s initial listing
requirements. The AMEX staff alleges that in order to meet the AMEX’s listing
requirements and obtain approval of PAM’s application to list PAM’s common stock
on AMEX, PAM’S
officers
and/or agents engaged in a scheme, in conjunction with an AMEX specialist’s
former officer, certain market consultants and others, to interfere with the
natural forces of supply and demand and artificially increase and/or support
the
price of PAM’s common stock and PAM’s issued shares to at least one individual
which were not irrevocable, fully paid and non-assessable to satisfy the market
value of public float initial listing requirement of the AMEX. Additionally,
the
staff of the AMEX alleges that XXX concealed the alleged scheme from the AMEX
staff, the stockholders, investors and other market constituents.
In
the
matter of Grant,
Xxxx and Xxxx Xxxxxxxx v. Pacific CMA, Inc.
Messrs
Xxxx and Sessions each currently own 128,438 restricted shares in XXX (the
“P&S Shares”). This action was commenced by Messrs. Xxxx and Sessions for
declaratory judgment seeking a judicial determination of their right to sell
the
P&S Shares pursuant to the exemption set forth in Section 4(1) of the
Securities Act of 1933, as amended (the “Act”). They further contend that they
are not underwriters within the meaning of Section 4(1) because they have held
their shares for more than seven years. Messrs. Xxxx and Sessions have amended
their Complaint to include a claim for damages as a result of PAM’s refusal to
honor their alleged right to sell their shares.
XXX
is
vigorously defending this action. It is PAM’s position, inter
alia,
that
Messrs. Xxxx and Sessions used a reverse merger transaction involving XXX,
originally a “blank check company,” in order to circumvent the registration
requirements of the Act and to conceal from investors the control over PAM’s
issued and outstanding common stock allegedly eligible to be included in the
public float or owned by Messrs. Xxxx and Sessions. As a result of the unique
creation of the issued and outstanding shares under common ownership of Messrs.
Xxxx and Sessions, all of the outstanding shares of the PAM’s common stock prior
to the reverse merger remain “underwriters” shares under the Act. XXX believes
that for it to allow these shares to be treated under SEC Rule 144, such
treatment would cause XXX to violate the federal securities laws. A trial date
has been scheduled for May 2007.
S-5.7-1
SCHEDULE
5.11
to
Credit
and Security Agreement among
Airgate
International Corporation (“Airgate NY),
Airgate
International Corporation (Chicago) (“Airgate Chicago”),
Paradigm
International, Inc. (“PII”), Pacific CMA International, LLC
(“LLC”)
and
Xxxxx Fargo Bank, National Association.
List
of Intellectual Property
|
Name
of Company
|
Patents,
Copyrights, Trademarks, Etc.
|
|
|
Airgate
International Corp.
|
None
|
|
|
Airgate
International Corp. (Chicago)
|
None
|
|
|
Paradigm
International Inc.
|
None
|
|
|
None
|
||
|
None
|
S-5.11-1
SCHEDULE
5.14
to
Credit
and Security Agreement among
Airgate
International Corporation (“Airgate NY),
Airgate
International Corporation (Chicago) (“Airgate Chicago”),
Paradigm
International, Inc. (“PII”), Pacific CMA International, LLC
(“LLC”)
and
Xxxxx Fargo Bank, National Association.
Environmental
Matters
|
Name
of Company
|
Hazardous
Substances
|
|
|
Airgate
International Corp.
|
None
|
|
|
Airgate
International Corp. (Chicago)
|
None
|
|
|
None
|
||
|
Pacific
CMA International, LLC
|
None
|
|
|
None
|
S-5.14-1
SCHEDULE
6.3
to
Credit
and Security Agreement among
Airgate
International Corporation (“Airgate NY),
Airgate
International Corporation (Chicago) (“Airgate Chicago”),
Paradigm
International, Inc. (“PII”), Pacific CMA International, LLC
(“LLC”)
and
Xxxxx Fargo Bank, National Association.
Permitted
Liens
|
Creditor
|
Collateral
|
Jurisdiction
|
Filing
Date
|
Filing
No.
|
||||
|
Crown
Credit Company*
|
Lift
Truck
|
Florida
|
March
12, 2007
|
200705017581
|
||||
|
U.S.
Bancorp*
|
Dell
Server
|
California
|
February
21, 2003
|
0305660175
|
*Debtor:
Paradigm International Inc.
S-6.3-1
SCHEDULE
6.4
to
Credit
and Security Agreement among
Airgate
International Corporation (“Airgate NY),
Airgate
International Corporation (Chicago) (“Airgate Chicago”),
Paradigm
International, Inc. (“PII”), Pacific CMA International, LLC
(“LLC”)
and
Xxxxx Fargo Bank, National Association.
Permitted
Indebtedness and Guaranties
See
the
discussion of Midsummer’s ownership of the Class A Preferred Stock in Schedule
5.2.
S-6.4-1
