CELLULAR TELECOM CORPORATION d/b/a INTELLICELL CORP.
LOAN AND SECURITY AGREEMENT
This Agreement is between the undersigned Borrower and the undersigned
Lender concerning loans and other credit accommodations to be made by Lender to
Borrower.
SECTION 1. PARTIES
1.1 The "Borrower" is the person, firm, corporation or other entity,
identified as the Borrower in Section 10.6(c) and its successors and assigns. If
more than one Borrower is specified in Section 10.6(c), all references to
Borrower shall mean each of them, jointly and severally, individually and
collectively, and the successors and assigns of each.
1.2 The "Lender" is The CIT Group/Credit Finance, Inc. and its successors
and assigns. SECTION 2. LOANS AND OTHER CREDIT ACCOMMODATIONS
SECTION 2. LOANS AND OTHER CREDIT ACCOMODATIONS
2.1 Revolving Loans. Lender shall, subject to the terms and conditions
contained herein, make revolving loans to Borrower ("Revolving Loans") in
amounts requested by Borrower from time to time, but not in excess of the Net
Availability existing immediately prior to the making of the requested loan and
provided the requested loan would not cause the outstanding Obligations to
exceed the Maximum Credit.
(a) The "Maximum Credit" is set forth in Section 10.1(a) hereof.
(b) The "Gross Availability" shall be calculated at any time as the
product obtained by multiplying the outstanding amount of Eligible Accounts, net
of all taxes, discounts, allowances and credits given or claimed, by the
Eligible Accounts Percentage set forth in Section 10.1(b) (subject to the
sublimits on availability relating to certain Eligible Accounts, as more fully
set forth in Section lO.l(d)),
plus: the product(s) obtained by multiplying the applicable
Eligible Inventory Percentage(s), if any, set forth in Section
10.1(b) by the values (as determined by Lender based on the lower
of cost or market) of Eligible Inventory, but the amount so added
shall not exceed any sub-limits set forth in Section lO.l(c),
minus: any Reserves.
(c) The "Net Availability" shall be calculated at any time as an
amount equal to the Gross Availability minus the aggregate amount of all
then-outstanding Obligations to Lender other than the then outstanding principal
balance of the Term Loan, if any.
(d) "Eligible Accounts" are accounts created by Borrower in the
ordinary course of its business which are and remain acceptable to Lender for
lending purposes. General criteria for Eligible Accounts are set forth below but
may be revised from time to time by Lender, in its sole judgment, on fifteen
(15) days' prior written notice to Borrower. Lender shall, in general, except as
otherwise set forth elsewhere in this Agreement, deem accounts to be Eligible
Accounts if: (1) such accounts arise from bona fide completed transactions and
have not remained unpaid for more than the number of days after the invoice date
and otherwise satisfy the criteria set forth in Section 10.1(d); (2) the amounts
of the accounts reported to Lender are absolutely owing to Borrower and do not
arise from sales on consignment, guaranteed sale or other terms under which
payment by the account debtors may be conditional or contingent; (3) the account
debtor's chief executive office or principal place of business is located in the
United States or Canada (excluding Quebec), or if the account debtor's chief
executive office or principal place of business is located other than in the
United States or Canada (excluding Quebec), such accounts are secured by a
letter of credit issued or confirmed by a domestic bank acceptable to Lender,
containing terms and conditions acceptable to Lender and Lender has physical
possession of the original letter of credit and Lender has a perfected lien upon
and security interest in the proceeds of such letter of credit; (4) such
accounts do not arise from progress xxxxxxxx or retainages or xxxx and hold
sales; (5) there are no contra relationships (other than in respect of account
debtors that have submitted no-offset letters to Lender which have been accepted
or approved by Lender), setoffs, counterclaims or disputes (other than usual and
customary discounts offered by Borrower to its customers for prompt payment not
exceeding two percent (2%) of the invoice amount, in the ordinary course of
business, which are set forth on the invoice issued by Borrower) existing with
respect thereto and there are no other facts existing or threatened which would
impair or delay the collectibility of all or any portion thereof; (6) the goods
giving rise thereto were not at the time of the sale subject to any liens except
those permitted in this Agreement; (7) such accounts are not accounts with
respect to which the account debtor or any officer or employee thereof is an
officer, employee or agent of or is affiliated with Borrower, directly or
indirectly, whether by virtue of family membership, ownership, control,
management or otherwise; (8) such accounts are not accounts with respect to
which the account debtor is the United States or any State or political
subdivision thereof or any department, agency or
-2-
instrumentality of the United States, any State or political subdivision, unless
there has been compliance with the Assignment of Claims Act or any similar State
or local law, if applicable; (9) Borrower has delivered to Lender or Lender's
representative such original documents as Lender may have requested pursuant to
Section 5.8 hereof in connection with such accounts and Lender shall have
received a verification of such account, satisfactory to it, if sent to the
account debtor or any other obligor or any bailee pursuant to Section 5.4
hereof; (10) there are no facts existing or threatened and known to Borrower or
Lender which might result in any material adverse change in the account debtor's
financial condition; (11) such accounts owed by a single account debtor or its
affiliates, other than Downtown Cellular Corp., do not represent more than
twenty (20%) percent of all otherwise Eligible Accounts (accounts excluded from
Eligible Accounts solely by reason of this subsection (11) shall nevertheless be
considered Eligible Accounts to the extent of the amount of such accounts which
does not exceed twenty (20%) percent of all otherwise Eligible Accounts); (12)
such accounts are not owed by an account debtor who is or whose affiliates are
past due upon other accounts owed to Borrower comprising more than fifty (50%)
percent of the accounts of such account debtor or its affiliates owed to
Borrower; (13) such accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the amount of any customer credit
limits as established, and changed, from time to time by Lender on notice to
Borrower (accounts excluded from Eligible Accounts solely by reason of this
subsection (13) shall nevertheless be considered Eligible Accounts to the extent
the amount of such accounts does not exceed such customer credit limit); (14)
such accounts are owed by account debtors deemed credit-worthy at all times by
Lender.
(e) "Eligible Inventory" is inventory 100% owned by Borrower which is
and remains acceptable to Lender, in Lender's sole discretion, for lending
purposes, is located at one of the addresses set forth in Section 10.6(e), and
meets all of the general criteria for Eligible Inventory set forth below, which
criteria may be revised from time to time by Lender, in its sole discretion, on
fifteen (15) days' prior written notice to Borrower:
(i) Such inventory has been purchased and received by Borrower,
and is held by Borrower free and clear of all liens and claims whatever except
the lien of Lender and Permitted Liens (defined below), except that inventory
which is in-transit to Borrower and which would otherwise qualify as Eligible
Inventory will so qualify provided that (a) it is backed by a letter of credit
issued through Lender or paid for in full in advance by Borrower, (b) Lender is
satisfied that title has passed to Borrower, and (c) Borrower has prepaid all
applicable freight charges;
-3-
(ii) Such inventory is in merchantable condition, not obsolete or
slow-moving, not defective, and is usable for the purposes for which it has been
purchased, held and processed;
(iii) Such inventory has not been returned by any purchaser as
the subject of any defense or claim on the basis that it is defective or not
merchantable or fit for the purposes for which sold;
(iv) Borrower continues to hold the inventory for sale in the
ordinary course of business, with the reasonable expectation that it will be
sold;
(v) Such inventory has not been shipped (whether or not an
account receivable has arisen), and has not been sold or delivered under any
contract or in any transaction which, as of any date of reference, has given
rise to an account, contract right or general intangible in the hands of
Borrower;
(vi) Such inventory is not held for sale to any affiliate of
Borrower;
(vii) Such inventory is not located in a country other than the
United States.
(viii) Such inventory is not located or warehoused in a location
where Borrower has not obtained a landlord's, mortgagee's or bailee's waiver, as
the case may be, in form and substance satisfactory to, and in favor of, Lender.
(f) In addition to the $750,000.00 reserve against Gross Availability
deducted by Lender on the date hereof as a dilution reserve ("Dilution
Reserve"), Lender shall have a continuing right to deduct reserves in
determining the Gross Availability (collectively "Reserves"), and to increase
and decrease such Reserves from time to time, if and to the extent that, in
Lender's sole judgement, such Reserves are necessary to protect Lender against
any state of facts which does, or would, with notice or passage of time or both,
constitute an Event of Default or have an adverse effect on any Collateral.
Lender may, at its option, implement Reserves by designating as ineligible a
sufficient amount of accounts or inventory which would otherwise be Eligible
Accounts or Eligible Inventory so as to reduce Gross Availability by the amount
of the intended Reserve.
(g) Subject to the terms and conditions hereof, including but not
limited to the existence of sufficient Gross and Net Availability, Borrower
agrees to borrow amounts from time to time such that the outstanding Revolving
Loans shall at all times equal or exceed the principal amount set forth in
Section lO.l(e) as the Minimum Borrowing. Borrower covenants, represents
-4-
and warrants to Lender that it will maintain Gross and Net Availability at
all times in amounts sufficient to permit Borrower to comply with the
Minimum Borrowing requirement.
2.2 Term Loan. The amount of any term loan being made by Lender to Borrower
is set forth in Section 10.2 ("Term Loan"). Such Term Loan shall be evidenced
by a promissory note (the "Promissory Note") delivered by Borrower to Lender
and shall be repaid, together with interest and other amounts, in accordance
with this Agreement and the Promissory Note.
2.3 Accommodations.
(a) Lender may, in its sole discretion, issue or cause to be issued,
from time to time at Borrower's request and on terms and conditions and for
purposes satisfactory to Lender, credit accommodations consisting of letters of
credit, bankers' acceptances, merchandise purchase guaranties or other
guaranties or indemnities for Borrower's account ("Accommodations"). Borrower
shall execute and perform additional agreements relating to the Accommodations
in form and substance acceptable to Lender and the issuer of any Accommodations,
all of which shall supplement the rights and remedies granted herein. Any
payments made by Lender or any affiliate of Lender in connection with the
Accommodations shall constitute additional Revolving Loans to Borrower.
(b) In addition to the fees and costs of any issuer in connection with
issuing or administering Accommodations, Borrower shall pay monthly to Lender,
on the first day of each month, a charge on open Accommodations at the rate per
annum set forth in Section 10.3(a) (the "Accommodation Charges").
(c) No Accommodation will be issued unless the full amount of the
Accommodation requested, plus fees and costs for issuance, is less than the Net
Availability existing immediately prior to the issuance of the requested
Accommodation, or if the requested Accommodation would cause the outstanding
Obligations to exceed the Maximum Credit, or cause the open amount of
Accommodations to exceed, at any time, the Accommodation sublimit set forth in
Section 10.3(b).
(d) All indebtedness, liabilities and obligations of any sort
whatsoever, however arising, whether present or future, fixed or contingent,
secured or unsecured, due or to become due, paid or incurred, arising or
incurred in connection with any Accommodation shall be included in the term
"Obligations", as defined herein, and shall include, without limitation, (i) all
amounts due or which may become due under any Accommodation; (ii) all amounts
charged or chargeable to Borrower or to Lender by any bank, other financial
institution or correspondent bank which opens, issues or is involved with such
Accommodations; (iii)
-5-
Lender's Accommodation Charges and all fees, costs and other charges of any
issuer of any Accommodation; and (iv) all duties, freight, taxes, costs,
insurance and all such other charges and expenses which may pertain directly or
indirectly to any Obligations or Accommodations or to the goods or documents
relating thereto.
(e) Borrower unconditionally agrees to indemnify and hold Lender
harmless from any and all loss, claim or liability (including reasonable
attorneys' fees) arising from any transactions or occurrences relating to any
Accommodation established or opened for Borrower's account, the Collateral
relating thereto and any drafts or acceptances thereunder, including any such
loss or claim due to any action taken by an issuer of any Accommodation.
Borrower further agrees to indemnify and hold Lender harmless for any errors or
omissions in connection with the Accommodations, whether caused by Lender, by
the issuer of any Accommodation or otherwise. Borrower's unconditional
obligation to indemnify and hold Lender harmless under this provision shall not
be modified or diminished for any reason or in any manner whatsoever, except for
Lender's wilful misconduct or gross negligence. Borrower agrees that any charges
made to Lender by any issuer of any Accommodation shall be conclusive on
Borrower and may be charged to Borrower's account.
(f) Lender shall not be responsible for: the conformity of any goods
to the documents presented; the validity or genuineness of any documents; delay,
default, or fraud by the Borrower or shipper and/or anyone else in connection
with the Accommodations or any underlying transaction.
(g) Borrower agrees that any action taken by Lender, if taken in good
faith, or any action taken by an issuer of any Accommodation, under or in
connection with any Accommodation, shall be binding on Borrower and shall not
create any resulting liability to Lender. In furtherance thereof, Lender shall
have the full right and authority to clear and resolve any questions of
non-compliance of documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute for Borrower's account any and
all applications for steamship or airway guarantees, indemnities or delivery
orders; to grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents; and to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications or Accommodations. All of
the foregoing actions may be taken in Lender's sole name, and the issuer thereof
shall be entitled to comply with and honor any and all such documents or
instruments executed by or received solely from Lender, all without any notice
to or any consent from Borrower. None of the foregoing actions described in this
subsection (g)
-6-
may be taken by Borrower without Lender's express written consent.
2.4 Certain Amounts Due on Demand. Lender may, in its sole discretion, make
or permit Revolving Loans, Accommodations or other Obligations in excess of the
Maximum Credit, Gross or Net Availability or applicable formulas or sub-limits.
All or any portion of such excess(es) shall become immediately due and payable,
upon Lender's demand.
2.5 Consent to Loan Participation. Borrower consents to any sale now or
hereafter made by Lender of an interest or interests (a "Participation
Interest") in the loans and Obligations evidenced by this Agreement and any
other agreements contemplated hereby or ancillary hereto, to any persons or
entities (even though not identified herein) which have or may hereafter
purchase a Participation Interest (a "Participating Lender") and to any
repurchase by Lender of any such Participation Interest. Borrower acknowledges
and agrees that, subject to and as provided by the terms of a participation
agreement between Lender and the Participating Lender(s), the Participating
Lender(s) (i) shall be considered as the absolute owner(s) of the Participation
Interest(s), and Lender shall act on behalf of the Participating Lender(s) as
agent ("Agent") in the servicing of the loans evidenced hereby, (ii) shall, with
respect to its participation, be entitled to all of the rights of Lender and
(iii) may exercise any and all rights of setoff or banker's lien (if available
under applicable law) with respect thereto, in each case as fully as though
Borrower were directly indebted to the Participating Lender(s) in the amount of
the Participation Interest. Lender may disclose to prospective participants such
information regarding Borrower's affairs as Lender possesses from time to time.
Lender shall not be required to give notice to Borrower of the grant of such
Participation Interest(s). Lender shall use its reasonable best efforts to
maintain confidential and to have prospective participants maintain
confidential, all information provided to it by Borrower, relating to Borrower
and Borrower's customers and suppliers, other than information concerning any of
the foregoing which is available in the public domain, and except for any
disclosure by Lender otherwise required (and then only to the extent required)
by law or in connection with any claims or controversies between Lender and
Borrower.
SECTION 3. INTEREST AND FEES
3.1 (a) Interest on the Revolving Loans shall be payable by Borrower on the
first day of each month, calculated upon the closing daily balances in the loan
account of Borrower for each day during the immediately preceding month, at the
per annum rate set forth as the Interest Rate in Section 10.4(a). The Interest
Rate shall increase or decrease by an amount equal to each
-7-
increase or decrease, respectively, in the Prime Rate, effective as of the date
of each such change. On and after any Event of Default or termination or
non-renewal hereof, interest on all unpaid matured Obligations shall accrue at a
rate equal to two percent (2%) per annum in excess of the Interest Rate
otherwise payable until such time as all Obligations are indefeasibly paid in
full (notwithstanding entry of any judgment against Borrower or the exercise of
any other right or remedy by Lender), and all such interest shall be payable on
demand. In no event shall charges constituting interest exceed the rate
permitted under any applicable law or regulation, and if any provision of this
Agreement is in contravention of any such law or regulation, such provision
shall be deemed amended to conform thereto.
(b) The "Prime Rate" is the rate of interest publicly announced by
Chemical Bank (or its successor) in New York, New York, from time to time as its
prime rate (the Prime Rate is not intended to be the lowest rate of interest
charged by Chemical Bank to its borrowers).
3.2 (a) Borrower shall pay Lender a Facility Fee in the amount set forth in
Section 10.4(b), which fee constitutes a part of the Obligations and shall be
earned and payable as set forth in Section 10.4(b) below.
(b) Borrower, shall also pay to Lender a facility fee for each year of
any renewal Term equal to one-half of one percent (.5%) of the Maximum Credit,
which fee will be earned and payable on the first day of each year of any
renewal Term.
3.3 Borrower shall pay Lender monthly, on the first day of each month
during the initial and each renewal Term an Account Servicing Fee for the
immediately preceding month (or part thereof) in the amount set forth in Section
10.4(c).
3.4 Borrower shall pay Lender monthly, on the first day of each month, in
arrears, an Unused Line Fee for each month during the initial and each renewal
Term at the rate per annum set forth in Section 10.4(d), calculated upon the
amount, if any, by which the Maximum Credit exceeds the average outstanding
daily principal balance during the preceding month of all Revolving Loans,
Accommodations and any Term Loan.
3.5 At Lender's option, all principal, interest, fees, costs, expenses and
other charges provided for in this Agreement, or in any other agreement now or
hereafter existing between Lender and Borrower, may be charged to any loan
account of Borrower maintained by Lender. Interest, fees for Accommodations, the
Unused Line Fee and any other amounts payable by Borrower to Lender based on a
per annum rate shall be calculated on the basis of actual days elapsed over a
360-day year.
-8-
SECTION 4. GRANT OF SECURITY INTEREST
4.1 To secure the payment and performance in full of all Obligations,
Borrower hereby grants to Lender a continuing security interest in and lien
upon, and a right of setoff against, and Borrower hereby assigns and pledges to
Lender, all of the Collateral, including any Collateral not deemed eligible for
lending purposes.
4.2 "Obligations" shall mean any and all Revolving Loans, Term Loans,
Accommodations and all other indebtedness, liabilities and obligations of every
kind, nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, whether arising
under this Agreement or otherwise, whether now existing or hereafter arising,
whether arising before, during or after the initial or any renewal Term or after
the commencement of any case with respect to Borrower under the United States
Bankruptcy Code or any similar statute, whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, original, renewed or extended and whether
arising directly or howsoever acquired by Lender including from any other entity
outright, conditionally or as collateral security, by assignment, merger with
any other entity, participations or interests of Lender in the obligations of
Borrower to others, assumption, operation of law, subrogation or otherwise and
shall also include all amounts chargeable to Borrower under this Agreement or in
connection with any of the foregoing.
4.3 "Collateral" shall mean all of the following property of Borrower:
All now owned and hereafter acquired right, title and interest of Borrower
in, to and in respect of all: accounts, interests in goods represented by
accounts, returned, reclaimed or repossessed goods with respect thereto and
rights as an unpaid vendor; contract rights; chattel paper; investment property,
general intangibles (including, but not limited to, tax and duty claims and
refunds, registered and unregistered patents, trademarks, service marks,
copyrights, trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, choses in action and other claims, and existing and future
leasehold interests in equipment, real estate and fixtures); documents;
instruments; letters of credit, bankers' acceptances or guaranties; cash monies,
deposits, securities, bank accounts, deposit accounts, credits and other
property now or hereafter held in any capacity by Lender, its affiliates or any
entity which, at any time, participates in Lender's financing of Borrower or at
any other depository or other institution;
-9-
agreements or property securing or relating to any of the items referred to
above;
All now owned and hereafter acquired right, title and interest of Borrower
in, to and in respect of goods, including, but not limited to:
All inventory, wherever located, whether now owned or hereafter acquired,
of whatever kind, nature or description, including all raw materials,
work-in process, finished goods, and materials to be used or consumed in
Borrower's business; and all names or marks affixed to or to be affixed
thereto for purposes of selling same by the seller, manufacturer, lessor or
licensor thereof and all inventory which may be returned to Borrower by its
customers or repossessed by Borrower and all of Borrower's right, title and
interest in and to the foregoing (including all of Borrower's rights as a
seller of goods);
All equipment and fixtures, wherever located, whether now owned or
hereafter acquired, including, without limitation, all machinery,
equipment, motor vehicles, furniture and fixtures, and any and all
additions, substitutions, replacements (including spare parts), and
accessions thereof and thereto (including, but not limited to Borrower's
rights to acquire any of the foregoing, whether by exercise of a purchase
option or otherwise);
All consumer goods, farm products, crops, timber, minerals or the like
(including oil and gas), wherever located, whether now owned or hereafter
acquired, of whatever kind, nature or description;
All now owned and hereafter acquired right, title and interests of Borrower
in, to and in respect of any real or other personal property in or upon which
Lender has or may hereafter have a security interest, lien or right of setoff;
All present and future books and records relating to any of the above
including, without limitation, all computer programs, printed output and
computer readable data in the possession or control of the Borrower, any
computer service bureau or other third party;
All products and proceeds of the foregoing in whatever form and wherever
located, including, without limitation, all insurance proceeds and all claims
against third parties for loss or destruction of or damage to any of the
foregoing.
-10-
4.4 As additional security for the timely payment and performance in full
of the Obligations, contemporaneously with the execution and delivery by
Borrower of this Agreement:
(i) Xxx Xxxxx ("Guarantor") shall execute and deliver to Lender a
guaranty and suretyship agreement in form satisfactory to Lender (the
"Guaranty").
SECTION 5. COLLECTION AND ADMINISTRATION
5.1 Borrower is authorized to collect the accounts and any other proceeds
of Collateral on behalf of and in trust for Lender, at Borrower's expense, but
such authority shall automatically terminate upon an Event of Default. Lender
may modify or terminate such authority at any time whether or not an Event of
Default has occurred and directly collect the accounts and other monetary
obligations included in the Collateral; provided however that Lender shall
provide Borrower with copies of correspondence to account debtors of Borrower by
which Lender requests or demands that future payments due to Borrower be paid
directly to Lender and copies of checks and remittance advices received by
Lender from such account debtors. Borrower shall, at Borrower's expense and in
the manner requested by Lender from time to time, direct that remittances and
all other proceeds of accounts and other Collateral shall be (a) sent to a post
office box designated by and/or in the name of Lender, or in the name of
Borrower, but as to which access is limited to Lender and/or (b) deposited into
a bank account maintained in the name of Lender and/or a blocked bank account
under arrangements with the depository bank under which all funds deposited to
such blocked bank account are required to be transferred solely to Lender. In
connection therewith, Borrower shall execute such post office box, lock box,
and/or blocked bank account agreements as Lender shall specify. Notwithstanding
anything herein to the contrary, upon at least three (3) business days prior
written notice to Lender, and so long as at the time of such notice there are no
Obligations outstanding and no Event of Default has occurred or is continuing,
Borrower may advise Lender to remit proceeds from the lock box directly to
Borrower's operating account instead of to Lender's collateral proceeds account.
Borrower acknowledges that during such period of time while proceeds are
deposited from the lock box to Borrower's operating account, Borrower will not
be permitted to borrow money from or have Accommodations issued through Lender.
Borrower shall give Lender at least fifteen (15) calendar days prior written
notice of its desire to reinstitute the deposit of proceeds from the lock box to
Lender's collateral proceeds account. Upon receipt of such notice, Lender
reserves the right to conduct a field examination. At the end of such fifteen
(15) calendar day period, so long as Borrower is otherwise in compliance with
its obligations under this Agreement, and so long as proceeds from the lock box
are again being deposited to Lender's collateral proceeds account, Borrower
-11-
shall again be permitted to borrow money from and have Accommodations issued
through Lender, pursuant to the terms and conditions of this Agreement.
5.2 All Obligations shall be payable at Lender's office set forth below or
at Lender's bank designated in Section 10.6(b) or at such other bank or place as
Lender may expressly designate from time to time for purposes of this Section.
Lender shall apply all proceeds of accounts or other Collateral received by
Lender and all other payments in respect of the Obligations to the Revolving
Loans whether or not then due or to any other Obligations then due, in whatever
order or manner Lender shall determine; provided however, that Borrower shall be
obligated to deposit to Lender's collateral proceeds account only that portion
of the net proceeds received by Borrower from its initial public offering of
common stock on or about the IPO Closing Date (defined below) as equals the
then-outstanding Obligations hereunder. For purposes of determining Gross
Availability and Net Availability, remittances and other payments with respect
to the Collateral and Obligations will be treated as credited to the loan
account of Borrower maintained by Lender and Collateral balances to which they
relate, upon the date of Lender's receipt of advice from Lender's bank that such
remittances or other payments have been credited to Lender's account or in the
case of remittances or other payments received directly in kind by Lender, upon
the date of Lender's deposit thereof at Lender's bank, subject to final payment
and collection. In computing interest charges, the loan account of Borrower
maintained by Lender will be credited with remittances and other payments three
(3) business days after Lender has received advice of receipt of remittances in
Lender's account at Lender's bank.
5.3 Lender shall render to Borrower monthly a loan account statement. Each
statement shall be considered correct and binding upon Borrower as an account
stated, except to the extent that Lender receives, within sixty (60) days after
the mailing of such statement to the address set forth in Section 9.4 herein,
written notice from Borrower of any specific exceptions by Borrower to that
statement.
5.4 Lender may, at any time, whether or not an Event of Default has
occurred, without notice to or assent of Borrower, (a) notify any account debtor
that the accounts and other Collateral which includes a monetary obligation have
been assigned to Lender by Borrower and that payment thereof is to be made to
the order of and directly to Lender, (b) send, or cause to be sent by its
designee, requests (which may identify the sender by a pseudonym) for
verification of accounts and other Collateral directly to any account debtor or
any other obligor or any bailee with respect thereto, and (c) demand, collect or
enforce payment of any accounts or such other Collateral, but without any duty
to do so, and Lender shall not be liable for any
-12-
failure to collect or enforce payment thereof. At Lender's request, all invoices
and statements sent to any account debtor, other obligor or bailee, shall state
that the accounts and such other Collateral have been assigned to Lender and are
payable directly and only to Lender.
5.5 Borrower hereby appoints Lender and any designee of Lender as
Borrower's attorney-in-fact and authorizes Lender or such designee, at
Borrower's sole expense, to exercise at any times in Lender's or such designee's
discretion all or any of the following powers, which powers of attorney, being
coupled with an interest, shall be irrevocable until all Obligations have been
paid in full: (a) receive, take, endorse, assign, deliver, accept and deposit,
in the name of Lender or Borrower, any and all cash, checks, commercial paper,
drafts, remittances and other instruments and documents relating to the
Collateral or the proceeds thereof, (b) transmit to account debtors, other
obligors or any bailees notice of the interest of Lender in the Collateral or
request from account debtors or such other obligors or bailees at any time, in
the name of Borrower or Lender or any designee of Lender, information concerning
the Collateral and any amounts owing with respect thereto, (c) notify account
debtors or other obligors to make payment directly to Lender, or notify bailees
as to the disposition of Collateral, (d) take or bring, in the name of Lender or
Borrower, all steps, actions, suits or proceedings deemed by Lender necessary or
desirable to effect collection of or other realization upon the accounts and
other Collateral, (e) after an Event of Default, change the address for delivery
of mail to Borrower and to receive and open mail addressed to Borrower, (f)
after an Event of Default, extend the time of payment of, compromise or settle
for cash, credit, return of merchandise, and upon any terms or conditions, any
and all accounts or other Collateral which includes a monetary obligation and
discharge or release the account debtor or other obligor, without affecting any
of the Obligations, and (g) execute in the name of Borrower and file against
Borrower in favor of Lender financing statements or amendments with respect to
the Collateral, including, without limitation, amendments for the purpose of
changing the name of Lender thereon to evidence Lender's status as Agent in
connection with a sale of a Participation Interest.
5.6 Borrower hereby releases and exculpates Lender, its officers, employees
and designees, from any 1iability arising from any acts under this Agreement or
in furtherance thereof, whether as attorney-in-fact or otherwise, whether of
omission or commission, and whether based upon any error of judgment or mistake
of law or fact, except for wilful misconduct or gross negligence. In no event
will Lender have any liability to Borrower for lost profits or other special,
exemplary, punitive, or consequential damages.
-13-
5.7 After written notice by Lender to Borrower and automatically, without
notice, after an Event of Default, Borrower shall not, without the prior written
consent of Lender in each instance, (a) grant any extension of time of payment
of any of the accounts or any other Collateral which includes a monetary
obligation, (b) compromise or settle any of the accounts or any such other
Collateral for less than the full amount thereof, (c) release in whole or in
part any account debtor or other person liable for the payment of any of the
accounts or any such other Collateral, or (d) grant any credits, discounts,
allowances, deductions, return authorizations or the like with respect to any of
the accounts or any such other Collateral, unless, both before and after giving
effect to such credits, discounts, allowances, deductions, return authorizations
or the like, Borrower has Net Availability in excess of $500,000.
5.8 At such times as Lender may request and in the manner specified by
Lender, Borrower shall deliver to Lender or Lender's representative original
invoices, agreements, proofs of rendition of services and delivery of goods and
other documents evidencing or relating to the transactions which gave rise to
accounts or other Collateral, together with customer statements, schedules
describing the accounts or other Collateral and/or statements of account and
confirmatory assignments to Lender of the accounts or other Collateral, in form
and substance satisfactory to Lender and duly executed by Borrower. Without
limiting the provisions of Section 5.7, Borrower's granting of credits,
discounts, allowances, deductions, return authorizations or the like will be
promptly reported to Lender in writing. In no event shall any such schedule or
confirmatory assignment (or the absence thereof or omission of any of the
accounts or other Collateral therefrom) limit or in any way be construed as a
waiver, limitation or modification of the security interests or rights of Lender
or the warranties, representations and covenants of Borrower under this
Agreement. Any documents, schedules, invoices or other paper delivered to Lender
by Borrower may be destroyed or otherwise disposed of by-Lender nine (9) months
after receipt by Lender, unless Borrower requests their return in writing in
advance and makes prior arrangements for their return, at Borrower's expense.
5.9 From time to time as requested by Lender, at the sole expense of
Borrower, Lender or its designee shall have access, prior to an Event of Default
upon at least three (3) days notice, during reasonable business hours and on or
after an Event of Default at any time and without notice, to all of the premises
where Collateral is located for the purposes of inspecting the Collateral, and
all Borrower's books and records, and Borrower shall permit Lender or its
designee to make such copies of such books and records or extracts therefrom as
Lender may request. Without expense to Lender, Lender may use such of Borrower's
personnel, equipment, including computer equipment, programs, printed output and
computer readable media, supplies and premises
-14-
Borrower shall deliver to Lender audited financial statements of Borrower
prepared by and accompanied by the unqualified report and opinion thereon of
independent certified public accountants acceptable to Lender, together with a
certificate signed by such accountant to the effect that such accountant does
not then know of any Event of Default specified in Section 7 hereof or the
occurrence or continuance of any event which, with the giving of notice or the
passage of time or both, would constitute such an Event of Default or if such
accountant shall have obtained knowledge of any such Event of Default or other
event, specifying the nature thereof. Lender acknowledges that as of the date
hereof, but subject to contrary determination at a future time in its reasonable
discretion, Xxxxxxx X. Xxxxxx & Company, LLP, are independent certified public
accountants acceptable to Lender. Borrower will provide Lender with copies of
all periodic reports and other documents and materials filed with the Securities
and Exchange Commission (including all filings in connection with Borrower's
proposed initial public offering) and all press releases, as and when the same
are filed or released, as the case may be.
6.2 Borrower may from time to time render invoices to account debtors under
its trade names set forth in Section 10.6(g) after Lender has received prior
written notice from Borrower of the use of such trade names and as to which,
Borrower agrees that: (a) each trade name does not refer to another corporation
or other legal entity, (b) all accounts and proceeds thereof (including any
returned merchandise) invoiced under any such trade names are owned exclusively
by Borrower and are subject to the security interest of Lender and the other
terms of this Agreement, and (c) all schedules of accounts and confirmatory
assignments including any sales made or services rendered using the trade name
shall show Borrower's name as assignor and Lender is authorized to receive,
endorse and deposit to any loan account of Borrower maintained by Lender all
checks or other remittances made payable to any trade name of Borrower
representing payment with respect to such sales or services.
6.3 Borrower shall promptly notify Lender in writing of any loss, damage,
investigation, action, suit, proceeding or claim in relating to a material
portion of the Collateral or which may result in any material adverse change
in Borrower's business, assets, liabilities or condition, financial or
otherwise.
6.4 Borrower's books and records concerning accounts and its chief
executive office are and shall be maintained only at the address set forth in
Section 10.6(d). Borrower's only other places of business and the only other
locations of Collateral, if any, are and shall be the addresses set forth in
Section 10.6 hereof, except Borrower may change such locations or open a new
place of business after fifteen (15) business days prior written notice to
Lender. Prior to any change in location or opening of
-16-
any new place of business, Borrower shall execute and deliver or cause to be
executed and delivered to Lender such financing statements, financing documents
and security and other agreements as Lender may reasonably require, including,
without limitation, those described in Section 6.14.
6.5 Borrower has and at all times will continue to have good and marketable
title to all of the Collateral, free and clear of all liens, security interests,
claims or encumbrances of any kind except in favor of Lender and except, if any,
those set forth on Schedule A hereto (Permitted Liens").
6.6 Borrower shall not, directly or indirectly: (a) sell, lease, transfer,
assign, abandon or otherwise dispose of any part of the Collateral (including,
without limitation, the return of inventory to vendors, provided however, that
(i) during any period of time during the Term that there are no Obligations
outstanding, Borrower may return inventory to vendors, and (ii) returns of
inventory to vendors in amounts less than $200,000 at any one time will be
permitted so long as Borrower provides Lender with simultaneous notice thereof
and so long as after giving effect to any such return, Borrower's Net
Availability is in excess of $500,000) or any material portion of its other
assets (other than sales of inventory to buyers in the ordinary course of
business or as otherwise permitted by section 6.12(e) and other than the sale,
abandonment or other disposition of surplus, obsolete or non-working equipment
which is no longer useful in the ordinary course of Borrower's business, having
an aggregate value in any calendar year of not more than $25,000.00, provided
however that on and after the closing date of the transactions contemplated by
Borrower's registration statement (the "Registration Statement") to be filed
under the Securities Act of 1933, as amended, for the initial public offering of
shares of Borrower's Common Stock (as defined below) (the "IPO Closing Date"),
such amount shall increase to $100,000, so long as all proceeds thereof are
immediately deposited into Borrower's collateral proceeds account with Lender)
or (b) change its corporate name or trade or otherwise conduct business under
any assumed or fictitious name, other than "Intellicell Corp". Borrower shall
not, directly or indirectly, without the prior written consent of Lender, which
consent shall not be unreasonably withheld: (x) consolidate with or merge with
or into any other entity, or permit any other entity to consolidate with or
merge with or into Borrower, or (y) form or acquire any interest in any firm,
corporation or other entity, provided, however, that (i) Borrower may, upon at
least 10 business days prior written notice to Lender, form a Delaware
corporation ("Newco") and merge Borrower with and into Newco in order to change
Borrower's domiciliary state to Delaware, so long as no material assets of
Borrower are transferred to Newco and so long as the merger of Borrower into
Newco is not consummated until Lender has recorded WCC-1 Financing Statements
against Newco in
-17-
all jurisdictions where Lender deems necessary or proper and until Newco has
executed such documents and instruments in favor of Lender as Lender deems
necessary, and (ii) after the IPO Closing Date, so long as Borrower has and at
all times thereafter maintains a Tangible Net Worth (defined in Section 10.5(a))
of at least $4,500,000.00, Borrower shall be permitted to enter into and
consummate acquisitions of substantially all of the assets of other entities or
acquire all of the outstanding capital stock of other entities (but not merge
with or into such other entities or merge such other entities into Borrower),
without first obtaining Lender's consent, so long as after giving effect to any
such transaction, Borrower remains in compliance with all of the financial
covenants set forth in this Agreement and otherwise remains in compliance with
all other terms and conditions of this Agreement. Lender shall not be obligated
to lend money to Borrower against any of the assets acquired pursuant to, or in
connection with, any of the acquisition transactions permitted pursuant to the
preceding sentence.
6.7 Borrower shall at all times maintain, with insurers acceptable to
Lender, casualty insurance with respect to the Collateral and other assets. All
such insurance policies shall be in such form, substance, amounts and coverage
as may be satisfactory to Lender and shall provide for thirty (30) days' prior
written notice to Lender of cancellation or reduction of coverage. Borrower
hereby irrevocably appoints Lender and any designee of Lender as
attorney-in-fact for Borrower to obtain at Borrower's expense, any such
insurance should Borrower fail to do so and, after an Event of Default, to
adjust or settle any claim or other matter under or arising pursuant to such
insurance or to amend or cancel such insurance. Borrower shall deliver to Lender
evidence of such insurance and a lender's loss payable endorsement satisfactory
to Lender as to all existing and future insurance policies with respect to the
Collateral. Borrower shall deliver to Lender, in kind, all instruments
representing proceeds of insurance received by Borrower. Lender may apply any
insurance proceeds received at any time to the cost of repairs to or replacement
of any portion of the Collateral and/or, at Lender's option, to payment of or as
security for any of the Obligations, whether or not due, in any order or manner
as Lender determines.
6.8 Borrower is and at all times will continue to be in compliance with the
requirements of all material laws, rules, regulations and orders of any
governmental authority relating to its business (including laws, rules,
regulations and orders relating to taxes, payment and withholding of payroll
taxes, employer and employee contributions and similar items, securities,
employee retirement and welfare benefits, employee health and safety, or
environmental matters) and all material agreements or other instruments binding
on Borrower or its property. To the extent applicable to Borrower, all of
Borrower's inventory shall be produced in accordance with the
-18-
requirements of the Federal Fair Labor Standards Act of 1938, as amended and all
rules, regulations and orders related thereto. Borrower shall pay and discharge
all taxes, assessments and governmental charges against Borrower or any
Collateral prior to the date on which penalties are imposed or liens attach with
respect thereto, unless the same are being contested in good faith and, at
Lender's option, Reserves are established for the amount contested and penalties
which may accrue thereon.
6.9 With respect to each account deemed an Eligible Account, except as
reported in writing to Lender, Borrower has no knowledge that any of the
criteria for eligibility are not or are no longer satisfied. As to each account,
except as disclosed in writing to Lender at the time such account arises (a)
each is valid and legally enforceable and represents an undisputed bona fide
indebtedness incurred by the account debtor for the sum reported to Lender, (b)
each arises from an absolute and unconditional sale of goods, without any right
of return or consignment (other than as expressly permitted pursuant to Section
5.7(d) herein and subject to the right of purchasers of goods in the ordinary
course of business to return or reject goods deemed non-conforming under the
applicable contract of sale), or from a completed rendition of services, (c)
each is not, at the time such account arises, subject to any defense, offset,
dispute, contra relationship, counterclaim, or any given or claimed credit,
allowance or discount, and (d) all statements made and all unpaid balances and
other information appearing in the invoices, agreements, proofs of rendition of
services and delivery of goods and other documentation relating to the accounts,
and all confirmatory assignments, schedules, statements of account and books and
records with respect thereto, are true and correct and in all respects what they
purport to be.
6.10 With respect to Borrower's equipment, such equipment is, and Borrower
shall keep the equipment, in good order and repair, and in running and
marketable condition, ordinary wear and tear and damage by casualty excepted.
6.11 Borrower shall at all times maintain working capital and tangible net
worth (except as otherwise defined herein, each as determined in accordance with
GAAP, in effect on the date hereof, consistently applied) in the amounts set
forth in Section 10.5 and Borrower shall not, directly or indirectly, expend or
commit to expend, for fixed or capital assets (including capital lease
obligations) an amount in excess of the capital expenditure limit set forth in
Section 10.5 in any fiscal year of Borrower.
6.12 Borrower will not, directly or indirectly: (a) lend or advance money
or property to, guarantee or assume indebtedness of, or invest (by capital
contribution or otherwise) in any person, firm, corporation or other entity,
except (i) as otherwise specifically permitted by Section 6.6 hereof, (ii) to
-19-
employees to cover travel and other bona fide business expenses incurred by
such employees in the ordinary course of Borrower's business, (iii)
investments by Borrower of the proceeds from the sale of its securities in
short-term interest-bearing U.S. government securities, short term
certificates of deposit, time deposits and money market accounts and high
quality money market instruments, and (iv) the making of endorsements of
negotiable instruments for deposit or collection in the ordinary course of
business, indemnity agreements in the ordinary course of business and
indemnity agreements in favor of the underwriter of the initial public
offering of Borrower's common stock set forth in the underwriting agreement
and in related agreements between Borrower and such underwriter; or (b)
declare, pay or make any cash dividend, redemption or other distribution on
account of any shares of any class of stock of Borrower now or hereafter
outstanding, other than dividends in the form of shares of Borrower's
capital stock distributed to Borrower's stockholders; or (c) make any
payment of the principal amount of or interest on any indebtedness owing to
any officer, director, shareholder, or affiliate of Borrower; or (d) make
any loans or advances to any officer, director, employee, shareholder or
affiliate of Borrower; or (e) enter into any sale, lease or other
transaction with any officer, director, employee, shareholder or affiliate
of Borrower on terms that are less favorable to Borrower than those which
might be obtained at the time from persons who are not an officer,
director, employee, shareholder or affiliate of Borrower, provided, however
that in respect of Subsections (d) and (e) above, Borrower shall be
permitted to make (i) advances to employees permitted by Section 6.12(a)
above, (ii) S Corporation distributions to shareholders of Borrower, which
prior to the IPO Closing Date shall be limited to distributions to such
shareholders in amounts not to exceed the federal, state and local income
taxes on Borrower's S Corporation income attributable to such shareholders,
and on the IPO Closing Date shall not exceed any remaining retained
earnings of Borrower in respect of which such shareholders have paid or are
liable to pay federal, state or local income taxes; and (iii) sales of
inventory to employees for their personal use (and not for resale) at
reduced or discounted prices not below Borrower's cost not to exceed
$50,000 in the aggregate during any fiscal year of Borrower.
6.13 Borrower shall pay, on Lender's demand, all costs, expenses, filing
fees and taxes payable in connection with the preparation, execution, delivery,
recording, administration, collection, liquidation, enforcement and defense of
the Obligations, Lender's rights in the Collateral, this Agreement and all other
existing and future agreements or documents contemplated herein or related
hereto, including any amendments, waivers, supplements or consents which may
hereafter be made or entered into in respect hereof, or in any way involving
claims or defenses asserted by Lender or claims or defenses against Lender
-20-
asserted by Borrower, any guarantor or any third party directly or indirectly
arising out of or related to the relationship between Borrower and Lender or any
guarantor and Lender, including, but not limited to the following, whether
incurred before, during or after the initial or any renewal Term or after the
commencement of any case with respect to Borrower or any guarantor under the
United States Bankruptcy Code or any similar statute: (a) all costs and expenses
of filing or recording (including Uniform Commercial Code financing statement
filing taxes and fees, documentary taxes, intangibles taxes and mortgage
recording taxes and fees, if applicable); (b) all title insurance and other
insurance premiums, appraisal fees, fees incurred in connection with any
environmental report, audit or survey and search fees; (c) all fees relating to
the wire transfer of loan proceeds and other funds and fees for returned checks;
(d) all expenses and costs heretofore and from time to time hereafter incurred
by Lender during the course of periodic field examinations of the Collateral and
Borrower's operations, plus a per diem charge at the rate of $650 per person,
per day for Lender's examiners in the field and office, provided however that so
long as no Event of Default has occurred, the aggregate amount of fees and
expenses payable by Borrower pursuant to this subsection 6.13(d) shall be
limited to $14,000 for each 12-month period hereafter; and (e) the costs, fees
and disbursements of in-house and outside counsel to Lender.
6.14 At the request of Lender, at any time and from time to time, at
Borrower's sole expense, Borrower shall execute and deliver or cause to be
executed and delivered to Lender, such agreements, documents and instruments,
including waivers, consents and subordination agreements from mortgagees or
other holders of security interests or liens, landlords or bailees, and do or
cause to be done such further acts as Lender, in its discretion, deems necessary
or desirable to create, preserve, perfect or validate any security interest of
Lender or the priority thereof in the Collateral and otherwise to effectuate the
provisions and purposes of this Agreement. Borrower hereby authorizes Lender to
file financing statements or amendments against Borrower in favor of Lender with
respect to the Collateral, without Borrower's signature and to file as financing
statements any carbon, photographic or other reproductions of this Agreement or
any financing statements signed by Borrower.
6.15 Borrower is a business corporation, duly organized, validly existing
and in good standing under the laws of the State set forth in Exhibit D-1 hereto
and will (i) do or cause to be done all things necessary to obtain, preserve,
renew and keep in full force and effect its existence and its qualification to
do business and good standing in such State and any other jurisdiction(s)) in
which such qualification is necessary for the proper conduct of its business or
wherein it owns or leases any property, a schedule of which is attached hereto
as Exhibit D-2,
-21-
and conduct and operate its business in substantially the manner in which same
is presently conducted and operated; (ii) at all times maintain, preserve and
protect all material patents, franchises, trademarks, trade names, copyrights
and other general intangibles; (iii) preserve the condition of all property
useful in the conduct of its business and keep the same in good repair, working
order and condition (reasonable wear and tear and damage by casualty excepted)
and from time to time make, or cause to be made, all repairs, renewals,
replacements, betterments and improvements thereto, to the extent that the same
are necessary for the proper and advantageous conduct of its business; and (iv)
comply with all material agreements to which it is subject.
6.16 (i) Borrower hereby indemnifies and agrees to protect, defend and hold
harmless Lender and Lender's directors, officers, employees, agents, attorneys
and shareholders from and against any and all losses, damages, expenses or
liabilities of any kind or nature and from any suits, claims, or demands,
including all reasonable counsel fees incurred in investigating, evaluating or
defending such claim, suffered by any of them and caused by, relating to,
arising out of, resulting from, or in any way connected with this Agreement, or
any other collateral document, and any transaction contemplated herein or
therein (other than actions arising out of the wilful misconduct or gross
negligence of Lender), including but not limited to, claims based upon any act
or failure to act by Lender in connection with this Agreement or any other
collateral document, and any transaction contemplated herein or therein. If
Borrower shall have knowledge of any claim or liability hereby indemnified
against, it shall give prompt written notice thereof to Lender. This covenant
shall survive payment of the Obligations.
(ii) Lender shall give Borrower prompt notice of all suits or actions
instituted against Lender with respect to which Borrower has indemnified Lender,
and Borrower shall have the right to participate in any such suit or action.
Lender shall also have the right, at the sole expense of Borrower, to
participate in, or at Lender's election, assume the defense or prosecution of
such suit, action, or proceeding, and in the latter event the Borrower may
employ counsel and participate therein. Lender shall have the right to adjust,
settle, or compromise any claim, suit, or judgment after notice to Borrower,
unless Borrower desires to litigate such claim, defend such suit, or appeal such
judgment and simultaneously therewith deposit with Lender additional collateral
security sufficient to pay any judgment rendered, with interest, costs, and
expenses; and the right of Lender to indemnification under this Agreement shall
extend to any money paid by Lender in settlement or compromise of any such
claims, suits, and judgments in good faith, after notice to Borrower.
-22-
(iii) If any suit, action, or other proceeding is brought by Lender
against Borrower for breach of this covenant of indemnity, separate suits may be
brought as causes of action accrue, without prejudice or bar to the bringing of
subsequent suits on any other cause of action, whether theretofore or thereafter
accruing.
6.17 Borrower has the lawful power to own its properties and to engage in
the businesses it conducts; and has no subsidiaries or joint venture partners
other than as set forth on Schedule B hereto.
6.18 Except as described on Schedule C attached hereto, Borrower is not a
party to or, to its best knowledge, threatened with, any litigation, suit,
action, investigation (whether civil or criminal), proceedings or controversy
before any Court, administrative agency or other governmental authority and
Borrower is not in violation of or in default with respect to any judgment,
order, writ, injunction, decree or rule of any court, administrative agency or
governmental instrumentality or in any material respect under any regulation of
any administrative agency or governmental instrumentality.
6.19 Borrower has no knowledge of any environmental hazards, risks or
liabilities applicable to it or its assets or business, or of any violations by
it or them of any state or federal statutes, regulations, laws or orders
pertaining to environmental matters, including, without limitation, the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Federal Resource Conservation and Recovery Act ("RCRA") or
applicable State laws. Borrower has not received a summons, citation, notice,
directive, letter or other communication, written or oral, from any state or
federal agency concerning any intentional or unintentional action or omission by
Borrower or any present or former affiliate resulting in any releasing,
spilling, leaking, pumping, pouring, emitting, emptying, dumping or otherwise
disposing of "Hazardous Waste" (as defined in 42 U.S.C. Section 6903(5)) or
"Hazardous Substance" (as defined in 42 U.S.C. Section 9609(14)). No lien
arising under or in connection with RCRA or CERCLA, or applicable State law, has
attached to any revenues or to any real or personal property (including, but not
limited to the Collateral) owned by Borrower.
6.20 Borrower holds no United States or foreign patents and has no United
States or foreign patent applications pending and has no federally registered
trademarks or tradenames and operates under no fictitious names, other than as
disclosed in Section 10.6(g) below.
6.21 On the IPO Closing Date, Borrower shall issue to Lender a certain
common stock purchase warrant (the "Lender's Warrant")
-23-
which will entitle Lender to purchase up to Fifteen Thousand (15,000) fully
paid, validly issued and nonassessable shares of common stock of Borrower (the
"Common Stock") at a price equal to the initial public offering price of the
Common Stock per share, as shall be set forth in the Registration Statement as
of the effective time thereof (or if appropriate, in the Rule 424(b)
prospectus), and pursuant to such other terms and conditions in form and
substance substantially similar to and no less favorable than, the terms and
conditions contained in the common stock purchase warrant which is issued by
Borrower to Sands Brothers & Co., Ltd. (the "Sands Brothers' Warrant") on or
about the IPO Closing Date, except that the Lender's Warrant shall (i) include
piggy back registration rights (a) with respect to any demand or piggy back
registration rights set forth in the Sands Brother's Warrant, and (b) with
respect to any other registration statement filed on behalf of Borrower (other
than registration statements on Form S-4 or on Form S-8) or on behalf of any
other warrant holder or on behalf of any other stockholder of Borrower; provided
however no such piggy back registration rights may be exercised by Lender for a
period of 12 months after the IPO Closing Date and (ii) otherwise be in form and
substance reasonably satisfactory to Lender, Borrower and Sands Brothers.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES
7.1 All Obligations shall be immediately due and payable, without notice or
demand, and any provisions of this Agreement as to future loans and credit
accommodations by Lender shall terminate automatically, upon the termination or
non-renewal of this Agreement or, at Lender's option, upon or at any time after
the occurrence or existence of any one or more of the following "Events of
Default":
(a) Borrower fails to pay when due any of the Obligations or fails to
perform any of the terms of this Agreement or any other existing or future
financing, security or other agreement between Borrower and Lender or any
affiliate of Lender;
(b) Any representation, warranty or statement of fact made by Borrower
to Lender in this Agreement or any other agreement, schedule, confirmatory
assignment or otherwise, or to any affiliate of Lender, shall prove materially
inaccurate or misleading;
(c) Any guarantor of the Obligations revokes, terminates or fails to
perform any of the terms of any guaranty, endorsement or other agreement of such
party in favor of Lender or any affiliate of Lender;
(d) Any judgment or judgments aggregating in excess of $200,000, or
any injunction or attachment is obtained against
-24-
Borrower or any guarantor which remains unstayed or undischarged for a period
of ten (10) days or is enforced;
(e) Borrower or any guarantor or a general partner of a guarantor or
Borrower (which is a partnership), being a natural person, dies, or Borrower or
any guarantor which is a partnership or corporation, is dissolved, or Borrower
or any guarantor which is a corporation fails to maintain its corporate
existence in good standing, or the usual business of Borrower or any guarantor
ceases or is suspended;
(f) Xxx Xxxxx ceases to (i) be the chief executive officer of Borrower
or (ii) own a controlling interest in Borrower's outstanding voting capital
stock, which interest may be less than 51% of such outstanding stock; Lender
hereby acknowledges that on and after the IPO Closing Date, Xxx Xxxxx may own
approximately 42% of such stock on a fully diluted basis, which 42% amount shall
be deemed to constitute a controlling interest;
(g) Borrower or any guarantor becomes insolvent, makes an assignment
for the benefit of creditors, makes or sends notice of a bulk transfer or calls
a general meeting of its creditors or principal creditors;
(h) Any petition or application for any relief under the bankruptcy
laws of the United States now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed by or against Borrower or any guarantor; except that, with
respect to the commencement of any case against Borrower or any guarantor under
Title 11 of the United States Code, as amended, the same shall not constitute an
Event of Default hereunder unless such case is not dismissed within sixty (60)
days after the date of its filing or Borrower or such guarantor shall file any
answer admitting or not contesting the commencement of such case or indicates
its consent to, acquiescence in or approval of any such case or proceeding or
the relief requested is granted sooner; provided however, that after the filing
of a petition against Borrower and thereafter during the pendency of such case,
Lender shall have no obligation whatsoever to make any advances or loans
hereunder unless an Order of the bankruptcy court or other court of competent
jurisdiction is entered, which Order shall be in form and substance satisfactory
to Lender in all respects;
(i) The indictment of Borrower or any guarantor under any criminal
statute, or commencement of civil proceedings where the amount in controversy is
more than $200,000 or criminal proceedings, against Borrower or any guarantor
pursuant to which statute or proceedings the penalties or remedies sought or
-25-
available include forfeiture of any of the property of Borrower or such
guarantor;
(j) Any default or event of default under any financing, security or
other agreement, document or instrument at any time executed and/or delivered
to, with or in favor of Lender or any of its affiliates by any affiliate of
Borrower; or
(k) Lender in good faith believes that either (i) the prospect of
payment or performance of the Obligations is materially impaired or (ii) the
Collateral is not sufficient to secure fully the Obligations and such
insufficiency is not remedied to Lender's satisfaction within forty eight (48)
hours after Borrower is so advised.
7.2 Upon the occurrence of an Event of Default and at any time thereafter,
Lender shall have all rights and remedies provided in this Agreement, any other
agreements between Borrower and Lender, the Uniform Commercial Code or other
applicable law, all of which rights and remedies may be exercised without notice
to Borrower, all such notices being hereby waived, except such notice as is
expressly provided for hereunder or is not waivable under applicable law. All
rights and remedies of Lender are cumulative and not exclusive and are
enforceable, in Lender's discretion, alternatively, successively, or
concurrently on any one or more occasions and in any order Lender may determine.
Without limiting the foregoing, Lender may (a) accelerate the payment of all
Obligations and demand immediate payment thereof to Lender, (b) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (c) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (d) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (e) extend the time
of payment of, compromise or settle for cash, credit, return of merchandise, and
upon any terms or conditions, any and all accounts or other Collateral which
includes a monetary obligation and discharge or release the account debtor or
other obligor, without affecting any of the Obligations, (f) sell, lease,
transfer, assign, deliver or otherwise dispose of any and all Collateral
(including, without limitation, entering into contracts with respect thereto, by
public or private sales at any exchange, broker's board, any office of Lender or
elsewhere) at such prices or terms as Lender may deem reasonable, for cash, upon
credit or for future delivery, with the Lender having the right to purchase the
whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of Borrower, which
right or equity of redemption is hereby expressly waived and released by
Borrower.
-26-
If any of the Collateral is sold or leased by Lender upon credit terms or for
future delivery, the Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Lender. If notice of disposition of
Collateral is required by law, seven (7) days prior notice by Lender to Borrower
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and Borrower waives any other notice. In
the event Lender institutes an action to recover any Collateral or seeks
recovery of any Collateral by way of prejudgment remedy, Borrower waives the
posting of any bond which might otherwise be required.
7.3 Lender may apply the cash proceeds of Collateral actually received by
Lender from any sale, lease, foreclosure or other disposition of the Collateral
to payment of any of the Obligations, in whole or in part (including reasonable
attorneys' fees and legal expenses incurred by Lender with respect thereto or
otherwise chargeable to Borrower) and in such order as Lender may elect, whether
or not then due. Borrower shall remain liable to Lender for the payment of any
deficiency together with interest at the highest rate provided for herein and
all costs and expenses of collection or enforcement, including reasonable
attorneys' fees and legal expenses.
7.4 Lender may, at its option, cure any default by Borrower under any
agreement with a third party or pay or bond on appeal any judgment entered
against Borrower, discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
and pay any amount, incur any expense or perform any act which, in Lender's sole
judgment, is necessary or appropriate to preserve, protect, insure, maintain, or
realize upon the Collateral. Lender may charge Borrower's loan account for any
amounts so expended, such amounts to be repayable by Borrower on demand. Lender
shall be under no obligation to effect such cure, payment, bonding or discharge,
and shall not, by doing so, be deemed to have assumed any obligation or
liability of Borrower.
SECTION 8. JURY TRIAL WAIVER: CERTAIN OTHER WAIVERS AND
CONSENTS
8.1 Borrower and Lender each waive all rights to trial by jury in any
action or proceeding instituted by either of them against the other which
pertains directly or indirectly to this Agreement, the Obligations, the
Collateral, any alleged tortious conduct by Borrower or Lender, or, in any way,
directly or indirectly, arises out of or relates to the relationship between
Borrower and Lender. In no event will Lender be liable for lost profits or other
special or consequential damages.
-27-
8.2 Borrower waives all rights to interpose any claims, deductions, setoffs
or counterclaims of any kind, nature or description in any action or proceeding
instituted by Lender with respect to this Agreement, the Obligations, the
Collateral or any matter arising therefrom or relating thereto, except
compulsory counterclaims.
8.3 Borrower hereby irrevocably submits and consents to the nonexclusive
jurisdiction of the State and Federal Courts located in the State of New York
and any other State where any Collateral is located with respect to any action
or proceeding arising out of this Agreement, the Obligations, the Collateral or
any matter arising therefrom or relating thereto. In any such action or
proceeding, Borrower waives personal service of the summons and complaint or
other process and papers therein and agrees that the service thereof may be made
by mail directed to Borrower at its chief executive office set forth herein or
other address thereof of which Lender has received notice as provided herein,
service to be deemed complete five (5) days after mailing, or as permitted under
the rules of either of said Courts. Any such action or proceeding commenced by
Borrower against Lender will be litigated only in a Federal Court located in the
district, or a State Court in the State and County, in which the office of
Lender designated in Section 10.6(a) is located and Borrower waives any
objection based on forum non conveniens and any objection to venue in connection
therewith.
8.4 Lender shall not, by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights or remedies unless such
waiver shall be in writing and signed by an authorized officer of Lender. A
waiver by Lender of any right or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right or remedy which Lender would
otherwise have on any future occasion, whether similar in kind or otherwise.
SECTION 9. TERM OF AGREEMENT: MISCELLANEOUS
9.1 This Agreement shall only become effective upon execution and delivery
by Borrower and Lender and shall continue in full force and effect for a term of
two (2) years from the date hereof and shall be deemed automatically renewed for
successive terms of two (2) years thereafter unless terminated as of the end of
the initial or any renewal term (each a "Term") by either party giving the other
written notice at least sixty (60) days' prior to the end of the then-current
Term.
9.2 Borrower may also terminate this Agreement by giving Lender at least
thirty (30) days prior written notice at any time upon payment in full of all of
the Obligations as provided herein, including the early termination fee provided
below. Lender shall also have the right to terminate this Agreement at
-28-
any time upon or after the occurrence of an Event of Default. If Lender
terminates this Agreement upon or after the occurrence of an Event of Default,
or if Borrower shall terminate this Agreement as permitted herein effective
prior to the end of the then-current Term, in addition to all other Obligations,
Borrower shall pay to Lender, upon the effective date of termination, in view of
the impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits, an early termination fee equal to three percent (3%) of the Maximum
Credit if termination occurs at any time during the first year of the initial
Term, and one percent (1%) of the Maximum Credit if termination occurs during
the second year of the initial Term or during any renewal Term.
9.3 Upon termination of this Agreement by Borrower, as permitted herein, in
addition to payment of all Obligations which are not contingent, Borrower shall
deposit such amount of cash collateral as Lender determines, in its sole
discretion, is necessary to secure Lender from loss, cost, damage or expense,
including reasonable attorneys' fees, in connection with any open Accommodations
or remittance items or other payments provisionally credited to the Obligations
and/or to which Lender has not yet received final and indefeasible payment.
9.4 Except as otherwise provided, all notices, requests and demands
hereunder shall be (a) made to Lender at its address set forth in Section
10.6(a) and to Borrower at its chief executive office set forth in Section
10.6(d), or to such other address as either party may designate by written
notice to the other in accordance with this provision, and (b) deemed to have
been given or made: if by hand, immediately upon delivery; if by telex, telegram
or telecopy (fax), immediately upon receipt; if by overnight delivery service,
one day after dispatch; and if by first class or certified mail, three (3) days
after mailing.
9.5 If any provision of this Agreement is held to be invalid or
unenforceable, such provision shall not affect this Agreement as a whole, but
this Agreement shall be construed as though it did not contain the particular
provision held to be invalid or unenforceable.
9.6 This Agreement and the Promissory Note referred to in Section 2.2, if
any, contain the entire agreement of the parties as to the subject matter
hereof, all prior commitments, proposals and negotiations concerning the subject
matter hereof being merged herein. Neither this Agreement nor any provision
hereof shall be amended, modified or discharged orally or by course of conduct,
but only by a written agreement signed by an authorized officer of Lender. This
Agreement shall be binding upon and inure to the benefit of each of the parties
hereto and their respective successors and assigns, except that any obligation
of Lender
-29-
under this Agreement shall not be assignable or inure to the successors and
assigns of Borrower.
9.7 No termination of this Agreement shall relieve or discharge Borrower of
its Obligations, grants of Collateral, duties and covenants hereunder or
otherwise until such time as all Obligations to Lender have been indefeasibly
paid and satisfied in full, including, without limitation, the continuation and
survival in full force and effect of all security interests and liens of Lender
in and upon all then-existing and thereafter-arising or acquired Collateral and
all warranties and waivers of Borrower.
9.8 All terms used herein which are defined in the Uniform Commercial Code
shall have the meanings set forth therein unless otherwise defined in this
Agreement and all references to the singular or plural herein shall also mean
the plural or singular, respectively.
9.9 This Agreement shall be governed by and construed in accordance with
the laws of the State of New York (without regard to New York conflicts of laws
principles).
9.10 Notwithstanding anything to the contrary contained in this Agreement
or in any other agreement signed by Borrower with or in favor of Lender relating
to or in connection with this Agreement whether executed now or hereafter
(except for an amendment to this Agreement), if there exists a conflict between
the provisions of this Agreement and any other such agreement, the provisions of
this Agreement, or any amendment thereto, will govern.
SECTION 10. ADDITIONAL DEFINITIONS AND TERMS
---------- --------------------------------
10.1 (a) Maximum Credit:
$7,500,000.00.
(b) Gross Availability Formulas
Eligible Accounts Percentage:
Eighty Two Percent (82%), so long as the dilution percentage of
such accounts ("dilution percentage" is defined as the sum of all
credits, allowances, write-offs, contra-accounts, and other
offsets which reduce the value of accounts, divided by the gross
invoices), as calculated on a rolling 90-day basis, remains less
than or equal to six percent (6%). If the dilution percentage is
greater than six percent (6%) then the advance formula will be
decreased by one percentage point for each percentage point or
fraction thereof that such dilution percentage exceeds six
percent (6%).
Eligible Inventory Percentage:
Fifty Percent (50%)
(c) Inventory Sub-limit(s):
-30-
Lesser of $2,500,000.00 or 100% of the in-formula outstanding
accounts receivable advances.
(d) Maximum days after Invoice Date for Eligible Accounts:
Sixty (60) days past due date, but in no event longer than ninety
(90) days after invoice date, except in the case of accounts with
COD terms, which will be limited to up to thirty (30) days after
invoice date; provided that, subject to change in the sole
discretion of Lender, the aggregate borrowings outstanding
against accounts due from Downtown Cellular Corp. and its
subsidiaries shall not exceed the lesser of $1,250,000.00 or
thirty percent (30%) of Borrower's gross accounts receivable; and
provided further, that the aggregate borrowings outstanding at
any one time against Canadian accounts shall be limited to
$1,000,000.00.
(e) Minimum Borrowing: N/A
10.2 Term Loan: N/A
10.3 Accommodations:
(a) Lender's Charge for Accommodations:
Two and one-half percent (2.5%) per annum.
(b) Sub-limit for Accommodations: $2,000,000.00
10.4 Fees:
(a) Interest Rate:
Prime Rate plus one and three-quarters percent (1.75%) per
annum.
(b) Facility Fee:
The Facility Fee shall be equal to the sum of (i) $56,250.00,
earned and payable at closing; plus (ii) one-half of one percent
(.5%) of the Maximum Credit, earned and payable on each
anniversary of the closing.
(c) Account Servicing Fee: N/A
(d) Unused Line Fee:
-31-
One-half of one percent (.5%) per annum.
10.5 Financial Covenants:
(a) Tangible Net Worth - Commencing on the IPO Closing Date and continuing
thereafter throughout the Term, not less than $4,500,000.00. For purposes
of this agreement, "Tangible Net Worth" shall mean, at any time, the
aggregate stockholders' equity (determined in accordance with GAAP), less
all intangible assets of the Borrower, including, without limitation,
organization costs, securities issuance costs, unamortized debt discount
and expense, goodwill, excess of purchase costs over net assets acquired,
patents, trademarks, trade names, copyrights, trade secrets, know-how,
licenses, franchises, capitalized research and development expenses,
amounts owing from officers and/or affiliates and any amount reflected as
treasury stock.
(b) Working Capital - Commencing on the IPO Closing Date and continuing
thereafter throughout the Term, not less than $1,500,000.00. For purposes
hereof, "Working Capital" shall mean at any time, the amount by which
current assets (determined in accordance with GAAP) exceeds current
liabilities (determined in accordance with GAAP), less any amounts due from
any affiliate to the extent that such amount is included in current assets.
10.6 (a) Lender's Office:
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(b) Lender's Bank:
Chemical Bank
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
(c) Borrower: Cellular Telecom Corporation
(d) Borrower's Chief Executive Office:
0000 Xxxxxxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
(e) Locations of Eligible Inventory
Collateral:
-32-
0000 Xxxxxxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
(f) Borrower's Other Offices and Locations of Collateral:
None
(g) Borrower's Trade Names for Invoicing:
Intellicell Corp.
IN WITNESS WHEREOF, and intending to be legally bound, Borrower and Lender
have duly executed this Agreement this 19th day of June, 1996.
THE CIT GROUP/CREDIT FINANCE INC.,
individually and as Agent
By: /s/ (illegible)
-----------------------
Title: Asst Vice President
--------------------
CELLULAR TELECOM CORPORATION,
d/b/a INTELLICELL CORP.
By: /s/ Xxx Xxxxx
----------------------
Xxx Xxxxx, President
STATE OF :
:
COUNTY OF :
On the______ day of June, 1996, before me personally came Xxx Xxxxx, to me
known, who, being by me duly sworn, did depose and say that he is the President
of Cellular Telecom corporation, d/b/a Intellicell Corp., the corporation
described herein and which executed the foregoing instrument; that said
instrument was signed and sealed on behalf of said corporation by authority of
its board of directors; and that they acknowledged said instrument to be the
free act and deed of said corporation.
---------------------------
Notary Public
My Commission Expires:______
-33-
GUARANTY AND SURETYSHIP AGREEMENT
Xxx Xxxxx
June 19, 1996
The CIT Group/Credit Finance, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
RE: Cellular Telecom Corporation d/b/a Intellicell Corp. ("Borrower")
Gentlemen:
Reference is made to the financing arrangements between The CIT
Group/Credit Finance, Inc. ("Lender") and Borrower, pursuant to which Lender may
extend loans, advances and other financial accommodations to Borrower as set
forth in a certain Loan and Security Agreement, dated on or about the date
hereof, between Borrower and Lender (the "Loan Agreement"), and various other
agreements, documents and instruments now or at any time executed and/or
delivered in connection therewith or otherwise related thereto, including, but
not limited to, this Guaranty and Suretyship Agreement ("Guaranty") (all of the
foregoing, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, being collectively
referred to herein as the "Financing Agreement").
Due to the close business and financial relationships between Borrower and
the undersigned ("Guarantor"), in consideration of the benefits which will
accrue to Guarantor, and as an inducement for and in consideration of Lender at
any time providing or extending loans, advances and other financial
accommodations to Borrower, whether pursuant to the Financing Agreements or
otherwise, Guarantor hereby, irrevocably and unconditionally, guarantees and
agrees to be liable (a) for the prompt indefeasible and full payment and
performance of all revolving loans, term loans, letters of credit, bankers'
acceptances, merchandise purchase guaranties or other guaranties or indemnities
for Borrower's account and all other obligations, liabilities and indebtedness
of every kind, nature or description owing by Borrower to Lender and/or its
affiliates, including principal, interest, charges, fees and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under any of the Financing Agreements or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of the Financing Agreements or after the
commencement of any case with respect to Borrower under the United States
Bankruptcy Code or any similar statute, whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, original, renewed or extended, and
whether arising directly or howsoever acquired by Lender including from any
other entity outright, conditionally or as collateral security, by assignment,
merger with any other entity, participations or interests of Lender in the
obligations of Borrower to others, assumption, operation of law, subrogation or
otherwise and (b) to pay to Lender on demand the amount of all expenses
(including, without limitation, attorneys' fees and legal expenses) incurred by
Lender in connection with the preparation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of Borrower's
obligations, liabilities and indebtedness as aforesaid to Lender, Lender's
rights in any collateral or under this Guaranty and all other Financing
Agreements or in any way involving claims by or against Lender directly or
indirectly arising out of or related to the relationship between Borrower and
Lender, Guarantor and Lender, or any other Obligor (as hereinafter defined) and
Lender, whether such expenses are incurred before, during or after the initial
or any renewal term of the Financing Agreements or after the commencement of any
case with respect to Borrower, Guarantor or any other Obligor under the United
States Bankruptcy Code or any similar statute (all of which being collectively
referred to herein as the "Guaranteed Obligations.).
Notice of acceptance of this Guaranty, the making of loans, advances and
extensions of credit or other financial accommodations to, and the incurring of
any expenses by or in respect of, Borrower, and presentment, demand, protest,
notice of protest, notice of nonpayment or default and all other notices to
which Borrower or Guarantor are or may be entitled are hereby waived. Guarantor
also waives notice of, and hereby consents to, (i) any amendment, modification,
supplement, renewal, restatement or extensions of time of payment of or increase
or decrease in the amount of any of the Guaranteed Obligations or to the
Financing Agreements and any collateral, and the guarantee and surety made
herein shall apply to the Guaranteed Obligations as so amended, modified,
supplemented, renewed, restated or extended, increased or decreased, (ii) the
taking, exchange, surrender and releasing of collateral or guarantees now or at
any time held by or available to Lender for the obligations of Borrower or any
other party at any time liable for or in respect of the Guaranteed Obligations
(individually and collectively, the "Obligors".), (iii) the exercise of, or
refraining from the exercise of any rights against Borrower, Guarantor or any
other Obligor or any collateral, and (iv) the settlement, compromise or release
of, or the waiver of any default with respect to, any Guaranteed Obligations.
Guarantor agrees that the amount of the Guaranteed Obligations shall not be
diminished and the liability of Guarantor hereunder shall not be otherwise
impaired or affected by any of the foregoing.
This Guaranty is a guaranty and surety of payment and not of collection.
Guarantor agrees that Lender need not attempt to collect any Guaranteed
Obligations from Borrower or any other Obligor or to realize upon any
collateral, but may require Guarantor to make immediate payment of the
Guaranteed Obligations to Lender when due or at any time thereafter. Lender may
apply any amounts received in respect of the Guaranteed Obligations to any of
the Guaranteed Obligations, in whole or in part (including reasonable attorneys'
fees and legal expenses incurred by Lender with respect thereto or otherwise
chargeable to Borrower or Guarantor) and in such order as Lender may elect,
whether or not then due.
No invalidity, irregularity or unenforceability of all or any part of the
Guaranteed Obligations shall affect, impair or be a defense to this Guaranty,
nor shall any other circumstance which might otherwise constitute a defense
available to, or legal or equitable discharge of Borrower in respect of any of
the Guaranteed Obligations or Guarantor in respect of this Guaranty, affect,
impair or be a defense to this Guaranty. Without limitation of the foregoing,
the liability of Guarantor hereunder shall not be discharged or impaired in any
respect by reason of any failure by Lender to perfect or continue perfection of
any lien or security interest in any collateral for the Guaranteed Obligations
or any delay by Lender in perfecting any such lien or security interest. As to
interest, fees and expenses, whether arising before or after the commencement of
any case with respect to Borrower under the United States Bankruptcy Code or any
similar statute, Guarantor shall be liable therefor, even if Borrower's
liability for such amounts does not, or ceases to, exist by operation of law.
This Guaranty is absolute, unconditional and continuing. Payment by
Guarantor shall be made to Lender at its office from time to time on demand as
Guaranteed Obligations become due. One or more successive or concurrent actions
may be brought hereon against Guarantor, either in the same action in which
Borrower or any other Obligors are sued or in separate actions.
Payment of all amounts now or hereafter owed to Guarantor by Borrower or
any other Obligor is hereby subordinated in right of payment to the indefeasible
payment in full to Lender of the Guaranteed Obligations and is hereby assigned
to Lender as security therefor; provided however, that in the absence of an
event of default under the Loan Agreement, the payment subordination described
above shall not apply to the payment by Borrower to Guarantor of (i)
compensation and related fringe benefit payments and payments for Guarantor's
services to the Borrower as an officer and director thereof, which on an annual
basis in the aggregate shall not exceed $250,000.00 and (ii) distributions to
Guarantor as a shareholder of Borrower of Borrower's retained earnings to the
extent permitted by the Loan Agreement. Until all of the Guaranteed Obligations
have been indefeasibly paid, satisfied and discharged in full, Guarantor hereby
irrevocably and unconditionally waives and relinquishes all statutory,
contractual, common law, equitable and all other claims against Borrower, any
collateral for the Guaranteed Obligations or other assets of Borrower or any
other
-2-
Obligor, for subrogation, reimbursement, exoneration, contribution,
indemnification, setoff or other recourse in respect of sums paid or payable to
Lender by Guarantor hereunder and Guarantor hereby further irrevocably and
unconditionally waives and relinquishes any and all other benefits which
Guarantor might otherwise directly or indirectly receive or be entitled to
receive by reason of any amounts paid by or collected or due from Guarantor,
Borrower or any other Obligor upon the Guaranteed Obligations or realized from
their property.
All sums at any time owed by Lender to Guarantor or to the
credit of Guarantor and any property of Guarantor on which Lender at any time
has a lien or security interest or of which Lender at any time has possession,
shall secure payment and performance of all Guaranteed Obligations and all other
obligations of Guarantor to Lender however arising.
In case proceedings be instituted by or against Guarantor or
any other Obligor, in bankruptcy or insolvency, or for reorganization,
arrangement, receivership, or the like, or if Guarantor or any other Obligor
calls a meeting of creditors or makes any assignment for the benefit of
creditors, or upon the occurrence of any event which constitutes an event of
default under the Financing Agreements, the liability of Guarantor for the
entire Guaranteed Obligations shall mature, even if the liability of Borrower or
any other Obligor therefor does not; provided, however that in the case of any
involuntary bankruptcy proceeding filed against Guarantor, Guarantor shall have
a period of sixty (60) days from the date of such filing to cause the same to be
terminated or withdrawn before the same shall result in the liability of
Guarantor for the entire Guaranteed Obligations to mature.
Guarantor shall continue to be liable hereunder until one of
Lender's officers actually receives a written termination notice by certified
mail; but the giving of such notice shall not relieve Guarantor from liability
for any Guaranteed Obligations incurred before termination or for
post-termination collection expenses and interest pertaining to any Guaranteed
Obligations arising before termination.
Guarantor agrees that this Guaranty shall remain in full force
and effect or be reinstated, as the case may be, if at any time payment of any
of the Guaranteed Obligations is rescinded or otherwise restored by Lender to
Borrower or to any other person who made such payment, or to the creditors or
creditors' representative of Borrower or such other person.
Lender's books and records showing the account between Lender
and Borrower shall be admissible in evidence in any action or proceeding as
prima facie proof of the items therein set forth, and any written statements
rendered by Lender to Borrower, to the extent to which no written objection is
made within sixty (60) days after the date thereof, shall be considered correct
and be binding on Guarantor as an account stated for purposes of this Guaranty.
No delay on Lender's part in exercising any rights hereunder
or failure to exercise the same shall constitute a waiver of such rights. No
notice to, or demand on, Guarantor shall be deemed to be a waiver of the
obligation of Guarantor to take further action without notice or demand as
provided herein. No waiver of any of Lender's rights hereunder, and no
modification or amendment of this Guaranty, shall be deemed to be made by Lender
unless the same shall be in writing, duly signed on Lender's behalf, and each
such waiver, if any, shall apply only with respect to the specific instance
involved and shall in no way impair Lender's rights or the obligations of
Guarantor to Lender in any other respect at any other time.
Guarantor hereby releases and exculpates Lender, its officers,
employees and designees, from any liability arising from any acts under this
Guaranty or in furtherance thereof, whether as attorney-in-fact or otherwise,
whether of omission or commission, and whether based upon any error of judgment
or mistake of law or fact, except for willful misconduct or gross negligence.
This Guaranty is binding upon Guarantor and Guarantor's heirs,
representatives and assigns and shall benefit Lender and its successors,
endorsees, transferees and assigns. The term "Guarantor" wherever
- 3 -
used herein shall mean the undersigned and any one or more heirs,
representatives and assigns. All references to Borrower and Lender herein shall
include their respective successors and assigns. This instrument shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of New York (without regard to New York conflicts of laws principles).
Guarantor and Lender waive all rights to trial by jury in any action or
proceeding instituted by either of them against the other which pertains
directly or indirectly to this Guaranty, any alleged tortious conduct by
Guarantor or Lender, or, in any way, directly or indirectly, arising out of or
related to the relationship between Guarantor and Lender or Borrower and Lender.
GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING. In no event will Lender be
liable for lost profits or other special, exemplary, punitive or consequential
damages.
Guarantor waives all rights to interpose any claims, deductions, setoffs or
counterclaims of any kind, nature or description in any action or proceeding
instituted by Lender with respect to this Guaranty or any matter arising
herefrom or relating hereto, except compulsory counterclaims.
Guarantor hereby irrevocably submits and consents to the non-exclusive
jurisdiction of the State and Federal Courts located in the State and City of
New York with respect to any action or proceeding arising out of this Guaranty
or any matter arising herefrom or relating hereto. Any such action or proceeding
commenced by Guarantor against Lender will be litigated only in a Federal Court
located in the district, or a State Court in the State and County of New York,
and Guarantor waives any objection based on forum non conveniens and any
objection to venue in connection therewith.
In any such action or proceeding, Guarantor waives personal service of the
summons and complaint or other process and papers therein and agrees that any
process or notice of motion or other application to any of said Courts or a
judge thereof, or any notice in connection with any proceedings hereunder may be
served (i) inside or outside such State by registered or certified mail, return
receipt requested, addressed to Guarantor at the address set forth below or
which Guarantor has previously advised Lender in writing and as indicated in the
records of Lender and service or notice so served shall be deemed complete five
(5) days after the same shall have been posted or (ii) in such other manner as
may be permissible under the rules of said Courts. GUARANTOR ACKNOWLEDGES THAT
THE WAIVERS SET FORTH IN THIS GUARANTY ARE SPECIFIC AND MATERIAL ASPECTS OF THIS
GUARANTY AND THAT LENDER WOULD NOT EXTEND CREDIT TO THE BORROWER IF THE WAIVERS
SET FORTH IN THIS GUARANTY WERE NOT A PART OF THIS GUARANTY.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE MAXIMUM LIABILITY OF THE
GUARANTOR FOR THE GUARANTEED OBLIGATIONS SHALL NOT EXCEED THE SUM OF (A)
$500,000, PLUS (B) INTEREST ON SUCH $500,000 AT THE THEN APPLICABLE RATE
PROVIDED FOR IN THE LOAN AGREEMENT FROM THE DATE OF DEMAND FOR ANY PAYMENT
HEREUNDER PLUS ANY AND ALL COSTS AND EXPENSES OF COLLECTION HEREUNDER (INCLUDING
WITHOUT LIMITATION ATTORNEYS' FEES AND OTHER EXPENSES).
IF (I) THE TANGIBLE NET WORTH (AS DEFINED IN THE LOAN AGREEMENT) OF BORROWER IS
EQUAL TO OR GREATER THAN $4,500,000 AT ALL TIMES DURING THE PERIOD COMMENCING ON
THE CLOSING DATE OF THE TRANSACTIONS CONTEMPLATED BY BORROWER'S REGISTRATION
STATEMENT FOR THE INITIAL PUBLIC OFFERING OF ITS COMMON STOCK AND CONTINUING
UNTIL THE FIRST ANNIVERSARY OF THE DATE OF THIS GUARANTY, AND (II) SO LONG AS NO
EVENT OF DEFAULT HAS OCCURRED UNDER THE LOAN AGREEMENT, THEN THIS GUARANTY SHALL
THEREUPON BE TERMINATED AND SHALL BE OF NO FURTHER FORCE OR EFFECT.
-4-
IN WITNESS WHEREOF, and intending to be legally bound hereby, Guarantor has
executed and delivered this Guaranty as of the day and year first above written.
/s/ Xxx Xxxxx
--------------------------------
Xxx Xxxxx
Address: 0000 Xxxxxxxxxxxx Xxx
Xxx Xxxx, Xx, 00000
STATE OF )
) ss.
COUNTY OF )
On this_____day of June, 1996, before me personally came Xxx Xxxxx, to me
known, who, being by me duly sworn, did depose and say that he executed the
foregoing instrument as his free act and deed for the purposes therein
contained.
--------------------------------
Notary Public
-5-
