Exhibit 10.42
LOAN AND SECURITY AGREEMENT
This is a Loan and Security Agreement made the 7th day of February,
2001, between XXXXXX UNITED BANK ("Lender"), a New Jersey state-chartered bank
having a location at 00 Xxxx Xxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxx 00000, and
Programmer's Paradise, Inc., a corporation of the State of Delaware, having its
principal place of business at 0000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx
00000 ("Borrower").
RECITAL:
WHEREAS, Borrower and Lender, wish to enter into a commercial lending
arrangement whereby Lender shall make loans to Borrower on a revolving basis and
Borrower shall repay same under the terms and conditions set forth herein; and
WHEREAS, the loans and other financial accommodations to be provided to
Borrower by Lender are to be secured by substantially all of the assets of
Borrower including, without limitation, all accounts receivable, equipment,
inventory and the other personal property of Borrower; and
WHEREAS, by this writing Borrower and Lender wish to set forth the
terms and conditions of the lending arrangement between Borrower and Lender.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS:
For the purposes of this Agreement, the following definitions shall
apply to the terms set forth below:
The term "Account Debtor" shall mean and include all customers of
Borrower or other Persons who are indebted to Borrower.
The term "Accounts Receivable" shall mean all accounts as defined in
the Uniform Commercial Code of the State of New Jersey, and, in addition, any
and all obligations of any kind at any time due and/or owing to Borrower and all
rights of Borrower to receive payment or any other consideration (whether
classified under the Uniform Commercial Code of the State of New Jersey or any
other State as accounts, accounts receivable, contract rights, chattel paper,
General Intangibles, or otherwise) including without limitation, invoices,
contract rights, accounts receivable, choses in action, notes, drafts,
acceptances, instruments and all other debts, obligations and liabilities in
whatever form owing to Borrower from any Person, firm, governmental authority,
corporation or any other entity, all security therefor, and Borrower's rights to
goods sold (whether delivered, undelivered, in transit or returned), which may
be
represented thereby, whether now existing or hereafter arising, together with
all proceeds and products of any and all of the foregoing.
The term "Advances" shall mean all loans made to Borrower pursuant to
Section 2.1 hereof.
The term "Advance Limit" shall have the meaning set forth in Section
2.1(c).
The term "Affiliate" shall mean and include any Person in which one or
more of the stockholders owning ten percent (10%) or more of Borrower, any
subsidiary and/or any parent, now or at any time or times hereafter hold,
individually, jointly or severally, an equity or other ownership interest in
excess of ten percent (10%) of the total equity or ownership interest in such
Person.
The term "Agreement" shall mean this Loan and Security Agreement and
any extensions or renewals thereof or modifications or amendments thereto.
The term "Authorized Person" shall mean an officer of Borrower
authorized to sign Borrowing Base Certificates, requests for Advances and the
other reports required by this Agreement.
The term "Banking Day" shall mean any day other than a Saturday, Sunday
or other day on which Lender is closed for a United States of America or any
state declared bank holiday.
The term "Borrower" shall mean Programmer's Paradise, Inc., a Delaware
corporation.
The term "Borrowing Base Certificate" shall mean a certificate,
substantially in the form of Exhibit "A" attached hereto and made a part hereof,
which shall be completed and signed by an Authorized Person and shall be
utilized by Borrower and Lender to calculate the sums available to be borrowed
as Revolving Loans.
The term "Collateral" shall mean and include Borrower's Accounts
Receivable, Inventory, General Intangibles, Machinery, Equipment, returned or
repossessed merchandise, and all other property of Borrower or others, which or
in which Lender, by this Agreement or otherwise, is given a security interest or
the right to hold as security for or to apply to the payment of Borrower's
Obligations and all proceeds of same, all as more fully described on Schedule
1.(a) hereto, provided however, and anything contained herein to the contrary
notwithstanding, (a) proceeds of the European Sale shall not be deemed to be
included as part of the Collateral and (b) contracts containing anti-assignment
provisions or requiring the consent of the other party to an assignment by
Borrower shall not be deemed to be included as part of the Collateral unless and
until any such anti-assignment provisions or requirements are rendered void
pursuant to contract or statute.
The term "Default" shall mean the occurrence of an event which, but for
the lapse of time or giving of notice or both, would be deemed an Event of
Default hereunder.
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The term "Default Rate" shall mean a rate of interest five (5)
percentage points in excess of the then applicable rate.
The term "Eligible Account", "Eligible Accounts" or "Eligible Accounts
Receivable" shall mean the Accounts Receivable as to which Borrower has
furnished to Lender information adequate to identify the same, at such times and
in such form as has been or, from time to time may be, requested by Lender,
which meet all of the following criteria on the origination date of the said
Accounts and continuing thereafter until collected, and which are in all other
respects acceptable to Lender:
(a) Borrower is the sole owner of the Accounts Receivable
and has not sold, assigned, mortgaged or
hypothecated, nor released from Lender's security
interest, all or any portion thereof, nor are they
subject to any claim, lien or security interest of
any Persons or entities, including without limitation
the United States, or any agencies or
instrumentalities thereof;
(b) They shall be valid and legally enforceable, owing to
Borrower for the performance of services or the sale
of goods arising in the ordinary course of business
for which Borrower has delivered or, at the time of
origination of the said Accounts, if required by
Lender, will deliver to the Lender invoices, xxxxxxxx
and shipping documents and other documents evidencing
the obligation of the Account Debtor to pay the
Account Receivable;
(c) They do not represent a conditional sale, sale on
consignment, xxxx and hold or other sale on a basis
other than that of absolute sale, are not evidenced
by any note, instrument, chattel paper or like
document, and do not arise out of a contract with the
United States or any of its departments, agencies, or
instrumentalities, unless accepted by Lender and
Borrower has complied with the Federal Assignment of
Claims Act in all respects to assign such Account to
Lender;
(d) No financing statement covering any Account
Receivable or its proceeds, except in favor of
Lender, is on file in any public office, and neither
Borrower nor Lender have received any notice of any
proposed acquisition, of any Account Receivable
security interest therein;
(e) They shall be outstanding for a period of not more
than ninety (90) days from the invoice date;
(f) If the aggregate amount of an Account Debtor's
indebtedness to Borrower in calculating the Advance
Limit exceeds twenty (20%) percent of Borrower's
total Accounts at the time outstanding, then such
excess shall not be eligible to be classified as a
Eligible Account Receivable;
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(g) They are not subject to any offsets, credits,
allowances or adjustments due the Account Debtor
except usual and customary prompt payment discounts,
nor has any Account Debtor returned the goods or
indicated any dispute or complaint concerning them
and the Account is not a contra account or otherwise
subject to any right of set-off;
(h) Not more than fifty percent (50%) percent of the
total amount of the Accounts Receivable due from the
Account Debtor has been classified not Eligible by
Lender;
(i) Borrower has not received any notice, nor has it any
knowledge of any facts which adversely affect the
credit of the Account Debtor;
(j) The Account Debtor is not a Subsidiary or other
Affiliate of Borrower nor a director or officer of
Borrower or an Affiliate of any director or officer;
(k) The Account Debtor is located in the United States of
America; and
(l) Lender has not notified Borrower that either the
Account Receivable or the Account Debtor is not
eligible.
The term "Equipment" shall mean all equipment as defined in the Uniform
Commercial Code of the State of New Jersey and, in addition, all equipment,
machinery, furniture, fixtures, and all other tangible assets, and all
replacements, repairs, modifications, alterations, additions, controls and
operating accessories therefor, all substitutions and replacements therefor, and
all accessions and additions thereto and all proceeds and products of the
foregoing now owned or hereafter acquired by Borrower.
The term "European Sale" shall mean the sale by Borrower of the stock
or assets of the European Subsidiaries.
The term "European Subsidiaries" shall mean ISP*D International
Software Partners GmbH, InTeCo-Entwicklungsgesellschaft fur
Informationstechnologic und Communication mbH, Logicsoft Holdings B.V.,
Logicsoft Group Nederland B.V., Euro Soft B.V., ISP*A Software Partners GmbH,
Logicsoft Group France S.A.S., Logicsoft Group Italia S.r.l., Programmer's
Paradise Italia S.r.l., International Software Partners Italia S.r.l.,
Systematika Ltd., Internet Paradise Ltd., Programmer's Paradise UK Ltd., ISP*UK
Ltd., International Software Partners UK Limited, System Science Ltd., "C"
Science Ltd., and Logicsoft Group (UK) Ltd.
The term "Event of Default" shall mean a default as set forth in
Section 11 of this Agreement.
The term "GAAP" shall mean generally accepted accounting principles in
effect from time to time in the United States of America.
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The term "General Intangibles" shall mean and include all of Borrower's
now owned or hereafter acquired cash, deposit accounts, letters of credit of
which Borrower is beneficiary, choses in action, causes of action and all other
intangible personal property including, without limitation, corporate or other
business records, inventions, designs, patents, patent applications, trademarks,
trademark applications, trade names, trade secrets, good will, registrations,
copyrights, licenses, franchises, customer lists, tax refunds, tax refund
claims, insurance claims, rights and claims against carriers and shippers and
rights to indemnification.
The term "Guarantors" shall mean any Person who agrees at any time to
be a guarantor and/or surety for Borrower, including, but without limitation
Programmer's Paradise (Canada), Inc., Corsoft, Inc., Programmer's Paradise
Catalogs, Inc. and Lifeboat Distribution, Inc, together with each Subsidiary
which is formed after the execution of this Agreement.
The term "Inventory" shall mean all items described in the Uniform
Commercial Code of the State of New Jersey definition thereof and all of the
following, whether or not so described (in all cases whether now owned or
hereafter acquired by Borrower and wherever located): all goods, merchandise or
other personal property held by Borrower for sale or lease or to be furnished
under labels and other devices, names or marks affixed thereto for purposes of
selling or identifying the same or the seller or manufacturer thereof, and all
right, title and interest of Borrower therein and thereto; all raw materials,
work or goods in process; and all materials and supplies of any kind or
description used or usable in connection with the manufacture, packaging,
shipping, advertisement, sale or finishing of any of the foregoing, together
with all proceeds and products of any of the foregoing.
The term "Lender" shall mean Xxxxxx United Bank, a New Jersey
state-chartered bank, its successors and assigns.
The term "Letter of Credit" shall mean any and all irrevocable
documentary or stand-by letters of credit issued by Lender for the account and
at the request of Borrower.
The term "Letter of Credit Liabilities" shall mean, without
duplication, the total of the aggregate undrawn face amounts of all Letters of
Credit plus all unreimbursed drawings against Letters of Credit plus all
outstanding drafts presented to Lender.
The term "Line of Credit" shall mean Five Million Dollars
($5,000,000.00) which is the maximum amount of Revolving Loans and Letter of
Credit Liabilities, in the aggregate, available to Borrower under the terms and
conditions of this Agreement, as evidenced by the face amount of the Secured
Revolving Note.
The term "Machinery" shall mean and include, without limitation, all
inanimate mechanisms for utilizing or applying power, including the
appurtenances thereto, used by or for Borrower in the operation of their
business and all accessories, substitutions, additions, replacements and parts
thereof, whether now owned or hereafter acquired.
The term "Obligation" or "Obligations" shall mean all indebtedness,
obligations, liabilities, and agreements of every kind and nature of Borrower to
or with Lender, or to or with
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any affiliate of Lender, or any guaranty of Borrower of any other Person's
indebtedness, liabilities and agreements to or with Lender, or to or with any
affiliate of Lender, now existing or hereafter arising, and now or hereafter
contemplated, pursuant to this Agreement, the Relevant Documents or otherwise,
whether in the form of refinancing, letters of credit, hedge, cap, collar, swap,
or other derivative agreements, bankers acceptances, guarantees, loans,
interest, charges, expenses or otherwise, direct or indirect, (including without
limitation, any participation or interest of Lender [or of any affiliate of
Lender] in any obligations of Borrower to others), acquired outright,
conditionally or as collateral security from another, absolute or contingent,
joint or several, liquidated or unliquidated, secured or unsecured, arising by
operation of law or otherwise, including without limitation any future advances,
renewals, extensions or changes in form of, or substitutions for, any of said
indebtedness, obligations or liabilities, the other sums and charges to be paid
to Lender pursuant to Sections 2, 3 and 4 hereof, and all interest and late
charges on any of the foregoing.
The term "Permitted Acquisition" shall mean an acquisition of the stock
or assets of any Person so long as (a) no Default or Event of Default has
occurred and is continuing or would occur as the result of the consummation of
such acquisition; (b) if the purchase is price payable in whole or in part in
cash, such payment does not exceed Five Million Dollars ($5,000,000.00) as to
any one acquisition or Ten Million Dollars ($10,000,000.00) in the aggregate
during the term of this Agreement; and (c) if the purchase price is payable in
whole or in part by a note or other evidence of indebtedness, such indebtedness
is consented to by Lender and is subordinated to the Obligations by an agreement
of subordination in form and substance acceptable to Lender.
The term "Permitted Liens" shall mean (a) liens for taxes not
delinquent or which are being contested in good faith by appropriate proceedings
for which adequate reserves have been set aside; (b) those liens in favor of
Lender created by this Agreement and the Relevant Documents; (c) those liens set
forth on Schedule 6.16 annexed hereto and made a part hereof; (d) carriers',
warehousemen's, mechanics', materialmen's, repairmen's, landlord's or other like
liens arising in the ordinary course of business which are not overdue for a
period of more than 30 days or that are being contested in good faith by
appropriate proceedings; (e) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation; (f)
deposits to secure the performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business; (g) any interest or title of a lessor under any
lease entered into by Borrower in the ordinary course of its business and
covering only the assets so leased; (h) judgment liens which do not cause any
Event of Default; (i) licenses of intellectual property in the ordinary course
of business; (j) liens on fixed assets existing at the time such fixed assets
are acquired in connection with a Permitted Acquisition and not created in
contemplation thereof; (k) deposits in an aggregate amount not to exceed
$250,000 made in the ordinary course of business to secure liability insurance
carriers; and (l) purchase-money liens on Equipment acquired with purchase money
financing not exceeding the limitation on indebtedness set forth in Section
8.5(d).
The term "Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
limited liability company, corporation, institution, entity, party or government
(including any political subdivision thereof).
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The term " Prime Rate" shall mean the rate of interest published from
time to time as the "Prime Rate" in the column entitled "Money Rates" in the
Wall Street Journal, or if not so published, the average of the prime rates
announced from time to time by the three (3) largest money-center banks in New
York, New York. The Prime Rate may not reflect the lowest rate extended by
Lender to any particular class or category of customers of Lender.
The term "Reimbursement Deposit Account" shall have the meaning set
forth in Section 3.2(b).
The term "Relevant Documents" shall mean any and all documents and
instruments executed or delivered by Borrower to Lender pursuant or incident to
this Agreement, or heretofore or hereafter executed or delivered by Borrower
with respect to its Revolving Loan and any other financial accommodations
extended to Borrower by Lender pursuant to this Agreement.
The term "Revolving Loan" or "Revolving Loans" shall mean the loans
made pursuant to Section 2 of this Agreement and the indebtedness of Borrower to
Lender incurred pursuant to this Agreement.
The term "SEC" shall mean the United States Securities and Exchange
Commission.
The term "Secured Revolving Note" shall mean the Secured Revolving
Promissory Note executed contemporaneously herewith and any renewal, extension,
modification or amendment thereto or substitution therefor.
The term "Subordinated Debt" shall mean all indebtedness of Borrower
subordinated to the Obligations pursuant to one or more subordination agreements
in form and substance acceptable to Lender.
The term "Subsidiary" shall mean any Person at least a majority of
whose issued and outstanding equity now or at any time or times hereafter is
owned by the Borrower and/or one or more Subsidiaries thereof.
The term "Termination Date" shall mean April 1, 2003.
2. REVOLVING LOAN:
2.1 (a) Amount. During the term of this Agreement, provided no Default
or Event of Default has occurred and is continuing Lender will provide, from
time to time, at the request of Borrower, Revolving Loans to Borrower in an
aggregate amount up to but not in excess of the Advance Limit, which Revolving
Loans may be borrowed, repaid and reborrowed pursuant to the terms of this
Agreement and which Revolving Loans shall be payable, in full together with all
accrued and unpaid interest, fees and costs, if any, on the Termination Date. If
the outstanding aggregate amount of the Revolving Loans plus the Letter of
Credit Liabilities
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shall exceed the Advance Limit at any time, such excess shall be deemed secured
by the Collateral, shall be payable immediately upon demand and shall be subject
to the terms of this Agreement.
(b) Advance Request Procedure. Each Advance under the Revolving
Loan may be requested telephonically but shall be confirmed in writing via
facsimile, not later than 12:00 Noon Eastern Time on any Banking Day, by an
Authorized Person.
(c) Advance Limit. The Advance Limit shall not in the aggregate at
any time outstanding exceed the lesser of:
(i) Five Million ($5,000,000) Dollars; or
(ii) The result of the following calculation:
(x) up to 65 percent (65%) of the face amount of Borrower's
Eligible Accounts Receivable; minus
(y) the Letter of Credit Liabilities.
(e) Lender shall have the right, from time to time, to increase the
percentage of advance and/or establish such reserves as it shall deem reasonably
necessary from time to time, and the sums advanced pursuant thereto shall
nevertheless be secured by the Collateral and subject to the terms of this
Agreement.
(f) It is understood that the total of the outstanding principal
balance of Revolving Loans plus the Letter of Credit Liabilities shall not
exceed Five Million ($5,000,000) Dollars.
2.2 Collateral and Proceeds of Collateral.
(a) At all times, Borrower shall immediately deliver or cause to be
delivered to a lockbox or to a blocked account with Lender, over each of which
Lender shall have the sole power of withdrawal, all remittances upon its
Accounts Receivable, and all other proceeds of Collateral, in the form received.
(b) Such lockbox shall be swept daily and the amount of each such
sweep shall be deposited to the blocked account for further application to the
Obligations, notwithstanding that the sums credited may constitute uncollected
funds. All such credits shall be conditioned upon final payment to Lender of the
items giving rise to them and, if any items are not so paid, the amount of any
credit given shall be charged either as a debit to any deposit account of
Borrower with Lender or to the Revolving Loan whether or not the item is
returned, notwithstanding the prior application by Lender to the Obligations. In
the event that, on any Banking Day, funds are on deposit in the blocked account
which exceed the total of (i) the outstanding principal balance of the Revolving
Loan on such Banking Day plus (ii) Five Thousand Dollars ($5,000.00), then such
excess shall be re-deposited by Lender to an operating
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account with Lender designated by Borrower and, upon such re-deposit, Borrower
shall have dominion over such funds. The Borrower shall not commingle any
proceeds of the Collateral with any other funds or property of the Borrower, and
shall hold such proceeds separate and apart therefrom and upon an express trust
for Lender.
2.3 Determination of Loan Balance. In determining the Borrower's
outstanding Revolving Loan balance, the following shall govern:
(a) Domestic checks received by the Lender on or before 1:00 p.m.
eastern time of any Banking Day, shall be credited against the balance of the
Obligations on such Banking Day;
(b) Domestic checks received by the Lender after 1:00 p.m. eastern
time of any Banking Day, shall be credited against the balance of the
Obligations on the following Banking Day;
(c) Any other form of proceeds received by the Lender shall be
credited against the balance of the Obligations when the Lender has received
notification of collection (it being understood, that if the Lender receives
notice of collection on or before 1:00 p.m. eastern time of any Banking Day,
such proceeds shall be deemed to have been received by the Lender on such day,
and if Lender receives notice of collection after 1:00 p.m. eastern time of any
Banking Day, such proceeds shall be deemed to have been received by the Lender
as of the following Banking Day);
(d) Such credits shall be conditioned upon final payment to Lender
at its own office in cash or solvent credits of the items giving rise to them
and if any item is not so paid, the amount of any credit given for it shall be
charged either as a debit to any deposit account of Borrower with Lender or to
the Revolving Loan whether or not the item is returned.
2.4 Monthly and Interim Statements. Once each month Lender shall render
a statement of account to Borrower showing the current status of the Revolving
Loan account and the interest thereon. If these statements or any interim
statements indicate that the outstanding balance of the Revolving Loan exceeds
the Advance Limit, such excess shall at all times be governed and secured by
this Agreement and Borrower forthwith shall pay the difference in cash. The
statement of account rendered by Lender shall be considered correct, accepted by
Borrower and conclusively binding upon the Borrower, unless Borrower gives
notice to Lender to the contrary in writing within ten (10) Banking Days after
the sending of said statement by the Lender. If Borrower disputes the
correctness of Lender's statement, Borrower's notice shall specify in detail the
particulars of why it contends Lender's statement of account is incorrect.
2.5 Negative Balances. In the event Borrower's operating account(s)
with Lender contain a negative balance at any time, then Lender shall be deemed
to have made an Advance to Borrower in the amount of such deficiency, pursuant
to the terms hereof, on the Lender's Banking Day immediately preceding the day
on which such deficiency occurs. Nothing contained herein shall be deemed or be
construed to (a) obligate the Lender to honor any items presented to Lender for
payment against any account of Borrower in which a deficiency exists,
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whether or not it has ever done so in the past; or (b) relieve Borrower of its
obligations to pay usual and customary charges of Lender imposed generally with
respect to such deficiencies in addition to the interest accrued as the result
of any Advances made pursuant to this subsection.
3. LETTERS OF CREDIT:
3.1 Issuance of Letters of Credit. From time to time, subject to
satisfaction by Borrower of the terms and conditions hereinafter set forth,
Lender may, at its discretion, upon the request of Borrower, issue one or more
Letters of Credit for the account of Borrower. Each Letter of Credit shall be in
form and substance satisfactory to Lender. Without limiting the generality of
the preceding sentence, issuance of all Letters of Credit shall be on the
following terms and conditions:
(a) Term. No (i) standby Letter of Credit shall have a stated term
of more than one (1) year; (ii) no documentary Letter of Credit shall have a
stated term of more than ninety (90) days; and (c) no Letter of Credit shall
have a stated term extending later than the Termination Date.
(b) Application. Each Letter of Credit shall be issued in
accordance with Lender's then current practices relating to the issuance by
Lender of standby or documentary letters of credit, including, but not limited
to, the payment by Borrower of all applicable fees and other charges as
customarily imposed by Lender generally upon the issuance of Letters of Credit.
Each Letter of Credit shall be issued only after receipt by Lender of its then
current application and agreement for a standby or documentary letter of credit,
properly completed and executed by Borrower and delivered to Lender at least
three (3) Banking Days prior to the requested issuance date.
(c) Requests for Letters of Credit; Conditions Precedent. Letters
of Credit may be requested by the Borrower at any time during which this
Agreement is in effect so long as no Event of Default has occurred and is
continuing. Once requested, Letters of Credit will be issued, at Lender's
discretion, only after all conditions precedent to the issuance thereof set
forth herein and in any application for such Letters of Credit have been
satisfied, and all fees applicable to such Letters of Credit have been paid.
(d) No Violation of Advance Limit. At no time may a Letter of
Credit be issued if such issuance would cause Borrower to be in violation of the
Advance Limit.
(e) Payment Obligations. The payment obligations of Borrower under
this Section 3 shall be absolute, unconditional and irrevocable and shall be
paid strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation, the following circumstances:
(i) the existence of any claim, set-off, defense or other right
which Borrower may have at any time against any beneficiary, or any transferee,
of any Letter of Credit (or any persons or entities for whom any such
beneficiary or any such transferee may be acting),
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or Lender or any other person or entity, whether in connection with this
Agreement, the transactions contemplated herein or any unrelated transaction;
(ii) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
(iii) payment by Lender under any Letter of Credit against
presentation of a draft or certificate which does not comply with the terms of
such Letter of Credit, except payment where a court of competent jurisdiction
determines in a final, non-appealable judgment to have resulted primarily and
directly from the gross negligence or willful misconduct of Lender; and
(iv) any other circumstances or occurrences whatsoever, whether
or not similar or dissimilar to any one or more of the foregoing, except
circumstances or occurrences which a court of competent jurisdiction determines
in a final, non-appealable judgment to have resulted primarily and directly from
the gross negligence or willful misconduct of Lender.
(f) Supplemental Provisions. The provisions of any application and
agreement for any Letter of Credit are supplemental to, and not in derogation
of, any rights and remedies of Lender under this Agreement, at law, in equity,
by arbitration or otherwise.
3.2. Payments Under Letters of Credit
(a) Payments upon Draw. Upon the occurrence of any draw on any
Letter of Credit, Borrower hereby agrees to repay immediately to Lender on the
same day such draw is honored by Lender, in immediately available funds, the
amount of such draw, together with any and all costs or expenses which Lender
may incur in connection with such Letter of Credit, without any requirement of
notice, presentment or demand by Lender, all of which are hereby waived by
Borrower. In order to implement the foregoing, upon the occurrence of a draw
under any Letter of Credit, unless Lender is immediately so reimbursed by
Borrower, Borrower hereby irrevocably authorizes and directs Lender to treat
such draw as a request for a Revolving Loan in the amount of such draw, and
Borrower hereby irrevocably authorizes and directs Lender to make a Revolving
Loan, bearing interest as set forth in this Agreement, in the aggregate amount
of such draw. Borrower further hereby irrevocably authorizes and directs Lender
to retain the proceeds of any such Revolving Loan and credit such proceeds so as
to immediately eliminate the liability of Borrower to Lender pertaining to such
draw.
(b) Payment Upon Bankruptcy, Etc. If any Event of Default occurs,
specifically including those pursuant to Section 11.5, and at such time there
are outstanding unexpired Letters of Credit, Borrower hereby irrevocably
authorizes and directs Lender to make a Revolving Loan in the amount of the
aggregate undrawn face amount(s) of such unexpired Letters of Credit, the
proceeds of which Revolving Loan shall be placed in an interest-bearing deposit
account for the sole benefit of and under the sole dominion and control of
Lender (the "Reimbursement Deposit Amount"), which shall be used to reimburse
Lender for draws upon any such unexpired Letters of Credit. If from time to
time, as draws on outstanding Letters of
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Credit have been honored and as outstanding Letters of Credit expire, funds
remain in the Reimbursement Deposit Account in excess of the then aggregate
undrawn face amount(s) of the remaining Letters of Credit, those funds shall be
returned to Lender and shall be applied by Lender to reduce the outstanding
Obligations.
(c) Payments After Termination of Agreement. If all Obligations
have been paid and this Agreement terminated for any reason, Borrower shall
immediately upon demand by Lender, deposit into, and keep on deposit in, the
Reimbursement Deposit Account, for the sole benefit of and under the sole
dominion and control of Lender, an amount equal to not less than 105% of the
aggregate undrawn face amount(s) of all outstanding Letters of Credit, for the
purpose of providing Lender with a means of repayment of draws under any of the
Letters of Credit. At such time as Lender shall have no further obligations
under and pursuant to any Letter of Credit, Lender, after reimbursing itself for
all draws under any Letter of Credit and any customary fees or other expenses
due and owing in connection therewith, shall promptly remit the balance of the
Reimbursement Deposit Account, if any, to the order of Borrower.
(d) Reserve to Revolving Loan/Advances Not Discretionary. (i)
Anything in this Agreement to the contrary notwithstanding, the Advance Limit
shall be reduced at all times by the aggregate amounts to be drawn upon plus the
aggregate amounts drawn and remaining unpaid under all Letters of Credit; and
(ii) in no event shall any Revolving Loan made by Lender pursuant to and in
compliance with the terms and provisions of this Section 3 be deemed to be
discretionary or voluntary and Borrower covenants and agrees to pay, protect,
indemnify and hold harmless Lender from and against any and all costs and
expenses, including, but not limited to, reasonable attorneys' fees and experts'
costs and expenses, incurred by Lender as a result of the allegation by any
Person or entity that the Revolving Loan in question was discretionary or
voluntary on the part of Lender.
3.3 Uniform Customs and Practices for Documentary Credits. Each Letter
of Credit shall be governed by, construed and enforced in accordance with the
Uniform Customs and Practices for Documentary Credits, 1993 Revision, ICC
Publication No. 500 as amended, updated or superseded from time to time (the
"UCP"). Anything in this Agreement to the contrary notwithstanding, in no event
shall Lender have any obligation to (a) issue a revolving documentary credit;
(b) issue an authenticated teletransmission or pre-advice of any Letter of
Credit; or (c) issue any Letter of Credit if Lender determines, which
determination shall be final and conclusive and binding on Borrower, that the
terms and conditions of the Letter of Credit sought by Borrower are not in
compliance with the internal policies of Lender, including, but not limited to,
if Lender determines that the use of proceeds of the Letter of Credit being
sought by Borrower, if drawn upon, are not in compliance with such internal
policies.
4. INTEREST AND OTHER CHARGES:
4.1 Interest Rate. Except as otherwise provided herein, the Revolving
Loan shall bear interest during each calendar month at a fluctuating interest
rate per annum equal at all times to the Prime Rate in effect from time to time
during the period for which interest is being calculated plus one (1) percentage
point per annum and each change in such rate shall take effect
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contemporaneously with the corresponding change in the Prime Rate, without
notice to Borrower. Upon the occurrence and during the continuance of an Event
of Default under this Agreement or the Relevant Documents, the Revolving Loans
shall, at the option of Lender, bear interest at the Default Rate. Interest
shall be calculated on a daily basis upon the unpaid balance with each day
representing 1/360th of a year.
4.2 Payment of Interest.
(a) Interest shall be calculated as at the end of each calendar
month and is due on the first Banking Day of the following month.
(b) Interest shall be charged by Lender first as a debit to any
deposit or operating account maintained by Borrower at Lender with any remaining
unpaid balance charged to the Revolving Loan.
(c) Any failure or delay by Lender in submitting invoices for
interest payments shall not discharge or relieve Borrower of the obligation to
make such interest payments.
4.3 Maximum Rate. In no event shall the interest rate charged under
this Agreement be higher than the maximum lawful rate. In the event the interest
rate exceeds the maximum lawful rate, any such excess received by Lender shall
be deemed and applied as a payment of the outstanding principal balance of the
Obligations.
4.4 Facility Fee. Upon the execution of this Agreement a fee of Fifty
Thousand Dollars ($50,000.00) shall be immediately due and payable in full, by
Borrower to Lender. Such fee shall be charged by Lender to the Revolving Loan or
to any operating account maintained by Borrower with Lender.
4.5 Field Examination Fee. Borrower shall reimburse Lender to defray
the cost of periodic field examinations performed by Lender's employees or
agents at Borrower's premises or at premises where Collateral is located at the
rate of seven hundred fifty dollars ($750) per day, which, absent the existence
of an Event of Default, shall be limited to not more than four (4) field
examinations in any twelve (12) month period. Such reimbursement shall be
charged by Lender to the Revolving Loan or to any operating account maintained
by Borrower with Lender. This limitation on Borrower's reimbursement obligation
is not intended, nor shall it be deemed, to limit Lender's right to perform, at
Lender's expense, such additional field examinations as Lender may deem
necessary or desirable. Furthermore, upon the occurrence and during the
continuance of any Event of Default, Borrower shall bear the cost of all field
examinations.
4.6 Unused Facility Fee. There shall be due and payable, upon the first
Banking Day of each calendar quarter, an unused facility fee calculated as (a)
the difference between the amount of the Line of Credit then in effect and the
total of the average daily principal balance of the Revolving Loans plus the
average daily Letter of Credit Liabilities during the prior calendar quarter
times (b) one-quarter percent (1/4%) per annum. Such fee shall be deemed fully
earned
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and non-refundable upon receipt and shall be charged by Lender to the Revolving
Loan or to any operating account maintained by Borrower with Lender.
4.7 Letter of Credit Fees. There shall be due and payable upon the
issuance of each Letter of Credit a fee of two (2%) percent per annum of the
face amount of such Letter of Credit together with the customary fees generally
charged to Lender's customers.
4.8 Late Charge. In the event any scheduled payment of interest or
principal upon the Revolving Loan is received more than ten (10) days after the
date due, such payment shall be subject to a late charge calculated as five
percent (5%) of such payment, but not less than twenty-five dollars ($25.00) nor
more than two thousand five hundred dollars ($2,500.00). Such late charge
represents reimbursement to Lender for the cost of processing late payments
generally and, as such, shall not be deemed additional interest.
4.9 Additional Expenses. In the event that any change in applicable
law, regulation, condition, directive or interpretation thereof (including any
request, guideline or policy whether or not having the force of law and
including, without limitation, Regulation D promulgated by the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect) by any authority charged with the administration or interpretation
thereof occurs which (a) subjects Lender to any tax with respect to any amount
paid or to be paid by the Lender as the maker of the Loans (other than any tax
measured by or based upon the overall net income of Lender) or its obligations,
if any, under the Loan Agreement; or (b) changes the basis of taxation of
payments to Lender on any amounts payable hereunder (other than any tax measured
by or based upon the overall net income of Lender); or (c) imposes, modifies or
deems applicable any reserve or deposit requirements against the assets held by,
deposits with or for the account of, or loans or commitments by, Lender in
connection with Loans made pursuant hereto or the obligations, if any, of Lender
hereunder; or (d) imposes, modifies or deems applicable any insurance premium
payable by Lender (if any) in connection with Loans made pursuant hereto or its
obligations relating hereto; or (e) imposes upon Lender any other condition with
respect to such amount paid or payable to or by Lender; and the result of any of
the foregoing is to directly increase the cost to Lender of making any Loans
pursuant hereto or maintaining its obligations, if any, hereunder, or to reduce
the amount of any payment (whether of principal, interest or otherwise) to be
received by Lender or to require Lender to make any payment on or calculated by
reference to the gross amount of any sum received by them, in each case by an
amount which Lender, in its sole judgment, deems material, then and in any such
case Lender shall deliver to the Borrower written notice of the happening of
such event and the amount of such increased cost, reduction or payment. The
Borrower shall pay to Lender within thirty (30) days after delivery of such
notice, such amount or amounts as will compensate it for such increased cost,
reduction or payment. The protection of this section shall be available to
Lender regardless of any possible claim of invalidity of the law, regulation,
condition, directive or interpretation which has been imposed.
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5. SECURITY INTEREST:
5.1 Security Interest. (a) As collateral security for (i) the due and
punctual payment of the Revolving Loan, all interest thereon and any and all
extensions, renewals, substitutions and changes in form thereof; (ii) all other
Obligations of Borrower to Lender; and (iii) all costs and expenses incurred or
paid by Lender to enforce its rights pursuant to this Agreement, the Relevant
Documents or otherwise (including, without limitation, reasonable attorney's
fees), Borrower hereby pledges, transfers, assigns, sets over and grants to
Lender, a security interest in the Collateral, whether now existing or hereafter
created and whether now owned or hereafter acquired, wherever located, and all
accessions and additions thereto, replacements and substitutions therefor and
proceeds and products thereof.
(b) All Collateral heretofore, herein or hereafter given to the
Lender shall secure payment of the Revolving Loan and all of the Borrower's
other Obligations to Lender. Lender shall be under no obligation to proceed
against any or all of the Collateral before proceeding directly against
Borrower, any Guarantor or against any item of Collateral prior to any other
item of Collateral.
5.2 Continuation of Security Interest. The security interest granted in
this Agreement shall continue in full force and effect until the Borrower has
fully paid and discharged all Obligations.
5.3 Further Assurances. Borrower shall take such steps and execute and
deliver such financing statements and other documents all in form and substance
satisfactory to Lender relating to the creation, validity or perfection of the
security interests provided for herein, under the Uniform Commercial Code or
other laws of the State of New Jersey or of any other state or states as Lender
may from time to time request.
6. REPRESENTATIONS AND WARRANTIES:
6.1 Organization and Qualification. Borrower hereby represents and
warrants to Lender, knowing and intending that Lender shall rely thereon in
making the Loans contemplated hereby, that:
(a) Borrower has been and will continue to be a corporation duly
organized and validly existing and in good standing under the laws of the state
of its incorporation, and is and will continue to be qualified and in good
standing in all jurisdictions wherein the character of the property owned or the
nature of the businesses transacted by Borrower makes licensing or qualification
as a foreign entity necessary, except to the extent that a failure to be so
qualified or in good standing as a foreign entity could not reasonably be
expected to have a material adverse effect upon Borrower, or upon Borrower's
ability to repay the Obligations, or upon Lender's ability to realize upon the
Collateral.
(b) A true, accurate and complete copy of Borrower's valid
resolution authorizing the transaction contemplated herein, and Borrower's
certificate of incorporation and
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by-laws all as in effect on the date hereof and certified by the Secretary of
Borrower to heretofore been delivered to Lender.
6.2 Due Authorization No Default. (a) The execution, delivery and
performance of this Agreement and the Relevant Documents has been duly
authorized by all necessary action on the part of Borrower; is not inconsistent
with the certificate of incorporation, by-laws or other governing documents;
does not contravene any law, governmental rule, regulation or order applicable
to Borrower; and does not and will not contravene any provision of, or
constitute a default under, any material indenture, mortgage, contract or other
instrument or any order, writ, injunction or decree to which Borrower is a party
or by which it or its properties or assets are bound.
(b) This Agreement and the Relevant Documents, upon their execution
and delivery, will constitute the legal, valid and binding agreements of
Borrower, enforceable in accordance with their terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally
(whether enforcement is sought at law or in equity).
6.3 No Governmental Consent Necessary. No consent or approval of,
giving of notice to, registration with or taking of any other action in respect
of any governmental authority or agency is required with respect to the
execution, delivery and performance by Borrower of this Agreement and the
Relevant Documents, except the filing of Uniform Commercial Code Financing
Statements on form UCC-1 with the appropriate jurisdictions.
6.4 No Proceedings. Except as disclosed in writing to Lender, there are
no actions, suits, or proceedings pending or, to Borrower's knowledge,
threatened against or affecting Borrower, with more than Fifty Thousand Dollars
($50,000.00) singly or Two Hundred Thousand Dollars ($200,000.00) in the
aggregate at issue, in any court or before any governmental commission, board or
authority which, if adversely determined, will have an adverse effect on the
ability of Borrower to perform its responsibilities under this Agreement or the
Relevant Documents; the Borrower is not in default with respect to any order of
any court, arbitrator or governmental or non-governmental body; and the Borrower
is not subject to or a party to any order of any court or governmental or
non-governmental body arising out of any action, suit or proceeding under any
statute or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters.
6.5 Financial Statements. (a) Subject to any limitation stated therein,
all balance sheets, income statements and other financial data which have been
or shall hereafter be furnished to Lender to induce it to enter into this
Agreement, and to continue to provide financing under this Agreement or
otherwise in connection herewith, do and will fairly represent in all material
respects the financial condition of Borrower as at the respective dates thereof
and the results of its operations for the periods for which the same are
furnished to Lender. All other information, reports and other papers and data
furnished to Lender are, or will be at the time the same are so furnished, true,
accurate and complete in all material respects to the best of Borrower's
knowledge. All such financial statements and other information have been, or
will have been at the time of issuance prepared in accordance with GAAP
consistently applied.
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(b) Except as shown on the most recent financial statements which
have been delivered to Lender and are identified on Schedule 6.5 annexed hereto
and made part hereof, Borrower has no other liabilities as of the date hereof.
6.6 Changes in Financial Condition. (a) Except as set forth on Schedule
6.5, there has been no material adverse change in Borrower's financial condition
since the date of the most recent financial statements identified on Schedule
6.5.
(b) Borrower's assets, at fair valuation, exceed Borrower's
liabilities (including without limitation contingent liabilities); Borrower is
paying its debts as they become due; and Borrower has capital and assets
sufficient to carry on its business.
6.7 Accounts Receivable. The most recent list of Accounts Receivable of
Borrower delivered to Lender is complete as of the date thereof, and contains an
accurate aging thereof. All of said Accounts Receivable are collectible, are
subject to no counterclaims or setoffs of any nature whatsoever in excess of any
reserves which may be established by Borrower for such contingencies from time
to time in accordance with GAAP, and require no further act on the Borrower's
part to make such accounts owing by the Account Debtors. None of the Accounts
Receivable include any conditional sales, consignments or sales on any basis
other than that of absolute sale in the ordinary and usual course of business.
No agreement has been made under which any deductions or discounts may be
claimed as to any such account except customary discounts or rebates in the
ordinary course of business.
6.8 Inventory. Except as reserved against on the books of Borrower,
Borrower's Inventory consists of items of a quality and quantity usable or
saleable in the ordinary course of their businesses and the values carried on
Borrower's balance sheet are set at the lower of cost or market, in accordance
with GAAP consistently applied.
6.9 Taxes and Assessments. Borrower has paid and discharged when due
all taxes, assessments and other governmental charges which may lawfully be
levied or assessed upon its income and profits, or upon all or any portion of
any property belonging to it, whether real, personal or mixed (other than any
the amount or validity of which are being contested in good faith by appropriate
proceedings and for which Borrower has set aside adequate reserves in accordance
with GAAP). Borrower has filed all tax returns, federal, state and local, and
all related information, required to be filed by it.
6.10 ERISA. (a) Borrower is in compliance in all material respects with
the provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the related provisions of the Internal Revenue Code, and
with all regulations and published interpretations issued thereunder by the
United States Treasury Department, the United States Department of Labor and the
Pension Benefit Guaranty Corporation ("PBGC").
(b) Neither a reportable event as defined in Section 4043 or ERISA,
nor a prohibited transaction as defined in Section 406 of ERISA or Section 4975
of the Internal
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Revenue Code, has occurred and is continuing with respect to any employee
benefit plan subject to ERISA established or maintained, or to which
contributions have been made, by Borrower.
(c) No employee benefit plan subject to ERISA established or
maintained, or to which contributions have been or may be made, by Borrower or
by any trade or business (whether or not incorporated) which together with
Borrower would be treated as a single employer under Section 4001 of ERISA (any
such trade or business being referred to hereinafter as an "ERISA Affiliate,"
and any such employee benefit plan being referred to hereinafter as a "Plan") is
maintained by Borrower. No notice of intention to terminate a Plan has been
filed nor has any Plan been terminated; the PBGC has not instituted proceedings
to terminate, or to appoint a trustee to administer, any Plan, nor do
circumstances exist that constitute grounds for any such proceedings; and
neither Borrower nor any ERISA Affiliate has completely or partially withdrawn
from any multiemployer Plan described in Section 4001(a)(3) of ERISA. Borrower
and each ERISA Affiliate has met the minimum funding standards under ERISA with
respect to each of its Plans; no Plan of Borrower or of any ERISA Affiliate has
an accumulated funding deficiency or waived funding deficiency within the
meaning of ERISA; and no material liability to the PBGC under ERISA has been
incurred by Borrower or any ERISA Affiliate.
6.11 O.S.H.A./EPA. Borrower has duly complied with, and its facilities,
businesses assets, property, leaseholds and equipment are in compliance in all
material respects with, the provisions of the Federal Occupational Safety and
Health Act and the Environmental Protection Act, and all rules and regulations
thereunder and all similar state and local laws, rules and regulations; and
there have been no outstanding citations, notices or orders of noncompliance
issued to Borrower or relating to its business, assets, property, leaseholds or
equipment under any such laws, rules or regulations.
6.12 Environmental Matters. (a) Except as disclosed in Schedule 6.12 to
this Agreement, no property owned or used by Borrower and located in the State
of New Jersey is an "industrial establishment" within the meaning of the New
Jersey Industrial Site Recovery Act ("ISRA") or is or has been used for the
generation, manufacture, refining, transportation, treatment, storage, handling
or disposal of any "hazardous substances" or "hazardous wastes" within the
meaning of ISRA. The following are all of the Standard Industrial Classification
Codes applicable to the properties and operations of Borrower: 5961 and the
following are all of the North American Industrial Classification System numbers
applicable to the properties and operations of Borrower: 45411.
(b) Borrower is in compliance in all material respects with
all applicable federal, state and local statutes, rules, regulations, orders and
other provisions of law relating to air emissions, water discharge, noise
emissions, solid and liquid disposal, hazardous waste and substances, and other
environmental, health and safety matters.
6.13 No Other Violation. Borrower is not in violation of any term of
its certificate of incorporation or by-laws and no event or condition has
occurred and is continuing which constitutes or results in (or would constitute
or result in, with the giving of notice) lapse of time or other condition):
- 18 -
(a) A breach of or a default by Borrower under any material
agreement, undertaking or instrument to which Borrower is a party or by which it
may be affected; or
(b) The imposition of any lien, encumbrance or restriction on any
property of Borrower, except as noted in Schedule 6.16 hereof.
6.14 Margin Stock. No part of the proceeds of any Revolving Loan will
be used, directly or indirectly, to purchase or carry any "margin stock" (as
defined in Regulation U issued by the Board of Governors of the Federal Reserve
System), to extend credit to others for the purpose of purchasing or carrying
any such margin stock, or for any purpose that violates any provision of
Regulations G, T, U or X issued by the Board of Governors of the Federal Reserve
System.
6.15 Location of Collateral. As of the date hereof, none of the
Collateral in which a security interest is granted to Lender pursuant to this
Agreement or any Relevant Document, or to be hereafter conveyed, is or will be
located in or on any premises other than those premises set forth on Schedule
6.15 annexed hereto and made part hereof. Said Schedule contains an accurate
record of all of the landlords of property leased by and mortgagees of property
owned by Borrower.
6.16 Other Liens. Borrower has good and marketable title to and own all
of the Collateral free and clear of any and all liens, encumbrances or security
interests whatsoever, except (a) those encumbrances created pursuant to this
Agreement; (b) those encumbrances set forth on Schedule 6.16 annexed hereto and
made part hereof, or (c) Permitted Liens. Except as set forth on Schedule 6.16,
none of the Collateral is subject to any prohibition against encumbering,
pledging, hypothecating or assigning the same or requires notice or consent
prior to Borrower's doing of the same.
6.17 Books and Records. Borrower maintains its books and records
relative to the Collateral at 0000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx
00000.
6.18 Representations and Warranties True, Accurate, and Complete.
(a) None of the representations, warranties or statements made
to Lender pursuant hereto or in connection with this Agreement or the
transactions contemplated hereby contains any untrue statement of a material
fact, or omits or will omit to state a material fact necessary in order to make
the statements contained herein and therein, in light of the circumstances in
which they are made, not misleading.
(b) All warranties and representations made herein or in the
Relevant Documents by Borrower will be true and accurate at the time it requests
Lender to make Advances to it hereunder.
6.19 Names; Location of Office. Schedule 6.19 annexed hereto and made
part hereof sets forth a complete and accurate list of:
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(a) All names by which the Borrower is known or under which the
Borrower is conducting business, including, without limitation, their corporate
name and all trade names; and
(b) All offices and locations at or out of which the Borrower
conducts any of its business or operations, said Schedule 6.19 identifies
Borrower's chief executive offices, if there are more than one.
6.20 Subsidiaries. Schedule 6.20 annexed hereto and made a part hereof
sets forth a complete and accurate list of all the domestic Subsidiaries of
Borrower and all foreign Subsidiaries of Borrower which are not to be conveyed
under the European Sale, their jurisdictions of formation and qualification and
their chief executive office locations.
7. AFFIRMATIVE COVENANTS:
Until payment in full of all Obligations and the termination of this
Agreement, Borrower covenants and agrees that it will:
7.1 Notify Lender. Promptly inform Lender if any one or more of the
representations and warranties made by Borrower in this Agreement, in any
Relevant Document or in any certificate delivered in conjunction with this
transaction at any time shall no longer be entirely true, accurate and complete.
7.2 Pay Taxes and Liabilities; Comply with Agreements. Promptly pay,
when due, all indebtedness, sums and liabilities of any kind now or hereafter
owing by Borrower to any party however created, incurred, evidenced, acquired,
arising or payable, including without limitation the Obligations, income and
excise taxes and taxes with respect to any of the Collateral, or any wages or
salaries paid by Borrower or otherwise, except such taxes or liabilities which
are being disputed in good faith in an appropriate forum for which adequate
reserves have been set aside.
7.3 Observe Covenants, etc. Observe, perform and comply with the
covenants, terms and conditions of this Agreement, the Relevant Documents and
any other agreement or document entered into between Borrower and Lender.
7.4 Maintain Corporate Existence and Qualifications. Maintain and
preserve, and cause any Subsidiary to maintain and preserve, in full force and
effect, their existence and rights, franchises, licenses and qualifications
necessary to continue their businesses, and comply in all material respects with
all applicable statutes, rules and regulations pertaining to the operation,
conduct and maintenance of their existence and business including, without
limitation, all federal, state and local laws relating to Benefit Plans,
environmental, safety, or health matters, and hazardous or liquid waste or
chemicals or other liquids (including use, sale, transport and disposal
thereof), except to the extent that (a) a failure to do so could not reasonably
be expected to have a material adverse effect upon the Borrower, upon the
ability of the Borrower to repay the Obligations, or upon the ability of Lender
to realize upon the Collateral; (b) a Subsidiary is
- 20 -
merged into Borrower with Borrower as the survivor, or (c) a Subsidiary is
liquidated in accordance with all applicable laws and regulations and the
proceeds of such liquidation are retained by Borrower.
7.5 Information and Documents to Be Furnished to Lender. Borrower shall
furnish to Lender:
(a) Annual Financial Statements. As soon as delivered to any other
creditor, but in no event later than ninety (90) days after the end of each
fiscal year, Borrower's balance sheet as at the end of such fiscal year,
Borrower's statement of cash flow for such fiscal year and Borrower's income and
surplus statement for such fiscal year, all in reasonable detail, all prepared
on a consolidated basis, in accordance with GAAP consistently applied, and all
audited without qualification by independent certified public accountants
selected by Borrower; and, in addition to such annual financial statements,
Borrower shall deliver to Lender a true and complete copy of Borrower's form
10-K as submitted to the SEC within five (5) days of the filing of same and
together with the annual financial statement a management-prepared annual
financial statement prepared on a consolidating basis in accordance with GAAP
consistently applied, each together with any supplementary information as Lender
shall reasonably require.
(b) Quarterly Financial Statements. As soon as delivered to any
other creditor but in no event later than forty-five (45) days after the end of
each fiscal quarter, except the fourth such quarter in any fiscal year, or five
(5) days of filing with the SEC, whichever is later, a true and complete copy of
Borrower's form 10-Q as submitted to the SEC, together with a certification by
the President, Chief Financial Officer or Vice President of Finance of Borrower,
which certification shall include evidence of the method of calculating
compliance with financial covenants and shall affirmatively state that (i) such
statements are true, accurate and correct, (ii) such statements were internally
prepared in accordance with GAAP applied on a consistent basis; and (iii) as of
the date of such statements no Event of Default or event which, but for the
lapse of time or giving of notice or both, would constitute an Event of Default
existed, and in addition to such statements, any supplementary information to
the financial reports as Lender shall reasonably require.
(c) Management Letter. Promptly a copy of any management letter
received by Borrower from its accountants.
(d) Covenant Compliance Certificate. Contemporaneously with the
delivery of each financial statement required by Sections 7.5(a) and (b) above,
a certification of covenant compliance in form and substance acceptable to
Lender and containing evidence of the method of calculating covenant compliance.
(e) Borrowing Base Certificate. On or before the fifteenth (15th)
day of each month, or more frequently if Lender shall require at any time, a
complete, dated and signed Borrowing Base Certificate as of the end of the
previous month in form and substance acceptable to Lender.
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(f) Sale and Remittance Reports. Daily, a summary report of the
total dollar amount of all invoices/bills issued and of collections received
directly by Borrower as of the close of the previous business day and, not less
than weekly, a customer analysis sales report as customarily prepared by
Borrower and a report of collections received directly by Borrower as of the end
of the prior week.
(g) Inventory Reports. If applicable, on or before the fifteenth
(15th) day of each month, or more frequently if Lender shall require at any
time, a report in form and substance satisfactory to Lender setting forth the
type and value of Inventory (which value shall be determined on the basis of the
lower of cost of market values then prevailing) and the location of said
Inventory.
(h) Accounts Receivable/Payable Aging Reports. On or before the
fifteenth (15th) day of each month, a summary aging report setting forth the
amount due and owing on Accounts Receivable and accounts payable on Borrower's
books as of the close of the preceding month, together with a reconciliation
report satisfactory to Lender showing all sales, collections, payments and
adjustments to Accounts Receivable and payments on accounts payable on
Borrower's books, and, if reasonably required by Lender from time to time, such
a report with respect to Accounts Receivable, in detail, by Account Debtor.
(i) Projections. Annually, not later than thirty (30) days prior to
the end of each fiscal year, an annual budget, in form and substance
satisfactory to Lender; prepared on a month-to-month basis.
(j) Customer Lists. Within thirty (30) days of the execution hereof
and annually on the same date of each year thereafter, a detailed customer list
setting forth each of Borrower's customers to whom sales were made during the
immediately preceding twelve (12) month period, including the address, telephone
number and contact person for each.
(k) Proof of Insurance. Annually, proof of insurance, including,
without limitation, credit insurance and hazard insurance, in form and substance
satisfactory to Lender, including, but without limitation, a certificate of
insurance.
(l) Income Tax Return. As to Borrower and each Guarantor, within
ten (10) days of filing with the Internal Revenue Service, a true and complete
copy of its signed Federal income tax return.
(m) Change in Status. Immediately, notice of any change in the
status of an Account Receivable or Inventory from that which is Eligible to that
which is not.
(n) Rejection, Delay, Claims. Immediately, notice of delay in
performance, or claims made in regard to Accounts Receivable.
(o) ERISA Documents. All ERISA reports, notices, returns and all
other documents filed as required by or in compliance with ERISA, whether to the
Internal Revenue
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Service, the Department of Labor, the Pension Benefit Guaranty Corporation or
any other appropriate agency, and all documents and information distributed to
participants in any Plan.
(p) Notice of Environmental, Health or Safety Complaints. Within
five (5) Banking Days of receipt, notice or copies if written of all claims,
complaints, orders, citations or notices, whether formal or informal, written or
oral, from any governmental body or private person or entity, relating to air
emissions, water discharge, noise emission, solid or liquid waste disposal,
hazardous waste or materials, or any other environmental, health or safety
matter, including the name of the party who filed the claim and the potential
amount and the nature of the claim.
(q) Press Releases. Within ten (10) days of issuance, copies of all
press releases.
(r) Other Information. Immediately upon demand:
(i) Certificates of insurance for all policies of insurance to
be maintained by Borrower pursuant hereto;
(ii) An estoppel certificate executed by the President of
Borrower indicating that there then exists no Event of Default and no event
which, with the giving of notice or lapse of time, or both, would constitute an
Event of Default under any agreement to which Borrower is a party;
(iii) All original and other documents evidencing right to
payment, including but not limited to invoices, original orders, shipping and
delivery receipts;
(iv) All information received by Borrower indicating an adverse
change in the financial status or condition of any Account Debtor;
(v) Assignments, in form acceptable to Lender, of Accounts
Receivable, and of the monies due or to become due on specific contracts
relating to the same; and
(vi) From time to time, such other information as Lender may
reasonably request.
7.6 Access to Records and Property. At any time and from time to time,
upon request by Lender during business hours, give any representatives of Lender
access to, and permit any of them to examine, copy or make extracts from, any
and all books, records and documents in the possession of Borrower or any
independent contractor relating to Borrower's affairs and the Collateral, and to
inspect any of their properties and the Collateral wherever located.
7.7 Comply With Laws. Comply in all material respects with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, compliance with
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which is necessary to maintain its existence or the conduct of its businesses or
noncompliance with which would materially and adversely affect its ability to
perform its responsibilities under this Agreement or Lender's ability to realize
upon the Collateral.
7.8 Insurance Required. (a) Cause to be maintained, in full force and
effect on all property given as collateral security for all Obligations,
insurance in such amounts and against such risks as is reasonably satisfactory
to Lender and as generally carried by similar businesses located in the same
general geographic area. Said insurance policy or policies shall:
(i) Be in a form and with insurers which are reasonably
satisfactory to Lender;
(ii) Designate Lender and its assignees, as additional insureds
and lender loss payees as their interests may from time to time appear;
(iii) Contain a "breach of warranty clause" whereby the insurer
agrees that a breach of the insuring conditions or any negligence by Borrower or
any other Person shall not invalidate the insurance as to Lender and its
assigns; and
(iv) Provide that they may not be canceled or materially altered
without thirty (30) days' prior notice to the Lender and its assigns.
(b) Additional Insurance. Obtain such additional insurance as
Lender may reasonably require.
(c) Notice of Loss. In the event of loss or damage, forthwith
notify Lender and file proofs of loss with the appropriate insurer. Borrower
hereby authorizes Lender to endorse any checks or drafts constituting insurance
proceeds.
(d) Policies and Proof of Payment. Upon demand, deliver to Lender
the original of each policy evidencing insurance required to be maintained under
this Agreement, together with evidence of payment of all premiums therefor.
(e) Proceeds. Subject to the provisions of section 7.10, forthwith
upon receipt of insurance proceeds endorse and deliver the same to Lender.
(f) No Duty for Lender. In no event shall Lender be required either
to (i) ascertain the existence of or examine any insurance policy or (ii) advise
Borrower in the event such insurance coverage shall not comply with the
requirements of this Agreement.
7.9 Condition of Property; No Liens. Maintain all property conveyed to
Lender as collateral security for any Obligations in good condition and repair
at all times, preserve it against any loss, damage, or destruction of any nature
whatsoever relating to said property or its use, and keep said property free and
clear of any liens and encumbrances whatsoever, except those liens and
encumbrances created pursuant hereto, disclosed herein or Permitted Liens.
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7.10 Payment of Proceeds. Forthwith upon receipt of all proceeds of
Collateral, except insurance proceeds not exceeding the sum of One Hundred
Thousand Dollars which may be retained by Borrower for the repair or replacement
of the Collateral which was the subject of such claim so long as no Event of
Default has occurred and is continuing, pay such proceeds over to Lender in the
form received, and such proceeds shall thereupon become Lender's sole property
for application to the Obligations.
7.11 Further Assurances. At any time or from time to time upon request
of Lender, execute and deliver such further documents and do such other acts and
things as Lender may reasonably request in order to effectuate more fully the
purposes of this Agreement and the Relevant Documents.
7.12 Pay Legal Fees and Expenses. Pay to Lender, within five (5)
Banking Days after demand, together with interest at the Default Rate from the
date when billed or advanced by Lender until repaid by Borrower, all costs,
expenses or other sums billed or advanced by Lender (including reasonable legal
fees and disbursements) to preserve, collect, protect its interest in or realize
on the Collateral, and to enforce Lender's rights as against Borrower, any
Account Debtor or Guarantor, or in the prosecution or defense of any action or
proceeding related to the subject matter of this Agreement or the Relevant
Documents, including without limitation reasonable legal fees, expenses and
disbursements unless a court determines otherwise. All such expenses, costs and
other sums shall be deemed Obligations secured by the Collateral.
7.13 Records. At all times keep accurate and complete records of the
Collateral and the status of each Account Receivable.
7.14 Banking Relationship. Borrower shall maintain its primary
operating account(s) at a branch of Lender, provided however, Borrower shall not
be required to deposit the proceeds of the European Sale with Lender.
7.15 Delivery of Documents. If any proceeds of Accounts Receivable
shall include or any of the Accounts Receivable shall be evidenced by notes,
trade acceptances or instruments or documents, or if any Inventory is covered by
documents of title or chattel paper, whether or not negotiable, Borrower shall
immediately deliver them to Lender appropriately endorsed. Borrower waives
protest regardless of the form of the endorsement. If Borrower fails to endorse
any such instrument or document, Lender is authorized to endorse it on
Borrower's behalf.
7.16 United States Contracts. If any Accounts Receivable arise out of
contracts with the United States or any of its departments, agencies or
instrumentalities and such Accounts Receivable, in the aggregate, exceed ten
percent (10%) of Borrower's total Accounts Receivable, Borrower will notify
Lender, and if required by Lender, Borrower shall execute any necessary
instruments in order that all money due or to become due under such contract
shall be assigned to Lender and proper notice of the assignment given under the
Federal Assignment of Claims Act.
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8. NEGATIVE COVENANTS:
Until payment in full of all Obligations, Borrower covenants and agrees
that it will not:
8.1 No Consolidation, Merger, Acquisition. Consolidate with, merge
with, or acquire the stock or assets of any Person, firm, joint venture,
partnership, corporation, or other entity, whether by merger, consolidation,
purchase of stock or otherwise, except that (a) any Subsidiary may merge into
Borrower so long as Borrower is the surviving corporation and (b) Borrower may
make Permitted Acquisitions.
8.2 Disposition of Assets or Collateral. Sell, lease, transfer, convey
or otherwise dispose of any or all of its assets or Collateral, other than (a)
the retirement of worn or obsolete fixed assets in the ordinary course of
business, (b) the sale of Inventory in the ordinary course of business, and (c)
the sale of the European Subsidiaries.
8.3 Other Liens. Incur, create or permit to exist any mortgage,
assignment, pledge, hypothecation, security interest, lien or other encumbrance
on any of their property or assets, whether now owned or hereafter acquired,
except Permitted Liens.
8.4 Negative Pledges. Incur, create or permit to exist any negative
pledge in any other mortgage, security agreement, pledge, hypothecation or other
agreement entered into between Borrower with any other Person.
8.5 Other Liabilities. Incur, create, assume or permit to exist any
indebtedness or liability on account of either borrowed money or the deferred
purchase price of property, except (a) Obligations to Lender; or (b)
indebtedness subordinated to payment of the Obligations on terms approved by
Lender in writing; (c) those liabilities existing on the date hereof; (d) other
liabilities on account of borrowed money or the deferred purchase price of
property not to exceed the sum of $250,000.00 outstanding at any time; or (e)
unsecured indebtedness incurred in connection with a Permitted Acquisition, with
the prior written consent of Lender, which consent shall be conditioned, among
other things, upon Lender's receipt of a subordination agreement in form and
substance acceptable to Lender from the seller(s) to whom such unsecured
indebtedness is owed.
8.6 Loans. Make loans to any Person except (a) extensions of trade
credit in the ordinary course of business; (b) loans to employees of Borrower
not to exceed an aggregate of $500,000.00 outstanding at any time; (c) loans to
Subsidiaries existing as of the date of this Agreement not to exceed an
aggregate of $500,000.00 outstanding at any time; an existing loan to the French
Subsidiary, Programmer's Paradise S.A.R.L. (which Subsidiary is not operating
and is to be dissolved) which shall not at any time exceed the outstanding
principal balance as of the date hereof of approximately One Million Six Hundred
Thousand Dollars ($1,600,000.00).
8.7 Guarantees. Except for the benefit of Lender, assume, guarantee,
endorse, contingently agree to purchase or otherwise become liable upon the
obligation of any Person, firm or entity except (a) by the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; or (b) contingent obligations under letters
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of credit entered into in the ordinary course of business for the purchase of
merchandise for resale, or (c) indemnities delivered in conjunction with the
European Sale.
8.8 Remove Property. Remove, or cause or permit to be removed any of
its Collateral or assets from those premises set forth on Schedule 6.15 annexed
hereto and made part hereof, except for sales of Inventory in the ordinary
course of Borrower's businesses or as otherwise expressly permitted by this
Agreement.
8.9 Transfers of Notes or Accounts Receivable. Sell, assign, transfer,
discount or otherwise dispose of any Accounts Receivable or any promissory note
payable to it with or without recourse, except for collection without recourse
in the ordinary course of business.
8.10 Sale of Inventory. Sell any Inventory on a xxxx-and-hold,
guaranteed sale, sale-and-return, sale on approval or consignment basis, or any
other basis subject to a repurchase obligation or right to return.
8.11 Dividends. Declare or pay any cash dividend or make any
distribution on, or redeem, retire or otherwise acquire directly or indirectly,
any share of its stock, except, so long as no Event of Default has occurred and
is continuing, (a) the repurchase of stock in compliance with the limitation set
forth in Section 8.18 and (b) dividends or distributions made solely out of the
proceeds of the European Sale.
8.12 Modification of Documents. Change, alter or modify, or permit any
change, alteration or modification of its certificate of incorporation, by-laws
or other governing documents, without the prior written consent of Lender which
shall not be unreasonably withheld.
8.13 Change Business. Materially change or alter the nature of its
business, provided that the European Sale and Permitted Acquisitions shall not
be deemed material changes or alterations.
8.14 Settlements. Compromise, settle or adjust any claims in a material
amount relating to any of the Collateral, except the compromise, settlement, or
adjustment of Accounts Receivable which are not included as Eligible Receivables
on the Borrowing Base Certificate.
8.15 Change Location or Name. Change the place where its books and
records are maintained or change its name or transact business under any other
name without thirty (30) days' prior written notice to and the prior written
consent of Lender, which shall not be unreasonably withheld.
8.16 Transactions With Affiliates. Enter into any transaction with an
Affiliate or Subsidiary on terms less advantageous to Borrower than those that
could be obtained from any other Person in an arms-length transaction.
8.17 Current Ratio. Cause, suffer or permit the ratio of the total of
Borrower's current assets to Borrower's current liabilities as at the end of any
fiscal quarter to be or become less
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than 1.5 to 1.0 calculated on a consolidated basis, in accordance with GAAP
applied on a consistent basis.
8.18 Tangible Net Worth. Cause, suffer or permit Tangible Net Worth (as
hereinafter defined) as at the end of any fiscal quarter, to be less than
Eighteen Million Dollars ($18,000,000) at any time. For the purposes of this
Agreement, the term "Tangible Net Worth" shall mean, as of the time of any
determination thereof, the difference between (i) the sum of (A) the par value
(or the value stated on the books of Borrower) of the capital stock of all
classes of Borrower, plus (or minus in the case of a deficit), (B) the amount of
the surplus, whether capital or earned of Borrower, plus (C) the amount of
Subordinated Debt less (ii) the sum of treasury stock, unamortized debt discount
and expense, goodwill, trademarks, trade names, patents, deferred charges, and
other similar intangible assets and any write-up after the date hereof of the
value of any assets, all determined, on a consolidated basis, in accordance with
generally accepted accounting principles, applied on a consistent basis.
8.19 Senior Debt to Tangible Net Worth. Cause, suffer or permit the
ratio of Senior Debt (as hereinafter defined) to Tangible Net Worth on a
consolidated basis, as at the end of any fiscal quarter, to be or become more
than 2.0 to 1.0. For the purposes of this Agreement, the term "Senior Debt"
shall mean all indebtedness of Borrower owed to any Person which is not
Subordinated Debt.
8.20 Capital Expenditures. Enter into any agreements to purchase or pay
for or become obligated to pay for capital expenditures, long term leases,
capital leases and/or sale lease-backs, which exceed an amount aggregating, on a
consolidated basis, in excess of Two Million ($2,000,000) Dollars during the
fiscal year ending December 31, 2001 or during any fiscal year thereafter.
9. MISCELLANEOUS RIGHTS AND DUTIES OF LENDER:
9.1 Charges Against Credit Balances. Lender, without demand and acting
in its sole and absolute discretion, in each instance, consistent with the terms
of this Agreement, may charge and withdraw from any credit balance which
Borrower may then have with Lender or any of its branches, or which Borrower may
have with any affiliate of Lender, any amount which shall become due from
Borrower to the Lender under this Agreement.
9.2 Remittances. Borrower covenants and agrees (a) to receive in trust
for Lender, all payments for the sale of goods or the performance of services
and in each case, whether by cash, checks, drafts, notes, acceptances or other
forms of payment; and (b) deliver such payments to Lender in the identical form
in which received.
9.3 Collections; Modification of Terms. At any time after the
occurrence and during the continuance of an Event of Default, Lender may, in its
sole and absolute discretion, and at any time, with respect to any of the
Collateral, demand, xxx for, collect or receive any money or property, at any
time payable or receivable on account of or in exchange for, or make any
compromises it deems desirable including without limitation extending the time
of payment,
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arranging for payment in installments, or otherwise modifying the terms or
rights with respect to any of the Collateral, all of which may be effected
without notice to or consent by Borrower and without otherwise discharging or
affecting the Obligations, the Collateral or the security interests granted
hereunder.
9.4 Notification of Account Debtors. At any time after the occurrence
and during the continuance of an Event of Default, Lender may notify the Account
Debtors on any of the Accounts Receivable to make payment directly to Lender,
and Lender may endorse all items of payment received by it which are payable to
Borrower. Borrower, at the request of Lender, shall notify the Account Debtors
of Lender's security interest in its Accounts Receivable. Until such time as
Lender elects to exercise its right of notification, Borrower is authorized to
collect and enforce the Accounts Receivable under the terms and conditions set
forth in Sections 2.2(a) and 9.2.
9.5 Uniform Commercial Code. At all times prior and subsequent to an
Event of Default, Lender shall be entitled to all the rights and remedies of a
secured party under the Uniform Commercial Code as enacted in New Jersey, as the
same may be amended from time to time, (N.J.S.A. 12A:9-101 et seq.), with
respect to all Collateral.
9.6 Preservation of Collateral. At all times prior and subsequent to an
Event of Default, Lender may take any and all action which in its sole and
absolute discretion is necessary and proper to preserve its interest in the
Collateral, including without limitation the payment of debts of Borrower which
might in Lender's sole and absolute discretion, impair the Collateral or
Lender's security interest therein, purchasing insurance on the Collateral,
repairing the Collateral, or paying taxes or assessments thereon, and the sums
so expended by Lender shall be secured by the Collateral, shall be added to the
amount of the Obligation due Lender and shall be payable on demand with interest
at the Default Rate from the date expended by Lender until repaid by Borrower.
9.7 Mails. From and after the occurrence and during the continuance of
an Event of Default, Lender is authorized to (and Borrower shall, upon request
of Lender) notify the postal authorities to deliver all mail, correspondence or
parcels addressed to Borrower to Lender at such address as Lender may direct,
provided, however, that Lender shall promptly forward all mail to Borrower which
is unrelated to the Collateral.
9.8 Lender's Right to Cure. In the event Borrower shall fail to perform
any of its responsibilities hereunder or under any of the Relevant Documents,
then Lender, in addition to all of its rights and remedies hereunder, may
perform the same, but shall not be obligated to do so, at the cost and expense
of Borrower. In any such event, Borrower shall promptly reimburse Lender
together with interest at the Default Rate from the date such sums are expended
until repaid by Borrower.
9.9 Test Verifications. Lender shall have the right to make test
verifications of any and all Accounts Receivable in any manner, whether oral or
written, and through any medium, including telephonically, which Lender
considers advisable, and Borrower shall render any necessary assistance to
Lender.
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9.10 Power of Attorney. Lender is hereby irrevocably appointed by
Borrower as its lawful attorney and agent in fact to execute financing
statements and other documents and agreements as Lender may deem necessary for
the purpose of perfecting any security interests, mortgages or liens under any
applicable law. Further, Lender is hereby authorized to file on behalf of
Borrower, in its name, and at its expense, such financing statements, documents
or agreements in any appropriate governmental office. Borrower hereby grants a
power of attorney to Lender to endorse Borrower's name on checks, notes,
acceptances, drafts and any other instruments requiring Borrower's endorsement,
to change the address where Borrower's mail should be sent and to open all mail
and to do such other acts and things necessary to effectuate the purposes of
this Agreement. All acts by the Lender or its designee are hereby ratified and
approved, and neither the Lender, nor its designee shall be liable for any acts
of omission or commission, or for any error of judgment or mistake, except for
gross negligence or willful misconduct. Borrower hereby grants a power of
attorney to Lender to file proofs of loss respecting the Collateral with the
appropriate insurer and to endorse any checks or drafts constituting insurance
proceeds. The powers of attorney granted to Lender in this Agreement are coupled
with an interest and are irrevocable so long as this Agreement is in force or
any Obligation shall remain unpaid. Although fully vested hereby as Borrower's
attorney-in-fact, Lender shall refrain from exercising those powers which are
not incident to the maintenance of the commercial lending relationship with
Borrower until an Event of Default has occurred and is continuing.
9.11 Communication with Accountants. Borrower authorizes Lender to
communicate directly with its independent certified public accountants and
authorizes these accountants to discuss with, and if requested, disclose to
Lender any and all financial statements, including any management letter with
respect to the business, financial condition and other affairs of the Borrower.
9.12 Confidentiality. Lender shall hold all non-public information
obtained by Lender pursuant to the requirements of this Agreement in accordance
with Lender's customary procedures for handling confidential information of this
nature; provided, however, Lender may disclose such confidential information to
its examiners, affiliates, outside auditors, counsel and other professional
advisors, to any present, future or prospective participant or successor in
interest who agrees to be bound by this clause and as required or requested by
any governmental body or representative thereof or pursuant to legal process;
provided, further that (i) unless specifically prohibited by applicable law or
court order, Lender shall use its best efforts prior to disclosure thereof, to
notify the Borrower of the applicable request for disclosure of such non-public
information (A) by a governmental body or representative thereof (other than any
such request in connection with an examination of the financial condition of
Lender by such governmental body) or (B) pursuant to legal process and (ii) in
no event shall Lender be obligated to return any materials furnished by Borrower
other than those documents and instruments which have been delivered into the
possession of Lender for the purpose of perfecting Lender's security interest in
and to the Collateral upon payment in full of the Obligations and termination of
this Agreement.
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10. CONDITIONS TO MAKING EXTENSIONS OF CREDIT:
10.1 Initial Extension of Credit. The obligation of Lender to make the
first Advance hereunder is subject to the satisfaction of each of the following
conditions precedent:
(a) Loan Documents. Receipt by Lender of a fully executed copy of
this Agreement with complete Schedules, the Secured Revolving Note and all
Related Documents.
(b) Financing Statements. Receipt of Lender of all required Uniform
Commercial Code Financing Statements, fully executed and in a form suitable for
filing in all appropriate jurisdiction(s).
(c) Landlord's/Warehousemen's Waivers. Receipt by Lender of
landlord's or warehouseman's waivers, as applicable, for each real property
location occupied by Borrower or at which Collateral is located, executed by the
owner and/or lessor and/or operator, as applicable, of such location.
(d) Deposit Account; Lockbox Agreements. Receipt by Lender of (i)
evidence satisfactory to it that Borrower has opened a deposit account with
Lender, and (ii) fully executed lockbox and blocked account agreements.
(e) Insurance. Receipt by Lender of copies of Borrower's insurance
policies containing a long-form lender loss payable endorsement satisfactory to
Lender and which in all other respects comply with the requirements hereof.
(f) Searches. Receipt by Lender of lien, judgment and standing
searches with respect to Borrower and all Guarantors satisfactory to Lender.
(g) Completion of Due Diligence. Receipt by Lender of all
information requested from Borrower in connection with Lender's due diligence
review of Borrower and all other parties, and completion of such review by
Lender, with results satisfactory to Lender.
(h) Officers' Certificates. Receipt by Lender of an officers'
certificate for the Borrower and each Guarantor showing the names and titles of
the officers and directors and with respect to the Guarantors all shareholders
and appending as exhibits all governing documents and enabling resolutions for
this transaction.
(i) Opinion of Counsel. Receipt by Lender of an opinion of the
counsel to Borrower addressed to Lender and in all respects satisfactory to
Lender and its counsel.
(j) Borrowing Base Certificate. Receipt by Lender of a Borrowing
Base Certificate, dated as of the date hereof and executed by the President,
Chief Financial Officer or Vice President-Finance of Borrower, evidencing
sufficient availability to support the initial Advance requested hereunder.
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(k) European Sale Agreements. Receipt by Lender of a true and
complete copy of the agreements relating to the European Sale and Lender's
satisfactory review of same.
(l) Payoff. Payoff letter(s) from Borrower's existing secured
lender(s) in form and substance acceptable to Lender, together with satisfactory
confirmation of the termination/discharge of all liens in favor of such Lender.
(m) Fees. Receipt by Lender of all fees and expenses which are
payable to Lender, its counsel, or to third-party providers of services related
to the closing of this transaction.
(n) Miscellaneous. Receipt by Lender of such other documents,
instruments, records, assurances and information as Lender or its counsel may
reasonably require, all in form and substance satisfactory to Lender and its
counsel.
10.2 Conditions to All Advances.
(a) Lender's obligation to advance any Revolving Loan or to issue
any Letter of Credit is subject to the condition that, as of the date of such
advance or issuance, no Event of Default or event which, for the lapse of time
or giving of notice or both would constitute an Event of Default, shall have
occurred and be continuing.
(b) Borrower's acceptance of each Revolving Loan under this
Agreement shall constitute reaffirmation of all representations and warranties
set forth herein.
11. DEFAULT:
The occurrence of any of the following shall constitute an Event of
Default:
11.1 Failure to Pay. Borrower fails to pay, when due any payment of
principal, interest or other charges due and owing to Lender pursuant to any
Obligations of Borrower to Lender including, without limitation, those
Obligations arising pursuant to this Agreement or any Relevant Document, or
under any other agreement for the payment of monies then due and payable to
Lender;
11.2 Failure to Perform. Borrower's failure to perform or observe any
covenant, term or condition of this Agreement set forth in Section 6 or in
subsections 7.5, 7.6 or 7.10 or Borrower's failure to perform or observe any
other covenant, term or condition of this Agreement or under any Relevant
Documents to be performed or observed by Borrower, which continues uncured and
not waived for a period of ten (10) Banking Days;
11.3 Cross Default; Default on Other Debt. A default on any of the
Obligations (with the exception of defaults covered by Subsection 11.1 and 11.2
above) or any default on any other obligation or indebtedness of Borrower or any
Guarantor to any Person beyond any applicable grace period, so that the holder
of such indebtedness declares such indebtedness due prior to its
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date of maturity because of Borrower's or such Guarantor's default thereunder,
provided however, that Borrower's or such Guarantor's failure to make such
payment shall not be deemed a default hereunder if same is being contested in
good faith;
11.4 False Representation or Warranty. Borrower shall have made any
statement, representation or warranty in this Agreement or in any Relevant
Document or any certificate executed by Borrower incident to this Agreement,
which is at any time found to have been false in any material respect at the
time such representation or warranty was made;
11.5 Petition by or Against Borrower. Borrower ceases to do business as
going concerns, or there is filed by or against Borrower, any petition with
respect to its own financial condition under any bankruptcy law or any amendment
thereto (including without limitation a petition for reorganization, arrangement
or extension) or under any other insolvency laws providing for the relief of
debtors and, in the case of involuntary proceedings only, such proceeding is not
stayed or dismissed within forty-five (45) days of its filing;
11.6 Appointment of Receiver. A receiver, custodian, trustee,
conservator or liquidator is appointed for Borrower, or all or a substantial
part of its assets; or Borrower shall be adjudicated bankrupt, insolvent or in
need of any relief provided to debtors by any court;
11.7 Judgments; Levies. If any final judgment or judgments (except
those covered by insurance), or any levy, sequestration, or attachment, which in
the aggregate exceed $25,000.00, against Borrower or its property, remains
unpaid, undischarged, unsatisfied, unbonded or undismissed for a period of
thirty (30) days after Borrower has received notification of the entry thereof
unless same is stayed pending an appeal brought in good faith in an appropriate
forum;
11.8 Change in Condition. There occurs any material and adverse change
in the condition or affairs, financial or otherwise, of Borrower which, in the
opinion of Lender, impairs Lender's security or increases its risk;
11.9 Liquidation or Dissolution. The liquidation and/or dissolution of
Borrower;
11.10 Environmental Claim. At any time the Lender reasonably determines
that an environmental claim will have a potentially material adverse effect on
the financial condition of Borrower; or
11.11 Failure to Notify. If at any time the Borrower fails to provide
Lender immediately with notice or copies, if written, of all complaints, orders,
citations or notices with respect to environmental, health or safety complaints
as required by Section 7.5.
11.12 Rejection of Liability. If at any time Borrower or any Guarantor
denies or seeks to render invalid the validity or enforceability of this
Agreement or any Relevant Documents or if at any time any Guarantor terminates
its guaranty.
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12. REMEDIES:
12.1 Acceleration; Proceed Against Collateral. Upon the occurrence of
an Event of Default:
(a) The total amount ("Default Amount") of (i) the aggregate amount
of all Obligations for principal and interest, including late charges thereon,
and all other sums which are then due and unpaid; and (ii) an amount equal to
the aggregate amount of all principal remaining to be repaid on all Obligations;
and (iii) interest on the foregoing sums, at the Default Rate provided from said
occurrence until paid in full shall, automatically upon the occurrence of any
event specified in Section 11.5 and otherwise at the option of Lender, become
immediately due and payable without notice or demand; and
(b) Lender may forthwith give written notice to Borrower, whereupon
Borrower shall, at its expense, promptly deliver any or all Collateral to such
place as Lender may designate, or Lender shall have the right to enter upon the
premises where the Collateral is located and take immediate possession of and
remove the Collateral without liability to Lender. In the event Lender obtains
possession of the Collateral, Lender may sell, lease or otherwise dispose of any
or all of the Collateral at public or private sale, at such price or prices as
Lender may deem best, either for cash, on credit, or for future delivery, in
bulk or in parcels and/or lease or retain the Collateral repossessed using it or
keeping it idle. Notice of any sale or other disposition shall be given to the
Borrower at least ten (10) days before the time of any intended sale or
disposition of the Collateral is to be made, which the Borrower hereby agrees
shall be reasonable notice of such sale or other disposition. Lender may also
elect to retain the Collateral or any part thereof in satisfaction of Borrower's
Obligations. The proceeds, if any, of any such sale or leasing by Lender shall
be applied: First, to the payment of all fees and expenses incurred by Lender,
including without limitation any reasonable legal fees and expenses; Second, to
pay the Default Amount to the extent not previously paid by Borrower; and Third,
to pay any excess remaining thereafter to Borrower.
12.2 Set-off.
(a) Upon the occurrence of an Event of Default, Lender shall have
the right, immediately and without notice or other action to set-off against any
of the Borrower's liabilities to Lender any money owed by Lender (or any
affiliate of Lender) in any capacity to Borrower, whether or not due, and Lender
shall be deemed to have exercised such right of set-off and to have made a
charge against any such money immediately upon the occurrence of such Event of
Default even though the actual book entries may be made at a time subsequent
thereto.
(b) If other lenders have participated with the Lender with respect
to the Lender's making loans to the Borrower pursuant to the terms hereof, then,
Borrower hereby authorizes such other participating lenders, upon the occurrence
of an Event of Default, immediately and without notice or other action, at the
request of Lender, to set off against any of the Borrower's liabilities to
Lender any money owed by such participating lenders in any capacity to Borrower,
whether or not due, and to remit the monies set off to the Lender.
- 34 -
12.3 Cumulative Remedies; Waivers. No remedy referred to herein is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lender at law or in
equity. No express or implied waiver by Lender of any default or Event of
Default hereunder shall in any way be, or be construed to be, a waiver of any
future or subsequent default or Event of Default. The failure or delay of Lender
in exercising any rights granted it hereunder upon any occurrence of any of the
contingencies set forth herein shall not constitute a waiver of any such right
upon the continuation or recurrence of any such contingencies or similar
contingencies and any single or partial exercise of any particular right by
Lender shall not exhaust the same or constitute a waiver of any other right
provided herein. The Events of Default and remedies thereon are not restrictive
of and shall be in addition to any and all other rights and remedies of Lender
provided for by this Agreement and applicable law.
12.4 WAIVE JURY TRIAL. LENDER AND BORROWER HEREBY AGREE THAT ANY
PROCEEDING OR LITIGATION RELATING TO THIS AGREEMENT, THE RELEVANT DOCUMENTS OR
OTHER AGREEMENTS OR INSTRUMENTS BETWEEN THEM SHALL BE TRIED BY A JUDGE ONLY AND
NOT BY A JURY, THEREFORE LENDER AND BORROWER HEREBY WAIVE ALL RIGHT TO A TRIAL
BY JURY IN ANY SUCH PROCEEDING OR LITIGATION.
12.5 Costs and Expenses. Borrower shall be liable for all costs,
charges and expenses, including reasonable attorney's fees and disbursements,
incurred by Lender by reason of the occurrence of any Event of Default or the
exercise of the Lender's remedies with respect thereto.
12.6 No Marshalling. Lender shall be under no obligation whatsoever to
proceed first against any of the Collateral before proceeding against any other
of the Collateral. It is expressly understood and agreed that all of the
Collateral stands as equal security for all Obligations, and that Lender shall
have the right to proceed against any or all of the Collateral in any order, or
simultaneously, as in its sole and absolute discretion it shall determine. It is
further understood and agreed that Lender shall have the right, as it in its
sole and absolute discretion shall determine, to sell any or all of the
Collateral in any order or simultaneously.
13. WAIVERS, CONSENTS:
13.1 Waivers. Borrower waives demand, presentment, notice of dishonor
or protest of any instruments either of Borrower or others which may be included
in the Collateral or which may evidence the Obligations.
13.2 Consents. Borrower consents:
(a) To any extension, postponement of time of payment, indulgence
or to any substitution, exchange or release of Collateral.
- 35 -
(b) To any addition to, or release of, any party or persons
primarily or secondarily liable, or acceptance of partial payments on any
Accounts Receivable or instruments and the settlement, compromising or
adjustment thereof.
14. SURVIVAL:
All representations and warranties made herein or in any certificate or
instrument contemplated hereby shall survive any independent investigation made
by Lender and the execution and delivery of this Agreement, and said
certificates or instruments and shall continue so long as any Obligations are
outstanding and unsatisfied, applicable statutes of limitation to the contrary
notwithstanding.
15. EFFECT OF HOLIDAYS:
If any payment pursuant to this Agreement becomes due and payable on a
Saturday, Sunday or legal holiday under the laws of the State of New Jersey or
any applicable lending office of Lender, the maturity thereof shall be extended
to the next succeeding Banking Day.
16. NOTICES:
16.1 Written; Effective Date. All notices and other communications
hereunder shall be in writing, shall be deemed to have been duly given when: (a)
transmitted by confirmed facsimile followed by written notice delivered by one
of the methods set forth below, (b) sent, postage prepaid, by certified mail,
return receipt requested or (c) deposited with a recognized overnight courier
and shall be deemed received upon (x) receipt of the facsimile prior to 5:00
p.m. Eastern time on a Banking Day and otherwise on the next succeeding Banking
Day, (y) three (3) Banking Days after deposit with the United States Postal
Service and (z) one (1) Banking Day after deposit with a recognized overnight
courier. Any notification of a sale or other disposition of Collateral or any
other action by Lender required to be given by Lender shall be sufficient if
given not less than ten (10) days prior to the days on which such sale or other
disposition would be made, and such notification shall be deemed reasonable
notice.
16.2 To Lender. Notices to Lender shall be directed to the following
address:
Xxxxxx United Bank
00 Xxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, V.P.
Facsimile: (000) 000-0000
- 36 -
with a copy to:
Pitney, Xxxxxx, Xxxx & Xxxxx LLP
Postal Service Address:
X.X. Xxx 0000
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Courier Service Address:
000 Xxxxxx Xxxxx
Xxxxxxx Xxxx, Xxx Xxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
16.3 To Borrower. Notice to Borrower shall be directed to the
following address:
Programmer's Paradise, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, V.P. and C.F.O.
Facsimile: (000) 000-0000
with a copy to:
Dechert
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
Provided, however, any failure to provide a copy to a party's attorney shall not
invalidate the notice given to such party.
17. TERMINATION OF AGREEMENT:
17.1 Termination by Lender. Lender, in its sole and absolute
discretion, may terminate this Agreement at any time upon the earlier to occur
of (a) the occurrence of an Event of Default hereunder; or (b) the Termination
Date, whereupon the Obligations shall be due and payable immediately.
17.2 Termination by Borrower. Borrower may terminate this Agreement at
any time on or after the second (2nd) annual anniversary of the execution of
this Agreement, upon giving Lender not less than thirty (30) days' prior
irrevocable written notice. In the event Borrower seeks to terminate this
Agreement prior to such second anniversary date or without the giving of
adequate notice, then in addition to the payment of all of Borrower's
obligations to Lender, in full, together with all accrued interest, fees and
charges, there shall also be due and payable a termination fee as follows:
- 37 -
(a) two percent (2%) of the amount of the Line of Credit if
terminated prior to the first anniversary date;
(b) one percent (1%) of the amount of the Line of Credit if
terminated on or after the first anniversary date but prior to the second
anniversary date;
(c) one percent (1%) of the amount of the Line of Credit if
terminated on or after the second anniversary date but with insufficient notice;
and
(d) anything contained in this section 17.2 to the contrary
notwithstanding, one half of a percent (0.50%) of the amount of the Line of
Credit in the event Borrower elects to terminate its revolving line of credit
due to Lender's failure to consent to a merger which Borrower, in good faith,
intends to enter into.
17.3 Rights Upon Termination. Notwithstanding the termination of this
Agreement as herein provided, Lender's security interest, rights and remedies
herein set forth shall remain in full force and effect until all Borrower's
Obligations are paid in full.
17.4 Termination of Agreement. Upon full and final payment of the
Revolving Loans and all other Obligations under this Agreement and the Relevant
Documents, this Agreement shall terminate (except for such duties and
obligations that may relate to any indemnifications provided by Borrower to
Lender hereunder, all of which are expressly intended to survive payment of the
Obligations and the termination hereof) provided however: (a) Borrower may be
required to provide further indemnities, in form and substance reasonably
acceptable to Lender, relating to Lender's claims to uncollected funds
previously credited to Borrower which arise after such termination of this
Agreement and (b) Lender shall execute and deliver a letter in the form
customarily provided by Lender to confirm the amount of the Obligations which,
upon payment in full, will oblige the Lender to provide terminations on form
UCC-3 and other discharges and/or terminations which may then be applicable to
evidence the release of the security interests and liens of Lender in and to the
Collateral.
18. INDEMNITIES BY BORROWERS:
18.1 Capital Adequacy. If (a) any adoption of, change in or
interpretation of any statute or governmental regulation applicable to Lender,
or (b) compliance with any guideline, request or direction of any central bank
or other governmental authority or quasi-governmental authority exercising
control over banks or financial institutions generally, or any court requires
the agreements of Lender hereunder be treated as an asset or otherwise be
included for purposes of calculating the appropriate amount of capital to be
maintained by the Lender or any corporation controlling the Lender (a "Capital
Adequacy Event"), the result of which is to reduce the rate of return on the
Lender's capital as a consequence of such requirement to a level below that
which the Lender could have achieved but for such Capital Adequacy Event, taking
into consideration the Lender's policies with respect to capital adequacy, by an
amount which the Lender deems to be material, the Lender shall promptly deliver
to the Borrower a statement of the amount necessary to compensate the Lender for
the reduction in the rate of return on its
- 38 -
capital attributable to such commitments (the "Capital Compensation Amount").
The Lender shall determine the Capital Compensation Amount in good faith, using
reasonable attribution and averaging methods. The Lender shall from time to time
notify the Borrower of the amount so determined (which determination, absent
manifest error, shall be conclusive). Such amount shall be due and payable by
the Borrower to the Lender ten (10) business days after such notice is given.
All such amounts shall be part of the Obligations and shall bear interest at the
rate set forth in Subsection 4.3 if not paid when due.
18.2 Indemnification of Lender. Borrower hereby covenants and agrees to
indemnify, defend and hold harmless Lender and its officers, directors,
employees and agents from and against any and all claims, damages, liabilities,
costs and expenses (including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel) which may be incurred by or asserted against
Lender or any such other individual or entity, except as a result of their gross
negligence or willful misconduct in connection with:
(a) any investigation, action or proceeding arising out of or in
any way relating to this Agreement, any Relevant Documents, any of the Revolving
Loans, any of the Collateral, or any act or omission relating to any of the
foregoing; or
(b) any taxes (except taxes imposed with reference to Lender's
income or continued corporate existence), liabilities, claims or damages
relating to the Collateral or Lender's liens thereon; or
(c) the correctness, validity or genuineness of any instruments or
documents that may be released or endorsed to Borrower by Lender (which shall
automatically be deemed to be without recourse to Lender in any event), or the
existence, character, quantity, quality, condition, value or delivery of any
goods purporting to be represented by any such documents; or
(d) any broker's commission, finder's fee or similar charge or fee
in connection with the transactions contemplated in this Agreement.
18.3 Claims by Borrower Limited. To the extent permitted by applicable
law, no claims may be made by Borrower or any other Person against Lender or any
of its affiliates, directors, officers, employees, agents, attorneys or
consultants for any special, indirect, consequential or punitive damages in
respect of any claim for breach of contract, tort or any other theory of
liability arising out of or related to the transactions contemplated by this
Agreement or any act, omission or event occurring in connection therewith except
those arising as a result of the gross negligence or willful misconduct of
Lender or any of its affiliates, directors, officers, employees, agents,
attorneys or consultants; and Borrower hereby waives, releases and agrees not to
xxx upon any claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in their its favor. Neither Lender nor any of
its affiliates, directors, officers, employees or agents shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement or the transactions contemplated hereby, except for its or their
own gross negligence or willful misconduct.
- 39 -
19. AMENDMENTS AND MISCELLANEOUS:
19.1 Amendments. The terms of this Agreement shall not be waived,
altered, modified, amended or supplemented in any manner whatsoever except by a
written instrument signed by Lender and Borrower.
19.2 Binding on Successors/Assignments. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided however:
(a) Neither this Agreement nor the proceeds of the Revolving Loans
shall be assignable by Borrower without the prior written consent of Lender and
any attempt at such assignment without such consent shall be void and, at the
option of Lender, be deemed an Event of Default; and
(b) This Agreement and the Obligations may be assigned, and/or
participated in (either in whole or in part) by Lender and/or its successors and
assigns. Provided also, however, (i) any assignee shall be reputable financial
institution or other commercial lender which customarily engages in transaction
of this type and size and (ii) in the event Borrower elects to obtain alternate
financing as a result of such assignment, and anything contained in this
Agreement to the contrary notwithstanding, no termination fee shall be imposed.
19.3 Invalidity. Any provision of this Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
19.4 Gender. Throughout this Agreement, the masculine shall include the
feminine and vice versa and the singular shall include the plural and vice
versa, unless the context of this Agreement indicates otherwise.
19.5 Cross Default/Cross Collateral. All other agreements between
Borrower and Lender and/or any of Lender's affiliates or subsidiaries are hereby
amended so that a default under this Agreement is a default under all other
agreements and a default under any one of the other agreements is a default
under this Agreement. Further, such agreements are amended so that the
Collateral under this Agreement secures the Obligations now or hereafter
outstanding under all other agreements of Borrower with Lender and/or Lender's
affiliates or subsidiaries and the collateral pledged under any other agreement
with Lender and/or its affiliates or subsidiaries secures the Obligations under
this Agreement.
19.6 Expenses of Lender. Borrower agrees to pay all costs and expenses
of the Lender in connection with the preparation, execution, delivery and
administration of this Agreement or any amendments, extensions or modifications
thereto and other instruments and documents to be executed contemporaneously
herewith, including reasonable attorney's fees and out of pocket expenses of
counsel for Lender.
- 40 -
19.7 Section and Paragraph Headings. Section and paragraph headings are
for convenience only and shall not be construed as part of this Agreement.
19.8 Law/Forum. (a) This Agreement shall be construed in accordance
with, and shall be governed by, the laws of the State of New Jersey.
(b) Lender and Borrower hereby consent to the jurisdiction of the
State Courts of the State of New Jersey or the Federal Courts of the District of
New Jersey and hereby agree that the defense of forum non conveniens shall not
be brought in response to any action brought in such Courts.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed by their proper corporate officers the day and year first above
written.
PROGRAMMER'S PARADISE, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and CEO
XXXXXX UNITED BANK
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
- 41 -
SCHEDULE 1(a)
Description of Collateral
(a) Accounts, as that term is defined by the Uniform Commercial Code of
the State of New Jersey and in addition thereto, all obligations of any kind at
any time due and/or owing to Borrower and all rights of Borrower to receive
payment or any other consideration (whether classified under the Uniform
Commercial Code of the State of New Jersey or any other state as accounts,
contract rights, chattel paper, General Intangibles, leases or otherwise)
including without limitation, invoices, contract rights, accounts receivable,
General Intangibles, leases choses-in-action, notes, drafts, acceptances,
instruments, and all other debts, obligations and liabilities in whatever form
owing to Borrower from any Person, firm, governmental authority, corporation or
any other entity, all security therefor, and all Borrower's rights to goods sold
(whether delivered, undelivered, in transit or returned), which may be
represented thereby, whether now existing or hereafter arising, together with
all proceeds and products of any and all of the foregoing.
(b) Equipment, which shall mean, in addition to the definition thereof
contained in the Uniform Commercial Code of the State of New Jersey, all
equipment, machinery, furniture, fixtures, and all other tangible assets, and
all replacements, repairs, modifications, alterations, additions, controls and
operating accessories therefor, all substitutions and replacements therefor, and
all accessions and additions thereto and all proceeds and products of the
foregoing now owned or hereafter acquired by Borrower.
(c) General Intangibles, which shall mean and include all of the
Borrower's now owned or hereafter acquired cash, deposit accounts, letters of
credit of which Borrower is beneficiary, choses in action, causes of action and
all other intangible personal property including, without limitation, corporate
or other business records, inventions, designs, patents, patent applications,
trademarks, trademark applications, trade names, trade secrets, good will,
registrations, copyrights, licenses, franchises, customer lists, tax refunds,
tax refund claims, insurance claims, rights and claims against carriers and
shippers and rights to indemnification.
(d) Inventory, which shall have the meaning set forth in the Uniform
Commercial Code of the State of New Jersey and in addition thereto, all goods,
merchandise or other tangible personal property held by Borrower for sale or
lease or to be furnished under labels and other devices, the names or marks
affixed thereto for purposes of selling or identifying the same or the seller or
manufacturer thereof, and all right, title and interest of Borrower therein and
thereto, all raw materials, work or goods in process, or materials and supplies
of every nature used, consumed or to be consumed in the Borrower's business, all
packaging and shipping materials, and all proceeds and products of any of the
foregoing, whether now owned or hereafter acquired by Borrower, and wherever
located.
(e) Machinery, which shall mean and include, without limitation, all
inanimate mechanisms for utilizing or applying power including the appurtenances
thereto used by or for Borrower in the operation of its businesses and all
accessories, substitutions, additions, replacements and parts thereof, whether
now owned or hereafter acquired.
- 42 -
(f) Merchandise, which shall include all goods, inventory, chattels and
other personal property of Borrower, now owned or hereafter acquired.
(g) Any claims of Borrower against third parties for loss or damage to,
or destruction of, any and all of the foregoing, all guarantees, security and
liens for payment of any Accounts Receivable and documents of title, policies,
certificates of insurance, insurance proceeds, securities, chattel paper, and
other documents and instruments evidencing or pertaining thereto, and all files,
correspondence, computer programs, tapes, discs and related data processing
software owned by Borrower or in which Borrower has an interest which contain
information identifying any one or more of the items in (a), (b), (c), (d), (e)
and (f) above, this subsection (g), or (h), (i) or (j) below, or any Account
Borrower, showing the amounts owed by each, payments thereon or otherwise
necessary or helpful in the realization thereon or the collection thereof.
(h) Any and all monies, securities, drafts, notes, contracts leases,
licenses, General Intangibles, and other property of Borrower, including
customer lists and all proceeds and products thereof, and all other assets of
Borrower, now or hereafter held or received by or in transit to the Lender from
or for Borrower, or which may now or hereafter be in the possession of Lender or
as to which Lender may now or hereafter control possession, by documents of
title or otherwise, whether for safekeeping, custody, pledge, transmission,
collection or otherwise, and any and all deposits, general or special, balances,
sums, proceeds and credits of Borrower, and all rights and remedies which the
Borrower might exercise with respect to any of the foregoing, but for the
execution of this Agreement in favor of Lender.
(i) All Borrower's right, title and interest throughout the world, in
and to the trade secrets' rights in the information regarding computer software
programs developed by or for the Borrower, including without limitation, the
right to prevent all persons, including Borrower, from using the programs or
from using and transferring the information contained therein without
authorization.
(j) All proceeds, including insurance proceeds, and products of the
Collateral.
- 43 -
SCHEDULE 6.5
Financial Statements
Borrower delivered the following financial statements to Lender:
1. Unaudited, condensed consolidated balance sheets of Borrower and its
consolidated subsidiaries as of December 31, 1999 and November 30, 2000, and the
related condensed consolidated statements of operations and comprehensive income
and cash flows.
2. Audited, consolidated balance sheets of Borrower and its consolidated
subsidiaries as of December 31, 1998 and December 31, 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows.
3. Unaudited, condensed consolidated balance sheets of Borrower and its
consolidated subsidiaries as of September 30, 1998 and September 30, 1999, and
the related condensed consolidated statements of operations and comprehensive
income and cash flows.
- 44 -
SCHEDULE 6.12
Environmental Matters
None.
- 45 -
SCHEDULE 6.15
Location of Collateral
Address Landlord
------- --------
0000 Xxxxxxxxxx Xxxxxx SBC Holdings X.X.
Xxxxxxxxxx, Xxx Xxxxxx 00000
0000 Xxxxxxxxxx Xxxxxx SBC Holdings X.X.
Xxxxxxxxxx, Xxx Xxxxxx 00000
*4055 Sladeview Crescent, Xxxx 0 Xxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 Development Corp.
* Inventory may be shipped to such address from time to time in the ordinary
course of Borrower's business.
- 46 -
SCHEDULE 6.16
Other Liens; Prohibitions
Other Liens
-----------
1. Results of lien searches conducted by Lender, attached as Exhibit A to this
schedule.
2. In connection with the European Sale, Euro 3,275,000 is being held in escrow
for potential liabilities, pursuant to a certain Escrow Agreement dated January
9, 2001, between Borrower, as Seller, PC-Xxxx Information Technologies AG, as
Buyer and Xx. Xxxxxxxx Punder, as Escrow Agent.
Prohibitions
------------
Borrower's contracts with Microsoft and with Computer Associates are not
assignable by Borrower.
- 47 -
SCHEDULE 6.19
Names, Locations of Offices
Names under which Borrower conducts business:
--------------------------------------------
Programmer's Paradise, Inc.
Programmer's Shop
Programmer's Super Shop
Locations where Borrower conducts Business or Operations:
Chief Executive Office:
----------------------
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Other locations:
---------------
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
- 48 -
SCHEDULE 6.20
Subsidiaries
----------------------------------- --------------- ---------------- ---------------------------
Jurisdictions
Where
Qualified as
Name of Jurisdiction a foreign Address of
Subsidiary of Formation entity Chief Executive Office
----------------------------------- --------------- ---------------- ---------------------------
Programmer's Paradise Catalogs, Delaware New Jersey 1157 Shrewsbury Ave.,
Inc. Xxxxxxxxxx, Xxx Xxxxxx
00000
----------------------------------- --------------- ---------------- ---------------------------
Programmer's Paradise (Canada) Ontario, None 0000 Xxxxxxxxx Xxxxxxxx,
Xxx. Xxxxxx Xxxx 0 Xxxxxxxxxxx,
Xxxxxxx, Xxxxxx X0X 0X0
----------------------------------- --------------- ---------------- ---------------------------
Xxxxxxxxxxxxxxxxxxx.xxx Inc. Delaware None 0000 Xxxxxxxxxx Xxx.,
Xxxxxxxxxx, Xxx Xxxxxx
00000
----------------------------------- --------------- ---------------- ---------------------------
Corsoft, Inc. Delaware New Jersey 0000 Xxxxxxxxxx Xxx.,
Xxxxxxxxxx, Xxx Xxxxxx
00000
----------------------------------- --------------- ---------------- ---------------------------
Lifeboat Distribution, Inc. Delaware New Jersey 0000 Xxxxxxxxxx Xxx.,
Xxxxxxxxxx, Xxx Xxxxxx
00000
----------------------------------- --------------- ---------------- ---------------------------
Programmer's Paradise France France None 150-154, Xx xx Xxxxxx
X.X.X.X. 00000 Xxxxxxxxxx Xxxxx
Xxxxxx
----------------------------------- --------------- ---------------- ---------------------------
