$120,000,000
BUSINESS CREDIT AND SECURITY AGREEMENT
Dated as of July 14, 1998
AMONG
XXXXXXX COMPUTER RESOURCES, INC.
GLOBAL COMBINED TECHNOLOGIES, INC.
AND
DEUTSCHE FINANCIAL SERVICES CORPORATION
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BUSINESS CREDIT AND SECURITY AGREEMENT
BETWEEN: DEUTSCHE FINANCIAL SERVICES CORPORATION, a Nevada corporation
("DFS")
AND: XXXXXXX COMPUTER RESOURCES, INC., a Delaware corporation
("Xxxxxxx")
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AND GLOBAL COMBINED TECHNOLOGIES, INC., an Oklahoma corporation
("Global")
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(Xxxxxxx and Global sometimes hereinafter being referred to
individually and collectively as "Borrower").
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EFFECTIVE DATE: July 14, 1998
1. RECITALS
Borrower has requested that DFS provide Borrower with a credit
facility for working capital, acquisition of inventory, and acquisition
purposes. Global is a wholly-owned subsidiary of Xxxxxxx both of which do
business with each other and with third parties as an integrated family of
companies, and accordingly, each Borrower desires to have the availability of
one common credit facility instead of separate credit facilities. Each Borrower
has requested that DFS extend such a common credit facility. Each Borrower
acknowledges that DFS will be lending against, and relying on a lien upon,
substantially all of Borrower's assets even though the proceeds of any
particular Loan made hereunder may not be advanced directly to such Borrower,
and that such Borrower will nevertheless benefit by the making of all such Loans
by DFS and the availability of a single credit facility of a size greater than
each could independently warrant.
2. DEFINITIONS
Terms defined in this Agreement shall have initial capital letters.
Those terms are defined below, in this Section 2, and elsewhere in this
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Agreement. All financial and accounting terms used herein and not otherwise
defined, shall be defined in accordance with GAAP.
"AAA" shall have the meaning set forth in Section 14.2.
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"Account Debtor" shall mean any Person who is or who may become obligated
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to Borrower under, with respect to, or on account of an Account, general
intangible or other Collateral.
"Accounts" shall have the meaning given to that term in the UCC, and, to
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the extent not included therein, shall also mean all accounts, leases, contract
rights, chattel paper, general intangibles, choses in action and instruments,
including any Lien or other security interest that secures or may secure any of
the foregoing, plus all books, invoices, documents and other records in any form
evidencing or relating to any of the foregoing, now owned or hereafter acquired
by Borrower.
"Acquisition Facility" shall have the meaning set forth in Section 3.4.
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"Acquisition Loan" shall have the meaning set forth in Section 3.4.
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"Additional Monthly Report" shall have the meaning set forth in Section
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3.12(a).
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"Affiliates" shall mean: (i) any individual who is an officer or director
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of a Person; and (ii) any Person who directly or indirectly controls, is
controlled by, or is under common control or ownership with, another Person.
For the purposes of this definition, the term "control" shall mean the ownership
of or the ability to direct or control 10% or more of the beneficial interest in
the applicable entity.
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"Agreement" shall mean this Business Credit and Security Agreement, and any
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amendments hereto.
"Average Daily Balance" shall have the meaning set forth in Section 3.6.
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"Borrowing Base" shall mean, as of any date of determination, an amount
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equal to the Eligible Account Availability minus the Distribution Finance
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Facility Deficit, minus the amount of any overdrafts under Borrower's cash
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management facilities with Star Bank, N.A.
"Borrowing Base Certificate" shall have the meaning set forth in Section
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3.3(a).
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"Business" shall mean the sale, installation and servicing of
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microcomputers and microcomputer equipment primarily for commercial, health
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care, governmental, financial and educational customers.
"Business Day" shall mean any day other than Saturdays, Sundays, legal
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holidays designated by Federal law, and any other day on which DFS' office is
closed.
"Capital Expenditures" means, for any period, expenditures made by the
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Borrower or any Subsidiary of Borrower to acquire or construct fixed assets,
plant and equipment (including renewals, improvements and replacements during
such period in the aggregate amount of items leased or acquired under
Capitalized Lease Obligations at the cost of the item, but excluding capital
expenditures made with insurance proceeds to the extent used to replace or
repair damaged fixed assets, plant and equipment) computed in accordance with
GAAP.
"Capitalized Lease Obligations" means that portion of any obligation of
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the Borrower or any Subsidiary of the Borrower as lessee under a lease which at
the time are recorded as capitalized lease obligations on the balance sheet of
the Borrower or such Subsidiary prepared in accordance with GAAP.
"Collateral" shall mean all items described in Section 6.1.
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"Corporate Guarantor" shall mean a corporate guarantor of any of the
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Obligations.
"Credit Facility" shall have the meaning set forth in Section 3.1(a).
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"Daily Charge" shall have the meaning set forth in Section 3.6.
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"Daily Contract Balance" shall have the meaning set forth in Section 3.6.
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"Daily Rate" shall have the meaning set forth in Section 3.6.
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"Debt" shall have the meaning set forth in Section 9.3.
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"Default" shall have the meaning set forth in Section 10.
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"Default Interest Rate" shall have the meaning set forth in Section 3.9.
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"DFS Companies" shall have the meaning set forth in Section 14.1.
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"Disputes" shall have the meaning set forth in Section 14.1.
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"Distribution Finance Facility" shall have the meaning set forth in Section
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3.2.
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"Distribution Finance Facility Deficit" shall have the meaning set forth in
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Section 3.18.
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"Distribution Finance Inventory Value" shall have the meaning set forth in
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Section 3.18.
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"Distribution Finance Loan" shall have the meaning set forth in Section
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3.2.
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"Effective Date" shall mean the date set forth in the heading on page 1 of
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this Agreement.
"Electronic Transfers" shall have the meaning set forth in Section
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3.6(b)(ii).
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"Eligible Account Availability" shall have the meaning set forth in Section
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3.3(a).
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"Eligible Accounts" shall mean all Accounts that are not Ineligible
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Accounts and all Eligible Vendor Accounts, Eligible Unbilled Accounts, and
Eligible TIFS Accounts.
"Eligible TIFS Accounts" shall mean Accounts which are otherwise Eligible
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Accounts which are rendered Ineligible Accounts under the terms of item (d) of
the definition of "Ineligible Accounts" herein because TIFS is a Subsidiary of
Borrower, provided, however, in no event shall the amount of Eligible TIFS
Accounts exceed at any time $7,500,000. Such Accounts shall, notwithstanding
such item (d), be considered Eligible Accounts hereunder if they are otherwise
Eligible Accounts, with the following modifications: (i) such Accounts shall be
Ineligible Accounts if they are unpaid more than forty-five (45) days from date
of invoice; and (ii) all Accounts of TIFS shall be Ineligible Accounts if fifty
percent (50%) or more of the outstanding balance of such Accounts are unpaid
more than forty-five (45) days from the date of invoice.
"Eligible Unbilled Accounts" shall mean Accounts which are otherwise
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Eligible Accounts except that such Accounts represent the right to payment for
goods sold or services rendered within the preceding sixty (60) days for which
Borrower is entitled to submit, but has not yet submitted, an invoice to the
Account Debtor; provided, however, no such Account shall be considered an
Eligible Unbilled Account hereunder unless Borrower has given written notice
thereof to DFS.
"Eligible Vendor Accounts" shall mean Accounts which are otherwise Eligible
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Accounts but which represent amounts due and owing to Borrower from its vendors,
manufacturers and/or distributors in connection with rebates, discounts or other
incentive payments, and for which DFS has received an executed agreement from
such vendor, in form and substance acceptable to DFS, in which such vendor
waives it right to offset or otherwise deduct from its obligations under such
Account, any amounts owing to such vendor.
"Environmental Laws" shall mean the Resource Conservation and Recovery Act,
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as amended, the Toxic Substances Control Act, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the Solid
Waste Disposal Act, as amended, the Water Pollution Control Act, as amended, the
Clean Air Act, as amended, the Clean Water Act, as amended, and any successor or
comparable federal or state statutes, now existing or later enacted, or any
regulation promulgated under any of such federal or state statutes relating to
the protection of the environment.
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"Environmental Lien" shall mean a Lien in favor of any governmental entity
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for (a) any liability under any Environmental Law, or (b) damages arising from
or costs incurred by such governmental entity in response to a spillage,
disposal, or release into the environment of any Hazardous Material or other
hazardous, toxic or dangerous waste, substance or constituent, or other
substance.
"Equipment" shall have the meaning as given to that term in the UCC, and,
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to the extent not included therein, shall also mean all equipment, machinery,
trade fixtures, furnishings, furniture, supplies, materials, tools, machine
tools, office equipment, appliances, apparatus, parts and all attachments,
replacements, substitutions, accessions, additions and improvements to any of
the foregoing.
"Excess Advances" shall have the meaning given in Section 5.2.
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"FAA" shall have the meaning set forth in Section 14.5.
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"GAAP" shall mean generally accepted accounting principles, consistently
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applied.
"Governmental Account Debtor" shall have the meaning given in the
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definition of Ineligible Accounts.
"Hazardous Material" shall mean any and all hazardous or toxic substances,
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materials or wastes as defined or listed under the Environmental Laws.
"Indebtedness" shall mean any sum for borrowed money owed by Borrower or
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any Subsidiary to a Person and shall include any debt guaranteed by Borrower or
any Subsidiary, any debt as to which the Borrower has granted or permitted to
exist a Lien on any asset even if non-recourse, letter of credit reimbursement
obligations, and capitalized lease obligations.
"Indemnified Liabilities" shall have the meaning set forth in Section 12.1.
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"Indemnitees" shall have the meaning set forth in Section 12.1.
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"Ineligible Accounts" shall mean: (a) Accounts created from the sale of
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goods and services on non-standard terms and/or that allow for payment to be
made more than thirty (30) days from date of sale; (b) Accounts unpaid: (i) more
than one-hundred twenty (120) days from date of invoice if the Account Debtor is
the United States of America, any state, or any local government, or any
department, agency, instrumentality or subdivision thereof (herein, a
"Governmental Account Debtor"), or (ii) more than ninety (90) days from date of
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invoice if the Account Debtor is not a Governmental Account Debtor; (c) all
Accounts of any Account Debtor if fifty percent (50%) or more of the outstanding
balance of such Accounts are unpaid: (i) more than one hundred twenty (120) days
from the date of invoice if such Account Debtor is a Governmental Account
Debtor, or (ii) more than ninety (90) days from the date of invoice if such
Account Debtor is not a Governmental Account Debtor; (d) Accounts for which the
Account Debtor is an officer, director, shareholder (which is not publicly
traded on a recognized exchange), partner, member, owner, employee, agent,
parent, Subsidiary (excepting, however, Eligible TIFS Accounts, as defined
herein), or Affiliate of, or is related to, Borrower or has common shareholders,
officers, directors, owners, partners or members with Borrower; (e) Accounts
arising from any xxxx-and-hold sale, guaranteed sale, sale and return, sale on
approval, consignment sale, or any sale on a repurchase or return basis; (f)
Accounts for which the payment is or may be conditional; (g) Accounts for which
5
the Account Debtor is not a commercial or institutional entity or is not a
resident of the United States or Canada; (h) Accounts with respect to which any
warranty or representation provided in Section 8.19 is not true and correct; (i)
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Accounts which represent goods or services purchased for a personal, family or
household purpose; (j) Accounts which represent goods used for demonstration
purposes or loaned by Borrower to another party; (k) Accounts which are progress
payment, barter, or contra accounts; and (l) any and all other Accounts which
DFS deems to be ineligible, in its reasonable credit judgment.
"Intangibles" shall have the meaning set forth in Section 9.3.
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"Intercreditor Agreements" collectively means the following certain
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agreements: (i) Assignment and Amendment to Intercreditor Agreement dated on or
about the date hereof by and among Star Bank, N.A., IBM Credit Corporation and
DFS, along with the underlying Intercreditor Agreement, as so amended; (ii)
subordination agreement dated on or about the date hereof by and between Hewlett
Packard Company and DFS; and (iii) any other intercreditor and/or subordination
agreement hereafter entered into by DFS and any person that is a vendor to the
Borrower of Inventory, on terms acceptable to DFS; as any of the foregoing may
be renewed, extended, modified, amended, supplemented or restated from time to
time.
"Inventory" shall have the meaning given to that term in the UCC, and, to
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the extent not included therein, shall also mean all of Borrower's merchandise,
materials, finished goods, work-in-process, component materials, packaging,
shipping materials, parts and other tangible personal property, now owned or
hereafter acquired and held for sale or which contribute to the finished
products or the sale, promotion, storage and shipment thereof, whether located
at facilities owned or leased by Borrower, or in the course of transport to or
from facilities owned or leased by Borrower.
"Lien" shall mean any security interest, mortgage, pledge, lien,
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hypothecation, judgment lien or similar legal process, charge, encumbrance,
title retention agreement or analogous instrument or device (including, without
limitation, the interest of lessors under capitalized leases and the interest of
a vendor under any conditional sale or other title retention agreement),
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting any of Borrower's property.
"Loan" shall mean any advance made to or for the benefit of Borrower
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pursuant to this Agreement, including but not limited to any Distribution
Finance Loan, any Acquisition Loan and any Working Capital Loan.
"Loan Documents" shall mean all documents executed by Borrower pursuant to
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any financial accommodation between Borrower and DFS and all documents entered
into in connection with the transaction herein contemplated. The term "Loan
Documents" includes, but is not limited to, this Agreement, all financing
statements, all pledges, mortgages, deeds of trust, leasehold mortgages,
security agreements, guaranties, assignments, subordination agreements, and any
future or additional documents or writings executed under the terms of this
Agreement or any amendments or modifications hereto.
"Material Adverse Effect" means any act or circumstance or event that (a)
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could reasonably be expected to be material or adverse to the Business,
financial condition, results of operations, or business prospects of any Person,
or (b) in any manner whatsoever does or could reasonably be expected to
materially and adversely affect the validity or enforceability of any Loan
Document.
"Monthly Reports" shall have the meaning given in Section 3.12(b).
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"Obligations" shall mean all liabilities and Indebtedness of any kind and
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nature whatsoever now or hereafter arising, owing, due or payable from Borrower
(and/or any of its Subsidiaries and Affiliates) to DFS, whether primary or
secondary, joint or several, direct, contingent, fixed or otherwise, secured or
unsecured, or whether arising under this Agreement, any other Loan Document or
any other agreement now or hereafter executed by Borrower (or any of its
Subsidiaries or Affiliates) and delivered to DFS. Obligations will include,
without limitation, any third party claims against Borrower (or any of its
Subsidiaries or Affiliates) satisfied or acquired by DFS. Obligations will also
include all obligations of Borrower to pay to DFS: (a) any and all sums
reasonably advanced by DFS to preserve or protect the Collateral or the value of
the Collateral or to preserve, protect, or perfect DFS' security interests in
the Collateral; (b) in the event of any proceeding to enforce the collection of
the Obligations after a Default, the reasonable expenses of retaking, holding,
preparing for sale, selling or otherwise disposing of or realizing on the
Collateral, or expenses of any exercise by DFS of its rights, together with
reasonable attorneys' fees, expenses of collection and court costs, as provided
in the Loan Documents; and (c) any other indebtedness or liability of Borrower
to DFS, whether direct or indirect, absolute or contingent, now or hereafter
arising.
"Operating Lease" means any lease, as defined in the Financial Accounting
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Standard Board Statement of Financial Accounting Standards No. 13, dated
November, 1976 or otherwise in accordance with GAAP.
"OSHA Law" shall mean the Occupational Safety and Health Act of 1970, any
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successor thereto, and any other federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to or
imposing liability or standards of conduct concerning employee health and/or
safety.
"Other Reports" shall have the meaning set forth in Section 3.12(c).
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"Participant" shall mean a Person or Persons, including but not limited to
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Star Bank, National Association, a national banking association, who may from
time to time purchase an undivided economic participation in some or all of the
Loans, on terms acceptable to DFS.
"Participation Agreement" shall mean that certain Participation Agreement
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of even date between DFS and Participant, as amended from time to time, pursuant
to which Participant, shall purchase an undivided economic participation in that
portion of the Working Capital Loans and the Acquisition Loans which exceed
$30,000,000.
"Permitted Liens" shall mean: (a) Liens for taxes, assessments or other
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governmental charges or levies not yet delinquent or which are being contested
in good faith by appropriate action and as to which adequate reserves shall have
been set aside in conformity with GAAP and which are, in addition, satisfactory
to DFS in its reasonable discretion; (b) Liens of mechanics, materialmen,
landlords, warehousemen, carriers and similar Liens arising in the future in the
ordinary course of business for sums not yet delinquent, or being contested in
good faith if a reserve or other appropriate provision in accordance with GAAP
shall have been made therefor and which are, in addition, satisfactory to DFS in
its reasonable discretion; (c) statutory Liens incurred in the ordinary course
of business in connection with workers' compensation, unemployment insurance,
social security, and similar items for sums not yet delinquent or being
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contested in good faith, if a reserve or other appropriate provision in
accordance with GAAP shall have been made therefor and which are, in addition,
satisfactory to DFS in its reasonable discretion; (d) lessor's Liens arising
from operating leases entered into in the ordinary course of business; (e) Liens
arising from legal proceedings, so long as such proceedings are being contested
in good faith by appropriate proceedings, appropriate reserves have been
established therefor in accordance with GAAP and which are, in addition,
satisfactory to DFS in its reasonable discretion, and so long as execution is
stayed and bonded on appeal on all judgments resulting from any such
proceedings; (f) Liens in favor of DFS granted hereunder; (g) Purchase Money
Liens securing Permitted Purchase Money Indebtedness which is not incurred in
violation of Section 9.2.11; (h) Liens to the extent allowed under the
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Intercreditor Agreements; (i) Liens in favor of The Fifth Third Bank of Northern
Kentucky, Inc. given by TIFS; and (j) Liens securing the non-recourse
Indebtedness described in Section 9.2.11(g), the priority of which shall be
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determined by intercreditor/subordination agreements acceptable to DFS.
"Permitted Purchase Money Indebtedness" shall mean Purchase Money
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Indebtedness of Borrower incurred in compliance with Section 9.2.11 which is
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secured by a Purchase Money Lien and which, when aggregated with the principal
amount of all other such Indebtedness (excluding, however, Capitalized Lease
Obligations) of Borrower at the time outstanding, does not exceed $20,000,000.
For the purposes of this definition, the principal amount of any Purchase Money
Indebtedness consisting of capitalized leases shall be computed as a Capitalized
Lease Obligation.
"Person" shall mean an individual, a partnership, a joint venture, a
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corporation, a trust, a limited liability company, an unincorporated
organization, and a government or any department or agency thereof.
"Prime Rate" shall mean a fluctuating interest rate per annum equal to the
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prime rate of interest announced publicly from time to time (whether or not
charged in each instance) by The Chase Manhattan Bank (or any successor thereof)
as such bank's prime rate. Each change in the Prime Rate shall become effective
on the day such bank announces a change in its prime or reference rate. If the
bank listed above discontinues the practice of announcing or publishing a prime,
base or reference rate during the term of this Agreement, then DFS may, in its
reasonable judgment, designate a comparable bank and/or publicly announced rate
to be thereafter used as a basis for determining Prime Rate. Borrower
acknowledges that the bank listed above may extend credit at rates of interest
less than its announced prime, base or reference rate.
"Purchase Money Indebtedness" shall mean and include:
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(i) Indebtedness for the payment of all or any part of the purchase
price of any assets,
(ii) any Indebtedness incurred at the time of or within ten (10) days
prior to or after the acquisition of any assets for the purpose of financing all
or any part of the purchase price thereof, and
(iii) any renewals, extensions or refinancings thereof, but not any
increases beyond the original principal amounts thereof outstanding at the time.
"Purchase Money Lien" shall mean a Lien upon assets which secures Purchase
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Money Indebtedness, but only if such Lien shall at all times be confined solely
to the assets the purchase price of which was financed through the incurrence of
such Purchase Money Indebtedness.
"SPP" shall have the meaning set forth in Section 3.2(b).
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"Statement of Transaction" shall have the meaning set forth in Section
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3.2(a).
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"Subordinated Debt" shall have the meaning set forth in Section 9.3.
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"Subsidiaries" shall mean any corporation in which a Person owns or
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controls greater than 50% of the voting securities, or any partnership, joint
venture or limited liability company in which a Person owns or controls greater
than 50% of the aggregate equitable interest. The term "Subsidiary" means any
one of the Subsidiaries.
"Tangible Net Worth" shall have the meaning set forth in Section 9.3.
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"TIFS" means Technology Integration Financial Services, Inc. (formerly
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known as Xxxxxxx Computer Leasing Company, Inc.), a Kentucky corporation and
wholly-owned Subsidiary of Xxxxxxx.
"Total Credit Limit" shall have the meaning set forth in Section 3.1(a).
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"Total Working Capital Credit Limit" shall have the meaning set forth in
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Section 3.3.
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"UCC" shall mean the Uniform Commercial Code as in effect in the State of
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Kentucky and any successor statute, together with any regulations thereunder, in
each case as in effect from time to time. References to sections of the UCC
shall be construed to also refer to any successor sections.
"Unmatured Default" shall mean any event which, but for the passage of time
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or notice, or both, would be a Default.
"Working Capital Loan" shall have the meaning set forth in Section 3.3.
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3. CREDIT FACILITY
3.1 Total Credit Facility.
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(a) In consideration of Borrower's payment and performance of its
Obligations and subject to the terms and conditions contained in this Agreement,
DFS agrees to provide, and Borrower agrees to accept, an aggregate credit
facility (the "Credit Facility") of up to One Hundred Twenty Million Dollars
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($120,000,000) (the "Total Credit Limit"), BUT ONLY TO THE EXTENT that DFS has
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received and continues to have in full force and effect, upon terms acceptable
to DFS, in its sole discretion, a Participation Agreement in which the
"Participant Commitment" (as defined in the Participation Agreement) is at least
Thirty Million Dollars ($30,000,000). The Credit Facility shall be available in
the form of Distribution Finance Loans, Working Capital Loans and Acquisition
Loans. No Loans need be made by DFS if Borrower is in Default or if there
exists any Unmatured Default. This is an agreement regarding the extension of
credit, and not the provision of goods or services.
(b) In furtherance of the foregoing, anything in this Agreement to the
contrary notwithstanding, DFS shall have no obligation to make any Loan
hereunder if the "Participant Commitment" (as defined in the Participation
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Agreement) is less than Thirty Million Dollars ($30,000,000), or if there exists
a default under or termination of a Participation Agreement. DFS may exercise
its rights as described herein ninety (90) days after having given written
notice to Borrower, and thereupon the aggregate maximum amount available for
Working Capital Loans and Acquisition Loans will be reduced by the amount of the
terminated or nonperforming Participation Agreement(s), as the case may be;
provided, however, DFS shall have no such notice obligation, and the resulting
reduction shall be automatic if at such time Borrower is in Default. DFS
represents and warrants to Borrower that concurrently with the execution of this
Agreement, it shall enter into a Participation Agreement with Star Bank,
National Association.
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3.2 Distribution Finance Loans. Subject to the terms of this
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Agreement, DFS may provide to Borrower distribution financing for the
acquisition of Inventory from vendors approved by DFS (each advance being a
"Distribution Finance Loan"), up to an aggregate unpaid principal amount at any
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time not to exceed Sixty Million Dollars ($60,000,000) (herein, the
"Distribution Finance Facility"). DFS may, however, at any time and without
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notice to Borrower, elect not to finance any Inventory sold by particular
vendors who are in default of their obligations to DFS. DFS may at any time
suspend or terminate the relationship or approval of any vendor. DFS will use
reasonable efforts to attempt to give Borrower prior notice of such suspension
or termination.
(a) Financing Terms and Statements of Transaction. Borrower and
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DFS agree that certain financial terms of any advance made by DFS as a
Distribution Finance Loan under this Agreement, whether regarding finance
charges, other fees, maturities, curtailments or other financial terms, are not
set forth herein because such terms depend, in part, upon the availability of
vendor discounts, payment terms or other incentives, prevailing economic
conditions, DFS' floorplanning volume with Borrower and with Borrower's vendors,
and other economic factors which may vary over time. Borrower and DFS further
agree that it is therefore in their mutual best interest to set forth in this
Agreement only the general terms of Borrower's Distribution Finance Loans. Upon
agreeing to finance a particular item of Inventory for Borrower, DFS will send
Borrower a Statement of Transaction identifying such Inventory and the
applicable financial terms ("Statement of Transaction"). Unless Borrower
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notifies DFS in writing of any objection within thirty (30) days after a
Statement of Transaction is mailed to Borrower: (i) the amount shown on such
Statement of Transaction will be an account stated; (ii) Borrower will have
agreed to all rates, charges and other terms shown on such Statement of
Transaction; (iii) Borrower will have agreed that the items of Inventory
referenced in such Statement of Transaction are being financed by DFS at
Borrower's request; and (iv) such Statement of Transaction will be incorporated
herein by reference, will be made a part hereof as if originally set forth
herein, and will constitute an addendum hereto. If Borrower objects to the
terms of any Statement of Transaction, Borrower agrees to pay DFS for such
Inventory in accordance with the most recent terms for similar Inventory to
which Borrower has not objected (or, if there are no prior terms, at the lesser
of 16% per annum or at the maximum lawful contract rate of interest permitted
under applicable law). The Statement of Transaction may specify a "Minimum
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Prime", which shall mean a minimum rate per annum designated as a floor below
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which the Prime Rate shall be deemed not to fall for purposes of calculating
Borrower's Distribution Finance Loan finance charges, notwithstanding that the
"Prime Rate" as defined herein might otherwise be a lower rate per annum.
(b) Payment Terms. Borrower will immediately pay DFS the
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principal indebtedness owed DFS on each item of Inventory financed by DFS (as
shown on the Statement of Transaction identifying such Inventory) on the
earliest occurrence of any of the following events: (i) when such Inventory is
lost, stolen or damaged to the extent that such loss, theft or damage is not
adequately insured under an insurance policy which names DFS as loss payee;
(ii) for Inventory financed under Scheduled Payment Program ("SPP") terms (as
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shown on the Statement of Transaction identifying such Inventory), in strict
accordance with the installment payment schedule; and (iii) when otherwise
required under the terms of any financing program agreed to in writing by the
parties. Regardless of the SPP terms pertaining to any Inventory financed by
DFS, if DFS determines that the current outstanding debt which Borrower owes to
DFS exceeds the aggregate wholesale invoice price of such Inventory in
Borrower's possession, Borrower will immediately upon demand pay DFS the
difference between such outstanding debt and the aggregate wholesale invoice
price of such Inventory. If Borrower from time to time is required to make
immediate payment to DFS of any past due obligation discovered during any
Inventory review, or at any other time, Borrower agrees that acceptance of such
payment by DFS shall not be construed to have waived or amended the terms of its
financing program. The proceeds of any Inventory received by Borrower will be
held by Borrower in trust for DFS' benefit, for application as provided in this
10
Agreement. Prior to the occurrence of a Default, DFS shall apply payments
hereunder in accordance with Borrower's instructions. Upon the occurrence and
during the continuance of a Default, DFS may apply: (A) payments to reduce
finance charges first and then principal, regardless of Borrower's instructions;
and (B) principal payments to the oldest (earliest) invoice for Inventory
financed by DFS, but, in any event, all principal payments will first be applied
to such Inventory which is sold, rented, leased, or otherwise disposed of or
unaccounted for, or lost, stolen or damaged to the extent that such loss, theft
or damage is not adequately insured under an insurance policy which names DFS as
a loss payee. Any third party discount, rebate, bonus or credit granted to
Borrower for any Inventory will not reduce the debt Borrower owes DFS until DFS
has received payment therefor in cash. Borrower will: (1) pay DFS even if any
Inventory is defective or fails to conform to any warranties extended by any
third party; (2) not assert against DFS any claim or defense Borrower has
against any third party; and (3) indemnify and hold DFS harmless against all
claims and defenses asserted by any buyer of the Inventory relating to the
condition of, or any representations regarding, any of the Inventory. Borrower
waives all rights of offset Borrower may have against DFS.
3.3 Working Capital Loans. Subject to the terms of this
-----------------------
Agreement, DFS agrees, for so long as no Default exists, to provide to Borrower,
and Borrower agrees to accept, working capital financing (each advance being a
"Working Capital Loan") on Eligible Accounts in the maximum aggregate unpaid
----------------------
principal amount at any time equal to the lesser of (i) the Borrowing Base and
(ii) Sixty Million Dollars ($60,000,000) ("Total Working Capital Credit Limit"),
----------------------------------
subject in all events to the terms of Section 3.1(b) hereof; provided, however,
-------------- -------- -------
that in no event shall the maximum principal amount outstanding under the
Working Capital Loans and the Acquisition Facility exceed in the aggregate, at
any time, Sixty Million Dollars ($60,000,000). A request for a Working Capital
Loan shall be made, or shall be deemed to be made, as provided in Section 5.1
-----------
hereof.
(a) Eligible Accounts. On receipt of each Borrowing Base
------------------
Certificate initially in the form set forth on Exhibit 3.3, and, thereafter, in
-----------
such form as DFS may require from time to time, together with such supporting
information as DFS may require from time to time (the "Borrowing Base
---------------
Certificate"), DFS will credit Borrower with ninety percent (90%) of the net
-----------
amount of the Eligible Accounts which are, absent error or other discrepancy,
listed in such Borrowing
Base Certificate, subject to the Total Working Capital Credit Limit (the
"Eligible Account Availability"). For purposes hereof, the net amount of
-------------------------------
Eligible Accounts at any time shall be the face amount of such Eligible Accounts
less any and all returns, discounts (which may, at DFS' option, be calculated on
shortest terms), credits, rebates, allowances, or excise taxes of any nature at
any time issued, owing, claimed by Account Debtors, granted, outstanding, or
payable in connection with such Accounts at such time.
3.4 Acquisition Facility. Subject to the terms of this Agreement,
--------------------
DFS agrees, for so long as no Default exists, to provide Borrower with
acquisition financing for the purposes described herein (each advance being an
"Acquisition Loan"), up to an aggregate unpaid principal amount not to exceed at
----------------
any time Ten Million Dollars ($10,000,000), on and subject to the following
terms and conditions (the "Acquisition Facility"), subject in all events to the
--------------------
terms of Section 3.1(b) hereof; provided, however, that in no event shall the
--------------- -------- -------
maximum principal amount outstanding under the Acquisition Facility and the
Working Capital Loans exceed in the aggregate, at any time, Sixty Million
Dollars ($60,000,000):
11
(a) An Acquisition Loan may be made to satisfy Borrower's working
capital needs to the extent they exceed the formula-determined Borrowing Base in
connection with the acquisition of the stock or assets of another corporation;
(b) Each Acquisition Loan shall be due and payable one-hundred eighty
(180) days after the date thereof; provided, DFS shall have the option,
exercisable in its sole discretion, to grant Borrower one (1) or more thirty
(30) day extensions of any such Acquisition Loan;
(c) no Guaranty shall be in default and each shall be in full force
and effect at the time any Acquisition Loan is requested;
(d) Borrower will pay DFS finance charges on the principal amount of
any Acquisition Loan outstanding at the end of each day at a rate that is
one-half of one percent (.50%) per annum above the Prime Rate; and
(e) except as provided to the contrary in clauses (a) through (d)
above, each Acquisition Loan pursuant to this Section 3.4 shall be subject to
-----------
all other terms and conditions of this Agreement.
As a precondition to any such Acquisition Loan, Borrower shall have signed
and sent to DFS, a request, setting forth in writing the amount of the proposed
Acquisition Loan along with a copy of the underlying acquisition agreement and
all related exhibits, schedules and agreements pursuant to which such
acquisition is to be consummated.
Notwithstanding anything else herein and unless otherwise agreed to in
writing by DFS, the total outstanding principal amount of all Loans under this
Agreement shall not at any time exceed the Total Credit Limit.
3.5 Mandatory Prepayment. If at any time and for any reason the
---------------------
aggregate amount of outstanding Working Capital Loans exceeds the Borrowing
Base, Borrower will, immediately upon demand, repay an amount of the Working
Capital Loans made to it by DFS hereunder equal to such excess. In addition,
Borrower shall immediately pay DFS whatever sums may be necessary from time to
time to remain in compliance with the Total Credit Limit and the Total Working
Capital Credit Limit, as such limits may change from time to time, including,
without limitation, as a result of any Collateral no longer being deemed
eligible, or as a result of any change in the amount of any Eligible Account.
3.6 Interest; Calculation of Charges; Fees.
------------------------------------------
(a) Distribution Finance Loans. Borrower will pay DFS finance
----------------------------
charges on the outstanding principal debt Borrower owes DFS for each item of
Inventory financed by DFS under a Distribution Finance Loan at the rate(s) shown
on the Statement of Transaction identifying such Inventory, unless Borrower
objects thereto as provided in Section 3.2(a). The finance charges attributable
--------------
to such rates will: (i) be computed based on a 360 day year; (ii) be calculated
by multiplying the Daily Charge (as defined below) by the actual number of days
in the applicable billing period; and (iii) accrue from the invoice date of the
Inventory identified on such Statement of Transaction, until DFS receives full
payment of the principal debt Borrower owes DFS in good funds in accordance with
DFS' payment recognition policy and DFS applies such payment to Borrower's
principal debt in accordance with the terms of this Agreement. The annual
percentage rate of the finance charges will be calculated from the invoice date
of any item of Inventory financed by DFS, regardless of any period during which
any finance charge subsidy shall be paid or payable by any third party.
(b) Working Capital Loans.
-----------------------
12
(i) Interest; Calculation. Borrower will pay DFS finance
----------------------
charges on the Daily Contract Balance (as defined below) at a rate equal to the
Prime Rate minus one and one-quarter of one percent (1.25%) per annum; provided,
--------
however, that if at any time the aggregate monthly volume under the Distribution
-------
Finance Facility is less than Twenty Million Dollars ($20,000,000.00) per month
for a three-month consecutive period, then for the following month and for every
month thereafter until the month after such aggregate volume again exceeds
Twenty Million Dollars ($20,000,000.00) per month for a three-month consecutive
period, Borrower agrees to pay interest to DFS, on the Daily Contract Balance,
at a rate equal to the Prime Rate minus one-half of one percent (.50%) per
annum. The finance charges attributable to such rate will: (i) be computed
based on a 360 day year; (ii) be calculated with respect to each day by
multiplying the Daily Rate (as defined below) by the Daily Contract Balance; and
(iii) accrue from the date DFS authorizes any Electronic Transfer (as defined in
Section 3.6(b)(ii) below) or otherwise advances a Working Capital Loan to or for
------------------
the benefit of Borrower, until DFS receives full payment of the principal debt
Borrower owes DFS in good funds in accordance with DFS' payment recognition
policy and DFS applies such payment to Borrower's principal debt in accordance
with the terms of this Agreement.
(ii) Method of Transfer. Working Capital Loans will be made by
------------------
DFS, at Borrower's direction, by paper check, electronic transfer by Automated
Clearing House ("ACH"), Fed Wire Funds Transfer ("Fed Wire") or such other
--- --------
electronic means as DFS may announce from time to time (ACH, Fed Wire and such
other electronic transfer are collectively referred to as "Electronic
----------
Transfers"). If Borrower does not request a Working Capital Loan be made in a
specific method of transfer, DFS may determine from time to time in its sole
discretion what method of transfer to use.
(c) Definitions. The "Daily Charge" is the product of the Daily
----------- -------------
Rate multiplied by the Average Daily Balance. The "Daily Rate" is the quotient
----------
of the applicable annual rate provided herein or in any Statement of Transaction
divided by 360. The "Daily Contract Balance" is the amount of outstanding
------------------------
principal debt which Borrower owes DFS on the Working Capital Loans at the end
of each day (including the amount of all Electronic Transfers authorized) after
DFS has credited payments which it has received on the Working Capital Loans.
The "Average Daily Balance" is the quotient of: (i) the sum of the outstanding
----------------------
principal debt owed DFS on the Distribution Finance Facility on each day of a
billing period for each item of Inventory identified on the Statement of
Transaction, divided by (ii) the actual number of days in such billing period.
(d) Certain Charges. Borrower will (i) reimburse DFS for all
----------------
charges made by banks, including charges for collection of checks and other
items of payment and (ii) pay DFS all fees and charges in effect from time to
time for transfers of funds to or from the Borrower.
3.7 Billing Statement. DFS will send Borrower a monthly billing
------------------
statement identifying all charges due on Borrower's account with DFS. The
charges specified on each billing statement will be: (a) due and payable in full
immediately on receipt; and (b) an account stated, absent manifest error. DFS
may adjust the billing statement at any time to conform to applicable law and
this Agreement.
3.8 Loan Proceeds. The parties intend that all indebtedness
--------------
incurred hereunder shall be governed exclusively by the terms of this Agreement
and the other Loan Documents, and shall not, unless requested by DFS, be
evidenced by notes or other evidences of indebtedness. Upon any such request,
Borrower will immediately execute and deliver any such note or other evidence
reasonably requested by DFS. Any fees, charges or expenses charged to DFS by
any bank for payments made by DFS at Borrower's request shall be immediately
payable by Borrower. All advances and other obligations of Borrower made
hereunder will constitute a single obligation.
13
3.9 Default Interest Rate. If a Default occurs, and unless and
-----------------------
until cured, DFS may without prior demand, raise the rate of interest accruing
on the disbursed unpaid principal balance of any Loan by three percentage points
(3%) above the rate of interest otherwise applicable (the "Default Interest
----------------
Rate"), whether or not DFS elects to accelerate the unpaid principal balances as
a result of a Default. DFS will notify Borrower in writing before imposing the
Default Interest Rate permitted by this Section.
3.10 Interest Rate After Certain Events. If a judgment is entered
-------------------------------------
against Borrower for sums due under any of the Obligations, as applicable, the
amount of the judgment entered (which may include principal, interest,
reasonable attorneys' fees and costs) shall bear interest at the judgment rate
as permitted under applicable law as of the date of entry of the judgment. All
Obligations of Borrower described in clauses (a) and (b) of the definition
thereof shall bear interest at the Default Interest Rate.
3.11 Verification Rights of DFS. DFS may, without notice to
-----------------------------
Borrower and at any time or times hereafter verify the validity, amount or any
other matter relating to any Account by mail, telephone or other means, in the
name of Borrower or DFS.
3.12 Reports.
-------
(a) Additional Monthly Reports. Borrower agrees to provide DFS
----------------------------
with a report by the 25th day of each month, or more frequently if requested by
DFS, in each case as of the 15th day of such month, which shall be in such form
as is satisfactory to DFS, including supporting information regarding, but not
limited to (i) a Borrowing Base Certificate; (ii) an Inventory aging report;
(iii) a statement of the current Inventory status, showing the lower of cost
(determined on a "first-in, first-out" basis) or market value thereof; and (iv)
an aging of Accounts (the "Additional Monthly Report").
---------------------------
(b) Monthly Reports. Borrower agrees to provide to DFS by the
---------------
15th day of each month, or more frequently if requested by DFS, in each case as
of the last day of the immediately prior month, each of the following: (i)
Inventory aging report; (ii) aging of Accounts; (iii) an updated Exhibit 8.17;
------------
and (iv) aging of Borrower's accounts payable (the "Monthly Reports").
----------------
(c) Other Reports. Borrower agrees to provide DFS within
--------------
five (5) Business Days after each request by DFS any other report or information
requested by DFS (the "Other Reports").
--------------
(d) Accuracy of Reports. The Additional Monthly Report,
---------------------
Monthly Reports and the Other Reports will be true and correct in all material
respects. Borrower acknowledges DFS' reliance on the truthfulness and accuracy
in all material respects of each Additional Monthly Report, Monthly Report and
the Other Reports.
3.13 Establishment of Reserves. Notwithstanding the foregoing
---------------------------
provisions of Section 3.3, DFS shall have the right to establish reserves in
------------
such amounts, and with respect to such matters, as DFS shall deem necessary or
appropriate, against the amount of Working Capital Loans which Borrower may
otherwise request under Section 3.3, including, without limitation, with respect
-----------
to (a) price adjustments, damages, unearned discounts, returned products or
other matters for which credit memoranda are issued in the ordinary course of
Borrower's business; (b) shrinkage, spoilage and obsolescence of Inventory; (c)
slow moving Inventory; (d) other sums chargeable against Borrower as Working
14
Capital Loans under any section of this Agreement; (e) a material increase in
Dealer's dilution percentage, as determined by DFS; and (f) such other matters,
events, conditions or contingencies as to which DFS, in its sole reasonable
credit judgment determines reserves should be established from time to time
hereunder. DFS will notify Borrower in writing before establishing any reserve
described herein; provided, however, that DFS shall have no obligation to
-------- -------
provide such prior notice to Borrower upon the occurrence and during the
continuance of a Default.
3.14 Capital Adequacy.
-----------------
(a) In the event that DFS shall have determined that the
adoption of any law, rule or regulation regarding capital adequacy, or any
change therein or in the interpretation or application thereof or compliance by
DFS with any request or directive regarding capital adequacy (whether or not
having the force of law) from any central bank or governmental authority, does
or shall have the effect of reducing the rate of return on DFS' capital as a
consequence of its obligations hereunder to a level below that which DFS could
have achieved but for such adoption, change or compliance (taking into
consideration DFS' policies with respect to capital adequacy) by an amount
deemed by DFS, in its sole discretion, to be material, then from time to time,
after submission by DFS to Borrower of a written demand therefor, Borrower shall
pay to DFS such additional amount or amounts as will compensate DFS for such
reduction.
(b) A certificate of DFS claiming entitlement to payment as
set forth in Section 3.14(a) above shall be conclusive in the absence of
----------------
manifest error. Such certificate shall set forth the nature of the occurrence
giving rise to such payment, the additional amount or amounts to be paid to DFS,
and the method by which such amounts were determined. In determining such
amount, DFS may use any reasonable averaging and attribution method.
3.15 Collections. Unless otherwise directed by DFS, to expedite
-----------
collection of Accounts for the benefit of DFS, Borrower shall notify all of its
Account Debtors to make payment of the Accounts to one or more lock-boxes under
the sole control of DFS. The lock-box, and all accounts into which the proceeds
of any such lock-box(es) are deposited, shall be established at banks selected
by the Borrower and satisfactory to DFS. Borrower shall issue to any such banks
an irrevocable letter of instruction, in form and substance acceptable to DFS,
directing such banks to deposit all payments or other remittances received in
the lock-box to such account or accounts as DFS shall direct, for application
against the outstanding balance of the Obligations. Until all Obligations have
been satisfied in full, all funds deposited in the lock-box or any such account
immediately shall become the property of DFS, and any disbursements of the
proceeds in the lock-box or any such account will only be made to DFS. Borrower
shall obtain the agreement of such banks to waive any offset rights against the
funds so deposited. DFS assumes no responsibility for such lock-box
arrangement, including, without limitation, any claim of accord and satisfaction
or release with respect to deposits which any banks accept thereunder. All
remittances which Borrower receives in payment of any Accounts, and the proceeds
of any of the other Collateral, shall be: (i) kept separate and apart from
Borrower's own funds so that they are capable of identification as DFS'
property; (ii) held by Borrower as trustee of an express trust for DFS' benefit;
and (iii) shall be immediately deposited in such accounts designated by DFS.
All proceeds received or collected by DFS with respect to Accounts, and reserves
and other property of Borrower in possession of DFS at any time or times
hereafter, may be held by DFS without interest to Borrower until all Obligations
are paid in full or applied by DFS on account of the Obligations. DFS may
release to Borrower such portions of such reserves and proceeds as DFS may
determine. Upon the occurrence and during the continuance of a Default, DFS may
notify the Account Debtors that the Accounts have been assigned to DFS, collect
the Accounts directly in its own name and charge the collection costs and
expenses, including reasonable attorneys' fees, to Borrower. DFS has no duty to
protect, insure, collect or realize upon the Accounts to preserve rights in
them.
15
3.16 Advancements. If Borrower fails to (a) perform any of the
------------
affirmative covenants contained herein, (b) protect or preserve the Collateral
or (c) protect or preserve the status and priority of the Liens and security
interest of DFS in the Collateral, DFS may make advances to perform those
obligations. DFS will use reasonable efforts to attempt to give Borrower notice
prior to making such advancement. All sums so advanced will be due and payable
upon demand and will immediately upon advancement become secured by the security
interests created by this Agreement and will be subject to the terms and
provisions of this Agreement and all of the Loan Documents. DFS may add all
sums so advanced, plus any expenses or costs incurred by DFS, including
reasonable attorney's fees, as outstanding Loans as DFS may designate in its
sole discretion. The provisions of this Section will not be construed to
prevent the institution of rights and remedies of DFS upon the occurrence of a
Default. Any provisions in this Agreement to the contrary notwithstanding, the
authorizations contained in this Section will impose no duty or obligation on
DFS to perform any action or make any advancement on behalf of Borrower and are
for the sole benefit and protection of DFS.
3.17 Continuing Requirements - Accounts. Borrower will: (a) if
------------------------------------
from time to time required by DFS, immediately upon their creation, deliver to
DFS copies of all invoices, delivery evidences and other such documents relating
to each Account; (b) without DFS' consent not permit or agree to any extension,
compromise or settlement or make any change to any Account; (c) affix
appropriate endorsements or assignments upon all such items of payment and
proceeds so that the same may be properly deposited by DFS to DFS' account; (d)
immediately notify DFS in writing which Accounts may be deemed Ineligible
Accounts; and (e) xxxx all chattel paper and instruments now owned or hereafter
acquired by it to show that the same are subject to DFS' security interest and
immediately thereafter deliver such chattel paper and instruments to DFS with
appropriate endorsements and assignments to DFS.
3.18 Distribution Finance Facility Deficit. The "Distribution
---------------------------------------- ------------
Finance Facility Deficit" shall mean the amount, if any, by which Borrower's
--------------------
total current outstanding indebtedness under the Distribution Finance Facility
as of the date of any monthly Inventory report, exceeds the Distribution Finance
Inventory Value (as defined below) as determined by, and as of the date of, such
monthly Inventory report. Such Distribution Finance Facility Deficit, if any,
will remain in effect for purposes of this Agreement until the preparation and
delivery by Borrower to DFS of a new monthly Inventory report. The term
"Distribution Finance Inventory Value" is defined herein to mean one hundred
---------------------------------------
percent (100%) of the total aggregate wholesale invoice price of all of
Borrower's Inventory financed under the Distribution Finance Facility that is
unsold and in Borrower's possession and control as of the date of the applicable
monthly Inventory report and to the extent that DFS has a first priority, fully
perfected security interest therein, less the amount of any such Inventory
consisting of demonstration items or Inventory that is obsolete or otherwise
unmerchantable.
Furthermore, in the event Borrower's Distribution Finance Facility Deficit
exceeds at any time (a) the Eligible Account Availability, minus (b) Borrower's
outstanding Working Capital Loans, Borrower will immediately pay to DFS, as a
reduction of Borrower's total current outstanding indebtedness to DFS under the
Distribution Finance Facility, the difference between (i) Borrower's
Distribution Finance Facility Deficit, and (ii) (a) the Eligible Account
Availability minus (b) Borrower's outstanding Working Capital Loans.
3.19 Appointment of Xxxxxxx as Agent. Global hereby appoints Xxxxxxx
-------------------------------
as its agent and attorney-in-fact to take any action or execute any document or
instrument necessary or appropriate for the administration of the Collateral
hereunder and under the other Loan Document. Without limiting the generality of
the foregoing, Xxxxxxx shall prepare and deliver to DFS all reports concerning
the Accounts and other Collateral required by this Agreement, whether such
Collateral is owned by Xxxxxxx or Global, and such other Borrower shall be fully
bound by the statements and actions of Xxxxxxx. In addition, Xxxxxxx shall be
16
the only Borrower from whom DFS shall recognize requests for advances hereunder,
whether such advance request is for the benefit of Xxxxxxx or Global. DFS shall
be entitled to rely absolutely and without duty of inquiry or investigation upon
any agreement, request, communication or other notice given by Xxxxxxx
hereunder.
4. TERM OF AGREEMENT
4.1 Termination. This Agreement will continue in full force and
-----------
effect and be non-cancellable for two (2) years from the Effective Date (except
that it may be terminated by DFS upon ninety (90) days written notice to
Borrower or, with no prior notice in the exercise of its rights and remedies
upon Default by Borrower); provided, however, that Borrower may terminate this
-------- -------
Agreement prior to such date upon: (a) at least 90 days written notice to DFS;
(b) payment to DFS of all Obligations; and (c) payment to DFS of an amount as
follows:
Date of
Termination . . . . . . . . . Amount
----------------------------- --------
On or prior to the first. . . $165,000
anniversary of the
Effective Date
After the first anniversary . $ 82,500
of the Effective Date through
the second anniversary of the
Effective Date
This sum will also be paid by Borrower if this Agreement is terminated on
account of Borrower's Default. Termination on any date other than the
anniversary date will not entitle Borrower to a refund of any fee. DFS shall be
entitled to payment of all fees upon Default by Borrower which would have been
payable during the original term of this Agreement, or any extension thereof,
but for such early termination. These accelerated fees represent liquidated
damages are not a penalty. Any such written notice of termination delivered by
Borrower to DFS shall be irrevocable. It is understood that Borrower may elect
to terminate this Agreement in its entirety only, no section or lending facility
may be terminated singly.
Notwithstanding anything herein to the contrary, Borrower shall have
no obligation to pay the foregoing fee to DFS in the event this Agreement is
terminated by Borrower in connection with DFS' assignment of its interest in
this Agreement to a third party unacceptable to Borrower or the acquisition of
DFS by a third party unacceptable to Borrower.
4.2 Effect of Termination. Borrower will not be relieved from any
---------------------
Obligations to DFS arising out of DFS' advances or commitments made before the
effective termination date of this Agreement. DFS will retain all of its
rights, interests and remedies hereunder until Borrower has paid all of
Borrower's Obligations to DFS. All waivers set forth within this Agreement will
survive any termination of this Agreement.
5. BORROWING AND REPAYMENT PROCEDURES
5.1. Borrowing Procedures.
---------------------
17
(a) Generally. A request for a Working Capital Loan shall be made, or
---------
shall be deemed to be made, in the following manner: (i) Borrower may give DFS
written notice of its intention to borrow, in which notice Borrower shall
specify the amount of the proposed borrowing and the proposed borrowing date;
(ii) upon the occurrence and during the continuance of a Default, the becoming
due of any amount required to be paid under this Agreement as interest shall be
deemed irrevocably to be a request for a Working Capital Loan on the due date in
the amount required to pay such interest; and (iii) upon the occurrence and
during the continuance of a Default, the becoming due of any other Obligations
shall be deemed irrevocably to be a request for a Working Capital Loan on the
due date in the amount then so due.
For purposes of subpart (i) above, Borrower agrees that DFS may rely and act
upon any request for a Working Capital Loan from any individual listed by
Borrower on Exhibit 5.1(a), attached hereto.
---------------
(b) Conditions Precedent to Each Working Capital Loan. Without
----------------------------------------------------
limiting the applicability of the conditions precedent set forth in Section 7
---------
below to DFS' obligation to make any Working Capital Loan, the obligation of DFS
to make any Working Capital Loan shall be subject to the further conditions
precedent that, on the date of each such Working Capital Loan:
(i) The following statements shall be true: (A) the
representations and warranties contained in Section 8 hereof are correct in all
---------
material respects on and as of the date of such Working Capital Loan as though
made on and as of such date, and (B) there exists no Default or Unmatured
Default, nor would any Default or any Unmatured Default result from the making
of the Working Capital Loan requested by Borrower;
(ii) Borrower shall have signed and sent to DFS, if DFS so
requests, a request for advance, setting forth in writing the amount of the
Working Capital Loan requested; provided, however, that the foregoing condition
-------- -------
precedent shall not prevent DFS, if it so elects in its sole discretion, from
making a Working Capital Loan pursuant to Borrower's non-written request
therefor;
(iii) DFS shall have received a completed Borrowing Base Certificate,
signed by the Borrower, and dated not more than sixteen (16) days prior to the
date of Borrower's request for such Working Capital Loan; and
(iv) DFS shall have received such other approvals, opinions or
documents as it may reasonably request.
Borrower agrees that the making of a request by Borrower for a Working Capital
Loan, shall constitute a certification by Borrower and the Person(s) executing
or giving the same that all representations and warranties of Borrower herein
are true in all material respects as of the date thereof and that all required
conditions to the making of the Working Capital Loan have been met.
5.2 Excess Advances. DFS, in its sole and absolute discretion,
----------------
may elect to permit the total unpaid balance of Loans to exceed the Total Credit
Limit (the "Excess Advances"), and no such event or occurrence shall cause or
----------------
constitute a waiver by DFS of its right to demand payment of all or any part of
the Loans at any time within the terms of this Agreement or to refuse, in its
sole and absolute discretion, to make such further Loans. Any such Excess
Advances shall be payable immediately upon demand therefor, unless otherwise
specifically agreed to by DFS, and shall bear interest at the Default Interest
Rate.
5.3 All Loans One Obligation. All Obligations of Borrower to DFS
-------------------------
under this Agreement and all other agreements between Borrower and DFS shall
constitute one obligation to DFS secured by the security interest granted in
this Agreement, and by all other Liens heretofore, now, or at any time or
times hereafter granted by Borrower. All of the rights of DFS set forth in this
Agreement shall apply to any modification of or supplement to this Agreement, or
Exhibits hereto, unless otherwise agreed in writing.
18
5.4 Payments of Principal and Interest. Without waiving any other
----------------------------------
rights Borrower may otherwise have, all payments and amounts due hereunder by
Borrower shall be made or be payable without set-off or counterclaim and shall
be made to DFS on the date due at its office(s) responsible for Borrower's
account, or at such other place which DFS may designate to Borrower in writing.
Any payments received after such time shall be deemed received on the next
Business Day. Whenever any payment to be made hereunder shall be stated to be
due on a date other than a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall be included in the
computation of payment of interest or any fees.
5.5 Collection Days. All payments and all amounts received
----------------
hereunder will be credited by DFS to Borrower's account one (1) Business Day
after good funds have been deposited into DFS' general operating account.
6. SECURITY FOR THE OBLIGATIONS
6.1 Grant of Security Interest. To secure payment of all of
-----------------------------
Borrower's current and future Obligations and to secure Borrower's performance
of all of the provisions under this Agreement and the other Loan Documents,
Borrower grants DFS a security interest in all of Borrower's Inventory,
equipment, fixtures, accounts, contract rights, chattel paper, security
agreements, instruments, deposit accounts, reserves, documents and general
intangibles; and all judgments, claims, insurance policies, and payments owed or
made to Borrower thereon; all whether now owned or hereafter acquired, all
attachments, accessories, accessions, returns, repossessions, exchanges,
substitutions and replacements thereto, and all proceeds thereof. All such
assets are collectively referred to herein as the "Collateral." All such terms
----------
for which meanings are provided in the Uniform Commercial Code are used herein
with such meanings. All Collateral financed by DFS, and all proceeds thereof,
will be held in trust by Borrower for DFS, with such proceeds being payable in
accordance with this Agreement. Borrower covenants with DFS that DFS may
realize upon all or part of any Collateral in any order it desires and any
realization by any means upon any Collateral will not bar realization upon any
other Collateral. Borrower's liability under this Agreement is direct and
unconditional and will not be affected by the release or nonperfection of any
security interest granted hereunder.
6.2 Future Advances. DFS' security interests shall secure all
----------------
current and all future advances to Borrower made by DFS under the Loan
Documents.
6.3 Financing Statements. Borrower shall execute and deliver to
---------------------
DFS for the benefit of DFS such financing statements, certificates of title and
original documents as may be required by DFS with respect to DFS' security
interests.
6.4 Guaranties. Borrower shall cause any and all Subsidiaries,
----------
whether now existing or hereafter acquired, to execute and deliver
collateralized guaranties of the Obligations secured by a first priority,
perfected security interest in the assets described therein, except for TIFS
which perfected security interest shall be subordinated to TIFS' primary lender,
The Fifth Third Bank of Northern Kentucky, Inc., or its successors.
6.5 Further Assurances. Borrower will execute and deliver to DFS,
------------------
at such time or times as DFS may request, all financing statements, security
agreements, assignments, certificates, affidavits, reports, schedules, and other
documents and instruments that DFS may deem necessary to perfect and maintain
perfected DFS' security interests in the Collateral and to fully consummate the
transactions contemplated under all Loan Documents. All filing, recording or
registration fees shall be payable by Borrower.
19
6.6 Intellectual Property. Borrower shall execute and deliver a
----------------------
collateral assignment of patents, copyrights and trademarks in form and
substance reasonably acceptable to DFS granting DFS a first priority security
interest in and to the items listed in Exhibit 8.21 in form acceptable for
------------
recordation.
7. CONDITIONS PRECEDENT
All duties and obligations of DFS under the Loan Documents on the Effective
Date, and at all times during the term of this Agreement, are specifically
subject to the full and continued satisfaction by Borrower of the conditions
precedent set forth below.
7.1 Conditions Precedent. The following conditions must be
---------------------
satisfied as of the Effective Date:
(a) DFS' Counsel. DFS' counsel must approve of all matters pertaining
------------
to (i) title to the Collateral; (ii) the form, substance and due
execution of all Loan Documents; (iii) Borrower's organizational
documents; and (iv) all other legal matters, including the application
of any laws relating to usury.
(b) Material Change. There must not have been any change, between
----------------
April 5, 1998 and the Effective Date, which would have a Material
Adverse Effect on the condition of Borrower, the condition of the
Business, the value and condition of the Collateral, the structure of
Borrower other than as contemplated herein, or in the financial
information, audits and the like obtained by DFS.
(c) Perfected Liens. DFS shall have a perfected first priority Lien
----------------
and security interest in the Collateral, subject only to the Permitted
Liens.
(d) Insurance. Borrower shall provide DFS with certificates of
---------
insurance evidencing that Borrower and each Corporate Guarantor has
obtained the insurance as required in Section 9.1.2.
-------------
(e) Laws. Borrower and its Subsidiaries shall be in compliance with
----
all applicable laws and governmental regulations, including, but not
limited to, all Environmental Laws, the failure to comply with which
would have a Material Adverse Effect on Borrower, its Subsidiaries or
the Business.
(f) Certificate of Good Standing. A certificate of good standing for
----------------------------
Borrower (or other similar certificate) must be delivered to DFS, from
the appropriate governmental authority of Borrower's and each
Corporate Guarantor's state of incorporation and other jurisdictions
in which Borrower and each such Corporate Guarantor does business,
dated not earlier than 30 days prior to the Effective Date.
(g) Opinion of Borrower's Counsel. DFS must receive a written opinion
-----------------------------
from counsel for Borrower and each Corporate Guarantor, dated the
Effective Date, and addressed to and for the benefit of DFS, in form
and substance satisfactory to DFS.
(h) UCC Searches. DFS must receive a certificate from a provider of
------------
financing statement searches acceptable to DFS which identifies all
financing statements of public record not more than 30 days before the
Effective Date, that pertain to the Collateral and the collateral of
each Corporate Guarantor.
20
(i) Other Documents. Such other documents, certificates, submissions,
---------------
insurance policies and other matters as reasonably requested by DFS
relating to the transaction herein contemplated, including but not
limited to (A) Collateralized Guarantees from each of the Borrower's
Subsidiaries, along with such other documents as are necessary to
provide DFS with a first priority, fully perfected security interest
in all of the assets of each such Subsidiary, except for TIFS which
perfected security interest of DFS' shall be subordinated to TIFS'
primary lender, The Fifth Third Bank of Northern Kentucky, Inc., or
its successors, and (B) the Participation Agreement.
(j) President's Certificate (or Chief Executive Officer's Certificate,
------------------------------------------------------------------
for Global). In the form attached hereto as Exhibit 7.1(j) compliance
---------- --------------
with all of the terms and conditions in the Loan Documents.
(k) Articles of Incorporation. A certified copy of the Articles of
--------------------------
Incorporation, By-Laws and the resolutions of the directors of
Borrower authorizing the transactions contemplated by this Agreement.
(l) Secretary's Certificate of Resolution and Incumbency. In the form
----------------------------------------------------
attached hereto as Exhibit 7.1(l).
--------------
(m) Payoff Letter. A lien release and payoff letter executed by any
--------------
and all lienholders on any of the Collateral, other than with respect
to the Permitted Liens.
8. REPRESENTATIONS AND WARRANTIES
To induce DFS to enter into this Agreement, Borrower makes the
representations and warranties set forth below, all of which will remain true in
all material respects during the term of this Agreement. Borrower acknowledges
DFS' justifiable right to rely upon the representations and warranties set forth
below.
8.1 Financial Statements. Borrower's audited consolidated
---------------------
financial statements as of January 5, 1998 and Borrower's unaudited consolidated
financial statements as of April 5, 1998, copies of which have been previously
submitted to DFS, have been prepared in conformity with GAAP (except for the
absence of footnotes and non year-end adjustments on the unaudited financial
statements) and present fairly the financial condition of Borrower and its
consolidated Subsidiaries as at such dates and the results of their operations
for the periods then ended. Borrower warrants and represents to DFS that all
financial statements and information relating to Borrower or any Corporate
Guarantor which have been or may hereafter be delivered by Borrower or any
Corporate Guarantor are true and correct in all material respects and have been
and will be prepared in accordance with GAAP and, with respect to such
previously delivered statements or information, there has been no change which
would have a Material Adverse Effect on the financial or business condition of
Borrower or any Corporate Guarantor since the submission to DFS, either as of
the date of delivery, or, if different, the date specified therein, and Borrower
acknowledges DFS' reliance thereon.
8.2 Non-Existence of Defaults. Neither Borrower nor any of its
---------------------------
Subsidiaries is in default with respect to any material amount of its existing
Indebtedness. The making and performance of this Agreement and all other Loan
Documents, will not immediately, or with the passage of time, the giving of
notice, or both: (a) violate the provisions of the bylaws or any other
corporate document of Borrower; (b) violate any laws to the best of Borrower's
21
knowledge after reasonable inquiry, except where the failure to so comply could
not reasonably be expected to have a Material Adverse Effect upon Borrower, the
Business or Borrower's operations or financial condition; (c) result in a
material default under any contract, agreement, or instrument to which Borrower
is a party or by which Borrower or its properties are bound; or (d) result in
the creation or imposition of any security interest in, or Lien or encumbrance
upon, any of the Collateral except the Permitted Liens.
8.3 Litigation. Set forth on Exhibit 8.3 is a list of all
---------- ------------
actions, suits, investigations or proceedings pending or, to the knowledge of
Borrower, threatened against Borrower or any of its Subsidiaries, as of the date
hereof in which there is a reasonable probability of an adverse decision which
would Material and Adverse Effect upon Borrower, the Business, or the
Collateral.
8.4 Material Adverse Effect. Borrower does not know of or expect
------------------------
any change which would have a Material Adverse Effect on the Business, or on
Borrower's or any of the Subsidiaries' assets, liabilities, properties, or
condition, financial or otherwise, including changes in Borrower's financial
condition from April 5, 1998 through the Effective Date.
8.5 Title to Collateral. Except as set forth on Exhibit 8.5,
--------------------- -----------
Borrower has good and marketable title to all of the Collateral, free and clear
of any and all Liens, claims and encumbrances, other than the Permitted Liens.
8.6 Corporate Status. Borrower and each of the Subsidiaries is a
-----------------
corporation duly organized and validly existing, in good standing, with
perpetual corporate existence, under the laws of their respective jurisdictions
of formation. Borrower and its Subsidiaries have the corporate power and
authority to own their properties and to transact the Business in which they are
engaged and presently propose to engage. Borrower and each Subsidiary is duly
qualified as a foreign corporation and in good standing in all states where the
nature of their Business or the ownership or use of their property requires such
qualification, and where failure to so qualify would have a Material Adverse
Effect on its Business, operations or financial condition.
8.7 Subsidiaries. Exhibit 8.7 hereto lists the Subsidiaries as of
------------ -----------
the Effective Date.
8.8 Power and Authority. Borrower has the corporate power to
---------------------
borrow and to execute, deliver and carry out the terms and provisions of the
Loan Documents. Borrower has taken or caused to be taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement and all other Loan Documents and the borrowing thereunder.
8.9 Place of Business. Xxxxxxx'x chief executive office and the
-------------------
principal place of business is located at 0000 Xxxxxxxxxx Xxxx, Xxxxxx, XX
00000. Global's chief executive office and principal place of business is
located at 0000 Xxxxxxxxxx Xxxx, Xxxxxx, XX 00000. Borrower's records
concerning the Collateral are kept at such chief executive office, or will be
kept at such other place that Borrower informs DFS of not less than 30 days in
advance of relocation.
8.10 Enforceability of the Loan Documents. The Loan Documents
----------------------------------------
executed by Borrower are the valid and binding obligations of Borrower and are
enforceable against Borrower in accordance with their terms, except as limited
by bankruptcy, insolvency, or other laws of general application relating to the
enforcement of creditors' rights.
8.11 Taxes. Xxxxxxx'x federal tax identification number is
-----
00-0000000. Global's federal tax identification number is 00-0000000. Borrower
has: (a) filed all federal, state and local tax returns and other reports that
22
it is required by law to file the failure of which would have a Material Adverse
Effect on the Business or Borrower's or any Subsidiary's assets, (b) paid or
caused to be paid all taxes, assessments and other governmental charges that are
due and payable, the failure of which to pay would have a Material Adverse
Effect on the Business, except those contested in good faith and in accordance
with accepted procedures, and for which adequate reserves have been established
in accordance with GAAP, and (c) made adequate provision for the payment of such
taxes, assessments or other charges accruing but not yet payable. Borrower has
no knowledge of any deficiency or additional assessment in a material amount in
connection with any taxes, assessments or charges.
8.12 Compliance with Laws. Borrower, to the best of its knowledge
----------------------
after reasonable inquiry, has complied, and shall cause each Subsidiary to
comply, in all material respects with all applicable laws, including any
Environmental Laws and any zoning laws, the failure to comply with which would
have a Material Adverse Effect on Borrower individually, or Borrower and its
Subsidiaries on a consolidated basis.
8.13 Consents. Borrower and the Subsidiaries have obtained all
--------
material consents, permits, licenses, approvals or authorization of, or effected
the filing, registration or qualification with, any governmental entity which is
required to be obtained or effected by Borrower and the Subsidiaries in
connection with the Business or the execution and delivery of this Agreement and
the other Loan Documents the failure of which to obtain or effect would have a
Material Adverse Effect on Borrower individually, or on Borrower and its
Subsidiaries on a consolidated basis.
8.14 Purpose. Borrower will use the advances which DFS makes under
-------
the Credit Facility solely for lawful purposes and as described in Section 3
---------
hereof.
8.15 Condition of the Business. All material assets used in the
----------------------------
conduct of the Business are in good operating condition and repair and are fully
usable in the ordinary course thereof, reasonable wear and tear excepted.
8.16 Capital. All issued shares and all outstanding shares in the
-------
Subsidiaries as reflected in Borrower's financial statements are validly issued
pursuant to proper authorization of the board of directors of such Subsidiary,
and are fully paid, and non-assessable. Except for those stock option plans and
Shareholders Right Plan described on Exhibit 8.16, which plans shall not
--------------
bematerially amended without notice to DFS, there are no outstanding
subscriptions, warrants, options, calls or commitments, obligations or
securities convertible or exchangeable for shares of any stock of Borrower or
the Subsidiaries. Borrower and the Subsidiaries shall give DFS thirty days (30)
prior written notice before entering any agreement to register its equity or
debt securities under the Securities Act of 1933, as amended, or any state
securities law. All Borrower's and Subsidiary's issued shares and outstanding
capital stock are fully paid and non-assessable, and each such Person's capital
structure is as set forth on Exhibit 8.16.
-------------
8.17 Location of Collateral. Exhibit 8.17 describes the locations
------------------------ -------------
where any of the Collateral is located or stored as of the date hereof.
8.18 Real Property. Neither Borrower nor any Subsidiary own or lease
-------------
any real property, except as set forth on Exhibit 8.18 attached hereto.
-------------
8.19 Warranties and Representations-Accounts. For each Account
-----------------------------------------
listed by Borrower on any Borrowing Base Certificate, Borrower warrants and
represents to DFS that at all times: (a) such Account is genuine; (b) such
Account is not evidenced by a judgment or promissory note or similar instrument
or agreement; (c) it represents an undisputed bona fide transaction completed in
accordance with the terms of the invoices and purchase orders relating thereto;
23
(d) the goods sold or services rendered which resulted in the creation of such
Account have been delivered or rendered to and accepted by the Account Debtor;
(e) the amounts shown on the Borrowing Base Certificate, Borrower's books and
records and all invoices and statements delivered to DFS with respect thereto
are owing to Borrower and are not contingent; (f) no payments have been or will
be made thereon except payments turned over to DFS pursuant to the terms of this
Agreement; (g) there are no offsets, counterclaims or disputes existing or
asserted with respect thereto and Borrower has not made any agreement with the
Account Debtor for any deduction or discount of the sum payable thereunder
except regular discounts allowed by Borrower in the ordinary course of its
business for prompt payment; (h) there are no facts or events which in any way
impair the validity or enforceability thereof or reduce the amount payable
thereunder from the amount shown on the Borrowing Base Certificate, Borrower's
books and records and the invoices and statements delivered to DFS with respect
thereto; (i) to the best of Borrower's knowledge, all persons acting on behalf
of the Account Debtor thereon have the authority to bind the Account Debtor; (j)
the goods sold or transferred giving rise thereto are not subject to any Lien,
claim, encumbrance or security interest which is superior to that of DFS other
than a Permitted Lien; (k) such Account is subject to DFS' perfected, first
priority security interest and no other Lien other than a Permitted Lien; and
(l) there are no proceedings or actions known to Borrower or which to Borrower's
knowledge are threatened or pending against the Account Debtor thereon which
might have a Material Adverse Effect on such Account Debtor's financial
condition.
8.20 Environmental, Health and Safety Matters. Except as disclosed
------------------------------------------
on Exhibit 8.20, to the best of Borrower's knowledge, after reasonable inquiry:
------------
(a) the operations of Borrower and each of the Subsidiaries complies in all
respects with (i) all applicable Environmental Laws, and (ii) all applicable
OSHA Laws; (b) none of the operations of Borrower or any Subsidiary are subject
to any judicial or administrative proceeding alleging the Violation of any
Environmental Law or OSHA Law; (c) none of the operations of Borrower or any
Subsidiary is the subject of federal or state investigation evaluating whether
any remedial action is needed to respond to (i) a spillage, disposal or release
into the environment of any Hazardous Material or other hazardous, toxic or
dangerous waste, substance or constituent, or other substance, or (ii) any
unsafe or unhealthful condition at any premises of Borrower or any Subsidiary;
(d) neither Borrower nor any Subsidiary has filed any notice under any
Environmental Law or OSHA Law indicating or reporting (i) any past or present
spillage, disposal or release into the environment of, or treatment, storage or
disposal of, any Hazardous Material or other hazardous, toxic or dangerous
waste, substance or constituent, or other substance or (ii) any unsafe or
unhealthful condition at any premises of Borrower or any Subsidiary; and (e)
neither Borrower nor any Subsidiary has any known contingent liability in
connection with (i) any spillage, disposal or release into the environment of,
or otherwise with respect to, any Hazardous Material or other hazardous, toxic
or dangerous waste, substance or constituent, or other substance or (ii) any
unsafe or unhealthful condition at any premises of Borrower or any Subsidiary.
8.21 Patents, Copyrights, Trademarks, Etc. The Borrower and each of
-------------------------------------
the Subsidiaries possesses or has the right to use all of the patents,
trademarks, trade names, service marks and copyrights, and applications
therefor, and all technology, know-how, processes, methods and designs used in
or necessary for the conduct of its business, without known conflict with the
rights of others, except to the extent that the failure to so obtain or apply
could be expected not to have a Material Adverse Effect on the Borrower, any
Subsidiary or the Collateral. All such licenses, patents, trademarks, trade
names, service marks and copyrights, and applications therefor existing on the
date hereof are listed on Exhibit 8.21.
-------------
24
8.22 Solvency. The Borrower and each of the Subsidiaries now has
--------
capital sufficient to carry on its respective business and transactions and all
business and transactions in which it is about to engage and is now solvent and
able to pay its respective debts as they mature, and Borrower and each of the
Subsidiaries now owns property having a value, greater than the amount required
to pay Borrower's or such Subsidiary's debts.
8.23 Leases. Exhibit 8.23(a) attached hereto is a complete listing
------ ----------------
of all capitalized leases of Borrower and Exhibit 8.23(b) attached hereto is a
---------------
complete listing of all Operating Leases of Borrower.
8.24 Labor Relations. Except as described on Exhibit 8.24 attached
---------------- ------------
hereto and made a part hereof, neither Borrower nor any of its Subsidiaries is a
party to any collective bargaining agreement, and there are no material
grievances, disputes or controversies with any union or any other organization
of Borrower's employees, or threats of strikes, work stoppages or any asserted
pending demands for collective bargaining by any union or organization.
8.25 Business Locations; Agent for Process. During the preceding six
-------------------------------------
(6) year period, Borrower has had no office, place of business or agent for
service of process located in any state or county other than as shown on
Exhibit 8.17.
-------------
8.26 Warranties and Representations-Inventory. Borrower covenants,
------------------------------------------
warrants and represents to DFS that at all times: (a) Inventory will be kept
only at the locations indicated on Exhibit 8.17; (b) no Inventory is or will be
------------
produced in violation of the Federal Fair Labor Standards Act; (c) Borrower now
keeps and will keep correct and accurate records itemizing and describing the
kind, type, quality and quantity of Inventory, Borrower's cost therefor and the
selling price thereof, the daily withdrawals therefrom and the additions
thereto; (d) Inventory is not and will not be stored with a bailee, repairman,
warehouseman or similar party without DFS' prior written consent, and Borrower
will, concurrently with delivery to such party, cause any such party to issue
and deliver to DFS, in form acceptable to DFS, warehouse receipts, in DFS' name
evidencing the storage of such Inventory, and waivers of warehouseman's liens in
favor of DFS; (e) Borrower will pay all of its taxes, rents, business taxes, and
the like on the premises where the Inventory is located; and (f) Borrower will
not rent, lease, lend, demonstrate, pledge, consign, transfer or secrete any of
the Inventory or use any of the Inventory for any purpose other than exhibition
and sale to buyers in the ordinary course of business, without DFS' prior
written consent.
8.27 Reaffirmation. Each request for a Loan made by Borrower
-------------
pursuant to this Agreement or any of the other Loan Documents shall constitute
(a) an automatic representation and warranty by Borrower to DFS that there does
not then exist any Default or any Unmatured Default, and (b) a reaffirmation as
of the date of said request of all of the representations and warranties of
Borrower contained in this Agreement and the other Loan Documents, except to the
extent (i) previously fulfilled in accordance with the terms hereof or (ii)
previously waived in writing by DFS with respect to any particular factual
circumstance.
8.28 Survival of Representations and Warranties. Borrower covenants,
------------------------------------------
warrants and represents to DFS that all representations and warranties of
Borrower contained in this Agreement or any of the other Loan Documents shall be
true at the time of Borrower's execution of this Agreement and the other Loan
Documents, and shall survive the execution, delivery and acceptance thereof by
DFS and the parties thereto and the closing of the transactions described
therein or related thereto.
25
9. BORROWER'S COVENANTS
9.1 Affirmative Covenants. During the term of this Agreement and
----------------------
thereafter for so long as any Obligations are outstanding and unpaid, Borrower
covenants that unless otherwise consented to by DFS in writing, it shall perform
all the acts and promises required by this Agreement and all the acts and
promises set forth below.
9.1.1 Payment and Performance. Borrower will pay and perform
-----------------------
all Obligations in full when and as due hereunder.
9.1.2 Insurance.
---------
(a) Type of Insurance. Borrower will at all times cause the
-----------------
Business and the Collateral to be insured by insurers of
reasonable financial soundness and having an A. M. Best
rating of A or better, with such policies, against such
risks and in such amounts as are appropriate for reasonably
prudent businesses in Borrower's industry and of Borrower's
size and financial strength.
(b) Requirements as to Insurance Policies. The policies of
--------------------------------------
insurance which Borrower is required to carry shall comply
with the requirements listed below:
(i) Each such policy shall provide that it may not be
canceled or allowed to lapse at the end of a policy period
without at least 30 days' prior written notice to DFS;
(ii) Each liability and hazard insurance policy shall name
DFS as an additional insured; and
(iii) Each property insurance policy required hereunder
shall contain a standard lender's loss payable clause in
favor of DFS. Such insurance policies shall also contain
lender's loss payable endorsements satisfactory to DFS
providing, among other things, that any loss shall be
payable in accordance with the terms of such policy
notwithstanding any act of Borrower which might otherwise
result in forfeiture of such insurance;
(c) Collection of Claims. Borrower will promptly advise DFS
--------------------
of any insured casualty in excess of $500,000 and Borrower
agrees that DFS may direct all insurance proceeds therefrom
to be paid directly to DFS to the extent that such loss is
not adequately insured under an insurance policy which names
DFS as a loss payee, and hereby appoints DFS its
attorney-in-fact for such purpose.
(d) Blanket Policies. Any insurance required hereunder may
----------------
be supplied by means of a blanket or umbrella insurance
policy.
(e) Delivery of Policies or Certificates of Insurance.
------------------------------------------------------
Borrower shall deliver to DFS certificates of insurance
issued by insurers to evidence that the insurance maintained
by Borrower complies with the requirements hereunder.
9.1.3 Collection of Receivables; Sale of Inventory. Borrower
-----------------------------------------------
will collect its Accounts and sell its Inventory only in the ordinary course of
business, unless written permission to the contrary is obtained from DFS.
26
9.1.4 Notice of Litigation and Proceedings. Borrower will give
-------------------------------------
prompt notice to DFS of: (a) any litigation or proceeding (including fines and
penalties of any public authority) in which it, or any of the Subsidiaries is a
party in which there is a reasonable probability of an adverse decision which
would require it or any of the Subsidiaries to pay money or deliver assets,
whether or not the claim is considered to be covered by insurance that might
have a Material Adverse Effect upon Borrower's or any of its Subsidiary's
operations, financial condition, property or business; (b) any class action
litigation against it, regardless of size, that might have a Material Adverse
Effect upon Borrower's or any of its Subsidiary's operations, financial
condition, property or business; and (c) the institution of any other suit or
proceeding that might have a Material Adversely Effect on its or any of its
Subsidiary's operations, financial condition, property or the Business.
9.1.5 Payment of Indebtedness to Third Persons. Borrower will,
-----------------------------------------
and will cause each Subsidiary to, pay, when due, all Indebtedness and any other
liability due third persons, except when the amount thereof is being contested
in good faith by appropriate proceedings and with adequate reserves therefor
satisfactory to DFS in accordance with GAAP being set aside by Borrower or such
Subsidiary. DFS will use reasonable efforts to attempt to give Borrower notice
before DFS requires Borrower to set aside additional reserves.
9.1.6 Notice of Change of Business Location. Borrower will
------------------------------------------
notify DFS 30 days in advance of: (a) any change in or discontinuation of any
warehouse location of Borrower or any Subsidiary, any other location of a
material amount of the Collateral, Borrower's principal place of business, or
any of the Subsidiaries' existing offices or places of business, (b) the
establishment of any new places of business relating to the Business, and (c)
any change in or addition to the locations where Borrower's Inventory or records
are kept.
9.1.7 Payment of Taxes. Borrower will, and will cause each
------------------
Subsidiary to, pay or cause to be paid, when and as due, all taxes, assessments
and charges or levies imposed upon it or on any of its property or that it is
required to withhold and pay over to the taxing authority or that it must pay on
its income, the failure of which to pay would have a Material Adverse Effect on
Borrower individually, or on Borrower and the Subsidiaries on a consolidated
basis, except where contested in good faith by appropriate proceedings with
adequate reserves therefor satisfactory to DFS, in accordance with GAAP, having
been set aside by Borrower or such Subsidiary. DFS will use reasonable efforts
to attempt to give Borrower notice before DFS requires additional reserves.
However, Borrower will and will cause each Subsidiary to, pay or cause to be
paid all such taxes, assessments, charges or levies immediately whenever
foreclosure of any Lien that attaches on the Collateral appears imminent.
9.1.8 Further Assurances. Borrower agrees to, and will cause
-------------------
each Subsidiary to, execute such other and further documents, including, without
limitation, deeds of trust, promissory notes, security agreements, financing
statements, continuation statements, certificates of title, and the like as may
from time to time in the reasonable opinion of DFS be necessary to perfect,
confirm, establish, re-establish, continue, or complete the security interests,
collateral assignments and Liens in the Collateral, and the purposes and
intentions of this Agreement.
9.1.9 Maintenance of Status. Borrower will take all necessary
-----------------------
steps to (a) preserve its, and each Subsidiary's, existence as a corporation,
(b) preserve Borrower's and the Subsidiaries' franchises and permits, and (c)
comply with all present and future material agreements to which Borrower, or any
of the Subsidiaries, is subject, and (d) maintain, and cause each Subsidiary to
27
maintain, its qualification and good standing in all states in which such
qualification is necessary or in which the failure to be so qualified might have
a Material Adverse Effect on the financial condition or properties of Borrower
or the Business. Borrower will not change the nature of the Business during the
term of this Agreement.
9.1.10 Financial Statements; Reporting Requirements;
------------------------------------------------
Certification as to Events of Defaults. During the term of this Agreement,
-------------------------------------------
Borrower will furnish one copy of the following to DFS, upon DFS' request
therefore:
(a) within 120 days after the end of each fiscal year, annual
financial statements for Xxxxxxx and its Subsidiaries as of the
end of such fiscal year, consisting of a consolidated and
consolidating balance sheet, consolidated and consolidating
statement of operations, consolidated and consolidating
statements of cash flows and consolidated and consolidating
statement of stockholder's equity, in comparative form, together
with a narrative description of the financial condition and
results of operations and the liquidity and capital resources of
Borrower and setting forth in comparative form the corresponding
figures for the corresponding period of the prior fiscal year and
the corresponding figures from the most recent financial
projections of Borrower, discussing the reasons for any
significant variations. The statements and balance sheet will be
audited by an independent firm of certified public accountants
selected by Borrower, and certified by that firm of certified
public accountants to have been prepared in accordance with GAAP.
The certified public accountants will render an unqualified
opinion as to such statements and balance sheets. DFS will have
the absolute and irrevocable right, from time to time, to discuss
the affairs of Borrower directly with the independent certified
public accountant after prior notice to Borrower and the
reasonable opportunity of Borrower to be present at any such
discussions;
(b) by the 45th day of each quarter, a certificate of the
President, or Chief Financial Officer, in the form of Exhibit
-------
9.1.10(b) attached hereto, of Xxxxxxx stating that such Person
---------
has reviewed the provisions of the Loan Documents and that a
review of the activities of Borrower during such quarter has been
made by or under such Person's supervision with a view to
determining whether Borrower has observed and performed all of
Borrower's obligations under the Loan Documents, and that, to the
best of such Person's knowledge, information and belief, Borrower
has observed and performed each and every undertaking contained
in the Loan Documents and is not at the time in default in the
observance or performance of any of the terms and conditions
thereof or, if Borrower will be so in default, specifying all of
such defaults and events of which such Person may have knowledge;
(c) within 60 days after the end of each fiscal year, an annual
budget and income statement with cash flow projections for the
current fiscal year;
(d) promptly upon receipt thereof, copies of all final reports
and final management letters submitted to Borrower or any of the
Borrower's Subsidiaries by independent accountants in connection
with any annual or interim audit of the books of Borrower or such
Subsidiaries made by such accountants;
(e) copies of any and all reports, filings and other
documentation delivered to the Securities and Exchange Commission
by or on behalf of Borrower promptly after the delivery thereof,
if applicable; and
28
(f) any other statements, reports and other information as DFS
may reasonably request concerning the financial condition or
operations of Borrower and its properties.
9.1.11 Notice of Existence of Default. Borrower will, and will
-------------------------------
cause its Subsidiaries to, promptly notify DFS of: (a) the existence of any
known condition or event, which constitutes a Default or an Unmatured Default
and (b) the actual or threatened termination, suspension, lapse or
relinquishment of any material license, authorization, permit or other right
granted Borrower or for Borrower's benefit and used in the Business, or granted
to any of its Subsidiaries or for any such Subsidiaries' benefit, by any
governmental agency material to the Business.
9.1.12 Compliance with Laws. Borrower will, and will cause its
---------------------
Subsidiaries to, comply in all material respects with all applicable laws,
rules, regulations and orders the failure to comply with which would have a
Material Adverse Effect on Borrower individually, or Borrower and its
Subsidiaries on a consolidated basis.
9.1.13 Maintenance of Collateral. Borrower will maintain all
---------------------------
material Collateral and every part thereof in good condition and repair.
Borrower will not permit the value of the Collateral to be materially impaired.
Borrower will defend the Collateral against all claims and legal proceedings by
persons other than DFS. Borrower will not transfer the Collateral from the
premises where now located (other than Inventory sold in the ordinary course of
business and other Collateral transferred in the ordinary course of business),
or permit the Collateral to become a fixture or accession (unless so affixed on
the Effective Date) to any goods which are not items of Collateral, without the
prior written approval of DFS. Borrower will not permit the Collateral to be
used in violation of any applicable law, regulations, or any policy of
insurance. As to Collateral consisting of instruments and chattel paper,
Borrower will preserve rights in it against prior parties.
9.1.14 Collateral Records and Statements. Borrower will keep
------------------------------------
such accurate and complete books and records pertaining to the Collateral in
such detail and form as DFS reasonably requires, including, but not limited to:
schedules of Inventory; original orders; invoices; shipping documents; billing
settlements and receivables; sold receivables; Inventory listing containing
model, serial number (if available) and location. Other reporting will be
available upon request by DFS, including, but not be limited to, accounts
payable agings in such form as DFS reasonably requires. The statements will be
in the form and will contain the information as is prescribed by DFS.
9.1.15 Inspection of Collateral. DFS and any third party
--------------------------
appraiser selected by DFS may examine the Collateral at any time, and from time
to time during normal business hours. DFS and any third party appraiser
selected by DFS will have full access to, and the right to: (a) review, inspect
and make abstracts and copies from Borrower's books and records pertaining to
the Collateral, and (b) inspect and examine Inventory and check and test the
same as to quality, quantity, value and condition, wherever located, at any time
during reasonable business hours, and from time to time. Borrower will assist
DFS and any third party appraiser selected by DFS in so doing.
9.1.16 Landlord's Agreements. Borrower will provide or cause to
---------------------
be provided, on the Effective Date, landlord waivers and agreements in a form
acceptable to DFS with respect to leased real property and with respect to any
future leases, prior to entering into them.
29
9.2 Negative Covenants. During the term of this Agreement and
-------------------
thereafter, for so long as any Obligations are outstanding and unpaid, Borrower
covenants that unless otherwise consented to in writing by DFS, Borrower shall
not perform or cause or permit to be performed the following acts:
9.2.1 Change of Name, Etc. Borrower and the Subsidiaries will
---------------------
not change their name, or begin to trade under any assumed names or trade names
without thirty (30) days prior written notice to DFS. Borrower will not, and
will not permit any Subsidiary to, change its manner of organization, enter into
any mergers, consolidations, reorganizations or recapitalizations without DFS'
prior written consent which shall not be unreasonably withheld, other than as
contemplated herein.
9.2.2 Sale or Transfer of Assets. Except in the ordinary course
--------------------------
of business, except for other asset sales not exceeding $100,000 in the
aggregate during any fiscal year, or except as consented to in writing by DFS,
Borrower and the Subsidiaries will not sell, transfer, lease (including
sale-leaseback) or otherwise dispose of all or any substantial part of their
assets. This provision will not apply to any sale if the proceeds of such sale
pay the Obligations in full.
9.2.3 Encumbrance of Assets. Borrower will not, and will not
-----------------------
permit a Subsidiary to, mortgage, pledge, grant or permit to exist a security
interest in or Lien upon any of the Collateral, now owned or hereafter acquired
except for the Permitted Liens.
9.2.4 Acquisition of Stock or Assets; New Subsidiaries.
------------------------------------------------------
Borrower and the Subsidiaries will not, without at least thirty (30) days prior
written notice to DFS, acquire, or enter into any agreement, to acquire, all or
substantially all the assets of, equity interest or stock in, another business,
nor will the Borrower hereafter create any new Subsidiaries. Borrower and the
Subsidiaries shall give DFS prompt written notice of entering into any
commitment letter or letter of intent to acquire all or substantially all of the
assets of, equity interest or stock in another business.
9.2.5 False Certificates or Documents. Borrower has not and
----------------------------------
will not, and will not permit any Subsidiary to, furnish DFS with any
certificate or other document that contains any untrue statement of material
fact or that omits to state a material fact necessary to make it not misleading
in light of the circumstances under which it was furnished.
9.2.6 Assignment. Borrower will not assign or attempt to assign
----------
the Loan Documents or any of its interests under the Loan Documents, except in
favor of DFS.
9.2.7 Transactions with Affiliates. Borrower will not enter
------------------------------
into any contracts, leases, sales or other transactions with any Affiliate on
terms less favorable than could be obtained generally by Borrower from a
non-Affiliate.
9.2.8 Dividends. Borrower will not declare or pay any dividends
---------
(other than a stock dividend) upon its capital stock in any given fiscal year in
amount in excess of fifty percent (50%) of Borrower's net profits for such
fiscal year, without DFS' prior written consent.
9.2.9 Loans by Borrower. Borrower will not, and will not permit
-----------------
any Subsidiary to, make any loan to any Person which exceed in the aggregate at
any time One Million Dollars ($1,000,000), except for loans in anticipation of
reasonable and normally reimbursable business expenses and trade credit extended
in the ordinary course of Business.
30
9.2.10 Fiscal Year. Borrower will not change its fiscal
------------
year-end without sixty (60) days prior written notice to DFS.
9.2.11 Total Indebtedness. Borrower shall not create, incur,
-------------------
assume, or suffer to exist, or permit any Subsidiary to create, incur or suffer
to exist, any Indebtedness, except:
(a) the Obligations;
(b) Subordinated Debt;
(c) Indebtedness of any Subsidiary to Borrower;
(d) Accounts payable to trade creditors and current operating
expenses (other than for money borrowed) incurred in the ordinary
course of business which are aged not more than thirty (30) days
past due, unless actively contested in good faith and by
appropriate and lawful proceedings and for which adequate
reserves have been established in accordance with GAAP;
(e) Permitted Purchase Money Indebtedness;
(f) Capitalized Lease Obligations not to exceed $250,000
outstanding at any time;
(g) non-recourse Indebtedness of TIFS to The Fifth Third Bank of
Northern Kentucky, Inc. in connection with its lease financing
program with such bank;
(h) recourse Indebtedness of TIFS to The Fifth Third Bank of
Northern Kentucky, Inc. in connection with its lease financing
program with such bank which does not exceed at any time, the
aggregate sum of $20,000,000;
(i) Obligations under Operating Leases permitted by Section
-------
9.2.16 and
------
(j) unsecured Indebtedness not included in items (a) through (i)
above which does not exceed at any time, the aggregate sum of
$25,000,000.
9.2.12 Adverse Transactions. Borrower will not enter into any
---------------------
transaction, or permit any Subsidiary to enter into any transaction, which
materially and adversely affects or may materially and adversely affect the
Collateral or Borrower's ability to repay the Obligations or permit or agree to
any material extension, compromise or settlement or make any change or
modification of any kind or nature with respect to any Account, including any of
the terms relating thereto, other than discounts and allowances in the ordinary
course of business, all of which shall be reflected in the Borrowing Base
Certificate submitted to DFS pursuant to Section 3.3 of this Agreement.
------------
9.2.13 Guaranties. Borrower will not guarantee, assume, endorse
----------
or otherwise, in any way, become directly or contingently liable with respect to
the Indebtedness of any Person, (i) except by endorsement of instruments or
items of payment for deposit or collection, (ii) except for customary
Indebtedness in the form of guarantees given in connection with asset sales in
the ordinary course of business, to the extent the maximum exposure under such
guarantees at no time exceeds in the aggregate $10,000,000; and (iii) except for
that certain Payment Guaranty dated as of October 31, 1997 given by Xxxxxxx to
The Fifth Third Bank of Northern Kentucky, Inc. of up to $20,000,000 of the
obligations of TIFS to The Fifth Third Bank of Northern Kentucky, Inc., provided
that such guaranty may not be modified or otherwise amended without the prior
written consent of DFS.
9.2.14 Margin Securities. Borrower will not own, purchase or
------------------
acquire, or permit any Subsidiary to own, purchase or acquire, (or enter, or
permit any Subsidiary to enter, into any contract to purchase or acquire) any
"margin security" as defined by any regulation of the Federal Reserve Board as
now in effect or as the same may hereafter be in effect unless, prior to any
such purchase or acquisition or entering into any such contract, DFS shall have
31
received an opinion of counsel satisfactory to DFS to the effect that such
purchase or acquisition will not cause this Agreement to violate Regulations G
or U or any other regulation of the Federal Reserve Board then in effect.
9.2.15 Tax Consolidation. Borrower will not file or consent to
------------------
the filing of any consolidated income tax return with any Person other than a
Subsidiary.
9.2.16 Operating Leases. The Borrower shall not, and shall not
------------------
permit any Subsidiary of the Borrower to, enter into any Operating Leases except
for Operating Leases entered into in the ordinary course of business in the
manner and to the extent consistent with past practice; provided, however, that
the total rent per annum for all Operating Leases of the Borrower and its
Subsidiaries shall not exceed $3,000,000 in the aggregate, for any fiscal year.
9.3 FINANCIAL COVENANTS.
9.3.1 Amounts. Borrower agrees that it will at all times
-------
maintain the following:
(a) a Tangible Net Worth plus Subordinated Debt in the combined amount
of not less than Fifty Million Dollars ($50,000,000);
(b) a ratio of Debt minus Subordinated Debt to Tangible Net Worth plus
Subordinated Debt of not more than Four to One (4.0:1.0); and
(c) a ratio of Current Tangible Assets to current liabilities of not
less than One and Twenty One-Hundredths to One (1.20:1.0).
For purposes of this paragraph: (i) "Tangible Net Worth" means the
-------------------
book value of Borrower's assets less liabilities (including as
liabilities all reserves for contingencies and other potential
liabilities), excluding from such assets all Intangibles; (ii)
"Intangibles" means and includes general intangibles (as that term is
-----------
defined in the Uniform Commercial Code); accounts receivable and
advances due from officers, directors, member, owner, employees,
stockholders and affiliates; leasehold improvements net of
depreciation; licenses; good will; prepaid expenses; escrow deposits;
covenants not to compete; the excess of cost over book value of
acquired assets; franchise fees; organizational costs; finance
reserves held for recourse obligations; capitalized research and
development costs; and such other similar items as DFS may from time
to time determine in DFS' sole discretion; (iii) "Debt" means all of
----
Borrower's liabilities and indebtedness for borrowed money of any kind
and nature whatsoever, whether direct or indirect, absolute or
contingent, and including obligations under capitalized leases,
guaranties or with respect to which Borrower has pledged assets to
secure performance, whether or not direct recourse liability has been
assumed by Borrower; (iv) "Subordinated Debt" means all of Borrower's
-----------------
Debt which is subordinated to the payment of Borrower's liabilities to
DFS by an agreement in form and substance satisfactory to DFS; and (v)
"Current Tangible Assets" means Borrower's current assets less, to the
-----------------------
extent otherwise included therein, all Intangibles. The foregoing
terms will be determined in accordance with GAAP, and, if applicable,
on a consolidated basis ("Financial Covenants").
9.3.2 Covenant Compliance Certificate. The President or Chief
---------------------------------
Financial Officer of Borrower will certify to DFS by the 45th day of each
quarter, or more often if requested by DFS, that Borrower is in compliance with
the Financial Covenants as set forth in a form acceptable to DFS in its sole
discretion.
32
10. DEFAULT/REMEDIES
Borrower will be in default under this Agreement (each, a "Default")
-------
if:
(a) Borrower breaches any terms, covenants, warranties or
representations contained herein, or in any other Loan Document;
(b) any Corporate Guarantor breaches any terms, covenants, warranties
or representations contained in any guaranty or other agreement between such
Corporate Guarantor and DFS, revokes or attempts to revoke any such guaranty
agreement, or repudiates such Corporate Guarantor's liability thereunder;
(c) any representation, statement, report or certificate made or
delivered by Borrower or any Corporate Guarantor to DFS is not accurate when
made and such breach is not cured to DFS' satisfaction within five (5) days
after the sooner to occur of Borrower's receipt of notice of such breach from
DFS or the date on which such breach becomes known to any officer of Borrower;
(d) Borrower fails to pay any portion of Borrower's debts to DFS when
due and payable hereunder or under any other agreement between DFS and Borrower;
(e) Borrower abandons any material amount of the Collateral;
(f) Borrower or any Corporate Guarantor is or becomes in default of
any obligation owed to any third party which exceed at any time the aggregate
amount of $1,000,000;
(g) money judgment(s) are issued against Borrower or any Corporate
Guarantor which are not dismissed, satisfied or discharged within 30 days and
which exceed at any time the aggregate amount of $1,000,000;
(h) an attachment, sale or seizure issues or is executed against any
assets of Borrower or against any assets of any Corporate Guarantor which is not
satisfied or released within ten (10) days;
(i) [RESERVED];
(j) Borrower or any Corporate Guarantor ceases existence as a
corporation unless such Corporate Guarantor ceases existence pursuant to a
merger with and into Borrower;
(k) (i) Borrower ceases or suspends business, or (ii) any Corporate
Guarantor ceases or suspends business outside the ordinary course of its
business; provided, however, that the cessation or suspension of the business of
any Corporate Guarantor for any reason whatsoever shall be a Default if such
event occurs without prior notice thereof to DFS;
(l) Borrower or any Corporate Guarantor makes a general assignment for
the benefit of creditors;
(m) Borrower or any Corporate Guarantor becomes insolvent or
voluntarily or involuntarily becomes subject to the Federal Bankruptcy Code, any
state insolvency law or any similar law;
(n) any receiver is appointed for any of Borrower's or any Corporate
Guarantor's assets;
(o) any guaranty of Borrower's debts to DFS is terminated or
notification of Corporate Guarantor's intent to so terminate is given to DFS;
(p) Borrower loses any franchise, permission, license or right to sell
or deal in any Collateral which would have a Material Adverse Effect upon
Borrower;
(q) Borrower or any Corporate Guarantor misrepresents Borrower's or
such Corporate Guarantor's financial condition or organizational structure;
(r) any of the Collateral becomes subject to any Lien, claim,
encumbrance or security interest other than a Permitted Lien and other than any
other Liens, not to exceed $100,000 in the aggregate at any time;
(s) Borrower shall be enjoined, restrained or in any way prevented by
court, governmental or administrative order from conducting all or any material
part of its Business; or any material lease or agreement pursuant to which
Borrower leases, uses or occupies any property shall be canceled or terminated
prior to the expiration of its stated term, or any material part of the
Collateral shall be taken through condemnation or the value thereof shall be
impaired through condemnation;
33
(t) Xxxxx Xxxxxxx shall cease to own and control (except by reason of
death), beneficially and of record, at least 15% of the issued and outstanding
capital stock of Borrower;
(u) there shall occur a change which has a Material Adverse Effect on
the financial or other condition or business prospects of Borrower or any
Corporate Guarantor;
(v) any vendor, distributor or manufacturer from whom Borrower
purchases Inventory terminates or materially alters its obligations under any
repurchase or related agreement with DFS;
(w) there exists any default under the terms of a Participation
Agreement, including but not limited to, Participant's failure to fund its share
of any Working Capital Loan or Acquisition Loan or to provide at least
$30,000,000 of participations in the Working Capital Loans and Acquisition
Loans;
(x) the Participation Agreement is terminated for any reason; or
(y) DFS determines in good faith that it is insecure with respect to
any of the Collateral or the payment of any part of Borrower's Obligations.
In the event of a Default:
(i) DFS may at any time at DFS' election, with notice or demand to
Borrower, do any one or more of the following: cease making further
Loans and declare all or any of the Obligations immediately due and
payable, together with all costs and expenses of DFS' collection
activity, including, without limitation, all reasonable attorneys'
fees; exercise any or all rights under applicable law (including,
without limitation, the right to possess, transfer and dispose of the
Collateral); and/or cease extending any additional credit to Borrower.
(ii) Borrower will segregate and keep the Collateral in trust for DFS, and
in good order and repair, and will not sell, rent, lease, consign,
otherwise dispose of or use any Collateral, nor further encumber any
Collateral.
(iii)Upon DFS' oral or written demand, Borrower will immediately deliver
the Collateral to DFS, in good order and repair, at a place specified
by DFS, together with all related documents; or DFS may, in DFS' sole
discretion and without notice or demand to Borrower, take immediate
possession of the Collateral together with all related documents.
(iv) DFS may, without notice, apply the Default Interest Rate.
(v) DFS may, without notice to Borrower and at any time or times, enforce
payment and collect, by legal proceedings or otherwise, Accounts in
the name of Borrower or DFS; and take control of any cash or non-cash
items of payment or proceeds of Accounts and of any rejected,
returned, repossessed or stopped in transit goods relating to
Accounts. DFS may at its sole election and without demand enter, with
or without process of law, any premises where Collateral might be and,
without charge or liability to DFS therefor do one or more of the
following: (i) take possession of the Collateral and use or store it
in said premises or remove it to such other place or places as DFS may
deem convenient; (ii) take possession of all or part of such premises
and the Collateral and place a custodian in the exclusive control
thereof until completion of enforcement of DFS' security interest in
the Collateral or until DFS' removal of the Collateral and, (iii)
remain on such premises and use the same, together with Borrower's
materials, supplies, books and records, for the purpose of liquidating
or collecting such Collateral and conducting and preparing for
disposition of such Collateral.
(vi) Upon the occurrence of a Default under Sections 10.1 (l), (m), or (n),
------------------------------
all Obligations shall automatically be accelerated and due and payable
and the Default Interest Rate shall automatically apply as of the date
of the first occurrence of such Default, without any prior notice,
demand or action of any type on the part of DFS.
34
All of DFS' rights and remedies are cumulative. DFS' failure to
exercise any of DFS' rights or remedies hereunder will not waive any
of DFS' rights or remedies as to any past, current or future Default.
11. SALE OF COLLATERAL
Borrower agrees that if DFS conducts a private sale of any Collateral
by requesting bids from 10 or more dealers or distributors in that type of
Collateral, any sale by DFS of such Collateral in bulk or in parcels within 120
days of: (a) DFS' taking possession and control of such Collateral; or (b) when
DFS is otherwise authorized to sell such Collateral; whichever occurs last, to
the bidder submitting the highest cash bid therefor, is a commercially
reasonable sale of such Collateral under the Uniform Commercial Code. Borrower
agrees that the purchase of any Collateral by a vendor, as provided in any
agreement between DFS and the vendor, if any, is a commercially reasonable
disposition and private sale of such Collateral under the Uniform Commercial
Code, and no request for bids shall be required. Borrower further agrees that
7 or more days prior written notice will be commercially reasonable notice of
any public or private sale (including any sale to a vendor). Borrower
irrevocably waives any requirement that DFS retain possession and not dispose of
any Collateral until after an arbitration hearing, arbitration award,
confirmation, trial or final judgment. If DFS disposes of any such Collateral
other than as herein contemplated, the commercial reasonableness of such
disposition will be determined in accordance with the laws of the state
governing this Agreement.
12. INDEMNIFICATIONS
12.1 General Indemnity. In addition to the payment of expenses and
------------------
attorneys' fees, if applicable, whether or not the transactions contemplated
hereby shall be consummated, Borrower agrees to indemnify, pay and hold DFS and
the officers, directors, employees, agents, and affiliates of DFS (collectively
called the "Indemnitees") harmless from and against, any and all other
-----------
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of counsel
for any of such Indemnitees in connection with any investigative, administrative
or judicial proceeding commenced or threatened, whether or not any of such
Indemnitees shall be designated a party thereto), that may be imposed on,
incurred by, or asserted against the Indemnitees, in any manner relating to or
arising out of the Loan Documents, the statements contained in any commitment
letters delivered by DFS, DFS' agreement to make the Loans or any other payment
hereunder, or the use or intended use of the proceeds of any of the Loans
hereunder (the "Indemnified Liabilities"); provided, however, that Borrower
------------------------ -------- -------
shall have no obligation to an Indemnitee hereunder with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of an
Indemnitee. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, Borrower shall contribute the maximum
portion that it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them. The provisions of the undertakings and
indemnification set out in this Section 12.1 shall survive satisfaction and
------------
payment of the Obligations and termination of this Agreement.
12.2 Environmental and Safety and Health Indemnity. Borrower hereby
----------------------------------------------
indemnifies the Indemnitees and agrees to hold the Indemnitees harmless from and
against any and all losses, liabilities, damages, injuries, costs, expenses and
claims of any and every kind whatsoever (including, without limitation, court
costs and attorneys' fees) which at any time or from time to time may be paid,
35
incurred or suffered by, or asserted against, an Indemnitee for, with respect
to, or as a direct or indirect result of the violation by Borrower or any
Subsidiary, of any Environmental Law or OSHA Law; or with respect to, or as a
direct or indirect result of (a) the presence on or under, or the escape,
seepage, leakage, spillage, disposal, discharge, emission or release from,
properties utilized by Borrower and/or any Subsidiary in the conduct of its
business into or upon any land, the atmosphere, or any watercourse, body of
water or wetland, of any Hazardous Material or other hazardous, toxic or
dangerous waste, substance or constituent, or other substance (including,
without limitation, any losses, liabilities, damages, injuries, costs, expenses
or claims asserted or arising under the Environmental Laws) or (b) the existence
of any unsafe or unhealthful condition on or at any premises utilized by
Borrower and/or any Subsidiary in the conduct of its business. The provision of
and undertakings and indemnification set out in this Section 12.2 shall survive
------------
satisfaction and payment of the Obligations and termination of this Agreement.
13. OTHER TERMS
13.1 Amendment, Changes and Modification. The Loan Documents may be
------------------------------------
amended, changed or modified only as may be agreed upon in writing by Borrower
and DFS from time to time.
13.2 Binding Effect. The Loan Documents will be binding upon the
---------------
parties, their successors and assigns, provided, however, that Borrower shall
not assign or attempt to assign this Agreement, any other Loan Document or any
of its interests under the Loan Documents, without the prior written consent of
DFS.
13.3 Broker Fee. Neither party is obligated to pay any premium or
-----------
other charge, brokerage fee or commission in connection with the agreements set
forth herein. Each party will indemnify the other and hold it harmless from any
such claim arising out of such party's acts or those of its representatives.
13.4 Entire Agreement. The Loan Documents embody the entire
-----------------
agreement of the parties relating to the Credit Facility. There are no
promises, terms, conditions, obligations or warranties other than those
contained in the Loan Documents. The Loan Documents supersede all prior
communications, representations or agreements, verbal or written, between the
parties relating to the Credit Facility.
13.5 Headings. The headings to the sections of this Agreement are
--------
included only for the convenience of the parties and will not have the effect of
defining, diminishing or enlarging the rights of the parties or affecting the
construction or interpretation of any portion of this Agreement.
13.6 Incorporation by Reference. All other Loan Documents are
----------------------------
incorporated herein by this reference and are made a part of this Agreement as
if fully set forth herein. This Agreement, prior to such incorporation,
controls in the event of any conflict with the terms of any other Loan
Documents.
13.7 Interpretation. For the purpose of construing this Agreement,
--------------
unless the context otherwise requires, words in the singular will be deemed to
include words in the plural, and vice versa.
13.8 Notices. Any notice under the Loan Documents, will be in
-------
writing. Any notice to be given or document to be delivered under the Loan
Documents will be deemed to have been duly given upon delivery, if delivered in
person or by any expedited delivery service which provides proof of delivery,
upon tested telex or facsimile transmission, or on the fifth Business Day after
mailing, if mailed by certified mail, return receipt requested, postage prepaid
mail, addressed to DFS or Borrower at the appropriate addresses. DFS will use
36
reasonable efforts to deliver any notice DFS is required to give to Borrower;
provided, however, that failure by DFS to actually give any such notice will not
be deemed to be a waiver of any rights or remedies of DFS and will not give rise
to any claims, defenses or damages by Borrower. The addresses for notices are
those set forth below or such other addresses as may be hereafter specified by
written notice by the parties:
to DFS: Deutsche Financial Services Corporation
0000 Xxx Xxxxx Xxxx, Xxxxx 000
Xx. Xxxxx, XX 00000
Attention: Regional Vice President
Facsimile No.: (000) 000-0000
with a copy to: Deutsche Financial Services Corporation
000 Xxxxxxxxx Xxxxxx Xxxxx
Xx. Xxxxx, XX 00000-0000
Attention: General Counsel
Facsimile No.: (000) 000-0000
to Pomeroy or: Pomeroy Computer Resources, Inc.
Global 0000 Xxxxxxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Chief Financial Officer
Facsimile No.: (000) 000-0000
with a copy to: Xxxxxxxxx & Dreidame Co., L.P.A.
Suite 2300
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxx, III, Esq.
Facsimile No.: (000) 000-0000
13.9 No Third Party Beneficiary Rights and Reliance. No Person not a
----------------------------------------------
party to this Agreement will have any benefit under this Agreement nor have
third-party beneficiary rights as a result of any of the Loan Documents, nor
will any party be entitled to rely on any actions or inactions of DFS or its
agents, all of which are done for the sole benefit and protection of DFS.
13.10 Protection or Preservation of Collateral. DFS will not have any
----------------------------------------
contractual duty to protect, insure, collect or realize upon the Collateral or
preserve rights in it against prior parties. DFS will not be responsible or
liable for any shortage, discrepancy, damage, loss or destruction of any part of
the Collateral regardless of the cause, excepting those arising directly from
DFS' gross negligence or willful misconduct.
13.11 Relationship of the Parties. Neither DFS on the one hand
------------------------------
nor Borrower on the other hand will be deemed a partner, joint venturer or
related entity of the other by reason of the Loan Documents.
13.12 Reversal of Payments. To the extent that Borrower makes a
----------------------
payment or payments to DFS, which payment or payments or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law, or equitable cause,
then to the extent of such payment or proceeds received, the Credit Facility
will be revived and continue in full force and effect, as if such payment or
proceeds had not been received by DFS.
37
13.13 Severability. If any provision of this Agreement (either
------------
generally, or as to a specific application to a set of facts) will be held to be
invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability will not affect any other provision of this Agreement (either
in its entirety, or as to or the application of such provision to any other set
of facts), but this Agreement will be construed as if such invalid, illegal or
unenforceable provision never had been included in this Agreement.
13.14 Maximum Interest. Borrower acknowledges that DFS intends to
----------------
strictly conform to the applicable usury laws governing this Agreement.
Regardless of any provision contained herein or in any other document executed
or delivered in connection herewith or therewith, DFS shall never be deemed to
have contracted for, charged or be entitled to receive, collect or apply as
interest on this Agreement (whether termed interest herein or deemed to be
interest by judicial determination or operation of law), any amount in excess of
the maximum amount allowed by applicable law, and, if DFS ever receives,
collects or applies as interest any such excess, such amount which would be
excessive interest will be applied first to the reduction of the unpaid
principal balances of advances under this Agreement, and, second, any remaining
excess will be paid to Borrower. In determining whether or not the interest
paid or payable under any specific contingency exceeds the highest lawful rate,
Borrower and DFS shall, to the maximum extent permitted under applicable law:
(a) characterize any non-principal payment (other than payments which are
expressly designated as interest payments hereunder) as an expense or fee rather
than as interest; (b) exclude voluntary pre-payments and the effect thereof; and
(c) spread the total amount of interest throughout the entire term of this
Agreement so that the interest rate is uniform throughout such term.
13.15 Waivers by DFS. DFS may at any time or from time to time
----------------
waive all or any rights under any of the Loan Documents, but any waiver or
indulgence at any time or from time to time will not constitute, unless
specifically so expressed by DFS in writing, a future waiver by DFS of
performance by Borrower.
13.16 Survival. The grant of security interest herein to secure
--------
all Obligations, and all provisions relating to the Collateral will survive
termination of this Agreement and will remain in full force and effect until all
Obligations have been paid in full and this Agreement has been terminated. The
Agreement to arbitrate all Disputes will survive termination of this Agreement.
13.17 Participations; Assignments. DFS may, without the consent
----------------------------
of Borrower, grant participations in or assign, at any time and from time to
time hereafter, its interest in this Agreement or any Loan Document, or of any
portion thereof.
13.18 Counterparts. This Agreement may be executed in any number
------------
of counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.
13.19 Information. DFS may provide to any third party any credit
-----------
information on Borrower that DFS may from time to time possess.
13.20 Release. Borrower releases DFS from all claims and causes
-------
of action which Borrower may now or hereafter have for any loss or damage to it
claimed to be caused by or arising from: (a) any failure of DFS to protect,
enforce or collect, in whole or in part, any Account; (b) DFS' notification to
any Account Debtors thereon of DFS' security interest in any of the Accounts;
(c) DFS' directing any Account Debtor to pay any sum owing to Borrower directly
to DFS; and (d) any other act or omission to act on the part of DFS, its
officers, agents or employees, except for willful misconduct or gross
negligence. DFS will have no obligation to preserve rights to Accounts against
prior parties.
38
13.21 Miscellaneous. Time is of the essence regarding Borrower's
-------------
performance of its obligations to DFS notwithstanding any course of dealing or
custom on DFS' part to grant extensions of time. Borrower's liability under
this Agreement is direct and unconditional and will not be affected by the
release or nonperfection of any security interest granted hereunder. DFS will
have the right to refrain from or postpone enforcement of this Agreement or any
other Loan Documents without prejudice and the failure to strictly enforce the
Loan Documents will not be construed as having created a course of dealing
between DFS and Borrower contrary to the specific terms of the Loan Documents or
as having modified, released or waived the same. The express terms of this
Agreement and the other Loan Documents will not be modified by any course of
dealing, usage of trade, or custom of trade which may deviate from the terms
hereof. If Borrower fails to pay any taxes, fees or other obligations which may
impair DFS' interest in the Collateral, or fails to keep the Collateral insured,
DFS may, but shall not be required to, pay such taxes, fees or obligations and
pay the cost to insure the Collateral, and the amounts paid will be: (a) an
additional debt owed by Borrower to DFS, which shall be subject to finance
charges as provided herein; and (b) due and payable immediately in full.
Borrower agrees to pay all of DFS' reasonable attorneys' fees and expenses
incurred by DFS in enforcing DFS' rights hereunder.
13.22 Waivers by Borrower. Borrower irrevocably waives notice of:
-------------------
DFS' acceptance of this Agreement, presentment, demand, protest, nonpayment,
nonperformance, and dishonor. Borrower and DFS irrevocably waive all rights to
claim any punitive and/or exemplary damages. Borrower waives all rights of
offset Borrower may have against DFS. Borrower waives all notices of default
and non-payment at maturity of any or all of the Accounts.
13.23 NO ORAL AGREEMENTS. ORAL AGREEMENTS OR COMMITMENTS TO LEND
MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING
PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU,
(BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY
AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH
IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS
WE MAY LATER AGREE IN WRITING TO MODIFY IT. THERE ARE NO UNWRITTEN AGREEMENTS
BETWEEN THE PARTIES. DFS may, from time to time, announce in writing to
Borrower its policies and procedures regarding its administration of this
facility including, without limit, DFS' fees and/or charges for transfers of
funds to or from Borrower, including Electronic Transfers; any subsequent use by
Borrower of this facility following any such announcement shall constitute
Borrower's acceptance of such revised policies and procedures.
13.24 Supplement. If Borrower and DFS have heretofore executed
----------
other agreements in connection with all or any part of the Collateral, this
Agreement shall supplement each and every other agreement previously executed by
and between Borrower and DFS, and in that event, this Agreement shall neither be
deemed a novation nor a termination of such previously executed agreement nor
shall execution of this Agreement be deemed a satisfaction of any obligation
secured by such previously executed agreement. Notwithstanding the foregoing,
this Agreement replaces in its entirety and renders null and void that certain
Agreement for Wholesale Financing between Xxxxxxx and DFS dated as of March 27,
1992, along with all amendments thereto. DFS has no knowledge of any default
under such Agreement by Xxxxxxx.
13.25 Use of Counsel and Receipt of Agreement. Borrower
---------------------------------------------
acknowledges that it has received a true and complete copy of this Agreement.
Borrower acknowledges that it has (a) had representation of counsel during
negotiation of this Agreement, and (b) read and understood this Agreement.
13.26 Facsimiles, Etc. Notwithstanding anything herein to the
-----------------
contrary: (a) DFS may rely on any facsimile copy, electronic data transmission
or electronic data storage of any statement, Statement of Transaction, financial
39
statements or other reports, and (b) such facsimile copy, electronic data
transmission or electronic data storage will be deemed an original, and the best
evidence thereof for all purposes, including, without limitation, under this
Agreement or any other Loan Documents, and for all evidentiary purposes before
any arbitrator, court or other adjudicatory authority.
13.27 Power of Attorney. Borrower irrevocably appoints DFS (and
-------------------
any Person designated by it) as Borrower's true and lawful Attorney with full
power to at any time, in the discretion of DFS (whether or not Default has
occurred) to: (a) endorse the name of Borrower upon any of the items of payment
of proceeds of the Collateral and deposit the same in the account of DFS for
application to the Obligations; (b) sign the name of Borrower to verify the
accuracy of the Accounts; (c) sign the name of Borrower on any document or
instrument that DFS shall deem necessary or appropriate to perfect and maintain
perfected the security interests in the Collateral under this Agreement and
other Loan Documents; (d) initiate and settle any insurance claim and endorse
Borrower's name on any check, instrument or other item of payment; (e) endorse
the name of Borrower upon financing statements, instruments, Certificates of
Title and Statements of Origin pertaining to the Collateral; (f) supply omitted
information and correct errors in any documents between DFS and Borrower; and
(g) do anything to preserve and protect the Collateral and DFS' rights and
interest therein. In the event of a Default, Borrower irrevocably appoints DFS
(and any Person designated by it) as Borrower's true and lawful Attorney with
full power to at any time, in the discretion of DFS to: (i) demand payment,
enforce payment and otherwise exercise all of Borrower's rights, and remedies
with respect to the collection of any Accounts; (ii) settle, adjust, compromise,
extend or renew any Accounts; (iii) settle, adjust or compromise any legal
proceedings brought to collect any Accounts; (iv) sell or assign any Accounts
upon such terms, for such amounts and at such time or times as DFS may deem
advisable; (v) discharge and release any Accounts; (vi) prepare, file and sign
Borrower's name on any Proof of Claim in Bankruptcy or similar document against
any Account Debtor; (vii) endorse the name of Borrower upon any chattel paper,
document, instrument, invoice, freight xxxx, xxxx of lading or similar document
or agreement relating to any Account or goods pertaining thereto; and (viii)
take control in any manner of any item of payments or proceeds and for such
purpose to notify the Postal Authorities to change the address for delivery of
mail addressed to Borrower to such address as DFS may designate. This power of
attorney is for value and coupled with an interest and is irrevocable so long as
any Obligations remain outstanding and by DFS exercising such right, DFS shall
not waive any right against Borrower until the Obligations are paid in full.
13.28 Expenses. Borrower agrees, whether or not any Loan is made
--------
hereunder, to pay DFS upon demand for all reasonable expenses, including
reasonable fees of attorneys for DFS (who may be employees of DFS), incurred by
DFS in connection with the enforcement of the Borrower's obligations hereunder
or under any other Loan Document. Borrower also agrees to (i) indemnify and
hold DFS harmless from any loss or expense which may arise or be created by the
acceptance of telephonic or other instructions for making Loans, except for any
loss or expense arising from DFS' gross negligence or willful misconduct
(provided, however, that reliance alone upon telephonic or other instructions
shall not itself be deemed to constitute gross negligence or willful
misconduct), and (ii) to pay and save DFS harmless from all liability for, any
stamp or other taxes which may be payable with respect to the execution or
delivery of this Agreement or any of the other Loan Documents. Borrower's
obligations under this Section 13.28 shall survive any termination of this
--------------
Agreement.
13.29 Joint and Several Liability. Notwithstanding anything herein
----------------------------
to the contrary, each Borrower is primarily and jointly and severally liable for
all Obligations. If and to the extent a Borrower shall be deemed a guarantor of
40
the other Borrower hereunder, such Borrower's joint liability for any
Obligations of such other Borrower shall be deemed to be a guaranty of payment
and performance, and not of collection. A Default by one Borrower shall be
deemed a Default by the other Borrower.
14. BINDING ARBITRATION.
14.1 Arbitrable Claims. Except as otherwise specified below, all
------------------
actions, disputes, claims and controversies under common law, statutory law or
in equity of any type or nature whatsoever (including, without limitation, all
torts, whether regarding negligence, breach of fiduciary duty, restraint of
trade, fraud, conversion, duress, interference, wrongful replevin, wrongful
sequestration, fraud in the inducement, usury or any other tort, all contract
actions, whether regarding express or implied terms, such as implied covenants
of good faith, fair dealing, and the commercial reasonableness of any Collateral
disposition, or any other contract claim, all claims of deceptive trade
practices or lender liability, and all claims questioning the reasonableness or
lawfulness of any act), whether arising before or after the date of this
Agreement, and whether directly or indirectly relating to: (a) this Agreement
and/or any amendments and addenda hereto, or the breach, invalidity or
termination hereof; (b) any previous or subsequent agreement between DFS and
Borrower; (c) any act committed by DFS or by any parent company, subsidiary or
affiliated company of DFS (the "DFS Companies"), or by any employee, agent,
-------------
officer or director of a DFS Company whether or not arising within the scope and
course of employment or other contractual representation of the DFS Companies
provided that such act arises under a relationship, transaction or dealing
between DFS and Borrower; and/or (d) any other relationship, transaction or
dealing between DFS and Borrower (collectively the "Disputes"), will be subject
--------
to and resolved by binding arbitration.
14.2 Administrative Body. All arbitration hereunder will be conducted
--------------------
by the American Arbitration Association ("AAA"). If the AAA is dissolved,
---
disbanded or becomes subject to any state or federal bankruptcy or insolvency
proceeding, the parties will remain subject to binding arbitration which will be
conducted by a mutually agreeable arbitral forum. The parties agree that all
arbitrator(s) selected will be attorneys with at least five (5) years secured
transactions experience. The arbitrator(s) will decide if any inconsistency
exists between the rules of any applicable arbitral forum and the arbitration
provisions contained herein. If such inconsistency exists, the arbitration
provisions contained herein will control and supersede such rules. The site of
all arbitration proceedings will be in the Division of the Federal Judicial
District in which AAA maintains a regional office that is closest to Borrower.
14.3 Discovery. Discovery permitted in any arbitration proceeding
---------
commenced hereunder is limited as follows. No later than thirty (30) days after
the filing of a claim for arbitration, the parties will exchange detailed
statements setting forth the facts supporting the claim(s) and all defenses to
be raised during the arbitration, and a list of all exhibits and witnesses. No
later than twenty-one (21) days prior to the arbitration hearing, the parties
will exchange a final list of all exhibits and all witnesses, including any
designation of any expert witness(es) together with a summary of their
testimony; a copy of all documents and a detailed description of any property to
be introduced at the hearing. Under no circumstances will the use of
interrogatories, requests for admission, requests for the production of
documents or the taking of depositions be permitted. However, in the event of
the designation of any expert witness(es), the following will occur: (a) all
information and documents relied upon by the expert witness(es) will be
delivered to the opposing party, (b) the opposing party will be permitted to
depose the expert witness(es), (c) the opposing party will be permitted to
designate rebuttal expert witness(es), and (d) the arbitration hearing will be
continued to the earliest possible date that enables the foregoing limited
discovery to be accomplished.
41
14.4 Exemplary or Punitive Damages. The Arbitrator(s) will not have
--------------------------------
the authority to award exemplary or punitive damages and each party hereby
irrevocably waives any right to claim any exemplary or punitive damages.
14.5 Confidentiality of Awards. All arbitration proceedings, including
-------------------------
testimony or evidence at hearings, will be kept confidential (except to the
extent disclosure is required by law or by any governmental agency), although
any award or order rendered by the arbitrator(s) pursuant to the terms of this
Agreement may be entered as a judgment or order in any state or federal court
and may be confirmed within the federal judicial district which includes the
residence of the party against whom such award or order was entered. This
Agreement concerns transactions involving commerce among the several states. The
Federal Arbitration Act, Title 9 U.S.C. Sections 1 et seq., as amended ("FAA")
---
will govern all arbitration(s) and confirmation proceedings hereunder.
14.6 Prejudgment and Provisional Remedies. Nothing herein will be
---------------------------------------
construed to prevent DFS' or Borrower's use of bankruptcy, receivership,
injunction, repossession, replevin, claim and delivery, sequestration, seizure,
attachment, foreclosure, dation and/or any other prejudgment or provisional
action or remedy relating to any Collateral for any current or future debt owed
by either party to the other. Any such action or remedy will not waive DFS' or
Borrower's right to compel arbitration of any Dispute.
14.7 Attorneys' Fees. If either Borrower or DFS brings any other
----------------
action for judicial relief with respect to any Dispute (other than those set
forth in Section 14.6) the party bringing such action will be liable for and
-------------
immediately pay all of the other party's costs and expenses (including
attorneys' fees) incurred to stay or dismiss such action and remove or refer
such Dispute to arbitration. If either Borrower or DFS brings or appeals an
action to vacate or modify an arbitration award and such party does not prevail,
such party will pay all costs and expenses, including attorneys' fees, incurred
by the other party in defending such action. Additionally, if one party sues
the other party or institutes any arbitration claim or counterclaim against the
other party in which the other party prevails, the first party will pay all
costs and expenses (including attorneys' fees) incurred by the prevailing party
in the course of defending such action or proceeding.
14.8 Limitations. Any arbitration proceeding must be instituted: (a)
-----------
with respect to any Dispute for the collection of any debt owed by either party
to the other, within two (2) years after the date the last payment was received
by the instituting party; and (b) with respect to any other Dispute, within two
(2) years after the date the incident giving rise thereto occurred, whether or
not any damage was sustained or capable of ascertainment or either party knew of
such incident. Failure to institute an arbitration proceeding within such
period will constitute an absolute bar and waiver to the institution of any
proceeding, whether arbitration or a court proceeding, with respect to such
Dispute.
14.9 Survival After Termination. The agreement to arbitrate will
----------------------------
survive the termination of this Agreement.
15. INVALIDITY/UNENFORCEABILITY OF BINDING ARBITRATION. IF THIS
AGREEMENT IS FOUND TO BE NOT SUBJECT TO ARBITRATION, ANY LEGAL PROCEEDING WITH
RESPECT TO ANY DISPUTE WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A
JUDGE WITHOUT A JURY. BORROWER AND DFS WAIVE ANY RIGHT TO A JURY TRIAL IN ANY
SUCH PROCEEDING.
16. GOVERNING LAW. Borrower acknowledges and agrees that this and all
--------------
other agreements between Borrower and DFS have been substantially negotiated,
42
and will be substantially performed, in the state of Missouri. Accordingly,
Borrower agrees that all Disputes will be governed by, and construed in
accordance with, the laws of such state, except to the extent inconsistent with
the provisions of the FAA which shall control and govern all arbitration
proceedings hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
43
IN WITNESS WHEREOF, the parties have, by their duly authorized
officers, executed this Agreement as of the Effective Date.
THIS AGREEMENT CONTAINS BINDING ARBITRATION, JURY WAIVER AND PUNITIVE DAMAGES
WAIVER PROVISIONS
ATTEST: XXXXXXX COMPUTER RESOURCES, INC.
By: /s/ Xxxxxxx Xxxxx By: /s/ Xxxxxxx X. Xxxxxxx
-------------------- ------------------------------
Chief Operating Officer Print Name: Xxxxxxx X. Xxxxxxx
Title: Chief Financial Officer
ATTEST: GLOBAL COMBINED TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
------------------------ ------------------------------
Secretary Print Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
DEUTSCHE FINANCIAL SERVICES CORPORATION
By: /s/ Xxxxxxx Xxxxx
------------------------
Print Name: Xxxxxxx Xxxxx
Title: Regional Vice President
1
INDEX OF EXHIBITS
-----------------
EXHIBIT 3.3 BORROWING BASE CERTIFICATE
EXHIBIT 5.1(a) AUTHORIZED BORROWING OFFICERS
EXHIBIT 7.1(j) PRESIDENT'S CERTIFICATE
EXHIBIT 7.1(l) SECRETARY'S CERTIFICATE OF RESOLUTION
AND INCUMBENCY
EXHIBIT 8.3 LITIGATION
EXHIBIT 8.5 LIENS
EXHIBIT 8.7 SUBSIDIARIES
EXHIBIT 8.16 CAPITAL STRUCTURE/OPTION PLANS
EXHIBIT 8.17 COLLATERAL LOCATIONS
EXHIBIT 8.18 REAL PROPERTY OWNED OR LEASED
EXHIBIT 8.20 ENVIRONMENTAL, HEALTH AND
SAFETY MATTERS
EXHIBIT 8.21 PATENTS, COPYRIGHTS, TRADEMARKS
EXHIBIT 8.23(a) CAPITALIZED LEASES
EXHIBIT 8.23(b) OPERATING LEASES
EXHIBIT 8.24 LABOR RELATIONS
EXHIBIT 9.1.10(b) BUSINESS CREDIT AND SECURITY
AGREEMENT CERTIFICATIONS
2
EXHIBIT 3.3
-----------
BORROWING BASE CERTIFICATE
--------------------------
[To Be Provided by DFS]
3
EXHIBIT 5.1(a)
--------------
AUTHORIZED BORROWING OFFICERS
-----------------------------
[To Be Provided by Xxxxxxx and Global]
4
EXHIBIT 7.1(j)
PRESIDENT'S CERTIFICATE
-----------------------
I, Xxxxx X. Xxxxxxx, President of XXXXXXX COMPUTER RESOURCES, INC., a
Delawarecorporation ("Borrower"), hereby certify to Deutsche Financial Services
-------- --------
Corporation ("DFS"), in connection with the Business Credit and Security
---
Agreement dated as of July 14, 1998 among Borrower, GLOBAL COMBINED
TECHNOLOGIES, INC. and DFS (the "Credit Agreement"; terms defined in the Credit
Agreement are used herein as so defined), that:
1. The representations and warranties of Borrower contained in Section
8 of the Credit Agreement are correct on and as of the date hereof as though
made on and as of such date;
2. No event has occurred and is continuing, or would result from any
Loan being made to Borrower under the Credit Agreement on the date hereof, which
constitutes a Default; and
3. After the funding of the Loans to be made by DFS to Borrower on the
date hereof, Borrower will be in full compliance with all of the terms and
provisions of the Credit Agreement.
IN WITNESS WHEREOF, I have signed this Certificate this 14th day of July,
1998.
/s/ Xxxxx X. Xxxxxxx
------------------------
President
CHIEF EXECUTIVE OFFICER'S CERTIFICATE
-------------------------------------
I, Xxxxxxx X. Xxxxxxx, Chief Executive Officer of GLOBAL COMBINED
TECHNOLOGIES, INC., an Oklahoma corporation ("Borrower"), hereby certify to
--------
Deutsche Financial Services Corporation ("DFS"), in connection with the Business
---
Credit and Security Agreement dated as of July 14, 1998 among Borrower, XXXXXXX
COMPUTER RESOURCES, INC. and DFS (the "Credit Agreement"; terms defined in the
Credit Agreement are used herein as so defined), that:
1. The representations and warranties of Borrower contained in Section
8 of the Credit Agreement are correct on and as of the date hereof as though
made on and as of such date;
2. No event has occurred and is continuing, or would result from any
Loan being made to Borrower under the Credit Agreement on the date hereof, which
constitutes a Default; and
3. After the funding of the Loans to be made by DFS to Borrower on the
date hereof, Borrower will be in full compliance with all of the terms and
provisions of the Credit Agreement.
IN WITNESS WHEREOF, I have signed this Certificate this 14th day of July,
1998.
/s/ Xxxxxxx X. Xxxxxxx
-------------------------
Chief Executive Officer
5
EXHIBIT 7.1(l)
SECRETARY'S CERTIFICATE OF RESOLUTION AND INCUMBENCY
I certify that I am the Secretary or Assistant Secretary of the corporation
named below, and that the following completely and accurately sets forth certain
resolutions of the Board of Directors of the corporation adopted at a special
meeting thereof held on due notice (and with shareholder approval, if required
by law), at which meeting there was present a quorum authorized to transact the
business described below, and that the proceedings of the meeting were in
accordance with the certificate of incorporation, charter and by-laws of the
corporation, and that they have not been revoked, annulled or amended in any
manner whatsoever.
Upon motion duly made and seconded, the following resolution was
unanimously adopted after full discussion:
"RESOLVED, That the several officers, directors, and agents of this
corporation, or any one or more of them, are hereby authorized and empowered on
behalf of this corporation: to obtain financing from Deutsche Financial
Services Corporation ('DFS') in such amounts and on such terms as such officers,
directors or agents deem proper; to enter into financing, security, pledge and
other agreements with DFS relating to the terms upon which such financing may be
obtained and security and/or other credit support is to be furnished by this
corporation therefor; from time to time to supplement or amend any such
agreements; execute and deliver any and all assignments and schedules; and from
time to time to pledge, assign, mortgage, grant security interests, and
otherwise transfer, to DFS as collateral security for any obligations of this
corporation to DFS, whenever and however arising, any assets of this
corporation, whether now owned or hereafter acquired; the Board of Directors
hereby ratifying, approving and confirming all that any of said officers,
directors or agents have done or may do with respect to the foregoing."
I do further certify that the following are the names and specimen
signatures of the officers and agents of said corporation so empowered and
authorized, namely:
President:
(Print Name) (Signature)
Vice-President:
(Print Name) (Signature)
Secretary:
(Print Name) (Signature)
Treasurer:
(Print Name) (Signature)
Agent:
(Print Name) (Signature)
Witness by hand and seal of said corporation this day of,
-- -----------
19 .
---
(seal)
Secretary
XXXXXXX COMPUTER RESOURCES, INC.
Name of Corporation
1
EXHIBIT 7.1(l)
SECRETARY'S CERTIFICATE OF RESOLUTION AND INCUMBENCY
I certify that I am the Secretary or Assistant Secretary of the corporation
named below, and that the following completely and accurately sets forth certain
resolutions of the Board of Directors of the corporation adopted at a special
meeting thereof held on due notice (and with shareholder approval, if required
by law), at which meeting there was present a quorum authorized to transact the
business described below, and that the proceedings of the meeting were in
accordance with the certificate of incorporation, charter and by-laws of the
corporation, and that they have not been revoked, annulled or amended in any
manner whatsoever.
Upon motion duly made and seconded, the following resolution was
unanimously adopted after full discussion:
"RESOLVED, That the several officers, directors, and agents of this
corporation, or any one or more of them, are hereby authorized and empowered on
behalf of this corporation: to obtain financing from Deutsche Financial
Services Corporation ('DFS') in such amounts and on such terms as such officers,
directors or agents deem proper; to enter into financing, security, pledge and
other agreements with DFS relating to the terms upon which such financing may be
obtained and security and/or other credit support is to be furnished by this
corporation therefor; from time to time to supplement or amend any such
agreements; execute and deliver any and all assignments and schedules; and from
time to time to pledge, assign, mortgage, grant security interests, and
otherwise transfer, to DFS as collateral security for any obligations of this
corporation to DFS, whenever and however arising, any assets of this
corporation, whether now owned or hereafter acquired; the Board of Directors
hereby ratifying, approving and confirming all that any of said officers,
directors or agents have done or may do with respect to the foregoing."
I do further certify that the following are the names and specimen
signatures of the officers and agents of said corporation so empowered and
authorized, namely:
President:
(Print Name) (Signature)
Vice-President:
(Print Name) (Signature)
Secretary:
(Print Name) (Signature)
Treasurer:
(Print Name) (Signature)
Agent:
(Print Name) (Signature)
Witness by hand and seal of said corporation this day of,
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19 .
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(seal)
Secretary
GLOBAL COMBINED
TECHNOLOGIES, INC.
2
EXHIBIT 8.3
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LITIGATION
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[To be provided by Xxxxxxx and Global]
1
EXHIBIT 8.5
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LIENS
-----
[To be provided by Xxxxxxx and Global]
2
EXHIBIT 8.7
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SUBSIDIARIES
------------
[To be provided by Xxxxxxx and Global]
3
EXHIBIT 8.16
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I
CAPITAL STRUCTURE
-----------------
[To be provided by Xxxxxxx and Global]
[For Borrower and Each Subsidiary]
shares authorized
----
shares outstanding
----
par value
----
treasury shares
----
II
OPTION PLANS
------------
[To be provided by Xxxxxxx and Global]
4
EXHIBIT 8.17
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COLLATERAL LOCATIONS
--------------------
[To be provided by Xxxxxxx and Global]
5
EXHIBIT 8.18
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REAL PROPERTY OWNED OR LEASED
-----------------------------
[To be provided by Xxxxxxx and Global]
6
EXHIBIT 8.20
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ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
----------------------------------------
[To be provided by Xxxxxxx and Global]
7
EXHIBIT 8.21
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PATENTS, COPYRIGHTS, TRADEMARKS
-------------------------------
[To be provided by Xxxxxxx and Global]
8
EXHIBIT 8.23(a)
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CAPITALIZED LEASES
------------------
[To be provided by Xxxxxxx and Global]
9
EXHIBIT 8.23(b)
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OPERATING LEASES
----------------
[To be provided by Xxxxxxx and Global]
10
EXHIBIT 8.24
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LABOR RELATIONS
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[To be provided by Xxxxxxx and Global]
11
EXHIBIT 9.1.10(b)
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XXXXXXX COMPUTER RESOURCES, INC.
BUSINESS CREDIT AND SECURITY AGREEMENT CERTIFICATIONS
AS OF , 19
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In accordance with Section 9.1.10(b) of the Business Credit and Security
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Agreement dated as of July 14, 1998 ( as amended, "Credit Agreement",
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capitalized terms used herein having the meanings given them in the Credit
Agreement), among XXXXXXX COMPUTER RESOURCES, INC., GLOBAL COMBINED
TECHNOLOGIES, INC. (collectively, "Borrower") and Deutsche Financial Services
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Corporation, I certify that:
(i) the enclosed Borrower prepared monthly financial package
(Consolidating Balance Sheet and Consolidating Statement of Operations) as of
and for the period ending, 19, all unaudited, fairly present the financial
position and results of operations of Borrower and its Subsidiaries and have
been prepared in accordance with GAAP.
(ii) to the best of my knowledge, Borrower has kept, observed,
performed and fulfilled each and every covenant, obligation and agreement
binding upon Borrower under the Credit Agreement and that no Default has
occurred.
XXXXXXX COMPUTER RESOURCES, INC., (for
itself and Global Combined Technologies,
Inc.)
By:
Title:
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