EXHIBIT 10
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), dated as of August
13, 1999, by and between COMPUTER COMPONENTS CORPORATION, a Texas corporation
(the "Borrower") which maintains its chief executive office at 0000 Xxxxx Xxxx
Xxxx, Xxxxxxx, Xxxxx, 00000, and FOOTHILL CAPITAL CORPORATION, a California
corporation (the "Lender") whose mailing address is 0000 Xxx Xxxxx Xxxx, Xxxxx
000, Post Office Xxx 000, Xxxxxxxxxxxxxx, Xxxxxxxx 00000. provides:
1. Definitions: As used herein, the following terms, when initial
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capital letters are used, shall have the respective meanings set forth below. In
addition, all terms defined in the Uniform Commercial Code as enacted in the
Commonwealth of Virginia (the "UCC"), whether or not capitalized, shall have the
meanings given therein unless otherwise defined herein.
1.1 Account Debtor: shall mean the account debtor or any customer of
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the Borrower who is obligated or indebted to the Borrower with respect to any of
the Receivables and/or the prospective purchaser with respect to any contract
right, and/or any Person who enters into or proposes to enter into any contract
or other arrangement with the Borrower pursuant to which the Borrower is to
deliver any personal property or perform any service.
1.2 Affiliate shall mean any Person directly or indirectly controlling,
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controlled by, or under common control with the Borrower. For purposes of this
definition, "control" as applied to any Person means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of the Borrower whether through the ownership of voting securities, by
contract or otherwise.
1.3 Business Day(s) shall mean a day on which the Lender is open to
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conduct a full lending business.
1.4 Collateral shall mean the following types or items of personal
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property, whether now owned or hereafter acquired by the Borrower, wherever
located: (a) the Receivables, the General Intangibles, the Inventory, the
Equipment, the Payments and all other items of personal property; (b) all of the
Borrower's rights, title and interest in and to all goods and other property
represented by or securing any of the foregoing, including all goods that may be
reclaimed or repossessed from or returned by Account Debtors; (c) all of the
Borrower's rights as an unpaid seller, including stoppage in transit, detinue
and reclamation; (d) all additional amounts due the Borrower from any Account
Debtor, irrespective of whether such additional amounts have been specifically
assigned to the Lender; (e) all guarantees and other agreements and property
securing or relating to any of the items referred to above or acquired for the
purpose of securing or enforcing such items; (f) all books of account and
records, ledger sheets, files, documents, customer lists and other documents
containing the names, addresses and other information regarding the Borrower's
customers; computer tapes, programs, discs and other material, media or
documents relating to the recording, billing or analyzing of any of the above;
all computers, word processors, printers, switches, interfaces, source codes,
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mask works, software, instructional material, and connectors, and all parts,
accessories, additions, substitutions, or options together with all property or
equipment used in connection with any of the above or which are used to operate
or cause to operate any features, special applications, format controls, options
or software of any or all of the above-mentioned items; (g) all policies of
insurance on the foregoing property and the proceeds of such insurance; (h) all
rebates received or due from manufacturers and others; (i) all post office
boxes; and (j) all proceeds and products of any of the foregoing in whatever
form, including cash, negotiable instruments and other evidences of
indebtedness, chattel paper, security agreements and other documents.
1.5 Eligible Government Accounts shall mean the amount of billed
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Government Accounts of the Borrower for work completed, under specific
Government Contracts which are and at all times shall continue to be acceptable
to the Lender in all respects and which have been assigned to the Lender
pursuant to the Assignment of Claims Act or any appropriate regulation of any
department, agency or instrumentality of the United States (without regard to
prior approvals of such specific Government Contracts) after deducting therefrom
(a) all billed Government Accounts under which more than 90 days have elapsed
from the invoice date, (b) all Government Accounts arising under Government
Contracts which contain an express prohibition against assignment; (c) all
retainages, payments, adjustments, setoffs and credits applicable thereto, and
(d) all amounts due thereon considered by the Lender, in its sole discretion, to
be difficult to collect or uncollectible by reason of return, rejection,
repossession, loss or damage of or to the products or goods giving rise thereto.
1.6 Eligible Inventory shall mean all Inventory valued at the lowest of
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(a) the Borrower's net purchase cost or net manufacturing cost, (b) the lowest
bulk market price, (c) the Borrower's lowest bulk selling price, minus estimated
expenses for completion and disposal, and minus an allowance for normal profit
margin for hulk sales, (d) any ceiling prices which may he established by any
law, or (e) prevailing market value, excluding, however, any Inventory which
consists of (i) any goods located outside of the United States, (ii) any goods
located outside of a State in which the Lender has properly perfected its
security interest by filing, free and clear of all other Liens, (iii) any goods
not in the actual possession of, or in transit to or from, the Borrower or any
goods in the possession of a bailee, warehouseman, consignee or similar Person,
(iv) all work-in-process, (v) any goods the sale or other disposition of which
has given rise to a Receivable, (vi) any goods which the Lender determines in
its reasonable discretion at any time and in good faith are defective,
unmerchantable or obsolete, (vii) any goods which are not covered by insurance
as required by Section 6.5 hereof, and (viii) any goods which the Lender in its
reasonable discretion has deemed to be ineligible because the Lender otherwise
considers the collateral value thereof to be impaired or its ability to realize
such value to be insecure.
1.7 Eligible Receivables shall mean, at any time of determination
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thereof, each Receivable of the Borrower to the extent that it conforms and
continues to conform to the following criteria to the satisfaction of the
Lender: (i) the Receivable arose from a bona fide outright sale of goods or
provision of services by the Borrower, and such goods or services have been
delivered to the appropriate Account Debtor or its respective designees, the
Borrower has in its possession shipping and delivery receipts evidencing such
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shipment and delivery, no return, rejection or repossession has occurred and
such goods or services have been finally accepted by the Account Debtor; (ii)
the Receivable is based upon an enforceable written order or contract for goods
delivered or services rendered and the same were shipped, held, or performed in
accordance with such order or contract; (iii) the title of the Borrower to the
Receivable and, except as to the Account Debtor and any creditor which finances
the Account Debtor's purchase of such goods, to any goods is absolute and is not
subject to any prior assignment, claim, lien, or security interest, and the
Borrower otherwise has the full and unqualified right and power to assign and
grant a security interest in it to the Lender; (iv) the amount shown on the
books of the Borrower and on any invoice, certificate, schedule or statement
delivered to the Lender is owing to the Borrower and no partial payment has been
received unless reflected on such invoice, certificate, schedule or statement;
(v) the Receivable is not subject to any claim of reduction, counterclaim,
set-off, recoupment, or other defense in law or equity, or any claim for
credits, allowances, or adjustments by the Account Debtor because of returned,
inferior, or damaged goods, unsatisfactory services or for any other reason;
(vi) the Account Debtor has not returned or refused to retain, or otherwise
notified the Borrower of any dispute concerning, or claimed nonconformity of,
any of the goods or services from the sale of which the Receivable arose; (vii)
the Receivable is not outstanding more than the number of days set forth in
Schedule A attached hereto from the date of the invoice therefor; (viii) the
Receivable does not arise out of a contract with, or order from, an Account
Debtor that, by its terms, forbids or makes void or unenforceable the assignment
by the Borrower to the Lender of the Receivable arising with respect thereto;
(ix) the Borrower has not received any note, trade acceptance draft or other
instrument with respect to, or in payment of, the Receivable, unless, if any
such instrument has been received, the Borrower immediately notified the Lender
and, at the latter's request, endorsed or assigned and delivered the same to the
Lender; (x) the Borrower has not received any notice of the death of the Account
Debtor or a partner thereof, nor has the Borrower received any notice of
dissolution, termination of existence, insolvency, business failure, appointment
of a receiver for any part of the property of, assignment for the benefit of
creditors by, or the filing of a petition in bankruptcy or the commencement of
any proceeding under any bankruptcy or insolvency laws by or against, the
Account Debtor; (xi) the Account Debtor is not an Affiliate of the Borrower;
(xii) the Account Debtor is not incorporated in or primarily conducting business
in any jurisdiction located outside of the United States of America; (xiii) the
Borrower is not indebted in any manner to the Account Debtor, with the exception
of customary credits, adjustments and/or discounts given to a Account Debtor by
the Borrower in the ordinary course of its business. The Lender, in the exercise
of its sole discretion, may exclude from eligibility all or any portion of any
Receivable that (i) results in an unacceptable concentration of the Receivables
in any Account Debtor; or (ii) the Lender has deemed ineligible because of
uncertainty as to the credit worthiness of the Account Debtor or because the
Lender otherwise considers the collateral value thereof to be impaired or its
ability to realize such value to be insecure. In the event of any dispute under
the foregoing criteria, as to whether a Receivable is, or has ceased to be, an
Eligible Receivable, the decision of the Lender in the exercise of its sole and
absolute discretion shall control.
1.8 Environmental Laws shall mean all federal, state and local laws,
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whether now or hereafter enacted, and as amended from time to time, relating to
pollution or protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases or threatened releases of Hazardous
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Materials into the environment (including, without limitation, ambient air,
surface water, ground water or land), or otherwise relating to the manufacture,
generation, production, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, and any and all
regulations, codes, plans, orders, decrees, judgments, injunctions, notices or
demand letters issued, entered, promulgated or approved thereunder.
1.9 Equipment shall mean (a) all equipment of the Borrower of every
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type and description, now owned and hereafter acquired and wherever located,
including, without limitation, all machinery, motor vehicles and other rolling
stock, furniture, furnishings, tools, dies, fittings, accessories, all
substitutions therefor, leasehold improvements, fixtures, and materials and
supplies relating to any of the foregoing; (b) all present and future documents
of title and trust receipts relating to any of the foregoing; (c) all present
and future rights, claims and causes of action of the Borrower in connection
with purchases of (or contracts for the purchase of), or warranties relating to,
or damages to, goods held or to be held by the Borrower as equipment; (d) all
present and future warranties, manuals and other written materials (and
packaging thereof or relating thereto) relating to any of the foregoing; and (e)
all present and future general intangibles of the Borrower in any way relating
to any of the foregoing.
1.10 Event of Default shall mean any event described in Section 9.1
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hereof.
1.11 Fair Labor Standards Act shall mean the Fair Standards Labor Act
as amended, 29 U.S.C. Sections 201-209, any applicable regulations and
interpretations issued pursuant thereto, and any amendments to any of the
foregoing.
1.12 General Intangibles shall mean all general intangibles now owned
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or hereafter acquired by the Borrower, including, without limitation, choices of
action, causes of action and all other intangible property of every kind and
nature, including, without limitation, corporate or other business records,
inventions, designs, blueprints, plans, patents, patent applications,
trademarks, trade names, trade secrets, goodwill, registrations, domestic and
foreign copyrights, copyright applications, service marks, logos, licenses,
franchises, customer lists, tax refunds, tax refund claims, contractual rights,
insurance policies on lives of employees payable to the Borrower, any letter of
credit on which the Borrower is a beneficiary, rights or claims against carriers
and shippers, leases and rights to indemnification between the Borrower and the
U.S. Government or any agency thereof, and all amendments thereto.
1.13 Government Accounts shall mean all accounts arising out of any
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Government Contract.
1.14 Government Contracts shall mean any contract between the Borrower
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and the United States Government or any agency thereof, and all amendments
thereto.
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1.15 Guarantor and Guarantors shall mean individually and collectively
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the Person(s) listed on Schedule A attached hereto.
1.16 Hazardous Materials shall mean any (i) hazardous, regulated and/or
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toxic chemicals, materials, substances or wastes occurring in the air, water,
soil or ground water on, over or under the real property owned, occupied or
controlled by the Borrower, or in or on improvements thereon (the "Property"),
as defined by the Comprehensive Environmental Response, Compensation, and
Liability Act (Superfund or CERCLA), and the Superfund Amendments and the
Reauthorization Act of 1986 (XXXX), 42 U.S.C. xx.xx. 9601 et seq., the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. xx.xx. 11001 et seq., the
Resource Conservation and Recovery Act (the Solid Waste Disposal Act or RCRA),
42 U.S.C. xx.xx. 6901 et seq., the Federal Water Pollution Control Act, (CWA),
33 U.S.C. xx.xx. 1251 et seq., the Clean Air Act (CAA), 42 U.S.C. xx.xx. 7401 et
seq., and the Toxic Substances Control Act (TSCA), 15 U.S.C. xx.xx. 2601 et.
seq., or comparable state statutes, as each such statute may be amended from
time to time, and/or as defined in regulations promulgated thereunder; (ii) oil,
petroleum products, and their by-products; (iii) any substance, the presence of
which is prohibited or controlled by any other applicable federal or state or
local laws, regulations, statutes or ordinances now in force or hereafter
enacted relating to waste disposal or environmental protection with respect to
hazardous, toxic or other substances generated, produced, leaked, released,
spilled or disposed of at or from the Property; and (iv) any other substance
which by law requires special handling in its collection, storage, treatment or
disposal including, but not limited to, asbestos, polychlorinated biphenyls
(PCBs), urea formaldehyde foam insulation and lead-based paints, but not
including small quantities of such materials present on the Property in retail
containers and used in the ordinary course of the Borrower's business.
1.17 Inventory shall mean all inventory now owned or hereafter acquired
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by the Borrower, including, without limitation (a) all goods which are held for
sale or lease by the Borrower or are furnished or to be furnished by the
Borrower under contracts for service, (b) all raw materials, work in process,
finished goods, materials and supplies of every kind used or consumed in
connection with the manufacture, packing, shipping, advertising or sale of such
goods, (c) all proceeds and products from the sale or other disposition of such
goods. including all goods returned or repossessed, or acquired by the Borrower
by way of substitution or replacement, and all additions and accessions thereto,
and all documents and instruments covering such goods, and (d) all of the above
owned by the Borrower or in which the Borrower now has or in which the Borrower
may hereafter acquire an interest, whether in transit or in the Borrower's
constructive or actual possession or held by the Borrower or others for the
Borrower's account (including any of the above held on consignment), including,
without limitation, all of the above which may be located on the Borrower's
premises or upon the premises of any carriers, forwarding agents, truckers,
warehousemen, vendors, selling agents, finishers, converters or other third
parties who may have possession, temporary or otherwise, thereof.
1.18 Letter(s) of Credit shall mean any letter(s) of credit issued
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pursuant to Section 2.4 hereof for or on behalf of the Borrower.
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1.19 Loan Documents shall mean the Note, this Agreement, the Guaranty
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or any other agreement or document referred to herein or now or hereafter
delivered in connection with the transactions contemplated hereby, together with
any and all revisions, amendments, restatements and modifications to,
replacements of and substitutions for, any of the foregoing.
1.20 Lockbox Agreement shall mean the written agreement by and among
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the Borrower, the Lender and a federally insured banking institution, in form
and substance satisfactory to the Lender, whereby said parties agree that
Payments shall be mailed to a U.S. Post Office box to which the bank shall have
exclusive and unrestricted access under such agreement. Under such agreement,
Payments shall hereafter be deposited into an account of the Lender maintained
at the bank for application to the Revolving Loans.
1.21 Note shall mean, collectively, any promissory notes executed by
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the Borrower to evidence any other loans by the Lender to the Borrower as
renewed, extended, restated or modified from time to time described in Section
2.3.
1.22 Obligations shall mean, without limitation, the Revolving Loans,
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other loans by the Lender to the Borrower and all other indebtedness and
liabilities of the Borrower to the Lender of every kind, nature and description,
now existing or hereafter arising, regardless of how they arise or by what
agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument and whether liquidated or unliquidated, secured or
unsecured, direct or indirect (that is, whether the same are due directly from
the Borrower to the Lender, or are due indirectly from the Borrower to the
Lender by reason of the Borrower having acted as endorser, guarantor or obligor
of indebtedness, liabilities or obligations to the Lender of any third party),
absolute or contingent, due or to become due, and all obligations to perform
acts or refrain from taking any action. Obligations shall also include all
interest, fees and other charges chargeable to the Borrower or due from the
Borrower to the Lender from time to time and all costs and expenses referred to
in Sections 13 and 14 hereof.
1.23 Payment(s) shall mean any check, note, draft, xxxx of exchange,
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acceptance, money order, legal tender or other form of payment or evidence of
indebtedness in total or partial payment of the amount due on any Receivable or
other Collateral.
1.24 Permitted Liens shall mean (a) any lien or security interest
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specifically consented to by the Lender in writing; and (b) purchase money
security interests on Equipment acquired after the date hereof in the ordinary
course of business provided such security interests secure not more than the
lower of the cost or fair market value of such Equipment and in the aggregate do
not exceed the amount as set forth in Schedule A attached hereto.
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1.25 Person shall mean an individual, partnership, corporation, limited
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liability company, business franchise, joint stock company, trust,
unincorporated association, joint venture, government authority or other entity
of whatever nature.
1.26 Reasonable Attorneys' Fees shall mean, as used in any of the Loan
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Documents, the fees of counsel based upon counsel's usual and customary hourly
rates and not upon any fixed percentage of the Obligations.
1.27 Receivables shall mean (a) all of the Borrower's present and
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future accounts, contract rights, receivables, promissory notes and other
instruments, chattel paper and all rights to receive the payment of money or
other consideration under present or future contracts, including, without
limitation, all of the Borrower's rights under each Government Contract and all
related Government Accounts now owned or hereafter acquired by the Borrower; (b)
all present and future cash of the Borrower; (c) all present and future
judgments, orders, awards and decrees in favor of the Borrower and causes of
action in favor of the Borrower; (d) all present and future contingent and
noncontingent rights of the Borrower to the payment of money for any reason
whatsoever, whether arising in contract, tort or otherwise, including, without
limitation, all rights to receive payments under presently existing or hereafter
acquired or created letters of credit; (e) all present and future claims, rights
of indemnification and other rights of the Borrower under or in connection with
any contracts or agreements to which the Borrower is or becomes a party or third
party beneficiary; (f) all goods previously or hereafter returned, repossessed
or stopped in transit, the sale, lease or other disposition of which contributed
to the creation of any account, instrument or chattel paper of the Borrower; (g)
all present and future rights of the Borrower as an unpaid seller of goods,
including rights of stoppage in transit, detinue and reclamation; (h) all rights
which the Borrower may now or at any time hereafter have, by law or agreement,
against any Account Debtor or other obligor of the Borrower, and all rights,
liens and security interests which the Borrower may now or at any time hereafter
have, by law or agreement, against any property of any Debtor or other obligor
of the Borrower and (i) all present and future interests and rights of the
Borrower, including rights to the payment of money, under or in connection with
all present and future leases and subleases of real or personal property to
which the Borrower is a party, as lessor, sublessor, lessee or sublessee.
1.28 Reference Rate shall mean the rate of interest announced from time
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to time by Xxxxx Fargo Bank, as its "prime rate" or "reference rate" as the case
may be. whether or not such announced rate is the best rate available from such
financial institution. The Borrower hereby acknowledges and agrees that the
Reference Rate is a reference used in determining interest rates on certain
loans by the Lender and is not intended to be the lowest rate of interest
charged on any extension of credit to any customer. In the event the foregoing
institution ceases to announce a Reference Rate or the same is unascertainable
or is discontinued by the Lender as a standard, a comparable rate designated by
the Lender shall be deemed to be the Reference Rate.
1.29 Revolving Loans shall mean the loans described in Section 2.1.
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2. Loans , Interest, Fees and Letters of Credit
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2.1 Subject to the terms and conditions of this Agreement, the Lender
agrees to make Revolving Loans from time to time to the Borrower in an aggregate
principal amount of up to:
(a) the percentage of Eligible Receivables set forth in Schedule
A attached hereto, and
(b) the percentage of Eligible Inventory set forth in Schedule A
attached hereto, and
(c) the percentage of Eligible Government Accounts set forth
in Schedule A attached hereto.
2.2 The Revolving Loans shall be made on the following terms and
conditions:
(a) The Revolving Loans shall be used solely for refinancing
existing indebtedness and for working capital.
(b) The aggregate principal amount of Revolving Loans based on the
value of Eligible Inventory shall not exceed the amount set forth in Schedule A
attached hereto.
(c) The aggregate principal amount of Revolving Loans shall not
exceed the amount set forth in Schedule A attached hereto.
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(d) All Revolving Loans will be made from time to time in the
absolute discretion of the Lender and neither this Agreement nor other action by
the Lender shall obligate the Lender to make further Revolving Loans to the
Borrower. After notice to the Borrower, the Lender may, in its discretion,
change any or all of the percentages set forth in Section 2.1(a), (b) or (c).
All Revolving Loans shall be payable without offset to the Lender and shall be
evidenced by the entries upon certain books and records designated by the
Lender.
(e) The Revolving Loans shall accrue interest on the daily
outstanding balance thereof at the annual rate (the "Interest Rate") set forth
in Schedule A attached hereto. Accrued interest shall be payable to the Lender
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on the first day of each month beginning on the date set forth on Schedule A
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attached hereto. The effective date of any increase or decrease in the Interest
Rate shall be the date on which the Reference Rate changes. All interest shall
be computed on the basis of a 360-day year and paid for the actual number of
days elapsed in each interest calculation period.
(f) Upon the occurrence of any Event of Default, the Interest Rate
may be increased, at the Lender's option, to a rate equal to the rate set forth
on Schedule A attached hereto above the Reference Rate in effect from time
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to time (the "Default Rate of Interest").
(g) In addition to the interest payable to the Lender pursuant
to Section 2.2(e), the Borrower shall also pay to the Lender or the Lender may
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collect from advances made to the Borrower under the Revolving Loans an amount
of interest equal to the aggregate of the amounts calculated each month by
multiplying the amount of each Payment received by the Lender from Account
Debtors during such month by the Interest Rate for a period beginning on the
date after a Payment is applied to the principal balance due under the Revolving
Loans and ending on the date set forth in Schedule A attached hereto.
(h) The Borrower shall pay the Lender a monthly service fee equal
to the amount set forth in Schedule A attached hereto (the "Service Fee").
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(i) The Lender shall send the Borrower a monthly statement of the
Borrower's loan account showing all debits and credits and which shall also
reflect the interest accrued on the Revolving Loans pursuant to Section 2.2(e)
and (f) hereof, the additional interest charged with respect to Payments
pursuant to Section 2.2(g) hereof (collectively, the "Interest) and the Service
Fee for the immediately preceding month. The Interest and Service Fee shall be
added by the Lender to the Borrower's loan account at the end of each month and
shall be deemed to be first paid from amounts subsequently credited to the loan
account. The statement of the loan account shall be deemed correct and accepted
by and conclusively binding upon the Borrower unless the Borrower notifies the
Lender in writing specifically as to a particular discrepancy within 20 days
from the mailing of such statement.
2.3 The Lender agrees to make other loans to the Borrower in the amount
set forth in Schedule A attached hereto subject to the following terms and
conditions: ----------
(a) The proceeds of the loans shall be used solely for the
purposes set forth in Schedule A attached hereto.
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(b) The Borrower shall repay such loans in accordance with the
terms and conditions of the Note and Schedule A attached hereto. Unless sooner
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paid, the entire unpaid principal amount of such loans and all accrued and
unpaid interest thereon shall be due and payable on the date set forth on
Schedule A (the "Maturity Date").
(c) Such Loans shall accrue interest on the daily outstanding
balance thereof at the annual rate (the "Interest Rate") set forth in Schedule A
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attached hereto. Accrued interest shall be payable to the Lender on the first
day of each month beginning on the date set forth on Schedule A attached hereto.
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All interest shall be computed on the basis of a 360-day year and paid for the
actual number of days elapsed in each interest calculation period.
(d) Upon the occurrence of any Event of Default, the Interest Rate
may be increased, at the Lender's option, to a rate equal to the rate set forth
on Schedule A attached hereto above the Reference Rate in effect from time to
time (the "Default Rate of Interest").
(e) The Borrower shall pay the Lender a monthly service fee equal
to the amount set forth on Schedule A attached hereto (the "Service Fee").
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(f) The Borrower shall pay to the Lender an appraisal fee in
the amount set forth on Schedule A attached hereto for each appraisal of the
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Collateral performed by the Lender or its agents (the "Appraisal Fee").
(g) The Borrower may prepay the other loans at any time; provided
each such prepayment shall be accompanied by all outstanding interest and fees
and a prepayment fee equal to the percentage set forth on Schedule A of
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the amount prepaid in the first year, a fee equal to the percentage set forth on
Schedule A of the amount prepaid in the second year and a fee equal to the
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percentage set forth on Schedule A of the amount prepaid thereafter (the
"Prepayment Fee). -----------
2.4 Subject to the terms and conditions of this Agreement, the Lender
will from time to time cause to be issued by a commercial bank (the "Issuer")
Letters of Credit to such parties and in such amounts which total, in the
aggregate at any time, not more than the amount set forth on Schedule A attached
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hereto as the Borrower may from time to time request by submission to the Issuer
or the Lender of such documents, agreements and information as the Issuer or the
Lender may request.
(a) In the event the Issuer may issue one or more Letters of
Credit for the account of the Borrower, the amount available to be advanced
under the Revolving Loans shall be reduced by an amount equal to the amount
which could be drawn under such Letter(s) of Credit. Upon termination or release
of a Letter of Credit issued hereunder, the amount available to be advanced
under the Revolving Loans shall be increased by the amount which could have been
drawn under such Letter of Credit.
(b) The Borrower shall pay to the Lender for the account of the
Issuer such fee for the issuance of a Letter of Credit together with such other
fees, interest and charges as the Issuer may from time to time determine.
3. Security for the Obligations.
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3.1 To secure the payment and performance of the Obligations, the
Borrower hereby grants to the Lender a continuing security interest in all
existing and hereinafter acquired or arising Collateral.
3.2 As additional security for the payment and performance of the
Obligations, the Obligations shall be guaranteed by the Guarantors who shall
each execute and deliver to the Lender an unconditional guaranty (the "Guaranty
Agreement") in form and substance satisfactory to the Lender and its counsel.
4. Receivables.
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4.1 Unless the Lender requires a Lockbox Agreement, the Lender hereby
authorizes and permits the Borrower to receive from Account Debtors or otherwise
all Payments, subject to the reasonable direction and control of the Lender at
all times. The Borrower shall open and maintain at its expense a depository
account ("Depository Account") over which the Lender alone shall have the power
of withdrawal or, if requested by the Lender, a lockbox, with a bank acceptable
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to the Lender, and deposit or direct all Payments to such account or lockbox
immediately upon receipt thereof. The Borrower's loan account with the Lender
shall be credited with (i) all amounts received on any Business Day in the
Lender's Chase Manhattan Bank account by wire transfer from the Depository
Account or the lockbox prior to 12:00 noon on such day and (ii) all Payments
actually received at the Lender's address set forth at the beginning of this
Agreement pursuant to Section 4.2 on the date of such receipt. Payments which
are deposited into the Lender's account from the Depository Account or the
lockbox after 12:00 noon on any Business Day shall be credited to the Borrower's
loan account on the next Business Day.
4.2 The Lender shall have the right at any time to notify Account
Debtors of its security interest in the Receivables and to require Payments to
be made directly to the Lender. To facilitate direct collection, the Borrower
hereby appoints the Lender and any officer or employee of the Lender, as the
Lender may from time to time designate, as attorney-in-fact for the Borrower to
(a) receive, open and dispose of all mail addressed to the Borrower and take
therefrom any Payments or proceeds of Receivables; (b) take over the Borrower's
post office boxes or make other arrangements, in which the Borrower shall
cooperate, to receive the Borrower's mail, including notifying the post office
authorities to change the address for delivery of mail addressed to the Borrower
to such address as the Lender shall designate; (c) endorse the name of the
Borrower in favor of the Lender upon any and all Payments that may come into the
Lender's possession; (d) sign and endorse the name of the Borrower on any
invoice or xxxx of lading relating to any Receivable, on verifications of
Receivables sent to any Debtor, to drafts against Account Debtors, to
assignments of Receivables and to notices to Account Debtors; and (e) do all
acts and things necessary to carry out this Agreement, including signing the
name of the Borrower on any instruments required by law in connection with the
transactions contemplated hereby and on financing statements as permitted by the
UCC. The Borrower hereby ratifies and approves all acts of such attorney-in-fact
and neither the Lender nor any other such attorney-in-fact shall be liable for
any acts of commission or omission, or for any error of judgment or mistake of
fact or law unless occasioned by the Lender's or such attorney-in-fact's gross
negligence. This power, being coupled with an interest, is irrevocable so long
as any of the Obligations remain unsatisfied.
4.3 The Lender shall not, under any circumstances, be liable for any
error or omission or delay of any kind occurring in the settlement, collection
or payment of any Receivable or any instrument received in payment thereof or
for any damage resulting therefrom unless occasioned by the Lender's gross
negligence or willful misconduct. The Lender may, after the occurrence of an
Event of Default, without notice to or consent from the Borrower, xxx upon or
otherwise collect, extend the time of payment of, or compromise or settle for
cash, credit or otherwise upon any terms, any of the Receivables or any
securities, instruments or insurance applicable thereto and/or release the
obligor thereon. The Lender is authorized to accept the return of the goods
represented by any of the Receivables, without notice to or consent of the
Borrower, or without discharging or any way affecting the Obligations.
4.4 The Lender shall not be liable for or prejudiced by any loss,
depreciation or other damage to the Receivables and other Collateral unless
caused by the Lender's gross negligence or willful misconduct.
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4.5 On or before ten (10) days after the end of each month, or from
time to time as the Lender may reasonably require, the Borrower shall deliver to
the Lender schedules of all outstanding Receivables and existing Inventory. Such
schedules shall be in form satisfactory to the Lender and shall show the age of
such Receivables in intervals of not more than 30 days, and contain such other
information and be accompanied by such supporting documents as the Lender may
from time to time prescribe. At the Lender's request, the Borrower shall also
deliver to the Lender copies of the Account Debtor's invoices, evidences of
shipment or delivery and such other schedules and information as the Lender may
reasonably request. The items to be provided under this Section are to be
prepared and delivered to the Lender from time to time solely for its
convenience in maintaining records of the Collateral and the Borrower's failure
to give any of such items to the Lender shall not affect, terminate, modify or
otherwise limit the Lender's security interest granted herein.
5. Representations and Warranties. The Borrower hereby represents and
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warrants to the Lender that:
5.1 (a) The Borrower is and at all times hereafter shall be a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and has the corporate power and authority to
conduct its business as now conducted and as proposed to be conducted while this
Agreement is in effect; (b) the execution and delivery of this Agreement and the
performance of the transactions contemplated hereby are within the corporate
authority of the Borrower and have been duly authorized by all proper and
necessary corporate action; (c) the execution and delivery of this Agreement and
the performance of the transactions contemplated hereby will not violate or
contravene any provisions of law or the articles of incorporation or bylaws of
the Borrower, or result in a breach or default in respect of the terms of any
other agreement to which the Borrower is a party or by which it is bound, which
breach or default would result in the creation, imposition or enforcement of any
lien against any of the Collateral, or would have a material adverse effect on
the conduct of the Borrower's business as it is now being conducted and proposed
to be conducted while this Agreement is in effect, or would otherwise impair the
value of the security interest granted to the Lender hereunder; and (d) the
Borrower is duly qualified as a foreign corporation and is in good standing and
duly authorized to do business in every jurisdiction where the nature of its
properties or its business requires such qualification and authorization.
5.2 This Agreement is the valid and legally binding agreement of the
Borrower enforceable against the Borrower in accordance with its terms.
5.3 Except as previously disclosed to the Lender in writing, no Person
has sold substantially all of its assets to the Borrower or sold assets to the
Borrower outside the ordinary course of such seller's business or in a
transaction subject to the bulk transfer laws at any time in the past.
5.4 The execution and delivery of this Agreement and the performance of
the transactions contemplated hereby do not require any approval or consent of
any governmental agency or authority, of stockholders of the Borrower, or of any
other Person.
5.5 The financial statements of the Borrower and the Guarantors and
other related information previously submitted to the Lender are true, complete
and correct in all material respects, fairly represent the financial condition
14
of the Borrower and each Guarantor and the results of their respective
operations and transactions as of the dates and for the periods of such
statements and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the period
involved. There are no liabilities, direct or indirect, fixed or contingent,
matured or unmatured, known to the Borrower or the Guarantor which are not
reflected therein. There has been no material adverse change in the business,
operations, prospects, assets, properties or condition (financial or otherwise)
of the Borrower or the Guarantor since the date of said financial statements.
5.6 The Borrower has filed all federal, state, local and other tax
returns and reports required to be filed by it and such returns and reports are
true and correct. The Borrower has paid all taxes, assessments and other
governmental charges lawfully levied or imposed on or against it or its
property, other than those presently payable without penalty or interest.
5.7 There is no litigation or proceeding or governmental investigation
pending or, to the knowledge of the Borrower, threatened against or relating to
the Borrower, its properties or business which is not reflected in the financial
statements and other related information previously submitted to the Lender by
the Borrower.
5.8 The Borrower is not in violation of or default under any statute,
regulation, license, permit, order, writ, injunction or decree of any
government, governmental department, commission, board, bureau, agency,
instrumentality or court, which violation or default would have a material
adverse effect on the business, properties or condition, financial or otherwise,
of the Borrower.
5.9 The Borrower is in compliance with all federal, state and local
laws, including, but not limited to, Environmental Laws and the Fair Labor
Standards Act.
5.10 (a) The Borrower has not terminated any employee pension benefit
plan ("Plan") subject to Title IV of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") since September 2, 1984 and is not in the process
of terminating any Plan, and no fact, including, without limitation, any
reportable event described in Section 4043 of ERISA exists in connection with
any Plan of the Borrower which might constitute grounds for (i) the termination
of any Plan by the Pension Benefit Guaranty Corporation or (ii) the appointment
by the appropriate United States District Court of a trustee to administer any
Plan.
(b) The Borrower has fulfilled its obligations under the minimum
funding standards of ERISA and the Internal Revenue Code (the "Code") with
respect to each Plan and is in compliance in all material respects with the
provisions of ERISA and the Code presently applicable to each Plan, and has made
all contributions to the Plans required by the terms thereof.
(c) The Borrower has not incurred any liability under Section 4203
or 4205 of ERISA with respect to any withdrawal or partial withdrawal from any
multiemployer plan (as defined in Section 4001(a)(3) of ERISA.
5.11 The Borrower is not in default under a material contract, which
default would have a material adverse effect on the business, properties or
15
condition, financial or otherwise, of the Borrower, or in the performance of any
covenants or conditions respecting any of its indebtedness, and no holder of any
indebtedness of the Borrower has given notice of any asserted default
thereunder, and no liquidation or dissolution of the Borrower and no
receivership, insolvency, bankruptcy, reorganization or other similar proceeding
relative to the Borrower or its properties is pending or, to the knowledge of
the Borrower, is threatened against it.
5.12 The Borrower maintains a place of business and keeps Collateral
and maintains its books of account and records, including all records concerning
the Collateral, only at the location(s) set forth in Schedule A attached hereto.
5.13 The Borrower is the sole owner of and has good and marketable
title to the Collateral, and the Borrower has full right and power to grant the
Lender a security interest therein. At the time the Collateral becomes subject
to the Lender's security interest, the Collateral will be free from all liens,
encumbrances and security interests in favor of any Person other than the
Lender, except for Permitted Liens.
5.14 As to each and every Receivable, to the best of the Borrower's
knowledge and belief (a) it is a bona fide existing obligation, valid and
enforceable against the Account Debtor for a sum certain for sales of goods
shipped or delivered, or goods leased, or services rendered in the ordinary
course of business; (b) all supporting documents, instruments, chattel paper and
other evidence of indebtedness, if any, delivered to the Lender are complete and
correct and are valid and enforceable in accordance with their terms, except to
the extent enforceability may be limited by bankruptcy, insolvency or similar
laws affecting creditor's rights generally and by equitable principles of
general applicability (regardless of whether such enforceability is considered
in a proceeding in equity or at law), and all signatures and endorsements that
appear thereon are genuine, and all signatures and endorsers have full capacity
to contract; (c) the Account Debtor is liable for and will make payment of the
amount expressed in such Receivable according to its terms; (d) it is subject to
no discount, allowance or special terms of payment, except for ordinary trade
discounts and allowances for prompt payment, without the prior approval of the
Lender; (e) it is subject to no dispute, defense or offset, real or claimed; (f)
it is not subject to any prohibition or limitation upon assignment; and (g) the
Borrower has full right and power to grant the Lender a security interest
therein and the security interest granted in such Receivable to the Lender in
Section 3 hereof will be a valid first security interest which will inure to the
benefit of the Lender without further action. The warranties set out herein
shall be deemed to have been made with respect to each and every Receivable now
owned or hereafter acquired by the Borrower.
5.15 No portion of the Revolving Loans shall be used to purchase or
carry any "Margin Security" or "Margin Stock" as such terms are used in
Regulations G and U of the Board of Governors of the Federal Reserve System, 12
C.F.R. 207 and 221.
5.16 The Borrower is now in compliance and will in the future comply
with any and all of the requirements of Title 31 Section 3727 and Title 00
Xxxxxxx 00 xx xxx Xxxxxx Xxxxxx Code where such statutes are applicable to a
particular Receivable, and shall take all such other action as may be necessary
to facilitate the direct collection of or ensure perfection of the Lender's
security interest in the Receivables at all times.
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5.17 Except as previously disclosed to the Lender in writing, no
franchises, licenses, trademarks, trade names, copyrights or patents are owned
or licensed by, or registered in the name of, or have been applied for by, the
Borrower, and no such rights or agreements are necessary to the conduct of the
present business of the Borrower. The Borrower has no knowledge and has not
received any notice to the effect that any product it manufactures or sells, or
any service it renders, or any process, method, know-how, trade secret, part or
material it employs in the manufacture of any product it makes or sells or any
service it renders, or the marketing or use by it or another of any such product
or service, may infringe any trademark, trade name, copyright, patent, trade
secret or legally protectable right of any other Person.
5.18 The Borrower utilizes no tradenames in the conduct of its
business, except as stated above and has not changed its name, been the
surviving entity in a merger or acquired any business.
5.19 The Inventory is not now and shall not at any time hereafter be
stored with a bailee, warehouseman, or similar Person without the Lender's prior
written consent. If any Inventory is so stored, the Borrower will, concurrent
with storing such Inventory, cause any such bailee, warehouseman, or similar
Person to issue and deliver to the Lender, in a form acceptable to the Lender,
warehouse receipts in the Lender's name evidencing the storage of the Inventory.
All such warehouse receipts do and will evidence ownership of the Inventory
stored by the issuers thereof, and the holder thereof is and will continue to be
the owner of good and marketable title of same, free and clear of any liens or
encumbrances. All such warehouse receipts are and will be genuine, valid and
enforceable by the holder thereof in accordance with their terms and all
statements thereon are and will be true and accurate in all respects.
5.20 All Equipment is personality and is not and will not be affixed to
real estate in such manner as to become a fixture or part of such real estate.
5.21 There are no strikes, work stoppages. material grievance
proceedings or other material controversies pending or, to the best of
Borrower's knowledge, threatened between the Borrower and any employees of the
Borrower or any union or other collective bargaining unit representing such
employees. The Borrower has complied and is in compliance with all laws relating
to the employment of labor, including, without limitation, provisions relating
to wages. hours, collective bargaining, occupational safety and health, equal
employment opportunities and the withholding of income taxes and social security
contributions, the non-compliance with which might materially adversely affect
its business, operations, prospects, assets, properties or condition (financial
or otherwise).
5.22 After giving effect to the transactions contemplated by this
Agreement, the Borrower (a) will have capital and assets sufficient to carry on
its business and all businesses in which it is engaged or about to be engaged,
(b) will be solvent and able to pay its debts and other liabilities, whether
fixed or contingent, as they mature, and (c) will own property the present fair
saleable value of which on a going concern basis (assuming an orderly
liquidation) is greater than the amount required to pay its debts and other
liabilities, whether fixed or contingent The Borrower does not intend to incur,
and does not believe that it is incurring obligations beyond its ability to pay
as they mature.
5.23 The foregoing representations and warranties are made by the
Borrower with the knowledge and intention that the Lender will rely thereon, are
17
continuing and are reaffirmed upon each advance under the Revolving Loan or
other loans authorized hereunder, and shall survive the execution and delivery
of this Agreement and the making of all loans hereunder.
6. Affirmative Covenants. The Borrower covenants and agrees that
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until all of the Obligations have been paid in full, unless the Lender shall
otherwise consent in writing, it shall:
6.1 Maintain complete and accurate books of account and records
pertaining to the Collateral and the operations of the Borrower, and all such
books of account and records shall be kept and maintained at the location(s) set
forth in Schedule A attached hereto. The Borrower shall not move such books of
account and records without giving the Lender at least 30 days' prior written
notice. Prior to moving any of such books of account and records, the Borrower
shall execute and deliver to the Lender financing statements satisfactory to the
Lender. All such books of account and records and all financial statements and
reports furnished to the Lender shall be maintained and prepared in accordance
with generally accepted accounting principles applied on a basis consistent with
prior periods.
6.2 Grant the Lender, or its representatives, full and complete access
to all Collateral and to all books of account, records, correspondence and other
papers relating to the Collateral during normal business hours and the right to
inspect, examine, verify and make abstracts from and copies of the Collateral
and of such books of account, records, correspondence and other papers, and to
investigate such other activities and business of the Borrower as they may deem
necessary or appropriate at the time.
6.3 Deliver to the Lender:
(a) Within 20 days after the end of each calendar month of each
fiscal year, unaudited financial statements, including a balance sheet and
related profit and loss statements, for such month prepared by the Borrower's
chief financial officer.
(b) Within 90 days after the end of each of the Borrower's fiscal
years, reviewed or audited financial statements (as the Lender may request),
including a balance sheet and related profit and loss statements, for such year
prepared by independent certified public accountants acceptable to the Lender.
Subject to the time limitations set forth above, the Borrower shall instruct
such accountants to deliver a copy of such financial statements, with all
opinions, statements and management letters provided to the Borrower by such
accountants, directly to the Lender at the time such financial statements are
delivered or exhibited to the Borrower.
(c) As soon as available, but in no event more than ten (10) days
after the end of each month, a written schedule in form satisfactory to the
Lender listing or otherwise describing the status of the Borrower's performance
and schedule for completion of each Government Contract which is or may become
the subject of a Receivable.
(d) No less frequently than once per year, the personal financial
statements of the Guarantor, in each case setting forth in appropriate detail on
forms provided by the Lender his assets, liabilities and income as of the end of
such year, certified by him to be true and correct and to accurately
18
reflect his financial condition as of the date thereof.
(e) Such other financial and business information and reports in
form and substance satisfactory to the Lender as and when the Lender may from
time to time reasonably request.
6.4 While this Agreement remains in effect and until the Obligations
have been paid in full, (a) maintain its corporate existence in good standing;
(b) make no change in the nature or character of its business or engage in any
business in which it was not engaged on the date of this Agreement; and (c)
maintain and keep in full force and effect all franchises, licenses and permits
necessary to the proper conduct of its business.
6.5 Maintain and keep all of its properties, real and personal, in good
working order, condition and repair and insure and keep insured all such
properties at all times against loss or damage by fire, theft, and such other
risks and hazards as are customarily insured against by corporations in similar
circumstances, or as the Lender may specify from time to time, with insurers, in
amounts and under policies acceptable to the Lender, and insure against loss or
damage from business interruption on account of fire or other casualty and
against liability on account of property damage and personal injury and under
all applicable worker's compensation laws, and against such other risks as the
Lender may reasonably request, with insurers, in amounts and under policies
reasonably acceptable to the Lender. If the Borrower fails to do so, the Lender
may obtain (but shall be under no obligation to do so) such insurance and add
the cost thereof to the Obligations. The Borrower agrees that, if any loss
should occur, the proceeds of all such insurance policies that relate to the
Collateral (the "Lender's Policies") may be applied to the payment of all or any
part of the Obligations, as the Lender may direct. At the Lender's request, the
Borrower shall deliver to the Lender the original (or certified copy) of each of
the Lender's Policies and evidence of payment of all premiums therefor. The
Lender's Policies shall contain an endorsement, in form and substance acceptable
to the Lender, showing loss payable to the Lender. Such endorsement or an
independent instrument furnished to the Lender shall provide that the insurer
will give the Lender at least 30 days' written notice before any such policy or
policies of insurance shall be altered or canceled and that no act of default of
the Borrower or any person shall affect the right of the Borrower to recover
under the Lender's Policies in case of loss of damage. The Borrower hereby
directs all insurers under the Lender's Policies to pay all proceeds payable
thereunder directly to the Lender. The Borrower irrevocably makes, constitutes
and appoints the Lender (and all officers, employees or agents designated by the
Lender) as the Borrower's true and lawful attorney and agent-in-fact for the
purpose of making, settling and adjusting claims under the Lender's Policies,
endorsing the name of the Borrower on any check, draft, instrument or other item
of payment for the proceeds of such policies and for making all determinations
and decisions with respect to such policies.
6.6 Comply at all times with the provisions of all leases to which the
Borrower is a party or under which it occupies property, so as to prevent any
loss of forfeiture thereof or thereunder, provided, however, that the Borrower
may cancel, surrender or modify any lease or contest in good faith any provision
thereof if such action is deemed advantageous to its business and if no
forfeiture, other than reasonable settlement payments in connection with such
surrenders or cancellations, under any such lease results therefrom.
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6.7 (a) Pay the Obligations as they become due or upon demand of the
Lender;
(b) Pay all indebtedness and obligations in accordance with their
terms and pay all taxes, assessments and governmental charges lawfully levied or
imposed on or against the Borrower or its properties prior to the date when such
taxes, assessments or charges shall become delinquent, unless the Borrower shall
contest the validity thereof in good faith and shall post any bond or other
security required by applicable law or by the Lender against the payment
thereof.
6.8 Comply with all federal, state and local laws including, but not
limited to requirements of Environmental Laws applicable to its business,
whether now in effect or hereafter enacted, and upon request of the Lender, the
Borrower will provide the Lender with such evidence of compliance as the Lender
may reasonably request.
6.9 If required, comply with Section 1809 of the Small Business Act
relating to I.R.S. Code Section 6302(h)(2)(C)(i)(iv) and (ii)(iv) or deposit
with a bank insured by the Federal Deposit Insurance Corporation or any
successor thereto, when due, all F.I.C.A. and withholding taxes and such other
taxes as may from time to time be owing, comply with all requirements of the
Lender with respect thereto and furnish the Lender with such proof of payment
thereof as the Lender may from time to time request.
6.10 Qualify as a foreign corporation and obtain all requisite licenses
and permits in each state in which the failure of the Borrower to so qualify
would have a material adverse effect on its business, operations, properties,
assets or financial condition.
6.11 At the request of the Lender, take the necessary or appropriate
steps to file and perfect, at the Borrower's expense, any lien, judgment, claim
or lawsuit that may be available to the Borrower under the laws of the
applicable jurisdiction in the event that any Receivable is not paid within 60
days after its due date.
6.12 Defend the Collateral against all claims and demands of all
Persons at any time claiming the same or any interest therein and pay all costs
and expenses (including Reasonable Attorneys' Fees) incurred in connection with
such defense.
6.13 Promptly notify the Lender of any condition or event that
constitutes, or with the running of time, the giving of notice, or both, would
constitute, an Event of Default, and promptly inform the Lender of any material
adverse change in the financial condition of the Borrower or of the Guarantor.
6.14 Promptly notify the Lender in writing of any action or omission of
the Lender which the Borrower claims caused or may cause injury, loss or damage
to the Borrower. Failure of the Borrower to so notify the Lender of such claim
within thirty (30) days after the Borrower determines that it has such claim
shall constitute a waiver of such claim.
6.15 Immediately notify the Lender of any change in the location of any
of the Borrower's places of business or the opening of any new place of
business.
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6.16 At the request of the Lender, execute and deliver such financing
statements, documents and instruments, and perform all other acts as the Lender
deems necessary or desirable, to perfect or continue the perfection of the
Lender's security interest in the Collateral, and pay, upon demand, all expenses
(including Reasonable Attorneys' Fees, filing fees and taxes) incurred by the
Lender in connection therewith.
6.17 At the request of the Lender, make available to the Lender a copy
of each Government Contract and a copy of each amendment thereto or modification
thereof which changes the price of such contract or the amount funded to pay for
such contract, except to the extent that furnishing such copies may be
prohibited by government security regulations.
6.18 At the request of the Lender, submit to the Lender for the
Lender's approval those Government Contracts which the Borrower desires to be
included in determining Eligible Government Accounts, and provide such other
information concerning such Government Contracts as the Lender may reasonably
request. The Lender shall not unreasonably delay or withhold its response
regarding the Lender's approval of such Government Contracts.
6.19 Promptly after the furnishing thereof, provide to the Lender
copies of any statement or report furnished to any other Person pursuant to the
terms of any indenture, loan, credit, or similar agreement and not otherwise
required to be furnished to the Lender pursuant to any other Section of this
Agreement. Promptly after the sending or filing thereof, provide to the Lender
copies of all proxy statements, and reports which the Borrower or any Affiliate
sends to its stockholders, and copies of all regular, periodic, and special
reports, and all registration statements which the Borrower files with the
authority which may be substituted therefor, or with any national securities
exchange.
6.20 Prepare, execute, and file appropriate financing statements with
respect to any consigned Inventory showing the consignee as debtor, the Borrower
as secured party, and the Lender as assignee of the Borrower;
6.21 Not permit any item of the Equipment to become a fixture to real
estate or an accession to other property without the prior written consent of
the Lender, and the Equipment is now and shall at all times remain personal
property except with the Lender's prior written consent. If any of the Equipment
is or will be attached to real estate in such a manner as to become a fixture
under applicable state law and if such real estate is encumbered, the Borrower
will obtain from the holder of each lien or encumbrance a written consent and
subordination to the security interest hereby granted, or a written disclaimer
of any interest in the Equipment, in a form acceptable to the Lender.
6.22 Promptly, upon request by the Lender, deliver, assign, and endorse
to the Lender all chattel paper, instruments, promissory notes and all other
documents held by the Borrower in connection therewith.
6.23 With respect to all property owned, subleased, operated or
occupied by the Borrower, maintain and cause all operators, tenants, subtenants,
licensees and occupants of all such property to maintain such property free of
all Hazardous Materials, and prevent all such property from being used for the
manufacture, generation, production, processing, distribution, use, treatment,
storage, disposal, transport or handling of any Hazardous Materials; and deliver
21
to the Lender copies of all reports prepared by any governmental authority, any
environmental auditor or engineer, or any other person, relating to or in
connection with the Borrower's compliance with any Environmental Laws, unless
the Borrower cannot obtain such reports or copies thereof.
6.24 Sell or dispose of the Inventory only to buyers in the ordinary
course of business. Upon the sale, exchange, lease or disposition of Inventory,
the security interest of the Lender therein shall without breach in continuity
and without further formality or act continue in and attach to all cash and
non-cash proceeds of such sale, exchange, lease or disposition, including all
the instruments for the payment of money, Receivables, contract rights,
documents of title, shipping documents and chattel paper, and all Inventory
returned or rejected by customers or repossessed by the Borrower or by the
Lender. As to any such sale, exchange, lease or disposition, the Lender shall
have all of the rights of an unpaid seller, including stoppage in transit,
replevin, detinue and reclamation.
6.25 Immediately notify the Lender of any change in location of any of
the Inventory not in the ordinary course of business, and, prior to any such
change, execute and deliver to the Lender such financing statements satisfactory
to the Lender as the Lender may request. The Borrower, at its sole expense, will
defend the Inventory against any claims or demands adverse to the Lender's
interest therein, and will promptly pay, when due, all taxes or assessments
levied against the Borrower on the Inventory other than those contested by the
Borrower in good faith by appropriate proceedings. If the Borrower shall fail to
pay such taxes or assessments, or fail to keep the Inventory free from any lien
or security interest in favor of anyone other than the Lender, the Lender may
(but shall not be obligated to) make expenditures for such purposes and any
amounts so expended shall be added to the Obligations, shall be repayable on
demand and shall accrue interest at the rate specified in Section 2.2 (e) until
repaid.
6.26 Report, in form satisfactory to the Lender, such information as
the Lender may reasonably request regarding the Inventory. Such reports shall be
for such period, shall reflect the Borrower's records as at such time and shall
be rendered with such frequency as the Lender may designate, and each such
report shall confirm that all Inventory reported upon is subject to the Lender's
security interest.
6.27 Advise the Lender promptly, in sufficient detail, of any
substantial change relating to the type, quantity or quality of the Inventory,
or any event which would have a material adverse effect on the value of the
Inventory or on the security interest granted to the Lender herein. A physical
listing of all Inventory, wherever located, shall be taken by the Borrower
whenever reasonably requested by the Lender, and a copy of such physical listing
will be supplied to the Lender. Such listing shall be extended to show the value
of such Inventory at the lowest wholesale price. The Lender may examine and
inspect the Inventory at any reasonable time.
6.28 Pay to the Lender, the Lender's customary Field Examination and
Audit Fees as set forth on Schedule A attached hereto.
6.29 At the request of the Lender, execute and deliver a Lockbox
Agreement to the Lender and comply with the terms thereof.
7. Negative Covenants. The Borrower covenants and agrees that until
------------------
22
the Obligations have been paid in full, unless the Lender shall consent in
advance in writing, it shall not:
7.1 Discontinue its business, sell a material part of its assets or
liquidate or sell, transfer, assign or otherwise dispose of any of the
Collateral, provided, however, that it may sell in the ordinary course of
business and for a full and adequate consideration in money or money's worth,
any product, merchandise or service produced, marketed or furnished by it.
7.2 Sell (except for the sale of Inventory in the ordinary course of
business), assign, pledge, grant a security interest in any of the Collateral,
whether now owned or hereafter acquired, except for Permitted Liens.
7.3 (a) Make any loans to any Person, including any of its officers,
directors or stockholders or (b) repay any existing loans made to it by its
officers, directors or stockholders.
7.4 (a) Declare or pay any dividends (except dividends payable solely
in shares of its capital stock) or make any other payments on its capital stock,
(b) issue, redeem, repurchase or retire, purchase or otherwise acquire any of
its capital stock now or hereafter outstanding, (c) grant or issue any warrant,
right or option pertaining thereto or other security convertible into any of the
foregoing, or make any distribution to its stockholders (other than as provided
herein) or set aside any sum or property for any such purpose; provided,
however, that if and for so long as the Borrower elects under Section 1362 of
the Internal Revenue Code to have the provisions of Subchapter S of the Internal
Revenue Code apply to the Borrower and its shareholders, then for so long as no
Event of Default, or any event or condition the occurrence of which would, with
the lapse of time or the giving of notice, or both, become an Event of Default,
exits or would result therefrom, the Borrower may make cash distributions to its
shareholders equal to the federal and state income taxes payable by them on
taxable income of the Borrower based on the maximum statutory rate applicable to
the individual shareholders for the applicable tax year.
7.5 Compromise or discount any Receivable except for ordinary trade
discounts or allowances for prompt payment.
7.6 Consolidate or merge with any Person or acquire or purchase any
equity or interest in any other Person, including shares of stock of other
corporations, or acquire or purchase any assets or obligations of any other
entity, except that the Borrower is permitted to own notes and other Receivables
acquired in the ordinary course of business.
7.7 Change its name, do business under an assumed or trade name, or
move any of the Collateral to another location not permitted under this
Agreement without giving the Lender at least 30 days' prior written notice
thereof and executing and delivering to the Lender such financing statements
satisfactory to the Lender as the Lender may request.
7.8 Replace or terminate the individuals named in Schedule A attached
hereto as an officer or employee of the Borrower.
7.9 Enter into any sale-leaseback transaction, or incur indebtedness
except:
23
(a) The Obligations of the Borrower to the Lender.
(b) Unsecured current liabilities incurred in the ordinary course
of business.
(c) Indebtedness (not overdue) secured by Permitted Liens.
(d) Indebtedness under guarantees or for other contingent
liabilities to the extent permitted by this Agreement.
(e) Indebtedness of the Borrower which has been subordinated to
the Obligations pursuant to a subordination agreement acceptable to the Lender.
7.10 (a) Lend or advance money, credit, or property to any Person or
Affiliate; (b) invest in (by capital contribution or otherwise), or purchase or
repurchase the stock or indebtedness, or all or a substantial part of the assets
or properties, of any Person; (c) or guarantee, assume, endorse, or otherwise
become responsible for (directly or indirectly or by any instrument having the
effect of assuring any Person's payment or performance) the indebtedness,
performance, obligations, stock, or dividends of any Person or Affiliate; or (d)
agree to do any of the foregoing except the endorsement of negotiable
instruments for deposit or collection in the ordinary course of business.
7.11 Incur, create, assume or permit to exist rental obligations or
other commitments under leases of real or personal property (except leases of
equipment in the ordinary course of business) other than under leases in effect
on the date of this Agreement.
8. Conditions for Closing and Advances. The Lender's obligations to
make any advance under the Revolving Loans or the Note are subject to the
following:
8.1 With respect to the initial advance, the Borrower shall have
delivered to the Lender the following and the following conditions precedent
have been satisfied in the sole discretion of the Lender:
(a) The Borrower's written authorization to deduct from the
initial advance the amount set forth in Schedule A attached hereto in payment of
the funding fee.
(b) This Agreement fully executed.
(c) The executed original Note required by Section 2.3 (b).
(d) The executed Guaranty Agreements required by Section 3.2.
(e) Landlord waivers in favor of the Lender and in form and
content satisfactory to the Lender executed by the owner of any premises leased
by the Borrower.
(f) Such executed financing statements or other documents which
the Lender may request in connection with the Collateral; evidence satisfactory
to the Lender that all filings under the Uniform Commercial Code or with any
federal or state agency or department that the Lender or its counsel deems
necessary or desirable in connection with the creation and perfection of the
security interest granted hereunder have been effected; and such other
24
evidence as the Lender may require that confirms that, as a result of such
filings, the Lender's security interest in the Collateral is consistent with the
representation contained in this Agreement relating thereto.
(g) If requested by the Lender, a Certificate of Good Standing
for the Borrower in the state of its incorporation.
(h) If requested by the Lender, a Certificate of the Borrower's
qualification to do business as a foreign corporation in the state(s) in which
the nature of its business or its properties makes such qualification necessary.
(i) A certificate of the President of the Borrower certifying to
such matters as the Lender may request as of the date of the closing, in form
and substance satisfactory to the Lender.
(j) A certificate of the Secretary of the Borrower certifying
that the copies of the Borrower's bylaws and articles of incorporation and other
charter documents attached hereto are true and correct copies of same as of the
date of the closing.
(k) Certified copy of resolutions of the Board of Directors of
the Borrower authorizing the execution and delivery of this Agreement and the
performance of the transactions contemplated hereby, dated the date of the
closing.
(l) Certificates or endorsements evidencing the insurance
coverage required by Section 6.5 hereof.
(m) The written opinion of the Borrower's and Guarantor's counsel
in form and content satisfactory to the Lender and its counsel.
(n) Evidence satisfactory to the Lender that all past due
federal, state and local taxes owed by the Borrower have been paid in full or
that there is sufficient availability under Section 2.1 hereof to allow the
Lender to make such payment from the proceeds of the Revolving Loans.
(o) The fully completed and executed IRS Form 8821 with respect
to the Borrower.
(p) If requested by the Lender, the executed Lockbox
Agreement.
(q) If requested by the Lender, the executed assignment or
assignments to the Lender of life insurance on the life of such individual(s)
and in such face amount as the Lender may request, together with evidence of
acceptance of such assignment(s) by the issuing company or companies.
(r) If requested by the Lender, executed deeds of trust,
mortgages or other instruments in form acceptable to the Lender which, when
recorded, shall create a lien on such real property with such priority and
securing such amount of the Obligations as determined by the Lender.
(s) If requested by the Lender, fully executed subordination and
intercreditor agreements in form acceptable to the Lender executed by such
Persons as determined by the Lender.
25
(t) All such other documents, receipts, certificates, instruments
or information as the Lender or its counsel may request.
(u) There shall exist no Event of Default (as hereinafter
defined) and no event which, upon the giving of notice or lapse of time or both,
would constitute an Event of Default.
(v) The representations and warranties contained in this
Agreement shall be true and correct.
(w) If required by the Lender, the Lender shall have conducted a
follow-up field examination with respect to the Borrower's assets and the
results of such field examination are in all respects satisfactory to the
Lender.
(x) The Lender shall have determined in good faith that no
material adverse change has occurred in the total financial condition of the
Borrower or the Guarantor from the financial condition of the Borrower or the
Guarantor, as the case may be, as set forth in the most recent financial
statements furnished to the Lender and as previously disclosed to the Lender.
8.2 All future advances of the Revolving Loan will be made from time to
time in the absolute discretion of the Lender, and neither this Agreement nor
any other action by the Lender shall obligate the Lender to make future loans or
advances to the Borrower. Future advances under the Revolving Loan shall be
further conditioned upon the following:
(a) The Borrower shall have delivered to the Lender such other
agreements, certificates, instruments, opinions and other documents and
materials as the Lender may reasonably request.
(b) The Borrower and the Guarantor shall have complied and shall
then be in compliance with all terms, covenants and conditions of this
Agreement.
(c) There shall exist no Event of Default and no event which,
upon notice or lapse of time or both, would constitute an Event of Default.
(d) The representations and warranties contained in this
Agreement shall be true and correct.
(e) The Lender shall have determined in good faith that no
material adverse change has occurred in the total financial condition of the
Borrower or the Guarantor from the financial condition of the Borrower or the
Guarantor, as the case may be, as set forth in the most recent financial
statements furnished to the Lender pursuant to this Agreement or from the
financial condition of the Borrower or the Guarantor, as the case may be,
previously disclosed to the Lender in any other manner.
9. Events of Default and Remedies.
------------------------------
9.1 The following shall constitute Events of Default under this
Agreement:
(a) The failure of the Borrower to pay when due any of the
Obligations.
26
(b) The failure of the Borrower to observe or perform any
affirmative or negative covenant contained in any of the Loan Documents.
(c) The discovery that any representation or warranty at any time
made in any or in connection with any of the Loan Documents, was in any material
respect false at the time it was made.
(d) The occurrence of a default (as described or defined therein)
under any other indebtedness or liability for borrowed money of the Borrower or
the Guarantor (other than the Revolving Loans) if the effect of such default is
to accelerate the maturity of such evidence of indebtedness or liability or to
permit the holder thereof to cause any indebtedness to become due prior to its
stated maturity.
(e) The suspension by the Borrower or any Guarantor of the
operation of its present business or a material adverse change (in the
reasonable opinion of the Lender) in the nature of its business; the admission
in writing by the Borrower or any Guarantor of its inability to pay its debts as
they mature; the permitting of a receiver or trustee to be appointed for all or
substantially all of its assets and, if appointed without its consent, the
failure to cause such receiver or trustee to be discharged within 60 days; the
instituting by the Borrower or any Guarantor of proceedings under any law, state
or federal, relating to bankruptcy, insolvency or any reorganization or
arrangement for the relief of debtors or, if any such proceedings are instituted
against it, the failure to cause such proceedings to be dismissed or stayed
within 60 days.
(f) The validity or enforceability of any of the Loan Documents
shall be contested by the Borrower or the Guarantor or the Borrower or the
Guarantor shall deny that it has any liability or obligation hereunder.
(g) The validity or enforceability of any Guaranty Agreement
shall he contested by the Borrower or the Guarantor shall deny that he has any
current or future liability or obligation thereunder, or shall fail to perform
his obligations thereunder.
(h) The loss, theft, damage, or destruction of any material
portion of the Collateral for which there is either no insurance coverage or for
which, in the opinion of the Lender, there is insufficient insurance coverage.
(i) The Borrower makes any payment on account of indebtedness
that has been subordinated to any of the Obligations, other than payments
specifically permitted by the terms of such subordination.
(j) Any Person holding indebtedness that has been subordinated to
the Obligations dies, terminates the subordination agreement or asserts that it
is terminated, or becomes the subject of an insolvency proceeding, or such
Person dies and the subordination of such indebtedness is revoked, terminated or
is otherwise no longer effective.
(k) The filing against the Borrower of formal charges under any
federal or state law for which forfeiture of any part or all of the Collateral
is a part of the potential penalty and such charges are not dismissed within 90
days of the date of filing thereof.
27
9.2 Upon the occurrence of an Event of Default, the Lender at its
option may: (i) make no further advances under the Revolving Loan; (ii)
terminate this Agreement and declare the Obligations of the Borrower immediately
due and payable and exercise all of its rights and remedies against the Borrower
and any Collateral; (iii) exercise all rights granted to a secured party under
the UCC , under applicable law, or otherwise or granted to the Lender herein.
The Lender shall have the right to require the Borrower to assemble any
Collateral and make such Collateral available at a location or locations
designated by the Lender. The Lender may foreclose its lien and security
interest in the Collateral in any way permitted by law. The Lender may enter the
Borrower's premises without legal process and without incurring a liability to
the Borrower, if this can be done without breach of peace, and remove the
Collateral to such place or places as the Lender may deem advisable, or the
Lender may require the Borrower to make the Collateral available to the Lender
at a convenient place and, with or without having the Collateral at the time or
place of sale, the Lender may sell or otherwise dispose of all or any part of
the Collateral whether in its then condition or after further preparation or
processing, either at public or private sale or at any broker's board, in lots
or in bulk, for cash or for credit, at any time or place, in one or more sales,
and upon such terms and conditions as the Lender may elect. In any such sale the
Lender may be the purchaser; (iv) take possession or control of, store, lease,
operate, manage, sell or otherwise dispose of all of any part of the Collateral;
(v) notify all parties under the contracts, accounts and Receivables forming all
or any part of the Collateral to make any payments due to the Borrower from such
parties directly to the Lender; (vi) in the Lender's own name, or in the name of
the Borrower, demand, collect, receive, xxx upon or otherwise collect, extend
the time of payment of, or compromise or settle for cash, credit or otherwise
upon any terms, any of the Receivables or any securities, instruments or
insurance applicable thereto and/or release the obligor thereon; (vii) endorse
as the agent of the Borrower any chattel paper, documents, or instruments
forming all or any part of the Collateral; (viii) make formal application for
the transfer of all of the Borrower's permits, licenses, approvals, agreements,
and the like relating to the Collateral or to the Borrower's business to the
Lender or to any assignee of the Lender or to any purchaser of any of the
Collateral; (ix) use and operate any Equipment or other property of the Borrower
to process or finish any Inventory; (x) pay, purchase, contest, or compromise
any encumbrance, charge, or lien that, in the opinion of the Lender, appears to
be prior or superior to its Lien and pay all expenses incurred in connection
therewith; (xi) prepare and file any bankruptcy proofs of claim or similar
documents against any Account Debtor; (xii) take any other action which the
Lender deems necessary or desirable to protect and realize upon its security
interest in the Collateral; (xiii) in addition to the foregoing, and not in
substitution therefor, take such measures as it deems necessary or advisable to
refurbish, repair, improve, process, finish, operate, demonstrate, and prepare
for sale the Collateral and may store, ship, reclaim, recover, protect,
advertise for sale or lease, and insure the Collateral and exercise any one or
more of the rights and remedies exercisable by the Lender under other provisions
of this Agreement, under the Note, or provided by applicable law (including,
without limitation, the UCC); (xiv) obtain appointment of a receiver for all or
any of the Collateral, the Borrower and Guarantor hereby consenting to the
appointment of such a receiver and each agreeing not to oppose any such
appointment. Any receiver so appointed shall have such powers as may be
conferred by the appointing authority including any or all of the powers, rights
and remedies which the Lender is authorized to exercise by this Agreement, the
28
Note and the Guaranty and shall have the right to incur such obligations and to
issue such certificates therefor as the appointing authority shall authorize.
9.3 Any notices required under the UCC with respect to the sale or
other disposition of the Collateral shall be deemed reasonable if mailed by the
Lender to the Persons entitled thereto at their last known address at least five
(5) days prior to disposition of the Collateral and, in the case of a private
sale of Collateral, need state only that the Lender intends to negotiate such a
sale.
9.4 The proceeds of any sale or disposition of the Collateral by the
Lender shall first be applied to the payment of all costs and expenses incurred
by the Lender in taking possession of, removing, storing, repairing or otherwise
preparing for sale and selling the Collateral (including the Lender's reasonable
attorney's fees and other legal costs and expenses). After payment of all such
costs and expenses, the Lender shall have the right to apply the remaining
proceeds of any such sale or disposition to the payment of the Obligations in
such order of application as the Lender may, in its sole discretion, elect.
9.5 The rights, options and remedies of the Lender shall be cumulative
and no failure or delay by the Lender in exercising any right, option or remedy
shall be deemed a waiver thereof or of any other right, option or remedy, or
waiver of any Event of Default hereunder.
9.6 In addition to the provisions of Section 9.2, it is expressly
understood and agreed between the Borrower and the Lender that default (which
shall include any failure by the Borrower to pay on demand any Obligation
payable on demand by it to the Lender) by the Borrower, beyond any applicable
grace period, on any other loans, indebtedness, liabilities or obligations of
the Borrower to the Lender or to any other Person (other than suppliers and
vendors in the ordinary course of business), now existing or hereafter an sing,
regardless of how they arise or by what contract, agreement or instrument they
may be evidenced, or whether evidenced by any contract, agreement or instrument,
shall, at the Lender's option, if such default results in the acceleration of
any such indebtedness, liabilities or obligations, constitute an Event of
Default hereunder and a default on all such other loans, indebtedness,
liabilities or obligations of the Borrower to the Lender.
9.7 The Borrower, having knowledge that it may be entitled to notice
and a hearing prior to repossession of the Collateral, hereby waives any right
it may have under existing or future law to notice of foreclosure or of any
other act described herein, to any hearing that may be held relating to
foreclosure or any other such act, and to any notice that may be required to be
given by the Lender prior to such hearing. The Borrower hereby expressly
releases the Lender and its agents from any and all liability relating to such
foreclosure and any other acts described herein unless occasioned by the
Lender's gross negligence or willful misconduct.
10. Destruction of Documents. Any documents, schedules, invoices or
------------------------
other papers delivered to the Lender by the Borrower may be destroyed or
otherwise disposed of by the Lender three months after they are delivered to or
received by the Lender, unless the Borrower requests prior to delivery, in
29
writing, the return of said documents, schedules, invoices or other papers and
makes arrangements, at the Borrower's expense, for their delivery to the
Borrower.
11. Indemnification. The Borrower, its successors and assigns, agrees
---------------
at its sole cost and expense to defend, indemnify and hold harmless the Lender,
its directors, officers, employees, agents, contractors, subcontractors,
licensees, invitees, successors and assigns, from and against any and all
claims, demands, judgments, damages, actions, causes of action, injuries,
administrative orders, consent agreement and orders, liabilities, penalties,
costs, and expenses of any kind whatsoever (including claims arising out of loss
of life, injury to persons, property or business or damage to natural resources)
in connection with the activities of the Borrower, its successors and assigns,
its predecessors in interest, or third parties who have trespassed on the
Borrower's premises, suppliers to the Borrower, the Guarantor or parties in
contractual relationship with the Borrower, its successors and assigns, or any
of them, whether or not occasioned wholly or in part by any condition, accident
or event caused by any act or omission of the Lender, its directors, officers,
employees, agents, contractors, subcontractors, licensees, invitees, successors
and assigns which arises out of the violation or alleged violation of any
Environmental Law. The Borrower, its successors and assigns shall assume the
burden and expense of defending all suits, administrative proceedings, and
negotiations of any description, with any and all Persons arising out of any of
the occurrences set forth herein. The terms and conditions of this Section shall
survive the payment of the Obligations and termination of this Agreement.
12. Jurisdiction, Venue and Waiver of Jury Trial.
--------------------------------------------
12.1 The forum having the proper jurisdiction and venue to adjudicate
any claim, dispute or default which may arise out of the execution and delivery
of this Agreement and the performance of the transactions contemplated hereby
shall be the Circuit Court of the City of Richmond, Virginia, and the proper
appellate courts of the Commonwealth of Virginia, and the United States District
Court for the Eastern District of Virginia, Richmond Division, and proper
appellate courts of the United States, unless the Lender in its sole discretion
chooses to bring suit on its own behalf in some other court of competent
jurisdiction. The Borrower expressly submits and consents to such jurisdiction
and venue and specifically waives any and all rights it may have to contest the
jurisdiction and/or venue of the above mentioned forums and to demand any other
forum. The Borrower waives personal service of any and all legal process upon it
and consents and agrees that all such service may be made by Certified Mail
directed to the Borrower at its address set forth at the beginning of this
Agreement, Attention: President, and service so made shall be deemed to be
completed and effective service of process on the earlier of the date the return
receipt therefor is signed or five Business Days after the same shall have been
deposited in the United States mail, certified and postage prepaid.
12.2 THE BORROWER WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ON ANY MATTER ARISING OUT OF THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY.
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE
BORROWER, AND THE BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR
30
OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY
OR IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE BORROWER FURTHER REPRESENTS THAT
IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF
THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND
THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
13. Collection Costs. All costs and expenses, including, without
-----------------
limitation, reasonable attorneys' fee and legal expenses and the cost of annual
financing statement, judgment and tax lien searches, incurred by the Lender in
connection with obtaining or enforcing payment of any of the Obligations or
foreclosing the Lender's security interest in any of the Collateral or lien
against the Borrower's real estate, whether through judicial proceedings or
otherwise, or in collecting, enforcing or protecting its interests under this
Agreement, or under any other instruments or documents delivered pursuant
hereto, or in defending or prosecuting any actions or proceedings arising out of
or relating to the Lender's transactions with the Borrower, shall be paid by the
Borrower to the Lender, upon demand, and the Lender may take judgment against
the Borrower for all such costs, expenses and fees in addition to all other
amounts due from Borrower hereunder.
14. Expenses. The Borrower shall pay to the Lender all reasonable
--------
expenses of the Lender incurred in connection with the preparation of this
Agreement (including all Exhibits and any and all amendments or modifications
hereto) and the closing and making of the Revolving Loans, including reasonable
fees and expenses of the Lender's counsel, and all filing, recording and other
costs connected with the perfection of the Lender's security interests and liens
pursuant to Section 3 hereof. All such costs and expenses until paid shall be
included in the Obligations or deducted from any amount due the Borrower. The
Borrower agrees that the attorneys retained by the Lender shall represent only
the interests of the Lender.
15. Waivers and Releases. The Borrower and each endorser, guarantor
----------------------
and surety for any of the Obligations hereby (a) waives notice of nonpayment,
demand, presentment, protest and notice of protest with respect to any of the
Obligations, the Collateral, or notice of acceptance hereof, or of any other
action taken in reliance hereon, notice and opportunity to be heard before
exercise by the Lender of the remedies of self-help, set-off, or other summary
procedures permitted by law or by any agreement with the Borrower, and all other
demands and notices of any description, except such as are expressly provided
for herein, and (b) releases the Lender from all claims for loss or damage
caused by any act or failure to act on the part of the Lender, its officers,
attorneys, agents and employees, except any such act or failure to act which
arises out of the gross negligence or willful misconduct of the Lender, its
officers, attorneys, agents or employees.
16. Miscellaneous.
-------------
16.1 All notices, consents, requests, demands, or other communications
provided for in this agreement shall be in writing and shall be delivered by
hand, sent prepaid by Federal Express (or a comparable overnight delivery
service) by facsimile or sent by the United States mail, certified, postage
31
prepaid, return receipt requested, to the Lender or the Borrower, as the case
may be, at their respective addresses set forth at the beginning of this
agreement and to the attention of LOAN ADMINISTRATION DIVISION in the case of
the Lender and to the attention of the person as set forth in Schedule A
attached hereto, in the case of the Borrower. Any notice, request, demand or
other communication delivered or sent in the foregoing manner shall be deemed
given or made (as the case may be) upon the earliest of (a) the date it is
actually received, (b) on the Business Day after the day on which it is
delivered by hand, (c) on the Business Day after the day on which it is properly
delivered to Federal Express (or a comparable overnight delivery service), or
(d) on the third Business Day after the day on which it is deposited in the
United States mail. The Borrower or the Lender may change its address by
notifying the other party of the new address in any manner permitted herein.
Rejection or other refusal to accept or the inability to deliver because of a
changed address of which no notice was given shall not affect the date of such
notice, election or demand sent in accordance with the foregoing provisions.
16.2 If, at any time after payment in full by the Borrower of all
Obligations and termination of the Lender's liens, any payments on the
Obligations previously made by the Borrower or any other person must be
disgorged by the Lender for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy, or reorganization of the Borrower or
such other person), this Agreement and the Lender's liens granted hereunder
shall be reinstated as to all disgorged payments as though such payments had not
been made, and the Borrower shall sign and deliver to the Lender all documents
and things necessary to reperfect all terminated liens.
16.3 Unless sooner terminated by the Lender under the terms of this
Agreement, the term of this Agreement (the "Term") shall be the period set forth
on Schedule A attached hereto The Term shall automatically renew from year to
year thereafter unless the Borrower terminates the Agreement by giving the
Lender 60 days prior written notice. The Borrower shall pay annually to the
Lender a fee (the "Annual Fee") in the amount set forth on Schedule A attached
hereto. If the Borrower elects to terminate this Agreemem1t prior to the end of
the initial or any renewal Term, the Borrower shall pay to the Lender in
addition to the Obligations then due under this Agreement, a prepayment premium
(the "Prepayment Premium") equal to the amount set forth on Schedule A attached
hereto. The termination of this Agreement shall not affect the rights of either
party or the Obligations arising prior to the effective date of such
termination, and the provisions hereof and the security interests granted to the
Lender hereunder shall continue in full force and effect, notwithstanding the
fact that the Borrower's account may from time to time temporarily have a credit
balance, until all of the Obligations and other liabilities of the Borrower,
including, without limitation, the Borrower's liability for F.I.C.A. and
withholding taxes, have been paid in full or the Borrower has furnished the
Lender with an indemnification satisfactory to it with respect thereto. All
representations, warranties, covenants, waivers and agreements contained herein
shall survive the termination hereof unless otherwise provided.
16.4 This Agreement and Schedule A annexed hereto together with any
Addendum hereto shall constitute the entire agreement of the parties hereto and
no provision of this Agreement, including the provisions of this Section, may be
modified, deleted or amended in any manner except by agreement in writing
executed by the parties. All terms of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns, provided, however, that the Borrower shall
32
not assign or transfer its rights hereunder without the prior written consent of
the Lender.
16.5 This Agreement shall be construed and enforced in accordance with
the laws of the Commonwealth of Virginia without regard to its rules with
respect to choice of law. All references in this Agreement to the single number
and neuter gender shall be deemed to mean and include the plural number and all
genders, and vice versa, unless the context shall otherwise require.
16.6 The underlined headings contained herein are for convenience only
and shall not affect the interpretation of this Agreement.
16.7 A carbon, photographic or other reproduction of this Agreement or
any financing statement signed by the Borrower in connection with this Agreement
shall be sufficient as a financing statement.
16.8 This Agreement may be executed in more than one counterpart, each
of which shall be deemed an original.
16.9 All claims, liabilities and obligations of the parties arising out
of or in connection with the Obligations and the transactions contemplated by
this Agreement shall be fully and finally released and extinguished upon payment
in full of all of the Borrower's Obligations hereunder and the termination of
this Agreement.
16.10 The terms and conditions contained in any Addendum hereto shall
be incorporated herein by reference.
The Borrower and the Lender each has caused this Agreement to be duly
executed and delivered by its proper and duly authorized officer as of the day
and year first above written.
COMPUTER COMPONENTS CORPORATION
By: /s/ Xxxxx X. Xxxxxx
---------------------------
Title: President
FOOTHILL CAPITAL CORPORATION
By:___________________________________
-----------------------------
Title: Vice President
33
SCHEDULE A TO LOAN AND SECURITY AGREEMENT BETWEEN
COMPUTER COMPONENTS CORPORATION
AND FOOTHILL CAPITAL CORPORATION
DATED AUGUST 13, 1999
Invoice Eligibility Days (S. 1 .7): 90 days.
------------------------ -----------
Guarantors (S. 1.15): Tech Electro Industries, Inc.
----------
Limit on Purchase of Equipment (S. 1.23(b): $25,000.00.
------------------------------
Eligible Receivables Percentage (S. 2.1(a)): 85%.
-------------------------------
Eligible Inventory Percentage (S. 2.1(b)): 50% of Eligible Inventory
-------------------------------
consisting of battery and transformer Inventory having at any date an expiration
date in excess of 12 months from such date.
Eligible Government Accounts Percentage (S. 2.1(c)): N/A.
---------------------------------------
Revolving Loan Secured By Eligible Inventory (S. 2.2(b)): $500,000.00
--------------------------------------------
Revolving Loans Maximum Principal (S. 2.2(c)): $3,000,000.00.
---------------------------------
Interest Rate on Revolving Loans (S. 2.2(e)): 2% over the Reference Rate.
--------------------------------
Interest Payment Date on Revolving Loans (S. 2.2(e)): August 1, 1999.
----------------------------------------
Default Rate of Interest on Revolving Loans (S. 2.2(1)): 7% over the Reference
-----------------------------------------------
Rate.
Float Days (S. 2.2(g)): 3 Business Days.
----------
Service Fee (S. 2.2(h)): $1,000.00.
-----------
Unused Line Fee (S. 2.2(j)): 0.5% per annum.
---------------
Principal Amount of Other Loans (S. 2.3): N/A.
-------------------------------
Use of Proceeds of Other Loans (S. 2.3(a)): N/A.
------------------------------
Maturity Date of Other Loans (S. 2.3(b)): N/A.
----------------------------
Interest Rate on Other Loans (S. 2.3(c)): N/A.
----------------------------
Interest Payment Date on Other Loans (S. 2.3(c)): N/A.
------------------------------------
Default Rate of Interest on Other Loans (S. 2.3(e)): N/A.
---------------------------------------
Service Fee on Other Loans (S. 2.3 (e)): N/A.
--------------------------
Appraisal Fee on Other Loans (S. 2.3 (f)): N/A.
----------------------------
Prepayment Fee on Other Loans (S. 2.3 (g)): N/A.
-----------------------------
34
Letter of Credit Limit (S. 2.4): $250,000.00.
----------------------
Letter of Credit Fee (S. 2.4(b)): 0.5% of the face amount of each Letter of
--------------------
Credit when issued.
Location of Collateral (S. 5.12 & ss. 6.1): 0000 Xxxxx Xxxx Xxxx, Xxxxxxx,
----------------------
Texas.
Location of Books of Account and Records (S. 5.12 & ss. 6.1):4300 Xxxxx Xxxx
----------------------------------------
Road, Addison, Texas.
Field Examination and Audit Fees: (S. 6.28): $850.00 per man day plus
-----------------------------------
out-of-pocket travel and per diem expenses for each field examination and audit
conducted by the Lender.
Executive Management (S. 7.8): Xxxxx X. Xxxxxx.
--------------------
Funding Fee (S. 8.1(a)): $45,000.00.
-----------
Notification Designee (S. 16.1): Xxxxx X. Xxxxxx, President.
---------------------
Term (S. l6.3): 3 years
----
Annual Fee (S. 16.3):0.625% times the total lending commitment of $3,000,000.00.
------
Prepayment Premium (S. 16.3): The Borrower may prepay the Revolving Loans in
------------------
full at any time upon 60 days prior written notice to the Lender and payment of
a fee equal to (i) 4% of the Revolving Loans Maximum Principal amount in Section
2.2(c), if prepayment occurs prior to the first anniversary of the date of this
Agreement, (ii) 2% of the Revolving Loans Maximum Principal amount in Section
2.2(c) if prepayment occurs after the first anniversary but prior to the second
anniversary of the date of this Agreement or (iii) 1% of the Revolving Loans
Maximum Principal amount in Section 2.2(c) if prepayment occurs thereafter.
COMPUTER COMPONENTS CORPORATION
By: /s/ Xxxxx X. Xxxxxx
--------------------------
Its: President
FOOTHILL CAPITAL CORPORATION
By: /s/ Xxxx Xxxxx
--------------------------
Its: Vice President
35
