1
EXHIBIT 10.74
CONFORMED COPY
INCORPORATING AMENDMENT AND WAIVER
DATED AS OF MARCH 4, 1998
==============================================================
CREDIT AGREEMENT
Dated as of October 24, 1997
among
CODE-ALARM, INC.,
as Borrower,
THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and Lender
==============================================================
2
Page
TABLE OF CONTENTS
-i-
3
INDEX OF APPENDICES
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 1.1(b) - Form of Term A Note
Exhibit 1.1(c)(i) - Form of Term B Note
Exhibit 1.1(c)(ii) - Form of Notice of Term Loan B Advance
Exhibit 1.1(d) - Form of Notice of Term Loan C Advance
Exhibit 1.1(e) - Form of Swing Line Note
Exhibit 1.5(e) - Form of Notice of Conversion/Continuation
Exhibit 4.1(b - Form of Borrowing Base Certificate
Exhibit 9.1(a) - Form of Assignment Agreement
Schedule 1.1 - Responsible Individual
Schedule 1.4 - Sources and Uses; Funds Flow Memorandum
Schedule 3.2 - Executive Offices; FEIN
Schedule 3.4(A) - Financial Statements
Schedule 3.4(B) - Pro Forma
Schedule 3.4(C) - Projections
Schedule 3.4(D) - Fair Salable Balance Sheet
Schedule 3.6 - Real Estate and Leases
Schedule 3.7 - Labor Matters
Schedule 3.8 - Ventures, Subsidiaries and Affiliates; Outstanding
Stock
Schedule 3.11 - Tax Matters
Schedule 3.12 - ERISA Plans
Schedule 3.13 - Litigation
Schedule 3.15 - Intellectual Property
Schedule 3.17 - Hazardous Materials
Schedule 3.18 - Insurance
Schedule 3.19 - Deposit and Disbursement Accounts
Schedule 3.20 - Government Contracts
Schedule 3.21 - Customer and Trade Relations
Schedule 3.22 - Material Agreements
Schedule 5.1 - Trade Names
Schedule 6.2 - Investments
Schedule 6.3 - Indebtedness
Schedule 6.4 - Transactions with Affiliates
Schedule 6.7 - Existing Liens
Annex A (Recitals) - Definitions
Annex B (Section 1.2) - Letters of Credit
Annex C (Section 1.8) - Cash Management System
Annex D (Section 2.1(a)) - List of Closing Documents
Annex E (Section 4.1(a)) - Financial Statements and Projections -- Reporting
-i-
4
Annex F (Section 4.1(b)) - Collateral Reports
Annex G (Section 6.10) - Financial Covenants
Annex H (Section 9.9(a)) - Lenders' Wire Transfer Information
Annex I (Section 11.10) - Notice Addresses
-ii-
5
CREDIT AGREEMENT, dated as of October 24, 1997 among Code-Alarm, Inc., a
Michigan corporation (a "Borrower"); THE OTHER CREDIT PARTIES SIGNATORY HERETO;
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation (in its individual
capacity, "GE Capital"), for itself, as Lender, and as Agent for Lenders, and
the other Lenders signatory hereto from time to time.
RECITALS
WHEREAS, Borrower desires that Lenders extend revolving letter of credit
and term credit facilities to Borrower of up to Twenty-Five Million Five
Hundred Thousand Dollars ($25,500,000.00) in the aggregate for the purpose of
(a) refinancing certain indebtedness of Borrower, (b) providing working capital
financing for Borrower, (c) providing funds to satisfy, or letters of credit to
secure the issuance of a supersedeas or appeal bond or similar obligation with,
a certain potentially adverse judgment or judgments which may be entered
against one or more Credit Parties in certain pending litigation, and (d)
providing funds for other general corporate purposes of Borrower; and for these
purposes, Lenders are willing to make certain loans and other extensions of
credit to Borrower of up to such amount upon the terms and conditions set forth
herein; and
WHEREAS, Borrower desires to secure all of its obligations under the Loan
Documents by granting to Agent, for the benefit of Agent and Lenders, security
interests in and liens upon all of its existing and after-acquired personal and
real property; and
WHEREAS, capitalized terms used in this Agreement shall have the meanings
ascribed to them in Annex A. All Annexes, Disclosure Schedules, Exhibits and
other attachments (collectively, "Appendices") hereto, or expressly identified
to this Agreement, are incorporated herein by reference, and taken together,
shall constitute but a single agreement. These Recitals shall be construed as
part of the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Credit Facilities.
(a) Revolving Credit Facility. (i) Subject to the terms and conditions
hereof, each Revolving Lender agrees to make available from time to time until
the Commitment Termination Date its Pro Rata Share of revolving credit advances
(other than revolving credit advances made under Section 1.1(e)) (each, a
"Revolving Credit Advance"). The Pro Rata Share of the Revolving Loan of each
Revolving Lender shall not at any time exceed its separate Revolving Loan
Commitment. The obligations of each Revolving Lender hereunder shall be
several and not joint. The aggregate amount of Revolving Credit Advances
outstanding shall not exceed at any time the lesser of (A) the Maximum Amount
and (B) the Borrowing Base, in each
6
case less the sum of the Letter of Credit Obligations and the Swing
Line Loan outstanding at such time ("Borrowing Availability"). Until the
Commitment Termination Date, Borrower may from time to time borrow, repay and
reborrow under this Section 1.1(a). Each Revolving Credit Advance shall be
made on notice by Borrower to the representative of Agent identified on
Schedule 1.1 at the address specified thereon. Those notices must be given no
later than (1) 11:00 a.m. (Chicago time) on the Business Day of the proposed
Revolving Credit Advance, in the case of an Index Rate Loan, or (2) 11:00 a.m.
(Chicago time) on the date which is three (3) Business Days prior to the
proposed Revolving Credit Advance, in the case of a LIBOR Loan. Each such
notice (a "Notice of Revolving Credit Advance") must be given in writing (by
telecopy or overnight courier) substantially in the form of Exhibit 1.1(a)(i),
and shall include the information required in such Exhibit and such other
information as may be required by Agent. If Borrower desires to have the
Revolving Credit Advances bear interest by reference to a LIBOR Rate, Borrower
must comply with Section 1.5(e).
(ii) Borrower shall execute and deliver to each Revolving Lender a note to
evidence the Revolving Loan Commitment of that Revolving Lender. Each note
shall be in the principal amount of the Revolving Loan Commitment of the
applicable Revolving Lender, dated the Closing Date and substantially in the
form of Exhibit 1.1(a)(ii) (each a "Revolving Note" and, collectively, the
"Revolving Notes"). Each Revolving Note shall represent the obligation of
Borrower to pay the amount of each Revolving Lender's Revolving Loan Commitment
or, if less, the applicable Revolving Lender's Pro Rata Share of the aggregate
unpaid principal amount of all Revolving Credit Advances to Borrower together
with interest thereon as prescribed in Section 1.5. The entire unpaid balance
of the aggregate Revolving Loan and all other non-contingent Obligations shall
be immediately due and payable in full in immediately available funds on the
Commitment Termination Date.
(iii) At the request of Borrower, in its discretion Agent may (but shall
have absolutely no obligation to), make Revolving Credit Advances to Borrower
on behalf of Revolving Lenders in amounts which cause the outstanding balance
of the aggregate Revolving Loan to exceed the Borrowing Base (less the Swing
Line Loan) (such excess Revolving Credit Advances are herein referred to
collectively as "Overadvances"), and no such event or occurrence shall cause or
constitute a waiver by Agent or Lenders of any Default or Event of Default that
may result therefrom or of Agent's, Swing Line Lender's or Revolving Lenders'
right to refuse to make any further Overadvances, Swing Line Advances or
Revolving Credit Advances, or incur any Letter of Credit Obligations, as the
case may be, at any time that an Overadvance exists or would result therefrom.
In addition, Overadvances may be made even if the applicable conditions to
lending set forth in Section 2 have not been met. All Overadvances shall
constitute Index Rate Loans, shall bear interest at the Default Rate and shall
be payable on demand. Except as otherwise provided in Section 1.11(b), the
authority of Agent to make Overadvances is limited to an aggregate amount not
to exceed $1,000,000 at any time, shall not cause the aggregate Revolving Loan
to exceed the Maximum Amount, and may be revoked prospectively by a
written notice to Agent signed by Revolving Lenders holding fifty percent (50%)
or more of the Revolving Loan Commitments.
-2-
7
(b) Term Loan A. (i) Subject to the terms and conditions hereof, each
Term Lender agrees to make a term loan on the Closing Date to Borrower in the
original principal amount of its Term Loan A Commitment (collectively, the
"Term Loan A"). The obligations of each Term Lender hereunder shall be several
and not joint. Each such Term Loan shall be evidenced by promissory notes
substantially in the form of Exhibit 1.1(b) (each a "Term A Note" and
collectively the "Term A Notes"), and Borrower shall execute and deliver a Term
A Note to each applicable Term Lender. Each Term A Note shall represent the
obligation of Borrower to pay the amount of the applicable Term Lender's Term
Loan A, together with interest thereon as prescribed in Section 1.5.
(ii) Borrower shall pay the principal amount of the Term Loan A in twelve
(12) equal, consecutive quarterly installments of $125,000 each, on the first
day of January, April, July and October of each year, commencing on January 1,
1998.
(iii) Notwithstanding the foregoing clause (ii), the aggregate outstanding
principal balance of the Term Loan A shall be due and payable in full in
immediately available funds on the Commitment Termination Date, if not sooner
paid in full.
(iv) Each payment of principal with respect to the Term Loan A shall be
paid to Agent for the ratable benefit of each Term Lender making a Term Loan A,
ratably in proportion to each such Term Lender's respective Term Loan A
Commitment.
(c) Term Loan B. (i) Subject to the terms and conditions hereof, each
Term Lender agrees to make a term loan on the Term Loan B Funding Date to
Borrower (the "Term Loan B") in the original principal amount of its Term Loan
B Commitment. The obligations of each Term Lender hereunder shall be several
and not joint. Each Term Loan B shall be evidenced by promissory notes
substantially in the form of Exhibit 1.1(c)(i) (each a "Term B Note" and
collectively the "Term B Notes"), and Borrower shall execute and deliver a Term
B Note to the applicable Term Lender on the Closing Date in an amount equal to
such Term Lender's Term B Commitment. Each Term B Note shall represent the
obligation of Borrower to pay the amount of the applicable Term Lender's Term
Loan B, together with interest thereon as prescribed in Section 1.5. The Term
Loan B shall be made on notice by Borrower to the representative of Agent
identified on Schedule 1.1 at the address specified thereon. Such notice (a
"Notice of Term Loan B Advance") must be given no later than 11:00 a.m.
(Chicago time) on the date which is three (3) Business Days prior to the Term
Loan B Funding Date whether such Term Loan B shall be an Index Rate Loan or a
LIBOR Loan and shall be given in writing (by telecopy or overnight courier)
substantially in the form of Exhibit 1.1(c)(i), and shall include the
information required in such Exhibit and such other information as may be
required by Agent.
(ii) Borrower shall pay the aggregate principal amount of the Term Loan B
in equal, consecutive quarterly installments equal to one-twelfth (1/12) of the
aggregate original principal amount of such Loan on the first day of January,
April, July and October of each year, commencing on the first of such dates
occurring after the Term Loan B Funding Date (unless the first of such dates is
less than forty-five (45) days following the Term Loan B Funding Date, in
-3-
8
which case such installments shall commence on the second of such dates
occurring after the Term Loan B Funding Date).
(iii) Notwithstanding the foregoing clause (ii), the aggregate outstanding
principal balance of the Term Loan B, shall be due and payable in full in
immediately available funds on the Commitment Termination Date, if not sooner
paid in full.
(iv) Each payment of principal with respect to the Term Loan B shall be
paid to Agent for the ratable benefit of each Term Lender making a Term Loan B
ratably in proportion to each such Term Lender's respective Term Loan B
Commitment.
(d) Reimbursement of Litigation L/C Obligations; Term Loan C. (i) The
issuance of the Litigation L/C, the advancing of Term Loan C and terms of
repayment of the Litigation L/C Obligations, Term Loan C and the other
Litigation Obligations shall be governed by and construed in accordance with
the Litigation L/C Agreement, pursuant to which Agent and term Lender may
either cause the issuance of the Litigation L/C or directly advance "Term Loan
C" (as defined below) pursuant to the Term Loan C Commitments. Each of the
Credit Parties acknowledges and agrees that, notwithstanding anything contained
herein to the contrary, Borrower's Litigation L/C Obligations shall arise, and
shall be deemed to arise, immediately upon Borrower's execution of the
Litigation L/C Agreement.
(ii) If Agent and Term Lenders shall have incurred Litigation L/C
Obligations, then, upon payment by the L/C Issuer under the Litigation L/C, and
regardless of whether an Event of Default or Default shall then exist and
notwithstanding the failure of Borrower to satisfy any of the conditions set
forth in Section 2.4, each Term Lender shall fund its Pro Rata Share of such
payment to Agent pursuant to Annex B hereof and the Litigation L/C Agreement
and in accordance with their respective Term Loan C Commitments, and, upon such
payments, Borrower's Obligations to reimburse Agent for the Litigation L/C
Obligations shall thereafter be payable directly to such Term Lenders pursuant
to the terms of the Litigation L/C Agreement and Annex B (which Obligations to
the Term Lenders shall thereafter constitute "Term Loan C" hereunder and
thereunder), which Term Loan C shall be an Index Rate Loan. Borrower's request
for Agent's and Term Lenders' incurrence of Litigation L/C Obligations shall be
made on notice by Borrower to Agent two (2) Business Days prior to incurrence
pursuant to Annex B. Notwithstanding anything herein to the contrary, such
recharacterization of Borrower's Litigation L/C Obligations hereunder shall
occur solely for purposes of references herein, in the Litigation L/C Agreement
and in the other Loan Documents, to such Obligations and shall not be construed
to constitute a refinancing, repayment or novation of any such Obligations. All
liens and security interests in the Collateral which are granted to Agent under
the Litigation Collateral Documents to secure the Litigation L/C Obligations
shall continue to secure Borrower's Obligations with respect to Term Loan C as
so recharacterized. The obligations of the Term Lenders to pay to Agent their
respective Pro Rata Shares of payments under the Litigation L/C hereunder
shall be several and not joint.
(iii) If Agent shall not have incurred Litigation L/C Obligations or shall
have terminated the Litigation L/C prior to its being drawn, Borrower may
request Term Lenders to
-4-
9
directly advance Term Loan C pursuant to this subparagraph. Subject to
the terms and conditions hereof (including, without limitation, the conditions
set forth in Sections 2.1, 2.3(II) and 2.4), each Term Lender agrees to make a
Term Loan C on the Term Loan C Funding Date to Borrower in the original
principal amount of its Term Loan C Commitment. The obligations of each Term
Lender hereunder shall be several and not joint. If the Term Loan C is
advanced under this subparagraph, it shall be made on notice by Borrower to the
representative of Agent identified on Schedule 1.1 at the address specified
thereon. Such notice (a "Notice of Term Loan C Advance") must be given no
later than 11:00 a.m. (Chicago time) on the date which is three (3) Business
Days prior to the Term Loan C Funding Date whether such Term Loan C shall be an
Index Rate Loan or a LIBOR Loan and shall be given in writing (by telecopy or
overnight courier) substantially in the form of Exhibit 1.1(d), and shall
include the information required in such Exhibit and such other information as
may be required by Agent.
(iv) Each Term Loan C shall be evidenced by a promissory note
substantially in the form of Exhibit A to the Litigation L/C Agreement (each a
"Term C Note" and collectively the "Term C Notes"), and Borrower shall execute
and deliver its Term C Note to each Term Lender on the Closing Date as provided
in the Litigation L/C Agreement in an amount equal to such Term Lender's Term
Loan C Commitment. Each Term C Note, following the applicable Term Lender's
payment to Agent of its Pro Rata Share of payment under the Litigation L/C,
shall represent the Obligation of Borrower to pay the amount of the applicable
Term Lender's Term Loan C, together with interest thereon as prescribed in
Section 1.5.
(v) As provided in the Litigation L/C Agreement, Borrower shall pay the
aggregate principal amount of the Term Loan C in equal, consecutive quarterly
installments equal to the lesser of $250,000 and one-twelfth (1/12) of the
aggregate original principal amount of such Loan, on the first day of January,
April, July and October of each year, commencing on the first of such dates
occurring after the date on which the L/C Issuer make payment under the
Litigation L/C (unless the first of such dates is less than forty-five (45)
days following the date of such payment by the L/C Issuer, in which case such
installments shall commence on the second of such dates occurring after the
date of such payment).
(vi) Notwithstanding the foregoing clause (ii) and as provided in the
Litigation L/C Agreement, the aggregate outstanding principal balance of the
Term Loan C, shall be due and payable in full in immediately available funds on
the Commitment Termination Date, if not sooner paid in full.
(vii) As provided in the Litigation L/C Agreement, each payment of
principal with respect to the Term Loan C shall be paid to Agent for the
ratable benefit of each Term Lender making a Term Loan C ratably in proportion
to each such Term Lender's respective Term Loan C Commitment.
(e) Swing Line Facility. (i) Agent shall notify the Swing Line Lender
upon Agent's receipt of any Notice of Revolving Credit Advance. Subject to the
terms and conditions hereof, the Swing Line Lender may, in its discretion, make
available from time to time until the Commitment Termination Date revolving
credit advances (other than revolving credit advances
-5-
10
made under Section 1.1(a)) (each, a "Swing Line Advance") in accordance
with any such notice. The aggregate amount of Swing Line Advances outstanding
shall not exceed the lesser of (A) the Swing Line Commitment and (B) the
Borrowing Base less the outstanding balance of the Revolving Loan at such time
("Swing Line Availability"). Until the Commitment Termination Date, Borrower
may from time to time borrow, repay and reborrow under this Section 1.1(e).
Each Swing Line Advance shall be made pursuant to a Notice of Revolving Credit
Advance delivered to Agent by Borrower in accordance with Section 1.1(a).
Those notices must be given no later than 11:00 a.m. (Chicago time) on the
Business Day of the proposed Swing Line Advance. Notwithstanding any other
provision of this Agreement or the other Loan Documents, the Swing Line Loan
shall constitute an Index Rate Loan. Borrower shall repay the aggregate
outstanding principal amount of the Swing Line Loan upon demand therefor by
Agent.
(ii) Borrower shall execute and deliver to the Swing Line Lender a
promissory note with respect to the Swing Line Commitment. Such note shall be
in the principal amount of the Swing Line Commitment of the Swing Line Lender,
dated the Closing Date and substantially in the form of Exhibit 1.1(e) (each a
"Swing Line Note" and, collectively, the "Swing Line Notes"). The Swing Line
Note shall represent the obligation of Borrower to pay the amount of the Swing
Line Commitment or, if less, the aggregate unpaid principal amount of all Swing
Line Advances made to Borrower together with interest thereon as prescribed in
Section 1.5. The entire unpaid balance of the Swing Line Loan and all other
non-contingent Obligations shall be immediately due and payable in full in
immediately available funds on the Commitment Termination Date if not sooner
paid in full.
(iii) Refunding of Swing Line Loans. The Swing Line Lender, at any time
and from time to time in its sole and absolute discretion, may on behalf of
Borrower (and Borrower hereby irrevocably authorizes the Swing Line Lender to
so act on its behalf) request each Revolving Lender (including the Swing Line
Lender) to make a Revolving Credit Advance to Borrower (which shall be an Index
Rate Loan) in an amount equal to such Revolving Lender's Pro Rata Share of the
principal amount of the Swing Line Loan (the "Refunded Swing Line Loan")
outstanding on the date such notice is given. Unless any of the events
described in Sections 8.1(h) or 8.1(i) shall have occurred (in which event the
procedures of Section 1.1(e)(iv) shall apply) and regardless of whether the
conditions precedent set forth in this Agreement to the making of a Revolving
Credit Advance are then satisfied, each Revolving Lender shall disburse
directly to Agent, its Pro Rata Share of a Revolving Credit Advance on behalf
of the Swing Line Lender, prior to 2:00 p.m. (Chicago time), in immediately
available funds on the Business Day next succeeding the date such notice is
given. The proceeds of such Revolving Credit Advances shall be immediately
paid to the Swing Line Lender and applied to repay the Refunded Swing Line
Loan of Borrower.
(iv) Participation in Swing Line Loans. If, prior to refunding a Swing
Line Loan with a Revolving Credit Advance pursuant to Section 1.1(e)(iii), one
of the events described in Sections 8.1(h) or 8.1(i) shall have occurred, then,
subject to the provisions of Section 1.1(e)(v) below, each Revolving Lender
will, on the date such Revolving Credit Advance was to have been made for the
benefit of Borrower, purchase from the Swing Line Lender an undivided
participation interest in the Swing Line Loan to Borrower in an amount equal to
its Pro
-6-
11
Rata Share of such Swing Line Loan. Upon request, each Revolving Lender will
promptly transfer to the Swing Line Lender, in immediately available funds,
the amount of its participation.
(v) Revolving Lenders' Obligations Unconditional. Each Revolving Lender's
obligation to make Revolving Credit Advances in accordance with Section
1.1(e)(iii) and to purchase participating interests in accordance with Section
1.1(e)(iv) shall be absolute and unconditional and shall not be affected by any
circumstance, including (A) any setoff, counterclaim, recoupment, defense or
other right which such Revolving Lender may have against the Swing Line Lender,
Borrower or any other Person for any reason whatsoever; (B) the occurrence or
continuance of any Default or Event of Default; (C) any inability of Borrower
to satisfy the conditions precedent to borrowing set forth in this Agreement on
the date upon which such participating interest is to be purchased or (D) any
other circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing. If any Revolving Lender does not make available to Agent
or the Swing Line Lender, as applicable, the amount required pursuant to
Section 1.1(e)(iii) or 1.1(e)(iv), as the case may be, the Swing Line Lender
shall be entitled to recover such amount on demand from such Revolving Lender,
together with interest thereon for each day from the date of non-payment until
such amount is paid in full at the Federal Funds Rate for the first two
Business Days and at the Index Rate thereafter.
(f) Reliance on Notices. Agent shall be entitled to rely upon, and shall
be fully protected in relying upon, any Notice of Revolving Credit Advance,
Notice of Conversion/Continuation, Notice of Term Loan B Advance, requests for
the incurrence of Letter of Obligations or Litigation L/C Obligations under
Annex B and the Litigation L/C Agreement, or similar notice believed by Agent
to be genuine. Agent may assume that each Person executing and delivering such
a notice was duly authorized, unless the responsible individual acting thereon
for Agent has actual knowledge to the contrary.
1.2 Letters of Credit. Subject to and in accordance with the terms and
conditions contained herein and in Annex B or the Litigation L/C Agreement, as
applicable, Borrower shall have the right to request, and Lenders agree to
incur, or purchase participations in, Letter of Credit Obligations and
Litigation L/C Obligations.
1.3 Prepayments.
(a) Voluntary Prepayments. Borrower may at any time on at least five (5)
days' prior written notice by Borrower to Agent (i) voluntarily prepay all or
part of the Term Loans and/or (ii) voluntarily prepay all or part of the
Revolving Loan and permanently reduce (but not terminate) the Revolving Loan
Commitment; provided that (A) any such prepayments or reductions shall be in a
minimum amount of $250,000 and integral multiples of $100,000 in excess of such
amount and (B) the Revolving Loan Commitment shall not be reduced to an amount
less than the greater of (x) $4,000,000 and (y) the L/C Sublimit. In addition,
Borrower may at any time on at least ten (10) days' prior written notice by
Borrower to Agent terminate the Revolving Loan Commitment; provided that upon
such termination, all Loans and other Obligations shall be immediately due and
payable in full. Any such voluntary prepayment and
-7-
12
any such reduction or termination of the Revolving Loan Commitment must
be accompanied by the payment of the fee required by Section 1.9(c), if any,
plus the payment of any LIBOR funding breakage costs in accordance with Section
1.13(b). Upon any such reduction or termination of the Revolving Loan
Commitment, Borrower's right to request Revolving Credit Advances, or request
that Letter of Credit Obligations be incurred on its behalf, or request Swing
Line Advances, shall simultaneously be permanently reduced or terminated, as
the case may be; provided that a permanent reduction of the Revolving Loan
Commitment shall not require a corresponding pro rata reduction in the L/C
Sublimit (as defined in Annex B). Each notice of partial prepayment shall
designate the Loans or other Obligations to which such prepayment is to be
applied, provided that any partial prepayments of any Term Loan made by or on
behalf of Borrower shall be applied to prepay the scheduled installments of
such Term Loan in inverse order of their respective maturities.
(b) Mandatory Prepayments. (i) If at any time the outstanding balance of
the aggregate Revolving Loan exceeds the lesser of (A) the Maximum Amount and
(B) the Borrowing Base, less, in each case, the aggregate outstanding Swing
Line Loan at such time, Borrower shall immediately repay the aggregate
outstanding Revolving Credit Advances to the extent required to eliminate such
excess. If any such excess remains after repayment in full of the aggregate
outstanding Revolving Credit Advances, Borrower shall provide cash collateral
for the Letter of Credit Obligations in the manner set forth in Annex B to the
extent of such remaining excess. Notwithstanding the foregoing, any
Overadvance made pursuant to Section 1.1(a)(iii) shall be repaid on demand.
(ii) Immediately upon receipt by any Credit Party of proceeds of any asset
disposition (including condemnation proceeds, other than asset dispositions
with respect to which no prepayments are required under Section 6.8, and
excluding proceeds of casualty insurance and proceeds of other claims for
damage and destruction) or any sale of Stock of any Subsidiary of any Credit
Party, Borrower shall prepay the Obligations in an amount equal to all such
proceeds, net of (A) commissions and other reasonable and customary transaction
costs, fees and expenses properly attributable to such transaction and payable
by Borrower in connection therewith (in each case, paid to non-Affiliates), (B)
transfer taxes, (C) amounts payable to holders of senior Liens (to the extent
such Liens constitute Permitted Encumbrances hereunder), if any, and (D) an
appropriate reserve for income taxes in accordance with GAAP in connection
therewith. Any such prepayment shall be applied in accordance with
Section 1.3(c).
(iii) If Borrower issues Stock or any debt securities (other than Stock or
debt securities issued pursuant to Section 2.2 and applied to the payment of
the portion of the Net Litigation Liability which exceeds $3,000,000), then,
not later than the Business Day following the date of receipt of the proceeds
thereof, Borrower shall prepay the Obligations (or cash collateralize the
Letter of Credit Obligations or Litigation L/C Obligations) in an aggregate
amount equal to all such proceeds, net of underwriting discounts and
commissions and other reasonable costs paid to non-Affiliates in connection
therewith. Any such prepayment (or cash collateralization) shall be applied in
accordance with Section 1.3(c).
-8-
13
(iv) Borrower shall prepay the outstanding principal balance of the Term
Loan B or Term Loan C (whichever is outstanding), or provide cash collateral
with respect to the Litigation L/C Obligations, on the earlier of the date
which is ten (10) days after (A) the date on which Borrower's annual audited
Financial Statements for the immediately preceding Fiscal Year are delivered
pursuant to Annex E or (B) the date on which such annual audited Financial
Statements were required to be delivered pursuant to Annex E, in an amount
equal to Excess Cash Flow for the immediately preceding Fiscal Year; provided,
however, that Borrower's obligations under this subparagraph shall only pertain
to Excess Cash Flow with respect to its Fiscal Years ending December 31, 1998
and thereafter. Any prepayments (or cash collateralization) paid pursuant to
this clause (iv) shall be applied in accordance with Section 1.3(c). Each such
prepayment (or cash collateralization) shall be accompanied by a certificate
signed by Borrower's chief financial officer certifying the manner in which
Excess Cash Flow and the resulting prepayment were calculated, which
certificate shall be in form and substance satisfactory to Agent.
(v) Immediately upon receipt by any Credit Party of proceeds of any money
judgment or other payment ordered by a court of law or other Governmental
Authority arising out of any litigation or other proceedings involving patents
or other intellectual property (including, without limitation, with respect to
the California Award), (i) Borrower shall prepay the Loans or cash
collateralize the Litigation L/C in an amount equal to fifty percent (50%) of
all such proceeds (net of reasonable costs and expenses paid to non-Affiliates
in connection therewith) if, at the time of such prepayment or cash
collateralization, neither the Term Loan B or the Term Loan C shall have been
advanced by the Term Lenders and the Litigation L/C shall not have been issued,
or the Term Loan B shall have been previously repaid in full, or the Term Loan
C shall have been previously repaid in full or (ii) Borrower shall prepay the
Term Loan B or Term Loan C (whichever is outstanding) or provide cash
collateral with respect to the Litigation L/C Obligations, in an amount equal
to all of such proceeds if, at the time of such prepayment, any principal
portion of the Term Loan B or Term Loan C shall remain outstanding or the
Litigation L/C shall be outstanding. If any prepayment or cash
collateralization under clause (ii) above results in a prepayment in full of
the Term Loan B or Term Loan C, or full cash collateralization of the
Litigation L/C Obligations and the aggregate of such proceeds exceeds the
amount of such prepayment or cash collateralization, then the Borrower shall
further prepay the Loans or cash collateralize the Letter of Credit
Obligations in an amount equal to fifty percent (50%) of such excess proceeds
as a prepayment or cash collateralization under clause (i) above. All such
prepayments shall be applied in accordance with Section 1.3(c).
(c) Application of Certain Mandatory Prepayments. Subject to the
provisions of Section 1.3(d):
(i) All prepayments and cash collateral payments made by Borrower pursuant
to Sections 1.3(b)(ii), 1.3(b)(iii), or 1.3(b)(v)(i), or the second sentence
of Section 1.3(b)(v), shall be applied as follows: first, to Fees and
reimbursable expenses of Agent then due and payable pursuant to any of the Loan
Documents; second, to interest then due and payable on the Term Loan B or Term
Loan C, if any; third, to prepay the scheduled installments of the Term Loan B
or Term Loan C, if any, in inverse order of maturity, until such Loan shall
have been
-9-
14
prepaid in full or to any Litigation L/C Obligations to provide cash
collateral therefor in the manner set forth in Annex B and the Litigation L/C
Agreement, until all such Litigation L/C Obligations have been fully cash
collateralized in the manner set forth in Annex B and the Litigation L/C
Agreement; fourth, to interest then due and payable on the Term Loan A; fifth,
to prepay the scheduled installments of the Term Loan A in inverse order of
maturity, until such Loan shall have been prepaid in full (or, in the case of
an application of the proceeds of the California Award pursuant to Section
1.3(b)(v), not to exceed an amount equal to $750,000 minus the aggregate amount
of principal of the Term Loan A therefore repaid by Borrower); sixth, to
interest then due and payable on the Swing Line Loan; seventh, to the principal
balance of the outstanding Swing Line Loan until the same shall have been
repaid in full; eighth, to interest then due and payable on Revolving Credit
Advances; ninth, to the principal balance of outstanding Revolving Credit
Advances until the same shall have been paid in full; and tenth, to any Letter
of Credit Obligations to provide cash collateral therefor in the manner set
forth in Annex B, until all such Letter of Credit Obligations have been fully
cash collateralized in the manner set forth in Annex B; it being understood and
agreed that neither the Revolving Loan Commitment nor the Swing Line Commitment
shall be permanently reduced by the amount of any such prepayments; and
(ii) Any prepayments and cash collateral payments made by Borrower
pursuant to Section 1.3(b)(iv) or 1.3(b)(v)(ii) above shall be applied to
prepay the scheduled installments of the Term Loan B or Term Loan C (whichever
is outstanding) in inverse order of maturity, until such Loan shall have been
prepaid in full, or to its Litigation L/C Obligations to provide cash
collateral therefor in the manner set forth in Annex B and the Litigation L/C
Agreement, until all such Litigation L/C Obligations have been fully cash
collateralized in the manner set forth in Annex B and the Litigation L/C
Agreement.
(iii) All cash collateral paid pursuant to this Section 1.3 shall be held
by Agent in an interest bearing account subject to such agreements and
documents as may be reasonably acceptable to Agent.
(d) Application of Prepayments from Insurance and Damage Claim Proceeds.
Prepayments from insurance proceeds in accordance with Section 5.4(c) and from
proceeds of other claims for damage and destruction shall be applied as
follows: insurance proceeds and proceeds of other claims for damage and
destruction from casualties or losses to cash or Inventory shall be applied
first, to the Swing Line Loans and second to the Revolving Credit Advances;
insurance proceeds and proceeds of other claims for damage and destruction from
casualties or losses to Equipment, Fixtures and Real Estate shall be applied to
the Term Loans and Litigation L/C Obligations (first to Borrower's Term Loan B,
Term Loan C or Litigation L/C Obligations (as cash collateral), if any, and
then to its Term Loan A). Neither the Revolving Loan Commitment nor the Swing
Line Loan Commitment shall be permanently reduced by the amount of any such
prepayments. If the insurance proceeds and proceeds of other claims for damage
and destruction received exceed the outstanding principal balances of the
Loans, if the insurance proceeds and proceeds of other claims for damage and
destruction do not specifically relate to cash, Inventory, Equipment, Fixtures
or Real Estate, or if the precise amount of insurance proceeds and proceeds of
other claims for damage and destruction allocable to
-10-
15
Inventory as compared to Equipment, Fixtures and Real Estate is not
otherwise determined, the allocation and application of those proceeds shall be
determined by Agent, subject to the approval of Requisite Lenders.
(e) Nothing in this Section 1.3 shall be construed to constitute Agent's
or any Lender's consent to any transaction referred to in Section 1.3(b)(ii)
and 1.3(b)(iii) above which is not permitted by other provisions of this
Agreement or the other Loan Documents.
1.4 Use of Proceeds. Borrower shall utilize the proceeds of the
Revolving Loan and the Swing Line Advances solely for the financing of
Borrower's ordinary working capital and general corporate needs, including
capital expenditures (to the extent not prohibited by this Agreement), but
excluding the payment of, or providing security for, any judgments or related
court awarded legal fees or other court awarded amounts relating to the DEI
Litigation or any legal fees relating to the California Award or related
litigation; provided, however, that (a) Borrower may utilize proceeds of
Revolving Loans to pay judgments or other awards relating to the DEI Litigation
in an amount not to exceed the aggregate amount of proceeds of the California
Award which has been applied to the Revolving Loan pursuant to Section
1.3(b)(v) if, after giving effect to any such payment, the Net Borrowing
Availability exceeds $500,000 and (b) Borrower may utilize proceeds of
Revolving Loans to pay legal fees relating to the California Award or related
litigation if, after giving effect to any such payment, the Net Borrowing
Availability exceeds $500,000. Borrower shall utilize the proceeds of the
Term Loan A and the Revolving Loans and Swing Line Advances made on the Closing
Date, for the Refinancing or for the financing of Borrower's ordinary working
capital and general corporate needs (including capital expenditures not
prohibited by this Agreement), but excluding the payment of any judgments
relating to the DEI Litigation. Borrower shall utilize the proceeds
of the Term Loan B solely for the payment of the Final Judgment and shall
utilize the Litigation L/C solely to obtain and secure a supersedeas bond
issued to prevent the creation, enforcement and execution of any judicial lien
with respect to the Lower Court Judgment in connection with an appeal of such
judgment. Disclosure Schedule (1.4) contains a description of Borrower's
sources and uses of funds as of the Closing Date, including Loans and Letter of
Credit Obligations to be made or incurred on that date, and a funds flow
memorandum detailing how funds from each source are to be transferred to
particular uses.
1.5 Interest and Applicable Margins. (a) Borrower shall pay interest to
Agent, for the ratable benefit of Lenders in accordance with the various Loans
being made by each Lender, in arrears on each applicable Interest Payment Date,
at the following rates: (i) with respect to the Revolving Credit Advances, the
Index Rate plus the Applicable Revolver Index Margin per annum or, at the
election of Borrower, the applicable LIBOR Rate plus the Applicable Revolver
LIBOR Margin per annum, based on the aggregate Revolving Credit Advances
outstanding from time to time; (ii) with respect to the Term Loans, the Index
Rate plus the Applicable Term Loan Index Margin per annum or, at the election
of Borrower, the applicable LIBOR Rate plus the Applicable Term Loan LIBOR
Margin per annum; and (iii) with respect to the Swing Line Loan, the Index Rate
plus the Applicable Revolver Index Margin per annum.
-11-
16
(b) If any payment on any Loan becomes due and payable on a day other than
a Business Day, the maturity thereof will be extended to the next succeeding
Business Day (except as set forth in the definition of LIBOR Period) and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
(c) All computations of Fees calculated on a per annum basis and interest
shall be made by Agent on the basis of a three hundred and sixty (360) day
year, in each case for the actual number of days occurring in the period for
which such interest and Fees are payable. The Index Rate shall be determined
each day based upon the Index Rate as in effect each day. Each determination
by Agent of an interest rate hereunder shall be conclusive, absent manifest
error.
(d) At the election of Agent (or upon the written request of Requisite
Lenders) confirmed by written notice from Agent to Borrower, and so long as any
Default or Event of Default shall have occurred and be continuing, the interest
rates applicable to the Loans and the Letter of Credit Fees shall be increased
by two percentage points (2%) per annum above the rates of interest or the rate
of such Fees otherwise applicable hereunder ("Default Rate"), and all
outstanding Obligations shall bear interest at the Default Rate applicable to
such Obligations. Interest and Letter of Credit Fees at the Default Rate shall
accrue from the date of such notice until such Default or Event of Default is
cured or waived, or the Agent (upon written authorization therefor from the
Requisite Lenders) notifies Borrower that the Default Rate no longer applies,
and shall be payable upon demand.
(e) So long as no Default or Event of Default shall have occurred and be
continuing, and subject to the additional conditions precedent set forth in
Section 2.4, Borrower shall have the option to (i) request that any Revolving
Credit Advances be made as a LIBOR Loan, (ii) convert at any time all or any
part of outstanding Loans (other than the Swing Line Loan) from Index Rate
Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an Index Rate Loan,
subject to payment of LIBOR breakage costs in accordance with Section 1.13(b)
if such conversion is made prior to the expiration of the LIBOR Period
applicable thereto, or (iv) continue all or any portion of any Loan (other than
the Swing Line Loan) as a LIBOR Loan upon the expiration of the applicable
LIBOR Period and the succeeding LIBOR Period of that continued Loan shall
commence on the last day of the LIBOR Period of the Loan to be continued. Any
Loan to be made or continued as, or converted into, a LIBOR Loan must be in a
minimum amount of $1,000,000 and integral multiples of $100,000 in excess of
such amount. Any such election must be made by 11:00 a.m. (Chicago time) on
the third (3rd) Business Day prior to (1) the date of any proposed Advance
which is to bear interest at the LIBOR Rate, (2) the end of each LIBOR Period
with respect to any LIBOR Loans to be continued as such, or (3) the date on
which Borrower wishes to convert any Index Rate Loan to a LIBOR Loan for a
LIBOR Period designated by Borrower in such election. If no election is
received with respect to a LIBOR Loan by 11:00 a.m. (Chicago time) on the third
(3rd) Business Day prior to the end of the LIBOR Period with respect thereto
(or if a Default or an Event of Default shall have occurred and be continuing
or if the additional conditions precedent set forth in Section 2.4 shall not
have been satisfied), that LIBOR Loan shall be converted to an Index Rate Loan
at the end of its LIBOR Period. Borrower must make such election by notice to
Agent in writing, by telecopy or
-12-
17
overnight courier. In the case of any conversion or continuation, such
election must be made pursuant to a written notice (a "Notice of
Conversion/Continuation") in the form of Exhibit 1.5(e).
(f) Notwithstanding anything to the contrary set forth in this Section
1.5, if a court of competent jurisdiction determines in a final order that the
rate of interest payable hereunder exceeds the highest rate of interest
permissible under law (the "Maximum Lawful Rate"), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest which would have been received had
the interest rate payable hereunder been (but for the operation of this
paragraph) the interest rate payable since the Closing Date as otherwise
provided in this Agreement. Thereafter, interest hereunder shall be paid at
the rate(s) of interest and in the manner provided in Sections 1.5(a) through
(e) above, unless and until the rate of interest again exceeds the Maximum
Lawful Rate, and at that time this paragraph shall again apply. In no event
shall the total interest received by any Lender pursuant to the terms hereof
exceed the amount which such Lender could lawfully have received had the
interest due hereunder been calculated for the full term hereof at the Maximum
Lawful Rate. If the Maximum Lawful Rate is calculated pursuant to this
paragraph, such interest shall be calculated at a daily rate equal to the
Maximum Lawful Rate divided by the number of days in the year in which such
calculation is made. If, notwithstanding the provisions of this
Section 1.5(f), a court of competent jurisdiction shall finally determine that
a Lender has received interest hereunder in excess of the Maximum Lawful Rate,
Agent shall, to the extent permitted by applicable law, promptly apply such
excess in the order specified in Section 1.11 and thereafter shall refund any
excess to Borrower or as a court of competent jurisdiction may otherwise order.
1.6 Eligible Accounts. Based on the most recent Borrowing Base
Certificate delivered by Borrower to Agent and on other information available
to Agent, Agent shall in its reasonable credit judgment determine which
Accounts of Borrower and Tessco shall be "Eligible Accounts" for purposes of
this Agreement; provided, however, and notwithstanding anything in this section
or this Agreement to the contrary, no Accounts of Tessco shall constitute
Eligible Accounts from and after the earlier of June 30, 1998 and the
completion of the Tessco Liquidation. In determining whether a particular
Account of Borrower or Tessco constitutes an Eligible Account, Agent shall not
include any such Account to which any of the exclusionary criteria set forth
below applies. Agent reserves the right, at any time and from time to time
after the Closing Date, to adjust any such criteria, to establish new criteria
and to adjust advance rates with respect to Eligible Accounts, in its
reasonable credit judgment, subject to the approval of Supermajority Revolving
Lenders in the case of adjustments or new criteria or changes in advance rates
which have the effect of making more credit available. Unless Agent shall have
otherwise agreed in writing, Eligible Accounts shall not include any Account of
Borrower or Tessco:
-13-
18
(a) which does not arise from the sale of Inventory or the performance of
services by Borrower or Tessco in the ordinary course of its business;
(b) upon which (i) Borrower's or Tessco's right to receive payment is not
absolute or is contingent upon the fulfillment of any condition whatsoever or
(ii) Borrower or Tessco is not able to bring suit or otherwise enforce its
remedies against the Account Debtor through judicial process;
(c) to the extent any defense, counterclaim, setoff or dispute is asserted
as to such Account or if the Account represents a progress billing consisting
of an invoice for goods sold or used or services rendered pursuant to a
contract under which the Account Debtor's obligation to pay that invoice is
subject to Borrower's or Tessco's completion of further performance under such
contract;
(d) that is not a true and correct statement of bona fide indebtedness
incurred in the amount of the Account for merchandise sold to or services
rendered and accepted by the applicable Account Debtor;
(e) with respect to which an invoice or other electronic communication
(with respect to which, in the case of an electronic communication, tangible
evidence of the existence and terms of such Account can be reproduced by
Borrower or Tessco), in any case acceptable to Agent in form and substance, has
not been sent to the applicable Account Debtor;
(f) that (i) is not owned by Borrower or Tessco or (ii) is subject to any
right, claim, security interest or other interest of any other Person, other
than Liens in favor of Agent, on behalf of itself and Lenders;
(g) that arises from a sale to any Credit Party or any Affiliate of any
Credit Party, or to any director, officer, other employee of any Credit Party
or any Affiliate of any Credit Party, or to any other entity which has any
common officer or director with any Credit Party;
(h) that is the obligation of an Account Debtor that is the United States
government or a political subdivision thereof, or any state or municipality or
department, agency or instrumentality thereof unless Agent, in its sole
discretion, has agreed to the contrary in writing and Borrower or Tessco, if
necessary or desirable, has complied with the Federal Assignment of Claims Act
of 1940, and any amendments thereto, or any applicable state statute or
municipal ordinance of similar purpose and effect, with respect to such
obligation;
(i) that is the obligation of an Account Debtor located in a foreign
country other than Canada (excluding the provinces of Quebec, Newfoundland,
Nova Scotia and Xxxxxx Xxxxxx Island) unless payment thereof is assured by a
letter of credit or bankers' acceptance satisfactory to Agent as to form,
amount and issuer;
-14-
19
(j) to the extent Borrower or any Subsidiary thereof is liable for
goods sold or services rendered by the applicable Account Debtor to Borrower or
any Subsidiary thereof, but only to the extent of the potential offset;
(k) that arises with respect to goods which are delivered on a
xxxx-and-hold, cash-on-delivery basis or placed on consignment, guaranteed sale
or other terms by reason of which the payment by the Account Debtor is or may
be conditional;
(l) that is in default; provided, that, without limiting the generality
of the foregoing, an Account shall be deemed in default upon the occurrence of
any of the following:
(i) it is not paid within the earlier of: sixty (60) days
following its due date or ninety (90) days following its original invoice
date net of credit balances, unless assured by a letter of credit
satisfactory to Agent as to form, amount and issuer;
(ii) if any Account Debtor obligated upon such Account suspends
business, makes a general assignment for the benefit of creditors or
fails to pay its debts generally as they come due; or
(iii) if any petition is filed by or against any Account Debtor
obligated upon such Account under any bankruptcy law or any other
federal, state or foreign (including any provincial) receivership,
insolvency relief or other law or laws for the relief of debtors;
(m) which is the obligation of an Account Debtor if fifty percent
(50%) or more of the dollar amount of all Accounts in excess of $2,500 and
owing by that Account Debtor to Borrower and Tessco are ineligible under the
other criteria set forth in this Section 1.6;
(n) to the extent the Dollar amount of such Account, when aggregated
with the Dollar amount of all other Accounts owing by that Account Debtor (other
than Ford Motor Company, General Motors Corporation, Chrysler Corporation,
Mitsubishi Motor Sales of America, Inc., Volkswagen of America, Inc., and
Subaru of America, Inc.) to Borrower and Tessco, exceeds ten percent (10%) of
the aggregate gross amount of all Accounts;
(o) as to which Agent's interest, on behalf of itself and Lenders,
therein is not a first priority perfected security interest;
(p) as to which any of the representations or warranties pertaining to
Accounts set forth in this Agreement or the Security Agreement is untrue;
(q) to the extent such Account is evidenced by a judgment, Instrument or
Chattel Paper;
(r) which is payable in any currency other than Dollars;
-15-
20
(s) to the extent Borrower or Tessco has received payments with respect to
such Account, the goods sold with respect to such Account have not been
delivered or such Account remains indicated on Borrower's or Tessco's most
recent trial balance delivered to Agent pursuant to Annex F hereto;
(t) to the extent such Account may be offset by warranty expenses with
respect to the goods sold and giving rise to such Account; or
(u) which is unacceptable to Agent in its reasonable credit judgment.
1.7 Eligible Inventory. Based on the most recent Borrowing Base
Certificate delivered by Borrower to Agent and on other information available
to Agent, Agent shall in its reasonable credit judgment determine which
Inventory of Borrower and Tessco shall be "Eligible Inventory" for purposes of
this Agreement; provided, however, that, notwithstanding anything in this
section or this Agreement to the contrary, no Inventory of Tessco shall
constitute Eligible Inventory from and after the earlier of June 30, 1998 and
the completion of the Tessco Liquidation. In determining whether any
particular Inventory of Borrower or Tessco constitutes Eligible Inventory,
Agent shall not include any such Inventory to which any of the exclusionary
criteria set forth below applies. Agent reserves the right, at any time and
from time to time after the Closing Date, to adjust any such criteria, to
establish new criteria and to adjust advance rates with respect to Eligible
Inventory, in its reasonable credit judgment, subject to the approval of
Supermajority Revolving Lenders in the case of adjustments or new criteria or
changes in advance rates which have the effect of making more credit available.
Unless Agent shall have otherwise agreed in writing, Eligible Inventory shall
not include any Inventory of Borrower or Tessco:
(a) that is not owned by Borrower or Tessco free and clear of all Liens
and rights of any other Person (including the rights of a purchaser that has
made progress payments and the rights of a surety that has issued a bond to
assure Borrower's or Tessco's performance with respect to that Inventory),
except the Liens in favor of Agent, on behalf of itself and Lenders;
(b) (i) that is located at a premises at which Borrower maintains
Inventory having an aggregate book value of less than $100,000 or (ii) that is
located on premises which are not owned and operated by Borrower or Tessco, or
stored with a bailee, warehouseman or similar Person, or located on premises
that are leased to Borrower or Tessco, or located on premises which are owned
by Borrower or Tessco and subject to a Lien securing Indebtedness of Borrower
or Tessco, unless in any such case under this clause (b)(ii), (x) a
satisfactory bailee letter, landlord waiver or mortgagee's waiver has been
delivered to Agent, or (y) Reserves satisfactory to Agent have been established
with respect thereto;
(c) that is placed on consignment or is in transit (other than Inventory
which is in transit for not more than ten (10) days from Tessco to Borrower or
Borrower to Tessco in the ordinary course of business or in connection with the
Tessco Liquidation);
-16-
21
(d) that is covered by a negotiable document of title, unless such
document has been delivered to Agent;
(e) that in Agent's reasonable determination, is excess, obsolete,
unsalable, shopworn, seconds, damaged or unfit for sale;
(f) that consists of display items or packing, labels, inserts or shipping
materials, manufacturing supplies, work-in-process Inventory or replacement
parts;
(g) that consists of goods which have been returned by the buyer;
(h) that is not of a type held for sale in the ordinary course of
Borrower's or Tessco's business;
(i) as to which Agent's Lien, on behalf of itself and Lenders, therein is
not a first priority perfected Lien;
(j) as to which any of the representations or warranties pertaining to
Inventory set forth in this Agreement or the Security Agreement is untrue;
(k) to the extent that it consists of any costs associated with
"freight-in" charges;
(l) to the extent that it consists of Hazardous Materials or goods that
can be transported or sold only with licenses that are not readily available;
(m) to the extent that it is not covered by casualty insurance acceptable
to Agent;
(n) to the extent that it is physically counted annually or quarterly and
carried forward on the perpetual inventory as constant until the next physical
count; or
(o) to the extent reserves are established with respect to it for
variances resulting from physical inventory counts or standard cost
adjustments.
(p) that is otherwise unacceptable to Agent in its reasonable credit
judgment.
1.8 Cash Management Systems. On or prior to the Closing Date, Borrower
will establish and will maintain until the Termination Date, the cash
management systems described on Annex C (the "Cash Management Systems").
1.9 Fees. (a) Borrower shall pay to GE Capital, individually, the Fees
specified in that certain fee letter of even date herewith between Borrower and
GE Capital (the "GE Capital Fee Letter"), at the times specified for payment
therein.
-17-
22
(b) As additional compensation for the Revolving Lenders, Borrower agrees
to pay to Agent, for the ratable benefit of such Lenders, in arrears, on the
first Business Day of each month prior to the Commitment Termination Date and
on the Commitment Termination Date, a fee for Borrower's non-use of available
funds in an amount equal to two-fifths of one percent (0.40%) per annum
(calculated on the basis of a 360 day year for actual days elapsed) of the
difference between (x) the Maximum Amount (as it may be reduced from time to
time) and (y) the average for the period of the daily closing balances of the
aggregate Revolving Loan and the Swing Line Loan outstanding during the period
for which such fee is due.
(c) If, prior to the second anniversary of the Closing Date, the Revolving
Loan Commitment is reduced or terminated, whether voluntarily or involuntarily
and whether before or after acceleration of the Obligations, Borrower shall pay
to Agent, for the benefit of Lenders as liquidated damages and compensation for
the costs of being prepared to make funds available hereunder an amount equal
to two percent (2.00%) of the amount of the reduction of the Revolving Loan
Commitment; provided, however, that (i) if Borrower requests Agent and Lenders
to consent to permitting Borrower to voluntarily redeem the Series A Preferred
Stock pursuant to the terms and conditions of the Series A Preferred Stock
Documents and Agent and Lenders refuse to consent thereto, and Borrower
terminates the Commitments and repays the Obligations in their entirety within
ninety (90) days of such refusal, the amount payable under this section shall
be one percent (1.00%) of the amount of the Revolving Loan Commitment
immediately prior to such termination and repayment and (ii) if Borrower shall
have notified the Agent in writing that it objects to the assignee of any
assignment effected under Section 9.1 within ten (10) days of such assignment
and Borrower terminates the Commitments and repays the Obligations in their
entirety within ninety (90) days of such notification, no amount shall be
payable under this section.
1.10 Receipt of Payments. Borrower shall make each payment under this
Agreement not later than 2:00 p.m. (New York time) on the day when due in
immediately available funds in Dollars to the Collection Account. For purposes
of computing interest and Fees and determining Borrowing Availability or Net
Borrowing Availability as of any date, all payments shall be deemed received on
the day of receipt of immediately available funds therefor in the Collection
Account prior to 2:00 p.m. (New York time). Payments received after 2:00 p.m.
(New York time) on any Business Day shall be deemed to have been received on
the following Business Day.
1.11 Application and Allocation of Payments. (a) So long as no Event of
Default shall have occurred and be continuing, (i) payments consisting of
proceeds of Accounts received in the ordinary course of business shall be
applied to the Swing Line Loan and the Revolving Loan; (ii) payments matching
specific scheduled payments then due shall be applied to those scheduled
payments; (iii) voluntary prepayments shall be applied as determined by
Borrower, subject to the provisions of Section 1.3(a); and (iv) mandatory
prepayments shall be applied as set forth in Section 1.3. As to each other
payment, and as to all payments made when an Event of Default shall have
occurred and be continuing or following the Commitment Termination Date,
Borrower hereby irrevocably waives the right to direct the application of any
and all payments received from or on behalf of Borrower, and Borrower hereby
irrevocably
-18-
23
agrees that Agent shall have the continuing exclusive right to apply,
reverse and reapply any and all such payments against the Obligations of
Borrower as Agent may deem advisable notwithstanding any previous entry by
Agent in the Loan Account or any other books and records. In the absence of a
specific determination by Agent with respect thereto, payments shall be applied
to amounts then due and payable in the following order: (1) to Fees and Agent's
expenses reimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to
principal payments on the Swing Line Loan; (4) to interest on the other Loans,
ratably in proportion to the interest accrued as to each Loan; (5) to
principal payments on the other Loans and to provide cash collateral for
Letter of Credit Obligations and Litigation L/C Obligations in the manner
described in Annex B and the Litigation L/C Agreement, ratably to the
aggregate, combined principal balance of the other Loans and outstanding
Letter of Credit Obligations and Litigation L/C Obligations; and (6) to all
other Obligations including expenses of Lenders to the extent reimbursable
under Section 11.3.
(b) Agent is authorized to, and at its sole election may, charge to the
Revolving Loan balance on behalf of Borrower and cause to be paid all Fees,
expenses, Charges, costs (including insurance premiums in accordance with
Section 5.4(a)) and interest and principal, other than principal of the
Revolving Loan, owing by Borrower under this Agreement or any of the other Loan
Documents if and to the extent Borrower fails to promptly pay any such amounts
as and when due, even if such charges would cause the balance of the aggregate
Revolving Loan and the Swing Line Loan to exceed Borrowing Availability. At
Agent's option and to the extent permitted by law, any charges so made shall
constitute part of the Revolving Loan hereunder.
1.12 Loan Account and Accounting. Agent shall maintain a loan account
(the "Loan Account") on its books to record: (a) all Advances and the Term
Loans, (b) all payments made by Borrower, and (c) all other debits and credits
as provided in this Agreement with respect to the Loans or any other
Obligations. All entries in the Loan Account shall be made in accordance with
Agent's customary accounting practices as in effect from time to time. The
balance in the Loan Account, as recorded on Agent's most recent printout or
other written statement, shall be presumptive evidence of the amounts due and
owing to Agent and Lenders by Borrower; provided that any failure to so record
or any error in so recording shall not limit or otherwise affect Borrower's
duty to pay the Obligations. Agent shall render to Borrower a monthly
accounting of transactions with respect to the Loans setting forth the balance
of the Loan Account as to Borrower. Unless Borrower notifies Agent in writing
of any objection to any such accounting (specifically describing the basis for
such objection), within thirty (30) days after the date thereof, each and every
such accounting shall (absent manifest error) be deemed final, binding and
conclusive upon Borrower in all respects as to all matters reflected therein.
Only those items expressly objected to in such notice shall be deemed to be
disputed by Borrower.
1.13 Indemnity. (a) Each Credit Party that is a signatory hereto shall
jointly and severally indemnify and hold harmless each of Agent, Lenders and
their respective Affiliates, and each such Person's respective officers,
directors, employees, attorneys, agents and representatives (each, an
"Indemnified Person"), from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses (including
attorneys' fees and disbursements and other
-19-
24
costs of investigation or defense, including those incurred upon any appeal)
which may be instituted or asserted against or incurred by any such Indemnified
Person as the result of credit having been extended, suspended or
terminated under this Agreement and the other Loan Documents and the
administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or failures
to act in connection therewith, including any and all Environmental Liabilities
and legal costs and expenses arising out of or incurred in connection with
disputes between or among any parties to any of the Loan Documents
(collectively, "Indemnified Liabilities"); provided, that no such Credit Party
shall be liable for any indemnification to an Indemnified Person to the extent
that any such suit, action, proceeding, claim, damage, loss, liability or
expense results from that Indemnified Person's gross negligence or willful
misconduct, as finally determined by a court of competent jurisdiction. NO
INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY
LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH
PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY,
FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED
AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY
LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR
THEREUNDER.
(b) To induce Lenders to provide the LIBOR Rate option on the terms
provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to
the last day of any applicable LIBOR Period (whether that repayment is made
pursuant to any provision of this Agreement or any other Loan Document or is
the result of acceleration, by operation of law or otherwise); (ii) Borrower
shall default in payment when due of the principal amount of or interest on any
LIBOR Loan; (iii) Borrower shall default in making any borrowing of, conversion
into or continuation of LIBOR Loans after Borrower has given notice requesting
the same in accordance herewith; or (iv) Borrower shall fail to make any
prepayment of a LIBOR Loan after Borrower has given a notice thereof in
accordance herewith, Borrower shall indemnify and hold harmless each Lender
from and against all losses, costs and expenses resulting from or arising from
any of the foregoing. Such indemnification shall include any loss (including
loss of margin) or expense arising from the reemployment of funds obtained by
it or from fees payable to terminate deposits from which such funds were
obtained. For the purpose of calculating amounts payable to a Lender under
this subsection, each Lender shall be deemed to have actually funded its
relevant LIBOR Loan through the purchase of a deposit bearing interest at the
LIBOR Rate in an amount equal to the amount of that LIBOR Loan and having a
maturity comparable to the relevant Interest Period; provided, however, that
each Lender may fund each of its LIBOR Loans in any manner it sees fit, and the
foregoing assumption shall be utilized only for the calculation of amounts
payable under this subsection. This covenant shall survive the termination of
this Agreement and the payment of the Notes and all other amounts payable
hereunder. As promptly as practicable under the circumstances, each Lender
shall provide Borrower with its written calculation of all amounts payable
pursuant to this Section 1.13(b), and such calculation shall be binding on the
parties hereto unless Borrower shall object in writing within ten (10) Business
Days of receipt thereof, specifying the basis for such objection in detail.
-20-
25
1.14 Access. Each Credit Party which is a party hereto shall, during
normal business hours, from time to time: (a) provide Agent and any of its
officers, employees and agents access to its properties, facilities, advisors
and employees (including officers) of each Credit Party and to the Collateral,
(b) permit Agent, and any of its officers, employees and agents, to inspect,
audit and make extracts from any Credit Party's books and records, (c) permit
Agent, and its officers, employees and agents, to inspect, review, evaluate and
make test verifications and counts of the Accounts, Inventory and other
Collateral of any Credit Party, (d) make available to Agent and its counsel, as
quickly as is possible under the circumstances, originals or copies of all
books and records which Agent may request, and (e) deliver any document or
instrument necessary for Agent, as it may from time to time request, to obtain
records from any service bureau or other Person which maintains records for
such Credit Party, and shall maintain duplicate records or supporting
documentation on media, including computer tapes and discs owned by such Credit
Party. If a Default or Event of Default shall have occurred and be continuing,
each such Credit Party shall provide such access and make such deliveries to
Agent and to each Lender at all times and without advance notice. If no
Default or Event of Default shall have occurred and be continuing, each such
Credit Party shall provide such access and make such deliveries to Agent upon
three (3) Business Days' prior notice and not more frequently than once during
any twelve month period. Borrower shall pay Agent, within thirty (30) days of
Agent's demand therefor, an amount equal to $600 per person, per day, plus all
of Agent's out-of-pocket expenses, for each on-site inspection by Agent
pursuant to this section, provided that such payments to Agent shall not exceed
$15,000 for any on-site inspection occurring prior to the occurrence of a
Default or Event of Default. Furthermore, so long as any Event of Default shall
have occurred and be continuing, Borrower shall provide Agent and each Lender
with access to their suppliers and customers. Representatives of other Lenders
may accompany Agent's representatives on regularly scheduled audits at no
charge to Borrower.
1.15 Taxes. (a) Any and all payments by Borrower hereunder or under the
Notes shall be made, in accordance with this Section 1.15, free and clear of
and without deduction for any and all present or future Taxes. If Borrower
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder or under the Notes, (i) the sum payable shall be increased as
much as shall be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
1.15) Agent or Lenders, as applicable, receive an amount equal to the sum they
would have received had no such deductions been made, (ii) Borrower shall make
such deductions, and (iii) Borrower shall pay the full amount deducted to the
relevant taxing or other authority in accordance with applicable law. Within
thirty (30) days after the date of any payment of Taxes, Borrower shall furnish
to Agent the original or a certified copy of a receipt evidencing payment
thereof.
(b) Each Credit Party that is a signatory hereto shall jointly and
severally indemnify and, within ten (10) days of demand therefor, pay Agent and
each Lender for the full amount of Taxes (including any Taxes imposed by any
jurisdiction on amounts payable under this Section 1.15) paid by Agent or such
Lender, as appropriate, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
were correctly or legally asserted, unless the payment of such Taxes by Agent
or such Lender was made with gross negligence or willful misconduct by Agent or
such Lender. Agent
-21-
26
or such Lender shall use its best efforts to give Borrower as much advance
notice of each such payment of Taxes in excess of $2,500 under this subsection
as is reasonably possible under the circumstances.
(c) Each Lender organized under the laws of a jurisdiction outside the
United States (a "Foreign Lender") as to which payments to be made under this
Agreement or under the Notes are exempt from United States withholding tax
under an applicable statute or tax treaty shall provide to Borrower and Agent a
properly completed and executed IRS Form 4224 or Form 1001 or other applicable
form, certificate or document prescribed by the IRS or the United States
certifying as to such Foreign Lender's entitlement to such exemption (a
"Certificate of Exemption"). Any foreign Person that seeks to become a Lender
under this Agreement shall provide a Certificate of Exemption to Representative
and Agent prior to becoming a Lender hereunder. No foreign Person may become a
Lender hereunder if such Person is unable to deliver a Certificate of
Exemption.
1.16 Capital Adequacy; Increased Costs; Illegality. (a) If any Lender
shall have determined that the adoption after the date hereof of any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements
or compliance by any Lender with any request or directive regarding capital
adequacy, reserve requirements or similar requirements (whether or not having
the force of law) from any central bank or other Governmental Authority
increases or would have the effect of increasing the amount of capital,
reserves or other funds required to be maintained by such Lender and thereby
reducing the rate of return on such Lender's capital as a consequence of its
obligations hereunder, then Borrower shall from time to time upon demand by
such Lender (with a copy of such demand to Agent) pay to Agent, for the account
of such Lender, additional amounts sufficient to compensate such Lender for
such reduction. A certificate as to the amount of that reduction and showing
the basis of the computation thereof submitted by such Lender to Borrower and
to Agent shall, absent manifest error, be final, conclusive and binding for all
purposes.
(b) If, due to either (i) the introduction of or any change in any law or
regulation (or any change in the interpretation thereof) or (ii) the compliance
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), there shall be any increase
in the cost to any Lender of agreeing to make or making, funding or maintaining
any Loan or incurring any Letter of Credit Obligations or Litigation L/C
Obligations, then Borrower shall from time to time, upon demand by such Lender
(with a copy of such demand to Agent), pay to Agent for the account of such
Lender additional amounts sufficient to compensate such Lender for such
increased cost. A certificate as to the amount of such increased cost,
submitted to Borrower and to Agent by such Lender, shall be conclusive and
binding on Borrower for all purposes, absent manifest error. Each Lender
agrees that, as promptly as practicable after it becomes aware of any
circumstances referred to above which would result in any such increased cost,
the affected Lender shall, to the extent not inconsistent with such Lender's
internal policies of general application, use reasonable commercial efforts to
minimize costs and expenses incurred by it and payable to it by Borrower
pursuant to this Section 1.16(b).
-22-
27
(c) Notwithstanding anything to the contrary contained herein, if the
introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to
agree to make or to make or to continue to fund or maintain any LIBOR Loan,
then, unless that Lender is able to make or to continue to fund or to maintain
such LIBOR Loan at another branch or office of that Lender without, in that
Lender's opinion, adversely affecting it or its Loans or the income obtained
therefrom, on notice thereof and demand therefor by such Lender to Borrower
through Agent, (i) the obligation of such Lender to agree to make or to make or
to continue to fund or maintain LIBOR Loans shall terminate and (ii) Borrower
shall forthwith prepay in full all outstanding LIBOR Loans owing by Borrower to
such Lender, together with interest accrued thereon, unless Borrower, within
five (5) Business Days after the delivery of such notice and demand, converts
all such Loans into a Loan bearing interest based on the Index Rate.
1.17 Single Loan. Except with respect to the Litigation Obligations, all
Loans to Borrower and all of the other Obligations of Borrower arising under
this Agreement and the other Loan Documents (other than the Litigation
Collateral Documents) shall constitute one general obligation of Borrower
secured, until the Termination Date, by all of the Collateral pursuant to the
Collateral Documents other than the Litigation Collateral Documents. The
Litigation Obligations shall constitute a single, but separate, general
obligation of Borrower secured, until the Termination Date, by all of the
Collateral pursuant to the Litigation Collateral Documents.
2. CONDITIONS PRECEDENT
2.1 Conditions to the Initial Loans.
No Lender shall be obligated to make or incur its initial Loans or Letter
of Credit Obligations or Litigation L/C Obligations hereunder on or after the
Closing Date, unless and until the following conditions have been satisfied or
provided for in a manner satisfactory to Agent, or waived in writing by Agent
and Lenders:
(a) Credit Agreement; Loan Documents. This Agreement or counterparts
hereof shall have been duly executed by, and delivered to, Borrower, Agent and
Lenders; and Agent shall have received such documents, instruments, agreements
and legal opinions as Agent shall request in connection with the transactions
contemplated by this Agreement and the other Loan Documents, including all
those listed in the Closing Checklist attached hereto as Annex D, each in form
and substance satisfactory to Agent.
(b) Repayment of Prior Lender Obligations; Satisfaction of Outstanding
L/Cs. (i) Agent shall have received a fully executed original of a pay-off
letter satisfactory to Agent confirming that all of the Prior Lender
Obligations will be repaid in full from the proceeds of the Term Loan A and
the initial Revolving Credit Advance and all Liens upon any of the property of
Borrower or any of its Subsidiaries in favor of Prior Lender shall be
terminated by Prior Lender immediately upon such payment; and (ii) all letters
of credit issued or guaranteed by Prior Lender
-23-
28
shall have been cash collateralized, supported by a guaranty of Agent
or supported by a Letter of Credit issued pursuant to Annex B, or terminated,
as mutually agreed upon by Agent, Borrower and Prior Lender.
(c) Approvals. Agent shall have received (i) satisfactory evidence that
the Credit Parties have obtained all required consents and approvals of all
Persons including all requisite Governmental Authorities, to the execution,
delivery and performance of this Agreement and the other Loan Documents and the
consummation of the Related Transactions or (ii) an officer's certificate in
form and substance satisfactory to Agent affirming that no such consents or
approvals are required.
(d) Opening Availability. The Eligible Accounts and Eligible Inventory of
Borrower and Tessco supporting the initial Revolving Credit Advance and the
initial Letter of Credit Obligations incurred and the amount of the Reserves to
be established on the Closing Date shall be sufficient in value, as determined
by Agent, to provide Borrower, with Net Borrowing Availability of at least
$1,000,000, after giving effect to the initial Revolving Credit Advance made to
Borrower, the incurrence of any initial Letter of Credit Obligations, the
payment of all fees and expenses incurred or owing by Borrower to Agent and
Lenders and to the purchasers of the Series A Preferred Stock as of the Closing
Date, and the consummation of the Related Transactions (on a pro forma basis,
with trade payables being paid currently, and expenses and liabilities being
paid in the ordinary course of business and without acceleration of sales).
(e) Payment of Fees. Borrower shall have paid the Fees required to be paid
on the Closing Date in the respective amounts specified in Section 1.9
(including the Fees specified in the GE Capital Fee Letter), and shall have
reimbursed Agent for all fees, costs and expenses of closing presented as of
the Closing Date.
(f) Capital Structure: Other Indebtedness. The capital structure of each
Credit Party and the terms and conditions of all Indebtedness of each Credit
Party shall be acceptable to Agent in its sole discretion. Without limiting
the foregoing, the aggregate consolidated Indebtedness, together with all other
consolidated liabilities of Borrower (other than trade payables), shall not
exceed $10,000,000 as of the Closing Date after giving effect to the
consummation of all of the Related Transactions.
(g) Consummation of Related Transactions. Agent shall have received fully
executed copies of the Series A Preferred Stock Documents, the Series B
Preferred Stock Documents, and each of the other Related Transactions
Documents, each of which shall be in form and substance satisfactory to Agent
and its counsel. The Related Transactions shall have been consummated in
accordance with the terms of the Related Transactions Documents and
Borrower shall have received $6,999,850 of cash proceeds (before deduction of
expenses) from the issuance of the Series A Preferred Stock, which proceeds
shall be accounted for as a contribution to Borrower's equity capital.
(h) Pegasus Guaranties. Each of the Litigation Guaranty and the
Supplemental Guaranty shall have been duly executed and delivered to Agent and
Agent shall
-24-
29
have received all documents, instruments, certificates and opinions
as may be required by the terms thereof or as Agent shall otherwise require
with respect thereto.
2.2 Further Conditions to Term Loan B. No Lender shall be obligated to
fund its Term Loan B, unless and until the following conditions shall have been
satisfied or provided for in a manner satisfactory to Agent, or waived in
writing by Agent and Lenders:
(a) Entry of Final Judgment. The Final Judgment shall have been entered
or established by settlement agreement and Agent shall have received
satisfactory evidence of (i) such entry or settlement, (ii) the amount of
Borrower's and each other Credit Party's liability with respect thereto, (iii)
the amount and timing of any proceeds of insurance, indemnification or
contribution expected to be received by Borrower and each of the other Credit
Parties with respect thereto and (iv) the aggregate amount of accrued and
unpaid expenses (including, without limitation, legal fees) incurred by the
Credit Parties with respect to the DEI Litigation as of the Term Loan B Funding
Date.
(b) Additional Equity or Subordinated Debt. If the aggregate amount of
the Final Judgment, minus the amount of any proceeds of insurance,
indemnification or contribution actually received by the Credit Parties with
respect thereto on or prior to the Term Loan B Funding Date plus the amount
determined pursuant to clause (iv) of Section 2.2(a) (provided, however, that
such amount shall not be added to Net Litigation Liability to the extent that,
as the date of determination of Net Litigation Liability hereunder, the Net
Borrowing Availability minus such amount, exceeds $500,000) (the "Net
Litigation Liability"), exceeds $3,000,000, Borrower shall have received, or
will simultaneously receive, additional net capital contributions or net
proceeds of Subordinated Debt, or a combination thereof, in an aggregate amount
at least equal to such excess, and shall have applied, or will simultaneously
apply, such contributions and proceeds to the payment in part of the Net
Litigation Liability. Agent shall have received, or will simultaneously
receive, satisfactory evidence of the application of such contributions and
proceeds to the Net Litigation Liability. The structure of, and documentation
governing, such additional net capital contributions and Subordinated Debt
shall be in form and substance acceptable in all respects to Agent and the
Requisite Lenders, and the identity of the Credit Parties or other obligors and
issuers with respect to the securities issued in exchange for such capital
contributions and for such Subordinated Debt shall be selected only with the
written approval of Agent and the Requisite Lenders. Without limiting the
foregoing, (i) any such Subordinated Debt shall not exceed $1,000,000 in
aggregate principal, shall be unsecured, no principal or interest with respect
thereto shall be required to be paid in cash to the holders of such
Subordinated Debt on or prior to its maturity date, and its maturity date shall
be no earlier than the July 24, 2003 and (ii) any such equity securities shall
not require dividends to be paid in cash or mandatory redemptions to be made
prior to July 24, 2003.
(c) Timing of Request for Advance. Each of the other conditions described
in this Section 2.2 shall have been satisfied, and Borrower shall have
delivered the Notice of Term Loan B Advance, on or prior to the earlier of (i)
the ninth (9th) day following the entry or settlement of the Final Judgment and
(ii) December 31, 1998.
-25-
30
(d) Minimum Availability. The Net Borrowing Availability shall be not
less than $500,000.
(e) Term Loan C Not Outstanding. No Litigation L/C Obligations nor any
Obligations with respect to Term Loan C shall be outstanding. If the
Litigation L/C shall have been theretofore issued, it shall have been
theretofore terminated or expired.
2.3 Further Conditions to Incurrence of Litigation L/C Obligations or
Making Term Loan C. The Agent and Term Lenders shall not be obligated to
incur Litigation L/C Obligations or cause the Litigation L/C to be issued,
amended, renewed, modified, extended, supplemented, substituted, replaced or
reissued, or directly advance the Term Loan C pursuant to Section 1.1(c) of the
Litigation L/C Agreement, unless and until the following conditions shall have
been satisfied or provided for in a manner satisfactory to Agent, or waived in
writing by Agent and Lenders:
(I) In the case of a request to incur Litigation L/C Obligations in
connection with the issuance, amendment, renewal, modification, extension,
supplement, substitution, replacement or reissuance of the Litigation L/C
pursuant to the Litigation L/C Agreement:
(a) Entry of Lower Court Judgment. The Lower Court Judgment shall have
been entered and Agent shall have received satisfactory evidence (i) of such
entry, (ii) of the amount of Borrower's and each other Credit Party's liability
with respect thereto, (iii) of the aggregate amount of accrued and unpaid
expenses (including, without limitation, legal fees) incurred by the Credit
Parties with respect to the DEI Litigation as of the proposed Litigation L/C
Issuance Date, (iv) that the sum of the amounts described in clauses (ii) and
(iii) of this subparagraph is less than or equal to $12,000,000 (provided,
however, the amount determined pursuant to clause (iii) shall not be included
in such addition to the extent that, as the date of determination hereof, the
Net Borrowing Availability minus such amount, exceeds $500,000), (v) that,
notwithstanding anything contained in Section 2.3(I)(a)(iv) to the contrary,
the Litigation L/C, shall be in a face amount which is less than or equal to
$12,000,000, (vi) that the Litigation L/C shall be sufficient in amount and in
such terms and conditions as to permit Borrower to obtain and secure a
supersedeas or appeal bond or similar obligation pursuant to Federal Rule of
Civil Procedure 62(d) or otherwise which, together with an order of the Lower
Court approving such bond, will have the effect under applicable laws and
procedures of enjoining or preventing the creation, attachment, perfection,
enforcement, levy, execution and foreclosure of any judicial or judgment lien
which could otherwise arise with respect to that portion of the Lower Court
Judgment which is the subject to bonding by Borrower, and all remaining
portions of the Lower Court Judgment have either been paid in full or are
otherwise then subject to a stay of execution pursuant to an order entered by
the Lower Court (or an appellate court of competent jurisdiction) having the
effect under applicable laws and procedures of enjoining or preventing the
creation, attachment, perfection, enforcement, levy, execution and foreclosure
of any judicial or judgment lien with respect to the Lower Court Judgment or
any portion thereof; provided, however, that any such supersedeas or appeal
bond or similar obligation shall not dissolve, or have the effect of
dissolving, any judicial or judgment lien in connection with the Lower Court
Judgment under applicable law and procedure (as amended, renewed, modified,
extended, substituted,
-26-
31
supplemented, replaced or reissued from time to time, the "Bond"),
(vii) that the form of the Bond shall be reasonably satisfactory to Agent,
(viii) that, prior to the expiration of any applicable stay of execution with
respect to the Lower Court Judgment or any portion thereof which is to be
bonded, the Bond shall have been approved by the Lower Court and shall be in
full force and effect, (ix) that, upon the issuance and posting of the
Litigation L/C (and after giving effect to any amendment, renewal,
modification, extension, supplement, substitution, replacement or reissuance
thereof) and upon the approval of the Bond by the Lower Court and the issuance
of the Bond, no judicial lien or judgment shall have in fact been created,
attached or perfected under applicable law and procedure with respect to any
portion of the Lower Court Judgment, (x) that, upon the issuance and posting of
the Litigation L/C and Bond, Borrower will have taken all actions as are
necessary to timely and properly appeal those portions of the Lower Court
Judgment which are to be secured by the Litigation L/C, (xi) with respect to
any requested amendment, renewal, modification, extension, supplement,
substitution, replacement or reissuance of the Litigation L/C which will
secure any portion of the Lower Court Judgment which was not previously secured
by the Bond or Litigation L/C, that each of the foregoing matters described in
clauses (i) through (x) of this subparagraph shall be satisfied with respect to
the Lower Court Judgment, Litigation L/C and Bond, that the Lower Court
Judgment is not subject to further increase or other modification by the Lower
Court and all post-judgment motions and other unresolved issues relating to the
DEI Litigation and before the Lower Court have been resolved by the Lower
Court, and that the Litigation L/C shall not have been previously drawn in
whole or in part.
(b) Pegasus Litigation Guaranty. The Pegasus Litigation Guaranty shall be
effective in accordance with its terms, and shall be valid and enforceable
severally against the Pegasus Funds in an amount not less than the proposed
aggregate face amount of the Litigation L/C, neither Pegasus Fund shall be in
default or breach of any term or condition of the Pegasus Litigation Guaranty,
and, if requested by any Lender, each Pegasus Fund shall have reaffirmed and
ratified its obligations under the Pegasus Litigation Guaranty.
(c) Timing of Request for Incurrence of Litigation L/C Obligations. Each
of the other conditions described in this Section 2.3(I) shall have been
satisfied, and (i) in the case of the initial incurrence of Litigation L/C
Obligations, Borrower shall have requested that the Litigation L/C and Bond be
issued, and the Litigation L/C and Bond will be issued, on or prior to
March 5, 1998 and (ii) in the case of each amendment, renewal, modification,
extension, supplement, substitution, replacement or reissuance of the
Litigation L/C, Borrower shall have requested such action, and such action
shall be effected, and any related amendment, renewal, modification, extension,
supplement, substitution, replacement or reissuance of the Bond shall be
effected, on or prior to the earlier of (x) the expiration of the stay of
execution with respect to the Lower Court Judgment or any portion thereof and
(y) December 31, 1998.
(d) Minimum Availability. The Net Borrowing Availability shall be not
less than $500,000.
(e) Term Loan B and C Not Outstanding. No Obligations with respect to
Term Loan B or Term Loan C shall be outstanding.
-27-
32
(II) In the case of a request to advance the Term Loan C pursuant to
Section 1.1(c) of the Litigation L/C Agreement:
(a) Entry of Final Judgment. The Final Judgment shall have been entered
or established by settlement agreement and Agent shall have received
satisfactory evidence (i) of such entry or settlement (including, without
limitation, executed copies of any settlement agreement), (ii) of the amount of
the Net Litigation Liability and (iii) that the Net Litigation Liability shall
be less than or equal to $12,000,000.
(b) Pegasus Litigation Guaranty. The Pegasus Litigation Guaranty shall be
effective in accordance with its terms, and shall be valid and enforceable
severally against the Pegasus Funds in an amount not less than the requested
principal amount of the Term Loan C and neither Pegasus Fund shall be in
default or breach of any term or condition of the Pegasus Litigation Guaranty,
and, if requested by any Lender, each Pegasus Fund shall have reaffirmed and
ratified its obligations under the Pegasus Litigation Guaranty.
(c) Timing of Request for Advance. Each of the other conditions described
in this Section 2.3(II) shall have been satisfied, and Borrower shall have
delivered the Notice of Term Loan C Advance, on or prior to the earlier of (i)
the ninth (9th) day following the entry or settlement of the Final Judgment and
(ii) December 31, 1998.
(d) Minimum Availability. The Net Borrowing Availability shall be not
less than $500,000.
(e) Term Loan B and Litigation L/C Not Outstanding. No Litigation L/C
Obligations nor any Obligations with respect to Term Loan B shall be
outstanding. If the Litigation L/C shall have been theretofore issued, it
shall have been theretofore terminated or expired.
2.4 Further Conditions to Each Loan. Except as otherwise expressly
provided herein, no Lender shall be obligated to fund any Loan (other than its
Pro Rata Share of payments under the Litigation L/C as the Term Loan C under
Section 1.1(b) of the Litigation L/C Agreement), convert or continue any Loan
as a LIBOR Loan or any incur any Letter of Credit Obligation or Litigation L/C
Obligations (whether initially or by renewal, extension or other modification),
if, as of the date thereof:
(a) Any representation or warranty by any Credit Party contained herein or
in any of the other Loan Documents shall be untrue or incorrect as of such
date, except to the extent that such representation or warranty expressly
relates to an earlier date, or if the proceeds of the requested Loan or use of
the requested Letter of Credit is inconsistent with the provisions of Section
1.4; or
(b) Any event or circumstance having a Material Adverse Effect shall have
occurred since the date hereof; or
-28-
33
(c) (i) Any Event of Default shall have occurred and be continuing or
would result after giving effect to such Loan (or the incurrence of such Letter
of Credit Obligations or Litigation L/C Obligations), or (ii) a Default shall
have occurred and be continuing or would result after giving effect to such
Loan, and Agent or Requisite Revolving Lenders shall have determined, in its or
their sole and absolute discretion, not to make such Loan or incur such Letter
of Credit Obligations or Litigation L/C Obligations so long as that Default is
continuing; or
(d) After giving effect to such Advance (or the incurrence of such Letter
of Credit Obligations), the outstanding principal amount of the aggregate
Revolving Loan would exceed the lesser of the Borrowing Base and the Maximum
Amount, less, in each case, the then outstanding principal amount of the Swing
Line Loan; or
(e) After giving effect to such Swing Line Advance, the outstanding
principal amount of the Swing Line Loan would exceed Swing Line Availability.
The request and acceptance by Borrower of the proceeds of any Loan, the
incurrence of any Letter of Credit Obligations or Litigation L/C Obligations or
the conversion or continuation of any Loan into, or as, a LIBOR Loan, as the
case may be, shall be deemed to constitute, as of the date of such request,
acceptance, conversion or continuation, (i) a representation and warranty by
Borrower that the conditions in this Section 2.4 have been satisfied (and that
the conditions set forth in Section 2.2 have been satisfied in the case of a
request for the Term Loan B, that the conditions set forth in Section 2.3(I)
have been satisfied in the case of a request for the incurrence of the
Litigation L/C Obligations, and that the conditions set forth in Section
2.3(II) have been satisfied in the case of a request for a direct advance of
Term Loan C) and (ii) a reaffirmation by Borrower of the granting and
continuance of Agent's Liens, on behalf of itself and Lenders, pursuant to the
Collateral Documents or Litigation Collateral Documents, as the case may be.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Loans and to incur Letter of Credit
Obligations and Litigation L/C Obligations, the Credit Parties executing this
Agreement, jointly and severally, make the following representations and
warranties to Agent and each Lender with respect to all Credit Parties, each
and all of which shall survive the execution and delivery of this Agreement.
3.1 Corporate Existence; Compliance with Law. Each Credit Party
(excluding, except in the case of clause (f) below, each of Borrower's
Subsidiaries which are organized under the laws of jurisdictions outside of the
United States) (a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation; (b) is duly
qualified to conduct business and is in good standing in each other
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification; (c) has the requisite corporate power and
authority and the legal right to own, pledge, mortgage or otherwise encumber
and operate its properties, to lease the property it operates under lease and
to conduct its business as now, heretofore and proposed to be
-29-
34
conducted; (d) has all licenses, permits, consents or approvals from or
by, and has made all filings with, and has given all notices to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct; (e) is in compliance with its charter and
by-laws; and (f) subject to specific representations set forth herein regarding
ERISA, Environmental Laws, tax and other laws, is in compliance with all
applicable provisions of law, except where the failure to comply, individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.
3.2 Executive Offices; FEIN. As of the Closing Date, the current
location of each Credit Party's chief executive office and principal place of
business is set forth in Disclosure Schedule (3.2), and, except as set forth in
such schedule, none of such locations have changed within the twelve (12)
months preceding the Closing Date. In addition, Disclosure Schedule (3.2)
lists the federal employer identification number of each Credit Party.
3.3 Corporate Power, Authorization, Enforceable Obligations. The
execution, delivery and performance by each Credit Party of the Loan Documents
to which it is a party and the creation of all Liens provided for therein, the
execution, delivery and performance by each Credit Party of the other Related
Transaction Documents to which it is a party, and their consummation of each
Related Transaction pursuant thereto: (a) are within such Person's corporate
power; (b) have been duly authorized by all necessary or proper corporate and
shareholder action; (c) do not contravene any provision of such Person's
charter or bylaws; (d) do not violate any law or regulation, or any order or
decree of any court or Governmental Authority; (e) do not conflict with or
result in the breach or termination of, constitute a default under or
accelerate or permit the acceleration of any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which such Person is a party or by which such Person or any of its property is
bound; (f) do not result in the creation or imposition of any Lien upon any of
the property of such Person other than those in favor of Agent, on behalf of
itself and Lenders, pursuant to the Loan Documents; and (g) do not require the
consent or approval of any Governmental Authority or any other Person, except
those referred to in Section 2.1(c), all of which will have been duly obtained,
made or complied with prior to the Closing Date. On or prior to the Closing
Date, each of the Loan Documents shall have been duly executed and delivered by
each Credit Party thereto and each such Loan Document shall then constitute a
legal, valid and binding obligation of such Credit Party enforceable against it
in accordance with its terms.
3.4 Financial Statements and Projections. Except for the Projections and
the Fair Salable Balance Sheet, all Financial Statements concerning Borrower
and its Subsidiaries which are referenced below have been prepared in
accordance with GAAP consistently applied throughout the periods covered
(except as disclosed therein and except, with respect to unaudited Financial
Statements, for the absence of footnotes and normal year-end audit adjustments)
and present fairly in all material respects the financial position of the
Persons covered thereby as at the dates thereof and the results of their
operations and cash flows for the periods then ended.
(a) The following Financial Statements attached hereto as Disclosure
Schedule (3.4(A)) have been delivered on the date hereof:
-30-
35
(i) The audited consolidated balance sheets at December 31, 1996 and
1995 and the related statements of income and cash flows of Borrower and
its Subsidiaries for the Fiscal Years then ended, certified by Deloitte &
Touche LLP.
(ii) The unaudited balance sheet(s) at March 31, 1997, April 30,
1997, May 31, 1997, June 30, 1997, July 31, 1997 and August 31, 1997 and
the related statement(s) of income and cash flows of Borrower and its
Subsidiaries for the Fiscal Quarter then ended in the case of the March
31, 1997 statements, and the months then ended in the case of the April
30, 1997, May 31, 1997, June 30, 1997, July 31, 1997 and August 31, 1997
statements.
(b) Pro Forma. The Pro Forma delivered on the date hereof and attached
hereto as Disclosure Schedule (3.4(B)) was prepared by Borrower giving pro
forma effect to the Related Transactions, was based on the unaudited
consolidated and consolidating balance sheets of Borrower and its Subsidiaries
dated August 31, 1997 and was prepared in accordance with GAAP, with only such
adjustments thereto as would be required in accordance with GAAP.
(c) Projections. The Projections delivered on the date hereof and
attached hereto as Disclosure Schedule (3.4(C)) have been prepared by Borrower
in light of the past operations of its and its Subsidiaries' businesses, but
including future payments of known contingent liabilities reflected on the Fair
Salable Balance Sheet, and reflect projections for the twelve (12) months
ending December 31, 1997 and December 31, 1998 on a month by month basis and
for the fiscal years ending December 31, 1998, 1999 and 2000 on an annual
basis. The Projections are based upon estimates and assumptions stated
therein, all of which Borrower believes, as of the Closing Date, to be
reasonable and fair in light of current conditions and current facts known to
Borrower and, as of the Closing Date, reflect Borrower's good faith and
reasonable estimates of the future financial performance of Borrower and its
Subsidiaries and of the other information projected therein for the period set
forth therein.
(d) Fair Salable Balance Sheet. The Fair Salable Balance Sheet delivered
on the date hereof and attached hereto as Disclosure Schedule (3.4(D)) was
prepared by Borrower on the same basis as the Pro Forma, except that Borrower's
assets are set forth therein at their fair salable values on a going concern
basis and the liabilities set forth therein include all contingent liabilities
of Borrower and its Subsidiaries stated at the reasonably estimated present
values thereof.
3.5 Material Adverse Effect. Between December 31, 1996 and the Closing
Date, (a) no Credit Party has incurred any obligations, contingent or
non-contingent liabilities, liabilities for Charges, long-term leases or
unusual forward or long-term commitments which are not reflected in the Pro
Forma and which, alone or in the aggregate, could reasonably be expected to
have a Material Adverse Effect, (b) no contract, lease or other agreement or
instrument has been entered into by any Credit Party or has become binding upon
any Credit Party's assets and no law or regulation applicable to any Credit
Party has been adopted which has had or could reasonably be expected to have a
Material Adverse Effect, and (c) no Credit Party is in default and to the best
of Borrower's knowledge no third party is in default under any material
contract,
-31-
36
lease or other agreement or instrument, which alone or in the
aggregate could reasonably be expected to have a Material Adverse Effect.
Between December 31, 1996 and the Closing Date no event has occurred, which
alone or together with other events, could reasonably be expected to have a
Material Adverse Effect.
3.6 Ownership of Property; Liens. As of the Closing Date, the real
estate ("Real Estate") listed on Disclosure Schedule (3.6) constitutes all of
the real property owned, leased, subleased, or occupied by any Credit Party.
Each Credit Party owns good and marketable fee simple title to all of its owned
real estate, and valid and marketable leasehold interests in all
of its leased Real Estate, all as described on Disclosure Schedule (3.6), and
copies of all such leases or a summary of terms thereof satisfactory to Agent
have been delivered to Agent. Disclosure Schedule (3.6) further describes any
Real Estate with respect to which any Credit Party is a lessor, sublessor or
assignor as of the Closing Date. Each Credit Party also has good and
marketable title to, or valid leasehold interests in, all of its personal
properties and assets. As of the Closing Date, none of the properties and
assets of any Credit Party is subject to any Liens other than Permitted
Encumbrances, and there are no facts, circumstances or conditions known to any
Credit Party that may result in any Liens (including Liens arising under
Environmental Laws) other than Permitted Encumbrances. Each Credit Party has
received all deeds, assignments, waivers, consents, non-disturbance and
recognition or similar agreements, bills of sale and other documents, and has
duly effected all recordings, filings and other actions necessary to establish,
protect and perfect such Credit Party's right, title and interest in and to all
such Real Estate and other properties and assets. Disclosure Schedule (3.6)
also describes any purchase options, rights of first refusal or other similar
contractual rights pertaining to any Real Estate. As of the Closing Date, no
portion of any Credit Party's Real Estate has suffered any material damage by
fire or other casualty loss which has not heretofore been repaired and restored
in all material respects to its original condition or otherwise remedied. As
of the Closing Date, all material permits required to have been issued or
appropriate to enable the Real Estate to be lawfully occupied and used for all
of the purposes for which they are currently occupied and used have been
lawfully issued and are in full force and effect.
3.7 Labor Matters. As of the Closing Date (a) no strikes or other
material labor disputes against any Credit Party are pending or, to any Credit
Party's knowledge, threatened; (b) hours worked by and payment made to
employees of each Credit Party comply with the Fair Labor Standards Act and
each other federal, state, local or foreign law applicable to such matter; (c)
all payments due from any Credit Party for employee health and welfare
insurance have been paid or accrued as a liability on the books of such Credit
Party; (d) except as set forth in Disclosure Schedule (3.7), no Credit Party is
a party to or bound by any collective bargaining agreement, management
agreement, consulting agreement or any employment agreement (and true and
complete copies of any agreements described on Disclosure Schedule (3.7) have
been delivered to Agent); (e) there is no organizing activity involving any
Credit Party pending or, to any Credit Party's knowledge, threatened by any
labor union or group of employees; (f) there are no representation proceedings
pending or, to any Credit Party's knowledge, threatened with the National Labor
Relations Board, and no labor organization or group of employees of any Credit
Party has made a pending demand for recognition; and (g) except as set forth in
Disclosure Schedule (3.7), there are no complaints or charges against any
-32-
37
Credit Party pending or, to the knowledge of any Credit Party, threatened to be
filed with any Governmental Authority or arbitrator based on, arising out of,
in connection with, or otherwise relating to the employment or termination of
employment by any Credit Party of any individual.
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness. Except as set forth in Disclosure Schedule (3.8), no Credit
Party has any Subsidiaries, is engaged in any joint venture or partnership with
any other Person, or is an Affiliate of any other Person. All of the issued
and outstanding Stock of each Credit Party (other than Borrower) is owned by
each of the Persons and in the amounts set forth on Disclosure Schedule (3.8).
As of the Closing Date, after giving effect to the Related Transactions, the
names of each Person which owns of record five percent (5.00%) or more (on a
fully-diluted basis) of the outstanding shares of any class of Stock issued by
Code Alarm, and the aggregate amounts of such Stock owned by such Persons, is
set forth on Disclosure Schedule (3.8). Except as set forth in Disclosure
Schedule (3.8), as of the Closing Date, after giving effect to the Related
Transactions, there are no outstanding rights to purchase, options, warrants or
similar rights or agreements pursuant to which any Credit Party may be required
to issue, sell, repurchase or redeem any of its Stock or other equity
securities or any Stock or other equity securities of its Subsidiaries. All
outstanding Indebtedness and all known and probable contingent liabilities of
each Credit Party as of the Closing Date (after giving effect to the Related
Transactions) are described in Section 6.3 (including Disclosure Schedule
(6.3)).
3.9 Government Regulation. No Credit Party is an "investment company" or
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act
of 1940 as amended. No Credit Party is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, or any other
federal or state statute that restricts or limits its ability to incur
Indebtedness or to perform its obligations hereunder. The making of the Loans
by Lenders to Borrower, the incurrence of the Letter of Credit Obligations or
Litigation L/C Obligations on behalf of Borrower, the application of the
proceeds thereof and repayment thereof and the consummation of the Related
Transactions will not violate any provision of any such statute or any rule,
regulation or order issued by the Securities and Exchange Commission.
3.10 Margin Regulations. No Credit Party is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin security" as
such terms are defined in Regulation U or G of the Federal Reserve Board as now
and from time to time hereafter in effect (such securities being referred to
herein as "Margin Stock"). No Credit Party owns any Margin Stock, and none of
the proceeds of the Loans or other extensions of credit under this Agreement
will be used, directly or indirectly, for the purpose of purchasing or carrying
any Margin Stock, for the purpose of reducing or retiring any Indebtedness
which was originally incurred to purchase or carry any Margin Stock or for any
other purpose which might cause any of the Loans or other extensions of credit
under this Agreement to be considered a "purpose credit" within the meaning of
Regulation G, T, U or X of the Federal Reserve Board. No Credit Party will
take or permit to be taken any action which might cause any Loan Document to
violate any regulation of the Federal Reserve Board.
-33-
38
3.11 Taxes. All tax returns, reports and statements, including
information returns, required by any Governmental Authority to be filed by any
Credit Party have been filed with the appropriate Governmental Authority and
all Charges have been paid prior to the date on which any fine, penalty,
interest or late charge may be added thereto for nonpayment thereof (or any
such fine, penalty, interest, late charge or loss has been paid), excluding
Charges or other amounts being contested in accordance with Section 5.2(b).
Proper and accurate amounts have been withheld by each Credit Party from its
respective employees for all periods in full and complete compliance with all
applicable federal, state, local and foreign law and such withholdings have
been timely paid to the respective Governmental Authorities. Disclosure
Schedule (3.11) sets forth as of the Closing Date those taxable years for which
any Credit Party's tax returns are currently being audited by the IRS or any
other applicable Governmental Authority and any assessments or threatened
assessments in connection with such audit, or otherwise currently outstanding.
Except as described on Disclosure Schedule (3.11), no Credit Party has executed
or filed with the IRS or any other Governmental Authority any agreement or
other document extending, or having the effect of extending, the period for
assessment or collection of any Charges. None of the Credit Parties and their
respective predecessors are liable for any Charges: (a) under any agreement
(including any tax sharing agreements) or (b) to each Credit Party's knowledge,
as a transferee. As of the Closing Date, no Credit Party has agreed or been
requested to make any adjustment under IRC Section 481(a), by reason of a
change in accounting method or otherwise, which would have a Material Adverse
Effect.
3.12 ERISA. (a) Disclosure Schedule (3.12) lists and separately
identifies all Title IV Plans, Multiemployer Plans, ESOPs and Retiree Welfare
Plans. Copies of all such listed Plans, together with a copy of the latest
form 5500 for each such Plan, have been delivered to Agent. Each Qualified
Plan has been determined by the IRS to qualify under Section 401 of the IRC,
and the trusts created thereunder have been determined to be exempt from tax
under the provisions of Section 501 of the IRC, and nothing has occurred which
would cause the loss of such qualification or tax-exempt status. Except as set
forth in Disclosure Schedule (3.12), each Plan is in compliance with the
applicable provisions of ERISA and the IRC, including the filing of reports
required under the IRC or ERISA. No Credit Party or ERISA Affiliate has failed
to make any contribution or pay any amount due as required by either Section
412 of the IRC or Section 302 of ERISA or the terms of any such Plan. No
Credit Party or ERISA Affiliate has engaged in a prohibited transaction, as
defined in Section 4975 of the IRC, in connection with any Plan, which would
subject any Credit Party to a material tax on prohibited transactions imposed
by Section 4975 of the IRC.
(b) Except as set forth in Disclosure Schedule (3.12): (i) no Title IV
Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event described
in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or
is reasonably expected to occur; (iii) there are no pending, or to the
knowledge of any Credit Party, threatened claims (other than claims for
benefits in the normal course), sanctions, actions or lawsuits, asserted or
instituted against any Plan or any Person as fiduciary or sponsor of any Plan;
(iv) no Credit Party or ERISA Affiliate has incurred or reasonably expects to
incur any liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years no Title IV Plan with
Unfunded Pension Liabilities has been transferred outside of the "controlled
group" (within the
-34-
39
meaning of Section 4001(a)(14) of ERISA) of any Credit Party
or ERISA Affiliate; and (vi) no liability under any Title IV Plan has been
satisfied with the purchase of a contract from an insurance company that is
not rated AAA by the Standard & Poor's Corporation or the equivalent by
another nationally recognized rating agency.
3.13 No Litigation. No action, claim, lawsuit, demand, investigation or
proceeding is now pending or, to the knowledge of any Credit Party, threatened
against any Credit Party, before any Governmental Authority or before any
arbitrator or panel of arbitrators (collectively, "Litigation"), (a) which
challenges any Credit Party's right or power to enter into or perform any of
its obligations under the Loan Documents to which it is a party, or the
validity or enforceability of any Loan Document or any action taken thereunder,
or (b) which could reasonably be expected to have a Material Adverse Effect.
Except as set forth on Disclosure Schedule (3.13), as of the Closing Date there
is no Litigation pending or threatened which seeks damages in excess of
$100,000 or injunctive relief or alleges criminal misconduct of any Credit
Party.
3.14 Brokers. No broker or finder acting on behalf of any Credit Party
brought about the obtaining, making or closing of the Loans or the Related
Transactions, and no Credit Party has any obligation to any Person in respect
of any finder's or brokerage fees in connection therewith.
3.15 Intellectual Property. Except as set forth on Disclosure Schedule
(3.15), (a) as of the Closing Date, each Credit Party owns or has rights to use
all Intellectual Property necessary to continue to conduct its business as now
or heretofore conducted by it or proposed to be conducted by it, and each
Patent, Trademark, Copyright and License is listed, together with application
or registration numbers, as applicable, in Disclosure Schedule (3.15) hereto
and (b) each Credit Party conducts its business and affairs without
infringement of or interference with any Intellectual Property of any other
Person. Notwithstanding the foregoing, none of the matters set forth in
Disclosure Schedule (3.15) could reasonably be expected to have a Material
Adverse Effect.
3.16 Full Disclosure. No information contained in this Agreement, any of
the other Loan Documents, any Projections, Financial Statements or Collateral
Reports or other reports from time to time delivered hereunder or any written
statement furnished by or on behalf of any Credit Party to Agent or any Lender
pursuant to the terms of this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made. The Liens granted to
Agent, on behalf of itself and Lenders, pursuant to the Collateral Documents
will at all times be fully perfected first priority Liens in and to the
Collateral described therein, subject, as to priority, only to Permitted
Encumbrances with respect to the Collateral.
3.17 Environmental Matters. (a) Except as set forth in Disclosure
Schedule (3.17), as of the Closing Date: (i) the Real Estate is free of
contamination from any Hazardous Material except for such contamination that
would not adversely impact the value or
-35-
40
marketability of such Real Estate and which would not result in Environmental
Liabilities of the Credit Parties which could reasonably be expected to exceed
$50,000; (ii) no Credit Party has caused or suffered to occur any Release of
Hazardous Materials on, at, in, under, above, to, from or about any of its Real
Estate the cleanup of which could reasonably be expected to exceed $50,000;
(iii) the Credit Parties are and have been in compliance with all Environmental
Laws, except for such noncompliance which would not result in Environmental
Liabilities of the Credit Parties which could reasonably be expected to exceed
$50,000; (iv) the Credit Parties have obtained, and are in compliance with, all
Environmental Permits required by Environmental Laws for the operations of
their respective businesses as presently conducted, except where the failure to
so obtain or comply with such Environmental Permits would not result in
Environmental Liabilities of the Credit Parties which could reasonably be
expected to exceed $50,000, and all such Environmental Permits are valid,
uncontested and in good standing; (v) no Credit Party is involved in operations
or knows of any facts, circumstances or conditions, including any Releases of
Hazardous Materials, that are likely to result in any Environmental Liabilities
of such Credit Party which could reasonably be expected to exceed $50,000, and
no Credit Party has authorized any current or former tenant of the Real Estate
to engage in any such operations; (vi) there is no Litigation arising under or
related to any Environmental Laws, Environmental Permits or Hazardous Material
which seeks damages, penalties, fines, costs or expenses in excess of $50,000
or injunctive relief, or which alleges criminal misconduct by any Credit Party;
(vii) no notice has been received by any Credit Party identifying it as a
"potentially responsible party" or requesting information under CERCLA or
analogous state statutes, and to the knowledge of the Credit Parties (other
than from customary business operations), there are no facts, circumstances or
conditions that may result in any Credit Party being identified as a
"potentially responsible party" under CERCLA or analogous state statutes; and
(viii) the Credit Parties have provided to Agent copies of all existing written
environmental reports, reviews and audits and all written information
pertaining to actual or potential Environmental Liabilities of the Credit
Parties, in each case relating to any Credit Party.
(b) Each Credit Party hereby acknowledges and agrees that Agent (i) is not
now, and has not ever been, in control of any of the Real Estate or any Credit
Party's affairs, and (ii) does not have the capacity through the provisions of
the Loan Documents or otherwise to influence any Credit Party's conduct with
respect to the ownership, operation or management of any of its Real Estate or
compliance with Environmental Laws or Environmental Permits.
3.18 Insurance. Disclosure Schedule (3.18) lists all insurance policies
of any nature maintained, as of the Closing Date, for current occurrences by
each Credit Party, as well as a summary of the terms of each such policy.
3.19 Deposit and Disbursement Accounts. Disclosure Schedule (3.19) lists
all banks and other financial institutions at which any Credit Party maintains
deposits and/or other accounts as of the Closing Date, including any
Disbursement Accounts, and such Schedule correctly identifies the name, address
and telephone number of each depository, the name in which the account is held,
a description of the purpose of the account, and the complete account number.
-36-
41
3.20 Government Contracts. Except as set forth in Disclosure Schedule
(3.20), as of the Closing Date, no Credit Party is a party to any contract or
agreement with any Governmental Authority and no Credit Party's Accounts are
subject to the Federal Assignment of Claims Act, as amended (31 U.S.C. Section
3727) or any similar state or local law.
3.21 Customer and Trade Relations. Except as disclosed on Disclosure
Schedule (3.21), as of the Closing Date, there exists no actual or, to the
knowledge of any Credit Party, threatened termination or cancellation of, or
any material adverse modification or change in: (a) the business relationship
of any Credit Party with any customer or group of customers whose purchases
during the preceding twelve (12) months caused them to be ranked among the ten
largest customers of such Credit Party; or (b) the business relationship of any
Credit Party with any supplier material to its operations.
3.22 Agreements and Other Documents. As of the Closing Date, each Credit
Party has provided to Agent or its counsel, on behalf of Lenders, accurate and
complete copies (or summaries) of all of the following agreements or documents
to which any it is subject and each of which is listed on Disclosure Schedule
(3.22): (a) supply agreements and purchase agreements not terminable by such
Credit Party within sixty (60) days following written notice issued by such
Credit Party and involving transactions in excess of $1,000,000 per annum; (b)
OEM contracts and similar agreements with customers pursuant to which revenues
have been generated (or are reasonably expected to be generated) in excess of
$1,000,000 per annum, together with schedules describing, and other evidence
of, all accreditations awarded to Borrower or any other Credit Parties by any
of such customers, or any insurance industry group or similar organization,
with respect to any products or services sold or provided by Borrower or such
other Credit Parties pursuant to such OEM contracts and similar agreements; (c)
any lease of Equipment having a remaining term of one year or longer and
requiring aggregate rental and other payments in excess of $500,000 per annum;
(d) licenses and permits held by the Credit Parties, the absence of which could
be reasonably likely to have a Material Adverse Effect; (e) instruments or
documents evidencing Indebtedness (other than leases of Equipment) of such
Credit Party and any security interest granted by such Credit Party with
respect thereto; and (f) instruments and agreements evidencing the issuance of
any equity securities, warrants, rights or options to purchase equity
securities of such Credit Party.
3.23 Solvency. After giving effect to (a) the Loans and Letter of Credit
Obligations to be made or extended on the Closing Date or such other date as
Loans, Letter of Credit Obligations and Litigation L/C Obligations requested
hereunder are made or extended and the execution and delivery of the Loan
Documents, (b) the disbursement and application of the proceeds of such Loans
pursuant to the instructions of Borrower, (c) the issuance of the Series A
Preferred Stock, the Series B Preferred Stock, the Refinancing and the
consummation of the other Related Transactions and (d) the payment and accrual
of all transaction costs in connection with the foregoing, the Credit Parties,
taken as a whole, are Solvent.
3.24 Series A Preferred Stock Issuance. As of the Closing Date, Borrower
have delivered to Agent a complete and correct copy of the Series A Preferred
Stock Documents (including all schedules, exhibits, amendments, supplements,
modifications, assignments and all
-37-
42
other documents delivered pursuant thereto or in connection therewith).
As of the Closing Date the Series A Preferred Stock and the "Attached Warrants"
and "Shortfall Warrants" (as such terms are defined in the Series A Preferred
Stock Documents) have been issued pursuant to the Series A Preferred Stock
Documents and not less than $6,999,850 in cash proceeds (before deduction of
expenses) from such issuance have been received by Borrower. Borrower
acknowledge that Agent and each Lender are entering into this Agreement and are
extending the Commitments in reliance upon the issuance of the Series A
Preferred Stock and such Series A Warrants pursuant to the Series A Preferred
Stock Documents, the receipt by Borrower of all of the proceeds of such
issuance, and this Section 3.24.
3.25 Series B Preferred Stock Issuance. As of the Closing Date, Borrower
has delivered to Agent a complete and correct copy of the Series B Preferred
Stock Documents (including all schedules, exhibits, amendments, supplements,
modifications, assignments and all other documents delivered pursuant thereto
or in connection therewith). As of the Closing Date the Series B Preferred
Stock has been issued pursuant to the Series B Preferred Stock Documents to the
Series B Pledgor, all of the outstanding shares of such Series B Preferred
Stock have been pledged by the Series B Pledgor to Agent, for itself and
Lenders, as security for the Obligations, pursuant to a Pledge Agreement, and
the certificate of designation with respect to the Series B Preferred Stock
shall have been duly approved by Borrower and filed with the Department of
Consumer and Industry Services of the State of Michigan. Borrower acknowledges
that Agent and each Lender are entering into this Agreement and are extending
the Commitments in reliance upon the issuance of the Series B Preferred Stock
pursuant to the Series B Preferred Stock Documents, the pledge of such Series B
Preferred Stock to Agent, and this Section 3.25.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices. (a) Each Credit Party executing this Agreement
hereby agrees that from and after the Closing Date and until the Termination
Date, it shall deliver to Agent and/or Lenders, as required, the Financial
Statements, notices, Projections and other information at the times, to the
Persons and in the manner set forth in Annex E.
(b) Each Credit Party executing this Agreement hereby agrees that from and
after the Closing Date and until the Termination Date, it shall deliver to
Agent and/or Lenders, as required, the various Collateral Reports (including
Borrowing Base Certificates in the form of Exhibit 4.1(b)) at the times, to the
Persons and in the manner set forth in Annex F.
4.2 Communication with Accountants. Following the occurrence and
continuation of a Default or Event of Default, each Credit Party executing this
Agreement authorizes Agent and each Lender, to communicate directly with its
independent certified public accountants, including, without limitation,
Deloitte & Touche LLP, and authorizes and shall instruct those accountants and
advisors to disclose and make available to Agent and each Lender any and all
Financial Statements and other supporting financial documents, schedules and
information relating to any Credit Party (including copies of any issued
management letters) with respect to the business, financial condition and other
affairs of any Credit Party.
-38-
43
5. AFFIRMATIVE COVENANTS
Each Credit Party executing this Credit Agreement jointly and severally
agrees as to all Credit Parties that from and after the date hereof and until
the Termination Date:
5.1 Maintenance of Existence and Conduct of Business. Each Credit Party
shall, except as otherwise permitted by Section 6.1: (a) do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence and its rights and franchises; (b) continue to conduct its
business substantially as now conducted or as otherwise permitted hereunder;
(c) at all times maintain, preserve and protect all of its assets and
properties used or useful in the conduct of its business, and keep the same in
good repair, working order and condition in all material respects (taking into
consideration ordinary wear and tear) and from time to time make, or cause to
be made, all necessary or appropriate repairs, replacements and improvements
thereto consistent with industry practices; and (d) transact business only in
such corporate and trade names as are set forth in Disclosure Schedule (5.1).
5.2 Payment of Obligations. (a) Subject to Section 5.2(b), each Credit
Party shall pay and discharge or cause to be paid and discharged promptly all
Charges payable by it, including Charges imposed upon it, its income and
profits, or any of its property (real, personal or mixed) and all Charges with
respect to tax, social security and unemployment withholding with respect to
its employees.
(b) Each Credit Party may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges or claims described in
Section 5.2(a); provided, that (i) adequate reserves with respect to such
contest are maintained on the books of such Credit Party, in accordance with
GAAP, (ii) such contest is maintained and prosecuted continuously and with
diligence and operates to suspend collection or enforcement of such Charges or
claims or any Lien in respect thereof, (iii) none of the Collateral becomes
subject to forfeiture or loss as a result of such contest, (iv) no Lien shall
be imposed to secure payment of such Charges or claims other than Permitted
Encumbrances, (v) such Credit Party shall promptly pay or discharge such
contested Charges or claims and all additional charges, interest, penalties and
expenses, if any, and shall deliver to Agent evidence acceptable to Agent of
such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to such Credit Party or the conditions set forth in this
Section 5.2(b) are no longer met, and (vi) Agent has not advised Borrower in
writing that Agent reasonably believes that nonpayment or nondischarge thereof
could have or result in a Material Adverse Effect.
5.3 Books and Records. Each Credit Party shall keep adequate books and
records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance with GAAP and on
a basis consistent with the Financial Statements attached as Disclosure
Schedule (3.4(A)).
5.4 Insurance; Damage to or Destruction of Collateral. (a) The Credit
Parties shall, at their sole cost and expense, maintain the policies of
insurance described on Disclosure Schedule (3.18) or substantially similar
replacement policies, in any case in form and with
-39-
44
insurers acceptable to Agent. If any Credit Party at any time or
times hereafter shall fail to obtain or maintain any of the policies of
insurance required above or to pay all premiums relating thereto, Agent may at
any time or times thereafter obtain and maintain such policies of insurance and
pay such premiums and take any other action with respect thereto which Agent
deems advisable. Agent shall have no obligation to obtain insurance for any
Credit Party or pay any premiums therefor. By doing so, Agent shall not be
deemed to have waived any Default or Event of Default arising from any Credit
Party's failure to maintain such insurance or pay any premiums therefor. All
sums so disbursed, including attorneys' fees, court costs and other charges
related thereto, shall be payable by Borrower to Agent within thirty (30) days
of demand therefor and shall be additional Obligations hereunder secured by the
Collateral.
(b) Agent reserves the right at any time upon any change in any Credit
Party's risk profile (including any change in the product mix maintained by any
Credit Party or any laws affecting the potential liability of such Credit
Party) to require additional forms and limits of insurance to, in Agent's
reasonable opinion, adequately protect both Agent's and Lender's interests in
all or any portion of the Collateral and to ensure that each Credit Party is
protected by insurance in amounts and with coverage customary for its industry;
provided, however, that, in the event of any such change, the Credit Parties
shall obtain such additional forms and limits not later than thirty (30) days
following Agent's written request therefor. If requested by Agent, each Credit
Party shall deliver to Agent from time to time a report of a reputable
insurance broker, satisfactory to Agent, with respect to its insurance
policies.
(c) Borrower shall deliver to Agent, in form and substance satisfactory
to Agent, endorsements to (i) all "All Risk" and business interruption
insurance naming Agent, on behalf of itself and Lenders, as loss payee, and
(ii) all general liability and other liability policies naming Agent, on behalf
of itself and Lenders, as additional insured. Borrower irrevocably makes,
constitutes and appoints Agent (and all officers, employees or agents
designated by Agent), so long as any Default or Event of Default shall have
occurred and be continuing or the anticipated insurance proceeds exceed
$150,000, as Borrower's true and lawful agent and attorney-in-fact for the
purpose of making, settling and adjusting claims under such "All Risk" policies
of insurance, endorsing the name of Borrower on any check or other item of
payment for the proceeds of such "All Risk" policies of insurance and for
making all determinations and decisions with respect to such "All Risk"
policies of insurance. Agent shall have no duty to exercise any rights or
powers granted to it pursuant to the foregoing power-of-attorney. Borrower
shall promptly notify Agent of any loss, damage, or destruction to the
Collateral in the amount of $150,000 or more, whether or not covered by
insurance. After deducting from such proceeds the expenses, if any, incurred
by Agent in the collection or handling thereof, Agent may, at its option, apply
such proceeds to the reduction of the Obligations in accordance with Section
1.3(d), or permit or require the applicable Borrower to use such money, or any
part thereof, to replace, repair, restore or rebuild the Collateral in a
diligent and expeditious manner with materials and workmanship of substantially
the same quality as existed before the loss, damage or destruction.
Notwithstanding the foregoing, if the casualty giving rise to such insurance
proceeds would not reasonably be expected to have a Material Adverse Effect and
such insurance proceeds do not exceed $150,000 in the aggregate, Agent shall
permit Borrower to replace, restore, repair or rebuild the property; provided
that if Borrower shall not have
-40-
45
completed or entered into binding agreements to complete such
replacement, restoration, repair or rebuilding within 180 days of such
casualty, Agent may apply such insurance proceeds to the Obligations in
accordance with Section 1.3(d). All insurance proceeds which are to be made
available to Borrower to replace, repair, restore or rebuild the Collateral
shall be applied by Agent to reduce the outstanding principal balance of the
Revolving Loan (which application shall not result in a permanent reduction of
the Revolving Loan Commitment) and upon such application, Agent shall establish
a Reserve against the Borrowing Base in an amount equal to the amount of such
proceeds so applied (except in the case of proceeds of Inventory). Thereafter,
such funds shall be made available to that Borrower to provide funds to
replace, repair, restore or rebuild the Collateral as follows: (i) Borrower
shall request a Revolving Credit Advance be made to Borrower in the amount
requested to be released; (ii) so long as the conditions set forth in Section
2.4 have been met, Revolving Lenders shall make such Revolving Credit Advance;
and (iii) the Reserve established with respect to such insurance proceeds shall
be reduced by the amount of such Revolving Credit Advance. To the extent not
used to replace, repair, restore or rebuild the Collateral, such insurance
proceeds shall be applied in accordance with Section 1.3(d).
5.5 Compliance with Laws. Each Credit Party shall comply with all
federal, state, local and foreign laws and regulations applicable to it,
including those relating to the Communications Act of 1934, as amended,
licensing, ERISA and labor matters and Environmental Laws and Environmental
Permits, except to the extent that the failure to comply, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
5.6 Supplemental Disclosure. From time to time as may be requested by
Agent (which request will not be made more frequently than once each year
absent the occurrence and continuance of a Default or an Event of Default), the
Credit Parties shall supplement each Disclosure Schedule hereto, or any
representation herein or in any other Loan Document, with respect to any matter
hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or which is
necessary to correct any information in such Disclosure Schedule or
representation which has been rendered materially inaccurate thereby (and, in
the case of any supplements to any Disclosure Schedule, such Disclosure
Schedule shall be appropriately marked to show the changes made therein);
provided that (a) no such supplement to any such Disclosure Schedule or
representation shall be or be deemed a waiver of any Default or Event of
Default resulting from the matters disclosed therein, except as consented to
by Agent and Requisite Lenders in writing; and (b) no supplement shall be
required as to representations and warranties that relate solely to the
Closing Date.
5.7 Intellectual Property. Each Credit Party will conduct its business
and affairs without infringement of or interference with any Intellectual
Property of any other Person.
5.8 Environmental Matters. Each Credit Party shall and shall cause each
Person within its control to: (a) conduct its operations and keep and maintain
its Real Estate in compliance with all Environmental Laws and Environmental
Permits other than noncompliance
-41-
46
which could not reasonably be expected to have a Material Adverse
Effect; (b) implement any and all investigation, remediation, removal and
response actions which are appropriate or necessary to maintain the value and
marketability of the Real Estate or to otherwise comply with Environmental Laws
and Environmental Permits pertaining to the presence, generation, treatment,
storage, use, disposal, transportation or Release of any Hazardous Material on,
at, in, under, above, to, from or about any of its Real Estate; (c) notify
Agent promptly after such Credit Party becomes aware of any violation of
Environmental Laws or Environmental Permits or any Release on, at, in, under,
above, to, from or about any Real Estate which is reasonably likely to result
in Environmental Liabilities of the Credit Parties in excess of $75,000; and
(d) promptly forward to Agent a copy of any order, notice, request for
information or any communication or report received by such Credit Party in
connection with any such violation or Release or any other matter relating to
any Environmental Laws or Environmental Permits that could reasonably be
expected to result in Environmental Liabilities of the Credit Parties in excess
of $75,000, in each case whether or not the Environmental Protection Agency or
any Governmental Authority has taken or threatened any action in connection
with any such violation, Release or other matter. If Agent at any time has a
reasonable basis to believe that there may be a violation of any Environmental
Laws or Environmental Permits by any Credit Party or any Environmental
Liability of the Credit Parties arising thereunder, or a Release of Hazardous
Materials on, at, in, under, above, to, from or about any of its Real Estate,
which, in each case, could reasonably be expected to have a Material Adverse
Effect, then each Credit Party shall, upon Agent's written request (i) cause
the performance of such environmental audits including subsurface sampling of
soil and groundwater, and preparation of such environmental reports, at
Borrower's expense, as Agent may from time to time request, which shall be
conducted by reputable environmental consulting firms acceptable to Agent and
shall be in form and substance acceptable to Agent, and (ii) permit Agent or
its representatives to have access to all Real Estate for the purpose of
conducting such environmental audits and testing as Agent deems appropriate,
including subsurface sampling of soil and groundwater. Borrower shall
reimburse Agent for the costs of such audits and tests and the same will
constitute a part of the Obligations secured hereunder.
5.9 Landlords' Agreements, Mortgagee Agreements and Bailee Letters. Each
Credit Party shall use its best efforts to obtain a landlord's agreement,
mortgagee agreement or bailee letter, as applicable, from the lessor of each
leased property or mortgagee of owned property or with respect to any
warehouse, processor or converter facility or other location where Collateral
is located, which agreement or letter shall contain a waiver or subordination
of all Liens or claims that the landlord, mortgagee or bailee may assert
against the Inventory or Collateral at that location, and shall otherwise be
satisfactory in form and substance to Agent. With respect to such locations or
warehouse space leased or owned as of the Closing Date, if Agent has not
received a landlord or mortgagee agreement or bailee letter as of the Closing
Date and until such time as such agreement or waiver shall be later delivered,
Borrower's or Tessco's Eligible Inventory at that location shall, in Agent's
discretion, be excluded from the Borrowing Base or be subject to such Reserves
as may be established by Agent in its reasonable credit judgment. After the
Closing Date, no real property or warehouse space shall be leased or acquired
by any Credit Party and no Inventory shall be shipped to a processor or
converter under arrangements established after the Closing Date, unless and
until a satisfactory landlord or mortgagee agreement or bailee letter, as
appropriate, shall first have been obtained with respect
-42-
47
to such location; provided that Borrower may hold Inventory at newly
established locations without such agreements or letters with Agent's prior
approval and subject to such Reserves as are established at Agent's discretion.
Each Credit Party shall timely and fully pay and perform its obligations under
all leases and other agreements with respect to each leased location or public
warehouse where any Collateral is or may be located.
5.10 Further Assurances. Each Credit Party executing this Agreement
agrees that it shall and shall cause each other Credit Party to, at such Credit
Party's expense and upon request of Agent, duly execute and deliver, or cause
to be duly executed and delivered, to Agent such further instruments and do and
cause to be done such further acts as may be necessary or proper in the
reasonable opinion of Agent to carry out more effectually the provisions and
purposes of this Agreement or any other Loan Document.
5.11 OEM Contracts and Accreditations. Each Credit Party executing and
delivering this Agreement shall substantially comply with each OEM Contract to
which it is a party. Each Credit Party shall exert its best efforts to cause
the renewal of each such OEM Contract and each OEM Accreditation upon its
expiration, on such terms and are not less favorable to the Credit Parties as
those governing the OEM Contract or OEM Accreditation subject to such
expiration.
5.12 Tessco Liquidation. Borrower shall promptly notify Agent of all
material developments relating to the Tessco Liquidation, and promptly provide
Agent with complete copies of any and all documents, instruments, agreements
governing such transaction. Borrower shall promptly provide to Agent all
Collateral Documents, Litigation Collateral Documents, UCC financing statements
and UCC financing statement amendments, and other documents, agreements, and
instruments, as may be reasonably requested by Agent to evidence the
continuation of Agent's liens and security interests in the property subject to
such transaction with the same priority as such liens and security interests
had immediately prior to such transaction, together with such additional
operational, financial and legal information as Agent may reasonably request in
connection with such transaction. Borrower agrees to complete the Tessco
Liquidation on or before June 30, 1998.
6. NEGATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally agrees as
to all Credit Parties that, without the prior written consent of Agent and the
Requisite Lenders, from and after the date hereof until the Termination Date:
6.1 Mergers, Subsidiaries, Etc. No Credit Party shall directly or
indirectly, by operation of law or otherwise, (a) form or acquire any
Subsidiary, or (b) merge with, consolidate with, acquire all or substantially
all of the assets or capital stock of, or otherwise combine with or acquire,
any Person, other than (i) the Tessco Liquidation (provided, that no Default or
Event of Default exists and is continuing at the time of such Tessco
Liquidation, or would result therefrom and such transaction shall be effected
in compliance with all applicable laws) and (ii) the merger of wholly-owned
Subsidiaries into Borrower or other wholly-owned Subsidiaries.
-43-
48
6.2 Investments; Loans and Advances. Except as set forth on Disclosure
Schedule (6.2) otherwise expressly permitted by this Section 6, no Credit Party
shall make or permit to exist any investment in, or make, accrue or permit to
exist loans or advances of money to, any Person, through the direct or indirect
lending of money, holding of securities or otherwise, except (a) that Borrower
may hold investments comprised of notes payable, or stock or other securities
issued by Account Debtors to Borrower pursuant to negotiated agreements with
respect to settlement of such Account Debtor's Accounts in the ordinary course
of business, so long as the aggregate amount of such Accounts so settled by
Borrower does not exceed $100,000; (b) that each Credit Party may maintain its
existing investments in its Subsidiaries as of the Closing Date; (c)
investments in the form of loans, permitted under Section 6.4(b) and
intercompany advances and investments permitted under Section 6.3, and (d) for
other investments not exceeding $50,000 in the aggregate at any time
outstanding.
6.3 Indebtedness. (a) No Credit Party shall create, incur, assume or
permit to exist any Indebtedness, except (without duplication) (i) Indebtedness
secured by purchase money security interests permitted in clause (c) of Section
6.7, (ii) the Loans and the other Obligations, (iii) deferred taxes, (iv)
unfunded pension fund and other employee benefit plan obligations and
liabilities to the extent they are permitted to remain unfunded under
applicable law, (v) existing Indebtedness described in Disclosure Schedule
(6.3) to Persons which are not Affiliates and refinancings thereof or
amendments or modifications thereto which do not have the effect of increasing
the principal amount thereof or changing the amortization thereof (other than
to extend the same) and which are otherwise on terms and conditions no less
favorable to any Credit Party, Agent or any Lender, as determined by Agent,
than the terms of the Indebtedness being refinanced, amended or modified, (vi)
Subordinated Debt satisfying the conditions described in Section 2.2(b) and
provided that the proceeds thereof are used solely to satisfy that portion of
the Net Litigation Liability which exceeds $3,000,000, (vii) Borrower may
assume the Indebtedness of Tessco upon the consummation of the Tessco
Liquidation in compliance with Section 6.1, and (viii) Indebtedness of Tessco
owing to Borrower existing on the Closing Date as described in Disclosure
Schedule (6.3), and additional Indebtedness in connection with the ongoing
business between Tessco and Borrower and in connection with the Tessco
Liquidation consisting of intercompany loans and advances made after the
Closing Date by Borrower to Tessco or Tessco to Borrower, provided that (A)
Borrower and Tessco shall have executed and delivered to each other, on the
Closing Date, a demand note (the "Intercompany Note") to evidence all such
intercompany Indebtedness owing at any time to one another (including all
existing intercompany Indebtedness owing on the Closing Date), which
Intercompany Note shall be in form and substance satisfactory to Agent and
shall be pledged and delivered to Agent pursuant to the Collateral Agreements
executed by Borrower and Tessco and as additional collateral security for the
Obligations (including the Litigation Obligations); (B) Borrower and Tessco
shall record all intercompany transactions on its books and records in a manner
satisfactory to Agent; (C) the obligations of Borrower and Tessco under such
Intercompany Note shall be subordinated to the Obligations of Borrower
hereunder and the obligations of Tessco under its Loan Documents in a manner
satisfactory to Agent; (D) at the time any such intercompany loan or advance is
made by Borrower to Tessco or Tessco to Borrower, and after giving effect
thereto, Borrower shall be Solvent; (E) no Default or Event of Default would
occur and be continuing after giving effect to any such proposed intercompany
loan; and (F) in the case
-44-
49
of any intercompany Indebtedness arising as a result of Borrower making
a loan or advance, Borrower shall have Net Borrowing Availability of not less
than $500,000 after giving effect to such intercompany loan.
(b) No Credit Party shall, directly or indirectly, voluntarily purchase,
redeem, defease or prepay any principal of, premium, if any, interest or other
amount payable in respect of any Indebtedness, other than (i) the Obligations,
(ii) Indebtedness secured by a Permitted Encumbrance if the asset securing such
Indebtedness has been sold or otherwise disposed of in accordance with Sections
6.8(b) or (c), (iii) intercompany Indebtedness permitted under Section 6.3 and
(iv) other Indebtedness (excluding Subordinated Debt) not in excess of
$500,000.
6.4 Employee Loans and Affiliate Transactions.
(a) Except as otherwise expressly permitted in this Section 6.4 with
respect to Affiliates, no Credit Party shall enter into or be a party to any
transaction with any other Credit Party or any Affiliate thereof except in the
ordinary course of and pursuant to the reasonable requirements of such Credit
Party's business and upon fair and reasonable terms that are no less favorable
to such Credit Party than would be obtained in a comparable arm's length
transaction with a Person not an Affiliate of such Credit Party; provided,
however, that nothing in this Section shall prohibit the consummation of the
Tessco Liquidation in compliance with Section 6.1 or the sale of goods for
value of Borrower to Tessco and Tessco to Borrower. In addition, if any such
transaction or series of related transactions other than as part of the Tessco
Liquidation involves payments in excess of $100,000, the terms of these
transactions must be disclosed in advance to Agent and Lenders. All such
transactions existing as of the date hereof are described on Disclosure
Schedule (6.4).
(b) No Credit Party shall enter into any lending or borrowing transaction
with any employees of any Credit Party after the Closing Date, except (i) loans
to their respective employees on an arm's-length basis in the ordinary course
of business consistent with past practices for travel expenses, relocation
costs and similar purposes and (ii) stock option financing up to a maximum of
$25,000 to any employee and up to a maximum of $100,000 in the aggregate at any
one time outstanding.
6.5 Capital Structure and Business. No Credit Party shall:
(a) make any changes in any of its business objectives, purposes or
operations which could in any way adversely affect the repayment of the Loans
or any of the other Obligations or could have or result in a Material Adverse
Effect;
(b) make any change in its capital structure as described on Disclosure
Schedule (3.8), including the issuance of any shares of Stock, warrants or
other securities convertible into Stock or any revision of the terms of its
outstanding Stock, except that (i) Borrower may make a Qualified Public
Offering of its Common Stock so long as (A) the proceeds thereof are applied in
prepayment of the Obligations as required by Section 1.3(b)(ii), and (B) no
Change of Control occurs after giving effect thereto, (ii) Borrower may issue
-45-
50
additional shares of its capital stock, pursuant to an exercise of the GECC
Warrants, (iii) Borrower may issue capital stock and Subordinated Debt to the
extent necessary to satisfy the portion of Net Litigation Liability, if any,
which exceeds $3,000,000 as provided in Section 2.2(b), (iv) Borrower may
increase the number of authorized shares of its Common Stock, (v) Borrower may
issue the Management Options and, upon their exercise, issue shares of its
capital stock in accordance with their terms, (vi) Borrower and Tessco may
effect the Tessco Liquidation and mergers of Subsidiaries in compliance with
Section 6.1, (vii) Borrower may issue additional shares of its capital stock
upon the exercise of Series A Warrants, and payment-in-kind dividends, in
accordance with the terms and conditions of the Series A Preferred Stock
Documents, and (viii) Borrower may issue the "Litigation Warrants" in
accordance with the terms and conditions of the Series A Preferred Stock
Documents;
(c) amend its charter (including any certificate of designation with
respect to preferred stock) or bylaws in a manner which would adversely affect
Agent or Lenders or such Credit Party's duty or ability to repay the
Obligations other than, in the case of Borrower, to increase the number of
authorized shares of its Common Stock; or
(d) engage in any business other than the businesses currently engaged in
by it or businesses reasonably related thereto.
6.6 Guaranteed Indebtedness. No Credit Party shall create, incur, assume
or permit to exist any Guaranteed Indebtedness except (a) by endorsement of
instruments or items of payment for deposit to the general account of any
Credit Party, (b) Guaranteed Indebtedness with respect to the Obligations and
(c) for Guaranteed Indebtedness incurred for the benefit of any other Credit
Party if the primary obligation is expressly permitted by this Agreement.
6.7 Liens. No Credit Party shall create, incur, assume or permit to
exist any Lien on or with respect to its Accounts or any of its other
properties or assets (whether now owned or hereafter acquired) except for (a)
Permitted Encumbrances; (b) Liens in existence on the date hereof and
summarized on Disclosure Schedule (6.7); (c) Liens created after the date
hereof by conditional sale or other title retention agreements (including
Capital Leases) or in connection with purchase money Indebtedness with respect
to Equipment and Fixtures acquired by any Credit Party in the ordinary course
of business, involving the incurrence of an aggregate amount of purchase money
Indebtedness and Capital Lease Obligations of not more than $100,000
outstanding at any one time for all such Liens (provided that such Liens attach
only to the assets subject to such purchase money debt and such Indebtedness is
incurred within twenty (20) days following such purchase and does not exceed
100% of the purchase price of the subject assets); and (d) other Liens securing
Indebtedness not exceeding $100,000 in the aggregate at any time outstanding,
so long as such Liens do not attach to any Accounts or Inventory. In addition,
no Credit Party shall become a party to any agreement, note, indenture or
instrument, or take any other action, which would prohibit the creation of a
Lien on any of its properties or other assets in favor of Agent, on behalf of
itself and Lenders, as additional collateral for the Obligations, except
operating leases, Capital Leases or Licenses which prohibit Liens upon the
assets that are subject thereto.
-46-
51
6.8 Sale of Stock and Assets. No Credit Party shall sell, transfer,
convey, assign or otherwise dispose of any of its properties or other assets,
including its capital Stock or the capital Stock of any of its Subsidiaries
(whether in a public or a private offering, except as permitted under Section
6.5(b)) or otherwise or any of their Accounts, other than (a) the sale of
Inventory in the ordinary course of business, (b) the sale, transfer,
conveyance or other disposition of Equipment, Fixtures or Real Estate that are
obsolete or no longer used or useful in such Credit Party's business and having
a value not exceeding $50,000 in any single transaction or $100,000 in the
aggregate in any Fiscal Year, and (c) the sale, transfer, conveyance or other
disposition of other Equipment and Fixtures having a value not exceeding
$50,000 in any single transaction or $100,000 in the aggregate in any Fiscal
Year; provided, however, if any sale, transfer, conveyance or other disposition
under clause (b) or (c) above involves property having a value in excess of
$25,000 for any single transaction, or if all such sales, transfers,
conveyances and other dispositions under clause (b) or (c) involve property
having an aggregate value in excess of $50,000 for any Fiscal Year, then
Borrower shall make prepayments of the Obligations in accordance with Section
1.3(b)(ii) in amounts equal to all of the proceeds of such sales, transfers,
conveyances or other dispositions. With respect to any disposition of assets
or other properties permitted pursuant to clause (b) and clause (c) above,
Agent agrees on reasonable prior written notice to release its Lien on such
assets or other properties in order to permit the applicable Credit Party to
effect such disposition and shall execute and deliver to Borrower, at
Borrower's expense, appropriate UCC-3 termination statements and other
releases as reasonably requested by Borrower.
6.9 ERISA. No Credit Party shall, or shall cause or permit any ERISA
Affiliate to, cause or permit to occur an event which could result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA.
6.10 Financial Covenants. Borrower shall not breach or fail to comply
with any of the Financial Covenants (the "Financial Covenants") set forth in
Annex G.
6.11 Hazardous Materials. No Credit Party shall cause or permit a
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of the Real Estate where such Release would (a) violate in any respect, or
form the basis for any Environmental Liabilities of the Credit Parties under,
any Environmental Laws or Environmental Permits or (b) otherwise adversely
impact the value or marketability of any of the Real Estate or any of the
Collateral, other than such violations or impacts which could not reasonably be
expected to have a Material Adverse Effect.
6.12 Sale-Leasebacks. No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets.
6.13 Cancellation of Indebtedness. No Credit Party shall cancel any
claim or debt owing to it, except for reasonable consideration negotiated on an
arm's-length basis and (except with respect to the California Award) in the
ordinary course of its business consistent with past practices.
-47-
52
6.14 Restricted Payments. No Credit Party shall make any Restricted
Payment, except (a) intercompany loans and advances between Borrower and Tessco
permitted by Section 6.3 above, (b) dividends and distributions by Subsidiaries
of Borrower paid to Borrower, (c) employee loans permitted under Section 6.4(b)
above, (d) payments of scheduled and accrued dividends (and not any liquidating
dividends or any redemption or repurchase payments) to holders of Series A
Preferred Stock pursuant to the terms and conditions of the Series A Preferred
Stock Documents, (e) cash payments for fractional shares upon the exercise of
GECC Warrants or Series A Warrants and (f) scheduled payments of interest on
Subordinated Debt permitted under Section 6.3, provided that (i) no Default or
Event of Default shall have occurred and be continuing or would result after
giving effect to each payment pursuant to clauses (d) and (f) above, and (ii)
Borrower shall have Net Borrowing Availability of at least $1,000,000 after
giving effect to each payment pursuant to clauses (d) and (f) above.
6.15 Change of Corporate Name or Location; Change of Fiscal Year. No
Credit Party shall (a) change its corporate name, or (b) change its chief
executive office, principal place of business, corporate offices or warehouses
or locations at which Collateral is held or stored, or the location of its
records concerning the Collateral, in any case without at least thirty (30)
days prior written notice to Agent and after Agent's written acknowledgment
that any reasonable action requested by Agent in connection therewith,
including to continue the perfection of any Liens in favor of Agent, on behalf
of Lenders, in any Collateral, has been completed or taken, and provided that
any such new location shall be in the continental United States. Without
limiting the foregoing, no Credit Party shall change its name, identity or
corporate structure in any manner which might make any financing or
continuation statement filed in connection herewith seriously misleading within
the meaning of Section 9-402(7) of the Code or any other then applicable
provision of the Code except upon prior written notice to Agent and Lenders and
after Agent's written acknowledgment that any reasonable action requested by
Agent in connection therewith, including to continue the perfection of any
Liens in favor of Agent, on behalf of Lenders, in any Collateral, has been
completed or taken. No Credit Party shall change its Fiscal Year.
6.16 No Impairment of Intercompany Transfers. No Credit Party shall
directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the other Loan
Documents) which could directly or indirectly restrict, prohibit or require the
consent of any Person with respect to the payment of dividends or distributions
or the making or repayment of intercompany loans by a Subsidiary of Borrower to
Borrower or between such Subsidiaries.
6.17 No Speculative Transactions. No Credit Party shall engage in any
transaction involving commodity options, futures contracts or similar
transactions, except solely to hedge against fluctuations in the prices of
commodities owned or purchased by it and the values of foreign currencies
receivable or payable by it and interest swaps, caps or collars.
6.18 Changes Relating to Preferred Stock and Subordinated Debt. No
Credit Party shall change or amend the terms of any of the Series A Preferred
Stock Documents, the
-48-
53
Series B Preferred Stock Documents or any Subordinated Debt (or any indenture
or agreement in connection therewith).
7. TERM
7.1 Termination. The financing arrangements contemplated hereby shall be
in effect until the Commitment Termination Date, and the Loans and all other
Obligations shall be automatically due and payable in full on such date.
7.2 Survival of Obligations Upon Termination of Financing Arrangements.
Except as otherwise expressly provided for in the Loan Documents, no
termination or cancellation (regardless of cause or procedure) of any financing
arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of the Credit Parties or the rights of
Agent and Lenders relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Commitment Termination
Date. Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of Agent
and each Lender, all as contained in the Loan Documents, shall not terminate or
expire, but rather shall survive any such termination or cancellation and shall
continue in full force and effect until the Termination Date; provided however,
that in all events the provisions of Section 11, the payment obligations under
Sections 1.13, 1.15 and 1.16, and the indemnities contained in the Loan
Documents shall survive the Termination Date.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(a) Borrower (i) fails to make any payment of principal of, or interest
on, or Fees owing in respect of, the Loans or any of the other Obligations when
due and payable, or (ii) fails to pay or reimburse Agent or Lenders for any
expense reimbursable hereunder or under any other Loan Document within ten (10)
days following the date such payment is due hereunder or thereunder.
(b) Any Credit Party shall fail or neglect to perform, keep or observe any
of the provisions of Sections 1.4, 1.8, 5.4 or 6, or any of the provisions set
forth in Annexes C, F or G, respectively.
(c) Borrower shall fail or neglect to perform, keep or observe any of the
provisions of Section 4 or any provisions set forth in Annex E, and the same
shall remain unremedied for three (3) Business Days or more.
-49-
54
(d) Any Credit Party, either Pegasus Fund or the Series B Pledgor shall
fail or neglect to perform, keep or observe any other provision of this
Agreement or of any of the other Loan Documents (other than any provision
embodied in or covered by any other clause of this Section 8.1) and the same
shall remain unremedied for twenty-five (25) days or more.
(e) A default or breach shall occur under any other agreement, document or
instrument to which any Credit Party is a party which is not cured within any
applicable grace period, and such default or breach (i) involves the failure to
make any payment when due in respect of any Indebtedness (other than the
Obligations) of any Credit Party having an aggregate outstanding principal
balance in excess of $250,000 in the aggregate, or (ii) causes, or permits any
holder of such Indebtedness or a trustee to cause, such Indebtedness, or any
portion thereof in excess of $250,000 in the aggregate, to become due prior to
its stated maturity or prior to its regularly scheduled dates of payment,
regardless of whether such default is waived, or such right is exercised, by
such holder or trustee.
(f) Any information contained in any Borrowing Base Certificate is untrue
or incorrect in any material respect, or any representation or warranty herein
or in any Loan Document or in any written statement, report, financial
statement or certificate (other than a Borrowing Base Certificate) made or
delivered to Agent or any Lender by any Credit Party is untrue or incorrect in
any material respect as of the date when made or deemed made.
(g) Assets of any Credit Party with a fair market value of $25,000 or more
shall be seized, levied upon or subjected to a writ or distress warrant, or
come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors of any Credit Party and such condition continues for
thirty (30) days or more.
(h) A case or proceeding shall have been commenced against the Series B
Pledgor, either Pegasus Fund or any Credit Party seeking a decree or order in
respect of such Person (i) under Title 11 of the United States Code, as now
constituted or hereafter amended or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for any
such Person or of any substantial part of any such Person's assets, or (iii)
ordering the winding-up or liquidation of the affairs of any such Person, and
such case or proceeding shall remain undismissed or unstayed for sixty (60)
days or more or such court shall enter a decree or order granting the relief
sought in such case or proceeding.
(i) The Series B Pledgor, either Pegasus Fund or any Credit Party (i)
shall file a petition seeking relief under Title 11 of the United States Code,
as now constituted or hereafter amended, or any other applicable federal, state
or foreign bankruptcy or other similar law, (ii) shall fail to contest in a
timely and appropriate manner or shall consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of any such Person or
of any substantial part of any such Person's assets, (iii) shall make an
assignment for the benefit of creditors, (iv) shall take any corporate action
in furtherance of
-50-
55
any of the foregoing; or (v) shall admit in writing its inability to, or shall
be generally unable to, pay its debts as such debts become due.
(j) A final judgment or judgments for the payment of money in excess of
$250,000 in the aggregate at any time outstanding shall be rendered against any
Credit Party (excluding the Lower Court Judgment or the Final Judgment, but
including any other judgment with respect to the DEI Litigation) and the same
shall not, within thirty (30) days after the entry thereof, have been
discharged or execution thereof stayed or bonded pending appeal, or shall not
have been discharged prior to the expiration of any such stay.
(k) The Lower Court Judgment, Final Judgment and/or any other judgment
with respect to the DEI Litigation shall have been entered or determined and
the sum of the amount of Borrower's and each Credit Parties' liability with
respect thereto and the aggregate amount of accrued and unpaid expenses
(including, without limitation, legal fees) incurred by the Credit Parties with
respect to the DEI Litigation as of the date of such entry or determination,
exceeds $12,000,000 (provided, however, that such sum shall not include such
expenses to the extent that, as of any date of determination hereof, the Net
Borrowing Availability minus such expenses exceeds $500,000); or the Lower
Court Judgment shall have been entered and the conditions described in Section
2.3(I) shall have not been satisfied by the applicable time specified in
Section 2.3(I)(c) or, as of such time, either the Bond shall not have been
approved by the Lower Court or issued as contemplated by Section 2.3 or the
conditions precedent to the issuance of the Litigation L/C shall not have been
otherwise satisfied; or the Lower Court Judgment shall have been entered and
any portion thereof shall not be subject to a stay of execution pursuant to the
conditions set forth in Section 2.3(I) as a matter of applicable law; or the
Final Judgment shall have been entered or otherwise determined and the
conditions described in Section 2.2 shall have not been satisfied by the time
specified in Section 2.2(c) or, as of such time, the conditions precedent to
the making of Term Loan B shall not have been otherwise satisfied and the
conditions described in Section 2.3(II) shall have not been satisfied by the
time specified in Section 2.3(II)(c) or, as of such time, the conditions
precedent to the making of Term Loan C directly shall not have been otherwise
satisfied; or any Lien (including, without limitation, any judicial or judgment
lien) securing, arising as a result of or otherwise relating to the Lower Court
Judgment or any portion thereof, the Final Judgment or any other judgment or
claim against any of the Credit Parties with respect to the DEI Litigation
shall have been created, attached or perfected under applicable law and
procedure, or a writ of execution with respect thereto shall have been issued.
(l) Any material provision of any Loan Document shall for any reason cease
to be valid, binding and enforceable in accordance with its terms (or the
Series B Pledgor, either Pegasus Fund or any Credit Party shall challenge the
enforceability of, or revoke or attempt to revoke, any Loan Document or shall
assert in writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Loan Documents has ceased to be or
otherwise is not valid, binding and enforceable in accordance with its terms),
or any security interest created under any Loan Document shall cease to be a
valid and perfected first priority security interest or Lien (except as
otherwise permitted herein or therein) in any of the Collateral or Litigation
Collateral purported to be covered thereby.
-51-
56
(m) Any Change of Control shall occur.
(n) Any event shall occur, whether or not insured or insurable, as a
result of which revenue-producing activities cease or are substantially
curtailed at any facility of Borrower or any of its Subsidiaries generating
more than 10% of Borrower's consolidated revenues for the Fiscal Year preceding
such event and such cessation or curtailment continues for more than thirty
(30) days; provided, however, that no Event of Default shall exist under this
clause (m) solely as a result of the physical relocation of Tessco's
Georgetown, Texas location to one or more of Borrower's facility locations in
connection with the Tessco Liquidation.
8.2 Remedies. (a) If any Event of Default shall have occurred and be
continuing, Agent may (and at the written request of the Requisite Revolving
Lenders shall), without notice, suspend this facility with respect to further
Advances and/or the incurrence of further Letter of Credit Obligations or
Litigation L/C Obligations whereupon any further Advances and Letter of Credit
Obligations or Litigation L/C Obligations shall be made or extended in Agent's
sole discretion (or in the sole discretion of the Requisite Revolving Lenders,
if such suspension occurred at their direction) so long as such Event of
Default is continuing. If any Event of Default shall have occurred and be
continuing, Agent may (and at the written request of Requisite Lenders shall),
without notice except as otherwise expressly provided herein, increase the rate
of interest applicable to the Loans and the Letter of Credit Fees to the
Default Rate.
(b) If any Event of Default shall have occurred and be continuing, Agent
may (and at the written request of the Requisite Lenders shall), without
notice, (i) terminate this facility with respect to further Advances or the
incurrence of further Letter of Credit Obligations or Litigation L/C
Obligations; (ii) declare all or any portion of the Obligations, including all
or any portion of any Loan, to be thereupon due and payable, and require that
the Letter of Credit Obligations and Litigation L/C Obligations be cash
collateralized as provided in Annex B or the Litigation L/C Agreement, all
without presentment, demand, protest or further notice of any kind, all of
which are expressly waived by Borrower and each other Credit Party; and (iii)
exercise any rights and remedies provided to Agent under the Loan Documents
and/or at law or equity, including all remedies provided under the Code;
provided, however, that upon the occurrence of an Event of Default specified in
Sections 8.1, (h) or (i), all of the Obligations, including the aggregate
Revolving Loan, shall become immediately due and payable without declaration,
notice or demand by any Person, and the Commitments shall be thereupon
terminated.
8.3 Waivers by Credit Parties. Except as otherwise provided for in this
Agreement or by applicable law, each Credit Party waives: (a) presentment,
demand and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by Agent on which any Credit Party may in any way
be liable, and hereby ratifies and confirms whatever Agent may do in this
regard, (b) all rights to notice and a hearing prior to Agent's taking
possession or control of, or to Agent's replevy, attachment or levy upon, the
Collateral or any bond or security which might be required by any court prior
to
-52-
57
allowing Agent to exercise any of its remedies, and (c) the benefit of all
valuation, appraisal, marshaling and exemption laws.
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1 Assignment and Participations. (a) The Credit Parties signatory
hereto consent to any Lender's assignment of, and/or sale of participations
in, at any time or times, the Loan Documents, Loans, Letter of Credit
Obligations, Litigation L/C Obligations and any Commitment or of any portion
thereof or interest therein, including any Lender's rights, title, interests,
remedies, powers or duties thereunder, whether evidenced by a writing or not.
Any assignment by a Lender shall (i) require the consent of Agent (which shall
not be unreasonably withheld or delayed) and the execution of an assignment
agreement (an "Assignment Agreement") substantially in the form attached hereto
as Exhibit 9.1(a) and otherwise in form and substance satisfactory to, and
acknowledged by, Agent; (ii) be conditioned on such assignee Lender
representing to the assigning Lender and Agent that it is purchasing the
applicable Loans to be assigned to it for its own account, for investment
purposes and not with a view to the distribution thereof; (iii) if a partial
assignment, be in an amount at least equal to $5,000,000 and, after giving
effect to any such partial assignment, the assigning Lender shall have retained
Commitments in an amount at least equal to $5,000,000; and (iv) include a
payment to Agent by such assigning Lender of an assignment fee of $3,500. In
the case of an assignment by a Lender under this Section 9.1, the assignee
shall have, to the extent of such assignment, the same rights, benefits and
obligations as it would if it were a Lender hereunder. The assigning Lender
shall be relieved of its obligations hereunder with respect to its Commitments
or assigned portion thereof from and after the date of such assignment.
Borrower hereby acknowledges and agrees that any assignment will give rise to a
direct obligation of Borrower to the assignee and that the assignee shall be
considered to be a "Lender". In all instances, each Lender's liability to make
Loans hereunder shall be several and not joint and shall be limited to such
Lender's Pro Rata Share of the applicable Commitment. In the event Agent or
any Lender assigns or otherwise transfers all or any part of a Note, Agent or
any such Lender shall so notify Borrower and Borrower shall, upon the request
of Agent or such Lender, execute new Notes in exchange for the Notes being
assigned. Notwithstanding the foregoing provisions of this Section 9.1(a), any
Lender may at any time pledge or assign all or any portion of such Lender's
rights under this Agreement and the other Loan Documents to a Federal Reserve
Bank; provided, however, that no such pledge or assignment shall release such
Lender from such Lender's obligations hereunder or under any other Loan
Document.
(b) Any participation by a Lender of all or any part of its Commitments
shall be in an amount at least equal to $5,000,000, and with the understanding
that all amounts payable by Borrower hereunder shall be determined as if that
Lender had not sold such participation, and that the holder of any such
participation shall not be entitled to require such Lender to take or omit to
take any action hereunder except actions directly affecting (i) any reduction
in the principal amount of, or interest rate or Fees payable with respect to,
any Loan in which such holder participates, (ii) any extension of the scheduled
amortization of the principal amount of any Loan in which such holder
participates or the final maturity date thereof, and (iii) any release of all
or substantially all of the Collateral (other than in accordance with the terms
of this
-53-
58
Agreement, the Collateral Documents or the other Loan Documents).
Solely for purposes of Sections 1.13, 1.15, 1.16 and 9.8, Borrower acknowledges
and agrees that a participation shall give rise to a direct obligation of
Borrower to the participant and the participant shall be considered to be a
"Lender". Except as set forth in the preceding sentence neither Borrower nor
any Credit Party shall have any obligation or duty to any participant. Neither
Agent nor any Lender (other than the Lender selling a participation) shall have
any duty to any participant and may continue to deal solely with the Lender
selling a participation as if no such sale had occurred.
(c) Except as expressly provided in this Section 9.1, no Lender shall, as
between Borrower and that Lender, or Agent and that Lender, be relieved of any
of its obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans,
the Notes or other Obligations owed to such Lender.
(d) Each Credit Party executing this Agreement shall assist any Lender
permitted to sell assignments or participations under this Section 9.1 as
reasonably required to enable the assigning or selling Lender to effect any
such assignment or participation, including the execution and delivery of any
and all agreements, notes and other documents and instruments as shall be
requested and, if requested by Agent, the preparation of informational
materials for, and the participation of management in meetings with, potential
assignees or participants. Each Credit Party executing this Agreement shall
certify the correctness, completeness and accuracy of all descriptions of the
Credit Parties and their affairs contained in any selling materials provided by
them and all other information provided by them and included in such materials,
except that any Projections delivered by Borrower shall only be certified by
Borrower as having been prepared by Borrower in compliance with the
representations contained in Section 3.4(c).
(e) A Lender may furnish any information concerning Borrower in the
possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants). Each Lender shall obtain
from assignees or participants confidentiality covenants substantially
equivalent to those contained in Section 11.8.
(f) So long as no Event of Default shall have occurred and be continuing,
no Lender shall assign or sell participations in any portion of its Loans or
Commitments to a potential Lender or participant, if, as of the date of the
proposed assignment or sale, the assignee Lender or participant would be
subject to capital adequacy or similar requirements under Section 1.16(a),
increased costs under Section 1.16(b), an inability to fund LIBOR Loans under
Section 1.16(c), or withholding taxes in accordance with Section 1.16(d).
9.2 Appointment of Agent. GE Capital is hereby appointed to act on
behalf of all Lenders as Agent under this Agreement and the other Loan
Documents. The provisions of this Section 9.2 are solely for the benefit of
Agent and Lenders and no Credit Party nor any other Person shall have any
rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement and the other Loan
Documents, and, notwithstanding the use of the term "Agent", Agent shall act
solely as an independent contractor and contractual representative of Lenders
and does not assume and shall not be deemed to have
-54-
59
assumed any obligation toward or relationship of agency, trust or other
fiduciary with or for any Lender, Credit Party or any other Person. Agent
shall have no duties or responsibilities except for those expressly set forth
in this Agreement and the other Loan Documents. The duties of Agent shall be
mechanical and administrative in nature and Agent shall not have, or be deemed
to have, by reason of this Agreement, any other Loan Document or otherwise a
fiduciary relationship in respect of any Lender. Neither Agent nor any of its
Affiliates nor any of their respective officers, directors, employees, agents,
attorneys or representatives shall be liable to any Lender for any action taken
or omitted to be taken by it hereunder or under any other Loan Document, or in
connection herewith or therewith, except for damages solely caused by its or
their own gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction.
If Agent shall request instructions from Requisite Lenders, Requisite
Revolving Lenders, Supermajority Revolving Lenders or all affected Lenders with
respect to any act or action (including failure to act) in connection with this
Agreement or any other Loan Document, then Agent shall be entitled to refrain
from such act or taking such action unless and until Agent shall have received
instructions from Requisite Lenders, Requisite Revolving Lenders,
Supermajority Revolving Lenders or all affected Lenders, as the case may be,
and Agent shall not incur liability to any Person by reason of so refraining.
Agent shall be fully justified in failing or refusing to take any action
hereunder or under any other Loan Document (a) if such action would, in the
opinion of Agent, be contrary to law or the terms of this Agreement or any
other Loan Document, (b) if such action would, in the opinion of Agent, expose
Agent to Environmental Liabilities or (c) if Agent shall not first be
indemnified to its satisfaction against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such
action. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against Agent as a result of Agent acting or refraining from
acting hereunder or under any other Loan Document in accordance with the
instructions of Requisite Lenders, Requisite Revolving Lenders, Supermajority
Revolving Lenders or all affected Lenders, as applicable.
9.3 Agent's Reliance, Etc. Neither Agent nor any of its Affiliates nor
any of their respective directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement or the other Loan Documents, except for damages
caused by its or their own gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction. Without limitation of the
generality of the foregoing, Agent: (a) may treat the payee of any Note as
the holder thereof until Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to Agent; (b)
may consult with legal counsel, independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement or the other Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of any Credit Party or to
inspect the Collateral (including the books and records) of any Credit Party;
(e) shall not be responsible to any Lender for the due
-55-
60
execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or the other Loan Documents or any other instrument
or document furnished pursuant hereto or thereto or the perfection, priority,
enforceability or unavoidability of any of the Liens securing the Obligations;
and (f) shall incur no liability under or in respect of this Agreement or the
other Loan Documents by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopy, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
9.4 GE Capital and Affiliates. With respect to its Commitments
hereunder, GE Capital shall have the same rights and powers under this
Agreement and the other Loan Documents as any other Lender and may exercise the
same as though it were not Agent; and the term "Lender" or "Lenders" shall,
unless otherwise expressly indicated, include GE Capital in its individual
capacity. GE Capital and its Affiliates may lend money to, invest in, and
generally engage in any kind of business with, any Credit Party, any of their
Affiliates and any Person who may do business with or own securities of any
Credit Party or any such Affiliate, all as if GE Capital were not Agent and
without any duty to account therefor to Lenders. GE Capital and its Affiliates
may accept fees and other consideration from any Credit Party for services in
connection with this Agreement or otherwise without having to account for the
same to Lenders. GE Capital has also received warrants from Borrower and is an
investor in each of the Pegasus Funds. Each Lender acknowledges the potential
conflict of interest between GE Capital as a Lender holding disproportionate
interests in the Loans, GE Capital as a stockholder or warrant holder of
Borrower, GE Capital as an investor in each of the Pegasus Funds and GE Capital
as Agent.
9.5 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the Financial Statements referred to in Section 3.4(a) and such other documents
and information as it has deemed appropriate, made its own credit and financial
analysis of the Credit Parties and its own decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Each
Lender acknowledges the potential conflict of interest of each other Lender as
a result of Lenders holding disproportionate interests in the Loans, and
expressly consents to, and waives any claim based upon, such conflict of
interest.
9.6 Indemnification. Lenders agree to indemnify Agent (to the extent not
reimbursed by the Credit Parties and without limiting the obligations of the
Credit Parties hereunder), ratably according to their respective Pro Rata
Shares, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against Agent in any way relating to or arising out of this Agreement or any
other Loan Document or any action taken or omitted by Agent in connection
therewith; provided, however, that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from
-56-
61
Agent's gross negligence or wilful misconduct as finally determined by
a court of competent jurisdiction. Without limiting the foregoing, each Lender
agrees to reimburse Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement and each other Loan Document, to the extent that Agent is not
reimbursed for such expenses by the Credit Parties.
9.7 Successor Agent. Agent may resign at any time by giving not less
than thirty (30) days' prior written notice thereof to Lenders and Borrower.
Upon any such resignation, the Requisite Lenders shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed
by the Requisite Lenders and shall have accepted such appointment within 30
days after the resigning Agent's giving notice of resignation, then the
resigning Agent may, on behalf of Lenders, appoint a successor Agent, which
shall be a Lender, if a Lender is willing to accept such appointment, or
otherwise shall be a commercial bank or financial institution or a subsidiary
of a commercial bank or financial institution if such commercial bank or
financial institution is organized under the laws of the United States of
America or of any State thereof and has a combined capital and surplus of at
least $300,000,000. If no successor Agent has been appointed pursuant to the
foregoing, by the 30th day after the date such notice of resignation was given
by the resigning Agent, such resignation shall become effective and the
Requisite Lenders shall thereafter perform all the duties of Agent hereunder
until such time, if any, as the Requisite Lenders appoint a successor Agent as
provided above. Any successor Agent appointed by Requisite Lenders hereunder
shall be subject to the approval of Borrower, such approval not to be
unreasonably withheld or delayed; provided that such approval shall not be
required if a Default or an Event of Default shall have occurred and be
continuing. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall succeed to and become vested with
all the rights, powers, privileges and duties of the resigning Agent. Upon the
earlier of the acceptance of any appointment as Agent hereunder by a successor
Agent or the effective date of the resigning Agent's resignation, the resigning
Agent shall be discharged from its duties and obligations under this Agreement
and the other Loan Documents, except that any indemnity rights or other rights
in favor of such resigning Agent shall continue. After any resigning Agent's
resignation hereunder, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement and the other Loan Documents. Agent may be removed at the
written direction of the holders (other than Agent) of two-thirds or more of
the Commitments (excluding Agent's Commitment); provided that in so doing, such
Lenders shall be deemed to have waived and released any and all claims they may
have against Agent.
9.8 Setoff and Sharing of Payments. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Lender and each holder of any Note is hereby authorized at any time or
from time to time, without notice to any Credit Party or to any other Person,
any such notice being hereby expressly waived, to set off and to appropriate
and to apply any and all balances held by it at any of its offices for the
account of any
-57-
62
Credit Party (regardless of whether such balances are then due to such
Credit Party) and any other properties or assets any time held or owing by that
Lender or that holder to or for the credit or for the account of the Credit
Parties against and on account of any of the Obligations which are not paid
when due. Any Lender or holder of any Note exercising a right to set off or
otherwise receiving any payment on account of the Obligations in excess of its
Pro Rata Share thereof shall purchase for cash (and the other Lenders or
holders shall sell) such participations in each such other Lender's or holder's
Pro Rata Share of the Obligations as would be necessary to cause such Lender to
share the amount so set off or otherwise received with each other Lender or
holder in accordance with their respective Pro Rata Shares. Each Lender's
obligation under this Section 9.8 shall be in addition to and not limitation of
its obligations to purchase a participation in an amount equal to its Pro Rata
Share of the Swing Line Loans under Section 1.1. Each Credit Party agrees, to
the fullest extent permitted by law, that (a) any Lender or holder may exercise
its right to set off with respect to amounts in excess of its Pro Rata Share of
the Obligations and may sell participations in such amount so set off to other
Lenders and holders and (b) any Lender or holders so purchasing a participation
in the Loans made or other Obligations held by other Lenders or holders may
exercise all rights of set-off, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender or holder were a
direct holder of the Loans and the other Obligations in the amount of such
participation. Notwithstanding the foregoing, if all or any portion of the
set-off amount or payment otherwise received is thereafter recovered from the
Lender that has exercised the right of set-off, the purchase of participations
by that Lender shall be rescinded and the purchase price restored without
interest.
9.9 Advances; Payments; Non-Funding Lenders; Information; Actions in
Concert.
(a) Advances; Payments. (i) Revolving Lenders shall refund or
participate in the Swing Line Loan in accordance with clauses (iii) and (iv) of
Section 1.1(e). Agent shall notify Revolving Lenders, promptly after receipt
of a Notice of Revolving Credit Advance and in any event prior to 1:00 p.m.
(New York time) on the date such Notice of Revolving Advance is received, by
telecopy, telephone or other similar form of transmission. Each Revolving
Lender shall make the amount of such Lender's Pro Rata Share of each Revolving
Credit Advance available to Agent in same day funds by wire transfer to Agent's
account as set forth in Annex H not later than 3:00 p.m. (New York time) on the
requested funding date, in the case of an Index Rate Loan and not later than
11:00 a.m. (New York time) on the requested funding date in the case of a LIBOR
Loan. After receipt of such wire transfers (or, in the Agent's sole
discretion, before receipt of such wire transfers), subject to the terms
hereof, Agent shall make the requested Revolving Credit Advance to the
Borrower. All payments by each Revolving Lender shall be made without setoff,
counterclaim or deduction of any kind.
(ii) Agent shall notify Term Lenders promptly after receipt of a Notice
of Term Loan B Advance or promptly upon its receipt of notice of a payment by
the L/C Issuer under the Litigation L/C, and in any event prior to 1:00 p.m.
(New York time) on the date a Notice of Term Loan B Advance is received or, in
the case of a notice of payment under the Litigation L/C prior to 1:00 p.m. on
the Business Day next following the date of Agent's receipt of such notice.
Any such notification to Term Lenders shall be by telecopy, telephone or other
similar form of
-58-
63
transmission. Each Term Lender shall make the amount of such Lender's
Pro Rata Share of the Term Loan B or payment under the Litigation L/C available
to Agent in same day funds by wire transfer to Agent's account as set forth in
Annex H not later than 3:00 p.m. (New York time) on the Term Loan B Funding
Date in the case of Term Loan B if requested as an Index Rate Loan, not later
than 11:00 a.m. (New York time) on the Term Loan B Funding Date in the case of
Term Loan B if requested as a LIBOR Loan or, not later than 3:00 p.m. (New York
time) on the Business Day next following the date of Agent's receipt of notice
of such payment in the case of a payment with respect to the Litigation L/C.
In the case of Term Loan B, after receipt of such wire transfers (or, in
Agent's sole discretion, before receipt of such wire transfers), subject to the
terms hereof, Agent shall make the Term Loan B available to Borrower. All
payments by each Term Lender shall be made without setoff, counterclaim or
deduction of any kind.
(iii) On the second (2nd) Business Day of each calendar week or more
frequently as aggregate cumulative payments in excess of $2,000,000 are
received with respect to the Loans (other than the Swing Line Loan) (each, a
"Settlement Date"), Agent will advise each Lender by telephone, or telecopy of
the amount of such Lender's Pro Rata Share of principal, interest and Fees paid
for the benefit of Lenders with respect to each applicable Loan. Provided that
such Lender has made all payments required to be made by it and has purchased
all participations required to be purchased by it under this Agreement and the
other Loan Documents as of such Settlement Date, Agent will pay to each Lender
such Lender's Pro Rata Share of principal, interest and Fees paid by Borrower
since the previous Settlement Date for the benefit of that Lender on the Loans
held by it. Such payments shall be made by wire transfer to such Lender's
account (as specified by such Lender in Annex H or the applicable Assignment
Agreement) not later than 1:00 p.m. (Chicago time) on the next Business Day
following each Settlement Date.
(b) Availability of Lender's Pro Rata Share. Agent may assume that each
Revolving Lender will make its Pro Rata Share of each Revolving Credit Advance
available to Agent on each funding date and that each Term Lender will make its
Pro Rata Share of Term Loan B on the Term Loan B Funding Date. If such Pro
Rata Share is not, in fact, paid to Agent by such Lender when due, Agent will
be entitled to recover such amount on demand from such Lender without set-off,
counterclaim or deduction of any kind. If any Lender fails to pay the amount
of such Pro Rata Share of any Revolving Credit Advance, or if any Term Lender
fails to pay the amount of its Pro Rata Share of any payment under the
Litigation L/C when due, forthwith upon Agent's demand, Agent shall promptly
notify Borrower and Borrower shall immediately repay such amount to Agent.
Nothing in this Section 9.9(b) or elsewhere in this Agreement or the other Loan
Documents shall be deemed to require Agent to advance funds on behalf of any
Lender or to relieve any Lender from its obligation to fulfill its Commitments
hereunder or to prejudice any rights that Borrower may have against any Lender
as a result of any default by such Lender hereunder. To the extent that Agent
advances funds to Borrower on behalf of any Lender and is not reimbursed
therefor on the same Business Day as such Advance is made, Agent shall be
entitled to retain for its account all interest accrued on such Advance until
reimbursed by the applicable Lender.
-59-
64
(c) Return of Payments. (i) If Agent pays an amount to a Lender under
this Agreement in the belief or expectation that a related payment has been or
will be received by Agent from Borrower and such related payment is not
received by Agent, then Agent will be entitled to recover such amount from such
Lender on demand without set-off, counterclaim or deduction of any kind.
(ii) If Agent determines at any time that any amount received by Agent
under this Agreement must be returned to Borrower or paid to any other Person
pursuant to any insolvency law or otherwise, then, notwithstanding any other
term or condition of this Agreement or any other Loan Document, Agent will not
be required to distribute any portion thereof to any Lender. In addition, each
Lender will repay to Agent on demand any portion of such amount that Agent has
distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to Borrower or such other Person, without set-off,
counterclaim or deduction of any kind.
(d) Non-Funding Lenders. The failure of any Lender (such Lender, a
"Non-Funding Lender") to make any Revolving Credit Advance, to purchase any
participation in any Swing Line Loan to be made or purchased by it on the date
specified therefor, to make its Term Loan B, or to pay its Pro Rata Share of
any payment under the Litigation L/C, shall not relieve any other Lender (each
such other Lender, an "Other Lender") of its obligations to make such Advance,
purchase such participation on such date, make such Term Loan B or to make such
payment with respect to the Litigation L/C payment, but neither any Other
Lender nor Agent shall be responsible for the failure of any Non-Funding Lender
to make an Advance to be made, or to purchase a participation to be purchased,
by such Non-Funding Lender, and no Non-Funding Lender shall have any obligation
to Agent or any Other Lender for the failure by such Non-Funding Lender.
Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender
shall not have any voting or consent rights under or with respect to any Loan
Document or constitute a "Lender", a "Revolving Lender" or a "Term Lender" (or
be included in the calculation of "Requisite Lenders", "Requisite Revolving
Lenders" or "Supermajority Revolving Lenders" hereunder) for any voting or
consent rights under or with respect to any Loan Document.
(e) Dissemination of Information. Agent will use reasonable efforts to
provide Lenders with any notice of Default or Event of Default received by
Agent from, or delivered by Agent to, any Credit Party, with notice of any
Event of Default of which Agent has actually become aware and with notice of
any action taken by Agent following any Event of Default; provided, however,
that Agent shall not be liable to any Lender for any failure to do so, except
to the extent that such failure is attributable solely to Agent's gross
negligence or willful misconduct as finally determined by a court of competent
jurisdiction. Lenders acknowledge that Borrower is required to provide
Financial Statements and Collateral Reports to Lenders in accordance with
Annexes E and F hereto and agree that Agent shall have no duty to provide the
same to Lenders.
(f) Actions in Concert. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no
Lender shall take any
-60-
65
action to protect or enforce its rights arising out of this Agreement or the
Notes (including exercising any rights of set-off) without first obtaining the
prior written consent of Agent or Requisite Lenders, it being the intent of
Lenders that any such action to protect or enforce rights under this Agreement
and the Notes shall be taken in concert and at the direction or with the consent
of Agent.
10. SUCCESSORS AND ASSIGNS
10.1 Successors and Assigns. This Agreement and the other Loan
Documents shall be binding on and shall inure to the benefit of each Credit
Party, Agent, Lenders and their respective successors and assigns (including, in
the case of any Credit Party, a debtor-in- possession on behalf of such Credit
Party), except as otherwise provided herein or therein. No Credit Party may
assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder or under any of the other Loan Documents without
the prior express written consent of Agent and Requisite Lenders. Any such
purported assignment, transfer, hypothecation or other conveyance by any Credit
Party without the prior express written consent of Agent and Requisite Lenders
shall be void. The terms and provisions of this Agreement are for the purpose of
defining the relative rights and obligations of each Credit Party, Agent and
Lenders with respect to the transactions contemplated hereby and no Person shall
be a third party beneficiary of any of the terms and provisions of this
Agreement or any of the other Loan Documents.
11. MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement and Pegasus
Litigation Guaranty. (a) The Loan Documents constitute the complete agreement
between the parties with respect to the subject matter thereof and may not be
modified, altered or amended except as set forth in Section 11.2 below. Any
letter of interest, commitment letter, and/or fee letter (other than the GE
Capital Fee Letter) and/or confidentiality agreement between any Credit Party
and Agent or any Lender or any of their respective affiliates, predating this
Agreement and relating to a financing of substantially similar form, purpose or
effect shall be superseded by this Agreement.
(b) Without Borrower's prior written consent, Agent shall not
enter into any written amendment to the Litigation Guaranty which expands or
modifies the deliveries required pursuant to Section 3 hereof.
11.2 Amendments and Waivers. (a) Except for actions expressly
permitted to be taken by Agent, no amendment, modification, termination or
waiver of any provision of this Agreement or any of the Notes, or any consent to
any departure by any Credit Party therefrom, shall in any event be effective
unless the same shall be in writing and signed by Agent and Borrower, and by
Requisite Lenders, Requisite Revolving Lenders, Supermajority Revolving Lenders
or all affected Lenders, as applicable. Except as set forth in clauses (b) and
(c) below, all such amendments, modifications, terminations or waivers requiring
the consent of any Lenders shall require the written consent of Requisite
Lenders.
-61-
66
(b) No amendment, modification, termination or waiver of or
consent with respect to any provision of this Agreement which increases the
percentage advance rates set forth in the definition of the Borrowing Base, or
which makes less restrictive the nondiscretionary criteria for exclusion from
Eligible Accounts and Eligible Inventory set forth in Sections 1.6 and 1.7,
shall be effective unless the same shall be in writing and signed by Agent,
Supermajority Revolving Lenders and Borrower. No amendment, modification,
termination or waiver of or consent with respect to any provision of this
Agreement which waives compliance with the conditions precedent set forth in
Section 2.2 to the making of any Loan or the incurrence of any Letter of Credit
Obligations shall be effective unless the same shall be in writing and signed by
Agent, Requisite Revolving Lenders and Borrower. Notwithstanding anything
contained in this Agreement to the contrary, no waiver or consent with respect
to any Default (if in connection therewith Agent or Requisite Revolving Lenders,
as the case may be, have exercised its or their right to suspend the making or
incurrence of further Advances or Letter of Credit Obligations pursuant to
Section 8.2(a)) or any Event of Default shall be effective for purposes of the
conditions precedent to the making of Loans or the incurrence of Letter of
Credit Obligations set forth in Section 2.2 unless the same shall be in writing
and signed by Agent, Requisite Revolving Lenders and Borrower.
(c) No amendment, modification, termination or waiver shall,
unless in writing and signed by Agent and each Lender directly affected thereby,
do any of the following: (i) increase the principal amount of any Lender's
Commitment (which action shall be deemed to directly affect all Lenders); (ii)
reduce the principal of, rate of interest on or Fees payable with respect to any
Loan or Letter of Credit Obligations of any affected Lender; (iii) extend any
scheduled payment date or final maturity date of the principal amount of any
Loan of any affected Lender; (iv) waive, forgive, defer, extend or postpone any
payment of interest or Fees as to any affected Lender; (v) release any Guaranty
or, except as otherwise permitted herein or in the other Loan Documents, permit
any Credit Party to sell or otherwise dispose of any Collateral with a value
exceeding $5,000,000 in the aggregate (which action shall be deemed to directly
affect all Lenders); (vi) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which shall be required for
Lenders or any of them to take any action hereunder; and (vii) amend or waive
this Section 11.2 or the definitions of the terms "Requisite Lenders",
"Requisite Revolving Lenders" or "Supermajority Revolving Lenders" insofar as
such definitions affect the substance of this Section 11.2. Furthermore, no
amendment, modification, termination or waiver affecting the rights or duties of
Agent under this Agreement or any other Loan Document shall be effective unless
in writing and signed by Agent, in addition to Lenders required hereinabove to
take such action. Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given. No amendment, modification, termination or waiver shall be
required for Agent to take additional Collateral pursuant to any Loan Document.
No amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the holder of that Note.
No notice to or demand on any Credit Party in any case shall entitle such Credit
Party or any other Credit Party to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this Section 11.2 shall be binding upon
each holder of the Notes at the time outstanding and each future holder of the
Notes.
-62-
67
(d) If, in connection with any proposed amendment,
modification, waiver or termination (a "Proposed Change"):
(i) requiring the consent of all affected Lenders,
the consent of Requisite Lenders is obtained, but the consent
of other Lenders whose consent is required is not obtained
(any such Lender whose consent is not obtained as described
this clause (i) and in clauses (ii), (iii) and (iv) below
being referred to as a "Non-Consenting Lender"), or
(ii) requiring the consent of Supermajority Revolving
Lenders, the consent of Requisite Revolving Lenders is
obtained, but the consent of Supermajority Revolving Lenders
is not obtained, or
-63-
68
(iii) requiring the consent of Requisite Revolving
Lenders, the consent of Revolving Lenders holding 51% or more
of the aggregate Revolving Loan Commitments is obtained, but
the consent of Requisite Revolving Lenders is not obtained, or
(iv) requiring the consent of Requisite Lenders, the
consent of Lenders holding 51% or more of the aggregate
Commitments is obtained, but the consent of Requisite Lenders
is not obtained,
then, so long as Agent is not a Non-Consenting Lender, at Borrower's request,
Agent or a Person acceptable to Agent shall have the right with Agent's consent
and in Agent's sole discretion (but shall have no obligation) to purchase from
such Non-Consenting Lenders, and such NonConsenting Lenders agree that they
shall, upon Agent's request, sell and assign to Agent or such Person, all of the
Commitments of such Non-Consenting Lender for an amount equal to the principal
balance of all Loans held by the Non-Consenting Lender and all accrued interest
and Fees with respect thereto through the date of sale, such purchase and sale
to be consummated pursuant to an executed Assignment Agreement.
(e) Upon indefeasible payment in full in cash and performance
of all of the Obligations (other than indemnification Obligations under Section
1.13), termination of the Commitments and a release of all claims against Agent
and Lenders, and so long as no suits, actions proceedings, or claims are pending
or threatened against any Indemnified Person asserting any damages, losses or
liabilities that are Indemnified Liabilities, Agent shall deliver to Borrower
termination statements, mortgage releases and other documents necessary or
appropriate to evidence the termination of the Liens securing payment of the
Obligations.
11.3 Fees and Expenses. Borrower shall reimburse Agent for all
reasonable out-of-pocket expenses incurred in connection with the preparation of
the Loan Documents (including the reasonable fees and expenses of all of its
special loan counsel, advisors, consultants and auditors retained in connection
with the Loan Documents and the Related Transactions and advice in connection
therewith). Borrower shall reimburse Agent (and, with respect to clauses (c) and
(d) below, all Lenders) for all reasonable fees, costs and expenses, including
the fees, costs and expenses of counsel or other advisors (including
environmental and management consultants and appraisers) for advice, assistance,
or other representation in connection with:
(a) the forwarding to Borrower or any other Person on
behalf of Borrower by Agent of the proceeds of the Loans;
(b) any amendment, modification or waiver of, or consent
with respect to, any of the Loan Documents or Related Transactions Documents or
advice in connection with the administration of the Loans made pursuant hereto
or its rights hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Agent, any Lender, Borrower or any other Person)
in any way relating to the
-64-
69
Collateral, any of the Loan Documents or any other agreement to be executed or
delivered in connection therewith or herewith, whether as party, witness, or
otherwise, including any litigation, contest, dispute, suit, case, proceeding or
action, and any appeal or review thereof, in connection with a case commenced by
or against Borrower or any other Person that may be obligated to Agent by virtue
of the Loan Documents; including any such litigation, contest, dispute, suit,
proceeding or action arising in connection with any work-out or restructuring of
the Loans during the pendency of one or more Events of Default; provided that in
the case of reimbursement of counsel for Lenders other than Agent, such
reimbursement shall be limited to one counsel for all such Lenders and,
provided, further, that Borrower shall not be obligated hereunder to reimburse
the Agent or the Lenders to the extent the amount otherwise to be reimbursed
hereunder resulted from the Agent's or such Lenders' gross negligence or willful
misconduct.
(d) any attempt to enforce any remedies of Agent against
any or all of the Credit Parties or any other Person that may be obligated to
Agent or any Lender by virtue of any of the Loan Documents; including any such
attempt to enforce any such remedies in the course of any work-out or
restructuring of the Loans during the pendency of one or more Events of Default;
provided that in the case of reimbursement of counsel for Lenders other than
Agent, such reimbursement shall be limited to one counsel for all such Lenders;
(e) any work-out or restructuring of the Loans during the
pendency of one or more Events of Default;
(f) efforts to (i) monitor the Loans or any of the other
Obligations, (ii) evaluate, observe or assess any of the Credit Parties or their
respective affairs, and (iii) verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of any of the Collateral;
including all reasonable attorneys' and other professional and service
providers' fees arising from such services, including those in connection with
any appellate proceedings; and all reasonable expenses, costs, charges and other
fees incurred by such counsel and others in any way or respect arising in
connection with or relating to any of the events or actions described in this
Section 11.3 shall be payable by Borrower to Agent, within thirty (30) days of
demand therefor. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include: fees, costs and expenses of
accountants, environmental advisors, appraisers, investment bankers, management
and other consultants and paralegals; court costs and expenses; photocopying and
duplication expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram or telecopy charges;
secretarial overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal or other advisory
services.
11.4 No Waiver. Agent's or any Lender's failure, at any time
or times, to require strict performance by the Credit Parties of any provision
of this Agreement and any of the other Loan Documents shall not waive, affect or
diminish any right of Agent or such Lender thereafter to demand strict
compliance and performance therewith. Any suspension or waiver of
-65-
70
an Event of Default shall not suspend, waive or affect any other Event of
Default whether the same is prior or subsequent thereto and whether the same or
of a different type. Subject to the provisions of Section 11.2, none of the
undertakings, agreements, warranties, covenants and representations of any
Credit Party contained in this Agreement or any of the other Loan Documents and
no Default or Event of Default by any Credit Party shall be deemed to have been
suspended or waived by Agent or any Lender, unless such waiver or suspension is
by an instrument in writing signed by an officer of or other authorized employee
of Agent and the applicable required Lenders, and directed to Borrower
specifying such suspension or waiver.
11.5 Remedies. Agent's and Lenders' rights and remedies under
this Agreement shall be cumulative and nonexclusive of any other rights and
remedies which Agent or any Lender may have under any other agreement, including
the other Loan Documents, by operation of law or otherwise. Recourse to the
Collateral shall not be required.
11.6 Severability. Wherever possible, each provision of this
Agreement and the other Loan Documents shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
11.7 Conflict of Terms. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any of the
other Loan Documents, the provision contained in this Agreement shall govern and
control.
11.8 Confidentiality. Agent and each Lender agree to use
commercially reasonable efforts (equivalent to the efforts Agent or such Lender
applies to maintaining the confidentiality of its own confidential information)
to maintain as confidential all confidential information provided to them by the
Credit Parties and designated as confidential for a period of two (2) years
following receipt thereof, except that Agent and any Lender may disclose such
information (a) to Persons employed or engaged by Agent or such Lender in
evaluating, approving, structuring or administering the Loans and the
Commitments; (b) to any bona fide assignee or participant or potential assignee
or participant that has agreed to comply with the covenant contained in this
Section 11.8 (and any such bona fide assignee or participant or potential
assignee or participant may disclose such information to Persons employed or
engaged by them as described in clause (a) above); (c) as required or requested
by any Governmental Authority or reasonably believed by Agent or such Lender to
be compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, in the opinion of Agent's or such Lender's counsel, required by
law; (e) in connection with the exercise of any right or remedy under the Loan
Documents or in connection with any Litigation to which Agent or such Lender is
a party; or (f) which ceases to be confidential through no fault of Agent or
such Lender; provided, however, that such Lender shall use its best efforts to
give Borrower as much advance notice of the proposed disclosure as is reasonably
possible under the circumstances.
-66-
71
11.9 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE
AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN XXXX
COUNTY, CITY OF CHICAGO, ILLINOIS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS
PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS,
PROVIDED, THAT AGENT, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
XXXX COUNTY, CITY OF CHICAGO, ILLINOIS AND, PROVIDED, FURTHER NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS
IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH
COURT, AND EACH CREDIT PARTY HEREBY WAIVES ANY OBJECTION WHICH SUCH CREDIT PARTY
MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR
SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY
BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE
ADDRESS SET FORTH IN ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF
OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
11.10 Notices. Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other parties, or whenever any of the parties desires to
give or serve upon any other parties any communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the
-67-
72
United States Mail, registered or certified mail, return receipt requested, with
proper postage prepaid, (b) upon transmission, when sent by telecopy or other
similar facsimile transmission (with such telecopy or facsimile promptly
confirmed by delivery of a copy by personal delivery or United States Mail as
otherwise provided in this Section 11.10), (c) one (1) Business Day after
deposit with a reputable overnight courier with all charges prepaid or (d) when
delivered, if hand-delivered by messenger, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number indicated
on Annex I or to such other address (or facsimile number) as may be substituted
by notice given as herein provided. The giving of any notice required hereunder
may be waived in writing by the party entitled to receive such notice. Failure
or delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to any Person (other than Borrower or Agent)
designated on Annex I to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
11.11 Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
11.12 Counterparts. This Agreement may be executed in any
number of separate counterparts, each of which shall collectively and separately
constitute one agreement.
11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT
PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
11.14 Press Releases. Each Credit Party executing this
Agreement agrees that neither it nor its Affiliates will in the future issue any
press releases or other public disclosure using the name of GE Capital or its
affiliates or referring to this Agreement, the other Loan Documents or the
Related Transactions Documents without at least two (2) Business Days' prior
notice to GE Capital and without the prior written consent of GE Capital unless
(and only to the extent that) such Credit Party or Affiliate is required to do
so under law and then, in any event, such Credit Party or Affiliate will consult
with GE Capital before issuing such press release or other public disclosure.
Each Credit Party consents to the publication by Agent or any Lender of
-68-
73
a tombstone or similar advertising material relating to the financing
transactions contemplated by this Agreement.
11.15 Reinstatement. Notwithstanding anything contained herein
to the contrary, this Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against Borrower for
liquidation or reorganization, should Borrower become insolvent or make an
assignment for the benefit of any creditor or creditors or should a receiver or
trustee be appointed for all or any significant part of Borrower's assets, and
shall continue to be effective or to be reinstated, as the case may be, if at
any time payment and performance of the Obligations, or any part thereof, is,
pursuant to applicable law, rescinded, avoided or reduced in amount, or must
otherwise be restored or returned by any obligee of the Obligations, whether as
a "voidable preference," "fraudulent transfer," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made.
Notwithstanding anything contained herein to the contrary, in the event that any
payment, or any part thereof, is rescinded, avoided, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, avoided, reduced, restored or returned.
11.16 Advice of Counsel. Each of the parties represents to
each other party hereto that it has discussed this Agreement and, specifically,
the provisions of Sections 11.9 and 11.13, with its counsel.
11.17 No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
* * * *
-69-
74
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the date first written above.
CODE-ALARM, INC.
By: ________________________________
Name: __________________________
Title: _________________________
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
Revolving Loan
Commitment (including
a Swing Line Commitment By: _______________________________
of $1,200,000): Name: _________________________
$12,000,000 Title: ________________________
Term Loan A Commitment:
$1,500,000
Term Loan B Commitment:
$3,000,000
Term Loan C Commitment:
$12,000,000
-70-
75
The following Persons are signatories to this Agreement in
their capacity as Credit Parties and not as borrowers.
TESSCO GROUP, INC.
By: ________________________________
Name: __________________________
Title: _________________________
XXXXXXX SECURITY SYSTEMS, INC.
By: _________________________________
Name: ___________________________
Title: __________________________
INTERCEPT SYSTEMS, INC.
By: _________________________________
Name: _________________________
Title: ________________________
ANES, INC.
By: _________________________________
Name: _________________________
Title: ________________________
-71-
76
ANNEX A (RECITALS)
TO
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have
(unless otherwise provided elsewhere in the Loan Documents) the following
respective meanings and all section references in the following definitions
shall refer to Sections of the Agreement:
"Account Debtor" shall mean any Person who may become
obligated to any Credit Party under, with respect to, or on account of, an
Account.
"Accounts" shall mean all "accounts," as such term is defined
in the Code, now owned or hereafter acquired by any Credit Party and, in any
event, including (a) all accounts receivable, other receivables, book debts and
other forms of obligations (other than forms of obligations evidenced by Chattel
Paper, Documents or Instruments) now owned or hereafter received or acquired by
or belonging or owing to any Credit Party, whether arising out of goods sold or
services rendered by it or from any other transaction (including any such
obligations which may be characterized as an account or contract right under the
Code), (b) all of each Credit Party's rights in, to and under all purchase
orders or receipts now owned or hereafter acquired by it for goods or services,
(c) all of each Credit Party's rights to any goods represented by any of the
foregoing (including unpaid sellers' rights of rescission, replevin, reclamation
and stoppage in transit and rights to returned, reclaimed or repossessed goods),
(d) all monies due or to become due to any Credit Party, under all purchase
orders and contracts for the sale of goods or the performance of services or
both by such Credit Party or in connection with any other transaction (whether
or not yet earned by performance on the part of such Credit Party) now or
hereafter in existence, including the right to receive the proceeds of said
purchase orders and contracts, and (e) all collateral security and guarantees of
any kind, now or hereafter in existence, given by any Person with respect to any
of the foregoing.
"Advance" shall mean any Revolving Credit Advance or Swing
Line Advance, as the context may require.
"Affiliate" shall mean, with respect to any Person, (a) each
Person that, directly or indirectly, owns or controls, whether beneficially, or
as a trustee, guardian or other fiduciary, five percent (5%) or more of the
Stock having ordinary voting power in the election of directors of such Persons,
(b) each Person that controls, is controlled by or is under common control with
such Person, (c) each of such Person's officers, directors, joint venturers and
partners and (d) in the case of Borrower, the immediate family members, spouses
and lineal descendants of individuals who are Affiliates of Borrower. For the
purposes of this definition, "control" of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the
A-1
77
direction of its management or policies, whether through the ownership of voting
securities, by contract or otherwise; provided, however, that the term
"Affiliate" shall specifically exclude Agent and each Lender.
"Agent" shall mean GE Capital or its successor appointed
pursuant to Section 9.7.
"Agreement" shall mean the Credit Agreement by and among
Borrower, the other Credit Parties named therein, GE Capital, as Agent and
Lender and the other Lenders signatory from time to time to the Agreement.
"Appendices" shall have the meaning assigned to it in the
recitals to the Agreement.
"Applicable Revolver Index Margin" shall mean one and one-half
of one percent (1.50%) per annum.
"Applicable Revolver LIBOR Margin" shall mean three and
one-quarter of one percent (3.25%) per annum.
"Applicable Term Loan Index Margin" shall mean (a) in the case
of the Term Loan A, one and three-quarters of one percent (1.75%) per annum and
(b) in the case of the Term Loan B and Term Loan C, two percent (2.00%) per
annum.
"Applicable Term Loan LIBOR Margin" shall mean (a) in the case
of the Term Loan A, three and one-half of one percent (3.50%) per annum and (b)
in the case of the Term Loan B and Term Loan C, three and three-quarters of one
percent (3.75%) per annum.
"Assignment Agreement" shall have the meaning assigned to it
in Section 9.1(a).
"Bond" shall have the meaning assigned to it in Section
2.3(I).
"Borrower Accounts" shall have the meaning assigned to it in
Annex C.
"Borrower" shall have the meaning assigned thereto in the
recitals to the Agreement.
"Borrowing Availability" shall have the meaning assigned to it
in Section 1.1(a)(i).
"Borrowing Base" shall mean, as of any date of determination
by Agent, from time to time, an amount equal to the sum at such time of the
following, minus the Tessco Liquidation Reserve then in effect:
(a) eighty-five percent (85%) of Borrower's and Tessco's
Eligible Accounts, less any Reserves established by Agent at such time;
A-2
78
(b) twenty-five percent (25%) of the book value of Borrower's
and Tessco's Eligible Inventory valued on a first-in, first-out basis
(at the lower of cost or market), less any Reserves established by
Agent at such time; and
(c) the Supplemental Amount.
"Borrowing Base Certificate" shall mean a certificate to be
executed and delivered from time to time by Borrower in the form attached to the
Agreement as Exhibit 4.1(b).
"Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of Illinois or New York and in reference to LIBOR Loans shall mean any
such day that is also a LIBOR Business Day.
"California Award" shall mean any judgment, settlement or
other award payable to any Credit Party in connection with the litigation
pending with the United States District Court for the Southern District of
California known as Directed Electronics, Inc. v. Code-Alarm, Inc., case number
95-0513(CGA), or any appeal thereof.
"Capital Expenditures" shall mean, with respect to any Person,
all expenditures (by the expenditure of cash or the incurrence of Indebtedness)
by such Person during any measuring period for any fixed assets or improvements
or for replacements, substitutions or additions thereto, that have a useful life
of more than one year and that are required to be capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any
lease of any property (whether real, personal or mixed) by such Person as lessee
that, in accordance with GAAP, would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person.
"Capital Lease Obligation" shall mean, with respect to any
Capital Lease of any Person, the amount of the obligation of the lessee
thereunder that, in accordance with GAAP, would appear on a balance sheet of
such lessee in respect of such Capital Lease.
"Cash Management Systems" shall have the meaning assigned to
it in Section 1.8.
"Change of Control" means (a) any person or group of persons
(within the meaning of the Securities Exchange Act of 1934, as amended), other
than either of the Pegasus Funds, shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended) of 20% or more
(computed on a fully diluted basis) of the issued and outstanding shares of
capital Stock of Borrower having the right to vote for the election of directors
of Borrower under ordinary circumstances; (b) during any period of twelve
consecutive calendar months, individuals who at the beginning of such period
constituted the board of directors of Borrower (together with any new directors
whose election by the board of directors of Borrower or whose nomination for
election by the stockholders of Borrower was approved by a vote of at
A-3
79
least two-thirds of the directors then still in office who either were directors
at the beginning of such period or whose elections or nomination for election
was previously so approved) cease for any reason other than death or disability
to constitute a majority of the directors then in office, (c) Borrower shall
cease to own and control all of the economic and voting rights associated with
all of the outstanding capital Stock of Tessco (other than as a result of the
Tessco Liquidation, if consummated in compliance with Section 6.1) or any of its
other Subsidiaries, (d) Xxxx X. Xxxxxxx shall cease to hold the office of, or
cease to perform the duties substantially to the same degree as currently being
performed of, President and Chief Executive Officer of Borrower (provided,
however, that no such event shall constitute an Event of Default as a result of
Xx. Xxxxxxx'x death, disability or termination for cause if Xx. Xxxxxxx is
thereafter replaced within forty-five (45) days with an officer acceptable to
the Requisite Lenders), or (e) Xxxx X. Xxxxxxx, his wife and trusts with respect
to which he or his wife are sole beneficiaries or trustees shall cease to own,
collectively, less than 400,000, 320,000 and 250,000 shares of Common Stock of
Borrower on the first, second and third anniversaries, respectfully, of the date
of this Agreement.
"Charges" shall mean all federal, state, county, city,
municipal, local, foreign or other governmental taxes (including taxes owed to
the PBGC at the time due and payable), levies, assessments, charges, liens,
claims or encumbrances upon or relating to, but in any event in favor of or owed
to a Governmental Authority, (a) the Collateral, (b) the Obligations, (c) the
employees, payroll, income or gross receipts of any Credit Party, (d) any Credit
Party's ownership or use of any properties or other assets, or (e) any other
aspect of any Credit Party's business.
"Chattel Paper" shall mean any "chattel paper," as such term
is defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located.
"Closing Checklist" shall mean the schedule, including all
appendices, exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with the Agreement, the other Loan
Documents and the transactions contemplated thereunder, substantially in the
form attached hereto as Annex D.
"Closing Date" shall mean October 24, 1997.
"Code" shall mean the Uniform Commercial Code as the same may,
from time to time, be enacted and in effect in the State of Illinois; provided,
however, in the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of Agent's or any Lender's security
interest in any Collateral is governed by the Uniform Commercial Code as enacted
and in effect in a jurisdiction other than the State of Illinois, the term
"Code" shall mean the Uniform Commercial Code as enacted and in effect in such
other jurisdiction solely for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions related to
such provisions.
"Collateral" shall mean the property covered by the Security
Agreements, the Pledge Agreements, the Mortgages and the other Collateral
Documents and Litigation Collateral Documents and any other property, real or
personal, tangible or intangible, now existing or hereafter acquired, that may
at any time be or become subject to a security interest or Lien in
A-4
80
favor of Agent, on behalf of itself and Lenders, to secure the Obligations or
Litigation Obligations or a Credit Party's guaranty obligations with respect to
the Obligations or Litigation Obligations.
"Collateral Documents" shall mean the Security Agreements, the
Pledge Agreements, the Guaranties, the Litigation Guaranty, the Supplemental
Guaranty, the Mortgages, the Patent Security Agreements, the Trademark Security
Agreements, the Copyright Security Agreements and all similar agreements entered
into, guaranteeing payment of, or granting a Lien upon property as security for
payment of, the Obligations or a Credit Party's guaranty obligations with
respect to the Obligations.
"Collateral Reports" shall mean the reports with respect to
the Collateral referred to in Annex F.
"Collection Account" shall mean that certain account of Agent,
account number 000-000-00 in the name of Agent at Bankers Trust Company in New
York, New York.
"Commitment Termination Date" shall mean the earliest of (a)
October 24, 2000, (b) the date of termination of Lenders' obligations to make
Advances and/or incur Letter of Credit Obligations and/or Litigation L/C
Obligations or permit existing Loans to remain outstanding pursuant to Section
8.2(b), and (c) the date of indefeasible prepayment in full by Borrower of the
Loans and the cancellation and return (or stand-by guarantee) of all Letters of
Credit or the cash collateralization of all Letter of Credit Obligations and
Litigation L/C Obligations pursuant to Annex B, and the permanent reduction of
the Revolving Loan Commitment and the Swing Line Commitment to zero dollars
($0), in accordance with the provisions of Section 1.3(a).
"Commitments" shall mean (a) as to any Lender, the aggregate
of such Lender's Revolving Loan Commitment (including without duplication the
Swing Line Lender's Swing Line Commitment) and Term Loan Commitment as set forth
on the signature page to the Agreement or in the most recent Assignment
Agreement executed by such Lender and (b) as to all Lenders, the aggregate of
all Lenders' Revolving Loan Commitments (including without duplication the Swing
Line Lender's Swing Line Commitment) and Term Loan Commitments, which aggregate
maximum commitment shall be Twenty-Five Million Five Hundred Thousand Dollars
($25,500,000.00) on the Closing Date, as such amount may be adjusted, if at all,
from time to time in accordance with the Agreement.
"Compliance Certificate" shall have the meaning assigned to it
in Annex E.
"Concentration Accounts" shall have the meaning assigned to it
in Annex C.
"Contracts" shall mean all "contracts," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party, in any
event, including all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) in or under which any
Credit Party may now or hereafter have any right, title or
A-5
81
interest, including any agreement relating to the terms of payment or the terms
of performance of any Account.
"Control Letter" means a letter agreement between Agent and
(i) the issuer of uncertificated securities with respect to uncertificated
securities in the name of any Credit Party, (ii) a securities intermediary with
respect to securities, whether certificated or uncertificated, securities
entitlements and other financial assets held in a securities account in the name
of any Credit Party, (iii) a futures commission merchant or clearing house with
respect to commodity accounts and commodity contracts held by any Credit Party,
whereby, among other things, the issuer, securities intermediary or futures
commission merchant disclaims any security interest in the applicable financial
assets, acknowledges the Lien of Agent, on behalf of itself and Lenders, on such
financial assets, and agrees to follow the instructions or entitlement orders of
Agent without further consent by the affected Credit Party.
"Copyright License" shall mean any and all rights now owned or
hereafter acquired by any Credit Party under any written agreement granting any
right to use any Copyright or Copyright registration.
"Copyright Security Agreements" shall mean, collectively, each
Copyright Security Agreement executed by a Credit Party in favor of Agent, on
behalf of itself and Lenders, with respect to Copyrights, as security for the
obligations or for such Credit Party's guaranty obligations with respect to the
Obligations.
"Copyrights" shall mean all of the following now owned or
hereafter acquired by any Credit Party: (a) all copyrights and general
intangibles of like nature (whether registered or unregistered), now owned or
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright Office
or in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof, and (b) all
reissues, extensions or renewals thereof.
"Credit Parties" shall mean Borrower and each of its
Subsidiaries.
"DEI Litigation" shall mean the litigation currently pending
with the United States District Court for the Eastern District of Michigan known
as Code Alarm, Inc. v. Electromotive Technologies Corporation and Directed
Electronics, Inc., case number 87-CV-74022-DT, and all appeals with respect
thereto.
"Default" shall mean any event which, with the passage of time
or notice or both, would, unless cured or waived, become an Event of Default.
"Default Rate" shall have the meaning assigned to it in
Section 1.5(d).
"Disbursement Accounts" shall have the meaning assigned to it
on Annex C.
A-6
82
"Disclosure Schedules" shall mean the Schedules prepared by
Borrower and denominated as Disclosure Schedules 1.4 through 6.7 in the Index to
the Agreement.
"Documents" shall mean any "documents," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located.
"Dollars" or "$" shall mean lawful currency of the United
States of America.
"EBITDA" shall mean, with respect to any Person for any fiscal
period, an amount equal to (a) consolidated net income before stock dividends of
such Person for such period, minus (b) the sum of (i) income tax credits
(including, without limitation, cash income tax credits), (ii) interest income,
(iii) gain from extraordinary items for such period, (iv) any aggregate net gain
(but not any aggregate net loss) during such period arising from the sale,
exchange or other disposition of capital assets by such Person (including any
fixed assets, whether tangible or intangible, all inventory sold in conjunction
with the disposition of fixed assets and all securities), and (v) any other
non-cash gains which have been added in determining consolidated net income, in
each case to the extent included in the calculation of consolidated net income
of such Person for such period in accordance with GAAP, but without duplication,
plus (c) the sum of (i) any provision for income taxes, (ii) Interest Expense
(other than preferred stock dividends), (iii) the amount of non-cash charges
(including depreciation and amortization) for such period, (iv) amortized debt
discount for such period, and (v) the amount of any deduction to consolidated
net income as the result of any grant to any members of the management of such
Person of any Stock, in each case to the extent included in the calculation of
consolidated net income of such Person for such period in accordance with GAAP,
but without duplication. For purposes of this definition, and notwithstanding
the foregoing, the following items shall be excluded in determining consolidated
net income of a Person: (1) the income (or deficit) of any other Person accrued
prior to the date it became a Subsidiary of, or was merged or consolidated into,
such Person or any of such Person's Subsidiaries; (2) the income (or deficit) of
any other Person (other than a Subsidiary) in which such Person has an ownership
interest, except to the extent any such income has actually been received by
such Person in the form of cash dividends or distributions; (3) the
undistributed earnings of any Subsidiary of such Person to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
is not at the time permitted by the terms of any contractual obligation or
requirement of law applicable to such Subsidiary; (4) any restoration to income
of any contingency reserve, except to the extent that provision for such reserve
was made out of income accrued during such period; (5) any write-up of any
asset; (6) any net gain from the collection of the proceeds of life insurance
policies; (7) any net gain arising from the acquisition of any securities, or
the extinguishment, under GAAP, of any Indebtedness, of such Person, (8) in the
case of a successor to such Person by consolidation or merger or as a transferee
of its assets, any earnings of such successor prior to such consolidation,
merger or transfer of assets, (9) any deferred credit representing the excess of
equity in any Subsidiary of such Person at the date of acquisition of such
Subsidiary over the cost to such Person of the investment in such Subsidiary
(10) any ordinary or extraordinary gain realized after the Closing Date as a
result of any judgment entered with respect to the litigation relating to any
potential California Award and (11) any ordinary or extraordinary loss incurred
after the Closing Date of up to $12,000,000 in respect of the DEI Litigation.
A-7
83
"Eligible Accounts" shall have the meaning assigned to it in
Section 1.6 of the Agreement.
"Eligible Inventory" shall have the meaning assigned to it in
Section 1.7 of the Agreement.
"Environmental Laws" shall mean all applicable federal, state,
local and foreign laws, statutes, ordinances, codes, rules, standards and
regulations, and any applicable judicial or administrative interpretation
thereof, including any applicable judicial or administrative order, consent
decree, order or judgment, imposing liability or standards of conduct for the
regulation and protection of human health, safety, the environment and natural
resources (including ambient air, surface water, groundwater, wetlands, land
surface or subsurface strata). Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.
xx.xx. 9601 et seq.) ("CERCLA"); the Hazardous Materials Transportation
Authorization Act of 1994 (49 U.S.C. xx.xx. 5101 et seq.); the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. xx.xx. 136 et seq.); the
Solid Waste Disposal Act (42 U.S.C. xx.xx. 6901 et seq.); the Toxic Substance
Control Act (15 U.S.C. xx.xx. 2601 et seq.); the Clean Air Act (42 U.S.C. xx.xx.
7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. xx.xx. 1251 et
seq.); the Occupational Safety and Health Act (29 U.S.C. xx.xx. 651 et seq.);
and the Safe Drinking Water Act (42 U.S.C. xx.xx. 300(f) et seq.), and any and
all regulations promulgated thereunder, and all analogous state, local and
foreign counterparts or equivalents and any transfer of ownership notification
or approval statutes.
"Environmental Liabilities" shall mean, with respect to any
Person, all liabilities, obligations, responsibilities, response, remedial and
removal costs, investigation and feasibility study costs, capital costs,
operation and maintenance costs, losses, damages, punitive damages, property
damages, natural resource damages, consequential damages, treble damages, costs
and expenses (including all fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, arising under or related to
any Environmental Laws, Environmental Permits, or in connection with any Release
or threatened Release or presence of a Hazardous Material whether on, at, about,
in, under, or migrating from or to any real or personal property of that Person.
"Environmental Permits" shall mean all permits, licenses,
authorizations, certificates, approvals, registrations or other written
documents required by any Governmental Authority under any Environmental Laws.
"Equipment" shall mean all "equipment," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located and, in any event, including all such Credit Party's machinery
and equipment, including processing equipment, conveyors, machine tools, data
processing and computer equipment with software and peripheral equipment (other
than software constituting part of the Accounts), and all engineering,
processing and manufacturing equipment, office machinery, furniture, materials
handling equipment, tools,
A-8
84
attachments, accessories, automotive equipment, trailers, trucks, forklifts,
molds, dies, stamps, motor vehicles, rolling stock and other equipment of every
kind and nature, trade fixtures and fixtures not forming a part of real
property, all whether now owned or hereafter acquired, and wherever situated,
together with all additions and accessions thereto, replacements therefor, all
parts therefor, all substitutes for any of the foregoing, fuel therefor, and all
manuals, drawings, instructions, warranties and rights with respect thereto, and
all products and proceeds thereof and condemnation awards and insurance proceeds
with respect thereto.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974 (or any successor legislation thereto), as amended from time to time,
and any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to any Credit
Party, any trade or business (whether or not incorporated) which, together with
such Credit Party, are treated as a single employer within the meaning of
Sections 414(b), (c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to any Credit Party or
any ERISA Affiliate, (a) any event described in Section 4043(c) of ERISA with
respect to a Title IV Plan; (b) the withdrawal of any Credit Party or ERISA
Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (c) the complete or partial withdrawal of any Credit Party or any ERISA
Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to
terminate a Title IV Plan or the treatment of a plan amendment as a termination
under Section 4041 of ERISA; (e) the institution of proceedings to terminate a
Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Credit
Party or ERISA Affiliate to make when due required contributions to a
Multiemployer Plan or Title IV Plan unless such failure is cured within 30 days;
(g) any other event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan
or for the imposition of liability under Section 4069 or 4212(c) of ERISA; (h)
the termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 of
ERISA; or (i) the loss of a Qualified Plan's qualification or tax exempt status.
"ESOP" shall mean a Plan which is intended to satisfy the
requirements of Section 4975(e)(7) of the IRC.
"Event of Default" shall have the meaning assigned to it in
Section 8.1.
"Excess Cash Flow" shall mean, without duplication, with
respect to any Fiscal Year of Borrower and its Subsidiaries, consolidated net
income after preferred stock dividends plus (a) depreciation, amortization and
other non cash charges, minus (b) Capital Expenditures during such Fiscal Year
(excluding the portion thereof which is financed other than with the proceeds of
Loans hereunder and excluding any Capital Expenditures in such Fiscal Year to
the extent in excess of the amount permitted to be made in such Fiscal Year
pursuant to clause (a) of Annex G), minus (c) scheduled principal payments paid
or payable in respect of Funded Debt,
A-9
85
plus or minus (as the case may be), (d) extraordinary gains or losses,
respectively, which are cash items not included in the calculation of net
income, minus (e) mandatory prepayments paid in cash pursuant to Section 1.3
other than mandatory prepayments made pursuant to Sections 1.3(b)(i), 1.3(b)(iv)
or 1.3(d), minus (f) voluntary prepayments paid in cash pursuant to Section 1.3
to the extent such prepayments are applied to any Term Loan installments in the
inverse order of their maturities, and plus (g) deferred federal income taxes.
Notwithstanding the foregoing, losses with respect to the DEI Litigation shall
not reduce Excess Cash Flow for any period.
"Fair Salable Balance Sheet" shall mean a balance sheet of
Borrower prepared in accordance with Section 3.4(d).
"Federal Funds Rate" shall mean, for any day, a floating rate
equal to the weighted average of the rates on overnight Federal funds
transactions among members of the Federal Reserve System, as determined by
Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System, or any successor thereto.
"Fees" shall mean any and all fees payable to Agent or any
Lender pursuant to the Agreement or any of the other Loan Documents.
"Final Judgment" shall mean (a) an order, judgment, ruling or
other decree (or any revision, modification or amendment thereto) issued and
entered by the Lower Court in or relating to the DEI Litigation or by any other
Federal court or state court as may have jurisdiction over any proceeding in
connection with the DEI Litigation, which order, judgment, ruling or other
decree has not been reversed, vacated, stayed, modified or amended and as to
which (i) no appeal, petition for review, reargument, rehearing, reconsideration
or certiorari has been taken and is pending and the time for filing of such
appeal, petition for review, reargument, rehearing, reconsideration or
certiorari has expired, or (ii) such appeal or petition has been heard and
dismissed, denied or otherwise resolved and the time to further appeal or
petition has expired with no further appeal or petition pending; or (b) a
settlement agreement, stipulation or other agreement entered into which has the
effect of any aforesaid order, judgment, ruling or other decree with like
finality.
"Financial Statements" shall mean the consolidated and
consolidating income statements, statements of cash flows and balance sheets of
Borrower delivered in accordance with Section 3.4 of the Agreement and Annex E
to the Agreement.
"Fiscal Month" shall mean any of the monthly accounting
periods of Borrower.
"Fiscal Quarter" shall mean any of the quarterly accounting
periods of Borrower, ending on March 31, June 30, September 30 and December 31
of each year.
"Fiscal Year" shall mean any of the annual accounting periods
of Borrower ending on December 31 of each year.
A-10
86
"Fixed Charge Coverage Ratio" shall mean, with respect to any
Person for any fiscal period, the ratio of (i) EBITDA, minus Capital
Expenditures, minus current federal tax expenses paid to (ii) scheduled payments
of principal (excluding mandatory and voluntary prepayments) with respect to
Indebtedness during such period, plus Interest Expense for such period.
"Fixtures" shall mean any "fixtures" as such term is defined
in the Code, now owned or hereafter acquired by any Credit Party.
"Funded Debt" shall mean, with respect to any Person, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness and which by its terms matures more than one
year from, or is directly or indirectly renewable or extendible at such Person's
option under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year from the date of
creation thereof, and specifically including Capital Lease Obligations, current
maturities of long-term debt, revolving credit and short-term debt extendible
beyond one year at the option of the debtor, and also including, in the case of
Borrower, the Obligations.
"Funding Accounts" shall have the meaning assigned in Annex C.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect on the Closing Date, consistently
applied as such term is further defined in Annex G to the Agreement.
"GE Capital Fee Letter" shall mean that certain letter, dated
as of October 24, 1997, between GE Capital and Borrower with respect to certain
Fees to be paid from time to time by Borrower to GE Capital.
"GECC Warrant Documents" shall mean, collectively, the GECC
Warrants, the GECC Warrant Purchase Agreement and that certain Registration
Rights Agreement dated as of October 24, 1997 among Borrower and certain holders
of equity securities issued by Borrower.
"GECC Warrants" shall mean that certain Warrant To Purchase
Common Stock of Code-Alarm, Inc. issued by Borrower on October 24, 1997 to GECC
for the purchase of 131,718 initial shares of Borrower's Common Stock, no par
value, for an initial exercise price of approximately $1.88 per share, and each
warrant issued in substitution thereof pursuant to the terms thereof.
"GECC Warrant Purchase Agreement" shall mean that certain
Warrant Purchase Agreement of even date herewith between Borrower and GECC with
respect to the GECC Warrant.
"General Intangibles" shall mean any "general intangibles," as
such term is defined in the Code, now owned or hereafter acquired by any Credit
Party, and, in any event, including all right, title and interest which such
Credit Party may now or hereafter have in or
A-11
87
under any Contract, all customer lists, Licenses, Copyrights, Trademarks,
Patents, and all applications therefor and reissues, extensions or renewals
thereof, rights in Intellectual Property, interests in partnerships, joint
ventures and other business associations, licenses, permits, copyrights, trade
secrets, proprietary or confidential information, inventions (whether or not
patented or patentable), technical information, procedures, designs, knowledge,
know-how, software, data bases, data, skill, expertise, experience, processes,
models, drawings, materials and records, goodwill (including the goodwill
associated with any Trademark or Trademark License), all rights and claims in or
under insurance policies (including insurance for fire, damage, loss and
casualty, whether covering personal property, real property, tangible rights or
intangible rights , all liability, life, key man and business interruption
insurance, and all unearned premiums), uncertificated securities, choses in
action, deposit, checking and other bank accounts, rights to receive tax refunds
and other payments, rights of indemnification, all books and records,
correspondence, credit files, invoices and other papers, including without
limitation all tapes, cards, computer runs and other papers and documents in the
possession or under the control of such Credit Party or any computer bureau or
service company from time to time acting for such Credit Party.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
A-12
88
"Guaranteed Indebtedness" shall mean, as to any Person, any
obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner, including any obligation or arrangement of such Person
(a) to purchase or repurchase any such primary obligation, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet condition
of the primary obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (d) to indemnify the owner of such primary obligation against
loss in respect thereof. The amount of any Guaranteed Indebtedness at any time
shall be deemed to be an amount equal to the lesser at such time of (x) the
stated or determinable amount of the primary obligation in respect of which such
Guaranteed Indebtedness is made and (y) the maximum amount for which such Person
may be liable pursuant to the terms of the instrument embodying such Guaranteed
Indebtedness; or, if not stated or determinable, the maximum reasonably
anticipated liability (assuming full performance) in respect thereof.
"Guaranties" shall mean, collectively, each Guaranty executed
by a Credit Party in favor of Agent and Lenders, in respect of the Obligations.
"Hazardous Material" shall mean any substance, material or
waste which is regulated by or forms the basis of liability under any
Environmental Laws, including any material or substance which is (a) defined as
a "solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "pollutant,"
"contaminant," "hazardous constituent," "special waste," "toxic substance" or
other similar term or phrase under any Environmental Laws, (b) petroleum or any
fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's), or
any radioactive substance (except for radioactive substances occurring as a
result of natural conditions).
"Indebtedness" of any Person shall mean without duplication
(a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property payment for which is deferred six (6) months or more,
but excluding obligations to trade creditors incurred in the ordinary course of
business other than those that are overdue by more than six (6) months unless
being contested in good faith, (b) all reimbursement and other obligations with
respect to letters of credit, bankers' acceptances and surety bonds, whether or
not matured, (c) all obligations evidenced by notes, bonds, debentures or
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all Capital Lease Obligations, (f) all
obligations of such Person under commodity purchase or option agreements or
other commodity price hedging arrangements, in each case whether contingent or
matured, (g) all obligations of such Person under any foreign exchange contract,
currency swap agreement, interest rate swap, cap or collar agreement or other
similar agreement or arrangement designed to alter the risks of that Person
arising from fluctuations in currency values or interest rates, in each case
whether contingent or matured, (h) all Indebtedness referred
A-13
89
to above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
property or other assets (including accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, and (i) the Obligations.
"Indemnified Liabilities" shall have the meaning assigned to
it in Section 1.13.
"Index Rate" shall mean, for any day, a floating rate equal to
the higher of (i) the rate publicly quoted from time to time by The Wall Street
Journal as the "PRIME RATE" or "base rate on corporate loans posted by at least
75% of the nations 30 largest banks" (or, if The Wall Street Journal ceases
quoting a base rate of the type described, the highest per annum rate of
interest published by the Federal Reserve Board in Federal Reserve statistical
release H.15 (519) entitled "Selected Interest Rates" as the Bank prime loan
rate or its equivalent), and (ii) the Federal Funds Rate plus fifty (50) basis
points per annum. Each change in any interest rate provided for in the Agreement
based upon the Index Rate shall take effect at the time of such change in the
Index Rate.
"Index Rate Loan" shall mean a Loan or portion thereof bearing
interest by reference to the Index Rate.
"Instruments" shall mean any "instrument," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located, and, in any event, including all certificated securities, all
certificates of deposit, and all notes and other, without limitation, evidences
of indebtedness, other than instruments that constitute, or are a part of a
group of writings that constitute, Chattel Paper.
"Intellectual Property" shall mean any and all Licenses,
Patents, Copyrights, Trademarks, trade secrets and customer lists.
"Intercompany Note" shall have the meaning assigned to it in
Section 6.3.
"Interest Expense" shall mean, with respect to any Person for
any fiscal period, interest expense (whether cash or non-cash) of such Person
determined in accordance with GAAP which is paid or accrued during the relevant
period ended on such date, including, in any event, interest expense with
respect to any Funded Debt of such Person, together with all cash dividends paid
or accrued during such period with respect to any capital stock of such Person
(including, without limitation, with respect to Borrower, its Series A Preferred
Stock).
"Interest Payment Date" means (a) as to any Index Rate Loan,
the first Business Day of each month to occur while such Loan is outstanding,
(b) as to any LIBOR Loan, the last day of the applicable LIBOR Period; provided
that in the case of any LIBOR Period greater than three months in duration,
interest shall be payable at three-month intervals and on the last day of such
LIBOR Period; and provided further that, in addition to the foregoing, each of
(x) the date upon which all of the Commitments have been terminated and the
Loans have been paid in full
A-14
90
and (y) the Commitment Termination Date shall be deemed to be an "Interest
Payment Date" with respect to any interest which is then accrued under the
Agreement.
"Inventory" shall mean any "inventory," as such term is
defined in the Code, now or hereafter owned or acquired by any Credit Party,
wherever located, and in any event including inventory, merchandise, goods and
other personal property which are held by or on behalf of any Credit Party for
sale or lease or are furnished or are to be furnished under a contract of
service, or which constitute raw materials, work in process or materials used or
consumed or to be used or consumed in such Credit Party's business or in the
processing, production, packaging, promotion, delivery or shipping of the same,
including other supplies.
"Investment Property" shall have the meaning ascribed thereto
in Section 9-115 of the Code in those jurisdictions in which such definition has
been adopted and shall include (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Credit Party,
including the rights of any Credit Party to any securities account and the
financial assets held by a securities intermediary in such securities account
and any free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all commodity contracts held by any Credit
Party; and (iv) all commodity accounts held by any Credit Party.
"IRC" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any
successor thereto.
"L/C Issuer" shall have the meaning assigned to such term in
Annex B.
"L/C Sublimit" shall have the meaning assigned to such term in
Annex B.
"Lenders" shall mean GE Capital, the other Lenders named on
the signature page of the Agreement, and, if any such Lender shall decide to
assign all or any portion of the Obligations, such term shall include such
assignee.
"Letter of Credit Fee" has the meaning ascribed thereto in
Annex B.
"Letter of Credit Obligations" shall mean all outstanding
obligations incurred by Agent and Lenders at the request of Borrower, whether
direct or indirect, contingent or other wise, due or not due, in connection with
the issuance of a reimbursement agreement or guaranty by Agent with respect to
any Letter of Credit other than the Litigation L/C. The amount of such Letter of
Credit Obligations shall equal the maximum amount which may be payable by Agent
or Lenders thereupon or pursuant thereto.
"Letters of Credit" shall mean commercial or standby letters
of credit (including, without limitation, the Litigation L/C), issued for the
account of Borrower by any L/C Issuer, and
A-15
91
bankers' acceptances issued by Borrower, for which Agent and Lenders have
incurred Letter of Credit Obligations or Litigation L/C Obligations.
"Letter of Credit Cash Collateral Account" has the meaning
ascribed in Annex B.
"LIBOR Business Day" shall mean a Business Day on which banks
in the city of London are generally open for interbank or foreign exchange
transactions.
"LIBOR Loan" shall mean a Loan or any portion thereof bearing
interest by reference to the LIBOR Rate.
"LIBOR Period" shall mean, with respect to any LIBOR Loan,
each period commencing on a LIBOR Business Day selected by Borrower pursuant to
the Agreement and ending one, two, three or six months thereafter, as selected
by Borrower's irrevocable notice to Agent as set forth in Section 1.5(e);
provided that the foregoing provision relating to LIBOR Periods is subject to
the following:
(a) if any LIBOR Period would otherwise end on a day that is
not a LIBOR Business Day, such LIBOR Period shall be extended to the
next succeeding LIBOR Business Day unless the result of such extension
would be to carry such LIBOR Period into another calendar month in
which event such LIBOR Period shall end on the immediately preceding
LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the
Commitment Termination Date shall end two (2) LIBOR Business Days prior
to such date;
(c) any LIBOR Period pertaining to a LIBOR Loan that begins on
the last LIBOR Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the
end of such LIBOR Period) shall end on the last LIBOR Business Day of a
calendar month;
(d) Borrower shall select LIBOR Periods so as not to require a
payment or prepayment of any LIBOR Loan during a LIBOR Period for such
Loan; and
(e) Borrower shall select LIBOR Periods so that there shall be
no more than five (5) separate LIBOR Loans in existence at any one
time.
"LIBOR Rate" shall mean for each LIBOR Period, a rate of
interest determined by Agent equal to:
(a) the offered rate for deposits in United States Dollars for
the applicable LIBOR Period which appears on Telerate Page 3750 as of
11:00 a.m., London time, on the second full LIBOR Business Day next
preceding the first day of each LIBOR Period (unless such date is not a
Business Day, in which event the next succeeding Business Day will be
used); divided by
A-16
92
(b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day which is two (2) LIBOR Business Days
prior to the beginning of such LIBOR Period (including basic,
supplemental, marginal and emergency reserves under any regulations of
the Board of Governors of the Federal Reserve system or other
governmental authority having jurisdiction with respect thereto, as now
and from time to time in effect) for Eurocurrency funding (currently
referred to as "Eurocurrency liabilities" in Regulation D of such Board
which are required to be maintained by a member bank of the Federal
Reserve System (such rate to be adjusted to the nearest one sixteenth
of one percent (1/16th of 1%) or, if there is not a nearest one
sixteenth of one percent (1/16th of 1%), to the next highest one
sixteenth of one percent (1/16th of 1%).
If such interest rates shall cease to be available from
Telerate News Service, the LIBOR Rate shall be determined from such
financial reporting service or other information as shall be mutually
acceptable to Agent and Borrower.
"License" shall mean any Copyright License, Patent License,
Trademark License or other license of rights or interests now held or hereafter
acquired by any Credit Party.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, collateral assignment, deposit arrangement, lien, charge with
respect to specific property, claim with respect to specific property, security
interest, easement or encumbrance, or preference, priority with respect to
specific property or other security agreement or preferential arrangement of any
kind or nature whatsoever (including any lease or title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
perfecting a security interest under the Code or comparable law of any
jurisdiction other than a financing statement filed solely with respect to a
lessor's interest in property owned by such lessor).
"Litigation" shall have the meaning assigned to it in Section
3.13.
"Litigation Collateral Documents" shall mean, collectively,
all Collateral Documents pursuant to which any Litigation Obligations are
secured or guaranteed.
"Litigation Guaranty" shall mean that certain Limited
Litigation Guaranty of even date herewith executed and delivered by the Pegasus
Funds in favor of Agent and Lenders.
"Litigation L/C" shall mean a standby letter of credit issued
for the account of Borrower by the L/C Issuer to secure the Bond and with
respect to which Agent and Lenders have incurred Litigation L/C Obligations, as
such letter of credit may be from time to time amended, renewed, modified,
extended, supplemented, substituted, replaced or reissued.
"Litigation L/C Agreement" shall mean that certain Litigation
L/C and Term Loan C Agreement of even date herewith among Borrower, Agent and
the Term Lenders pursuant to which the Agent and the Term Lender have agreed,
subject to certain terms and conditions, to
A-17
93
incur the Litigation L/C Obligations, advance Term Loan C and incur other
Litigation Obligations and each of the parties thereto have agreed to the terms
of repayment thereof.
"Litigation L/C Cash Collateral Account" has the meaning
ascribed thereto in Annex B.
"Litigation L/C Issuance Date" shall mean a Business Day on or
after which the conditions set forth in Sections 2.1, 2.3(I) and 2.4 shall have
been satisfied and on which Borrower has requested the L/C Issuer to issue,
amend, renew, modify, extend, supplement, substitute, replace or reissue the
Litigation L/C pursuant to the terms and conditions of Annex B and the
Litigation L/C Agreement.
"Litigation L/C Obligations" shall mean all outstanding
obligations incurred by Agent and Lenders, whether direct or indirect,
contingent or otherwise, due or not due, in connection with the issuance of a
reimbursement agreement, guaranty or similar accommodation by Agent with respect
to the Litigation L/C. The amount of such Litigation L/C Obligations shall equal
the maximum amount which may be payable by Agent or Lenders thereupon or
pursuant thereto.
"Litigation Obligations" shall mean, collectively, the
Litigation L/C Obligations, the outstanding principal balance of, and accrued
interest on, Term Loan C, all Fees and expenses with respect to the Litigation
L/C, and all other Obligations with respect to the Litigation L/C, the
Litigation L/C Obligations or Term Loan C.
"Loan Account" shall have the meaning assigned to it in
Section 1.12.
"Loan Documents" shall mean the Agreement, the Notes, the
Collateral Documents, the GECC Warrant Documents and all other agreements,
instruments, documents and certificates identified in the Closing Checklist
executed and delivered to, or in favor of, Agent and/or Lenders and including
all other pledges, powers of attorney, consents, assignments, contracts,
notices, and all other written matter whether heretofore, now or hereafter
executed by or on behalf of any Credit Party, or any employee of any Credit
Party, and delivered to Agent or any Lender in connection with the Agreement or
the transactions contemplated hereby. Any reference in the Agreement or any
other Loan Document to a Loan Document shall include all appendices, exhibits or
schedules thereto, and all amendments, restatements, supplements or other
modifications thereto, and shall refer to such Agreement as the same may be in
effect at any and all times such reference becomes operative.
"Loans" shall mean the Revolving Loan, the Swing Line Loan and
the Term Loan.
"Lower Court" shall mean the United States District Court for
the Eastern District of Michigan.
"Lower Court Judgment" shall mean a judgment or other award
entered against Borrower (and, possibly, other Credit Parties) by the Lower
Court with respect to the DEI
A-18
94
Litigation, excluding any partial judgment or award until such time as a
complete judgment or award has been entered by such court with respect to all
matters at issue in the DEI Litigation; provided, however, that certain "Final
Judgment" entered by the Lower Court on February 3, 1998 shall constitute a
Lower Court Judgment in the amount of $10,679,344.86 (which amount includes,
among other things, daily prejudgment interest of $1,992.99 from January 20,
1998 until February 2, 1998), notwithstanding the fact that such judgment is
subject to modification by the Lower Court as a result of certain post-judgment
pleadings filed with, and being considered by, the Lower Court and as a result
of certain other unresolved issues with respect to the DEI Litigation, and for
all purposes of this Agreement and the other Loan Documents, the term, "Lower
Court Judgment" shall mean and refer to such February 3, 1998 judgment as may be
modified, supplemented, altered, amended, reestablished and reentered from time
to time by the Lower Court.
"Management Options" shall mean, collectively, the stock
options from time to time issued by Borrower pursuant to the Code-Alarm, Inc.
1987 Stock Option Plan dated as of May 29, 1987, as amended by Amendment No. 1
thereto dated as of March 16, 1990, and Amendment No. 2 thereto dated as of
March 27, 1992, and the Code-Alarm, Inc. 1997 Stock Option Plan dated as of
October 24, 1997.
"Margin Stock" shall have the meaning assigned to it in
Section 3.10.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the business, assets, operations, prospects or financial or other
condition of any Credit Party, (b) Borrower's ability to pay any of the Loans or
any of the other Obligations in accordance with the terms of the Agreement, or
any Credit Party's ability to perform its obligations under the terms of any
Loan Document to which it is a party, (c) the Collateral or Agent's Liens, on
behalf of itself and Lenders, on the Collateral or the priority of such Liens,
or (d) Agent's or any Lender's rights and remedies under the Agreement and the
other Loan Documents. Without limiting the foregoing, any event or occurrence
which results or could reasonably be expected to result in costs or liabilities
in excess of $250,000 shall, for purposes of this Agreement and the other Loan
Documents, be deemed to have a Material Adverse Effect. Notwithstanding the
foregoing, the DEI Litigation shall not be deemed to have had, or reasonably be
expected to have, a Material Adverse Effect unless (i) the sum of (A) the amount
of the Lower Court Judgment, the Final Judgment or any other judgment with
respect to the DEI Litigation plus (B) the aggregate amount of accrued and
unpaid expenses (including, without limitation, legal fees) incurred by the
Credit Parties with respect to the DEI Litigation as of the time of the entry or
other determination of such judgment, exceeds $12,000,000 (provided, however,
the amount determined pursuant to clause (B) shall not be included in such sum
to the extent that, as the date of determination hereof, the Net Borrowing
Availability minus such amount, exceeds $500,000), (ii) the Lower Court Judgment
is reasonably expected to be entered and the conditions described in Section
2.3(I) shall not have been satisfied, or could reasonably be expected to be
unsatisfied, by the time specified in Section 2.3(I)(c), or the Bond or the
Litigation L/C is otherwise reasonably expected not to be issued, (iii) the
Final Judgment is reasonably expected to be entered and the conditions described
in Section 2.2 shall not have been satisfied, or could reasonably be expected to
be unsatisfied, by the time specified in Section 2.2(c), or Term Loan B is
otherwise reasonably
A-19
95
expected not to be made or (iv) the Lower Court Judgment shall have been entered
and it could reasonably be expected that all or portions thereof will not be
subject to a stay of execution pursuant to the conditions set forth in Section
2.3(I) as a matter of applicable law.
"Maximum Amount" shall mean, at any particular time, an amount
equal to the Revolving Loan Commitment of all Lenders.
"Mortgaged Properties" shall have the meaning assigned to it
in Annex D.
"Mortgages" shall mean, collectively, each mortgage, deed of
trust, leasehold mortgage, leasehold deeds of trust, collateral assignment of
leases or other real estate security document executed by a Credit Party in
favor of Agent, on behalf of itself and Lenders, with respect to the Mortgaged
Properties, as security for the Obligations or for such Credit Party's guaranty
obligations with respect to the Obligations.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA
Affiliate is making, is obligated to make, has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.
"Net Borrowing Availability" shall mean as of any date of
determination, the lesser of (a) the Maximum Amount and (b) the Borrowing Base,
less the sum of the aggregate Revolving Loan and Swing Line Loan then
outstanding.
"Net Litigation Liability" shall have the meaning assigned to
it in Section 2.2.
A-20
96
"Net Worth" shall mean, with respect to any Person as of any
date of determination, and without duplication, the book value of the total
gross assets of such Person, minus (a) reserves applicable thereto, and minus
(b) all of such Person's liabilities on a consolidated basis (including accrued
and deferred income taxes), all as determined in accordance with GAAP, excluding
the effects of losses incurred on or after September 30, 1997 of up to
$12,000,000 in respect of the DEI Litigation, and the effects of charge-offs or
writedowns of up to $3,300,000 related to the Tessco Liquidation and up to
$1,700,000 relating to Borrower's Madison Heights operations (all such
charge-offs or writedowns to occur by December 31, 1997).
"Notes" shall mean the Revolving Notes, the Swing Line Notes
and the Term Notes, collectively.
"Notice of Conversion/Continuation" shall have the meaning
assigned to it in Section 1.5(e).
"Notice of Revolving Credit Advance" shall have the meaning
assigned to it in Section 1.1(a).
"Notice of Term Loan B Advance" shall have the meaning
assigned to it in Section 1.1(c)(i).
"Notice of Term Loan C Advance" shall have the meaning
assigned to it in Section 1.1(d)(iii).
"Obligations" shall mean all loans, advances, debts,
liabilities and obligations for the performance of covenants, tasks or duties or
for payment of monetary amounts (whether or not such performance is then
required or contingent, or such amounts are liquidated or determinable) owing by
any Credit Party to Agent or any Lender, and all covenants and duties regarding
such amounts, of any kind or nature, present or future, whether or not evidenced
by any note, agreement or other instrument, arising under the Agreement or any
of the other Loan Documents. This term includes all principal, interest
(including all interest which accrues after the commencement of any case or
proceeding in bankruptcy after the insolvency of, or for the reorganization of
any Credit Party, whether or not allowed in such proceeding), Fees, Charges,
Letter of Credit Obligations, Litigation L/C Obligations, expenses, attorneys'
fees and any other sum chargeable to any Credit Party under the Agreement or any
of the other Loan Documents.
"OEM Accreditations" shall mean, collectively, the
accreditations and similar awards granted or afforded to Borrower or any other
Credit Party by one or more customers party to an OEM Contract with respect to
any products or services sold or provided by Borrower or any other Credit
Parties to such customers pursuant to such OEM Contracts, including, without
limitation, the accreditations described on Disclosure Schedule (3.22).
"OEM Contracts" shall mean, collectively, the agreements to
which one or more Credit Parties is party, together with their related purchase
orders, renewals, exhibits and
A-21
97
schedules, of the type described in Section 3.22, including, without limitation,
those listed on Disclosure Schedule (3.22), in any case pursuant to which
revenues have been generated (or are reasonably expected to be generated) by the
Credit Parties in excess of $1,000,000 per annum.
"Overadvance" shall have the meaning assigned to it in Section
1.1(a)(iii).
"Patent License" shall mean rights under any written agreement
now owned or hereafter acquired by any Credit Party granting any right with
respect to any invention on which a Patent is in existence.
"Patent Security Agreements" shall mean, collectively, each
Patent Security Agreement executed by a Credit Party in favor of Agent, on
behalf of itself and Lenders, with respect to Patents and Patent Licenses, as
security for the Obligations or for such Credit Party's guaranty obligation with
respect to the Obligations.
"Patents" shall mean all of the following in which any Credit
Party now holds or hereafter acquires any interest: (a) all letters patent of
the United States or any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or any
other country, including registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State or Territory thereof, or any other country, and (b)
all reissues, continuations, continuations-in-part or extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"Pegasus Funds" shall mean, collectively, Pegasus Partners,
L.P., a Delaware limited partnership, and Pegasus Related Partners, L.P., a
Delaware limited partnership.
"Permitted Encumbrances" shall mean the following
encumbrances: (a) Liens for taxes or assessments or other governmental Charges
not yet due and payable; (b) pledges or deposits of money securing obligations
under workmen's compensation, unemployment insurance, social security or public
liability laws or similar legislation; (c) pledges or deposits of money made in
the ordinary course of business securing bids, tenders, contracts (other than
contracts for the payment of money) or leases to which any Credit Party is a
party as lessee; (d) deposits of money securing statutory obligations of any
Credit Party; (e) inchoate and unperfected workers', mechanics' or similar liens
arising in the ordinary course of business, so long as such Liens attach only to
Equipment, Fixtures and/or Real Estate; (f) carriers', warehousemen's,
suppliers' or other similar possessory liens arising in the ordinary course of
business and securing liabilities in an outstanding aggregate amount not in
excess of $25,000 at any time, so long as such Liens attach only to Inventory;
(g) deposits securing, or in lieu of, surety, appeal or customs bonds in
proceedings to which any Credit Party is a party; (h) any attachment or judgment
lien not constituting an Event of Default under Section 8.1(j); (i) zoning
restrictions, easements, licenses, or other restrictions on the use of any Real
Estate or other minor irregularities in title (including leasehold title)
thereto, so long as the same do not materially
A-22
98
impair the use, value, or marketability of such Real Estate; (j) presently
existing or hereinafter created Liens in favor of Agent, on behalf of Lenders;
and (k) Liens expressly permitted under clauses (b) and (c) of Section 6.7 of
the Agreement.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit corporation,
other entity or government (whether federal, state, county, city, municipal,
local, foreign, or otherwise, including any instrumentality, division, agency,
body or department thereof).
"Plan" shall mean, at any time, an employee benefit plan, as
defined in Section 3(3) of ERISA, which any Credit Party maintains, contributes
to or has an obligation to contribute to on behalf of participants who are or
were employed by any Credit Party.
"Pledge Agreements" shall mean, collectively, each Pledge
Agreement, executed by a Credit Party in favor of Agent, on behalf of itself and
Lenders, with respect to Stock or investment property, as security for the
Obligations or for such Credit Party's guaranty obligations with respect to the
Obligations.
"Prior Lender" shall mean NBD Bank.
"Prior Lender Obligations" shall mean all loans, letter of
credit obligations, fees, expense reimbursement obligations, indemnification
obligations, and other obligations of payment or performance, whether liquidated
or contingent, and whether or not due and payable, owing by any of the Credit
Parties to the Prior Lender or any participant or assignee of the Prior Lender,
other than unsecured obligations to such parties with respect to unknown
reimbursement or indemnification obligations and ongoing fees, expenses and
other obligations arising from the continuation of portions of the Cash
Management System with the Prior Lender.
"Proceeds" shall mean "proceeds," as such term is defined in
the Code and, in any event, shall include (a) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to any Credit Party from time
to time with respect to any of the Collateral, (b) any and all payments (in any
form whatsoever) made or due and payable to any Credit Party from time to time
in connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of governmental authority), (c) any claim of
any Credit Party against third parties (i) for past, present or future
infringement of any Patent or Patent License, or (ii) for past, present or
future infringement or dilution of any Copyright, Copyright License, Trademark
or Trademark License, or for injury to the goodwill associated with any
Trademark or Trademark License, (d) any recoveries by any Credit Party against
third parties with respect to any litigation or dispute concerning any of the
Collateral, and (e) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral, upon disposition or
otherwise.
A-23
99
"Pro Forma" means the unaudited consolidated and consolidating
balance sheet of Borrower and its Subsidiaries delivered pursuant to Section 3.4
after giving pro forma effect to the Related Transactions.
"Projections" means Borrower's forecasted consolidated: (a)
balance sheets; (b) profit and loss statements; (c) cash flow statements; and
(d) capitalization statements, in each case prepared in a manner consistent with
the historical Financial Statements of the Borrower, together with appropriate
supporting details and a statement of underlying assumptions.
"Pro Rata Share" shall mean with respect to all matters
relating to any Lender (a) with respect to the Revolving Loan or the Swing Line
Loan, the percentage obtained by dividing (i) the Revolving Loan Commitment,
including the Swing Line Commitment of that Lender by (ii) the aggregate
Revolving Loan Commitments, including the Swing Line Commitment of all Lenders,
and (b) with respect to the Term Loans, the percentage obtained by dividing (i)
the Term Loan Commitments of that Lender by (ii) the aggregate Term Loan
Commitments of all Lenders, as any such percentages may be adjusted by
assignments permitted pursuant to Section 9.1.
"Qualified Plan" shall mean a Plan which is intended to be
tax-qualified under Section 401(a) of the IRC.
"Qualified Public Offering" shall mean a firm underwritten
public offering of common stock registered under the Securities Act of 1933, as
amended, by a nationally recognized investment banking firm, and after giving
effect to which the issuer shall be or remain qualified for listing on the
NASDAQ National Market, the American Stock Exchange or the New York Stock
Exchange.
"Real Estate" shall have the meaning assigned to it in Section
3.6.
"Refinancing" shall mean the repayment in full by Borrower of
the Prior Lender Obligations on the Closing Date and the replacement,
termination or securing of any letter of credit obligations constituting Prior
Lender Obligations pursuant to Section 2.1(b) on the Closing Date.
"Refunded Swing Line Loan" shall have the meaning assigned to
it in Section 1.1(e)(iii).
"Related Transactions" means the initial borrowing under the
Revolving Loan and borrowing of the Term Loan A on the Closing Date, the
issuance of the GECC Warrants, the Refinancing, the issuance of the Series A
Preferred Stock and the "Attached Warrants" and "Shortfall Warrants" (as defined
in the Series A Preferred Stock Documents), the issuance of the Series B
Preferred Stock, the payment of all fees, costs and expenses associated with all
of the foregoing, and the execution and delivery of all of the Related
Transactions Documents.
A-24
100
"Related Transactions Documents" shall mean the Loan
Documents, the Series A Preferred Stock Documents, the Series B Preferred Stock
Documents, and the agreements and documents evidencing and governing the terms
of the Refinancing.
"Release" shall mean any release, spill, emission, leaking,
pumping, pouring, emitting, emptying, escape, injection, deposit, disposal,
discharge, dispersal, dumping, leaching or migration of Hazardous Material in
the indoor or outdoor environment, including the movement of Hazardous Material
through or in the air, soil, surface water, ground water or property.
"Requisite Lenders" shall mean (a) Lenders having more than
sixty-six and two-thirds percent (66 2/3%) of the Commitments of all Lenders, or
(b) if the Commitments have been terminated, more than sixty-six and two-thirds
percent (66 2/3%) of the aggregate outstanding amount of all Loans (with the
Swing Line Loan being attributed to the Lender making such loan), Letter of
Credit Obligations and Litigation L/C Obligations.
"Requisite Revolving Lenders" shall mean (a) Lenders having
more than sixty-six and two-thirds percent (66 2/3%) of the Revolving Loan
Commitments of all Lenders, or (b) if the Revolving Loan Commitments have been
terminated, more than sixty-six and two-thirds percent (66 2/3%) of the
aggregate outstanding amount of the Revolving Loan (with the Swing Line Loan
being attributed to the Lender making such Loan) and Letter of Credit
Obligations.
"Reserves" shall mean, with respect to the Borrowing Base (a)
reserves established by Agent from time to time against Borrower's and/or
Tessco's Eligible Inventory pursuant to Section 5.9, (b) reserves established
pursuant to Section 5.4(c), and (c) such other reserves against Borrower's
and/or Tessco's Eligible Accounts or Eligible Inventory of Borrower or Tessco
which Agent may, in its reasonable credit judgment, establish from time to time.
Without limiting the generality of the foregoing, reasonable Reserves
established to ensure the payment of accrued Interest Expenses or Indebtedness,
Reserves for product warranty liabilities and expenses, and Reserves for
physical Inventory test counts, shall be deemed to be a reasonable exercise of
Agent's credit judgment.
"Restricted Payment" shall mean (a) the declaration or payment
of any dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of a Person's Stock
(other than common stock dividends and, in the case of the Series A Preferred
Stock, non-cash, payment-in-kind dividends), (b) any payment on account of the
purchase, redemption, defeasance, sinking fund or other retirement of a Person's
Stock or any other payment or distribution made in respect thereof, either
directly or indirectly, (c) any payment or prepayment of principal of, premium,
if any, or interest, fees or other charges on or with respect to, and any
redemption, purchase, put, call, retirement, defeasance, sinking fund or similar
payment and any claim for rescission with respect to, any Subordinated Debt; (d)
any payment made to redeem, purchase, repurchase, put, call or retire, or to
obtain the surrender of, any outstanding warrants, options or other rights to
acquire Stock of such Person now or hereafter outstanding; (e) any payment of a
claim for the rescission of the purchase or sale of, or for material damages
arising from the purchase or sale of, any shares of such Person's Stock or of
A-25
101
a claim for reimbursement, indemnification or contribution arising out of or
related to any such claim for damages or rescission; (f) any payment, loan,
contribution, or other transfer of funds or other property to any stockholder of
such Person; and (g) any payment of management fees (or other fees of a similar
nature) by such Person to any stockholder of such Person or their Affiliates.
"Retiree Welfare Plan" shall mean, at any time, a Plan that is
a "welfare plan" as defined in Section 3(2) of ERISA, that provides for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant's termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC and at the
sole expense of the participant or the beneficiary of the participant.
"Revolving Credit Advance" shall have the meaning assigned to
it in Section 1.1(a)(i).
"Revolving Lenders" shall mean, as of any date of
determination, Lenders having a Revolving Loan Commitment.
"Revolving Loan" shall mean as the context may require, at any
time, the sum of (i) the aggregate amount of outstanding Revolving Credit
Advances plus (ii) the aggregate Letter of Credit Obligations.
"Revolving Loan Commitment" shall mean (a) as to any Lender,
the aggregate commitment of such Lender to make Revolving Credit Advances
(including without duplication Swing Line Advances) and/or incur Letter of
Credit Obligations as set forth in the signature page to the Agreement or in the
most recent Assignment Agreement executed by such Lender and (b) as to all
Lenders, the aggregate commitment of all Lenders to make Revolving Credit
Advances (including without duplication Swing Line Advances) and/or incur Letter
of Credit Obligations, which aggregate commitment shall be Twelve Million
Dollars ($12,000,000.00) on the Closing Date, as such amount may be adjusted, if
at all, from time to time in accordance with the Agreement.
"Revolving Note" shall have the meaning assigned to it in
Section 1.1(a)(ii).
"Security Agreements" shall mean, collectively, each Security
Agreement executed by a Credit Party in favor of Agent, on behalf of itself and
Lenders, as security for the Obligations or for such Credit Party's guaranty
obligations with respect to the Obligations.
"Series A Preferred Stock" shall mean Borrower's Series A
Preferred Stock, $0.01 par value, and Series A-2 Preferred Stock, $0.01 par
value.
"Series A Preferred Stock Documents" shall mean, collectively,
(a) that certain Unit Purchase Agreement dated as of October 24, 1997 among
Borrower and the Pegasus Funds, (b) that certain Certificate of Designation,
Number, Powers, Preferences and Relative, Participating, Optional and Other
Rights of Series A Preferred Stock of Code-Alarm, Inc.
A-26
102
adopted by Borrower's board of directors as of October 24, 1997, (c) that
certain Registration Rights Agreement dated as of October 24, 1997 among
Borrower and certain holders of equity securities issued by Borrower and (d) the
Series A Warrants.
"Series A Warrants" shall mean, collectively, the "Attached
Warrants", "Shortfall Warrants" and "Litigation Warrants", as each of such terms
is defined in the Series A Preferred Stock Documents.
"Series B Pledgor" shall mean Xx. Xxxxx X. Xxxxxx.
"Series B Preferred Stock" shall mean Borrower's Series B
Preferred Stock, no par value.
"Series B Preferred Stock Documents" shall mean (a) that
certain Subscription Agreement for Code-Alarm Inc. Series B Preferred Stock of
even date herewith between the Series B Pledgor and Borrower and (b) that
certain Certificate of Designation, Number, Powers, Preference and Relative,
Participating, Optional, and Other Rights of Series B Preferred Stock of
Code-Alarm, Inc.
"Solvent" shall mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of such
Person on a going concern basis is greater than the total amount of liabilities,
including contingent liabilities, of such Person; (b) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probably liability of such Person on its debts as they
become absolute and matured; (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay such debts and liabilities as they mature; and (d) such Person is not
engaged in a business or transaction, and is not about to engage in a business
or transaction, for which such Person's property would constitute an
unreasonably small capital. The amount of contingent liabilities (such as
litigation, guarantees and pension plan liabilities) at any time shall be
computed as the amount which, in light of all the facts and circumstances
existing at the time, represents the amount which can reasonably be expected to
become an actual or matured liability.
"Stock" shall mean all shares, options, warrants, general or
limited partnership interests or other equivalents (regardless of how
designated) of or in a corporation, partnership or equivalent entity whether
voting or nonvoting, including common stock, preferred stock or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended).
"Subordinated Debt" shall mean any Indebtedness of any Credit
Party subordinated to the Obligations in a manner and form satisfactory to Agent
and Lenders in their sole discretion, as to right and time of payment and as to
any other rights and remedies thereunder, including, without limitation, any
Subordinated Debt issued by Borrower for the purposes described in Section
2.2(b).
A-27
103
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than fifty percent (50%) of the
outstanding Stock having ordinary voting power to elect a majority of the board
of directors of such corporation (irrespective of whether, at the time, Stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person and/or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of fifty percent (50%) or more of such Stock
whether by proxy, agreement, operation of law or otherwise, and (b) any
partnership or limited liability company in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than fifty
percent (50%) or of which any such Person is a general partner or may exercise
the powers of a general partner.
"Supermajority Revolving Lenders" shall mean (a) Lenders
having eighty percent (80%) or more of the Revolving Loan Commitments of all
Lenders, or (b) if the Revolving Loan Commitments have been terminated, eighty
percent (80%) or more of the aggregate outstanding amount of the Revolving Loan
(with the Swing Line Loan being attributed to the Lender making such Loan) and
Letter of Credit Obligations.
"Supplemental Amount" shall mean $4,000,000, provided that the
Supplemental Guaranty is valid, binding and enforceable, and otherwise the
"Supplemental Amount" shall equal zero.
"Supplemental Guaranty" shall mean that certain Limited
Supplemental Guaranty of even date herewith executed and delivered by the
Pegasus Funds.
"Swing Line Advance" has the meaning assigned to it in Section
1.1(e)(i).
"Swing Line Availability" has the meaning assigned to it in
Section 1.1(e)(i).
"Swing Line Commitment" shall mean, as to the Swing Line
Lender, the commitment of the Swing Line Lender to make Swing Line Loans as set
forth on the signature page to the Agreement, which commitment constitutes a
subfacility of the Revolving Loan Commitment of the Swing Line Lender.
"Swing Line Lender" shall mean GE Capital.
"Swing Line Loan" shall mean, as the context may require, at
any time, the aggregate amount of outstanding Swing Line Advances.
"Swing Line Note" has the meaning assigned to it in Section
1.1(e)(ii).
"Taxes" shall mean taxes, levies, imposts, deductions, Charges
or withholdings, and all liabilities with respect thereto, excluding taxes
imposed on or measured by the net income
A-28
104
of Agent or a Lender by the jurisdictions under the laws of which Agent and
Lenders are organized or in which they otherwise conduct operations, or any
political subdivision thereof.
"Term A Note" shall have the meaning assigned to it in Section
1.1(b)(i).
"Term B Note" shall have the meaning assigned to it in Section
1.1(c)(i).
"Term C Note" shall have the meaning assigned to it in Section
1.1(d).
"Term Lenders" shall mean those Lenders having Term Loan
Commitments.
"Term Loan A" shall have the meaning assigned to it in Section
1.1(b)(i).
"Term Loan A Commitment" shall mean (a) as to any Lender, the
commitment of such Lender to make its Pro Rata Share of the Term Loan A as set
forth on the signature page to the Agreement or in the most recent Assignment
Agreement executed by such Lender, and (b) as to all such Lenders, the aggregate
commitment of all Lenders to make the Term Loan A, which aggregate commitment
shall be One Million Five Hundred Thousand Dollars ($1,500,000) on the Closing
Date.
"Term Loan B" shall have the meaning assigned to it in Section
1.1(c)(i).
"Term Loan B Commitment" shall mean (a) as to any Lender, the
commitment of such Lender to make its Pro Rata Share of the Term Loan B as set
forth in the signature page to the Agreement or in the most recent Assignment
Agreement executed by such Lender, and (b) as to all such Lenders, the aggregate
commitment of all Lenders to make the Term Loan B, which aggregate commitment
shall be Three Million Dollars ($3,000,000.00) on the Closing Date.
"Term Loan B Funding Date" shall mean a Business Day on or
after which the conditions set forth in Sections 2.1, 2.2 and 2.4 shall have
been satisfied and on which the Term Lenders have been requested to fund the
Term Loan B pursuant to Section 1.1(c)(i).
"Term Loan C" shall have the meaning assigned to it in Section
1.1(d).
"Term Loan C Commitment" shall mean (a) as to any Lender, the
commitment of such Lender to make its Pro Rata Share of the Term Loan C as set
forth in the signature pages to the Agreement or in the most recent Assignment
Agreement executed by such Lender and (b) as to all such Lenders, the aggregate
commitment of all Lenders to make the Term Loan C, which aggregate commitment
shall be Twelve Million Dollars ($12,000,000) on the Closing Date.
"Term Loan C Funding Date" shall mean a Business Day on or
after which the conditions set forth in Sections 2.1, 2.3(II) and 2.4 shall have
been satisfied and on which the Term Lenders have been requested to fund the
Term Loan C pursuant to Section 1.1(c) of the Litigation L/C Agreement.
A-29
105
"Term Loan Commitment" shall mean, collectively, the Term Loan
A Commitment, the Term Loan B Commitment and the Term Loan C Commitment.
"Term Loan(s)" shall mean the Term Loan A, the Term Loan B,
the Term Loan C, any portion or component of the Term Loan A, Term Loan B or
Term Loan C, or the Term Loan A, the Term Loan B and the Term Loan C,
collectively, in each case as the context requires.
"Term Note" shall mean, collectively, the Term A Note, the
Term B Note and the Term C Note, or any one of such instruments.
"Termination Date" shall mean the date on which the Loans have
been indefeasibly repaid in full and all other Obligations under the Agreement
and the other Loan Documents have been completely discharged and Letter of
Credit Obligations and Litigation L/C Obligations have been cash collateralized,
cancelled or backed by stand-by letters of credit in accordance with Annex B,
and Borrower shall have no further right to borrow any monies or obtain
additional financial accommodations under the Agreement or the Litigation L/C
Agreement.
"Tessco" means Tessco Group, Inc., a Michigan corporation.
"Tessco Liquidation" shall mean the merger of Tessco with and
into Borrower, or the liquidation or dissolution of Tessco such that the assets
and liabilities of Tessco immediately prior to such liquidation or dissolution
are assigned to and assumed by Borrower upon the consummation of such
liquidation or dissolution.
"Tessco Liquidation Reserve" shall mean, as of any date of
determination, the total liabilities and contingent liabilities (to the extent
known and probable) of Tessco, other than Tessco's intercompany liabilities
owing to Borrower and Tessco's obligations to Agent and Lenders under the Loan
Documents, plus an amount equal to two months' rental obligations with respect
to all existing operating leases of Tessco.
A-30
106
"Title IV Plan" shall mean an employee pension benefit plan,
as defined in Section 3 (2) of ERISA (other than a Multiemployer Plan), which is
covered by Title IV of ERISA, and which any Credit Party or ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Trademark License" shall mean rights under any written
agreement now owned or hereafter acquired by any Credit Party granting any right
to use any Trademark.
"Trademark Security Agreements" shall mean, collectively, each
Trademark Security Agreement executed by a Credit Party in favor of Agent, on
behalf of Lenders, with respect to Trademarks and Trademark Licenses, as
security for the Obligations or for such Credit Party's guaranty obligations
with respect to the Obligations.
"Trademarks" shall mean all of the following now owned or
hereafter acquired by any Credit Party: (a) all trademarks, trade names,
corporate names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), now owned or existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, including registrations, recordings and applications in
the United States Patent and Trademark Office or in any similar office or agency
of the United States, any state or territory thereof, or any other country or
any political subdivision thereof; (b) all reissues, extensions or renewals
thereof; and (c) all goodwill associated with or symbolized by any of the
foregoing.
"Unfunded Pension Liability" shall mean, at any time, the
aggregate amount, if any, of the sum of (a) the amount by which the present
value of all accrued benefits under each Title IV Plan exceeds the fair market
value of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions for
funding purposes in effect under such Title IV Plan, and (b) for a period of
five (5) years following a transaction which might reasonably be expected to be
covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that
could be avoided by any Credit Party or any ERISA Affiliate as a result of such
transaction.
All other undefined terms contained in any of the Loan
Documents shall, unless the context indicates otherwise, have the meanings
provided for by the Code as in effect in the State of Illinois to the extent the
same are used or defined therein. Unless otherwise specified, references in the
Agreement or any of the Appendices to a Section, subsection or clause refer to
such Section, subsection or clause as contained in the Agreement. The words
"herein," "hereof" and "hereunder" and other words of similar import refer to
the Agreement as a whole, including all Annexes, Exhibits and Schedules, as the
same may from time to time be amended, restated, modified or supplemented, and
not to any particular section, subsection or clause contained in the Agreement
or any such Annex, Exhibit or Schedule.
A-31
107
Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter genders. The words "including",
"includes" and "include" shall be deemed to be followed by the words "without
limitation"; references to Persons include their respective successors and
assigns (to the extent and only to the extent permitted by the Loan Documents)
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and related
regulations shall include any amendments of the same and any successor statutes
and regulations. Whenever any provision in any Loan Document refers to the
knowledge (or an analogous phrase) of any Credit Party, such words are intended
to signify that the chief financial officer or chief executive officer of such
Credit Party has actual knowledge or awareness of a particular fact or
circumstance or that either such officer, if it had exercised reasonable
diligence, would have known or been aware of such fact or circumstance.
* * * *
X-00
000
XXXXX B (SECTION 1.2)
TO
CREDIT AGREEMENT
LETTERS OF CREDIT
(a) Issuance. Subject to the terms and conditions of the
Agreement and the Litigation L/C Agreement, Agent and Revolving Lenders agree to
incur (or in the case of the Litigation L/C, the Term Lenders agree to incur),
from time to time prior to the Commitment Termination Date, upon the request of
Borrower, Letter of Credit Obligations and Litigation L/C Obligations by causing
Letters of Credit to be issued (by a bank or other legally authorized Person
selected by or acceptable to Agent in its sole discretion (each, an "L/C
Issuer")) for Borrower's account and guaranteed by Agent; provided, however,
that if the L/C Issuer is a Revolving Lender, then such Letters of Credit (other
than the Litigation L/C) shall not be guaranteed by Agent but rather each
Revolving Lender shall, subject to the terms and conditions hereinafter set
forth, purchase (or be deemed to have purchased) risk participations in all such
Letters of Credit issued with the written consent of Agent, as more fully
described in paragraph (b)(ii) below; and, provided, further, that if the L/C
Issuer is a Term Lender, then the Litigation L/C shall not be guaranteed by
Agent but rather each Term Lender shall, subject to the terms and conditions
hereinafter set forth, purchase (or be deemed to have purchased) risk
participations in the Litigation L/C, as more fully described in paragraph
(b)(ii) below. The aggregate amount of all such Letter of Credit Obligations
shall not at any time exceed the least of (i) One Million Dollars
($1,000,000.00) (the "L/C Sublimit"), and (ii) the Maximum Amount less the
aggregate outstanding principal balance of the Revolving Credit Advances and the
Swing Line Loan, and (iii) the Borrowing Base less the aggregate outstanding
principal balance of the Revolving Credit Advances and the Swing Line Loan. The
aggregate amount of all Litigation L/C Obligations shall not at any time exceed
the least of (i) $12,000,000, (ii) the amount necessary to obtain and secure the
Bond and (iii) the aggregate maximum amount of Litigation L/C Obligations which
are guaranteed pursuant to the terms and conditions of the Litigation Guaranty.
No such Letter of Credit shall have an expiry date which is more than one year
following the date of issuance thereof, and neither Agent nor any Lenders shall
be under any obligation to incur Letter of Credit Obligations in respect of, or
purchase risk participations in, any Letter of Credit having an expiry date
which is later than the Commitment Termination Date.
(b) Advances Automatic; Participations. (i) In the event that
Agent or any Revolving Lender shall make any payment on or pursuant to any
Letter of Credit Obligation, such payment shall then be deemed automatically to
constitute a Revolving Credit Advance to the applicable Borrower under Section
1.1(a) of the Agreement regardless of whether a Default or Event of Default
shall have occurred and be continuing and notwithstanding Borrower's failure to
satisfy the conditions precedent set forth in Section 2, and each Revolving
Lender shall be obligated to pay its Pro Rata Share thereof in accordance with
the Agreement. The failure of any Revolving Lender to make available to Agent
for Agent's own account its Pro Rata Share of any such Revolving Credit Advance
or payment by Agent under or in respect of a Letter of Credit (other than the
Litigation L/C) shall not relieve any other Revolving Lender of its obligation
hereunder to make available to Agent its Pro Rata Share thereof, but no
Revolving Lender shall
B-1
109
be responsible for the failure of any other Revolving Lender to make available
such other Revolving Lender's Pro Rata Share of any such payment.
(ii) In the event that Agent or any Term Lender shall make
payments on or pursuant to the Litigation L/C Obligations, such payments shall
then be deemed automatically to constitute all or part of the Term Loan C to
Borrower pursuant to Section 1.1(d)(ii) of the Agreement and pursuant to the
Litigation L/C Agreement regardless of whether a Default or Event of Default
shall have occurred and be continuing and notwithstanding Borrower's failure to
satisfy any of the conditions precedent set forth in Section 2.4, and each Term
Lender shall be obligated to pay its Pro Rata Share thereof to the Agent in
accordance with the Agreement. The failure of any Term Lender to make available
to Agent for Agent's own account its Pro Rata Share of any such payment by Agent
under or in respect of the Litigation L/C shall not relieve any other Term
Lender of its obligation hereunder to make available to Agent its Pro Rata Share
thereof, but no Term Lender shall be responsible for the failure of any other
Term Lender to make available such other Term Lender's Pro Rata Share of any
such payment.
(iii) If it shall be illegal or unlawful for Borrower to incur
Revolving Credit Advances as contemplated by paragraph (b)(i) above because of
an Event of Default described in Section 8.1(h) or (i) or otherwise or if it
shall be illegal or unlawful for any Revolving Lender to be deemed to have
assumed a ratable share of the reimbursement obligations owed to an L/C Issuer,
or if the L/C Issuer is a Revolving Lender, then (i) immediately and without
further action whatsoever, each Revolving Lender shall be deemed to have
irrevocably and unconditionally purchased from Agent (or such L/C Issuer, as the
case may be) an undivided interest and participation equal to such Revolving
Lender's Pro Rata Share (based on the Revolving Loan Commitments) of the Letter
of Credit Obligations in respect of all Letters of Credit then outstanding and
(ii) thereafter, immediately upon issuance of any Letter of Credit, each
Revolving Lender shall be deemed to have irrevocably and unconditionally
purchased from Agent (or such L/C Issuer, as the case may be) an undivided
interest and participation in such Revolving Lender's Pro Rata Share (based on
the Revolving Loan Commitments) of the Letter of Credit Obligations with respect
to such Letter of Credit on the date of such issuance. Each Revolving Lender
shall fund its participation in all payments or disbursements made under the
Letters of Credit in the same manner as provided in the Agreement with respect
to Revolving Credit Advances.
(iv) If it shall be illegal or unlawful for Borrower to incur
the Term Loan C as contemplated by paragraph (b)(ii) above because of an Event
of Default described in Section 8.1(h) or (i) or otherwise or if it shall be
illegal or unlawful for any Term Lender to be deemed to have assumed a ratable
share of the reimbursement obligations owed to an L/C Issuer, or if the L/C
Issuer is a Term Lender, then immediately and without further action whatsoever,
each Term Lender shall be deemed to have irrevocably and unconditionally
purchased from Agent (or such L/C Issuer, as the case may be) an undivided
interest and participation equal to such Term Lender's Pro Rata Share (based on
the Term Loan C Commitments) of the Litigation L/C Obligations. Each Term Lender
shall fund its participation in all payments or disbursements made under the
Litigation L/C as provided in the Agreement.
B-2
110
(c) Cash Collateral. If Borrower is required to provide cash
collateral for any Letter of Credit Obligations or Litigation L/C Obligations
pursuant to the Agreement prior to the Commitment Termination Date, Borrower
will pay to Agent for the benefit of the applicable Lenders cash or cash
equivalents acceptable to Agent ("Cash Equivalents") in an amount equal to 105%
of the maximum amount then available to be drawn under each applicable Letter of
Credit outstanding for the benefit of Borrower. Any and all such funds or Cash
Equivalents securing or otherwise relating to any Letter of Credit Obligations
shall be held by Agent in a cash collateral account (the "Letter of Credit Cash
Collateral Account") maintained at a bank or financial institution acceptable to
Agent. Any and all such funds or Cash Equivalents securing or otherwise relating
to the Litigation L/C Obligations shall be held by Agent in a cash collateral
account (the "Litigation L/C Cash Collateral Account") maintained at a bank or
financial institution acceptable to Agent. The Letter of Credit Cash Collateral
Account and the Litigation L/C Cash Collateral Account shall collectively be
referred to as the "Cash Collateral Accounts." The Cash Collateral Accounts
shall be in the name of Borrower and shall be pledged to, and subject to the
control of, Agent, for the benefit of Agent and Lenders, in a manner
satisfactory to Agent. Borrower hereby pledges and grants to Agent, on behalf of
Lenders, a security interest in all such funds and Cash Equivalents held in the
Cash Collateral Accounts from time to time and all proceeds thereof, as security
for the payment of all amounts due in respect of the Letter of Credit
Obligations, Litigation L/C Obligations and other Obligations, whether or not
then due. The Agreement, including this Annex B, shall constitute a security
agreement under applicable law. The funds, Cash Equivalents and proceeds of, in
or relating to the Litigation L/C Cash Collateral Account shall at all times be
segregated from, and shall not at any time be commingled or deposited with, the
funds, Cash Equivalents and proceeds of, in or relating to the Letter of Credit
Cash Collateral Account, and the Borrower hereby agrees and acknowledges to take
all necessary and appropriate actions to effect such segregation and to prevent
any such commingling.
If any Letter of Credit Obligations or Litigation L/C
Obligations, whether or not then due and payable, shall for any reason be
outstanding on the Commitment Termination Date, Borrower shall either (i)
provide cash collateral therefor in the manner described above, or (ii) cause
all such Letters of Credit and guaranties thereof to be canceled and returned,
or (iii) deliver a stand-by letter (or letters) of credit in guaranty of such
Letter of Credit Obligations and Litigation L/C Obligations, which stand-by
letter (or letters) of credit shall be of like tenor and duration as, and in an
amount equal to 105% of the aggregate maximum amount then available to be drawn
under, the Letters of Credit to which such outstanding Letter of Credit
Obligations or Litigation L/C Obligations relate and shall be issued by a
Person, and shall be subject to such terms and conditions, as are be
satisfactory to Agent in its sole discretion.
From time to time after funds are deposited in the Cash
Collateral Accounts by Borrower, whether before or after the Commitment
Termination Date, Agent may apply such funds or Cash Equivalents then held in
the Cash Collateral Accounts to the payment of any amounts, in such order as
Agent may elect, as shall be or shall become due and payable by Borrower to
Lenders with respect to such Letter of Credit Obligations and Litigation L/C
Obligations of Borrower and, upon the satisfaction in full of all Letter of
Credit Obligations and Litigation L/C Obligations, to any other Obligations then
due and payable.
B-3
111
Neither Borrower nor any Person claiming on behalf of or
through Borrower shall have any right to withdraw any of the funds or Cash
Equivalents held in the Cash Collateral Accounts, except that upon the
termination of all Letter of Credit Obligations and Litigation L/C Obligations
and the payment of all amounts payable by Borrower to Lenders in respect
thereof, any funds remaining in the Cash Collateral Accounts shall be applied to
other Obligations when due and owing and upon payment in full of such
Obligations, any remaining amount shall be paid to Borrower or as otherwise
required by law.
(d) Fees and Expenses. Borrower agrees to pay to Agent for the
benefit of Revolving Lenders and Term Lenders, as applicable, as compensation to
such Lenders for Letter of Credit Obligations and Litigation L/C Obligations
incurred hereunder, (x) all costs and expenses incurred by Agent or any Lender
on account of such Letter of Credit Obligations and Litigation L/C Obligations,
and (y) for each month during which any Letter of Credit Obligation or
Litigation L/C Obligations shall remain outstanding, a fee (the "Letter of
Credit Fee") in an amount equal to (i) in the case of Letters of Credit other
than the Litigation L/C, two percent (2.00%) per annum multiplied by the maximum
amount available from time to time to be drawn under the applicable Letter of
Credit and (ii) in the case of the Litigation L/C, three percent (3.00%) per
annum multiplied by the maximum amount available from time to time to be drawn
under the Litigation L/C. Such fee shall be paid to Agent for the benefit of the
applicable Lenders in arrears, on the first day of each month. In addition,
Borrower shall pay to any L/C Issuer, on demand, such fees (including all per
annum fees), charges and expenses of such L/C Issuer in respect of the issuance,
negotiation, acceptance, amendment, transfer and payment of such Letter of
Credit or otherwise payable pursuant to the application and related
documentation under which such Letter of Credit is issued.
(e) Request for Incurrence of Letter of Credit Obligations or
Litigation L/C Obligations. Borrower shall give Agent at least two (2) Business
Days prior written notice requesting the incurrence of any Letter of Credit
Obligation or Litigation L/C Obligations, specifying the date such Letter of
Credit Obligation or Litigation L/C Obligations is to be incurred, identifying
the beneficiary to which such Letter of Credit Obligation or Litigation L/C
Obligations relates and describing the nature of the transactions proposed to be
supported thereby. The notice shall be accompanied by the form of the Letter of
Credit (which shall be acceptable to the L/C Issuer) to be guarantied and shall
include (i) a representation and warranty by Borrower that, upon issuance of
such Letter of Credit, all of the conditions set forth in Sections 2.1, 2.3(I)
and 2.4 of the Credit Agreement have been, or thereupon will be, satisfied and
(ii) a reaffirmation by Borrower of the granting and continuance of Agent's
Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents and
the Litigation Collateral Documents. Notwithstanding anything contained herein
to the contrary, Letter of Credit applications by Borrower and approvals by
Agent may be made and transmitted pursuant to electronic codes and security
measures mutually agreed upon and established by and among Borrower, Agent and
the L/C Issuer.
(f) Obligation Absolute. The obligation of Borrower to
reimburse Agent, Revolving Lenders and Term Lenders, as applicable, for payments
made with respect to any Letter of Credit Obligation or Litigation L/C
Obligation shall be absolute, unconditional and
B-4
112
irrevocable, without necessity of presentment, demand, protest or other
formalities, and the obligations of each such Lender to make payments to Agent
with respect to Letters of Credit shall be unconditional and irrevocable. Such
obligations of Borrower and Lenders shall be paid strictly in accordance with
the terms hereof under all circumstances including the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit, the Litigation Guaranty, the Agreement or the other Loan
Documents or any other agreement;
(ii) the existence of any claim, set-off, defense or other
right which Borrower or any of their respective Affiliates or any
Lender may at any time have against a beneficiary or any transferee of
any Letter of Credit (or any Persons or entities for whom any such
transferee may be acting), Agent, any Lender, or any other Person,
whether in connection with the Agreement, the Letter of Credit, the
transactions contemplated herein or therein or any unrelated
transaction (including any underlying transaction between Borrower or
any of their respective Affiliates and the beneficiary for which the
Letter of Credit was procured);
(iii) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iv) payment by Agent (except as otherwise expressly provided
in paragraph (g)(ii)(C) below) or any L/C Issuer under any Letter of
Credit or guaranty thereof against presentation of a demand, draft or
certificate or other document which does not strictly comply with the
terms of such Letter of Credit or such guaranty;
(v) any other circumstance or happening whatsoever, which is
similar to any of the foregoing; or
(vi) the fact that a Default or an Event of Default shall have
occurred and be continuing.
(g) Indemnification; Nature of Lenders' Duties. (i) In
addition to amounts payable as elsewhere provided in the Agreement, Borrower
hereby agrees to pay and to protect, indemnify, and save harmless Agent and each
Lender from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including attorneys' fees and allocated
costs of internal counsel) which Agent or any Lender may incur or be subject to
as a consequence, direct or indirect, of (A) the issuance of any Letter of
Credit or guaranty thereof, or (B) the failure of Agent or any Lender seeking
indemnification or of any L/C Issuer to honor a demand for payment under any
Letter of Credit or guaranty thereof as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto government or
Governmental Authority, in each case other than to the extent as a result of the
gross negligence or willful misconduct of Agent or such Lender (as finally
determined by a court of competent jurisdiction).
B-5
113
(ii) As between Agent and any Lender and Borrower, Borrower
assumes all risks of the acts and omissions of, or misuse of any Letter of
Credit by beneficiaries of any Letter of Credit. In furtherance and not in
limitation of the foregoing, to the fullest extent permitted by law neither
Agent nor any Lender shall be responsible: (A) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document issued by any
party in connection with the application for and issuance of any Letter of
Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (C) for failure of the beneficiary of any Letter of
Credit to comply fully with conditions required in order to demand payment under
such Letter of Credit; provided that, in the case of any payment by Agent under
any Letter of Credit or guaranty thereof, Agent shall be liable to the extent
such payment was made as a result of its gross negligence or willful misconduct
(as finally determined by a court of competent jurisdiction) in determining that
the demand for payment under such Letter of Credit or guaranty thereof complies
on its face with any applicable requirements for a demand for payment under such
Letter of Credit or guaranty thereof; (D) for errors, omissions, interruptions
or delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher; (E) for errors
in interpretation of technical terms; (F) for any loss or delay in the
transmission or otherwise of any document required in order to make a payment
under any Letter of Credit or guaranty thereof or of the proceeds thereof; (G)
for the credit of the proceeds of any drawing under any Letter of Credit or
guaranty thereof; and (H) for any consequences arising from causes beyond the
control of Agent or any Lender. None of the above shall affect, impair, or
prevent the vesting of any of Agent's or any Lender's rights or powers hereunder
or under the Agreement.
(iii) Nothing contained herein shall be deemed to limit or to
expand any waivers, covenants or indemnities made by Borrower in favor of any
L/C Issuer in any letter of credit application, reimbursement agreement or
similar document, instrument or agreement between Borrower and such L/C Issuer.
* * * *
B-6
114
ANNEX C (SECTION 1.8)
TO
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEMS
Borrower shall, and shall cause its Subsidiaries to, establish
and maintain the Cash Management Systems described below:
(a) On or before the Closing Date and until the Termination
Date, Borrower shall (i) establish lock boxes ("Lock Boxes") at one or more of
the banks set forth on Disclosure Schedule (3.19), and shall request in writing
and otherwise take such reasonable steps to ensure that all Account Debtors
forward payment directly to such Lock Boxes, and (ii) deposit and cause its
Subsidiaries to deposit or cause to be deposited promptly, and in any event no
later than the third Business Day after the date of receipt thereof (unless the
aggregate face amount of such items exceeds $25,000, in which case such items
shall be deposited no later than the first Business Day after receipt thereof),
all cash, checks, drafts or other similar items of payment relating to or
constituting payments made in respect of any and all Collateral (whether or not
otherwise delivered to a Lock Box) into bank accounts in Borrower's name or any
such Subsidiary's name (collectively, the "Borrower Accounts") at banks set
forth on Disclosure Schedule (3.19) (each, a "Relationship Bank"). On or before
the Closing Date, Borrower shall have established a concentration account in its
name (each a "Concentration Account" and, collectively, the "Concentration
Accounts") at the bank or banks which shall be designated as the Concentration
Account bank for Borrower on Disclosure Schedule (3.19) (each a "Concentration
Account Bank" and collectively, the "Concentration Account Banks"), which banks
shall be satisfactory to Agent.
(b) On or before the Closing Date (or such later date as Agent
shall consent to in writing), each Concentration Account Bank, each bank where a
Funding Account or other Disbursement Account is located (other than
Disbursement Accounts which are "zero balance accounts") and all other
Relationship Banks, shall have entered into tri-party blocked account agreements
with Agent, for the benefit of itself and Lenders, and the applicable Borrower
and Subsidiaries thereof, as applicable, in form and substance acceptable to
Agent, which shall become operative on or prior to the Closing Date. Each such
blocked account agreement shall provide, among other things, that (i) all items
of payment deposited in such account and proceeds thereof deposited in the
applicable Concentration Account are held by such bank as agent or
bailee-in-possession for Agent, on behalf of Lenders, (ii) the bank executing
such agreement has no rights of setoff or recoupment or any other claim against
such account, as the case may be, other than for payment of its service fees and
other charges directly related to the administration of such account and for
returned checks or other items of payment, and (iii) from and after the Closing
Date (A) with respect to banks at which a Borrower Account is located, such bank
agrees to forward immediately all available amounts in each Borrower Account to
Borrower's Concentration Account Bank and to commence the process of daily
sweeps from such Borrower Account into the applicable Concentration Account and
(B) with respect to each Concentration
C-1
115
Account Bank, such bank agrees to immediately forward all available amounts
received in the applicable Concentration Account to the Collection Account
through daily sweeps from such Concentration Account into the Collection
Account. Borrower shall not, nor shall it cause or permit any Subsidiary thereof
to, accumulate or maintain cash in any disbursement or payroll accounts as of
any date of determination in excess of checks outstanding against such accounts
as of that date and amounts necessary to meet minimum balance requirements.
(c) So long as no Default or Event of Default has occurred and
is continuing, Borrower may amend Disclosure Schedule (3.19) to add or replace a
Relationship Bank, Lock Box or Borrower Account or to replace any Concentration
Account or any Funding Account or other Disbursement Account; provided, however,
that (i) Agent shall have consented in writing in advance to the opening of such
account or Lock Box with the relevant bank and (ii) prior to the time of the
opening of such account or Lock Box, the applicable Borrower and/or the
Subsidiaries thereof, as applicable, and such bank shall have executed and
delivered to Agent a tri-party blocked account agreement, in form and substance
satisfactory to Agent (except in the case of Disbursement Accounts which are
zero balance accounts). Borrower shall close any of their accounts (and
establish replacement accounts in accordance with the foregoing sentence)
promptly and in any event within thirty (30) days of notice from Agent that the
creditworthiness of any bank holding an account is no longer acceptable in
Agent's reasonable judgment, or as promptly as practicable and in any event
within sixty (60) days of notice from Agent that the operating performance,
funds transfer and/or availability procedures or performance with respect to
accounts or lockboxes of the bank holding such accounts or Agent's liability
under any tri- party blocked account agreement with such bank is no longer
acceptable in Agent's reasonable judgment.
(d) The Lock Boxes, Borrower Accounts, the "Funding Accounts"
(as defined below), the Concentration Accounts, and to the extent not "zero
balance accounts", each other disbursement account, payroll account or similar
account now or hereafter used for payments by the Borrower or any of its
Subsidiaries (collectively, "Disbursement Accounts"), shall be cash collateral
accounts, with all cash, checks and other similar items of payment in such
accounts securing payment of the Loans and all other Obligations, and in which
Borrower and each Subsidiary thereof shall have granted a Lien to Agent, on
behalf of itself and Lenders, pursuant to the Security Agreement.
(e) All amounts deposited in the Collection Account shall be
deemed received by Agent in accordance with Section 1.10 of the Agreement and
shall be applied (and allocated) by Agent in accordance with Section 1.11 of the
Agreement. In no event shall any amount be so applied unless and until such
amount shall have been credited in immediately available funds to the Collection
Account.
C-2
116
(f) Borrower may maintain, in its name, an account (each a
"Funding Account" and collectively, the "Funding Accounts") at a bank acceptable
to Agent into which Agent shall, from time to time, deposit proceeds of
Revolving Credit Advances and Swing Line Advances made to Borrower pursuant to
Section 1.1 for use by Borrower solely in accordance with the provisions of
Section 1.4.
(g) Borrower shall and shall cause its Affiliates, officers,
employees, agents, directors or other Persons acting for or in concert with
Borrower (each a "Related Person") to (i) hold in trust for Agent, for the
benefit of itself and Lenders, all checks, cash and other items of payment
received by Borrower or any such Related Person, and (ii) within three (3)
Business Days after receipt by Borrower or any such Related Person (unless the
aggregate face amount of such items exceeds $25,000, in which case such items
shall be deposited within one (1) Business Day after such receipt), of any
checks, cash or other items or payment, deposit the same into a Borrower
Account. Borrower and each Related Person thereof acknowledges and agrees that
all cash, checks or items of payment constituting proceeds of Collateral are the
property of Agent and Lenders. All proceeds of the sale or other disposition of
any Collateral, shall be deposited directly into the applicable Borrower
Accounts.
* * * *
C-3
117
ANNEX D (SECTION 2.1(a))
TO
CREDIT AGREEMENT
LIST OF CLOSING DOCUMENTS
In addition to, and not in limitation of, the conditions described in Section
2.1 of the Agreement, pursuant to Section 2.1(a), the items described on the
attached List of Closing Documents must be received by Agent in form and
substance satisfactory to Agent on or prior to the Closing Date (each
capitalized term used but not otherwise defined herein shall have the meaning
ascribed thereto in Annex A to the Agreement), unless otherwise indicated
therein as permitted to be delivered on a later date.
* * * *
D-1
118
ANNEX E (SECTION 4.1(a))
TO
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING
Borrower shall deliver or cause to be delivered to Agent or to
Agent and Lenders, as indicated, the following:
(a) Monthly Financials. To Agent and Lenders, within thirty
(30) days after the end of each of the first two (2) Fiscal Months of each
Fiscal Quarter, financial information regarding Borrower and its Subsidiaries,
certified by the Chief Financial Officer of Borrower, consisting of consolidated
and consolidating (i) unaudited balance sheets as of the close of such Fiscal
Month and the related statements of income and cash flow for that portion of the
Fiscal Year ending as of the close of such Fiscal Month; (ii) unaudited
statements of income and cash flows for such Fiscal Month, setting forth in
comparative form the figures for the corresponding period in the prior year and
the figures contained in the Projections for such Fiscal Year, all prepared in
accordance with GAAP (subject to normal year-end adjustments); and (iii) a
schedule of the outstanding balance of all intercompany Indebtedness among
Borrower and each of its Subsidiaries as of the last day of that Fiscal Month.
Such financial information shall be accompanied by (A) a statement in reasonable
detail (each, a "Compliance Certificate") showing the calculations used in
determining compliance with each financial covenant set forth on Annex G which
is tested on a monthly basis, and (B) the certification of the chief financial
officer of Borrower that (i) such financial information presents fairly in
accordance with GAAP (subject to normal year-end adjustments) the financial
position and results of operations of Borrower and its Subsidiaries, on a
consolidated and consolidating basis, in each case as at the end of such month
and for the period then ended and (ii) any other information presented is true,
correct and complete in all material respects and that there was no Default or
Event of Default in existence as of such time or, if a Default or Event of
Default shall have occurred and be continuing, describing the nature thereof and
all efforts undertaken to cure such Default or Event of Default;
(b) Quarterly Financials. To Agent and Lenders, within
forty-five (45) days after the end of each Fiscal Quarter, consolidated and
consolidating financial information regarding Borrower and its Subsidiaries,
certified by the chief financial officer of Borrower, including (i) unaudited
balance sheets as of the close of such Fiscal Quarter and the related statements
of income and cash flow for that portion of the Fiscal Year ending as of the
close of such Fiscal Quarter and (ii) unaudited statements of income and cash
flows for such Fiscal Quarter, in each case setting forth in comparative form
the figures for the corresponding period in the prior year and the figures
contained in the Projections for such Fiscal Year, all prepared in accordance
with GAAP (subject to normal year-end adjustments). Such financial information
shall be accompanied by (A) a Compliance Certificate in respect of each of the
financial covenants set forth on Annex G which is tested on a quarterly basis
and (B) the certification of the chief financial officer of Borrower that (i)
such financial information presents fairly in accordance with GAAP (subject to
normal year-end adjustments) the financial position, results of
E-1
119
operations and statements of cash flows of Borrower and its Subsidiaries, on
both a consolidated and consolidating basis, as at the end of such Fiscal
Quarter and for the period then ended, (ii) any other information presented is
true, correct and complete in all material respects and that there was no
Default or Event of Default in existence as of such time or, if a Default or
Event of Default shall have occurred and be continuing, describing the nature
thereof and all efforts undertaken to cure such Default or Event of Default. In
addition, Borrower shall deliver to Agent and Lenders, within forty-five (45)
days after the end of its first Fiscal Quarter ending in 1998 and each Fiscal
Quarter thereafter, a management discussion and analysis which includes a
comparison to budget for that Fiscal Quarter and a comparison of performance for
that Fiscal Quarter to the corresponding period in the prior year;
(c) Operating Plan. To Agent and Lenders, as soon as
available, but not later than thirty (30) days after the end of each Fiscal
Year, an annual operating plan for Borrower, approved by the Board of Directors
of Borrower, for the following year, which will include a statement of all of
the material assumptions on which such plan is based, will include monthly
balance sheets and a monthly budget for the following year and will integrate
sales, gross profits, operating expenses, operating profit, cash flow
projections and Borrowing Availability projections all prepared on the same
basis and in similar detail as that on which operating results are reported (and
in the case of cash flow projections, representing management's good faith
estimates of future financial performance based on historical performance), and
including plans for personnel, Capital Expenditures and facilities;
(d) Annual Audited Financials. To Agent and Lenders, within
ninety (90) days after the end of each Fiscal Year, audited Financial Statements
for Borrower and its Subsidiaries on a consolidated and consolidating basis,
consisting of balance sheets and statements of income and retained earnings and
cash flows, setting forth in comparative form in each case the figures for the
previous Fiscal Year and the figures contained in the Projections for such
Fiscal Year, which Financial Statements shall be prepared in accordance with
GAAP, certified without qualification, (as to the consolidated financial
statements) by an independent certified public accounting firm of national
standing or otherwise acceptable to Agent. Such Financial Statements shall be
accompanied by (i) a statement prepared in reasonable detail showing the
calculations used in determining compliance with each of the financial covenants
set forth on Annex G, (ii) the annual letters to such accountants in connection
with their audit examination detailing contingent liabilities and material
litigation matters, and (iii) the certification of the chief executive officer
or chief financial officer of Borrower that all such Financial Statements
present fairly in accordance with GAAP the financial position, results of
operations and statements of cash flows of Borrower and its Subsidiaries on a
consolidated and consolidating basis, as at the end of such year and for the
period then ended, and that there was no Default or Event of Default in
existence as of such time or, if a Default or Event of Default shall have
occurred and be continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default;
(e) Management Letters. To Agent and Lenders, within five (5)
Business Days after receipt thereof by any Credit Party, copies of all
management letters, exception reports
E-2
120
or similar letters or reports received by such Credit Party from its independent
certified public accountants;
(f) Default Notices. To Agent and Lenders, as soon as
practicable, and in any event within five (5) Business Days after the chief
executive officer or chief financial officer of Borrower has actual knowledge of
the existence of any Default, Event of Default, or other event which has had a
Material Adverse Effect, telephonic or telecopied notice specifying the nature
of such Default or Event of Default or other event, including the anticipated
effect thereof, which notice, if given telephonically, shall be promptly
confirmed in writing on the next Business Day;
(g) SEC Filings and Press Releases. To Agent and Lenders,
promptly upon their becoming available, copies of: (i) all Financial Statements,
reports, notices and proxy statements made publicly available by any Credit
Party to its security holders; (ii) all regular and periodic reports and all
registration statements and prospectuses, if any, filed by any Credit Party with
any securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority; and (iii) all press releases and
other statements made available by any Credit Party to the public concerning
material adverse changes or developments in the business of any such Person;
(h) Subordinated Debt and Equity Notices. To Agent, as soon as
practicable, copies of all material written notices given or received by any
Credit Party with respect to any Subordinated Debt or Stock of such Person, and,
within three (3) Business Days after any Credit Party obtains knowledge of any
matured or unmatured event of default with respect to any Subordinated Debt,
notice of such event of default;
(i) Supplemental Schedules. To Agent, supplemental
disclosures, if any, required by Section 5.6 of the Agreement;
(j) Litigation. To Agent in writing, (i) promptly upon
learning thereof, notice of any Litigation commenced or threatened against any
Credit Party that (A) seeks damages in excess of $100,000, (B) seeks injunctive
relief, (C) is asserted or instituted against any Plan, its fiduciaries or its
assets or against any Credit Party or ERISA Affiliate in connection with any
Plan, (D) alleges criminal misconduct by any Credit Party, or (E) alleges the
violation of any law regarding, or seeks remedies in connection with, any
Environmental Liabilities of the Credit Parties, (ii) promptly upon obtaining
knowledge thereof (and in no event later than the following Business Day),
notice of any material development in any such Litigation referred to in clause
(i) hereof or described in the Disclosure Schedules (including, without
limitation, the DEI Litigation) and copies of all orders and decrees entered
with respect to the DEI Litigation, (iii) monthly (prior to the Term Loan B
Funding Date or the date on which the Litigation L/C is issued, whichever is
later), together with the delivery of the monthly financial statements referred
to in clause (a) above, a description of the status of the DEI Litigation and a
schedule disclosing the amount that would be determined pursuant to Sections
2.2(a)(iv) or 2.3(I)(a)(iii) of the Credit Agreement as if the Term Loan B
Funding Date occurred on the date such schedule was prepared and (iv) promptly
following their filing, if requested by Agent, copies of all material pleadings
filed with respect to the DEI Litigation.
E-3
121
(k) Insurance Notices. To Agent, disclosure of losses or
casualties required by Section 5.4 of the Agreement;
(l) Leases; Warehouses. To Agent, copies of (i) any and all
default notices received under or with respect to any leased location or public
warehouse where Collateral is located, and (ii) such other notices or documents
as Agent may request in its reasonable discretion;
(m) OEM Contracts. To Agent and Lenders, copies of all notices
received indicating or asserting that (i) any Credit Party is in material
default or breach of any OEM Contract, (ii) any OEM Contract is or will be
terminated or expired and will not replaced, or (iii) any OEM Accreditation will
expire or be withdrawn or terminated; and
(n) Other Documents. To Agent and Lenders, such other
financial and other information respecting any Credit Party's business or
financial condition as Agent or any Lender shall, from time to time, request.
* * * *
X-0
000
XXXXX F (SECTION 4.1(b))
TO
CREDIT AGREEMENT
COLLATERAL REPORTS
Borrower shall deliver or cause to be delivered the following:
(a) To Agent, upon its request, and in no event less
frequently than the tenth (10th) Business Day of each month (together with a
copy of all or any part of such delivery requested by any Lender in writing
after the Closing Date), each of the following, in each case providing
information as of the last day of the then immediately preceding month:
(i) a Borrowing Base Certificate, in each case accompanied by
such supporting detail and documentation as shall be requested by Agent
in its reasonable discretion;
(ii) a summary of Inventory by location and type with a
supporting perpetual Inventory report, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in
its reasonable discretion;
(iii) a trial balance showing Accounts outstanding aged from
invoice due date as follows: 1 to 30 days, 31 to 60 days, 61 to 90 days
and 91 days or more, accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable
discretion; and
(iv) a calculation of the Tessco Liquidation Reserve.
(b) To Agent, at the time of delivery of each of the monthly
and quarterly Financial Statements delivered pursuant to Annex E, or at such
more frequent intervals as Agent may request from time to time (together with a
copy of all or any part of such delivery requested by any Lender in writing
after the Closing Date), collateral reports, including all additions and
reductions (cash and non-cash) with respect to Accounts, in each case
accompanied by such supporting detail and documentation as shall be requested by
Agent in its reasonable discretion;
(c) To Agent, at the time of delivery of each of the monthly
and quarterly Financial Statements delivered pursuant to Annex E, a
reconciliation of the Accounts trial balance and month-end Inventory reports of
Borrower to Borrower's general ledger and monthly Financial Statements delivered
pursuant to such Annex E, in each case accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion;
F-1
123
(d) To Agent, at the time of delivery of each of the quarterly
and annual Financial Statements delivered pursuant to Annex E, (i) a listing of
government contracts of Borrower and Tessco subject to the Federal Assignment of
Claims Act of 1940; and (ii) a list of any applications for the registration of
any Patent, Trademark or Copyright with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency which
any Credit Party thereof has filed in the prior Fiscal Quarter;
(e) Borrower, at its own expense, shall deliver to Agent the
results of each physical verification, if any, which Borrower or any of its
Subsidiaries may in their discretion have made, or caused any other Person to
have made on their behalf, of all or any portion of their Inventory (and, if a
Default or an Event of Default shall have occurred and be continuing, Borrower
shall, upon the request of Agent, conduct, and deliver the results of, such
physical verifications as Agent may require);
(f) Borrower, at its own expense, shall deliver to Agent such
appraisals of its assets as Agent may request at any time after the occurrence
and during the continuance of a Default or an Event of Default, such appraisals
to be conducted by an appraiser, and in form and substance, satisfactory to
Agent; and
(g) Such other reports, statements and reconciliations with
respect to the Borrowing Base or Collateral of any or all Credit Parties as
Agent shall from time to time request in its reasonable discretion.
* * * *
F-2
124
ANNEX G (SECTION 6.10)
TO
CREDIT AGREEMENT
FINANCIAL COVENANTS
Borrower shall not breach or fail to comply with any of the
following financial covenants, each of which shall be calculated in accordance
with GAAP consistently applied:
(a) Maximum Capital Expenditures. Borrower and its Subsidiaries on a
consolidated basis shall not make Capital Expenditures during any of its Fiscal
Years of more than (i) the amount set forth below opposite such Fiscal Year plus
(ii) in the case of Fiscal Year 1998 and each Fiscal Year thereafter, 50% (but
not to exceed $250,000) of the unused portion of the maximum amount of Capital
Expenditures permitted hereunder for the then immediately preceding Fiscal Year
(and without giving effect to any additional amounts permitted during such
preceding Fiscal Year because of this clause (ii)):
Fiscal Year Maximum Amount
----------- --------------
1997 $1,000,000
1998 $1,300,000
1999 and each Fiscal
Year thereafter $1,000,000.
(b) Minimum Fixed Charge Coverage Ratio. Borrower and its Subsidiaries
shall have on a consolidated basis at the end of any Fiscal Quarter ending on or
after March 31, 1998, a Fixed Charge Coverage Ratio for the 12-month period then
ended, taken as a single accounting period (or with respect to the Fiscal
Quarters ending on or before December 31, 1998, the period commencing on January
1, 1998 and ending on the last day of such Fiscal Quarter, taken as a single
accounting period) of not less 1.5 to 1.0; provided, however, that, if Term Loan
B or Term Loan C shall be outstanding during any such Fiscal Quarter, such ratio
shall not be less than, for any such period ending at the end of such Fiscal
Quarter, the ratio set forth below and corresponding to the outstanding
principal balance of Term Loan B or Term Loan C as of the last day of such
Fiscal Quarter:
Term Loan B or C Balance Minimum Ratio
------------------------ -------------
$0 to $3,000,000 1.15 to 1.0
Greater than $3,000,000
and less than or equal to
$6,000,000 1.10 to 1.0
G-1
125
Greater than $6,000,000
and less than or equal to
$9,000,000 1.05 to 1.0
Greater than $9,000,000 1.00 to 1.0.
(c) Cumulative Minimum EBITDA. Borrowers and its Subsidiaries on a
consolidated basis shall have, for the period commencing January 1, 1998 and
ending as of the end of each Fiscal Month set forth below, EBITDA for such
period then ended (taken as a single accounting period) of not less than the
following:
Month Ending Amount
------------ ------
February, 1998 $ 700,000
March, 1998 $ 1,025,000.
(d) Minimum Quarterly EBITDA. Borrower and its Subsidiaries on a
consolidated basis shall have, for each of the following Fiscal Quarters, EBITDA
for such Fiscal Quarter of not less than the corresponding amounts set forth
below opposite such Fiscal Quarters:
Fiscal Quarter Ending Amount
--------------------- ------
June 30, 1998 $1,200,000
September 30, 1998 $1,225,000
December 31, 1998 $1,025,000
Each Fiscal Quarter
thereafter $1,250,000.
(e) Minimum Net Worth. Borrower and its Subsidiaries on a consolidated
basis shall have Net Worth at all times of not less than the "Minimum Net Worth"
(as defined below). "Minimum Net Worth" shall mean $8,300,000 as of the Closing
Date and shall increase (on a cumulative basis), as of the end of the Fiscal
Quarter ending December 31, 1997 and each subsequent Fiscal Quarter, by 80% of
an amount equal to (i) Borrower's and its Subsidiaries' consolidated net income,
determined in accordance with GAAP for such Fiscal Quarter (with no adjustment
in the event of a net loss for such Fiscal Quarter) minus (ii) all dividends
paid or accrued with respect to the Series A Preferred Stock for such Fiscal
Quarter (and without duplication of such amounts that were accrued in prior
periods and paid in the current period).
G-2
126
Unless otherwise specifically provided herein, any accounting
term used in the Agreement shall have the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be computed
in accordance with GAAP consistently applied as in effect on the Closing Date
(and without giving effect to any changes in GAAP except to the extent agreed to
in writing by Borrowers and the Requisite Lenders). That certain items or
computations are explicitly modified by the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing.
* * * *
G-3
127
ANNEX H (SECTION 9.9(a))
TO
CREDIT AGREEMENT
WIRE TRANSFER INFORMATION
Attached.
H-1
128
ANNEX I (SECTION 11.10)
TO
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Agent or GE Capital, at
General Electric Capital Corporation
00 Xxxxx XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Account Manager
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:(1)
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: H. Xxxxx Xxxxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
and:
General Electric Capital Corporation
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Corporate Counsel
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
(B) If to Borrower, at
Code-Alarm, Inc.
000 Xxxx Xxxxxxxx
-----------
(1) Notwithstanding the provisions of Section 11.10 of the Credit
Agreement, Borrower shall not be required to deliver to the following
addressees copies of any of the reports or materials required by
paragraphs (a) through (e) of Annex E or by Annex F, or any notices or
requests provided pursuant to Article I.
I-1
000
Xxxxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:
Pepper, Xxxxxxxx & Xxxxxxx
000 Xxxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
* * * *
I-2
