Exhibit 7
AMENDED AND RESTATED
WORKING CAPITAL FINANCING AND
TERM LOAN
AGREEMENT
This AMENDED AND RESTATED WORKING CAPITAL FINANCING AND TERM LOAN
AGREEMENT (as amended, supplemented or otherwise modified from
time to time, this "Agreement") is hereby made this 30th day of
August, 1996, by and between IBM CREDIT CORPORATION with a place
of business at 0000 Xxxxxxxxx Xxxxxxx, Xxxxx 000, Xxx Xxxxx, XX
00000 ("IBM Credit"), and RADIUS INC. with a place of business at
000 Xxxxxxx Xxxx Xxxxx, Xxxxxxxxx, XX 00000 ("Customer").
RECITALS
WHEREAS, Customer and IBM Credit entered into that certain
Inventory and Working Capital Financing Agreement dated as of
February 17, 1995 (as amended, supplemented or otherwise modified
prior to the date hereof, the "Existing Financing Agreement")
pursuant to which Customer requested that IBM Credit finance
Customer's acquisition of inventory and equipment and finance
Customer's working capital requirements;
WHEREAS, Customer has been in default of the terms and
conditions of the Existing Financing Agreement and has been in
default of payments to its other creditors;
WHEREAS, on or about January 29, 1996 certain of the largest
unsecured creditors of Customer formed a committee (the
"Unsecured Creditors Committee") to resolve Customer's payment
defaults to its unsecured creditors;
WHEREAS, Customer and IBM Credit have agreed that IBM Credit
shall not finance Customer's purchases of Products (as defined in
the Existing Financing Agreement) from Authorized Suppliers (as
defined in the Existing Financing Agreement);
WHEREAS, IBM Credit is willing to agree to restructure the
indebtedness of Customer under the Existing Financing Agreement
by (1) converting Three Million ($3,000,000.00) of such
indebtedness to senior convertible preferred stock of Customer,
(2) continuing a portion of such indebtedness under a secured
working capital line of credit and (3) continuing the remaining
portion of such indebtedness as a secured term loan;
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NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby
agree that the Existing Financing Agreement is hereby amended and
restated in its entirety to read as follows:
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Section 1. DEFINITIONS
1.1 Special Definitions. The following terms shall have the
following respective meanings in this Agreement:
"A/R Advance": any loan or advance of funds made by IBM Credit
to Customer pursuant to Section 2.2 of this Agreement.
"A/R Advance Date": the Business Day on which IBM Credit makes
an A/R Advance under this Agreement.
"A/R Finance Charges": as defined on Attachment A.
"Abacus": Abacus, Ltd., successor in interest to Gradeup, Ltd.
and a wholly-owned subsidiary of Computers Unlimited (Europe).
"Accounts": as defined in the U.C.C.
"Advance": any loan or other extension of credit by IBM Credit
to Customer pursuant to this Agreement including, without
limitation, A/R Advances and the Term Loan.
"Affiliate": with respect to the Customer, any Person meeting
one of the following: (i) at least 10% of such Person's equity is
owned, directly or indirectly, by Customer; (ii) at least 10% of
Customer's equity is owned, directly or indirectly, by such
Person; or (iii) at least 10% of Customer's equity and at least
10% of such Person's equity is owned, directly or indirectly, by
the same Person or Persons. All of Customer's officers,
directors, joint venturers, and partners shall also be deemed to
be Affiliates of Customer for purposes of this Agreement.
"Approved Officer": the chief executive officer, chief financial
officer or other officer of Radius approved in writing by IBM
Credit.
"Auditors": a nationally recognized firm of independent
certified public accountants selected by Customer and
satisfactory to IBM Credit.
"Available Credit": at any time, (1) the Maximum Advance Amount
less (2) the Outstanding A/R Advances at such time.
"Average Daily Balance": the sum of the Outstanding A/R Advances
or Outstanding Term Loan, as the case may be, as of the end of
each day during a calendar month, divided by the number of days
in the calendar month.
"Borrowing Base": as defined in Attachment A.
"Business Day": any day other than a Saturday, Sunday or other
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day on which commercial banks in New York, New York are generally
closed or on which IBM Credit is closed.
"Closing Date": the date on which the conditions precedent to
the effectiveness of this Agreement set forth in Section 5.1
hereof are satisfied or waived in writing by IBM Credit.
"Code": the Internal Revenue Code of 1986, as amended or any
successor statute.
"Collateral": as defined in Section 4.1.
"Collateral Management Report": a report to be delivered by
Customer to IBM Credit from time to time, as provided herein,
signed by an Approved Officer, in the form of Attachment F
hereto, detailing and certifying, among other items: Customer's
Eligible Accounts, Customer's Eligible Foreign Accounts, the
amounts and aging of all of Customer's Accounts, the amounts and
aging of Customer's accounts payable as of a specified date, all
of Customer's IBM Credit borrowing activity during a specified
period and the total amount of Customer's Borrowing Base as well
as Customer's Outstanding A/R Advances, Outstanding Term Loan,
Available Credit and any Shortfall Amount as of a specified date.
"Compliance Certificate": a certificate substantially in the
form of Attachment C.
"Default": either (1) an Event of Default or (2) any event or
condition which, but for the requirement that notice be given or
time lapse or both, would be an Event of Default.
"Delinquency Fee Rate": as defined on Attachment A.
"Eligible Account": as defined in Section 3.1.
"Eligible Foreign Account": an account of Customer for which the
account debtor is QMS (Japan) or Abacus that, but for (i) such
account being payable in other than U.S. dollars and (ii) the
account debtor for such account not being a resident of the
United States, constitutes an Eligible Account.
"Eligible Inventory": inventory of the Customer that (i) is in
the possession or under the control of Customer, (ii) is located
in a jurisdiction in the United States where IBM Credit has filed
effective financing statements, (iii) is subject to the perfected
security interest of IBM Credit that is prior to all other
security interests in or liens on such inventory, (iv) is being
held by Customer for sale to customers in the ordinary course of
business and (v) is not inventory constituting spare parts.
"Environmental Laws": all statutes, laws, judicial decisions,
regulations, ordinances, and other governmental restrictions
relating to pollution, the protection of the environment,
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occupational health and safety, or to emissions, discharges or
release of pollutants, contaminants, hazardous substances or
wastes into the environment.
"Environmental Liability": any claim, demand, obligation, cause
of action, allegation, order, violation, injury, judgment,
penalty or fine, cost or expense, resulting from the violation or
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alleged violation of any Environmental Laws or the imposition of
any Lien pursuant to any Environmental Laws.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended, or any successor statutes.
"Event of Default": as defined in Section 9.1.
"Financial Statements": the consolidated and consolidating
balance sheets, statements of operations, statements of cash
flows and statements of changes in shareholder's equity of
Customer and its Subsidiaries for the period specified, prepared
in accordance with GAAP and consistent with prior practices.
"GAAP": generally accepted accounting principles in the United
States as in effect from time to time.
"Governmental Authority": any nation or government, any state or
other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or
other entity owned or controlled (through stock or capital
ownership or otherwise) by any of the foregoing.
"Hazardous Substances": all substances, wastes or materials, to
the extent subject to regulation as "hazardous substances" or
"hazardous waste" under any Environmental Laws.
"Indebtedness": with respect to any Person, (1) all obligations
of such Person for borrowed money or for the deferred purchase
price of property or services (other than trade liabilities
incurred in the ordinary course of business and payable in
accordance with customary practices) or which is evidenced by a
note, bond, debenture or similar instrument, (2) all obligations
of such Person under capital leases, (3) all obligations of such
Person in respect of letters of credit, banker's acceptances or
similar obligations issued or created for the account of such
Person, (4) liabilities arising under any interest rate
protection, future, option swap, cap or hedge agreement or
arrangement under which such Person is a party or beneficiary,
(5) all obligations under guaranties of such Person and (6) all
liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise
become liable for the payment thereof. For purposes of
clarification, Customer and IBM Credit acknowledge that preferred
stock of Customer held by IBM Credit shall not be considered
"Indebtedness" as defined herein.
"Investment": with respect to any Person (the "Investor"), (1)
any investment by the Investor in any other Person, whether by
means of share purchase, capital contribution, purchase or other
acquisition of a partnership or joint venture interest, loan,
time deposit, demand deposit or otherwise, and (2) any guaranty
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by the Investor of any Indebtedness or other obligation of any
other Person.
"Lien(s)": any lien, claim, charge, pledge, security interest,
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deed of trust, mortgage, other encumbrance or other arrangement
having the practical effect of the foregoing, including the
interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement.
"Line of Credit": as defined in Section 2.1.
"Material Adverse Effect": a material adverse effect (1) on the
business, operations, results of operations, assets, or financial
condition of the Customer, (2) on the aggregate value of the
Collateral or the aggregate amount which IBM Credit would be
likely to receive (after giving consideration to reasonably
likely delays in payment and reasonable costs of enforcement) in
the liquidation of such Collateral to recover the Obligations in
full, or (3) on the rights and remedies of IBM Credit under this
Agreement.
"Maximum Advance Amount": at any time, the lesser of (1) the
Line of Credit and (2) the Borrowing Base at such time.
"Obligations": all covenants, agreements, warranties, duties,
representations, loans, advances, interest (including interest
accruing on or after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like
proceeding, relating to Customer, whether or not a claim for
post-filing or post-petition interest is allowed in such
proceeding), fees, reasonable expenses, indemnities, liabilities
and Indebtedness of any kind and nature whatsoever now or
hereafter arising, owing, due or payable from Customer to IBM
Credit.
"Other Agreements": all security agreements, mortgages, leases,
instruments, documents, guarantees, schedules, contracts and
similar agreements executed by Customer and delivered to IBM
Credit, pursuant to this Agreement or otherwise, and all
amendments, supplements and other modifications to the foregoing
from time to time.
"Other Charges": as set forth in Attachment A.
"Outstanding Advances": at any time of determination, the sum of
the Outstanding A/R Advances and the Outstanding Term Loan.
"Outstanding A/R Advances": at any time of determination, the
sum of (1) the unpaid principal amount of all A/R Advances made
by IBM Credit under this Agreement; and (2) any finance charge,
fee, expense or other amount related to A/R Advances charged to
Customer's account with IBM Credit.
"Outstanding Term Loan": at any time of determination, the sum
of (1) the unpaid principal amount of the Term Loan; and (2) any
finance charge, fee, expense or other amount related to the Term
Loan charged to Customer's account with IBM Credit.
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"Permitted Indebtedness": any of the following:
(1) Indebtedness to IBM Credit;
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(2) Indebtedness described in Section VII of Attachment B;
(3) guaranties in favor of IBM Credit;
(4) guaranties on behalf of Subsidiaries of Customer in favor of
other creditors in an aggregate amount at any time not exceeding
fifty thousand dollars ($50,000.00);
(5) Customer's obligations under its lease relating to 000
Xxxxxxx Xxxx Xxxxx, Xxxxxxxxx, XX. as in existence on the date
hereof;
(6) Purchase Money Indebtedness incurred to purchase equipment
to be used in Customer's business in an amount not to exceed
$250,000 per fiscal quarter; and
(7) Other Indebtedness consented to by IBM Credit in writing
prior to the incurrence thereof.
"Permitted Liens": any of the following:
(1) Liens which are the subject of an intercreditor agreement,
in effect from time to time between IBM Credit and any other
secured creditor;
(2) Liens described in Section I of Attachment B;
(3) Liens of warehousemen, mechanics, materialmen, workers,
repairmen, common carriers, landlords and other similar Liens
arising by operation of law or otherwise, not waived in
connection herewith, for amounts that are not yet due and payable
or being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted if an adequate
reserve or other appropriate provisions shall have been made
therefor as required to be in conformity with GAAP and an adverse
determination in such proceedings could not reasonably be
expected to have a Material Adverse Effect;
(4) attachment or judgment Liens individually or in the
aggregatenot in excess of fifty thousand dollars ($50,000.00)
(exclusive of (A) any amounts that are duly bonded to the
satisfaction of IBM Credit or (B) any amount fully covered by
insurance as to which the insurance company has acknowledged its
obligation to pay such judgment in full);
(5) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which,
in the aggregate, are not substantial in amount and which do not
materially detract from the value of the property subject thereto
or materially interfere with the ordinary conduct of the business
of Customer;
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(6) extensions and renewals of the foregoing permitted Liens;
provided that (A) the aggregate amount of such extended or
renewed Liens do not exceed the original principal amount of the
Indebtedness which it secures, (B) such Liens do not extend to
any property other than property already previously subject to
the Lien and (C) such extended or renewed Liens are on terms and
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conditions no more restrictive than the terms and conditions of
the Liens being extended or renewed;
(7) Liens for taxes, assessments or governmental charges not
delinquent or being contested, in good faith, by appropriate
proceedings promptly instituted and diligently conducted if an
adequate reserve or other appropriate provisions shall have been
made therefor as required in order to be in conformity with GAAP
and an adverse determination in such proceedings could not
reasonably be expected to have a Material Adverse Effect;
(8) Liens arising out of deposits in connection with workers'
compensation, unemployment insurance or other social security or
similar legislation;
(9) Purchase Money Security Interests securing Purchase Money
Indebtedness constituting Permitted Indebtedness;
(10) Liens in favor of IBM Credit arising pursuant to this
Agreement; and
(11) other Liens arising after the date hereof and consented to
by IBM Credit in writing prior to the incurrence thereof.
"Person": any individual, association, firm, corporation,
partnership, trust, unincorporated organization or other entity
whatsoever.
"Policies": all policies of insurance required to be maintained
by Customer under this Agreement or any of the Other Agreements.
"Prime Rate": as of the date of determination, the average of
the rates of interest announced by Citibank, N.A., The Chase
Manhattan Bank, N.A. and Bank of America National Trust & Savings
Association as their prime or base rate, as of the last Business
Day of the calendar month immediately preceding the date of
determination, whether or not such announced rates are the actual
rates charged by such banking institutions to their most
creditworthy borrowers.
"Purchase Money Indebtedness": any Indebtedness (including
capital leases) incurred to finance the acquisition of assets to
be used in the Customer's business not to exceed the lesser of
(1) the purchase price or acquisition cost of such asset and (2)
the fair market value of such asset.
"Purchase Money Security Interest": any security interest
securing Purchase Money Indebtedness, which security interest
applies solely to the particular asset acquired with the Purchase
Money Indebtedness.
"Request for A/R Advance": as defined in Section 2.2.
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"Requirement of Law": as to any Person, the articles of
incorporation and by-laws of such Person, and any law, treaty,
rule or regulation or determination of an arbitrator or a court
or other governmental authority, in each case applicable to or
binding upon such Person or any of its property or to which such
Person or any of its property is subject.
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"Shortfall Transaction Fee": as defined on Attachment A.
"Subsidiary": with respect to any Person, any corporation or
other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of
directors or other Persons performing similar functions are at
the time directly or indirectly owned by such Person.
"Term Loan": as defined in Section 2.9.
"Termination Date": shall mean the earlier of (i) the fourth
anniversary of the date of this Agreement or such other date as
IBM Credit and Customer may agree to in writing from time to time
and (ii) the date that is ninety (90) days following the date on
which the Term Loan is paid in full.
"Voting Stock": securities, the holders of which are ordinarily,
in the absence of contingencies, entitled to elect the corporate
directors (or persons performing similar functions).
1.2. Other Defined Terms. Terms not otherwise defined in this
Agreement which are defined in the Uniform Commercial Code as in
effect in the State of New York (the "U.C.C.") shall have the
meanings assigned to them therein.
Section 2. LINE OF CREDIT/FINANCE CHARGES/OTHER CHARGES
2.1. Line of Credit. Subject to the terms and conditions set
forth in this Agreement, on and after the Closing Date to but not
including the date that is the earlier of (x) the date on which
this Agreement is terminated pursuant to Section 10.1 and (y) the
date on which IBM Credit terminates the Line of Credit pursuant
to Section 9.2, IBM Credit agrees to extend to the Customer a
line of credit ("Line of Credit") in the amount set forth in
Attachment A pursuant to which IBM Credit will make to the
Customer, from time to time, A/R Advances in an aggregate amount
at any one time outstanding not to exceed the Maximum Advance
Amount. Notwithstanding any other term or provision of this
Agreement, IBM Credit may, at any time and from time to time, in
its sole discretion, (i) temporarily increase the amount of the
Line of Credit above the amount set forth in Attachment A and
decrease the amount of the Line of Credit back to the amount of
the Line of Credit set forth in Attachment A, in each case upon
notice to Customer and (y) make Advances pursuant to this
Agreement upon the request of Customer in an aggregate amount at
any one time outstanding in excess of the Line of Credit.
2.2. A/R Advances. (A) Whenever Customer shall desire IBM
Credit to provide an A/R Advance, Customer shall deliver to IBM
Credit (i) written notice of Customer's request for such an
Advance ("Request for A/R Advance") and (ii) a Collateral
Management Report. For any requested A/R Advance pursuant to
which monies will be disbursed to Customer or any Person other
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than IBM Credit, a Request for A/R Advance shall be delivered to
IBM Credit on or prior to 1:00 p.m. (New York City, NY time) one
Business Day prior to the requested A/R Advance Date. The Request
for A/R Advance shall specify (i) the requested A/R Advance Date
and (ii) the amount of the requested A/R Advance. Customer may
deliver a Request for A/R Advance via facsimile. Any Request for
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A/R Advance delivered to IBM Credit shall be irrevocable.
(B) Subject to the terms and conditions of this Agreement,
on the A/R Advance Date specified in a Request for A/R Advance,
IBM Credit shall make the principal amount of each A/R Advance
available to the Customer in immediately available funds to an
account maintained by Customer. If IBM Credit is making an A/R
Advance hereunder on a day on which Customer is to repay all or
any part of an Outstanding Advance (or any other amount owing
hereunder), IBM Credit shall apply the proceeds of the A/R
Advance to such repayment and only an amount equal to the
difference, if any, between the amount of the A/R Advance and the
amount being repaid shall be made available to Customer as
provided in the immediately preceding sentence.
(C) Each A/R Advance shall accrue a finance charge on the
unpaid principal amount thereof, at a per annum rate equal to the
lesser of (a) the finance charge set forth in Attachment A to
this Agreement under the caption "A/R Finance Charge", and (b)
the highest rate from time to time permitted by applicable law.
If it is determined that amounts received from the Customer were
in excess of such highest rate, then the amount representing such
excess shall be considered reductions to principal of Advances.
(D) Unless otherwise due and payable at an earlier date,
the unpaid principal amount of each A/R Advance shall be due and
payable on the Termination Date.
2.3. Finance and Other Charges. (A) Finance charges shall be
calculated by multiplying the applicable Delinquency Fee Rate,
Term Loan Finance Charge or A/R Finance Charge provided for in
this Agreement by Customer's applicable Average Daily Balance.
The Delinquency Fee Rate, the Term Loan Finance Charge and the
A/R Finance Charge provided for in this Agreement are each
computed on the basis of an actual day, 360 day year.
(B) The Customer hereby agrees to pay to IBM Credit the
charges set forth as "Other Charges" in Attachment A. The
Customer also agrees to pay IBM Credit additional charges for any
returned items of payment received by Customer. The Customer
hereby acknowledges that any such charges are not interest but
that such charges, if unpaid, will constitute part of the
Outstanding Advances.
(C) The finance charges and Other Charges owed under this
Agreement, and any charges hereafter agreed to in writing by the
parties, will be set forth in IBM Credit's monthly billing
statement to Customer and shall be payable on the 15th day of
each month, or IBM Credit may, in its sole discretion, add unpaid
finance charges and Other Charges to the Customer's outstanding
Advances.
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(D) If any amount owed under this Agreement, including,
without limitation, any Advance, the Term Loan or any Shortfall
Amount, is not paid when due (whether at maturity, by
acceleration or otherwise), the unpaid amount thereof will bear a
late charge from and including its due date (or in the case of
any Shortfall Amount, from and including the date demand for
payment is made) to but not including the date IBM Credit
receives payment thereof, at a per annum rate equal to the lesser
of (a) the amount set forth in Attachment A to this Agreement as
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the "Delinquency Fee Rate" and (b) the highest rate from time to
time permitted by applicable law. In addition, if any Shortfall
Amount shall not be paid when due pursuant to Section 2.5 hereof,
Customer shall pay IBM Credit an additional late charge equal to
the Shortfall Transaction Fee. If it is determined that amounts
received from Customer were in excess of such highest rate, then
the amount representing such excess shall be considered
reductions to principal of Advances.
2.4. Statements Regarding Customer's Account. IBM Credit will
send statements of each transaction hereunder as well as monthly
billing statements to Customer with respect to Advances and other
charges due on Customer's account with IBM Credit. Each
statement of transaction and monthly billing statement shall be
deemed, absent manifest error, to be correct and shall constitute
an account stated with respect to each transaction or amount
described therein unless within seven (7) calendar days after
such statement of transaction or billing statement is received by
Customer, Customer provides IBM Credit written notice objecting
that such amount or transaction is incorrectly described therein
and specifying the error(s), if any, contained therein. IBM
Credit may at any time adjust such statements of transaction or
billing statements to comply with applicable law and this
Agreement.
2.5. Shortfall. If, on any date, the Outstanding A/R Advances
shall exceed the Maximum Advance Amount (such excess, the
"Shortfall Amount"), then A/R Advances in an amount equal to the
Shortfall Amount shall be due and payable on such date and
Customer shall on such date repay the Outstanding Advances in an
amount equal to such Shortfall Amount.
2.6. Application of Payments. Customer hereby agrees that all
checks and other instruments delivered to IBM Credit on account
of Customer's Obligations shall constitute conditional payment
until such items are actually collected by IBM Credit. Customer
waives the right to direct the application of any and all
payments at any time or times hereafter received by IBM Credit on
account of the Customer's Obligations. Subject to the provision
of Section 2.10, Customer agrees that IBM Credit shall have the
continuing exclusive right to apply and reapply any and all such
payments to Customer's Obligations in such manner as IBM Credit
may deem advisable notwithstanding any entry by IBM Credit upon
any of its books and records.
2.7. Prepayment and Reborrowing By Customer. (A) All amounts
received by IBM Credit, including all amounts in respect of
Accounts deposited to the Special Accounts, may be credited by
IBM Credit from time to time to the repayment of the Obligations
under this Agreement or, in IBM Credit's sole and absolute
discretion, may be disbursed to Customer. The crediting of
amounts received by IBM Credit in respect of such Obligations
shall in all cases be subject to the final collection thereof.
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(B) Customer may at any time prepay, without notice or
penalty, in whole or in part amounts owed under this Agreement.
IBM Credit may apply payments made to it (whether by the Customer
or otherwise) to pay finance charges and other amounts owing
under this Agreement first and then to the principal amount owed
by the Customer.
(C) Subject to the terms and conditions of this Agreement,
any amount prepaid or repaid to IBM Credit in respect to the
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Outstanding A/R Advances may be reborrowed by Customer in
accordance with the provisions of this Agreement.
2.8. Application of Collections by IBM Credit. Subject to the
provisions of Section 2.10, Customer agrees that IBM Credit may
from time to time apply any and all monies, reserves and proceeds
received or collected by IBM Credit with respect to the Accounts
and other Goods or property of Customer at any time or times
hereafter, including, without limitation, any and all funds
collected from the Lockbox and the Special Account, to pay or
prepay, as the case may be, any amounts owing by Customer to IBM
Credit whether or not such amounts are then due and payable, or
IBM Credit may, in its sole discretion, disburse any part of or
all such monies, reserves and proceeds to Customer. Customer
agrees that IBM Credit may, but shall not be obligated to, cause
funds collected from the Lockbox to be swept on a daily basis.
2.9. Term Loan. (A) On the Closing Date, the portion of the
Outstanding Advances pursuant to the Existing Financing Agreement
in an amount to be agreed upon by Customer and IBM Credit (which
amount shall include an Advance by IBM Credit to Customer
hereunder on the Closing Date in an amount not to exceed $500,000
to fund Customer's settlement of claims with certain unsecured
creditors) shall constitute a term loan to Customer (the "Term
Loan"). The Term Loan shall be subject to the Mandatory
Pre-Payments set forth in Section 2.10. Unless otherwise due and
payable at an earlier date (whether by acceleration, Mandatory
Pre-Payment or otherwise), the principal balance of the Term Loan
shall be due and payable on August 31, 2000 (or if such date is
not a Business Day, on the Business Day immediately preceding
such date).
(B) The Term Loan shall accrue a finance charge on the
unpaid principal amount thereof, at a per annum rate equal to the
lesser of (a) the finance charge set forth in Attachment A to
this Agreement under the caption "Term Loan Finance Charge", and
(b) the highest rate from time to time permitted by applicable
law. If it is determined that amounts received from the Customer
were in excess of such highest rate, then the amount representing
such excess shall be considered reductions to principal of
Advances.
2.10. Mandatory Pre-Payments. On each Mandatory Pre-Payment
Date, the Obligations of Customer to IBM Credit shall be due and
payable in an amount equal to the Mandatory Pre-Payment Amount.
For purposes of this Agreement, "Mandatory Pre-Payment Date"
shall mean each of the following dates: (i) the date of the
consummation of any sale, transfer or other disposition by
Customer of any assets (other than inventory and used or obsolete
equipment in the ordinary course of business) or operations of
Customer, including, without limitation, the sale, transfer or
other disposition of Customer's interest in Splash Technology
Holdings, Inc., UMAX Computer Corporation and Portrait Display
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Labs, Inc., (ii) the date of the receipt by Customer of any other
Non-Operating Cash Flow, (iii) the date of the consummation of
any equity investment, debt issue or capital infusion in Customer
from any source, and (iv) the thirtieth (30th) day following the
end of each fiscal quarter of Customer. For purposes of this
Agreement, "Mandatory Pre-Payment Amount" shall mean each of the
following amounts: (1) an amount equal to the proceeds of any
sale, transfer or other disposition set forth in clause (i) of
the definition of Mandatory Pre-Payment Date, (2) an amount equal
to the amount of any Non-Operating Cash Flow received by
Customer, (3) an amount equal to ten percent (10%) of the
proceeds of an equity investment, debt issue or capital infusion
set forth in clause (iii) of the definition of Mandatory
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Pre-Payment Date, and (4) an amount equal to fifty percent (50%)
of the Operating Cash Flow of Customer for the immediately
preceding fiscal quarter, in the case of each of clauses (1), (2)
and (3) of this sentence, net of all reasonable and customary
out-of-pocket costs and expenses thereof. For purposes of this
Agreement, "Non-Operating Cash Flow" shall mean the proceeds or
other amounts received by Customer in respect of any event other
than (x) for sales of inventory and used or obsolete equipment in
the ordinary course of business and (y) any event described in
clauses (1), (3) or (4) of the definition of Mandatory
Pre-Payment Amount. For purposes of this Agreement, "Operating
Cash Flow" shall mean, with respect to a fiscal quarter of
Customer, the greater of (x) the Operating Cash Flow of Customer
for such fiscal quarter determined on substantially the same
basis set forth in Attachment D and (y) seventy-five percent
(75%) of the projected Operating Cash Flow of Customer for such
fiscal quarter, as set forth on Attachment D. Customer shall
cause the Mandatory Pre-Payment Amounts to be transferred
directly by the transferor to an account of IBM Credit specified
by IBM Credit. The Mandatory Pre-Payment Amounts shall be
applied to the Obligations of Customer under this Agreement in
the following order: first, to pay any past-due finance charges,
second, to pay any outstanding Shortfall Amount, third, to pay
the Term Loan, and fourth, upon the request of IBM Credit, to
redeem shares of convertible preferred stock of Customer held by
IBM Credit. For purposes of clarification, Customer and IBM
Credit acknowledge that Customer shall not be obligated to
satisfy the Customer's obligations pursuant to the Line of Credit
(other than for past-due interest and principal, including any
Shortfall Amount) prior to redeeming the preferred stock held by
IBM Credit. Customer shall make such arrangements and execute
such agreements, documents, instruments and papers as IBM Credit
may request to carry out the terms of this paragraph 2.10.
2.11. Sale of Stock Splash. During the first year following the
registration of any of the common stock of Splash Technology
Holdings, Inc. ("Splash") in connection with a sale of any such
stock in a public offering (the "Splash Registration"), upon the
request of IBM Credit, Customer shall use its best efforts to
sell, as soon as possible thereafter, fifty percent (50%) of
Customer's interest in Splash (as of the date hereof and
excluding any shares subject to an option issued by Customer in
favor of IBM Credit). During the second year following the
Splash Registration, upon the request of IBM Credit, Customer
shall use its best efforts to sell, as soon as possible
thereafter, a percent of Customer's interest in Splash (as of the
date hereof and excluding any shares subject to an option issued
by Customer in favor of IBM Credit) equal to seventy-five percent
(75%) minus the percent of shares sold by Customer in the
previous year. During the third year following the Splash
Registration, upon the request of IBM Credit, Customer shall use
its best efforts to sell, as soon as possible thereafter, a
percent of Customer's interest in Splash (as of the date hereof
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and excluding any shares subject to an option issued by Customer
in favor of IBM Credit) equal to one hundred percent (100%) minus
the percent of shares sold by Customer in the previous two years.
In addition to the foregoing, if at any time following the Splash
Registration the amount of the Outstanding Term Loan shall exceed
ninety percent (90%) of the market value of Customer's interest
in Splash (as of the date of determination and excluding any
shares subject to an option issued by Customer in favor of IBM
Credit), upon the request of IBM Credit, Customer shall use its
best efforts to sell, as soon as possible thereafter, a percent
of Customer's interest in Splash (as of the date hereof and
excluding any shares subject to an option issued by Customer in
favor of IBM Credit) equal to one hundred percent (100%) minus
the percent of shares previously sold by Customer.
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Section 3. LINE OF CREDIT
ADDITIONAL PROVISIONS
3.1. Ineligible Accounts. IBM Credit and Customer agree that
IBM Credit shall have the sole right to determine eligibility of
Accounts from an Account debtor for purposes of determining the
Borrowing Base; however, without limiting such right, the
following Accounts will be deemed to be ineligible for purposes
of determining the Borrowing Base:
(A) Accounts created from the sale of goods and/or
performance of services on non-standard terms or that allow for
payment to be made more than thirty (30) days from the date of
such sale or performance of services;
(B) Accounts unpaid more than ninety (90) days from date of
invoice;
(C) Accounts payable by an account debtor if fifty percent
(50%) or more of the aggregate outstanding balance of all such
Accounts remain unpaid for more than ninety (90) days from the
date of invoice;
(D) Accounts payable by an account debtor (other than
Abacus to the extent Abacus is an Affiliate of Customer solely by
reason of an officer or director of Abacus being an officer or
director of Customer) that is an Affiliate of Customer, or an
officer, employee, agent, guarantor, stockholder or Affiliate of
Customer or is related to or has common shareholders, officers or
directors with Customer;
(E) Accounts arising from consignment sales;
(F) Accounts with respect to which the payment by the
account debtor is or may be conditional;
(G) Accounts with respect to which:
(i) the account debtor is not a commercial entity, or
(ii) the account debtor is not a resident of the United
States;
(H) Accounts payable by any account debtor to which
Customer is or may become liable for goods sold or services
rendered by such account debtor to Customer;
(I) Accounts arising from the sale or lease of goods
purchased for a personal, family or household purpose;
(J) Accounts arising from the sale or other disposition of
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goods that has been used for demonstration purposes or loaned or
leased by the Customer to another party;
(K) Accounts which are progress payment accounts or contra
accounts;
(L) Accounts upon which IBM Credit does not have a valid,
perfected, first priority security interest;
(M) Accounts payable by an account debtor that is or
Customer knows will become, subject to proceedings under United
States Bankruptcy Law or other law for the relief of debtors;
(N) Accounts that are not payable in US dollars;
(O) Accounts payable by any account debtor that is a
remarketer of computer hardware or software products and whose
purchases of such products from Customer have been financed by
another person who pays the proceeds of such financing directly
to Customer on behalf of such debtor;
(P) Accounts arising from the sale or lease of goods which
are billed to any account debtor but have not yet been shipped by
Customer;
(Q) Accounts with respect to which Customer has permitted
or agreed to any extension, compromise or settlement, or made any
change or modification of any kind or nature, including, but not
limited to, any change or modification to the terms relating
thereto;
(R) Accounts that do not arise from undisputed bona fide
transactions completed in accordance with the terms and
conditions contained in the invoices, purchase orders and
contracts relating thereto;
(S) Accounts that are discounted for the full payment term
specified in Customer's terms and conditions with its account
debtors, or for any longer period of time;
(T) Accounts on cash on delivery (C.O.D.) terms;
(U) Accounts arising from maintenance or service contracts
that are billed in advance of full performance of service;
(V) Accounts arising from bartered transactions;
(W) Accounts arising from incentive payments, rebates,
discounts, credits, and refunds from a supplier; and
(X) Any and all other Accounts that IBM Credit deems, in
its reasonable discretion, to be ineligible.
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The aggregate of all Accounts that are not ineligible Accounts
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shall hereinafter be referred to as "Eligible Accounts".
3.2. Reimbursement for Charges. Customer agrees to pay for all
costs and expenses of Customer's bank in respect to collection of
checks and other items of payment, all fees relating to the use
and maintenance of the Lockbox and the Special Account (each as
defined in Section 3.3) and with respect to remittances of
proceeds of the Advances hereunder.
3.3. Lockbox and Special Account. Customer and its Subsidiaries
shall establish and maintain lockbox(es) (each, a "Lockbox") at
the address(es) set forth in Attachment A with the financial
institution(s) listed in Attachment A (each, a "Bank") pursuant
to an agreement between the Customer and each Bank in form and
substance satisfactory to IBM Credit. Customer shall also
establish and maintain a deposit account which shall contain only
proceeds of Customer's Collateral ("Special Account") with each
Bank. Customer shall enter into and maintain a contingent
blocked account agreement with each Bank for the benefit of IBM
Credit in form and substance satisfactory to IBM Credit pursuant
to which, among other things, such Bank shall agree that, upon
notice from IBM Credit, disbursements from the Special Account
shall be made only as IBM Credit shall direct. Customer
acknowledges that IBM Credit has notified or will notify each
Bank that disbursements from the Special Account shall be made
only as IBM Credit shall direct, and consents to such
notification.
3.4. Deposit Accounts. Customer shall cause to be maintained
with each bank or other financial institution at which Customer
or any of its Subsidiaries has funds (each, a "Deposit Account
Institution"), an agreement between IBM Credit and such Deposit
Account Institution, in form and substance satisfactory to IBM
Credit, to perfect IBM Credit's security interest in such funds
("Deposit Account Agreement"). Customer shall not deposit funds
into, or allow funds to remain in any account that is not subject
to a Deposit Account Agreement.
3.5. Collections. Customer shall instruct all account debtors
and all transferors of amounts described in Section 2.10 hereof
to remit payments directly to a Lockbox or a Special Account. In
addition, Customer shall have such instruction (i) printed in
conspicuous type on all invoices sent to Account debtors and (ii)
include as a term of any agreement with any such transferor and
shall use such other reasonable efforts to cause account debtors
and transferors to comply with such instructions as IBM Credit
may request. Customer shall instruct the Bank to deposit all
remittances to such Bank's Lockbox into its Special Account.
Without limiting the Customer's foregoing obligations, if, at any
time, Customer receives a remittance directly from an account
debtor or other transferor, then Customer shall make entries on
its books and records in a manner that shall reasonably identify
such remittances and shall keep a separate account on its record
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books of all remittances so received and deposit the same into
the Special Account. Until so deposited into the Special
Account, Customer shall keep all remittances separate and apart
from Customer's other property so that they are capable of
identification as the proceeds of Collateral in which IBM Credit
has a security interest.
3.6. Application of Remittances and Credits. Customer shall
apply all remittances with respect to Accounts against the
aggregate of Customer's outstanding Accounts no later than the
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end of the Business Day on which such remittances are deposited
into the Special Account. Customer also agrees to apply each
remittance with respect to Accounts against its respective
Account no later than three (3) Business Days from the date such
remittance is deposited into the Special Account. In addition,
Customer shall promptly apply any credits owing in respect to any
Account when due.
3.7. Power of Attorney. Customer hereby irrevocably appoints
IBM Credit, with full power of substitution, as its true and
lawful attorney-in-fact with full power, in good faith and in
compliance with commercially reasonable standards, in the
discretion of IBM Credit, to:
(A) sign the name of Customer on any document or instrument
that IBM Credit shall deem necessary or appropriate to perfect
and maintain perfected the security interest in the Collateral
contemplated under this Agreement and the Other Agreements;
(B) endorse the name of Customer upon any of the items of
payment of proceeds and deposit the same in the account of IBM
Credit for application to the Obligations; and
upon the occurrence and during the continuance of an Event of
Default as defined in Section 9.1 hereof:
(C) demand payment, enforce payment and otherwise exercise
all Customer's rights and remedies with respect to the collection
of any Accounts;
(D) settle, adjust, compromise, extend or renew any
Accounts;
(E) settle, adjust or compromise any legal proceedings
brought to collect any Accounts;
(F) sell or assign any Accounts upon such terms, for such
amounts and at such time or times as IBM Credit may deem
advisable;
(G) discharge and release any Accounts;
(H) prepare, file and sign Customer's name on any Proof of
Claim in Bankruptcy or similar document against any Account
debtor;
(I) prepare, file and sign Customer's name on any notice of
lien, claim of mechanic's lien, assignment or satisfaction of
lien or mechanic's lien, or similar document in connection with
any Accounts;
(J) endorse the name of Customer upon any chattel paper,
document, instrument, invoice, freight xxxx, xxxx of lading or
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similar document or agreement relating to any Account or goods
pertaining thereto;
(K) sign the name of Customer to requests for verification
of Accounts and notices thereof to Account debtors;
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(L) sign the name of Customer on any document or instrument
that IBM Credit shall deem necessary or appropriate to enforce
any and all remedies it may have under this Agreement, at law or
otherwise;
(M) make, settle and adjust claims under the Policies with
respect to the Collateral and endorse Customer's name on any
check, draft, instrument or other item of payment of the proceeds
of the Policies with respect to the Collateral; and
(N) take control in any manner of any term of payment of
proceeds and for such purpose to notify the postal authorities to
change the address for delivery of mail addressed to Customer to
such address as IBM Credit may designate.
The power of attorney granted by this Section is for value and
coupled with an interest and is irrevocable so long as this
Agreement is in effect or any Obligations remain outstanding.
Nothing done by IBM Credit pursuant to such power of attorney
will reduce any of Customer's Obligations other than Customer's
payment Obligations to the extent IBM Credit has received monies.
Section 4. SECURITY -- COLLATERAL
4.1 Grant. To secure Customer's full and punctual payment and
performance of the Obligations when due (whether at the stated
maturity, by acceleration or otherwise), Customer hereby grants
IBM Credit a security interest in all of Customer's right, title
and interest in and to all property and assets of every kind,
character and description whatsoever, whether now owned or
hereafter acquired or existing and wherever located, including
but not limited to the following:
(A) all inventory and equipment, and all parts thereof,
attachments, accessories and accessions thereto, products thereof
and documents therefor;
(B) all accounts, contract rights, chattel paper,
instruments, deposit accounts, obligations of any kind owing to
Customer, whether or not arising out of or in connection with the
sale or lease of goods or the rendering of services and all
books, invoices, documents and other records in any form
evidencing or relating to any of the foregoing;
(C) general intangibles, including patents, trademarks,
trade names and copyrights;
(D) all rights now or hereafter existing in and to all
mortgages, security agreements, leases or other contracts
securing or otherwise relating to any of the foregoing; and
(E) all substitutions and replacements for all of the
foregoing, all proceeds of all of the foregoing and, to the
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extent not otherwise included, all payments under insurance or
any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing.
All of the above assets shall be collectively defined herein as
the "Collateral".
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Customer covenants and agrees with IBM Credit that: (a) the
security provided by this Agreement is in addition to any other
security from time to time held by IBM Credit and (b) the
security hereby created is a continuing security interest and
will cover and secure the payment and performance of all
Obligations both present and future of Customer to IBM Credit
pursuant to this Agreement and the Other Agreements.
4.2. Further Assurances. Customer shall, from time to time upon
the request of IBM Credit, execute and deliver to IBM Credit, or
cause to be executed and delivered, at such time or times as IBM
Credit may request, such other and further documents,
certificates and instruments that IBM Credit may deem necessary
to perfect and maintain perfected IBM Credit's security interests
in the Collateral and that IBM Credit may deem necessary to fully
consummate all of the transactions contemplated under this
Agreement and the Other Agreements. Customer shall make
appropriate entries on its books and records disclosing IBM
Credit's security interests in the Collateral.
Section 5. CONDITIONS PRECEDENT
5.1. Conditions Precedent to the Effectiveness of this
Agreement. The effectiveness of this Agreement is subject to the
satisfaction of, or waiver in writing by IBM Credit of compliance
with, the following conditions precedent on or prior to September
13, 1996:
(A) this Agreement executed and delivered by Customer and
IBM Credit and receipt by IBM Credit of all attachments hereto in
form and substance satisfactory to IBM Credit in its sole
discretion;
(B) (i) copies of the resolutions of the Board of Directors
of Customer in form and substance satisfactory to IBM Credit in
its sole and absolute discretion certified by the secretary or
assistant secretary of Customer authorizing the execution,
delivery and performance of this Agreement and each Other
Agreement executed and delivered in connection herewith, (ii) a
certificate of the secretary or an assistant secretary of
Customer, in form and substance satisfactory to IBM Credit in its
sole and absolute discretion, certifying the names and true
signatures of the officers of Customer authorized to sign this
Agreement and the Other Agreements and (iii) copies of the
articles of incorporation and by-laws of Customer in form and
substance satisfactory to IBM Credit in its sole and absolute
discretion certified by the secretary or assistant secretary of
Customer;
(C) certificates dated as of a recent date from the
Secretary of State or other appropriate authority evidencing the
good standing of Customer in the jurisdiction of its organization
and in each other jurisdiction where the ownership or lease of
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its property or the conduct of its business requires it to
qualify to do business unless the failure to so qualify could not
reasonably be expected to have a Material Adverse Effect;
(D) copies of all approvals and consents from any Person,
in each case in form and substance satisfactory to IBM Credit in
its sole and absolute discretion, which are required to enable
Customer to authorize, or required in connection with, (a) the
execution, delivery or performance of this Agreement and each of
the Other Agreements, and (b) the legality, validity, binding
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effect or enforceability of this Agreement and each of the Other
Agreements and (c) the execution delivery or performance and
legality, validity, binding effect or enforceability of the
restructuring contemplated in connection herewith;
(E) a lockbox agreement executed by Customer and each Bank,
in form and substance satisfactory to IBM Credit;
(F) a contingent blocked account agreement executed by
Customer and each Bank in form and substance satisfactory to IBM
Credit;
(G) the security interest of the Credit Managers
Association shall have been released, the security agreement
between Customer and the Credit Managers Association shall have
been terminated, UCC termination statements relating thereto
shall have been filed, appropriate filings shall have been made
terminating any filings made by the Credit Managers Association
with the United States Patent and Trademark Office and the United
States Copyright Office, all in form and substance satisfactory
to IBM Credit in its sole and absolute discretion;
(H) a favorable opinion of counsel for Customer,
satisfactory to IBM Credit, in form and substance satisfactory to
IBM Credit and Customer;
(I) UCC-1 financing statements for each jurisdiction
reasonably requested by IBM Credit executed by Customer and each
guarantor whose guaranty to IBM Credit is intended to be secured
by a pledge of its assets and all other statements, instruments
and act (including, possession by IBM Credit) necessary to
perfect IBM Credit's security interest in the Collateral;
(J) Customer shall have delivered to IBM Credit convertible
preferred stock of the Customer and warrants to purchase common
stock of Customer, in form and substance satisfactory to IBM
Credit in its sole and absolute discretion;
(K) Customer and IBM Credit shall have executed a
registration rights agreement in form and substance satisfactory
to IBM Credit in its sole and absolute discretion, which
agreement shall include terms providing for a fee to IBM Credit
in an amount equal to $3,000,000 in the event the securities
obtained by IBM Credit pursuant to the recapitalization
(including those securities set forth in paragraph J above) are
not subject to an effective registration statement on or prior to
a date to be agreed upon by Customer and IBM Credit;
(L) The existing creditors of Customer (other than IBM
Credit) shall have either (i) converted their claims against
Customer for common stock of Customer or (ii) released their
claims against Customer for cash in an amount not to exceed
$500,000 in the aggregate, other than current claims payable by
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customer in an amount satisfactory to IBM Credit, all in form and
substance satisfactory to IBM Credit in its sole and absolute
discretion;
(M) All acts necessary or desirable, in the sole and
absolute discretion of IBM Credit, to the recapitalization of
Customer outlined in the Private Placement Memorandum dated
August 9, 1996 shall have occurred and be in full force and
effect;
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(N) the statements, certificates, documents, instruments,
financing statements, agreements and information set forth in
Attachment A and Attachment B; and
(O) all such other statements, certificates, documents,
instruments, financing statements, agreements and other
information with respect to the matters contemplated by this
Agreement as IBM Credit shall have reasonably requested.
5.2 Conditions to each Advance. No Advance will be required to
be made or renewed by IBM Credit under this Agreement unless, on
and as of the date of such Advance, the following statements
shall be true to the satisfaction of IBM Credit:
(A) The representations and warranties contained in this
Agreement or in any document, instrument or agreement executed in
connection herewith, are true and correct in all material
respects on and as of the date of such Advance as though made on
and as of such date;
(B) No event has occurred and is continuing or after giving
effect to such Advance or the application of the proceeds thereof
would result which would constitute a Default;
(C) No event has occurred and is continuing which could
reasonably be expected to have a Material Adverse Effect;
(D) Both before and after giving effect to the making of
such Advance, no Shortfall Amount exists.
Except as Customer has otherwise disclosed to IBM Credit in
writing prior to each request, each request (or deemed request
pursuant to Section 2.2 (D)) for an Advance hereunder and the
receipt (or deemed receipt) by the Customer of the proceeds of
any Advance hereunder shall be deemed to be a representation and
warranty by Customer that, as of and on the date of such Advance,
the statements set forth in (A) through (D) above are true
statements. No such disclosures by Customer to IBM Credit shall
in any manner be deemed to satisfy the conditions precedent to
each Advance that are set forth in this Section 5.2.
Section 6. REPRESENTATIONS AND WARRANTIES
To induce IBM Credit to enter into this Agreement, Customer
represents and warrants to IBM Credit as follows:
6.1. Organization and Qualifications. Customer and each of its
Subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction
of its incorporation, (ii) has the power and authority to own its
properties and assets and to transact the businesses in which it
presently is engaged and (iii) except as otherwise disclosed in
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Attachment B or to the extent the failure to so qualify could not
reasonably be expected to have a Material Adverse Effect, is duly
qualified and is authorized to do business and is in good
standing in each jurisdiction where it presently is engaged in
business and is required to be so qualified.
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6.2. Rights in Collateral; Priority of Liens. Customer and each
of its Subsidiaries owns the property granted by it,
respectively, as Collateral to IBM Credit, free and clear of any
and all Liens in favor of third parties except for the Permitted
Liens. The Liens granted by the Customer and each of its
Subsidiaries pursuant to this Agreement, the Guaranties and the
Other Agreements in the Collateral constitute the valid and
enforceable first, prior and perfected Liens on the Collateral,
except to the extent any Liens that are prior to IBM Credit's
Liens are the subject of an intercreditor agreement between IBM
Credit and the holder of such Lien.
6.3. No Conflicts. The execution, delivery and performance by
Customer of this Agreement and each of the Other Agreements (i)
are within its corporate power; (ii) have been duly authorized by
all necessary corporate action; (iii) are not in contravention in
any respect of any Requirement of Law or any indenture, contract,
lease, agreement, instrument or other commitment to which it is a
party or by which it or any of its properties are bound; (iv) do
not require the consent, registration or approval of any
Governmental Authority or any other Person (except such as have
been duly obtained, made or given, and are in full force and
effect); and (v) will not result in the imposition of any Liens
upon any of its properties (other than for Liens in favor of IBM
Credit).
6.4. Enforceability. This Agreement and all of the other
documents executed and delivered by the Customer in connection
herewith are the legal, valid and binding obligations of
Customer, and are enforceable in accordance with their terms,
except as such enforceability may be limited by the effect of any
applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws affecting creditors'
rights generally or the general equitable principles relating
thereto.
6.5. Locations of Offices, Records and Inventory. The address
of the principal place of business and chief executive office of
Customer is as set forth on Attachment B or on any notice
provided by Customer to IBM Credit pursuant to Section 7.7(C) of
this Agreement. The books and records of Customer, and all of
its chattel paper (other than the chattel paper delivered to IBM
Credit pursuant to Section 7.14(E)) and records of Accounts, are
maintained exclusively at such location. There is no
jurisdiction in which Customer has any assets, equipment or
inventory (except for vehicles and inventory in transit for
processing) other than those jurisdictions identified on
Attachment B or on any notice provided by Customer to IBM Credit
pursuant to Section 7.7(C) of this Agreement. Attachment B, as
amended from time to time by any notice provided by Customer to
IBM Credit in accordance with Section 7.7(C) of this Agreement,
also contains a complete list of the legal names and addresses of
each warehouse at which the Customer's inventory is stored. None
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of the receipts received by Customer from any warehouseman states
that the goods covered thereby are to be delivered to bearer or
to the order of a named person or to a named person and such
named person's assigns.
6.6. Fictitious Business Names. Customer has not used any
corporate or fictitious name during the five (5) years preceding
the date of this Agreement, other than those listed on Attachment
B.
6.7. Organization. All of the outstanding capital stock of
Customer has been validly issued, is fully paid and
nonassessable.
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6.8. No Judgments or Litigation. Except as set forth on
Attachment B, no judgments, orders, writs or decrees are
outstanding against Customer nor is there now pending or, to the
best of Customer's knowledge after due inquiry, threatened, any
litigation, contested claim, investigation, arbitration, or
governmental proceeding by or against Customer.
6.9. No Defaults. Except as set forth on Attachment B, the
Customer is not in default under any term of any indenture,
contract, lease, agreement, instrument or other commitment to
which it is a party or by which it, or any of its properties are
bound. Customer has no knowledge of any dispute regarding any
such indenture, contract, lease, agreement, instrument or other
commitment. No Default or Event of Default has occurred and is
continuing.
6.10. Labor Matters. Except as set forth on any notice provided
by Customer to IBM Credit pursuant to Section 7.1(F) of this
Agreement, Customer is not a party to any labor dispute. There
are no strikes or walkouts or labor controversies pending or
threatened against the Customer which could reasonably be
expected to have a Material Adverse Effect.
6.11. Compliance with Law. Customer has not violated or failed
to comply with any Requirement of Law or any requirement of any
self regulatory organization.
6.12. ERISA. Each "employee benefit plan", "employee pension
benefit plan", "defined benefit plan", or "multi-employer benefit
plan", which Customer has established, maintained, or to which it
is required to contribute (collectively, the "Plans") is in
compliance with all applicable provisions of ERISA and the Code
and the rules and regulations thereunder as well as the Plan's
terms and conditions. There have been no "prohibited
transactions" and no "reportable event" has occurred within the
last 60 months with respect to any Plan. Customer has no
"multi-employer benefit plan". As used in this Agreement the
terms "employee benefit plan", "employee pension benefit plan",
"defined benefit plan", and "multi-employer benefit plan" have
the respective meanings assigned to them in Section 3 of ERISA
and any applicable rules and regulations thereunder. The
Customer has not incurred any "accumulated funding deficiency"
within the meaning of ERISA or incurred any liability to the
Pension Benefit Guaranty Corporation (the "PBGC") in connection
with a Plan (other than for premiums due in the ordinary course).
6.13. Compliance with Environmental Laws. Except as otherwise
disclosed in Attachment B:
(A) The Customer has obtained all government approvals
required with respect to the operation of its businesses under
any Environmental Law.
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(B) (i) the Customer has not generated, transported or
disposed of any Hazardous Substance; (ii) the Customer is not
currently generating, transporting or disposing of any Hazardous
Substance; (iii) the Customer has no knowledge that (a) any of
its real property (whether owned, leased, or otherwise directly
or indirectly controlled) has been used for the disposal of or
has been contaminated by any Hazardous Substance, or (b) any of
its business operations have contaminated lands or waters of
others with any Hazardous Substance; (iv) the Customer and its
respective assets are not subject to any Environmental Liability
and, to the best of the Customer's knowledge, any threatened
Environmental Liability; (v) the Customer has not received any
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notice of or otherwise learned of any governmental investigation
evaluating whether any remedial action is necessary to respond to
a release or threatened release of any Hazardous Substance for
which the Customer may be liable; (vi) the Customer is not in
violation of any Environmental Law; (vii) there are no
proceedings or investigations pending against Customer with
respect to any violation or alleged violation of any
Environmental Law; provided however, that the parties acknowledge
that any generation, transportation, use, storage and disposal of
certain such Hazardous Substances in Customer's or its
Subsidiaries' business shall be excluded from representations (i)
and (ii) above so long as, and only so long as, Customer is at
all times generating, transporting, utilizing, storing and
disposing such Hazardous Substances in accordance with all
applicable Environmental Laws and in a manner designed to
minimize the risk of any spill, contamination, release or
discharge of Hazardous Substances other than as authorized by
Environmental Laws.
6.14. Intellectual Property. Customer possesses such assets,
licenses, patents, patent applications, copyrights, service
marks, trademarks, trade names and trade secrets and all rights
and other property relating thereto or arising therefrom
("Intellectual Property") as are necessary or advisable to
continue to conduct its present and proposed business activities.
6.15. Licenses and Permits. Customer has obtained and holds in
full force and effect all franchises, licenses, leases, permits,
certificates, authorizations, qualifications, easements, rights
of way and other rights and approvals which are necessary for the
operation of its businesses as presently conducted. Customer is
not in violation of the terms of any such franchise, license,
lease, permit, certificate, authorization, qualification,
easement, right of way, right or approval.
6.16. Investment Company. The Customer is not (i) an investment
company or a companycontrolled by an investment company within
the meaning of the Investment Company Act of 1940, as amended,
(ii) a holding company or a subsidiary of a holding company, or
an Affiliate of a holding company or of a subsidiary of a holding
company, within the meaning of the Public Utility Holding Company
Act of 1935, as amended, or (iii) subject to any other law which
purports to regulate or restrict its ability to borrow money or
to consummate the transactions contemplated by this Agreement or
the Other Agreements or to perform its obligations hereunder or
thereunder.
6.17. Taxes and Tax Returns. Except as otherwise disclosed on
Attachment B, Customer has timely filed all federal, state, and
local tax returns and other reports which it is required by law
to file, and has either duly paid all taxes, fees and other
governmental charges indicated to be due on the basis of such
reports and returns or pursuant to any assessment received by the
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Customer, or made provision for the payment thereof in accordance
with GAAP. The charges and reserves on the books of the Customer
in respect of taxes or other governmental charges are in
accordance with GAAP. No tax liens have been filed against
Customer or any of its property.
6.18. Status of Accounts. Each Account is based on an actual
and bona fide sale and delivery of goods or rendition of services
to customers, made by Customer, in the ordinary course of its
business; the goods and inventory being sold and the Accounts
created are its exclusive property and are not and shall not be
subject to any Lien, consignment arrangement, encumbrance,
security interest or financing statement whatsoever (other than
Permitted Liens). The Customer's customers have accepted goods
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or services and owe and are obligated to pay the full amounts
stated in the invoices according to their terms. There are no
proceedings or actions known to Customer which are pending or
threatened against any Material Account Obligor (as defined in
Section 7.14(B) of this Agreement) of any of the Accounts which
could reasonably be expected to result in a material adverse
effect on the obligor's ability to pay the full amounts due to
Customer.
6.19. Affiliate/Subsidiary Transactions. Except as set forth on
Attachment B, Customer is not a party to or bound by any
agreement or arrangement (whether oral or written) to which any
Affiliate or Subsidiary of the Customer is a party except (i) in
the ordinary course of and pursuant to the reasonable
requirements of Customer's business and (ii) upon fair and
reasonable terms no less favorable to Customer than it could
obtain in a comparable arm's-length transaction with an
unaffiliated Person.
6.20. Accuracy and Completeness of Information. All factual
information furnished by or on behalf of the Customer to IBM
Credit or the Auditors for purposes of or in connection with this
Agreement or any Other Agreement, or any transaction contemplated
hereby or thereby is or will be true and accurate in all material
respects on the date as of which such information is dated or
certified and not incomplete by omitting to state any material
fact necessary to make such information not misleading at such
time.
6.21. Recording Taxes. All recording taxes, recording fees,
filing fees and other charges payable in connection with the
filing and recording of this Agreement have either been paid in
full by Customer or arrangements for the payment of such amounts
by Customer have been made to the satisfaction of IBM Credit.
6.22. Indebtedness. Customer (i) has no Indebtedness, other
than Permitted Indebtedness; and (ii) has not guaranteed the
obligations of any other Person (except as permitted by Section
8.4).
Section 7. AFFIRMATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment
and satisfaction of all Obligations:
7.1. Financial and Other Information. Customer shall cause to
be furnished to IBM Credit the following information within the
following time periods:
(A) as soon as available and in any event within ninety
(90) days after the end of each fiscal year of Customer (i)
audited Financial Statements (provided that, to the extent not
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otherwise audited by the Auditors, the consolidating Financial
Statements may be unaudited) as of the close of the fiscal year
and for the fiscal year, together with a comparison to the
Financial Statements for the prior year, in each case accompanied
by (a) either an opinion of the Auditors without a "going
concern" or like qualification or exception, or qualification
arising out of the scope of the audit or, if so qualified, an
opinion which shall be in scope and substance reasonably
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satisfactory to IBM Credit, (b) such Auditors' "Management
Letter" to Customer, if any, (c) a written statement signed by
the Auditors stating that in the course of the regular audit of
the business of Customer and its consolidated Subsidiaries, which
audit was conducted by the Auditors in accordance with generally
accepted auditing standards, the Auditors have not obtained any
knowledge of the existence of any Default under any provision of
this Agreement, or, if such Auditors shall have obtained from
such examination any such knowledge, they shall disclose in such
written statement the existence of the Default and the nature
thereof, it being understood that such Auditors shall have no
liability, directly or indirectly, to anyone for failing to
obtain knowledge of any such Default; (ii) if composed, a
narrative discussion of the consolidated financial condition and
results of operations and the consolidated liquidity and capital
resources of Customer and its Subsidiaries for such fiscal year
prepared by an Approved Officer; and (iii) a Compliance
Certificate along with a schedule, in substantially the form of
Attachment C hereto, of the calculations used in determining, as
of the end of such fiscal year, whether Customer is in compliance
with the financial covenants set forth in Attachment A;
(B) as soon as available and in any event within forty-five
(45) days after the end of each fiscal quarter of Customer (i)
Financial Statements as of the end of such period and for the
fiscal year to date, together with a comparison to the Financial
Statements for the same periods in the prior year, all in
reasonable detail and duly certified (subject to normal year-end
audit adjustments and except for the absence of footnotes) by an
Approved Officer of Customer as having been prepared in
accordance with GAAP; (ii) if composed, a narrative discussion of
the consolidated financial condition and results of operations
and the consolidated liquidity and capital resources of Customer
and its Subsidiaries for such period and for the fiscal year to
date prepared by an Approved Officer of Customer; and (iii) a
Compliance Certificate along with a schedule, in substantially
the form of Attachment C hereto, of the calculations used in
determining, as of the end of such fiscal quarter, whether
Customer is in compliance with the financial covenants set forth
in Attachment A;
(C) promptly after Customer obtains knowledge of (i) the
occurrence of a Default or Event of Default, or (ii) the
existence of any condition or event which would result in the
Customer's failure to satisfy the conditions precedent to
Advances set forth in Section 5, a certificate of an Approved
Officer of Customer specifying the nature thereof and the
Customer's proposed response thereto, each in reasonable detail;
(D) promptly after Customer obtains knowledge of (i) any
proceeding(s) being instituted or threatened to be instituted by
or against Customer in any federal, state, local or foreign court
or before any commission or other regulatory body (federal,
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state, local or foreign), or (ii) any actual or prospective
change, development or event which, in any such case, has had or
could reasonably be expected to have a Material Adverse Effect, a
certificate of an Approved Officer of Customer specifying the
nature thereof and the Customer's proposed response thereto, each
in reasonable detail;
(E) promptly after Customer obtains knowledge that (i) any
order, judgment or decree in excess of fifty thousand dollars
($50,000.00) shall have been entered against Customer or any of
its properties or assets, or (ii) it has received any
notification of a material violation of any Requirement of Law
from any Governmental Authority, a certificate of an Approved
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Officer of Customer specifying the nature thereof and the
Customer's proposed response thereto, each in reasonable detail;
(F) promptly after Customer learns of any material labor
dispute to which Customer may become a party, any strikes or
walkouts relating to any of its plants or other facilities, or
the expiration of any labor contract to which Customer is a party
or by which it is bound, a certificate of an Approved Officer of
Customer specifying the nature thereof and the Customer's
proposed response thereto, each in reasonable detail;
(G) within five (5) Business Days after request by IBM
Credit, any written certificates, schedules and reports together
with all supporting documents as IBM Credit may reasonably
request relating to the Collateral or the Customer's or any of
its Subsidiary's business affairs and financial condition;
(H) on the first Business Day of each week, a Collateral
Management Report (with back-up in form and detail satisfactory
to IBM Credit) as of the last Business Day of the immediately
preceding week;
(I) along with the Financial Statements set forth in
Section 7.1(A) and (B), and at such other times as IBM Credit may
request, the name, address and phone number of each of its
account debtors' primary contacts for each Account on the
Accounts aging report contained in its most recent Collateral
Management Report; and
(J) within three (3) days after the same are sent, copies
of all financial statements and reports which Customer sends to
its stockholders, and within three (3) days after the same are
filed, copies of all financial statements, reports and any other
documents which Customer may make to, or file with, the
Securities and Exchange Commission or any successor or analogous
governmental authority.
Each certificate, schedule and report provided by Customer to IBM
Credit shall be signed by an Approved Officer of Customer, which
signature shall be deemed a representation and warranty that the
information contained in such certificate, schedule or report is
true and accurate in all material respects on the date as of
which such certificate, schedule or report is made and does not
omit to state a material fact necessary in order to make the
statements contained therein not misleading at such time. Each
financial statement delivered pursuant to this Section 7.1 shall
be prepared in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods.
7.2. Location of Collateral. The inventory, equipment and other
tangible Collateral shall be kept or sold at the addresses as set
forth on Attachment B or on any notice provided by Customer to
IBM Credit in accordance with Section 7.7(C). Such locations
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shall be certified quarterly to IBM Credit substantially in the
form of Attachment G.
7.3. Changes in Customer. Customer shall provide 30 days prior
written notice to IBM Credit of any change in Customer's name,
chief executive office and principal place of business,
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organization, form of ownership or corporate structure; provided,
however, that Customer's compliance with this covenant shall not
relieve it of any of its other obligations or any other
provisions under this Agreement or any Other Agreement limiting
actions of the type described in this Section.
7.4. Corporate Existence. Customer shall (A) maintain its
corporate existence, maintain in full force and effect all
licenses, bonds, franchises, leases and qualifications to do
business, and all contracts and other rights necessary to the
profitable conduct of its business, (B) continue in, and limit
its operations to, the same general lines of business as
presently conducted by it unless otherwise permitted in writing
by IBM Credit and (C) comply with all Requirements of Law.
7.5. ERISA. Customer shall promptly notify IBM Credit in
writing after it learns of the occurrence of any event which
would constitute a "reportable event" under ERISA or any
regulations thereunder with respect to any Plan, or that the PBGC
has instituted or will institute proceedings to terminate any
Plan. Notwithstanding the foregoing, the Customer shall have no
obligation to notify IBM Credit as to any "reportable event" as
to which the 30-day notice requirement of Section 4043(b) has
been waived by the PBGC, until such time as such Customer is
required to notify the PBGC of such reportable event. Such
notification shall include a certificate of an Approved Officer
of Customer setting forth details as to such "reportable event"
and the action which Customer proposes to take with respect
thereto, together with a copy of any notice of such "reportable
event" which may be required to be filed with the PBGC, or any
notice delivered by the PBGC evidencing its intent to institute
such proceedings. Upon request of IBM Credit, Customer shall
furnish, or cause the plan administrator to furnish, to IBM
Credit the most recently filed annual report for each Plan.
7.6. Environmental Matters. (A) Customer and any other Person
under Customer's control (including, without limitation, agents
and Affiliates under such control) shall (i) comply with all
Environmental Laws in all material respects, and (ii) undertake
to use commercially reasonable efforts to prevent any unlawful
release of any Hazardous Substance by Customer or such Person
into, upon, over or under any property now or hereinafter owned,
leased or otherwise controlled (directly or indirectly) by
Customer.
(B) Customer shall notify IBM Credit, promptly upon its
obtaining knowledge of (i) any non-routine proceeding or
investigation by any Governmental Authority with respect to the
presence of any Hazardous Substances on or in any property now or
hereinafter owned, leased or otherwise controlled (directly or
indirectly) by Customer, (ii) all claims made or threatened by
any Person or Governmental Authority against Customer or any of
Customer's assets relating to any loss or injury resulting from
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any Hazardous Substance, (iii) Customer's discovery of evidence
of unlawful disposal of or environmental contamination by any
Hazardous Substance on any property now or hereinafter owned,
leased or otherwise controlled (directly or indirectly) by
Customer, and (iv) any occurrence or condition which could
constitute a violation of any Environmental Law.
7.7. Collateral Books and Records/Collateral Audit. (A)
Customer agrees to maintain books and records pertaining to the
Collateral in such detail, form and scope as is consistent with
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good business practice, which shall reflect IBM Credit's interest
in the Collateral.
(B) Customer agrees that IBM Credit or its agents may enter
upon the premises of Customer at any time and from time to time,
during normal business hours and upon reasonable notice under the
circumstances, and at any time at all on and after the occurrence
and during the continuance of an Event of Default for the
purposes of (i) inspecting the Collateral, (ii) inspecting and/or
copying (at Customer's expense) any and all records pertaining
thereto, (iii) discussing the affairs, finances and business of
Customer with any officers, employees and directors of Customer
or with the Auditors and (iv) verifying Eligible Accounts,
Eligible Foreign Accounts and other Collateral. Customer also
agrees to provide IBM Credit with such reasonable information and
documentation that IBM Credit deems necessary to conduct the
foregoing activities, including, without limitation, reasonably
requested samplings of purchase orders, invoices and evidences of
delivery or other performance. Upon the occurrence and during
the continuance of a Default which has not been waived by IBM
Credit in writing, IBM Credit may conduct any of the foregoing
activities in any manner that IBM Credit deems reasonably
necessary.
(C) Customer shall give IBM Credit thirty (30) days prior
written notice of any change in the location of any Collateral,
the location of its books and records or in the location of its
chief executive office or place of business from the locations
specified in Attachment B, and will execute in advance of such
change and cause to be filed and/or delivered to IBM Credit any
financing statements, landlord or other lien waivers, or other
documents reasonably required by IBM Credit, all in form and
substance reasonably satisfactory to IBM Credit.
(D) Customer agrees to advise IBM Credit promptly, in
reasonably sufficient detail, of any substantial change relating
to the type, quantity or quality of the Collateral, or any event
which could reasonably be expected to have a Material Adverse
Effect on the value of the Collateral or on the security
interests granted to IBM Credit therein.
7.8. Insurance; Casualty Loss. (A) Customer will maintain with
financially sound and reputable insurance companies: (i)
insurance on its properties, (ii) public liability insurance
against claims for personal injury or death as a result of the
use of any products sold by it and (iii) insurance coverage
against other business risks, in each case, in at least such
amounts and against at least such risks as are usually and
prudently insured against in the same general geographical area
by companies of established repute engaged in the same or a
similar business. Customer will furnish to IBM Credit, upon its
written request, the insurance certificates with respect to such
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insurance. In addition, all Policies so maintained are to name
IBM Credit as an additional insured as its interest may appear.
(B) Without limiting the generality of the foregoing,
Customer shall keep and maintain, at its sole expense, the
Collateral insured for an amount not less than the amount set
forth on Attachment A from time to time opposite the caption
"Collateral Insurance Amount" against all loss or damage under an
"all risk" Policy in companies mutually acceptable to IBM Credit
and Customer, with a lender's loss payable endorsement or
mortgagee clause in form and substance reasonably satisfactory to
IBM Credit designating that any loss payable thereunder with
respect to such Collateral shall be payable to IBM Credit.
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Customer agrees to instruct each insurer to give IBM Credit, by
endorsement upon the Policy issued by it or by independent
instruments furnished to IBM Credit, at least ten (10) days
written notice before any Policy shall be altered or cancelled
and that no act or default of Customer or any other person shall
affect the right of IBM Credit to recover under the Policies.
Customer hereby agrees to direct all insurers under the Policies
to pay all proceeds with respect to the Collateral directly to
IBM Credit. If Customer fails to pay any cost, charges or
premiums, or if Customer fails to insure the Collateral, IBM
Credit may pay such costs, charges or premiums. Any amounts paid
by IBM Credit hereunder shall be considered an additional debt
owed by Customer to IBM Credit due and payable by Customer
immediately upon receipt of an invoice by IBM Credit.
7.9. Taxes. Customer agrees to pay, when due, all taxes
lawfully levied or assessed against Customer or any of the
Collateral before any penalty or interest accrues thereon unless
such taxes are being contested, in good faith, by appropriate
proceedings promptly instituted and diligently conducted and an
adequate reserve or other appropriate provisions have been made
therefor as required in order to be in conformity with GAAP and
an adverse determination in such proceedings could not reasonably
be expected to have a Material Adverse Effect.
7.10. Compliance With Laws. Customer agrees to comply with all
Requirements of Law applicable to the Collateral or any part
thereof, and to the operation of its business.
7.11. Fiscal Year. Customer agrees to maintain its fiscal year
as a year ending September 30 unless Customer provides IBM Credit
at least thirty (30) days prior written notice of any change
thereof.
7.12. Intellectual Property. Customer shall do and cause to be
done all things necessary to preserve and keep in full force and
effect all registrations of Intellectual Property which the
failure to do or cause to be done could reasonably be expected to
have a Material Adverse Effect.
7.13. Maintenance of Property. Customer shall maintain all of
its material properties (business and otherwise) in good
condition and repair (ordinary wear and tear excepted) and pay
and discharge all costs of repair and maintenance thereof and all
rental and mortgage payments and related charges pertaining
thereto and not commit or permit any waste with respect to any of
its material properties.
7.14. Collateral. Customer shall:
(A) from time to time upon the request of IBM Credit,
provide IBM Credit with access to copies of all invoices,
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delivery evidences and other such documents relating to each
Account;
(B) promptly upon Customer's obtaining knowledge thereof,
furnish to and inform IBM Credit of all material adverse
information relating to the financial condition of any Account
obligor whose outstanding obligations to Customer constitute two
percent (2%) or more of the Accounts at such time (a "Material
Account Obligor");
(C) promptly upon Customer's learning thereof, notify IBM
Credit in writing of any event which would cause any obligation
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of a Material Account Obligor to become an Ineligible Account;
(D) keep all goods rejected or returned by any account
debtor and all goods repossessed or stopped in transit by
Customer from any account debtor segregated from other property
of Customer, holding the same in trust for IBM Credit until
Customer applies a credit against such account debtor's
outstanding obligations to Customer or sells such goods in the
ordinary course of business, whichever occurs earlier;
(E) stamp or otherwise xxxx chattel paper and instruments
now owned or hereafter acquired by it in conspicuous type to show
that the same are subject to IBM Credit's security interest and
immediately thereafter deliver or cause such chattel paper and
instruments to be delivered to IBM Credit or any agent designated
by IBM Credit with appropriate endorsements and assignments to
vest title and possession in IBM Credit; until so delivered to
IBM Credit or its designated agent, Customer shall hold such
chattel paper and instruments as agent for IBM Credit;
(F) use commercially reasonable efforts to collect all
Accounts owed;
(G) promptly notify IBM Credit of any loss, theft or
destruction of or damage to any of the Collateral. Customer
shall diligently file and prosecute its claim for any award or
payment in connection with any such loss, theft, destruction of
or damage to Collateral. Customer shall, upon demand of IBM
Credit, make, execute and deliver any assignments and other
instruments sufficient for the purpose of assigning any such
award or payment to IBM Credit, free of any encumbrances of any
kind whatsoever;
(H) consistent with reasonable commercial practice, observe
and perform all matters and things necessary or expedient to be
observed or performed under or by virtue of any lease, license,
concession or franchise forming part of the Collateral in order
to preserve, protect and maintain all the rights of IBM Credit
thereunder;
(I) consistent with reasonable commercial practice,
maintain, use and operate the Collateral and carry on and conduct
its business in a proper and efficient manner so as to preserve
and protect the Collateral and the earnings, incomes, rents,
issues and profits thereof;
(J) at any time and from time to time, upon the request of
IBM Credit, and at the sole expense of Customer, Customer will
promptly and duly execute and deliver such further instruments
and documents and take such further action as IBM Credit may
reasonably request for the purpose of obtaining or preserving the
full benefits of this Agreement and the Other Agreements and of
the rights and powers herein and therein granted, including,
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without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the security interests granted
herein and the payment of any and all recording taxes and filing
fees in connection therewith;
(K) promptly, but in any event within two (2) days of
authorizing such credits, apply rebate, price protection or
other credits to the Accounts;
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7.15. Subsidiaries. IBM Credit may require that any
Subsidiaries of Customer become parties to this Agreement or any
other agreement executed in connection with this Agreement as
guarantors or sureties and grant to IBM Credit perfected first
priority security interests in their assets.
7.16. On Site Collateral Verification. Customer shall from time
to time upon the request of IBM Credit allow employees, agents
and representatives of IBM Credit access, during normal business
hours and as often as IBM Credit may request, to the premises,
inventory, books and records of Customer or any of its
Subsidiaries to verify the Collateral and Customer's compliance
with the terms of this Agreement and to discuss the business,
operations, properties and financial and other condition of the
Company or any of its Subsidiaries with such officers and
employees and agents, including without limitation, its
independent certified public accounts, as IBM Credit may from
time to time request. Customer shall use reasonable efforts to
obtain permission from third party facilities where Collateral is
located for IBM Credit to have access to such facilities to
inspect and verify such Collateral.
7.17. Lockbox Participation and Special Account Deposits.
Without limiting Customer's other Obligations, Customer
acknowledges and reaffirms its obligations pursuant to Section
3.4 of this Agreement and acknowledges and reaffirms that such
obligations apply to all Accounts of Customer including, without
limitation, Accounts payable by account debtors that are not
residents of the United States (including Accounts that are
payable by Xxxxxx Micro, Inc. (Canada), Merisel Canada, Inc., QMS
(Japan) and Abacus) and Accounts payable by an account debtor
that is a remarketer of computer hardware and software products
whose purchases of such products from Customer have been financed
by another person who pays proceeds of such financing directly to
Customer on behalf of such account debtor. Customer agrees that
if Customer receives a remittance directly from an account
obligor, then Customer shall deposit the same into the Special
Account within one Business Day of such receipt.
7.18. Further Assurances Regarding Patents, Trademarks,
Tradenames and Copyrights. Customer shall do and cause to be
done all things necessary to preserve and keep in full force and
effect all registrations of patents, trademarks, tradenames and
copyrights necessary or advisable for the profitable conduct of
its business. With respect to any federal registration of any
patent, trademark, tradename or copyright or the filing of any
application therefor, Customer promptly shall cooperate with IBM
Credit to deliver to IBM Credit a collateral assignment with
respect to each such registration and application, in form and
substance satisfactory to IBM Credit. IBM Credit shall prepare
the form of collateral assignment based upon information provided
by Customer and, upon execution by Customer, IBM Credit shall
file such collateral assignment with the appropriate agency.
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Whenever, Customer, either by itself or through any agent,
employee, licensee or designee, shall file an application for the
registration of any patent, trademark, tradename or copyright
with the United States Patent and Trademark Office or United
States Copyright Office, Customer shall report such filing to IBM
Credit within five Business Days after such filing occurs. Upon
request of IBM Credit, Customer shall execute and deliver any and
all agreements, instruments, documents, and papers, which IBM
Credit shall prepare based upon information provided by Customer,
as IBM Credit may request to evidence and/or perfect IBM
Credit's security interest in any patent, trademark, tradename or
copyright and the goodwill and general intangibles relating
thereto or represented thereby, and Customer hereby constitutes
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IBM Credit its attorney-in-fact to execute and file all such
writings for the foregoing purposes, all acts of such attorney
being hereby ratified and confirmed, such power being coupled
with an interest and irrevocable until the Obligations are paid
in full and this Agreement is terminated. For the purposes of
enabling IBM Credit to exercise its rights and remedies under
this Agreement, Customer hereby grants to IBM Credit an
irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to Customer) to use, assign,
license or sublicense, following the occurrence of an Event of
Default and the exercise by IBM Credit of its rights and remedies
with respect thereto, any of the Collateral consisting of
patents, trademarks, tradenames or copyrights now owned or
hereafter acquired by Customer, wherever the same may be located,
including in such license reasonable access to all media in which
any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout thereof.
Upon payment in full of all Obligations and termination of this
Agreement, the license granted by Customer pursuant to the
immediately preceding sentence shall be terminated.
7.19. Collateral Reconciliation Reports. Customer shall provide
to IBM Credit on each Business Day a Collateral Reconciliation
Report as of the close of business on the Business Day
immediately preceding the day such report is provided to IBM
Credit. Such Collateral Reconciliation Report shall be in form
and detail satisfactory to IBM Credit and shall include back-up
documentation supporting such reconciliation in form and detail
satisfactory to IBM Credit. Such Collateral Reconciliation
Report shall reconcile the most recently preceding Collateral
Reconciliation Report to such Collateral Reconciliation Report
and shall include new sales, collections, credits issued,
purchases, returns and any other item affecting the accounts
receivable or inventory balance since the prior reconciliation.
Such Collateral Reconciliation Report shall also include a
summary of domestic gross receivables and Eligible Receivables,
foreign gross receivables and Eligible Foreign Receivables, gross
inventory and Eligible Inventory by location.
7.20. Listings and Reconciliations. Customer shall provide to
IBM Credit on or prior to the twentieth (20th) Business Day
following each fiscal month a copy of all bank statements
received by Customer for such month along with a reconciliation
of account balances in such account from the preceding statement
to account balances in such account as of the date of such
statement.
7.21. Price Protection Credits. Except as set forth on
Attachment B, Customer shall not, without IBM Credit's prior
consent, announce any program for price protection credits that
could have the effect of reducing accounts receivable in which
IBM Credit has a security interest.
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7.22. Additional Reporting Requirements. Customer shall deliver
to IBM Credit, on the first Business Day of each week, a listing,
in form and detail satisfactory to IBM Credit in its reasonable
discretion, as of the Saturday immediately preceding such
Business Day, of (i) Customer's inventory, (ii) the location of
such inventory and (iii) the lower of the cost (net of any
applicable credits) and the fair market value of such inventory.
Customer shall deliver to IBM Credit, on the last Business Day of
each week, a cash flow projection, in form and detail
satisfactory to IBM Credit in its reasonable discretion, for the
immediately following week and each week remaining in such fiscal
quarter based upon Customer's best estimate of minimum levels of
activity for such week to support Customer's on going business
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activities. Customer shall provide to IBM Credit on the first
Business Day of each week, a projection, in form and detail
satisfactory to IBM Credit in its reasonable discretion, for such
week of Customer's Outstanding A/R Advances and Customer's
Borrowing Base.
7.23. Subsidiaries. Customer shall not make any Investment in
or loan to, or transfer any assets to any Subsidiary or Affiliate
without the prior written consent of IBM Credit.
Section 8. NEGATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment
and satisfaction of all Obligations due hereunder:
8.1. Liens. The Customer will not, directly or indirectly
mortgage, assign, pledge, transfer, create, incur, assume, permit
to exist or otherwise permit any Lien or judgment to exist on any
of its property, assets, revenues or goods, whether real,
personal or mixed, whether now owned or hereafter acquired,
except for Permitted Liens.
8.2. Disposition of Assets. The Customer will not, directly or
indirectly, sell, lease, assign, transfer or otherwise dispose of
any assets other than (i) sales of inventory in the ordinary
course of business and short term rental of inventory as
demonstrations in amounts not material to Customer, and (ii)
voluntary dispositions of individual assets and obsolete or worn
out property, other than patents, trademarks, trade names and
copyrights, in the ordinary course of business, provided, that
the aggregate book value of all such assets and property so sold
or disposed of under this section 8.2 (ii) in any fiscal year
shall not exceed 5% of the consolidated assets of the Customer as
of the beginning of such fiscal year.
8.3. Corporate Changes. The Customer will not, without the
prior written consent of IBM Credit, directly or indirectly,
merge, consolidate, liquidate, dissolve or enter into or engage
in any operation or activity materially different from that
presently being conducted by Customer.
8.4. Guaranties. The Customer will not, directly or indirectly,
assume, guaranty, endorse, or otherwise become liable upon the
obligations of any other Person, except (i) by the endorsement of
negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, (ii) by the
giving of indemnities or warranties in connection with the sale
of inventory or other asset dispositions permitted hereunder,
(iii) for guaranties in favor of IBM Credit, or (iv) on behalf of
its Subsidiaries not to exceed an aggregate amount of fifty
thousand dollars ($50,000.00) per annum.
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8.5. Restricted Payments. The Customer will not, directly or
indirectly: (i) declare or pay any dividend (other than dividends
payable solely in common stock of Customer) on, or make any
payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of
capital stock of Customer or any warrants, options or rights to
purchase any such capital stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in
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obligations of Customer, provided, however that Customer may (x)
purchase for cash from directors, officers and employees of
Customer shares of capital stock in connection with the
termination of any such director's, officer's or employee's
service to Customer to the extent such purchases are consistent
with past practices (which may not be changed without IBM
Credit's prior consent) and are in an aggregate amount not
exceeding fifty thousand dollars ($50,000.00) per annum and (y)
redeem and pay dividends on the convertible preferred stock of
Customer held by IBM Credit; or (ii) make any optional payment or
prepayment on or redemption (including, without limitation, by
making payments to a sinking or analogous fund) or repurchase of
any Indebtedness (other than the Obligations).
8.6. Investments. The Customer will not, directly or
indirectly, make, maintain or acquire any Investment in any
Person other than:
(A) interest bearing deposit accounts (including
certificates of deposit) which are insured by the Federal Deposit
Insurance Corporation ("FDIC") or a similar federal insurance
program;
(B) direct obligations of the government of the United
States of America or any agency or instrumentality thereof or
obligations guaranteed as to principal and interest by the United
States of America or any agency thereof;
(C) stock or obligations issued to Customer in settlement
of claims against others by reason of an event of bankruptcy or a
composition or the readjustment of debt or a reorganization of
any debtor of Customer;
(D) commercial paper of any corporation organized under the
laws of any State of the United States or any bank organized or
licensed to conduct a banking business under the laws of the
United States or any State thereof having the short-term highest
rating then given by Xxxxx'x Investor's Services, Inc. or
Standard & Poor's Corporation;
(E) the investments set forth on Attachment E.
8.7. Affiliate/Subsidiary Transactions. The Customer will not,
irectly or indirectly, enter into any transaction with any
Affiliate or Subsidiary, including, without limitation, the
purchase, sale or exchange of property or the rendering of any
service to any Affiliate or Subsidiary of Customer except in the
ordinary course of business and pursuant to the reasonable
requirements of Customer's business upon fair and reasonable
terms no less favorable to Customer than could be obtained in a
comparable arm's-length transaction with an unaffiliated Person.
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8.8. ERISA. The Customer will not (A) terminate any Plan so as
to incur a material liability to the PBGC, (B) permit any
"prohibited transaction" involving any Plan (other than a
"multi-employer benefit plan") which would subject the Customer
to a material tax or penalty on "prohibited transactions" under
the Code or ERISA, (C) fail to pay to any Plan any contribution
which they are obligated to pay under the terms of such Plan, if
such failure would result in a material "accumulated funding
deficiency", whether or not waived, (D) allow or suffer to exist
any occurrence and during the continuance of a "reportable
event" or any other event or condition, which presents a material
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risk of termination by the PBGC of any Plan (other than a
"multi-employer benefit plan"), or (E) fail to notify IBM Credit
as required in Section 7.5. As used in this Agreement, the terms
"accumulated funding deficiency" and "reportable event" shall
have the respective meanings assigned to them in ERISA, and the
term "prohibited transaction" shall have the meaning assigned to
it in the Code and ERISA. For purposes of this Section 8.8, the
terms material liability, tax, penalty, accumulated funding
deficiency and risk of termination shall mean a liability, tax,
penalty, accumulated funding deficiency or risk of termination
which could reasonably be expected to have a Material Adverse
Effect.
8.9. Additional Negative Pledges. Customer will not, directly
or indirectly, create or otherwise cause or permit to exist or
become effective any contractual obligation which may restrict or
inhibit IBM Credit's rights or ability to sell or otherwise
dispose of the Collateral or any part thereof after the
occurrence and during the continuance of an Event of Default.
8.10. Storage of Collateral with Bailees and Warehousemen.
Collateral shall not be stored with a bailee, warehouseman or
similar party without the prior written consent of IBM Credit
unless Customer, concurrently with the delivery of such
Collateral to such party, causes such party to issue and deliver
to IBM Credit, in form and substance satisfactory to IBM Credit,
warehouse receipts in the name of IBM Credit evidencing the
storage of such Collateral.
8.11. Use of Proceeds. The Customer shall not use any portion
of the proceeds of any Advances other than for its general
working capital requirements.
8.12. Accounts. The Customer shall not permit or agree to any
extension, compromise or settlement or make any change or
modification of any kind or nature with respect to any Account,
including any of the terms relating thereto, which would affect
IBM Credit's ability to collect payment on any Account in whole
or in part, except for such extensions, compromises or
settlements made by Customer in the ordinary course of its
business, provided, however, that the aggregate amount of such
extensions, compromises or settlements does not exceed five
percent (5%) of the Customer's Accounts at any time.
8.13. Indebtedness. The Customer will not create, incur, assume
or permit to exist any Indebtedness, except for Permitted
Indebtedness.
8.14. Loans. The Customer will not make any loans, advances,
contributions or payments of money or goods to any Subsidiary,
Affiliate or parent corporation or to any officer, director or
stockholder of Customer or of any such corporation (except for
compensation for personal services actually rendered), except for
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transactions expressly authorized in this Agreement, provided,
however, that Customer may make loans to its officers in an
aggregate outstanding amount at any time not exceeding two
hundred fifty thousand dollars ($250,000.00), and to its
Subsidiaries in an aggregate outstanding amount at any time not
exceeding one hundred thousand dollars ($100,000.00).
8.15. Premium Payments. Customer shall not make, directly or
indirectly, any payments to suppliers at a premium above the
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regular invoice price on account of past due indebtedness to such
supplier without the prior written consent of IBM Credit.
Section 9. DEFAULT
9.1. Event of Default. Any one or more of the following events
shall constitute an Event of Default by the Customer under this
Agreement and the Other Agreements:
(A) The failure to make timely payment of the Obligations or
any part thereof, within the earlier of (i) one Business Day
after receiving written notice that such payment has not been
made when due in accordance with the terms of any documents
evidencing the same and (ii) five days after such payment becomes
due in accordance with the terms of any documents evidencing the
same;
(B) (x) the failure to comply with or observe any term,
covenant or agreement (other than pursuant to Sections 7.1 (C)
(i), 8.1, 8.2 or 8.3) contained in this Agreement that is capable
of being remedied by Customer if such failure shall remain
unremedied for ten (10) days after written notice from IBM Credit
thereof; provided that during such 10-day period Customer is
diligently taking efforts necessary to remedy such failure or (y)
Customer fails to comply with or observe any term, covenant or
agreement contained in Sections 8.1, 8.2 or 8.3 that is capable
of being remedied by Customer if such failure shall remain
unremedied for 10 days; provided that during such 10-day period,
Customer is diligently taking efforts necessary to remedy such
failure;
(C) Customer fails to comply with or observe any term,
covenant or agreement contained in this Agreement other than as
referred to in paragraphs (A) or (B);
(D) Any representation, warranty, statement, report or
certificate made or delivered by or on behalf of Customer or any
of its officers, employees or agents or by or on behalf of any
Subsidiary or guarantor to IBM Credit was false in any material
respect at the time when made or deemed made;
(E) The occurrence of any event or circumstance which could
reasonably be expected to have a Material Adverse Effect;
(F) Customer or any Subsidiary or guarantor shall generally
not pay its debts as such debts become due, become or otherwise
declare itself insolvent, file a voluntary petition for
bankruptcy protection, have filed against it any involuntary
bankruptcy petition, cease to do business as a going concern,
make any assignment for the benefit of creditors, or a custodian,
receiver, trustee, liquidator, administrator or person with
similar powers shall be appointed for Customer or any Subsidiary
or any of its respective properties or have any of its respective
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properties seized or attached, or take any action to authorize,
or for the purpose of effectuating, the foregoing; provided,
however, that Customer or any Subsidiary shall have a period of
forty-five (45) days within which to discharge any involuntary
petition for bankruptcy or similar proceeding; provided, further,
however, that any of the foregoing set forth in this paragraph
(F), with respect to any Subsidiary or guarantor, could
reasonably be expected to have a Material Adverse Effect;
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(G) The use by Customer of any funds borrowed from IBM
Credit under this Agreement for any purpose other than as
provided in this Agreement;
(H) The entry of any judgment against Customer or any
guarantor in an amount in excess of fifty thousand dollars
($50,000.00) and such judgment is not satisfied, dismissed,
stayed or superseded by bond within thirty (30) days after the
day of entry thereof (and in the event of a stay or supersedeas
bond, such judgment is not discharged within thirty (30) days
after termination of any such stay or bond) or such judgment is
not fully covered by insurance as to which the insurance company
has acknowledged its obligation to pay such judgment in full;
(I) The dissolution or liquidation of Customer or any
guarantor, or Customer or any guarantor or any of their directors
or stockholders shall take any action to dissolve or liquidate
Customer or any guarantor;
(J) Any "going concern" or like qualification or exception,
or qualification arising after the date of this Agreement out of
the scope of an audit by an Auditor of his opinion relative to
any Financial Statement delivered to IBM Credit under this
Agreement;
(K) There issues a warrant of distress or distraint or any
similar proscription for any rent or taxes with respect to any of
Customer's properties, assets or premises and such warrant shall
continue for a period of two (2) Business Days from the date such
warrant is issued;
(L) Customer suspends business;
(M) The occurrence of any event or condition which enables
the holder of any Indebtedness or trade liabilities arising in
one or more related or unrelated transactions, in aggregate
principal
amount exceeding fifty thousand dollars ($50,000.00) to
accelerate the maturity thereof or the failure of Customer to pay
when due any such Indebtedness or trade liabilities;
(N) Any guaranty of any or all of the Customer's Obligations
executed by any guarantor in favor of IBM Credit, shall at any
time for any reason cease to be in full force and effect or shall
be declared to be null and void by a court of competent
jurisdiction or the validity or enforceability thereof shall be
contested or denied by any such guarantor, or any such guarantor
shall deny that it has any further liability or obligation
thereunder or any such guarantor shall fail to comply with or
observe any of the terms, provisions or conditions contained in
any such guaranty;
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(O) Customer is in default under the material terms of any
of the Other Agreements after the expiration of any applicable
cure periods;
(P) There shall occur a "reportable event" with respect to
any Plan, or any Plan shall be subject to termination proceedings
(whether voluntary or involuntary) and there shall result from
such "reportable event" or termination proceedings a liability of
Customer to the PBGC which in the reasonable opinion of IBM
Credit will have a Material Adverse Effect;
(Q) Any "person" (as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) acquires a
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beneficial interest in 50% or more of the Voting Stock of
Customer; or
(R) Customer is in default of any of the terms or
conditions of its agreements with Mitsubishi Electronics America
which default allows Mitsubishi Electronics America to exercise
any of its rights under any security agreement by and between
Customer and Mitsubishi Electronics America.
9.2. Acceleration. Upon the occurrence and during the
continuance of an Event of Default which has not been waived in
writing by IBM Credit, IBM Credit may, in its sole discretion,
take any or all of the following actions, without prejudice to
any other rights it may have at law or under this Agreement to
enforce its claims against the Customer: (a) declare all
Obligations to be immediately due and payable (except with
respect to any Event of Default set forth in Section 9.1(F)
hereof, in which case all Obligations shall automatically become
immediately due and payable without the necessity of any notice
or other demand) without presentment, demand, protest or any
other action or obligation of IBM Credit; and
(b) immediately terminate the Line of Credit hereunder.
9.3. Remedies. (A) Upon the occurrence and during the
continuance of any Event of Default which has not been waived in
writing by IBM Credit, IBM Credit may exercise all rights and
remedies of a secured party under the U.C.C. Without limiting
the generality of the foregoing, IBM Credit may: (i) remove from
any premises where same may be located any and all documents,
instruments, files and records (including the copying of any
computer records), and any receptacles or cabinets containing
same, relating to the Accounts, or IBM Credit may use (at the
expense of the Customer) such of the supplies or space of the
Customer at Customer's place of business or otherwise, as may be
necessary to properly administer and control the Accounts or the
handling of collections and realizations thereon; (ii) bring
suit, in the name of the Customer or IBM Credit and generally
shall have all other rights respecting said Accounts, including
without limitation the right to accelerate or extend the time of
payment, settle, compromise, release in whole or in part any
amounts owing on any Accounts and issue credits in the name of
the Customer or IBM Credit; (iii) sell, assign and deliver the
Accounts and any returned, reclaimed or repossessed merchandise,
with or without advertisement, at public or private sale, for
cash, on credit or otherwise, at IBM Credit's sole option and
discretion, and IBM Credit may bid or become a purchaser at any
such sale; and (iv) foreclose the security interests created
pursuant to this Agreement by any available judicial or
non-judicial procedure, or take possession of any or all of the
Collateral without judicial process and enter any premises where
any Collateral may be located for the purpose of taking
possession of or removing the same.
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(B) Upon the occurrence and during the continuance of any
Event of Default which has not been waived in writing by IBM
Credit, IBM Credit shall have the right to sell, lease, or
otherwise dispose of all or any part of the Collateral, whether
in its then condition or after further preparation or processing,
in the name of Customer or IBM Credit, or in the name of such
other party as IBM Credit may designate, either at public or
private sale or at any broker's board, in lots or in bulk, for
cash or for credit, with or without warranties or
representations, and upon such other terms and conditions as IBM
Credit in its sole discretion may deem advisable, and IBM Credit
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shall have the right to purchase, including for a credit bid, at
any such sale. If IBM Credit, in its sole discretion, determines
that any of the Collateral requires rebuilding, repairing,
maintenance or preparation, IBM Credit shall have the right, at
its option, to do such of the aforesaid as it deems necessary for
the purpose of putting such Collateral in such saleable form as
IBM Credit shall deem appropriate. The Customer hereby agrees
that any disposition by IBM Credit of any Collateral pursuant to
and in accordance with the terms of a repurchase agreement
between IBM Credit and the manufacturer or any supplier
(including any Authorized Supplier) of such Collateral
constitutes a commercially reasonable sale. The Customer agrees,
at the request of IBM Credit, to assemble the Collateral and to
make it available to IBM Credit at places which IBM Credit shall
select, whether at the premises of the Customer or elsewhere, and
to make available to IBM Credit the premises and facilities of
the Customer for the purpose of IBM Credit's taking possession
of, removing or putting such Collateral in saleable form. If
notice of intended disposition of any Collateral is required by
law, it is agreed that ten (10) Business Days notice shall
constitute reasonable notification.
(C) IBM Credit is hereby granted, upon the occurrence and
during the continuance of any Event of Default which has not been
waived in writing by IBM Credit, an irrevocable, non-exclusive
license to use, assign, license or sublicense all computer
software programs, data bases, processes and materials used by
the Customer in its businesses or in connection with any of the
Collateral.
(D) The net cash proceeds resulting from IBM Credit's
exercise of any of the foregoing rights (after deducting all
charges, costs and expenses, including reasonable attorneys'
fees) shall be applied by IBM Credit to the payment of Customer's
Obligations, whether due or to become due, in such order as IBM
Credit may in it sole discretion elect. Customer shall remain
liable to IBM Credit for any deficiencies, and IBM Credit in turn
agrees to remit to Customer or its successors or assigns, any
surplus resulting therefrom.
(E) The enumeration of the foregoing rights is not intended
to be exhaustive and the exercise of any right shall not preclude
the exercise of any other legal or equitable rights, all of which
shall be cumulative.
9.4. Waiver. If IBM Credit seeks to take possession of any of
the Collateral by any court process Customer hereby irrevocably
waives to the extent permitted by applicable law any bonds,
surety and security relating thereto required by any statute,
court rule or otherwise as an incident to such possession and any
demand for possession of the Collateral prior to the commencement
of any suit or action to recover possession thereof. In
addition, Customer waives to the extent permitted by applicable
- -
law all rights of set-off it may have against IBM Credit.
Customer further waives to the extent permitted by applicable law
presentment, demand and protest, and notices of non-payment,
non-performance, any right of contribution, dishonor, and any
other demands, and notices required by law.
Section 10. MISCELLANEOUS
10.1. Term; Termination. (A) This Agreement shall remain in
force until the earlier of (i) the Termination Date, (ii) the
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date specified in a written notice by the Customer that it
intends to terminate this Agreement which date shall be no less
than 90 days following the receipt by IBM Credit of such written
notice, and (iii) termination by IBM Credit after the occurrence
and during the continuance of an Event of Default. Upon the date
that this Agreement is terminated, all of Customer's Obligations
shall be immediately due and payable in their entirety, even if
they are not yet due under their terms.
(B) Until the indefeasible payment in full of all of
Customer's Obligations, no termination of this Agreement or any
of the Other Agreements shall in any way affect or impair the
Customer's Obligations to IBM Credit including, without
limitation, any transaction or event occurring prior to such
termination, and IBM Credit's security interest in the
Collateral.
10.2. Indemnification. The Customer hereby agrees to indemnify
and hold harmless IBM Credit and each of its officers, directors,
agents and assigns (collectively, the "Indemnified Persons")
against all losses, claims, damages, liabilities or other
expenses (including reasonable attorneys' fees and court costs
now or hereinafter arising from the enforcement of this
Agreement, the "Losses") to which any of them may become subject
insofar as such Losses arise out of or are based upon any event,
circumstance or condition (a) occurring or existing on or before
the date of this Agreement relating to any financing arrangements
IBM Credit may from time to time have with (i) Customer, (ii) any
Person that shall be acquired by Customer or (iii) any Person
that Customer may acquire all or substantially all of the assets
of, or (b) directly or indirectly, relating to the execution,
delivery or performance of this Agreement or the consummation of
the transactions contemplated hereby or thereby or to any of the
Collateral or to any act or omission of the Customer in
connection therewith. Notwithstanding the foregoing, the
Customer shall not be obligated to indemnify IBM Credit for any
Losses incurred by IBM Credit which are a result of IBM Credit's
gross negligence or willful misconduct. The indemnity provided
herein shall survive the termination of this Agreement. IBM
Credit shall notify Customer in writing promptly upon obtaining
knowledge of any claim subject to indemnification pursuant to
this paragraph 10.2 and shall use reasonable efforts to minimize
the amount of any indemnified Loss. Customer agrees to pay
promptly, upon demand, all reasonable costs and fees, including
reasonable attorney's fees, incurred by IBM Credit in the
administration, renewal, extension, modification, documentation,
restructuring, "workout", enforcement or collection of any or all
of the Obligations, or in any litigation, arbitration, mediation,
bankruptcy or other proceeding of any type, relating thereto.
10.3. Additional Obligations. IBM Credit, without waiving or
releasing any Obligation or Default of the Customer, may perform
any Obligations of the Customer that the Customer shall fail or
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refuse to perform and IBM Credit may, at any time or times
hereafter, but shall be under no obligation so to do, pay,
acquire or accept any assignment of any security interest, lien,
encumbrance or claim against the Collateral asserted by any
person. All sums paid by IBM Credit in performing in
satisfaction or on account of the foregoing and any expenses,
including reasonable attorney's fees, court costs, and other
charges relating thereto, shall be a part of the Obligations,
payable on demand and secured by the Collateral.
10.4. LIMITATION OF LIABILITY. NEITHER IBM CREDIT NOR ANY OTHER
INDEMNIFIED PERSON SHALL HAVE ANY LIABILITY WITH RESPECT TO ANY
SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED BY CUSTOMER
- -
IN CONNECTION WITH THIS AGREEMENT, ANY OTHER AGREEMENT OR ANY
CLAIMS IN ANY MANNER RELATED THERETO. NOR SHALL IBM CREDIT OR
ANY OTHER INDEMNIFIED PERSON HAVE ANY LIABILITY TO CUSTOMER OR
ANY OTHER PERSON FOR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY
IT OR THEM HEREUNDER, EXCEPT FOR ITS OR THEIR OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
10.5. Alteration/Waiver. This Agreement and the Other
Agreements may not be altered or amended except by an agreement
in writing signed by the Customer and by IBM Credit. No delay or
omission of IBM Credit to exercise any right or remedy hereunder,
whether before or after the occurrence of any Event of Default,
shall impair any such right or remedy or shall operate as a
waiver thereof or as a waiver of any such Event of Default. In
the event that IBM Credit at any time or from time to time
dispenses with any one or more of the requirements specified in
this Agreement or any of the Other Agreements, such dispensation
may be revoked by IBM Credit at any time and shall not be deemed
to constitute a waiver of any such requirement subsequent
thereto. IBM Credit's failure at any time or times to require
strict compliance and performance by the Customer of any
undertakings, agreements, covenants, warranties and
representations of this Agreement or any Other Agreement shall
not waive, affect or diminish any right of IBM Credit thereafter
to demand strict compliance and performance thereof. Any waiver
by IBM Credit of any Default by the Customer under this Agreement
or any of the Other Agreements shall not waive or affect any
other Default by the Customer under this Agreement or any of the
Other Agreements, whether such Default is prior or subsequent to
such other Default and whether of the same or a different type.
None of the undertakings, agreements, warranties, covenants, and
representations of the Customer contained in this Agreement or
the Other Agreements and no Default by the Customer shall be
deemed waived by IBM Credit unless such waiver is in writing
signed by an authorized representative of IBM Credit.
10.6. Severability. If any provision of this Agreement or the
Other Agreements or the application thereof to any Person or
circumstance is held invalid or unenforceable, the remainder of
this Agreement and the Other Agreements and the application of
such provision to other Persons or circumstances will not be
affected thereby, the provisions of this Agreement and the Other
Agreements being severable in any such instance.
10.7. One Loan. All Advances heretofore, now or at any time or
times hereafter made by IBM Credit to the Customer under this
Agreement or the Other Agreements shall constitute one loan
secured by IBM Credit's security interests in the Collateral and
by all other security interests, liens and encumbrances
heretofore, now or from time to time hereafter granted by the
Customer to IBM Credit or any assignor of IBM Credit.
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10.8. Additional Collateral. All monies, reserves and proceeds
received or collected by IBM Credit with respect to Accounts and
other property of the Customer in possession of IBM Credit at any
time or times hereafter are hereby pledged by Customer to IBM
Credit as security for the payment of Customer's Obligations and
shall be applied promptly by IBM Credit on account of the
Customer's Obligations in accordance with the provisions of this
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Agreement; provided, however, IBM Credit may release to the
Customer such portions of such monies, reserves and proceeds as
IBM Credit may from time to time determine, in its sole
discretion.
10.9. No Merger or Novations. Neither the obtaining of any
judgment nor the exercise of any power of seizure or sale shall
operate to extinguish the Obligations of the Customer to IBM
Credit secured by this Agreement and shall not operate as a
merger of any covenant in this Agreement, and the acceptance of
any payment or alternate security shall not constitute or create
a novation and the obtaining of a judgment or judgments under a
covenant herein contained shall not operate as a merger of that
covenant or affect IBM Credit's rights under this Agreement.
10.10. Paragraph Titles. The Section titles used in this
Agreement and the Other Agreements are for convenience only and
do not define or limit the contents of any Section.
10.11. Binding Effect; Assignment. This Agreement and the Other
Agreements shall be binding upon and inure to the benefit of IBM
Credit and the Customer and their respective successors and
assigns; provided, that the Customer shall have no right to
assign this Agreement or any of the Other Agreements without the
prior written consent of IBM Credit.
10.12. Notices. Except as otherwise expressly provided in this
Agreement, any notice required or desired to be served, given or
delivered hereunder shall be in writing, and shall be deemed to
have been validly served, given or delivered (A) upon receipt if
deposited in the United States mails, first class mail, with
proper postage prepaid, (B) upon receipt of confirmation or
answerback if sent by telecopy, or other similar facsimile
transmission, (C) one 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
properly addressed to the party to be notified and sent to the
address or number indicated as follows:
(i) If to IBM Credit at:
IBM Credit Corporation
0000 Xxxxxxxxx Xxxxxxx,Xxxxx #000
Xxx Xxxxx, XX 00000
Attention: Remarketer Finance Center Manager
Telecopy: (000) 000-0000
(ii) If to Customer at:
Radius Inc.
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telecopy: 000-000-0000
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or to such other address or number as each party designates to
the other in the manner prescribed herein.
10.13. Counterparts. This Agreement may be executed in any
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number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto were upon the same
instrument.
10.14. Amendment and Restatement. Notwithstanding anything
contained herein or in any other document to the contrary, it is
understood and agreed by Customer and IBM Credit that the claims
of IBM Credit arising hereunder and existing as of the date
hereof constitute continuing claims arising out of the
obligations of Customer under the Existing Financing Agreement.
Customer acknowledges and agrees that the Indebtedness
represented by the Advances outstanding as of the date hereof has
not been satisfied or discharged and that this Agreement amends
and restates such Indebtedness and is not intended to effect a
novation of the obligations of Customer which were evidenced by
the Existing Financing Agreement.
10.15. Third Party Beneficiaries. This Agreement is made and
entered into for the sole protection and benefit of the parties
hereto and their permitted successors and assigns, and neither
this Agreement nor any of the Other Agreements is intended to
operate as, directly or indirectly, nor shall be construed as
effecting in any way, directly or indirectly, a waiver, estoppel,
discharge, release, or other modification of the parties rights
against any Person, nor shall any other Person have any right of
action hereunder.
10.16. General Release. Customer does hereby release, acquit
and forever discharge, for itself and its successors and assigns,
IBM Credit, Affiliates of IBM Credit, and each and every present
and former officer, director, employee, agent, successor and
assign of IBM Credit and Affiliate of IBM Credit (the
"Releasees") from any and all manner of actions, causes of
action, suits, debts, costs, claims and demands whatsoever,
regardless of whether known or unknown, at law or in equity or
under federal, state, foreign, or other law, which against the
Releasees or any one or more of them Customer, ever had, now has
or which can, shall or may hereafter accrue for, upon or by
reason of, arising out of or in connection with any matter, cause
or thing whatsoever from the beginning of the world to the day of
this Agreement, excluding claims arising under ordinary product
and service warranties for product and services purchased by
Customer from Affiliates of IBM Credit in the ordinary course of
Customer's business, but including any claims relating to
Mississippi I or Mississippi II product or services. Customer
hereby waives, to the fullest extent permitted by law, the
benefits of any statute, law, rule, regulation or common law,
which may limit the scope of the covenants and releases contained
herein. Customer intends by this Release to forever release,
acquit, waive and forever discharge the Releasees of and from any
and all claims and rights described above, it being understood
that all claims or rights which Customer or any person who claims
by, through or under Customer may have against the Releasees
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shall be forever released, acquitted, waived and forever
discharged, and such persons shall be forever barred from
bringing or asserting the same in their own name or names,
jointly or with or through any other person, natural, corporate
or otherwise; provided, however, that Customer is not waiving any
rights or claims under this Agreement arising on or after the
date hereof.
SECTION 1542 OF THE CIVIL CODE OF THE STATE OF
CALIFORNIA PROVIDES AS FOLLOWS:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
- -
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
CUSTOMER IS AWARE THAT IT MAY HEREAFTER DISCOVER CLAIMS OR
FACTS IN ADDITION TO OR DIFFERENT FROM THOSE IT NOW KNOWS OR
BELIEVES TO BE TRUE WITH RESPECT TO THE MATTERS RELATED
HEREIN. NEVERTHELESS, IT IS THE INTENTION OF CUSTOMER TO
FULLY, FINALLY AND FOREVER SETTLE AND RELEASE ALL SUCH
MATTERS, AND ALL CLAIMS RELATIVE THERETO, WHICH DO NOW
EXIST, MAY EXIST, OR HERETOFORE HAVE EXISTED BETWEEN
CUSTOMER AND THE RELEASEES. IN FURTHERANCE OF SUCH
INTENTION, THE RELEASES GIVEN HEREIN SHALL BE AND REMAIN IN
EFFECT AS FULL AND COMPLETE RELEASES OF ALL SUCH MATTERS,
NOTWITHSTANDING THE DISCOVERY OR EXISTENCE OF ANY ADDITIONAL
CLAIMS OF FACTS RELATIVE THERETO. CUSTOMER WAIVES AND
RELINQUISHES ANY AND ALL RIGHTS IT MAY HAVE UNDER SECTION
1542 OF THE CALIFORNIA CIVIL CODE AS CURRENTLY WORDED OR
HEREAFTER AMENDED.
10.17. SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW.
TO INDUCE IBM CREDIT TO ACCEPT THIS AGREEMENT AND THE OTHER
AGREEMENTS, THE CUSTOMER HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND ANY OTHER AGREEMENT, OR
FOR THE RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS
OF THE STATE OF NEW YORK AND ANY FEDERAL DISTRICT COURT IN NEW
YORK.
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE
BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW
OR HEREINAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT
IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE
SAME.
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM
OF MAIL), POSTAGE PREPAID, TO CUSTOMER AT ITS ADDRESS SET FORTH
IN SECTION 10.12 OR AT SUCH OTHER ADDRESS OF WHICH IBM CREDIT
SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
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[SIGNATURE]
SHALL LIMIT THE RIGHT TO XXX IN ANY OTHER JURISDICTION.
(E) AGREES THAT THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
(WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS) OF THE
STATE OF NEW YORK.
10.18. JURY TRIAL WAIVER. EACH OF IBM CREDIT AND THE CUSTOMER
HEREBY IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING (INCLUDING ANY COUNTERCLAIM) OF ANY TYPE IN
WHICH IBM CREDIT AND THE CUSTOMER ARE PARTIES AS TO ALL MATTERS
ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT OR ANY
DOCUMENT, INSTRUMENT OR AGREEMENT EXECUTED IN CONNECTION
HEREWITH.
Initials: __________
IN WITNESS WHEREOF, the Customer has read this entire Agreement,
and has caused its authorized representatives to execute this
Agreement and has caused its corporate seal to be affixed hereto
as of the date first written above.
RADIUS INC.
By:/s/ Xxxxxxx X. Xxxxxx
Print Name: Xxxxxxx X. Xxxxxx
Title: Chairman and CEO
ACCEPTED this 30 day of August, 1996,
IBM CREDIT CORPORATION
By: /s/ Xxxxxx X. Xxxxx
Print Name: Xxxxxx X. Xxxxx
Title: Director Remarketer Financing Portfolio Controls
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ATTACHMENT A, EFFECTIVE DATE September 12, 1996
("IWCF ATTACHMENT A")
TO AMENDED AND RESTATED WORKING CAPITAL FINANCING
AND TERM LOAN AGREEMENT ("IWCF AGREEMENT")
DATED August 30, 1996
Customer: Radius, Inc.
I. Fees, Rates and Repayment Terms:
(A) Credit Line: Five Million Dollars ($5,000,000.00);
(B) Borrowing Base:
(a) The lesser of 10% of the fair market value of Eligible
Inventory as of the date of determination as reflected
in Customer's most recent Collateral Management Report
or $500,000.00; plus
(b) 80% of Eligible Accounts as of the date of
determination as reflected in the Customer's most
recent Collateral Management Report; plus
(c) the lesser of 50% of Eligible Foreign Accounts as of
the date of determination as reflected in Customer's
most recent Collateral Management Report or
$500,000.00; plus
(C) Collateral Insurance Amount: Fifteen Million Dollars
($15,000,000.00)
(D) A/R Finance Charge: Prime Rate plus 2.25%
(E) Term Loan Finance Charge: Prime Rate plus 3.25%
(F) Delinquency Fee Rate: Prime Rate plus 6.500%
.pa
IWCF ATTACHMENT A
TO AMENDED AND RESTATED WORKING CAPITAL FINANCING
AND TERM LOAN AGREEMENT ("IWCF AGREEMENT")
(G) Shortfall Transaction Fee: Shortfall Amount multiplied by
0.30%
(H) Other Charges:
(i) Application Processing Fee: N/A
(ii) Monthly Service Fee: $2,000.00
(iii) Closing Fee: N/A
(iv) Commitment Fee: N/A
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II. Bank Account
(A) Customer's Lockbox(es) and Special Account(s) will be
maintained at the following Bank(s):
Name of Bank: Silicon Valley Bank
Address: 0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Phone: (000) 000-0000
Lockbox Address: Xxxx. Xx. 00000 Xxx Xxxxxxxxx, XX 00000-0000
Special Account #: 0351777270
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IWCF ATTACHMENT A
TO AMENDED AND RESTATED WORKING CAPITAL FINANCING AND
TERM LOAN AGREEMENT ("IWCF AGREEMENT")
III. Financial Covenants:
Definitions: The following terms shall have the following
respective meanings in this Attachment A. All amounts shall be
determined in accordance with generally accepted accounting
principles (GAAP).
Current shall mean within the on-going twelve month period.
Current Assets shall mean assets that are cash or expected
to become cash within the on-going twelve months.
Current Liabilities shall mean payment obligations resulting
from past or current transactions that require settlement
within the on-going twelve month period. All indebtedness
to IBM Credit shall be considered a Current Liability for
purposes of determining compliance with the Financial
Covenants.
Interest Coverage Ratio shall mean the ratio of Revenue plus
all other income minus all costs except interest and tax
expenses to interest expense.
Long Term shall mean beyond the on-going twelve month
period.
Long Term Assets shall mean assets that take longer than a
year to be converted to cash. They are divided into four
categories: tangible assets, investments, intangibles and other.
Long Term Debt shall mean payment obligations of indebtedness which
mature more than twelve months from the
date of determination, or mature within twelve months from such
date but are renewable or extendible at the option of
the debtor to a date more than twelve months from the date
of determination.
Net Profit after Tax shall mean Revenue plus all other
income, minus all costs, including applicable taxes.
Revenue shall mean the monetary expression of the aggregate
of products or services transferred by an enterprise to its
customers for which said customers have paid or are
obligated to pay, plus other income as allowed.
Subordinated Debt shall mean Customer's indebtedness to
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third parties as evidenced by an executed Notes Payable
Subordination Agreement in favor of IBM Credit.
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IWCF ATTACHMENT A
TO AMENDED AND RESTATED WORKING CAPITAL FINANCING
AND TERM LOAN AGREEMENT ("IWCF AGREEMENT")
III. Financial Covenants (continued):
Tangible Net Worth shall mean:
Total Net Worth minus;
(a) goodwill, organizational expenses, pre-paid expenses,
deferred charges, research and development expenses,
software development costs, leasehold expenses, trademarks,
trade names, copyrights, patents, patent applications,
privileges, franchises, licenses and rights in any thereof,
and other similar intangibles (but not including contract
rights) and other current and non-current assets as
identified in Customer's financial statements; and
(b) all accounts receivable from employees, officers,
directors, stockholders and affiliates; and
(c) all callable/redeemable preferred stock.
Total Assets shall mean the total of Current Assets and Long
Term Assets.
Total Liabilities shall mean the Current Liabilities and Long
Term Debt less Subordinated Debt, resulting from past or current
transactions, that require settlement in the future.
Total Net Worth (the amount of owner's or stockholder's ownership
in an enterprise) is equal to Total Assets minus Total
Liabilities.
Working Capital shall mean Current Assets minus Current
Liabilities.
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IWCF ATTACHMENT A
TO AMENDED AND RESTATED WORKING CAPITAL FINANCING
AND TERM LOAN AGREEMENT ("IWCF AGREEMENT")
III. Financial Covenants (continued):
Customer will be required to maintain the following financial
ratios, percentages and amounts at all times:
a) Revenue on an annual basis (i.e., the current fiscal
year-to-date Revenue annualized) to Working Capital
ratio greater than zero and equal to or less than
9.0:1.0;
b) Current Assets to Current Liabilities ratio greater
than: 1.0 to 1 as of the quarter ending 9/30/96;
c) Current Assets to Current Liabilities ratio greater
than: 1.0 to 1 as of the quarter ending 12/31/96;
d) Current Assets to Current Liabilities ratio greater
than: 1.3 to 1 as of the quarter ending 3/31/97;
e) Current Assets to Current Liabilities ratio greater
than: 1.5 to 1 as of the quarter ending 6/30/97;
f) Current Assets to Current Liabilities ratio greater
than: 1.8 to 1 as of the quarter ending 9/30/97 and
thereafter;
g) Net Profit after Tax to Revenue percentage equal to or
greater than 2.5 percent;
h) Interest Coverage Ratio equal to or greater than 2.0
from 10/1/96 through 9/30/97; equal to or greater than
4.0 from 10/1/97 and thereafter;
i) Minimum Working Capital of $12 million dollars as of
the quarter ending 9/30/96;
j) Minimum Working Capital of $12 million dollars as of
the quarter ending 12/31/96;
k) Minimum Working Capital of $15 million dollars as of
the quarter ending 3/31/97 and thereafter;
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IWCF ATTACHMENT A
TO AMENDED AND RESTATED WORKING CAPITAL FINANCING
AND TERM LOAN AGREEMENT ("IWCF AGREEMENT")
III. Financial Covenants (continued):
IV. Additional Conditions Precedent Pursuant to Section 5.1 (M)
of the Agreement:
. Executed Waiver of Landlord Lien for all premises in which a
landlord has the right of levy for rent;
. A Certificate of Location of Collateral whereby the Customer
certifies where Customer presently keeps or sells inventory,
equipment and other tangible Collateral;
. A Compliance Certificate as to Customer's compliance with
the financial covenants set forth in Attachment A as of the last
fiscal month of Customer for which financial statements have been
published;
. A copy of an all-risk insurance certificate pursuant to
Section 7.8 (B) of the Agreement;
