EXHIBIT 10.09
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this "Agreement"), dated as of June
27, 1996, is entered into by and between Litronic Industries, Inc., a California
corporation (the "Company"), and Fidelity Funding of California, Inc., a
California corporation ("Fidelity"). In consideration of the mutual covenants
and agreements contained herein, the Company and Fidelity hereby agree as
follows:
Section 1. Definitions and Construction.
1.1. When used herein, the following terms shall have the following
meanings:
"Account" means the right of the Company to payment for goods sold or
leased or for services rendered which is not evidenced by an instrument or
chattel paper, whether or not earned by performance.
"Account Debtor" means the Person obligated to make payment on an
Account.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, or is controlled by or under common control
with, such Person.
"Applicable Rate" means, as applicable, the Revolving Loan Rate, the
Fixed Asset Loan Rate, the Standby Facility Rate or the Real Estate Contract
Rate.
"Borrowing Base" means an amount equal to the sum, determined by
Fidelity from time to time in its sole discretion, of (a) 85% of the face amount
of Eligible Accounts, plus at Fidelity's option, (b) the lesser of (i) $600,000
or (ii) 50 % of the value of Eligible Inventory.
"Borrowing Base Certificate" means a certificate in the form attached
hereto as Exhibit A, duly executed by an authorized officer of the company.
"Cash Collateral" has the meaning given to it in Section 10.
"Collateral" means all Personal Property Collateral and all Real
Property.
"Concentration Limit" means, as of any date, an amount equal to 20% of
the face amount of Accounts outstanding on such date; provided that with respect
to Accounts owed by the United States or any department or instrumentality
thereof, "Concentration Limits" means, as of any date, an amount equal to 50% of
the face amount of such Accounts outstanding on such date.
"Current Assets" means, as of any date, only those assets of the
Company that may, in the ordinary course of business, be converted into cash
within a period of one year from such date, but excluding (a) amounts due from
employees, officers, shareholders or directors of the
Company, (b) prepaid expenses for services or for supplies that are not
purchased for resale, and (c) amounts due from Affiliates of the Company.
"Current Liabilities" means, as of any date, all obligations of the
Company that are due within one year from such date.
"Debt" means, with respect to any Person, all indebtedness, obligations
and liabilities of such Person, including without limitation: (a) all
liabilities which would be reflected on a balance sheet of such Person prepared
in accordance with GAAP, (b) all obligations of such Person in respect of any
guaranty of a Debt or another Person, or (c) all obligations, indebtedness and
liabilities secured by any lien on or security interest in any property or
assets of such Person.
"Debt Coverage Ratio" means, for any period of three consecutive
calendar months, the ratio of EBITDA for such period to the sum of Interest
Expense for such period plus the Principal Repayment. For purposes of this
definition, the term "Principal Repayment" means, as of any date, the Current
Liabilities as of such date divided by four.
"EBITDA" means, for any period, the sum (determined without
duplication, on a consolidated basis and in accordance with GAAP) of (a) the
Company's net income (or net loss) for such period (including gains and losses
from sales of assets in the ordinary course of business) before provision for
income taxes, (b) the Interest Expense of the Company for such period, and (c)
depreciation, amortization and all other non-cash charges of the Company during
such period to the extent deducted in determining such net income.
"Eligible Accounts" means, at the time of determination thereof, all
Accounts other than (i) any Account which is payable more than 30 days from
invoice date, (ii) any Account which has been outstanding for more than 90 days
from invoice date, (iii) any Account as to which Fidelity does not have a valid
and perfected, first priority security interest, (iv) to the extent that the
aggregate outstanding Accounts owed by any single Account Debtor exceeds the
Concentration Limit, any Account owed by such Account Debtor, (v) any Account
that is owed by an Account Debtor that is an Affiliate of the Company or an
officer or employee of the Company, (vi) any Account that arises out of a sale
made or services performed outside of the Untied States or that is owed by an
Account Debtor located outside the United States, (vii) any Account that is owed
by a creditor or supplier of the Company or with respect to which any defense,
counterclaim or right of set off has been asserted, (viii) any Account owed by
an Account Debtor if more than 25% (in dollar amount) of such Account Debtor's
Accounts are 90 or more days past due, (ix) any Account that is owed by the
United States or any department, agency or instrumentality thereof, unless the
right to payment under such Account is assigned to Fidelity as Collateral in
full compliance with the Assignment of Claims Act of 1940, as amended (31 U.S.C.
3727) and (x) any Account that has not been approved by Fidelity, in its sole
and absolute discretion, for including in the Borrowing Base.
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"Eligible Inventory" means, at the time of determination, all raw
materials and finished goods that are part of the Company's Inventory, valued at
the lower of cost or market value, that (i) are owned by the Company, are
located in the United States of America and, if located on leased or mortgaged
premises, are subject to the terms of a lien waiver letter executed by the
landlord or mortgagee of such premises if deemed necessary by Fidelity in its
sole discretion, (ii) are ready for sale, and are not, in the opinion of
Fidelity,damaged, obsolete or otherwise not readily salable at full value,
(iii) have been held in Inventory for not more than 120 days, (iv) are not on
lease or consignment or furnished under any contract of service from or to any
Person, (v) are subject to an enforceable, first priority, perfected security
interest in favor of Fidelity, (vi) are not the subject of an invoice giving
rise to an Eligible Account, and (vii) have been approved by Fidelity, in its
sole and absolute discretion for inclusion in the Borrowing Base.
"Eligible Machinery and Equipment" means, at the time of
determination, all machinery and equipment, valued at the lower of cost or
liquidation value, that (i) are owned by the Company, are located in the United
States of America and, if located on leased or mortgaged premises, are subject
to the terms of a lien waiver letter executed by the landlord or mortgagee of
such premises if deemed necessary by Fidelity in its sole discretion, (ii) are
not on lease or consignment to any Person, (iii) are subject to an enforceable,
first priority, perfected security interest in favor of Fidelity, (iv) are not,
in the opinion of Fidelity, damaged or obsolete, (v) are not fixtures, and (vi)
have been approved by Fidelity, in its sole and absolute discretion for
inclusion in the Borrowing Base.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, rules, orders, licenses, agreements or
other governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants or industrial, toxic or hazardous
substances into the environment, or otherwise relating to the manufacture,
processing, treatment, transport or handling of pollutants or industrial, toxic
or hazardous substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Plan" means any pension benefit plan subject to Title IV of
ERISA maintained by the Company or any Affiliate thereof with respect to which
the Company has a fixed or contingent liability.
"Event of Default" has the meaning given it in Section 12.
"Fixed Asset Loan" has the meaning given to it in Section 3.
"Fixed Asset Loan Amount" means the lesser of (a) $1,000,000 or (ii)
85% of the forced liquidation value of the Eligible Machinery and Equipment as
determined by an appraisal satisfactory to Fidelity.
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"Fixed Asset Loan Maturity Date" means the earlier to occur of (a) the
Fixed Asset Loan Term Date or (b) the last day of the Term.
"Fixed Asset Loan Rate" means a rate of interest equal to the lesser of
(a) the Prime Rate in effect from time to time plus three percent (3%) per annum
and (b) the maximum rate permitted by applicable law. The Fixed Asset Loan shall
be automatically increased or decreased, as the case may be, without notice to
the Company from time to time as of the effective date of each change in the
Prime Rate.
"Fixed Asset Loan Term Date" means the date which is five years from
the date hereof.
"GAAP" means generally accepted accounting principles and practices as
promulgated by the American Institute of Certified Public Accountants, applied
on a basis consistent with past practices.
"Indemnified Claims" means any and all claims, demands, actions, causes
of action, judgments, liabilities, damages and consequential damages, penalties,
fines, costs, fees, expenses and disbursements (including, without limitation,
fees and expenses of attorneys and other professional consultants and experts in
connection with any investigation or defense) of every kind, known or unknown,
existing or hereafter arising, foreseeable or unforeseeable, which may be
imposed upon, threatened or asserted against or incurred or paid by any
Indemnified Person at any time and from time to time, because of, resulting from
, in connection with or arising out of any transaction, act, omission, event or
circumstance in any way connected with the Collateral or the Transaction
Documents (including but not limited to enforcement of Fidelity's rights
thereunder or the defense of Fidelity's actions thereunder), excluding with
respect to any Indemnified Persons, any of the foregoing resulting from such
Indemnified Person's gross negligence or willful misconduct.
"Indemnified Persons" means Fidelity and its officers, directors,
shareholders, employees, attorneys, representatives and Affiliates.
"Intangible Assets" means such of the Company's assets as are treated
as intangible pursuant to GAAP, including without limitation: (a) obligations
owing by officers, directors, shareholders, employees, subsidiaries, Affiliates
or any Person in which any such officer, director, shareholder, employee,
subsidiary, or Affiliate owns any interest and (b) any asset which is intangible
or lacks intrinsic or marketable value or collectibility, including but not
limited to; goodwill, noncompetition agreements, patents, copyrights,
trademarks, franchises, organization or research and development costs.
"Interest Expense" means, for any period, all interest charges paid or
accrued by the Company during such period.
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"Inventory" means all goods, now owned or hereafter acquired by the
Company, wherever located, that are held for sale or lease or are to be
furnished under any contract of service (including, but not limited to raw
materials, work in process, finished goods and materials used or consumed in the
manufacture or production thereof, goods in which the Company has an interest in
mass or a joint or other interest or rights of any kind, and goods which have
been returned to or repossessed or stopped in transit by the Company).
"Late Payment Rate " means a per annum rate of interest equal to the
lesser of (a) the Applicable Rate plus four percent (4%) and (b) the maximum
rate permitted by applicable law.
"Mortgage" means the Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing dated of even date herewith by and among the
Company, First American Title Insurance Company, as trustee, and Fidelity, as
beneficiary.
"Obligations" means all indebtedness, obligations and liabilities of
the Company to Fidelity arising under the Transaction Documents, and all other
indebtedness, obligations and liabilities of the Company to Fidelity, whether
presently existing or hereafter arising, direct or indirect, primary or
secondary, joint or several, fixed or contingent, and whether originally payable
to Fidelity or to a third party and subsequently acquired by Fidelity.
"Person" means any individual, corporation, joint venture, partnership,
trust, unincorporated organization or governmental entity or agency.
"Personal Property Collateral" has the meaning given it in Section 9.
"Prime Rate" means the rate per annum published from time to time by
The Wall Street Journal as the base rate for corporate loans at large commercial
banks (or, if more than one such rate is published, the higher or highest of the
rates so published). If such rate is no longer published by The Wall Street
Journal, then Fidelity shall, in its sole discretion substitute the base or
prime rate for corporate loans at a large commercial bank for the base rate
published in The Wall Street Journal. Such rate may not necessarily be the
lowest or best rate actually charged to any customer of such commercial bank.
"Real Estate Loan" has the meaning given to it in Section 4.
"Real Estate Loan Amount" means the lesser of (a) $2,200,000 or (ii)
75% of the appraised value of the Real Property as determined by an appraisal
performed in accordance with the provisions of Section 6.1.
"Real Estate Loan Maturity Date" means the earlier to occur of (a) the
Real Estate Term Date or (b) the last day of the Term.
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"Real Estate Loan Rate" means a rate of interest equal to the lesser of
(a) the Prime Rate in effect from time to time plus three and one-half percent
(3.5%) per annum and (b) the maximum rate permitted by applicable law. The Real
Estate Loan Rate shall be automatically increased or decreased, as the case may
be, without notice to the Company from time to time as of the effective date of
each change in the Prime Rate.
"Real Estate Term Date" means the date which is seven years from the
date hereof.
"Real Property" means the Company's administrative office,
manufacturing, research and development facility located at 0000 Xxxxxxx Xxxxxx,
Xxxxx Xxxx, Xxxxxxxxxx.
"Remittance Address" means the address designated in writing by
Fidelity.
"Revolver Advance" has the meaning given to it in Section 2.1.
"Revolver Commitment" means $2,500,000.
"Revolving Loan Rate" means a rate of interest equal to the lesser of
(a) the Prime Rate in effect from time to time plus two percent (2%) per annum
and (b) the maximum rate permitted by applicable law. The Revolving Loan Rate
shall be automatically increased or decreased, as the case may be, without
notice to the Company from time to time as of the effective date of each change
in the Prime Rate.
"Shareholders Equity" means, as of any date, the shareholders' equity
of the Company as of such date determined in accordance with GAAP.
"Standby Facility" has the meaning given it in Section 3A.1.
"Standby Facility Amount" means $250,000.
"Standby Facility Maturity Date" means the earlier to occur of (a) the
Standby Facility Term Date or (b) the last day of the Term.
"Standby Facility Rate" means a rate of interest equal to the lesser of
(a) the Prime Rate in effect from time to time plus three percent (3%) per annum
and (b) the maximum rate permitted by applicable law. The Standby Facility Rate
shall be automatically increased or decreased, as the case may be, without
notice to the Company from time to time as of the effective date of each change
in the Prime Rate.
"Standby Facility Term Date" means the date which is five years from
the date hereof.
"Tangible Net Worth" means, as of any date, the amount obtained by
subtracting the Company's Intangible Assets as of such date from the sum of (i)
the Company's Shareholders'
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Equity as of such date plus (ii) all obligations for borrowed money owed by the
Company to its shareholders, provided that such obligations have been
subordinated to the Obligations on terms satisfactory to Fidelity in its sole
discretion.
"Term" has the meaning given to it in Section 14.4.
"Termination Event" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) of ERISA or (ii)
any other reportable event described in Section 4043(b) of ERISA other than a
reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) of ERISA or (b) the withdrawal of the Company or any Affiliate
of the Company from any ERISA Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) any
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any ERISA
Plan.
"Transactions Documents" means this Agreement, the Mortgage, and all
other documents and instruments executed and delivered in connection therewith.
"UCC" means the Uniform Commercial Code as in effect in the applicable
jurisdiction.
"Working Capital" means, as of any date, the excess of Current Assets
over Current Liabilities as of such date, provided that any Revolver Advances
outstanding as of such date shall, for purposes of the calculation of Working
Capital be treated as Current Liabilities regardless of their characterization
under GAAP.
1.2. Terms defined in the UCC and used but not defined herein shall
have the meanings ascribed to them in the UCC.
1.3. References herein to a particular agreement, instrument or
document also shall be deemed to refer to and include all renewals, extensions
and modifications of such agreement, instrument or document. All addenda,
exhibits and schedules attached to this Agreement are a part hereof for all
purposes. Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires.
1.4. All interest accruing on the outstanding Revolver Advances shall
be calculated on the basis of actual days elapsed (including the first but
excluding the last day) plus three (3) business days and a year of 360 days. All
interest otherwise accruing hereunder shall be calculated on the basis of actual
days elapsed (including the first but excluding the last day) and a year of 360
days. Unless otherwise expressly provided herein or unless Fidelity otherwise
consents, all financial statements and reports furnished to Fidelity hereunder
shall be prepared, and all financial computations and determinations pursuant
hereto shall be made, in accordance with GAAP. All payments received by Fidelity
after its internally established time for closing
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business on any business day shall be applied as of the next succeeding business
day. Any payment which is due on a day which is not a business day shall instead
be deemed to be due on the next succeeding business day, and interest thereon
shall accrue and be payable at the then applicable rate during the time of such
extension. Fidelity's records in respect of loans advanced, accrued interest,
payments received and applied and other matters in respect of calculation of the
amount of the Obligations shall be deemed conclusive absent demonstration of
error. All statements of account rendered by Fidelity to the Company relating to
principal, accrued interest or costs owing by the Company under this Agreement
shall be presumed to be correct and accurate unless, within 30 days after
receipt thereof, the Company shall notify Fidelity in writing of any claimed
error therein.
Section 2. Revolver Advances.
2.1. Subject to the terms of this Agreement, including, without
limitation, Section 6, Fidelity shall make advances to the Company (each a
"Revolver Advance and collectively the "Revolver Advances") from time to time
during the Term; provided, however, that the aggregate principal amount of
Revolver Advances outstanding at any time shall not exceed the lesser of (i)
Borrowing Base determined by Fidelity from time to time and (ii) the Revolver
Commitment. Ech Revolver Advance must be greater than or equal to $5,000 or must
equal the unadvanced portion of the Borrowing Base. The Company hereby agrees to
repay to Fidelity all Revolver Advances made to the Company hereunder, together
with interest thereon, in the manner provided herein. The principal owing
hereunder in respect of the Revolver Advances at any given time shall equal the
aggregate amount of Revolver Advances made hereunder minus all principal
payments on the Revolver Advances received by Fidelity hereunder. Subject to the
terms and conditions hereof, the Company may borrow, repay and reborrow Revolver
Advances under this Agreement.
2.2 Each request by the Company to Fidelity for a Revolver Advance
hereunder must be in writing or promptly confirmed in writing. Each such written
request or confirmation shall be accompanied by a "Borrowing Base Certificate"
in the form attached hereto as Exhibit "A," together with (i) one copy of an
invoice for each Account described in such Borrowing Base Certificate and
evidence of shipment of the sale of goods or services covered thereby, (ii) any
necessary waivers and releases for labor, services, equipment or material of the
Company or any other Person on Fidelity's form, and (iii) a schedule of Eligible
Inventory, setting forth the location of all such Inventory, including Eligible
Inventory not in the possession of the Company and the name of the Person in
possession thereof.
2.3. Promptly after receiving each Borrowing Base Certificate, Fidelity
shall, based upon such Borrowing Base Certificate and such other information
available to Fidelity, redetermine the Borrowing Base, which redetermination
shall take effect immediately and remain in effect until the next such
redetermination. If all conditions precedent to any Revolver Advance requested
have been met, Fidelity will on the date requested make such Revolver Advance
available to the Company by wire transfer to the account designated in writing
by the
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Company. In the event Fidelity does not receive an appropriately completed
Borrowing Base Certificate, Fidelity shall have no obligation to redetermine the
Borrowing Base or make any additional Revolver Advances hereunder.
2.4. If the aggregate unpaid principal balance of the Revolver Advances
exceeds the Borrowing Base at any time, the Company shall, upon receipt of
notice thereof from Fidelity, immediately repay the principal of the Revolver
Advances in an amount at least equal to such excess. Any principal repaid
pursuant to this Section 2.4. shall be in addition to, and not in lieu of, all
payments otherwise required to be paid under the Transaction Documents.
2.5. The aggregate unpaid principal balance of the Revolver Advances
shall bear interest at the Revolving Loan Rate in effect from time to time. All
accrued and unpaid interest on the Revolver Advances shall be due and payable by
the Company to Fidelity on the last day of each calendar month.
2.6. The aggregate unpaid principal balance of the Revolver Advances
plus all accrued but unpaid interest thereon shall be payable by the Company to
Fidelity on the last day of the Term.
Section 3. Fixed Asset Loan.
3.1. Subject to the terms and conditions hereof, including, without
limitation, Section 6, Fidelity agrees to make a loan to the Company in an
amount equal to the Fixed Asset Loan Amount. The Company hereby agrees to repay
to Fidelity the Fixed Asset Loan, together with interest thereon, in the manner
provided herein. The principal owing hereunder in respect of the Fixed Asset
Loan at any given time shall equal the Fixed Asset Loan Amount minus all
principal payments on the Fixed Asset Loan received by Fidelity hereunder.
3.2. If upon receipt of any appraisal of the Eligible Machinery and
Equipment (or upon such other information then available to Fidelity) Fidelity
determines that the liquidation value of the Eligible Machinery and Equipment is
less than the outstanding principal balance of the Fixed Asset Loan, the Company
shall, upon receipt of notice thereof from Fidelity, immediately repay the
principal of the Fixed Asset Loan in an amount at least equal to such excess.
Any principal repaid pursuant to this Section 3.2 shall be in addition to, and
not in lieu of, all payments otherwise required to be paid under the Transaction
Documents.
3.3. The aggregate unpaid principal balance of the Fixed Asset Loan
shall bear interest at the Fixed Asset Loan Rate in effect from time to time.
All accrued and unpaid interest on the Fixed Asset Loan shall be due and payable
by the Company to Fidelity on the last day of each calendar month.
3.4. Prior to the Fixed Asset Loan Maturity Date, principal of the
Fixed Asset Loan shall be payable in monthly installments, due and payable on
the last day of each calendar month,
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in an amount which would amortize the principal of the Fixed Asset Loan in full
on the Fixed Asset Loan Term Date, which amounts shall be set forth in a
schedule prepared by Fidelity and provided to the Company. The aggregate
principal balance of the Fixed Asset Loan plus all accrued but unpaid interest
thereon shall be due and payable by the Company to Fidelity on the Fixed Asset
Loan Maturity Date.
Section 3A. Standby Facility.
3A.1. Subject to the terms and conditions hereof, including, without
limitation, Section 6, Fidelity agrees to make a loan to the Company in an
amount equal to the Standby Facility Amount. The Company hereby agrees to repay
to Fidelity the Standby Facility, together with interest thereon, in the manner
provided herein. The principal owing hereunder in respect of the Standby
Facility at any given time shall equal the Standby Facility Amount minus all
principal payments on the Standby Facility received by Fidelity hereunder.
3A.2. The aggregate unpaid principal balance of the Standby Facility
shall bear interest at the Standby Facility Rate in effect from time to time.
All accrued and unpaid interest on the Standby Facility shall be due and payable
by the Company to Fidelity on the last day of each calendar month.
3A.3. Prior to the Standby Facility Maturity Date, principal of the
Standby Facility shall be payable in monthly installments, due and payable on
the last day of each calendar month, in an amount which would amortize the
principal of the Standby Facility in full on the Standby Facility Term Date,
which amounts shall be set forth in a schedule prepared by Fidelity and provided
to the Company. The aggregate principal balance of the Standby Facility plus all
accrued but unpaid interest thereon shall be due and payable by the Company to
Fidelity on the Standby Facility Maturity Date.
Section 4. Real Estate Loan.
4.1. Subject to the terms and conditions hereof, including, without
limitation, Section 6, Fidelity agrees to make a loan to the Company in an
amount equal to the Real Estate Loan Amount. The Company hereby agrees to repay
to Fidelity the Real Estate Loan, together with interest thereon, in the manner
provided herein. The principal owing hereunder in respect of the Real Estate
Loan at any given time shall equal the Real Estate Loan Amount minus all
principal payments on the Real Estate Loan received by Fidelity hereunder.
4.2. The aggregate unpaid principal balance of the Real Estate Loan
shall bear interest at the Real Estate Loan Rate in effect from time to time.
All accrued and unpaid interest on the Real Estate Loan shall be due and payable
by the Company to Fidelity on the last day of each calendar month.
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4.3. Beginning one year after the date hereof and prior to the Real
Estate Loan Maturity Date, principal shall be payable in monthly installments,
due and payable on the last day of each calendar month, in an amount which would
amortize the principal of the Real Estate Loan in full on the Real Estate Loan
Term Date, which amounts shall be set forth in a schedule prepared by Fidelity
and provided to the Company. The aggregate principal balance of the Real Estate
Loan plus all accrued but unpaid interest thereon shall be due and payable by
the Company to Fidelity on the Real Estate Loan Maturity Date.
Section 5. Fees.
5.1. The Company shall pay to Fidelity an annual commitment fee in the
amount of $44,000, payable on the date hereof and on each anniversary of the
date hereof during the Term; provided that when the Real Estate Loan has been
repaid in full, the commitment fee shall be reduced to 1% of sum of (i) the
Revolver Commitment and (ii) the then outstanding principal balance of the Fixed
Asset Loan (prorated during the year in which such reduction occurs). The
Company hereby authorizes Fidelity, at its sole discretion, to deduct the
commitment fee from any Advance hereunder.
5.2. As consideration for Fidelity's commitment to advance funds
hereunder the Company shall pay to Fidelity a minimum usage fee (in this section
called the "Minimum Usage Fee") of not less than $15,000 for each calendar month
(or fraction thereof, on a prorated basis) during the Term. In the event that
the income earned by Fidelity during any calendar month (or fraction thereof on
a prorated basis) pursuant to Sections 2.5 and 5.3 is less than the Minimum
Usage Fee, the Company shall pay to Fidelity the difference between the amount
so earned by Fidelity and the Minimum Usage Fee, regardless of Fidelity's prior
compensation. The Minimum Usage Fee for each calendar month shall be due and
payable on the first day of the next calendar month.
5.3. The Company shall pay to Fidelity a monthly servicing fee in an
amount equal to .13% of the average monthly outstanding balance of the Revolver
Advances for each calendar month. The monthly servicing fee for each calendar
month shall be due and payable on the first day of the next calendar month.
5.4. In addition to, and not in lieu of, any termination fee required
by Section 14.4, the Company shall pay to Fidelity a liquidation fee (in this
section called the "Liquidation Fee") in the amount of two percent (2%) of the
face amount of each Eligible Account included in the Borrowing Base that is
outstanding at any time during the Liquidation Period (as defined below) and
that Fidelity collects following collection efforts by Fidelity and excluding
collections in the ordinary course of business (i.e. paid within 30 days). The
Liquidation Fee shall be payable on the date on which Fidelity collects the
applicable Eligible Account. For purposes of this section, the term "Liquidation
Period" means a period beginning on the earliest of (i) the date of commencement
against or by the Company of any voluntary or involuntary case under the federal
Bankruptcy Code, (ii) the date of any general assignment by the Company for the
benefit of its
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creditors; (iii) the date of any appointment or taking possession by a receiver,
liquidator, assignee, custodian or similar official of all or a substantial part
of the Company's assets, or (iv) the date of the cessation of business of the
Company and ending on the date on which Fidelity has actually received all fees,
costs, expenses and other amounts owing to it hereunder.
5.5. Contemporaneously with the execution and delivery hereof, the
Company shall pay to Fidelity (i) a fee of $12,000 to cover the costs of the
negotiation, preparation, execution and delivery of the Transaction Documents,
including the fees, if any, of outside legal counsel, and (ii) costs of
preparation of mortgage on the Real Property and a review of the title
commitment and title insurance policy on the Real Property. In addition, the
Company shall pay or reimburse Fidelity upon demand for all other costs and
expenses incurred by Fidelity in connection with its due diligence review of the
Company and the closing of the transactions contemplated hereby and all
reasonable attorney's fees, court costs and other expenses incurred by Fidelity
(whether or not litigation is commenced or judgment issued, and if litigation is
commenced whether at trial or any appellate level) in connection with the
enforcement by Fidelity of this Agreement or any other Transaction Document, the
protection or enforcement of Fidelity's interest in the Collateral, the
collection by Fidelity of the Collateral, or the representation of Fidelity in
connection with any bankruptcy case or insolvency proceeding involving the
Company, the Collateral, or any Account Debtor, including, without limitation,
any representation involving relief rom a stay motion, a cash collateral
dispute, an assumption or rejection motion or a dispute concerning any proposed
disclosure statement and plan proposed in any such proceeding.
5.6. Fidelity shall be entitled to collect upon demand its normal and
customary charges for the following routine services provided or obtained in the
course of performing its functions with respect to the Collateral: lock box
charges and wire transfers.
5.7. All interest, fees and other amounts due to Fidelity pursuant to
this Section 5 shall be payable on demand, and may, in Fidelity's sole
discretion, be deducted from Revolver Advances or paid from the Cash Collateral.
All past due amounts owed hereunder, including but not limited to, past due
interest, fees and other amounts, that are not paid when due shall bear interest
from the date due until paid at the Late Payment Rate.
Section 6. Conditions Precedent to the Loans.
6.1. Fidelity shall not be obligated to make the Fixed Asset Loan, the
Real Estate Loan, the Standby Facility or any Revolver Advance hereunder
(including the first) until it shall have received the following documents, duly
executed in form and substance satisfactory to Fidelity and its counsel:
(a) continuing unconditional and absolute guaranty by Xxxx Xxxx of all
Obligations;
12
(b) a certificate executed by the President and the Secretary of the
Company certifying (i) the names and signatures of the officers of the Company
authorized to execute Transaction Documents, (ii) the resolutions duly adopted
by the Board of Directors of the Company authorizing the execution of this
Agreement and the other Transaction Documents, and (iii) correctness and
completeness of the copy of the bylaws of the Company attached thereto;
(c) a certificate executed by the President and the Chief Financial
Officer of the Company certifying the satisfaction of the conditions set forth
in Section 7;
(d) certificates regarding the due formation, valid existence and good
standing of the Company in the state of its organization issued by the
appropriate governmental authorities in such jurisdiction;
(e) a release executed by the Bank of Xxxxx Xxxxx releasing all liens
and security interests of the Bank of Xxxxx Xxxxx in the Collateral;
(f) a release executed by Finova releasing all liens and security
interests of Finova in the Collateral;
(g) endorsements naming Fidelity as an additional insured or loss
payee, as appropriate, on all liability insurance and all property insurance
policies of the Company;
(h) a satisfactory appraisal of the Real Property by an appraiser
acceptable to Fidelity;
(i) a satisfactory appraisal of the eligible Machinery and Equipment
dated within one month of the date hereof by an appraiser acceptable to
Fidelity;
(j) a commitment for title insurance on the Real Property, acceptable
to Fidelity;
(k) the Mortgage;
(l) a Subordination Agreement executed by Xxxx Xxxx (the "Subordination
Agreement").
6.2. Fidelity shall not be obligated to make the Fixed Asset Loan, the
Real Estate Loan, the Standby Facility or any Revolver Advance hereunder
(including the first), unless (i) all representations and warranties made by the
Company in the Transaction Documents are true on and as of the date of the
making of the Fixed Asset Loan, the Real Estate Loan, the Standby Facility or
such Revolver Advance as if such representations and warranties had been made as
of the date thereof, (ii) the Company has performed and complied with all
agreements and conditions required in the Transactions Documents to be performed
or complied with by it on or prior to such date, (iii) no Event of Default or
any event or circumstance that, with the passage of time, the giving of notice
or both, would become an Event of Default shall have occurred, (iv)
13
the making of the Fixed Asset Loan, the Real Estate Loan, the Standby Facility
or such Revolver Advance shall not be prohibited by any law or any regulation or
any order of any court or governmental agency or authority, (v) the Company
shall have not repudiated or made any anticipatory breach of any of its
obligations under any Transaction Document, and (vi) Fidelity shall have
approved the Fixed Asset Loan, the Real Estate Loan, the Standby Facility or
such Revolver Advance in its sole discretion.
Section 7. The Company's Representations and Warranties. The Company
represents and warrants to Fidelity on the date hereof, and shall be deemed to
represent and warrant to Fidelity on the date on which the Fixed Asset Loan, the
Real Estate Loan, the Standby Facility or any Revolver Advance is made to the
Company hereunder, that:
7.1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation, with all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement and the other Transaction Documents to which it is a party
and to conduct its business as presently conducted. The Company is duly
qualified and authorized to do business as a foreign corporation and is in good
standing in all states in which such qualification and good standing are
necessary for the conduct by the Company of its business or the performance by
the Company of its obligations hereunder. The execution, delivery and
performance by the Company of this Agreement and the other Transaction Documents
to which it is a party do not and will not constitute (a) a violation of any
applicable law or the Company's articles or certificate of incorporation or
bylaws or (b) a material breach of any other document, agreement or instrument
to which the Company is a party or by which the Company is bound. This Agreement
and the other Transactions Documents to which the Company is a party have been
duly authorized, executed and delivered by the Company, and are legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms. No consent of, approval by, registration or filing with or
authorization from any governmental authority or agency is required in
connection with the execution, delivery or performance by the Company of this
Agreement or the other Transaction Documents to which it is a party.
7.2. None of the Eligible Accounts, the Eligible Inventory, the
Eligible Machinery and Equipment, the Real Property or any other Collateral is
subject to any lien, encumbrance, security interest or other claim of any kind
or nature, except for those liens that will be released upon the funding of the
first advance hereunder. The Company has not transferred, sold, pledged or given
a security interest in any of its Accounts, Inventory, machinery or equipment to
anyone other than Fidelity. There are no financing statements on file in any
public office governing any property of the Company of any kind, real or
personal, in which the Company is named in or has signed as the debtor, except
the financing statement or statements filed or to be filed in respect of this
Agreement or those statements on file that were disclosed in writing by the
Company to Fidelity prior to the execution and delivery of this Agreement.
14
7.3. The Company is the sole owner and holder of, and has good and
defensible title to, all Collateral.
7.4. The amount of each Eligible Account is due and owing to the
Company and represents an accurate statement of a bona fide sale, delivery and
acceptance of Inventory or performance of service by the Company to or for an
Account Debtor. The terms for payment of the Eligible Accounts are 30 days from
date of invoice and the payment of the Eligible Accounts is not contingent upon
the fulfillment by the Company of any further performance of any nature
whatsoever. There are no set-offs, allowances, discounts, deductions,
counterclaims against the Eligible Accounts or any claims by Account Debtors, of
any kind whatsoever, valid or invalid, that have been or may be asserted as a
basis for refusing to pay an Eligible Account, in whole or in part, either at
the time it is accepted by Fidelity for inclusion in the Borrowing Base or prior
to the date it is to be paid. To the best of the Company's knowledge, each
Account Debtor's business is solvent. The Company has served or caused to be
served any and all preliminary notices required by law to perfect or enforce any
mechanic's lien or stop notice or bonded stop notice for the Eligible Accounts
and the information contained in those notices is true and correct to the best
of the Company's knowledge.
7.5. The address set forth below the Company's signature hereon is, and
for at least the last six months has been, the Company's mailing address, its
chief executive office, its principal place of business, the office where all of
the books and records concerning the Eligible Accounts are maintained and the
location of all Collateral. Prior to January 4, 1995, the Company's legal name
was Dril-Tron, Inc. The Company does not transact business, and has not
transacted business during the past five years, under any trade, fictitious or
assumed name, other than Dril-Tron, Inc. and those set forth under the Company's
signature hereon. During the past five years, the Company has not been a party
to a merger or consolidation and has not acquired all or substantially all of
the assets of any Person.
7.6. The Company has filed all tax reports and returns required to be
filed by it and has paid, when due and payable, all federal, state and local
taxes and governmental charges imposed upon the Company.
7.7. The Company is in compliance with ERISA, and is not required to
contribute to any "multiemployer plan" as defined in Section 4001 of ERISA. The
Company has conducted its business in material compliance with all applicable
laws, including but not limited to, applicable Environmental Laws, and maintains
and is in compliance with all licenses and permits required under any such laws
to conduct its business and perform its obligations hereunder. The Company does
not have any known material contingent liability under any Environmental
Law.
7.8. The application made by the Company to Fidelity in connection with
this Agreement and the statements made therein and in any materials furnished in
connection therewith are true and correct as of the date hereof. All financial
statements furnished by the
15
Company to Fidelity in connection with such application were prepared in
accordance with GAAP and fairly present the financial condition and results of
operations of the Company as of the dates and for the periods indicated therein.
7.9. There is no fact which the Company has not disclosed to Fidelity
in writing which could materially adversely affect the properties, business or
financial condition of the Company, or any of the Collateral, or which it is
necessary to disclose in order to keep the foregoing representations and
warranties from being misleading.
Section 8. Covenants of the Company. From the date hereof and until the
payment and performance is full of all of the Obligations, the Company covenants
with Fidelity that:
8.1. The Company shall preserve and maintain its corporate existence,
good standing and authority to transact business in all jurisdiction where
necessary for the proper conduct of its business, and shall maintain all of its
properties, rights, privileges and franchises necessary in the normal conduct of
its business.
8.2. The Company shall permit Fidelity and its representatives,
including any appraisers, auditors and accountants selected by Fidelity, to
inspect any of the Collateral at any time during normal business hours. In
addition, Fidelity shall have the right, from time to time, to audit the
Company's books and records upon reasonable notice to the Company; provided that
so long as no Event of Default has occurred and is continuing, Fidelity shall
not conduct more than one audit per calendar quarter. The Company shall pay all
costs associated with any such audits at the rate of $700 per day per auditor
plus reasonable out-of-pocket expenses.
8.3. The Company shall maintain its books and records in accordance
with GAAP. The Company shall furnish Fidelity, upon request, such information
and statements as Fidelity shall request from time to time regarding the
Company's business affairs, financial condition and results of its operations.
Without limiting the generality of the foregoing, the Company shall provide
Fidelity, on or prior to the last day of each month, unaudited consolidated and
consolidating financial statements with respect to the prior month and, within
90 days after the end of each of the Company's fiscal years, audited annual
consolidated financial statements and such certificates relating to the
foregoing as Fidelity may request including, without limitation, a monthly
certificate from the president and chief financial officer of the Company
stating whether any events of Defaults have occurred and stating in detail the
nature thereof. The Company shall provide Fidelity a Borrowing Base Certificate,
appropriately completed and with all attachments, at any time that Fidelity
shall request and on or before the last day of any calendar week in which the
company does not request a Revolver Advance. In addition, the Company shall
furnish to Fidelity upon request a current listing of all open and unpaid
accounts payable and accounts receivable, names, addresses and contact persons
for Account Debtors, and such other items of information that Fidelity may deem
necessary or appropriate from time to time. The Company immediately shall notify
Fidelity in writing upon becoming aware of the existence of any condition or
circumstance that constitutes an Event of Default or that would, with the giving
of
16
notice, the passage of time or both, constitute an Event of Default. Any such
written notice shall specify the nature of such condition or circumstance, the
period of the existence thereof and the action that the Company proposes to take
with respect thereto.
8.4. The Company promptly shall notify Fidelity of any attachment or
any other legal process levied against the Company and any action, suit,
proceeding or other similar claim of $25,000 or more initiated against the
Company.
8.5. The Company shall keep and maintain adequate insurance by insurers
acceptable to Fidelity with respect to its business and all Collateral, provided
that in no event shall such insurance coverage be less than the coverage set
forth on Exhibit "B." Fidelity agrees that as to the Collateral in existence as
of the date hereof, the coverage set forth on Exhibit "B" is satisfactory. Such
insurance shall cover loss, damages and liability of amounts not less than
reasonably requested by Fidelity and shall include, at a minimum, business
interruption insurance, insurance for workers compensation, general premises
liability, fire, casualty, theft and all risk. The Company shall cause Fidelity
to be an additional insured and loss payee under all policies of insurance
covering any of the Collateral, to the extent of Fidelity's interest. The
Company shall deliver copies of each insurance policy to Fidelity upon request.
8.6. The Company shall file all tax reports and returns required to be
filed by it in the manner and at the times required by applicable law, and shall
pay all federal, state and local taxes and charges imposed upon the Company when
due.
8.7. The Company shall comply with ERISA and shall not become required
to contribute to any "multiemployee plan" as defined in Section 4001 of ERISA.
The Company shall conduct its business in material compliance with all
applicable laws, and shall maintain and comply with all licenses and permits
required under any such laws to conduct its business and perform its obligations
hereunder. Without limiting the generality of the foregoing, the Company shall
comply in all material respects with all Environmental Laws now or hereafter
applicable to the Company and shall obtain, at or prior to the time required by
applicable Environmental Laws, all environmental, health and safety permits,
licenses and other authorizations necessary for its operations. The Company
promptly shall furnish to Fidelity all written notices of violation, complaints,
penalty assessments, suits or other proceedings received by the Company with
respect to any alleged violation of or non-compliance with any Environmental
Laws.
8.8. The Company shall maintain a Tangible Net Worth of not less than
(i) a negative $100,000 at any time after the date hereof, and (ii) the sum of a
negative $100,000 plus the greater of (A) $750,000 or (B) the net income of the
Company for its fiscal year 1996 at any time after December 30, 1996.
8.9. The Company shall maintain an Debt Coverage Ratio (determined as
of the last day of each calendar month) of not less than 1.5 to 1.0.
17
8.10. The Company shall at all times maintain Working Capital of not
less than (i) a negative $750,000 at any time after the date of the first
funding hereunder and (ii) a negative $250,000 at any time after December 30,
1996.
8.11. The Company shall not grant, create or allow to exist any
security interest, lien or other encumbrance on any of the collateral other than
(i) the lien and security interest granted to Fidelity herein, (ii) the existing
security interest of Phoenixcor on equipment of the Company, and (iii) purchase
money security interests in equipment of the Company at to which the Company has
given Fidelity written notice. The Company shall not execute any financing
statement in favor of any Person other than Fidelity, except a continuation
statement in favor of Phoenixcor or the holder of such a purchase money security
interest. The Company shall not change its mailing address, chief executive
office, principal place of business or place where such records are maintained,
open any new place of business, close any existing place of business or change
the location of any of the Collateral or transact business under any trade,
fictitious or assumed name other than those set forth under the company's
signature hereon without providing at least 30 days' prior written notice
thereof to Fidelity.
8.12. The Company shall not accept any returns or grant any allowance
or credit (other than those returns, allowances and credits accepted or granted
in the ordinary course of the Company's business) to any Account Debtor without
notice to and the prior written approval of Fidelity. The Company shall provide
to Fidelity for each Account Debtor on Eligible Accounts a weekly report, in for
and substance satisfactory to Fidelity, itemizing all such returns and
allowances made during the previous week with respect to such Eligible Accounts.
8.13. The Company shall not incur, directly, or indirectly, any
obligations for borrowed money or otherwise under any promissory note, bond,
indenture or similar instrument, or in connection with the obligations of any
Person (whether by guaranty, suretyship, purchase or repurchase agreement or
agreement to make investments or otherwise), other than in favor of Fidelity or
Xxxx Xxxx, provided that, pursuant to the Subordination Agreement, any
obligations for borrowed money owed by the Company to Xxxx Xxxx shall be
expressly subordinated to the Obligations, in the normal and ordinary course of
the Company's business.
8.14. The Company shall not use any of the funds paid to the Company
hereunder directly or indirectly for personal, family, household or agricultural
purposes.
8.15. The Company shall not directly or indirectly become liable in
connection with the obligations of any Person, whether by guarantee, surety,
endorsement (other than endorsement of negotiable instruments for collection in
the ordinary course of business), agreement to purchase or repurchase, agreement
to make investments, agreement to provide funds or maintain working capital, or
any agreement to assure a creditor against loss, other than in favor of
Fidelity.
18
8.16. The Company shall not discontinue, or make any material change
in, its business as currently established, or enter any new or different line of
business not directly related to the Company's existing line of business.
8.17. The Company shall not make any loans or advances to or for the
benefit of any officer, director or shareholder of the Company except advances
for routine expense allowances in the ordinary course of business. The Company
shall not make any loans or advances to or for the benefit of any Affiliate of
the Company. The Company shall not make any payment on any obligation owing to
any officer, director, shareholder or Affiliate of the Company other than
payments to Xxxx Xxxx that are permitted under the Subordination Agreement.
8.18. The Company shall not purchase or otherwise acquire assets from
any Person outside the ordinary course of business of the Company.
8.19. The Company shall not invest in or otherwise purchase or acquire
the securities of any Person.
8.20. The Company shall not sell or dispose of any of its assets other
than the sale of Inventory in the ordinary course of business, and the Company
shall not dissolve or liquidate or become a party to any merger or consolidation
with any Person.
Section 9. Personal Property Collateral. In order to secure the payment
of all Obligations, the Company hereby grants to Fidelity a security interest in
and lien upon all of the Company's right, title and interest in and to (a) all
Accounts, contract rights and general intangibles, receivables and claims
whether now or hereafter arising, all guaranties and security therefor and all
of the Company's right title and interest in the goods purchased and represented
thereby including all of the Company's rights in and to returned goods and
rights of stoppage in transit, replevin and reclamation as unpaid vendor; (b)
all Inventory and all accessions thereto and products thereof and documents
therefor; (c) all equipment and machinery, wherever located and whether now or
hereafter existing, and all parts thereof, accessions thereto, and replacements
therefor and all documents and general intangibles covering or relating thereto;
(d) except to the extent prohibited by law or contract, all books and records
pertaining to the foregoing, including but not limited to computer programs,
data, certificates, records, circulation lists, subscriber lists, advertiser
lists, supplier lists, customer lists, customer and supplier contracts, sales
orders, and purchasing records; and (e) all proceeds of the foregoing
(collectively, the "Personal Property Collateral"). The Company agrees to comply
with all appropriate laws in order and to take all actions necessary or
desirable in Fidelity's judgment to perfect Fidelity's security interest in and
to the Personal Property Collateral, to execute any financing statement or
additional documents as Fidelity may request and to deliver to Fidelity a list
of all locations of its Inventory, equipment and machinery and landlord and or
mortgagee lien waivers with respect to each site where Inventory, equipment or
machinery is located and which is either leased by the Company or has been
mortgaged by the Company, upon request by Fidelity.
19
Section 10. Collection. Each invoice representing an Account shall
state on its face that amounts payable thereunder are payable only at the
Remittance Address. Fidelity shall have the right at any time, either before or
after the occurrence of an Event of Default and without notice to the Company,
to notify any or all Account Debtors on the Personal Property Collateral of the
assignment of the Personal Property Collateral to Fidelity and to direct such
Account Debtors to make payment of all amounts due or to become due to the
Company directly to Fidelity, and to the extent permitted by law, to enforce
collection of any Personal Property Collateral and to adjust, settle or
compromise the amount or payment thereof. So long as no Event of Default or
event that, with the passage of time, the giving of notice or both, would become
an Event of Default has occurred and is continuing, all collections of Personal
Property Collateral or any other evidences of payment received by Fidelity shall
be applied by Fidelity to the payment of the Obligations of the Company to
Fidelity whether or not then due and any remaining funds shall be delivered to
the Company. Upon the occurrence of an Event of Default or an event that, with
the passage of time, the giving of notice or both, would become an Event of
Default, any such remaining funds may be held by Fidelity as cash collateral
("Cash Collateral") until all Obligations have been paid in full and Fidelity
has no further obligation to advance funds to the Company. All amounts and
proceeds (including instruments and writings) received by the Company in respect
of the Personal Property Collateral shall be received in trust for the benefit
of Fidelity hereunder, shall be segregated from other funds of the Company and
shall be promptly paid over to Fidelity in the same form as received (with any
necessary endorsement) to be applied in the same manner as payments received
directly by Fidelity.
Section 11. Power of Attorney. The Company grants to Fidelity an
irrevocable power of attorney coupled with an interest authorizing and
permitting Fidelity, at its option, with or without notice to the Company, to do
any or all of the following: (a) endorse the name of the Company on any checks
or other evidences of payment whatsoever that may come into the possession of
Fidelity regarding Personal Property Collateral, including checks received by
Fidelity pursuant to Section 10 hereof; (b) receive, open and forward any mail
addressed to the Company and put Fidelity's address on any statements mailed to
Account Debtors; (c) upon the occurrence of an Event of Default, pay, settle,
compromise, prosecute or defend any action, claim, conditional waiver and
release, or proceeding relating to Personal Property Collateral; (d) upon the
occurrence of an Event of Default, notify, in the name of the Company, the U.S.
Post Office to change the address for delivery of mail addressed to the Company
to such address as Fidelity may designate (provided that Fidelity shall turn
over to the Company all such mail not relating to Personal Property Collateral);
(e) upon the occurrence of an Event of Default, verify, sign, acknowledge,
record, file for recording, serve as required by law, any claim of mechanic's
lien, stop notice or bonded stop notice in the sole and absolute discretion of
Fidelity relating to any Personal Property Collateral; (f) upon the occurrence
of an Event of Default, insert all recording or service information in any
mechanic's lien or assignment of rights under stop notice/bonded stop notice
which the Company has signed in connection with this Agreement, recorded or
served to enforce payment of the Personal Property Collateral; (g) execute and
file on behalf of the Company any financing statement, amendment thereto or
continuation thereof (i) deemed necessary or appropriate by Fidelity to protect
Fidelity's interest in and to the Personal
20
Property Collateral or (ii) required or permitted under any provision of this
Agreement; and (h) upon the occurrence of an Event of Default, do all other
things necessary and proper in order to carry out this Agreement. The authority
granted to Fidelity herein is irrevocable until this Agreement is terminated and
all amounts due to Fidelity hereunder have been paid in full.
Section 12. Default. An event of default ("Event of Default") shall be
deemed to have occurred hereunder, Fidelity shall have no further obligation to
make any further Revolver Advances and may immediately exercise its rights and
remedies with respect to the Collateral under this Agreement, the Uniform
Commercial Code and applicable law, upon the happening of one or more of the
following:
(a) The Company shall fail to pay as and when due any amount owed by
the Company to Fidelity, whether hereunder or otherwise.
(b) The Company shall breach any covenant or agreement made herein or
in any other Transaction Document or any warranty or representation made herein
or in any other Transaction Document shall be untrue when made, and in either
case, the same shall not be cured to Fidelity's satisfaction within ten days
after such covenant or agreement is breached or such representation or warranty
is made; provided that if any such breach is impossible to remedy within ten
days, so long as the Company has undertaken (within the initial ten day cure
period) the steps necessary to remedy such breach and the Company diligently
continues to take all steps necessary to cure such failure, the ten day cure
period will be extended, but in no event shall the cure period exceed sixty
days.
(c) Any report, certificate, schedule, financial statement, profit and
loss statement or other statement furnished by the Company, or by any other
person on behalf of the Company, to Fidelity is not true and correct in any
material respect.
(d) There shall be commenced by the Company or any guarantor of the
Obligations any voluntary case under the federal Bankruptcy Code, or the Company
or any guarantor of the Obligations shall make an assignment for the benefit of
its creditors, or of a receiver or custodian shall be appointed for the Company
or any guarantor of the Obligations for a substantial portion of its assets.
(e) There shall be commenced against the Company or any guarantor of
the Obligations any involuntary case under the federal Bankruptcy Code, which
remains undismissed for a period of sixty days.
(f) The Company shall become insolvent in that its debts are greater
than the fair value of its assets, or the Company is generally not paying its
debts as they become due.
(g) Any involuntary lien, garnishment, attachment or the like shall be
issued against or shall attach to the Collateral and the same is not released
within ten days.
21
(h) An event or circumstance shall have occurred which has or may
result in a material adverse change in the Company's financial condition,
business or operations.
(i) The Company shall have a federal or state tax lien filed against
any of its properties, or shall fail to pay any federal or state tax when due,
or shall fail to file any federal or state tax form or report as and when due.
(j) Either (i) any "accumulated funding deficiency" (as defined in
Section 412(a) of the Internal Revenue Code of 1986, as amended) in excess of
$25,000 exists with respect to any ERISA Plan, or (ii) any Termination Event
occurs with respect to any ERISA Plan and the then current value of such ERISA
Plan's benefit liabilities exceeds the then current value of such ERISA Plan's
assets available for the payment of such benefit liabilities by more than
$25,000.
(k) The Company suffers the entry against it a final judgment for the
payment of money in excess of $35,000.
(l) Fidelity believes that the prospect for payment or performance of
the Obligations has become impaired.
(m) Any guarantor of the Obligations shall repudiate his, her or its
obligations in respect of such guaranty.
(n) Xxxx Xxxx, his spouse, the blood relatives of Xxxx Xxxx and any
trusts for the exclusive benefit of any blood relatives of Xxxx Xxxx, Xxxx Xxxx,
his spouse or lineal descendants cease to own or control in the aggregate at
least 51% of the outstanding capital stock of the Company.
Upon the occurrence of an Event of Default described in subsections (d) or (e)
of this section, all of the Obligations owing by the Company to Fidelity under
any of the Transaction Documents shall thereupon be immediately due and payable,
without demand, presentment, notice of demand or of dishonor and nonpayment, or
any other notice or declaration of any kind, all of which are hereby expressly
waived by the Company. During the continuation of any other Event of Default,
Fidelity, at any time and from to time to time, may declare any or
22
all of the Obligations owing by the Company to Fidelity under any of the
Transaction Documents immediately due and payable, all without notice, demand,
presentment, notice of demand or of dishonor and nonpayment, or any notice or
declaration of any kind, all of which are hereby expressly waived by the
Company. After any such acceleration (whether automatic or due to declaration by
Fidelity), any obligation of Fidelity to make any further Revolver Advances or
loans of any kind under this Agreement or any other agreement with the Company
shall terminate. All Revolver Advances hereunder are subject to approval by
Fidelity in its sole discretion, and may be declined in whole or in part,
without prior notice to the Company, whether or not an Event of Default may then
be in existence.
Section 13. Remedies and Application of Proceeds.
13.1. In addition to, and with limitation of, the foregoing provisions
of this Agreement, if an Event of Default shall have occurred and be continuing,
Fidelity may from time to time in its discretion, without limitation and without
notice except as expressly set forth herein: (A) exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein, under
the other Transaction Documents or otherwise available to it, all the rights and
remedies of a secured party on default under the UCC (whether or not the UCC
applies to the affected Collateral); (b) require the Company to, and the Company
hereby agrees that it will at its expense, assemble all or part of the
Collateral as directed by Fidelity and make it available to Fidelity at a place
to be designated by Fidelity that is reasonably convenient to both parties; (c)
reduce its claim to judgment or foreclose or otherwise enforce, in whole or in
part, the security interest created hereby by any available judicial procedure;
(d) dispose of, at its office, on the premises or the Company or elsewhere, all
or any part of the Collateral, as a unit or in parcels, by public or private
proceedings; (e) buy the Collateral, or any part thereof, at any public sale, or
at any private sale if the Collateral is of a type customarily sold in a
recognized market or is of a type that is the subject to widely distributed
standard price quotations; (f) apply by appropriate judicial proceedings for
appointment of a receiver for the Collateral, or any part thereof, and the
Company hereby consents to any such appointment; and (g) at its discretion,
retain the Collateral in satisfaction of the Obligations whenever the
circumstances are such that Fidelity is entitled to do so under the UCC or
otherwise. The Company agrees that, to the extent notice of sale shall be
required by law, unless a longer period of notice is prescribed by law, at least
five days' notice to the Company of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. Fidelity shall not be obligated to make any sale of Collateral
regardless of whether any notice of sale has been given. Fidelity may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
13.2. If any Event of Default shall have occurred and be continuing,
Fidelity may in its discretion apply any Cash Collateral, and any cash proceeds
received by Fidelity in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral, to any or all of the
following in such order as Fidelity may elect: (a) the repayment of all or any
portion of the
23
Obligations; (b) the repayment of reasonable costs and expenses, including
reasonable attorneys' fees and legal expenses, incurred by Fidelity in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral, (iii) the exercise or enforcement of any of
the rights of Fidelity hereunder, or (iv) the failure of the Company to perform
or observe any of the provisions hereof; (c) the payment or other satisfaction
of any liens and other encumbrances upon any of the Collateral; (d) the
reimbursement of Fidelity for the amount of any obligations of the Company paid
or discharged by Fidelity, and of any expenses of Fidelity payable by the
Company hereunder or under the other Transaction Documents; (e) by holding the
same as Collateral; (f) the payment of any other amounts required by applicable
law (including, without limitation, Part 5 of Article 9 of the UCC or any
successor or similar applicable statutory provision); and (g) by delivery to the
Company or to whomsoever shall be lawfully entitled to receive the same or as a
court of competent jurisdiction shall direct.
Section 14. Miscellaneous.
14.1. In the event that the Company commits any act or omission that
prevents or unreasonably interferes with (a) Fidelity's exercise of the rights
and privileges arising under the power of attorney granted in Section 11 of this
Agreement or (b) Fidelity's perfection of or levy upon the security interest
granted in the Collateral, including any seizure of any Collateral, the Company
acknowledges that such conduct will cause immediate, severe, incalculable and
irreparable harm and injury, and agrees that such conduct shall constitute
sufficient grounds to entitle Fidelity to an injunction, writ of possession, or
other applicable relief in equity, and to make such application for such relief
in any court of competent jurisdiction, without any prior notice to the
Company.
14.2. All rights, remedies and powers granted to Fidelity in this
Agreement, or in any other instrument or agreement given by the Company to
Fidelity or otherwise available to Fidelity in equity or at law, are cumulative
and may be exercised singularly or concurrently with such other rights as
Fidelity may have. These rights may be exercised from time to time as to all or
any part of the Collateral as Fidelity in its discretion may determine. In the
event that Fidelity elects to purchase the Eligible Accounts hereunder, such
transaction shall constitute a purchase of Accounts under the UCC, and the
Company shall be deemed to have sold, assigned, transferred, conveyed and
delivered to Fidelity, as absolute owner, all of the rights, title and interest
of the Company in and to all Eligible Accounts. No waiver by Fidelity of its
rights and remedies shall be effective unless the waiver is in writing and
signed by Fidelity. A waiver by Fidelity of a right or remedy under this
Agreement or any other Transaction Document on one occasion shall not be deemed
to be a waiver of such right or remedy on any subsequent occasion. A Revolver
Advance by Fidelity during the-continuation of an Event of Default shall not
obligate Fidelity to make any further Revolver Advances during the continuation
of such Event of Default.
24
14.3. Any notice or communication with respect to this Agreement or any
other Transaction Document shall be given in writing, sent by (i) personal
delivery, (ii) expedited delivery service with proof of delivery, (iii) United
States mail, postage prepaid, registered or certified mail, or (iv) prepaid
telegram, telex or telecopy, addressed to each party hereto at its address set
forth below its signature hereon or to such other address or to the attention of
such other Person as hereafter shall be designated in writing by the applicable
party sent in accordance herewith. Any such notice or communication shall be
deemed to have been given either at the time of personal delivery or, in the
case of delivery service or mail, as of the date of first attempted delivery at
the address and in the manner provided herein, or in the case of telegram, telex
or telecopy, upon receipt The Company hereby agrees that Fidelity may publicize
the transaction contemplated by this Agreement in newspapers, trade and similar
publications including, without limitation, the publication of a
"tombstone".
14.4. The term of this Agreement shall be for one year from the date
hereof (the original term, and any extension thereof made by Fidelity pursuant
to this section, are herein called the "Term"); provided, however, that Fidelity
may extend the term hereof for additional one-year periods, if Fidelity elects
to do so in its sole discretion, by notifying the Company in writing at least 30
days before the end of the term then in effect; and provided further that
Fidelity may terminate this Agreement at any time effective immediately upon the
occurrence of an Event of Default. The Company acknowledges that it shall have
no right to terminate this Agreement prior to the end of the Term, that
termination of this Agreement at any time prior to the end of the Term would
result in the loss by Fidelity of benefits under this Agreement and that the
damages incurred by Fidelity as a result of such termination would be difficult
and impractical to ascertain. Therefore, in the event this Agreement is
terminated prior to the end of the Term for any reason or the Fixed Asset Loan
is repaid in full (no termination fee shall be due solely as a result of the
prepayment of the Real Estate Loan), the Company shall pay to Fidelity an early
termination fee in an amount equal to (x) the average monthly accrued interest
and fees earned by Fidelity hereunder prior to the date of termination
multiplied by (y) the number of months remaining in the Term as of the date of
termination, but in no event shall such early termination fee exceed the maximum
amount permitted by applicable law. Any termination of this Agreement shall not
affect Fidelity's security interest in the Collateral, and this Agreement shall
continue to be effective, until all Obligations have been paid in full.
14.5. Fidelity agrees that, so long as no Event of Default has occurred
and is continuing, upon receipt by Fidelity of payment in full of the
outstanding principal balance of the Real Estate Loan, together with interest
thereon, Fidelity shall at the expense of the Company execute and deliver such
instruments and documents as the Company may reasonably request to release the
Mortgage.
14.6. Each and every provision, condition, covenant and representation
contained in this Agreement is, and shall be construed, to be a separate and
independent covenant and agreement. If any term or provision of this Agreement
shall to any extent be invalid or unenforceable, the remainder of the Agreement
shall not be affected thereby.
25
14 7. The Company hereby indemnifies and agrees to hold harmless and
defend all Indemnified Persons from and against any and all Indemnified Claims.
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH INDEMNIFIED CLAIMS
ARE IN ANY WAY OR TO ANY EXTENT OWNED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR
THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN-PART, BY ANY NEGLIGENT
ACT OR OMISSION OF ANY INDEMNIFIED PERSON.
If any Indemnified Claim is asserted against any Indemnified Person,
such Indemnified Person shall promptly notify the Company (but the failure to so
promptly notify the Company shall not affect the Company's obligations under
this section unless such failure materially prejudices the Company's right to
participate in the contest of such Indemnified Claim). The Company shall have
the obligation to assume the defense thereof, including the employment of
Advisors to take the lead role in asserting claims and defenses common to both
the Company and the various Indemnified Persons ("Lead Advisors"), provided that
all Persons chosen to be Lead Advisors must be consented to by Fidelity, which
consent will not be unreasonably withheld. If Lead Advisors are employed and
consented to in accordance with the preceding sentence, each Indemnified Person
shall nonetheless have the right to employ its own Advisors and to determine its
own defense of such action in any case, but the fees and expenses of such
Advisors shall be at the expense of such Indemnified Person except to the extent
that: (i) the employment of such Advisors shall have been authorized in writing
by the Company, or (ii) such Indemnified Person's counsel shall have reasonably
concluded that there appear to be claims or defenses available to it which are
not shared by the Company and such Advisors are engaged in reasonable efforts to
assert such claims and defense, in either of which events the reasonable fees
and expenses of such Indemnified Person shall be born by the Company. No
Indemnified Person shall settle or compromise any Indemnified Claim for which
the Company may be liable for payment hereunder nor shall the Company settle or
compromise any Indemnified Claim for which any Indemnified Person may be liable
for payments in addition to those actually and concurrently made by the Company,
without the consent of the other, which consent shall not be unreasonably
withheld. As used herein the term "Advisors" means attorneys, accountants,
experts, and other advisors.
Except as specifically provided in this section, the Company waives all
notices from any Indemnified Person. The provisions of this Section 14.7 shall
survive the termination of this Agreement.
14.8. All grants, covenants and agreements contained in this Agreement
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Company may not delegate or
assign any of its duties or obligations under this agreement without the prior
written consent of Fidelity. FIDELITY RESERVES THE RIGHT TO ASSIGN ITS RIGHTS
AND OBLIGATIONS UNDER THIS AGREEMENT IN WHOLE OR IN PART TO ANY PERSON OR
ENTITY. Without limiting the generality of the foregoing, Fidelity may from time
to time grant participations in all or any part
26
of the Obligations to any Person on such terms and conditions as may be
determined by Fidelity in its sole and absolute discretion, provided that the
grant of such participation shall not relieve Fidelity of its obligations
hereunder nor create any additional obligation of the Company.
14.9. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO THE
RULES THEREFORE RELATING TO CONFLICTS OF LAW. THE COMPANY HEREBY IRREVOCABLY
SUBMITS ITSELF TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS
LOCATED IN CALIFORNIA AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE
MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT, ANY BORROWING
HEREUNDER OR ANY OTHER RELATIONSHIP BETWEEN FIDELITY AND THE COMPANY BY ANY
MEANS ALLOWED UNDER STATE AND FEDERAL LAW. ANY LEGAL PROCEEDING ARISING OUT OF
OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY BORROWING HEREUNDER OR ANY OTHER
RELATIONSHIP BETWEEN FIDELITY AND THE COMPANY SHALL BE BROUGHT AND LITIGATED
EXCLUSIVELY IN ANY ONE OF THE STATE OR FEDERAL COURTS LOCATED IN THE STATE OF
CALIFORNIA HAVING JURISDICTION. THE PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO
ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY SUCH PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER.
14.10. EACH OF THE COMPANY AND FIDELITY HEREBY (A) IRREVOCABLY WAIVES,
TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY OR ASSOCIATED HEREWITH; (B) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (C) CERTIFIES TEAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK-TO ENFORCE THE FOREGOING WAIVERS, AND (D)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS PARAGRAPH.
14.11. THIS AGREEMENT, THE SECURITY DOCUMENTS DESCRIBED HEREBY AND THE
ACKNOWLEDGMENT DELIVERED IN CONNECTION
27
HEREWITH SET FORTH THE ENTIRE UNDERSTANDING AND AGREEMENT OF THE PARTIES HERETO
WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREIN AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. NO MODIFICATION OR AMENDMENT OF OR SUPPLEMENT TO THIS AGREEMENT OR TO
SUCH ACKNOWLEDGMENT SELL BE VALID OR EFFECTIVE UNLESS THE SAME IS IN WRITING AND
SIGNED BY THE PARTY AGAINST WHOM IT IS SOUGHT TO BE ENFORCED.
14.12. Fidelity hereby acknowledges that the Company is considering
incorporating the Company's divisions, INTERCON and INFOSEC, into separate
corporations and filing registration statements with the Securities and Exchange
Commission or other similar governmental authority. In the event the Company
proceeds with its plans to so incorporate and publicly register its divisions,
the Company and Fidelity shall enter into discussions concerning any waivers or
consents that may be required to effect such incorporation and public
registration.
28
The undersigned have entered into this Agreement as of the date first
written above.
FIDELITY FUNDING OF
CALIFORNIA, INC. LITRONIC INDUSTRIES, INC.
a California corporation a California corporation
By: [AUTHORIZED SIGNATORY] By: /S/ XXXX XXXX
--------------------------
Name: Xxxxx X. [illegible] Xxxx Xxxx
Title: Senior Vice President President
Mailing Address:
000 Xxxx Xxxxx Xxxxxx, Xxxxx X 0000 Xxxxxxx Xxxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000 Xxxxx Xxxx, Xxxxxxxxxx 00000
Street Address:
Same Same
Trade, Fictitious and Assumed Names
Used by the Company
___________________________________
29
EXHIBIT A
BORROWING BASE CERTIFICATE
LITRONIC INDUSTRIES, INC.
DATE: JUNE 27, 1996
REPORT #: 1
FINISHED RAW STANDBY
COLLATERAL ACCOUNTS GOODS MATERIALS FACILITY
RECEIVABLE INVENTORY INVENTORY AMOUNT
-----------------------------------------------------------------------------------------------------------------------------------
1 GROSS COLLATERAL AS OF LAST REPORT #:
INITIAL DATA REPORT DATE: JUNE 25,
1996 INITIAL DATA LINE 6 PRIOR REPORT 1,261,829 16,127 438,088 250,000
2 ADD SALES ASSIGNED AND INVENTORY N/A
ADDITIONS
3 ADD DEBIT MEMOS AND OTHER ADJUSTMENTS N/A
4 LESS CASH COLLECTIONS AND INVENTORY N/A
REDUCTIONS
5 LESS DISCOUNTS, CREDIT MEMOS AND N/A
ADJUSTMENTS
6 GROSS COLLATERAL PER THIS REPORT 1,261,829 16,127 438,088 250,000
7 INELIGIBLE COLLATERAL
ACCOUNTS RECEIVABLE INVENTORY
----------------------------------------------------------
A PAST DUE OVER 90 DAYS OBSOLETE 24,317 0 0 N/A
B CREDITS OVER 90 DAYS SLOW MOVE 0 0 0 N/A
C CROSS AGING CONSIGNED 0 0 0 N/A
D COD SALES LESS THAN 4 MONTHS 0 0 99,341 N/A
E FOREIGN RECEIVABLES PACKAGING 19,332 0 0 N/A
F CONTRA ACCOUNTS OTHER 0 0 0 N/A
G UNRECONCILED A/R OVERAGE 0 N/A
H OTHER 0 N/A
-------------------------------------------------------
8 TOTAL INELIGIBLE PER THIS REPORT (SUM
7A THROUGH 7H) 43,649 0 99,341 N/A
-------------------------------------------------------
9 NET ELIGIBLE PER COLLATERAL (6-8) 1,218,180 16,127 338,747 N/A
10 ADVANCE RATE 85% 50% 50% N/A
-------------------------------------------------------
11 COLLATERAL AVAILABILITY TOTAL
---------
1,462,890 1,035,453 8,064 169,374 250,000
12 BORROWING BASE
LESSER OF 11 OR REVOLVER COMMITMENT
TOTAL OF: $2,750,000 1,462,890
13 LESS SPECIAL RESERVE N/A N/A N/A N/A N/A
-----------------------------------------------------------------------
14 NET AVAILABILITY BEFORE LOAN BALANCE
(12-13) 1,462,890 1,035,453 8,064 169,374 250,000
-----------------------------------------------------------------------
LOAN
-----------------------------------------------
FINISHED RAW STANDBY
COLLATERAL ACCOUNTS GOODS MATERIALS FACILITY
RECEIVABLE INVENTORY INVENTORY AMOUNT
-----------------------------------------------------------------------------------------------------------------------------------
15 LOAN BALANCE - LAST REPORT LINE 22 0 0 0 0 0
16 LESS PAYMENTS FROM COLLECTIONS
-----------------------------------------------------------------------
17 BALANCE PER FIDELITY FUNDING OF
CALIFORNIA REPORT PRIOR TO NEW ACTIVITY 0 0 0 0 0
18 LESS NON-COLLECTION PAYMENTS
19 ADD LOAN ADJUSTMENTS:
INTEREST
MONTHLY SERVICE FEE - .13% OF AVERAGE
MONTHLY REVOLVER
WIRE TRANSFER FEES
OTHER - SPECIFY:
-----------------------------------------------------------------------
0 0 0 0 0
10 ADD LINE MAINTENANCE FEE N/A N/A N/A N/A N/A
21 ADD ADVANCE REQUEST THIS REPORT 500,000 500,000 0 0 0
-----------------------------------------------------------------------
22 NEW LOAN BALANCE 500,000 500,000 0 0 0
-----------------------------------------------------------------------
23 EXCESS AVAILABILITY 962,890 535,453 8,064 169,374 250,000
-----------------------------------------------------------------------
EXHIBIT A
BORROWING BASE CERTIFICATE
LITRONIC INDUSTRIES, INC.
DATE: JUNE 27, 1996
REPORT#: 1
THE UNDERSIGNED HEREBY CERTIFIES TO FIDELITY FUNDING OF CALIFORNIA, INC.
("FIDELITY") THAT:
1 HE IS THE DULY ELECTED AND QUALIFIED CHIEF FINANCIAL OFFICER OF LITRONIC,
INDUSTRIES, INC. (THE "COMPANY"), IS FAMILIAR WITH THE FACTS HEREIN
CERTIFIED AND IS DULY AUTHORIZED TO CERTIFY SUCH FACTS AND MAE AND DELIVER
THIS BORROWING BASE CERTIFICATE FOR AN ON BEHALF OF THE COMPANY, PURSUANT TO
THAT CERTAIN LOAN AND SECURITY AGREEMENT, (THE "AGREEMENT"), DATED AS OF
JUNE ____, 1996 BETWEEN THE COMPANY AND FIDELITY.
2 ALL REPRESENTATIONS AND WARRANTIES MADE BY THE COMPANY IN THE AGREEMENT OR
ANY OTHER INSTRUMENT DOCUMENT, CERTIFICATE OR OTHER AGREEMENT EXECUTED IN
CONNECTION THEREWITH (COLLECTIVELY, THE "TRANSACTION DOCUMENTS") DELIVERED
ON OR BEFORE THE DATE HEREOF ARE TRUE ON AND AS OF THE DATE HEREOF AS IF
SUCH REPRESENTATIONS AND WARRANTIES HAD BEEN MADE AS OF THE DATE HEREOF.
3 NO EVENTS OF DEFAULT OR ANY EVENT, THAT WITH THE GIVING OF NOTICE, THE
PASSAGE OF TIME OR BOTH, WOULD CONSTITUTE AN EVENT OF DEFAULT HAS OCCURRED
AND IS EXISTING.
4 THE COMPANY HAS PERFORMED AND COMPLIED WITH ALL AGREEMENTS AND CONDITIONS
REQUIRED IN THE TRANSACTION DOCUMENTS TO BE PERFORMED OR COMPLIED WITH BY IT
ON OR PRIOR TO THE FUNDING OF THE ADVANCE REQUESTED HEREBY.
5 AFTER FIDELITY MAKES THE ADVANCE REQUESTED HEREBY, THE AGGREGATE AMOUNT OF
ALL OUTSTANDING ADVANCES WILL NOT EXCEED THE LESSER OF (i) THE COMMITMENT
AND (ii) THE BORROWING BASE.
6 ALL INFORMATION CONTAINED IN THIS BORROWING BASE CERTIFICATE IS TRUE,
CORRECT AND COMPLETE.
TERMS USED AND NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANING ASSIGNED TO
THEM IN THE AGREEMENT, IF SO DEFINED UNDER SECTION 1. "DEFINITIONS AND
CONSTRUCTION" OF THE AGREEMENT.
IN WITNESS WHEREOF, THIS INSTRUMENT IS EXECUTED BY THE UNDERSIGNED AS OF JUNE
27, 1996:
LITRONIC INDUSTRIES, INC.
---------------------------
XXXXXX X. XXXXXXX
CHIEF FINANCIAL OFFICER
33
EXHIBIT B
-------------------------------------------------------------------------------
XXXXX CERTIFICATE OF LIABILITY INSURANCE DATE: 6/25/96
------------------------------------------------------------------------------
PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER
WIGMORE INSURANCE AGENCY, INC. OF INFORMATION ONLY AND CONFERS NO
0000 XXXXXX XXXX. #000 RIGHTS UPON THE CERTIFICATE HOLDER, THIS
XXXXX XXXX, XX 00000 CERTIFICATE DOES NOT AMEND, EXTEND OR
ALTER THE COVERAGE AFFORDED BY THE
POLICIES BELOW.
------------------------------------------------------------------------------
COMPANIES AFFORDING COVERAGE
------------------------------------------------------------------------------
COMPANY
A ZURICH AMERICAN
------------------------------------------------------------------------------
INSURED COMPANY
DRIL-TRON, INC., DBA: LITRONICS B SCOTTSDALE
0000 XXXXXXX XXX. ---------------------------------------
XXXXX XXXX, XX 00000 COMPANY
C PACIFIC NATIONAL
---------------------------------------
COMPANY
D
------------------------------------------------------------------------------
COVERAGES
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN
ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED,
NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER
DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN,
THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE
TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN
REDUCED BY PAID CLAIMS.
-------------------------------------------------------------------------------
CO POLICY POLICY
LTR TYPE OF INSURANCE POLICY NUMBER EFFECTIVE EXPIRATION LIMITS
DATE DATE
(MM/DD/YY) (MM/DD/YY)
-----------------------------------------------------------------------------------------------------------------------------------
A GENERAL LIABILITY
# COMMERCIAL GENERAL LIABILITY CPO134189807 04/28/96 04/28/97 GENERAL AGGREGATE $ 2,000,000
-----------------------------------
CLAIMS MADE # OCCUR PRODUCTS - COMP/OP $
OWNER'S & CONTRACTORS PROT AGG
-----------------------------------
PERSONAL & ADV $ 1,000,000
INJURY
-----------------------------------
EACH OCCURRENCE $ 1,000,000
------------------------------------
FIRE DAMAGE (any $ 50,000
one fire)
-----------------------------------
MED EXP (any one $ 5,000
person)
-----------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE LIABILITY COMBINED SINGLE $
ANY AUTO LIMIT
-----------------------------------
ALL OWNED AUTOS BODILY INJURY (per $
SCHEDULED AUTOS person)
HIRED AUTOS -----------------------------------
NON-OWNED AUTOS BODILY INJURY (per $
accident)
-----------------------------------
PROPERTY DAMAGE $
-----------------------------------------------------------------------------------------------------------------------------------
GARAGE LIABILITY AUTO ONLY - EA $
ANY AUTO ACCIDENT
-----------------------------------
OTHER THAN AUTO
ONLY:
-----------------------------------
EACH ACCIDENT $
-----------------------------------
AGGREGATE $
-----------------------------------------------------------------------------------------------------------------------------------
A EXCESS LIABILITY EACH OCCURRENCE $ 2,000,000
-----------------------------------
UMBRELLA FORM CC13419007 04/28/96 04/28/97 AGGREGATE $ 2,000,000
-----------------------------------
# OTHER THAN U
-----------------------------------
$
-----------------------------------------------------------------------------------------------------------------------------------
C WORKERS COMPENSATION AND WC STATUTORY LIMITS OTHER
EMPLOYERS= LIABILITY LIMITS OTHER
-----------------------------------
THE PROPRIETOR/ INC WC2386063 10/01/95 10/01/96 EL EACH ACCIDENT $ 1,000,000
-----------------------------------
PARTNERS/EXECUTIVES EL DISEASE - POLICY $ 1,000,000
OFFICERS ARE # EXCL LIMIT
-----------------------------------
EL DISEASE - EA $ 1,000,000
EMPLOYEE
-----------------------------------------------------------------------------------------------------------------------------------
B OTHER
EARTHQUAKE BLDG CS029449 02/03/96 02/03/97 3,500,000
----------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS
ZURICH POLICY: BLDG COVERAGE $3,500,000 CONTENTS $5,500,000
CERTIFICATE HOLDER IS NAMED ADDITIONAL INSURED
----------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE HOLDER CANCELLATION
FIDELITY FUNDING OF CAL. SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELED BEFORE
275 X. XXXXX SUITE A EXPIRATION DATE THEREOF,THE ISSUING COMPANY WILL ENDEAVOR TO
XXXXX XXXX, XX 00000 MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO
ATTN: XXX XXXXXXXX THE LEFT, BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO
OBLIGATION OR LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENTS
OR REPRESENTATIVES.
--------------------------------------------------------------------
AUTHORIZED REPRESENTATIVE
------------------------------------------------------------------------------------------------------------------------------------
