EXHIBIT 10.1
(TEXTRON FINANCIAL LOGO)
SCHEDULE TO LOAN AND SECURITY AGREEMENT
(REVOLVING CREDIT LOAN AND FLOORPLAN LOAN)
BORROWER: VALERENT, INC., INTERNETWORK
EXPERTS, INC., I-SECTOR
CORPORATION, ISECOLDSUB, INC.,
STRATASOFT, INC.
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ADDRESS: 0000 XXXXXXXXX XXXXXXX
XXXXXXX, XX 00000
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DATE: SEPTEMBER 30, 2004
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This Schedule forms an integral part of the Loan and Security Agreement among
the above Borrowers and TEXTRON Financial Corporation dated the above date, and
all references herein and therein to "this Agreement" shall be deemed to refer
to said Agreement and to this Schedule. All references herein to "Borrower" or
"Borrowers" shall mean any one or more of the "Borrowers" set forth above, as
the context may require. The Borrowers are jointly and severally liable for all
Obligations under the Loan and Security Agreement and the other Loan Documents.
All references to "Borrower" in the context of the Master DISD Contract shall
mean Internetwork Experts, Inc.
The only facility being extended by TEXTRON to the Borrowers hereunder is a
Floorplan Loan facility as described below. No revolving line of credit facility
is being extended to the Borrowers and no Revolving Credit Loans will be made to
the Borrowers. To the extent that any term or provision in the Loan and Security
Agreement to which this Schedule is attached is inconsistent with any term or
provision in this Schedule, the term or provision in this Schedule shall govern.
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DEFINITIONS (SECTION 1):
"Base Rate" means the rate of interest published in the "Money
Rates" section of The Wall Street Journal as the "Prime Rate." If The Wall
Street Journal listing of "Money Rates" is discontinued or substantially
altered, TEXTRON may, in its Permitted Discretion, choose another index of
annual interest rates for nonconsumer loans; in such event, the substitute index
shall be considered the Base Rate, although it may be necessary for TEXTRON to
adjust the number of percentage points above or below the Base Rate so that the
substitute index is comparable to the rate of interest under the prior index.
"Customized Supplemental Services Agreements" means those
certain "Customized Supplemental Services Agreements" issued by MSE to the DISD
under the Master DISD Contract which, among other things, set forth the products
and services to be delivered by Borrower to MSE and/or DISD and the date on
which the Borrower and MSE are authorized by the DISD to commence the delivery
of such products and services.
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"DISD" means the Dallas Independent School District.
"DISD Inventory" means Inventory acquired by Borrower for
installation under the Master DISD Contract.
"DISD Receivable" means a Receivable arising under the Master
DISD Contract and shall include, without duplication, any Receivable payable to
Borrower by MSE under the Master DISD Contract or payable by the DISD or USAC to
the Borrower under the Master DISD Contract.
"DISD/SLD Inventory Conditions" mean, with respect to any DISD
Inventory, each of the following: (1) the Master DISD Contract is in full force
and effect, (2) such Inventory is acquired in respect of "E-rate Year 6" under
the E-rate Program and in respect of DISD's 2004/2005 budget year, (3) a
Customized Supplemental Services Agreement describing such Inventory has been
issued under the Master DISD Contract by MSE which is reasonably satisfactory to
TEXTRON, such Customized Supplemental Services Agreement is in effect and
remains unamended (except as approved in writing by TEXTRON in its Permitted
Discretion), and a copy of such Customized Supplemental Services Agreement has
been delivered to TEXTRON, (4) a purchase order for such Inventory has been
received by MSE from the DISD and by Borrower from MSE, copies of which have
been delivered to TEXTRON, (5) the purchase of such Inventory is covered by a
Funding Commitment Decision Letter that has been issued by USAC for Funding Year
2005 and remains in full force and effect, in respect of which delivery and full
performance of all services related to such Inventory is to be completed on or
prior to September 30, 2005 (a copy of such Letter has been delivered to
TEXTRON), (6) any amount of the sales price of such Inventory to DISD under the
applicable Customized Supplemental Services Agreement (and any related services)
that has been classified as ineligible by USAC has been approved by TEXTRON in
its Permitted Discretion and otherwise is fully payable by the DISD, and (7)
Form 486 (Receipt of Services Confirmation Form) has been filed by the DISD with
USAC with respect to such Inventory and a Form 486 Notification Letter has been
received from USAC with respect thereto.
"DISD/SLD Receivables Conditions" mean, with respect to any DISD
Receivable, each of the following: (1) the Master DISD Contract is in full force
and effect, (2) such Receivable is generated from the sale of DISD Inventory or
services in respect of "E-rate Year 6" under the E-rate Program and in respect
of DISD's 2004/2005 budget year, (3) a Customized Supplemental Services
Agreement describing the DISD Inventory or services generating such Receivable
has been issued under the Master DISD Contract by MSE which is reasonably
satisfactory to TEXTRON, such Customized Supplemental Services Agreement is in
effect and remains unamended (except as approved in writing by TEXTRON in its
Permitted Discretion), and a copy of such Customized Supplemental Services
Agreement has been delivered to TEXTRON, (4) a purchase order for the DISD
Inventory or services generating such Receivable has been received by MSE from
the DISD and by Borrower from MSE, copies of which have been delivered to
TEXTRON, (5) the purchase of the DISD Inventory or services generating such
Receivable is covered by a Funding Commitment Decision Letter that has been
issued by USAC for Funding Year 2005 and remains in full force and effect (a
copy of such Letter has been delivered to TEXTRON), (6) the delivery of the DISD
Inventory or the full performance of the services generating such Receivable has
been completed on or prior to September 30, 2005, (7) Form 486 (Receipt of
Services Confirmation Form) has been filed by the DISD with USAC with respect to
the DISD Inventory or services generating such Receivables and a Form 486
Notification Letter has been received from USAC with respect thereto, (9) an
invoice in respect of such Receivable has been issued to the DISD by MSE for any
portion of the purchase order price of the DISD Inventory and/or services
generating such Receivable not to be paid by the USAC and to USAC with respect
to that portion of the purchase order price to be paid by it pursuant to the
applicable Funding Commitment Decision Letter, (10) a Form 474 has been
delivered by MSE to USAC with respect to such Receivable (and a copy thereof
delivered to TEXTRON), such delivery of such Form 474 shall
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[TEXTRON FINANCIAL]
LENDING HELP BEYOND EXPECTATIONS.
have been effected no later than 120 days after the date of the aforesaid Form
486 Notification Letter or 120 days after the last date of the DISD to receive
product or services, whichever is later (and in any case not later than January
28, 2006), and such Form 474 shall conform to the requirements of the applicable
Funding Commitment Decision Letter and be satisfactory to TEXTRON in its
Permitted Discretion, (11) Borrower shall have complied with all requirements,
if any, of USAC regarding its annual certifications on Form 473, (12) the
payment of such Receivable shall be made by ACH electronic fund transfers to the
E-rate Account, (13) the invoice generating such Receivable does not constitute
a progress billing on a project not yet completed, except that (i) the final
billing at such time as the delivery of DISD Inventory or services bearing its
own FRN has been completed and delivered to or performed for the DISD may be
deemed an Eligible Receivable, (ii) recurring service billing for "E-rate Year
6" under the Master DISD Contract and consistent with applicable Funding
Decision Commitment Letters is permitted and (iii) interim invoicing (to DISD
and USAC and/or MSE) for Inventory and services delivered under applicable FRN's
pursuant to the applicable Funding Commitment Decision Letter are permitted; and
(14) the amount of such Receivable is represented by an invoice or xxxx issued
in the name of DISD or USAC by MSE and by an invoice or xxxx issued in the name
of MSE by Borrower.
"Earnings Before Taxes, Interest and Depreciation" with
respect to any period means consolidated net income of Borrower for such period
determined in accordance with GAAP plus all income taxes, interest expenses and
depreciation and amortization charges deducted in the computation thereof.
"Eligible Inventory" means Inventory which TEXTRON, in its
Permitted Discretion, deems Eligible Inventory, based on such considerations as
TEXTRON may from time to time deem appropriate. Without limiting the generality
of the foregoing, (a) no Inventory shall be Eligible Inventory unless, in
TEXTRON's Permitted Discretion, such Inventory (i) consists of raw materials and
finished goods, in good, new and salable condition which are not obsolete or
unmerchantable, and are not comprised of work in process, packaging materials or
supplies; (ii) meets all standards imposed by any governmental agency or
authority; (iii) conforms in all respects to the warranties and representations
set forth herein; (iv) is at all times subject to TEXTRON's duly perfected,
first priority security interest; (v) meets all criteria under TEXTRON's
agreement with the manufacturer of such Inventory; and (vi) is situated at a
location in compliance with Section 5.16 hereof and (b) no Inventory which is to
be purchased and installed in connection with the Master DISD Contract, shall be
Eligible Inventory unless, in TEXTRON's Permitted Discretion, all of the
DISD/SLD Inventory Conditions have been and continue to be satisfied with
respect thereto.
"Eligible Receivables" means Receivables arising in the
ordinary course of Borrower's business from the sale of goods or rendition of
services, which TEXTRON, in its Permitted Discretion, shall deem eligible based
on such considerations as TEXTRON may from time to time deem appropriate.
Without limiting the foregoing, (a) no Receivable shall qualify as an Eligible
Receivable if (i) the account debtor has failed to pay the Receivable within a
period of ninety (90) days after invoice date, to the extent of any amount
remaining unpaid after such period; (ii) the account debtor has failed to pay
more than the percentage specified below ("Cross-Age Percentage") of all other
outstanding Receivables owed by it to Borrower within ninety (90) days after
invoice date in respect thereof; (iii) the account debtor is an Affiliate of
Borrower; (iv) the Borrower is not the lawful and unconditional owner of the
Receivable; (v) the goods relating thereto are placed on consignment, guaranteed
sale, "xxxx and hold," "COD" or other terms pursuant to which payment by the
account debtor may be conditional; (vi) the account debtor is not located in the
United States or Canada, unless the Receivable is supported by a letter of
credit, credit insurance, or other form of guaranty or security, in each case in
form and substance satisfactory to TEXTRON; (vii) the account debtor is the
United States of America or any state, city, municipality, or other political
subdivision thereof, or any department, agency or instrumentality thereof,
unless the provisions of the applicable Assignment of Claims Act has been
complied with, provided that this clause (vii) shall not apply to any DISD
Receivables; (viii) Borrower is or may become liable to the account debtor for
goods sold or services rendered by the account debtor to Borrower; (ix) the
account debtor's total obligations to Borrower exceed the percentage specified
below ("Concentration Limit") of all Eligible Receivables, to the extent of such
excess,
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provided that this clause (ix) shall not apply to any DISD Receivables; (x) the
account debtor disputes liability or makes any claim with respect thereto (up to
the amount of such liability or claim), or is subject to any insolvency or
bankruptcy proceeding, or becomes insolvent, fails or goes out of a material
portion of its business; (xi) the amount thereof consists of late charges or
finance charges; (xii) the amount thereof consists of a credit balance more than
ninety (90) days after invoice date; (xiii) the face amount thereof exceeds the
amount specified below ("Proof of Shipment Threshold"), unless accompanied by
evidence of shipment of the goods relating thereto satisfactory to TEXTRON in
its Permitted Discretion; (xiv) the invoice in respect of such Receivable
constitutes a progress billing on a project not yet completed, except that the
final billing at such time as the matter has been completed and delivered to the
customer may be deemed an Eligible Receivable and except that any progress or
interim billing may be deemed an Eligible Receivable if the customer has agreed
in writing to accept and pay specific interim percentage invoices, provided that
this clause (xiv) shall not apply in any case to any DISD Receivables; or (xv)
the amount thereof is not yet represented by an invoice or xxxx issued in the
name of the applicable account debtor and (b) no DISD Receivable shall qualify
as an Eligible Receivable unless, in TEXTRON's Permitted Discretion, all of the
DISD/SLD Receivables Conditions have been and continue to be satisfied with
respect thereto and, after giving effect thereto, the aggregate of the net
invoice amounts of all DISD Receivables that are Eligible Receivables does not
exceed the DISD concentration limit set forth below (to the extent that such
DISD concentration limit is exceeded, the least amount of DISD Receivables that
would otherwise qualify as Eligible Receivables shall be deemed ineligible such
that the aggregate of the net invoice amounts of the remaining DISD Receivables
that qualify as Eligible Receivables would not exceed the DISD concentration
limit as set forth below).
(i) Cross-Age Percentage: 50%
(ii) Concentration Limit: 15%
(iii) DISD Concentration Limit Lesser of $10,000,000 or 45% of
net invoice prices of all
Receivables
(iii) Proof of Shipment Threshold: $100,000 and all invoices dated
the last day of each month
"E-rate Account" means the demand deposit account to which all
payments under the Master DISD Contract will be made by the DISD and USAC.
"E-rate Program" means that certain program established in the
Telecommunications Act of 1996, as amended, pursuant to which the Federal
Communication Commissions acting through USAC provides discounts to assist
schools and libraries in the United States of America in obtaining affordable
telecommunications equipment and internet access.
"FRN" or "FRN's" means a Funding Request number or numbers as
set forth in Block 5 of the applicable Form 471 of DISD relating to the Master
DISD Contract.
"Funding Decision Commitment Letter" means, in the case of the
Master DISD Contract, a letter from the USAC stating which portion or portions
of the Master DISD Contract have been approved by USAC for funding.
"Master DISD Contract" means that certain Master Agreement for
Products and Services
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between the DISD and the MSE dated as of January 31, 2003, as amended, pursuant
to which MSE and the Consortium are to be provide certain products and services
to the DISD.
"Minimum Working Capital" at any date means an amount equal to
(i) the sum of the amount at which Borrower's cash, Receivables and Inventory
(calculated at the lower of cost or market and determined on a first-in,
first-out basis) would be shown on a consolidated balance sheet of Borrower at
such date prepared in accordance with GAAP, provided that amounts due from
Affiliates shall be excluded therefrom, minus (ii) Adjusted Current Liabilities
(as defined below in this definition) at such date determined on a consolidated
basis. "Adjusted Current Liabilities" for this definition shall mean at any time
the sum of accounts payable, Floorplan Loans payable, current portion of long
term notes payable, accrued expenses (less Stratasoft warranty reserves), all as
would be shown on a consolidated balance sheet of the Borrowers prepared in
accordance with GAAP.
"MSE" means Micro System Enterprises, Inc., a Texas
corporation, in its capacity as a representative of the "Consortium" under, and
as defined in, the Master DISD Contract.
"SLD" means School and Libraries Division of the Federal
Communications Commission.
"Tangible Capital Funds" at any date means an amount equal to,
(i) the sum of the amounts at which Borrower's cash, Receivables, Inventory
(calculated at the lower of cost or market and determined on a first-in,
first-out basis) and net fixed assets would be shown on a consolidated balance
sheet of Borrower at such date prepared in accordance with GAAP, provided that
amounts due from Affiliates shall be excluded therefrom, minus (ii) Total
Liabilities of Borrower at such date determined on a consolidated basis.
"Total Liabilities" at any date means all accounts payable,
all short-term and long-term notes payable, loans and bonds (including, without
limitation, the Floorplan Loans but excluding all Subordinated Debt of Borrower)
and all accrued expenses and payables and all payables as a result of
discontinued operations, all determined on a consolidated basis in accordance
with GAAP.
"USAC" means Universal Service Administrative Company, Schools
and Libraries Division.
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TOTAL FACILITY (SECTION 2.1):
Twenty-Five Million Dollars ($25,000,000), provided that the Total Facility
shall never exceed the "Borrowing Limit" as provided for under NEGATIVE
COVENANTS (Section 6.2) below.
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LOANS (SECTION 2.2):
Revolving Credit Loans: No revolving line of credit for
revolving receivables or revolving inventory loans (collectively,
"Revolving Credit Loans") is being extended to Borrower.
Floorplan Loans: A floorplan line of credit is being extended
to Borrower consisting of loans against (i) Floorplanned Inventory not
constituting DISD Inventory and (ii) Floorplanned Inventory consisting
of DISD Inventory that qualifies as Eligible Inventory payable as
provided below (collectively "Floorplan Loans") in an aggregate
principal amount not to exceed at any time the Total Facility. No
individual Floorplan Loan shall exceed at the time of the extension
thereof (a) ninety percent (90%) of the manufacturer's invoice price
for the Floorplanned Inventory or Eligible Inventory, as the case may
be, in respect thereof or (b) the remainder of (1) the Total Facility,
minus (2) the aggregate outstanding principal balance of Floorplan
Loans previously extended to Borrower, minus (3) 100% of the aggregate
amount of all open approvals (based on prices to be invoiced to
Borrower) given by TEXTRON in its sole discretion to any one or more
manufacturers of Floorplanned Inventory other than Cisco Systems,
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Schedule to Loan and Security Agreement page 5 of 16
[TEXTRON FINANCIAL]
LENDING HELP BEYOND EXPECTATIONS.
Inc. in respect of the acquisition by Borrower from such manufacturer
or manufacturers of Floorplanned Inventory, minus (4) 50% of the
aggregate amount of open approvals (based on prices to be invoiced to
Borrower) given by TEXTRON in its sole discretion to Cisco Systems,
Inc. in respect of the acquisition by Borrower from Cisco Systems, Inc.
of Floorplanned Inventory, provided that in no case shall the aggregate
amount of open approvals granted by TEXTRON in favor of Cisco Systems,
Inc. ever exceed Twenty Million Dollars ($20,000,000).
The aggregate principal amount of all Floorplan Loans made to
or for the benefit of Borrower (including the sum of (A) 100% of the
aggregate amount of all open approvals (based on prices to be invoiced
to Borrower) given by TEXTRON in its sole discretion to any one or more
manufacturers of Floorplanned Inventory other than Cisco Systems, Inc.
in respect of the acquisition by Borrower from such manufacturer or
manufacturers of Floorplanned Inventory, plus (B) 50% of the aggregate
amount of all open approvals (based on prices to be invoiced to
Borrower) given by TEXTRON in its sole discretion to Cisco Systems,
Inc. in respect of the acquisition by Borrower from Cisco Systems, Inc.
of Floorplanned Inventory and outstanding at such time) shall not
exceed at any time the Total Facility (the Total Facility is sometimes
also referred to herein as the "Maximum Floorplan Amount"). Without in
any way limiting TEXTRON's full discretion in granting or not granting
approvals to Cisco Systems, Inc., as contemplated above, Borrower
acknowledges and agrees that the aggregate amount of all such open
approvals will not exceed $20,000,000 unless TEXTRON expressly consents
to the same in writing.
No Floorplan Loans shall be made against Eligible Inventory
consisting of DISD Inventory at such time as Borrower's undertakings in
respect of E-rate Year 6 under the Master DISD Contract have been fully
performed or if, after giving effect thereto, the Borrowing Limit under
NEGATIVE COVENANTS (SECTION 6.2) below would be breached.
The reference in Section 2.3(b) of the Loan and Security
Agreement to "approvals given by TEXTRON to a manufacturer or vendor of
Floorplanned Inventory" shall have the meaning set forth above with
respect to open approvals given to manufacturers other than Cisco
Systems, Inc. and open approvals given to Cisco Systems, Inc.
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INTEREST AND FEES (SECTION 2.6 AND 2.7):
INTEREST RATE:
REVOLVING INTEREST RATE. Not Applicable.
FLOORPLAN CREDIT LINE INTEREST. Amounts financed under the
Floorplan Credit Line in respect of Floorplanned Inventory shall
not accrue interest until the expiration of any manufacturer
interest free period and thereafter shall bear interest at the per
annum rate of two and one-half (2.5%) percent in excess of the
Base Rate until maturity. Interest shall be due and payable on
demand and accrued and unpaid interest in respect of each
Floorplan Loan shall be due and payable, in any case, on the
maturity date thereof. All Floorplan Loans shall mature and be due
and payable sixty (60) days from the date made, provided that
TEXTRON may increase or decrease such maturity date so as to
conform it to TEXTRON's common due date program of the 1st, 10th
and 20th day of each month; in any case, such maturity date may be
extended as provided for below or as provided for in Section
2.10(a) of this Agreement. Interest on any amount past due under
the Floorplan Credit Line pursuant to Section 2.6(b) shall accrue
from the maturity date or any extended maturity date in respect
thereof at a per annum rate of six percent (6.0%) in excess of the
Base Rate. The Borrower may ask for an extension of any aforesaid
maturity date for a maximum of 30 days subject to TEXTRON's review
of Borrower's collateral reports and its determination, in its
PERMITTED DISCRETION, that
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[TEXTRON FINANCIAL]
LENDING HELP BEYOND EXPECTATIONS.
sufficient collateral coverage exists for any such extension. If
TEXTRON shall permit such extension, interest shall accrue on any
Obligations in respect of such Floorplan Loan at the rate of two
and one-half (2.5%) percent in excess of the Base Rate (on the
average daily balance of such Loan) until the extended maturity
date with respect thereto. Thereafter, interest shall accrue on
such Floorplan Loan at a per annum rate of six percent (6.0%) in
excess of the Base Rate.
FLOATING RATE. In all applications, unless a fixed interest rate
is specified, the interest rate chargeable hereunder shall be
increased or decreased as the case may be, without notice or
demand of any kind, upon the announcement of any change in the
Base Rate. Each change in the Base Rate shall be effective
immediately. In all applications unless specified otherwise,
interest charges and all other fees and charges shall be computed
on the basis of a year of 360 days and actual days elapsed and
shall be payable to TEXTRON in arrears on the first Business Day
of each month.
DEFAULT INTEREST RATE ON REVOLVING CREDIT LOANS. Not Applicable.
TEXTRON RIGHT TO VARY TERMS. From time to time TEXTRON may offer
different terms to Borrower after notice with respect to the
Floorplan Loans. Such terms will become effective at the end of
any notice period in respect thereof provided by TEXTRON. Borrower
will receive from TEXTRON weekly transaction confirmations and
monthly statements which will reflect all applicable terms.
AMOUNT OF FEES:
EXAMINATION FEE. Borrower shall pay TEXTRON an examination fee
equal to the actual fees and costs and expenses accrued by the
field examiners (the "EXAMINATION FEE"), which shall be deemed
fully earned on the date such payment is due.
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COLLECTION DAYS (SECTION 2.10(e))
Payments made on the Borrower's Obligations to Textron in part or in
full at any time hereafter, shall be credited to Borrower's loan
account upon receipt of good, collected funds with respect thereto.
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INSURANCE (SECTION 3.4):
Insurance required in the amount equal to the amount of Inventory
listed on the most recent quarterly financial report of Borrower but,
to the extent that inventory levels of Borrower exceed such amount (on
a consistent basis as determined by TEXTRON in its sole discretion),
the insurance shall be increased to amounts sufficient to cover the
higher inventory levels.
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CONDITIONS OF CLOSING (SECTION 4.1):
All of the loans outstanding under that certain Loan and Security
Agreement dated February 18, 2004 among Borrower and TEXTRON are hereby
refinanced under this Agreement as of September 30, 2004 and all
accrued and unpaid interest and other fees and amounts owing thereunder
shall be evidenced by this Loan and Security Agreement and the other
Loan Documents and shall be owing and outstanding hereunder and
thereunder. There shall be no loss of principal, interest, fees or
other amounts as a result of such refinancing. All borrowing by
Borrower after the Closing Date shall be hereunder and no further
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Schedule to Loan and Security Agreement page 7 of 16
[TEXTRON FINANCIAL]
LENDING HELP BEYOND EXPECTATIONS.
borrowing shall be available to Borrower under the aforesaid Loan and
Security Agreement.
The obligation of TEXTRON to make the initial advance is subject to the
fulfillment, to the satisfaction of TEXTRON and its counsel, of each of
the following conditions, in addition to the conditions set forth in
Sections 2.1 and 2.2 of the Agreement:
Borrower shall cause the conditions precedent set forth in
Section 4.1 of this Agreement and set forth above in this
Schedule to be satisfied, and shall provide evidence to TEXTRON
that all such conditions precedent have been satisfied, on or
before the Closing Date. The following shall be included as
additional conditions precedent under Section 4.1 of this
Agreement: (i) Borrower shall have paid all costs, fees and
expenses incurred by TEXTRON in connection with the negotiation,
preparation, execution and delivery of this Agreement and each
of the other Loan Documents, including, but not limited to,
attorneys' and paralegals' fees and disbursements of in-house
and outside counsel; (ii) a reaffirmation of Limited Fraud
Guaranty of Xxxxx Xxxx shall have been received; and (iii) UCC
financing statement amendments shall have been filed with the
Secretary of States of Texas and Delaware, as applicable, for
each Borrower which conforms collateral descriptions in the
financing statements to those set forth in Section 3.1.
"CLOSING DATE" means September 30, 2004.
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REPRESENTATIONS (SECTION 5):
STATE OF INCORPORATION (Section 5.1):
Valerent, Inc. - Delaware
Internetwork Experts, Inc. - Delaware
Stratasoft, Inc. - Texas
ISECOLDSUB, Inc. - Delaware
I-Sector Corporation - Delaware
STATES QUALIFIED TO DO BUSINESS (Section 5.1):
All Borrowers - Texas
BORROWER'S NAMES (Sections 5.2 and 6.2.7):
Prior Corporate and Fictitious Names:
Technicomp Corporation
Allstar - Valcom
Allstar Systems, Inc.
X. Xxxx, Inc.
Allstar Solutions, Inc.
Allstar Computer Services, Inc.
Netsurant
Global Outsourcing Solutions, Inc.
TRADEMARKS, COPYRIGHTS, LICENSES AND PATENTS (Sections 1.1 and 5.5):
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[TEXTRON FINANCIAL]
LENDING HELP BEYOND EXPECTATIONS.
(If registered or filed, list recording office, and name, date
and filing number)
Stratasoft # 2228125 dated 12-24-1997, by subsidiary of
Stratasoft, Inc.
Stratadail # 2228127 dated 12-24-1997, by subsidiary of
Stratasoft, Inc.
Stratavoice # 2228126 dated 12-24-1007 by subsidiary of
Stratasoft, Inc.
Stratavoice Code # Tx-4-369-041 dated 8-27-1996 by subsidiary
of Stratasoft, Inc.
Stratavoice Code # Tx-4-360-123 dated 8-23-1996 by subsidiary
of Stratasoft, Inc.
Patent License from E-Share, Communications, Inc. covering
Patents dealing with Predicative Dialers, etc. by subsidiary
of Stratasoft, Inc.
PERMITTED ENCUMBRANCES (Sections 1.1 and 5.8): None, except with
respect to Stratasoft Patents, eShare, Inc. has a security interest
senior in priority to TEXTRON's security interest on the Stratasoft
Patents.
LOCATIONS (Section 5.16):
0000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
8601 XX 0000
Xxxxxxxx X Xxxxx 000
Xxxxxx XX 00000
0000 Xxx Xxxxxx Xx #000
Xxx Xxxxxxx XX 00000
0000 Xxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx Xxxxxx X0X 0X0
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
FEDERAL TAX ID NO. (Section 5.16):
Valerent, Inc. 00-0000000
Internetwork Experts, Inc. 00-0000000
Stratasoft, Inc. 00-0000000
ISECOLDSUB, Inc. 00-0000000
I-Sector Corporation 76-50515249
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AFFIRMATIVE COVENANTS (SECTION 6.1):
U.S. GOVERNMENT RECEIVABLES (Section 6.1.12): Face amount in excess
of $20,000.00.
FINANCIAL COVENANTS (SECTION 6.1.13): Borrower shall comply with all of
the following financial covenants (compliance shall be determined as of
the end of each fiscal quarter of Borrower):
MINIMUM TANGIBLE CAPITAL FUNDS. Borrower shall have maintained
Tangible Capital Funds of not less than Two Million Two
Hundred Thousand Dollars ($2,200,000) as of the end of each
--------------------------------------------------------------------------------
Schedule to Loan and Security Agreement page 9 of 16
[TEXTRON FINANCIAL]
LENDING HELP BEYOND EXPECTATIONS.
fiscal quarter occurring prior to the Closing Date. Borrower
shall maintain Tangible Capital Funds of not less than Nine
Million Five Hundred Thousand Dollars ($9,500,000) as of the
end of each fiscal quarter occurring after the Closing Date.
INDEBTEDNESS TO TANGIBLE CAPITAL FUNDS. Borrower shall have
maintained a ratio of Total Liabilities determined on a
consolidated basis to Tangible Capital Funds of not greater
than 6.0 to 1.0 as of the end of each fiscal quarter occurring
prior to the Closing Date. Borrower shall maintain a ratio of
Total Liabilities determined on a consolidated basis to
Tangible Capital Funds of not greater than 4.0 to 1.0 as of
the end of each fiscal quarter occurring after the Closing
Date.
MINIMUM WORKING CAPITAL. Borrower shall maintain Minimum
Working Capital of not less than Eight Million Dollars
($8,000,000) as of the end of each fiscal quarter occurring
after the Closing Date.
MINIMUM CASH ON HAND. Borrower shall maintain cash on hand and
cash equivalents of not less than Two Million Dollars
($2,000,000) as of the end of each fiscal quarter occurring
after the Closing Date as would be shown on a consolidated
balance sheet of Borrower at such date.
CURRENT RATIO. Borrower shall maintain a ratio of Current
Assets to Current Liabilities (each determined on a
consolidated basis under GAAP) of not less than 1.25 to 1.0 as
of the end of each fiscal quarter occurring after the Closing
Date.
EBITDA. Borrower shall, for each fiscal quarter ending after
the Closing Date, cause Earnings Before Interest Taxes
Depreciation and Amortization determined for such fiscal
quarter to exceed $100,000.
CREDIT MEMORANDA (Sections 3.6(b) and 6.1.14): $50,000 and thirty (30)
Business Days.
OTHER COVENANTS (Section 6.1.15):
MASTER DISD CONTRACT. The Borrower agrees to enter into a
Memorandum of Understanding among MSE, TEXTRON and the other
members of the "Consortium" under, and as defined in, the
Master DISD Contract regarding payment procedures under the
Master DISD Contract when such agreement has been finalized
among such parties (including Borrower). The Memorandum of
Understanding will be executed by the Borrower by October 30,
2004. Borrower agrees to comply with all of its undertakings
in respect of the Master DISD Contract and any agreements or
arrangements with MSE with respect thereto.
ACCOUNTS. Borrower shall not transfer or move its depository,
operating and investment accounts from Silicon Valley Bank
without the prior written consent of TEXTRON (which consent
will not unreasonably be withheld) and it shall maintain not
less than 85% of its cash and other liquid assets in such
accounts. Borrower shall deliver account control agreements in
form and substance acceptable to Lender from each financial
institution at which Borrower maintains an account (including,
without limitation, Silicon Valley Bank).
================================================================================
NEGATIVE COVENANTS (SECTION 6.2):
PERMITTED ADVANCES, LOANS OR EXTENSIONS OF CREDIT (Section 6.2.2):
None permitted
DIVIDENDS (SECTION 6.2.3): Declare or pay cash dividends upon any of
its stock or distribute any of its property or redeem, retire, purchase
or acquire directly or indirectly any of its stock if, after giving
effect thereto, an Event of Default would exist or an event would exist
which, with the giving of notice, lapse of time or both, could become
an Event of Default.
--------------------------------------------------------------------------------
Schedule to Loan and Security Agreement page 10 of 16
[TEXTRON FINANCIAL]
LENDING HELP BEYOND EXPECTATIONS.
PERMITTED INDEBTEDNESS OF OTHERS (Section 6.2.5): None permitted
INDEBTEDNESS (Section 6.2.11): Borrower shall not incur any
Indebtedness if, after giving effect thereto, an Event of Default would
exist or an event would exist which, with the giving of notice, lapse
of time or both, could become an Event of Default.
AFFILIATE TRANSACTION (6.2.12): The Borrower leases office space from
Allstar Equities, Inc., a Texas corporation ("Equities"), a company
wholly-owned by Xxxxx Xxxx. The current lease was executed on February
1, 2002, has an expiration date of January 31, 2007 and has rental
rates of $37 per month.
BORROWING LIMIT The aggregate outstanding principal amount of all
Floorplan Loans shall not, at any time, exceed the sum of
(a) 80% of the aggregate net invoice prices of all
Eligible Receivable plus
(b) (i) for so long as the Borrower is discharging
its undertakings in respect of the Master DISD Contract or any
DISD Receivable is owing to it, 90% of the invoice price of
(1) all Floorplanned Inventory and (2) all DISD Inventory that
is Eligible Inventory, provided that the sum of the amounts in
clauses (1) and (2) above shall be limited to the lesser of
$9,000,000 or 35% of the net invoice prices of all outstanding
Eligible Receivables and (ii) after the Borrower has
discharged its undertakings in respect of the Master DISD
Contract and all DISD Receivables owing to it have been paid,
the least of (1) 90% of the invoice price of all Floorplanned
Inventory, (2) 30% of the net invoice prices of all
outstanding Eligible Receivables and (3) $6,000,000. Borrower
shall, within two (2) Business Days of the aggregate
outstanding principal amount of the Floorplan Loans exceeding
at any time the aforesaid sum, prepay the Floorplan Loans in
an aggregate principal amount sufficient so that this covenant
shall not be violated.
Clause (x) of the definition of "Floorplan Collateral Coverage
Reconciliation" in this Agreement shall be determined as provided for
in clause (b) above.
OFFSETS. No offsets shall be made by Borrower with respect to any
amounts payable by Borrower against Receivables to be paid to Borrower
without the prior written consent of TEXTRON.
MASTER DISD CONTRACT. Borrower shall not agree to any amendment or
modification to the Master DISD Contract or any letter agreement or
other arrangement between Borrower, MSE, DISD and/or USAC unless and
until consented to in writing by TEXTRON.
PLACE OF ORGANIZATION: Borrower shall not change its place of
organization without the prior written consent of TEXTRON.
UCC: Borrower shall not file any Uniform Commercial Code termination or
amending finance statement without the prior written consent of
TEXTRON. Borrower shall not create, incur, assume or suffer to exist
any lien upon any of its property, whether now owned or hereafter
acquired, except Permitted Liens and the liens created by this
Agreement.
================================================================================
DEFAULT AND REMEDIES (SECTION 7):
JUDGMENTS (Section 7.1(i)): $100,000
--------------------------------------------------------------------------------
Schedule to Loan and Security Agreement page 11 of 16
[TEXTRON FINANCIAL]
LENDING HELP BEYOND EXPECTATIONS.
STOCK TRANSFER (Section 7.1 (n)): No stock or other equity transfer of
any direct or indirect subsidiary of I-Sector Corporation without
TEXTRON's consent, which will not be unreasonably withheld.
================================================================================
TERM (SECTION 9.2(a)):
The Floorplan Facility set forth in LOANS (Section 2.2) above is fully
discretionary on the part of TEXTRON and is not and does not constitute
a committed line of credit or other committed facility. TEXTRON may
cease making Loans hereunder in its sole discretion at any time. All
Floorplan Loans will mature hereunder as provided for in INTEREST AND
FEES (SECTION 2.6 and 2.7) above.
================================================================================
TERMINATION FEE (SECTION 9.2 (d)):
0.50% of the Total Facility amount if terminated in the first year
after the Closing Date, provided that, if Borrower reasonably believes
that modifications to the Loan and Security Agreement and this Schedule
are necessary in order for its future credit needs to be satisfied and
Borrower shall have delivered a reasonable written proposal to TEXTRON
in respect of such modifications, no termination fee shall be payable
if Borrower terminates the Loan and Security Agreement as a result of
TEXTRON's and Borrower's failure to reach an agreement regarding such
modifications or other similar reasonable modifications (each acting
reasonably in connection therewith) within thirty (30) days of the
delivery of the same to TEXTRON.
No termination fees are payable if terminated in the second or
subsequent years after the Closing Date.
================================================================================
DISBURSEMENT (SECTION 9.11):
Unless and until Borrower otherwise directs TEXTRON in writing, all
Floorplan Loans shall be wired to Borrower's following operating
account:
Not applicable
--------------------------------------------------------
--------------------------------------------------------
================================================================================
ADDITIONAL PROVISIONS:
The following conditions and reporting requirements are a continuing part of the
approval granted for this Floorplan Credit Facility.
OPERATIONAL CONDITIONS
1. Collateral Audits to be performed every calendar quarter.
2. Covenants to be monitored on a quarterly basis.
3. This Agreement will not become effective unless and until Silicon Valley
Bank shall have consented to the same.
4. Certificate of Corporate Borrowing Resolution on each of the Borrowers.
5. First priority broad lien and UCC filing on all Collateral of Borrowers
(excluding Stratasoft Patents with respect to which there is a senior
secured party).
6. Reaffirmation of Limited Fraud Guaranty by Xxxxx Xxxx
7. Evidence of casualty insurance in an amount equal to the inventory shown on
the most recent fiscal quarterly balance sheet with a lenders loss payable
endorsement favoring TEXTRON.
--------------------------------------------------------------------------------
Schedule to Loan and Security Agreement page 12 of 16
[TEXTRON FINANCIAL]
LENDING HELP BEYOND EXPECTATIONS.
8. Contingent lockbox and blocked account in favor of TEXTRON
9. Subordination of all debt of Borrower held by shareholders (other than
shareholders holding publicly traded stock of I-Sector Corporation)
REPORTING REQUIREMENTS
1. Monthly consolidated internally prepared financial statements within 45
days after each month's end.
2. Quarterly consolidated prepared financial statements (on Form 10-Q) within
45* days after each fiscal quarter's end.
3. Annual projections of monthly income statements, balance sheets and cash
flow statements for the following year within 60 days prior to fiscal
year's end and as available as updated during any fiscal year.
4. Annual CPA audited consolidating and consolidated financial statements (on
Form 10-K with annual reports) within 90* days after fiscal year's end.
5. All filings with, and correspondence to, SEC by I-Sector Corporation
(including, without limitation, all reports on Form 8-K but excluding
routine correspondence), including, without limitation, any financial
statements, reports, notices, and proxy statements.
6. Prompt reports of any legal actions pending or threatened against Borrower
in which damages equal to or more than $100,000 are claimed or prayed for.
7. Such other budgets, sales projections, operating plans, Master DISD
Contract information or other financial information requested by TEXTRON.
*If I-Sector Corporation qualifies as an "accelerated" filer under applicable
SEC rules and regulations so that quarterly and annual reports on Forms 10-Q and
10-K, respectively, are required to be filed sooner than 45 days after each
fiscal quarter's end and sooner than 90 days after each fiscal year's end, as
the case may be, then the 45 days and 90 days set forth above shall
automatically become such shorter time periods.
To the extent the foregoing is inconsistent with the reporting requirements
under Section 9.1(b) of the Agreement, the foregoing provisions shall govern;
otherwise the reporting requirements of Section 9.1(b) shall continue in full
force and effect as provided in this Agreement.
COLLATERAL REPORTING AND OTHER REQUIREMENTS
1. Weekly collateral reports of Receivables, DISD Receivables, Inventory, DISD
Inventory, accounts payable together with a borrowing base certificate
showing the calculations set forth in LOANS (SECTION 2.2) and NEGATIVE
COVENANTS (SECTION 6.2) - Borrowing Limit above, within 3 days of each
week's end.
2. Annual insurance renewals
3. Continuing program and repurchase agreements with all manufacturers and
vendors
RIGHT TO CONTACT MANUFACTURER AND CANCEL APPROVALS
TEXTRON shall have the right to cancel at any time any approvals
previously granted by TEXTRON to Cisco Systems, Inc. or any other manufacturer
in respect of Floorplanned Inventory to be acquired by Borrower from such person
(no such approval being final unless and until TEXTRON extends a Floorplan Loan
in respect thereof) and TEXTRON is hereby authorized to directly contact Cisco
Systems, Inc. or such other manufacturer in connection therewith. It is the
intention of Borrower and TEXTRON that no manufacturer of Floorplanned Inventory
shall have any third-party beneficiary rights hereunder.
--------------------------------------------------------------------------------
Schedule to Loan and Security Agreement page 13 of 16
[TEXTRON FINANCIAL]
LENDING HELP BEYOND EXPECTATIONS.
================================================================================
EXECUTED UNDER SEAL BY:
BORROWER: I-SECTOR CORPORATION STATE OF TEXAS
COUNTY OF XXXXXX
BY______________________________(SEAL) THE FOREGOING SCHEDULE TO LOAN AND SECURITY
AGREEMENT WAS ACKNOWLEDGED BEFORE ME THIS ___________ DAY
NAME___________________________ OF SEPTEMBER, 2004, BY _____________________,
TITLE____________________________ _____________________ OF I-SECTOR CORPORATION, A
CORPORATION ORGANIZED UNDER THE STATE OF DELAWARE, ON
BEHALF OF THE CORPORATION.
TITLE OR RANK:_____________________________________
SERIAL NUMBER, IF ANY: _____________
BORROWER: INTERNETWORK EXPERTS, INC. STATE OF TEXAS
BY______________________________(SEAL) COUNTY OF XXXXXX
NAME___________________________ THE FOREGOING SCHEDULE TO LOAN AND SECURITY
TITLE____________________________ AGREEMENT WAS ACKNOWLEDGED BEFORE ME THIS ___________ DAY
OF SEPTEMBER, 2004, BY _____________________,
_____________________ OF INTERNETWORK EXPERTS, INC., A
CORPORATION ORGANIZED UNDER THE STATE OF DELAWARE, ON
BEHALF OF THE CORPORATION.
TITLE OR RANK:_____________________________________
SERIAL NUMBER, IF ANY:
-------------
--------------------------------------------------------------------------------
Schedule to Loan and Security Agreement page 14 of 16
[TEXTRON FINANCIAL]
LENDING HELP BEYOND EXPECTATIONS.
BORROWER: VALERENT, INC. STATE OF TEXAS
COUNTY OF XXXXXX
BY______________________________(SEAL)
THE FOREGOING SCHEDULE TO LOAN AND SECURITY
NAME___________________________ AGREEMENT WAS ACKNOWLEDGED BEFORE ME THIS ___________ DAY
TITLE____________________________ OF SEPTEMBER, 2004, BY _____________________,
_____________________ OF VALERENT, INC., A CORPORATION
ORGANIZED UNDER THE STATE OF DELAWARE, ON BEHALF OF THE
CORPORATION.
TITLE OR RANK:_____________________________________
SERIAL NUMBER, IF ANY: _____________
BORROWER: ISECOLDSUB, INC. STATE OF TEXAS
COUNTY OF XXXXXX
BY______________________________(SEAL)
THE FOREGOING SCHEDULE TO LOAN AND SECURITY
NAME___________________________ AGREEMENT WAS ACKNOWLEDGED BEFORE ME THIS ___________ DAY
TITLE____________________________ OF SEPTEMBER, 2004, BY _____________________,
_____________________ OF ISECOLDSUB, INC., A CORPORATION
ORGANIZED UNDER THE STATE OF DELAWARE, ON BEHALF OF THE
CORPORATION.
TITLE OR RANK:_____________________________________
SERIAL NUMBER, IF ANY: _____________
BORROWER: STRATASOFT, INC. STATE OF TEXAS
COUNTY OF XXXXXX
BY______________________________(SEAL)
THE FOREGOING SCHEDULE TO LOAN AND SECURITY
NAME___________________________ AGREEMENT WAS ACKNOWLEDGED BEFORE ME THIS ___________ DAY
TITLE____________________________ OF SEPTEMBER, 2004, BY _____________________,
_____________________ OF STRATASOFT,INC., A CORPORATION
ORGANIZED UNDER THE STATE OF TEXAS, ON BEHALF OF THE
CORPORATION.
TITLE OR RANK:_____________________________________
SERIAL NUMBER, IF ANY: _____________
--------------------------------------------------------------------------------
Schedule to Loan and Security Agreement page 15 of 16
[TEXTRON FINANCIAL]
LENDING HELP BEYOND EXPECTATIONS.
LENDER AND
SECURED PARTY: TEXTRON FINANCIAL CORPORATION
BY____________________________(SEAL)
NAME_________________
TITLE__________________
--------------------------------------------------------------------------------
Schedule to Loan and Security Agreement page 16 of 16
[TEXTRON FINANCIAL]
LENDING HELP BEYOND EXPECTATIONS.
(TEXTRON FINANCIAL LOGO)
LOAN AND SECURITY AGREEMENT
(REVOLVING CREDIT LOAN AND FLOORPLAN LOAN)
BORROWER: VALERENT, INC., INTERNETWORK EXPERTS, INC.,
I-SECTOR CORPORATION, ISECOLDSUB, INC.,
STRATASOFT, INC.
--------------------------------------------
ADDRESS: 0000 XXXXXXXXX XXXXXXX
XXXXXXX, XX 00000
--------------------------------------------
BORROWER FEDERAL TAX ID NO.: VALERENT, INC. 00-0000000
INTERNETWORK EXPERTS, INC. 00-0000000
STRATASOFT, INC. 00-0000000
ISECOLDSUB, INC. 00-0000000
I-SECTOR CORPORATION 76-50515249
--------------------------------------------
AMOUNT OF CREDIT FACILITY: $25,000,000 (SUBJECT TO LIMITATIONS SET
FORTH IN THE SCHEDULE)
--------------------------------------------
DATE: SEPTEMBER 30, 2004
--------------------------------------------
================================================================================
TECHNOLOGY FINANCE DIVISION
================================================================================
TABLE OF CONTENTS
1. DEFINITIONS............................................................ 1
1.1 Defined Terms................................................ 1
1.2 Other Terms.................................................. 3
2. LOANS; INTEREST RATE AND OTHER CHARGES................................. 1
2.1 Total Facility .............................................. 3
2.2 Loans........................................................ 4
2.3 Reconciliation Payments...................................... 4
2.4. Floorplan Credit Line........................................ 4
2.5 Loan Account................................................. 4
2.6 Interest; Fees............................................... 4
2.7 Default Interest Rate........................................ 4
2.8 Examination Fees............................................. 4
2.9 Excess Interest.............................................. 4
2.10 Principal Payments; Proceeds of Collateral.................. 5
2.11 Application of Collateral................................... 6
3. COLLATERAL............................................................. 6
3.1 Security Interest in the Collateral.......................... 6
3.2 Perfection and Protection of Security Interest............... 6
3.3 Preservation of Collateral................................... 6
3.4 Insurance.................................................... 6
3.5 Collateral Reporting; Inventory.............................. 6
3.6 Receivables.................................................. 7
3.7 Equipment.................................................... 7
3.8 Other Liens; No Disposition of Collateral................... 7
3.9 Collateral Security.......................................... 7
4. CONDITIONS OF CLOSING.................................................. 7
4.1 Initial Advance.............................................. 7
4.2 Subsequent Advances.......................................... 9
5. REPRESENTATIONS AND WARRANTIES......................................... 9
5.1 Due Organization............................................. 9
5.2 Other Names.................................................. 9
5.3 Due Authorization............................................ 9
5.4 Binding Obligation........................................... 9
5.5 Intangible Property.......................................... 9
5.6 Capital...................................................... 9
5.7 Material Litigation.......................................... 9
5.8 Title; Security Interests of TEXTRON......................... 9
5.9 Restrictive Agreements; Labor Contracts...................... 9
5.10 Laws........................................................ 9
5.11 Consents.................................................... 9
5.12 Defaults.................................................... 9
5.13 Financial Condition......................................... 9
5.14 ERISA....................................................... 9
5.15 Taxes....................................................... 10
5.16 Locations................................................... 10
5.17 Business Relationships...................................... 10
5.18 Reaffirmations.............................................. 10
6. COVENANTS.............................................................. 10
6.1 AFFIRMATIVE COVENANTS:............................................ 10
6.1.1 Taxes...................................................... 10
6.1.2 Notice of Litigation....................................... 10
6.1.3 ERISA...................................................... 10
6.1.4 Change in Location......................................... 10
6.1.5 Corporate Existence........................................ 10
6.1.6 Labor Disputes............................................. 10
6.1.7 Violations of Law.......................................... 10
6.1.8 Defaults................................................... 10
6.1.9 Capital Expenditures....................................... 10
6.1.10 Books and Records......................................... 10
6.1.11 Leases; Warehouse Agreements.............................. 10
6.1.12 Additional Documents...................................... 10
6.1.13 Financial Covenants....................................... 10
6.1.14 Issuing of Credit Memoranda............................... 10
6.1.15 Other Covenants........................................... 11
6.2 NEGATIVE COVENANTS:............................................... 11
6.2.1 Mergers.................................................... 11
6.2.2 Loans...................................................... 11
6.2.3 Dividends.................................................. 11
6.2.4 Adverse Transactions....................................... 11
6.2.5 Indebtedness of Others..................................... 11
6.2.6 Repurchase................................................. 11
6.2.7 Name....................................................... 11
6.2.8 Prepayment................................................. 11
6.2.9 Compensation............................................... 11
6.2.10 Capital Expenditure....................................... 11
6.2.11 Indebtedness.............................................. 11
6.2.12 Affiliate Transactions.................................... 11
6.2.13 Nature of Business........................................ 11
6.2.14 Textron's Name............................................ 11
6.2.15 Margin Security........................................... 11
6.2.16 Real Property............................................. 11
6.2.17 Liens..................................................... 11
6.2.18 Change in Fiscal Year, Auditors........................... 11
6.2.19 Issuance of Stock......................................... 11
7. DEFAULT AND REMEDIES................................................... 11
7.1 Events of Default............................................ 11
7.2 Remedies..................................................... 12
7.3 Standards for Determining Commercial Reasonableness.......... 12
8. EXPENSES AND INDEMNITIES............................................... 13
8.1 Expenses..................................................... 13
8.2 Environmental Matters........................................ 13
9. MISCELLANEOUS.......................................................... 13
9.1 Examination of Records; Financial Reporting.................. 13
9.2 Term; Termination............................................ 14
9.3 Recourse to Security; Certain Waivers........................ 14
9.4 No Waiver by Textron......................................... 14
9.5 Binding on Successor and Assigns............................. 15
9.6 Severability................................................. 15
9.7 Amendments; Assignments...................................... 15
9.8 Integration.................................................. 15
9.9 Survival..................................................... 15
9.10 Evidence of Obligations..................................... 15
9.11 Loan Requests............................................... 15
9.12 Notices..................................................... 15
9.13 Brokerage Fees.............................................. 15
9.14 Disclosure.................................................. 15
9.15 Publicity................................................... 15
9.16 Captions.................................................... 15
9.17 Injunctive Relief........................................... 15
9.18 Counterparts................................................ 15
9.19 Construction................................................ 15
9.20 Time of Essence............................................. 15
9.21 Limitation of Actions....................................... 15
9.22 Liability................................................... 16
9.23 Notice of Breach by Textron................................. 16
9.24 Withholding and Other Tax Liabilities....................... 16
9.25 Power of Attorney........................................... 16
9.26 GOVERNING LAW; WAIVERS...................................... 16
9.27 MUTUAL WAIVER OF RIGHT TO JURY TRIAL........................ 17
THIS LOAN AND SECURITY AGREEMENT (collectively with the Schedule to Loan and
Security Agreement (the "SCHEDULE") attached hereto, the "AGREEMENT") dated the
date set forth on the cover page, is entered into by and between the borrower
named above (jointly and severally, the "BORROWER"), whose address is set forth
on the cover page and TEXTRON FINANCIAL CORPORATION ("TEXTRON"), whose address
is 0000 Xxxxx Xxxx Xxxxx 000 Xxxxx Xxxxx, XX 00000.
1. DEFINITIONS.
1.1 Defined Terms. In addition to terms defined elsewhere in this Agreement, the
following terms have the definitions set forth below:
"ADA" has the meaning set forth in Section 4.1(r).
"Affiliate" means any Person controlling, controlled by or under common control
with Borrower. For purposes of this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause direction of the
management and policies of any Person, whether through ownership of common or
preferred stock or other equity interests, by contract or otherwise. Without
limiting the generality of the foregoing, each of the following shall be an
Affiliate: any officer, director, employee or other agent of Borrower, any
shareholder or subsidiary of Borrower, and any other Person with whom or which
Borrower has common shareholders, officers or directors.
"Business Day" means any day on which commercial banks in both North Wales,
Pennsylvania and Providence,
Rhode Island are open for business.
"Capital Expenditures" means all expenditures made and liabilities incurred for
the acquisition of any fixed asset or improvement, replacement, substitution or
addition thereto which has a useful life of more than one year and including,
without limitation, those arising in connection with Capital Leases.
"Capital Lease" means any lease of property by Borrower that, in accordance with
GAAP, should be capitalized for financial reporting purposes and reflected as a
liability on the balance sheet of Borrower.
"Closing Date" has the meaning set forth in Section 4.1.
"Code" means the Uniform Commercial Code as adopted and in effect in the State
of
Rhode Island from time to time.
"Collateral" has the meaning set forth in Section 3.1.
"Current Assets" at any date means the amount at which the current assets of
Borrower would be shown on a balance sheet of Borrower as at such date, prepared
in accordance with GAAP, provided that amounts due from Affiliates and
investments in Affiliates shall be excluded therefrom.
"Current Liabilities" at any date means the amount at which the current
liabilities of Borrower would be shown on a balance sheet of Borrower, including
the Revolving Loans as at such date, prepared in accordance with GAAP.
"Deposit Accounts" has the meaning set forth in Section 9-105 of the Code.
"Due Date" has the meaning set forth in Section 2.10.
"Earnings Before Interest and Taxes" for any fiscal period of Borrower means the
net income of Borrower for such fiscal period, plus interest expense and
provision for income taxes for such fiscal period, and minus non-recurring
miscellaneous income and expenses, all calculated in accordance with GAAP.
"Environmental Costs" has the meaning set forth in Section 8.2.2(c).
"Equipment" means all of Borrower's present and hereafter acquired machinery,
molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dyes, jigs, goods and other tangible
personal property (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"ERISA" means the Employment Retirement Income Security Act of 1974, as amended,
and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not incorporated and
whether or not foreign) which is or may hereafter become a member of a group of
which Borrower is a member and which is treated as a single employer under ERISA
Section 4001(b)(1), or IRC Section 414.
"Event of Default" means any of the events set forth in Section 7.1.
"TEXTRON Affiliate" has the meaning set forth in Section 9.22.
"Floorplanned Inventory" means all Inventory from such manufacturer or vendors
acceptable to TEXTRON from time to time, financed by TEXTRON pursuant to Section
2.4.
"Floorplan Collateral Coverage Reconciliation" has the meaning set forth in
Section 2.3.
"Floorplan Credit Line" has the meaning set forth in Section 2.4.
"GAAP" means generally accepted accounting principles in the United States of
America as in effect from time to time as set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Boards which are applicable to the circumstances
as of the date of determination consistently applied, except that, for the
financial covenants set forth in this Agreement, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
"General Intangibles" means all general intangibles of Borrower, whether now
owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against TEXTRON, rights to purchase or sell
real or personal property, rights as a licensor or licensee of any kind,
royalties, telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including without limitation credit, liability,
property and other insurance)tax refunds and claims, computer programs, discs,
tapes and tape files, claims under guaranties, security interests or other
security held by or granted to Borrower to secure payment of any of the
Receivables by an account debtor, all rights to
--------------------------------------------------------------------------------
Loan and Security Agreement page 1 of 24
(TEXTRON FINANCIAL LOGO)
indemnification and all other intangible property of every kind and nature
(other than Receivables).
"Hazardous Substances" has the meaning set forth in Section 8.2.1(b).
"Indebtedness" means all of Borrower's present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or otherwise,
however evidenced, created, incurred, acquired, owing or arising, whether under
written or oral agreement, operation of law or otherwise, and includes, without
limiting the foregoing (i) the Obligations, (ii) obligations and liabilities of
any Person secured by a lien, claim, encumbrance or security interest upon
property owned by Borrower, even though Borrower has not assumed or become
liable therefor, (iii) obligations and liabilities created or arising under any
lease (including Capital Leases) or conditional sales contract or other title
retention agreement with respect to property used or acquired by Borrower, even
though the rights and remedies of the lessor, seller or lender are limited to
repossession, (iv) all unfunded pension fund obligations and liabilities and (v)
deferred taxes.
"Inventory" means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease, all raw materials, work in
process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in Borrower's business or
used in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, merchandise or other personal property, and all
documents of title or other documents representing them.
"Investment Property" means all of Borrower's right, title and interest in and
to investment property of every kind, nature or description, wherever located,
whether now owned or hereafter acquired by Borrower, including, without
limitation, investment property as defined in Section 9-115 of the Code, all of
Borrower's other securities (whether certificated or uncertificated), security
entitlements, securities accounts, commodity contracts, and commodity accounts,
and all present and future rights of exchange, subscription or substitution
incident to or arising from any of the foregoing, and all present and future
rights and interest in and to dividends or distributions of any kind, profits,
losses, or capital accounts incident to or arising from any of the foregoing.
"IRC" means the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
"Loan" or Loans" has the meaning set forth in Section 2.2.
"Loan Documents" means, collectively, this Agreement, any note or notes executed
by Borrower and payable to TEXTRON, and any other agreement entered into in
connection with this Agreement, including, without limitation, any guaranty or
surety agreements executed by any guarantors, together with all alterations,
amendments, changes, extensions, modifications, refinancings, refundings,
renewals, replacements, restatements, or supplements, of or to any of the
foregoing.
"Loan Party" means Borrower and each other party (other than TEXTRON, but
including each Guarantor and Subordinating Creditor, if any) to any of the Loan
Documents.
"Loan Reserves" means, as of any date of determination, such amounts as TEXTRON
may from time to time establish and revise in good faith reducing the amount of
Revolving Credit Loans which would otherwise be available to Borrower under the
lending formula(s) provided in the Schedule: (a) to reflect events, conditions,
contingencies or risks which, as determined by TEXTRON in good faith, do or may
affect either (i) the Collateral or any other property which is security for the
Obligations or its value, (ii) the assets, business or prospects of Borrower or
any Guarantor or (iii) the security interests and other rights of TEXTRON in the
Collateral (including the enforceability, perfection and priority thereof) or
(b) to reflect TEXTRON's good faith belief that any collateral report or
financial information furnished by or on behalf of Borrower or any Guarantor to
TEXTRON is or may have been incomplete, inaccurate or misleading in any material
respect or (c) in respect of any state of facts which TEXTRON determines in good
faith constitutes an Event of Default or may, with notice or passage of time or
both, constitute an Event of Default."
"Loan Year" means each twelve month period commencing on the Closing Date.
"Maximum Interest Rate" has the meaning set forth in Section 2.9.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA Sections
3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees of Borrower or
any ERISA Affiliate.
"Obligations" means all present and future loans, advances, debts, liabilities,
obligations, covenants, duties and indebtedness at any time owing by Borrower to
TEXTRON, whether evidenced by this Agreement, any note or other instrument or
document, whether arising from an extension of credit, opening of a letter of
credit, banker's acceptance, loan, guaranty, indemnification or otherwise,
whether direct or indirect (including, without limitation, those acquired by
assignment and any participation by TEXTRON in Borrower's debts owing to
others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorney's fees, expert
witness fees, examination fees, letter of credit fees, collateral monitoring
fees, closing fees, facility fees, anniversary fees, Termination Fees, and any
other sums chargeable to Borrower hereunder or under any other agreement with
TEXTRON.
"Overloan" has the meaning set forth in Section 2.3.
"PBGC" means the Pension Benefit Guarantee Corporation.
"Permitted Discretion" means TEXTRON's judgment exercised in good faith based
upon its consideration of any factor which TEXTRON believes in good faith: (i)
will or could adversely affect the value of any Collateral, the enforceability
or priority of TEXTRON's liens thereon or the amount which TEXTRON would be
likely to receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral; (ii) suggests that any
collateral report or financial information delivered to TEXTRON by any Person on
behalf of Borrower is incomplete, inaccurate or misleading in any material
respect; (iii) materially increases the likelihood of a bankruptcy,
reorganization or other insolvency proceeding involving Borrower, any Loan Party
or any of the Collateral, or (iv) creates or reasonably could be expected to
create an Event of Default. In exercising such judgment, TEXTRON may consider
such factors already included in or tested by the definition of Eligible
Receivables or Eligible Inventory, as well as any of the following: (i) the
financial and business climate of Borrower's industry and general macroeconomic
conditions, (ii) changes in collection history and dilution with respect to the
Receivables, (iii) changes in demand for, and pricing of, Inventory, (iv)
changes in any concentration of risk with respect to Receivables and/or
Inventory, and (v) any other factors that change the credit risk of lending to
Borrower on the security of the Receivables and Inventory. The burden of
establishing lack of good faith hereunder shall be on Borrower.
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Loan and Security Agreement page 2 of 24
(TEXTRON FINANCIAL LOGO)
"Permitted Encumbrance" means each of the liens, mortgages and other security
interests set forth in the Schedule.
"Person" means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, limited liability
company, government, or any agency or political division thereof, or any other
entity.
"Plan" means any plan described in ERISA Section 3(2) maintained for employees
of Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
"Prepared Financials" means the balance sheets of Borrower as of the date set
forth in the Schedule, and as of each subsequent date on which audited balance
sheets are delivered to TEXTRON from time to time hereunder, and the related
statements of operations, changes in stockholder's equity and changes in cash
flow for the periods ended on such dates.
"Prohibited Transaction" means any transaction described in Section 406 of ERISA
which is not exempt by reason of Section 408 of ERISA, and any transaction
described in Section 4975(c) of the IRC which is not exempt by reason of Section
4975(c)(2) of the IRC.
"Property" has the meaning set forth in Section 8.2.1(c).
"Receivables" means all of Borrower's now owned and hereafter acquired accounts
(whether or not earned by performance), proceeds of any letters of credit naming
Borrower as beneficiary, contract rights, chattel paper, instruments, documents
and all other forms of obligations at any time owing to Borrower, all guaranties
and other security therefor, whether secured or unsecured, all merchandise
returned to or repossessed by Borrower, and all rights of stoppage in transit
and all other rights or remedies of an unpaid manufacturer or vendor, lienor or
secured party.
"Reportable Event" means a reportable event described in Section 4043 of ERISA
or the regulations thereunder, a withdrawal from a Plan described in Section
4063 of ERISA, or a cessation of operations described in Section 4068(f) of
ERISA.
"Revolver Overloan" has the meaning set forth in Section 2.3.
"Revolving Credit Loans" has the meaning set forth in the Schedule.
"RMA Credits" means credit memoranda for return merchandise authorizations
issued by manufacturer or vendors of Floorplanned Inventory which are within
forty-five (45) days of their issuance date.
"Schedule" has the meaning set forth in the Preamble.
"Subordinated Debt" means liabilities of Borrower for which the repayment is
subordinated to the payment and performance of the Obligations, pursuant to a
subordination acceptable to TEXTRON in its Permitted Discretion.
"Tangible Capital Funds" at any date means Tangible Net Worth plus Subordinated
Debt.
Tangible Net Worth" at any time means an amount equal to, (i) the sum of the
amounts at which Borrower's cash, Receivables, Inventory (calculated at the
lower of cost or market and determined on a first-in, first-out basis) and net
fixed assets would be shown on a balance sheet of Borrower at such date prepared
in accordance with GAAP, provided that amounts due from Affiliates shall be
excluded therefrom, minus (ii) Total Indebtedness of Borrower at such date.
"Term" has the meaning set forth in Section 9.2(a).
"Termination Fee" has the meaning set forth in Section 9.2(d).
"Total Facility" has the meaning set forth in Section 2.1.
Trademarks, Copyrights, Licenses and Patents" means all of Borrower's right,
title and interest in and to, whether now owned or hereafter acquired: (i)
trademarks, trademark registrations, trade names, trade name registrations,
Internet domain names, Internet domain name registrations, and trademark,. trade
name or Internet domain name applications, including without limitation those
listed on the Schedule, as the same may be amended from time to time, and (a)
renewals thereof, (b) all income, royalties, damages and payments now and
hereafter due and/or payable with respect thereto, including without limitation,
damages and payments for past or future infringements thereof, (c) the right to
xxx for past, present and future infringements thereof, (d) all rights
corresponding thereto throughout the world, and (e) the goodwill of the business
operated by Borrower connected with and symbolized by any trademarks or trade
names; (ii) copyrights, copyright registrations and copyright applications,
including without limitation those listed in the Schedule, as the same may be
amended from time to time, and (a) renewals thereof, (b) all income, royalties,
damages and payments now and hereafter due and/or payable with respect thereto,
including without limitation, damages and payments for past or future
infringements thereof, (c) the right to xxx for past, present and future
infringements thereof, and (d) all rights corresponding thereto throughout the
world; (iii) license agreements, including without limitation those listed in
the Schedule, and the right to prepare for sale, sell and advertise for sale any
Inventory now or hereafter owned by Borrower and now or hereafter covered by
such licenses; and (iv) patents and patent applications, registered or pending,
including without limitation those listed in the Schedule, together with all
income, royalties, shop rights, damages and payments thereto, the right to xxx
for infringements thereof, and all rights thereto throughout the world and all
reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof.
"Valid Price Protection" means any credit memorandum issued by any manufacturer
or vendor of Floorplanned Inventory to reimburse Borrower for a decrease in the
value of Borrower's Floorplanned Inventory supplied by such manufacturer or
vendor caused by such manufacturer or vendor's reduction of the purchase price
from the manufacturer or vendor of such Floorplanned Inventory.
1.2 Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance GAAP. All
other terms contained in this Agreement, unless otherwise indicated, shall have
the meanings provided by the Code, to the extent such terms are defined therein.
2. LOANS; INTEREST RATE AND OTHER CHARGES.
2.1 Total Facility. Upon the terms and conditions set forth herein and provided
that no Event of Default or event which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default, may have
occurred and be continuing, TEXTRON may, upon Borrower's request, make advances
to Borrower from time to time in an aggregate outstanding principal amount not
to exceed the Total Facility amount (the "TOTAL FACILITY") set forth in the
Schedule, subject to deduction of reserves for accrued interest and such other
reserves as TEXTRON deems proper from time to time, and less amounts TEXTRON may
be obligated to pay in the future on behalf of Borrower. The Schedule is an
integral part of this Agreement and all references to
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Loan and Security Agreement page 3 of 24
(TEXTRON FINANCIAL LOGO)
"herein", "herewith" and words of similar import shall for all purposes be
deemed to include the Schedule.
2.2 Loans. Advances under the Total Facility (each, a "LOAN" and collectively,
"LOANS") shall be comprised of the amounts and at the advance rates shown in the
Schedule. TEXTRON may, in its Permitted Discretion, adjust the advance rates set
forth in the Schedule.
2.3 Reconciliation Payments. If at any time or for any reason (i) the
outstanding principal amount of Revolving Loans exceeds any of the applicable
dollar or percentage limitations contained in the Schedule (any such excess, a
"REVOLVER OVERLOAN"); (ii) the sum of (a) the aggregate outstanding principal
amount of Floorplan Loans plus (b) approvals given by TEXTRON to a manufacturer
or vendor of Floorplanned Inventory exceeds the Maximum Floorplan Amount (any
such excess a "FLOORPLAN OVERLOAN"); or (iii) the aggregate outstanding
principal amount of Floorplan Loans exceeds the sum of (x) the amount of
Floorplanned Inventory plus (y) the Valid Price Protection plus (z) the RMA
Credits (any such excess, a "FLOORPLAN COLLATERAL COVERAGE RECONCILIATION"),
then Borrower shall, upon TEXTRON's demand, immediately pay to TEXTRON, in cash,
the full amount of such Revolver Overloan or Floorplan Collateral Coverage
Reconciliation (each, an "OVERLOAN"). As long as no Event of Default shall have
occurred, TEXTRON may consent to reserve Floorplan Collateral Coverage
Reconciliation amounts against Revolving Loan excess availability, in lieu of a
cash payment. Without limiting Borrower's obligation to repay to TEXTRON on
demand any such amount of any Overloan, (a) on the date on which any inventory
report is required to be delivered to TEXTRON hereunder, Borrower shall repay in
full any Floorplan Collateral Coverage Reconciliation described therein to the
extent such Floorplan Collateral Coverage Reconciliation is not reserved against
and deducted from availability under the Revolving Loans, and (b) Borrower shall
pay TEXTRON interest on the outstanding principal amount of any Revolver
Overloan or Floorplan Collateral Coverage Reconciliation, on demand, at the rate
set forth in the Schedule.
2.4. Floorplan Credit Line. At the request of Borrower and as part of the Total
Facility, TEXTRON may, in its Permitted Discretion, make Floorplan Loans to or
for the account of Borrower for the purpose of financing Floorplanned Inventory
proposed by Borrower to be financed pursuant to this Section 2.4 (the "FLOORPLAN
CREDIT LINE"). At no time shall the sum of Borrower's Obligations to TEXTRON in
respect of the Floorplan Credit Line exceed the amount specified in the
Schedule. Upon receipt by TEXTRON of an invoice for Floorplanned Inventory from
Borrower or the manufacturer or vendor of such Floorplanned Inventory, which
invoice is acceptable to TEXTRON in its Permitted Discretion, TEXTRON shall, if
it elects to finance such Floorplanned Inventory, make a Floorplan Loan to
Borrower in an amount not to exceed (subject to the other limitations set forth
in this Agreement) the cost, as reflected on the manufacturer's or vendor's
invoice, of such Floorplanned Inventory, including freight. TEXTRON may, in its
Permitted Discretion, refuse to make a Floorplan Loan against any invoice. If
TEXTRON elects to make a Floorplan Loan, TEXTRON may disburse the proceeds of
such Floorplan Loan, less the amount of any discount agreed to between TEXTRON
and the manufacturer or vendor of the Floorplanned Inventory, directly to such
manufacturer or vendor on Borrower's behalf in accordance with the payment
arrangement then in effect between TEXTRON and such manufacturer or vendor.
TEXTRON will charge Borrower's loan account for the full amount of the Floorplan
Loan without regard to any discount that TEXTRON may be entitled to receive
pursuant to any payment arrangement referred to in the immediately preceding
sentence. The Floorplan Credit Line is an uncommitted line of credit, may be
terminated in whole or in part by TEXTRON, in its Permitted Discretion, at any
time and, upon such termination, no further Floorplan Loans shall be available
from TEXTRON.
2.5 Loan Account. All advances made hereunder shall be added to and deemed part
of the Obligations when made. TEXTRON may from time to time charge all
Obligations of Borrower when due to Borrower's loan account with TEXTRON.
2.6 Interest; Fees.
(a) Revolving Credit Line. Borrower shall pay TEXTRON interest on the daily
outstanding balance of the Revolving Credit Loans, at the per annum rates set
forth in the Schedule and the Secured Revolving Credit Note, as applicable.
Borrower shall also pay TEXTRON the fees set forth in the Schedule.
(b) Floorplan Credit Line. If Borrower fails to make any payment to TEXTRON when
due with respect to the Floorplan Credit Line, Borrower shall pay TEXTRON
interest on the daily amount past due at the applicable per annum rate set forth
in the Schedule. In addition, in the event that TEXTRON elects to make advances
under the Floorplan Credit Line which are not subsidized by the manufacturer or
vendor, such advances will bear interest from the invoice date until the due
date at the applicable rate set forth in the Schedule. All such interest shall
be payable upon demand of TEXTRON.
2.7 Default Interest Rate. Upon the occurrence and during the continuation of an
Event of Default, Borrower shall pay TEXTRON interest on the daily outstanding
balance of the Revolving Credit Loans at a rate pursuant to the Schedule. All
such default interest shall be payable upon demand of TEXTRON.
2.8 Examination Fees. Borrower agrees to pay to TEXTRON an examination fee in
the amount set forth in the Schedule in connection with each audit or
examination of Borrower performed by TEXTRON prior to or after the date hereof.
Without limiting the generality of the foregoing, Borrower shall pay to TEXTRON
an initial Examination Fee in an amount equal to the amount set forth on the
Schedule. Such initial Examination Fee shall be deemed fully earned at the time
of payment and due and payable upon the closing of this transaction, and shall
be deducted from any good faith deposit paid by Borrower to TEXTRON prior to the
date of this Agreement.
2.9 Excess Interest. The contracted for rate of interest of the loan
contemplated hereby, without limitation, shall consist of the following: (i) the
interest rate set forth in the Schedule, calculated and applied to the principal
balance of the Obligations in accordance with the provisions of this Agreement;
(ii) interest after an Event of Default, calculated and applied to the amount of
the Obligations in accordance with the provisions hereof; and (iii) all
Additional Sums (as herein defined), if any. Borrower agrees to pay an effective
contracted for rate of interest which is the sum of the above-referenced
elements. The Examination Fees, attorneys fees, expert witness fees, L/C Fees,
Collateral Monitoring Fees, Closing Fees, Facility Fees, other charges, goods,
things in action or any other sums or things of value paid or payable by
Borrower (collectively, the "ADDITIONAL SUMS"), whether pursuant to this
Agreement or any other documents or instruments in any way pertaining to this
lending transaction, or otherwise with respect to this lending transaction, that
under any applicable law may be deemed to be interest with respect to this
lending transaction, for the purpose of any applicable law that may limit the
maximum amount of interest to be charged with respect to this lending
transaction, shall be payable by Borrower as, and shall be deemed to be,
additional interest and for such purposes only, the agreed upon and "contracted
for rate of interest" of this lending transaction shall be deemed to be
increased by the rate of interest resulting from the inclusion of the Additional
Sums.
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Loan and Security Agreement page 4 of 24
(TEXTRON FINANCIAL LOGO)
It is the intent of the parties to comply with the usury laws of the State of
Rhode Island (the "APPLICABLE USURY LAW"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Agreement, or in any of
the documents securing payment hereof or otherwise relating hereto, in no event
shall this Agreement or such documents require the payment or permit the
collection of interest in excess of the maximum contract rate permitted by the
Applicable Usury Law (the "MAXIMUM INTEREST RATE"). In the event (a) any such
excess of interest otherwise would be contracted for, charged or received from
Borrower or otherwise in connection with the loan evidenced hereby, (b) the
maturity of the Obligations is accelerated in whole or in part, or (c) all or
part of the Obligations shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, shared or received in
connection with the loan evidenced hereby, would exceed the Maximum Interest
Rate, then in any such event (1) the provisions of this paragraph shall govern
and control, (2) neither Borrower nor any other person or entity now or
hereafter liable for the payment of the Obligations shall be obligated to pay
the amount of such interest to the extent that it is in excess of the Maximum
Interest Rate, (3) any such excess which may have been collected shall be either
applied as a credit against the then unpaid principal amount of the Obligations
or refunded to Borrower, at TEXTRON's option, and (4) the effective rate of
interest shall be automatically reduced to the Maximum Interest Rate. It is
further agreed, without limiting the generality of the foregoing, that to the
extent permitted by the Applicable Usury Law; (x) all calculations of interest
which are made for the purpose of determining whether such rate would exceed the
Maximum Interest Rate shall be made by amortizing, prorating, allocating and
spreading during the period of the full stated term of the loan evidenced
hereby, all interest at any time contracted for, charged or received from
Borrower or otherwise in connection with such loan; and (y) in the event that
the effective rate of interest on the loan should at any time exceed the Maximum
Interest Rate, such excess interest that would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law shall be paid to
TEXTRON from time to time, if and when the effective interest rate on the loan
otherwise falls below the Maximum Interest Rate, to the extent that interest
paid to the date of calculation does not exceed the Maximum Interest Rate, until
the entire amount of interest which would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law has been paid in full.
Borrower further agrees that should the Maximum Interest Rate be increased at
any time hereafter because of a change in the Applicable Usury Law, then to the
extent not prohibited by the Applicable Usury Law, such increases, if
applicable, shall apply to all indebtedness evidenced hereby regardless of when
incurred; but, again to the extent not prohibited by the Applicable Usury Law,
should the Maximum Interest Rate be decreased because of a change in the
Applicable Usury Law, such decreases shall not apply to the indebtedness
evidenced hereby regardless of when incurred.
2.10 Principal Payments; Proceeds of Collateral.
(a) Principal Payments. Except where evidenced by notes or other instruments
issued or made by Borrower to TEXTRON specifically containing payment provisions
which are in conflict with this Section 2.10(a) (in which event the conflicting
provisions of said notes or other instruments shall govern and control), that
portion of the Obligations consisting of principal payable on account of
Revolving Loans and Floorplan Loans shall be payable by Borrower to TEXTRON
immediately upon the earliest of (i) the receipt by TEXTRON or Borrower of any
proceeds of any of the Collateral, to the extent of said proceeds, (ii) the
occurrence of an Event of Default in consequence of which TEXTRON elects to
accelerate the maturity and payment of such loans, (iii) any termination of this
Agreement pursuant to Section 9.2, or (iv) in the case of any Floorplan Loan,
the date that is the number of days set forth in Exhibit A to this Agreement
after the invoice date for the Floorplanned Inventory purchased with the
proceeds of such Floorplan Loan, which number of days are specified opposite the
name of the manufacturer or vendor of such Floorplanned Inventory in such
Exhibit A (each, a "DUE DATE") (and TEXTRON shall have the right, in its
Permitted Discretion, to amend or supplement such Exhibit A in whole or in part
by delivery from time to time of a new such Exhibit A to Borrower), provided,
however, that any Revolver Overloan or Floorplan Collateral Coverage
Reconciliation shall be payable on demand pursuant to the provisions of Section
2.3. Provided that there is sufficient Eligible Inventory, as determined by
TEXTRON in its Permitted Discretion, to cover a specific invoice, Borrower and
TEXTRON may agree to extend the due date of such specific invoice, on such terms
and conditions as are established by TEXTRON in its Permitted Discretion, and
consented to by Borrower.
(b) Collections. Until TEXTRON notifies Borrower to the contrary, Borrower may
make collection of all Receivables for TEXTRON by directing all account debtors
and other third parties to remit all payments owing to Borrower to the lockbox
established in connection with the Blocked Account. In the event Borrower shall
nevertheless directly receive any payments or other financial proceeds of any
Collateral, Borrower shall receive all payments as trustee of TEXTRON and
immediately deliver all payments to TEXTRON in their original form as set forth
below, duly endorsed in blank or cause the same to be deposited into a Blocked
Account Dominion Account.
(c) Establishment of a Lockbox Account or Dominion Account. Unless Borrower
shall be otherwise directed by TEXTRON in writing, Borrower shall cause all
proceeds of Collateral to be deposited into a lockbox account, or such other
"blocked account" as TEXTRON may require (each, a "BLOCKED ACCOUNT") pursuant to
an arrangement with such bank as may be selected by Borrower and be acceptable
to TEXTRON which proceeds, unless otherwise provided herein, shall be applied in
payment of the Obligations in such order as TEXTRON determines in its Permitted
Discretion. Borrower shall issue to any such bank an irrevocable letter of
instruction directing said bank to transfer such funds so deposited to TEXTRON,
either to any account maintained by TEXTRON at said bank or by wire transfer to
appropriate account(s) of TEXTRON. All funds deposited in a Blocked Account
shall immediately become the sole property of TEXTRON and Borrower shall obtain
the agreement by such bank to waive any offset rights against the funds so
deposited. TEXTRON assumes no responsibility for any Blocked Account
arrangement, including without limitation, any claim of accord and satisfaction
or release with respect to deposits accepted by any bank thereunder.
Alternatively, TEXTRON may establish depository accounts in the name of TEXTRON
at a bank or banks for the deposit of such funds (each, a "DOMINION ACCOUNT")
and Borrower shall deposit all proceeds of Receivables and all cash proceeds of
any Collateral or cause same to be deposited, in kind, in such Dominion Accounts
of TEXTRON in lieu of depositing same to Blocked Accounts, and, unless otherwise
provided herein, all such funds shall be applied by TEXTRON to the Obligations
in such order as TEXTRON determines in its Permitted Discretion.
(d) Payments Without Deductions. Borrower shall pay principal, interest, and all
other amounts payable hereunder, or under any related agreement, without any
deduction whatsoever, including, but not limited to, any deduction for any
setoff or counterclaim.
(e) Collection Days Upon Repayment. In the event Borrower repays the Obligations
in part or in full at any time hereafter, such payment in full shall be credited
(conditioned upon final collection) to Borrower's loan account within the number
of days referenced in the Schedule after TEXTRON's receipt thereof.
(f) Monthly Accountings. TEXTRON shall provide Borrower monthly with an account
of advances, charges, expenses and payments made pursuant to this Agreement.
Such account shall be deemed correct, accurate and binding on Borrower and
TEXTRON and an account stated
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Loan and Security Agreement page 5 of 24
(TEXTRON FINANCIAL LOGO)
(except for reverses and reapplications of payments made and corrections of
errors discovered by TEXTRON), unless Borrower notifies TEXTRON in writing to
the contrary within thirty (30) days after each account is rendered, describing
the nature of any alleged errors or omissions.
(g) Collections and Administration. TEXTRON may, at any time, whether or not an
Event of Default has occurred, without notice to or assent of Borrower, (i)
notify any account debtor of the fact that the accounts and other Collateral
have been assigned to TEXTRON by Borrower and that payment thereof is to be made
to the order of and directly to TEXTRON, and (ii) after the occurrence of an
Event of Default, or an event which, with the giving of notice, passage of time,
or both, would become an Event of Default, demand, collect or enforce payment of
any accounts or such other Collateral, but without any duty to do so, and
TEXTRON shall not be liable for any failure to collect or enforce payment
thereof. At TEXTRON's request, all invoices, or bills and statements sent to any
account debtor, other obligor or bailee, shall state that the accounts and such
Collateral shall have been assigned to TEXTRON and are payable directly and only
to TEXTRON. TEXTRON shall have the right, at any time, in TEXTRON's name or in
the name of a nominee of TEXTRON, to verify the validity, amount or any other
matter relating to the accounts or the other Collateral, by mail, telephone or
otherwise.
2.11 Application of Collateral. TEXTRON shall have the continuing and exclusive
right to apply or reverse and re-apply any and all payments to any portion of
the Obligations, and such application or re-application can be in any order or
manner that TEXTRON deems necessary and appropriate in its Permitted Discretion.
To the extent that Borrower makes a payment or TEXTRON receives any payment or
proceeds of the Collateral for Borrower's benefit which is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by TEXTRON, and
TEXTRON may adjust the balance of the Loan as TEXTRON, in its Permitted
Discretion, deems appropriate under the circumstances.
3. COLLATERAL.
3.1 Security Interest in the Collateral. To secure the payment and performance
of the Obligations when due, Borrower hereby grants to TEXTRON(i) a first
priority security interest (subject only to Permitted Encumbrances) in all of
Borrower's now owned or hereafter acquired or arising Inventory, Equipment,
Receivables, life insurance policies, Trademarks, Copyrights, Licenses and
Patents, Investment Property, and General Intangibles, including, without
limitation, all of Borrower's Deposit Accounts, money, any and all property now
or at any time hereafter in TEXTRON's possession (including claims and credit
balances), any amounts owed to mutual customers of Borrower and TEXTRON which
are floorplanned by TEXTRON, and all proceeds (including proceeds of any
insurance policies, proceeds of proceeds and claims against third parties), all
products and all books and records related to any of the foregoing and (ii)
assigns, transfers and sets over to TEXTRON all of its right, title and
interest, powers, privileges and other benefits of all leases, rental agreements
and related documents entered into by Borrower with respect to any Equipment
leased by Borrower together with all income, proceeds and other benefits thereof
(all of the foregoing, together with all other property in which TEXTRON may be
granted a lien or security interest, is referred to herein, collectively, as the
"COLLATERAL").
3.2 Perfection and Protection of Security Interest. Borrower shall, at its
expense, take all actions requested by TEXTRON at any time to perfect, maintain,
protect and enforce TEXTRON's security interest and other rights in the
Collateral and the priority thereof from time to time, including, without
limitation, (i) executing and filing financing or continuation statements and
amendments thereof and executing and delivering such documents and titles in
connection with motor vehicles as TEXTRON shall require, all in form and
substance satisfactory to TEXTRON, (ii) maintaining a perpetual inventory and
complete and accurate inventory stock records, (iii) delivering to TEXTRON
warehouse receipts covering any portion of the Collateral located in warehouses
and for which warehouse receipts are issued, and transferring Inventory to
warehouses designated by TEXTRON, (iv) placing notations on Borrower's books of
account to disclose TEXTRON's security interest therein, and (v) delivering to
TEXTRON all letters of credit on which Borrower is named beneficiary. TEXTRON
may file, without Borrower's signature, one or more financing statements
disclosing TEXTRON's security interest under this Agreement. Borrower agrees
that a carbon, photographic, photostat or other reproduction of this Agreement
or of a financing statement is sufficient as a financing statement. If any
Collateral is at any time in the possession or control of any warehouseman,
bailee or any of Borrower's agents or processors, Borrower shall notify such
Person of TEXTRON's security interest in such Collateral and, upon TEXTRON's
request, instruct them to hold all such Collateral for TEXTRON's account subject
to TEXTRON's instructions. From time to time, Borrower shall, upon TEXTRON's
request, execute and deliver confirmatory written instruments pledging the
Collateral to TEXTRON, but Borrower's failure to do so shall not affect or limit
TEXTRON's security interest or other rights in and to the Collateral. Until the
Obligations have been fully satisfied and TEXTRON's obligation to make further
advances hereunder has terminated, TEXTRON's security interest in the Collateral
shall continue in full force and effect.
3.3 Preservation of Collateral. TEXTRON may, in its Permitted Discretion, at any
time discharge any lien or encumbrance on the Collateral or bond the same, pay
any insurance, maintain guards, pay any service bureau, obtain any record or
take any other action to preserve the Collateral and charge the cost thereof to
Borrower's loan account as an Obligation.
3.4 Insurance. Borrower will maintain and deliver evidence to TEXTRON of such
insurance as is required by TEXTRON, written by insurers, in amounts, and with
Lender's loss payee, additional insured and other endorsements, satisfactory to
TEXTRON. All premiums shall be paid by Borrower as and when due. Accurate and
complete copies of all policies shall be delivered by Borrower to TEXTRON. If
Borrower fails to comply with this section, TEXTRON may (but shall not be
required to) procure such insurance at Borrower's expense and charge the cost
thereof to Borrower's loan account as an Obligation.
3.5 Collateral Reporting.
(a) Invoices. Borrower shall not re-date any invoice or sale from the original
date thereof or make sales on extended terms beyond those customary in
Borrower's industry, or otherwise extend or modify the term of any Receivable.
Borrower shall deliver a copy of any invoice requested by TEXTRON. Each copy of
an invoice delivered to TEXTRON by Borrower will be a genuine copy of the
original invoice sent to the account debtor named therein; and with respect to
any invoice or accounts receivable aging report delivered to TEXTRON, all goods
described in each invoice will have been delivered to the account debtor and all
services of Borrower described in each invoice will have been performed.
(b) Instruments. If any Receivable is or becomes evidenced by a promissory note,
trade acceptance or any other instrument for the
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Loan and Security Agreement page 6 of 24
(TEXTRON FINANCIAL LOGO)
payment of money, Borrower shall immediately deliver such instrument to TEXTRON
appropriately endorsed to TEXTRON and, regardless of the form of any
presentment, demand, notice of dishonor, protest or notice of protest with
respect thereto, Borrower shall remain liable thereon until such instrument is
paid in full.
(c) Physical Inventory. Borrower shall maintain its computerized perpetual
inventory system and shall conduct a physical count of the Inventory at such
intervals as TEXTRON requests and promptly supply TEXTRON with a copy of such
accounts accompanied by a report of the quantity and value (calculated at the
lower of cost or market value on a first in, first out basis) of the Inventory
and such additional information with respect to the Inventory as TEXTRON may
request from time to time.
(d) Returns. For so long as no Event of Default has occurred and is continuing
and subject to the provisions of Section 3.6(b), if any account debtor returns
any Inventory to Borrower in the ordinary course of its business, Borrower shall
promptly determine the reason for such return and may issue a credit memorandum
to the account debtor in the appropriate amount. In the event any account debtor
returns Inventory to Borrower after the occurrence of any Event of Default,
Borrower shall (i) hold the returned Inventory in trust for TEXTRON, (ii)
segregate all returned Inventory from all of Borrower's other property, (iii)
conspicuously label the returned Inventory as TEXTRON's property, (iv)
immediately notify TEXTRON of the return of any Inventory, specifying the reason
for such return, the location and condition of the returned Inventory, and on
TEXTRON's request deliver such returned Inventory to TEXTRON, and (v) not
dispose of, or issue any credits or allowances with respect to, any returned
Inventory without TEXTRON's prior written consent.
(e) Consignments. Borrower shall not consign any Inventory.
3.6 Receivables.
(a) Eligibility. (i) Borrower represents and warrants that each Receivable
covers and shall cover a bona fide sale or lease and delivery by it of goods or
the rendition by it of services in the ordinary course of its business, and
shall be for a liquidated amount and shall not be subject to any offset,
deduction, counterclaim, rights of return or cancellation, lien (except for
TEXTRON's security interest and Permitted Encumbrances) or other condition. If
any representation or warranty herein is breached as to any Receivable or any
Receivable ceases to be an Eligible Receivable for any reason other than payment
thereof, then TEXTRON may, in addition to its other rights hereunder, designate
any and all Receivables owing by that account debtor as not Eligible
Receivables; provided, that TEXTRON shall in any such event retain its security
interest in all Receivables, whether or not Eligible Receivables, until the
Obligations have been fully satisfied and TEXTRON's obligation to provide loans
hereunder has terminated. If Borrower becomes aware of any matter affecting any
Receivable, including information affecting the credit of the account debtor
thereon, Borrower shall promptly notify TEXTRON in writing.
(ii) TEXTRON at any time shall be entitled to (i) establish and increase or
decrease reserves against Eligible Receivables and Eligible Inventory, (ii)
reduce the advance rates in the Schedule or restore such advance rates to any
level equal to or below the advance rates set forth in the Schedule or (iii)
impose additional restrictions (or eliminate the same) to the standards of
eligibility set forth in the definitions of "Eligible Receivables" and "Eligible
Inventory," in the exercise of its Permitted Discretion. TEXTRON may but shall
not be required to rely on the schedules and/or reports delivered to TEXTRON in
connection herewith in determining the then eligibility of Receivables and
Inventory. Reliance thereon by TEXTRON from time to time shall not be deemed to
limit the right of TEXTRON to revise advance rates or standards of eligibility
as provided above.
(b) Disputes. Borrower shall notify TEXTRON promptly of all disputes or claims
and settle or adjust such disputes or claims at no expense to TEXTRON, but no
discount, credit or allowance shall be granted to any account debtor and no
returns of merchandise shall be accepted by Borrower without TEXTRON's consent,
except for discounts, credits and allowances made or given in the ordinary
course of Borrower's business. Borrower shall send TEXTRON a copy of each credit
memorandum in excess of the amount provided in the Schedule as soon as issued or
as soon as known by Borrower. TEXTRON may, at any time after the occurrence of
an Event of Default, settle or adjust disputes or claims directly with account
debtors for amounts and upon terms which TEXTRON considers advisable in its
reasonable credit judgment and, in all cases, TEXTRON shall credit Borrower's
loan account with only the net amounts received by TEXTRON in payment of any
Receivables.
3.7 Equipment. Borrower shall keep and maintain the Equipment in good operating
condition and repair and make all necessary replacements thereto to maintain and
preserve the value and operating efficiency thereof at all times consistent with
Borrower's past practice, ordinary wear and tear excepted. Borrower shall not
permit any item of Equipment to become a fixture (other than a trade fixture) to
real estate or an accession to other property.
3.8 Other Liens; No Disposition of Collateral. Borrower represents, warrants and
covenants that except for TEXTRON's security interest, Permitted Encumbrances,
and such other liens, claims and encumbrances as may be permitted by TEXTRON in
its Permitted Discretion from time to time in writing, (a) all Collateral is and
shall continue to be owned by it free and clear of all liens, claims and
encumbrances whatsoever and (b) Borrower shall not, without TEXTRONS's prior
written approval, sell, encumber or dispose of or permit the sale, encumbrance
or disposal of any Collateral or all or any substantial part of any of its other
assets (or any interest of Borrower therein), except for the sale of Inventory
in the ordinary course of Borrower's business, Equipment which is obsolete and
non-material assets other than Receivables and Inventory. In the event TEXTRON
gives any such prior written approval with respect to any such sale of
Collateral, the same may be conditioned on the sale price being equal to, or
greater than, an amount acceptable to TEXTRON. The proceeds of any such sales
shall be remitted to TEXTRON pursuant to this Agreement for application to the
Obligations.
3.9 Collateral Security. The Obligations shall constitute one loan secured by
the Collateral. TEXTRON may, in its Permitted Discretion, (i) exchange, enforce,
waive or release any of the Collateral, (ii) apply Collateral and direct the
order or manner of sale thereof as it may determine, and (iii) settle,
compromise, collect or otherwise liquidate any Collateral in any manner without
affecting its right to take any other action with respect to any other
Collateral.
4. CONDITIONS OF CLOSING.
4.1 Initial Advance. The obligation of TEXTRON to make the initial advance
hereunder is subject to the fulfillment, to the satisfaction of TEXTRON and its
counsel, of each of the following conditions and any additional conditions
specified in the Schedule on or prior to the date set forth on the Schedule (the
date of fulfillment of all such conditions, the "CLOSING DATE"):
(a) Loan Documents. TEXTRON shall have received each of the following Loan
Documents: (i) the Agreement fully and properly executed by Borrower; (ii)
promissory notes in such amounts and on
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Loan and Security Agreement page 7 of 24
(TEXTRON FINANCIAL LOGO)
such terms and conditions as TEXTRON shall specify, executed by Borrower; (iii)
such security agreements, intellectual property assignments, guaranty
agreements, pledge agreements, mortgages and deeds of trust as TEXTRON may
require with respect to this Agreement, executed by each of the parties thereto
and, if applicable, duly acknowledged for recording or filing in the appropriate
governmental offices; (iv) such other documents, instruments and agreements in
connection herewith as TEXTRON shall require, executed, certified and/or
acknowledged by such parties as TEXTRON shall designate;
(b) Terminations by Existing Lender. Borrower's existing lender(s) shall have
executed and delivered UCC termination statements and other documentation
evidencing the termination of its liens and security interests in the assets of
Borrower or a subordination agreement in form and substance satisfactory to
TEXTRON in its Permitted Discretion; and TEXTRONshall have approved in its
Permitted Discretion any outstanding payoff arrangements with the foregoing
creditors;
(c) Charter and Other Corporate Documents. TEXTRON shall have received copies of
(i) Borrower's Bylaws and Articles or Certificate of Incorporation, as amended,
modified, or supplemented to the Closing Date, certified by the Secretary of
Borrower; and (ii) Borrower's registrations of fictitious names, trademarks,
tradenames and Internet domain names.
(d) Good Standing. TEXTRON shall have received a certificate of status with
respect to Borrower, and each other Loan Party, dated within thirty (30) days
prior to the Closing Date, by the Secretary of State or other similar official
of the state of incorporation or organization of Borrower or such Loan Party,
which certificate shall indicate that Borrower or such Loan Party is in good
standing in such state;
(e) Foreign Qualification. TEXTRON shall have received certificates of status
with respect to Borrower and each other Loan Party, each dated within ten (10)
days prior to the Closing Date, issued by the Secretary of State or other
similar official of each state in which such party's failure to be duly
qualified or licensed would have a material adverse effect on its financial
condition or assets, indicating that such party is in good standing;
(f) Authorizing Resolutions and Incumbency. TEXTRON shall have received (i) a
copy of resolutions of Borrower's Board of Directors authorizing the execution
and delivery of this Agreement and the other Loan Documents, (ii) a copy of
resolutions of each other Loan Party's Board of Directors authorizing the
execution and delivery of the Loan Documents to which such Loan Party is a
party, and authorizing specific officers of such Loan Party to execute same, and
(iii) a certificate from the Secretary of Borrower and each other Loan Party
attesting to (A) the adoption of the such resolutions, and (B) the authenticity
of original specimen signatures of such officers;
(g) Insurance. TEXTRON shall have received the insurance certificates and
certified copies of policies required by Section 3.4 hereof, in form and
substance satisfactory to TEXTRON and its counsel, together with an additional
insured endorsement in favor of TEXTRON with respect to all liability policies
and a lender's loss payable endorsement in favor of TEXTRON with respect to all
casualty and business interruption policies, each in form and substance
acceptable to TEXTRON and its counsel;
(h) Title Insurance. TEXTRON shall have received binding commitments to issue
title insurance, in form and substance satisfactory to TEXTRON and its counsel,
with respect to any real property that constitutes part of the Collateral;
(i) Searches; Certificates of Title. TEXTRON shall have received searches
reflecting the filing of its financing statements and fixture filings in such
jurisdictions as it shall determine, and shall have received certificates of
title with respect to the Collateral which shall have been duly executed in a
manner sufficient to perfect all of the security interests granted to TEXTRON;
(j) Landlord, Bailee and Mortgagee Waivers. TEXTRON shall have received
landlord, bailee and/or mortgagee waivers from the lessors, bailors and/or
mortgagees of all locations where any Collateral is located;
(k) Fees. Borrower shall have paid all fees payable by it on the Closing Date
pursuant to this Agreement;
(l) Opinion of Counsel. TEXTRON shall have received an opinion of Borrower's
counsel covering such matters as TEXTRON shall determine in its Permitted
Discretion;
(m) Officer Certificate. TEXTRON shall have received a certificate of the
President and the Chief Financial Officer or similar official of Borrower,
attesting to the accuracy of each of the representations and warranties of
Borrower set forth in this Agreement and the fulfillment of all conditions
precedent to the initial advance hereunder;
(n) Solvency Certificate. TEXTRON shall have received a signed certificate of
the Borrower's duly elected Chief Financial Officer or such other officer of
Borrower acceptable to TEXTRON, concerning the solvency and financial condition
of Borrower, on TEXTRON's standard form;
(o) Blocked Account. Any Blocked Account required by TEXTRON shall have been
established to the satisfaction of TEXTRON in its Permitted Discretion;
(p) Environmental Assessment. If required by TEXTRON, Borrower shall have caused
a Phase I Environmental Assessment to be conducted on the property or properties
owned or occupied by Borrower, all at Borrower's own expense and the results of
such assessment(s) shall have been in form and substance satisfactory to TEXTRON
in its Permitted Discretion. Such assessment(s) shall have included, in
TEXTRON's Permitted Discretion, core samplings, and shall have been conducted by
an environmental engineer acceptable to TEXTRON;
(q) Environmental Certificate. TEXTRON shall have received an Environmental
Certificate from Borrower, in form and substance satisfactory to TEXTRON in its
Permitted Discretion, with respect to all locations of Collateral;
(r) ADA Compliance. If necessary, as of the Closing Date, Borrower shall be in
compliance with the Americans with Disabilities Act of 1990, as amended ("ADA"),
or, if any renovations of Borrower's facilities or modifications of Borrower's
employment practices shall be required to bring them into compliance with the
ADA, review and approval by TEXTRON of Borrower's proposed plan to come into
such compliance. Borrower shall deliver representations and warranties to
TEXTRON concerning Borrower's compliance with the ADA, and no evidence shall
have come to the attention of TEXTRON indicating that Borrower is not in
compliance with the ADA (except to the extent that TEXTRON has reviewed and
approved Borrower's plan to come into compliance).
(s) Minimum Excess Availability. If required by TEXTRON, Borrower shall have
Excess Availability under the Revolving Credit Loans facility of not less than
the amount specified in the Schedule, after giving effect to the initial advance
hereunder and after giving effect to any applicable Loan Reserves against
borrowing availability under the Revolving Credit Loans.
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Loan and Security Agreement page 8 of 24
(TEXTRON FINANCIAL LOGO)
(t) Schedule Conditions. Borrower shall have complied with all additional
conditions precedent as set forth in the Schedule.
(u) Other Matters. All other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed
or recorded and shall be in form and substance satisfactory to TEXTRON and its
counsel.
4.2 Subsequent Advances. The obligation of TEXTRON to make any advance shall be
subject to the further conditions precedent that, on and as of the date of such
advance: (i) the representations and warranties of Borrower set forth in this
Agreement shall be accurate, before and after giving effect to such advance or
issuance and to the application of any proceeds thereof; (ii) no Event of
Default and no event which, with notice or passage of time or both, would
constitute an Event of Default has occurred and is continuing, or would result
from such advance or issuance or from the application of any proceeds thereof;
(iii) no material adverse change has occurred in the Borrower's business,
operations, financial condition, or assets or in the prospect of repayment of
the Obligations; and (iv) TEXTRON shall have received such other approvals,
opinions or documents as TEXTRON shall reasonably request.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
5.1 Due Organization. It is a corporation duly organized, validly existing and
in good standing under the laws of the State set forth on the Schedule, is
qualified and authorized to do business and is in good standing in all states in
which such qualification and good standing are necessary in order for it to
conduct its business and own its property, and has all requisite power and
authority to conduct its business as presently conducted, to own its property
and to execute and deliver each of the Loan Documents to which it is a party and
perform all of its Obligations thereunder and has not taken any steps to wind
up, dissolve or otherwise liquidate its assets;
5.2 Other Names. Borrower has not, during the preceding five (5) years, been
known by or used any other corporate or fictitious name except as set forth in
the Schedule, nor has Borrower been the surviving entity of a merger or
consolidation or acquired all or substantially all of the assets of any person
during such time, except as set forth in the Schedule;
5.3 Due Authorization. The execution, delivery and performance by Borrower of
the Loan Documents to which it is a party have been authorized by all necessary
corporate action and do not and shall not constitute a violation of any
applicable law or of Borrower's Articles or Certificate of Incorporation or
By-Laws or any other document, agreement or instrument to which Borrower is a
party or by which Borrower or its assets are bound;
5.4 Binding Obligation. Each of the Loan Documents to which Borrower is a party
is the legal, valid and binding obligation of Borrower enforceable against
Borrower in accordance with its terms;
5.5 Intangible Property. Borrower possesses adequate Trademarks, Copyrights,
Licenses and Patents for the present and planned future conduct of its business
without any known conflict with the rights of others, and each is valid and has
been duly registered or filed with the appropriate governmental or regulatory
authorities; and each is valid and has been duly registered or filed with the
appropriate governmental or regulatory authorities; each of Borrower's patents,
patent applications, copyrights, Internet domain names, trademarks and trademark
applications which have been registered or filed with any governmental or
regulatory authority (including the U.S. Patent and Trademark Office, U.S.
Copyright Office and the Library of Congress) are listed by name, date and
filing number in the Schedule;
5.6 Capital. Borrower has capital sufficient to conduct its business, is able to
pay its debts as they mature and owns property having a fair salable value
greater than the amount required to pay all of its debts (including contingent
debts);
5.7 Material Litigation. Borrower has no pending or overtly threatened
litigation, actions or proceedings which would materially and adversely affect
its business, assets, operations, prospects or condition, financial or
otherwise, or the Collateral or any of TEXTRONS's interests therein;
5.8 Title; Security Interests of TEXTRON. Borrower has good, indefeasible and
merchantable title to the Collateral and, upon the execution and delivery of the
Loan Documents, filing of UCC-1 Financing Statements, delivery of the
certificate(s) evidencing any pledged securities, the filing of any collateral
assignments or security agreements regarding Borrower's Trademarks, Copyrights,
Licenses and Patents, if any, with the appropriate governmental or regulatory
authorities, and the recording of any mortgages or deeds of trust with respect
to real property, in each case in the appropriate offices, this Agreement and
such documents shall create valid and perfected first priority liens in and to
the Collateral, subject only to Permitted Encumbrances;
5.9 Restrictive Agreements; Labor Contracts. Borrower is not a party or subject
to any contract or subject to any charge, corporate restriction, judgment,
decree or order materially and adversely affecting its business, assets,
operations, prospects or condition, financial or otherwise, or which restricts
its right or ability to incur Indebtedness, and it is not party to any labor
dispute. In addition, no labor contract is scheduled to expire during the Term
of this Agreement, except as disclosed to TEXTRON in writing prior to the date
hereof;
5.10 Laws. Borrower is not in violation of any applicable statute, regulation,
ordinance or any order of any court, tribunal or governmental agency, in any
respect materially and adversely affecting the Collateral or its business,
assets, operations, prospects or condition, financial or otherwise;
5.11 Consents. Borrower has obtained or caused to be obtained or issued any
required consent of a governmental agency or other Person in connection with the
financing contemplated hereby;
5.12 Defaults. Borrower is not in default with respect to any note, indenture,
loan agreement, mortgage, lease, deed or other agreement to which it is a party
or by which it or its assets are bound, nor has any event occurred which, with
the giving of notice or the lapse of time, or both, would cause such a default;
5.13 Financial Condition. The Prepared Financials fairly present Borrower's
financial condition and results of operations and those of such other Persons
described therein as of the date thereof in accordance with GAAP; there are no
material omissions from the Prepared Financials or other facts or circumstances
not reflected in the Prepared Financials; and there has been no material and
adverse change in such financial condition or operations since the date of the
initial Prepared Financials delivered to TEXTRON hereunder;
5.14 ERISA. None of Borrower, any ERISA Affiliate, or any Plan is or has been in
violation of any of the provisions of ERISA, any of the qualification
requirements of IRC Section 401(a) or any of the published interpretations
thereunder, nor has Borrower or any ERISA Affiliate received any notice to such
effect. No notice of intent to terminate a Plan has been filed under Section
4041 of ERISA, nor has any Plan been terminated under ERISA. The PBGC has not
instituted proceedings to
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Loan and Security Agreement page 9 of 24
(TEXTRON FINANCIAL LOGO)
terminate, or appointed a trustee to administer, a Plan. No lien upon the assets
of Borrower has arisen with respect to a Plan. No prohibited transaction or
Reportable Event has occurred with respect to a Plan. Neither Borrower nor any
ERISA Affiliate has incurred any withdrawal liability with respect to any
Multiemployer Plan. Borrower and each ERISA Affiliate have made all
contributions required to be made by them to any Plan or Multiemployer Plan when
due. There is no accumulated funding deficiency in any Plan, whether or not
waived;
5.15 Taxes. Borrower has filed all tax returns and such other reports as it is
required by law to file and has paid or made adequate provision for the payment
on or prior to the date when due of all taxes, assessments and similar charges
that are due and payable;
5.16 Locations; Federal Tax ID No. Borrower's chief executive office and the
offices and locations where it keeps the Collateral (except for Inventory in
transit) are at the locations set forth in the Schedule, except to the extent
that such locations may have been changed after notice to TEXTRON in accordance
with Section 6.4; Borrower's federal tax identification number is as shown in
the Schedule;
5.17 Business Relationships. There exists no actual or threatened termination,
cancellation or limitation of, or any modification or change in, the business
relationship between Borrower and any customer or any group of customers whose
purchases individually or in the aggregate are material to the business of
Borrower, or with any material supplier, and there exists no present condition
or state of facts or circumstances which would materially and adversely affect
Borrower or prevent Borrower from conducting such business after the
consummation of the transactions contemplated by this Agreement in substantially
the same manner in which it has heretofore been conducted; and
5.18 Reaffirmations. Each request for a loan made by Borrower pursuant to this
Agreement shall constitute (i) an automatic representation and warranty by
Borrower to TEXTRON that there does not then exist any Event of Default and (ii)
a reaffirmation as of the date of said request of all of the representations and
warranties of Borrower contained in this Agreement and the other Loan Documents.
6. COVENANTS.
6.1 Affirmative Covenants: Borrower covenants that, so long as any Obligation
remains outstanding and this Agreement is in effect, it shall:
6.1.1 Taxes. File all tax returns and pay or make adequate provision for the
payment of all taxes, assessments and other charges on or prior to the date when
due;
6.1.2 Notice of Litigation. Promptly notify TEXTRON in writing of any
litigation, suit or administrative proceeding which may materially and adversely
affect the Collateral or Borrower's business, assets, operations, prospects or
condition, financial or otherwise, whether or not the claim is covered by
insurance;
6.1.3 ERISA. Notify TEXTRON in writing (i) promptly upon the occurrence of any
event described in Paragraph 4043 of ERISA, other than a termination, partial
termination or merger of a Plan or a transfer of a Plan's assets and (ii) prior
to any termination, partial termination or merger of a Plan or a transfer of a
Plan's assets;
6.1.4 Change in Location. Notify TEXTRON in writing forty-five (45) days prior
to any change in the location of Borrower's chief executive office or the
location of any Collateral, or Borrower's opening or closing of any other place
of business;
6.1.5 Corporate Existence. Maintain its corporate existence and its
qualification to do business and good standing in all states necessary for the
conduct of its business and the ownership of its property and maintain adequate
assets, Trademarks, Copyrights, Licenses and Patents for the conduct of its
business;
6.1.6 Labor Disputes. Promptly notify TEXTRON in writing of any material labor
dispute to which Borrower is or may become subject and the expiration of any
labor contract to which Borrower is a party or bound;
6.1.7 Violations of Law. Promptly notify TEXTRON in writing of any violation of
any law, statute, regulation or ordinance of any governmental entity, or of any
agency thereof, applicable to Borrower which may materially and adversely affect
the Collateral or Borrower's business, assets, prospects, operations or
condition, financial or otherwise;
6.1.8 Defaults. Notify TEXTRON in writing within five (5) Business Days of the
occurrence of Borrower's default under any note, indenture, loan agreement,
mortgage, lease or other agreement to which Borrower is a party or by which
Borrower is bound, or of any other default under any Indebtedness of Borrower;
6.1.9 Capital Expenditures. Promptly notify TEXTRON in writing of the making of
any Capital Expenditure materially affecting Borrower's business, assets,
prospects, operations or condition, financial or otherwise, except to the extent
permitted in the Schedule;
6.1.10 Books and Records. Keep adequate records and books of account with
respect to its business activities in which proper entries are made in
accordance with GAAP, reflecting all of its financial transactions;
6.1.11 Leases; Warehouse Agreements. Provide TEXTRON with (i) copies of all
agreements between Borrower and any landlord or warehouseman which owns any
premises at which any Collateral may, from time to time, be located, and (ii)
without limiting the landlord and mortgagee waivers to be provided pursuant to
Section 4.1(j) hereof, landlord and mortgagee waivers in form acceptable to
TEXTRON with respect to all locations where any Collateral is hereafter located;
6.1.12 Additional Documents. At TEXTRON's request, promptly execute or cause to
be executed and delivered to TEXTRON any and all documents, instruments or
agreements deemed necessary by TEXTRON to facilitate the collection of the
Obligations or the Collateral or otherwise to give effect to or carry out the
terms or intent of this Agreement or any of the other Loan Documents. Without
limiting the generality of the foregoing, if any of the Receivables with a face
value in excess of the amount set forth in the Schedule arises out of a contract
with the United States of America or any department, agency, subdivision or
instrumentality thereof, Borrower shall promptly notify TEXTRON of such fact in
writing and shall execute any instruments and take any other action required or
requested by TEXTRON to comply with the provisions of the Federal Assignment of
Claims Act;
6.1.13 Financial Covenants. Comply with the financial covenants set forth in the
Schedule;
6.1.14 Issuing of Credit Memoranda. Borrower shall issue credit memoranda in the
ordinary course of its business no later than the number of Business Days
referenced in the Schedule after: (i) Borrower's receipt of returned goods or
merchandise; or (ii) any account debtor shall become entitled to a credit from
Borrower under any other circumstances; and
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Loan and Security Agreement page 10 of 24
(TEXTRON FINANCIAL LOGO)
6.1.15 Other Covenants. Borrower shall comply with any other covenants set forth
in the Schedule.
6.2 NEGATIVE COVENANTS: Without TEXTRON's prior written consent, which consent
TEXTRON may withhold in its Permitted Discretion, so long as any Obligation
remains outstanding and this Agreement is in effect, Borrower shall not:
6.2.1 Mergers. Merge or consolidate with or acquire any other Person (in which
case TEXTRON's consent shall not be unreasonably withheld), or make any other
material change in its capital structure or in its business or operations which
might adversely affect the repayment of the Obligations;
6.2.2 Loans. Make advances, loans or extensions of credit to, or invest in, any
Person except as set forth in the Schedule;
6.2.3 Dividends. Declare or pay cash dividends upon any of its stock or
distribute any of its property or redeem, retire, purchase or acquire directly
or indirectly any of its stock;
6.2.4 Adverse Transactions. Enter into any transaction which materially and
adversely affects the Collateral or its ability to repay the Obligations in full
as and when due;
6.2.5 Indebtedness of Others. Become directly or contingently liable for the
Indebtedness of any Person, except by endorsement of instruments for deposit;
and except for the existing guarantees made by Borrower prior to the date
hereof, if any, which are set forth in the Schedule
6.2.6 Repurchase. Make a sale to any customer on a xxxx-and-hold, guaranteed
sale, sale and return, sale on approval, consignment, or any other repurchase or
return basis;
6.2.7 Name. Use any corporate or fictitious name other than its corporate name
as set forth in its Articles or Certificate of Incorporation on the date hereof
or as set forth in the Schedule;
6.2.8 Prepayment. Prepay any Indebtedness other than trade payables and other
than the Obligations;
6.2.9 Compensation. Intentionally Omitted;
6.2.10 Capital Expenditure. Intentionally Omitted;
6.2.11 Indebtedness. Create, incur, assume or permit to exist any Indebtedness
(including Indebtedness in connection with Capital Leases) in excess of the
amount set forth in the Schedule, other than (i) the Obligations, (ii) trade
payables and other contractual obligations to suppliers and customers incurred
in the ordinary course of business, and (iii) other Indebtedness existing on the
date of this Agreement and reflected in the Prepared Financials (except
Indebtedness paid on the date of this Agreement from proceeds of the initial
advances hereunder) and (iv) Subordinated Debt;
6.2.12 Affiliate Transactions. Except as set forth below and on the Schedule,
sell, transfer, distribute or pay any money or property to any Affiliate, or
invest in (by capital contribution or otherwise) or purchase or repurchase any
stock or Indebtedness, or any property, of any Affiliate, or become liable on
any guaranty of the indebtedness, dividends or other obligations of any
Affiliate. Notwithstanding the foregoing, if no Event of Default has occurred,
Borrower may engage in transactions with Affiliates in the normal course of
business, in amounts and upon terms which are fully disclosed to TEXTRON and
which are no less favorable to Borrower than would be obtainable in a comparable
arm's length transaction with a Person who is not an Affiliate;
6.2.13 Nature of Business. Enter into any new business or make any material
change in any of Borrower's business objectives, purposes or operations;
6.2.14 TEXTRON's Name. Use the name of TEXTRON in connection with any of
Borrower's business or activities, except in connection with internal business
matters or as required in dealings with governmental agencies and financial
institutions or with trade creditors of Borrower, solely for credit reference
purposes; or
6.2.15 Margin Security. Engage (and has not in the past) engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
G or Regulation U issued by the Board of Governors of the Federal Reserve
System); use any proceeds of any Loan or other advance to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock, or in any manner which might cause such Loan or other
advance or the application of such proceeds to violate (or require any
regulatory filing under) Regulation G, Regulation T, Regulation U, Regulation X
or any other regulation of the Board of Governors of the Federal Reserve System,
in each case as in effect on the date or dates of such Loan or other advance and
such use of proceeds; or use any proceeds of any Loan or other advance to
acquire any security of a class which is registered pursuant to Section 12 of
the Securities Exchange Act of 1934; or
6.2.16 Real Property. Purchase or acquire any real property without TEXTRON's
prior written consent, a condition of which consent shall include delivery of
appropriate environmental reports and analysis, in form and substance
satisfactory to TEXTRON and its counsel.
6.2.17 Liens. Create, incur, assume or suffer to exist any lien upon any of its
Property, whether now owned or hereafter acquired, except Permitted
Encumbrances.
6.2.18 Change in Fiscal Year; Auditors. Change or permit any subsidiary to
change the commencement or ending date of its fiscal year or retain the
independent public auditors for purposes of preparing the Borrower's audited
financial statements which are different than those retained by Borrower and its
subsidiaries at the time of the Closing Date, in each case, without receiving
the prior written consent of TEXTRON; or
6.2.19 Issuance of Stock. Intentionally Omitted.
7. DEFAULT AND REMEDIES.
7.1 Events of Default. Any one or more of the following events shall constitute
an Event of Default under this Agreement:
(a) Borrower fails to pay when due and payable any portion of the Obligations at
stated maturity, upon acceleration or otherwise;
(b) Borrower or any other Loan Party fails or neglects to perform, keep, or
observe in any material respect any term, provision, condition, covenant or
agreement contained in any Loan Document to which Borrower or such other Loan
Party is a party;
(c) Any material adverse change occurs in Borrower's business, assets,
operations, prospects or condition, financial or otherwise;
(d) The prospect of repayment of any portion of the Obligations or the value or
priority of TEXTRON's security interest in the Collateral is materially
impaired;
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Loan and Security Agreement page 11 of 24
(TEXTRON FINANCIAL LOGO)
(e) Any material portion of Borrower's assets is seized, attached, subjected to
a writ or distress warrant, is levied upon or comes into the possession of any
judicial officer unless such action is stayed and such attachment is dismissed
within thirty (30) days;
(f) Borrower shall generally not pay its debts as they become due or shall enter
into any agreement (whether written or oral), or offer to enter into any
agreement, with all or a significant number of its creditors regarding any
moratorium or other indulgence with respect to its debts or the participation of
such creditors or their representatives in the supervision, management or
control of the business of Borrower;
(g) Any bankruptcy or other insolvency proceeding is commenced by Borrower, or
any such proceeding is commenced against Borrower and remains undischarged or
unstayed for forty-five (45) days;
(h) Any notice of lien, levy or assessment in an aggregate amount is filed of
record with respect to any of Borrower's assets;
(i) Any judgments are entered against Borrower in an aggregate amount exceeding
the amount set forth in the Schedule unless each such judgment is stayed and
each such judgment is dismissed within thirty (30) days;
(j) Any default shall occur under (i) any material agreement between Borrower
and any third party including, without limitation, any default which would
result in a right by such third party to accelerate the maturity of any
Indebtedness of Borrower to such third party; or (ii) any Subordinated Debt;
(k) Any representation or warranty made or deemed to be made by Borrower, any
Affiliate or any other Loan Party in any Loan Document or any other statement,
document or report made or delivered to TEXTRON in connection therewith shall
prove to have been misleading in any material respect;
(l) Any Prohibited Transaction or Reportable Event shall occur with respect to a
Plan which could have a material adverse effect on the financial condition of
Borrower; any lien upon the assets of Borrower in connection with any Plan shall
arise; Borrower or any of its ERISA Affiliates shall fail to make full payment
when due of all amounts which Borrower or any of its ERISA Affiliates may be
required to pay to any Plan or any Multiemployer Plan as one or more
contributions thereto; Borrower or any of its ERISA Affiliates creates or
permits the creation of any accumulated funding deficiency, whether or not
waived; or
(m) If any of the Loans are guaranteed: (i) any Guarantor revokes or terminates
its guaranty or any security therefor, or becomes subject to any bankruptcy or
other insolvency proceeding; (ii) any Guarantor other than an individual
Guarantor, is dissolved, liquidated, merged, reorganized or terminated; or (iii)
any individual Guarantor dies or becomes disabled; or
(n) Any transfer in violation of the number or percentage set forth in the
Schedule of the issued and outstanding shares of common stock or other evidence
of ownership of Borrower.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, TEXTRON RESERVES THE
RIGHT TO CEASE MAKING ANY ADVANCES OR LOANS IF AN EVENT OF DEFAULT HAS OCCURRED
AND IS CONTINUING.
7.2 Remedies. Upon the occurrence of an Event of Default, TEXTRON may, at its
option and in its Permitted Discretion and in addition to all of its other
rights under the Loan Documents, terminate this Agreement and declare all of the
Obligations to be immediately payable in full. TEXTRON shall also have all of
its rights and remedies under applicable law, including, without limitation, the
default rights and remedies of a secured party under the Code and upon the
occurrence of an Event of Default Borrower hereby consents to the appointment of
a receiver by TEXTRON in any action initiated by TEXTRON pursuant to this
Agreement and to the jurisdiction and venue set forth in Section 9.26, and
Borrower waives notice and posting of a bond in connection therewith. Further,
TEXTRON may, at any time, take possession of the Collateral and keep it on
Borrower's premises, at no cost to TEXTRON, or remove any part of it to such
other place(s) as TEXTRON may desire, or Borrower shall, upon TEXTRON's demand,
at Borrower's sole cost, assemble the Collateral and make it available to
TEXTRON at a place reasonably convenient to TEXTRON. TEXTRON may sell and
deliver any Collateral at public or private sales, for cash, upon credit or
otherwise, at such prices and upon such terms as TEXTRON deems advisable, at
TEXTRON's discretion, and may, if TEXTRON deems it reasonable, postpone or
adjourn any sale of the Collateral by an announcement at the time and place of
sale or of such postponed or adjourned sale without giving a new notice of sale.
Borrower agrees that TEXTRON has no obligation to preserve rights to the
Collateral or xxxxxxxx any Collateral for the benefit of any Person. TEXTRON is
hereby granted a license or other right to use, without charge, Borrower's
Trademarks, Copyrights, Licenses and Patents or any similar property, in
completing production, advertising or selling any Collateral and Borrower's
rights under all licenses and all franchise agreements shall inure to TEXTRON's
benefit. Any requirement of reasonable notice shall be met if such notice is
mailed postage prepaid to Borrower at its address set forth in the heading to
this Agreement at least five (5) days before sale or other disposition. The
proceeds of sale shall be applied, first, to all attorneys fees and other
expenses of sale, and second, to the Obligations in such order as TEXTRON shall
elect, in its sole discretion. TEXTRON shall return any excess to Borrower and
Borrower shall remain liable for any deficiency to the fullest extent permitted
by law. TEXTRON shall also have the right to reduce the Total Facility amount,
the Revolving Loans Borrowing Base, the Floorplan Loans Borrowing Base, or any
portion of either borrowing base, or the advance rates or to modify the terms
and conditions upon which TEXTRON is willing to consider making advances under
the Total Facility or to take additional reserves in the Revolving Loans
Borrowing Base or the Floorplan Loans Borrowing Base for any reason.
7.3 Standards for Determining Commercial Reasonableness. Borrower and TEXTRON
agree that the following conduct by TEXTRON with respect to any disposition of
Collateral shall conclusively be deemed commercially reasonable (but other
conduct by TEXTRON, including, but not limited to, TEXTRON's use in its sole
discretion of other or different times, places and manners of noticing and
conducting any disposition of Collateral shall not be deemed unreasonable): Any
public or private disposition: (i) as to which on no later than the fifth
calendar day prior thereto written notice thereof is mailed or personally
delivered to Borrower and, with respect to any public disposition, on no later
than the fifth calendar day prior thereto notice thereof describing in general
non-specific terms, the Collateral to be disposed of is published once in a
newspaper of general circulation in the county where the sale is to be
conducted; (provided that no notice of any public or private disposition need be
given to the Borrower if the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market); (ii)
which commences at any time between 8:00 a.m. and 5:00 p.m. Without limiting the
generality of the foregoing, Borrower expressly agrees that, with respect to any
disposition of accounts, instruments and general intangibles, it shall be
commercially reasonable for TEXTRON to direct any prospective purchaser thereof
to ascertain directly from Borrower any and all information concerning the same,
including, but not limited to, the terms of payment, aging and
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Loan and Security Agreement page 12 of 24
(TEXTRON FINANCIAL LOGO)
delinquency, if any, the financial condition of any obligor or account debtor
thereon or guarantor thereof, and any collateral therefor.
8. EXPENSES AND INDEMNITIES.
8.1 Expenses. Borrower covenants that, so long as any Obligation remains
outstanding and this Agreement remains in effect, it shall promptly reimburse
TEXTRON for all costs, fees and expenses incurred by TEXTRON in connection with
the negotiation, preparation, execution, delivery, administration and
enforcement of each of the Loan Documents, including, but not limited to, the
attorneys' and paralegals' fees of in-house and outside counsel, expert witness
fees, lien, title search and insurance fees, appraisal fees, all charges and
expenses incurred in connection with any and all environmental reports and
environmental remediation activities, and all other costs, expenses, taxes and
filing or recording fees payable in connection with the transactions
contemplated by this Agreement, including without limitation all such costs,
fees and expenses as TEXTRON shall incur or for which TEXTRON shall become
obligated in connection with (i) any inspection or verification of the
Collateral, (ii) any proceeding relating to the Loan Documents or the
Collateral, (iii) actions taken with respect to the Collateral and TEXTRON's
security interest therein, including, without limitation, the defense or
prosecution of any action involving TEXTRON and Borrower or any third party,
(iv) enforcement of any of TEXTRON's rights and remedies with respect to the
Obligations or Collateral, and (v) consultation with TEXTRON's attorneys and
participation in any workout, bankruptcy or other insolvency or other proceeding
involving any Loan Party or any Affiliate, whether or not suit is filed.
Borrower shall also pay all TEXTRON charges in connection with bank wire
transfers, forwarding of loan proceeds, deposits of checks and other items of
payment, returned checks, establishment and maintenance of lockboxes and other
Blocked Accounts, and all other bank and administrative matters, in accordance
with TEXTRON's schedule of bank and administrative fees and charges in effect
from time to time.
8.2 Environmental Matters.
8.2.1 Definitions. The following definitions apply to the provisions of this
Section 8.2: (a) the term "APPLICABLE LAW" shall include, but shall not be
limited to, all local, state and/or federal laws, rules, regulations or
ordinances, whether currently in existence or hereafter enacted, which govern,
to the extent applicable to the Property or to Borrower, (i) the existence,
cleanup and/or remedy of contamination on real property; (ii) the protection of
the environment from soil, air or water pollution, or from spilled, deposited or
otherwise emplaced contamination; (iii) the emission or discharge of hazardous
substances into the environment; (iv) the control of hazardous wastes; or (v)
the use, generation, transport, treatment, removal or recovery of Hazardous
Substances; (b) the term "HAZARDOUS SUBSTANCE" shall mean (i) any oil, flammable
substance, explosives, radioactive materials, hazardous wastes or substances,
toxic wastes or substances or any other wastes, materials or pollutants which
either pose a hazard to the Property or to persons on or about the Property or
cause the Property to be in violation of any Applicable Law; (ii) asbestos in
any form which is or could become friable, urea formaldehyde foam insulation,
transformers or other equipment which contain dielectric fluid containing levels
of polychlorinated biphenyls, or radon gas; (iii) any chemical, material or
substance defined as or included in the definition of "hazardous substances,"
"waste," "hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," or "toxic substances" or words of similar import
under any Applicable Law, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 USC
Sections 9601 et seq.; the Resource Conservation and Recovery Act ("RCRA"), 42
USC Sections 6901 et seq.; the Hazardous Materials Transportation Act, 49 USC
Sections 1801 et seq.; the Federal Water Pollution Control Act, 33 USC Sections
1251 et seq.; (iv) any other chemical, material or substance, exposure to which
is prohibited, limited or regulated by any governmental authority which may or
could pose a hazard to the health or safety of the occupants of the Property or
the owners and/or occupants of property adjacent to or surrounding the Property,
or any other person coming upon the Property or adjacent property; and (v) any
other chemical, materials or substance which may or could pose a hazard to the
environment; and (c) the term "PROPERTY" shall mean all real property, wherever
located, in which Borrower or any Affiliate of Borrower has any right, title or
interest, whether now existing or hereafter arising, as owner..
8.2.2 Covenants and Representations.
(a) Borrower represents and warrants that there have not been during the period
of Borrower's possession of any interest in the Property and, to the best of its
knowledge after reasonable inquiry, there have not been at any other times, any
activities on the Property involving, directly or indirectly, the use,
generation, treatment, storage or disposal of any Hazardous Substances except in
compliance with Applicable Law (i) under, on or in the land included in the
Property, whether contained in soil, tanks, sumps, ponds, lagoons, barrels, cans
or other containments, structures or equipment, (ii) incorporated in the
buildings, structures or improvements included in the Property, including any
building material containing asbestos, or (iii) used in connection with any
operations on or in the Property.
(b) Without limiting the generality of the foregoing and to the extent not
included within the scope of this Section 8.2.2, Borrower represents and
warrants that it is in full compliance with Applicable Law and has received no
notice from any person or any governmental agency or other entity of any
violation by Borrower or its Affiliates of any Applicable Law.
(c) Borrower shall be solely responsible for and agrees to indemnify TEXTRON,
protect and defend TEXTRON with counsel reasonably acceptable to TEXTRON, and
hold TEXTRON harmless from and against any claims, actions, administrative
proceedings, judgments, damages, punitive damages, penalties, fines, costs,
liabilities (including sums paid in settlements of claims), interest or losses,
attorneys' fees (including any fees and expenses incurred in enforcing this
indemnity), consultant fees, expert fees, and other out-of-pocket costs or
expenses actually incurred by TEXTRON (collectively, the "ENVIRONMENTAL COSTS"),
that may, at any time or from time to time, arise directly or indirectly from or
in connection with: (i) the presence, suspected presence, release or suspected
release of any Hazardous Substance whether into the air, soil, surface water or
groundwater of or at the Property, or any other violation of Applicable Law, or
(ii) any breach of the foregoing representations and covenants; except to the
extent any of the foregoing result from the actions of TEXTRON, its employees,
agents and representatives. All Environmental Costs incurred or advanced by
TEXTRON shall be deemed to be made by TEXTRON in good faith and shall constitute
Obligations hereunder.
9. MISCELLANEOUS.
9.1 Examination of Records; Financial Reporting.
(a) Examinations. TEXTRON shall at all reasonable times have full access to and
the right to examine, audit, make abstracts and copies from and inspect
Borrower's records, files, books of account and all other documents, instruments
and agreements relating to the Collateral and the right to check, test and
appraise the Collateral. Borrower shall deliver to TEXTRON any instrument
necessary for TEXTRON to obtain records from any service bureau maintaining
records for Borrower. All instruments and certificates prepared by Borrower
showing the value of
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Loan and Security Agreement page 13 of 24
(TEXTRON FINANCIAL LOGO)
any of the Collateral shall be accompanied, upon TEXTRON's request, by copies of
related purchase orders and invoices. TEXTRON may, at any time after the
occurrence of an Event of Default, remove from Borrower's premises Borrower's
books and records (or copies thereof) or require Borrower to deliver such books
and records or copies to TEXTRON. If originals are removed, TEXTRON shall permit
Borrower to make copies prior to such removal. TEXTRON may, without expense to
TEXTRON, use Borrower's personnel, supplies and premises as may be reasonably
necessary for examining the Collateral or for maintaining or enforcing TEXTRON's
security interest.
(b) Reporting Requirements. Borrower shall furnish TEXTRON, upon request, such
information and statements as TEXTRON shall request from time to time regarding
Borrower's business affairs, financial condition and the results of its
operations. Without limiting the generality of the foregoing, Borrower shall
provide TEXTRON with:
(i) on a weekly basis, TEXTRON's standard form collateral and loan
report, together with accounts receivable certifications and notice of
assignment documents on a daily basis or as described in the Schedule, together
with cash receipt and revenue reports;
(ii) and upon TEXTRON's request, copies of sales journals, cash receipt
journals, and deposit slips, copies of service invoices, customer statements and
credit memoranda issued, remittance advices and reports, evidence of billing and
copies of shipping and delivery documents;
(iii) within five (5) days of the date due (or earlier if available)
all cost reports (interim and annual) from all Governmental Authorities or other
Persons, as applicable;
(iv) within ten (10) days after the end of each month, (1) monthly
agings (aged from service date) and reconciliations of Receivables (with
listings of concentrated accounts), (2) monthly agings (aged from invoice date)
of accounts payable, with outstanding and held check registers, and (3) monthly
perpetual inventory reports for the Inventory valued on a first in, first out
basis at the lower of cost or market (in accordance with GAAP);
(v) within thirty (30) days after the end of each month, unaudited
financial statements with respect to the prior month prepared on a basis
consistent with such statements prepared in prior months and otherwise in
accordance with GAAP;
(vi) within thirty (30) days after the end of each quarter, unaudited
financial statement with respect to the prior quarter prepared on a basis
consistent with such statements prepared in prior quarters and otherwise in
accordance with GAAP;
(vii) audited annual consolidated and consolidating financial
statements, prepared in accordance with GAAP applied on a basis consistent with
the most recent Prepared Financials provided to TEXTRON by Borrower, including
balance sheets, income and cash flow statements, accompanied by the unqualified
report thereon of independent certified public accountants acceptable to
TEXTRON, together with the management letter, in the form provided to the
auditors and shareholders of Borrower, as soon as available, and in any event,
within ninety (90) days after the end of each of Borrower's fiscal years;
(viii) within thirty (30) days prior to the end of each fiscal year of
Borrower annual operating budgets (including income statement, balance sheets
and cash flow statements, by month) for the upcoming fiscal year of Borrower;
and
(ix) such certificates relating to the foregoing as TEXTRON may
request, including, without limitation, a quarterly certificate from the
president and the chief financial officer of Borrower ("Compliance Certificate")
showing Borrower's compliance with each of the financial covenants set forth in
this Agreement, and stating whether any Event of Default has occurred or event
which, with giving of notice or the passage of time, or both, would constitute
an Event of Default, and if so, the steps being taken to prevent or cure such
Event of Default, and such other certificates relating to the reporting
requirements set forth in this Section 9.1 as TEXTRON shall request.. All
reports or financial statements submitted by Borrower shall be in reasonable
detail and shall be certified by the principal financial officer of Borrower as
being complete and correct.
(c) Confidentiality. All confidential information provided by Borrower or by any
Loan Party to TEXTRON shall be kept confidential and shall only be used by
TEXTRON and/or its counsel in connection herewith.
(d) Guarantor's Financial Statements and Tax Returns. If any of the Loans are
guaranteed, Borrower shall cause each of the Guarantors to deliver to TEXTRON
such Guarantor's annual financial statement (in form acceptable to TEXTRON) and
a copy of such Guarantor's federal income tax return with respect to the
corresponding year, in each case on the date when such tax return is due or, if
earlier, on the date when available.
9.2 Term; Termination.
(a) Term. The term of this Agreement shall be as set forth in the Schedule (the
"TERM"), unless earlier terminated as provided herein.
(b) Prior Notice. Each party shall have the right to terminate this Agreement at
the end of the Term by giving the other party written notice not less than sixty
(60) days prior to the effective date of such termination, provided, however,
that TEXTRON may terminate the Floorplan Credit Line at any time, with or
without notice to Borrower, as set forth in Section 2.4 hereof.
(c) Payment in Full. Upon the effective date of termination, the Obligations
shall become immediately due and payable in full in cash.
(d) Early Termination; Termination Fee. In addition to the procedure set forth
in Section 9.2(b), Borrower may terminate this Agreement at any time but only
upon ninety (90) days' prior written notice and prepayment of the Obligations.
Upon any such early termination by Borrower (or any voluntary prepayment of any
Term Loan) or any termination of this Agreement by TEXTRON upon the occurrence
of an Event of Default, then, and in any such event, Borrower shall pay to
TEXTRON upon the effective date of such termination a fee (the "TERMINATION
FEE") in an amount equal to the amount shown on the Schedule.
9.3 Recourse to Security; Certain Waivers. All Obligations shall be payable by
Borrower as provided for herein and, in full, at the termination of this
Agreement; recourse to security shall not be required at any time. Borrower
waives presentment and protest of any instrument and notice thereof, notice of
default and, to the extent permitted by applicable law, all other notices to
which Borrower might otherwise be entitled.
9.4 No Waiver by TEXTRON. Neither TEXTRON's failure to exercise any right,
remedy or option under this Agreement, any supplement, the Loan Documents or
other agreement between TEXTRON and Borrower nor any delay by TEXTRON in
exercising the same shall operate as a waiver. An Event of Default shall exist
or continue or be continuing until such Event of Default is waived in writing by
TEXTRON as herein provided. No waiver by TEXTRON shall be effective unless in
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Loan and Security Agreement page 14 of 24
(TEXTRON FINANCIAL LOGO)
writing and then only to the extent stated. No waiver by TEXTRON shall affect
its right to require strict performance of this Agreement. TEXTRON's rights and
remedies shall be cumulative and not exclusive.
9.5 Binding on Successor and Assigns. All terms, conditions, promises,
covenants, provisions and warranties shall inure to the benefit of and bind
TEXTRON's and Borrower's respective representatives, successors and assigns.
9.6 Severability. If any provision of this Agreement shall be prohibited or
invalid under applicable law, it shall be ineffective only to such extent,
without invalidating the remainder of this Agreement.
9.7 Amendments; Assignments. This Agreement may not be modified, altered or
amended, except by an agreement in writing signed by Borrower and TEXTRON.
Borrower may not sell, assign or transfer any interest in this Agreement or any
other Loan Document, or any portion thereof, including, without limitation, any
of Borrower's rights, title, interests, remedies, powers and duties hereunder or
thereunder. Borrower hereby consents to TEXTRON's participation, sale,
assignment, transfer or other disposition, at any time or times hereafter, of
this Agreement and any of the other Loan Documents, or of any portion hereof or
thereof, including, without limitation, TEXTRON's rights, title, interests,
remedies, powers and duties hereunder or thereunder. In connection therewith,
TEXTRON may disclose all documents and information which TEXTRON now or
hereafter may have relating to Borrower or Borrower's business. To the extent
that TEXTRON assigns its rights and obligations hereunder to a third party,
TEXTRON shall thereafter be released from such assigned obligations to Borrower
and such assignment shall effect a novation between Borrower and such third
party.
9.8 Integration. This Agreement, together with the Schedule (which is a part
hereof) and the other Loan Documents, reflect the entire understanding of the
parties with respect to the transactions contemplated hereby.
9.9 Survival. All of the representations and warranties of Borrower contained in
this Agreement shall survive the execution, delivery and acceptance of this
Agreement by the parties. No termination of this Agreement or of any guaranty of
the Obligations shall affect or impair the powers, obligations, duties, rights,
representations, warranties or liabilities of the parties hereto and all shall
survive any such termination.
9.10 Evidence of Obligations. Each Obligation may, in TEXTRON's Permitted
Discretion, be evidenced by notes or other instruments issued or made by
Borrower to TEXTRON. If not so evidenced, such Obligation shall be evidenced
solely by entries upon TEXTRON's books and records.
9.11 Loan Requests. Each oral or written request for a loan by any Person who
purports to be any employee, officer or authorized agent of Borrower shall be
made to TEXTRON on or prior to 11:00 a.m., Pennsylvania time, on the Business
Day on which the proceeds thereof are requested to be paid to Borrower and shall
be conclusively presumed to be made by a Person authorized by Borrower to do so
and the crediting of a loan to Borrower's operating account shall conclusively
establish Borrower's obligation to repay such loan. Unless and until Borrower
otherwise directs TEXTRON in writing, all loans shall be wired to Borrower's
operating account set forth on the Schedule.
9.12 Notices. Any written notice, consent or other communication provided for in
this Agreement shall be delivered personally (effective upon delivery), via
facsimile (effective upon confirmation of transmission), via overnight courier
(effective the next business day after dispatch if instructed to deliver on next
business day) or via U.S. Mail (effective 3 days after ailing, postage prepaid,
first class) to each party at its address(es) and/or facsimile number(s) set
forth below its signature, or to such other address as either party shall
specify to the other in writing from time to time.
9.13 Brokerage Fees. Borrower represents and warrants to TEXTRON that, with
respect to the financing transaction herein contemplated, no Person is entitled
to any brokerage fee or other commission and Borrower agrees to indemnify and
hold TEXTRON harmless against any and all such claims.
9.14 Disclosure. No representation or warranty made by Borrower in this
Agreement, or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to Borrower
or which reasonably should be known to Borrower which Borrower has not disclosed
to TEXTRON in writing with respect to the transactions contemplated by this
Agreement which materially and adversely affects the business, assets,
operations, prospects or condition (financial or otherwise), of Borrower.
9.15 Publicity. TEXTRON is hereby authorized to issue appropriate press releases
and to cause a tombstone to be published announcing the consummation of this
transaction and the aggregate amount thereof.
9.16 Captions. The Section titles contained in this Agreement are without
substantive meaning and are not part of this Agreement.
9.17 Injunctive Relief. Borrower recognizes that, in the event Borrower fails to
perform, observe or discharge any of its Obligations under this Agreement, any
remedy at law may prove to be inadequate relief to TEXTRON. Therefore, TEXTRON,
if it so requests, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
9.18 Counterparts; Facsimile Execution. This Agreement may be executed in one or
more counterparts, each of which taken together shall constitute one and the
same instrument, admissible into evidence. Delivery of an executed counterpart
of this Agreement by telefacsimile shall be equally as effective as delivery of
a manually executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile shall also deliver a
manually executed counterpart of this Agreement, but the failure to deliver a
manually executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
9.19 Construction. The parties acknowledge that each party and its counsel have
reviewed this Agreement and that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any amendments or exhibits
hereto.
9.20 Time of Essence. Time is of the essence for the performance by Borrower of
the Obligations set forth in this Agreement.
9.21 Limitation of Actions. Borrower agrees that any claim or cause of action by
Borrower against TEXTRON, or any of TEXTRON's directors, officers, employees,
agents, accountants or attorneys, based upon, arising from, or relating to this
Agreement, or any other present or future agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, whether or not relating hereto or thereto,
occurred, done, omitted or suffered to be done by TEXTRON, or by TEXTRON's
directors, officers, employees, agents, accountants or attorneys, whether
sounding in contract or in tort or otherwise, shall be barred unless asserted by
Borrower by the commencement of an action or proceeding
--------------------------------------------------------------------------------
Loan and Security Agreement page 15 of 24
(TEXTRON FINANCIAL LOGO)
in a court of competent jurisdiction by the filing of a complaint within one
year after the first act, occurrence or omission upon which such claim or cause
of action, or any part thereof, is based and service of a summons and complaint
on an officer of TEXTRON or any other person authorized to accept service of
process on behalf of TEXTRON, within 30 days thereafter. Borrower agrees that
such one-year period of time is a reasonable and sufficient time for Borrower to
investigate and act upon any such claim or cause of action. The one-year period
provided herein shall not be waived, tolled, or extended except by a specific
written agreement of TEXTRON. This provision shall survive any termination of
this Loan Agreement or any other agreement.
9.22 Liability. Neither TEXTRON nor any TEXTRON Affiliate shall be liable for
any indirect, special, incidental or consequential damages in connection with
any breach of contract, tort or other wrong relating to this Agreement or the
Obligations or the establishment, administration or collection thereof
(including without limitation damages for loss of profits, business
interruption, or the like), whether such damages are foreseeable or
unforeseeable, even if TEXTRON has been advised of the possibility of such
damages. Neither TEXTRON, nor any TEXTRON Affiliate shall be liable for any
claims, demands, losses or damages, of any kind whatsoever, made, claimed,
incurred or suffered by the Borrower through the ordinary negligence of TEXTRON,
or any TEXTRON Affiliate. "TEXTRON AFFILIATE" shall mean TEXTRON's directors,
officers, employees, agents, attorneys or other person or entity affiliated with
or representing TEXTRON.
9.23 Notice of Breach by TEXTRON. Borrower agrees to give TEXTRON written notice
of (i) any action or inaction by TEXTRON or any attorney of TEXTRON in
connection with any Loan Documents that may be actionable against TEXTRON or any
attorney of TEXTRON or (ii) any defense to the payment of the Obligations for
any reason, including, but not limited to, commission of a tort or violation of
any contractual duty or duty implied by law. Borrower agrees that unless such
notice is fully given as promptly as possible (and in any event within thirty
(30) days) after Borrower has knowledge, or with the exercise of reasonable
diligence should have had knowledge, of any such action, inaction or defense,
Borrower shall not assert, and Borrower shall be deemed to have waived, any
claim or defense arising therefrom.
9.24 Withholding and Other Tax Liabilities: TEXTRON shall have the right to
refuse to make any advances from time to time unless Borrower shall, at
TEXTRON's request, have given to TEXTRON evidence, reasonably satisfactory to
TEXTRON, that Borrower has properly deposited or paid, as required by law, all
withholding taxes and all federal, state, city, county or other taxes due up to
and including the date of the advance. Until all of Borrower's liabilities and
obligations to TEXTRON have been paid in full (and notwithstanding any
termination or expiration of this Agreement), TEXTRON shall be entitled to
continue to hold any and all of the Collateral until Borrower has given to
TEXTRON evidence, reasonably satisfactory to TEXTRON, that Borrower has properly
deposited or paid, as required by law, all federal withholding taxes due up to
and including the date of such expiration or termination. Copies of validated
deposit slips showing payment shall likewise constitute satisfactory evidence
for such purpose. In the event that any lien, assessment or tax liability
against Borrower shall arise in favor of any taxing authority, whether or not
notice thereof shall be filed or recorded as may be required by law, TEXTRON
shall have the right (but shall not be obligated, nor shall TEXTRON hereby
assume the duty) upon reasonable prior notice to Borrower to pay any such lien,
assessment or tax liability by virtue of which such charge shall have arisen;
provided, however, that TEXTRON shall not pay any such tax, assessment or lien
if the amount, applicability or validity thereof is being contested in good
faith and by appropriate proceedings by Borrower and further provided that
Borrower's title to and its right to use, the Collateral are not materially
adversely affected and TEXTRON's lien and priority in the Collateral are not
affected, altered or impaired thereby. In order to pay any such lien, assessment
or tax liability, TEXTRON shall not be obliged to wait until said lien,
assessment or tax liability is filed before taking such action permitted hereby.
Any sum or sums which TEXTRON shall have paid for the discharge of any such lien
shall constitute an Obligation and shall be added to the Revolving Loans and
shall be paid by Borrower to TEXTRON with interest thereon, upon demand, and
TEXTRON shall be subrogated to all rights of such taxing authority against
Borrower. TEXTRON may establish reserves against the Revolving Loans Borrowing
Base for any amounts paid by TEXTRON pursuant to this paragraph or for any
amounts being contested in good faith under this paragraph.
9.25 Power of Attorney. Borrower appoints TEXTRON and its designees as
Borrower's attorney, with the power to endorse Borrower's name on any checks,
notes, acceptances, money orders or other forms of payment or security that come
into TEXTRON's possession; after the occurrence of any Event of Default, to sign
Borrower's name on any invoice or xxxx of lading relating to any Receivable, on
drafts against customers, on assignments of Receivables, on notices of
assignment, financing statements and other public records, on verifications of
accounts and on notices to customers or account debtors; to send requests for
verification of Receivables to customers or account debtors; after the
occurrence of any Event of Default, to notify the post office authorities to
change the address for delivery of Borrower's mail to an address designated by
TEXTRON and to open and dispose of all mail addressed to Borrower; and to do all
other things TEXTRON deems necessary or desirable to carry out the terms of this
Agreement. Borrower hereby ratifies and approves all acts of such attorney.
Neither TEXTRON nor any of its designees shall be liable for any acts or
omissions nor for any error of judgment or mistake of fact or law while acting
as Borrower's attorney. This power, being coupled with an interest, is
irrevocable until the Obligations have been fully satisfied and TEXTRON's
obligation to provide loans hereunder shall have terminated.
9.26 GOVERNING LAW; WAIVERS. THIS AGREEMENT, INCLUDING WITHOUT LIMITATION
ENFORCEMENT OF THE OBLIGATIONS, SHALL BE INTERPRETED IN ACCORDANCE WITH THE
INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF THE STATE OF
RHODE ISLAND
GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. BORROWER HEREBY
CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN THE STATE OF
RHODE ISLAND OR, AT THE SOLE OPTION OF TEXTRON, IN ANY OTHER
COURT IN WHICH TEXTRON SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. BORROWER WAIVES
ANY OBJECTION OF FORUM NON CONVENIENS AND VENUE. BORROWER WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY MESSENGER, CERTIFIED MAIL OR REGISTERED MAIL DIRECTED TO
BORROWER AT THE ADDRESS SET FORTH BELOW ITS SIGNATURE HERETO AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3)
DAYS AFTER THE SAME SHALL HAVE BEEN POSTED TO BORROWER'S ADDRESS.. BORROWER
FURTHER WAIVES ANY RIGHT IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK ANY
JUDGMENT ENTERED AGAINST IT.
--------------------------------------------------------------------------------
Loan and Security Agreement page 16 of 24
(TEXTRON FINANCIAL LOGO)
9.27 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. TEXTRON AND BORROWER EACH HEREBY
WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS AGREEMENT; (II) ANY OTHER
PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN TEXTRON AND BORROWER; OR (III)
ANY CONDUCT, ACTS OR OMISSIONS OF TEXTRON OR BORROWER OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
TEXTRON OR BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.
9.28 LIEN TERMINATION. In recognition of TEXTRON's right to have all of its
attorneys' fees and other expenses incurred in connection with this Agreement
secured by the Collateral, notwithstanding the payment in full of the
Obligations, TEXTRON shall not be required to execute or record any terminations
or satisfactions of any of its liens on the Collateral unless and until Borrower
and all Guarantors have executed and delivered to TEXTRON general releases of
all claims, in form and substance satisfactory to TEXTRON in its sole
discretion.
--------------------------------------------------------------------------------
Loan and Security Agreement page 17 of 24
(TEXTRON FINANCIAL LOGO)
EXECUTED UNDER SEAL BY: I-SECTOR CORPORATION
(CORPORATE SEAL)
------------------------------------------
Fed Tax I.D. No.: 76-50515249
------------------------------------------
By:
------------------------------------------
Title:
------------------------------------------
BORROWER'S ADDRESS FOR NOTICES:
0000 Xxxxxxxxx Xxxxxxx
------------------------------------------
Xxxxxxx, XX 00000
------------------------------------------
Attn: Xxxxx Xxxx
------------------------------------------
Fax No.:
STATE OF TEXAS
----------------------
COUNTY OF XXXXXX
----------------------
The foregoing instrument was acknowledged before me this ________ day of
September, 204, by ____________________________________ of I-Sector Corporation,
Inc. a corporation duly organized under the State of Delaware, on behalf of the
corporation.
Signature:
-------------------------------------
Title or Rank:
-------------------------------------
Serial No. (if any):
-------------------------------------
--------------------------------------------------------------------------------
Loan and Security Agreement page 18 of 24
(TEXTRON FINANCIAL LOGO)
EXECUTED UNDER SEAL BY: INTERNETWORK EXPERTS, INC.
(CORPORATE SEAL)
------------------------------------------
Fed Tax I.D. No.: 00-0000000
------------------------------------------
By:
------------------------------------------
Title:
------------------------------------------
BORROWER'S ADDRESS FOR NOTICES:
0000 Xxxxxxxxx Xxxxxxx
------------------------------------------
Xxxxxxx, XX 00000
------------------------------------------
Attn: Xxxxx Xxxx
------------------------------------------
Fax No.:
------------------------------------------
STATE OF TEXAS
----------------------
COUNTY OF XXXXXX
----------------------
The foregoing instrument was acknowledged before me this ________ day of
September, 204, by ____________________________________ of Internetwork Experts,
Inc. a corporation duly organized under the State of Delaware, on behalf of the
corporation.
Signature:
-------------------------------------
Title or Rank:
-------------------------------------
Serial No. (if any):
-------------------------------------
--------------------------------------------------------------------------------
Loan and Security Agreement page 19 of 24
(TEXTRON FINANCIAL LOGO)
EXECUTED UNDER SEAL BY: VALERENT, INC.
(CORPORATE SEAL)
------------------------------------------
Fed Tax I.D. No.: 00-0000000
------------------------------------------
By:
------------------------------------------
Title:
------------------------------------------
BORROWER'S ADDRESS FOR NOTICES:
0000 Xxxxxxxxx Xxxxxxx
------------------------------------------
Xxxxxxx, XX 00000
------------------------------------------
Attn: Xxxxx Xxxx
------------------------------------------
Fax No.:
------------------------------------------
STATE OF TEXAS
----------------------
COUNTY OF XXXXXX
----------------------
The foregoing instrument was acknowledged before me this ________ day of
September, 204, by ____________________________________ of Valerent, Inc. a
corporation duly organized under the State of Delaware, on behalf of the
corporation.
Signature:
-------------------------------------
Title or Rank:
-------------------------------------
Serial No. (if any):
-------------------------------------
--------------------------------------------------------------------------------
Loan and Security Agreement page 20 of 24
(TEXTRON FINANCIAL LOGO)
EXECUTED UNDER SEAL BY: ISECOLDSUB, INC.
(CORPORATE SEAL)
------------------------------------------
Fed Tax I.D. No.: 00-0000000
------------------------------------------
By:
------------------------------------------
Title:
------------------------------------------
BORROWER'S ADDRESS FOR NOTICES:
0000 Xxxxxxxxx Xxxxxxx
------------------------------------------
Xxxxxxx, XX 00000
------------------------------------------
Attn: Xxxxx Xxxx
------------------------------------------
Fax No.:
------------------------------------------
STATE OF TEXAS
----------------------
COUNTY OF XXXXXX
----------------------
The foregoing instrument was acknowledged before me this ________ day of
September, 204, by ____________________________________ of ISECOLDSUB, Inc. a
corporation duly organized under the State of Delaware, on behalf of the
corporation.
Signature:
-------------------------------------
Title or Rank:
-------------------------------------
Serial No. (if any):
-------------------------------------
--------------------------------------------------------------------------------
Loan and Security Agreement page 21 of 24
(TEXTRON FINANCIAL LOGO)
EXECUTED UNDER SEAL BY: STRATASOFT, INC.
(CORPORATE SEAL)
------------------------------------------
Fed Tax I.D. No.: 00-0000000
------------------------------------------
By:
------------------------------------------
Title:
------------------------------------------
BORROWER'S ADDRESS FOR NOTICES:
0000 Xxxxxxxxx Xxxxxxx
------------------------------------------
Xxxxxxx, XX 00000
------------------------------------------
Attn: Xxxxx Xxxx
------------------------------------------
Fax No.:
------------------------------------------
STATE OF TEXAS
----------------------
COUNTY OF XXXXXX
----------------------
The foregoing instrument was acknowledged before me this ________ day of
September, 204, by ____________________________________ of Stratasoft, Inc. a
corporation duly organized under the State of Texas, on behalf of the
corporation.
Signature:
-------------------------------------
Title or Rank:
-------------------------------------
Serial No. (if any):
-------------------------------------
--------------------------------------------------------------------------------
Loan and Security Agreement page 22 of 24
(TEXTRON FINANCIAL LOGO)
TEXTRON FINANCIAL CORPORATION
By: (SEAL)
--------------------------------------------
Title:
--------------------------------------------
TEXTRON'S address for notices: With a copy to:
TEXTRON FINANCIAL CORPORATION TEXTRON FINANCIAL CORPORATION
0000 XXXXX XXXX XXXXX 000 0000 XXXXX XXXXX XXXXXXX, XXXXX 000
XXXXX XXXXX XX 00000 XXXXXXXXXX, XX 00000
ATTN: VP PORTFOLIO MANAGER ATTN: XXX XXXXXX
FACSIMILE: (000) 000-0000 FACSIMILE: (000) 000-0000
--------------------------------------------------------------------------------
Loan and Security Agreement page 23 of 24
(TEXTRON FINANCIAL LOGO)
LOAN AND SECURITY AGREEMENT
BORROWER:
DATE: OCTOBER 5, 2004
EXHIBIT A
FLOORPLAN LOAN TERMS
MANUFACTURER OR VENDOR INVOICE DUE DATE TERMS
Cisco Systems, Inc Net 60 days from Invoice Date
All other Manufacturers or Vendors Various terms as agreed upon between
Textron, Borrower and Manufacturer or
Vendors
--------------------------------------------------------------------------------
Loan and Security Agreement page 24 of 24
(TEXTRON FINANCIAL LOGO)
