AMERICAN COMMERCIAL FINANCE CORPORATION
COMMERCIAL REVOLVING LOAN, DEMAND LOAN AND SECURITY AGREEMENT
WITH
NETPLEX SYSTEMS, INC.
DATED: APRIL , 2001
COMMERCIAL REVOLVING LOAN, DEMAND LOAN AND SECURITY AGREEMENT
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This Commercial Revolving Loan, Demand Loan and Security Agreement dated as
of April , 2001, by and between NETPLEX SYSTEMS, INC., a Virginia
corporation with its chief executive office and principal place of business at
0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000 ("Borrower"), and
AMERICAN COMMERCIAL FINANCE CORPORATION, a Delaware corporation with an office
at 000 Xxxxx Xxxx Xxxxxx, Xxxx Xxxxxxxx, Xxxxxxxxxxx 00000 ("Lender").
PREAMBLE
WHEREAS, Borrower has requested Lender to extend to Borrower revolving
loans in the maximum aggregate principal amount of up to Three Million
($3,000,000.00) Dollars (the "Revolving Loan"); and
WHEREAS, Lender has agreed to extend the Loans to Borrower on the
conditions set forth below.
NOW, THEREFORE, for the mutual considerations contained in this Agreement,
Borrower and Lender agree as follows:
ARTICLE I
Definitions
Section I.1 Accounting Terms; Etc. Unless otherwise defined, all
accounting terms shall be construed, and all computations or classifications of
assets and liabilities and of income and expenses shall be made or determined in
accordance with generally accepted accounting principles consistently applied.
As used herein, or in the Financing Agreements or in any certificate, document
or report delivered pursuant to this Agreement or any other Financing Agreement,
the following terms shall have the following meanings:
(a) "Account" and "Accounts" shall have the meanings assigned in Section
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7.1(a) hereof.
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(b) "Account Debtor" and "Account Debtors" shall mean the person or entity
or persons or entities obligated to Borrower upon the Accounts.
(c) "Agreement" shall mean this Commercial Revolving Loan , Demand Loan and
Security Agreement as the same may from time to time be amended, supplemented or
otherwise modified.
(d) "Arrangement" and "Arrangements" shall have the meaning assigned in
Section 3.1(n) hereof.
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(e) "Borrower" shall have the meaning assigned in the first paragraph
hereof.
(f) "Borrowing Base" shall mean an amount equal to the lesser of (i) Three
Million ($3,000,000.00) Dollars, or (ii) an amount equal to eighty (80%) percent
of Eligible Accounts.
(g) "Business Day" shall mean any day other than a day on which commercial
banks in Hartford, Connecticut are required or permitted by law to close.
(h) "Collateral" shall mean the property of Borrower described in Section
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7.1 hereof.
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(i) "Commitment Letter" shall mean that certain commitment letter issued by
Lender to Borrower and dated March 21, 2001.
(j) "Company" and "Companies" shall mean Borrower and any entities
affiliated with Borrower in connection with any Plan.
(k) "Defaulting Event" shall mean the occurrence of an Event of Default or
the occurrence of any condition or event which but for the giving of notice or
passage of time or both would constitute an Event of Default.
(l) "Dollar" and the sign "$" shall mean lawful money of the United States
of America.
(m) "Eligible Accounts" shall mean those Accounts of Borrower which arise
from the sale of Inventory or rendition of services in the ordinary course of
Borrower's business, are subject to Lender's perfected, first lien security
interest and no other lien or security interest (except for those liens or
security interests which are approved by Lender), and are evidenced by an
invoice or other documentary evidence satisfactory to Lender and are insured by
an entity, acceptable to Lender, on terms and conditions satisfactory to Lender,
and the policy for such credit insurance names Lender as co-insured. Further, no
Account shall be an Eligible Account if:
(i) it arises out of a sale or lease made by Borrower to any
affiliate, division, subsidiary or parent of Borrower or
to any person or entity controlled by or under common
control with an affiliate, division, subsidiary or parent
of Borrower;
(ii) it is due or unpaid more than sixty (60) days after its
original invoice date;
(iii) the Account Debtor is also Borrower's creditor or
supplier, has disputed liability or made any claim with
respect to any other Account due from such Account Debtor
to Borrower, or the Account is otherwise subject to any
defense, counterclaim or offset of or by the Account
Debtor (to the extent of such defense, counterclaim or
offset);
(iv) the Account Debtor is located outside the United States
and Canada (unless such account is supported by a letter
of credit or credit insurance acceptable in form, scope
and substance to Lender in Lender's sole discretion);
(v) the account debtor is located in New Jersey or Minnesota,
unless Borrower has (x) filed a Notice of Business
Activity Report in the appropriate office or agency for
such state in the then current year, or
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(y) received a Certificate of Authority to do business and
is in good standing in such state;
(vi) the sale giving rise to the Account is on a xxxx-and-hold,
guaranteed sale, sale-and-return, sale on approval,
consignment or other repurchase or return basis, or is
evidenced by a note or chattel paper;
(vii) Borrower has made an agreement with the Account Debtor for
any deduction from the invoice representing said Account,
except for discounts or allowances made in the ordinary
course of Borrower's business for prompt payment, which
discounts or allowances are reflected in the calculation
of the face value of each respective invoice related
thereto;
(viii) forty (40%) percent or more of the aggregate invoices for
an Account Debtor are due or unpaid for more than sixty
(60) days after their original invoice date;
(ix) when aggregated with all of the Accounts of that Account
Debtor, exceeds twenty (20%) percent of the then aggregate
of Eligible Accounts;
(x) it arises out of a sale made by Borrower to an Account
Debtor that is the United States Government or any agency
or subdivision thereof (collectively, the "Government"),
unless Borrower has complied in all respects with the
Federal Assignment of Claims Act of 1940 or has otherwise
satisfied Lender as to the assignability and
collectability of said Accounts;
(xi) the Account Debtor is located in the State of New Jersey
or in the State of Minnesota, unless Borrower has filed
and shall file all legally required Notice of Business
Activities Reports with the New Jersey Division of
Taxation or the Minnesota Department of Revenue;
(xii) it is an Account with respect to which the Account Debtor
is the United States of America or any department, agency
or office thereof, unless the Borrower assigns its right
to payment of such Account in accordance with the Federal
Assignment of Claims Act of 1940, as amended;
(xiii) it arises from a fixed fee contract, service (software
maintenance) contract or service charges; or
(xiv) the Lender in its sole discretion deems the Account to be
unacceptable for any reason.
If there is any dispute as to whether any Account is an Eligible Account,
the determination of Lender shall at all times control.
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(n) "Eligible Inventory" shall mean Borrower's Inventory to the extent
Lender, in its sole discretion, determines that such Inventory is eligible for
advance. In addition and without limiting Lender's discretion, Eligible
Inventory shall be net of reserves and returns, valued at the lower of cost or
market, and subject to Lender's perfected first security interest and to no
other lien or security interest. Further and without limiting Lender's
discretion, no Inventory shall be eligible if it is:
(i) deemed by Lender as slow moving or obsolete;
(ii) not otherwise in good condition and salable through normal
trade channels;
(iii) not salable in the ordinary course of Borrower's business;
or
(iv) not produced by Borrower in accordance with the Federal
Fair Labor Standards Act of 1938, as amended, and all
rules, regulations and orders promulgated thereunder.
(o) "Environmental Laws" shall mean any and all applicable foreign,
federal, state and local statutes, laws, regulations, rules, ordinances, orders,
guidances, policies or common law (whether now existing or hereafter enacted or
promulgated) pertaining to the environment, of any and all federal, state or
local governments and governmental and quasi-governmental agencies, bureaus,
subdivisions, commissions or departments which may now or hereafter have
jurisdiction over Borrower and all applicable judicial and administrative and
regulatory decrees, judgments and orders, including common law rulings and
determinations, relating to injury to, or the protection of, real or personal
property or human health or the environment, including, without limitation, all
requirements pertaining to reporting, licensing, permitting, investigation,
remediation and removal of emissions, discharges, releases or threatened
releases of Hazardous Materials, chemical substances, pollutants or contaminants
whether solid, liquid or gaseous in nature, into the environment or relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of such Hazardous Materials, chemical substances,
pollutants or contaminants.
Without limiting the generality of the foregoing, the term "Environmental
Laws" shall encompass each of the following statutes, and regulations
promulgated thereunder, and amendments and successors to such statutes and
regulations, as may be enacted and promulgated from time to time: Federal
Occupational Safety and Health Act ("OSHA"); the Clean Air Act ("CAA"); the
Toxic Substances Control Act ("TSCA"); the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("XXXX"); the Clean Water Act
("CWA"); the Resource Conservation and Recovery Act, as amended by the Hazardous
and Solid Waste Amendments of 1984 ("RCRA"); the Hazardous Materials
Transportation Act; and all applicable Environmental Laws of each state and
municipality in which Borrower conducts business or locates assets and all rules
and regulations thereunder and amendments thereto, and all similar state and
local laws, rules and regulations.
(p) "ERISA" shall mean the Employee Retirement Income Security Act of 1974
and all rules and regulations promulgated pursuant thereto, as the same may from
time to time be supplemented or amended.
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(q) "Event of Default" and "Events of Default" shall have the meanings
assigned in Section 8.1 hereof.
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(r) "Financing Agreement" or "Financing Agreements" shall mean this
Agreement, the Notes, the Guaranty, the Fidelity Guaranty and any and all other
instruments, agreements and documents executed in connection herewith or
therewith or related hereto or thereto, together with any amendments,
supplements or modifications hereto or thereto.
(s) "Fixed Assets" shall mean equipment and other assets of Borrower
which, by generally accepted accounting principles, must be treated as fixed
assets in financial statements of Borrower.
(t) "Further Loans" shall have the meaning assigned in Section 5.2 hereof.
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(u) "Guarantor" shall have the meaning assigned in Section 5.1(d) hereof.
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(v) "Guaranty" shall have the meaning assigned in Section 5.1(d) hereof.
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(w) "Hazardous Material" shall mean any chemical, compound, material,
mixture or substance: (i) the presence of which requires or may hereafter
require notification, investigation, monitoring or remediation under any
Environmental Law; (ii) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "toxic substance" or
"pollutant" or "contaminant" under any present or future applicable federal,
state or local law or under the rules and regulations adopted or promulgated
pursuant thereto, including, without limitation, the Environmental Laws; (iii)
which is toxic, explosive, corrosive, reactive, ignitable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of any foreign country, the United States, any state
of the United States, or any political subdivision thereof to the extent any of
the foregoing has or had jurisdiction over Borrower; (iv) which contains,
without limitation, gasoline, diesel fuel or other petroleum products, asbestos
or polychlorinated biphenyls ("PCBs"); or (v) any other chemical, material or
substance, exposure to, or disposal of, which is now or hereafter prohibited,
limited or regulated by any federal, state or local governmental body,
instrumentality or agency.
(x) "Indemnifiable Liabilities" shall have the meaning assigned in Section
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13.1(a) hereof.
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(y) "Indemnitee" and "Indemnitees" shall have the meanings assigned in
Section 13.1(a) hereof.
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(z) "Inventory" shall have the meaning assigned in Section 7.1(d) hereof.
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(aa) "Lender" shall have the meaning assigned in the first paragraph
hereof.
(bb) "Lessor's Agreement" shall have the meaning assigned in Section 5.1(f)
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hereof.
(cc) "Loan" means a Revolving Loan and "Loans" means the Revolving Loans.
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(dd) "Minimum Balance" shall have the meaning assigned in Section 3.1(a)
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hereof.
(ee) "Notes" means the Revolving Promissory Note and any other note(s)
executed by the Borrower in favor of the Lender.
(ff) "Notice of Borrowing" shall have the meaning assigned in Section 2.3
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hereof.
(gg) "Obligation" and "Obligations" shall mean and include all loans,
advances, interest, indebtedness, liabilities, obligations, fees, charges,
expenses, guarantees, covenants and duties at any time owing by Borrower to
Lender of every kind and description, whether or not evidenced by any note or
other instrument, whether or not for the payment of money, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, including, but not limited to, the Loans, the Service Charge,
the Termination Fee, and all other indebtedness, liabilities and obligations of
Borrower arising under this Agreement and the other Financing Agreements or
otherwise, and all costs, expenses, fees, charges incurred by Lender hereunder
or otherwise with respect to Borrower, including without limitation fees and
expenses of attorneys, paralegals and other professionals actually incurred in
connection with any of the foregoing, or in any way connected with, involving or
relating to the preservation, enforcement, protection or defense of, or
realization under this Agreement, any of the other Financing Agreements, any
related agreement, document or instrument, the Collateral and the rights and
remedies hereunder or thereunder, including without limitation, all costs,
expenses and fees incurred in inspecting or surveying mortgaged real estate, if
any, or conducting Environmental studies or tests, and all costs, expenses and
fees incurred in connection with any "workout" or default resolution
negotiations involving legal counsel or other professionals and further in
connection with any modification, renegotiation or restructuring of the
indebtedness evidenced by this Agreement and/or any of the other Financing
Agreements and/or obligations.
(hh) "Plan" means any employee benefit plan or other plan maintained by
Borrower or any entity affiliated with Borrower for employees covered by Title I
of ERISA.
(ii) "Premises" shall mean the real property located at 0000 Xxxxxx Xxxxxx
Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000.
(jj) "Prime Rate" shall mean the Prime Rate as published from time to time
in the "Money Rates" section of The Wall Street Journal or any successor
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publication, or in the event that such rate is no longer published in The Wall
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Street Journal, a comparable index or reference selected by Lender. The Prime
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Rate need not and may not necessarily be the lowest or most favorable rate.
(kk) "Receivables" shall have the meaning assigned in Section 7.1(a)
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hereof.
(ll) "Release" shall mean any release, emission, disposal, leaching or
migration into the environment (including, without limitation, the abandonment
or disposal of any barrels, containers, or other closed receptacles containing
any Hazardous Materials) or into or out of any property owned, occupied or used
by Borrower.
(mm) "Renewal Term" shall have the meaning assigned in Section 12.1 (a)
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hereof.
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(nn) "Revolving Loan" and "Revolving Loans" shall have the meanings
assigned in Section 2.1 hereof.
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(oo) "Revolving Loan Account" shall have the meaning assigned in Section
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2.3 hereof.
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(pp) "Revolving Promissory Note" shall have the meaning assigned in Section
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2.3 hereof.
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(qq) "Subordinating Creditor" and "Subordinating Creditors" shall mean any
officer, director or shareholder of the Borrower to whom the Borrower is
indebted.
(rr) "Subordination Agreement" and "Subordination Agreements" shall have
the meaning set forth in Section 5.1(e) hereof.
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(ss) "Subsidiary" and "Subsidiaries" shall mean any corporation or
corporations of which the outstanding shares of any stock having ordinary voting
power is at the time owned by Borrower and/or by one or more Subsidiaries.
(tt) "Term" shall have the meaning assigned in Section 12.1(a) hereof.
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(uu) "Termination Fee" shall have the meaning assigned in Section 12.1(c)
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hereof.
ARTICLE II
Revolving Loans
Section II.1 Amount. Subject to the terms and conditions contained in this
Agreement, and so long as no Defaulting Event has occurred, Lender agrees, in
its sole discretion, to make loans (collectively, the "Revolving Loans" and,
individually, a "Revolving Loan") to Borrower from time to time until terminated
as provided below in principal amounts not exceeding in the aggregate at any one
time outstanding the Borrowing Base, it being agreed and understood that at no
time shall the maximum aggregate principal amount of the Revolving Loans made by
Lender exceed the Borrowing Base. Without limiting Lender's discretion,
notwithstanding the actual net face value of any Eligible Account of Borrower,
for purposes of computing the Borrowing Base, the value of any Eligible Account
with a net face value in excess of Fifty Thousand ($50,000.00) Dollars shall be
reduced to Fifty Thousand ($50,000.00) Dollars prior to the application of such
Borrowing Base. Lender may, in its sole discretion, raise or lower the Fifty
Thousand ($50,000.00) Dollars limit set forth in the immediately preceding
sentence without in any way creating a course of conduct which requires Lender
to maintain such raised or lowered limit or to raise or lower such limit again
in the future. Lender, in its exercise of its discretion, has set credit limits
on those customers of Borrower set forth on Schedule 2.1 attached hereto.
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Lender may, in its sole discretion, raise or lower the credit limits described
on Schedule 2.1 without in any way creating a course of conduct which requires
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Lender to maintain such raised or lowered credit limits or to raise or lower
such credit limits again in the future.
Section II.2 Payment on Demand. ALL OBLIGATIONS OF BORROWER ARISING UNDER
THE REVOLVING LOANS SHALL BE PAID BY BORROWER IN FULL UPON DEMAND BY LENDER,
NOTWITHSTANDING LENDER'S RIGHTS UPON THE
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OCCURRENCE OF AN EVENT OF DEFAULT AND WHETHER OR NOT SUCH EVENT OF DEFAULT HAS
OCCURRED.
Section II.3 Procedure For Advances, Notice of Borrowing, Revolving
Promissory Note, Etc. Within the limits of the Borrowing Base and the Term, so
long as Borrower is in compliance with all of the terms and conditions of this
Agreement and no Defaulting Event has occurred, Borrower may request borrowings,
repay and request reborrowings of Revolving Loans. Whenever Borrower desires an
advance, Borrower shall notify Lender (which notice shall be irrevocable) by
telex, telecopy or telephone of the proposed borrowing. Such notice (each, a
"Notice of Borrowing") shall specify the date of the proposed borrowing and the
amount to be borrowed. Each Notice of Borrowing must be received by Lender no
later than 11:00 a.m., Hartford, Connecticut time on the day such borrowing is
requested. In addition to this Agreement, the Revolving Loans shall be evidenced
by a revolving loan promissory note payable to Lender in the form of Exhibit A
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attached hereto (the "Revolving Promissory Note"). Insofar as Borrower may
request and Lender shall make Revolving Loans hereunder, Lender shall enter such
advances as debits on a revolving loan account maintained by Borrower with
Lender (the "Revolving Loan Account"). Lender may also record to the Revolving
Loan Account, in accordance with customary accounting practices and procedures,
all fees, accrued and unpaid interest, late fees, usual and customary charges
for the maintenance and administration of checking and any other accounts
maintained by Borrower with Lender and other fees and charges which are properly
chargeable to Borrower under this Agreement; all payments, subject to
collection, made by Borrower on account of indebtedness evidenced by the
Revolving Loan Account; all proceeds of Collateral which are finally paid to
Lender in its own office in cash or collected items; and other appropriate
debits and credits, including without limitation, payments of interest due
hereunder.
Section II.4 Monthly Statements. On a monthly basis, Lender shall render
a statement for the Revolving Loan Account, which statement shall be considered
correct and accepted by Borrower and conclusively binding upon Borrower unless
Borrower notifies Lender to the contrary within ten (10) days of the receipt of
said statement by Borrower. Lender shall have the right to debit the Revolving
Loan Account for any principal due and all interest charges on the Loans as and
when the same shall be due and payable, if not otherwise paid by Borrower.
Section II.5 Lender Discretion. Nothing herein shall be construed to (a)
require Lender to make Revolving Loans, and/or (b) prohibit Lender from lending
in excess of the Borrowing Base, it being agreed that all such loans and
advances shall be at Lender's sole discretion and shall not establish a pattern
or custom binding upon Lender.
ARTICLE III
Interest, Fees and other Charges
Section III.1 Interest.
(a) Interest Rates. So long as no Defaulting Event has occurred, the Loans
shall bear interest (from the date made through and including the date of
payment in full) at a floating rate per annum equal to one and three-quarters of
one percentage points (1.75%) above the Prime Rate, on the greater of (i) the
actual aggregate monthly balance outstanding under the Loans, or (ii) a
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minimum assumed aggregate monthly loan balance of One Million Five Hundred
Thousand ($1,500,000.00) Dollars (the "Minimum Balance").
(b) Payment of Interest. So long as any of the Obligations remain
outstanding, interest on the Loans shall be due and payable without notice or
demand monthly in arrears beginning on the first Business Day of the first month
next succeeding the date hereof, and continuing on the first Business Day of
each and every month thereafter.
(c) Change in Prime Rate. Any change in the interest rate because of a
change in the Prime Rate shall become effective, without notice or demand, on
the first day of each month immediately following the month in which any change
in the Prime Rate occurs so that the Prime Rate in effect on the last day of any
month shall be the Prime Rate for interest computation purposes for the next
succeeding month.
(d) Default Interest Rate. Notwithstanding the foregoing, interest on the
Loans, at all times after the occurrence and during the continuance of an Event
of Default, and interest on all payments of interest that are not paid when due,
shall accrue at a rate per annum equal to four percentage points (4.0%) above
the applicable interest rates otherwise in effect under this Agreement.
(e) Calculation Of Interest. Interest on the Loans shall be calculated on
the basis of a 360-day year and the actual number of days elapsed.
(f) Late Payment. If any amount due hereunder or under the Notes is not
paid within ten (10) days after the date it is due and payable, without in any
way affecting Lender's right to make demand hereunder or to declare an Event of
Default to have occurred, Lender may in its sole discretion assess a late charge
equal to five (5.0%) percent of such late payment against Borrower, which late
charge shall be immediately due and payable and may be paid by a charge to
Borrower's loan account as contemplated in Section 2.3 above.
(g) Lawful Interest. It being the intent of the parties that the rate of
interest and all other charges to Borrower be lawful, if for any reason the
payment of a portion of interest, fees or charges as required by this Agreement
would exceed the limit established by applicable law which a commercial lender
such as Lender may charge to a commercial borrower such as Borrower, then the
obligation to pay interest or charges shall automatically be reduced to such
limit and, if any amounts in excess of such limits shall have been paid, then
such amounts shall be applied to the unpaid principal amount of the Obligations
or refunded to Borrower so that under no circumstances shall interest or charges
required hereunder exceed the maximum rate allowed by law, as aforesaid.
Section III.2 Closing Fees. On or before the date hereof, Borrower shall
pay or have paid to Lender all fees, expenses and other costs actually incurred
by Lender in connection with the closing of the extension of the Loans
(including without limitation, all attorney's and other professionals' fees and
expenses).
Section III.3 Commitment Fee. Borrower shall also pay to Lender a
nonrefundable commitment fee equal to one and one-quarter (1.25%) percent of the
maximum principal amount of the Loans on the date hereof and on each anniversary
date of this Agreement. It is understood that the determination of the maximum
principal amount of the Loans shall be made without regard to the components of
the Borrowing Base based upon Eligible Accounts. For example, for purposes
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of this provision, on the date hereof the maximum principal amount of the Loans
is Three Million ($3,000,000.00) Dollars and the commitment fee payable on the
date hereof is Thirty-Seven Thousand Five Hundred ($37,500.00) Dollars.
ARTICLE IV
Representations and Warranties
Section IV.1 Representations and Warranties. Borrower represents and
warrants to Lender that:
(a) Good Standing and Qualification. It is duly organized, validly existing
and in good standing under the laws of the Commonwealth of Virginia. It has all
requisite corporate power and authority to own and operate its properties and to
carry on its business as presently conducted and is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
wherein the character of the properties owned or leased by it therein or in
which the transaction of its business therein makes such qualification
necessary.
(b) Corporate Authority. It has full power and authority to enter into this
Agreement and the other Financing Agreements to which it is a party, to make the
borrowings contemplated herein, to execute and deliver the Notes and the other
Financing Agreements to which it is a party, and to incur the obligations
provided for herein and therein, all of which have been duly authorized by all
necessary and proper corporate action. No other consent or approval or the
taking of any other action in respect of shareholders or of any public authority
is required as a condition to the validity or enforceability of this Agreement,
the Notes, the other Financing Agreements or any other instrument, document or
agreement delivered in connection herewith or therewith.
(c) Binding Agreements. This Agreement constitutes, and the Notes and the
other Financing Agreements executed and/or delivered in connection herewith or
therewith, when issued and delivered pursuant hereto for value received shall
constitute, valid and legally binding obligations of Borrower, enforceable in
accordance with their respective terms, except as enforcement may be limited by
principles of equity, bankruptcy, insolvency, or other laws affecting the
enforcement of creditors' rights generally.
(d) Litigation. Except as set forth on Schedule 4.1(d) hereof, there are no
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actions, suits or proceedings pending against Borrower before any court or
administrative agency, nor are there any actions, suits or proceedings
threatened, which, individually or in the aggregate, would materially and
adversely affect the financial condition, assets or operations of Borrower, nor
are there any such actions, suits or proceedings which question the validity of
this Agreement, the Notes, any of the other Financing Agreements, or any action
to be taken in connection with the transactions contemplated hereby or thereby.
(e) No Conflicting Law or Agreements. The execution, delivery and
performance by Borrower of this Agreement, the Notes and each other Financing
Agreement, as the case may be, does not (i) violate any provision of its
Certificate of Incorporation or By-laws or any order, decree or judgment, or any
provision of any statute, rule or regulation to which the Borrower may be
subject; (ii) violate or conflict with, result in a breach of or constitute
(with notice or lapse of time, or both) a default under any shareholder
agreement, stock preference agreement, mortgage, indenture
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or other contract or undertaking to which it is a party, or by which any of its
properties may be bound; and (iii) result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any property or assets
of Borrower except for the liens granted hereunder to Lender.
(f) Taxes. With respect to all of its taxable periods, it has filed all tax
returns which are required to be filed and all federal, state, municipal,
franchise and other taxes shown on such filed returns have been paid or are
being diligently contested by appropriate proceedings and have been reserved
against, as required by generally accepted accounting principles, consistently
applied.
(g) Financial Statements. It has heretofore delivered to Lender: (i) its
audited annual balance sheet as of December 31, 1999, and the related statements
of income, retained earnings and cash flows for the fiscal year or period then
ended. Each of such statements is complete and correct in all material respects
and fairly presents its consolidated financial condition as of the dates and for
the periods referred to therein and has been prepared in accordance with
generally accepted accounting principles consistently applied by it throughout
the periods involved. There are no liabilities, direct or indirect, fixed or
contingent, of Borrower as of the dates of said balance sheets which are not
reflected in such statements or in the notes thereto.
(h) Adverse Developments. Since December 31, 1999, there has been no
material adverse change in its financial condition, business, operations,
affairs or prospects of Borrower or in any of its properties or assets.
(i) Existence of Assets and Title Thereto. It has good and marketable title
to all of its properties and assets, including the properties and assets
reflected in the financial statements delivered in connection herewith. None of
such properties or assets are subject to any mortgage, pledge, lien, lease,
encumbrance or charge except those permitted under the terms of this Agreement.
(j) Regulations G, T, U and X. The proceeds of the borrowings hereunder are
not being used and will not be used, directly or indirectly, for the purposes of
purchasing or carrying any margin stock in contravention, or which would cause
the Lender to be in violation, of Regulations G, T, U or X promulgated by the
Board of Governors of the Federal Reserve System.
(k) Compliance. It is not in default with respect to any order, writ,
injunction or decree of any court or of any federal, state, municipal or other
governmental department, commission, board, bureau, agency, authority or
official, nor is it in violation of any law, statute, rule or regulation to
which it or any of its properties are subject and it has not received notice of
any such default from any party and is not in default in the payment or
performance of any of its obligations to any third parties or in the performance
of any mortgage, indenture, lease, contract or other agreement to which it is a
party or by which any of its assets or properties may be bound.
(l) Leases. It enjoys quiet and undisturbed possession under all leases
under which it is operating, and, except as set forth on Schedule 4.1(l) hereof,
---------------
all of such leases are valid and subsisting and not in default.
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(m) Pension Plans.
(i) No fact, including but not limited to any "reportable
event", as that term is defined in Section 4043 of ERISA, exists in
connection with any Plan of any of the Companies under Sections 414(b),
(c), (m), (n) and (o) of the Internal Revenue Code of 1986, as amended (the
"Code") which might constitute grounds for termination of any such Plan by
the Pension Benefit Guaranty Corporation (the "PBGC"), or for the
appointment by the appropriate United States District Court of a trustee to
administer any such Plan. A list of all of the Companies' respective Plans
are attached hereto on Schedule 5.1(m) attached hereto;
---------------
(ii) Except to the extent of issues and matters which would
not, in the aggregate, have a material adverse effect upon Borrower, Lender
or Borrower's ability to repay the Loans, no "prohibited transaction"
within the meaning of Section 406 of ERISA or Section 4975 of the Code
exists or will exist upon the execution and delivery of this Agreement and
the other Financing Agreements, or the performance by the parties hereto or
thereto of their respective duties and obligations hereunder and
thereunder;
(iii) Each of the Companies agrees to do all acts, including,
but not limited to, making all contributions necessary to maintain
compliance with ERISA or the Code, and agrees not to terminate any such
Plan in a manner or do so or fail to do any act which could result in the
imposition of a lien on any of its properties pursuant to Section 4068 of
ERISA;
(iv) None of the Companies sponsors or maintains, and has never
contributed to, and has not incurred any withdrawal liability under a
"multi-employer plan" as defined in Section 3 of ERISA and none of the
Companies has any written or verbal commitment of any kind to establish,
maintain or contribute to any "multi-employer plan" under the Multi-
employer Pension Plan Amendment Act of 1980;
(v) None of the Companies has any unfunded liability in
contravention of ERISA and the Code;
(vi) Except to the extent of issues and matters which would
not, in the aggregate, have a material adverse effect upon Borrower, Lender
or Borrower's ability to repay the Loans, each and every Plan complies
currently, and has complied in the past, both as to form and operation,
with its terms and with provisions of the Code and ERISA, and all
applicable regulations thereunder and all rules issued by the Internal
Revenue Service, U.S. Department of Labor and the PBGC and as such, is and
remains a "qualified" plan under the Code;
(vii) No actions, suits or claims are pending (other than
routine claims for benefits) against any Plan, or the assets of any such
Plan;
(viii) Except to the extent of issues and matters which would
not, in the aggregate, have a material adverse effect upon Borrower, Lender
or Borrower's ability to repay the Loans, the Companies have performed all
obligations required to be performed by it under any Plan and the Companies
are not in default, or in violation of any Plan, and have no knowledge of
any such default or violation by any other party to any and all Plans;
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(ix) No liability has been incurred by any of the Companies to
the PBGC or to participants or beneficiaries on account of any termination
of a Plan subject to Title IV of ERISA, no notice of intent to terminate a
Plan has been filed by (or on behalf of) any of the Companies pursuant to
Section 4041 of ERISA and no proceeding has been commenced by the PBGC
pursuant to Section 4042 of ERISA;
(x) The reporting and disclosure provisions of the Securities
Act of 1933 and Securities Exchange Act of 1934 have been complied with for
all such Plans.
(n) Deferred Compensation Arrangements. Except as set forth in Schedule
--------
5.1(n) attached hereto, none of the Companies has entered into employment
------
contracts or deferred compensation plans, incentive compensation plans,
executive compensation plans, arrangements or commitments (each, individually,
an "Arrangement"). With respect to each such Arrangement:
(i) Such Arrangement complies currently, and has complied in
the past, both as to form and operation with its terms and the provisions
of the Code and ERISA and all applicable laws, rules and regulations;
(ii) The disclosure and reporting provisions of the Securities
Act of 1933 and the Securities Exchange Act of 1934 have been satisfied;
(iii) Such Arrangement is legally valid and binding and is in
full force and effect;
(iv) The Companies have made all contributions required to be
made under any such Arrangement and no contributions are currently due and
owing;
(v) There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the best of the Companies' knowledge,
which could be reasonably expected to be asserted against any such
Arrangement; and
(vi) The Companies have performed all obligations required to
be performed by it under any such Arrangement and the Companies are not in
default or in violation of, and the Companies have no knowledge of a
default or violation by any other party to any such Arrangement.
(o) Chief Executive Office. Its chief executive office and principal place
of business, and the office where its books and records concerning Collateral
are kept, is as set forth in the first paragraph of this Agreement.
(p) Places of Business and Location of Collateral. It has no other places
of business and locates no Collateral, specifically including books and records,
at any location other than as set forth in the first paragraph of this Agreement
and as set forth on Schedule 5.1(p) attached hereto. It shall maintain a full
---------------
and complete set of its books and records in its offices at the chief executive
office described in the immediately preceding paragraph.
(q) Contingent Liabilities. It is not a party to any suretyship, guaranty,
or other similar type agreement; nor has it offered its endorsement to any
individual, concern, corporation or other
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entity or acted or failed to act in any manner which would in any way create a
contingent liability that does not appear in the financial statements referred
to hereinbefore.
(r) Contracts. No contract, governmental or otherwise, to which it is a
party, is subject to renegotiation, nor is it in default in any material respect
of any contract.
(s) Unions and Pensions. It is not a party to any collective bargaining or
union agreement.
(t) Licenses. It has all licenses, permits and other permissions required
by any government, agency or subdivision thereof, or from any licensing entity
to which Borrower may be subject, necessary for the conduct of its business, all
of which it represents to be in good standing and in full force and effect.
(u) Collateral. It is and shall continue to be the sole owner of the
Collateral free and clear of all liens, encumbrances, security interests and
claims except the liens granted to Lender hereunder and the security interests
and liens listed on Schedule 5.1(u) attached hereto; Borrower is fully
---------------
authorized to sell, transfer, pledge and/or grant a security interest in each
and every item of the Collateral to Lender; all documents and agreements related
to the Collateral shall be true and correct and in all respects what they
purport to be; all signatures and endorsements that appear thereon shall be
genuine and all signatories and endorsers shall have full capacity to contract;
none of the transactions underlying or giving rise to the Collateral shall
violate any applicable state or federal laws or regulations; all documents
relating to the Collateral shall be legally sufficient under such laws or
regulations and shall be legally enforceable in accordance with their terms; and
Borrower agrees to defend the Collateral against the claims of all persons other
than Lender.
(v) Tradenames. It does not have any tradenames.
(w) Financial Information. All financial information including, but not
limited to, information relating to the Receivables and Inventory, submitted by
it to Lender, whether previously or in the future, is and will be true and
correct in all material respects, and is and will be complete insofar as may be
necessary to render it a true and accurate depiction of the subject matter to
which it relates.
(x) Parent, Affiliate or Subsidiary Corporations. Borrower is a wholly-
owned subsidiary of The Netplex Group, Inc. and Borrower has no Subsidiaries.
(y) Environmental Matters.
(i) It has obtained all permits, licenses and other
authorizations which are required under all Environmental Laws. It is in
compliance with the terms and conditions of all such permits, licenses and
authorizations, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered, promulgated
or approved thereunder.
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(ii) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by Borrower to have any permit, license or authorization required
in connection with the conduct of its business or with respect to any
Environmental Laws, including without limitation, Environmental Laws
relating to the generation, treatment, storage, recycling, transportation,
disposal or release of any Hazardous Materials.
(iii) No oral or written notification of a release of any
Hazardous Material has been filed by or against Borrower and no property
now or previously owned, leased or used by it including without limitation,
the Premises, is listed or proposed for listing on the Comprehensive
Environmental Response, Compensation and Inventory of Sites or National
Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or on any similar state
or federal list of sites requiring investigation or cleanup.
(iv) There are no liens or encumbrances arising under or
pursuant to any Environmental Laws on any of the property or properties
owned, leased or used by it, including without limitation, any of the
properties owned or leased by it, and no governmental actions have been
taken or are in process which could subject any of such properties to such
liens or encumbrances or, as a result of which Borrower would be required
to place any notice or restriction relating to the presence of Hazardous
Materials at any property owned by it in any deed to such property.
(v) Neither it nor, to the best knowledge of Borrower, any
previous owner, tenant, occupant or user of any property owned, leased or
used by Borrower, has (i) engaged in or permitted any operations or
activities upon or any use or occupancy of such property, or any portion
thereof, for the purpose of or in any way involving the release, discharge,
refining, dumping or disposal (whether legal or illegal, accidental or
intentional) of any Hazardous Materials on, under, or in or about such
property, (ii) transported or had transported any Hazardous Materials to
such property except to the extent such Hazardous Materials are raw
products commonly used in day-to-day manufacturing operations of such
property and, in such case, in compliance with, all Environmental Laws;
(iii) engaged in or permitted any operations or activities which would
allow the facility to be considered a treatment, storage or disposal
facility as that term is defined in 40 CFR 264 and 265, or (iv)
constructed, stored or otherwise located Hazardous Materials on, under, in
or about any such property except to the extent commonly used in day-to-day
operations of any such property and, in such case, in compliance with all
Environmental Laws. Further, to the best knowledge of Borrower, no
Hazardous Materials have migrated from other properties upon, about or
beneath any such property.
(z) Use of Proceeds. It will use the proceeds of the Loans solely (i) to
satisfy in full loans outstanding to Silicon Valley Bank on the date hereof and
(ii) for working capital purposes.
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ARTICLE V
Conditions of Lending
Section V.1 Conditions of the Initial Loans. Subject to the terms hereof,
the obligation of Lender to make the first Revolving Loan under this Agreement
is subject to the fulfillment of the following conditions precedent at the time
of the execution of this Agreement:
(a) Notes. Lender shall have received a duly executed Revolving Promissory
Note drawn to its order.
(b) Evidence of Corporate Action. Lender shall have received certified
copies of all corporate action (in form and substance satisfactory to Lender)
taken by Borrower to authorize the execution, delivery and performance of this
Agreement, the Notes, and the other Financing Agreements to which it is a party,
and the borrowings to be made hereunder and thereunder, together with true
copies of Borrower's Certificate of Incorporation and By-laws and such other
papers as Lender or its counsel may require.
(c) Opinion of Counsel. Lender shall have received a favorable written
opinion of counsel for Borrower, the Fidelity Guarantor and the Guarantor, and
accompanied by such supporting documents as Lender or its counsel may require.
(d) Guarantees. Lender shall have received duly executed guarantees
(hereinafter, collectively, the "Guaranty") from The Netplex Group, Inc.,
Contractors Resources, Inc. and Waterside Capital (hereinafter, collectively,
the "Guarantor"). The Guaranty shall be in form, scope and substance
satisfactory to Lender and its counsel.
(e) Intercreditor Agreement. Lender shall have received an intercreditor
agreement from Waterside Capital in form, scope and substance satisfactory to
Lender and its counsel (the "Intercreditor Agreement").
(f) Fidelity Guarantees. Lender shall have received duly executed fidelity
guarantees (hereinafter, collectively, the "Fidelity Guaranty") from Xxxx X.
Xxxxx and Xxxxx Xxxxx (hereinafter, collectively, the "Fidelity Guarantor").
The Fidelity Guaranty shall be in form, scope and substance satisfactory to
Lender and its counsel.
(g) Lessor's Agreement. Borrower shall cause to be delivered to Lender a
lessor's agreement with respect to the Premises (the "Lessor's Agreement") in
form, scope and substance satisfactory to Lender and its counsel.
(h) UCC-1 Financing Statements. Lender shall have received from Borrower
duly executed UCC-1 financing statements and such other documents as Lender
deems necessary or proper to perfect the security interest in the Collateral,
all of which shall be in form, scope and substance satisfactory to Lender and
its counsel.
(i) Notice of Assignment and Post Office Box Change of Address Cards.
Lender shall have received a notice of assignment and post office change of
address cards from Borrower, which shall be in form, scope and substance
satisfactory to Lender and its counsel.
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(j) Further Documents. Lender shall have received such further documents,
instruments and agreements as Lender may request, including without limitation,
landlord's agreements, warehouse agreements, and evidence that the insurance
policies and certificates evidencing adequate insurance and coverage on each of
Borrower's assets are currently in full force and effect, continue to name
Lender as loss payee or additional insured, as the case may be, and that the
premiums are current.
Section V.2 Conditions of Additional Revolving Loans. In addition to the
conditions in Section 5.1 above, Lender shall make no further Revolving Loans
-----------
(collectively, the "Further Loans") unless the following conditions shall exist
or have been satisfied by Borrower at the time any Further Loan is requested:
(a) Absence of Termination or Default. Lender shall not have terminated the
Revolving Loan facility hereunder, nor shall a Defaulting Event exist or have
occurred.
(b) Compliance Certificates. On the date of each Revolving Loan hereunder
and after giving effect thereto, Borrower shall have delivered to Lender, upon
Lender's request, a certificate executed by its chief financial officer which
states, among other things, that: (i) Borrower has complied, and is then in
compliance, with all the terms, covenants and conditions of this Agreement and
the other Financing Agreements to which it is a party; (ii) there exists no
Event of Default or Defaulting Event; and (iii) the representations and
warranties contained herein and in the other Financing Agreements are true and
correct with the same effect as though such representations and warranties had
been made at the time of each Further Loan.
(c) Borrowing Base. The indebtedness of Borrower by virtue of the making of
any Revolving Loan shall not exceed the Borrowing Base. Borrower shall not
request any Revolving Loan if the effect of such Revolving Loan shall be to
cause the balance of all Revolving Loans to exceed the Borrowing Base.
(d) Further Documents. Lender shall have received such further documents,
instruments and agreements as Lender may reasonably request.
ARTICLE VI
Covenants
A. Affirmative Covenants.
Borrower covenants and agrees that from the date hereof until payment and
performance in full of all Obligations, and until the termination of this
Agreement, unless Lender otherwise consents in writing, Borrower shall:
Section VI.1 Financial Statements. Deliver or cause to be delivered to
Lender: (a) within thirty (30) days after the close of each fiscal month of
Borrower, internally prepared financial statements of Borrower including
consolidated and consolidating balance sheets as of the close of each month and
consolidated and consolidating statements of income and retained earnings for
such month and for that portion of the fiscal year-to-date then ended, which
shall be prepared on a basis consistent with that of the preceding period or
containing disclosure of the effect on financial
-17-
condition or results of operations of any change in such preparation, and which
shall be certified by the chief financial officer of Borrower as being accurate
and fairly presenting the financial condition of Borrower; (b) within ninety
(90) days after the close of each fiscal year of Borrower, audited, consolidated
and consolidating financial statements including a consolidated and
consolidating balance sheet as of the close of such fiscal year and statements
of income, stockholders' capital and cash flow for the year then ended, prepared
in conformity with generally accepted accounting principles, applied on a basis
consistent with that of the preceding year or containing disclosure of the
effect on financial condition or results of operations of any change in the
application of accounting principles during the year, and accompanied by a
report thereon containing an unqualified opinion of a recognized certified
public accounting firm selected by Borrower and reasonably satisfactory to
Lender, which opinion shall state that such financial statements fairly present
the financial condition and results of operations of Borrower in accordance with
generally accepted accounting principles, (c) within ten (10) days of the close
of each month, monthly aging of accounts receivable and accounts payable and
Inventory status reports in form, scope and substance satisfactory to Lender;
(d) daily loan and collateral descriptions in the form supplied by Lender to
Borrower; (e) within ten (10) days after Borrower's receipt, any management
letter prepared by Borrower's independent auditors; (f) contemporaneously with
the delivery to shareholders or governmental agencies, copies of all reports and
information delivered to shareholders or filed with governmental agencies; (g)
within ninety (90) days after the close of each fiscal year of the Guarantor,
financial statements in form and scope reasonably satisfactory to Lender; (h)
promptly upon Lender's written request, such other information about the
financial condition and operations of Borrower or the Guarantor, as Lender may,
from time to time, reasonably request; and (i) promptly upon becoming aware of
any Event of Default, or the occurrence or existence of a Defaulting Event,
notice thereof in writing.
Section VI.2 Insurance and Endorsements. (a) Keep its properties and cause
the Premises to be insured against fire and other hazards (pursuant to so-called
"All Risk" coverage) in amounts and with companies satisfactory to Lender to the
same extent and covering such risks as is customary in the same or a similar
business; maintain public liability coverage, including without limitation,
products liability coverage, against claims for personal injuries or death; and
maintain all worker's compensation, employment or similar insurance as may be
required by applicable law; and (b) all insurance shall contain such terms, be
in such form, and be for such periods reasonably satisfactory to Lender, and be
written by such carriers duly licensed by the appropriate governmental authority
of each state where any Collateral is located. Without limiting the generality
of the foregoing, such insurance must provide that it may not be canceled
without thirty (30) days' prior written notice to Lender. Borrower shall cause
Lender to be endorsed as a loss payee with a long form Lender's Loss Payable
Clause, in form and substance acceptable to Lender on all such insurance. In the
event of failure to provide and maintain insurance as herein provided, Lender
may, at its option, provide such insurance and charge the amount thereof to the
Revolving Loan Account. Borrower shall furnish to Lender certificates or other
satisfactory evidence of compliance with the foregoing insurance provisions.
Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled
with an interest, to make proofs of loss and claims for insurance, and to
receive payments of the insurance proceeds and execute and endorse all
documents, checks and drafts in connection with payment of such insurance. Any
insurance proceeds received by Lender shall be applied to the Obligations in
such order and manner as Lender shall determine in its sole discretion.
Section VI.3 Tax and Other Liens. Comply with all statutes and government
regulations and pay all taxes, assessments, governmental charges or levies, or
claims for labor, supplies, rent and
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other obligations made against it or its property which, if unpaid, might become
a lien or charge against Borrower or its properties, except liabilities being
contested in good faith and against which adequate reserves have been
established in accordance with generally accepted accounting principles.
Section VI.4 Place of Business; Location of Collateral. Maintain its chief
place of business and chief executive offices at the address set forth in the
introductory sentence hereof and its other places of business and locations of
Collateral as set forth in Schedule 5.1(p) hereto, unless Borrower shall have
---------------
given Lender thirty (30) days' prior written notice of any change thereof.
Section VI.5 Inspections. Allow Lender by or through any of its officers,
attorneys, and/or accountants designated by it, for the purpose of ascertaining
whether or not each and every provision hereof and of any related agreement,
instrument and document is being performed, to enter the offices and plants of
Borrower to examine or inspect any of the properties, books and records or
extracts therefrom, to make copies of such books and records or extracts
therefrom and to make complete environmental studies and/or investigations, and
to discuss the affairs, finances and accounts thereof with Borrower all at such
reasonable times, upon reasonable written notice and as often as Lender or any
representative of Lender may reasonably request.
Section VI.6 Litigation. Promptly advise Lender of the commencement or
threat of litigation, including arbitration proceedings and any proceedings
before any governmental agency (but excluding product liability claims which are
either fully covered by insurance or adequately covered by insurance and which
are not likely to have a material adverse effect on the business, assets or
condition (financial or otherwise) of Borrower), which is instituted against
Borrower or, upon receipt of any information pertaining thereto, the Guarantor
and is reasonably likely to have a materially adverse effect upon the condition,
financial, operating or otherwise, of Borrower or the Guarantor.
Section VI.7 Maintenance of Existence. Maintain its corporate existence
and comply with all valid and applicable statutes, rules and regulations, and
maintain its properties in good repair, working order and operating condition.
Borrower shall immediately notify Lender of any event causing material loss in
the value of its assets.
Section VI.8 Inventory. Allow Lender to examine and inspect the Inventory
at reasonable times and intervals and upon reasonable notice. Borrower shall
immediately notify Lender of any event causing material loss or depreciation in
value of Inventory and the amount of such loss or depreciation.
Section VI.9 ERISA. Immediately notify Lender of any event which causes it
not to be in compliance with ERISA in all material respects.
Section VI.10 Notice of Certain Events. Give prompt written notice to
Lender of:
(a) any material dispute that may arise between Borrower and any
governmental regulatory body or law enforcement agency;
(b) any labor controversy resulting or likely to result in a strike or work
stoppage against Borrower;
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(c) any proposal by any public authority to acquire the assets or business
of Borrower;
(d) the location of any Collateral other than at Borrower's places of
business disclosed in this Agreement other than Collateral in transit in the
ordinary course of Borrower's business;
(e) any proposed or actual change of the name, identity or corporate
structure of Borrower;
(f) any circumstance or event by virtue of which or in connection with
which Borrower may have incurred or may incur any liability, expense or
responsibility under any Environmental Law including, without limitation: (i)
any Release of any Hazardous Material required to be reported to any federal,
state or local governmental authority, instrumentality or agency under any
applicable Environmental Law; (ii) any and all written communications with
respect to claims or suits under any applicable Environmental Law or any Release
of Hazardous Material required to be reported to any federal, state or local
governmental authority, instrumentality or agency; (iii) any remedial action
taken by Borrower or any other person in response to (A) any Hazardous Material
on, under or about the properties or assets of Borrower, the existence of which
may give rise to a claim or suit resulting in a material change of Borrower's
business operations or financial condition, or (B) any claim or suit resulting
in a material change of Borrower's business operations or financial condition;
(iv) Borrower's discovery of any occurrence or condition on any real property
adjoining or in the vicinity of Borrower's business premises which may cause
such premises to be in violation of any Environmental Law or to be subject to
any restrictions on the ownership, occupation, transferability or use thereof
under any Environmental Law; and (v) any request for information from any
federal, state or local governmental authority, instrumentality or agency that
indicates such entity is investigating Borrower's potential responsibility for a
Release of Hazardous Material;
(g) any other matter which has resulted or is reasonably likely to result
in a material adverse change in the financial condition or operations of
Borrower;
(h) any information received by Borrower with respect to any Receivable
that may materially affect the value thereof or the rights and remedies of
Lender with respect thereto; and
(i) any action, suit or claim pending or which could be reasonably expected
to be asserted against Borrower.
Section VI.11 Defaults. Upon the occurrence of an Event of Default or of a
Defaulting Event, Borrower shall give prompt written notice of such occurrence
to Lender signed by the president or chief financial officer of Borrower
describing such occurrence and the action, if any, being taken to cure the Event
of Default or Defaulting Event.
Section VI.12 Duties. Comply with any and all federal, state and local
laws affecting its business, including, but not limited to, payment of all
federal and state taxes with respect to the sales to Account Debtors by Borrower
and disclosures in connection therewith. Borrower agrees to indemnify Lender
against and hold Lender harmless from, all claims, actions and losses, including
reasonable attorney's fees and costs incurred by Lender arising from any
contention, whether well founded or otherwise, that there has been a failure to
comply with such laws.
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Section VI.13 Collateral Duties. Do whatever Lender may reasonably request
from time to time by way of obtaining, executing, delivering and filing
financing statements, assignments, landlord's or mortgagee's waivers, warehouse
agreements and other notices and amendments and renewals of any of the
foregoing, and Borrower will take any and all steps and observe such formalities
as Lender may request, in order to create and maintain a valid and enforceable
first lien upon, pledge of, and first priority security interest in, any and all
of the Collateral. Lender hereby is authorized to file financing statements
without the signature of Borrower and to execute and file such financing
statements on behalf of Borrower as specified by the Uniform Commercial Code to
perfect or maintain its security interest in all of the Collateral. All
reasonable charges, expenses and fees Lender may incur in filing any of the
foregoing, together with reasonable costs and expenses of any lien search
required by Lender, and any taxes relating thereto, shall be charged to the
Revolving Loan Account and added to the Obligations.
Section VI.14 Audit and Appraisals by Lender; Fees. Permit Lender to audit
the books and records of Borrower and to conduct or cause to be conducted
appraisals of Borrower's assets at such times, upon reasonable notice, and in
such manner and detail as Lender deems reasonable. Without limiting the
generality of the foregoing, Lender shall be allowed to verify the Receivables
and Inventory of Borrower and to confirm with Account Debtors the validity and
amount of Receivables. Borrower shall promptly pay to Lender reasonable audit
fees and any out-of-pocket expenses incurred in connection with any audit
performed by Lender, or by any third party retained by Lender in its sole
discretion, if Lender, in its sole discretion, deems it necessary to hire
outside auditors after Lender has made a demand for payment of any Obligations
or the occurrence of an Event of Default. In addition, Borrower shall promptly
pay or reimburse Lender for the costs of any such appraisals conducted by or for
Lender. Lender may charge any such audit fees and out-of-pocket expenses to the
Revolving Loan Account.
Section VI.15 Bank Accounts. Maintain all of its bank accounts, including
without limitation, its operating and depository accounts, at Silicon Valley
Bank, 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000.
Section VI.16 Electronic Reporting. All information regarding sales, cash
receipts, Accounts and Inventory shall be transmitted to Lender electronically,
in ASCII readable formats, either on disk or transmitted to Lender via modem.
In the event that Borrower fails to report such information to Lender
electronically, Lender reserves the right, in its sole discretion, to adjust the
margin over the Prime Rate payable by Borrower hereunder upon ten (10) days
notice to Borrower. The foregoing notwithstanding, Lender shall not adjust the
margin over the Prime Rate payable by Borrower if the failure to report
information electronically to Lender arises from an Act of God, weather
conditions, riot, civil commotion, insurrection, war, political disturbance,
interruption in electrical or telephone service or other causes beyond the
control of Borrower.
Section VI.17 Master Arrangement Letters. If a project for services is
anticipated to generate revenues in excess of One Hundred Thousand ($100,000.00)
Dollars and a master arrangement letter is executed in connection with such
project, then Borrower shall submit to Lender a copy of such master arrangement
letter.
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B. Negative Covenants.
Borrower covenants and agrees that from the date hereof until payment and
performance in full of all Obligations, and until the termination of this
Agreement, unless Lender otherwise consents in writing, Borrower shall not:
Section VI.18 Encumbrances. Incur or permit to exist any lien, mortgage,
charge or other encumbrance against any of its properties or assets, whether now
owned or hereafter acquired, except: (a) liens required or expressly permitted
by this Agreement; (b) pledges or deposits in connection with or to secure
worker's compensation, unemployment or liability insurance; and (c) those listed
on Schedule 5.1(u) attached hereto.
---------------
Section VI.19 Limitation on Indebtedness. Create, incur or guarantee any
indebtedness or obligation for borrowed money (including without limitation, any
reimbursement obligations for any letter of credit issued by any financial
institution), from or issue or sell any of its obligations to any other lender,
other than the indebtedness due to Waterside Capital Corporation which is the
subject of the Intercreditor Agreement.
Section VI.20 Contingent Liabilities. Assume, guarantee, endorse or
otherwise become liable upon the obligations of any person, firm or corporation,
or enter into any purchase or option agreement or other arrangement having
substantially the same effect as such a guarantee, except by the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business.
Section VI.21 Consolidation or Merger. Merge into or consolidate with or
into any corporation.
Section VI.22 Loans, Advances, Investments. Make or permit to exist any
loans or advances to, or purchase any stock, other securities or evidences of
indebtedness of, or make or permit to exist any investment (including without
limitation the acquisition of stock of a corporation), or acquire any assets or
any other interest whatsoever, in any other person.
Section VI.23 Acquisition of Stock of Borrower; Dividends. Purchase,
acquire, redeem or retire, or make any commitment to purchase, acquire, redeem
or retire any of the capital stock of Borrower, whether now or hereafter
outstanding, or declare or pay any dividend, or make any distribution to any of
its stockholders.
Section VI.24 Sale and Lease of Assets. Sell or lease any of the assets of
the Borrower, except for sales of Inventory in the ordinary course of business
consistent with past practices and on an arms-length basis.
Section VI.25 Name Changes. Change its name or style other than as set
forth in this Agreement.
Section VI.26 Prohibited Transfers. Transfer, in any manner, either
directly or indirectly, any cash, property, or other assets to any parent or any
of its affiliates or Subsidiaries, other than (i) sales made in the ordinary
course of business and for fair consideration on terms no less favorable than if
such sale had been an arms-length transaction between Borrower or such
Subsidiary and an unaffiliated entity; (ii) reimbursements; and (iii) normal and
customary corporate charges.
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Section VI.27 Leasebacks. Lease any real estate or other capital asset
from any lessor who shall have acquired such property from Borrower.
Section VI.28 Loans to Officers, Directors and/or Shareholders. Make any
loan or advance or make any transfer, in any manner, of any cash, property or
other asset to or on behalf of any of its officers, directors or shareholders.
ARTICLE VII
Collateral
Section VII.1 Grant. To secure the prompt payment and performance of each
and all of the Obligations, Borrower pledges, assigns, transfers and grants to
Lender a continuing, first lien security interest in the following property of
Borrower, now owned or hereafter acquired or arising (herein called the
"Collateral"):
(a) All accounts and accounts receivable related to or arising from the
sale or lease of Inventory or rendition of services by Borrower (the "Accounts")
and all other accounts, bank accounts, contracts, contract rights, notes,
documents, chattel paper, instruments, acceptances, drafts or other forms of
obligations and receivables (collectively with the Accounts, the "Receivables"),
whether or not the same are listed on any schedules, assignments or reports
furnished to Lender from time to time, and whether such Receivables are now
existing or are created or arise at any time hereafter, together with all goods,
Inventory and merchandise returned by or reclaimed by or repossessed from
customers wherever such goods, Inventory and merchandise are located, and all
proceeds thereto including without limitation, proceeds of insurance thereon and
all guarantees, securities, and liens which Borrower may hold for the payment of
any such Receivables, including without limitation, all rights of stoppage in
transit, replevin and reclamation and all other rights and remedies of an unpaid
vendor or lienor, and any liens held by Borrower as a mechanic, contractor,
subcontractor, processor, materialman, machinist, manufacturer, artisan, or
otherwise;
(b) All documents, instruments, investment property, documents of title,
general intangibles, policies and certificates of insurance, guarantees,
securities, chattel paper, deposits, tax refunds, proceeds of insurance,
proceeds of an eminent domain or condemnation award, cash, liens or other
property, which are now or may hereinafter be in the possession of Borrower or
as to which Borrower may now or hereafter control possession by documents of
title or otherwise, including, but not limited to, all property allocable to
unshipped orders relating to Receivables and Inventory;
(c) All books, records, customer lists, supplier lists, ledgers, evidences
of shipping, invoices, purchase orders, sales orders and all other evidences of
Borrower's business records, including all cabinets, drawers, etc. that may hold
the same; computer records, lists, software, programs, wherever located, all
whether now existing or hereafter arising or acquired;
(d) All of Borrower's Inventory, whether now owned or hereafter acquired,
including without limitation (collectively, the "Inventory"): (i) all goods
manufactured or acquired for sale or lease, and any piece goods, raw materials,
work in process and finished merchandise, findings or component materials, and
all supplies, goods, incidentals, office supplies, packaging materials, and any
and all items including machinery and equipment used or consumed in the
operation of the business of Borrower or which contribute to the finished
product or to the sale, promotion and
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shipment thereof, in which Borrower may now or at any time hereafter may have an
interest, whether or not such Inventory is listed in this Agreement or on any
reports furnished to Lender from time to time; (ii) all Inventory whether or not
the same is in transit or in the constructive, actual or exclusive occupancy or
possession of Borrower or is held by Borrower or by others for the Accounts,
including without limitation, all goods covered by purchase orders and contracts
with suppliers and all goods billed and held by suppliers; (iii) all Inventory
which may be located on the premises of Borrower or of any carrier, forwarding
agents, truckers, warehousemen, vendors, selling agents or third parties; (iv)
all general intangibles relating to or arising out of Inventory; (v) all
proceeds and products of the foregoing resulting from the sale, lease or other
disposition of Inventory, including cash, accounts receivable, other non-cash
proceeds and trade-ins; and (vi) with respect to after-acquired Inventory, the
security interest shall be deemed to be a purchase money security interest;
(e) All general intangibles, including without limitation, tax refunds,
proceeds of insurance, eminent domain awards, condemnation proceeds, and
patents, copyrights, tradenames, trademarks, applications therefor, and licenses
to any patent, copyright, trademark, or tradename that Borrower now owns, has
the right to use or may hereafter own or acquire the right to use;
(f) All equipment, machinery, appliances, and furniture and fixtures, now
existing or hereafter arising, wherever located, and all contracts, contract
rights and chattel paper arising out of any lease of any of the foregoing;
(g) All other collateral in which Borrower may hereafter grant to Lender a
security interest; and
(h) All renewals, substitutions, replacements, additions, accessions,
proceeds, and products of any and all of the foregoing, including, without
limitation, all proceeds of credit, fire and other insurance and also including,
without limitation, rents and profits resulting from the temporary use of the
Collateral.
ARTICLE VIII
Events of Default
Section VIII.1 Events of Default. Without affecting the demand nature of
the Loans which shall at all times be due and payable on demand, any and all
Obligations, including without limitation, the Obligations arising pursuant to
or in connection with the Loans shall, at the option of Lender and
notwithstanding any time or credit allowed by any note or agreement, become
immediately due and payable without notice if any one or more of the following
events (collectively, "Events of Default" and individually, an "Event of
Default") shall occur:
(a) Borrower's failure to pay principal, interest or any other sum due
hereunder or under the Notes;
(b) Borrower's failure to pay or perform when due any other covenant, duty,
indebtedness, liability or obligation arising under this Agreement, the Notes or
any of the other Financing Agreements, or any other Obligation, or such failure
by any Guarantor or any Fidelity Guarantor,
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(c) the making by Borrower, any Guarantor or any Fidelity Guarantor of any
misrepresentation of a material fact to Lender;
(d) loss, theft, or destruction of any Collateral in excess of Five
Thousand ($5,000.00) Dollars in value which is not covered by insurance with
Lender's loss payee endorsement as required herein;
(e) the filing, making or issuance of any lien, levy, seizure, attachment,
garnishment, injunction, execution, tax lien or judgment upon or against
Borrower or any of the Collateral, or any other property or assets of Borrower;
(f) any of the following of, by, or involving Borrower, any Guarantor or
any Fidelity Guarantor: insolvency (failure to pay debts generally as they
mature or where the fair value of assets is not in excess of liabilities);
business failure; appointment of a receiver or custodian; assignment for the
benefit of creditors; calling of a meeting of creditors; appointment of a
committee of creditors, or liquidating banks, or offering of a composition
extension to creditors; or the commencement of any proceedings by or against
Borrower under any bankruptcy or insolvency law;
(g) Borrower's failure to keep the Collateral insured against loss by fire
or otherwise for the full insurable value thereof with companies and for
coverages (including Lender's Long Form Loss Payable Endorsement) acceptable to
Lender and making the loss, if any, payable to Lender;
(h) the loss, revocation or failure to renew any license and/or permit now
held or hereafter acquired by Borrower which adversely affects the ability of
Borrower to continue its operations as presently conducted;
(i) the occurrence of a default or event of default (howsoever defined)
under any other agreement between Lender, the Guarantor and the Fidelity
Guarantor;
(j) the declaration of a default that permits acceleration of maturity
under any obligation of Borrower to any other creditor; or
(k) the occurrence of any event or circumstance with respect to the
Borrower such that Lender shall believe in good faith that the prospect of
payment of all or any part of the Obligations or the performance by the Borrower
under this Agreement or any other agreement between the Lender and the Borrower
is impaired or there shall occur any material adverse change in the business or
financial condition of the Borrower.
Upon the occurrence of any Event of Default, at the option of Lender: (x)
any and all Obligations, including without limitation the Obligations arising
from or in connection with the Loans, shall become immediately due and payable,
and (y) Borrower's eligibility to request any Further Loans shall automatically
and immediately terminate, without presentment, demand, protest, notice of
protest or other notice or requirements of any kind, all of which Borrower
expressly waives. Notwithstanding the foregoing sentence, if any Event of
Default under clause (f) occurs, the acceleration of the Obligations and
termination of Borrower's eligibility to request Further Loans shall be
automatic.
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At any time after an Event of Default, Lender may proceed to enforce the
rights of Lender whether by suit in equity or by action at law, whether for
specific performance of any covenant or agreement contained in this Agreement,
the Notes or the other Financing Agreements, or in aid of the exercise of any
power granted in either this Agreement or the Notes or any other Financing
Agreement, or it may proceed to obtain judgment or any other relief whatsoever
appropriate to the enforcement of such rights, or proceed to enforce any legal
or equitable right which Lender may have by reason of the occurrence of any
Event of Default hereunder.
ARTICLE IX
Collection of Receivables
Section IX.1 Deposits. Until Lender exercises its rights to collect the
Receivables as provided for in this Agreement, Borrower shall continue direct
collection of all Receivables. All collections and other proceeds of Receivables
which Borrower receives shall be received in trust for Lender and Borrower
shall: keep all such collections separate and apart from all of its other funds
and property; identify such collections and proceeds as the property of Lender;
and immediately deposit such collections in the identical form received, in such
accounts of Lender as designated by Lender from time to time.
Section IX.2 Schedule. All collections of Receivables shall be set forth
on a schedule in form and substance satisfactory to Lender. Collections of
Receivables shall be credited to the Obligations of Borrower on the day of their
actual receipt by Lender; provided, however, that all credits shall be
conditional credits subject to collection and that returned items, at Lender's
option, may be charged to Borrower; and further provided that for purposes of
the computation of interest, items shall not be deemed to be collected until
three (3) days after their actual receipt by Lender.
ARTICLE X
Returned Merchandise
Section X.1 Procedures. Until Lender exercises its rights to collect the
Receivables as provided for in this Agreement, Borrower may continue its present
policies for returned merchandise and adjustments, but shall promptly notify
Lender of any credits, adjustments or disputes arising concerning the goods or
services represented by Receivables. In any event, Borrower will immediately pay
Lender from its own funds (and not from the proceeds of Receivables), for
application to the Revolving Loans, an amount equal to any credit or adjustment
made to any Eligible Accounts; provided, however, that so long as no Defaulting
Event has occurred, such payment need not be made if Borrower shall have, after
making such credit or adjustment, sufficient Receivables to maintain the
aggregate outstanding balance of the Revolving Loans under the Borrowing Base.
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ARTICLE XI
Rights and Remedies of Lender
Section XI.1 Remedies of Lender. Upon Lender's demand for payment of the
Loans or upon the occurrence of any Event of Default, Lender shall have in any
jurisdiction where enforcement of this Agreement, the Notes or any other
Financing Agreement is sought, in addition to all other rights and remedies
which Lender may have under law and equity, the following rights and remedies,
all of which may be exercised with or without further notice to Borrower and
without a prior judicial or administrative hearing, which notice and hearing are
expressly waived: to occupy any of Borrower's premises for up to six (6) months
rent free for the purposes of liquidating Collateral, including without
limitation, conducting an auction thereon; to enforce or foreclose the liens and
security interests created under this Agreement or under any other agreement
relating to Collateral by any available judicial procedure or without judicial
process; to enter any premises where any Collateral may be located for the
purpose of taking possession or removing the same; to sell, assign, lease, or
otherwise dispose of Collateral or any part thereof, either at public or private
sale, in lots or in bulk, for cash, on credit or otherwise, with or without
representations or warranties, and upon such terms as shall be acceptable to
Lender, all at Lender's sole option and as Lender in its sole discretion may
deem advisable; to bid or become purchaser at any such sale if public; and, at
the option of Lender, to apply or be credited with the amount of all or any part
of the Obligations owing to Lender against the purchase price bid by Lender at
any such sale.
Section XI.2 Specific Powers. Lender may at any time, before (with respect
to clauses (iii), (v), (vii) and (x) of this Section 11.2) or after the
occurrence of a demand for payment of the Loans or an Event of Default, at
Lender's sole discretion: (i) give notice of assignment to any Account Debtor;
(ii) collect Receivables directly and charge, or cause to be charged, the
collection costs and expenses actually incurred to the Revolving Loan Account;
(iii) collect receivables submitted by Borrower to Lender for collection and
charge, or cause to be charged, the collection costs and expenses to the
Revolving Loan Account; (iv) settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Lender considers advisable, and
credit, or cause to be credited, the Revolving Loan Account with the net amounts
received in payment of Receivables; (v) exercise all other rights granted in
this Agreement and the other Financing Agreements; (vi) receive, open and
dispose of all mail addressed to Borrower and notify the Post Office authorities
to change the address for delivery of Borrower's mail to an address designated
by Lender; (vii) endorse the name of Borrower on any checks or other evidence of
payment that may come into possession of Lender and on any invoice, freight or
express xxxx, xxxx of lading or other document; (viii) in the name of Borrower
or otherwise, demand, xxx for, collect and give acquittance for any and all
monies due or to become due on Receivables; (ix) compromise, prosecute or defend
any action, claim or proceeding concerning Receivables; and (x) do any and all
things necessary and proper to carry out the purposes contemplated in this
Agreement, the other Financing Agreements and any other agreement between the
parties. Neither Lender nor any person acting as its representative hereunder
shall be liable for any acts or omissions or for any error of judgment or
mistake of fact or law, except for gross negligence or willful misconduct.
Borrower agrees that the powers granted hereunder, being coupled with an
interest, shall be irrevocable so long as any Obligation remains unsatisfied.
Notwithstanding the foregoing, it is understood that Lender is under no duty to
take any of the foregoing actions and that after having made demand upon the
Account Debtors for payment, Lender shall have no further duty as to the
collection or protection of Receivables or any income therefrom and no further
duty to preserve any rights pertaining thereto, other than the safe custody
thereof in the event Lender takes possession thereof.
Section XI.3 Duties After Demand or Default. Borrower will, at Lender's
request, assemble all Collateral and make it available to Lender at places which
Lender may reasonably
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select, whether at the premises of Borrower or elsewhere and will make available
to Lender all premises and facilities of Borrower for the purpose of Lender
taking possession of Collateral or of removing or putting the Collateral in
salable form. In the event that Lender elects to exercise its right to take
possession and control of any Collateral, and any goods called for in any sales
order, contract, invoice or other instrument or agreement evidencing or
purporting to give rise to any Receivable shall not have been delivered or shall
be claimed to be defective by any customer, Lender shall have the right in its
sole discretion to use and deliver to such customer any goods of Borrower to
fulfill such order, contract or the like so as to make good any such Receivable.
If any Collateral shall require repairing, maintenance, preparation, or the
like, or is in process or other unfinished state, Lender shall have the right,
but shall not be obligated, to effectuate such repair, maintenance, preparation,
processing or completion of manufacturing for the purpose of putting the same in
such salable form as Lender shall deem appropriate, provided that Lender shall
nonetheless have the right to sell or dispose of such Collateral without such
processing. The net cash proceeds resulting from the collection, liquidation,
sale, lease or other disposition of Collateral shall be applied first to the
expenses (including all attorneys' and professionals' fees) of retaking,
holding, storing, processing and preparing for sale, selling, collecting,
liquidating and the like such collateral and then to the satisfaction of all
Obligations, application as to particular Obligations or against principal or
interest to be at Lender's sole discretion, and then, upon full and final
payment of the Obligations, and unless otherwise prohibited by court order or
law, to Borrower, it being agreed that if any such payment made to Lender is
recovered from or repaid by Lender in whole or in part in any bankruptcy,
insolvency or similar proceeding instituted by or against Borrower, this
Agreement automatically shall be reinstated without any further action by
Borrower and Lender. Borrower shall be liable to Lender and shall pay to Lender
on demand any deficiency which may remain after such sale, disposition,
collection or liquidation of Collateral.
Section XI.4 Cumulative Remedies. The enumeration of Lender's rights and
remedies set forth in this Article XII is not intended to be exhaustive and the
exercise by Lender of any right or remedy hereunder shall not preclude the
exercise of any other rights or remedies, all of which shall be cumulative and
shall be in addition to any other right or remedy given hereunder or under any
other agreement between the parties or which may now or hereafter exist in law
or at equity or by suit or otherwise. No delay or failure to take action on the
part of Lender in exercising any right, power or privilege shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or privilege preclude other or further exercise thereof or the exercise of
any other right, power or privilege or shall be construed to be a waiver of any
Event of Default. No course of dealing between Borrower and Lender or its
employees shall be effective to change, modify or discharge any provision of
this Agreement or to constitute a waiver of any Event of Default.
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ARTICLE XII
Term
Section XII.1 Term and Termination.
(a) Revolving Loan. Unless sooner terminated by Lender as a result of the
occurrence of a demand, an Event of Default, or a Defaulting Event, Borrower's
eligibility to request Revolving Loans shall commence on the date hereof and
shall continue for a period through and including March 31, 2003 (the "Term").
Borrower's eligibility to request Revolving Loans may be extended after the Term
(and after any Renewal Term, as defined below) only with the express written
consent of both Borrower and Lender. Any such extension (and any further
extension) shall be made only with the express written consent of both Borrower
and Lender (each being a "Renewal Term"). At the end of the Term (or at the end
of a Renewal Term, if applicable), Borrower shall pay the entire balance of the
Revolving Loans, and all other outstanding Obligations. Further, upon
termination of the Revolving Loan facility, all of the rights, interests and
remedies of Lender and Obligations of Borrower shall survive and Borrower shall
have no right to receive, and Lender shall have no obligation to make, any
further Revolving Loans. Upon full, final and indefeasible payment of the
Obligations to Lender, all rights and remedies of Borrower and Lender hereunder
shall cease, so long as any payment so made to Lender and applied to the
Obligations is not thereafter recovered from or repaid by Lender in whole or in
part in any bankruptcy, insolvency or similar proceeding instituted by or
against Borrower, whereupon this Agreement shall be automatically reinstated
without any further action by Borrower and Lender and shall continue to be fully
applicable to such Obligations to the same extent as though the payment so
recovered or repaid had never been originally made on such Obligations.
(b) Termination Fee. In the event that (a) this Agreement is terminated by
Borrower as of any date other than the end of the Term or the end of a Renewal
Term, or (b) this Agreement is terminated as a result of: (i) a demand by
Lender for payment of the Loans; or (ii) the occurrence of an Event of Default
or a Defaulting Event, Borrower shall pay to Lender on the effective date of
such termination, and in addition to any other payments Borrower is required to
make hereunder, a termination charge equal to five (5%) percent of the maximum
principal amount of the Loans, if terminated during the first year of the Loans
and one (1%) percent of the maximum principal amount of the Loans, if terminated
during the second year of the Loans (the "Termination Fee"). It is understood
that the determination of the maximum principal amount of the Loans shall be
made without regard to the components of the Borrowing Base based upon Eligible
Accounts. For example, for purposes of this provision, on the date hereof the
maximum principal amount of the Loans is Three Million ($3,000,000.00) Dollars
and the Termination Fee would be One Hundred Fifty Thousand ($150,000.00)
Dollars if the Loans were terminated during the first year.
ARTICLE XIII
Miscellaneous
Section XIII.1 Indemnification.
(a) In consideration of Lender's execution and delivery of this Agreement
and Lender's making of the Loans hereunder and in addition to all other
obligations of Borrower under this Agreement, Borrower hereby agrees to defend,
protect, indemnify and hold harmless Lender, its successors, assigns, officers,
directors, employees and agents (including without limitation, those retained in
connection with the transactions contemplated by this Agreement) (individually,
an "Indemnitee" and, collectively, the "Indemnitees") from and against any and
all actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages and expenses in connection therewith (irrespective of
whether any such Indemnitees is a party to any action for which
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indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements as and when incurred (collectively, the "Indemnifiable
Liabilities") incurred by the Indemnitees or any of them as a result of, or
arising out of, or relating to (i) the execution, delivery, performance or
enforcement of this Agreement and the other Financing Agreements and any
instrument, document or agreement executed pursuant hereto to any of the
Indemnitees; (ii) Lender's status as lender to, or creditor of, Borrower; or
(iii) the operation of Borrower's business from and after the date hereof,
including without limitation those arising under any Environmental Law. To the
extent that the foregoing undertaking by Borrower may be unenforceable for any
reason, Borrower shall make the maximum contribution to the payment and
satisfaction of each of the Indemnifiable Liabilities which is permissible under
applicable law.
(b) Borrower hereby covenants and agrees at all times to indemnify, hold
harmless and defend the Indemnitees, whether as secured party in possession or
as successor in interest to Borrower as owner of any personal property assets
located on the real property of Borrower, by virtue of any action taken by
Lender pursuant to the Financing Agreement, the Uniform Commercial Code (as in
effect in any applicable jurisdiction) or otherwise from and against any and all
liabilities, losses, damages, costs, expenses, penalties, fines, causes of
action, suits, claims, demands or judgments, including without limitation,
attorneys' fees and expenses, suffered or incurred in connection with: (i) the
Environmental Law, including, without limitation, liens or claims of any
federal, state or municipal government or quasi-governmental agency or any third
person, whether arising under any Environmental Law or any other federal, state
or municipal law or regulation; (ii) any spill or contamination affecting the
Premises or any other property owned, leased, controlled or used by Borrower,
including without limitation, any Hazardous Materials or other waste-like or
toxic substances located on, under, emanating from or relating to the Premises
or such property from and on and after the date hereof or any portion of any
thereof or any property contiguous to the Premises or such property from and
after the date hereof, and including without limitation, any loss of value of
the Premises or such property as a result of any such spill or contamination;
and (iii) the direct or indirect installation, use, generation, manufacture,
production, storage, release, threatened release, discharge, disposal or
presence of any Hazardous Materials, on, under or about the Premises or any
other property owned, leased, controlled or used by Borrower or any portion of
any thereof, from and including all consequential damages, the costs of any
required or necessary repair, cleanup or detoxification, and the costs of the
preparation and implementation of any closure, remedial or other required plans.
Further, the mere fact that such Indemnitee has been declared an "owner" or
"operator" (as such term is defined in any Environmental Law) resulting from
such Indemnitee having taking possession of any of the Collateral (without any
negligence on the part of such Indemnitee) shall not exonerate Borrower from any
claim by any Indemnitee seeking such indemnification.
Section XIII.2 Payment Set-Aside. To the extent that Borrower makes a
payment or payments to Lender (whether hereunder, under the Notes, or under the
other Financing Agreements) or Lender enforces its security interests or rights
or exercises its right of setoff, and such payment or payments or the proceeds
of such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to Borrower, a
trustee, receiver or any other person under any law (including without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action) in each case in connection with any bankruptcy or similar
proceeding involving Borrower, then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
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Section XIII.3 Set-off. Borrower hereby grants to Lender a lien and right
of setoff for all its liabilities to Lender upon and against all its deposits,
credits, collateral and property now or hereafter in the possession or control
of Lender or in transit to Lender. Lender may, upon the occurrence of any Event
of Default, apply or exercise the right of set off against any or all of the
foregoing, or any part thereof against any liability of Borrower to Lender.
Section XIII.4 Covenants to Survive; Binding Agreement. All covenants,
agreements, warranties and representations made herein, in the Notes, in the
other Financing Agreements, and in all certificates or other documents of
Borrower shall survive the advances of money made by Lender to Borrower
hereunder and the delivery of the Notes and the other Financing Agreements, and
all such covenants, agreements, warranties and representations shall be binding
upon and inure to the benefit of Lender and its successors and assigns, whether
or not so expressed.
Section XIII.5 Cross-Collateralization. All Collateral which Lender may at
any time acquire from Borrower or from any other source in connection with
Obligations arising under this Agreement and the other Financing Agreements
shall constitute collateral for each and every Obligation, without apportionment
or designation as to particular Obligations and that all Obligations, however
and whenever incurred, shall be secured by all Collateral however and whenever
acquired, and Lender shall have the right, in its sole discretion, to determine
the order in which Lender's rights in or remedies against any Collateral are to
be exercised and which type of Collateral or which portions of Collateral are to
be proceeded against and the order of application of proceeds of Collateral as
against particular Obligations.
Section XIII.6 Cross-Default. Borrower acknowledges and agrees that an
Event of Default and/or Defaulting Event under any one of the Financing
Agreements shall constitute an Event of Default or Defaulting Event under each
of the other Financing Agreements.
Section XIII.7 Amendments and Waivers. Neither this Agreement, the Notes,
the other Financing Agreements, nor any term, covenant or condition hereof or
thereof may be changed, waived, discharged, modified or terminated except by a
writing executed by the parties hereto or thereto. No failure on the part of
Lender to exercise, and no delay in exercising, any right, remedy or power
hereunder or under the Notes or the other Financing Agreements shall preclude
any other or future exercise thereof, or the exercise of any other right, remedy
or power.
Section XIII.8 Notices. All notices, requests, consents, demands and other
communications hereunder shall be in writing and shall be mailed by first class
mail or overnight mail to the respective parties to this Agreement to the
address set forth in the introductory sentence hereof.
Section XIII.9 Transfer of Lender's Interest. Borrower hereby agrees that
Lender, in its sole discretion, may freely sell, assign or otherwise transfer
participations, portions, co-lender interests or other interests in all or any
portion of the indebtedness, liabilities or obligations arising in connection
with or in any way related to the financing transactions of which this Agreement
is a part provided that such transferee is a recognized financial institution.
In the event of any such transfer, the transferee may, in Lender's sole
discretion, have and enforce all the rights, remedies and privileges of Lender.
Borrower consents to the release by Lender to any potential transferee of any
and all information (including without limitation, financial information)
pertaining to Borrower as Lender, in
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its sole discretion, may deem appropriate. If such transferee so participates
with Lender in making loans or advances hereunder or under any other agreement
between such Lender and Borrower, Borrower hereby grants to such transferee and
such transferee shall have and is hereby given a continuing lien and security
interest in any money, securities or other property of Borrower in the custody
or possession of such transferee, including the right of setoff under
circumstances consistent with this Agreement, to the extent of such transferee's
participation in the Obligations of Borrower to Lender. Notwithstanding anything
to the contrary contained in this Section 13.9 or any other provisions of the
Loan Agreement or any of the other Financing Agreements, Borrower hereby agrees
that Lender, in its sole discretion, may freely sell, assign or otherwise
transfer interests in all or any portion of the following (collectively, the
"Interests"): (i) the Financing Agreements; (ii) the Obligations and any other
indebtedness, liabilities or obligations arising under or in connection with or
in any way related to the Financing Agreements, (iii) the Collateral, and (iv)
any rights and remedies of the Lender arising under or in connection with or in
any way related to the Financing Agreements; provided, however, that such
transfer is in connection with a transaction pursuant to which any or all of the
Interests are transferred by Lender to a trust or special purpose entity in one
or a series of securitization transactions or similar financing arrangements. In
the event of any such transfer, the transferee shall have all the rights,
remedies and privileges of Lender. Borrower consents to the release by Lender to
any potential transferee of any and all information (including without
limitation, financial information) pertaining to Borrower as Lender, in its sole
discretion, may deem appropriate.
Section XIII.10 Waivers.
(a) BORROWER ACKNOWLEDGES THAT THE LOANS EVIDENCED HEREBY ARE COMMERCIAL
TRANSACTIONS AND WAIVES ITS RIGHT TO NOTICE AND HEARING UNDER CHAPTER 903a OF
THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE ALLOWED BY ANY STATE OR
FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH LENDER MAY DESIRE TO
USE, AND FURTHER WAIVES ITS RIGHTS TO REQUEST THAT LENDER POST A BOND, WITH OR
WITHOUT SURETY, TO PROTECT BORROWER AGAINST DAMAGES THAT MAY BE CAUSED BY ANY
PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY LENDER. BORROWER FURTHER WAIVES
DILIGENCE, DEMAND, PRESENTMENT FOR PAYMENT, NOTICE OF NONPAYMENT, PROTEST AND
NOTICE OF ANY RENEWALS OR EXTENSIONS.
(b) BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY COURT IN ANY SUIT, ACTION
OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO
THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT IS A PART AND/OR THE
ENFORCEMENT OF ANY OF LENDER'S RIGHTS, INCLUDING WITHOUT LIMITATION, TORT
CLAIMS. BORROWER ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY,
WITHOUT DURESS AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER
WITH ITS ATTORNEYS. BORROWER FURTHER ACKNOWLEDGES THAT LENDER HAS NOT
REPRESENTED TO BORROWER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
(c) BORROWER ACKNOWLEDGES THAT IT MAKES THE FOREGOING WAIVERS IN CLAUSE (a)
AND CLAUSE (b) ABOVE, KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER
CONSIDERATION OF THE RAMIFICATIONS OF SUCH WAIVERS WITH ITS ATTORNEYS.
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Section XIII.11 Section Headings; Severability; Entire Agreement. Section
and subsection headings have been inserted herein for convenience only and shall
not be construed as part of this Agreement. Every provision of this Agreement,
the Notes and the other Financing Agreements is intended to be severable; if any
term or provision of this Agreement, the Notes, the other Financing Agreements,
or any other document delivered in connection herewith shall be invalid, illegal
or unenforceable for any reason whatsoever, the validity, legality and
enforceability of the remaining provisions hereof or thereof shall not in any
way be affected or impaired thereby. All Exhibits and Schedules to this
Agreement shall be annexed hereto and shall be deemed to be part of this
Agreement. This Agreement, the other Financing Agreements, and the Exhibits and
Schedules attached hereto and thereto embody the entire agreement and
understanding between Borrower and Lender and supersede all prior agreements and
understandings relating to the subject matter hereof unless otherwise
specifically reaffirmed or restated herein.
Section XIII.12 Governing Law, Notice and Service of Process, Pleadings
and Other Papers. This Agreement and the other Financing Agreements, and all
transactions, assignments and transfers hereunder and thereunder, and all the
rights of the parties, shall be governed as to validity, construction,
enforcement and in all other respects by the laws of the State of Connecticut
(but not its conflicts of law provisions). Borrower hereby designates and
appoints, without power of revocation, the Secretary of the State of Connecticut
as Borrower's agent upon whom may be served all process, pleadings, notices or
other papers which may be served upon it as a result of any of its Obligations
under this Agreement or other Financing Agreements. Borrower agrees that the
Superior Court for the Judicial District of Hartford/New Britain or the United
States District Court for the District of Connecticut shall have jurisdiction to
hear and determine any claims or disputes pertaining to the financing
transactions of which this Agreement is a part and/or to any matter arising or
in any way related to this Agreement or any other agreement between Lender and
Borrower, and Borrower expressly submits and consents in advance to such
jurisdiction in any action or proceeding.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the date first above written.
Witnessed: NETPLEX SYSTEMS, INC.
____________________________ By:_____________________________________
AMERICAN COMMERCIAL FINANCE
CORPORATION
____________________________ By:_____________________________________
Xxxxxxx X. Mount, President
COMMONWEALTH OF VIRGINIA
_______________, ss. April , 2001
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Then personally appeared the above-named, __________________,
_______________, and acknowledged the foregoing instrument to be the free act
and deed of Netplex Systems, Inc., before me,
_________________________________________
Notary Public
My Commission Expires:
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SCHEDULES
The following Schedules to the within Commercial Revolving Loan, Demand
Loan and Security Agreement are respectively described in the section indicated.
Those Schedules in which no information has been inserted shall be deemed to
read "None".
SCHEDULE 2.1
------------
Credit Limits
Account Debtor Credit Limit
-------------- ------------
SVI Retail $ 25,000.00
King Pharmaceutical $350,000.00
Value City $350,000.00
American Eagle $250,000.00
Lucent $250,000.00
SCHEDULE 4.1(d)
---------------
Litigation
See attached
SCHEDULE 4.1(l)
---------------
Leases
See attached
SCHEDULE 5.1(m)
---------------
Pension Plans
See attached
SCHEDULE 5.1(n)
---------------
Deferred Compensation Arrangements
SCHEDULE 5.1(p)
---------------
Borrower's Places of Business
Address Property Located At Such Address
------- --------------------------------
See attached
SCHEDULE 5.1(s)
---------------
Unions and Pensions
SCHEDULE 5.1(u)
---------------
Other Encumbrances and Liens
See attached
Leases
See attached
EXHIBIT A
---------
REVOLVING PROMISSORY NOTE
$3,000,000.00 April , 2001
ON DEMAND, for value received, the undersigned, NETPLEX SYSTEMS, INC., a
Virginia corporation ("Maker"), does hereby promise to pay to AMERICAN
COMMERCIAL FINANCE CORPORATION ("Lender"), or order, at its office at 000 Xxxxx
Xxxx Xxxxxx, Xxxx Xxxxxxxx, Xxxxxxxxxxx 00000, or at such other place as the
holder hereof (including Lender, hereinafter referred to as "Holder") may
designate, the sum of up to Three Million ($3,000,000.00) Dollars, together with
interest on the unpaid balance of this Note, beginning as of the date hereof,
before or after maturity or judgment, at the rate of one and three-quarters of
one (1.75%) percentage points per annum above the Prime Rate on a floating
basis, which rate shall be computed and payable monthly in arrears on the basis
of a three hundred sixty (360) day year and actual days elapsed, together with
all taxes levied or assessed on this Note or the debt evidenced hereby against
the Holder, and together with all costs, expenses and attorneys' and other
professional fees actually incurred in any action to collect this Note or to
enforce, preserve, realize or foreclose any mortgage, security agreement or
other agreement securing this Note or to preserve, enforce, protect or sustain
the lien of said mortgage, security agreement or other agreement or in any
litigation or controversy arising from or connected with said mortgage, security
agreement or other agreement or this Note. The term "Prime Rate" as used herein
shall mean the Prime Rate as published from time to time in the "Money Rates"
section of The Wall Street Journal or any successor publication, or in the event
-----------------------
that such rate is no longer published in The Wall Street Journal, a comparable
-----------------------
index or reference selected by the Lender. The Prime Rate may not necessarily
be the lowest or most favorable rate. Any change in the interest rate because of
a change in the Prime Rate shall become effective, without notice or demand, on
the first day of each month immediately following the month in which any change
in the Prime Rate occurs so that the Prime Rate in effect on the last day of any
month shall be the Prime Rate for interest computation purposes for the next
succeeding month.
The principal amount of this Note shall be advanced, at the sole discretion
of Holder, pursuant to a Commercial Revolving Loan, Demand Loan and Security
Agreement between Maker and Lender dated of even date herewith (the "CRLDLSA")
and, notwithstanding the demand nature of this Note, is subject in all respects
to the terms and conditions of the CRLDLSA, including, but not limited to, the
repayment terms and the termination date set forth in the CRLDLSA. Advances and
payments on this Note may be evidenced by borrowing certificates, a grid (if
any) attached to this Note or similar certificates or documents, or by an
internal ledger account of Lender which shall set forth, among other things,
the principal amount of any advances and payments therefor. Maker shall pay
interest, principal and all other sums due hereunder ON DEMAND. If demand is not
sooner made, interest shall be paid on the first day of each and every month
commencing on the first of such dates next succeeding the date hereof, and
continuing until the obligations evidenced by this Note are fully and finally
paid. Holder may, in its sole discretion, charge any amounts due hereunder to
Maker's revolving loan account maintained with Holder pursuant to the CRLDLSA.
Without in any way limiting the demand nature of the indebtedness due
hereunder, which shall at all times be payable ON DEMAND, Maker agrees that (i)
if any installment of interest, principal or other sum due hereunder is not paid
on demand or when it is otherwise due and payable
hereunder, under the CRLDLSA or under any instrument evidencing any other
obligation of Maker to Holder; or (ii) if Maker or Holder shall terminate the
CRLDLSA; or (iii) if Maker or any endorser hereof or any guarantor or surety of
any obligation of Maker hereunder shall make an assignment for the benefit of
creditors or suffer or permit the appointment of a receiver for any part of its
property or suffer or permit the filing by or against it of any petition for
adjudication, arrangement, reorganization or the like under any bankruptcy or
insolvency law; or (iv) if Maker or any endorser hereof or any guarantor or
surety of any obligation of Maker hereunder shall be in default (beyond any
applicable grace or cure period) under any other provision of this Note, the
CRLDLSA, or any mortgage, security agreement or any other agreement securing
this Note, any other note by Maker to Holder, or in the payment or performance
of any other obligation to Holder, or in the payment or performance of any other
material obligation to any other person; or (v) if there shall be any material
adverse change from the present condition or affairs (financial or otherwise) of
Maker or any of the guarantors of the obligations of Maker, that in Holder's
reasonable opinion impairs its security or increases its risk; then an event of
default shall have occurred hereunder and, upon the happening of any such event,
the entire indebtedness with accrued interest thereon due under this Note shall,
at the option of Holder, accelerate and become immediately due and payable
without notice. Failure to exercise such option shall not constitute a waiver of
the right to exercise the same in the event of any subsequent default. Upon the
occurrence of such an event of default or demand for payment of any demand
indebtedness owing by Maker to Holder, the interest rate on this Note shall
automatically increase without notice to a floating per annum rate equal to four
percentage points (4.0%) above the rate otherwise in effect hereunder.
In the event of Maker's failure to pay any installment of interest, and/or
to pay any other sum due hereunder or under the CRLDLSA for more than ten (10)
days after the date it is due and payable, without in any way affecting Holder's
right to make demand hereunder or to declare an event of default to have
occurred, a late charge equal to five (5%) percent of such late payment shall be
assessed against Maker and shall be due and payable immediately.
Notwithstanding any provisions of this Note, it is the understanding and
agreement of Maker and Holder (and any guarantors of Maker's liabilities) that
the maximum rate of interest to be paid by Maker (or guarantors of Maker's
liabilities) to Holder shall not exceed the highest or the maximum rate of
interest permissible to be charged by a commercial lender such as Lender to a
commercial borrower such as Maker under the laws of the State of Connecticut.
Any amount paid in excess of such rate shall be considered to have been payments
in reduction of principal.
Maker hereby gives Holder a lien and right of setoff for all Maker's
liabilities upon and against all the deposits, credits, collateral and property
of Maker and guarantors, now or hereafter in the possession or control of Holder
or in transit to it. Holder may, upon the occurrence of an event of default
hereunder or upon demand for payment of any demand indebtedness owing from Maker
to Holder, apply or set off the same, or any part thereof, to any liability of
Maker even though unmatured.
Notwithstanding the foregoing, if this Note is secured wholly or in part by
the assignment of a life insurance policy or other agreement securing this Note,
and the proceeds therefrom are paid to Holder pursuant to such assignment or
other agreement securing this Note, Holder, at its option, may apply all or part
of such proceeds to the outstanding principal balance of this Note, interest
thereon and other obligations of Maker hereunder in such order as Holder, in its
sole discretion, deems proper.
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Failure by Holder to insist upon the strict performance by Maker of any
terms and provisions herein shall not be deemed to be a waiver of any terms and
provisions herein, and Holder shall retain the right thereafter to insist upon
strict performance by Maker of any and all terms and provisions of this Note or
any document securing the repayment of this Note.
MAKER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT, ACTION OR
PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO THE
FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR THE ENFORCEMENT OF
ANY OF HOLDER'S RIGHTS AND REMEDIES, INCLUDING WITHOUT LIMITATION, TORT CLAIMS.
MAKER ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND WITHOUT
DURESS AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS
ATTORNEYS. MAKER FURTHER ACKNOWLEDGES THAT LENDER HAS NOT AGREED WITH OR
REPRESENTED TO MAKER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
MAKER AND EACH AND ALL GUARANTORS OF THIS NOTE ACKNOWLEDGE THAT THE LOAN
EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND WAIVES ITS RIGHTS TO
NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS
OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH HOLDER MAY DESIRE TO USE, AND FURTHER WAIVES ITS RIGHTS TO REQUEST
THAT HOLDER POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT SAID MAKER AGAINST
DAMAGES THAT MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY
HOLDER. Maker further, waives diligence, demand, presentment for payment, notice
of nonpayment, protest and notice of protest, and notice of any renewals or
extensions of this Note, and all rights under any statute of limitations, and
all guarantors agree that the time for payment of this Note may be extended at
Holder's sole discretion, without impairing their liability thereon, and further
consent to the release of all or any part of the security for the payment
hereof, at the discretion of Holder, or the release of any party liable for this
obligation without affecting the liability of the other parties hereto. MAKER
ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS
AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS
ATTORNEYS. MAKER FURTHER ACKNOWLEDGES THAT LENDER HAS NOT AGREED WITH OR
REPRESENTED TO MAKER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
This Note shall be governed by and construed in accordance with the laws of
the State of Connecticut (but not its conflicts of law provisions).
NETPLEX SYSTEMS, INC.
__________________________ By:_____________________________________
Witness
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