Exhibit 10.44
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made on October 7, 2002, by and among
FLEET CAPITAL CORPORATION (together with its successors and assigns, "Lender"),
a Rhode Island corporation with an office at 000 Xxxxxxxx Xxxxxxx, X.X., Xxxxx
000, Xxxxxxx, Xxxxxxx 00000; SED INTERNATIONAL, INC., a Georgia corporation
("SED," individually and, in its capacity as the representative of the other
Borrowers pursuant to SECTION 3.3 hereof, "Borrowers' Agent"); SED INTERNATIONAL
HOLDINGS, INC., a Georgia corporation ("Parent"); and SED MAGNA (MIAMI), INC., a
Delaware corporation ("Magna"), each with its chief executive office and
principal place of business at 0000 Xxxxx Xxxxx Xxxxxxx Xxxxx, Xxxxxx, Xxxxxxx
00000 (SED, Parent and Magna are hereinafter referred to collectively as
"Borrowers" and individually as a "Borrower"). Capitalized terms used in this
Agreement have the meanings assigned to them in Appendix A, General Definitions.
R E C I T A L S:
Each Borrower has requested that Lender make available a revolving credit
facility to Borrowers, which facility shall be used by Borrowers to finance
their mutual and collective enterprise of the sale and distribution of
microcomputer, computer, cellular, wireless, peripheral, convergent technology,
consumer electronics and other related products and accessories. In order to
utilize the financial powers of each Borrower in the most efficient and
economical manner, and in order to facilitate the financing of each Borrower's
needs, Lender will, at the request of any Borrower, make loans to all Borrowers
under the credit facilities on a combined basis and in accordance with the
provisions hereinafter set forth. Borrowers' business is a mutual and collective
enterprise, and Borrowers believe that the consolidation of all loans under this
Agreement will enhance the aggregate borrowing powers of each Borrower and ease
the administration of their loan relationship with Lender, all to the mutual
advantage of Borrowers. Lender's willingness to extend credit to Borrowers and
to administer each Borrower's collateral security therefor, on a combined basis
as more fully set forth in this Agreement, is done solely as an accommodation to
Borrowers and at Borrowers' request in furtherance of Borrowers' mutual and
collective enterprise.
NOW THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the parties hereto hereby agree as follows:
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a total credit facility of up to $35,000,000
available to Borrowers as follows:
1.1. REVOLVER COMMITMENT.
1.1.1. Revolver Loans. Lender agrees, to the extent of the Revolver
Commitment and upon the terms and subject to the conditions set forth herein, to
make Revolver Loans to Borrowers on any Business Day during the period from the
date hereof through the Business Day before the last day of the Term, which
Revolver Loans may be repaid and reborrowed in accordance with the provisions of
this Agreement; provided, however, that Lender shall have no obligation to
Borrowers whatsoever to make any Revolver Loan on or after the Commitment
Termination Date or if at the time of the proposed funding thereof the aggregate
principal amount of all of the Revolver Loans then outstanding and Pending
Revolver Loans exceeds, or would exceed after the funding of such Revolver Loan,
the Borrowing Base. The Revolver Loans shall bear interest as set forth in
SECTION 2.1 hereof. Each Revolver Loan shall, at the option of Borrowers, be
made or continued as, or converted into, part of one or more Borrowings that,
unless specifically provided herein, shall consist entirely of Base Rate Loans
or LIBOR Loans.
1.1.2. Out-of-Formula Loans. If the unpaid balance of Revolver Loans
outstanding at any time should exceed the Borrowing Base at such time (an
"Out-of-Formula Condition"), such Revolver Loans shall nevertheless constitute
Obligations that are secured by the Collateral and entitled to all of the
benefits of the Loan Documents. In the event that Lender is willing in its sole
and absolute discretion to make Out-of-Formula Loans, such Out-of-Formula Loans
shall be payable ON DEMAND and, if not paid in full within 1 Business Day after
demand, shall bear interest as provided in SECTION 2.1.5.
1.1.3. Use of Proceeds. The proceeds of the Revolver Loans shall be
used by Borrowers solely for one or more of the following purposes: (i) to
satisfy any Debt owing on the Closing Date to Wachovia; (ii) to pay the fees and
transaction expenses associated with the closing of the transactions described
herein; (iii) to pay any of the Obligations; and (iv) for other lawful corporate
purposes of Borrowers to the extent not prohibited by this Agreement or
Applicable Law. In no event may any Revolver Loan proceeds be used by Borrowers
to make a contribution to the equity of any Subsidiary, to purchase or to carry,
or to reduce, retire or refinance any Debt incurred to purchase or carry, any
Margin Stock or for any related purpose that violates the provisions of
Regulations T, U or X of the Board of Governors.
1.1.4. Revolver Note. The Revolver Loans made by Lender and interest
accruing thereon shall be evidenced by the records of Lender and by the Revolver
Note. All outstanding principal amounts and accrued interest under the Revolver
Note shall be due and payable as set forth in SECTION 4.2 hereof.
1.1.5. Voluntary Reductions of Revolver Commitment. Borrowers shall
have the right to permanently reduce the amount of the Revolver Commitment at
any time and from time to time upon written notice to Lender of such reduction,
which notice shall specify the amount of such reduction, shall be irrevocable
once given, shall be given at least 5 Business Days prior to the end of the
month and shall be effective only upon Lender's receipt thereof. The effective
date of any voluntary reduction of the Revolver Commitment shall be the first
day of a month
following the month in which such notice is timely received by Lender. If on the
effective date of any such reduction in the Revolver Commitment and after giving
effect thereto an Out-of-Formula Condition exists, then the provisions of
SECTION 4.2.1(iii) hereof shall apply, except that such repayment shall be due
immediately upon such effective date without further notice to or demand upon
Borrowers. If the Revolver Commitment is reduced to zero, then such reduction
shall be deemed a termination of the Commitment by Borrowers pursuant to SECTION
5.2.2 hereof. The Revolver Commitment once reduced may not be reinstated without
the written consent of Lender.
1.2. RESERVED.
1.3. LC FACILITY.
1.3.1. Procurement of Letters of Credit. Subject to all of the terms
and conditions hereof, Lender agrees to establish the LC Facility, pursuant to
which, during the period from the date hereof until (but excluding) the 15th day
prior to the last day of the Term and provided that no Default or Event of
Default exists, Lender shall procure from Bank one or more Letters of Credit on
Borrowers' request therefor from time to time, subject to the following terms
and conditions:
(i) Borrowers acknowledge that Bank's willingness to issue any
Letter of Credit is conditioned upon Bank's receipt of (A) the LC Support
duly executed and delivered to Bank by Lender, (B) an LC Application with
respect to the requested Letter of Credit and (C) such other instruments
and agreements as Bank may customarily require for the issuance of a
letter of credit of equivalent type and amount as the requested Letter of
Credit. Lender shall have no obligation to execute any LC Support or to
join with Borrowers in executing an LC Application unless (x) Lender
receives an LC Request from Borrowers at least 2 Business Days prior to
the date on which Borrowers desire to submit such LC Application to Bank
and (y) each of the LC Conditions is satisfied on the date of Lender's
receipt of the LC Request and at the time of the requested execution of
the LC Application. Any Letter of Credit issued on the Closing Date shall
be for an amount in Dollars that is greater than $250,000. In no event
shall Lender have any liability or obligation to Borrowers or any
Subsidiary for any failure or refusal by Bank to issue, for Bank's delay
in issuing, or for any error of Bank in issuing any Letter of Credit.
(ii) Letters of Credit may be requested by Borrowers only if they
are to be used (a) to support obligations of Borrowers incurred either in
the Ordinary Course of Business or otherwise permitted by this Agreement,
on a standby or documentary basis, or (b) for such other purposes as
Lender may approve from time to time in writing.
(iii) Borrowers shall comply with all of the terms and conditions
imposed on Borrowers by Bank, whether such terms and conditions are
contained in an LC Application or in any agreement with respect thereto,
and subject to the rights of Bank, Lender shall have the same rights and
remedies that Bank has under any agreements that Borrowers may have with
Bank in addition to any
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rights and remedies contained in any of the Loan Documents. Borrowers
agree to reimburse Bank for any draw under any Letter of Credit
immediately as hereinafter provided, and to pay Bank the amount of all
other liabilities and obligations payable to Bank under or in connection
with any Letter of Credit immediately when due, irrespective of any claim,
setoff, defense or other right that Borrowers may have at any time against
Bank or any other Person. If Lender shall pay any amount under a LC
Support with respect to any Letter of Credit, then Borrowers shall pay to
Lender, in Dollars on the first Business Day following the date on which
payment was made by Lender under such LC Support (the "Reimbursement
Date"), an amount equal to the amount paid by Lender under such LC
Support, together with interest from and after the Reimbursement Date
until payment in full is made by Borrowers at the Default Rate for
Revolver Loans constituting Base Rate Loans. Until Lender has received
payment from Borrowers in accordance with the foregoing provisions of this
clause(iii), Lender, in addition to all of its other rights and remedies
under this Agreement, shall be fully subrogated to (A) the rights and
remedies of Bank as issuer of the Letter of Credit under any agreement
with Borrowers relating to the issuance of such Letter of Credit, and (B)
the rights and remedies of each beneficiary under such Letter of Credit
whose claims against Borrowers have been discharged with the proceeds of
such Letter of Credit. Whether or not a Borrower submits any Notice of
Borrowing to Lender, Borrowers shall be deemed to have requested from
Lender a Borrowing of Base Rate Loans in an amount necessary to pay to
Lender all amounts due Lender on any Reimbursement Date and whether or not
any Default or Event of Default has occurred or exists, the Revolver
Commitment has been terminated, the funding of the Borrowing deemed
requested by Borrowers would result in, or increase the amount of, any
Out-of-Formula Condition or any of the conditions set forth in SECTION 10
hereof are not satisfied.
(iv) Borrowers assume all risks of the acts, omissions or misuses of
any Letter of Credit by the beneficiary thereof. The obligation of
Borrowers to reimburse Lender for any payment made by Lender under the LC
Support shall be absolute, unconditional and irrevocable and shall be paid
without regard to any lack of validity or enforceability of any Letter of
Credit, the existence of any claim, setoff, defense or other right which
Borrowers may have at any time against a beneficiary of any Letter of
Credit, or improper honor by Bank of any draw request under a Letter of
Credit. If presentation of a demand, draft, certificate or other document
does not comply with the terms of a Letter of Credit and Borrowers contend
that, as a consequence of such noncompliance it has no obligation to
reimburse Bank for any payment made with respect thereto, Borrowers shall
nevertheless be obligated to reimburse Lender for any payment made under
the LC Support with respect to such Letter of Credit, but without waiving
any claim Borrowers may have against Bank in connection therewith. All
disputes regarding any Letter of Credit shall be resolved by Borrowers
directly with Bank.
(v) No Letter of Credit shall be extended or amended in any respect
that is not solely ministerial, unless all of the LC
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Conditions are met as though a new Letter of Credit were being requested
and issued.
(vi) Borrowers hereby authorize and direct Bank to deliver to Lender
all instruments, documents and other writings and Property received by
Bank pursuant to or in connection with any Letter of Credit and to accept
and rely upon Lender's instructions and agreements with respect to all
matters arising in connection with such Letter of Credit and the related
LC Application.
1.3.2. Cash Collateral Account. If any LC Outstandings, whether or
not then due or payable, shall for any reason be outstanding (i) at any time
when an Event of Default has occurred and is continuing, (ii) on any date that
Availability is less than zero, or (iii) on or at any time after the Commitment
Termination Date, then Borrowers shall, on Lender's request, forthwith deposit
with Lender, in cash, an amount equal to 105% of the aggregate amount of all LC
Outstandings. If Borrowers fail to make such deposit on the first Business Day
following Lender's demand therefor, Lender may advance such amount as Revolver
Loans (whether or not an Out-of-Formula Condition is created thereby). Such cash
(together with any interest accrued thereon) shall be held by Lender in the Cash
Collateral Account and may be invested, in Lender's discretion, in Cash
Equivalents. Each Borrower hereby pledges to Lender and grants to Lender a
security interest in all Cash Collateral held in the Cash Collateral Account
from time to time and all proceeds thereof, as security for the payment of all
Obligations, whether or not then due or payable. From time to time after cash is
deposited in the Cash Collateral Account, Lender may apply Cash Collateral then
held in the Cash Collateral Account to the payment of any amounts, in such order
as Lender may elect, as shall be or shall become due and payable by Borrowers to
Lender or any Lender with respect to the LC Outstandings. Neither Borrowers nor
any other Person claiming by, through or under or on behalf of Borrowers shall
have any right to withdraw any of the Cash Collateral held in the Cash
Collateral Account, including any accrued interest, provided that upon (i)
written waiver of the Event of Default or elimination of the Out-of-Formula
Condition that gave rise to Lender's request for Cash Collateral as provided in
this SECTION 1.3.2 or (ii) termination or expiration of all Letters of Credit
and the payment and satisfaction of all of the LC Outstandings, any Cash
Collateral remaining in the Cash Collateral Account shall be returned to
Borrowers unless an Event of Default then exists (in which event Lender may
apply such Cash Collateral to the payment of any other Obligations outstanding,
with any surplus to be turned over to Borrowers).
1.3.3. Indemnifications. In addition to any other indemnity which
Borrowers may have to Lender under any of the other Loan Documents and without
limiting such other indemnification provisions, Borrowers hereby agrees to
indemnify and defend each Lender Indemnitee and to hold each of the Lender
Indemnitees harmless from and against any and all Claims which any of the Lender
Indemnitees (other than as the actual result of their own gross negligence or
willful misconduct) incur or be subject to as a consequence, directly or
indirectly, of (a) the issuance of, payment or failure to pay or any performance
or failure to perform under any Letter of Credit or LC Support or (b) any suit,
investigation or proceeding as to which Lender is or may become a party to as a
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consequence, directly or indirectly, of the issuance of any Letter of Credit or
any LC Support or the payment or failure to pay thereunder.
SECTION 2. INTEREST, FEES AND CHARGES
2.1. INTEREST.
2.1.1. Rates of Interest.
(i) Borrowers jointly and severally agree to pay interest in
respect of all unpaid principal amounts of the Revolver Loans from the
respective dates such principal amounts are advanced until paid (whether at
stated maturity, on acceleration or otherwise) at a rate per annum equal to the
applicable rate indicated below:
(i) for Revolver Loans made or outstanding as Base Rate Loans, the
Applicable Margin for Revolver Loans that are Base Rate Loans plus the
Base Rate in effect from time to time; or
(ii) for Revolver Loans made or outstanding as LIBOR Loans, the
Applicable Margin for Revolver Loans that are LIBOR Loans plus the
Adjusted LIBOR Rate for the applicable Interest Period selected by
Borrowers in conformity with this Agreement.
Upon determining the Adjusted LIBOR Rate for any Interest Period requested
by Borrowers, Lender shall promptly notify Borrowers thereof by telephone and,
if so requested by Borrowers, confirm the same in writing. Such determination
shall, absent manifest error, be final, conclusive and binding on all parties
and for all purposes. The applicable rate of interest for all Loans (or portions
thereof) bearing interest based upon the Base Rate shall be increased or
decreased, as the case may be, by an amount equal to any increase or decrease in
the Base Rate, with such adjustments to be effective as of the opening of
business on the day that any such change in the Base Rate becomes effective.
Interest on each Loan shall accrue from and including the date on which such
Loan is made, converted to a Loan of another Type or continued as a LIBOR Loan
to (but excluding) the date of any repayment thereof; provided, however, that,
if a Loan is repaid on the same day made, one day's interest shall be paid on
such Loan. The Base Rate on the date hereof is 4.75% per annum and, therefore,
the rate of interest in effect hereunder on the date hereof, expressed in simple
interest terms, is 4.75% per annum with respect to any portion of the Revolver
Loans bearing interest as a Base Rate Loan.
2.1.2. Conversions and Continuations.
(i) Borrowers may on any Business Day, subject to the giving
of a proper Notice of Conversion/Continuation as hereinafter described, elect
(A) to continue all or any part of a LIBOR Loan by selecting a new Interest
Period therefor, to commence on the last day of the immediately preceding
Interest Period, or (B) to convert all or any part of a Loan of one Type into a
Loan of another Type; provided, however, that no outstanding Loans may be
continued beyond the last day of the Interest Period then in effect for such
Loans as, or converted into, LIBOR Loans when any Default or Event of Default
exists. Any conversion of a LIBOR Loan into a Base Rate Loan shall be made on
the last day of the Interest Period for such LIBOR Loan.
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(ii) Whenever Borrowers desire to convert or continue Loans
under SECTION 2.1.2(i), Borrowers shall give Lender written notice (or
telephonic notice promptly confirmed in writing) substantially in the form of
EXHIBIT B (a "Notice of Conversion/Continuation"), signed by an authorized
officer of Borrowers, at least 1 Business Day before the requested conversion
date in the case of a conversion into Base Rate Loans, and at least 2 Business
Days before the requested conversion or continuation date, in the case of a
conversion into or continuation of LIBOR Loans. Each such Notice of
Conversion/Continuation shall be irrevocable and shall specify the aggregate
principal amount of the Loans to be converted or continued, the date of such
conversion or continuation (which shall be a Business Day) and whether the Loans
are being converted into or continued as LIBOR Loans (and, if so, the duration
of the Interest Period to be applicable thereto and, in the absence of any
specification by Borrowers of an Interest Period, an Interest Period of one
month will be deemed specified) or Base Rate Loans. If, upon the expiration of
any Interest Period in respect of any LIBOR Loans, Borrowers shall have failed
to deliver the Notice of Conversion/Continuation, Borrowers shall be deemed to
have elected to convert such LIBOR Loans to Base Rate Loans.
2.1.3. Interest Periods. In connection with the making or
continuation of, or conversion into, each Borrowing of LIBOR Loans, Borrowers
shall select an interest period (each an "Interest Period") to be applicable to
such LIBOR Loan, which interest period shall commence on the date such LIBOR
Loan is made and shall end on a numerically corresponding day in the first,
second or third month thereafter; provided, however, that:
(i) the initial Interest Period for a LIBOR Loan shall
commence on the date of such Borrowing (including the date of any
conversion from a Loan of another Type) and each Interest Period
occurring thereafter in respect of such Revolver Loan shall commence
on the date on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day, provided that, if any Interest Period
in respect of LIBOR Loans would otherwise expire on a day that is
not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire
on the next preceding Business Day;
(iii) any Interest Period that begins on a day for which there
is no numerically corresponding day in the calendar month at the end
of such Interest Period shall expire on the last Business Day of
such calendar month; and
(v) no Interest Period shall extend beyond the last day of the
Term.
2.1.4. Interest Rate Not Ascertainable. If Lender shall
determine (which determination shall, absent manifest error, be final,
conclusive and binding upon all parties) that on any date for determining the
Adjusted LIBOR Rate for any Interest Period, by reason of any changes
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arising after the date of this Agreement affecting the London interbank market
or Lender's or Bank's position in such market, adequate and fair means do not
exist for ascertaining the applicable interest rate on the basis provided for in
the definition of Adjusted LIBOR Rate, then, and in any such event, Lender shall
forthwith give notice (by telephone confirmed in writing) to Borrowers of such
determination. Until Lender notifies Borrowers that the circumstances giving
rise to the suspension described herein no longer exist, the obligation of
Lender to make LIBOR Loans shall be suspended, and such affected Loans then
outstanding shall, at the end of the then applicable Interest Period or at such
earlier time as may be required by Applicable Law, bear the same interest as
Base Rate Loans. Notwithstanding the foregoing, in the event Lender determines
that adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of Adjusted LIBOR
Rate, for a LIBOR Loan then being requested by Borrower pursuant to a Notice of
Borrowing or a Notice of Conversion/Continuation, Borrower shall have the option
to rescind such Notice of Borrowing or Notice of Conversion/Continuation by
giving notice (by facsimile or by telephonic notice, confirmed in writing) to
Lender of such rescission on the date on which Lender gives and Borrower
receives notice of its determination as described above.
2.1.5. Default Rate of Interest. Borrowers shall pay interest
at a rate per annum equal to the Default Rate (i) with respect to the principal
amount of any portion of the Obligations (and, to the extent permitted by
Applicable Law, all past due interest) that is not paid on the due date thereof
(whether due at stated maturity, on demand, upon acceleration or otherwise)
until paid in full; (ii) with respect to the principal amount of all of the
Obligations (and, to the extent permitted by Applicable Law, all past due
interest) upon the earlier to occur of (x) a Borrower's receipt of notice of
Lender's election to charge the Default Rate based upon the existence of any
Event of Default, whether or not acceleration or demand for payment of the
Obligations has been made, or (y) the commencement by or against any Borrower of
an Insolvency Proceeding, whether or not under the circumstances described in
clause (i) or clause (ii) hereof Lender elects to accelerate the maturity or
demand payment of any of the Obligations; and (iii) with respect to the
principal amount of any Out-of-Formula Loans, if demand for payment thereof has
been made by Lender and such Out-of-Formula Loans are not paid in full within 1
Business Day after such demand by Lender. To the fullest extent permitted by
Applicable Law, the Default Rate shall apply and accrue on any judgment entered
with respect to any of the Obligations and to the unpaid principal amount of the
Obligations during any Insolvency Proceeding of a Borrower. Each Borrower
acknowledges that the cost and expense to Lender attendant upon the occurrence
of an Event of Default are difficult to ascertain or estimate and that the
Default Rate is a fair and reasonable estimate to compensate Lender for such
added cost and expense. Interest accrued at the Default Rate shall be due and
payable ON DEMAND.
2.2. FEES. In consideration of Lender's establishment of the Revolver
Commitment in favor of Borrowers, Borrowers jointly and severally agree to pay
the following fees:
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2.2.1. Closing Fee. Borrowers shall pay to Lender a closing
fee of $175,000, which shall be paid concurrently with the initial Revolver
Loans hereunder.
2.2.2. Commitment Fee. Borrowers shall pay to Lender a fee
("Commitment Fee") equal to the Applicable Margin multiplied by the amount by
which the Average Revolver Loan Balance for any month (or portion thereof that
the Revolver Commitment is in effect) is less than the amount of the Revolver
Commitment, such fee to be pro rated for the number of days in such period and
paid on the first day of the following month; but if the Revolver Commitment is
terminated on a day other than the first day of a month, then such fee payable
for the month in which termination shall occur shall be paid on the effective
date of such termination.
2.2.3. LC Facility Fees. Borrowers shall pay: (a)(i) to
Lender, through its Treasury and International Services Group, for standby
Letters of Credit, a per annum fee equal to the Applicable Margin for Revolver
Loans that are LIBOR Loans in effect from time to time based on the maximum
amount available to be drawn under all standby Letters of Credit outstanding,
payable monthly, in arrears, on the first Business Day of the following month;
(ii) to Lender, through its Treasury and International Services Group, a per
annum processing fee of .125% based on the maximum amount available to be drawn
under all standby Letters of Credit outstanding, payable on the date of issuance
of each Letter of Credit, and on each anniversary of such issuance; and (iii) to
Bank, for its own account, all normal and customary charges associated with the
issuance, amending, negotiating, processing and administration of standby
Letters of Credit; and (b) to Bank, for its own account, for documentary Letters
of Credit, all normal and customary charges associated with the issuance,
amending, negotiating, processing and administration of documentary Letters of
Credit.
2.2.4. Audit and Appraisal Fees. Borrowers shall reimburse
Lender for all reasonable costs and expenses incurred by Lender in connection
with all audits and appraisals of any Obligor's books and records and such other
matters pertaining to any Obligor or any Collateral as Lender shall deem
appropriate and, in each case, shall pay to Lender the standard amount charged
by Lender per day ($750 per day as of the Closing Date) for each day that an
employee or agent of Lender shall be engaged in an examination or review of any
Obligor's books and records.
2.2.5. Collateral Management Fee. Borrowers shall pay to
Lender a collateral management fee of $1,000, per month, which fee shall be
payable on the Closing Date and the first Business day of each month thereafter.
2.2.6. General Provisions. All fees shall be fully earned by
Lender when due and payable (and, in the case of Letters of Credit, upon each
issuance, renewal or extension of such Letter of Credit) and, except as
otherwise set forth herein or required by Applicable Law, shall not be subject
to rebate, refund or proration. All fees provided for in SECTION 2.2 are and
shall be deemed to be for compensation for services and are not, and shall not
be deemed to be, interest or any other charge for the use, forbearance or
detention of money.
2.3. COMPUTATION OF INTEREST AND FEES. All fees and other charges provided
for in this Agreement that are calculated as a per annum
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percentage of any amount and all interest shall be calculated daily and shall be
computed on the actual number of days elapsed over a year of 360 days. For
purposes of computing interest and other charges hereunder, all Payment Items
and other forms of payment received by Lender shall be deemed applied by Lender
on account of the Obligations (subject to final payment of such items) on the
Business Day Lender receives such items in immediately available funds in the
Payment Account, and Lender shall be deemed to have received such Payment Item
on the date specified in SECTION 4.6 hereof.
2.4. REIMBURSEMENT OF EXPENSES.
2.4.1. Borrowers shall reimburse Lender for all legal, accounting,
appraisal and other fees and expenses incurred by Lender in connection with (i)
the negotiation and preparation of any of the Loan Documents, any amendment or
modification thereto, any waiver of any Default or Event of Default thereunder,
or any restructuring or forbearance with respect thereto; (ii) the
administration of the Loan Documents and the transactions contemplated thereby,
to the extent that such fees and expenses are expressly provided for in this
Agreement or any of the other Loan Documents; (iii) action taken to perfect or
maintain the perfection or priority of any of Lender's Liens with respect to any
of the Collateral; (iv) any inspection of or audits conducted with respect to
Borrowers' books and records or any of the Collateral; (v) any effort to verify,
protect, preserve, or restore any of the Collateral or to collect, sell,
liquidate or otherwise dispose of or realize upon any of the Collateral; (vi)
any litigation, contest, dispute, suit, proceeding or action (whether instituted
by or against Lender, any Obligor or any other Person) in any way arising out of
or relating to any of the Collateral (or the validity, perfection or priority of
any of Lender's Liens thereon), any of the Loan Documents or the validity,
allowance or amount of any of the Obligations; (vii) the protection or
enforcement or any rights or remedies of Lender in any Insolvency Proceeding;
and (viii) any other action taken by Lender to enforce any of the rights or
remedies of Lender against any Obligor or any Account Debtors to enforce
collection of any of the Obligations or payments with respect to any of the
Collateral. All amounts chargeable to Borrowers under this SECTION 2.4 shall
constitute Obligations that are secured by all of the Collateral and shall be
payable ON DEMAND to Lender. Borrowers shall also reimburse Lender for expenses
incurred by Lender in its administration of any of the Collateral to the extent
and in the manner provided in SECTION 7 hereof or in any of the other Loan
Documents. The foregoing shall be in addition to, and shall not be construed to
limit, any other provision of any of the Loan Documents regarding the
reimbursement by Borrowers of costs, expenses or liabilities suffered or
incurred by Lender.
2.4.2. If at any time Lender shall agree to indemnify any Person
(including Bank or any Affiliate of Bank) against losses or damages that such
Person may suffer or incur in its dealings or transactions with Borrower, or
shall guarantee any liability or obligation of a Borrower to such Person, or
otherwise shall provide assurances of Borrowers' payment or performance under
any agreement with such Person, including indemnities, guaranties or other
assurances of payment or performance given by Lender with respect to Cash
Management Agreements, Hedging
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Agreements, Letters of Credit or any Banking Relationship Debt, then the
Contingent Obligation of Lender shall constitute part of the Obligations that
are secured by the Collateral and Borrowers shall repay, ON DEMAND, any amount
so paid or any liability incurred by Lender in connection with any such
indemnity, guaranty or assurance, except that repayment with respect to any LC
Support shall be due on the Reimbursement Date as provided in SECTION
1.3.1(III). Nothing herein shall be construed to impose upon Lender any
obligation to provide any such indemnity, guaranty or assurance except to the
extent provided in SECTION 1.3 hereof. The foregoing agreement of Borrowers
shall apply whether or not such indemnity, guaranty or assurance is in writing
or oral and regardless of Borrower's knowledge of the existence thereof, and
shall be in addition to any of the provision of the Loan Documents regarding
reimbursement by Borrowers of costs, expenses or liabilities suffered or
incurred by Lender.
2.5. BANK CHARGES. Borrowers shall pay to Lender, ON DEMAND, any and all
fees, costs or expenses which Lender or any Participant pays to a bank or other
similar institution (including any fees paid by Lender to any Participant)
arising out of or in connection with (i) the forwarding to a Borrower or any
other Person on behalf of a Borrower, by Lender or any Participant, of proceeds
of Loans made by Lender to Borrowers pursuant to this Agreement and (ii) the
depositing for collection, by Lender or any Participant, of any Payment Item
received or delivered to Lender or any Participant on account of the
Obligations. Each Borrower acknowledges and agrees that Lender may charge such
costs, fees and expenses to Borrowers based upon Lender's good faith estimate of
such costs, fees and expenses as they are incurred by Lender.
2.6. ILLEGALITY. Notwithstanding anything to the contrary contained
elsewhere in this Agreement, if (i) any change in any law or regulation or in
the interpretation thereof by any Governmental Authority charged with the
administration thereof shall make it unlawful for Lender to make or maintain a
LIBOR Loan or to give effect to its obligations as contemplated hereby with
respect to a LIBOR Loan or (ii) at any time Lender determines that the making or
continuance of any LIBOR Loan has become impracticable as a result of a
contingency occurring after the date hereof which adversely affects the London
interbank market or the position of Lender or Bank in such market, then Lender
shall give, after such determination, Borrowers notice thereof and may
thereafter (1) declare that LIBOR Loans will not thereafter be made by Lender,
whereupon any request by Borrowers for a LIBOR Loan shall be deemed a request
for a Base Rate Loan unless Lender's declaration shall be subsequently withdrawn
(which declaration shall be withdrawn promptly after the cessation of the
circumstances described in clause (i) or (ii) above); and (2) require that all
outstanding LIBOR Loans made by Lender be converted to Base Rate Loans, under
the circumstances of clause (i) or (ii) of this SECTION 2.6 insofar as Lender
determines the continuance of LIBOR Loans to be impracticable, in which event
all such LIBOR Loans shall be converted automatically to Base Rate Loans as of
the date of any Borrower's receipt of the aforesaid notice from Lender.
2.7. INCREASED COSTS. If, by reason of (a) the introduction after the date
hereof of or any change (including any change by way of imposition or increase
of Statutory Reserves or other reserve requirements) in or in the interpretation
of any law or regulation, or
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(b) the compliance with any guideline or request
from any central bank or other Governmental Authority or quasi-Governmental
Authority exercising control over banks or financial institutions generally
(whether or not having the force of law):
(i) Lender shall be subject after the date hereof to any Tax, duty
or other charge with respect to any LIBOR Loan or its obligation to make
LIBOR Loans, or a change shall result in the basis of taxation of payment
to Lender of the principal of or interest on its LIBOR Loans or its
obligation to make LIBOR Loans (except for changes in the rate of Tax on
the overall net income or gross receipts of Lender imposed by the
jurisdiction in which Lender's principal executive office is located); or
(ii) any reserve (including any imposed by the Board of Governors),
special deposits or similar requirement against assets of, deposits with
or for the account of, or credit extended by, Lender shall be imposed or
deemed applicable or any other condition affecting its LIBOR Loans or its
obligation to make LIBOR Loans shall be imposed on Lender or the London
interbank market;
and as a result thereof there shall be any increase in the cost to Lender of
agreeing to make or making, funding or maintaining LIBOR Loans (except to the
extent already included in the determination of the applicable Adjusted LIBOR
Rate for LIBOR Loans), or there shall be a reduction in the amount received or
receivable by Lender, then Lender shall, promptly after determining the
existence or amount of any such increased costs for which Lender seeks payment
hereunder, give Borrowers notice thereof and Borrowers shall from time to time,
upon written notice from and demand by Lender, pay to Lender, within 5 Business
Days after the date specified in such notice and demand, an additional amount
sufficient to indemnify Lender against such increased cost. A certificate as to
the amount of such increased costs, submitted to Borrowers by Lender, shall be
final, conclusive and binding for all purposes, absent manifest error.
At any time that, because of the circumstances described hereinabove in
this SECTION 2.7 or any other circumstances arising after the date of this
Agreement affecting Lender or the London interbank market or Lender's or Bank's
position in such market, the Adjusted LIBOR Rate, as determined by Lender, will
not adequately and fairly reflect the cost to Lender of funding LIBOR Loans,
then, and in any such event:
(i) Lender shall forthwith give notice (by telephone confirmed in
writing) to Borrowers of such event;
(ii) Borrowers' right to request and Lender's obligation to make
LIBOR Loans shall be immediately suspended and Borrowers' right to
continue a LIBOR Loan as such beyond the then applicable Interest Period
shall also be suspended, until each condition giving rise to such
suspension no longer exists; and
(iii) Lender shall make a Base Rate Loan as part of the requested
Borrowing of LIBOR Loans, which Base Rate Loan shall, for all purposes, be
considered part of such Borrowing.
For purposes of this SECTION 2.7, all references to Lender shall be deemed
to include any bank holding company or bank parent of Lender.
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2.8. CAPITAL ADEQUACY. If Lender determines that after the date hereof (a)
the adoption of any Applicable Law regarding capital requirements for banks or
bank holding companies or the subsidiaries thereof, (b) any change in the
interpretation or administration of any such Applicable Law by any Governmental
Authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or (c) compliance by Lender or its holding company with
any request or directive of any such Governmental Authority, central bank or
comparable agency regarding capital adequacy (whether or not having the force of
law), has the effect of reducing the return on Lender's capital to a level below
that which Lender could have achieved (taking into consideration Lender's and
its holding company's policies with respect to capital adequacy immediately
before such adoption, change or compliance and assuming that Lender's capital
was fully utilized prior to such adoption, change or compliance) but for such
adoption, change or compliance as a consequence of Lender's commitment to make
the Loans pursuant hereto by any amount deemed by Lender to be material:
(i) Lender shall promptly give notice of its determination of such
occurrence to Borrowers; and
(ii) Borrowers shall pay to Lender as an additional fee from time to
time, ON DEMAND, such amount as Lender certifies to be the amount
reasonably calculated to compensate Lender for such reduction.
A certificate of Lender claiming entitlement to compensation as set forth
above will be conclusive in the absence of manifest error. Such certificate will
set forth the nature of the occurrence giving rise to such compensation, the
additional amount or amounts to be paid to Lender (including the basis for
Lender's determination of such amount), and the method by which such amounts
were determined. In determining such amount, Lender may use any reasonable
averaging and attribution method. For purposes of this SECTION 2.8, all
references to Lender shall be deemed to include any bank holding company or bank
parent of Lender.
2.9. FUNDING LOSSES. If for any reason (other than due to a default by
Lender or as a result of Lender's refusal to honor a LIBOR Loan request due to
circumstances described in SECTIONS 2.6 or 2.7 hereof) a Borrowing of, or
conversion to or continuation of, LIBOR Loans does not occur on the date
specified therefor in a Notice of Borrowing or Notice of Conversion/Continuation
(whether or not withdrawn), or if any repayment (including any conversions
pursuant to SECTION 2.1.2 hereof) of any of its LIBOR Loans occurs on a date
that is not the last day of an Interest Period applicable thereto, or if for any
reason Borrower defaults in its obligation to repay LIBOR Loans when required by
the terms of this Agreement, then Borrower shall pay to Lender, within 10 days
after Lender's demand therefor, an amount (if a positive number) computed
pursuant to the following formula:
L = (R - T) x P x D
---------------
360
where
L = amount payable
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R = interest rate applicable to the LIBOR Loan unborrowed or prepaid
T = effective interest rate per annum at which any readily
marketable bond or other obligations of the United States,
selected at Lender's sole discretion, maturing on or nearest
the last day of the then applicable or requested Interest
Period for such LIBOR Loan and in approximately the same
amount as such LIBOR Loan, can be purchased by Lender on the
day of such payment of principal or failure to borrow
P = the amount of principal paid or the amount of the LIBOR Loan
requested or to have been continued or converted
D = the number of days remaining in the Interest Period as of the
date of such prepayment or the number of days in the requested
Interest Period
Borrowers shall pay such amount upon presentation by Lender of a statement
setting forth the amount and Lender's calculation thereof pursuant hereto, which
statement shall be deemed true and correct absent manifest error. For purposes
of this SECTION 2.9, all references to Lender shall be deemed to include any
bank holding company or bank parent of Lender.
2.10. MAXIMUM INTEREST. Regardless of any provision contained in any of
the Loan Documents, in no contingency or event whatsoever shall the aggregate of
all amounts that are contracted for, charged or received by Lender pursuant to
the terms of this Agreement or any of the other Loan Documents and that are
deemed interest under Applicable Law exceed the highest rate permissible under
any Applicable Law. No agreements, conditions, provisions or stipulations
contained in this Agreement or any of the other Loan Documents or the exercise
by Lender of the right to accelerate the payment or the maturity of all or any
portion of the Obligations, or the exercise of any option whatsoever contained
in any of the Loan Documents, or the prepayment by Borrowers of any of the
Obligations, or the occurrence of any contingency whatsoever, shall entitle
Lender to charge or receive in any event, interest or any charges, amounts,
premiums or fees deemed interest by Applicable Law (such interest, charges,
amounts, premiums and fees referred to herein collectively as "Interest") in
excess of the Maximum Rate and in no event shall Borrowers be obligated to pay
Interest exceeding such Maximum Rate, and all agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel Borrowers to pay Interest exceeding the Maximum Rate
shall be without binding force or effect, at law or in equity, to the extent
only of the excess of Interest over such Maximum Rate. If any Interest is
charged or received in excess of the Maximum Rate ("Excess"), each Borrower
acknowledges and stipulates that any such charge or receipt shall be the result
of an accident and bona fide error, and such Excess, to the extent received,
shall be applied first to reduce the principal Obligations and the balance, if
any, returned to Borrowers, it being the intent of the parties hereto not to
enter into a usurious or otherwise illegal relationship. The right to accelerate
the maturity of any of the Obligations does not include the right to accelerate
any Interest that has not otherwise accrued on the date of such acceleration,
and Lender does not intend to collect any unearned Interest in the event of any
such acceleration. Each Borrower recognizes that, with fluctuations in the
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rates of interest set forth in SECTION 2.1.1 of this Agreement and the Maximum
Rate, such an unintentional result could inadvertently occur. All monies paid to
Lender hereunder or under any of the other Loan Documents, whether at maturity
or by prepayment, shall be subject to any rebate of unearned Interest as and to
the extent required by Applicable Law. By the execution of this Agreement, each
Borrower covenants that (i) the credit or return of any Excess shall constitute
the acceptance by Borrowers of such Excess, and (ii) no Borrower shall seek or
pursue any other remedy, legal or equitable, against Lender, based in whole or
in part upon contracting for, charging or receiving any Interest in excess of
the Maximum Rate. For the purpose of determining whether or not any Excess has
been contracted for, charged or received by Lender, all Interest at any time
contracted for, charged or received from Borrowers in connection with any of the
Loan Documents shall, to the extent permitted by Applicable Law, be amortized,
prorated, allocated and spread in equal parts throughout the full term of the
Obligations. Borrowers and Lender shall, to the maximum extent permitted under
Applicable Law, (i) characterize any non-principal payment as an expense, fee or
premium rather than as Interest and (ii) exclude voluntary prepayments and the
effects thereof. The provisions of this Section shall be deemed to be
incorporated into every Loan Document (whether or not any provision of this
Section is referred to therein). All such Loan Documents and communications
relating to any Interest owed by Borrowers and all figures set forth therein
shall, for the sole purpose of computing the extent of Obligations, be
automatically recomputed by Borrowers, and by any court considering the same, to
give effect to the adjustments or credits required by this SECTION 2.10.
SECTION 3. LOAN ADMINISTRATION
3.1. MANNER OF BORROWING AND FUNDING REVOLVER LOANS. Borrowings under the
Revolver Commitment established pursuant to SECTION 1.1 hereof shall be made and
funded as follows:
3.1.1. Notice of Borrowing.
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(i) Whenever Borrowers desire to make a Borrowing under SECTION 1 of
this Agreement (other than a Borrowing resulting from a conversion or
continuation pursuant to SECTION 2.1.2), Borrowers shall give Lender prior
written notice (or telephonic notice promptly confirmed in writing) of
such Borrowing request (a "Notice of Borrowing"), which shall be in the
form of EXHIBIT C annexed hereto and signed by an authorized officer of
Borrower. Such Notice of Borrowing shall be given by Borrowers no later
than 11:00 a.m. at the office of Lender designated by Lender from time to
time (a) on the Business Day of the requested funding date of such
Borrowing, in the case of Base Rate Loans, and (b) at least 2 Business
Days prior to the requested funding date of such Borrowing, in the case of
LIBOR Loans. Notices received after 11:00 a.m. shall be deemed received on
the next Business Day. The Revolver Loans made by Lender on the Closing
Date shall each be in excess of $250,000 and shall be made as Base Rate
Loans and thereafter may be made or continued as, or converted into, Base
Rate Loans or LIBOR Loans. Each Notice of Borrowing (or telephonic notice
thereof) shall be irrevocable (other than as provided in SECTION 2.1.4
hereof) and shall specify (a) the principal amount of the Borrowing, (b)
the date of Borrowing (which shall be a Business Day), (c) whether the
Borrowing is to consist of Base Rate Loans or LIBOR Loans, (d) in the case
of LIBOR Loans, the duration of the Interest Period to be applicable
thereto, and (e) the account of Borrowers to which the proceeds of such
Borrowing are to be disbursed. Borrowers may not request any LIBOR Loans
if a Default or Event of Default exists.
(ii) Unless payment is otherwise timely made by Borrowers, the
becoming due of any amount required to be paid with respect to any of the
Obligations (whether as principal, accrued interest, fees or other
charges, including the repayment of any LC Outstandings and any amounts
owing to Bank or any other Affiliate of Lender) shall be deemed
irrevocably to be a request (without the requirement for the submission of
a Notice of Borrowing) for Revolver Loans on the due date of, and in an
aggregate amount required to pay, such Obligations, and the proceeds of
such Revolver Loans may be disbursed by way of direct payment of the
Obligation and shall bear interest as Base Rate Loans. Lender shall have
no obligation to Borrowers to honor any deemed request for a Revolver Loan
after the Commitment Termination Date or when an Out-of-Formula Condition
exists or would result therefrom or when any condition precedent set forth
in SECTION 10 hereof is not satisfied, but may do so in its discretion and
without regard to the existence of, and without being deemed to have
waived, any Default or Event of Default and regardless of whether such
Revolver Loan is funded after the Commitment Termination Date.
(iii) If Borrowers elect to establish a Deposit Account (including a
Controlled Disbursement Account) with Bank or any Affiliate of Bank, or
Borrowers otherwise incur Banking Relationship Debt, then the presentation
for payment by Bank of any check or other item of payment drawn on the
Controlled Disbursement Account or the becoming due of any Banking
Relationship Debt at a time when there are insufficient funds in such
Deposit Account to cover such item or Banking Relationship Debt shall be
deemed irrevocably to be a request (without any requirement for the
submission of a Notice of Borrowing) for Revolver Loans on the date of
such presentation or becoming due of any Banking Relationship Debt and in
an amount equal to the aggregate amount of
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the items presented for payment or the amount of Banking Relationship Debt
that has become due, and the proceeds of such Revolver Loans may be
disbursed to the Controlled Disbursement Account or other Deposit Account
with Bank or any Affiliate of Bank and shall bear interest as Base Rate
Loans. Lender shall not have any obligation to honor any deemed request
for a Revolver Loan after the Commitment Termination Date or when an
Out-of-Formula Condition exists or would result therefrom or when any
condition precedent in SECTION 10 hereof is not satisfied, but may do so
in its discretion and without regard to the existence of, and without
being deemed to have waived, any Default or Event of Default and
regardless of whether such Revolver Loan is funded after the Commitment
Termination Date.
(iv) As an accommodation to Borrowers, Lender may permit telephonic
requests for Borrowings and electronic transmittal of instructions,
authorizations, agreements or reports to Lender by Borrowers; provided,
however, that, if requested by Lender, Borrowers shall confirm each such
telephonic request for a Borrowing of LIBOR Loans by delivery of the
required Notice of Borrowing to Lender by facsimile transmission promptly,
but in no event later than 5:00 p.m. on the same day. Lender shall have no
liability to Borrowers for any loss or damage suffered by Borrowers as a
result of Lender's honoring of any requests, execution of any
instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to have
been sent to Lender by a Borrower and Lender shall not have any duty to
verify the origin of any such communication or the identity or authority
of the Person sending it.
3.1.2. Disbursement Authorization. Each Borrower hereby irrevocably
authorizes Lender to disburse the proceeds of each Revolver Loan requested by
any Borrower, or deemed to be requested pursuant to SECTION 3.1.1, as follows:
(i) the proceeds of each Revolver Loan requested under SECTION 3.1.1(I) shall be
disbursed by Lender in accordance with the terms of the written disbursement
letter from Borrowers in the case of the initial Borrowing, and, in the case of
each subsequent Borrowing, by wire transfer to such bank account as may be
agreed upon by any Borrower and Lender from time to time or elsewhere if
pursuant to a written direction from a Borrower; and (ii) the proceeds of each
Revolver Loan requested under SECTION 3.1.1(II) shall be disbursed by Lender by
way of direct payment of the relevant interest or other Obligation. Any Loan
proceeds received by any Borrower or in payment of any of the Obligations shall
be deemed to have been received by all Borrowers.
3.2. SPECIAL PROVISIONS GOVERNING LIBOR LOANS.
3.2.1. Number of LIBOR Loans. In no event may the number of LIBOR
Loans outstanding at any time exceed 4.
3.2.2. Minimum Amounts. Each Borrowing of LIBOR Loans pursuant to
SECTION 3.1.1(i), and each continuation of or conversion to LIBOR Loans pursuant
to SECTION 2.1.2 hereof, shall be in a minimum amount of $1,000,000 and integral
multiples of $500,000 in excess of that amount.
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3.2.3. LIBOR Lending Office. Lender's initial LIBOR Lending Office
is set forth opposite its name on the signature pages hereof. Lender shall have
the right at any time and from time to time to designate a different office of
itself or of any Affiliate as Lender's LIBOR Lending Office, and to transfer any
outstanding LIBOR Loans to such LIBOR Lending Office. No such designation or
transfer shall result in any liability on the part of Borrowers for increased
costs or expenses resulting solely from such designation or transfer (except any
such transfer that is made by Lender pursuant to SECTION 2.6 or SECTION 2.7
hereof, or otherwise for the purpose of complying with Applicable Law).
Increased costs for expenses resulting from a change in Applicable Law occurring
subsequent to any such designation or transfer shall be deemed not to result
solely from such designation or transfer.
3.3. BORROWERS' REPRESENTATIVE. Each Borrower hereby irrevocably appoints
SED as, and SED shall act under this Agreement as, the agent and representative
of itself and each other Borrower for all purposes under this Agreement,
including requesting Borrowings, selecting whether any Loan or portion thereof
is to bear interest as a Base Rate Loan or a LIBOR Loan, and receiving account
statements and other notices and communications to Borrowers (or any of them)
from Lender. Lender may rely, and shall be fully protected in relying, on any
Notice of Borrowing, Notice of Conversion/Continuation, disbursement
instructions, reports, information or any other notice or communication made or
given by SED, whether in its own name, on behalf of any Borrower or on behalf of
"the Borrowers," and Lender shall have no obligation to make any inquiry or
request any confirmation from or on behalf of any other Borrower as to the
binding effect on such Borrower of any such request, instruction, report,
information, notice or communication, nor shall the joint and several character
of Borrowers' liability for the Obligations be affected, provided that the
provisions of this SECTION 3.3 shall not be construed so as to preclude any
Borrower from directly requesting Borrowings or taking other actions permitted
to be taken by "a Borrower" hereunder. Lender may maintain a single Loan Account
in the name of "SED International, Inc." hereunder, and each Borrower expressly
agrees to such arrangement and confirms that such arrangement shall have no
effect on the joint and several character of such Borrower's liability for the
Obligations.
3.4. ALL LOANS TO CONSTITUTE ONE OBLIGATION. The Loans shall constitute
one general Obligation of Borrowers and (unless otherwise expressly provided in
any Security Document) shall be secured by Lender's Lien upon all of the
Collateral.
SECTION 4. PAYMENTS; NATURE OF EACH BORROWER'S LIABILITY
4.1. GENERAL REPAYMENT PROVISIONS. All payments (including all
prepayments) of principal of and interest on the Loans, LC Outstandings and
other Obligations that are payable to Lender shall be made to Lender in Dollars
without any offset or counterclaim and free and clear of (and without deduction
for) any present or future Taxes, and, with respect to payments made other than
by application of balances in the Payment Account, in immediately available
funds not later than 12:00 noon on the due date (and payment made after such
time on the due date to be deemed to have been made on the next succeeding
Business Day).
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4.2. REPAYMENT OF REVOLVER LOANS.
4.2.1. Payment of Principal. The outstanding principal amounts with
respect to the Revolver Loans shall be repaid as follows:
(i) Any portion of the Revolver Loans consisting of the principal
amount of Base Rate Loans shall be paid by Borrowers to Lender, unless
timely converted to a LIBOR Loan in accordance with this Agreement,
immediately upon (a) each receipt by Lender or a Borrower of any proceeds
of Accounts or Inventory, to the extent of such proceeds, and (b) the
Commitment Termination Date.
(ii) Any portion of the Revolver Loans consisting of the principal
amount of LIBOR Loans shall be paid by Borrowers to Lender, unless
converted to a Base Rate Loan or continued as a LIBOR Loan in accordance
with the terms of this Agreement, immediately upon (a) the last day of the
Interest Period applicable thereto and (b) the Commitment Termination
Date. In no event shall Borrowers be authorized to make a voluntary
prepayment with respect to any Revolver Loan outstanding as a LIBOR Loan
prior to the last day of the Interest Period applicable thereto unless (x)
otherwise agreed in writing by Lender or Borrowers are otherwise expressly
authorized or required by any other provision of this Agreement to pay any
LIBOR Loan outstanding on a date other than the last day of the Interest
Period applicable thereto, and (y) Borrowers pay to Lender concurrently
with any prepayment of a LIBOR Loan any amount due Lender under SECTION
2.9 hereof as a consequence of such prepayment. Notwithstanding the
foregoing provisions of this SECTION 4.2.1(II), if, on any date that
Lender receives proceeds of any of the Accounts or Inventory there are no
Revolver Loans outstanding as Base Rate Loans, Lender may either (1) hold
such proceeds as cash collateral for the Obligations for application to
any outstanding Revolver Loans bearing interest as LIBOR Loans as the same
become due and payable (whether at the end of the applicable Interest
Period or on the Commitment Termination Date) or (2) if an Event of
Default or Out-of-Formula Condition exists, apply such proceeds to any
outstanding Revolver Loans bearing interest as LIBOR Loans whether or not
the same are due and payable in which event Borrowers shall be liable to
Lender for any amount due Lender under SECTION 2.9 hereof as a consequence
of such application by Lender.
(iii) Notwithstanding anything to the contrary contained elsewhere
in this Agreement, if an Out-of-Formula Condition shall exist, Borrowers
shall, on the sooner to occur of Lender's demand or the first Business Day
after a Borrower has obtained knowledge of such Out-of-Formula Condition,
repay the outstanding Revolver Loans that are Base Rate Loans in an amount
sufficient to reduce the aggregate unpaid principal amount of all Revolver
Loans by an amount equal to such excess; and, if such payment of Base Rate
Loans is not sufficient to eliminate the Out-of-Formula Condition, then
Borrowers shall immediately either (a) deposit with Lender, for
application to any outstanding Revolver Loans bearing interest as LIBOR
Loans as the same become due and, payable (whether at the end of the
applicable Interest Periods or on the Commitment Termination Date) cash in
an amount sufficient to eliminate such Out-of-Formula Condition, to be
subject to Lender's Lien thereon and rights of offset with respect
thereto, or (b) pay the Revolver Loans outstanding as LIBOR Loans to the
extent necessary to eliminate such
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Out-of-Formula Condition and also pay to Lender any and all amounts
required by SECTION 2.9 hereof to be paid by reason of the prepayment of a
LIBOR Loan prior to the last day of the Interest Period applicable
thereto.
4.2.2. Payment of Interest. Interest accrued on the Revolver Loans
shall be due and payable on (i) the first calendar day of each month (for the
immediately preceding month), computed through the last calendar day of the
preceding month, with respect to any Revolver Loan (whether a Base Rate Loan or
LIBOR Loan) and (ii) the last day of the applicable Interest Period in the case
of a LIBOR Loan. Accrued interest shall also be paid by Borrowers on the
Commitment Termination Date. With respect to any Base Rate Loan converted into a
LIBOR Loan pursuant to SECTION 2.1.2 on a day when interest would not otherwise
have been payable with respect to such Base Rate Loan, accrued interest to the
date of such conversion on the amount of such Base Rate Loan so converted shall
be paid on the conversion date.
4.3. RESERVED.
4.4. PAYMENT OF OTHER OBLIGATIONS. The balance of the Obligations
requiring the payment of money, including the LC Outstandings and Extraordinary
Expenses incurred by Lender, shall be repaid by Borrowers to Lender as and when
provided in the Loan Documents, or, if no date of payment is otherwise specified
in the Loan Documents, ON DEMAND.
4.5. MARSHALING; PAYMENTS SET ASIDE. Lender shall be under no obligation
to marshal any assets in favor of any Borrower or any other Obligor or against
or in payment of any or all of the Obligations. To the extent that any Borrower
makes a payment or payments to Lender or Lender receives payment from the
proceeds of any Collateral 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
or required to be repaid to a trustee, receiver or any other Person, then to the
extent of any loss by Lender, the Obligations or part thereof originally
intended to be satisfied, and all Liens, rights and remedies therefor, shall be
revived and continued in full force and effect as if such payment or proceeds
had not been made received and any such enforcement or setoff had not occurred.
The provisions of the immediately preceding sentence of this SECTION 4.5 shall
survive any termination of the Revolver Commitment and payment in full of the
Obligations.
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4.6. APPLICATION OF PAYMENTS AND COLLATERAL PROCEEDS. All Payment Items
received by Lender by 12:00 noon, Hartford, Connecticut time, on any Business
Day shall be deemed received on that Business Day. All Payment Items received by
Lender after 12:00 noon, Hartford, Connecticut time, on any Business Day shall
be deemed received on the following Business Day. Each Borrower irrevocably
waives the right to direct the application of any and all payments and
Collateral proceeds at any time or times hereafter received by Lender from or on
behalf of such Borrower, and each Borrower does hereby irrevocably agree that
Lender shall have the continuing exclusive right to apply and reapply any and
all such payments and Collateral proceeds received at any time or times
hereafter by Lender or its agent against the Obligations, in such manner as
Lender may deem advisable, notwithstanding any entry by Lender upon any of its
books and records. If as the result of Lender's collection of proceeds of
Accounts and other Collateral as authorized by SECTION 7.2.6 a credit balance
exists, such credit balance shall not accrue interest in favor of Borrowers, but
shall be available to Borrowers at any time or times for so long as no Default
or Event of Default exists.
4.7. LOAN ACCOUNT; ACCOUNT STATED.
4.7.1. Loan Account. Lender shall establish an account on its books
(the "Loan Account") and shall enter all Loans as debits to the Loan Account and
shall also record in the Loan Account all payments made by Borrowers on any
Obligations and all proceeds of Collateral which are finally paid to Lender, and
may record therein, in accordance with customary accounting practice, other
debits and credits, including interest and all charges and expenses properly
chargeable to Borrowers.
4.7.2. Statements of Account. Lender will account to Borrowers
monthly with a statement of Loans, charges and payments made pursuant to this
Agreement, and such accounting rendered by Lender shall be deemed final, binding
and conclusive upon Borrowers unless Lender is notified by Borrowers in writing
to the contrary within 30 days after the date each accounting is deemed to have
been sent pursuant to SECTION 12.9. Such notice shall only be deemed an
objection to those items specifically objected to therein. Failure of Lender to
render any such account shall in no way affect the rights of Lender hereunder.
4.8. GROSS UP FOR TAXES. If Borrowers shall be required by Applicable Law
to withhold or deduct any Taxes from or in respect of any sum payable under this
Agreement or any of the other Loan Documents, (a) the sum payable to Lender
shall be increased as may be necessary so that, after making all required
withholding or deductions, Lender receives an amount equal to the sum it would
have received had no such withholding or deductions been made, (b) Borrowers
shall make such withholding or deductions, and (c) Borrowers shall pay the full
amount withheld or deducted to the relevant taxation authority or other
authority in accordance with Applicable Law.
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4.9. NATURE AND EXTENT OF EACH BORROWER'S LIABILITY.
4.9.1. Joint and Several Liability. Each Borrower shall be liable
for, on a joint and several basis, and hereby guarantees the timely payment by
all other Borrowers of, all of the Loans and other Obligations, regardless of
which Borrower actually may have received the proceeds of any Loans or other
extensions of credit hereunder or the amount of such Loans received or the
manner in which Lender accounts for such Loans or other extensions of credit on
its books and records, it being acknowledged and agreed that Loans to any
Borrower inure to the mutual benefit of all Borrowers and that Lender is relying
on the joint and several liability of Borrowers in extending the Loans and other
financial accommodations hereunder. Each Borrower hereby unconditionally and
irrevocably agrees that upon default in the payment when due (whether at stated
maturity, by acceleration or otherwise) of any principal of, or interest owed
on, any of the Loans or other Obligations, such Borrower shall forthwith pay the
same, without notice or demand.
4.9.2. Unconditional Nature of Liability. Each Borrower's joint and
several liability hereunder with respect to, and guaranty of, the Loans and
other Obligations shall, to the fullest extent permitted by Applicable Law, be
unconditional irrespective of (i) the validity, enforceability, avoidance or
subordination of any of the Obligations or of any promissory note or other
document evidencing all or any part of the Obligations, (ii) the absence of any
attempt to collect any of the Obligations from any other Obligor or any
Collateral or other security therefor, or the absence of any other action to
enforce the same, (iii) the waiver, consent, extension, forbearance or granting
of any indulgence by Lender with respect to any of the Obligations or any
Instrument or agreement evidencing or securing the payment of any of the
Obligations, or any other agreement now or hereafter executed by any other
Borrower and delivered to Lender, (iv) the failure by Lender to take any steps
to perfect or maintain the perfected status of its security interest in or Lien
upon, or to preserve its rights to, any of the Collateral or other security for
the payment or performance of any of the Obligations, or Lender's release of any
Collateral or of its Liens upon any Collateral, (v) Lender' election, in any
proceeding instituted under the Bankruptcy Code, for the application of Section
1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a security
interest by any other Borrower, as debtor-in-possession under Section 364 of the
Bankruptcy Code, (vii) the release or compromise, in whole or in part, of the
liability of any Obligor for the payment of any of the Obligations, (viii) any
amendment or modification of any of the Loan Documents or waiver of any Default
or Event of Default thereunder, (ix) any increase in the amount of the
Obligations beyond any limits imposed herein or in the amount of any interest,
fees or other charges payable in connection therewith, or any decrease in the
same, (x) the disallowance of all or any portion of Lender's claims for the
repayment of any of the Obligations under Section 502 of the Bankruptcy Code, or
(xi) any other circumstance that might constitute a legal or equitable discharge
or defense of any Obligor. At any time an Event of Default exists, Lender may
proceed directly and at once, without notice to any Obligor, against any or all
of Obligors to collect and recover all or any part of the Obligations, without
first proceeding against any other Obligor or against any Collateral or other
security for the payment or performance of any of the Obligations, and each
Borrower waives any provision that might otherwise require Lender under
Applicable Law to pursue or exhaust its remedies against any Collateral or
Obligor before pursuing such Borrower or another Obligor.
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Each Borrower consents and agrees that Lender shall be under no obligation to
marshal any assets in favor of any Obligor or against or in payment of any or
all of the Obligations.
4.9.3. No Reduction in Liability for Obligations. No payment or
payments made by an Obligor or received or collected by Lender from a Borrower
or any other Person by virtue of any action or proceeding or any setoff or
appropriation or application at any time or from time to time in reduction of or
in payment of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of any Borrower under this Agreement, each of
which shall remain jointly and severally liable for the payment and performance
of all Loans and other Obligations until the Obligations are paid in full and
the Commitment is terminated.
4.9.4. Contribution. Each Borrower is unconditionally obligated to
repay the Obligations as a joint and several obligor under this Agreement. If,
as of any date, the aggregate amount of payments made by a Borrower on account
of the Obligations and proceeds of such Borrower's Collateral that are applied
to the Obligations exceeds the aggregate amount of Loan proceeds actually used
by such Borrower in its business (such excess amount being referred to as an
"Accommodation Payment"), then each of the other Borrowers shall be obligated to
make contribution to such Borrower (the "Paying Borrower") in an amount equal to
(A) the product derived by multiplying the sum of each Accommodation Payment of
each Borrower by the Allocable Percentage of the Borrowers from whom
contribution is sought less (B) the amount, if any, of the then outstanding
Accommodation Payment of such Contributing Borrower (such last mentioned amount
which is to be subtracted from the aforesaid product to be increased by any
amounts theretofore paid by such Contributing Borrower by way of contribution
hereunder, and to be decreased by any amounts theretofore received by such
Contributing Borrower by way of contribution hereunder); provided, however, that
a Paying Borrower's recovery of contribution hereunder from the other Borrowers
shall be limited to that amount paid by the Paying Borrower in excess of its
Allocable Percentage of all Accommodation Payments then outstanding of all
Borrowers. As used herein, the term "Allocable Percentage" shall mean, on any
date of determinations thereof, a fraction the denominator of which shall be
equal to the number of Borrowers who are parties to this Agreement on such date
and the numerator of which shall be 1; provided, however, that such percentages
shall be modified in the event that contribution from a Borrower is not possible
by reason of insolvency, bankruptcy or otherwise by reducing such Borrower's
Allocable Percentage equitably and by adjusting the Allocable Percentage of the
other Borrowers proportionately so that the Allocable Percentages of all
Borrowers at all times equals 100%. For clarification, nothing in this SECTION
4.9.4 is intended to impair any Borrower's right of setoff or recoupment against
any other Borrower.
4.9.5. Subordination. Each Borrower hereby subordinates any claims,
including any right of payment, subrogation, contribution and indemnity, that it
may have from or against any other Obligor, and any successor or assign of any
other Obligor, including any trustee, receiver or debtor-in-possession,
howsoever arising, due or owing or whether heretofore, now or hereafter
existing, to the payment in full of all of the Obligations.
SECTION 5. TERM AND TERMINATION
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5.1. TERM OF REVOLVER COMMITMENT. Subject to Lender's right to cease
making Revolver Loans and other extensions of credit to Borrowers when any
Default or Event of Default exists or upon termination of the Revolver
Commitment as provided in SECTION 5.2, the Revolver Commitment shall be in
effect for a period of 3 years from the date hereof through the close of
business on October 7, 2005 (the "Term").
5.2. TERMINATION.
5.2.1. Termination by Lender. Lender may terminate the Revolver
Commitment without notice upon or after the occurrence of an Event of Default;
provided, however, that the Revolver Commitment shall automatically terminate as
provided in SECTION 11.2.
5.2.2. Termination by Borrowers. Upon at least 30 days prior written
notice to Lender, Borrowers may, at their option, terminate the Revolver
Commitment; provided, however, no such termination by Borrowers shall be
effective until Borrowers have satisfied all of the Obligations and executed in
favor of and delivered to Lender a general release of all Claims that Borrowers
may have against Lender. Any notice of termination given by Borrowers shall be
irrevocable unless Lender otherwise agrees in writing; provided, however, that a
notice of termination of the Revolver Commitment delivered by Borrowers may
provide that it is conditioned upon the effectiveness of replacement financing
and, if such replacement financing fails to materialize or otherwise is not
consummated, Borrowers (by delivery of written notice to Lender prior to the
effective date of termination of the Revolver Commitment by Borrowers) may
rescind or revoke such notice of termination. Borrowers may elect to terminate
the Revolver Commitment in its entirety only. No section of this Agreement or
Type of Loan available hereunder may be terminated by Borrowers singly.
5.2.3. Termination Charges. On the effective date of termination of
the Revolver Commitment pursuant to SECTION 5.2.2, Borrowers shall jointly and
severally pay to Lender (in addition to the then outstanding principal, accrued
interest, fees and other charges owing under the terms of this Agreement and any
of the other Loan Documents), as liquidated damages for the loss of the bargain
and not as a penalty, an amount equal to $525,000 if termination occurs during
the first Loan Year, or $350,000 if termination occurs during the second Loan
Year. In no event shall any termination charge be payable if (i) the effective
date of termination occurs at any time after the last day of the second Loan
Year or (ii) the termination of the Revolver Commitment occurs in connection
with a refinancing of the Obligations and Revolver Commitment by Lender, Bank or
an Affiliate of either Lender or Bank or a syndicate of lenders with respect to
which Lender, Bank or any Affiliate of Lender or Bank is the collateral and
administrative agent.
5.2.4. Effect of Termination. On the effective date of termination
of the Revolver Commitment by Lender or by Borrowers, all of the Obligations
shall be immediately due and payable and Lender shall have no obligation to make
any Loans or to procure any Letter of Credit. All undertakings, agreements,
covenants, warranties and representations of each Borrower contained in the Loan
Documents shall survive any such termination and Lender shall retain its Liens
in the Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrowers have satisfied the Obligations
to Lender, in full, and Lender has received from Obligors a full release of
Claims in
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form and substance satisfactory to Lender. For purposes of this Agreement, the
Obligations shall not be deemed to have been satisfied until all Obligations for
the payment of money have been paid to Lender in same day funds and all
Obligations that are at the time in question contingent (including all LC
Outstandings that exist by virtue of an outstanding Letter of Credit) have been
fully cash collateralized in favor of Lender, in a manner and with a financial
institution acceptable to Lender, or Lender has received as beneficiary a direct
pay letter of credit in form and from an issuing bank reasonably acceptable to
Lender and providing for direct payment to Lender of all such contingent
Obligations at the time they become fixed (including reimbursement of all sums
paid by Lender under any LC Support). Notwithstanding the payment in full of the
Obligations, Lender shall not be required to terminate its security interests in
any of the Collateral unless, with respect to any loss or damage Lender may
incur as a result of the dishonor or return of any Payment Items applied to the
Obligations, Lender shall have received either (i) a written agreement, executed
by Borrowers and any Person deemed financially responsible by Lender whose loans
or other advances to Borrowers are used in whole or in part to satisfy the
Obligations, indemnifying Lender from any such loss or damage; or (ii) such
monetary reserves and Liens on the Collateral for such period of time as Lender,
in its reasonable discretion, may deem necessary to protect Lender from any such
loss or damage. The provisions of SECTIONS 2.4, 2.7, 2.8, 2.9, 4.5, 4.8 and
5.2.4 and all obligations of Borrowers to indemnify Lender pursuant to this
Agreement or any of the other Loan Documents shall be joint and several and
shall in all events survive any termination of the Revolver Commitment.
SECTION 6. COLLATERAL SECURITY
6.1. GRANT OF SECURITY INTEREST IN COLLATERAL. To secure the prompt
payment and performance of all of the Obligations, each Borrower hereby grants
to Lender, for the benefit of itself as Lender and as agent for any Affiliate of
Lender, a continuing security interest in and Lien upon all of the following
Property and interests in Property of such Borrower, whether now owned or
existing or hereafter created, acquired or arising and wheresoever located:
(i) all Accounts Collateral;
(ii) all Goods, including all Inventory and all Equipment;
(iii) all Instruments;
(iv) all Chattel Paper;
(v) all Documents;
(vi) all General Intangibles;
(vii) all Deposit Accounts;
(viii) all Investment Property (but excluding any portion thereof
that constitutes Margin Stock unless otherwise expressly provided in any
Security Documents);
(ix) all Letter-of-Credit Rights;
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(x) all monies now or at any time or times hereafter in the
possession or under the control of Lender or a bailee or Affiliate of
Lender, including any Cash Collateral in the Cash Collateral Account;
(xi) all accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (i) through (x) above,
including proceeds of and unearned premiums with respect to insurance
policies insuring any of the Collateral and claims against any Person for
loss of, damage to, or destruction of any of the Collateral; and
(xii) all books and records (including customer lists, files,
correspondence, tapes, computer programs, print-outs, and other computer
materials and records) of such Borrower pertaining to any of (i) through
(xi) above.
6.2. LIEN ON DEPOSIT ACCOUNTS. As additional security for the payment and
performance of the Obligations, each Borrower hereby grants to Lender a
continuing security interest in and Lien upon and hereby collaterally assigns to
Lender all of such Borrower's right, title and interest in and to each Deposit
Account of Borrowers and in and to any deposits or other sums at any time
credited to each such Deposit Account, including any sums in any blocked account
or any special lockbox account and in the accounts in which sums are deposited.
In connection with the foregoing, each Borrower hereby authorizes and directs
each such bank or other depository to pay or deliver to Lender upon its written
demand therefor made at any time upon the occurrence and during the continuation
of an Event of Default and without further notice to such Borrower (such notice
being hereby expressly waived), all balances in each Deposit Account maintained
by Borrowers with such depository for application to the Obligations then
outstanding, and the rights given Lender in this Section shall be cumulative
with and in addition to Lender's other rights and remedies in regard to the
foregoing Property as proceeds of Collateral. Each Borrower hereby irrevocably
appoints Lender as its attorney to collect any and all such balances to the
extent any such payment is not made to Lender by such bank or other depository
after demand thereon is made by Lender pursuant hereto.
6.3. REAL ESTATE COLLATERAL. To further secure the prompt payment and
performance of the Obligations, each Borrower hereby grants, transfers and
assigns to Lender, and hereby grants to Lender a security interest in and Lien
upon, all of such Borrower's right, title and interest in, to and under all now
or hereafter existing leases of real Property to which such Borrower is a party,
whether as lessor or lessee, and all extensions, renewals and modifications
thereof, except to the extent that any such assignment or Lien would violate the
terms thereof.
6.4. OTHER COLLATERAL. In addition to the items of Property referred to in
SECTION 6.1 above, the Obligations shall also be secured by the Cash Collateral
to the extent provided herein and all of the other items of Property from time
to time described in any of the Security Documents as security for any of the
Obligations.
6.5. NO ASSUMPTION OF LIABILITY. The security interest granted pursuant to
this Agreement is granted as security only and shall not subject Lender to, or
in any way alter or modify, any obligation of liability of Borrowers with
respect to or arising out of the Collateral.
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6.6. LIEN PERFECTION; FURTHER ASSURANCES. Promptly after Lender's request
therefor, Borrowers shall execute or cause to be executed and deliver to Lender
such instruments, assignments, title certificates or other documents as are
necessary under the UCC or other Applicable Law (including any motor vehicle
certificate of title acts) to perfect (or continue the perfection of) Lender's
Lien upon the Collateral and shall take such other action as may be requested by
Lender to give effect to or carry out the intent and purposes of this Agreement.
Unless prohibited by Applicable Law, each Borrower hereby irrevocably authorizes
Lender to execute and file in any jurisdiction any financing statement or
amendment thereto on such Borrower's behalf, including financing statements that
indicate the Collateral as being of an equal or lesser scope, or with greater or
lesser detail, than as set forth in this SECTION 6. Borrower also hereby
ratifies its authorization for Lender to have filed in any jurisdiction any like
financing statement or amendment thereto if filed prior to the date hereof. To
the extent permitted by Applicable Law, the parties agree that a carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement and may be filed in any appropriate office in lieu thereof.
6.7. FOREIGN SUBSIDIARY STOCK. Notwithstanding anything to the contrary
set forth in SECTION 6.1 above, the types or items of Collateral described in
such Section (i) shall include only 65% of the stock of any Foreign Subsidiary
and (ii) shall not include any Borrower's rights or interests in any lease,
license, contract or agreement to which such Borrower is a party, to the extent
that a grant of a Security Interest or Lien under this Agreement or any other
Loan Document would result in a breach of or default under the terms or
provisions of any such lease, license, contract or agreement (other than to the
extent that any such term would be rendered ineffective pursuant to Sections
9-406, 9-407, 9-408 or 9-409 of the UCC, any other provisions of the UCC or any
other Applicable Law.
SECTION 7. COLLATERAL ADMINISTRATION
7.1. GENERAL
7.1.1. Location of Collateral. All tangible items of Collateral,
other than Inventory in transit, shall at all times be kept by Borrowers at one
or more of the business locations of a Borrower set forth in SCHEDULE 7.1.1
hereto and shall not be moved therefrom, without the prior written approval of
Lender, except that in the absence of an Event of Default and acceleration of
the maturity of the Obligations in consequence thereof, a Borrower (i) may make
sales or other dispositions of Collateral to the extent authorized by SECTION
9.2.10 hereof and (ii) move Inventory or Equipment or any record relating to any
Collateral to a location in the United States other than those shown on SCHEDULE
7.1.1 hereto so long as Borrowers have given Lender at least 30 Business Days
prior written notice of such new location and prior to moving any Inventory or
Equipment to such location where there have been filed any UCC-1 financing
statements and any other appropriate documentation necessary to perfect or
continue the perfection of Lender's first priority Liens with respect to such
Inventory or Equipment. Notwithstanding anything to the contrary contained in
this Agreement, no Borrower shall be permitted to keep, store or otherwise
maintain any Collateral at any location (including any location described in
SCHEDULE 7.1.1) unless (i) such Borrower is the owner of such location, (ii)
such Borrower leases such location and, except with respect to Borrowers'
locations at Fruegauf Xxxx. Xx. 0, Xxxxxxxxxx, Xxxxxxxxxxxx (subleased to an
unrelated Person) and San Xxxx, Puerto Rico as set forth in SCHEDULE 7.1.1, the
landlord has executed in favor of Lender a Landlord
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Waiver, or (iii) the Collateral consists of Inventory placed with a
warehouseman, bailee or a processor, Lender has received from such warehouseman,
bailee or processor an acceptable Lien waiver agreement and an appropriate UCC-1
financing statement has been filed with the appropriate Governmental Authority
in the jurisdiction where such warehouseman, bailee or processor is located in
order to perfect, or to maintain the uninterrupted perfection of Lender's
security interest in such Inventory.
7.1.2. Insurance of Collateral; Condemnation Proceeds. Each Borrower
shall maintain and pay for insurance upon all Collateral, wherever located,
covering casualty, hazard, public liability, theft, malicious mischief, and such
other risks in such amounts and with such insurance companies as are reasonably
satisfactory to Lender. SCHEDULE 7.1.2 describes all insurance of Borrowers in
effect on the date hereof. All proceeds payable under each such policy (and any
such policy of any Affiliates or any Subsidiary (including any Foreign
Subsidiary)) shall be payable to Lender for application to the Obligations. Each
Borrower shall deliver the originals or certified copies of such policies to
Lender with satisfactory lender's loss payable endorsements reasonably
satisfactory to Lender, naming Lender as sole loss payee, assignee or additional
insured, as appropriate. Each policy of insurance or endorsement shall contain a
clause requiring the insurer to give not less than 30 days prior written notice
to Lender in the event of cancellation of the policy for any reason whatsoever
and a clause specifying that the interest of Lender shall not be impaired or
invalidated by any act or neglect of any Borrower or the owner of the Property
or by the occupation of the premises for purposes more hazardous than are
permitted by said policy. If any Borrower fails to provide and pay for such
insurance, Lender may, at its option, but shall not be required to, procure the
same and charge each Borrower therefor. Each Borrower agrees to deliver to
Lender, promptly as rendered, true copies of all reports made in any reporting
forms to insurance companies. For so long as no Event of Default exists, each
Borrower shall have the right to settle, adjust and compromise any claim with
respect to any insurance maintained by each Borrower provided that all proceeds
thereof are applied in the manner specified in this Agreement, and Lender agrees
promptly to provide any necessary endorsement to any checks or drafts issued in
payment of any such claim. At any time that an Event of Default exists, only
Lender shall be authorized to settle, adjust and compromise such claims. Lender
shall have all rights and remedies with respect to such policies of insurance as
are provided for in this Agreement and the other Loan Documents.
7.1.3. Protection of Collateral. All expenses of protecting,
storing, warehousing, insuring, handling, maintaining and shipping any
Collateral, all Taxes imposed under any Applicable Law on any of the Collateral
or in respect of the sale thereof, and all other payments required to be made by
Lender to any Person to realize upon any Collateral shall be borne and paid by
Borrowers. Lender shall not be liable or responsible in any way for the
safekeeping of any of the Collateral or for any loss or damage thereto (except
for reasonable care in the custody thereof while any Collateral is in Lender's
actual possession) or for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency, or other Person
whomsoever, but the same shall be at Borrowers' sole risk.
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7.1.4. Defense of Title to Collateral. Borrowers shall at all times
defend their title to the Collateral and Lender's Liens therein against all
Persons and all claims and demands whatsoever other than Permitted Liens.
7.2. Administration of Accounts.
7.2.1. Records and Schedules of Accounts. Each Borrower shall keep
accurate and complete records of its Accounts and all payments and collections
thereon and shall submit to Lender on such periodic basis as Lender shall
request a sales and collections report for the preceding period, in form
satisfactory to Lender. Each Borrower shall also provide to Lender on or before
the 20th day of each month, a detailed aged trial balance of all of its Accounts
existing as of the last day of the preceding month, specifying the names,
addresses, face value, dates of invoices and due dates for each Account Debtor
obligated on an Account so listed ("Schedule of Accounts"), and, upon Lender's
request therefor, copies of proof of delivery and a copy of all documents,
including repayment histories and present status reports relating to the
Accounts so scheduled and such other matters and information relating to the
status of then existing Accounts as Lender shall reasonably request. In
addition, if Accounts in an aggregate face amount in excess of $500,000 cease to
be Eligible Accounts in whole or in part, Borrowers shall notify Lender of such
occurrence promptly (and in any event within 2 Business Days) after any
Borrower's having obtained knowledge of such occurrence and the Borrowing Base
shall thereupon be adjusted to reflect such occurrence. Each Borrower shall
deliver to Lender copies of invoices or invoice registers related to all of its
Accounts.
7.2.2. Discounts, Disputes and Returns. If any Borrower grants any
discounts, allowances or credits that are not shown on the face of the invoice
for the Account involved, Borrowers shall report such discounts, allowances or
credits, as the case may be, to Lender as part of the next required Schedule of
Accounts. If any amounts due and owing in excess of $200,000 are in dispute
between any Borrower and any single Account Debtor, or if any returns are made
in excess of $200,000 with respect to any Accounts owing from a single Account
Debtor, Borrowers shall provide Lender with written notice thereof at the time
of submission of the next Schedule of Accounts, explaining in detail the reason
for the dispute or return, all claims related thereto and the amount in
controversy. At any time an Event of Default exists, Lender shall have the right
to settle or adjust all disputes and claims directly with the Account Debtor and
to compromise the amount or extend the time for payment of any Accounts
comprising a part of the Collateral upon such terms and conditions as Lender may
deem advisable, and to charge the deficiencies, costs and expenses thereof,
including attorneys' fees, to Borrowers.
7.2.3. Taxes. If an Account of any Borrower includes a charge for
any Taxes payable to any Governmental Authority, Lender is authorized, in its
sole discretion, to pay the amount thereof to the proper taxing authority for
the account of such Borrower and to charge Borrowers therefor; provided,
however, that Lender shall not be liable for any Taxes that may be due by any
Borrower.
7.2.4. Account Verification. Whether or not a Default or an Event of
Default exists, Lender shall have the right at any time, in the name of Lender,
any designee of Lender or any Borrower, to verify the
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validity, amount or any other matter relating to any Accounts of any Borrower by
mail, telephone, telegraph or otherwise. Borrowers shall cooperate fully with
Lender in an effort to facilitate and promptly conclude any such verification
process.
7.2.5. Maintenance of Dominion Account. Borrowers shall maintain a
Dominion Account pursuant to a lockbox or other arrangement acceptable to Lender
and, in the case of such Dominion Account and lockbox arrangement, with such
bank as may be selected by Borrowers and be acceptable to Lender. Borrowers
shall issue to each such lockbox bank an irrevocable letter of instruction
directing such bank to deposit all payments or other remittances received in the
lockbox, if any, to the Dominion Account. Borrowers shall enter into agreements,
in form satisfactory to Lender, with each bank at which a Dominion Account is
maintained by which such bank shall immediately transfer to the Payment Account
all monies deposited to the Dominion Account. All funds deposited in each
Dominion Account shall be subject to Lender's Lien. Borrowers shall obtain the
agreement (in favor of and in form and content satisfactory to Lender) by each
bank at which a Dominion Account is maintained to waive any offset rights
against the funds deposited into such Dominion Account, except offset rights in
respect of charges incurred in the administration of such Dominion Account.
Lender does not assume any responsibility to Borrowers for such lockbox
arrangement or Dominion Account, including any claim of accord and satisfaction
or release with respect to deposits accepted by any bank thereunder. Borrowers
shall transfer all of their Deposit Accounts (other than any of Borrowers'
payroll and xxxxx cash accounts that are listed on SCHEDULE 7.2.5 or any other
Deposit Account as to which Borrowers give Lender written notice prior to the
establishment thereof) and system of cash management from Borrowers' existing
banks to Bank on or before November 30, 2002. If at any time the collected
balance in any Deposit Account not transferred to Bank as described in the
preceding sentence exceeds $100,000, then all balances in such Deposit Account
in excess of $100,000 shall be sent by wire transfer to the Payment Account for
application to the Obligations as provided herein. In all events, from and after
the date on which Bank can provide to Borrowers immediate imaging access
services, Borrowers shall cause all Account Debtors to remit all payments and
other remittances (other than Fax and Hold Checks) to the lockbox associated
with the Dominion Account.
7.2.6. Collection of Accounts; Proceeds of Collateral. To expedite
collection, Borrowers shall endeavor in the first instance to make collection of
their Accounts for Lender. All Payment Items received by any Borrower in respect
of its Accounts, together with the proceeds of any other Collateral, shall be
held by such Borrower as trustee of an express trust for Lender's benefit; such
Borrower shall immediately deposit same in kind in the Dominion Account; and
Lender may apply such proceeds to the Obligations in the manner authorized by
this Agreement. Lender retains the right at all times that a Default or an Event
of Default exists to notify Account Debtors of each Borrower that Accounts have
been assigned to Lender and to collect Accounts directly in its own name and to
charge to Borrowers the collection costs and expenses incurred by Lender,
including reasonable attorneys' fees.
7.3. Administration of Inventory.
7.3.1. Records and Reports of Inventory. Each Borrower shall keep
accurate and complete records of its Inventory and shall
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furnish Lender inventory reports respecting such Inventory in form and detail
satisfactory to Lender at such times as Lender may request, but so long as no
Default or Event of Default exists, no more frequently than once each week. Such
reports shall, among other things, break down Inventory into categories based
upon the vendor or supplier from which such Inventory was purchased and by
category (e.g., central processing units, hard drives, printers, motherboards
and the like), shall include a calculation of the Net Orderly Liquidation Value
of the Inventory within such categories and shall disclose the age of Inventory
as measured from the date of purchase. Borrowers shall, at their own expense,
conduct a physical inventory no less frequently than annually and periodic cycle
counts consistent with Borrowers' historical practices and shall, if requested
by Lender, provide to Lender a report based on each such physical inventory and
cycle count promptly thereafter, together with such supporting information as
Lender shall request. Lender may participate in and observe each physical count
or inventory, which participation shall be at Borrowers' expense at any time
that an Event of Default exists.
7.3.2. Returns of Inventory. No Borrower shall return any of its
Inventory to a supplier or vendor thereof, or any other Person, whether for
cash, credit against future purchases or then existing payables, or otherwise,
unless: (i) such return is in the Ordinary Course of Business of such Borrower
and such Person; (ii) no Default or Event of Default exists or would result
therefrom; (iii) the return of such Inventory will not result in an
Out-of-Formula Condition; (iv) Borrowers promptly notify Lender thereof if the
aggregate Value of all Inventory returned in any month exceeds $1,000,000; and
(v) any payments received by any Borrower in connection with any such return are
promptly turned over to Lender for application to the Obligations.
7.3.3. Acquisitions of Inventory. Borrowers will use their best efforts
to insure that all Inventory that is produced in the United States of America
will be produced in accordance with the FLSA and, unless Borrowers provide
Lender with prior written notice thereof, shall not acquire or accept any
Inventory on consignment or approval.
7.4. ADMINISTRATION OF EQUIPMENT.
7.4.1. Records and Schedules of Equipment. Each Borrower shall keep
accurate records itemizing and describing the kind, type, quality, quantity and
cost of its Equipment and all dispositions made in accordance with SECTION 7.4.2
hereof, and shall furnish Lender with a current schedule containing the
foregoing information if requested by Lender. Promptly after request therefor by
Lender, Borrowers shall deliver to Lender any and all evidence of ownership, if
any, of any of the Equipment.
7.4.2. Dispositions of Equipment. No Borrower will sell, lease or
otherwise dispose of or transfer any of the Equipment or any part thereof
without the prior written consent of Lender; provided, however, that the
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists, to (i) dispositions of Equipment which, in the aggregate as to
all Borrowers during any consecutive 12-month period, has a fair market value or
book value, whichever is more, of $250,000 or less, provided that all Net
Proceeds thereof are remitted to Agent for application to the Obligations, or
(ii) replacements of Equipment that is substantially worn, damaged or obsolete
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with Equipment of like kind, function and value, provided that the replacement
Equipment shall be acquired prior to or concurrently with, or, if due to order
or trade-in delays, within 60 days after, any disposition of the Equipment that
is to be replaced. The replacement Equipment shall be free and clear of Liens
other than Permitted Liens, and Borrowers shall have given Lender at least 10
days prior written notice of such disposition (unless such disposition is due to
casualty loss).
7.4.3. Condition of Equipment. The Equipment is in good operating
condition and repair, and all necessary replacements of and repairs thereto
shall be made so that the value and operating efficiency of the Equipment shall
be maintained and preserved, reasonable wear and tear and damage by casualty
excepted. Borrowers shall ensure that the Equipment shall be mechanically and
structurally sound, capable of performing the functions for which the Equipment
was originally designed, in accordance with the manufacturer's published and
recommended specifications. No Borrower will permit any of the Equipment to
become affixed to any real Property leased to such Borrower so that an interest
arises therein under the real estate laws of the applicable jurisdiction unless
the landlord of such real Property has executed a landlord waiver or leasehold
mortgage in favor of and in form acceptable to Lender, and no Borrower will
permit any of the Equipment to become an accession to any personal Property that
is subject to a Lien unless the Lien is a Permitted Lien.
7.5. BORROWING BASE CERTIFICATES. On the Closing Date and on each Business
Day after the Closing Date, Borrowers shall deliver to Lender a Borrowing Base
Certificate prepared as of the close of business of the previous Business Day.
All calculations of Availability in connection with any Borrowing Base
Certificate shall originally be made by Borrowers and certified by a Senior
Officer of Borrower's Agent to Lender, provided that Lender shall have the right
to review and adjust, in the exercise of its reasonable credit judgment, any
such calculation (i) to reflect its reasonable estimate of declines in value of
any of the Collateral described therein and (ii) to the extent that such
calculation is not in accordance with this Agreement or does not accurately
reflect the amount of the Availability Reserve.
SECTION 8. REPRESENTATIONS AND WARRANTIES
8.1. GENERAL REPRESENTATIONS AND WARRANTIES. To induce Lender to enter
into this Agreement and to make available the Revolver Commitment, each Borrower
warrants and represents to Lender that:
8.1.1. Organization and Qualification. Each Borrower and each of its
Subsidiaries is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization. Each Borrower and each
of its Subsidiaries (other than E-Store) is duly qualified and is authorized to
do business and is in good standing as a foreign corporation in each state or
jurisdiction listed on SCHEDULE 8.1.1 hereto and in all other states and
jurisdictions in which the failure of Borrower or any of such Subsidiaries to be
so qualified would have a Material Adverse Effect.
8.1.2. Power and Authority. Each Borrower and each of its Subsidiaries
is duly authorized and empowered to enter into, execute, deliver and perform
this Agreement and each of the other Loan Documents
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to which it is a party. The execution, delivery and performance of this
Agreement and each of the other Loan Documents have been duly authorized by all
necessary action and do not and will not (i) require any consent or approval of
any of the holders of the Equity Interests of any Borrower or any of its
Subsidiaries; (ii) contravene any Borrower's or any of its Subsidiaries'
Organization Documents; (iii) violate, or cause any Borrower or any of its
Subsidiaries to be in default under, any provision of any Applicable Law, order,
writ, judgment, injunction, decree, determination or award in effect having
applicability to such Borrower or any of its Subsidiaries; (iv) result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which any Borrower or
any of its Subsidiaries is a party or by which it or its Properties may be bound
or affected; or (v) result in, or require, the creation or imposition of any
Lien (other than Permitted Liens) upon or with respect to any of the Properties
now owned or hereafter acquired by any Borrower or any of its Subsidiaries.
8.1.3. Legally Enforceable Agreement. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, a legal,
valid and binding obligation of each Borrower and each of its Subsidiaries
signatories thereto enforceable against it in accordance with the respective
terms of such Loan Documents, except as the enforceability thereof may be
limited by bankruptcy, insolvency or other similar laws of general application
affecting the enforcement of creditors' rights or general principles of equity.
8.1.4. Capital Structure. As of the date hereof, SCHEDULE 8.1.4 hereto
states (i) the correct name of each Subsidiary, its jurisdiction of organization
and the percentage of its Equity Interests having voting powers owned by each
Person, (ii) the name of each Borrower's corporate or joint venture Affiliates
and the nature of the affiliation and (iii) the number of authorized and issued
Equity Interests (and treasury shares) of each Borrower and each of its
Subsidiaries. Each Borrower has good title to all of the shares it purports to
own of the Equity Interests of each of its Subsidiaries, free and clear in each
case of any Lien other than Permitted Liens. All such Equity Interests have been
duly issued and are fully paid and non-assessable. Since the date of the
financial statements of Borrowers referred to in SECTION 8.1.9 hereof, no
Borrower has made, or obligated itself to make, any Distribution. Except as set
forth on SCHEDULE 8.1.4, there are no outstanding options to purchase, or any
rights or warrants to subscribe for, or any commitments or agreements to issue
or sell, or any Equity Interests or obligations convertible into, or any powers
of attorney relating to, shares of the capital stock of any Borrower or any of
its Subsidiaries. Except as set forth on SCHEDULE 8.1.4 hereto, there are no
outstanding agreements or instruments binding upon the holders of any Borrower's
Equity Interests relating to the ownership of its Equity Interests.
8.1.5. Names. During the 5-year period preceding the date of this
Agreement, neither any Borrower nor any of its Subsidiaries has been known as or
used any corporate, fictitious or trade names except those listed on SCHEDULE
8.1.5 hereto. Except as set forth on SCHEDULE 8.1.5, no Borrower nor any of its
Subsidiaries has been the surviving corporation of a merger or consolidation or
acquired all or substantially all of the assets of any Person.
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8.1.6. Business Locations; Agent for Process. As of the date hereof,
each Borrower's and each of its Subsidiaries' chief executive office and other
places of business of each Borrower and each of its Subsidiaries are as listed
on SCHEDULE 7.1.1 hereto. During the 5-year period preceding the date of this
Agreement, no Borrower nor any of its Subsidiaries has had an office, place of
business or agent for service of process other than as listed on SCHEDULE 7.1.1.
Except as shown on SCHEDULE 7.1.1 on the date hereof, no Inventory of any
Borrower or any of its Subsidiaries is stored with a bailee, warehouseman or
similar Person, nor is any Inventory consigned to any Person.
8.1.7. Title to Properties; Priority of Liens. Each Borrower and each
of its Subsidiaries has good and marketable title to and fee simple ownership
of, or valid and subsisting leasehold interests in, all of its real Property,
and good title to all of its personal Property, including all Property reflected
in the financial statements referred to in SECTION 8.1.9 or delivered pursuant
to SECTION 9.1.3, except for Property permitted to be sold or otherwise disposed
of pursuant to the terms of this Agreement or sold or otherwise disposed of with
the consent of Lender, in each case free and clear of all Liens except Permitted
Liens. Each Borrower has paid or discharged, and has caused each Subsidiary to
pay and discharge, all lawful claims which, if unpaid, might become a Lien
against any Properties of such Borrower or Subsidiary that is not a Permitted
Lien. The Liens granted to Lender pursuant to this Agreement and the Security
Documents are first priority Liens, subject only to those Permitted Liens which
are expressly permitted by the terms of this Agreement to have priority over the
Liens of Lender.
8.1.8. Accounts. Lender may rely, in determining which Accounts are
Eligible Accounts, on all statements and representations made by a Borrower with
respect to any Account. Unless otherwise indicated in writing to Lender or
excluded by Borrowers in their calculation of the Borrowing Base in any
Borrowing Base Certificate, with respect to each Account, each Borrower warrants
that:
(i) It is genuine and in all respects what it purports to be, and it is
not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale and delivery of goods
by a Borrower in the Ordinary Course of Business and substantially in
accordance with the terms and conditions of all purchase orders, contracts
or other documents relating thereto and forming a part of the contract
between a Borrower and the Account Debtor;
(iii) It is for a sum certain maturing as stated in the duplicate
invoice covering such sale, a copy of which has been furnished or is
available to Lender on request;
(iv) Such Account, and Lender's security interest therein, is not, and
will not (by voluntary act or omission of a Borrower) be in the future,
subject to any offset, Lien, deduction, defense, dispute, counterclaim or
any other adverse condition except for disputes resulting in returned
goods where the amount in controversy is deemed by Lender to be
immaterial, and each such Account is absolutely owing to a Borrower and is
not contingent in any respect or for any reason;
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(v) The contract under which such Account arose does not condition or
restrict any Borrower's right to assign to Lender the right to payment
thereunder unless Borrowers have obtained the Account Debtor's consent to
such collateral assignment or complied with any conditions to such
assignment (regardless of whether under the UCC or other Applicable Law
any such restrictions are ineffective to prevent the grant of a Lien upon
such Account in favor of Lender);
(vi) Such Borrower has not made any agreement with any Account Debtor
for any extension, compromise, settlement or modification of any such
Account or any deduction therefrom, except discounts or allowances which
are granted by a Borrower in the Ordinary Course of Business for prompt
payment and which are reflected in the calculation of the net amount of
each respective invoice related thereto and are reflected in the Schedules
of Accounts submitted to Lender pursuant to SECTION 7.2.1 hereof and
extensions which are granted by a Borrower in the Ordinary Course of
Business;
(vii) To the best of such Borrower's knowledge, there are no facts,
events or occurrences which are reasonably likely to impair the validity
or enforceability of any of such Account or reduce the amount payable
thereunder from the face amount of the invoice and statements delivered to
Lender with respect thereto;
(viii) To the best of such Borrower's knowledge, the Account Debtor
thereunder (1) had the capacity to contract at the time any contract or
other document giving rise to the Account was executed and (2) is Solvent;
and
(ix) To the best of such Borrower's knowledge, there are no proceedings
or actions which are threatened or pending against any Account Debtor
thereunder and which are reasonably likely to result in any material
adverse change in such Account Debtor's financial condition or the
collectibility of such Account.
8.1.9. Financial Statements; Fiscal Year. The Consolidated and
consolidating balance sheets of Borrowers and such other Persons described
therein (including the accounts of all Subsidiaries of Borrowers for the
respective periods during which a Subsidiary relationship existed) as of June
30, 2002, and the related statements of income, changes in stockholder's equity,
and changes in financial position for the periods ended on such dates, have been
prepared in accordance with GAAP, and present fairly the financial positions of
Borrowers and such Persons at such dates and the results of Borrowers'
operations for such periods. Since July 31, 2002, there has been no material
change in the condition, financial or otherwise, of any Borrower or such other
Persons as shown on the Consolidated balance sheet as of such date and no
material change in the aggregate value of Equipment and real Property owned by
any Borrower or such other Persons.
8.1.10. Full Disclosure. The financial statements referred to in
SECTION 8.1.9 hereof do not contain any untrue statement of a material fact and
neither this Agreement nor any other written statement contains or omits any
material fact necessary to make the statements contained herein or therein not
materially misleading. There is no fact or
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circumstances in existence on the date hereof which any Borrower has failed to
disclose to Lender in writing that may reasonably be expected to have a Material
Adverse Effect.
8.1.11. Solvent Financial Condition. Each Borrower and each of its
Subsidiaries (other than E-Store and SED Brasil) is now Solvent and, after
giving effect to the Loans to be made hereunder, the Letters of Credit to be
issued in connection herewith and the consummation of the other transactions
described in the Loan Documents, Borrower and each of its Subsidiaries (other
than E-Store and SED Brasil) will be Solvent.
8.1.12. Surety Obligations. Except as set forth on SCHEDULE 8.1.12
hereto, on the date hereof no Borrower nor any of its Subsidiaries is obligated
as surety or indemnitor under any surety or similar bond or other contract
issued or entered into any agreement to assure payment, performance or
completion of performance of any undertaking or obligation of any Person.
8.1.13. Taxes. The FEIN of each Borrower and each of its Subsidiaries
is as shown on SCHEDULE 8.1.13 hereto. Each Borrower and each of its
Subsidiaries has filed all federal, state and local tax returns and other
reports it is required by law to file and has paid, or made provision for the
payment of, all Taxes upon it, its income and Properties as and when such Taxes
are due and payable, except to the extent being Properly Contested. The
provision for Taxes on the books of Borrowers and their Subsidiaries are
adequate for all years not closed by applicable statutes, and for their current
Fiscal Year.
8.1.14. Brokers. There are no claims against any Borrower for brokerage
commissions, finder's fees or investment banking fees in connection with the
transactions contemplated by this Agreement or any of the other Loan Documents.
8.1.15. Intellectual Property. Each Borrower and each of its
Subsidiaries owns or has the lawful right to use all Intellectual Property
necessary for the present and planned future conduct of its business without any
conflict with the rights of others; there is no objection to or pending or, to
the knowledge of any Borrower, threatened Intellectual Property Claim with
respect to any Borrower's right to use any such Intellectual Property and no
Borrower is aware of any grounds for challenge or objection thereto; and, except
as may be disclosed on SCHEDULE 8.1.15, no Borrower nor any of its Subsidiaries
pays any royalty or other compensation to any Person for the right to use any
Intellectual Property. All such patents, trademarks, service marks, tradenames,
copyrights, licenses and other similar rights are listed on SCHEDULE 8.1.15
hereto, to the extent they are registered under any Applicable Law or are
otherwise material to any Borrower's or Subsidiary's business.
8.1.16. Governmental Approvals. Each Borrower and each of its
Subsidiaries has, and is in good standing with respect to all Governmental
Approvals necessary to continue to conduct its business as heretofore or
proposed to be conducted by it and to own or lease and operate its Properties as
now owned or leased by it.
8.1.17. Compliance with Laws. Each Borrower and each of its
Subsidiaries has duly complied with, and its Properties, business
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operations and leaseholds are in compliance in all material respects with, the
provisions of all Applicable Law (except to the extent that any such
noncompliance with Applicable Law could not reasonably be expected to have a
Material Adverse Effect) and there have been no citations, notices or orders of
noncompliance issued to any Borrower or any of its Subsidiaries under any such
law, rule or regulation. To the knowledge of Borrower, no Inventory has been
produced in violation of the Fair Labor Standards Act (29 U.S.C. Section 201 et
seq.).
8.1.18. Burdensome Contracts. No Borrower nor any of its Subsidiaries
is a party or subject to any contract, agreement, or charter or other corporate
restriction, which has or could be reasonably expected to have a Material
Adverse Effect. No Borrower nor any of its Subsidiaries is a party or subject to
any Restrictive Agreement, except as set forth on SCHEDULE 8.1.18 hereto, none
of which prohibit the execution or delivery of any of the Loan Documents by any
Obligor or the performance by any Obligor of its obligations under any of the
Loan Documents to which it is a party, in accordance with the terms of such Loan
Documents.
8.1.19. Litigation. Except as set forth on SCHEDULE 8.1.19 hereto,
there are no actions, suits, proceedings or investigations pending, or to the
knowledge of any Borrower, threatened on the date hereof, against or affecting
any Borrower or any of its Subsidiaries, or the business, operations,
Properties, prospects, profits or condition of any Borrower or any of its
Subsidiaries, (i) which relate to any of the Loan Documents or any of the
transactions contemplated thereby or (ii) which, if determined adversely to
Borrower or any Subsidiary, could reasonably be expected to have a Material
Adverse Effect. To the knowledge of Borrowers, no Borrower or any of its
Subsidiaries is in default on the date hereof with respect to any order, writ,
injunction, judgment, decree or rule of any court, Governmental Authority or
arbitration board or tribunal.
8.1.20. No Defaults. No event has occurred and no condition exists
which would, upon or after the execution and delivery of this Agreement or
Borrowers' performance hereunder, constitute a Default or an Event of Default.
No Borrower or any of its Subsidiaries is in default, and no event has occurred
and no condition exists which constitutes or which with the passage of time or
the giving of notice or both would constitute a default, under any Material
Contract or in the payment of any Debt to any Person for Money Borrowed.
8.1.21. Leases. SCHEDULE 8.1.21 hereto is a complete listing of each
capitalized and operating lease of each Borrower and each of its Subsidiaries on
the date hereof that constitutes a Material Contract. Each Borrower and each of
its Subsidiaries is in substantial compliance with all of the terms of each of
its respective capitalized and operating leases and there is no basis upon which
the lessors under any such leases could terminate same or declare Borrower or
any of its Subsidiaries in default thereunder.
8.1.22. Pension Plans. Except as disclosed on SCHEDULE 8.1.22 hereto,
no Borrower nor any of its Subsidiaries has any Plan on the date hereof. Each
Borrower and each of its Subsidiaries is in full compliance with the
requirements of ERISA and the regulations promulgated thereunder with respect to
each Plan. No fact or situation that is reasonably likely to result in a
material adverse change in the financial
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condition of any Borrower or any of its Subsidiaries exists in connection with
any Plan. No Borrower nor any of its Subsidiaries has any withdrawal liability
in connection with a Multiemployer Plan.
8.1.23. Trade Relations. There exists no actual or threatened
termination, cancellation or limitation of, or any materially adverse
modification or change in, the business relationship between any Borrower or any
of its Subsidiaries and any customer or any group of customers whose purchases
individually or in the aggregate are material to the business of any Borrower or
any of its Subsidiaries, or with any material supplier or group of suppliers,
and there exists no condition or state of facts or circumstances which is
reasonably likely to have a Material Adverse Effect or prevent any Borrower or
any of its Subsidiaries from conducting such business after the consummation of
the transactions contemplated by this Agreement in substantially the same manner
in which it has heretofore been conducted.
8.1.24. Labor Relations. Except as described on SCHEDULE 8.1.24 hereto,
no Borrower nor any of its Subsidiaries is a party to any collective bargaining
agreement on the date hereof. On the date hereof, there are no material
grievances, disputes or controversies with any union or any other organization
of any Borrower's or any of its Subsidiaries' employees, or, to any Borrower's
knowledge, threats of strikes, work stoppages or any asserted pending demands
for collective bargaining by any union or organization.
8.1.25. Not a Regulated Entity. No Obligor is (i) an "investment
company" or a "person directly or indirectly controlled by or acting on behalf
of an investment company" within the meaning of the Investment Company Act of
1940; or (ii) a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935; or (iii) subject to regulation under the Federal Power Act, the
Interstate Commerce Act, any public utilities code or any other Applicable Law
regarding its authority to incur Debt.
8.1.26. Margin Stock. No Borrower nor any Subsidiary of a Borrower is
engaged, principally or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin Stock.
8.2. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES. Each representation
and warranty contained in this Agreement and the other Loan Documents shall be
deemed to be reaffirmed by each Borrower on each day that any Obligations are
outstanding or that Borrowers request or are deemed to have requested an
extension of credit hereunder, except for changes in the nature of a Borrower's
or, if applicable, any of its Subsidiaries' business or operations that may
occur after the date hereof in the Ordinary Course of Business so long as Lender
has consented to such changes or such changes do not violate any provision of
this Agreement. Notwithstanding the foregoing, representations and warranties
which by their terms are applicable only to a specific date shall be deemed made
only at and as of such date.
8.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Borrowers contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery
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and acceptance thereof by Lender and the parties thereto and the closing of the
transactions described therein or related thereto.
SECTION 9. COVENANTS AND CONTINUING AGREEMENTS
9.1. AFFIRMATIVE COVENANTS. For so long as the Revolver Commitment is
outstanding and thereafter until payment in full of the Obligations, each
Borrower covenants that, unless otherwise consented to by Lender in writing, it
shall and shall cause each Subsidiary to:
9.1.1. Visits and Inspections. Permit representatives of Lender, from
time to time, as often as may be reasonably requested, but only during normal
business hours and (except when a Default or Event of Default exists) upon
reasonable prior notice to such Borrowers, to visit and inspect its Properties
and the Properties of each Domestic Subsidiary, inspect, audit and make extracts
from such Borrower's and Subsidiary's books and records, and discuss with such
Borrower's and Subsidiary's officers, employees and independent accountants,
such Borrower's and each of its Subsidiary's business, financial condition,
business prospects and results of operations. Lender shall not have any duty to
make any such inspection and shall not incur any liability by reason of its
failure to conduct or delay in conducting any such inspection.
9.1.2. Notices. Notify Lender in writing promptly after Borrowers'
obtaining knowledge (i) of the commencement of any litigation affecting any
Obligor or any of its Properties, whether or not the claims asserted in such
litigation are considered by Borrower to be covered by insurance, and of the
institution of any administrative proceeding, to the extent that such litigation
or proceeding, if determined adversely to such Obligor, would reasonably be
expected to have a Material Adverse Effect; (ii) of any material labor dispute
to which any Obligor may become a party, any strikes or walkouts relating to any
of its plants or other facilities, and the expiration of any labor contract to
which it is a party or by which it is bound; (iii) of any material default by
any Obligor under, or termination of, any Material Contract or any note,
indenture, loan agreement, mortgage, lease, deed, guaranty or other similar
agreement relating to any Debt of such Obligor exceeding $300,000; (iv) of the
existence of any Default or Event of Default; (v) of any default by any Person
under any note or other evidence of Debt payable to an Obligor in an amount
exceeding $300,000; (vi) of any judgment against any Obligor in an amount
exceeding $300,000; (vii) of the assertion by any Person of any Intellectual
Property Claim, the adverse resolution of which could reasonably be expected to
have a Material Adverse Effect; (viii) of any violation or asserted violation by
any Borrower of any Applicable Law (including ERISA, OSHA, FLSA or any
Environmental Laws, the adverse resolution of which could reasonably be expected
to have a Material Adverse Effect; (ix) of any Environmental Release by an
Obligor or on any Property owned or occupied by an Obligor; (x) of the discharge
of Borrower's independent accountants or any withdrawal or resignation by such
independent accountants from their acting in such capacity; (xi) of any pending
or threatened strike or other work stoppage, unfair labor practice claim or
other labor dispute affecting any Borrower or any of its Subsidiaries in a
manner that could reasonably be expected to have a Material Adverse Effect; and
(xii) of the transfer of title to real Property leased by a Borrower. In
addition, Borrowers shall give Lender at least 30 Business Days' prior written
notice of any Obligor's opening of any new office or place of business.
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9.1.3. Financial and Other Information. Keep adequate records and books
of account with respect to its business activities in which proper entries are
made in accordance with GAAP reflecting all of its financial transactions; and
prepare and furnish, or cause to be prepared and to be furnished, to Lender the
following (all to be prepared in accordance with GAAP applied on a consistent
basis, unless Borrowers' certified public accountants concur in any change
therein and such change is disclosed to Lender and is consistent with GAAP and,
if required by Lender, the financial covenants set forth in SECTION 9.3 are
amended in a manner requested by Lender to take into account the effects of such
change):
(i) as soon as available, and in any event within 106 days after the
close of Borrowers' 2002 Fiscal Year and within 90 days after the close of
each Fiscal Year of Borrowers thereafter, unqualified audited balance
sheets of Borrowers and their respective Subsidiaries as of the end of
such Fiscal Year and the related statements of income, shareholders'
equity and cash flow, on a Consolidated basis, and on a consolidating
basis for the balance sheets and income statements, certified without
material qualification by a firm of independent certified public
accountants of recognized national standing selected by Borrowers but
reasonably acceptable to Lender (except for a qualification for a change
in accounting principles with which the accountant concurs), and setting
forth in each case in comparative form the corresponding Consolidated and
consolidating figures for the preceding Fiscal Year;
(ii) as soon as available, and in any event within 30 days after the
end of each month, including the last month of Borrowers' Fiscal Year,
unaudited balance sheets of Borrowers and their respective Subsidiaries as
of the end of such month and the related unaudited Consolidated and
consolidating statements of income and cash flow for such month and for
the portion of Borrowers' Fiscal Year then elapsed, on a Consolidated and
consolidating basis, setting forth in each case in comparative form the
corresponding figures for the preceding Fiscal Year and certified by the
principal financial officer of Borrowers as prepared in accordance with
GAAP and fairly presenting the Consolidated and consolidating financial
position and results of operations of Borrowers and their Subsidiaries for
such month and period subject only to changes from audit and year-end
adjustments and except that such statements need not contain notes;
(iii) not later than 20 days after each month, a listing of all of each
Borrower's trade payables as of the last Business Day of such month,
specifying the name of and balance due each trade creditor, and, at
Lender's request, a monthly detailed trade payable agings in form
acceptable to Lender;
(iv) promptly after the sending or filing thereof, as the case may be,
copies of any proxy statements, financial statements or reports (including
each 10K and each 10Q filed by Parent) which any Borrower has made
generally available to its shareholders and copies of any regular,
periodic and special reports or registration statements which any Borrower
files with the SEC or
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any Governmental Authority which may be substituted therefor, or any
national securities exchange;
(v) as soon as available, and in any event within 30 days after the end
of each Fiscal Quarter, the Picking and Shipping Accuracy Report for each
month during such Fiscal Quarter;
(vi) as soon as available, and in any event within 30 days after the
end of each Fiscal Quarter, a written report setting forth the percentage
of the aggregate costs of Inventory purchased by Borrowers during such
Fiscal Quarter that is subject to written price protection arrangements
between Borrowers and the vendors or suppliers from which such Inventory
was purchased; and
(vii) as soon as is available, such other data and information
(financial and otherwise) as Lender, from time to time, may reasonably
request, bearing upon or related to the Collateral or any Borrower's and
any of its Subsidiaries' financial condition or results of operations.
Concurrently with the delivery of the financial statements described in
clause (i) of this SECTION 9.1.3, Borrowers shall deliver to Lender a copy of
the accountants' letter to Borrowers' management that is prepared in connection
with such financial statements and shall cause to be prepared and shall deliver
to Lender a certificate of the aforesaid certified public accountants stating to
Lender that, based upon such accountants' audit of the Consolidated financial
statements of Borrowers and their Subsidiaries performed in connection with
their examination of said financial statements, nothing came to their attention
that caused them to believe that Borrower was not in compliance with SECTIONS
9.2.2, 9.2.3, 9.2.4, 9.2.6, 9.2.7, 9.2.8, 9.2.14, 9.2.15, 9.2.16 OR 9.3 hereof,
or, if they are aware of such noncompliance, specifying the nature thereof, and
acknowledging, in a manner satisfactory to Lender, that they are aware that
Lender is relying on such financial statements in making its decisions with
respect to the Loans; provided, however, that, in connection with the financial
statements described in clause (i) of this SECTION 9.1.3 for Borrowers' Fiscal
Year ending June 30, 2002, Borrowers shall cause their certified public
accountants to deliver to Lender the certificate regarding Borrowers' compliance
with the Sections of this Agreement described above on or before November 15,
2002. Concurrently with the delivery of the financial statements described in
clauses (i) and (ii) of this SECTION 9.1.3, or more frequently if requested by
Lender during any period that a Default or an Event of Default exists, Borrowers
shall cause to be prepared and furnished to Lender a Compliance Certificate
executed by the chief financial officer of Borrowers.
Promptly after the sending or filing thereof, each Borrower shall also
provide to Lender copies of any annual report to be filed in accordance with
ERISA in connection with each Plan and such other data and information
(financial and otherwise) as Lender, from time to time, may reasonably request,
bearing upon or related to the Collateral or such Borrower and its Subsidiaries'
financial condition or results of operations.
9.1.4. Landlord and Storage Agreements. Provide Lender with copies of
all existing agreements, and promptly after execution thereof provide Lender
with copies of all future agreements, between any
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Borrower and any landlord, warehouseman or bailee which owns any premises at
which any Collateral may, from time to time, be kept.
9.1.5. Guarantor Financial Statements. Deliver or cause to be
delivered to Lender financial statements for each Guarantor in form and
substance reasonably satisfactory to Lender at such intervals and covering such
time periods as Lender may request.
9.1.6. Projections. No later than 30 days prior to the end of each
Fiscal Year of Borrowers, deliver to Lender the Projections of Borrowers for the
forthcoming Fiscal Year, prepared on a month by month basis. The Projections
will be based upon estimates and assumptions which Borrowers believe to be
reasonable, will be prepared in all material respects on the basis of the
assumptions stated therein and reflect estimates of Borrowers and their
Subsidiaries, which Borrowers believe to be reasonable, of the results of
operations and other information projected therein. Neither Borrowers nor any
Subsidiary of Borrowers makes any representation or warranty that the
Projections will, in fact, be achieved.
9.1.7. Taxes. Pay and discharge all Taxes prior to the date on which
such Taxes become delinquent or penalties attach thereto, except and to the
extent only that such Taxes are being Properly Contested.
9.1.8. Compliance with Laws. Comply with all Applicable Law, including
ERISA, all Environmental Laws, FLSA, OSHA and all laws, statutes, regulations
and ordinances regarding the collection, payment and deposit of Taxes, and
obtain and keep in force any and all Governmental Approvals necessary to the
ownership of its Properties or to the conduct of its business, to the extent
that any such failure to comply, obtain or keep in force could be reasonably
expected to have a Material Adverse Effect. Without limiting the generality of
the foregoing, if any Environmental Release shall occur at or on any of the
Properties of Borrowers or any Subsidiary, Borrowers shall, or shall cause the
applicable Subsidiary to, act promptly and diligently to investigate and report
to Lender and all appropriate Governmental Authorities the extent of, and to
make appropriate remedial action to eliminate, such Environmental Release,
whether or not ordered or otherwise directed to do so by any Governmental
Authority.
9.1.9. Insurance. In addition to the insurance required herein with
respect to the Collateral, maintain with its current insurers or with other
financially sound and reputable insurers having a rating of at least B+ or
better by Best Rating Guide, (i) insurance with respect to its Properties and
business against such casualties and contingencies of such type (including
product liability, workers' compensation, or larceny, embezzlement or other
criminal misappropriation insurance) and in such amounts and with such
coverages, limits and deductibles as is customary in the business of such
Borrower or such Subsidiary and (ii) business interruption insurance in an
amount not less than $15,000,000.
9.1.10. Appraisals. In addition to any other appraisals required or
conducted by Lender, Borrowers shall cooperate with Lender's efforts to obtain
appraisals of Borrower's Inventory by ETV or such other independent appraiser
acceptable to Lender, at least once during each Fiscal Quarter of Borrower.
Borrowers shall be obligated to reimburse
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Lender for all reasonable cost and expenses at any time incurred by Lender in
connection with any such appraisals.
9.1.11. Negative Cash Position Report. Deliver to Lender each Business
Day a written report that is in form acceptable to Lender setting forth the
negative cash position of Borrowers for the preceding day (or days, in the case
of reports delivered on Mondays) to, among other things, enable Lender to
determine the average negative cash position of Borrowers for each Fiscal
Quarter.
9.1.12. Wachovia Certificates of Deposit. Promptly redeem the Wachovia
Certificates of Deposit upon termination or return to Wachovia of the letters of
credit issued by Wachovia for the account of Borrowers that the Wachovia
Certificates of Deposit secure, and remit, or cause to be remitted, to Lender
the net proceeds of the Wachovia Certificates of Deposit for application to the
Obligations as provided herein.
9.2. NEGATIVE COVENANTS. For so long as the Revolver Commitment is
outstanding and thereafter until payment in full of the Obligations, each
Borrower covenants that, unless Lender has otherwise consented in writing, it
shall not and shall not permit any Subsidiary to:
9.2.1. Fundamental Changes. Merge, reorganize, consolidate or
amalgamate with any Person, or liquidate, wind up its affairs or dissolve
itself, except for mergers or consolidations of any Subsidiary with another
Subsidiary; change its name or conduct business under any new fictitious name;
or change its FEIN; provided, however, that (i) Borrowers may liquidate and
dissolve E-Store and (ii) if at the time thereof and immediately after giving
effect thereto no Default or Event of Default shall exist (a) any Borrower may
merge with and into another Borrower and (b) any Subsidiary may liquidate or
dissolve if (1) Borrowers determine in good faith that such liquidation or
dissolution is in the best interests of Borrowers and is not materially
disadvantageous to the Lender and (2) such Subsidiary did not contribute more
than 10% of the gross revenue of Borrowers and their Subsidiaries, on a
Consolidated basis, for the Fiscal Year immediately preceding the proposed
liquidation or dissolution of such Subsidiary.
9.2.2. Advances. Make any advances of money to any Person, except as
follows:
(i) to an officer or employee of Borrowers or a Subsidiary for salary,
travel advances, advances against commissions and other similar advances
in the Ordinary Course of Business;
(ii) loans or other advances of money by a Borrower to another Borrower
or by a Subsidiary to a Borrower in the Ordinary Course of Business
("Intercompany Loans");
(iii) Foreign Subsidiary Advances provided that (a) the Net Amount of
Foreign Subsidiary Advances does not at any time exceed a total principal
amount of $5,000,000 in the aggregate at any time outstanding, (b) Average
Availability for the 90-day period ending on the date of any such Foreign
Subsidiary Advance by a Borrower is not less than $5,000,000 (after giving
effect to such Foreign Subsidiary Advance), (c) immediately after the
making of each such Foreign Subsidiary Advance, Availability is not less
than
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$5,000,000, (d) there exists no Default or Event of Default at the time of
or after giving effect to any such Foreign Subsidiary Advance, (e) such
Foreign Subsidiary Advance is evidenced by a Foreign Subsidiary Advance
Note and (f) such Borrower pledges to Lender each Foreign Subsidiary
Advance Note evidencing the amount of any such Foreign Subsidiary Advance
pursuant to a Note Pledge Agreement and collaterally assigns to Lender any
security agreement or other instrument whereby any such Foreign Subsidiary
has granted to such Borrower a security interest or Lien upon any of such
Foreign Subsidiary's Property as security for any such Foreign Subsidiary
Advance. As a condition precedent to Borrowers' authorization to make any
Foreign Subsidiary Advance, Borrowers shall provide to Lender a
certificate from a Senior Officer stating that all of the conditions to
the making of a Foreign Subsidiary Advance set forth in this SECTION 9.2.2
will be satisfied on the date of, and after giving effect to, such Foreign
Subsidiary Advance, specifying the amount of such Foreign Subsidiary
Advance to be made and containing schedules showing the calculations that
support such Senior Officer's certification; and
(iv) extensions of trade credit to customers in the Ordinary
Course of Business.
9.2.3. Permitted Debt. Create, incur, assume, guarantee or
suffer to exist any Debt, except:
(i) the Obligations;
(ii) Subordinated Debt existing on the Closing Date;
(iii) accounts payable by such Borrower or any of its
Subsidiaries to trade creditors, in each case incurred in the Ordinary
Course of Business;
(iv) obligations to pay Rentals in the Ordinary Course of
Business;
(v) Permitted Purchase Money Debt;
(vi) Debt for accrued payroll, Taxes and other operating
expenses (other than for Money Borrowed) incurred in the Ordinary Course
of Business of such Borrower or such Subsidiary, including obligations
under Cash Management Agreements, in each case so long as payment thereof
is not past due and payable unless, in the case of Taxes only, such Taxes
are being Properly Contested;
(vii) Debt for Money Borrowed by such Borrower (other than the
Obligations), but only to the extent that such Debt is outstanding on the
date of this Agreement and is not to be satisfied on or about the Closing
Date from the proceeds of the initial Loans;
(viii) Permitted Contingent Obligations;
(ix) Refinancing Debt so long as each of the Refinancing
Conditions is met;
(x) Debt resulting from Intercompany Loans to the extent
permitted by SECTION 9.2.2(ii) hereof;
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(xi) Debt of SED Brasil in a principal amount of up to
R$1,200,000 (One Million Two Hundred Thousand Reais with Banco Bradesco
S/A, and up to R$2,200,000 (Two Million Two Hundred Thousand Reais) with
Bank Boston Banco Multiplo S/A, both under revolving credit overdraft
protection facilities; and
(xii) Debt that is not included in any of the preceding
paragraphs of this SECTION 9.2.3, which is not secured by a Lien (unless
such Lien is a Permitted Lien) and does not exceed at any time, in the
aggregate, the sum of $100,000 as to Borrowers and all of their
Subsidiaries.
9.2.4. Affiliate Transactions. Enter into, or be a party to
any transaction with any Affiliate or stockholder, except: (i) the transactions
contemplated by the Loan Documents; (ii) payment of reasonable compensation to
officers and employees for services actually rendered to such Borrower or its
Subsidiaries or in accordance with historical practices; (iii) payment of
customary directors' fees and indemnities; (iv) transactions with Affiliates
that were consummated prior to the date hereof and have been disclosed to Lender
prior to the Closing Date; (v) transactions with Affiliates in the Ordinary
Course of Business and pursuant to the reasonable requirements of such
Borrower's or such Subsidiary's business and upon fair and reasonable terms
which are fully disclosed to Lender and are no less favorable to such Borrower
or such Subsidiary than would obtain in a comparable arm's length transaction
with a Person not an Affiliate or stockholder of such Borrower or such
Subsidiary; and (vi) employee stock purchase plans.
9.2.5. Limitation on Liens. Create or suffer to exist any Lien
upon any of its Property, income or profits, whether now owned or hereafter
acquired, except the following (collectively, "Permitted Liens"):
(i) Liens at any time granted in favor of Lender;
(ii) Liens for Taxes (excluding any Lien imposed pursuant to
any of the provisions of ERISA) not yet due or being Properly Contested;
(iii) carriers', warehousemen's, mechanic's, materialmen's,
repairmen's, landlord's (to the extent not waived or subordinated pursuant
to any Landlord Waiver) and other statutory Liens (excluding any Lien
imposed pursuant to any of the provisions of ERISA) arising in the
Ordinary Course of Business of a Borrower or a Subsidiary, but only if and
for so long as (x) payment in respect of any such Lien is not at the time
required or the Debt secured by any such Liens is being Properly Contested
and (y) such Liens do not materially detract from the value of the
Property of such Borrower or such Subsidiary and do not materially impair
the use thereof in the operation of such Borrower's or such Subsidiary's
business;
(iv) Purchase Money Liens securing Permitted Purchase Money
Debt;
(v) Liens securing Debt of a Subsidiary of any Borrower to
such Borrower or to another such Subsidiary or from one Borrower to
another Borrower;
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(vi) Liens arising by virtue of the rendition, entry or
issuance against such Borrower or any of its Subsidiaries, or any Property
of such Borrower or any of its Subsidiaries, of any judgment, writ, order,
or decree for so long as each such Lien (a) is in existence for less than
20 consecutive days after it first arises or is being Properly Contested
and (b) is at all times junior in priority to any Liens in favor of
Lender;
(vii) Liens incurred or deposits made in the Ordinary Course
of Business to secure the performance of tenders, bids, leases, surety,
indemnity and appeal bonds, performance and return of money and fiduciary
bonds, contracts (other than for the repayment of Money Borrowed),
statutory obligations and other similar obligations or arising as a result
of progress payments under government contracts; provided that, to the
extent any such Liens attach to any of the Collateral, such Liens are at
all times subordinate and junior to the Liens upon the Collateral in favor
of Lender.
(viii) easements, rights-of-way, restrictions, covenants or
other agreements of record and other similar charges or encumbrances on
real Property of a Borrower or a Subsidiary that do not secure any
monetary obligation and do not interfere with the ordinary conduct of the
business of such Borrower or such Subsidiary and the effect of any
moratorium, eminent domain or condemnation proceedings;
(ix) normal and customary rights of setoff upon deposits of
cash in favor of banks and other depository institutions and Liens of a
collection bank arising under the UCC on Payment Items in the course of
collection;
(x) Liens in existence immediately prior to the Closing Date
that are satisfied in full and released on the Closing Date as a result of
the application of Borrowers' cash on hand at the Closing Date or the
proceeds of Revolver Loans to be made on the Closing Date;
(xi) such other Liens as appear on SCHEDULE 9.2.5 hereto, to
the extent provided therein;
(xii) pledges and deposits made in the Ordinary Course of
Business in compliance with workmen's compensation, unemployment insurance
and other social security laws or regulations;
(viii) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; and
(xiv) such other Liens as Lender in its sole discretion may
hereafter approve in writing.
The foregoing negative pledge shall not apply to any Margin Stock to the extent
that the application of such negative pledge to such Margin Stock would require
filings or other actions by Lender under such regulations or otherwise result in
a violation of such regulations.
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9.2.6. Subordinated Debt. Make any payment of all or any part
of any Subordinated Debt or take any other action or omit to take any other
action in respect of any Subordinated Debt, except in accordance with the
subordination agreement relative thereto; or amend or modify the terms of any
agreement applicable to any Subordinated Debt, other than to extend the time of
payment thereof or to reduce the rate of interest payable in connection
therewith. To the extent that any payment is permitted to be made with respect
to any Subordinated Debt pursuant to the provisions of the subordination
agreement relative thereto, as a condition precedent to Borrowers' authorization
make any such payment, Borrowers shall provide to Lender, not less than 5
Business Days prior to the scheduled payment, a certificate from a Senior
Officer of Borrower's Agent stating that no Default or Event of Default is in
existence as of the date of the certificate or will be in existence as of the
date of such payment (both with and without giving effect to the making of such
payment), and specifying the amount of principal and interest to be paid.
9.2.7. Distributions. Declare or make any Distributions,
except for (i) Upstream Payments and (ii) Distributions in the form of purchases
or redemptions of the Equity Interests of Parent, provided that (a) the total
amount expended by Borrowers in connection with all such purchases or
redemptions since the Closing Date does not, in the aggregate, exceed $500,000,
(b) Average Availability, during the initial 89-day period of the Term, for the
period commencing on the Closing Date and ending on the date of any such
purchase or redemption by a Borrower and, thereafter, for the 90-day period
ending on the date of any such purchase or redemption by a Borrower, is not less
than $7,000,000 (after giving effect to such purchase or redemption by a
Borrower) and (c) immediately after giving effect to any such purchase or
redemption by a Borrower, Availability is not less than $7,000,000. Not later
than 30 days after the last day of each month, a Senior Officer of Borrowers
shall certify in writing to Lender (which written certification may be embodied
in each Compliance Certificate to be delivered to Lender pursuant to SECTION
9.1.3 hereof) that all of the conditions to making of such a Distribution set
forth in this SECTION 9.2.7 were satisfied at the time of, and after giving
effect to, each such Distribution made during such month, specifying the amount
of each such Distribution and containing schedules showing the calculations that
support such Senior Officer's certification.
9.2.8. Upstream Payments. Create or suffer to exist any
encumbrance or restriction on the ability of a Subsidiary to make, or the
subordination or postponement in favor of other Debt of, any Upstream Payment,
except for encumbrances, restrictions or subordinations (i) pursuant to the Loan
Documents, (ii) existing under Applicable Law and (iii) identified and fully
disclosed in SCHEDULE 9.2.8.
9.2.9. Reserved.
9.2.10. Disposition of Assets. Sell, assign, lease, consign or
otherwise dispose of any of its Properties or any interest therein, including
any disposition of Property as part of a sale and leaseback transaction, to or
in favor of any Person, except (i) sales of Inventory in the Ordinary Course of
Business, (ii) dispositions of Equipment to the extent authorized by SECTION
7.4.2 hereof, (iii) a transfer of Property to such Borrower by its Subsidiary,
to a Subsidiary by another Subsidiary or to such Borrower by another Borrower,
(iv) non-exclusive licenses of technology and other Intellectual Property by and
among Borrower and any
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of its Subsidiaries, and (v) other dispositions expressly authorized by other
provisions of the Loan Documents.
9.2.11. Subsidiaries. Form or acquire any Subsidiary after the
Closing Date or permit any existing Subsidiary to issue any additional Equity
Interests except director's qualifying shares.
9.2.12. Xxxx-and-Hold Sales and Consignments. Make a sale to
any customer on a xxxx-and-hold, guaranteed sale, sale and return, sale on
approval or consignment basis, or any sale on a repurchase or return basis.
9.2.13. Restricted Investments. Make or have any Restricted
Investment.
9.2.14. Reserved.
9.2.15. Tax Consolidation. File or consent to the filing of
any consolidated income tax return with any Person other than a Borrower or a
Subsidiary of a Borrower.
9.2.16. Accounting Changes. Make any significant change in
accounting treatment or reporting practices, except as may be required by GAAP,
or establish a fiscal year different from the Fiscal Year.
9.2.17. Organization Documents. Amend, modify or otherwise
change any of the terms or provisions in any of its Organization Documents as in
effect on the date hereof, except for changes that do not affect in any way such
Borrower's or such Subsidiary's rights and obligations to enter into and to
perform the Loan Documents to which it is a party and to pay all of the
Obligations and that do not otherwise have a Material Adverse Effect.
9.2.18. Restrictive Agreements. Enter into or become a party
to any Restrictive Agreement; provided that the foregoing shall not apply to (i)
Restrictive Agreements existing on the date hereof and identified on SCHEDULE
8.1.18 (but shall apply to any amendment or modification expanding the scope of
any restriction or condition contained in any such Restrictive Agreement), (ii)
restrictions or conditions imposed by any Restrictive Agreement evidencing or
governing secured Debt that is permitted by this Agreement if such restrictions
or conditions apply only to the Properties securing such Debt and (iii)
customary provisions in leases, licenses and other contracts restricting the
assignment thereof.
9.2.19. Hedging Agreements. Enter into any Hedging Agreement,
other than Hedging Agreements entered into in the Ordinary Course of Business,
to hedge or mitigate risks to which such Borrower or any Subsidiary is exposed
in the conduct of its business or the management of its liabilities and not for
any speculative purpose.
9.2.20. Conduct of Business. Engage in any business other than
the business engaged in by it on the Closing Date and any business or activities
which are substantially similar, related or incidental thereto.
9.2.21. Accounts Owing by Foreign Subsidiaries. Permit the
aggregate unpaid Accounts of Borrowers on which an Affiliate (including each of
the Foreign Subsidiaries) is the Account Debtor to at
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any time exceed $1,000,000. This restriction is not intended to affect the
ability of Borrowers to make Foreign Subsidiary Advances as and to the extent
permitted by SECTION 9.2.2(iii) hereof.
9.3. FINANCIAL COVENANTS.
i). Affirmative Financial Covenants. For so long as the
Revolver Commitment is outstanding and thereafter until payment in full of the
Obligations, Borrowers covenant that, unless otherwise consented to by Lender in
writing and subject to SECTION 9.3.3 hereof, they shall:
9.3.1. Minimum EBITDA. Achieve EBITDA of not less than
the amount shown below for the period corresponding thereto:
Period Amount
------ ------
The month ending ($ 71,000)
September 30, 2002
The 2-month period ending ($ 43,000)
October 31, 2002
The 3-month period ending ($ 111,000)
November 30, 2002
The 4-month period ending ($ 296,000)
December 31, 2002
The 5-month period ending $ 35,000
January 31, 2003
The 6-month period ending ($ 221,000)
February 28, 2003
The 7-month period ending ($ 77,000)
March 31, 2003
The 8-month period ending $ 73,000
April 30, 2003
The 9-month period ending $ 260,000
May 31, 2003
The 10-month period ending $ 487,000
June 30, 2003
The 11-month period ending $ 694,000
July 31, 2003
The 12-month period ending $ 775,000
August 31, 2003
The 12-month period ending $ 921,000
September 30, 2003
The 12-month period ending $ 1,082,000
October 31, 2003
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Period Amount
------ ------
The 12-month period ending $ 1,264,000
November 30, 2003
(ii) Minimum Fixed Charge Coverage Ratio. Maintain a Fixed
Charge Coverage Ratio of not less than the ratio shown below for the
period corresponding thereto:
Period Ratio
------ -----
The 12-month period ending December 31, 2003 1.15 to 1.0
and the 12-month period ending on the
last day of each month thereafter through and
including the month ending May 31, 2004
The 12-month period ending June 30, 2004 1.25 to 1.0
and the 12-month period ending on the last
day of each month thereafter
(iii) Minimum Adjusted Tangible Net Worth. Maintain at all
times an Adjusted Tangible Net Worth of not less than ($5,000,000);
provided, however, that the foregoing amount shall be increased as of the
last day of each month from and after June 30, 2002, by an amount equal to
75% of Net Income during such month, but no reduction in the foregoing
amount shall be made if Net Income in any month is a negative number.
9.3.2. Negative Financial Covenants. For so long as the Revolver
Commitment is outstanding and thereafter until payment in full of the
Obligations, Borrowers covenant that, unless otherwise consented to by Lender in
writing, they shall not:
(i) Capital Expenditures. Make Capital Expenditures (including
expenditures by way of capitalized leases) which, in the aggregate, as to
all Borrowers and their Subsidiaries, exceed (a) $500,000 during any
Fiscal Year of Borrowers through and including Borrowers' 2005 Fiscal Year
and (b) $100,000 during Borrowers' 2006 Fiscal Year.
9.3.3. Applicability of Financial Covenants. The financial
covenants set forth in SECTIONS 9.3.1 and 9.3.2 hereof shall be effective only
if Availability is, at the close of business on any Business Day, less than
$5,000,000 and, from and after such date, the provisions of SECTIONS 9.3.1 and
9.3.2 hereof shall be effective at all times irrespective of whether
Availability thereafter is equal to or exceeds $5,000,000. Within 10 Business
Days of the date on which Availability is less than $5,000,000 as described in
this SECTION 9.3.3, Borrowers shall deliver to Lender a Compliance Certificate
which reflects Borrowers' compliance or non-compliance with the provisions of
SECTIONS 9.3.1 and 9.3.2 hereof.
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SECTION 10. CONDITIONS PRECEDENT
10.1. CONDITIONS PRECEDENT TO INITIAL LOANS. Lender shall not be
required to fund any Loan requested by Borrowers, procure any Letter of Credit
or otherwise extend credit to Borrowers unless, on or before October 31, 2002,
each of the following conditions has been satisfied:
10.1.1. Loan Documents. Each of the Loan Documents shall have
been duly executed and delivered to Lender by each of the signatories thereto
and shall have been accepted by Lender, and each Obligor shall be in compliance
with all of the terms thereof.
10.1.2. Availability. Lender shall have determined that
immediately after Lender has made the initial Revolver Loans to be made on the
Closing Date and Bank has issued the Letters of Credit to be issued on the
Closing Date, and Borrowers have paid (or made provision for payment of) all
closing costs incurred in connection with the Revolver Commitment, Availability
is not less than $8,500,000.
10.1.3. Evidence of Perfection and Priority of Liens. Lender
shall have received copies of all filing receipts or acknowledgments issued by
any Governmental Authority to evidence any filing or recordation necessary to
perfect the Liens of Lender in the Collateral and evidence in form satisfactory
to Lender that such Liens constitute valid and perfected security interests and
Liens, and that there are no other Liens upon any Collateral except for
Permitted Liens.
10.1.4. Organization Documents. Lender shall have received
copies of the Organization Documents of each Obligor, and all amendments
thereto, certified by the Secretary of State or other appropriate official of
the jurisdiction of such Borrower's and each other Obligor's state of
organization.
10.1.5. Good Standing Certificates. Lender shall have received
good standing certificates for each Obligor, issued by the Secretary of State or
other appropriate official of such Obligor's jurisdiction of organization and
each jurisdiction where the conduct of such Obligor's business activities or
ownership of its Property necessitates qualification.
10.1.6. Opinion Letters. Lender shall have received the
written opinion of Xxxxx Xxxxxxx Xxxxxx Xxxxxxx & Small, P.C., counsel to
Borrowers, as to the transactions contemplated by this Agreement in the form set
forth in EXHIBIT E attached hereto.
10.1.7. Insurance. Lender shall have received certified copies
of the property and casualty insurance policies of Borrowers with respect to the
Collateral, or certificates of insurance with respect to such policies in form
acceptable to Lender, and loss payable endorsements acceptable to Lender naming
Lender as loss payee with respect to each such policy and certified copies of
Borrowers' liability insurance policies, including product liability policies,
or certificates of insurance with respect to such policies in form acceptable to
Lender together with endorsements naming Lender as an additional insured, all as
required by the Loan Documents.
10.1.8. Lockbox; Dominion Accounts; Account Control
Agreements. Lender shall have received the duly executed agreements
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establishing the lockbox and each Dominion Account, in each case with a
financial institution acceptable to Lender for the collection or servicing of
the Accounts and an account control agreement among Lender, Borrowers and each
bank at which a Borrower maintains a Deposit Account, sufficient to give
"control" (within the meaning of the UCC) to Lender over each such Deposit
Account, all in form and substance satisfactory to Lender.
10.1.9. Landlord Waivers. Lender shall have received Landlord
Waivers with respect to all premises at which any Collateral may be located.
10.1.10. No Labor Disputes. Lender shall have received
assurances satisfactory to it that there are no threats of strikes or work
stoppages by any employees, or organization of employees, of any Obligor which
Lender reasonably determines may have a Material Adverse Effect.
10.1.11. Compliance with Laws and Other Agreements. Lender
shall have determined or received assurances satisfactory to it that none of the
Loan Documents or any of the transactions contemplated thereby violate any
Applicable Law, court order or agreement binding upon any Obligor.
10.1.12. No Material Adverse Change. No material adverse
change in the financial condition of any Obligor or in the quality, quantity or
value of any Collateral shall have occurred since July 31, 2002.
10.1.13. License Agreements. Lender shall have received,
reviewed and found satisfactory in all respects all licenses and other
agreements pursuant to which any Borrower manufacturers, markets, distributes or
sells any of its Inventory.
10.1.14. Accounts Payable. Lender shall have reviewed and
found acceptable Borrowers' accounts payable and vendor arrangements.
10.1.15. Projections. Lender shall have received, in form and
substance satisfactory to Lender, month by month Projections from the Closing
Date through June 30, 2005, giving effect to Borrowers' projected Borrowings
under this Agreement.
10.1.16. Payment of Fees. Borrower shall have paid, or made
provision for the payment on the Closing Date of, all fees and expenses to be
paid hereunder to Lender on the Closing Date.
10.1.17. LC Conditions. With respect to the procurement of any
Letter of Credit on the Closing Date, each of the LC Conditions is satisfied.
10.1.18. Disbursement Letter. Lender shall have received
written instructions from Borrowers directing application of proceeds of the
initial Revolver Loans made pursuant to this Agreement, and an initial borrowing
base certificate from Borrowers in form satisfactory to Lender.
10.1.19. Affiliate Relationships. Lender shall have
satisfactorily reviewed each Borrower's relationship with any Affiliates.
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10.1.20. Financial Statements. Lender shall have received,
reviewed and found acceptable Borrowers' unaudited Consolidated and
consolidating financial statements for the month ending immediately prior to the
Closing Date.
10.1.21. Completion of Due Diligence. Lender shall have
satisfactorily completed its due diligence with respect to Borrowers, their
Properties and their books and records, including the completion of all field
examinations, customer references with respect to Borrowers and an evaluation of
(i) all material pending or threatened litigation or other adversarial
proceedings to which any Borrower or Subsidiary is a party and (ii) Borrowers'
management information systems, and all controls, backup procedures and disaster
recovery plans related thereto.
10.2. CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. Lender shall not
be required to fund any Revolver Loan, procure any Letters of Credit or
otherwise extend any credit to or for the benefit of any Borrower, unless and
until each of the following conditions has been and continues to be satisfied:
10.2.1. Defaults. No Default or Event of Default exists at the
time, or would result from the funding, of any Loan or other extension of
credit.
10.2.2. Satisfaction of Conditions in Other Loan Documents.
Each of the conditions precedent set forth in any other Loan Document shall have
been and shall remain satisfied.
10.2.3. No Litigation. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain or
prohibit, or to obtain damages in respect of, or which is related to or arises
out of this Agreement or any of the other Loan Documents or the consummation of
the transactions contemplated hereby or thereby.
10.2.4. No Material Adverse Effect. No event shall have
occurred and no condition shall exist which has or could be reasonably expected
to have a Material Adverse Effect.
10.2.5. Borrowing Base Certificate. Lender shall have received
each Borrowing Base Certificate required by the terms of this Agreement or
otherwise requested by Lender.
10.2.6. LC Conditions. With respect to the procurement of any
Letter of Credit after the Closing Date, each of the LC Conditions is satisfied.
10.3. LIMITED WAIVER OF CONDITIONS PRECEDENT. If Lender shall make any
Revolver Loans, procure any Letter of Credit or otherwise extend any credit to
Borrowers under this Agreement at a time when any of the foregoing conditions
precedent are not satisfied (regardless of whether the failure of satisfaction
of any such conditions precedent was known or unknown to Lender), the funding of
such Revolver Loans shall not operate as a waiver of the right of Lender to
insist upon the satisfaction of all conditions precedent with respect to each
subsequent Borrowing requested by Borrowers or a waiver of any Default or Event
of Default as a
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consequence of the failure of any such conditions to be satisfied, unless
Lender, in writing waives the satisfaction of any condition precedent in which
event such waiver shall only be applicable for the specific instance given and
only to the extent and for the period of time expressly stated in such written
waiver.
SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
11.1. EVENTS OF DEFAULT. The occurrence or existence of any one or more
of the following events or conditions shall constitute an "Event of Default":
11.1.1. Payment of Obligations. Borrowers shall fail to pay
any of the Obligations on the due date thereof (whether due at stated maturity,
on demand, upon acceleration or otherwise).
11.1.2. Misrepresentations. Any representation, warranty or
other written statement to Lender by or on behalf of any Obligor, whether made
in or furnished in compliance with or in reference to any of the Loan Documents,
proves to have been false or misleading in any material respect when made or
furnished or when reaffirmed pursuant to SECTION 8.2 hereof.
11.1.3. Breach of Specific Covenants. Any Borrower shall fail
or neglect to perform, keep or observe any covenant contained in SECTIONS 6.6,
7.1.1, 7.2, 7.4.2, 7.5, 9.1.1, 9.1.3, 9.1.6, 9.1.9, 9.1.10, 9.1.11, 9.2 OR 9.3
hereof on the date that such Borrower is required to perform, keep or observe
such covenant.
11.1.4. Breach of Other Covenants. Any Borrower shall fail or
neglect to perform, keep or observe any covenant contained in this Agreement
(other than a covenant which is dealt with specifically elsewhere in SECTION
11.1 hereof) and the breach of such other covenant is not cured to Lender's
satisfaction within 15 days after the sooner to occur of any Senior Officer's
receipt of notice of such breach from Lender or the date on which such failure
or neglect first becomes known to any Senior Officer; provided, however, that
such notice and opportunity to cure shall not apply in the case of any failure
to perform, keep or observe any covenant which is not capable of being cured at
all or within such 15-day period or which is a willful and knowing breach by a
Borrower.
11.1.5. Default Under Security Documents/Other Agreements. Any
Borrower or any other Obligor shall default in the due and punctual performance
or observance of any liability or obligation to be observed or performed by it
under any of the Security Documents or any of the Other Agreements.
11.1.6. Other Defaults. There shall occur any default or event
of default on the part of any Borrower or any Subsidiary under any agreement,
document or instrument to which a Borrower or any Subsidiary is a party or by
which a Borrower or any Subsidiary or any of their respective Properties are
bound, creating or relating to any Debt for Money Borrowed (other than the
Obligations) in excess of $300,000 if the payment or maturity of such Debt may
be accelerated in consequence of such event of default or demand for payment of
such Debt may be made.
11.1.7. Uninsured Losses. Any loss, theft, damage or
destruction of any of the Collateral not fully covered (subject to such
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deductibles as Lender shall have permitted) by insurance if the amount not
covered by insurance exceeds $500,000.
11.1.8. Material Adverse Effect. There shall occur any event
or condition that has a Material Adverse Effect.
11.1.9. Solvency. Any Obligor shall cease to be Solvent.
11.1.10. Insolvency Proceedings. Any Insolvency Proceeding
shall be commenced by any Obligor, an Insolvency Proceeding is commenced against
any Obligor and any of the following events occur: such Obligor consents to the
institution of the Insolvency Proceeding against it, the petition commencing the
Insolvency Proceeding is not timely controverted by such Obligor, the petition
commencing the Insolvency Proceeding is not dismissed within 30 days after the
date of the filing thereof (provided that, in any event, during the pendency of
any such period, Lender shall be relieved from their obligation to make Loans or
otherwise extend credit to or for the benefit of Borrowers hereunder), an
interim trustee is appointed to take possession of all or a substantial portion
of the Properties of such Obligor or to operate all or any substantial portion
of the business of such Obligor, or an order for relief shall have been issued
or entered in connection with such Insolvency Proceeding; or any Obligor shall
make an offer of settlement, extension or composition to its unsecured creditors
generally.
11.1.11. Business Disruption; Condemnation. There shall occur
a cessation of a substantial part of the business of any Obligor for a period
which may be reasonably expected to have a Material Adverse Effect; or any
Obligor shall suffer the loss or revocation of any license or permit now held or
hereafter acquired by such Obligor which is necessary to the continued or lawful
operation of its business; or any Obligor shall be enjoined, restrained or in
any way prevented by court, governmental or administrative order from conducting
all or any material part of its business affairs; or any material lease or
agreement pursuant to which any Obligor leases or occupies any premises on which
any Collateral is located shall be canceled or terminated prior to the
expiration of its stated term and such cancellation or termination has a
Material Adverse Effect or results in an Out-of-Formula Condition; or any
material part of the Collateral shall be taken through condemnation or the value
of such Property shall be materially impaired through condemnation.
11.1.12. Change of Ownership. There shall occur a Change of
Control with respect to Parent; Parent shall cease to own and control,
beneficially and of record, all of the issued and outstanding Equity Interests
of SED; or SED shall cease to own and control, beneficially and of record, all
of the issued and outstanding Equity Interests of Magna, other than pursuant to
a merger or consolidation permitted pursuant to SECTION 9.2.1 hereof.
11.1.13. ERISA. A Reportable Event shall occur which Lender,
in its reasonable discretion, shall determine constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee shall be requested
or appointed, or if any Obligor is in "default" (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan resulting
from such Obligor's complete or partial withdrawal from such Plan.
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11.1.14. Challenge to Loan Documents. Any Obligor or any of
its Affiliates shall challenge or contest in any action, suit or proceeding the
validity or enforceability of any of the Loan Documents, the legality or
enforceability of any of the Obligations or the perfection or priority of any
Lien granted to Lender, or any of the Loan Documents ceases to be in full force
or effect for any reason other than a full or partial waiver or release by
Lender in accordance with the terms thereof.
11.1.15. Judgment. One or more judgments or orders for the
payment of money in an amount that exceeds $300,000, individually, or in the
aggregate, $300,000 shall be entered against Borrower or any other Obligor and
either: (i) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order, or (ii) there shall be any period of 30 consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect.
11.1.16. Repudiation of or Default Under Guaranty. Any
Guarantor shall revoke or attempt to revoke the Guaranty signed by such
Guarantor, shall repudiate such Guarantor's liability thereunder, or shall be in
default under the terms thereof, or shall fail to confirm in writing, promptly
after receipt of Lender's written request therefor, such Guarantor's ongoing
liability under the Guaranty in accordance with the terms thereof.
11.1.17. Criminal Forfeiture. Any Obligor shall be convicted
under any law that could lead to a forfeiture of any Property of such Obligor.
11.1.18. Demand for Payment Under Guaranties. Demand for
payment shall be made under any guaranty given by a Borrower with respect to
Contingent Obligations of the type described in subsection (viii) of the
definition of "Permitted Contingent Obligations" in APPENDIX A to this Agreement
if the Debt with respect to which such guaranty is given exceeds $500,000 and
such demand is not being Properly Contested by such Borrower.
11.2. ACCELERATION OF OBLIGATIONS; TERMINATION OF REVOLVER COMMITMENT.
Without in any way limiting the right of Lender to demand payment of any portion
of the Obligations payable on demand in accordance with this Agreement:
11.2.1. Upon or at any time after the occurrence of an Event
of Default (other than pursuant to SECTION 11.1.10 hereof) and for so long as
such Event of Default shall exist, Lender may in its discretion (a) declare the
principal of and any accrued interest on the Loans and all other Obligations
owing under any of the Loan Documents to be, whereupon the same shall become
without further notice or demand (all of which notice and demand each Borrower
expressly waives), forthwith due and payable and Borrowers shall forthwith pay
to Lender the entire principal of and accrued and unpaid interest on the Loans
and other Obligations plus reasonable attorneys' fees and court costs if such
principal and interest are collected by or through an attorney-at-law and (b)
terminate the Revolver Commitment.
11.2.2. Upon the occurrence of an Event of Default specified
in SECTION 11.1.10 hereof, all of the Obligations shall become automatically
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due and payable without declaration, notice or demand by Lender to or upon
Borrower and the Revolver Commitment shall automatically terminate as if
terminated by Lender pursuant to SECTION 5.2.1 hereof and with the effects
specified in SECTION 5.2.4 hereof; provided, however, that, if Lender shall
continue to make Loans or otherwise extend credit to Borrowers pursuant to this
Agreement after an automatic termination of the Revolver Commitment by reason of
the commencement of an Insolvency Proceeding by or against any Borrower, such
Loans and other credit shall nevertheless be governed by this Agreement and
enforceable against and recoverable from each Obligor as if such Insolvency
Proceeding had never been instituted.
11.3. OTHER REMEDIES. Upon and after the occurrence of an Event of Default,
and for so long as such Event of Default shall exist, Lender may in its
discretion exercise from time to time the following rights and remedies:
11.3.1. All of the rights and remedies of a secured party
under the UCC or under other Applicable Law, and all other legal and equitable
rights to which Lender may be entitled under any of the Loan Documents, all of
which rights and remedies shall be cumulative and shall be in addition to any
other rights or remedies contained in this Agreement or any of the other Loan
Documents, and none of which shall be exclusive.
11.3.2. The right to collect all amounts at any time payable
to a Borrower from any Account Debtor or other Person at any time indebted to
such Borrower.
11.3.3. The right to take immediate possession of any of the
Collateral, and to (i) require Borrowers to assemble the Collateral, at
Borrowers' expense, and make it available to Lender at a place designated by
Lender which is reasonably convenient to both parties, and (ii) enter any
premises where any of the Collateral shall be located and to keep and store the
Collateral on said premises until sold (and if said premises be the Property of
a Borrower, then such Borrower agrees not to charge Lender for storage thereof).
11.3.4 The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by Applicable Law, in lots or in bulk, for cash or on credit, all as
Lender, in its sole discretion, may deem advisable. Borrowers agree that any
requirement of notice to Borrowers or any other Obligor of any proposed public
or private sale or other disposition of Collateral by Lender shall be deemed
reasonable notice thereof if given at least 10 days prior thereto, and such sale
may be at such locations as Lender may designate in said notice. Lender shall
have the right to conduct such sales on any Borrower's or any other Obligor's
premises, without charge therefor, and such sales may be adjourned from time to
time in accordance with Applicable Law. Lender shall have the right to sell,
lease or otherwise dispose of the Collateral, or any part thereof, for cash,
credit or any combination thereof, and Lender may purchase all or any part of
the Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations. The proceeds realized from the sale or other
disposition of any Collateral may be applied, after allowing 2 Business Days for
collection, first to any Extraordinary
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Expenses incurred by Lender, second to interest accrued with respect to any of
the Obligations; and third, to the principal of the Obligations. If any
deficiency shall arise, Obligors shall remain jointly and severally liable to
Lender therefor.
11.3.5. The right to the appointment of a receiver, without
notice of any kind whatsoever, to take possession of all or any portion of the
Collateral and to exercise such rights and powers as the court appointing such
receiver shall confer upon such receiver.
11.3.6. The right to require Borrowers to deposit with Lender
funds equal to the LC Outstandings and, if Borrowers fail promptly to make such
deposit, Lender may advance such amount as a Revolver Loan (whether or not an
Out-of-Formula Condition exists or is created thereby). Any such deposit or
advance shall be held by Lender as a reserve to fund future payments on any LC
Support. At such time as the LC Support has been paid or terminated and all
Letters of Credit have been drawn upon or expired, any amounts remaining in such
reserve shall be applied against any outstanding Obligations, or, if all
Obligations have been indefeasibly paid in full, returned to Borrowers.
Lender is hereby granted an irrevocable, non-exclusive license or other right to
use, license or sub-license (exercisable without payment of royalty or other
compensation to any Obligor or any other Person) any or all of each Borrower's
Intellectual Property and all of each Borrower's computer hardware and software,
trade secrets, brochures, customer lists, promotional and advertising materials,
labels, and packaging materials, and any Property of a similar nature, in
advertising for sale, marketing, selling and collecting and in completing the
manufacturing of any Collateral, and each Borrower's rights under all licenses
and all franchise agreements shall inure to Lender's benefit, to the full extent
not prohibited by the terms of any license or other agreement granting Borrowers
rights in and to such Intellectual Property.
11.4. SETOFF. In addition to any Liens granted under any of the Loan
Documents and any rights now or hereafter available under Applicable Law, Lender
(and each of its Affiliates) is hereby authorized by Borrowers at any time that
an Event of Default exists, without notice to Borrowers or any other Person (any
such notice being hereby expressly waived) to set off and to appropriate and to
apply any and all deposits, general or special (including Debt evidenced by
certificates of deposit whether matured or unmatured (but not including trust
accounts)) and any other Debt at any time held or owing by Lender or its
Affiliates to or for the credit or the account of any Borrower against and on
account of the Obligations of Borrowers arising under the Loan Documents to
Lender or any of its Affiliates, including all Loans and LC Outstandings all
claims of any nature or description arising out of or in connection with this
Agreement, irrespective of whether or not (i) Lender shall have made any demand
hereunder, (ii) Lender shall have declared the principal of and interest on the
Loans and other amounts due hereunder to be due and payable as permitted by this
Agreement and even though such Obligations may be contingent or unmatured or
(iii) the Collateral for the Obligations is adequate.
11.5. REMEDIES CUMULATIVE; NO WAIVER.
11.5.1. All covenants, conditions, provisions, warranties,
guaranties, indemnities, and other undertakings of Borrowers contained in
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this Agreement and the other Loan Documents, or in any document referred to
herein or contained in any agreement supplementary hereto or in any schedule or
in any Guaranty given to Lender or contained in any other agreement between
Lender and any or all Borrowers, heretofore, concurrently, or hereafter entered
into, shall be deemed cumulative to and not in derogation or substitution of any
of the terms, covenants, conditions, or agreements of Borrowers herein
contained. The rights and remedies of Lender under this Agreement and the other
Loan Documents shall be cumulative and not exclusive of any rights or remedies
that Lender would otherwise have.
11.5.2. The failure or delay of Lender to require strict
performance by Borrowers of any provision of any of the Loan Documents or to
exercise or enforce any rights, Liens, powers, or remedies under any of the Loan
Documents with respect to any Collateral shall not operate as a waiver of such
performance, Liens, rights, powers and remedies, but all such requirements,
Liens, rights, powers, and remedies shall continue in full force and effect
until all Loans and all other Obligations owing or to become owing from
Borrowers to Lender shall have been fully satisfied. None of the undertakings,
agreements, warranties, covenants and representations of Borrowers contained in
this Agreement or any of the other Loan Documents and no Event of Default by any
Borrower under this Agreement or any other Loan Documents shall be deemed to
have been suspended or waived by Lender, unless such suspension or waiver is by
an instrument in writing specifying such suspension or waiver and is signed by a
duly authorized representative of Lender and directed to Borrowers.
11.5.3. If Lender shall accept performance by a Borrower, in
whole or in part, of any obligation that a Borrower is required by any of the
Loan Documents to perform only when a Default or Event of Default exists, or if
Lender shall exercise any right or remedy under any of the Loan Documents that
may not be exercised other than when a Default or Event of Default exists,
Lender's acceptance of such performance by a Borrower or Lender's exercise of
any such right or remedy shall not operate to waive any such Event of Default or
to preclude the exercise by Lender of any other right or remedy, unless
otherwise expressly agreed in writing by Lender, as the case may be.
SECTION 12. MISCELLANEOUS
12.1. POWER OF ATTORNEY. Each Borrower hereby irrevocably designates,
makes, constitutes and appoints Lender (and all Persons designated by Lender) as
such Borrower's true and lawful attorney (and agent-in-fact) and Lender, or
Lender's designee, may, without notice to such Borrower and in either any
Borrower's or Lender's name, but at the cost and expense of Borrowers:
12.1.1. At such time or times as Lender or said designee, in
its sole discretion, may determine, endorse such Borrower's name on any Payment
Item or proceeds of the Collateral which come into the possession of Lender or
under Lender's control.
12.1.2. At any time that an Event of Default exists: (i)
demand payment of the Accounts from the Account Debtors, enforce payment of the
Accounts by legal proceedings or otherwise, and generally exercise all of such
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought
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to collect any of the Accounts or other Collateral; (iii) sell or assign any of
the Accounts and other Collateral upon such terms, for such amounts and at such
time or times as Lender deems advisable; (iv) take control, in any manner, of
any item of payment or proceeds relating to any Collateral; (v) prepare, file
and sign such Borrower's name to a proof of claim in bankruptcy or similar
document against any Account Debtor or to any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with any of the
Collateral; (vi) receive, open and dispose of all mail addressed to such
Borrower and to notify postal authorities to change the address for delivery
thereof to such address as Lender may designate; (vii) endorse the name of such
Borrower upon any of the items of payment or proceeds relating to any Collateral
and deposit the same to the account of Lender on account of the Obligations;
(viii) endorse the name of such Borrower upon any chattel paper, document,
instrument, invoice, freight xxxx, xxxx of lading or similar document or
agreement relating to any Accounts or Inventory of any Obligor and any other
Collateral; (ix) use such Borrower's stationery and sign the name of such
Borrower to verifications of the Accounts and notices thereof to Account
Debtors; (x) use the information recorded on or contained in any data processing
equipment and computer hardware and software relating to the Accounts,
Inventory, Equipment or any other Collateral; (xi) make and adjust claims under
policies of insurance; (xii) sign the name of a Borrower on any proof of claim
in bankruptcy against Account Debtors and on notices of Liens, claims of
mechanic's Liens or assignments or releases of mechanic's Liens securing any
Accounts; (xiii) take all action as may be necessary to obtain the payment of
any letter of credit or banker's acceptance of which a Borrower is a
beneficiary; and (xiv) do all other acts and things necessary, in Lender's
determination, to fulfill Borrowers' obligations under this Agreement.
12.2. INDEMNITY. Borrowers hereby agree to indemnify and defend the Lender
Indemnitees against and to hold the Lender Indemnitees harmless from any Claim
ever suffered or incurred by any of the Lender Indemnitees that arises out of or
relates to this Agreement or any of the other Loan Documents, any transactions
entered into pursuant to any of the Loan Documents, Lender's Lien upon any of
the Collateral, or the performance by Lender of its duties or the exercise of
any of its rights or remedies under this Agreement or any of the other Loan
Documents, or that results from Borrowers' failure to observe, perform or
discharge any of Borrowers' duties hereunder. Without limiting the generality of
the foregoing, this indemnity shall extend to any Claims asserted against or
incurred by any of the Lender Indemnitees by any Person under any Environmental
Laws or similar laws by reason of Borrowers' or any other Person's failure to
comply with laws applicable to solid or hazardous waste materials or other toxic
substances. Additionally, if any Taxes (excluding Taxes imposed upon or measured
solely by the net income of Lender, but including any intangibles tax, stamp
tax, recording tax or franchise tax) shall be payable by Lender or any Obligor
on account of the execution or delivery of this Agreement, or the execution,
delivery, issuance or recording of any of the other Loan Documents, or the
creation or repayment of any of the Obligations hereunder, by reason of any
Applicable Law now or hereafter in effect, Borrowers will pay (or will promptly
reimburse Lender for the payment of) all such Taxes, including any interest and
penalties thereon, and will indemnify and hold Lender Indemnitees harmless from
and against all liability in connection therewith. The foregoing indemnities
shall not apply to Claims incurred
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by any of the Lender Indemnitees as a direct and proximate result of their own
gross negligence or willful misconduct.
12.3. SURVIVAL OF ALL INDEMNITIES. Notwithstanding anything to the contrary
in this Agreement or any of the other Loan Documents, the obligation of each
Borrower with respect to each indemnity given by it in this Agreement, or shall
survive the payment in full of the Obligations and the termination of the
Revolver Commitment.
12.4. MODIFICATION OF AGREEMENT; SALE OF INTEREST. This Agreement may not
be modified, altered or amended, except by an agreement in writing signed by
Borrowers and Lender. No Borrower may sell, assign or transfer any interest in
this Agreement, any of the other Loan Documents, or any of the Obligations, or
any portion thereof, including such Borrower's rights, title, interests,
remedies, powers, and duties hereunder or thereunder. Each Borrower hereby
consents to Lender's participation, sale, assignment, transfer or other
disposition, at any time or times hereafter, of the Obligations, this Agreement
and any of the other Loan Documents, or of any portion hereof or thereof,
including Lender's rights, title, interests, remedies, powers, and duties
hereunder or thereunder; provided, however, that if there exists no Default or
Event of Default Lender agrees that it shall not sell, assign or transfer the
Obligations, this Agreement or any of the other Loan Documents in their entirety
without the prior written consent of Borrower. The foregoing proviso shall not
constitute a limitation on Lender's right to sell participations in the
Obligations, this Agreement and any of the other Loan Documents at any time or
times hereafter. In the case of an assignment, the assignee shall have, to the
extent of such assignment, the same rights, benefits and obligations as it would
if it were "Lender" hereunder and Lender shall be relieved of all obligations
hereunder upon any such assignment. Each Borrower further agrees that Lender may
disclose credit information regarding such Borrower and its Subsidiaries to any
potential participant or assignee, provided that confidentiality is maintained
consistent with the provisions of SECTION 12.17 hereof.
12.5. SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
12.6. CUMULATIVE EFFECT; CONFLICT OF TERMS. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Without limiting the generality of the foregoing,
the parties acknowledge that this Agreement and the other Loan Documents may use
several different limitations, tests or measurements to regulate the same or
similar matters and that such limitations, tests and measures are cumulative and
each must be performed, except as may be expressly stated to the contrary in
this Agreement. Except as otherwise provided in any of the other Loan Documents
by specific reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in direct conflict with, or
inconsistent with, any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
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12.7. EXECUTION IN COUNTERPARTS. This Agreement and any amendments hereto
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which counterparts taken together shall
constitute but one and the same instrument.
12.8. LENDER'S CONSENT. Whenever Lender's consent is required to be
obtained under this Agreement or any of the other Loan Documents as a condition
to any action, inaction, condition or event, Lender shall be authorized to give
or withhold its consent in its sole and absolute discretion and to condition its
consent upon the giving of additional collateral security for the Obligations,
the payment of money or any other matter.
12.9. NOTICES. All notices, requests and demands to or upon a party hereto
shall be in writing and shall be sent by certified or registered mail, return
receipt requested, personal delivery against receipt or by telecopier or other
facsimile transmission and shall be deemed to have been validly served, given or
delivered when delivered against receipt or, in the case of facsimile
transmission, when received (if on a Business Day and, if not received on a
Business Day, then on the next Business Day after receipt) at the office where
the noticed party's telecopier is located, in each case, addressed as follows:
If to Lender: Fleet Capital Corporation
000 Xxxxxxxx Xxxxxxx, X.X.
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Loan Administration Manager
Facsimile No.: (000) 000-0000
With a copy to: Parker, Hudson, Rainer & Xxxxx LLP
1500 Marquis Two Tower
000 Xxxxxxxxx Xxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: C. Xxxxxx Xxxxx, Esq.
Facsimile No.: (000) 000-0000
If to Borrowers: SED International, Inc.
0000 Xxxxx Xxxxx Xxxxxxx Xxxxx
Xxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxx
Facsimile No.: (000) 000-0000
With a copy to: Xxxxx Xxxxxxx Xxxxxx Xxxxxxx & Small, P.C.
0000 Xxxxxxxxx Xxxxxxx, X.X., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
or to such other address as each party may designate for itself by notice given
in accordance with this SECTION 12.9; provided, however, that no notice, request
or demand to or upon Lender pursuant to SECTIONS 1.1.5, 1.3, 2.1.2, 3.1. or
5.2.2 hereof shall be effective until actually received by the individual to
whose attention at Lender such notice is required to be sent. Any written
notice, request or demand
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that is not sent in conformity with the provisions hereof shall nevertheless be
effective on the date that such notice, request or demand is actually received
by the individual to whose attention at the noticed party such notice, request
or demand is required to be sent.
12.10. PERFORMANCE OF BORROWERS' OBLIGATIONS. If any Borrower shall fail to
discharge any covenant, duty or obligation hereunder or under any of the other
Loan Documents, Lender may, in its sole discretion at any time or from time to
time, for Borrowers' account and at Borrowers' expense, pay any amount or do any
act required of Borrowers hereunder or under any of the Loan Documents or
otherwise lawfully requested by Lender to enforce any of the Loan Documents or
Obligations, preserve, protect, insure or maintain any of the Collateral, or
preserve, defend, protect or maintain the validity or priority of Lender's Liens
in any of the Collateral, including the payment of any judgment against any
Borrower, any insurance premium, any warehouse charge, any finishing or
processing charge, any landlord claim, any other Lien upon or with respect to
any of the Collateral. All payments that Lender may make under this Section and
all out-of-pocket costs and expenses (including Extraordinary Expenses) that
Lender pays or incurs in connection with any action taken by it hereunder shall
be reimbursed to Lender by Borrowers ON DEMAND with interest from the date such
payment is made or such costs or expenses are incurred to the date of payment
thereof at the Default Rate applicable for Revolver Loans that are Base Rate
Loans. Any payment made or other action taken by Lender under this Section shall
be without prejudice to any right to assert, and without waiver of, an Event of
Default hereunder and to proceed thereafter as provided herein or in any of the
other Loan Documents.
12.11. CREDIT INQUIRIES. Each Borrower hereby authorizes and permits Lender
(but Lender shall have no obligation) to respond to usual and customary credit
inquiries from third parties concerning such Borrower or any of its
Subsidiaries.
12.12. TIME OF ESSENCE. Time is of the essence of this Agreement, the Other
Agreements and the Security Documents.
12.13. INDULGENCES NOT WAIVERS. Lender's failure at any time or times
hereafter, to require strict performance by Borrowers of any provision of this
Agreement shall not waive, affect or diminish any right of Lender thereafter to
demand strict compliance and performance therewith.
12.14. ENTIRE AGREEMENT; APPENDIX A, EXHIBITS AND SCHEDULES. This Agreement
and the other Loan Documents, together with all other instruments, agreements
and certificates executed by the parties in connection therewith or with
reference thereto, embody the entire understanding and agreement between the
parties hereto and thereto with respect to the subject matter hereof and thereof
and supersede all prior agreements, understandings and inducements, whether
express or implied, oral or written. Appendix A, each of the Exhibits and each
of the Schedules attached hereto are incorporated into this Agreement and by
this reference made a part hereof.
12.15. INTERPRETATION. No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or
- 63 -
judicial authority by reason of such party having or being deemed to have
structured, drafted or dictated such provision.
12.16. ADVERTISING AND PUBLICITY. With the prior consent of Borrower (which
shall not be unreasonably withheld or delayed), Lender may issue and disseminate
to the public (by advertisement or otherwise) information describing the credit
accommodations made available by Lender pursuant to this Agreement, including
the name and address of Borrower, the amount and security for the credit
accommodations and the general nature of Borrower's business, provided that
detail regarding terms (such as interest rate) may be provided only to industry
publications, such as the "LPC Gold Sheets."
12.17. CONFIDENTIALITY. Lender agrees to exercise reasonable efforts (and,
in any event, with at least the same degree of care as it ordinarily exercises
with respect to confidential information of its other customers) to keep any
confidential information that is delivered or made available by Borrowers to it
and that is marked confidential, including information made available to Lender
in connection with a visit or investigation by any Person contemplated in
SECTION 9.1.1 hereof, confidential from any Person other than their respective
Affiliates and individuals employed or retained by Lender who are or are
expected to become engaged in evaluating, approving, structuring, administering
or otherwise giving professional advice with respect to any of the Revolver
Loans or Collateral, including any of their respective legal counsel, auditors
or other professional advisors provided, however, that nothing herein shall
prevent Lender from disclosing such confidential information (i) to any party to
this Agreement from time to time or any Participant, (ii) pursuant the order of
any court or administrative agency, (iii) upon the request or demand of any
regulatory agency or authority having jurisdiction over Lender, (iv) which has
been publicly disclosed other than by an act or omission of Lender except as
permitted herein or which becomes available to Lender on a nonconfidential basis
from a source other than Obligors, (v) to the extent reasonably required in
connection with any litigation (with respect to any of the Loan Documents or any
of the transactions contemplated thereby) to which Lender or its Affiliates may
be a party, (vi) to the extent reasonably required in connection with the
exercise of any remedies hereunder, (vii) to any actual or proposed Participant,
counterparty or advisors to any swap or derivative transactions relating to
Obligors and the Obligations or other assignee of all or part of Lender's rights
hereunder so long as such assignee has agreed in writing to be bound by the
provisions of this Section, (viii) to the National Association of Insurance
Commissioners or any similar organization or to any nationally recognized rating
agency that requires access to information about Lender's portfolio in
connection with ratings issued with respect to Lender, (ix) to the extent
reasonably required by Applicable Law or (x) with the consent of Borrowers.
12.18. GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN ATLANTA,
GEORGIA. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF GEORGIA: PROVIDED, HOWEVER, THAT IF ANY OF THE
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN GEORGIA, THE LAWS OF
SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE
OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF LENDER'S OTHER
REMEDIES IN
- 64 -
RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE
DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF THE STATE OF GEORGIA. AS PART OF
THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR
FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF A BORROWER OR LENDER, EACH
BORROWER HEREBY CONSENTS AND AGREES THAT THE SUPERIOR COURT OF XXXX COUNTY,
GEORGIA, OR, AT LENDER'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF GEORGIA, ATLANTA DIVISION, SHALL HAVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWERS AND LENDER PERTAINING TO
THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT.
EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH BORROWER HEREBY WAIVES
ANY OBJECTION THAT SUCH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT
AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF
SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY CERTIFIED MAIL
ADDRESSED TO BORROWERS AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SED'S ACTUAL
RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE
RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR
TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY
OTHER APPROPRIATE FORUM OR JURISDICTION.
- 65 -
12.19. WAIVERS BY BORROWER. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, EACH BORROWER WAIVES (I) THE RIGHT TO TRIAL BY JURY (WHICH LENDER HEREBY
ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING
OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS OR THE
COLLATERAL; (II) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT,
PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT,
EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS,
DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER
ON WHICH SUCH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS
WHATEVER LENDER MAY DO IN THIS REGARD; (III) NOTICE PRIOR TO TAKING POSSESSION
OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY
ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF LENDER'S REMEDIES; (IV)
THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS; (V) ANY CLAIM
AGAINST AGENT OR ANY LENDER, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT,
CONSEQUENTIAL, OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES)
ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, ANY OF THE LOAN
DOCUMENTS, ANY TRANSACTION THEREUNDER OR THE USE OF THE PROCEEDS OF ANY LOANS;
AND(VI) NOTICE OF ACCEPTANCE HEREOF. EACH BORROWER ACKNOWLEDGES THAT THE
FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS
AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE
DEALINGS WITH BORROWERS. EACH BORROWER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
[Signatures on following page]
- 66 -
IN WITNESS WHEREOF, this Agreement has been duly executed in Atlanta,
Georgia, on the day and year specified at the beginning of this Agreement.
SED INTERNATIONAL, INC.
ATTEST: ("Borrower")
_____________________________________
By:___________________________________
XXXXXXX X. XXXXXX, Chief Financial Officer, XXXXXX XXXXXXX, Chairman of the
Vice President - Finance, Secretary and Board and Chief Executive Officer
Treasurer
[CORPORATE SEAL]
SED INTERNATIONAL HOLDINGS, INC.
ATTEST: ("Borrower")
_____________________________________
By:___________________________________
XXXXXXX X. XXXXXX, Chief Financial Officer, XXXXXX XXXXXXX, Chairman of the
Vice President - Finance, Secretary and Board and Chief Executive Officer
Treasurer
[CORPORATE SEAL]
SED MAGNA (MIAMI), INC.
ATTEST: ("Borrower")
_____________________________________
By:___________________________________
XXXXXXX X. XXXXXX, Chief Financial Officer, XXXXXX XXXXXXX, Chairman of the
Vice President - Finance, Secretary and Board and Chief Executive Officer
Treasurer
[CORPORATE SEAL]
Accepted in Atlanta, Georgia:
FLEET CAPITAL CORPORATION
("Lender")
By:___________________________________
Title:_______________________________
- 67 -
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated October 7, 2002, by and
among FLEET CAPITAL CORPORATION, SED INTERNATIONAL, INC., SED INTERNATIONAL
HOLDINGS, INC. and SED MAGNA (MIAMI), INC., the following terms shall have the
following meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa):
Account -shall have the meaning ascribed to "account" in the UCC and
shall include any and all rights of a Borrower to payment for goods sold or
leased or for services rendered that are not evidenced by an Instrument or
Chattel Paper, whether or not they have been earned by performance.
Account Debtor - any Person who is or may become obligated to any
Borrower under or on account of an Account.
Accounts Collateral - all Accounts of a Borrower and all right, title
and interest of a Borrower in or to any returned Goods the sale or other
disposition of which gave rise to an Account, together with all rights,
titles, securities and guarantees with respect to any Account, including
any rights to stoppage in transit, replevin, reclamation and resales, and
all related security or Liens, whether voluntary or involuntary, in each
case whether now existing or owned or hereafter created, arising or
acquired.
Accounts Formula Amount - on any date of determination thereof, an
amount equal to the lesser of (i) the Revolver Commitment on such date or
(ii) 85% of the net amount of Eligible Accounts on such date. As used
herein, the phrase "net amount of Eligible Accounts" shall mean the face
amount of such Accounts on any date less any and all returns, rebates,
discounts, credits, allowances or Taxes (including sales, excise or other
taxes) at any time issued, owing, claimed by Account Debtors, granted,
outstanding or payable in connection with, or any interest accrued on the
amount of, such Accounts at such date.
Adjusted LIBOR Rate - with respect to each Interest Period for a LIBOR
Loan, an interest rate per annum (rounded upwards, to the next 1/16th of
1%) equal to the quotient of (a) the LIBOR Rate in effect for such Interest
Period divided by (b) a percentage (expressed as a decimal) equal to 100%
minus Statutory Reserves.
Adjusted Net Earnings - with respect to any fiscal period, means the
net earnings (or loss) for such fiscal period of SED, all as reflected on
the financial statement of SED supplied to Lender pursuant to SECTION 9.1.3
of the Agreement, but excluding: ((i) any gain or loss arising from the
sale of capital assets which are sold other than in the Ordinary Course of
Business; ((ii) any gain arising from any write-up of assets during such
period; ((iii) earnings or losses of any Subsidiary accrued prior to the
date it became a Subsidiary; ((iv) earnings of any Person, substantially
all the assets of which have been acquired in any manner by SED, realized
by such Person prior to the date of such acquisition; ((v)
net earnings or losses of any entity (other than a Subsidiary of SED) in
which SED has an ownership interest unless such net earnings have actually
been received by SED in the form of cash or Cash Equivalent Distributions;
((vi) any portion of the net earnings of any Subsidiary which for any
reason is subject to a restriction preventing the payment of Distributions
to SED; ((vii) the earnings of any Person to which any assets of SED shall
have been sold, transferred or disposed of, or into which SED shall have
merged, or been a party to any consolidation or other form of
reorganization, prior to the date of such transaction; and ((viii) any gain
or loss arising from extraordinary or non-recurring items, all as
determined in accordance with GAAP.
Adjusted Tangible Assets - all assets of SED except: (i) any surplus
resulting from any write-up of assets subsequent to June 30, 2001; (ii)
patents, copyrights, trademarks, tradenames, non-compete agreements,
franchises and other similar intangibles; (iii) goodwill, including any
amounts, however designated on a balance sheet of SED, representing the
excess of the purchase price paid for assets or Equity Interests over the
value assigned thereto on the books of SED; (iv) Restricted Investments;
(v) unamortized discount and expense; (vi) assets located and notes and
receivables due from obligors outside of the United States of America which
are not supported by letters of credit or other credit enhancement or
support issued by a bank or other financial institution acceptable to
Lender available for presentation or drawing in the United States; and
(vii) Accounts, notes and other receivables due from Affiliates or
employees.
Adjusted Tangible Net Worth - at any date of determination thereof, an
amount equal to: (i) the net book value (after deducting related
depreciation, obsolescence, amortization, valuation and other proper
reserves) at which the Adjusted Tangible Assets of SED would be shown on a
balance sheet at such date in accordance with GAAP, minus (ii) the amount
at which SED's Debts would be shown on such balance sheet in accordance
with GAAP, and including as Debts all reserves for contingencies in
accordance with GAAP.
Affiliate - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with, another Person; (ii) which
beneficially owns or holds 10% or more of any class of the Equity Interests
of a Person; or (iii) 10% or more of the Equity Interests with power to
vote of which is beneficially owned or held by another Person or a
Subsidiary of another Person. For purposes hereof, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of any Equity Interest, by contract or otherwise.
Agreement - the Loan and Security Agreement referred to in the first
sentence of this Appendix A, all Exhibits and Schedules thereto and this
Appendix A.
Applicable Law - all laws, rules and regulations applicable to the
Person, conduct, transaction, covenant, Loan Document or Material Contract
in question, including all applicable common law and equitable principles;
all provisions of all applicable state,
federal and foreign constitutions, statutes, rules, regulations and orders
of governmental bodies; and all orders, judgments and decrees of all courts
and arbitrators having jurisdiction over the Person in question.
Applicable Margin - a percentage equal to 2.25% with respect to
Revolver Loans that are LIBOR Loans, 0% with respect to Revolver Loans that
are Base Rate Loans and .25% with respect to the Commitment Fee payable to
Lender pursuant to SECTION 2.2.2 of the Agreement; provided that,
commencing on the date on which Lender receives the Compliance Certificate
for the period ended December 31, 2002, the Applicable Margin shall be
increased or (if no Default or Event of Default exists) decreased, based
upon the Average Adjusted Availability and, if applicable, EBIT/Interest
Expense Ratio for the immediately preceding Fiscal Quarter of Borrowers, as
follows:
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APPLICABLE APPLICABLE
MARGIN FOR MARGIN FOR
EBIT/INTEREST REVOLVER LOANS REVOLVER LOANS APPLICABLE
PRICING AVERAGE ADJUSTED EXPENSE THAT ARE LIBOR THAT ARE BASE MARGIN FOR
LEVEL AVAILABILITY RATIO LOANS RATE LOANS COMMITMENT FEE
--------------------------------------------------------------------------------------------------------
1 Greater than Greater 2.00% 0.0% 0.25%
$12,000,000 than 1.5 to
1.0
--------------------------------------------------------------------------------------------------------
2 Greater than Equal to or 2.25% 0.0% 0.25%
$12,000,000 less than
1.5 to 1
--------------------------------------------------------------------------------------------------------
3 Greater than Not 2.25% 0.0% 0.25%
$8,000,000 but applicable
equal to or less
than $12,000,000
--------------------------------------------------------------------------------------------------------
4 Greater than Not 2.50% 0.25% 0.375%
$5,000,000 but applicable
equal to or less
than $8,000,000
--------------------------------------------------------------------------------------------------------
5 Equal to or less Not 2.75% 0.50% 0.50%
than $5,000,000 applicable
--------------------------------------------------------------------------------------------------------
-4-
The Applicable Margin shall be subject to reduction or increase, as
applicable and as set forth above, on a quarterly basis according to the
performance of Borrowers as measured by the Average Adjusted Availability
and, if applicable, the EBIT/Interest Expense Ratio for the immediately
preceding Fiscal Quarter of Borrowers. Except as set forth in the last
sentence hereof, any such increase or reduction in the Applicable Margin
provided for herein shall be effective 3 Business Days after receipt by
Lender of the applicable financial statements and corresponding Compliance
Certificate. If the financial statements and the Compliance Certificate of
Borrowers setting forth the Average Adjusted Availability and
EBIT/Interest Expense Ratio are not received by Lender by the date
required pursuant to SECTION 9.1.3 of the Agreement, the Applicable Margin
shall be determined as if Average Adjusted Availability is equal to or
less than $5,000,000 until such time as such financial statements and
Compliance Certificate are received and any Event of Default resulting
from a failure timely to deliver such financial statements or Compliance
Certificate is waived in writing by Lender; provided, however, that Lender
shall be entitled to accrue and receive interest at the Default Rate to
the extent authorized by SECTION 2.1.5 of the Agreement and, on each date
that the Default Rate accrues on any Revolver Loan, the Applicable Margin
on such date for such Revolver Loan shall be the Applicable Margin that
would apply if Average Adjusted Availability was equal to or less than
$5,000,000 (without regard to the actual Average Adjusted Availability or
EBIT/Interest Ratio). For the final Fiscal Quarter of any Fiscal Year of
Borrowers, Borrowers may provide the unaudited financial statements of
Borrowers, subject only to year-end adjustments, for the purpose of
determining the Applicable Margin; provided, however, that if, upon
delivery of the annual audited financial statements required to be
submitted by Borrowers to Lender pursuant to SECTION 9.1.3(I) of the
Agreement, Borrowers have not met the criteria for reduction of the
Applicable Margin pursuant to the terms hereinabove for the final Fiscal
Quarter of the Fiscal Year of Borrowers then ended, then (a) such
Applicable Margin reduction shall be terminated and, effective on the
first day of the month following receipt by Lender of such audited
financial statements, the Applicable Margin shall be the Applicable Margin
that would have been in effect if such reduction had not been implemented
based upon the unaudited financial statements of Borrowers for the final
Fiscal Quarter of the Fiscal Year of Borrowers then ended, and (b)
Borrowers shall pay to Lender, on the first day of the month following
receipt by Lender of such audited financial statements, an amount equal to
the difference between the amount of interest and fees that would have
been paid using the Applicable Margin determined based upon such audited
financial statements and the amount of interest and fees actually paid
during the period in which the reduction of the Applicable Margin was in
effect based upon the unaudited financial statements for the final Fiscal
Quarter of the Fiscal Year of Borrowers then ended.
Availability - on any date, the amount that Borrowers are entitled
to borrow as Revolver Loans on such date, such amount being the difference
derived when the sum of the principal amount of Revolver Loans then
outstanding (including any amounts that Lender may have paid for the
account of Borrowers pursuant to any of the Loan Documents and that have
not been reimbursed by Borrowers) is
-5-
subtracted from the Borrowing Base on such date. If the amount outstanding
is equal to or greater than the Borrowing Base, Availability is zero.
Availability Reserve - on any date of determination thereof, an
amount equal to the sum of the following (without duplication) (i) the
Inventory Reserve; (ii) all amounts of past due rent, fees or other
charges owing at such time by any Obligor to any landlord of any premises
where any of the Collateral is located, provided that any reserve for such
amounts shall not be in excess of the Value of the Collateral located at
any such premises; (iii) all amounts of past due fees or other charges
owing at such time by any Obligor to any processor, repairman, mechanic or
other Person who is in possession of any Collateral or has asserted any
Lien or claim thereto, unless such amounts are being Properly Contested,
provided that any reserve for such amounts shall not be in excess of the
Value of the Collateral in possession of any such Person; (iv) any amounts
which any Obligor is obligated to pay pursuant to the provisions of any of
the Loan Documents that Lender elects to pay for the account of such
Obligor in accordance with authority contained in any of the Loan
Documents; (v) the LC Reserve; (vi) the aggregate amount of reserves
established by Lender in its reasonable discretion in respect of ACH
(automated clearinghouse) transfers or obligations of Borrowers under any
Interest Rate Contracts or other Hedging Agreements; (vii) the aggregate
amount of reserves established by Lender in its reasonable discretion in
respect of foreign exchange settlement exposure; (viii) the aggregate
amount of reserves established by Lender in its reasonable discretion in
respect of merchant services exposure ($300,000 as of the Closing Date);
(ix) all customer deposits or other prepayments held by any Borrower; (x)
the Slow Moving Inventory Reserve; (xi) the HP Reserve, until such time as
Lender has obtained a duly and fully executed Intercreditor Agreement that
is in form and substance acceptable to Lender in the exercise of its sole
and absolute discretion such additional reserves, in such amounts and with
respect to such matters, as Lender in its reasonable credit judgment may
elect to impose from time to time.
Average Adjusted Availability - for any period, an amount equal to
(i) the sum of the actual amount of Availability on each day during such
period, as determined by Lender, divided by the number of days in such
period, minus (ii) the average amount of Borrowers' negative cash position
during such period, as determined by Lender based upon reports provided to
Lender each Business Day pursuant to SECTION 9.1.11 of the Agreement.
Average Availability - for any period, an amount equal to the sum of
the actual amount of Availability on each day during such period, as determined
by Lender, divided by the number of days in such period.
Average Revolver Loan Balance - for any period, the amount obtained
by adding the aggregate of the unpaid balance of Revolver Loans and LC
Outstandings at the end of each day for the period in question and by
dividing such sum by the number of days in such period.
-6-
Bank - Fleet National Bank and its successors.
Banking Relationship Debt - Debt or other obligations of a Borrower
to Bank (or any Affiliate of Bank) arising out of or relating to, among
other things, (i) checking and operating account relationships between
such Borrower and Bank (or any Affiliate of Bank), including any
obligations under Cash Management Agreements, (ii) Interest Rate Contracts
with Bank (or any Affiliate of Bank) and (iii) other products provided by
Bank (or any Affiliate of Bank) to such Borrower, including merchant card
services.
Bankruptcy Code - title 11 of the United States Code.
Base Rate - the greater from time to time of (i) the rate of
interest announced or quoted by Bank from time to time as its prime rate
or (ii) the Federal Funds Rate in effect from time to time plus .5%. The
prime rate announced by Bank is a reference rate and does not necessarily
represent the lowest or best rate charged by Bank. Bank may make loans or
other extensions of credit at, above or below its announced prime rate. If
the prime rate is discontinued by Bank as a standard, a comparable
reference rate designated by Bank as a substitute therefor shall be the
Base Rate.
Base Rate Loan - a Revolver Loan, or portion thereof, during any
period in which it bears interest at a rate based upon the Base Rate.
Board of Governors - the Board of Governors of the Federal Reserve
System.
Borrowing - a borrowing consisting of Revolver Loans of one Type
made on the same day by Lender or a conversion of a Revolver Loan or
Revolver Loans of one Type from Lender on the same day.
Borrowing Base - on any date of determination thereof, an amount
equal to the lesser of: (a) the amount of the Revolver Commitment on such
date minus the aggregate LC Outstandings on such date, or (b) an amount
equal to (i) the sum of the Accounts Formula Amount plus the Inventory
Formula Amount on such date minus (ii) the Availability Reserve on such
date.
Borrowing Base Certificate - a certificate, in the form requested by
Lender, by which Borrowers shall certify to Lender, with such frequency as
Lender may request, the amount of the Borrowing Base as of the date of the
certificate (which date shall be not more than 1 Business Day earlier than
the date of submission of such certificate to Lender) and the calculation
of such amount, with such calculations to include, among other things, the
"non-prime categories" of Accounts and Inventory as of the date of such
certificate. As used herein, the phrase "non-prime categories" shall mean
those categories of Accounts and Inventory that do not constitute
"Eligible Accounts" or "Eligible Inventory," respectively, and that Lender
requires Borrowers specifically to disclose and update as part of the
calculations accompanying each Borrowing Base Certificate.
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Business Day - any day excluding Saturday, Sunday and any other day
that is a legal holiday under the laws of the State of Georgia or is a day
on which banking institutions located in such state are closed; provided,
however, that when used with reference to a LIBOR Loan (including the
making, continuing, prepaying or repaying of any LIBOR Loan), the term
"Business Day" shall also exclude any day on which banks are not open for
dealings in Dollar deposits on the London interbank market.
Business Interruption Insurance Assignment - the Collateral
Assignment of Business Interruption Insurance to be executed by Borrowers
on or before the Closing Date in favor of Lender, in form and substance
satisfactory to Lender, as security for the payment of the Obligations.
Capital Expenditures - expenditures made or liabilities incurred for
the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which, in accordance with GAAP, are
included as "additions to property, plant or equipment" and reflected in
the applicable Borrower's statement of cash flows, including the total
principal portion of Capitalized Lease Obligations. Notwithstanding the
foregoing, any expenditure by Borrowers of proceeds of property and
casualty insurance or condemnation proceeding, shall not be deemed to
constitute "Capital Expenditures."
Capitalized Lease Obligation - any Debt represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP.
Cash Collateral - cash or Cash Equivalents, and any interest earned
thereon, that is deposited with Lender in accordance with the Agreement as
security for the Obligations.
Cash Collateral Account - a demand deposit, money market or other
account established by Lender at such financial institution as Lender may
select in its discretion, which account shall be in Lender's name and
subject to Lender's Liens.
Cash Equivalents - (i) marketable securities or direct obligations
issued or unconditionally guaranteed by the United States government and
backed by the full faith and credit of the United States government having
maturities of not more than 12 months from the date of acquisition; (ii)
domestic certificates of deposit and time deposits having maturities of
not more than 12 months from the date of acquisition, bankers' acceptances
having maturities of not more than 12 months from the date of acquisition
and overnight bank deposits, in each case issued by any commercial bank
organized under the laws of the United States, any state thereof or the
District of Columbia, which at the time of acquisition are rated A-1 (or
better) by S&P or P-1 (or better) by Xxxxx'x and (unless issued by Lender)
not subject to offset rights in favor of such bank arising from any
banking relationship with such bank, other than offset rights in favor of
such bank for nominal account and other fees; (iii) repurchase obligations
with a term of not more than 30 days for underlying securities of the
types described in clauses (i) and (ii) entered into with any financial
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institution meeting the qualifications specified in clause (ii) above;
(iv) commercial paper having at the time of investment therein or a
contractual commitment to invest therein a rating of A-1 (or better) by
S&P or P-1 (or better) by Xxxxx'x, and having a maturity within 12 months
after the date of acquisition thereof; (v) Eurodollar time deposits having
a maturity of less than one year purchased directly from Lender or Cash
Equivalent Bank; and (vi) shares of any money market mutual fund that (a)
has at least 95% of its assets invested continuously in the types of
investments referred to in clauses (i) through (v) above, (b) has net
assets of not less than $500,000,000, and (c) has a rating of A-1 (or
better) by S&P or P-1 (or better) by Xxxxx'x.
Cash Management Agreements - any agreement entered into from time to
time between a Borrower or any of its Subsidiaries, on the one hand, and
Bank or any of its Affiliates or any other banking or financial
institution, on the other, in connection with cash management services for
operating, collections, payroll and trust accounts of such Borrower or its
Subsidiaries provided by such banking or financial institution, including
automatic clearinghouse services, controlled disbursement services,
electronic funds transfer services, information reporting services,
lockbox services, stop payment services and wire transfer services.
CERCLA - the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C.Section 9601 et seq. and its implementing
regulations.
Change of Control - the occurrence of either of the following
events: (i) a Person or a Group of Persons shall, as a result of a tender
or exchange offer, open market purchases, privately negotiated purchases
or otherwise (other than any such event between one or more members of the
Control Group), have become the direct or indirect beneficial owner
(within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended) of Equity Interests of Parent representing 50% or more
of the Voting Power of Parent; or (ii) occupation of a majority of the
seats (other than vacancies) on the board of directors of Parent by
Persons who were neither (a) nominated by the board of directors of Parent
as of the Closing Date nor (b) appointed by directors so nominated.
Chattel Paper - shall have the meaning given to "chattel paper" in
the UCC.
Claims - any and all claims, demands, liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, awards, remedial
response, costs, expenses or disbursements of any kind or nature
whatsoever (including reasonable attorneys', accountants', consultants' or
paralegals' fees and expenses), whether arising under or in connection
with the Loan Documents, under any Applicable Law (including any
Environmental Laws) or otherwise, that may now or hereafter be suffered or
incurred by a Person and whether suffered or incurred in or as a result of
any investigation, litigation, arbitration or other judicial or
non-judicial proceeding or any appeals related thereto.
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Closing Date - the date on which all of the conditions precedent in
SECTION 10 of the Agreement are satisfied and the initial Revolver Loans
are made under the Agreement.
Collateral - all of the Property and interests in Property described
in SECTION 6 of the Agreement; all Property described in any of the
Security Documents as security for the payment or performance of any of
the Obligations; and all other Property and interests in Property that now
or hereafter secure (or are intended to secure) the payment and
performance of any of the Obligations.
Commitment Fee - as defined in SECTION 2.2.2 of the Agreement.
Commitment Termination Date - the date that is the soonest to occur
of (i) the last day of the Term; (ii) the date on which Borrowers elect to
terminate the Revolver Commitment pursuant to SECTION 5.2 of the
Agreement; or (iii) the date on which the Revolver Commitment is
automatically terminated pursuant to SECTION 11.2 of the Agreement.
Compliance Certificate - a Compliance Certificate to be provided by
Borrowers to Lender in accordance with, and in the form annexed as EXHIBIT
D to, the Agreement, and the supporting schedules to be annexed thereto.
Consolidated - the consolidation in accordance with GAAP of the
accounts or other items as to which such term applies.
Contingent Obligation - with respect to any Person, any obligation
of such Person arising from any guaranty, indemnity or other assurance of
payment or performance of any Debt, lease, dividend or other obligation
("primary obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including (i) the direct or
indirect guaranty endorsement (other than for collection or deposit in the
Ordinary Course of Business), co-making, discounting with recourse or sale
with recourse by such Person of the obligation of a primary obligor, (ii)
the obligation to make take-or-pay or similar payments, if required,
regardless of nonperformance by any other party or parties to an
agreement, (iii) any obligation of such Person, whether or not contingent,
(A) to purchase any such primary obligation or any Property constituting
direct or indirect security therefor, (B) to advance or supply funds (1)
for the purchase or payment of any such primary obligations or (2) to
maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor,
(C) to purchase Property, Securities or services primarily for the purpose
of assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (D)
otherwise to assure or hold harmless the holder of such primary obligation
against loss in respect thereof; provided, however, that the term
"Contingent Obligation" shall not include any product warranties extended
in the Ordinary Course of Business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation with respect to which such
Contingent Obligation is made (or, if less, the maximum amount of such
primary obligation for which such Person may
-10-
be liable pursuant to the terms of the instrument evidencing such
Contingent Obligation) or, if not stated or determinable, the maximum
reasonably anticipated liability with respect thereto (assuming such
Person is required to perform thereunder), as determined by such Person in
good faith.
Control - possession, directly or indirectly, of the power to direct
or cause the direction of management or policies (whether through
ownership of voting securities, by contract or otherwise, but not solely
by being an officer or director of a Person); provided, however, that any
Person which beneficially owns, directly or indirectly, 10% or more (a
number of votes) of the Equity Interests ordinarily having Voting Power
with respect to a corporation shall be conclusively presumed to control
such corporation. "Control," "Controlling," "Controlled" and "under common
control" shall have meanings correlative thereto.
Controlled Disbursement Account - a demand deposit account
maintained by Borrower at Bank and to which proceeds of Revolver Loans
will be wired from time to time.
Control Group - Xxxxxx Xxxxxxx, Xxxx Xxxxxxx, any entity Controlled
by any of them, their spouses, their lineal descendants and any trusts or
family limited partnerships created for the benefit of any such Person,
spouse or descendant.
Credit Insurance Assignment - the Assignment of Rights Under Credit
Insurance Policy to be executed by Borrowers and Credit Insurer on or
before the Closing Date in favor of Lender, in form and substance
satisfactory to Lender, as security for the payment of the Obligations.
Credit Insurance Policy - Policy No. 839/CP3360702 naming SED, as
the insured, and Credit Insurer, as the issuer, and all endorsements
hereto.
Credit Insurer - Xxxxx Xxxxxxx Group, Credit & Surety Division, 133
Houndsditch, Xxxxxx XX0X 0XX.
Current Assets - at any date, the amount at which all of the current
assets of a Person would be properly classified as current assets shown on
a balance sheet at such date in accordance with GAAP except that amounts
due from Affiliates and investments in Affiliates shall be excluded
therefrom.
Debt - as applied to a Person means, without duplication: (i) all
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such
Person as of the date as of which Debt is to be determined, including
Capitalized Lease Obligations; (ii) all Contingent Obligations of such
Person; (iii) all reimbursement obligations in connection with letters of
credit or letter of credit guaranties issued for the account of such
Person; and (iv) in the case of Borrowers (without duplication), the
Obligations. The Debt of a Person shall include any recourse Debt of any
partnership or joint venture in which such Person is a general partner or
joint venturer, except to the extent the terms of such Debt provide that
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such Person is not liable therefor under any circumstances whatsoever.
Default - an event or condition the occurrence of which would, with
the lapse of time or the giving of notice, or both, become an Event of
Default.
Default Rate - on any date, a rate per annum that is equal to (i) in
the case of each Loan outstanding on such date, 2% in excess of the rate
otherwise applicable to such Loan on such date, and (ii) in the case of
any of the other Obligations outstanding on such date, 2% in excess of the
Base Rate in effect on such date.
Deposit Account Control Agreement - each Deposit Account Control
Agreement to be executed by Borrowers on or before the Closing Date in
favor of Lender, in form and substance satisfactory to Lender, as security
for the Obligations.
Deposit Accounts - all of a Person's demand, time, savings,
passbook, money market or other depository accounts, and all certificates
of deposit, maintained by such Person with any bank, savings and loan
association, credit union or other depository institution.
Distribution - in respect of any entity, (i) any payment of any
dividends or other distributions on Equity Interests of the entity (except
distributions in such Equity Interests) and (ii) any purchase, redemption
or other acquisition or retirement for value of any Equity Interests of
the entity or any Affiliate of the entity unless made from the net
proceeds of the sale of Equity Interests within a reasonable period of
time (and in no event more than 3 days) after such sale.
Distributor Agreement - a written agreement between a Borrower and a
supplier of such Borrower which, among other things, includes an
appointment of such Borrower as a "distributor" for such supplier and sets
forth the terms governing sales of goods by such supplier to such
Borrower.
Document - shall have the meaning given to"document" in the UCC.
Dollars and the sign "$" - lawful money of the United States of
America.
Domestic Subsidiary - a Subsidiary of a Borrower (other than a
Subsidiary that is a Borrower) that is incorporated under the laws of a
state of the United States or the District of Columbia.
Dominion Account - a special account of Lender established by
Borrowers at a bank selected by Borrowers, but acceptable to Lender in its
discretion, and over which Lender shall have sole and exclusive access and
control for withdrawal purposes.
EBIT - for any period, an amount equal to the sum of (i) Adjusted
Net Earnings for such period, plus (ii) the aggregate amount of all
provision for all Taxes based on the income or profits
-12-
of SED for such period (whether or not paid, estimated or accrued), to the
extent deducted from Adjusted Net Earnings, plus (iii) Interest Expense of
SED for such period, to the extent deducted from Adjusted Net Earnings.
EBIT/Interest Expense Ratio - for any period, the ratio of (i) EBIT
for such period to (ii) Interest Expense for such period.
EBITDA - for any period, an amount equal to the sum of (i) EBIT for
such period plus (ii) depreciation and amortization of SED for such period
(including amortization of goodwill and other intangible assets,
amortization and write-offs of financing costs and premiums paid in
connection with any early extinguishment of Debt) and any non-cash
impairment charges related to goodwill, other intangible or long-lived
assets for such period.
Eligible Account - an Account which arises in the Ordinary Course of
Business of a Borrower from the sale of goods, is payable in Dollars, is
subject to Lender's duly perfected Lien, and is deemed by Lender, in its
reasonable credit judgment, to be an Eligible Account. Without limiting
the generality of the foregoing, no Account shall be an Eligible Account
if: (i) it arises out of a sale made by a Borrower to a Subsidiary or an
Affiliate of such Borrower or to a Person controlled by an Affiliate of
such Borrower; (ii) it is unpaid for more than 60 days after the original
due date shown on the invoice; (iii) it is due or unpaid more than 90 days
after the original invoice date; (iv) 20% or more of the Accounts from the
Account Debtor are not deemed Eligible Accounts hereunder; (v) the total
unpaid Accounts of the Account Debtor exceed 10% of the aggregate amount
of all Accounts, to the extent of such excess; (vi) any covenant,
representation or warranty contained in the Agreement with respect to such
Account has been breached; (vii) the Account Debtor is also a Borrower's
creditor or supplier, or the Account Debtor has disputed liability with
respect to such Account, or the Account Debtor has made any claim with
respect to any other Account due from such Account Debtor to a Borrower,
or the Account otherwise is or may become subject to any right of setoff,
counterclaim, reserve or chargeback, provided that, the Accounts of such
Account Debtor shall be ineligible only to the extent of such offset,
counterclaim, disputed amount, reserve or chargeback; (viii) an Insolvency
Proceeding has been commenced by or against the Account Debtor or the
Account Debtor has failed, suspended business or ceased to be Solvent;
(ix) it arises from a sale to an Account Debtor with its principal office,
assets or place of business outside the United States, unless the sale is
backed by an irrevocable letter of credit issued or confirmed by a bank
reasonably acceptable to Lender and that is in form and substance
reasonably acceptable to Lender and payable in the full amount of the
Account in freely convertible Dollars at a place of payment within the
United States and, if requested by Lender, such letter of credit, or
amounts payable thereunder, is assigned to Lender (with such assignment
acknowledged by the issuing or confirming bank); (x) it arises from a sale
to the Account Debtor on a xxxx-and-hold, guaranteed sale, sale-or-return,
sale-on-approval, consignment or any other repurchase or return basis;
(xi) the Account Debtor is the United States of America or any department,
agency or instrumentality thereof, unless such Borrower is not prohibited
from
-13-
assigning the Account and does assign its right to payment of such Account
to Lender, in a manner satisfactory to Lender, so as to comply with the
Assignment of Claims Act of 1940 (31 U.S.C. Section 3727 and 41 U.S.C.
Section 15), or is a state, county or municipality, or a political
subdivision or agency thereof and Applicable Law disallows or restricts an
assignment of Accounts on which it is the Account Debtor; (xii) the
Account Debtor is located in any state which imposes similar conditions on
the right of a creditor to collect accounts receivable unless such
Borrower has either qualified to transact business in such state as a
foreign entity or filed a Notice of Business Activities Report or other
required report with the appropriate officials in those states for the
then current year; (xiii) the Account Debtor is located in a state in
which such Borrower is deemed to be doing business under the laws of such
state and which denies creditors access to its courts in the absence of
qualification to transact business in such state or of the filing of any
reports with such state, unless such Borrower has qualified as a foreign
entity authorized to transact business in such state or has filed all
required reports; (xiv) the Account is subject to a Lien other than a
Permitted Lien; (xv) the goods giving rise to such Account have not been
delivered to and accepted by the Account Debtor or the services giving
rise to such Account have not been performed by such Borrower and accepted
by the Account Debtor or the Account otherwise does not represent a final
sale; (xvi) the Account is evidenced by Chattel Paper or an Instrument of
any kind, or has been reduced to judgment; (xvii) the Account represents a
progress billing or a retainage; (xviii) such Borrower has made any
agreement with the Account Debtor for any deduction therefrom, except for
discounts or allowances which are made in the Ordinary Course of Business
for prompt payment and which discounts or allowances are reflected in the
calculation of the face value of each invoice related to such Account;
(xix) such Borrower has made an agreement with the Account Debtor to
extend the time of payment thereof other than in the Ordinary Course of
Business; (xx) the Account represents, in whole or in part, a billing for
interest, fees or late charges, provided that such Account shall be
ineligible only to the extent of the amount of such billing; (xxi) it
arises from a sale on a C.O.D. basis; (xxii) to the extent there exist
credit balances with respect to any Account Debtor that are more than 60
days from the original invoice date therefor, in each case not to exceed
the total unpaid amount of all Eligible Accounts of such Account Debtor;
(xxiii) it arises out of the use of a credit or charge card or information
contained on or for use with a credit or charge card; or (xxiv) it is a
Floor Planned Account.
Eligible Inventory - such Inventory (other than packaging materials,
labels, samples, bags and supplies) of a Borrower which Lender, in its
reasonable credit judgment, deems to be Eligible Inventory. Without
limiting the generality of the foregoing, no Inventory shall be Eligible
Inventory unless: (i) it is finished goods; (ii) it is owned by a Borrower
and not held by such Borrower on consignment or other sale or return
terms; (iii) it is in good, new and saleable condition and is not damaged
or defective; (iv) it meets all standards imposed by any Governmental
Authority; (v) it conforms in all respects to the warranties and
representations set forth in the Agreement and is fully insured in the
manner required by the Agreement; (vi) it is at all times subject to
Lender's duly
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perfected, first priority security interest and no other Lien except a
Permitted Lien; (vii) it is situated in Borrowers' possession and control,
at a location in compliance with the Agreement, is not in transit outside
the continental United States or otherwise located outside the continental
United States and is not consigned to any Person; (viii) it is not the
subject of a negotiable warehouse receipt or other negotiable Document;
(ix) it has not been sold or leased; (x) it is not subject to any license
or other agreement that limits, conditions or restricts such Borrower's or
Lender's right to sell or otherwise dispose of such Inventory; (xi) it is
not the subject of an Intellectual Property Claim; (xii) it is not goods
originally sold by a Borrower pursuant to or in connection with a Floor
Planning Arrangement that have been repossessed or repurchased by, or
otherwise returned to, a Borrower in connection with such Borrower's
repurchase obligation under such Floor Planning Arrangement if such
Borrower has not fully satisfied all of its repurchase obligations to the
Floor Planner under such Floor Planning Arrangement; and (xiii) if it is
subject to a Distributor Agreement, such Distributor Agreement is a
Qualified Distributor Agreement.
Environmental Laws - all federal, state and local laws, rules,
regulations, codes, ordinances, programs, permits, guidance documents
promulgated by regulatory agencies, orders and consent decrees, now or
hereafter in effect and relating to human health and safety or the
protection or pollution of the environment, including CERCLA.
Environmental Release - a release as defined in CERCLA or under any
applicable Environmental Laws.
Equipment - all of Borrower's machinery, apparatus, equipment,
fittings, furniture, fixtures, motor vehicles and other tangible personal
Property (other than Inventory) of every kind and description, whether now
owned or hereafter acquired by a Borrower and wherever located, and all
parts, accessories and special tools therefor, all accessions thereto, and
all substitutions and replacements thereof.
Equity Interest - the interest of (i) a shareholder in a
corporation, (ii) a partner (whether general or limited) in a partnership
(whether general, limited or limited liability), (iii) a member in a
limited liability company, or (iv) any other Person having any other form
of equity security or ownership interest.
ERISA - the Employee Retirement Income Security Act of 1974 and all
rules and regulations from time to time promulgated thereunder.
ETV - Emerald Technology Valuations, LLC.
Eurocurrency Liabilities - as defined in Regulation D.
Event of Default - as defined in SECTION 11 of the Agreement.
Extraordinary Expenses - all costs, expenses, fees or advances that
Lender may suffer or incur, whether prior to or after the
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occurrence of an Event of Default, and whether prior to, after or during
the pendency of an Insolvency Proceeding of an Obligor, on account of or
in connection with (i) the audit, inspection, repossession, storage,
repair, appraisal, insuring, completion of the manufacture of, preparing
for sale, advertising for sale, selling, collecting or otherwise
preserving or realizing upon any Collateral; (ii) the defense of Lender's
Lien upon any Collateral or the priority thereof or any adverse claim with
respect to the Loans, the Loan Documents or the Collateral asserted by any
Obligor, any receiver or trustee for any Obligor or any creditor or
representative of creditors of any Obligor; (iii) the settlement or
satisfaction of any Liens upon any Collateral (whether or not such Liens
are Permitted Liens); (iv) the collection or enforcement of any of the
Obligations; (v) the negotiation, documentation, and closing of any
restructuring or forbearance agreement with respect to the Loan Documents
or Obligations; (vi) amounts advanced by Lender pursuant to SECTION 7.1.3
of the Agreement; (vii) the enforcement of any of the provisions of any of
the Loan Documents; or (viii) any payment under a guaranty, indemnity or
other payment agreement provided by Lender which is reimbursable to Lender
by Borrowers pursuant to SECTION 2.4.2 of the Agreement. Such costs,
expenses and advances may include transfer fees, taxes, storage fees,
insurance costs, permit fees, utility reservation and standby fees, legal
fees, appraisal fees, brokers' fees and commissions, auctioneers' fees and
commissions, accountants' fees, environmental study fees, wages and
salaries paid to employees of Borrower or independent contractors in
liquidating any Collateral, travel expenses, all other fees and expenses
payable or reimbursable by Borrower or any other Obligor under any of the
Loan Documents, and all other fees and expenses associated with the
enforcement of rights or remedies under any of the Loan Documents, but
excluding compensation paid to employees (including inside legal counsel
who are employees) of Lender.
Fax and Hold Checks - customer checks that are delivered by
facsimile transmission and are converted by software into bank drafts not
requiring the Account Debtor's original signature, for subsequent deposit
by a Borrower on a specific date according to the terms of the invoice or
sale or that are held by a Borrower for subsequent deposit by a Borrower
on a specific date according to the terms of the invoice or sale, all of
which are received in the Ordinary Course of Business and for the purpose
of improving cash flow of the applicable Borrower.
Federal Funds Rate - for any period, a fluctuating interest rate per
annum equal for each date during such period to the weighted average of
the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) in Atlanta, Georgia by the Federal Reserve Bank of Atlanta,
or if such rate is not so published for any day which is a Business Day,
the average of the quotations for such day on such transactions received
by Lender from 3 federal funds brokers of recognized standing selected by
Lender.
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FEIN - with respect to any Person, the Federal Employer
Identification Number of such Person.
Financed Capital Expenditures - Capital Expenditures funded with the
proceeds of Permitted Purchase Money Debt and those represented by
Capitalized Leased Obligations.
Fiscal Quarter - each consecutive period of 3 months beginning on
the first day of a Fiscal Year and ending on each September 30, December
31, March 31 and June 30.
Fiscal Year - the fiscal year of Borrowers and their Subsidiaries
for accounting and tax purposes, which ends on June 30 of each year and
when preceded by the designation of a calendar year (e.g., 2002 Fiscal
Year) means the fiscal year of Borrowers and their Subsidiaries ended on
June 30 of such designated calendar year.
Fixed Charge Coverage Ratio - for any period, the ratio of (i) the
sum of (a) EBITDA for such period minus (b) Non-Financed Capital
Expenditures of SED for such period minus (c) Taxes based on income paid
by SED during such period to (ii) Fixed Charges for such period.
Fixed Charges - for any period, the sum of (i) Interest Expense of
SED in respect of its Funded Debt, plus (ii) regularly scheduled payments
of principal on Funded Debt due during such period.
Floor Planned Account - an Account on which the Account Debtor is a
Floor Planner or that otherwise is payable by a Floor Planner (whether directly
or indirectly) that arises from a sale of Inventory by a Borrower in connection
with or pursuant to a Floor Planning Arrangement.
Floor Planner - any Person party to a Floor Planning Arrangement
with any Borrower.
Floor Planning Arrangement - any arrangement between any Borrower
and any Floor Planner.
FLSA - the Fair Labor Standards Act of 1938.
Foreign Subsidiary - a Subsidiary that is not a Domestic Subsidiary.
Foreign Subsidiary Advance - a loan or other advance of money by a
Borrower to or for the benefit of any Foreign Subsidiary, including (i)
all payments by Lender under any LC Support with respect to a Letter of
Credit issued by Bank for the account of Borrower or any Foreign
Subsidiary to support or secure Debt of such Foreign Subsidiary or to
otherwise benefit such Foreign Subsidiary and (ii) all amounts paid under
guaranties from a Borrower with respect to Debt (including Debt owing to
trade creditors) of a Foreign Subsidiary.
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Foreign Subsidiary Advance Note - each promissory note made by a
Foreign Subsidiary to a Borrower evidencing the principal amount of any
Foreign Subsidiary Advance made by Borrower to such Foreign Subsidiary.
Funded Debt - for SED, (i) the aggregate principal amount of Debt
for Money Borrowed which would, in accordance with GAAP, be classified as
long-term Debt, together with the maturities thereof, plus (ii) all Debt
outstanding under any revolving credit, line of credit or renewals
thereof, which would, in accordance with GAAP, be classified as short-term
Debt, plus (iii) Capitalized Leased Obligations.
GAAP - generally accepted accounting principles in the United States
of America in effect from time to time at the date of determination.
General Intangibles - all general intangibles of a Borrower, whether
now owned or hereafter created or acquired by a Borrower, including all
choses in action, causes of action, company or other business records,
inventions, blueprints, designs, patents, patent applications, trademarks,
trademark applications, trade names, trade secrets, service marks,
goodwill, brand names, copyrights, registrations, licenses, franchises,
customer lists, tax refund claims, computer programs, operational manuals,
permits, internet addresses and domain names, insurance refunds and
premium rebates, all claims under guaranties, security interests or other
security held by or granted to a Borrower to secure payment of such
Borrower's Accounts by an Account Debtor, all rights to indemnification
and all other intangible property of a Borrower of every kind and nature
(other than Accounts).
Goods - shall have the meaning given to "goods" in the UCC.
Governmental Approvals - all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports
to, all Governmental Authorities.
Governmental Authority - any federal, state, municipal, national,
foreign or other governmental department, commission, board, bureau,
court, agency or instrumentality or political subdivision thereof or any
entity or officer exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to any government or any
court, in each case whether associated with a state of the United States,
the District of Columbia or a foreign entity or government.
Group of Persons - a group of Persons acting in concert as a
partnership, limited partnership, syndicate or other group.
Guarantors - each Person who guarantees payment or performance of
the whole or any part of the Obligations.
Guaranty- each guaranty agreement now or hereafter executed by a
Guarantor in favor of Lender with respect to the Obligations.
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Hedging Agreement - any interest rate protection agreement, foreign
currency exchange agreement, commodity price protection agreement or other
interest or currency exchange rate or commodity price hedging arrangement.
HP - Hewlett-Packard Company.
HP Reserve - on any date, an amount equal to the total unpaid Debt
(including trade payables) owing by Borrowers, or any of them, to HP on
such date.
Indemnified Amount - in the case of Lender Indemnitees, the amount
of any loss, cost, expenses or damages suffered or incurred by Lender
Indemnitees and against which any Borrower or any Obligor have agreed to
indemnify Lender Indemnitees pursuant to the terms of the Agreement or any
of the other Loan Documents.
Insolvency Proceeding - any action, case or proceeding commenced by
or against a Person, or any agreement of such Person, for (i) the entry of
an order for relief under any chapter of the Bankruptcy Code or other
insolvency or debt adjustment law (whether state, federal or foreign),
(ii) the appointment of a receiver, trustee, liquidator or other custodian
for such Person or any part of its Property, (iii) an assignment or trust
mortgage for the benefit of creditors of such Person, or (iv) the
liquidation, dissolution or winding up of the affairs of such Person.
Instrument - shall have the meaning ascribed to the term
"instrument" in the UCC.
Intellectual Property - all intellectual and similar Property of
every kind and description, including inventions, designs, patents, patent
applications, copyrights, trademarks, service marks, tradenames, mask
works, trade secrets, confidential or proprietary information, know-how,
software and databases and all embodiments or fixations thereof and
related documentation, registrations and franchises, all books and records
describing or used in connection with the foregoing and all licenses, or
other rights to use any of the foregoing.
Intellectual Property Claim - the assertion by any Person of a claim
(whether asserted in writing, by action, suit or proceeding or otherwise)
that a Borrower's ownership, use, marketing, sale or distribution of any
Inventory, Equipment, Intellectual Property or other Property is violative
of any ownership or right to use any Intellectual Property of such Person.
Intercompany Loans - as defined in SECTION 9.2.2(II) of the
Agreement.
Intercreditor Agreement - the Intercreditor Agreement between HP and
Lender pursuant to which HP and Lender shall establish the relative
priorities of their Liens in the Collateral and agree to certain other
matters with respect to Borrowers and the Collateral.
Interest Expense - for any period, total interest expense (including
that portion attributable to capitalized leases and
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capitalized interest) of SED with respect to all outstanding Debts of SED,
including all commissions, discounts and other fees and charges owed with
respect to letters of credit and net cost under Interest Rate Contracts
and other Hedging Agreements.
Interest Period - as defined in SECTION 2.1.3 of the Agreement.
Interest Rate Contract - any interest rate agreement, interest rate
collar agreement, interest rate swap agreement, or other agreement or
arrangement at any time entered into by a Borrower with Bank that is
designed to protect against fluctuations in interest rates.
Inventory - all of each Borrower's inventory, whether now owned or
hereafter acquired, including all goods intended for sale or lease by a
Borrower, to be furnished by a Borrower under contracts of service or for
display or demonstration; all work in process; all raw materials and other
materials and supplies of every nature and description used or which might
be used in connection with the manufacture, printing, packing, shipping,
advertising, selling, leasing or furnishing of such goods or otherwise
used or consumed in Borrowers' business; and all Documents evidencing and
General Intangibles relating to any of the foregoing, whether now owned or
hereafter acquired by a Borrower.
Inventory Advance Rate Differential - on any date, an amount equal
to the sum of (i) 100% minus (ii) the product of (a) 85% multiplied by (b)
the NOLV Factor on such date.
Inventory Formula Amount - on any date of determination thereof, an
amount equal to the lesser of (i) $15,000,000 or (ii) the product of (a)
(1) 85% multiplied by (2) the NOLV Factor on such date multiplied by (b)
the Value of Eligible Inventory on such date.
Inventory Reserve - such reserves as may be established from time to
time by Lender to reflect changes in the saleability of Inventory in the
Ordinary Course of Business or such other factors as may negatively impact
the Value of Inventory, which reserves shall in no event exceed the Value
of all Eligible Inventory. Without limiting the generality of the
foregoing, such reserves may include reserves based on obsolescence,
seasonality, theft or other shrinkage, imbalance, change in composition or
mix or markdowns.
Investment Property - shall have the meaning given to the term
"investment property" in the UCC and shall include all Securities (whether
certificated or uncertificated), security entitlements, securities,
accounts, commodity contracts and commodity accounts.
Landlord Waiver - an agreement duly executed in favor of Lender, in
form and content acceptable to Lender, by which an owner of premises upon
which any Property of an Obligor is located agrees to waive or subordinate
any Lien it may have with respect to such Property in favor of Lender's
Lien therein and to permit Lender to enter upon such premises and to
remove such Property or to use such premises to store or dispose of such
Property.
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LC Application - an application by Borrowers to Bank, pursuant to a
form approved by Bank, for the issuance of a Letter of Credit, that is
submitted to Bank at least 3 Business Days prior to the requested issuance
of such Letter of Credit.
LC Conditions - the following conditions, the satisfaction of each
of which is required before Lender shall be obligated to provide any LC
Support to Bank for the issuance of a Letter of Credit: (i) each of the
conditions set forth in SECTION 10 of the Agreement has been and continues
to be satisfied, including the absence of any Default or Event of Default;
(ii) after giving effect to the issuance of the requested Letter of Credit
and all other unissued Letters of Credit for which an LC Application has
been signed by Lender, the LC Outstandings would not exceed $5,000,000 (as
such amount may be modified from time to time at the written direction of
Borrowers) and no Out-of-Formula Condition would exist, and, if no
Revolver Loans are outstanding, the LC Outstandings do not, and would not
upon the issuance of the requested Letter of Credit, exceed the Borrowing
Base; (iii) the expiry date of the Letter of Credit does not extend beyond
the earlier to occur of (a)(1) 365 days from the date of issuance in the
case of standby Letters of Credit, or (2) 150 days from the date of
issuance in the case of documentary Letters of Credit, or (b) the 10th
Business Day prior to the last Business Day of the Term; and (iv) the
currency in which payment is to be made under the Letter of Credit is
Dollars.
LC Documents - any and all agreements, instruments and documents
(other than an LC Application or an LC Support) required by Bank to be
executed by a Borrower or any other Person and delivered to Bank for the
issuance of a Letter of Credit.
LC Facility - a subfacility of the Revolver Facility established
pursuant to SECTION 1.3 of the Agreement.
LC Outstandings - on any date of determination thereof, an amount
(in Dollars) equal to the sum of (i) all amounts then due and payable by
any Obligor on such date by reason of any payment made on or before such
date by Lender under any LC Support, plus (ii) the aggregate undrawn
amount of all Letters of Credit then outstanding or to be issued by Bank
under an LC Application theretofore submitted to Bank.
LC Request - a Letter of Credit Procurement Request form, that may
be required by Bank from time to time, pursuant to which Borrower would
request the issuance of a Letter of Credit.
LC Reserve - on any date, the sum of (i) the Inventory Advance Rate
Differential on such date multiplied by the available amount of all
documentary Letters of Credit outstanding on such date plus (ii) 100% of
the available amount of all standby Letters of Credit outstanding on such
date minus (iii) the amount of LC Outstandings that are fully secured by
Cash Collateral on such date.
LC Support - a guaranty or other support agreement from Lender in
favor of Bank pursuant to which Lender shall guarantee or otherwise assure
the payment or performance by the parties (other
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than Lender) to an LC Application of such parties' obligations with
respect to such Letter of Credit, including the obligation of such parties
to reimburse Bank for any payment made by Bank under such Letter of
Credit.
Lender Indemnitees - Lender and each of its Affiliates, officers,
directors, employees, agents, attorneys and shareholders.
Letter of Credit - a standby or documentary letter of credit issued
by Bank for the account of Borrowers.
Letter-of-Credit Right - a right of a Borrower to payment or
performance under a letter of credit (whether the letter of credit is
written or electronic), whether or not such Borrower has demanded or is at
the time entitled to demand payment or performance.
LIBOR Loan - a Revolver Loan, or portion thereof, during any period
in which it bears interest at a rate based upon the applicable Adjusted
LIBOR Rate.
LIBOR Lending Office. with respect to Lender, the office designated
as a LIBOR Lending Office for Lender on the signature page hereof and such
other office of Lender or any of its Affiliates that is hereafter
designated by Lender as provided in SECTION 3.2.3 of the Agreement.
LIBOR Rate - with respect to an Interest Period, the rate per annum
reported to Lender by Bank as the rate at which deposits of U.S. Dollars
approximately equal in principal amount to or comparable to the amount of
the LIBOR Loan to which such Interest Period relates and for a term
comparable to such Interest Period are offered to Bank by prime banks in
the London interbank foreign currency deposits market at approximately
11:00 a.m., London time, 2 Business Days prior to the commencement of such
Interest Period. Each determination by Lender of any LIBOR Rate shall, in
the absence of any manifest error, be conclusive.
Lien - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract. The term "Lien"
shall also include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purpose of the
Agreement, a Borrower shall be deemed to be the owner of any Property
which it has acquired or holds subject to a conditional sale agreement or
other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes.
Loan Account - the loan account established by Lender on its books
pursuant to SECTION 4.7 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the
Security Documents.
Loan Year - a period commencing each calendar year on the same month
and day as the date of the Agreement and ending on the same
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month and day in the immediately succeeding calendar year, with the first
such period (i.e., the first Loan Year) to commence on the date of the
Agreement.
Margin Stock - shall have the meaning ascribed to it in Regulation U
of the Board of Governors.
Material Adverse Effect - the effect of any event, condition,
action, omission or circumstance which, alone or when taken together with
other events, conditions, actions, omissions or circumstances occurring or
existing concurrently therewith, (i) has a material adverse effect upon
the business, operations, Properties or condition (financial or otherwise)
of Borrowers and their Subsidiaries taken as a whole; (ii) has or could be
reasonably expected to have any material adverse effect whatsoever upon
the validity or enforceability of the Agreement or any of the other Loan
Documents; (iii) has any material adverse effect upon the value of the
whole or any material part of the Collateral, the Liens of Lender with
respect to the Collateral or the priority of any such Liens; (iv)
materially impairs the ability of Borrowers and their Subsidiaries taken
as a whole to perform the obligations of Borrowers under the Agreement or
any of the other Loan Documents, including repayment of any of the
Obligations when due; or (v) materially impairs the ability of Lender to
enforce or collect the Obligations or realize upon any of the Collateral
in accordance with the Loan Documents and Applicable Law.
Material Contract - an agreement to which an Obligor is a party
(other than the Loan Documents) (i) which is deemed to be a material
contract as provided in Regulation S-K promulgated by the SEC under the
Securities Act of 1933 or (ii) for which breach, termination,
cancellation, nonperformance or failure to renew could reasonably be
expected to have a Material Adverse Effect.
Maximum Rate - the maximum non-usurious rate of interest permitted
by Applicable Law that at any time, or from time to time, may be
contracted for, taken, reserved, charged or received on the Debt in
question or, to the extent that at any time Applicable Law may thereafter
permit a higher maximum non-usurious rate of interest, then such higher
rate. Notwithstanding any other provision hereof, the Maximum Rate shall
be calculated on a daily basis (computed on the actual number of days
elapsed over a year of 365 or 366 days, as the case may be).
Money Borrowed - as applied to any Person, (i) Debt arising from the
lending of money by any other Person to such Person; (ii) Debt, whether or
not in any such case arising from the lending of money by another Person
to such Person, (A) which is represented by notes payable or drafts
accepted that evidence extensions of credit, (B) which constitutes
obligations evidenced by bonds, debentures, notes or similar instruments,
or (C) upon which interest charges are customarily paid (other than
accounts payable) or that was issued or assumed as full or partial payment
for Property (other than accounts payable); (iii) Debt that constitutes a
Capitalized Lease Obligation; (iv) reimbursement obligations with respect
to letters of credit or guaranties of letters of credit, and (v) Debt of
such Person under any guaranty of obligations that would constitute Debt
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for Money Borrowed under clauses (i) through (iii) hereof, if owed
directly by such Person.
Xxxxx'x - Xxxxx'x Investors Services, Inc.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3)
of ERISA.
Net Amount of Foreign Subsidiary Advances - on any date, the
outstanding amount of Foreign Subsidiary Advances on such date, which
would reflect the aggregate amount of Distributions and payments
theretofore made by Foreign Subsidiaries to any Borrower.
Net Income - for any period, net income of SED, as determined in
accordance with GAAP.
Net Orderly Liquidation Value - the net orderly liquidation value of
Inventory as determined by Lender from time to time based upon appraisals
conducted for the benefit of Lender pursuant to SECTION 9.1.10 of the
Agreement.
Net Proceeds - with respect to a disposition of any Collateral
proceeds (including cash receivable (when received) by way of deferred
payment) received by a Borrower from the sale, lease, transfer or other
disposition of any Property, including insurance proceeds and awards of
compensation received with respect to the destruction or condemnation of
all or part of such Property, net of: (i) the reasonable and customary
costs of such sale, lease, transfer or other disposition (including legal
fees and sales commissions); and (ii) amounts applied to repayment of Debt
(other than the Obligations) secured by a Permitted Lien on the Collateral
disposed of that is senior to Lender's Liens with respect to such
Collateral.
NOLV Factor - on any date, a fraction, the numerator of which is the
Net Orderly Liquidation Value of Inventory on such date and the denominator of
which is the Value of Inventory on such date.
Non-Financed Capital Expenditures - Capital Expenditures that are
not Financed Capital Expenditures.
Note Pledge Agreement - each Note Pledge Agreement executed and
delivered by a Borrower, in form and substance satisfactory to Lender,
pursuant to which each such Borrower shall pledge to Lender, as security
for the Obligations, a Foreign Subsidiary Advance Note (or Foreign
Subsidiary Advance Notes) as required by SECTION 9.2.2 of the Agreement.
Notice of Borrowing - as defined in SECTION 3.1.1(i) of the
Agreement.
Notice of Conversion/Continuation - as defined in SECTION 2.1.2(ii)
of the Agreement.
Obligations - in each case, whether now in existence or hereafter
arising, (i) the principal of, and interest and premium, if any, on, the
Loans; (ii) all LC Outstandings and all other obligations of any Obligor
to Lender or Bank arising in connection
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with the issuance of any Letter of Credit; (iii) all Debt and other
obligations of Borrowers to Lender or Bank under or in connection with any
Cash Management Agreement or Interest Rate Contract, including any
premature termination or breakage costs; and (iv) all other Debts,
covenants, duties, overdrafts and obligations (including Contingent
Obligations) now or at any time or times hereafter owing by any Obligor to
Lender, Bank or any other Affiliate of Lender under or pursuant to the
Agreement or any of the other Loan Documents or otherwise, whether
evidenced by any note or other writing, whether arising from any extension
of credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, and whether direct or indirect, absolute or
contingent, due or to become due, primary or secondary, or joint or
several, including all interest, charges, expenses, fees or other sums
(including Extraordinary Expenses) chargeable to any or all Obligors
hereunder or under any of the other Loan Documents.
Obligor - each Borrower and each Guarantor, and each other Person
that is at any time liable for the payment of the whole or any part of the
Obligations or that has granted in favor of Lender a Lien upon any of any
of such Person's assets to secure payment of any of the Obligations.
Ordinary Course of Business - with respect to any transaction
involving any Person, the ordinary course of such Person's business, as
conducted by such Person in accordance with past practices and undertaken
by such Person in good faith and not for the purpose of evading any
covenant or restriction in any Loan Document.
Organization Documents - with respect to any Person, its charter,
certificate or articles of incorporation, bylaws, articles of
organization, operating agreement, members agreement, partnership
agreement or similar agreement or instrument governing the formation or
operation of such Person.
OSHA - the Occupational Safety and Hazard Act of 1970.
Other Agreements - the Revolver Note, each LC Support, each Interest
Rate Contract with Lender or with Bank subject to credit enhancement from
Lender, and any and all other agreements, instruments and documents (other
than the Agreement and the Security Documents) heretofore, now or
hereafter executed by any Borrower, any other Obligor or any other Person
and delivered to Lender in respect of the transactions contemplated by the
Agreement.
Out-of-Formula Condition - as defined in SECTION 1.1.2 of the
Agreement.
Out-of-Formula Loan - a Revolver Loan made or existing when an
Out-of-Formula Condition exists or the amount of any Revolver Loan which,
when funded, results in an Out-of-Formula Condition.
Participant - each Person who shall be granted the right by Lender
to participate in any of the Revolver Loans described in the Agreement and
who shall have entered into a participation agreement in form and
substance satisfactory to Lender. Any such Participant must have first
agreed in writing that the single Lender acting
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hereunder shall be the sole administrative agent and have sole authority
to make decisions and take any actions of the Lender hereunder.
Payment Account - an account maintained by Lender to which all
monies from time to time deposited to a Dominion Account shall be
transferred and all other payments shall be sent in immediately available
federal funds.
Payment Items - all checks, drafts, or other items of payment
payable to a Borrower, including proceeds of any of the Collateral.
Pending Revolver Loans - at any date, the aggregate principal amount
of all Revolver Loans which have been requested in any Notice of Borrowing
received by Lender but which have not theretofore been advanced by Lender.
Permitted Contingent Obligations - collectively, (i) Contingent
Obligations arising from endorsements of Payment Items for collection or
deposit in the Ordinary Course of Business; (ii) Contingent Obligations
arising from Interest Rate Contracts or other Hedging Agreements entered
into in the Ordinary Course of Business pursuant to this Agreement or with
Lender's prior written consent; (iii) Contingent Obligations of a Borrower
and its Subsidiaries existing as of the Closing Date, including extensions
and renewals thereof that do not increase the principal amount of such
Contingent Obligations as of the date of such extension or renewal; (iv)
Contingent Obligations incurred in the Ordinary Course of Business with
respect to surety bonds, appeal bonds, performance bonds and other similar
obligations; (v) Contingent Obligations arising under indemnity agreements
to title insurers to cause such title insurers to issue to Lender title
insurance policies; (vi) Contingent Obligations with respect to customary
indemnification obligations in favor of purchasers in connection with
dispositions of Equipment permitted under SECTION 7.4 of the Agreement;
(vii) Contingent Obligations consisting of reimbursement obligations from
time to time owing by a Borrower to Bank with respect to Letters of Credit
(but in no event to include reimbursement obligations at any time owing by
Borrower to any other Person that may issue letters of credit for the
account of a Borrower); (viii) Contingent Obligations arising from
guaranties given by a Borrower with respect to Debt of Foreign
Subsidiaries (including accounts payable owing to trade creditors incurred
by Foreign Subsidiaries in the Ordinary Course of Business) or other
Subsidiaries or other Affiliates, which Contingent Obligations do not at
any time exceed $5,000,000 in the aggregate; (ix) Contingent Obligations
arising from guaranties given by a Borrower with respect to endorsements
for collection or deposit or contingent liabilities or obligations with
respect to assigned or subleased operating leases in the Ordinary Course
of Business; and (x) other Contingent Obligations not to exceed $100,000
in the aggregate at any time.
Permitted Lien - a Lien of a kind specified in SECTION 9.2.5 of the
Agreement.
Permitted Purchase Money Debt -Purchase Money Debt of a Borrower and
its Subsidiaries which is incurred after the date of
-26-
the Agreement and that is secured by no Lien or only by a Purchase Money
Lien, provided that the aggregate amount of Purchase Money Debt
outstanding at any time does not exceed $250,000, and the incurrence of
such Purchase Money Debt does not violate any limitation in the Loan
Documents regarding Capital Expenditures. For the purposes of this
definition, the principal amount of any Purchase Money Debt consisting of
capitalized leases shall be computed as a Capitalized Lease Obligation.
Person - an individual, partnership, corporation, limited liability
company, limited liability partnership, joint stock company, land trust,
business trust or unincorporated organization or a Governmental Authority.
Picking and Shipping Accuracy Report - for any period, a written
report from Borrowers to Lender containing the information and in the form
of EXHIBIT G attached hereto for such period.
Plan - an employee benefit plan now or hereafter maintained for
employees of a Borrower that is covered by Title IV of ERISA.
Projections - Borrowers' forecasted Consolidated and consolidating
balance sheets, profit and loss statements and cash flow statements, all
prepared on a consistent basis with Borrowers' historical financial
statements, together with appropriate supporting details and a statement
of underlying assumptions, and a projection of the Borrowing Base and
Availability.
Properly Contested - in the case of any Debt of an Obligor
(including any Taxes) that is not paid as and when due or payable by
reason of such Obligor's bona fide dispute concerning its liability to pay
same or concerning the amount thereof, (i) such Debt is being properly
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted; (ii) such Obligor has established appropriate
reserves as shall be required in conformity with GAAP; (iii) the
non-payment of such Debt will not have a Material Adverse Effect and will
not result in a forfeiture of any assets of such Obligor; (iv) no Lien is
imposed upon any of such Obligor's assets with respect to such Debt unless
such Lien is at all times junior and subordinate in priority to the Liens
in favor of Lender (except only with respect to property taxes that have
priority as a matter of applicable state law) and enforcement of such Lien
is stayed during the period prior to the final resolution or disposition
of such dispute; (v) if the Debt results from, or is determined by the
entry, rendition or issuance against an Obligor or any of its assets of a
judgment, writ, order or decree, enforcement of such judgment, writ, order
or decree is stayed pending a timely appeal or other judicial review; and
(vi) if such contest is abandoned, settled or determined adversely (in
whole or in part) to such Obligor, such Obligor forthwith pays such Debt
and all penalties, interest and other amounts due in connection therewith.
Property - any interest in any kind of property or asset, whether
real, personal or mixed and whether tangible or intangible.
Purchase Money Debt - means and includes (i) Debt (other than the
Obligations) for the payment of all or any part of the purchase
-27-
price of any fixed assets, (ii) any Debt (other than the Obligations)
incurred at the time of or within 10 days prior to or after the
acquisition of any fixed assets for the purpose of financing all or any
part of the purchase price thereof, and (iii) any renewals, extensions or
refinancings, but not any increases in the principal amounts thereof
outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures
Purchase Money Debt, but only if such Lien shall at all times be confined
solely to the fixed assets acquired through the incurrence of the Purchase
Money Debt secured by such Lien and such Lien constitutes a purchase money
security interest under the UCC.
Qualified Distributor Agreement - a Distributor Agreement that is in
full force and effect that does not contain a Repurchase Right or that
contains a Repurchase Right that is acceptable to Lender and that
otherwise is acceptable to Lender.
Refinancing Conditions - the following conditions, each of which
must be satisfied before Refinancing Debt shall be permitted under SECTION
9.2.3 of the Agreement: (i) the Refinancing Debt is in an aggregate
principal amount that does not exceed the aggregate principal amount of
the Debt being extended, renewed or refinanced, except to the extent that
the transaction costs incurred for such Refinancing Debt are included
therein and financed thereby, (ii) the Refinancing Debt has a later or
equal final maturity and a longer or equal weighted average life than the
Debt being extended, renewed or refinanced, (iii) the Refinancing Debt
does not bear a rate of interest that exceeds a market rate (as determined
in good faith by a Senior Officer) as of the date of such extension,
renewal or refinancing, (iv) if the Debt being extended, renewed or
refinanced is subordinate to the Obligations, the Refinancing Debt is
subordinated to the same extent, (v) the covenants contained in any
instrument or agreement relating to the Refinancing Debt are no less
favorable to Borrowers than those relating to the Debt being extended,
renewed or refinanced, and (vi) at the time of and after giving effect to
such extension, renewal or refinancing, no Default or Event of Default
shall exist.
Refinancing Debt - Debt for Money Borrowed that is permitted by
clause (x) of SECTION 9.2.3 and that is the subject or the result of an
extension, renewal or refinancing.
Regulation D - Regulation D of the Board of Governors.
Reimbursement Date - as defined in SECTION 1.3.1(iii) of the
Agreement.
Rentals - all payments which a lessee is required to pay by the
terms of any lease.
Reportable Event - any of the events set forth in Section 4043(b) of
ERISA.
Repurchase Right - a right in favor of any supplier party to a
Distributor Agreement to purchase from the Borrower party thereto all or
any part of the inventory theretofore sold by such supplier to such
Borrower and owned by such Borrower upon the occurrence of
-28-
the contingency set forth in such Distributor Agreement that gives rise to
such purchase right in favor of such supplier.
Restricted Investment - any acquisition of Property by a Borrower or
any of its Subsidiaries in exchange for cash or other Property, whether in
the form of an acquisition of Equity Interests or Debt, or the purchase or
acquisition by a Borrower or any of its Subsidiaries of any other
Property, or a loan, advance, capital contribution or subscription, except
acquisitions of the following: (i) fixed assets to be used in the Ordinary
Course of Business of a Borrower or any of its Subsidiaries so long as the
acquisition costs thereof constitute Capital Expenditures permitted
hereunder; (ii) goods held for sale or lease or to be used in the
manufacture of goods or the provision of services by a Borrower or any of
its Subsidiaries in the Ordinary Course of Business; (iii) Current Assets
arising from the sale or lease of goods or the rendition of services in
the Ordinary Course of Business of a Borrower or any of its Subsidiaries;
(iv) investments in Subsidiaries to the extent existing on the Closing
Date; (v) Cash Equivalents to the extent they are not subject to rights of
offset in favor of any Person other than Lender other than rights of
offset in favor of banks or other financial institutions at which such
Cash Equivalents are held or maintained for nominal account and other
fees; (vi) loans and other advances of money to the extent not prohibited
by SECTION 9.2.2 of the Agreement; (vii) any Debt permitted pursuant to
SECTION 9.2.3 of the Agreement which could be otherwise characterized as a
Restricted Investment; (viii) Foreign Subsidiary Advances, to the extent
permitted under the Agreement; (ix) investments consisting of extensions
of trade credit to customers in the Ordinary Course of Business; and (x)
Permitted Contingent Obligations to the extent constituting an otherwise
Restricted Investment.
Restrictive Agreement - an agreement (other than any of the Loan
Documents) that, if and for so long as an Obligor or any Subsidiary of
such Obligor is a party thereto, would prohibit, condition or restrict
such Obligor's or Subsidiary's right to incur or repay Debt for Money
Borrowed (including any of the Obligations); grant Liens upon any of such
Obligor's or Subsidiary's assets (including Liens granted in favor of
Lender pursuant to the Loan Documents); declare or make Distributions;
amend, modify, extend or renew any agreement evidencing Debt for Money
Borrowed (including any of the Loan Documents); or repay any Debt owed to
another Obligor.
Revolver Commitment - the commitment of Lender to make Revolver
Loans to Borrowers in accordance with the provisions of SECTION 1.1
hereof, not to exceed $35,000,000 (unless otherwise agreed by Lender in
its sole and absolute discretion).
Revolver Loan - a loan made by Lender as provided in SECTION 1.1 of
the Agreement (including any Out-of-Formula Loan) (and each Base Rate Loan
and LIBOR Loan comprising any such Revolver Loan).
Revolver Note - the Revolver Note to be executed by Borrower in
favor of Lender in the form of EXHIBIT A attached hereto, which shall be
in the face amount of the Revolver Commitment and which
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shall evidence all Revolver Loans made by Lender to Borrower pursuant to
the Agreement.
S&P - Standard & Poor's Ratings Group, a division of XxXxxx-Xxxx,
Inc.
Schedule of Accounts - as defined in SECTION 7.2.1 of the Agreement.
SEC - Securities and Exchange Commission.
Security - shall have the same meaning as in Section 2(1) of the
Securities Act of 1933.
Security Documents - each Guaranty, each Deposit Account Control
Agreement, the Business Interruption Insurance Assignment, the Credit
Insurance Assignment, each Note Pledge Agreement, the Stock Pledge
Agreements, the Trademark Security Agreement and all other instruments and
agreements now or at any time hereafter securing the whole or any part of
the Obligations.
SED Brasil - SED International do Brasil Distribuidora Ltda., a
Brazilian corporation.
Senior Officer - the chairman of the board of directors, the
president or the chief financial officer of, or in-house legal counsel to,
Borrowers.
Slow Moving Inventory Non-Prime Amount - on any date, an amount
equal to the greater of (i) the Value on such date of all Inventory held
for sale by Borrowers for more than 90 days after the date of the invoice
evidencing Borrowers' purchase thereof or (ii) the amount of Borrowers'
reserve for obsolete or slow moving Inventory on such date.
Slow Moving Inventory Reserve - on any date, an amount equal to (i)
the Slow Moving Inventory Non-Prime Amount on such date multiplied by (ii)
the product of (a) 85% multiplied by (b) the NOLV Factor on such date.
Solvent - as to any Person, such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such
Person's Debts (including contingent Debts), (ii) is able to pay all of
its Debts as such Debts mature, (iii) has capital sufficient to carry on
its business and transactions and all business and transactions in which
it is about to engage, and (iv) is not "insolvent" within the meaning of
Section 101(32) of the Bankruptcy Code.
Stock Pledge Agreement - each Stock Pledge Agreement executed and
delivered by a Borrower on or before the Closing Date, pursuant to which
each such Borrower shall pledge to Lender, as security for the
Obligations, all of the Equity Interests of each of its Domestic
Subsidiaries and not more than 65% of the Equity Interests in each of its
Foreign Subsidiaries.
-00-
Xxxxxxxxx Xxxxxxxx - on any date, the percentage (expressed as a
decimal) established by the Board of Governors which is the then stated
maximum rate for all reserves (including, any emergency, supplemental or
other marginal reserve requirements) applicable to any member bank of the
Federal Reserve System in respect to Eurocurrency Liabilities (or any
successor category of liabilities under Regulation D). Such reserve
percentage shall include those imposed pursuant to said Regulation D. The
Statutory Reserve shall be adjusted automatically on and as of the
effective date of any change in such percentage.
Subordinated Debt - Debt of a Borrower that is fully and absolutely
subordinated in right of payment to the Obligations in a manner
satisfactory to Lender.
Subsidiary - any Person in which more than 20% of its outstanding
Voting Securities or more than 20% of all Equity Interests is owned
directly or indirectly by a Borrower, by one or more other Subsidiaries or
by a Borrower and one or more other Subsidiaries.
Taxes - any present or future taxes, levies, imposts, duties, fees,
assessments, deductions, withholdings or other charges of whatever nature,
including income, receipts, excise, property, sales, use, transfer,
license, payroll, withholding, social security and franchise taxes now or
hereafter imposed or levied by the United States, or any other
Governmental Authority and all interest, penalties, additions to tax and
similar liabilities with respect thereto, but excluding taxes imposed on
or measured by the net income or overall gross receipts of Lender.
Term - as defined in SECTION 5.1 of the Agreement.
Trademark Security Agreement - the Trademark Security Agreement to
be executed by Borrowers in favor of Lender on or before the Closing Date
and by which Borrowers shall assign to Lender, as security for the
Obligations, all of Borrowers' right, title and interest in and to all of
their trademarks.
Type - any type of a Loan determined with respect to the interest
option applicable thereto, which shall be either a LIBOR Loan or a Base
Rate Loan.
UCC - the Uniform Commercial Code (or any successor statute) as
adopted and in force in the State of Georgia or, when the laws of any
other state govern the method or manner of the perfection or enforcement
of any security interest in any of the Collateral, the Uniform Commercial
Code (or any successor statute) of such state.
Upstream Payment - a payment or distribution of cash or other
Property by a Subsidiary to a Borrower, whether in repayment of Debt owed
by such Subsidiary to such Borrower, to pay dividends on account of such
Borrower's ownership of Equity Interests or otherwise.
Value - with reference to the value of Inventory, value determined
on the basis of the lower of cost or market of such
-31-
Inventory, with the cost thereof calculated on a first-in, first-out
basis, determined in accordance with GAAP.
Voting Power - with respect to any Person, the power ordinarily
(without the occurrence of a contingency) to elect the members of the
Board of Directors (or Persons performing similar functions) of such
Person.
Voting Securities - Equity Interests of any class or classes of a
corporation or other entity the holders of which are ordinarily, in the
absence of contingencies, entitled to elect a majority of the corporate
directors (or Persons performing similar functions).
Wachovia - Wachovia Bank, N.A., a national banking association.
Wachovia Certificates of Deposit - collectively, (i) certificate of
deposit of Borrowers and issued by Wachovia, in the face amount of $800,000
maturing in July 2003 and (ii) certificate of deposit of Borrowers and issued by
Wachovia, in the face amount of $827,000 maturing in October 2002, together with
all accrued interest on each of the foregoing.
ACCOUNTING TERMS. Unless otherwise specified herein, all terms of an
accounting character used in the Agreement shall be interpreted, all accounting
determinations under the Agreement shall be made, and all financial statements
required to be delivered under the Agreement shall be prepared, in accordance
with GAAP, applied on a basis consistent with the most recent audited
Consolidated financial statements of Borrowers and their Subsidiaries heretofore
delivered to Lender and using the same method for inventory valuation as used in
such audited financial statements, except for any change required by GAAP;
provided, however, that for purposes of determining Borrower's compliance with
financial covenants contained in Section 9.3 of the Agreement, all accounting
terms shall be interpreted and all accounting determinations shall be made in
accordance with GAAP as in effect on the date of the Agreement and applied on a
basis consistent with the application used in the financial statements referred
to in Section 8.1.9 of the Agreement unless (i) Borrowers shall have objected to
determining such compliance on such basis at the time of delivery of such
financial statements or (ii) Lender shall so object in writing within 30 days
after the delivery of such financial statements, in either of which events such
calculations shall be made on a basis consistent with those used in the
preparation of the latest financial statements as to which such objection shall
not have been made. In the event of any change in GAAP that occurs after the
date of the Agreement and that is material to Borrowers, Lender shall the right
to require either that conforming adjustments be made to any financial covenants
set forth in the Agreement, or the components thereof, that are affected by such
change or that Borrowers report their financial condition based on GAAP as in
effect immediately prior to the occurrence of such change.
OTHER TERMS. All other terms contained in the Agreement shall have,
when the context so indicates, the meanings provided for by the UCC to the
extent the same are used or defined therein.
-32-
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein," "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. In the computation of periods of time from
a specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding." The
section titles, table of contents and list of exhibits appear as a matter of
convenience only and shall not affect the interpretation of the Agreement. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations, to any of the Loan Documents
shall include any and all amendments or modifications thereto and any and all
restatements, extensions or renewals thereof; to any Person shall mean and
include the successors and permitted assigns of such Person; to "including" and
"include" shall be understood to mean "including, without limitation" (and, for
purposes of the Agreement and each other Loan Document, the parties agree that
the rule of ejusdem generis shall not be applicable to limit a general
statement, which is followed by or referable to an enumeration of specific
matters to matters similar to the matters specifically mentioned); and to the
time of day shall mean the time of day on the day in question in Atlanta,
Georgia, unless otherwise expressly provided in the Agreement. A Default or an
Event of Default shall be deemed to exist at all times during the period
commencing on the date that such Default or Event of Default occurs to the date
on which such Default or Event of Default is waived in writing by Lender
pursuant to the Agreement or, in the case of a Default, is cured within any
period of cure expressly provided in the Agreement; and an Event of Default
shall "continue" or be "continuing" until such Event of Default has been waived
in writing by Lender. All calculations of Value, Net Orderly Liquidation Value
or the Net Amount of Foreign Subsidiary Advances shall be in Dollars, all Loans
shall be funded in Dollars and all Obligations shall be repaid in Dollars.
Whenever the phrase "to the best of any Borrower's knowledge" or words of
similar import relating to the knowledge or the awareness of any Borrower are
used in the Agreement or other Loan Documents, such phrase shall mean and refer
to (i) the actual knowledge of a Senior Officer of such Borrower or (ii) the
knowledge that a Senior Officer would have obtained if he had engaged in good
faith and diligent performance of his duties, including the making of such
reasonably specific inquiries as may be necessary of the employees or agents of
such Borrower and a good faith attempt to ascertain the existence or accuracy of
the matter to which such phrase relates. Wherever in SECTION 9.3 of the
Agreement (a) Dollar amounts are in parentheses, such amounts shall be deemed to
be negative amounts, and (b) Borrowers are required to maintain or achieve a
specified Dollar amount and such Dollar amount is negative, then such
requirement shall be deemed to obligate Borrowers to maintain or achieve a
Dollar amount (which may be a negative Dollar Amount) that does not exceed the
negative Dollar amount set forth in SECTION 9.3. Whenever the phrase "legal
fees," "attorneys' fees," "reasonable attorneys' fees" or words of similar
import are used in the Agreement or any of the other Loan Documents, such phrase
shall mean and refer to fees actually charged by attorneys (and the legal
assistants to such attorneys) of Lender's choosing for services rendered at such
attorneys' (and such legal assistants') standard hourly rates for comparable
matters, together with out-of-pocket expenses incurred by such attorneys and
legal assistants in connection with the rendition of such services.
-33-
[Signatures on following page]
-34-
IN WITNESS WHEREOF, this Appendix has been duly executed in Atlanta,
Georgia, on October 7, 2002.
SED INTERNATIONAL, INC.
ATTEST: ("Borrower")
By:
----------------------------------------- ----------------------------------------
XXXXXXX X. XXXXXX, Chief Financial Officer, XXXXXX XXXXXXX, Chairman of the Board
Vice President - Finance, Secretary and and Chief Executive Officer
Treasurer
[CORPORATE SEAL]
SED INTERNATIONAL HOLDINGS, INC.
ATTEST: ("Borrower")
By:
----------------------------------------- ----------------------------------------
XXXXXXX X. XXXXXX, Chief Financial Officer, XXXXXX XXXXXXX, Chairman of the Board
Vice President - Finance, Secretary and and Chief Executive Officer
Treasurer
[CORPORATE SEAL]
SED MAGNA (MIAMI), INC.
ATTEST: ("Borrower")
By:
----------------------------------------- ----------------------------------------
XXXXXXX X. XXXXXX, Chief Financial Officer, XXXXXX XXXXXXX, Chairman of the Board
Vice President - Finance, Secretary and and Chief Executive Officer
Treasurer
[CORPORATE SEAL]
ACCEPTED IN ATLANTA, GEORGIA:
FLEET CAPITAL CORPORATION
("Lender")
By:
----------------------------------------
Title:
-------------------------------------
-35-
EXHIBIT A
FORM OF REVOLVER NOTE
___________, 2002
U.S. $35,000,000.00 Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, SED INTERNATIONAL, INC., a Georgia
corporation ("SED"), SED INTERNATIONAL HOLDINGS, INC., a Georgia corporation
("Parent"), and SED MAGNA (MIAMI), INC., a Delaware corporation ("Magna"; SED,
Parent and Magna are hereinafter referred to collectively as "Borrowers" and
individually as a "Borrower"), hereby unconditionally, and jointly and
severally, promise to pay to the order of FLEET CAPITAL CORPORATION (herein,
together with any subsequent holder hereof, called the "Lender") the principal
sum of $35,000,000 or such lesser sum as may constitute the outstanding
principal amount of all Revolver Loans pursuant to the terms of the Loan
Agreement (as defined below) on the date on which such outstanding principal
amounts become due and payable pursuant to SECTION 4.2 of the Loan Agreement, in
strict accordance with the terms thereof. Borrowers likewise unconditionally,
and jointly and severally, promise to pay to Lender interest from and after the
date hereof on the outstanding principal amount of Revolver Loans at such
interest rates, payable at such times, and computed in such manner as are
specified in SECTION 2.1 of the Loan Agreement, in strict accordance with the
terms thereof.
This Revolver Note ("Note") is issued pursuant to, and is the "Revolver
Note" referred to in, the Loan and Security Agreement dated October 7, 2002 (as
the same may be amended from time to time, the "Loan Agreement"), among
Borrowers and Lender, and Lender is and shall be entitled to all benefits
thereof and of all Loan Documents executed and delivered in connection
therewith. All capitalized terms used herein, unless otherwise defined herein,
shall have the meanings ascribed to such terms in the Loan Agreement.
The repayment of the principal balance of this Note is subject to the
provisions of SECTION 4.2 of the Loan Agreement. The entire unpaid principal
balance and all accrued interest on this Note shall be due and payable
immediately upon the termination of the Revolver Commitment as set forth in
SECTION 5.2 of the Loan Agreement.
All payments of principal and interest shall be made in Dollars in
immediately available funds as specified in the Loan Agreement.
Upon or after the occurrence of an Event of Default and for so long as
such Event of Default exists, the principal balance and all accrued interest of
this Note may be declared (or shall become) due and payable in the manner and
with the effect provided in the Loan Agreement, and the unpaid principal balance
hereof shall bear interest at the Default Rate as and when provided in SECTION
2.1.5 of the Loan Agreement. Borrowers agree to pay, and save Lender harmless
against any liability for the payment of, all costs and expenses, including, but
not limited to, reasonable attorneys' fees, if this Note is collected by or
through an attorney-at-law.
All principal amounts of Revolver Loans made by Lender to Borrowers
pursuant to the Loan Agreement, and all accrued and unpaid interest thereon,
shall be deemed outstanding under this Note and shall continue to be owing by
Borrowers until paid in accordance with the terms of this Note and the Loan
Agreement.
In no contingency or event whatsoever, whether by reason of advancement of
the proceeds hereof or otherwise, shall the amount paid or agreed to be paid to
Lender for the use, forbearance or detention of money advanced hereunder exceed
the highest lawful rate permissible under any law which a court of competent
jurisdiction may deem applicable hereto; and, in the event of any such payment
inadvertently paid by Borrowers or inadvertently received by Lender, such excess
sum shall be, at Borrowers' option, returned to Borrowers forthwith or credited
as a payment of principal, but shall not be applied to the payment of interest.
It is the intent hereof that Borrowers not pay or contract to pay, and that
Lender not receive or contract to receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be paid by Borrowers under
Applicable Law.
Time is of the essence of this Note. To the fullest extent permitted by
Applicable Law, each Borrower, for itself and its legal representatives,
successors and assigns, expressly waives presentment, demand, protest, notice of
dishonor, notice of non-payment, notice of maturity, notice of protest,
presentment for the purpose of accelerating maturity, diligence in collection,
and the benefit of any exemption or insolvency laws.
Wherever possible each provision of this Note shall be interpreted in such
a manner as to be effective and valid under Applicable Law, but if any provision
of this Note shall be prohibited or invalid under Applicable Law, such provision
shall be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or remaining provisions of this
Note. No delay or failure on the part of Lender in the exercise of any right or
remedy hereunder shall operate as a waiver thereof, nor as an acquiescence in
any default, nor shall any single or partial exercise by Lender of any right or
remedy preclude any other right or remedy. Lender, at its option, may enforce
its rights against any Collateral securing this Note without Lender enforcing
its rights against any Borrower, any Guarantor of the indebtedness evidenced
hereby or any other property or indebtedness due or to become due to any
Borrower. Each Borrower agrees that, without releasing or impairing such
Borrower's liability hereunder, Lender may at any time release, surrender,
substitute or exchange any Collateral securing this Note and may at any time
release any party primarily or secondarily liable for the indebtedness evidenced
by this Note.
The rights of Lender and obligations of Borrowers hereunder shall be
construed in accordance with and governed by the laws (without giving effect to
the conflict of law principles thereof) of the State of Georgia. This Note is
intended to take effect as an instrument under seal under Georgia law.
IN WITNESS WHEREOF, Borrowers have caused this Note to be executed under
seal and delivered by its duly authorized officers on the date first above
written.
SED INTERNATIONAL, INC.
ATTEST: ("Borrower")
By:
------------------------------------ ---------------------------
Secretary
[CORPORATE SEAL] Title:
------------------------
[Signatures continued on following page]
-3-
SED INTERNATIONAL HOLDINGS, INC.
ATTEST: ("Borrower")
By:
------------------------------------ -----------------------------
Secretary
[CORPORATE SEAL] Title:
--------------------------
SED MAGNA (MIAMI), INC.
ATTEST: ("Borrower")
By:
------------------------------------ -----------------------------
Secretary
[CORPORATE SEAL] Title:
--------------------------
-4-
EXHIBIT B
FORM OF NOTICE OF CONVERSION/CONTINUATION
Date ______________,______
Fleet Capital Corporation
000 Xxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Loan Administration Officer
Re: Loan and Security Agreement dated October 7, 2002, by and among
SED International, Inc.,SED International Holdings, Inc. and
SED Magna (Miami), Inc. and Fleet Capital Corporation (as at
any time amended, the "Loan Agreement")
Gentlemen:
This Notice of Conversion/Continuation is delivered to you pursuant to
SECTION 2.1.2 of the Loan Agreement. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings attributable thereto in
the Loan Agreement. Borrowers hereby give notice of their request as follows:
Check as applicable:
[ ] A conversion of Loans from one Type to another, as follows:
(i) The requested date of the proposed conversion is ______________,
20__ (the "Conversion Date");
(ii) The Type of Loans to be converted pursuant hereto are presently
__________________ [select either LIBOR Loans or Base Rate Loans] in
the principal amount of $_____________ outstanding as of the
Conversion Date;
(iii) The portion of the aforesaid Loans to be converted on the Conversion
Date is $_____________ (the "Conversion Amount");
(iv) The Conversion Amount is to be converted into a ____________ [select
either a LIBOR Loan or a Base Rate Loan] (the "Converted Loan") on
the Conversion Date.
(v) [In the event a Borrowers select a LIBOR Loan:] Borrowers hereby
request that the Interest Period for such Converted Loan be for a
duration of _____ [insert length of Interest Period].
[ ] A continuation of LIBOR Loans for new Interest Period, as follows:
(i) The requested date of the proposed continuation is _______________,
20__ (the "Continuation Date");
(ii) The aggregate amount of the LIBOR Loans subject to such continuation
is $__________________;
(iii) The duration of the selected Interest Period for the LIBOR Loans
which are the subject of such continuation is: _____________ [select
duration of applicable Interest Period];
Each Borrower hereby ratifies and reaffirms all of its liabilities and
obligations under the Loan Documents and certifies that no Default or Event of
Default exists on the date hereof.
Borrowers have caused this Notice of Conversion/Continuation to be
executed and delivered by its duly authorized officer, this ___ day of
______________, 20__.
__________________________________
By:
__________________________________
Title:
_______________________________
EXHIBIT C
FORM OF NOTICE OF BORROWING
Date ______________, 20___
Fleet Capital Corporation
000 Xxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Loan Administration Officer
Re: Loan and Security Agreement dated October 7, 2002, by and among
SED International, Inc., SED International Holdings, Inc. and
SED Magna (Miami), Inc. and Fleet Capital Corporation (as at
any time amended, the "Loan Agreement") Gentlemen:
This Notice of Borrowing is delivered to you pursuant to SECTION 3.1.1 of
the Loan Agreement. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings attributable thereto in the Loan Agreement.
Borrowers hereby request a Revolver Loan in the aggregate principal amount of
$______________ to be made on _____________, _____, and to consist of:
Check as applicable: [ ] Base Rate Loans in the aggregate principal
amount of $_____________
[ ] LIBOR Loans in the aggregate principal amount of
$___________, with Interest Periods as follows:
(i) As to $_____________, an Interest Period of ______
month(s);
(ii) As to $_____________, an Interest Period of ______
months;
(iii) As to $_____________, an Interest Period of ______
months.
Each Borrower hereby ratifies and reaffirms all of its liabilities and
obligations under the Loan Documents and hereby certifies that no Default or
Event of Default exists on the date hereof.
Borrowers have caused this Notice of Borrowing to be executed and
delivered by its duly authorized officer, this ___ day of _____________, _____.
__________________________________
By:__________________________________
Title:__________________________________
EXHIBIT D
COMPLIANCE CERTIFICATE
[Letterhead of Borrowers]
__________________, 20__
Fleet Capital Corporation
000 Xxxxxxxx Xxxxxxx, X.X.
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
The undersigned, the chief financial officer of each of SED International,
Inc., SED International Holdings, Inc. and SED Magna (Miami), Inc.
("Borrowers"), gives this certificate to Fleet Capital Corporation ("Lender") in
accordance with the requirements of SECTION 9.1.3 of that certain Loan and
Security Agreement dated October 7, 2002, among Borrowers and Lender ("Loan
Agreement"). Capitalized terms used in this Certificate, unless otherwise
defined herein, shall have the meanings ascribed to them in the Loan Agreement.
1.Based upon my review of the balance sheets and statements of
income of Borrowers for the [fiscal year] [month] ending __________________,
20__, copies of which are attached hereto, I hereby certify that:
(a)EBITDA is $__________;
(b)Fixed Charge Coverage Ratio is ____ to 1.0;
(c)Adjusted Tangible Net Worth is $_____________________;
(d)Capital Expenditures during the period and for the fiscal year to
date total $__________ and $__________, respectively; and
(e)EBIT/Interest Expense Ratio is ______ to 1.0.
2. The Net Amount of Foreign Subsidiary Advances as of the last
day of the [fiscal year] [month] is $__________.
3. The unpaid amount of Eligible Accounts on which the Account
Debtor is a Foreign Subsidiary as of the last day of the [fiscal year] [month]
totals $__________.
4. The amount of Contingent Obligations of Borrowers under
guaranties with respect to Debt of Foreign Subsidiaries (including accounts
payable incurred to trade creditors by Foreign Subsidiaries in
the Ordinary Course of Business) as of the last day of the [fiscal year] [month]
totals $__________.
5. The aggregate amount expended by Borrowers to purchase or redeem
Equity Interests of Parent during the period commencing on the Closing Date and
ending on the last day of the [fiscal year] [month] totals $__________.
6. The Picking and Shipping Accuracy Report for the month is
attached hereto.
7. All conditions to making Distributions pursuant to SECTION
9.2.7(II) were satisfied at the time of, and after giving effect to, each such
Distribution made by Borrowers during the month.
8. No Default exists on the date hereof, other than:
__________________ ________________________________________________ [if none, so
state]; and
9. No Event of Default exists on the date hereof, other than
__________ ____________________________________________________ [if none, so
state].
10. As of the date hereof, Borrowers are current in their payment of
all accrued rent and other charges to Persons who own or lease any premises
where any of the Collateral is located, and there are no pending disputes or
claims regarding any Borrower's failure to pay or delay in payment of any such
rent or other charges.
11. Attached hereto is (a) a schedule showing the calculations that
support Borrowers' [compliance] [non-compliance] with the financial covenants,
as shown above, and (b) a schedule showing the amount and date of each
Distribution made by Borrowers pursuant to SECTION 9.2.7(ii) of the Loan
Agreement during the month and the calculations that support Borrowers'
compliance with the conditions to making such Distributions pursuant to SECTION
9.2.7(ii).
Very truly yours,
_______________________________
Chief Financial Officer
-2-
EXHIBIT E
FORM OF OPINION
See Attached.
EXHIBIT F
LETTER OF CREDIT PROCUREMENT REQUEST
Fleet Capital Corporation
Xxxxx 000
000 Xxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Loan Administration Manager
This Letter of Credit Procurement Request is delivered to you pursuant to
the Loan and Security Agreement dated October 7, 2002, by and among SED
International, Inc., SED International Holdings, Inc., SED Magna (Miami), Inc.
(hereinafter referred to collectively as "Borrowers" and individually as a
"Borrower"), and Fleet Capital Corporation ("Lender"), as the same may be
amended, supplemented, restated or otherwise modified from time to time (the
"Loan Agreement"). Unless otherwise defined herein, terms used herein have the
meanings assigned to them in the Loan Agreement.
Borrowers hereby request Lender to provide an LC Support to induce Bank to
issue a Letter of Credit, as follows:
(1) Borrower's/Account Party's Name
--------------------------------
(2) Amount of Letter of Credit: $
--------------------------------
(3) Issuance Date:
--------------------------------
(4) Beneficiary's Name:
--------------------------------
(5) Beneficiary's Address:
--------------------------------
--------------------------------
--------------------------------
--------------------------------
(6) Expiry Date:
--------------------------------
(7) Draw Conditions:
--------------------------------
--------------------------------
--------------------------------
--------------------------------
--------------------------------
--------------------------------
--------------------------------
(8) Single draw [ ] or Multiple draw [ ]
(9) Purpose of Letter of Credit:
Attached hereto is the Bank's form of LC Application, completed with the
details of the Letter of Credit requested herein.
Each Borrower hereby certifies that each of the LC Conditions is now, and
will on the date of issuance of the Letter of Credit, be satisfied in all
respects and that no Default or Event of Default exists.
Each Borrower hereby ratifies and reaffirms all of the Loan Documents and
Obligations arising thereunder.
IN WITNESS WHEREOF, each Borrower has caused this Letter of Credit
Procurement Request to be executed and delivered by its duly authorized officer,
this ___ day of _________________, 200___.
ATTEST: SED INTERNATIONAL, INC., a Georgia corporation
____________________________ By:___________________________________________
Secretary
President,_________________________________
[CORPORATE SEAL]
ATTEST: SED INTERNATIONAL HOLDINGS, INC., a Georgia
corporation
____________________________ By:___________________________________________
Secretary
President,_________________________________
[CORPORATE SEAL]
ATTEST: SED MAGNA (MIAMI), INC., a Delaware corporation
____________________________ By: ___________________________________________
Secretary
President,_________________________________
[CORPORATE SEAL]
EXHIBIT G
FORM OF PICKING AND SHIPPING ACCURACY REPORT
See Attached
-3-
Shipping Details by Facility for Fiscal Year '02
-4-
