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EXHIBIT 4.1
LOAN AND SECURITY AGREEMENT
by and among
CONGRESS FINANCIAL CORPORATION (WESTERN)
as Lender
CERPLEX, INC.
as Borrower
and
THE CERPLEX GROUP, INC.
as Guarantor
Dated: November 24, 1999
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TABLE OF CONTENTS
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Page
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SECTION 1. DEFINITIONS......................................................1
SECTION 2. CREDIT FACILITIES...............................................13
2.1 Loans..........................................................13
2.2 Letter of Credit Accommodations................................13
2.3 Availability Reserves..........................................15
SECTION 3. INTEREST AND FEES...............................................16
3.1 Interest.......................................................16
3.2 Closing Fee....................................................17
3.3 Servicing Fee..................................................17
3.4 Unused Line Fee................................................17
3.5 Changes in Laws and Increased Costs of Loans...................17
SECTION 4. CONDITIONS PRECEDENT............................................18
4.1 Conditions Precedent to Initial Loans and Letter of
Credit Accommodations..........................................18
4.2 Conditions Precedent to All Loans and Letter of
Credit Accommodations..........................................20
SECTION 5. GRANT OF SECURITY INTEREST......................................21
SECTION 6. COLLECTION AND ADMINISTRATION...................................22
6.1 Borrower's Loan Account........................................22
6.2 Statements.....................................................22
6.3 Collection of Accounts.........................................22
6.4 Payments.......................................................23
6.5 Authorization to Make Loans....................................24
6.6 Use of Proceeds................................................24
(i)
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SECTION 7. COLLATERAL REPORTING AND COVENANTS............................24
7.1 Collateral Reporting.........................................24
7.2 Accounts Covenants...........................................25
7.3 Inventory Covenants..........................................26
7.4 Equipment Covenants..........................................27
7.5 Power of Attorney............................................27
7.6 Right to Cure................................................28
7.7 Access to Premises...........................................28
SECTION 8. REPRESENTATIONS AND WARRANTIES................................28
8.1 Corporate Existence, Power and Authority; Subsidiaries.......28
8.2 Financial Statements; No Material Adverse Change.............29
8.3 Chief Executive Office; Collateral Locations.................29
8.4 Priority of Liens; Title to Properties.......................29
8.5 Tax Returns..................................................29
8.6 Litigation...................................................30
8.7 Compliance with Other Agreements and Applicable Laws.........30
8.8 Merger.
8.9 Acquisition of Purchased Assets..............................31
8.10 Capitalization.
8.11 Bank Accounts...............................................32
8.12 Environmental Compliance....................................32
8.13 Employee Benefits...........................................33
8.14 Accuracy and Completeness of Information....................33
8.15 Survival of Warranties; Cumulative..........................34
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS............................34
9.1 Maintenance of Existence.....................................34
9.2 New Collateral Locations.....................................34
9.3 Compliance with Laws, Regulations, Etc.......................34
9.4 Payment of Taxes and Claims..................................36
9.5 Insurance....................................................36
9.6 Financial Statements and Other Information...................37
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc......38
9.8 Encumbrances.................................................38
9.9 Indebtedness.................................................39
9.10 Loans, Investments, Guarantees, Etc.........................42
9.11 Dividends and Redemptions...................................43
(ii)
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9.12 Transactions with Affiliates...........................................43
9.13 Additional Bank Accounts...............................................43
9.14 Compliance with ERISA..................................................44
9.15 Adjusted Net Worth.....................................................44
9.16 Year 2000 Compliance...................................................44
9.17 Costs and Expenses.....................................................45
9.18 Further Assurances.....................................................46
SECTION 10. EVENTS OF DEFAULT AND REMEDIES..........................................46
10.1 Events of Default......................................................46
10.2 Remedies...............................................................48
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver..49
11.2 Waiver of Notices......................................................51
11.3 Amendments and Waivers.................................................51
11.4 Waiver of Counterclaims................................................51
11.5 Indemnification........................................................51
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS........................................52
12.1 Term...................................................................52
12.2 Notices................................................................53
12.3 Partial Invalidity.....................................................53
12.4 Successors.............................................................53
12.5 Entire Agreement.......................................................54
(iii)
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INDEX TO
EXHIBITS AND SCHEDULES
----------------------
Exhibit A Information Certificates of The Cerplex Group,
Inc. and Cerplex, Inc.
Schedule 8.4 Existing Liens
Schedule 8.11 Bank Accounts
Schedule 8.12 Environmental Compliance
Schedule 9.8 WCAS Collateral
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Loans, Advances and Guarantees
(i)
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LOAN AND SECURITY AGREEMENT
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This Loan and Security Agreement dated November ___, 1999 is entered
into by and among Congress Financial Corporation (Western), a California
corporation ("Lender"), Cerplex, Inc., a Delaware corporation ("Borrower") and
The Cerplex Group, Inc., a Delaware corporation ("Guarantor").
W I T N E S S E T H:
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WHEREAS, Borrower has requested that Lender enter into certain
financing arrangements with Borrower pursuant to which Lender may make loans and
advances and provide other financial accommodations to Borrower as part of the
revolving credit facility provided by Lender to Borrower and the proposed
revolving credit facility by Lender's United Kingdom affiliate, Burdale
Financial Limited, for the benefit of Borrower and its United Kingdom affiliate,
Cerplex Ltd. of up to $13,000,000 in the aggregate; and
WHEREAS, Lender is willing to make such loans and advances and provide
such financial accommodations to Borrower on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
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All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural. All
references to Lender, Borrower or Guarantor pursuant to the definitions set
forth in the recitals hereto, or to any other person herein, shall include their
respective successors and assigns. The words "hereof", "herein", "hereunder",
"this Agreement" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not any particular provision of this
Agreement and as this Agreement now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced. The word
"including" when used in this Agreement shall mean "including, without
limitation". An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender if such Event of Default is capable of being cured
as determined by Lender. Any accounting term used herein unless otherwise
defined in this Agreement shall have the meanings customarily given to such term
in accordance with GAAP. For purposes of this Agreement, the following terms
shall have the respective meanings given to them below:
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1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any United States or foreign banking authority for
determining the reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an international banking
office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar
Rate Loan made with the proceeds of such deposit, whether or not the Reference
Bank actually holds or has made any such deposits or loans. The Adjusted
Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage.
1.3 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its Subsidiaries (if any), the amount
equal to (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its Subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
and (ii) the aggregate amount of the indebtedness and other liabilities of such
Person and its Subsidiaries (including tax and other proper accruals) plus (b)
indebtedness of such Person and its Subsidiaries which is subordinated in right
of payment to the final payment in full of all of the Obligations on terms and
conditions acceptable to Lender.
1.4 "Affiliate" shall mean, with respect to a specified Person, a
partnership, corporation or any other person which directly or indirectly,
through one or more intermediaries, controls or is controlled by or is under
common control with such Person, and without limiting the generality of the
foregoing, includes (a) any Person which beneficially owns or holds five (5%)
percent or more of any class of voting securities of such Person or other equity
interests in such Person; (b) any Person of which such Person beneficially owns
or holds five (5%) percent or more of any class of voting securities or in which
such Person beneficially owns or holds five (5%) percent or more of the equity
interests; and (c) any director, officer or employee of such Person, and shall
include, without limitation, in the case of Borrower, Cerplex Ltd. For the
purposes of this definition, the term "control" (including with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
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1.5 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender, may from time to time establish and
revise in good faith reducing the amount of Loans and Letter of Credit
Accommodations which would otherwise be available to Borrower under the lending
formula(s) provided for herein: (a) to reflect events, conditions, contingencies
or risks which, as determined by Lender in good faith, do or may affect either
(i) the Collateral or any other property which is security for the Obligations
or its value, (ii) the assets, business or prospects of Borrower or any Obligor
or (iii) the security interests and other rights of Lender in the Collateral
(including the enforceability, perfection and priority thereof) or (b) to
reflect Lender's good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower or any Obligor to Lender is or
may have been incomplete, inaccurate or misleading in any material respect or
(c) to reflect outstanding Letter of Credit Accommodations as provided in
Section 2.2 hereof or (d) in respect of any state of facts which Lender
determines in good faith constitutes an Event of Default or may, with notice or
passage of time or both, constitute an Event of Default.
1.6 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.7 "Burdale Facility" shall mean any financing arrangements entered
into by Burdale Financial Limited at any time after the date hereof with Cerplex
Ltd., including, without limitation, the Burdale Revolving Loans and the Burdale
Term Loans; provided, that, (a) nothing contained herein shall be construed as a
commitment by Burdale or Lender on behalf of Burdale Financial Limited to
provide such financing and (b) in no event shall the Burdale Revolving Loans,
Burdale Term Loan and Burdale Letter of Credit Accommodations exceed in the
aggregate, the US Dollar Equivalent of $6,000,000, without the prior written
consent of Burdale Financial Limited.
1.8 "Burdale Letter of Credit Accommodations" shall mean letters of
credit, merchandise purchase or other guarantees which are from time to time
either (a) issued, opened or provided by Burdale Financial Limited for the
account of Cerplex Ltd. or (b) with respect to which Burdale Financial Limited
has agreed to indemnify the issuer or guaranteed to the issuer the performance
by Cerplex Ltd. of its obligations to such issuer.
1.9 "Burdale Obligations" shall mean any and all Burdale Revolving
Loans, Burdale Term Loans and Burdale Letter of Credit Accommodations and all
other obligations, liabilities and indebtedness of every kind, nature and
description owing by Cerplex Ltd. to Burdale Financial Limited and/or its
Affiliates, including, principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under the Burdale Facility or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of the Burdale Facility or after the commencement of
any case with respect to Cerplex Ltd. under any bankruptcy, insolvency or any
similar statute (including, without limitation, the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by
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Burdale Financial Limited, including, without limitation, the Burdale Revolving
Loans, the Burdale Term Loan and the Burdale Letter of Credit Accommodations.
1.10 "Burdale Revolving Loans" shall mean any loans now or hereafter
made by Burdale Financial Limited to or for the benefit of Cerplex Ltd. on a
revolving basis (involving advances, repayments and readvances) as provided for
in the Burdale Facility.
1.11 "Burdale Term Loan" shall mean any term loan made by Burdale
Financial Limited to or for the benefit of Cerplex Ltd. as provided for in the
Burdale Facility.
1.12 "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which commercial banks are authorized or required to close under
the laws of the State of California and/or North Carolina and/or New York, and a
day on which the Reference Bank and Lender are open for the transaction of
business, except that if a determination of a Business Day shall relate to any
Eurodollar Rate Loans, the term Business Day shall also exclude any day on which
banks are closed for dealings in dollar deposits in the London interbank market
or other applicable Eurodollar Rate market.
1.13 "Capital Stock" shall mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated)
of such Person's capital stock, partnership interests or interests in any
limited liability company at any time outstanding, and any and all rights,
warrants or options exchangeable for or convertible into such capital stock or
other interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.14 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.15 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.16 "Eligible Accounts" shall mean, the Accounts created by Borrower
which are and continue to be acceptable to Lender based on the criteria set
forth below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) such Accounts (other than Accounts owed by General Electric
Company, Compaq Computer Corp. and IBM Corporation) are not unpaid more than the
earlier of (i) sixty (60) days after the original due date for such Accounts or
(ii) ninety (90) days after the date of the original invoice for them;
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(c) as to Accounts owed by General Electric Company, Compaq
Computer Corp. and IBM Corporation of up to the amount of $1,000,000 for each
account debtor outstanding at any time, such Accounts are not unpaid more than
the earlier of (i) sixty (60) days after the original due date for such Accounts
or (ii) one hundred twenty (120) days after the original invoice for them;
PROVIDED, THAT, in no event shall the aggregate amount of such Accounts from all
such account debtors which are Eligible Accounts exceed $3,000,000 at any time;
(d) such Accounts comply with the terms and conditions contained
in Section 7.2(c) of this Agreement;
(e) such Accounts do not arise from sales of consigned goods,
sales on consignment, guaranteed sale, sale and return, sale on approval, or
other terms under which payment by the account debtor may be conditional or
contingent;
(f) the chief executive office of the account debtor with respect
to such Accounts is located in the United States of America or Canada (PROVIDED,
THAT, at any time promptly upon Lender's request, Borrower shall execute and
deliver, or cause to be executed and delivered, such other agreements, documents
and instruments as may be required by Lender to perfect the security interests
of Lender in those Accounts of an account debtor with its chief executive office
or principal place of business in Canada in accordance with the applicable laws
of the Province of Canada in which such chief executive office or principal
place of business is located and take or cause to be taken such other and
further actions as Lender may request to enable Lender as secured party with
respect thereto to collect such Accounts under the applicable Federal or
Provincial laws of Canada) or, at Lender's option, if the chief executive office
and principal place of business of the account debtor with respect to such
Accounts is located other than in the United States of America or Canada, then
if either: (i) the account debtor has delivered to Borrower an irrevocable
letter of credit issued or confirmed by a bank satisfactory to Lender and
payable only in the United States of America and in U.S. dollars, sufficient to
cover such Account, in form and substance satisfactory to Lender and if required
by Lender, the original of such letter of credit has been delivered to Lender or
Lender's agent and the issuer thereof notified of the assignment of the proceeds
of such letter of credit to Lender, or (ii) such Account is subject to credit
insurance payable to Lender issued by an insurer and on terms and in an amount
acceptable to Lender, or (iii) such Account is otherwise acceptable in all
respects to Lender (subject to lending formula with respect thereto as Lender
may determine);
(g) such Accounts do not consist of progress xxxxxxxx, xxxx and
hold invoices or retainage invoices, except as to xxxx and hold invoices in an
aggregate amount not to exceed ten (10%) percent of all otherwise Eligible
Accounts, if Lender shall have received an agreement in writing from the account
debtor, in form and substance satisfactory to Lender, confirming the
unconditional obligation of the account debtor to take the goods related thereto
and pay such invoice;
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(h) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff against such
Accounts (but the portion of the Accounts of such account debtor in excess of
the amount at any time and from time to time owed by Borrower to such account
debtor or claimed owed by such account debtor may be deemed Eligible Accounts);
(i) there are no facts, events or occurrences which would impair
the validity, enforceability or collectability of such Accounts or reduce the
amount payable or delay payment thereunder;
(j) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(k) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee, agent or
other Affiliate of Borrower directly or indirectly;
(l) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(m) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition;
(n) such Accounts of a single account debtor or its Affiliates
(excluding General Electric Company, Compaq Computer Corp. and IBM Corporation)
do not constitute more than fifteen (15%) of all otherwise Eligible Accounts
(but the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);
(o) such Accounts (other than Accounts owed by General Electric
Company, Compaq Computer Corp. and IBM Corporation) are not owed by an account
debtor who has Accounts unpaid more than the earlier of sixty (60) days after
the original due date for such Accounts or ninety (90) days after the date of
the original invoice for them, which constitute more than fifty (50%) percent of
the total Accounts of such account debtor;
(p) as to Accounts owed by General Electric Company, Compaq
Computer Corp. and IBM Corporation, more than the earlier of sixty (60) days
after the original due date for such
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Accounts or one hundred twenty (120) days after the date of the original invoice
for them, which constitute more than fifty (50%) percent of the total Accounts
of such account debtor;
(q) such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit with respect to such
account debtors as determined in good faith by Lender from time to time (but the
portion of the Accounts not in excess of such credit limit may be deemed
Eligible Accounts); and
(r) such Accounts are owed by account debtors deemed creditworthy
at all times by Lender, as determined in good faith by Lender.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.17 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between Borrower and any
governmental authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials or other materials or waste, or (c)
relating to all laws with regard to recordkeeping, notification, disclosure and
reporting requirements respecting Hazardous Materials or other materials or
waste. The term "Environmental Laws" includes (i) the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Federal
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii)
applicable state counterparts to such laws, and (iii) any common law or
equitable doctrine that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to any
Hazardous Materials or other materials or waste.
1.18 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
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1.19 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.20 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any Subsidiary of Borrower under Sections 414(b), 414(c),
414(m) or 414(o) of the Code.
1.21 "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by or on behalf of Borrower.
1.22 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.23 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.24 "Excess Availability" shall mean the amount, as determined by
Lender, equal to: (a) the lesser of (i) the amount of the Loans available to
Borrower as of such time pursuant to Section 2 hereof, as determined by Lender,
and subject to the sublimits and Availability Reserves from time to time
established by Lender hereunder and (ii) the Maximum Credit, minus (b) the sum
of: (i) the amount of all then outstanding and unpaid Obligations, plus (ii) the
aggregate amount of all trade payables and other obligations of Borrower which
are more than sixty (60) days past due as of such time.
1.25 "Exchange Rate" shall mean the prevailing spot rate of exchange of
such bank as Lender may select for the purpose of conversion of one currency to
another, at or around 11 a.m. Los Angeles, California time, on the date on which
any such conversion of currency is to be made under this Agreement.
1.26 "Expiration Date" shall have the meaning set forth in Section 12.1
hereof.
1.27 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by
Borrower or any Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
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1.28 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.15 hereof, GAAP shall be determined on the basis of
such principles in effect on the date hereof and consistent with those used in
the preparation of the audited financial statements delivered to Lender prior to
the date hereof.
1.29 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.30 "Information Certificates" shall mean the Information Certificates
with respect to Borrower and Guarantor constituting Exhibit A hereto containing
material information with respect to Borrower and Guarantor, their business and
assets provided by or on behalf of Borrower and Guarantor to Lender in
connection with the preparation of this Agreement and the other Financing
Agreements and the financing arrangements provided for herein.
1.31 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as
Borrower may elect, the exact duration to be determined in accordance with the
customary practice in the applicable Eurodollar Rate market; PROVIDED, THAT,
Borrower may not elect an Interest Period which will end after the last day of
the then-current term of this Agreement.
1.32 "Interest Rate" shall mean, as to Prime Rate Loans, a rate of
one-half (1/2%) percent per annum in excess of the Prime Rate and, as to
Eurodollar Rate Loans, a rate of two and three-fourths (2-3/4%) percent per
annum in excess of the Adjusted Eurodollar Rate (based on the Eurodollar Rate
applicable for the Interest Period selected by Borrower as in effect three (3)
Business Days after the date of receipt by Lender of the request of Borrower for
such Eurodollar Rate Loans in accordance with the terms hereof, whether such
rate is higher or lower than any rate previously quoted to Borrower); PROVIDED,
THAT, the Interest Rate shall mean the rate of two and one-half (2-1/2%) percent
per annum in excess of the Prime Rate as to Prime Rate Loans and the rate of
four and three-fourths (4-3/4%) percent per annum in excess of the Adjusted
Eurodollar Rate as to Eurodollar Rate Loans, at Lender's option, without notice,
(a) for the period (i) from and after the date of termination or non-renewal
hereof until Lender has received full and final payment of all obligations
(notwithstanding entry of a judgment against Borrower) and (ii) from and after
the date of the occurrence of an Event of Default for so long as such Event of
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Default is continuing as determined in good faith by Lender, and (b) on the
Loans to Borrower at any time outstanding in excess of the amounts available to
Borrower under Section 2 (whether or not such excess(es), arise or are made with
or without Lender's knowledge or consent and whether made before or after an
Event of Default).
1.33 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.34 "Letter of Credit Accommodations" shall mean, individually and
collectively, the letters of credit, merchandise purchase or other guaranties
which are from time to time either (a) issued or opened by Lender for the
account of Borrower or Obligor or (b) with respect to which Lender has agreed to
indemnify the issuer or guaranteed to the issuer the performance by Borrower of
its obligations to such issuer.
1.35 "Loans" shall mean, individually and collectively, all loans now
or hereafter made by Lender to or for the benefit of Borrower on a revolving
basis (involving advances, repayments and readvances) as set forth in Section
2.1 hereof.
1.36 "Maximum Credit" shall mean, at any time, the amount of
$10,000,000 reduced by the amount of all then outstanding Burdale Revolving
Loans.
1.37 "Merger" shall mean the merger of Cerplex Mass., Inc., a
Massachusetts corporation, with and into Borrower, with Borrower as the
surviving corporation of such merger pursuant to the terms of the Merger
Agreements.
1.38 "Merger Agreements" shall mean, collectively, the Certificate of
Merger of Cerplex Mass., Inc., a Massachusetts corporation and Borrower and all
related agreements, documents and instruments, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.39 "Net Amount of Eligible Accounts" shall mean, as to Borrower, the
gross amount of the Eligible Accounts of Borrower less (a) sales, excise or
similar taxes included in the amount thereof and (b) returns, discounts, claims,
credits and allowances of any nature at any time issued, owing, granted,
outstanding, available or claimed with respect thereto.
1.40 "Obligations" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to Lender and/or its Affiliates,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under this Agreement or otherwise, whether now existing or
hereafter arising, whether arising before, during or after the term of this
Agreement or after the commencement of any case with respect to Borrower under
the United States Bankruptcy Code or any similar statute (including, without
limitation, the payment of interest and other amounts which would
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accrue and become due but for the commencement of such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, and however
acquired by Lender.
1.41 "Obligor" shall mean any guarantor (including, without limitation,
Guarantor), endorser, acceptor, surety or other person liable on or with respect
to the Obligations or who is the owner of any property which is security for the
Obligations, other than Borrower.
1.42 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Code), limited liability
company, limited liability partnership, business trust, unincorporated
association, joint stock corporation, trust, joint venture or other entity or
any government or any agency or instrumentality or political subdivision
thereof.
1.43 "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
1.44 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.45 "Purchased Assets" shall mean all of the assets and properties
purchased by Borrower from Aurora Electronics Group, Inc. pursuant to the
Purchase Agreements.
1.46 "Purchase Agreements" shall mean the Xxxx of Sale and Assignment
and Assumption Agreement between Borrower, as purchaser and Aurora Electronics
Group, Inc., as seller and all related agreements, documents and instruments
executed and/or delivered in connection therewith, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced; PROVIDED, THAT, the term "Purchase Agreements" as used herein shall
not include any of the "Financing Agreements" as such term is defined herein.
1.47 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.48 "Reference Bank" shall mean First Union National Bank, or such
other bank as Lender may from time to time designate.
1.49 "Series B Notes" shall mean, collectively, the 10% Series B Senior
Subordinated Notes issued by Guarantor payable December 31, 2001 and all related
agreements, documents
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and instruments as the same now exist and may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.50 "Subordinated Debentures" shall mean, collectively, the 7 3/4%
Convertible Subordinated Debentures issued by Guarantor due April 15, 2001 and
all related agreements, documents and instruments as the same now exist and may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.51 "Subsidiary" or "subsidiary" shall mean, with respect to any
Person, any corporation, limited or general partnership, trust, association or
other business entity of which an aggregate of at least a majority of the
outstanding Capital Stock or other interests entitled to vote in the election of
the board of directors of such corporation (irrespective of whether, at the
time, Capital Stock of any other class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency),
managers, trustees or other controlling persons, or an equivalent controlling
interest therein, of such Person is, at the time, directly or indirectly, owned
by such Person and/or one or more subsidiaries of such Person.
1.52 "US Dollar Equivalent" shall mean at any time (a) as to any amount
denominated in US Dollars, the amount thereof at such time, and (b) as to any
amount denominated in pounds sterling or any other currency, the equivalent
amount in US Dollars calculated by Lender at such time using the Exchange Rate
in effect on the Business Day of determination.
1.53 "US Dollars", "US$" and "$" shall each mean lawful currency of the
United States of America.
1.54 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.
1.55 "WCAS" shall mean Welsh, Carson, Xxxxxxxx & Xxxxx VII, L.P., a
Delaware limited partnership, and its successors and assigns.
1.56 "WCAS Financing Agreements" shall mean, collectively, the Loan and
Security Agreement, dated April 30, 1998, between Borrower, certain of its
Affiliates and WCAS, as assignee of Greyrock Business Credit, a division of
NationsCredit Commercial Corporation, and related instruments and documents
which were assigned to WCAS in their entirety and subsequently assigned by WCAS
to certain of its Affiliates pursuant to assignment agreements effective as of
June 30, 1999, by and among Borrower, certain of its Affiliates, WCAS and
certain Affiliates of WCAS, and all guarantees, security agreements or other
agreements, documents and instruments in connection with any of the foregoing as
the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
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SECTION 2. CREDIT FACILITIES
-----------------
2.1 LOANS.
(a) Subject to and upon the terms and conditions contained
herein, Lender agrees to make Loans to Borrower from time to time in amounts
requested by Borrower up to the amount equal to:
(i) eighty (80%) percent of the Net Amount of Eligible
Accounts of Borrower, MINUS
(ii) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not
less than five (5) days prior notice to Borrower, reduce the lending formula set
forth in Section 2.1(a) above with respect to Eligible Accounts to the extent
that Lender determines in good faith that: (i) the dilution with respect to the
Accounts for any period (based on the ratio of (A) the aggregate amount of
reductions in Accounts other than as a result of payments in cash to (B) the
aggregate amount of total sales) has increased or may be reasonably anticipated
to increase above historical levels or to the extent that the dilution for the
immediately preceding four (4) consecutive month period is in excess of eight
(8%) percent, or (ii) the general creditworthiness of account debtors has
declined. In determining whether to reduce the lending formula(s), Lender may
consider events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts or in establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the
Loans and the Letter of Credit Accommodations outstanding at any time shall not
exceed the Maximum Credit. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans and
Letter of Credit Accommodations, exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set forth in Section
2.2(d) or the Maximum Credit, as applicable, such event shall not limit, waive
or otherwise affect any rights of Lender in that circumstance or on any future
occasions and Borrower shall, within five (5) days after demand by Lender, which
may be made at any time or from time to time, repay to Lender the entire amount
of any such excess(es) for which payment is demanded.
2.2 LETTER OF CREDIT ACCOMMODATIONS.
(a) Subject to and upon the terms and conditions contained
herein, at the request of Borrower, Lender agrees to provide or arrange for
Letter of Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Loans to Borrower
pursuant to this Section 2.
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(b) In addition to any charges, fees or expenses charged by any
bank or issuer in connection with the Letter of Credit Accommodations, Borrower
shall pay to Lender a letter of credit fee at a rate equal to one and one-half
(1-1/2%) percent per annum on the daily outstanding balance of the Letter of
Credit Accommodations for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month, except that
Borrower shall pay to Lender such letter of credit fee, at Lender's option,
without notice, at a rate equal to three and one-half (3-1/2%) percent per annum
or such daily outstanding balance for: (i) the period from and after the date of
termination or non-renewal hereof until Lender has received full and final
payment of all Obligations (notwithstanding entry of a judgment against
Borrower) and (ii) the period from and after the date of the occurrence of an
Event of Default and for so long as such Event of Default is continuing. Such
letter of credit fee shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed and the obligation of Borrower to pay
such fee shall survive the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless
on the date of the proposed issuance of any Letter of Credit Accommodations, the
Loans available to Borrower (subject to the Maximum Credit and any Availability
Reserves) are equal to or greater than an amount equal to one hundred (100%)
percent of the face amount thereof and all other commitments and obligations
made or incurred by Lender with respect thereto. Effective on the issuance of
each Letter of Credit Accommodation, an Availability Reserve shall be
established in an amount equal to one hundred (100%) percent of the face amount
thereof and all other commitments and obligations made or incurred by Lender
with respect thereto.
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed
$2,500,000. At any time an Event of Default exists or has occurred, upon
Lender's request, Borrower will either furnish cash collateral to secure the
reimbursement obligations to the issuer in connection with any Letter of Credit
Accommodations or furnish cash collateral to Lender for the Letter of Credit
Accommodations, and in either case, the Loans otherwise available to Borrower
shall not be reduced as provided in Section 2.2(c) to the extent of such cash
collateral.
(e) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or correspondent with respect
to any Letter of Credit Accommodation. Borrower assumes all risks with respect
to the acts or omissions of the drawer under or beneficiary of any Letter of
Credit Accommodation and for such purposes the drawer or beneficiary shall be
deemed Borrower's agent. Borrower assumes all risks for, and agrees to pay, all
foreign, Federal, State and local taxes, duties and levies relating to any goods
subject to any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder. Borrower hereby releases and holds Lender harmless from
and against any acts, waivers, errors, delays or omissions, whether caused by
Borrower, by any issuer or
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correspondent or otherwise with respect to or relating to any Letter of Credit
Accommodation except for Lender's own gross negligence or wilful misconduct as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction. The provisions of this Section 2.2(e) shall survive the payment of
Obligations and the termination of this Agreement.
(f) Nothing contained herein shall be deemed or construed to
grant Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter of
Credit Accommodation provided by an issuer other than Lender unless Lender has
duly executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrower shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower. Lender shall have the sole and exclusive right and
authority to, and Borrower shall not: (i) at any time an Event of Default exists
or has occurred and is continuing, (A) approve or resolve any questions of
non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Lender may take such actions either in its
own name or in Borrower's name.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Lender and to apply in all
respects to Borrower.
2.3 AVAILABILITY RESERVES. All Loans otherwise available to Borrower
pursuant to the lending formulas and subject to the Maximum Credit and other
applicable limits hereunder shall be subject to Lender's continuing right to
establish and revise Availability Reserves.
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SECTION 3. INTEREST AND FEES
-----------------
3.1 INTEREST.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the Interest Rate. All
interest accruing hereunder on and after the date of any Event of Default or
termination or non-renewal hereof shall be payable on demand.
(b) Borrower may from time to time request that Prime Rate Loans
to it be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate
Loans to it continue for an additional Interest Period. Such request from or on
behalf of a Borrower shall specify the amount of the Prime Rate Loans which will
constitute Eurodollar Rate Loans (subject to the limits set forth below) and the
Interest Period to be applicable to such Eurodollar Rate Loans. Subject to the
terms and conditions contained herein, three (3) Business Days after receipt by
Lender of such a request from Borrower, such Prime Rate Loans shall be converted
to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the
case may be, PROVIDED, THAT, (i) no Event of Default, or act, condition or event
which with notice or passage of time or both would constitute an Event of
Default shall exist or have occurred and be continuing, (ii) no party hereto
shall have sent any notice of termination or non-renewal of this Agreement,
(iii) Borrower shall have complied with such customary procedures as are
established by Lender and specified by Lender to Borrower from time to time for
requests by Borrower for Eurodollar Rate Loans, (iv) no more than four (4)
Interest Periods may be in effect at any one time, (v) the aggregate amount of
the Eurodollar Rate Loans must be in an amount not less than $3,000,000 or an
integral multiple of $1,000,000 in excess thereof, (vi) the maximum amount of
the Eurodollar Rate Loans at any time requested by a Borrower shall not exceed
the amount equal to eighty (80%) percent of the lowest principal amount of the
Loans which it is anticipated will be outstanding during the applicable Interest
Period, in each case as determined by Lender (but with no obligation of Lender
to make such Loans) and (vii) Lender shall have determined that the Interest
Period or Adjusted Eurodollar Rate is available to Lender through the Reference
Bank and can be readily determined as of the date of the request for such
Eurodollar Rate Loan by or on behalf of Borrower. Any request by Borrower to
convert Prime Rate Loans to Eurodollar Rate Loans or to continue any existing
Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to the
contrary contained herein, Lender and Reference Bank shall not be required to
purchase United States Dollar deposits in the London interbank market or other
applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the
provisions hereof shall be deemed to apply as if Lender and Reference Bank had
purchased such deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Lender has received and approved a request to continue such Eurodollar Rate Loan
at least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans to Borrower shall, at Lender's option,
upon notice by Lender to Borrower, convert to Prime Rate Loans in the event that
(i) an Event of Default or act, condition or event which, with the notice or
passage of time,
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or both, would constitute an Event of Default, shall exist or have occurred,
(ii) this Agreement shall terminate or not be renewed, or (iii) the aggregate
principal amount of the Prime Rate Loans which have previously been converted to
Eurodollar Rate Loans or existing Eurodollar Rate Loans continued, as the case
may be, at the beginning of an Interest Period shall at any time during such
Interest Period exceed either (A) the aggregate principal amount of the Loans
then outstanding, or (B) the then outstanding principal amount of Loans then
available to Borrower under Section 2 hereof. Borrower shall pay to Lender, upon
demand by Lender (or Lender may, at its option, charge any loan account of
Borrower) any amounts required to compensate Lender, the Reference Bank or any
participant with Lender for any loss (including loss of anticipated profits),
cost or expense incurred by such person, as a result of the conversion of
Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on non-contingent Obligations (other than Eurodollar
Rate Loans) shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs. In no event shall charges
constituting interest payable by Borrower to Lender exceed the maximum amount or
the rate permitted under any applicable law or regulation, and if any such part
or provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform thereto.
3.2 CLOSING FEE. Borrower shall pay to Lender as a closing fee the
amount of $75,000, which shall be fully earned and payable as of the date
hereof.
3.3 SERVICING FEE. Borrower shall pay to Lender monthly a servicing fee
in an amount equal to $5,000 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof and on the first day of each month
commencing December 1, 1999.
3.4 UNUSED LINE FEE. Borrower shall pay to Lender monthly an unused
line fee at a rate equal to three-eighths (3/8%) percent per annum calculated
upon the amount by which the Maximum Credit exceeds the aggregate amount of the
average daily principal balance of the outstanding Loans and Letter of Credit
Accommodations during the immediately preceding month (or part thereof) while
this Agreement is in effect and for so long thereafter as any of the Obligations
are outstanding, which fee shall be payable on the first day of each month in
arrears.
3.5 CHANGES IN LAWS AND INCREASED COSTS OF LOANS.
(a) Notwithstanding anything to the contrary contained herein,
all Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof)
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shall either (A) make it unlawful for Lender, Reference Bank or any participant
to make or maintain Eurodollar Rate Loans or to comply with the terms hereof in
connection with the Eurodollar Rate Loans, or (B) shall result in the increase
in the costs to Lender, Reference Bank or any participant of making or
maintaining any Eurodollar Rate Loans by an amount deemed by Lender to be
material, or (C) reduce the amounts received or receivable by Lender in respect
thereof, by an amount deemed by Lender to be material or (ii) the cost to
Lender, Reference Bank or any participant of making or maintaining any
Eurodollar Rate Loans shall otherwise increase by an amount deemed by Lender to
be material. Borrower shall pay to Lender, upon demand by Lender (or Lender may,
at its option, charge any loan account of Borrower) any amounts required to
compensate Lender, the Reference Bank or any participant with Lender for any
loss (including loss of anticipated profits), cost or expense incurred by such
person as a result of the foregoing, including, without limitation, any such
loss, cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such person to make or maintain the
Eurodollar Rate Loans or any portion thereof. A certificate of Lender setting
forth the basis for the determination of such amount necessary to compensate
Lender as aforesaid shall be delivered to Borrower and shall be conclusive,
absent manifest error.
(b) If any payments or prepayments in respect of the Eurodollar
Rate Loans are received by Lender other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under Section
6.3 or any other payments made with the proceeds of Collateral, Borrower shall
pay to Lender upon demand by Lender (or Lender may, at its option, charge the
loan account(s) of Borrower) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any additional loss (including
loss of anticipated profits), cost or expense incurred by such person as a
result of such prepayment or payment, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof.
SECTION 4. CONDITIONS PRECEDENT
--------------------
4.1 CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTER OF CREDIT
ACCOMMODATIONS. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property which
is intended to be security for the Obligations or the liability of any Obligor
in respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;
(b) Lender shall have received, in form and substance
satisfactory to Lender, evidence that the Certificate of Merger with respect to
the Merger has been filed with the
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Secretary of State of the States of Delaware and Massachusetts and the Merger
has been consummated prior to or contemporaneously with this Agreement and is
valid and effective in accordance with the Merger Agreements and the applicable
corporation statutes of the States of Delaware and Massachusetts;
(c) Lender shall have received, in form and substance
satisfactory to Lender, evidence that the Purchase Agreements have been duly
executed and delivered by and to the appropriate parties thereto and the
transactions contemplated under the terms of the Purchase Agreements have been
consummated prior to or contemporaneously with the execution of this Agreement;
(d) Lender shall have received, in form and substance
satisfactory to Lender, the Intercreditor and Subordination Agreement among
Lender, WCAS and certain Affiliates of WCAS, as acknowledged and agreed to by
Borrower and Guarantor, providing for the relative rights and priorities of
Lender, WCAS, and certain Affiliates of WCAS with respect to the assets and
properties of Borrower and related matters, duly authorized, executed and
delivered by WCAS, certain Affiliates of WCAS and Borrower;
(e) Lender shall have received, in form and substance
satisfactory to Lender, the guarantee by Guarantor in favor of Lender of all of
the Obligations of Borrower, duly authorized, executed and delivered by
Guarantor;
(f) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Lender, and Lender shall have received all information and
copies of all documents, including, without limitation, records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or governmental authorities;
(g) no material adverse change shall have occurred in the assets,
business or prospects of Borrower since the date of Lender's latest field
examination and no change or event shall have occurred which would impair the
ability of Borrower or any Obligor to perform its obligations hereunder or under
any of the other Financing Agreements to which it is a party or of Lender to
enforce the Obligations or realize upon the Collateral;
(h) Lender shall have completed a field review of the Records and
such other information with respect to the Collateral as Lender may require to
determine the amount of Loans available to Borrower (including, without
limitation, current perpetual inventory records and/or roll-forwards of Accounts
and Inventory through the date of closing and test counts of the Inventory in a
manner satisfactory to Lender, together with such supporting documentation as
may be necessary or appropriate, and other documents and information that will
enable Lender to accurately identify and verify the Collateral), the results of
which in each case shall be satisfactory to Lender, not more than three (3)
Business Days prior to the date hereof;
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(i) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Financing Agreements, including, without limitation, acknowledgments
by lessors, mortgagees and warehousemen of Lender's security interests in the
Collateral, waivers by such persons of any security interests, liens or other
claims by such persons to the Collateral and agreements permitting Lender access
to, and the right to remain on, the premises to exercise its rights and remedies
and otherwise deal with the Collateral;
(j) the amount of the Excess Availability of Borrower shall be
not less than $1,000,000, as of the date hereof, after giving effect to (i) the
initial Loans made or to be made and Letter of Credit Accommodations issued or
to be issued in connection with the initial transactions hereunder, and (ii) the
outstanding Burdale Revolving Loans, if any;
(k) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(l) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel(s) to Borrower and
Guarantor with respect to the Merger, the Purchase Agreements, the Financing
Agreements and the security interests and liens of Lender with respect to the
Collateral and such other matters as Lender may request; and
(m) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender.
4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTER OF CREDIT
ACCOMMODATIONS. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no act, condition or event which,
with notice or passage of time or both, would constitute an Event of Default,
shall exist or have occurred and be continuing on and as of the date of the
making of such Loan or providing each such Letter of Credit Accommodation and
after giving effect thereto.
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SECTION 5. GRANT OF SECURITY INTEREST
--------------------------
To secure payment and performance of all Obligations, Borrower hereby
grants to Lender and to Burdale Financial Limited a continuing security interest
in, a lien upon, and a right of set off against, and Borrower hereby assigns to
Lender and Burdale Financial Limited as security the following property and
interests in property, whether now owned or hereafter acquired or existing, and
wherever located (collectively, the "Collateral"):
5.1 Accounts;
5.2 all present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, choses in
action and other claims and existing and future leasehold interests in
equipment, real estate and fixtures), chattel paper, documents, instruments,
investment property, letters of credit, bankers' acceptances and guaranties;
5.3 all present and future monies, securities and other investment
property, credit balances, deposits, deposit accounts and other property of
Borrower now or hereafter held or received by or in transit to Lender or its
Affiliates or at any other depository or other institution from or for the
account of Borrower, whether for safekeeping, pledge, custody, transmission,
collection or otherwise, and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of Accounts and other
Collateral, including, without limitation, (a) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (b) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (c) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Accounts or other Collateral, including, without limitation,
returned, repossessed and reclaimed goods, and (d) deposits by and property of
account debtors or other persons securing the obligations of account debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Records; and
5.7 all products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and all claims against third parties for
loss or damage to or destruction of any or all of the foregoing.
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SECTION 6. COLLECTION AND ADMINISTRATION
-----------------------------
6.1 BORROWER'S LOAN ACCOUNT. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest. All entries in the loan account(s) shall
be made in accordance with Lender's customary practices as in effect from time
to time.
6.2 STATEMENTS. Lender shall render to Borrower each month a statement
setting forth the balance in Borrower's loan account(s) maintained by Lender for
Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing to Lender by Borrower.
6.3 COLLECTION OF ACCOUNTS.
(a) Borrower shall establish and maintain, at its expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Lender may specify, with such banks as are acceptable to
Lender into which Borrower shall promptly deposit and direct its account debtors
to directly remit all payments on Accounts and all payments constituting
proceeds of Inventory or other Collateral in the identical form in which such
payments are made, whether by cash, check or other manner. The banks at which
the Blocked Accounts are established shall enter into an agreement, in form and
substance satisfactory to Lender, providing that all items received or deposited
in the Blocked Accounts are the property of Lender, that the depository bank has
no lien upon, or right to setoff against, the Blocked Accounts, the items
received for deposit therein, or the funds from time to time on deposit therein
and that the depository bank will wire, or otherwise transfer, in immediately
available funds, on a daily basis, all funds received or deposited into the
Blocked Accounts to such bank account of Lender as Lender may from time to time
designate for such purpose ("Payment Account"). Borrower agrees that all
payments made to such Blocked Accounts or other funds received and collected by
Lender, whether on the Accounts or as proceeds of Inventory or other Collateral
or otherwise shall be the property of Lender.
(b) For purposes of calculating the amount of the Loans available
to Borrower, such payments will be applied (conditional upon final collection)
to the Obligations on the Business Day of receipt by Lender of immediately
available funds in the Payment Account provided such payments and notice thereof
are received in accordance with Lender's usual and customary practices as in
effect from time to time and within sufficient time to credit Borrower's loan
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account(s) on such day, and if not, then on the next Business Day. For the
purposes of calculating interest on the Obligations, such payments or other
funds received will be applied (conditional upon final collection) to the
Obligations one (1) Business Day following the date of receipt of immediately
available funds by Lender in the Payment Account provided such payments or other
funds and notice thereof are received in accordance with Lender's usual and
customary practices as in effect from time to time and within sufficient time to
credit Borrower's loan account(s) on such day, and if not, then on the next
Business Day.
(c) Borrower, Guarantor and all of their directors, employees,
agents, Subsidiaries and other Affiliates shall, acting as trustee for Lender,
receive, as the property of Lender, any monies, checks, notes, drafts or any
other payment relating to and/or proceeds of Accounts or other Collateral which
come into their possession or under their control and immediately upon receipt
thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to
Lender. In no event shall the same be commingled with Borrower's own funds.
Borrower agrees to reimburse Lender on demand for any amounts owed or paid to
any bank at which a Blocked Account is established or any other bank or person
involved in the transfer of funds to or from the Blocked Accounts arising out of
Lender's payments to or indemnification of such bank or person. The obligation
of Borrower to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.
6.4 PAYMENTS. All Obligations shall be payable to the Lender as
provided in Section 6.3 to such account or place as Lender may designate from
time to time. Lender may apply payments received or collected from Borrower or
for the account of Borrower (including, without limitation, the monetary
proceeds of collections or of realization upon any Collateral) to such of the
Obligations, whether or not then due, in such order and manner as Lender
determines. At Lender's option, all principal, interest, fees, costs, expenses
and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrower. Borrower
shall make all payments to Lender on the Obligations free and clear of, and
without deduction or withholding for or on account of, any setoff, counterclaim,
defense, duties, taxes, levies, imposts, fees, deductions, withholding,
restrictions or conditions of any kind. If after receipt of any payment of, or
proceeds of Collateral applied to the payment of, any of the Obligations, Lender
is required to surrender or return such payment or proceeds to any Person for
any reason, then the Obligations intended to be satisfied by such payment or
proceeds shall be reinstated and continue and this Agreement shall continue in
full force and effect as if such payment or proceeds had not been received by
Lender. Borrower shall be liable to pay to Lender, and does hereby indemnify and
hold Lender harmless for, the amount of any payments or proceeds surrendered or
returned. This Section 6.4 shall remain effective notwithstanding any contrary
action which may be taken by Lender in reliance upon such payment or proceeds.
This Section 6.4 shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
6.5 AUTHORIZATION TO MAKE LOANS. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from
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anyone purporting to be an officer of Borrower or other authorized person or, at
the discretion of Lender, if such Loans are necessary to satisfy any
Obligations. All requests for Loans or Letter of Credit Accommodations hereunder
shall specify the date on which the requested advance is to be made or Letter of
Credit Accommodations established (which day shall be a Business Day) and the
amount of the requested Loan or Letter of Credit Accommodation, as the case may
be. Requests received after 11:00 a.m. Los Angeles, California time on any day
shall be deemed to have been made as of the opening of business on the
immediately following Business Day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have been
made to, and at the request of and for the benefit of, Borrower when deposited
to the credit of Borrower or otherwise disbursed or established in accordance
with the instructions of Borrower or in accordance with the terms and conditions
of this Agreement.
6.6 USE OF PROCEEDS. All Loans made or Letter of Credit Accommodations
provided by Lender to Borrower pursuant to the provisions hereof shall be used
by Borrower only for general operating, working capital and other proper
corporate purposes of Borrower not otherwise prohibited by the terms hereof.
None of the proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security or for the purposes of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the Loans to
be considered a "purpose credit" within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System, as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
----------------------------------
7.1 COLLATERAL REPORTING. Borrower shall provide Lender with the
following documents in a form reasonably satisfactory to Lender: (a) on a
regular basis as required by Lender, a schedule of sales made, credits issued
and cash received; (b) on a monthly basis or more frequently as Lender may
request, (i) perpetual inventory reports, (ii) inventory reports by category,
(iii) agings of accounts payable and (iv) agings of accounts receivable, (c)
upon Lender's request, (i) copies of customer statements and credit memos,
remittance advices and reports, and copies of deposit slips and bank statements,
(ii) copies of shipping and delivery documents, and (iii) copies of purchase
orders, invoices and delivery documents for Inventory and Equipment acquired by
Borrower; and (d) such other reports as to the Collateral as Lender shall
reasonably request from time to time. If any of Borrower's records or reports of
the Collateral are prepared or maintained by an accounting service, contractor,
shipper or other agent, Borrower hereby irrevocably authorizes such service,
contractor, shipper or agent to deliver such records, reports, and related
documents to Lender and to follow Lender's instructions with respect to further
services at any time that an Event of Default exists or has occurred.
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7.2 ACCOUNTS COVENANTS.
(a) Borrower shall notify Lender promptly of: (i) any material
delay in Borrower's performance of any of its obligations to any account debtor
or the assertion of any material claims, offsets, defenses or counterclaims by
any account debtor, or any material disputes with account debtors, or any
settlement, adjustment or compromise thereof, (ii) all material adverse
information relating to the financial condition of any account debtor and (iii)
any event or circumstance which, to Borrower's knowledge would cause Lender to
consider any then existing Accounts as no longer constituting Eligible Accounts.
No credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor without Lender's consent,
except in the ordinary course of Borrower's business in accordance with
practices and policies previously disclosed in writing to Lender. So long as no
Event of Default exists or has occurred and is continuing, Borrower shall
settle, adjust or compromise any claim, offset, counterclaim or dispute with any
account debtor. At any time that an Event of Default exists or has occurred and
is continuing, Lender shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors or grant any credits, discounts or allowances.
(b) Without limiting the obligation of Borrower to deliver any
other information to Lender, Borrower shall promptly report to Lender any return
of Inventory by any one account debtor if the Inventory so returned in such case
has a value in excess of $50,000.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of business of Borrower in
accordance with practices and policies previously disclosed to Lender, (iv)
there shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto except as reported to Lender
in accordance with the terms of this Agreement, (v) none of the transactions
giving rise thereto will violate any applicable Federal, State or local laws or
regulations, all documentation relating thereto will be legally sufficient under
such laws and regulations and all such documentation will be legally enforceable
in accordance with its terms.
(d) Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender,
with appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments which Borrower now owns or may at any time acquire
immediately upon Borrower's receipt thereof, except as Lender may otherwise
agree.
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(f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
that the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof nor for the negligence of its agents or attorneys with
respect thereto and (iv) take whatever other action Lender may deem necessary or
desirable for the protection of its interests. At any time that an Event of
Default exists or has occurred and is continuing, at Lender's request, all
invoices and statements sent to any account debtor shall state that the Accounts
and such other obligations have been assigned to Lender and are payable directly
and only to Lender and Borrower shall deliver to Lender such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Lender may require.
7.3 INVENTORY COVENANTS. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping in all material respects correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, the cost therefor
and daily withdrawals therefrom and additions thereto; (b) Borrower shall
conduct a physical count of the Inventory of Borrower at least once each year,
but at any time or times as Lender may request on or after an Event of Default,
and promptly following such physical inventory shall supply Lender with a report
in the form and with such specificity as may be reasonably satisfactory to
Lender concerning such physical count; (c) Borrower shall not remove any
Inventory from the locations set forth or permitted herein, without the prior
written consent of Lender, except for sales of Inventory in the ordinary course
of Borrower's business and except to move Inventory directly from one location
of Borrower set forth or permitted herein to another such location of Borrower
(so long as a Uniform Commercial Code financing statement between Lender, as
secured party and Borrower, as debtor, covering such Inventory has previously
been recorded in the appropriate governmental offices of the jurisdiction of
such location); (d) Borrower shall produce, use, store and maintain the
Inventory, with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with applicable laws
(including, but not limited to, the requirements of the Federal Fair Labor
Standards Act of 1938, as amended and all rules, regulations and orders related
thereto); (e) Borrower assumes all responsibility and liability arising from or
relating to the production, use, sale or other disposition of the Inventory; (f)
Borrower shall not sell Inventory to any customer on approval, or any other
basis which entitles the customer to return or may obligate such Borrower to
repurchase such Inventory; (g) Borrower shall keep the Inventory in good and
marketable condition; and (h) Borrower shall not, without prior written notice
to Lender, acquire or accept any Inventory on consignment or approval except in
the ordinary course of its business.
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7.4 EQUIPMENT COVENANTS. With respect to the Equipment: (a) Borrower
shall keep the Equipment in good order, repair, running and marketable condition
(ordinary wear and tear excepted); (b) Borrower shall use the Equipment with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with all applicable laws; (c) the Equipment is and
shall be used in Borrower's business and not for personal, family, household or
farming use; (d) Borrower shall not remove any Equipment from the locations set
forth or permitted herein, except to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of Borrower or to
move Equipment directly from one location of Borrower set forth or permitted
herein to another such location of Borrower (so long as a Uniform Commercial
Code financing statement between Lender, as secured party, and Borrower, as
debtor, covering such Equipment has previously been recorded in the appropriate
governmental offices of the jurisdiction of such location) and except for the
movement of motor vehicles used by or for the benefit of Borrower in the
ordinary course of business; (e) the Equipment is now and shall remain personal
property and Borrower shall not permit any of the Equipment to be or become a
part of or affixed to real property; and (f) Borrower assumes all responsibility
and liability arising from the use of the Equipment.
7.5 POWER OF ATTORNEY. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default or an act, condition or event which with
notice or passage of time or both would constitute an Event of Default exists or
has occurred and is continuing, (i) demand payment on Accounts or other proceeds
of Inventory or other Collateral, (ii) enforce payment of Accounts or other
Collateral by legal proceedings or otherwise, (iii) exercise all of Borrower's
rights and remedies to collect any Account or other Collateral, (iv) sell or
assign any Account or other Collateral upon such terms, for such amount and at
such time or times as the Lender deems advisable, (v) settle, adjust,
compromise, extend or renew an Account, (vi) discharge and release any Account,
(vii) prepare, file and sign Borrower's name on any proof of claim in bankruptcy
or other similar document against an account debtor, (viii) notify the post
office authorities to change the address for delivery of Borrower's mail to an
address designated by Lender, and open and dispose of all mail addressed to
Borrower, and (ix) do all acts and things which are necessary, in Lender's
reasonable determination, to fulfill Borrower's obligations under this Agreement
and the other Financing Agreements and (b) at any time to (i) take control in
any manner of any item of payment or proceeds thereof, (ii) have access to any
lockbox or postal box into which Borrower's mail is deposited, (iii) endorse
Borrower's name upon any items of payment or proceeds thereof and deposit the
same in the Lender's account for application to the Obligations, (iv) endorse
Borrower's name upon any chattel paper, document, instrument, invoice, or
similar document or agreement relating to any Account or any goods pertaining
thereto or any other Collateral, (v) sign Borrower's name on any verification of
Accounts and notices thereof to account debtors and (vi) execute in Borrower's
name and file any UCC financing statements or amendments thereto. Borrower
hereby releases Lender and its officers, employees and designees from any
liabilities arising from any act or acts under this power of attorney and in
furtherance thereof, whether of omission or commission, except as a result of
Lender's own gross negligence or wilful
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misconduct as determined pursuant to a final non-appealable order of a court of
competent jurisdiction.
7.6 RIGHT TO CURE. Lender may, at its option, (a) cure any default by
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Lender's good faith judgment, is necessary or appropriate to preserve,
protect, insure or maintain the Collateral and the rights of Lender with respect
thereto. Lender may add any amounts so expended to the Obligations and charge
Borrower's account therefor, such amounts to be repayable by Borrower on demand.
Lender shall be under no obligation to effect such cure, payment or bonding and
shall not, by doing so, be deemed to have assumed any obligation or liability of
Borrower. Any payment made or other action taken by Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.
7.7 ACCESS TO PREMISES. From time to time as reasonably requested by
Lender, at the cost and expense of Borrower, (a) Lender or its designee shall
have complete access to all premises of Borrower during normal business hours
and after notice to Borrower, or at any time and without notice to Borrower if
an Event of Default exists or has occurred, for the purposes of inspecting,
verifying and auditing the Collateral and all of Borrower's books and records,
including, without limitation, the Records, and (b) Borrower shall promptly
furnish to Lender such copies of such books and records or extracts therefrom as
Lender may request, and (c) Lender or its designee may use during normal
business hours such of Borrower's personnel, equipment, supplies and premises as
may be reasonably necessary for the foregoing and if an Event of Default exists
or has occurred for the collection of Accounts and realization of other
Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower and Guarantor hereby jointly and severally represent and
warrant to Lender the following (which shall survive the execution and delivery
of this Agreement), the truth and accuracy of which are a continuing condition
of the making of Loans and providing Letter of Credit Accommodations by Lender
to Borrower:
8.1 CORPORATE EXISTENCE, POWER AND AUTHORITY; SUBSIDIARIES. Each of
Borrower and Guarantor is a corporation duly organized and in good standing
under the laws of its state of incorporation and is duly qualified as a foreign
corporation and in good standing in all states or other jurisdictions where the
nature and extent of the business transacted by it or the ownership of assets
makes such qualification necessary, except for those jurisdictions in which the
failure to so qualify would not have a material adverse effect on Borrower's or
Guarantor's financial condition, results of operation or business or the rights
of Lender hereunder or under any of the other Financing Agreements or the rights
of Lender in or to any of the Collateral. The execution, delivery and
performance of this Agreement, the other Financing Agreements and the
trans-
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actions contemplated hereunder and thereunder are all within Borrower's and
Guarantor's corporate powers, have been duly authorized and are not in
contravention of law or the terms of Borrower's or Guarantor's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower or Guarantor is a party or by which
Borrower or Guarantor or their property are bound. This Agreement and the other
Financing Agreements to which each of Borrower and/or Guarantor is a party
constitute legal, valid and binding obligations of Borrower and/or Guarantor, as
the case may be, enforceable in accordance with their respective terms. Each of
Borrower and Guarantor does not have any Subsidiaries except as set forth on the
Information Certificate.
8.2 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. All financial
statements relating to Borrower and Guarantor which have been or may hereafter
be delivered by Borrower or Guarantor to Lender have been prepared in accordance
with GAAP and fairly present the financial condition and the results of
operation of each of Borrower and Guarantor as at the dates and for the periods
set forth therein (except as to any interim financial statements, to the extent
such statements are subject to normal year-end adjustments and do not include
any notes). Except as disclosed in any interim financial statements furnished by
Borrower and Guarantor to Lender prior to the date of this Agreement, there has
been no material adverse change in the assets, liabilities, prospects and
condition, financial or otherwise of Borrower or Guarantor since the date of the
most recent audited financial statements furnished by Borrower and Guarantor to
Lender prior to the date of this Agreement.
8.3 CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS. The chief executive
office of Borrower and Guarantor and each of Borrower's and Guarantor's Records
concerning Accounts are located only at the addresses set forth below and the
only other places of business of Borrower or Guarantor and the only other
locations of Collateral, if any, are the addresses set forth in the Information
Certificates, subject to the right of Borrower and Guarantor to establish new
locations in accordance with Section 9.2 below. The Information Certificates of
Borrower and Guarantor correctly identify any of such locations which are not
owned by Borrower or Guarantor and sets forth the owners and/or operators
thereof and to the best of Borrower's and Guarantor's knowledge, the holders of
any mortgages on such locations.
8.4 PRIORITY OF LIENS; TITLE TO PROPERTIES. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Borrower has good
and marketable title to all of its properties and assets subject to no liens,
mortgages, pledges, security interests, encumbrances or charges of any kind,
except those granted to Lender and such others as are specifically listed on
Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 TAX RETURNS. Except as set forth in Schedule 8.5 hereto, in respect
of which the aggregate liability of Borrower and Guarantor does not exceed
$20,000, Borrower and Guarantor have filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations
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which are required to be filed by it (without requests for extension except as
previously disclosed in writing to Lender). All information in such tax returns,
reports and declarations is complete and accurate in all material respects.
Borrower and Guarantor have paid or caused to be paid all taxes due and payable
or claimed due and payable in any assessment received by it, except taxes the
validity of which are being contested in good faith by appropriate proceedings
diligently pursued and available to Borrower and Guarantor and with respect to
which adequate reserves have been set aside on its books. Adequate provision has
been made for the payment of all accrued and unpaid Federal, State, county,
local, foreign and other taxes whether or not yet due and payable and whether or
not disputed.
8.6 LITIGATION. Except as set forth on the Information Certificates,
there is no present investigation by any governmental agency pending, or to the
best of Borrower's or Guarantor's knowledge threatened, against or affecting
Borrower, Guarantor, their assets or business and there is no action, suit,
proceeding or claim by any Person pending, or to the best of Borrower's and
Guarantor's knowledge threatened, against Borrower or Guarantor or their assets
or goodwill, or against or affecting any transactions contemplated by this
Agreement, which if adversely determined against Borrower or Guarantor would
result in any material adverse change in the assets, business or prospects of
Borrower or Guarantor or would impair the ability of Borrower or Guarantor to
perform its obligations hereunder or under any of the other Financing Agreements
to which Borrower and/or Guarantor is a party or of Lender to enforce any
Obligations or realize upon any Collateral.
8.7 COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS. Neither
Borrower nor Guarantor is in default in any material respect under, or in
violation in any material respect of any of the terms of, any agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound. Borrower and Guarantor are in
compliance in all material respects with all applicable provisions of laws,
rules, regulations, licenses, permits, approvals and orders of any foreign,
Federal, State or local governmental authority.
8.8 MERGER.
(a) The Merger is valid and effective in accordance with the
terms of the Merger Agreements and the corporation statutes of the States of
Delaware and Massachusetts and Borrower is the surviving corporation pursuant to
the Merger.
(b) All actions and proceedings required by the Merger
Agreements, applicable law and regulation (including, but not limited to,
compliance with the Xxxx-Xxxxx-Xxxxxx Anti-Trust Improvements Act of 1976, as
amended) have been taken and the transactions required thereunder had been duly
and validly taken and consummated.
(c) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the
transactions described in the Merger Agreements and no governmental action or
proceeding has been threatened or commenced
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seeking any injunction, restraining order or other order which seeks to void or
otherwise modify the transactions described in the Merger Agreements.
(d) Borrower has delivered, or caused to be delivered, to Lender,
true, correct and complete copies of the Merger Agreements.
8.9 ACQUISITION OF PURCHASED ASSETS.
(a) The Purchase Agreements and the transactions contemplated
thereunder have been duly executed, delivered and performed in accordance with
their terms by the respective parties thereto in all respects, including the
fulfillment (not merely the waiver, except as may be disclosed to Lender and
consented to in writing by Lender) of all conditions precedent set forth therein
and giving effect to the terms of the Purchase Agreements and the assignments to
be executed and delivered by Aurora Electronics Group, Inc. (or any of its
affiliates or subsidiaries) thereunder, Borrower acquired and has good and
marketable title to the Purchased Assets, free and clear of all claims, liens,
pledges and encumbrances of any kind, except as permitted hereunder.
(b) All actions and proceedings, required by the Purchase Agreements,
applicable law or regulation (including, but not limited to, compliance with the
Xxxx-Xxxxx-Xxxxxx Anti-Trust Improvements Act of 1976, as amended) have been
taken and the transactions required thereunder have been duly and validly taken
and consummated.
(c) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the
transactions described in the Purchase Agreements and no governmental or other
action or proceeding has been threatened or commenced, seeking any injunction,
restraining order or other order which seeks to void or otherwise modify the
transactions described in the Purchase Agreements.
(d) Borrower has delivered, or caused to be delivered, to Lender, true,
correct and complete copies of the Purchase Agreements.
8.10 CAPITALIZATION.
(a) All of the issued and outstanding shares of capital stock of
Borrower are directly and beneficially owned and held by Guarantor and all of
such shares have been duly authorized and are fully paid and non-assessable,
free and clear of all claims, liens, pledges and encumbrances of any kind,
except as disclosed in writing to Lender.
(b) Borrower is solvent and will continue to be solvent after the
creation of the Obligations, the security interests of Lender and the other
transaction contemplated hereunder, is able to pay its debts as they mature and
has (and has reason to believe it will continue to have) sufficient capital (and
not unreasonably small capital) to carry on its business and all businesses in
which it is about to engage. The assets and properties of Borrower at a fair
valuation and at
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their present fair salable value are, and will be, greater than the indebtedness
of Borrower, and including subordinated and contingent liabilities computed at
the amount which, to the best of Borrower's knowledge, represents an amount
which can reasonably be expected to become an actual or matured liability.
8.11 BANK ACCOUNTS. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.11 hereto, subject to
the right of Borrower to establish new accounts in accordance with Section 9.13
below.
8.12 ENVIRONMENTAL COMPLIANCE.
(a) Except as set forth on Schedule 8.12 hereto, each of Borrower
and Guarantor has not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials or other
material or waste, on or off its premises (whether or not owned by it) in any
manner which at any time violates in any material respect any applicable
Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder and the operations of Borrower complies in all material
respects with all Environmental Laws and all licenses, permits, certificates,
approvals and similar authorizations thereunder.
(b) Except as set forth on Schedule 8.12 hereto, there has been
no investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any pending or
to the best of Borrower's and Guarantor's knowledge threatened, with respect to
any non-compliance with or violation of the requirements of any Environmental
Law by Borrower or Guarantor or the release, spill or discharge, threatened or
actual, of any Hazardous Material or other materials or waste or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or other material or waste or any other
environmental, health or safety matter, which affects Borrower or Guarantor or
their business, operations or assets or any properties at which Borrower or
Guarantor has transported, stored or disposed of any Hazardous Materials.
(c) Neither Borrower nor Guarantor has any material liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or other material or waste or
the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or other material or waste.
(d) Each of Borrower and Guarantor has all material licenses,
permits, certificates, approvals or similar authorizations required to be
obtained or filed in connection with the operations of Borrower and Guarantor
under any Environmental Law and all of such licenses, permits, certificates,
approvals or similar authorizations are valid and in full force and effect.
8.13 EMPLOYEE BENEFITS.
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(a) Borrower has not engaged in any transaction in connection
with which Borrower or its ERISA Affiliates could be subject to either a civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section
4975 of the Code, including any accumulated funding deficiency described in
Section 8.13(c) hereof and any deficiency with respect to vested accrued
benefits described in Section 8.13(d) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation has
been or is expected by Borrower to be incurred with respect to any employee
benefit plan of Borrower or its ERISA Affiliates. There has been no reportable
event (within the meaning of Section 4043(b) of ERISA) or any other event or
condition with respect to any employee pension benefit plan of Borrower or its
ERISA Affiliates which presents a risk of termination of any such plan by the
Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which Borrower or
its ERISA Affiliates is required under Section 302 of ERISA and Section 412 of
the Code to have paid under the terms of each employee benefit plan as
contributions to such plan as of the last day of the most recent fiscal year of
such plan ended prior to the date hereof, and no accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, exists with respect to any employee benefit plan, including any penalty
or tax described in Section 8.13(a) hereof and any deficiency with respect to
vested accrued benefits described in Section 8.13(d) hereof.
(d) The current value of all vested accrued benefits under all
employee benefit plans maintained by Borrower that are subject to Title IV of
ERISA does not exceed the current value of the assets of such plans allocable to
such vested accrued benefits, including any penalty or tax described in Section
8.13(a) hereof and any accumulated funding deficiency described in Section
8.13(c) hereof. The terms "current value" and "accrued benefit" have the
meanings specified in ERISA.
(e) Neither Borrower nor any of its ERISA Affiliates is or has
ever been obligated to contribute to any "multiemployer plan" (as such term is
defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.
8.14 ACCURACY AND COMPLETENESS OF INFORMATION. All information
furnished by or on behalf of Borrower or Guarantor in writing to Lender in
connection with this Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, including, without limitation, all
information on the Information Certificate is true and correct in all material
respects on the date as of which such information is dated or certified and does
not omit any material fact necessary in order to make such information not
misleading. No event or circumstance has occurred which has had or could
reasonably be expected to have a material adverse affect on the business, assets
or prospects of Borrower or Guarantor, which has not been accurately disclosed
to Lender in writing.
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8.15 SURVIVAL OF WARRANTIES; CUMULATIVE. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower and Guarantor shall now or hereafter give, or cause to be given, to
Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
----------------------------------
9.1 MAINTENANCE OF EXISTENCE. Each of Borrower and Guarantor shall at
all times preserve, renew and keep in full force and effect its corporate
existence and rights and franchises with respect thereto and maintain in full
force and effect all permits, licenses, trademarks, tradenames, approvals,
authorizations, leases and contracts necessary to carry on its business as
presently or proposed to be conducted. Each of Borrower and Guarantor shall give
Lender thirty (30) days prior written notice of any proposed change in its
corporate name, which notice shall set forth the new name and Borrower shall
deliver to Lender a copy of the amendment to the Certificate of Incorporation of
such Borrower or Guarantor, as the case may be, providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation of
Borrower or Guarantor, as the case may be, as soon as it is available.
9.2 NEW COLLATERAL LOCATIONS. Each of Borrower and Guarantor may open
any new location within the continental United States provided Borrower or
Guarantor, as the case may be, (a) gives Lender thirty (30) days prior written
notice of the intended opening of any such new location and (b) executes and
delivers, or causes to be executed and delivered, to Lender such agreements,
documents, and instruments as Lender may deem reasonably necessary or desirable
to protect its interests in the Collateral at such location, including UCC
financing statements.
9.3 COMPLIANCE WITH LAWS, REGULATIONS, ETC.
(a) Each of Borrower and Guarantor shall, at all times, comply in
all material respects with all laws, rules, regulations, licenses, permits,
approvals and orders applicable to it and duly observe all requirements of any
Federal, State or local governmental authority, including ERISA, the Code, the
Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards
Act of 1938, as amended, and all statutes, rules, regulations, orders, permits
and stipulations relating to environmental pollution and employee health and
safety, including all of the Environmental Laws.
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(b) Borrower and Guarantor shall establish and maintain, at their
expense, a system to assure and monitor its continued compliance in all material
respects with all Environmental Laws in all of its operations, which system
shall include annual reviews of such compliance by employees or agents of
Borrower and Guarantor who are familiar with the requirements of the
Environmental Laws. Copies of all environmental surveys, audits, assessments,
feasibility studies and results of remedial investigations shall be promptly
furnished, or caused to be furnished, by Borrower and Guarantor to Lender. Each
of Borrower and Guarantor shall take prompt and appropriate action to respond to
any non-compliance with any of the Environmental Laws and shall regularly report
to Lender on such response.
(c) Each of Borrower and Guarantor shall give both oral and
written notice to Lender promptly upon Borrower's or Guarantor's receipt of any
notice of, or Borrower's or Guarantor's otherwise obtaining knowledge of, (i)
the occurrence of any event involving the release, spill or discharge,
threatened or actual, of any Hazardous Material or (ii) any investigation,
proceeding, complaint, order, directive, claims, citation or notice with respect
to: (A) any non-compliance with or violation of any Environmental Law by
Borrower or Guarantor or (B) the release, spill or discharge, threatened or
actual, of any Hazardous Material or (C) the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of any
Hazardous Materials or (D) any other environmental, health or safety matter,
which affects Borrower or Guarantor or their business, operations or assets or
any properties at which Borrower or Guarantor transported, stored or disposed of
any Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is non-compliance, or any condition
which requires any action by or on behalf of Borrower or Guarantor in order to
avoid any non-compliance, with any Environmental Law, Borrower or Guarantor, as
the case may be, shall, at Lender's request and Borrower's expense: (i) cause an
independent environmental engineer acceptable to Lender to conduct such tests of
the site where Borrower's or Guarantor's non-compliance or alleged
non-compliance with such Environmental Laws has occurred as to such
non-compliance and prepare and deliver to Lender a report as to such
non-compliance setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and an estimate of
the costs thereof and (ii) provide to Lender a supplemental report of such
engineer whenever the scope of such non-compliance, or Borrower's or Guarantor's
response thereto or the estimated costs thereof, shall change in any material
respect.
(e) Borrower and Guarantor shall jointly and severally indemnify
and hold harmless Lender, its directors, officers, employees, agents, invitees,
representatives, successors and assigns, from and against any and all losses,
claims, damages, liabilities, costs, and expenses (including attorneys' fees and
legal expenses) directly or indirectly arising out of or attributable to the
use, generation, manufacture, reproduction, storage, release, threatened
release, spill, discharge, disposal or presence of a Hazardous Material or other
material or waste, including the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of Borrower or
Guarantor and the preparation and implementation of any closure, remedial or
other required plans. All representations, warranties, covenants and
indemnifications
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in this Section 9.3 shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
9.4 PAYMENT OF TAXES AND CLAIMS. Borrower and Guarantor shall duly pay
and discharge all taxes, assessments, contributions and governmental charges
upon or against it or its properties or assets, except for taxes the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower or Guarantor, as the case may be, and with
respect to which adequate reserves have been set aside on its books. Borrower
and Guarantor shall be liable for any tax or penalties imposed on Lender as a
result of the financing arrangements provided for herein and Borrower and
Guarantor agree jointly and severally to indemnify and hold Lender harmless with
respect to the foregoing, and to repay to Lender on demand the amount thereof,
and until paid by Borrower or Guarantor, as the case may be, such amount shall
be added and deemed part of the Loans, provided, that, nothing contained herein
shall be construed to require Borrower or Guarantor to pay any income or
franchise taxes attributable to the income of Lender from any amounts charged or
paid hereunder to Lender. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
9.5 INSURANCE. Borrower and/or Guarantor shall, at all times, maintain
with financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar business and similarly
situated. Said policies of insurance shall be reasonably satisfactory to Lender
as to form, amount and insurer. Borrower or Guarantor, as the case may be, shall
furnish certificates, policies or endorsements to Lender as Lender shall require
as proof of such insurance, and, if Borrower or Guarantor, as the case may be,
fails to do so, Lender is authorized, but not required, to obtain such insurance
at the expense of Borrower. All policies shall provide for at least thirty (30)
days prior written notice to Lender of any cancellation or reduction of coverage
and that Lender may act as attorney for Borrower and Guarantor in obtaining, and
at any time an Event of Default exists or has occurred, adjusting, settling,
amending and canceling such insurance. Each Borrower shall cause Lender to be
named as a loss payee and an additional insured (but without any liability for
any premiums) under such insurance policies and Borrower or Guarantor, as the
case may be, shall obtain non-contributory lender's loss payable endorsements to
all insurance policies in form and substance satisfactory to Lender. Such
lender's loss payable endorsements shall specify that the proceeds of such
insurance shall be payable to Lender as its interests may appear and further
specify that Lender shall be paid regardless of any act or omission by Borrower
or any of its Affiliates. At its option, Lender may apply any insurance proceeds
received by Lender at any time to the cost of repairs or replacement of
Collateral and/or to payment of the Obligations, whether or not then due, in any
order and in such manner as Lender may determine or hold such proceeds as cash
collateral for the Obligations.
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9.6 FINANCIAL STATEMENTS AND OTHER INFORMATION.
(a) Each of Borrower and Guarantor shall keep proper books and
records in which true and complete entries shall be made of all dealings or
transactions of or in relation to the Collateral and the business of Borrower,
Guarantor and their Subsidiaries (if any) in accordance with GAAP and Borrower
shall furnish or cause to be furnished to Lender: (i) within thirty (30) days
after the end of each fiscal month, monthly unaudited consolidated financial
statements and unaudited consolidating financial statements (including in each
case balance sheets, statements of income and loss, statements of cash flow, and
statements of shareholders' equity), all in reasonable detail, fairly presenting
the financial position and the results of the operations of Borrower, Guarantor
and their Subsidiaries (if any) as of the end of and through such fiscal month
and (ii) within ninety (90) days after the end of each fiscal year, audited
consolidated financial statements and unaudited consolidating financial
statements of Borrower, Guarantor and any Subsidiaries (including in each case
balance sheets, statements of income and loss, statements of cash flow and
statements of shareholders' equity), and the accompanying notes thereto, all in
reasonable detail, fairly presenting the financial position and the results of
the operations of Borrower, Guarantor and their Subsidiaries (if any) as of the
end of and for such fiscal year, together with the unqualified opinion of
independent certified public accountants, which accountants shall be an
independent accounting firm selected by Borrower or Guarantor and reasonably
acceptable to Lender, that such financial statements have been prepared in
accordance with GAAP, and present fairly the results of operations and financial
condition of Borrower, Guarantor and their Subsidiaries as of the end of and for
the fiscal year then ended.
(b) Borrower and Guarantor shall promptly notify Lender in
writing of the details of (i) any material loss, damage, investigation, action,
suit, proceeding or claim relating to the Collateral or any other property which
is security for the Obligations or which would result in any material adverse
change in Borrower's or Guarantor's business, properties, assets, goodwill or
condition, financial or otherwise and (ii) the occurrence of any Event of
Default or act, condition or event which, with the passage of time or giving of
notice or both, would constitute an Event of Default.
(c) Borrower and Guarantor shall promptly after the sending or
filing thereof furnish or cause to be furnished to Lender copies of all reports
which Borrower or Guarantor sends to its stockholders generally and copies of
all reports and registration statements which Borrower or Guarantor files with
the Securities and Exchange Commission, any national securities exchange or the
National Association of Securities Dealers, Inc.
(d) Borrower and Guarantor shall furnish or cause to be furnished
to Lender such budgets, forecasts, projections and other information respecting
the Collateral and the business of Borrower and Guarantor, as Lender may, from
time to time, reasonably request. Lender is hereby authorized to deliver a copy
of any financial statement or any other information relating to the business of
Borrower or Guarantor to any court or other government agency or to any
participant or assignee or prospective participant or assignee. Each of Borrower
and Guarantor hereby irrevocably authorizes and directs all accountants or
auditors to deliver to Lender, at
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Borrower's expense, copies of the financial statements of Borrower and Guarantor
and any reports or management letters prepared by such accountants or auditors
on behalf of Borrower and Guarantor and to disclose to Lender such information
as they may have regarding the business of Borrower and Guarantor. Any
documents, schedules, invoices or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender one (1) year after the same are
delivered to Lender, except as otherwise designated by Borrower to Lender in
writing.
9.7 SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC. Each of
Borrower and Guarantor shall not, directly or indirectly, (a) merge into or with
or consolidate with any other Person or permit any other Person to merge into or
with or consolidate with it, or (b) sell, assign, lease, transfer, abandon or
otherwise dispose of any Capital Stock or indebtedness to any other Person or
any of its assets to any other Person EXCEPT, FOR, (i) sales of Inventory in the
ordinary course of business, (ii) the disposition of worn-out or obsolete
Equipment or Equipment no longer used in the business of Borrower so long as (A)
any proceeds are paid to Lender and (B) such sales do not involve Equipment
having an aggregate fair market value in excess of $250,000 for all such
Equipment disposed of in any fiscal year of Borrower); or (c) form or acquire
any Subsidiaries, or (d) wind up, liquidate or dissolve or (e) agree to do any
of the foregoing.
9.8 ENCUMBRANCES. Each of Borrower and Guarantor shall not create,
incur, assume or suffer to exist any security interest, mortgage, pledge, lien,
charge or other encumbrance of any nature whatsoever on any of its assets or
properties, including the Collateral, EXCEPT: (a) the liens and security
interests of Lender; (b) liens securing the payment of taxes, either not yet
overdue or the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower or
Guarantor, as the case may be, and with respect to which adequate reserves have
been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of the
business or Borrower or Guarantor, as the case may be, to the extent: (i) such
liens secure indebtedness which is not overdue or (ii) such liens secure
indebtedness relating to claims or liabilities which are fully insured and being
defended at the sole cost and expense and at the sole risk of the insurer or
being contested in good faith by appropriate proceedings diligently pursued and
available to Borrower or Guarantor, in each case prior to the commencement of
foreclosure or other similar proceedings and with respect to which adequate
reserves have been set aside on its books; (d) zoning restrictions, easements,
licenses, covenants and other restrictions affecting the use of real property
which do not interfere in any material respect with the use of such real
property or ordinary conduct of the business of Borrower or Guarantor as
presently conducted thereon or materially impair the value of the real property
which may be subject thereto; (e) purchase money security interests in Equipment
(including capital leases) and purchase money mortgages on real estate securing
indebtedness of up to $500,000 in the aggregate at any time outstanding, so long
as such security interests and mortgages do not apply to any property of
Borrower or Guarantor other than the Equipment or real estate so acquired, and
the indebtedness secured thereby does not exceed the cost of the Equipment or
real estate so acquired, as the case may be; (f) purchase money security
interests in Inventory acquired from Banctec, Inc. securing indebtedness of up
to $300,000 in the aggregate; PROVIDED, THAT, (i) such security interests do not
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apply to any property of Borrower or Guarantor (including, without limitation,
Accounts arising in whole or in part from the sale or other disposition of such
Inventory by or on behalf of Borrower), other than the Inventory so acquired by
Borrower from Banctec, Inc., (ii) such Inventory shall not be commingled with
other Inventory of Borrower, but shall at all times be segregated from other
Inventory of Borrower and identified and identifiable as Inventory acquired from
Banctec, Inc. and (iii) in no event shall such Inventory be included in any
report as to the Inventory of Borrower as Eligible Inventory and in any report
as to the Inventory of Borrower, such Inventory shall be separately identified;
(g) the liens and security interests of WCAS and its Affiliates on the assets of
Borrower and certain of its Affiliates, as described on Schedule 9.8 hereto, to
secure the indebtedness of Borrower to WCAS and its Affiliates permitted under
Section 9.9 hereof, which liens and security interests are, in all respects,
subject and subordinate in priority to the liens and security interests of
Lender pursuant to the intercreditor and subordination agreement among Lender,
WCAS and its Affiliates, dated on or about the date hereof; and (h) the security
interests and liens set forth on Schedule 8.4 hereto.
9.9 INDEBTEDNESS. Each of Borrower and Guarantor shall not incur,
create, assume, become or be liable in any manner with respect to, or permit to
exist, any obligations or Indebtedness, EXCEPT:
(a) the Obligations;
(b) obligations of Borrower and/or Guarantor in favor of Lender
or Burdale Financial Limited in connection with the Burdale Facility;
(c) trade obligations and normal accruals in the ordinary course
of business;
(d) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in violation
of any other provision of this Agreement;
(e) indebtedness of Guarantor evidenced by or arising under the
Subordinated Debentures, as in effect on the date hereof; PROVIDED, THAT:
(i) the aggregate principal amount of such indebtedness shall
not exceed $10,451,000 less the aggregate amount of all repayments, repurchases
or redemptions, whether optional or mandatory, in respect thereof, plus interest
thereon at the rate provided for in the Subordinated Debentures as in effect on
the date hereof,
(ii) Borrower and Guarantor shall not, directly or indirectly,
make any payments in respect of such Indebtedness, EXCEPT, THAT, Guarantor may
repurchase up to twenty (20%) percent of the outstanding Subordinated Debentures
in respect of the sinking fund payment in the original principal amount of
$1,826,000 due and payable on April 15, 2000 in respect of the Subordinated
Debentures; PROVIDED, THAT (A) such repurchase shall fully satisfy and defease
the sinking fund payment then due and owing in respect of all Subordinated
Debentures
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and (B) the aggregate consideration paid or payable by Guarantor in respect of
such repurchase shall not exceed $500,000,
(iii)Borrower and Guarantor shall not, directly or indirectly,
(A) amend, modify, alter or change in any material respect any of the terms of
such indebtedness or of the Subordinated Debentures, or any related agreements,
documents or instruments, EXCEPT, THAT, Borrower or Guarantor may, after prior
written notice to Lender, amend, modify, alter or change the terms thereof so as
to extend the maturity thereof, or defer the timing of any payments in respect
thereof, or to forgive or cancel any portion of such indebtedness (other than
pursuant to payments thereof), or to reduce the interest rate or any fees in
connection therewith, or to make any covenants contained therein less
restrictive or burdensome as to Borrower or Guarantor, as the case may be, or
otherwise more favorable to Borrower or Guarantor, as the case may be, or (B)
redeem, retire, defease, purchase or otherwise acquire such indebtedness (except
pursuant to regularly scheduled payments permitted herein), or set aside or
otherwise deposit or invest any sums for such purpose, except for the repurchase
permitted under clause (ii) above,
(iv) Borrower or Guarantor, as the case may be, shall furnish
to Lender all notices or demands in connection with such indebtedness either
received by Borrower or Guarantor, as the case may be, or on its behalf,
promptly after the receipt thereof, or sent by Borrower or Guarantor, as the
case may be, or on its behalf, concurrently with the sending thereof, as the
case may be, and
(v) Borrower and Guarantor shall furnish to Lender all notices
or demands in connection with such Indebtedness received by Borrower or
Guarantor promptly after the receipt thereof, or sent by Borrower or Guarantor
concurrently with the sending thereof, as the case may be;
(f) indebtedness of Borrower pursuant to the WCAS Financing
Agreements as in effect on the date hereof PROVIDED THAT;
(i) the aggregate principal amount of such indebtedness shall
not exceed $25,450,727.77, less the aggregate amount of all repayments,
repurchases, or redemptions, whether optional or mandatory, in respect thereof,
plus interest thereon at the rate provided in the WCAS Financing Agreements as
in effect on the date hereof,
(ii) Borrower and Guarantor shall not directly or indirectly,
make or be required to make any payments in respect of such indebtedness and the
obligations of Borrower and Guarantor with respect to such Indebtedness shall be
subject in all respects to the Intercreditor and Subordination Agreement among
Lender, WCAS and certain Affiliates of WCAS,
(iii) Borrower and Guarantor shall not, directly or
indirectly, (A) amend, modify, alter or change in any material respect any of
the terms of such indebtedness or of any of the WCAS Financing Agreements,
EXCEPT, THAT, Borrower or Guarantor may, after prior written
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notice to Lender, amend, modify, alter or change the terms thereof so as to
extend the maturity thereof, or defer the timing of any payments in respect
thereof, or to forgive or cancel any portion of such indebtedness (other than
pursuant to payments thereof), or to reduce the interest rate or any fees in
connection therewith, or to make any covenants contained therein less
restrictive or burdensome as to Borrower or Guarantor, as the case may be, or
otherwise more favorable to Borrower or Guarantor, as the case may be, or (B)
redeem, retire, defease, purchase or otherwise acquire such indebtedness, or set
aside or otherwise deposit or invest any sums for such purpose,
(iv) Borrower or Guarantor, as the case may be, shall furnish
to Lender all notices or demands in connection with such indebtedness either
received by Borrower or Guarantor, as the case may be, or on its behalf,
promptly after the receipt thereof, or sent by Borrower or Guarantor, as the
case may be, or on its behalf, concurrently with the sending thereof, as the
case may be, and
(v) Borrower and Guarantor shall furnish to Lender all notices
or demands in connection with such Indebtedness received by Borrower or
Guarantor promptly after the receipt thereof, or sent by Borrower or Guarantor
concurrently with the sending thereof, as the case may be;
(g) Indebtedness of Guarantor evidenced by or arising under the
Series B Notes as in effect on the date hereof, PROVIDED THAT:
(i) to aggregate principal amount of such indebtedness shall
not exceed $387,820.82 less the aggregate amount of all repayments, repurchases
or redemptions, whether optional or mandatory, in respect thereof, plus interest
thereon at the rate provided for in the Series B Notes as in effect on the date
hereof,
(ii) Borrower and Guarantor shall not, directly or indirectly,
make or be required to make any payments in respect of such indebtedness,
(iii) Borrower and Guarantor shall not directly or indirectly,
(A) amend, modify, alter or change in any material respect any of the terms of
such indebtedness or any related agreements, documents or instruments, EXCEPT,
THAT, Borrower or Guarantor may, after prior written notice to Lender, amend,
modify, alter or change the terms thereof so as to extend the maturity thereof,
or defer the timing of any payments in respect thereof, or to forgive or cancel
any portion of such indebtedness (other than pursuant to payments thereof), or
to reduce the interest rate or any fees in connection therewith, or to make any
covenants contained therein less restrictive or burdensome as to Borrower or
Guarantor, as the case may be, or otherwise more favorable to Borrower or
Guarantor, as the case may be, or (B) redeem, retire, defease, purchase or
otherwise acquire such indebtedness, or set aside or otherwise deposit or invest
any sums for such purpose,
(iv) Borrower or Guarantor, as the case may be, shall furnish
to Lender all notices or demands in connection with such indebtedness either
received by Borrower or
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Guarantor, as the case may be, or on its behalf, promptly after the receipt
thereof, or sent by Borrower or Guarantor, as the case may be, or on its behalf,
concurrently with the sending thereof, as the case may be, and
(v) Borrower and Guarantor shall furnish to Lender all notices
or demands in connection with such indebtedness received by Borrower or
Guarantor promptly after the receipt thereof, or sent by Borrower or Guarantor
concurrently with the sending thereof, as the case may be; and
(h) the indebtedness set forth on Schedule 9.9 hereto; PROVIDED, THAT:
(i) Borrower and Guarantor may only make regularly
scheduled payments of principal and interest in respect of such indebtedness in
accordance with the terms of the agreement or instrument evidencing or giving
rise to such indebtedness as in effect on the date hereof,
(ii) Borrower and Guarantor shall not, directly or
indirectly, (A) amend, modify, alter or change the terms of such indebtedness or
any agreement, document or instrument related thereto as in effect on the date
hereof, or (B) redeem, retire, defease, purchase or otherwise acquire such
indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and
(iii) Borrower and Guarantor shall furnish to Lender all
notices or demands in connection with such indebtedness either received by
Borrower and Guarantor or on its behalf, promptly after the receipt thereof, or
sent by each of Borrower or on its behalf, concurrently with the sending
thereof, as the case may be.
9.10 LOANS, INVESTMENTS, GUARANTEES, ETC. Each of Borrower and
Guarantor shall not, directly or indirectly, make any loans or advance money or
property to any Person, or invest in (by capital contribution, dividend or
otherwise) or purchase or repurchase the Capital Stock or indebtedness or all or
a substantial part of the assets or property of any person, or guarantee,
assume, endorse, or otherwise become responsible for (directly or indirectly)
the indebtedness, performance, obligations or dividends of any Person or agree
to do any of the foregoing, except:
(a) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(b) investments in: (i) short-term direct obligations of the United
States Government, (ii) negotiable certificates of deposit issued by any bank
satisfactory to Lender, payable to the order of Borrower or Guarantor, as the
case may be, or to bearer and delivered to Lender, and (iii) commercial paper
rated A1 or P1; PROVIDED, THAT, as to any of the foregoing, unless waived in
writing by Lender, Borrower and Guarantor shall take such actions as are deemed
necessary by Lender to perfect the security interest of Lender in such
investments;
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(c) the guarantee by Guarantor in favor of Burdale Financial
Limited of the obligations of Cerplex Ltd. under the Burdale Facility;
(d) the existing loans, advances and guarantees set forth on
Schedule 9.10 hereto, PROVIDED, THAT, as to such loans, advances and guarantees,
(i) each of Borrower and Guarantor shall not, directly or indirectly, (A) amend,
modify, alter or change the terms of such loans, advances or guarantees or any
agreement, document or instrument related thereto, or (B) as to such guarantees,
redeem, retire, defease, purchase or otherwise acquire such guarantee or set
aside or otherwise deposit or invest any sums for such purpose and (ii) Borrower
shall furnish to Lender all notices, demands or other materials in connection
with such loans, advances or guarantees either received by Borrower or Guarantor
or on behalf of either of them, promptly after the receipt thereof, or sent by
Borrower or Guarantor or on behalf of either of them, concurrently with the
sending thereof, as the case may be.
9.11 DIVIDENDS AND REDEMPTIONS. Each of Borrower and Guarantor shall
not, directly or indirectly, declare or pay any dividends on account of any
shares of class of Capital Stock of such party now or hereafter outstanding, or
set aside or otherwise deposit or invest any sums for such purpose, or redeem,
retire, defease, purchase or otherwise acquire any shares of any class of
Capital Stock (or set aside or otherwise deposit or invest any sums for such
purpose) for any consideration other than common stock or apply or set apart any
sum, or make any other distribution (by reduction of capital or otherwise) in
respect of any such shares or agree to do any of the foregoing EXCEPT that
Borrower may declare and pay dividends to Guarantor to the extent necessary to
permit Guarantor to make the payment required to repurchase certain of the
Subordinated Debentures to the extent such repurchase is permitted under Section
9.9(e) hereof.
9.12 TRANSACTIONS WITH AFFILIATES. Each of Borrower and Guarantor shall
not, directly or indirectly, (a) purchase, acquire or lease any property from,
or sell, transfer or lease any property to, any officer, director, agent or
other Affiliate except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and reasonable terms no less
favorable to Borrower than Borrower would obtain in a comparable arm's length
transaction with a person who is not an Affiliate or (b) make any payments of
(i) management, consulting or other fees for management or similar services, or
(ii) any indebtedness owing to any officer, employee, shareholder, director or
other Affiliate of Borrower, or (iii) administrative costs and expenses of
Guarantor and reasonable compensation to officers, employees and directors of
Guarantor for services rendered to Borrower in the ordinary course of business
except, with respect to all of the items specified in this Section 9.12(b)(iii),
in the amount of up to $500,000 in the aggregate in any twelve (12) month period
during the term hereof.
9.13 ADDITIONAL BANK ACCOUNTS. Borrower shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts and the accounts set forth in Schedule 8.10 hereto, except:
(a) as to any new or additional Blocked Accounts and other such new or
additional accounts which contain any Collateral or proceeds thereof, with the
prior written consent of Lender and subject to such conditions thereto as Lender
may establish and (b)
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as to any accounts used by Borrower to make payments of payroll, taxes or other
obligations to third parties, after prior written notice to Lender.
9.14 COMPLIANCE WITH ERISA.
(a) Borrower shall not with respect to any "employee benefit
plans" maintained by Borrower or any of its ERISA Affiliates: (i) terminate any
of such employee benefit plans so as to incur any liability to the Pension
Benefit Guaranty Corporation established pursuant to ERISA, (ii) allow or suffer
to exist any prohibited transaction involving any of such employee benefit plans
or any trust created thereunder which would subject Borrower or such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA, (iii) fail to pay to any such
employee benefit plan any contribution which it is obligated to pay under
Section 302 of ERISA, Section 412 of the Code or the terms of such plan, (iv)
allow or suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any such employee benefit plan, (v) allow or suffer to
exist any occurrence of a reportable event or any other event or condition which
presents a material risk of termination by the Pension Benefit Guaranty
Corporation of any such employee benefit plan that is a single employer plan,
which termination could result in any liability to the Pension Benefit Guaranty
Corporation or (vi) incur any withdrawal liability with respect to any
multiemployer pension plan.
(b) As used in this Section 9.14, the terms "employee benefit
plans", "accumulated funding deficiency" and "reportable event" shall have the
respective meanings assigned to them in ERISA, and the term "prohibited
transaction" shall have the meaning assigned to it in Section 4975 of the Code
and ERISA.
9.15 ADJUSTED NET WORTH. Borrower shall maintain Adjusted Net Worth of
not less than the respective amount set forth below at all times during each
period indicated:
Period Amount
------ ------
From the date hereof through and
including June 29, 2000 $25,500,000
From June 30, 2000 through and
including September 29, 2000 $26,250,000
From September 30, 2000 through
and including December 30, 2000 $26,750,000
From December 31, 2000 and
thereafter $27,500,000
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9.16 YEAR 2000 COMPLIANCE. Borrower shall take all action which may be
required so that its computer-based information systems, including, without
limitation, all of its proprietary computer hardware and software and all
computer hardware and software leased or licensed from third parties (and
whether supplied by others or with which Borrower's systems interface) are able
to operate effectively in all material respects and correctly process data using
dates on or after January 1, 2000. Compliance with the foregoing shall mean that
the systems will operate and correctly process data without human intervention
such that (a) there is correct century recognition, (b) calculations properly
accommodate same century and multi-century formulas and date values, (c) all
leap years shall be calculated corrected and (d) the information systems shall
otherwise comply with applicable industry standards and regulatory guidelines
regarding the change of the century and year 2000 compliance. Borrower shall, by
no later than December 15, 1999, certify to Lender in writing that their
information systems have been modified, updated and programmed as required by
this Section. On and after the date hereof, the computer-based information
systems of Borrower shall be, and with ordinary course upgrading and
maintenance, will continue to be sufficient to permit Borrower to conduct its
business in the ordinary course without any material adverse effect as a result
of the year 2000.
9.17 COSTS AND EXPENSES. Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including, but not limited to: (a)
all costs and expenses of filing or recording (including Uniform Commercial Code
financing statement filing taxes and fees, documentary taxes, intangibles taxes
and mortgage recording taxes and fees, if applicable); (b) costs and expenses
and fees for insurance premiums, environmental audits, surveys, assessments,
engineering reports and inspections, appraisal fees and search fees; (c) all
title insurance and other insurance premiums, appraisal fees and search fees;
(d) costs and expenses of remitting loan proceeds, collecting checks and other
items of payment, and establishing and maintaining the Blocked Accounts,
together with Lender's customary charges and fees with respect thereto; (e)
charges, fees or expenses charged by any bank or issuer in connection with the
Letter of Credit Accommodations; (f) costs and expenses of preserving and
protecting the Collateral; (g) costs and expenses paid or incurred in connection
with obtaining payment of the Obligations, enforcing the security interests and
liens of Lender, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Lender arising out
of the transactions contemplated hereby and thereby (including, without
limitation, preparations for and consultations concerning any such matters); (h)
all out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Lender during the course of periodic field examinations of the
Collateral and Borrower's operations, plus a per diem charge at the rate of $650
per person per day for Lender's examiners in the field and office; and (i) the
reasonable fees and disbursements of counsel (including legal assistants) to
Lender in connection with any of the foregoing.
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9.18 FURTHER ASSURANCES. At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such request by Lender, Lender may, at its option, cease to make any
further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, Borrower hereby
authorizes Lender to execute and file one or more UCC financing statements
signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
------------------------------
10.1 EVENTS OF DEFAULT. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a)(i) Borrower fails to pay when due any of the Obligations or
(ii) Borrower or any Obligor fails to perform any of the covenants contained in
Sections 9.3, 9.4, 9.14, 9.15, and 9.17 of this Agreement and such failure shall
continue for fifteen (15) days; PROVIDED, THAT, such fifteen (15) days period
shall not apply in the case of: (A) any failure to observe any such covenant
which is not capable of being cured at all or within such fifteen (15) day
period or which has been the subject of a prior failure within a six (6) month
period or (B) an intentional breach of Borrower or any Obligor of any such
covenant or (iii) Borrower fails to perform any of the terms, covenants,
conditions or provisions contained in this Agreement or any of the other
Financing Agreements other than those described in Section 10.1(a)(i) or Section
10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by
Borrower or Guarantor to Lender in this Agreement, the other Financing
Agreements or any other agreement, schedule, confirmatory assignment or
otherwise shall when made or deemed made be false or misleading in any material
respect;
(c) any representation, warranty or statement of fact made by
Cerplex Ltd. to Burdale Financial Limited, in any agreement, document or
instrument executed and/or delivered in connection with the Burdale Facility
shall when made or deemed made be false or misleading in any material respect;
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(d) any Obligor revokes, terminates or fails to perform any of
the material terms, covenants, conditions or provisions of any guarantee,
endorsement or other agreement of such party in favor of Lender;
(e) any judgment for the payment of money is rendered against
Borrower or Obligor in excess of $250,000 in any one case or in excess of
$500,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against Borrower or
Obligor or any of its assets;
(f) any Obligor (being a natural person or a general partner of
an Obligor which is a partnership) dies or Borrower or any Obligor, which is a
partnership, limited liability company, limited liability partnership or
corporation, dissolves or suspends or discontinues doing business;
(g) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrower or any Obligor or all or any part of its
properties and such petition or application is not dismissed within thirty (30)
days after the date of its filing or Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(i) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or any Obligor or for all or any part of its
property; or
(j) any default by Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, including, without limitation, in respect any such
indebtedness under the WCAS Financing Agreements or in respect of the
Subordinated Debentures, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any case
in an amount in excess of $100,000, which default continues for more than the
applicable cure period, if any, with respect thereto, or any default by Borrower
or any Obligor under any material contract to any person other than Lender,
which default continues for more than the applicable cure period, if any, with
respect thereto;
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(k) any change in the controlling ownership of Borrower or
Guarantor;
(l) the indictment or threatened indictment of Borrower or any
Obligor under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings by any governmental unit or agency against
Borrower or any Obligor, pursuant to which statute or proceedings by any
governmental unit or agency the penalties or remedies sought or available
include forfeiture of any of the property of Borrower or such Obligor;
(m) there shall be a material adverse change in the business or
assets of Borrower or any Obligor after the date hereof; or
(n) there shall be an event of default under any of the other
Financing Agreements or event of default under or pursuant to any agreement,
document or instrument executed and/or delivered in connection with the Burdale
Facility (after giving effect to any applicable cure period with respect thereto
set forth in any such agreement, document or instrument) .
10.2 REMEDIES.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (PROVIDED, THAT, upon the occurrence of any
Event of Default described in Sections 10.1(h) and 10.1(i), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise
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dispose of any and all Collateral (including, without limitation, entering into
contracts with respect thereto, public or private sales at any exchange,
broker's board, at any office of Lender or elsewhere) at such prices or terms as
Lender may deem reasonable, for cash, upon credit or for future delivery, with
the Lender having the right to purchase the whole or any part of the Collateral
at any such public sale, all of the foregoing being free from any right or
equity of redemption of Borrower, which right or equity of redemption is hereby
expressly waived and released by Borrower and/or (vii) terminate this Agreement.
If any of the Collateral is sold or leased by Lender upon credit terms or for
future delivery, the Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Lender. If notice of disposition of
Collateral is required by law, five (5) days prior notice by Lender to Borrower
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and Borrower waives any other notice. In
the event Lender institutes an action to recover any Collateral or seeks
recovery of any Collateral by way of prejudgment remedy, Borrower waives the
posting of any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrower shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Loans and Letter of Credit Accommodations
available to Borrower and/or (ii) terminate any provision of this Agreement
providing for any future Loans or Letter of Credit Accommodations to be made by
Lender to Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
---------------------------------
11.1 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL
WAIVER.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of California
(without giving effect to principles of conflicts of law).
(b) Borrower, Guarantor and Lender irrevocably consent and submit
to the non-exclusive jurisdiction of the Superior Court of Los Angeles County,
California and the United
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Xxxxxx Xxxxxxxx Xxxxx for the Central District of California and waive any
objection based on venue or FORUM NON CONVENIENS with respect to any action
instituted therein arising under this Agreement or any of the other Financing
Agreements or in any way connected with or related or incidental to the dealings
of the parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard only in the courts described above (except that Lender shall have the
right to bring any action or proceeding against Borrower or Guarantor or its
property in the courts of any other jurisdiction which Lender deems necessary or
appropriate in order to realize on the Collateral or to otherwise enforce its
rights against Guarantor or Borrower or its property).
(c) Each of Borrower and Guarantor hereby waives personal service
of any and all process upon it and consents that all such service of process may
be made by certified mail (return receipt requested) directed to its address set
forth on the signature pages hereof and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited in the U.S.
mails, or, at Lender's option, by service upon Borrower or Guarantor in any
other manner provided under the rules of any such courts. Within thirty (30)
days after such service, Borrower or Guarantor, as the case may be, shall appear
in answer to such process, failing which Borrower or Guarantor shall be deemed
in default and judgment may be entered by Lender against Borrower or Guarantor
or for the amount of the claim and other relief requested.
(d) BORROWER, GUARANTOR AND LENDER EACH HEREBY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING
UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN
RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER,
GUARANTOR AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY
AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower or Guarantor
(whether in tort, contract, equity or otherwise) for losses suffered by Borrower
or Guarantor in connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Agreement, or any act,
omission or event occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or court order binding on Lender, that the
losses were the result of acts or omissions constituting gross negligence or
willful misconduct. In any such litigation, Lender shall be entitled to the
benefit of the rebuttable presumption that it
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acted in good faith and with the exercise of ordinary care in the performance by
it of the terms of this Agreement.
11.2 WAIVER OF NOTICES. Each of Borrower and Guarantor hereby expressly
waives demand, presentment, protest and notice of protest and notice of dishonor
with respect to any and all instruments and commercial paper, included in or
evidencing any of the Obligations or the Collateral, and any and all other
demands and notices, of any kind or nature whatsoever with respect to the
Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein. No notice to or demand on Borrower or Guarantor which
Lender may elect to give shall entitle Borrower or Guarantor to any other or
further notice or demand in the same, similar or other circumstances.
11.3 AMENDMENTS AND WAIVERS. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower and Guarantor. Lender shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its rights,
powers and/or remedies unless such waiver shall be in writing and signed by an
authorized officer of Lender. Any such waiver shall be enforceable only to the
extent specifically set forth therein. A waiver by Lender of any right, power
and/or remedy on any one occasion shall not be construed as a bar to or waiver
of any such right, power and/or remedy which Lender would otherwise have on any
future occasion, whether similar in kind or otherwise.
11.4 WAIVER OF COUNTERCLAIMS. Each of Borrower and Guarantor waives all
rights to interpose any claims, deductions, setoffs or counterclaims of any
nature (other then compulsory counterclaims) in any action or proceeding with
respect to this Agreement, the Obligations, the Collateral or any matter arising
therefrom or relating hereto or thereto.
11.5 INDEMNIFICATION. Borrower and Guarantor shall jointly and
severally indemnify and hold Lender, its Affiliates, and their respective
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in this Section may be unenforceable because it
violates any law or public policy, Borrower or Guarantor, as the case may be
shall pay the maximum portion which it is permitted to pay under applicable law
to Lender in satisfaction of indemnified matters under this Section. The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
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SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
--------------------------------
12.1 TERM.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on February 28, 2001 (the
"Expiration Date"), whereupon this Agreement and the other Financing Agreements
shall terminate simultaneously. Upon the Expiration Date of the Financing
Agreements, Borrower shall pay to Lender, in full, all outstanding and unpaid
Obligations and shall furnish cash collateral to Lender in such amounts as
Lender determines are reasonably necessary to secure Lender from loss, cost,
damage or expense, including attorneys' fees and legal expenses, in connection
with any contingent Obligations, including issued and outstanding Letter of
Credit Accommodations and checks or other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final and
indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate to Borrower for
such purpose. Interest shall be due until and including the next Business Day,
if the amounts so paid by Borrower to the bank account designated by Lender are
received in such bank account later than 12:00 noon, Los Angeles, California
time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower or Guarantor of its respective
duties, obligations and covenants under this Agreement or the other Financing
Agreements until all Obligations have been fully and finally discharged and
paid, and Lender's continuing security interest in the Collateral and the rights
and remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the
Expiration Date, in view of the impracticality and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Lender's lost profits as a result thereof, Borrower
agrees to pay to Lender, upon the effective date of such termination, an early
termination fee in the amount set forth below if such termination is effective
in the period indicated:
Amount Period
------ ------
(i) 2% of Maximum Credit From the date hereof to and including
May 23, 2000
(ii) 1.5% of Maximum Credit From May 24, 2000 to and including
November 23, 2000
(iii) 1.0% of Maximum Credit From November 24, 2000 to and including
February 28, 2001.
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Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrower or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination fee
provided for in this Section 12.1 shall be deemed included in the Obligations.
(d) Notwithstanding anything to the contrary contained in Section
12.1(c) above, in the event of the termination of this Agreement by Borrower
after the one (1) year anniversary of the date of this Agreement and the full
and final repayment of all of the Obligations and the receipt by Lender of cash
collateral all as provided in Section 12.1(a) above from the proceeds of the
initial loans and advances by Reference Bank to Borrower pursuant to a credit
facility provided by Reference Bank to Borrower to replace the financing
arrangements by Lender provided for herein, Borrower shall not be required to
pay the early termination fee provided for above.
12.2 NOTICES. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower
and Guarantor at their chief executive office set forth below, or to such other
address as either party may designate by written notice to the other in
accordance with this provision, and (b) deemed to have been given or made: if
delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next Business Day, one (1) Business Day after sending; and if by
certified mail, return receipt requested, five (5) days after mailing.
12.3 PARTIAL INVALIDITY. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 SUCCESSORS. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower, Guarantor and their
respective successors and assigns, except that Borrower may not assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Lender. Lender may, after notice to Borrower, assign its rights and delegate its
obligations under this Agreement and the other Financing Agreements and further
may assign, or sell participations in, all or any part of the Loans, the Letter
of Credit Accommodations or any other interest herein to another financial
institution or other person, in which event, the assignee or participant shall
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have, to the extent of such assignment or participation, the same rights and
benefits as it would have if it were the Lender hereunder, except as otherwise
provided by the terms of such assignment or participation.
12.5 ENTIRE AGREEMENT. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Lender, Borrower and Guarantor have caused these
presents to be duly executed as of the day and year first above written.
LENDER BORROWER
------ --------
CONGRESS FINANCIAL CORPORATION CERPLEX, INC.
(WESTERN)
By: By:
--------------------------- -------------------------
Title: Title:
------------------------ ----------------------
Address: Chief Executive Office:
-------- -----------------------
000 Xxxxx Xxxx Xxxxxx 000 Xxxxxxxx Xxxxxx, #000
Xxxxxxxx, Xxxxxxxxxx 00000 Xxxxxx, Xxxxxxxxxx 00000
GUARANTOR
---------
THE CERPLEX GROUP, INC.,
By: -------------------------
Title:
-----------------------
Chief Executive Office:
-----------------------
000 Xxxxxxxx Xxxxxx, #000
Xxxxxx, Xxxxxxxxxx 00000
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