EXHIBIT E
CREDIT AND SECURITY AGREEMENT
Dated as of June 28, 2001
This Credit and Security Agreement is made as of the date set forth
above by and between Rockshox, Inc., a Delaware corporation (the "Borrower), and
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Xxxxx Fargo Bank, N.A. (the "Lender").
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WITNESSETH
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WHEREAS, Borrower has requested that the Lender enter into financing
arrangements with it pursuant to which Lender may make loans and provide other
financial accommodations to Borrower; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, Borrower is entering into a Second Amended and Restated Credit and
Security Agreement with Xxxxx Fargo Business Credit, Inc. providing for a credit
facility to finance working capital for Borrower's domestic operations (the
"Domestic Credit Facility"); and
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WHEREAS, Lender is willing to make such loans and provide such
financial accommodations 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 are hereby acknowledged, Lender and Borrower
agrees as follows:
ARTICLE 1
Definitions
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Section 1.1 Definitions. For all purposes of this Agreement,
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except as otherwise expressly provided or unless the context otherwise requires:
"Accounts" means the aggregate unpaid obligations of customers and
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other account debtors to Borrower arising out of the sale or lease of goods
or rendition of services by Borrower on an open account or deferred payment
basis, whether now existing or hereafter arising.
"AccountsReceivable" shall mean all of the Borrower's now owned or
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hereafter acquired (a) "accounts" (as such term is defined in the UCC),
other receivables, book debts and other forms of obligations, whether
arising out of goods sold or services rendered or from any other
transaction; (b) rights in, to and under all purchase orders or receipts
for goods or services; (c) rights to any goods represented or purported to
be represented by any of the foregoing (including unpaid sellers' rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods); (d) moneys due or to become due
to Borrower under all purchase orders and contracts for the sale of goods
or the performance of services or both by Borrower (whether or not yet
earned by performance on the part of Borrower), including the proceeds of
the foregoing; (e) any notes, drafts, letters of credit, insurance proceeds
or other instruments, documents and writings evidencing or supporting the
foregoing; and (f) all collateral security and guarantees of any kind given
by any other Person with respect to any of the foregoing.
"Advance" means a Revolving Advance.
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"Affiliate" or "Affiliates" means any Person controlled by,
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controlling or under common control with Borrower, including (without
limitation) any subsidiary of Borrower. For purposes of this definition,
"control," when used with respect to any specified Person, means the power
to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise.
"Agreement" means this Credit and Security Agreement, as amended,
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supplemented and restated from time to time.
"Availability" means the Borrowing Base less the outstanding principal
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balance of the Revolving Advances.
"Availability Reserve" means as of any date of determination, such
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amount or amounts as Lender may from time to time establish and revise in
good faith and in its reasonable judgment reducing the amount of Revolving
Advances 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 and in
its reasonable judgment, do or may affect either (i) the Collateral or its
value, (ii) the assets, business or prospects of Borrower, 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 to Lender is or may have
been incomplete, inaccurate or misleading in any material respect, or (c)
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; provided however, that in no event
shall (x) the rebate reserves established by Borrower, from time to time,
reduce the amount of Revolving Advances or (y) a reserve be created with
respect to any accounts which are deemed not to be Eligible Foreign
Accounts.
"Base Rate" means the rate of interest publicly announced from time to
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time by Xxxxx Fargo Bank, N.A., San Francisco, California, as its "prime
rate" or, if such bank ceases to announce a rate so designated, any similar
successor rate designated by the Lender (which rate shall in no case
deviate from the Prime Rate as published in the Wall Street Journal except
for time lag in adjustments which shall not exceed five (5) Business Days).
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"Borrower Agreement" means the Borrower Agreement of even date
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herewith by and between the Borrower and the Lender in the form attached
hereto as Exhibit B.
"Borrowing Base" means, at any time and subject to change from time to
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time in the Lender's sole discretion:
(a) the lowest of:
(i) Five Million Dollars ($5,000,000); or
(ii) 85% of eligible Foreign Accounts Receivable Value; or
(iii) the Maximum Line under the Domestic Credit Agreement
(as defined by the Domestic Credit Agreement) minus the outstanding
Advances under the Domestic Credit Facility (as such term is defined in the
Domestic Credit Agreement).
(b) minus any Availability Reserves.
"Borrowing Base Certificate" means a certificate, substantially in the
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form attached hereto as Exhibit D, executed by Borrower and accepted by the
Lender.
"Business Day" means any day on which the Federal Reserve Bank of New
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York is open for business.
"Closing Date" means the date of this Agreement.
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"Collateral" has the meaning given in Section 3.1.
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"Commitment" means the Lender's commitment to make Advances to or for
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the Borrower's account pursuant to Article 2.
"Country Limitation Schedule" shall mean the most recent schedule
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published by Eximbank and provided to the Borrower by the Lender which sets
forth on a country by country basis whether and under what conditions
Eximbank will provide coverage for the financing of export transactions to
countries listed therein.
"Credit Facility" means the credit facility made available to the
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Borrower pursuant to Article 2.
"Debt" of any Person means, without duplication, all items of
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indebtedness or liability that in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a balance
sheet of that Person as at the date as of which Debt is to be determined.
For purposes of determining a Person's aggregate Debt at any time, "Debt"
shall also include the aggregate payments required to be made by such
Person at any time under any lease that is considered a capitalized lease
under GAAP.
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"Default" means an event that, with giving of notice or passage of
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time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the day a
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Default Event of Default has occurred and ending on the date the Lender
notifies Borrower in writing that the Default or Event of Default has been
waived or otherwise cured (if curable).
"Default Rate" means an annual rate equal to three percent (3%) over
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the Floating Rate, which rate shall change when and as the Floating Rate
changes.
"Domestic Credit Agreement" means that certain Second Amended and
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Restated Credit and Security Agreement dated as of June 28, 2001 by and
between the Borrower and WFBC, as the same may be amended, supplemented or
restated from time to time.
"Domestic Credit Facility" means the credit facility extended to the
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Borrower pursuant to the Domestic Credit Agreement.
"Eligible Foreign Accounts" means all Accounts owed by Account debtors
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of either Borrower located outside the US for the sale or provision of
Items, except the following shall not in any event be deemed Eligible
Foreign Accounts:
(i) That portion of Accounts not yet earned by the final
delivery of goods or rendition of services, as applicable, or for which an
invoice has not been issued, by the Borrower to the customer;
(ii) That portion of Accounts arising from any Items that
have been returned, rejected or repossessed;
(iii) Accounts as to which covenants, representations or
warranties in this Agreement with respect to such Account have been
breached;
(iv) That portion of Accounts unpaid 90 days or more after
the invoice date (in the event the Accounts have trade terms beyond 30
days, that portion of Accounts unpaid 30 days after the due date or 120
days after the invoice date, whichever is shorter);
(v) That portion of Accounts that is due and payable from a
Buyer who (A) applies for, suffers, or consents to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of all or a substantial part of its property or calls a
meeting of its creditors, (B) admits in writing its inability, or its
generally unable, to pay its debts as they become due or ceases operations
of its present business, (C) makes a general assignment for the benefit of
creditors, (D) files a petition seeking to take advantage of any other law
providing for the relief of debtors, (E) acquiesces to, or fails to have
dismissed , any petition which is filed against it in any involuntary case
under such bankruptcy laws, or (F) takes any action for the purpose of
effecting any of the foregoing;
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(vi) That portion of Accounts that arises from a
xxxx-and-hold, guaranteed sale, sale-and-return, sale on approval,
consignment or any other repurchase or return basis or is evidenced by
chattel paper;
(vii) Accounts that do not comply with the terms set forth in
Section 7 of the Loan Authorization Notice;
(viii) Accounts not from sale of Items in the ordinary course
of the Borrower's business;
(ix) Accounts owed by a shareholder, Affiliate, officer or
employee of the Borrower;
(x) Accounts owed by an account debtor that is insolvent, the
subject of bankruptcy proceedings or has gone out of business;
(xi) Accounts not subject to a duly perfected security
interest in favor of the Lender or which are subject to any lien, security
interest or claim in favor of any Person other than the Lender or WFBC.;
(xii) That portion of Accounts that constitutes finance
charges, service charges or sales or excise taxes;
(xiii) Accounts that arise from the sale of Items containing
less than fifty percent (50%) US Content;
(xiv) Accounts that arise from the sale of Items containing
any Foreign Content not incorporated into such Items in the US;
(xv) That portion of Accounts that is payable in a currency
other than US Dollars unless prior written approval has been received from
Eximbank;
(xvi) That portion of Accounts owed by military buyers or for
defense articles or services, except as may be approved in writing by the
Lender and Eximbank;
(xvii) That portion of Accounts due and collectible outside
the US;
(xviii) That portion of Accounts owed by Account debtors
located in, or arising from sales of Items delivered to, a Prohibited
Country;
(xix) That portion of Accounts that does not comply with the
requirements of the Country Limitation Schedule;
(xx) That portion of Accounts that has been restructured,
extended, amended or modified; except for those Accounts discounted in the
ordinary course of the Borrower's business and such discounts are reflected
on the invoice;
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(xxi) That portion of Accounts that is disputed or subject to
a claim of offset, contra account, defense, dispute or counterclaim or the
Account debtor is also a creditor or supplier of the Borrower or the
Account or any portion thereof is contingent in any respect for any reason;
(xxii) That portion of Accounts backed by a letter of credit
unless Items covered by that letter of credit have been shipped;
(xxiii) Accounts not owned by the Borrower or subject to any
right, claim or interest of another person other than the liens in favor of
the Lender;
(xxiv) Accounts owed by an account debtor, regardless of
whether otherwise eligible, if twenty-five percent (25%) or more of the
total amount due under Accounts from such debtor is ineligible under
clauses (i) or (ix) above;
(xxv) That portion of Accounts of a single debtor or its
affiliates which constitute more than twenty-five percent (25%) of all
otherwise Eligible Accounts; provided that, such percentage with respect to
Accounts owed by Giant Manufacturing Company, Ltd. and Merida Industry Co.,
Ltd. shall be forty percent (40%);
(xxvi) Accounts which arise from the sale of any Items to be
used in the construction, alteration, operation or maintenance of nuclear
power, enrichment, reprocessing, research or heavy water production
facilities;
(xxvii) That portion of Accounts, or portions thereof,
otherwise deemed ineligible for any reason by the Lender or Eximbank in its
discretion; and
(xxviii) Accounts which are deemed Eligible Accounts under
the Domestic Credit Agreement.
"Event of Default" has the meaning specified in Section 7.1.
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"Eximbank" means the Export-Import Bank of the United States.
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"Export Order" means a bona fide written export order or contract to
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purchase Items from the Borrower from a customer outside the US.
"Floating Rate" means an annual rate equal to the sum of the Base Rate
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plus seven hundred twenty five thousandth percent (0.725%), which annual
rate shall change when and as the Base Rate changes; provided, however,
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such Floating Rate shall be adjusted as follows: if (i) no Event of Default
exists or has occurred and is continuing, and (ii) Borrower's Net Income is
not less than Two Million Dollars ($2,000,000) for the fiscal year ending
on March 31, 2002, the Floating Rate shall be reduced to an annual rate
equal to the sum of the Base Rate plus three hundred seventy five
thousandths percent (0.375%).
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"Foreign Accounts Receivable Value" shall mean, at the date of
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determination thereof, the aggregate face amount of Eligible Foreign
Accounts less taxes, discounts, credits, allowances and Retainages, except
to the extent otherwise permitted by Eximbank in writing.
"Foreign Content" means that portion of the cost of Inventory arising
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from materials which are not of US origin or from labor and services not
performed in the US.
"Funding Date" has the meaning given in Section 2.1.
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"GAAP" means generally accepted accounting principles, applied on a
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basis consistent with the accounting practices applied in the financial
statements described in Section 5.2.
"Inventory" means all of the Borrower's inventory, as such term is
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defined in the UCC, whether now owned or hereafter acquired.
"Items" means the goods and services to be sold by Borrower to
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customers located outside the US.
"Loan Authorization Notice" means the notification of even date
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herewith regarding the Credit Facility given by the Lender to Eximbank on
Eximbank's required form.
"Loan Documents" means this Agreement, the Note, the Borrower
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Agreement, the Loan Authorization Notice, and the Security Documents.
"Lockbox" has the meaning given in Section 6.7.
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"Master Guaranty" means the Master Guarantee Agreement by and between
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Lender and Eximbank, as amended, modified, supplemented and restated from
time to time.
"Maturity Date" means December 10, 2003.
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"Maximum Line" means the lesser of (i) Five Million Dollars
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($5,000,000) or (ii) the Maximum Line under the Domestic Credit Agreement
(as defined by the Domestic Credit Agreement) minus the outstanding
advances under the Domestic Credit Facility.
"Net Income" has the meaning defined by GAAP.
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"Net Sales"means the gross sales of the Borrower, determined in
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accordance with GAAP, less returns, credit memos and discounts.
"Note" means the Revolving Note.
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"Obligations" means each and every debt, liability and obligation of
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every type and description, relating to this Agreement, which Borrower may
now or at any time hereafter owe to the Lender, including all indebtedness
arising under this Agreement and the Note, whether now in effect or
hereafter entered into. Obligations shall not refer to Obligations as such
term is defined in the Domestic Credit Agreement.
"Person" means any individual, corporation, partnership, joint
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venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Permitted Liens" means mortgages, deeds of trust, pledges, liens,
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security interests, adverse claims, assignments or transfers of interests
in the Collateral acceptable to the Lender in its sole discretion including
without limitation the following:
(a) in the case of any of the Borrower's property which is
not Collateral or other collateral described in this Agreement, covenants,
restrictions, rights, easements and minor irregularities in title which do
not materially interfere with the Borrower's business or operations as
presently conducted;
(b) mortgages, deeds of trust, pledges, liens security
interests and assignments in existence on the date hereof and listed in
Exhibit E hereto;
(c) the Security Interest and liens and security interests
created by this Agreement;
(d) purchase money security interests relating to the
acquisition of machinery and equipment of the Borrower not exceeding the
cost or fair market value thereof and so long as no Default Period is then
in existence and none would exist immediately after such acquisition;
(e) liens for taxes, assessments or governmental charges or
levies on the Borrower's property not exceeding Fifty Thousand Dollars
($50,000) if the same shall not at the time be delinquent or thereafter can
be paid without penalty, or are being contested in good faith and by
appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on the Borrower's books;
(f) liens imposed by law, such as carriers', warehousemen's
and mechanics' liens and other similar liens arising in the ordinary course
of business which secure payment of obligations not more than 60 days past
due or which are being contested in good faith by appropriate proceedings
and for which adequate reserves shall have been set aside on its books;
(g) liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation;
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(h) the replacement, extension or renewal of any lien
permitted hereunder so long as the Debt secured by such lien is not
increased by such replacement, extension or renewal; and
(i) liens of WFBC in connection with the Domestic Credit
Facility and Liens of Eximbank.
"Premises" means all premises where Borrower conduct its business and
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has any rights of possession.
"Prohibited Country" means any country in which Eximbank coverage is
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not available for commercial reasons or in which Eximbank is legally
prohibited from doing business, as designated in the Country Limitation
Schedule.
"Retainage" shall mean that portion of the purchase price of an Export
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Order that a buyer is not obligated to pay until the end of a specified
period of time following the satisfactory performance under such Export
Order.
"Revolving Advance" has the meaning given in Section 2.1.
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"Revolving Note" means the Borrower's revolving promissory note,
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payable to the order of the Lender in substantially the form of Exhibit A
hereto.
"Security Documents" means this Agreement.
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"Security Interest" has the meaning given in Section 3.1.
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"Tangible Net Worth" means the difference between (i) the tangible
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assets of the Borrower, which, in accordance with GAAP are tangible assets,
after deducting adequate reserves in each case where, in accordance with
GAAP, a reserve is proper and (ii) all Debt of the Borrower; provided,
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however, that notwithstanding the foregoing in no event shall there be
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included as such tangible assets patents, trademarks, trade names,
copyrights, licenses, goodwill, receivables from Affiliates, directors,
officers or employees, prepaid expenses, deposits, deferred charges or
treasury stock or any securities or Debt of the Borrower or any other
securities unless the same are readily marketable in the United States of
America or entitled to be used as a credit against federal income tax
liabilities, and any other assets designated from time to time by the
Lender, in its sole discretion.
"Termination Date" means the earliest of (i) the Maturity Date, (ii)
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the date Borrower terminates the Credit Facility, or (iii) the date the
Lender demands payment of the Obligations after an Event of Default
pursuant to Section 7.2.
"UCC" means the Uniform Commercial Code as in effect from time to time
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in the State of California.
"US" means the United States of America.
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"US Content" means with respect to any Item all the labor, materials
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and services which are of US origin or manufacture, and which are
incorporated into an Item in the United States.
"Warranty" shall mean Borrower's guarantee to any buyer that has
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entered into one or more Export Orders with Borrower that the Items will
function as intended during the warranty period set forth in the applicable
Export Order.
"WFBC" means Xxxxx Fargo Business Credit, Inc., a Minnesota
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corporation.
ARTICLE 2
Amount and Terms of the Credit Facility
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Section 2.1 Revolving Advances.
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(a) The Lender agrees to make advances (each a "Revolving
Advance") to the Borrower from time to time from the date all of the conditions
set forth in Section 4.1 are satisfied (the "Funding Date") to the Termination
Date, in each case on the terms and subject to the conditions herein set forth,
to provide the Borrower with working capital in accordance with clause (c)
below. The Lender shall have no obligation to make a Revolving Advance to
Borrower if, after giving effect to the requested Revolving Advance, the
outstanding Revolving Advances would exceed the Borrowing Base or the Maximum
Line.
(b) The Borrower's obligation to pay the Revolving Advances
shall be evidenced by the Revolving Note and shall be secured by the Collateral.
(c) The Borrower shall use Revolving Advances only for the
purpose of enabling the Borrower to finance the cost of manufacturing,
producing, purchasing or selling the Items in order to fulfill Export Orders.
the Borrower may not use any of the Revolving Advances for the purpose of (i)
servicing or repaying Borrower's pre-existing or future indebtedness unrelated
to the Loan Facility (unless approved by Eximbank in writing); (ii) acquiring
fixed assets or capital goods for use in the Borrower's business; (iii)
acquiring, equipping or renting commercial space outside of the US; (iv) paying
the salaries of non-US citizens or non-U. S. permanent residents who are located
in offices outside of the United States; or (v) in connection with a Retainage
or Warranty (unless approved by Eximbank in writing). In addition, no Revolving
Advance may be used to finance the manufacture, purchase or sale of any of the
following: (i) Items to be sold or resold to a Buyer located in a country as to
which Eximbank is prohibited from doing business as designated in the Country
Limitation Schedule; (ii) that part of the cost of the Items which is not US
Content unless such part is not greater than fifty percent (50%) of the cost of
the Items and is incorporated into the Items in the United States; (iii) defense
articles or defense services; or (iv) without Eximbank's prior written consent,
any Items to be used in the construction, alteration, operation or maintenance
of nuclear power, enrichment, reprocessing, research or heavy water production
facilities.
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(d) Within the limits set forth in this Section 2.1, the
Borrower may request Revolving Advances, prepay without premium or penalty and
without terminating the Credit Facility, and request additional Revolving
Advances.
Section 2.2 Requests for Advances. The Borrower shall make each
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request for a Revolving Advance to the Lender before 10:30 a.m. (Los Angeles,
California time) of the day of the requested Revolving Advance. Requests for
Revolving Advances may be made in writing or by telephone. The Lender will not
consider any such request unless the Lender has received from the Borrower,
among other things which may be reasonably required by Lender, a Borrowing Base
Certificate submitted no less than one month before the date of the requested
Advance and copies of the Export Orders (or a summary thereof) against which the
Borrower is requesting such Advance. Any request for an Advance shall be deemed
to be a representation by the Borrower that the conditions set forth in Section
4.2 have been satisfied as of the date of the request.
Section 2.3 Interest; Default Interest. All interest shall be
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payable monthly in arrears on the first day of the month and on the Termination
Date.
(a) Revolving Note. Except as set forth in subsection (b) and
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(c), the outstanding principal balance of the Advances shall bear interest at
the Floating Rate.
(b) Default Interest Rate. At any time during any Default Period,
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in the Lender's sole discretion and without waiving any of its other rights and
remedies, the principal of the Obligations outstanding from time to time shall
bear interest at the Default Rate, effective for any periods designated by the
Lender from time to time during that Default Period.
(c) Usury. In any event no rate change shall be put into effect
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which would result in a rate greater than the highest rate permitted by law.
Section 2.4 Fees.
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(a) Application Fee. The Borrower shall reimburse the Lender for
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the $100 application fee payable to Eximbank in connection with the Master
Guaranty.
(b) Facility Fee. The Borrower shall pay the Lender an
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annual facility fee of one percent (1.0%) of Five Million Dollars ($5,000,000)
or the maximum Commitment Amount for each year this Agreement is in effect. Such
fee shall be fully earned and non-refundable and payable on the Closing Date and
each anniversary of the Closing Date.
Section 2.5 Termination by the Borrower. The Borrower may
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terminate this Agreement at any time upon 30 days' prior written notice to the
Lender and, subject to payment and performance of all Obligations, shall be
entitled to obtain any release or termination of the Security Interest to which
the Borrower is otherwise entitled by law.
Section 2.6 Mandatory Prepayment. Without notice or demand, if
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the outstanding principal balance of the Revolving Advances shall at any time
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exceed the Borrowing Base, the Borrower shall immediately prepay the Revolving
Advances to the extent necessary to eliminate such excess.
Section 2.7 Advances Without Request. The Borrower hereby
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authorizes the Lender, in its discretion, at any time or from time to time
without Borrower's request, to make Revolving Advances to pay accrued interest,
fees, uncollected items that have been applied to the Obligations, and other
Obligations due and payable from time to time.
Section 2.8 Facility Subject to Eximbank Rules. The Borrower
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acknowledges that the Lender is willing to make the Credit Facility available to
the Borrower because the Eximbank is willing to guaranty payment of a
significant portion of the Obligations pursuant to the Guaranty. Accordingly,
in the event of any inconsistency among this Agreement, the Note, the Borrower
Agreement, the Loan Authorization Notice, Security Documents or the Master
Guaranty or related documents, the provision that is the more stringent on the
Borrower shall control.
ARTICLE 3
Security Interest
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Section 3.1 Grant of Security Interest. Terms used herein that
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are defined in the California Uniform Commercial Code shall have the meanings
given to them in the Code. The Borrower hereby grants to the Lender a security
interest (the "Security Interest") in the following collateral (the
"Collateral"), as security for the payment and performance of the Obligations:
INVENTORY: All inventory of the Borrower, as such term is defined in the
UCC, whether now owned or hereafter acquired, whether consisting of whole
goods, spare parts or components, supplies or materials, whether acquired,
held or furnished for sale, for lease or under service contracts or for
manufacture or processing, and wherever located;
ACCOUNTS AND OTHER RIGHTS TO PAYMENT: Each and every right of the Borrower
to the payment of money, including Accounts and Accounts Receivable,
whether such right to payment now exists or hereafter arises, whether such
right to payment arises out of a sale, lease or other disposition of goods
or other property, out of a rendering of services, out of a loan, out of
the overpayment of taxes or other liabilities, or otherwise arises under
any contract or agreement, whether such right to payment is created,
generated or earned by the Borrower or by some other Person who
subsequently transfers such Person's interest to the Borrower, whether such
right to payment is or is not already earned by performance, and howsoever
such right to payment may be evidenced, together with all other rights and
interests (including all liens and security interests) which the Borrower
may at any time have by law or agreement against any account debtor or
other obligor obligated to make any such payment or against any property of
such account debtor or other obligor; all including all of the Borrower's
rights to payment in the form of all present and future accounts, contract
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rights, loans and obligations receivable, chattel papers, electronic
chattel papers, bonds, notes and other debt instruments, tax refunds and
rights to payment in the nature of general intangibles;
EQUIPMENT: All of the Borrower's equipment, as such term is defined in the
UCC whether now or hereafter owned, including all present and future
machinery, vehicles, furniture, fixtures, manufacturing equipment, shop
equipment, office and recordkeeping equipment, parts, tools, supplies, and
including specifically the goods described in any equipment schedule or
list herewith or hereafter furnished to the Lender by the Borrower;
GENERAL INTANGIBLES: All of the Borrower's general intangibles, as such
term is defined in the UCC, whether now owned or hereafter acquired,
including all present and future contract rights, patents, patent
applications, copyrights, trademarks, trade names, trade secrets, customer
or supplier lists and contracts, manuals, operating instructions, permits,
franchises, the right to use the Borrower's name, and the goodwill of the
Borrower's business; and
INVESTMENT PROPERTY: All of the Borrower's investment property, as such
term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all securities, security entitlements,
securities accounts, commodity contracts, commodity accounts, stocks,
bonds, mutual fund shares, money market shares and US Government
securities;
plus all commercial tort claims, farm products, as-extracted collateral,
timber, crops, deposit accounts, letters of credit, proceeds of letters of
credit, chattel paper, electronic chattel paper all sums on deposit in any
Collateral Account (as defined in the Domestic Credit Agreement) and any
items in any Lockbox;
together with (i) all other collateral described in any Security Document,
(ii) all substitutions and replacements for and products of any of the
foregoing property, , (iii) in the case of all tangible property, together
with (A) all accessions, accessories, attachments, parts, equipment and
repairs now or hereafter attached or affixed to or used in connection with
any such goods, and (B) all warehouse receipts, bills of lading and other
documents of title now or hereafter covering such goods, and (iv) all
proceeds of any and all of the foregoing property.
Section 3.2 Notification of Account Debtors and Other Obligors.
----------------------------------------------------
Upon the occurrence and during the continuance of an Event of Default, the
Lender may notify any account debtor or other Person obligated to pay the amount
due that such right to payment has been assigned or transferred to the Lender
for security and shall be paid directly to the Lender. The Borrower will join
in giving such notice if the Lender so requests. At any time after the Borrower
or the Lender gives such notice to an account debtor or other obligor, the
Lender may, but need not, in the Lender's name or in the Borrower's name, (a)
demand, xxx for, collect or receive any money or property at any time payable or
receivable on account of, or securing, any such right to payment, or grant any
extension to, make any compromise or settlement with or otherwise agree to
waive, modify, amend or change the obligations (including collateral
13
obligations) of any such account debtor or other obligor; and (b) as the
Borrower's agent and attorney-in-fact, notify the US Postal Service to change
the address for delivery of the Borrower's mail to any address designated by the
Lender, otherwise intercept the Borrower's mail, and receive, open and dispose
of the Borrower's mail for purposes of the collection of Collateral, applying
all Collateral as permitted under this Agreement and holding all other mail for
the Borrower's account or forwarding such mail to the Borrower's last known
address.
Section 3.3 Assignment of Insurance. As additional security for
------------------------
the payment and performance of the Obligations, the Borrower hereby assigns to
the Lender any and all monies (including, without limitation, proceeds of
insurance and refunds of unearned premiums) due or to become due under, and all
other rights of the Borrower with respect to, any and all policies of insurance
now or at any time hereafter covering the Collateral or any evidence thereof or
any business records or valuable papers pertaining thereto, and the Borrower
hereby directs the issuer of any such policy to pay all such monies directly to
the Lender. At any time, whether or not a Default Period then exists, the Lender
may (but need not), in the Lender's name or in the Borrower's name, execute and
deliver proof of claim, receive all such monies, and endorse checks and other
instruments representing payment of such monies. Following the occurrence of
and during the continuance of an Event of Default, the Lender may (but need
not), in the Lender's name or in the Borrower's name, adjust, litigate,
compromise or release any claim against the issuer of any such policy.
Section 3.4 Occupancy.
---------
(a) The Borrower hereby irrevocably grants to the Lender the right
to take possession of the Premises at any time following the occurrence of and
during the continuance of an Event of Default.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise dispose of
goods that are Collateral and for other purposes that the Lender in good faith
considers related or incidental purpose.
(c) The Lender's right to hold the Premises shall terminate upon
the earlier of (i) payment in full of all Obligations, (ii) final sale or
disposition of all goods constituting Collateral and delivery of all such goods
to purchasers or (iii) waiver of the Event of Default.
(d) The Lender shall not be obligated to pay or account for any
rent or other compensation for the possession or use of any of the Premises;
provided, however, that if the Lender does pay or account for any rent or other
compensation for the possession or use of any of the Premises, the Borrower
shall reimburse the Lender promptly for the full amount thereof.
Section 3.5 License. The Borrower hereby grants to the Lender a
-------
non-exclusive, worldwide and royalty-free license to use or otherwise exploit
all trademarks, franchises, trade names, copyrights and patents of the Borrower
for the purpose of selling, leasing or otherwise disposing of any or all
Collateral following the occurrence and during the continuation of an Event of
Default.
14
Section 3.6 Filing a Copy. A carbon, photographic, or other
---------------
reproduction of this Agreement or of a financing statement signed by the
Borrower is sufficient as a financing statement.
ARTICLE 4
Conditions of Lending
---------------------
Section 4.1 Conditions Precedent to Lender's the Initial
-------------------------------------------------
Revolving Advance. The Lender's obligation to make the initial Revolving
----------
Advance hereunder shall be subject to the condition precedent that the Lender
shall have received all of the following, each in form and substance
satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Note, properly executed by the Borrower.
(c) The SBA/Eximbank Joint Application, properly completed and
executed by the Borrower.
(d) The Borrower Agreement, properly executed by the Borrower.
(e) A properly completed and executed Borrowing Base Certificate
as of a date not more than five (5) Business Days before the date of this
Agreement.
(f) An Exceptions Approval Letter, properly signed by Eximbank.
(g) An Intercreditor Agreement executed by Lender and WFBC.
(h) An Participation and Servicing Agreement executed by
Lender and WFBC.
(i) Evidence that there has been no material adverse change, as
determined by Lender, in the financial condition or business of the Borrower,
nor any material decline, as determined by Lender, in the market value of any
Collateral or a substantial or material portion of the assets of the Borrower
since the date of the latest financial statements of the Borrower delivered to
Lender prior to the Funding Date.
(j) Copies of the Borrower's federal tax returns for the last year
together with all schedules thereto.
(k) Current searches of appropriate filing offices showing that
(i) no state or federal tax liens have been filed and remain in effect against
the Borrower, (ii) no financing statements or assignments of patents, trademarks
or copyrights have been filed and remain in effect against the Borrower except
those financing statements and assignments of patents, trademarks or copyrights
relating to Permitted Liens or to liens held by Persons who have agreed in
writing that upon receipt of proceeds of the Advances, they will deliver UCC
15
releases and/or terminations and releases of such assignments of patents,
trademarks or copyrights satisfactory to the Lender, and (iii) the Lender has
duly filed all financing statements necessary to perfect the Security Interest,
to the extent the Security Interest is capable of being perfected by filing.
(l) A certificate of the Borrower's secretary or assistant
secretary certifying as to (i) the resolutions of the Borrower's directors and
if required, shareholders, authorizing the execution, delivery and performance
of the Loan Documents, (ii) the Borrower's certificate of incorporation and
bylaws, and (iii) the signatures of the Borrower's officers or agents authorized
to execute and deliver the Loan Documents and other instruments, agreements and
certificates, including Advance requests, on the Borrower's behalf.
(m) A current certificate issued by the Secretary of State of
Delaware, certifying that the Borrower is in compliance with all applicable
organizational requirements of the State of Delaware.
(n) Evidence from appropriate governmental officials that (i) the
Borrower is duly licensed or qualified to transact business in all jurisdictions
where the character of the property owned or leased or the nature of the
business transacted by it makes such licensing or qualification necessary, and
(ii) it has obtained and maintains all necessary export licenses.
(o) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in the Lender's
favor and with all liability insurance naming the Lender as an additional
insured.
(p) Payment of the fees and commissions due through the date of
the initial Advance and expenses incurred by the Lender through such date and
required to be paid by the Borrower under Sections 2.4(a), 2.4(b) and 8.2,
including all legal expenses incurred through the Closing Date.
(q) All documents relating to the Domestic Credit Facility,
properly executed by all parties thereto.
(r) Completion of a field review of the books and records of the
Borrower and such other information with respect to the Collateral as Lender may
reasonably require and a review of the Borrower's projections, budgets, business
plans, cash flows and such other financial information as Lender may require,
the results of all of which shall be satisfactory to Lender in its sole
discretion.
(s) Evidence that there has been no material adverse change, as
determined by Lender, in the financial condition or business of the Borrower,
nor any material decline, as determined by Lender, in the market value of any
Collateral or a substantial or material portion of the assets of the Borrower
since the date of the latest financial statements of the Borrower delivered to
Lender prior to the Funding Date.
(t) Satisfaction of any Eximbank requirements.
(u) Approval from Eximbank.
16
(v) Such other documents as the Lender in its sole discretion may
require.
Section 4.2 Conditions Precedent to All Advances. The Lender's
--------------------------------------
obligation to make each Advance shall be subject to the further conditions
precedent that on such date:
(a) the representations and warranties contained in Article 5 are
correct on and as of the date of such Advance as though made on and as of such
date, except to the extent that such representations and warranties relate
solely to an earlier date; and
(b) no event has occurred and is continuing, or would result
from such Advance which constitutes a Default or an Event of Default.
ARTICLE 5
Representations and Warranties
------------------------------
The Borrower represents and warrants to the Lender as follows:
Section 5.1 Name; Locations; Tax ID No.; Subsidiaries. During its
-----------------------------------------
existence, the Borrower has done business solely under the corporate names as
set forth herein and under such trade names and such other corporate names as
disclosed to Lender in writing before this Agreement is signed and delivered.
The address of the Borrower's chief executive office and principal place of
business and its federal tax identification number are set forth below its
signature to this Agreement. All Inventory is located at that location or at one
of the other locations disclosed to Lender in writing before this Agreement is
signed and delivered. The Borrower has no subsidiaries except as disclosed to
Lender in writing before this Agreement is signed and delivered.
Section 5.2 Financial Condition; No Adverse Change. The Borrower
---------------------------------------
has heretofore furnished to the Lender audited financial statements for its
fiscal year ended March 31, 2000 and unaudited financial statements of the
Borrower for the nine month period ending December 31, 2000, and those
statements fairly present the Borrower's financial condition on the dates
thereof and the results of its operations and cash flows for the periods then
ended and were prepared in accordance with GAAP, subject in the case of
unaudited financial statements to year-end audit adjustments and the absence of
footnotes. Since the date of the most recent financial statements, there has
been no material adverse change in the Borrower's business, properties or
condition (financial or otherwise).
Section 5.3 Suspension and Debarment, etc. On the date of this
-------------------------------
Agreement neither Borrower nor any of its Principals (as defined below) are (A)
debarred, suspended, proposed for debarment with a final determination still
pending, declared ineligible or voluntarily excluded (as such terms are defined
under any of the Debarment Regulations referred to below) from participating in
procurement or nonprocurement transactions with any US federal government
department or agency pursuant to any of the Debarment Regulations (as defined
below) or (B) indicted, convicted or had a civil judgment rendered against the
Borrower or any of its Principals for any of the offenses listed in any of the
Debarment Regulations. Unless authorized by Eximbank, the Borrower will not
knowingly enter into any transactions in connection with the Items with any
person who is debarred, suspended, declared ineligible or voluntarily excluded
from participation in procurement or nonprocurement transactions with any US
federal government department or agency pursuant to any of the Debarment
Regulations. The Borrower will provide immediate written notice to the Lender if
17
at any time it learns that the certification set forth in this Section 5.3 was
erroneous when made or has become erroneous by reason of changed circumstances.
For the purposes hereof, (1) "Principals" shall mean any officer, director,
owner, partner, key employee, or other person with primary management or
supervisory responsibilities with respect to the Borrower; or any other person
(whether or not an employee) who has critical influence on or substantive
control over the transaction covered by this Agreement and (2) the Debarment
Regulations shall mean (x) the Governmentwide Debarment and Suspension
(Nonprocurement) regulations (Common Rule), 53 Fed. Reg. 19204 (May 26, 1988),
(y) Subpart 9.4 (Debarment, Suspension and Ineligibility) of the Federal
Acquisition Regulations, 48 C.F.R. 9.400-9.409 and (z) the revised
Governmentwide Debarment and Suspension (Nonprocurement) regulations (Common
Rule), 60 Fed. Reg. 33037 (June 26, 1995). The Borrower acknowledges that any
statement, certification or representation made by it in connection with the
Credit Facility is subject to the penalties provided in Article 18 USC. Section
1001.
ARTICLE 6
Borrower's Covenants
--------------------
So long as the Advances or any amount owing to Lender hereunder shall
remain unpaid, the Borrower will comply with the requirements in this Article,
unless the Lender shall otherwise consent in writing.
Section 6.1 Reporting Requirements. The Borrower will deliver to
----------------------
the Lender each of the following in form and detail acceptable to the Lender:
(a) as soon as available, and in any event within ninety (90) days
after the end of each fiscal year of the Borrower, the Borrower's audited
consolidated financial statements with the unqualified opinion of independent
certified public accountants selected by the Borrower and acceptable to the
Lender, which annual financial statements shall include the Borrower's balance
sheet as at the end of such fiscal year and the related statements of the
Borrower's income, retained earnings and cash flows for the fiscal year then
ended, prepared, if the Lender so requests, on a consolidating (if applicable)
and consolidated basis to include any subsidiaries, all in reasonable detail and
prepared in accordance with GAAP, together with (i) copies of all management
letters prepared by such accountants; (ii) a report signed by such accountants
stating that in making the investigations necessary for said opinion they
obtained no knowledge, except as specifically stated, of any Default or Event of
Default hereunder and all relevant facts in reasonable detail to evidence, and
the computations as to, whether or not the Borrower is in compliance with the
requirements set forth in Sections 6.8, 6.9 (if the reporting date constitutes
the end of the Borrower's fiscal quarter) and 6.10; and (iii) a certificate of
the Borrower's chief financial officer stating that such financial statements
have been prepared in accordance with GAAP and whether or not such officer has
knowledge of the occurrence of any Default or Event of Default hereunder and, if
so, stating in reasonable detail the facts with respect thereto;
18
(b) as soon as available and in any event within thirty (30)
days after the end of each month, an unaudited/internal balance sheet and
statements of income and retained earnings of the Borrower as at the end of and
for such month and for the year to date period then ended, prepared, if the
Lender so requests, on a consolidating (if applicable) and consolidated basis to
include any subsidiaries, in reasonable detail and stating in comparative form
the figures for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, subject to year-end audit adjustments and the
absence of footnotes; and accompanied by a certificate of the Borrower's chief
financial officer, substantially in the form of Exhibit B hereto stating (i)
---------
that such financial statements have been prepared in accordance with GAAP,
subject to year-end audit adjustments and absence of footnotes, (ii) whether or
not such officer has knowledge of the occurrence of any Default or Event of
Default hereunder not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto, and (iii) all relevant facts
in reasonable detail to evidence, and the computations as to, whether or not the
Borrower is in compliance with the requirements set forth in Sections 6.8, 6.9
(if the reporting date constitutes the end of the Borrower's fiscal quarter)
and 6.10;
(c) as soon as available and in any event within ten (10) days
after the end of each month, a properly completed Borrowing Base Certificate as
at the end of such month, signed by the Borrower's chief financial officer;
(d) within ten (10) days after the end of each month, agings of
the Borrower's accounts receivable and accounts payable and an accounts
receivable certification as of the end of such month;
(e) weekly, or more frequently if the Lender so requests, a report
of the Borrower's sales and credit memos, and on each banking day, a collection
report;
(f) as soon as available and in any event within ten (10) days
after the end of each month a copy of the Export Order(s), or a written summary
of the Export Orders, against which Borrower is requesting an Advance. If
Borrower submits summaries of Export Orders, Borrower shall also deliver
promptly to Lender copies of any Export Orders requested by Lender. In
addition, at Lender's election, Lender may review a sampling selected by Lender
of those Export Orders representing at least ten percent (10%) of the aggregate
Dollar volume of Export Orders and ten percent (10%) of the number of Export
Orders supporting Advances made during the past quarter.
(g) at least thirty (30) days before the beginning of each fiscal
year of the Borrower, the projected balance sheets and income statements for
each month of such year, each in reasonable detail, representing the Borrower's
good faith projections and certified by the Borrower's chief financial officer
as being the most recent projections available and identical to the projections
used by the Borrower for internal planning purposes, together with such
supporting schedules and information as the Lender may in its reasonable
discretion require;
19
(h) as soon as available and in any event within five (5) days
after they are due, written notice of any and all taxes due but not paid;
(i) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment schedules,
copies of invoices to account debtors, shipment documents and delivery receipts
for goods sold, and such other material, reports, records or information as the
Lender may reasonably request;
(j) as soon as possible, and in any event by not later than when
the same is filed with any taxing authority, copies of any request for extension
of time for filing tax returns or paying taxes and copies of the state and
federal tax returns and all schedules thereto;
(k) promptly upon knowledge thereof, notice of any Items (and
the corresponding invoice amount) which are articles, services, or related
technical data that are listed on the United States Munitions List (part 121 of
title 22 of the Code of Federal Regulations);
(l) immediately after the commencement thereof, notice in writing
of all litigation and of all proceedings before any governmental or regulatory
agency affecting the Borrower;
(m) immediately after a proceeding in bankruptcy or an action for
debtor's relief is filed by, against, or on behalf of the Borrower, notice of
such proceeding;
(n) immediately after the Borrower fails to obtain the dismissal
or termination within thirty (30) calendar days of the commencement of any
proceeding or action referred to in (l) above, notice of such failure;
(o) immediately after the Borrower begins any procedure for its
dissolution or liquidation, or a procedure therefor has been commenced against
it; notice of such procedure;
(p) as soon as possible but no later than five (5) days after
material litigation is commenced against the Borrower, notice of such
litigation;
(q) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have sent to
its stockholders; and
(r) any other information Lender or WFBC may reasonably request.
Section 6.2 Inspection. Upon the Lender's request, the Borrower
----------
will permit any officer, employee, attorney, agent or accountant for the Lender
to audit, review, make extracts from or copy any and all records of the Borrower
and to inspect the Collateral at all times during ordinary business hours.
Section 6.3 Account Verification. The Lender may at any time and
--------------------
from time to time send, or request the Borrower to send, requests for
verification of Accounts or notices of assignment to account debtors and other
20
obligors. The Borrower authorizes the Lender to verify Accounts as frequently as
daily and the Borrower understands the Lender intends to do so by telephone
and/or in writing.
Section 6.4 Account Debtors to Pay to Designated Account; Pledge
-----------------------------------------------------
of Account. The Borrower shall instruct all of its Account debtors located
-----------
outside the US to make all payments for Items directly to the Collateral Account
(as defined by the Domestic Credit Agreement).
Section 6.5 No Other Liens. The Borrower will keep all Collateral
--------------
free and clear of all security interests, liens and encumbrances except the
Security Interest, purchase money security interests in equipment, and the lien
of WFBC under the Domestic Credit Facility, and Permitted Liens.
Section 6.6 Insurance. The Borrower will at all times keep all
---------
tangible Collateral insured against risks of fire (including so-called extended
coverage), theft, collision (for Collateral consisting of motor vehicles) and
such other risks and in such amounts as the Lender may reasonably request, with
a lender's loss payable clause in favor of Lender to the extent of its interest
under this Agreement.
Section 6.7 Lockbox. Upon the Lender's request, the Borrower will
-------
irrevocably direct all present and future Account debtors and other Persons
obligated to make payments on Accounts Receivables to make such payments
directly to a special lockbox (the "Lockbox") to be under the Lender's control.
Section 6.8 Minimum Tangible Net Worth. The Borrower will
-----------------------------
maintain Tangible Net Worth, determined as at the end of each month, in an
amount not less than One Dollar ($1).
Section 6.9 No Sale or Transfer of Collateral and Other Assets.
----------------------------------------------------
Without the prior written consent of Lender (which shall not be unreasonably
withheld), Borrower will not sell, lease, assign, transfer or otherwise dispose
of (i) the stock of any subsidiary, (ii) all or a substantial part of its
assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to anyone other than the sale of (1)
Inventory in the ordinary course of business or (2) any other property which is
obsolete, worn out or no longer useful in the Borrower's business.
Section 6.10 Change in Ownership. The Borrower will not issue or
-------------------
sell any capital stock other than in connection with stock options granted to
directors or employees of the Borrower pursuant to a stock option plan;
provided, however, that the Lender's prior written consent (which will not be
unreasonably withheld) Borrower may issue or sell capital stock in connection
with the acquisition of another business (whether by merger, stock acquisition
or asset acquisition).
Section 6.11 Place of Business; Name. Borrower will not change
-------------------------
the location of its chief executive office or principal place of business from
that disclosed pursuant to Section 5.1 or move, relocate, close or sell any
business location without at least thirty (30) days prior notice to the Lender.
21
Borrower will not permit any tangible Collateral or records pertaining to the
Collateral to be located in any state or area in which, in the event of such
location, a financing statement covering such Collateral would be required to
be, but has not in fact been, filed in order to perfect the Security Interest.
Borrower will not change its name without thirty (30) days prior notice to the
Lender.
Section 6.12 Negative Covenants. Without the prior written
-------------------
consent of Eximbank and Lender, Borrower shall not (a) merge, consolidate or
otherwise combine with any other Person; (b) acquire all or substantially all of
the assets or capital stock of any other Person; (c) make any material changes
in its organizational structure or identity; or (d) enter into any agreement to
do any of the foregoing.
ARTICLE 7
Events of Default, Rights and Remedies
--------------------------------------
Section 7.1 Events of Default. "Event of Default", wherever used
------------------
herein, means any one of the following events:
(a) Default in the payment of the Obligations when they become due
and payable, or Default in the payment of any fees, commissions, costs or
expenses required to be paid by the Borrower under this Agreement;
(b) Any payment default shall occur under any agreement (other
than this Agreement) between the Borrower and the Lender past the grace or cure
period, if any, set forth therein, or the Lender shall accelerate or demand
payment of any obligations (other than arising under this Agreement) owed to it
by the Borrower, or the Lender shall begin exercising its remedies against the
Borrower with respect thereto;
(c) WFBC shall accelerate or demand payment of any obligations
owed to it by the Borrower, or WFBC shall begin exercising its remedies against
the Borrower or WFBC shall begin properly exercising its remedies against the
Borrower with respect to such default;
(d) Eximbank shall repudiate, purport to revoke or fail to perform
its obligations under the Master Guaranty;
(e) The rendering against the Borrower of a final judgment, decree
or order for the payment of money in excess of One Hundred Thousand Dollars
($100,000) and the continuance of such judgment, decree or order unsatisfied and
in effect for any period of thirty (30) consecutive days without a stay of
execution;
(f) A petition shall be filed by or against the Borrower under the
United States Bankruptcy Code naming the Borrower as debtor, and such petition
is not dismissed or withdrawn within thirty (30) days;
(g) The Borrower begins any procedure for its liquidation or
dissolution or any such procedure is commenced against it; or
22
(h) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in any Loan Document not specifically
addressed in this Section 7.1, which shall remain uncured for 30 days after
occurrence of such default.
(i) any lien in any of the Collateral, granted or intended by the
Loan Documents to be granted to Lender, ceases to be a valid, enforceable,
perfected, first priority lien (or a lesser priority if expressly permitted
pursuant to Section 6 of the Loan Authorization Agreement) subject only to
Permitted Liens;
(j) any material provision of any Loan Document for any reason
ceases to be valid, binding and enforceable in accordance with its terms;
(k) any default or event of default other than those described
above occurs under any of the Loan Documents which causes the obligations
thereunder or a portion thereof to become due prior to its stated maturity or
prior to the regularly scheduled dates of payment;
(l) the aggregate amount of outstanding Advances exceeds the
amount calculated under the Borrowing Base and Borrower fails within thirty (30)
calendar days after being informed thereof by Lender to (i) pay to Lender an
amount equal to the difference between the aggregate amount of outstanding
Advances and the Borrowing Base or (ii) furnish additional Collateral to Lender
as security for the Credit Facility, in form and amount satisfactory to Lender.
Section 7.2 Rights and Remedies. Following the occurrence and
---------------------
during the continuation of an Event of Default, the Lender may exercise any or
all of the following rights and remedies:
(a) the Lender may, by notice to the Borrower, declare the
Commitment to be terminated, whereupon the same shall forthwith terminate;
(b) the Lender may, by notice to the Borrower, declare the
Obligations to be forthwith due and payable, whereupon all Obligations shall
become and be forthwith due and payable, without presentment, notice of
dishonor, protest or further notice of any kind, all of which the Borrower
hereby expressly waives;
(c) the Lender may, without notice to the Borrower and without
further action, apply any and all money owing by the Lender to the Borrower to
the payment of the Obligations;
(d) The Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC, including the
right to take possession of Collateral, or any evidence thereof, proceeding
without judicial process or by judicial process (without a prior hearing or
notice thereof, which the Borrower hereby expressly waives) and the right to
sell, lease or otherwise dispose of any or all of the Collateral, and in
connection therewith, the Borrower will on demand assemble the Collateral and
make it available to the Lender at a place to be designated by the Lender which
is reasonably convenient to both parties;
23
(e) The Lender may exercise any other rights and remedies
available to it by law or agreement.
(f) The remedies provided hereunder are cumulative.
Section 7.3 Certain Notices. If notice to the Borrower of any
----------------
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 8.1) at least 10
calendar days before the date of intended disposition or other action.
ARTICLE 8
Miscellaneous
-------------
Section 8.1 Addresses for Notices, Etc. Except as otherwise
-----------------------------
expressly provided herein, all notices, requests, demands and other
communications provided for hereunder shall be in writing and shall be (i)
personally delivered, (ii) sent by first class US mail, (iii) sent by overnight
courier of national reputation, or (iv) transmitted by telecopy, in each case
addressed or telecopied to the party to whom notice is being given at its
address or telecopy number as set forth below its signature to this Agreement.
Section 8.2 Costs and Expenses. The Borrower agrees to pay
-------------------
on demand all costs and expenses (including reasonable legal fees) incurred by
the Lender in connection with the Loan Documents and any other document or
agreement related thereto, and the transactions contemplated hereby, including
wire transfer and ACH charges, the cost of credit reports, overadvance fees, the
expense of any auditors and fees and expenses in enforcing this Agreement.
Section 8.3 Indemnity. In addition to the payment of expenses
---------
pursuant to Section 8.2, the Borrower agrees to indemnify, defend and hold
harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and
all present and future officers, directors, employees, attorneys and agents of
the foregoing (the "Indemnitees") from and against any of the following except
to the extent arising from the gross negligence or willful misconduct of Lender
or WFBC or the breach by Lender of any Loan Documents (collectively,
"Indemnified Liabilities"):
(i) any and all transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by reason of the
execution and delivery of this Agreement and the other Loan Documents or the
making of the Advances;
(ii) any and all liabilities, losses, damages, penalties,
judgments, suits, claims, costs and expenses of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of
counsel) in connection with any investigative, administrative or judicial
proceedings, whether or not such Indemnitee shall be designated a party thereto,
which may be imposed on, incurred by or asserted against any such Indemnitee, in
24
any manner related to or arising out of or in connection with the making of the
Advances, this Agreement and the other Loan Documents or the use or intended use
of the proceeds of the Advances; and
(iii) any claim, loss or damage to which any Indemnitee may
be subjected as a result of any violation by Borrower of any federal, state,
local or other governmental statute, regulation, law, or ordinance dealing with
the protection of human health and the environment.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, then the Borrower or counsel
designated by the Borrower and satisfactory to the Indemnitee, will resist and
defend such action, suit or proceeding to the extent and in the manner directed
by the Indemnitee. Each Indemnitee will use its best efforts to cooperate in the
defense of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's
obligations under this Section 8.3 shall survive the termination of this
Agreement and the discharge of the Borrower's other obligations hereunder. If
Eximbank makes payment of a claim to the Lender under the Master Guaranty in
connection with the Credit Facility, Eximbank shall be assigned all the Lender's
rights and remedies under the Loan Documents and may enforce any such rights or
remedies against the Borrower and the Collateral. Additionally, the Borrower
shall hold Eximbank harmless from and agrees to indemnify it against any and all
liabilities, damages, claims, costs and losses incurred or suffered by it
resulting from (a) any materially incorrect certification or statement knowingly
made by or on behalf of the Borrower to Eximbank or the Lender in connection
with an Advance, this Agreement or any of the other Loan Documents or (b) any
breach by the Borrower of the terms and conditions of this Agreement or any of
the other Loan Documents.
Section 8.4 Binding Effect; Assignment; Counterparts; Exchanging
-----------------------------------------------------
Information. The Loan Documents shall be binding upon and inure to the benefit
------------
of the Borrower and the Lender and its respective successors and assigns, except
that the Borrower shall not have the right to assign its rights thereunder or
any interest therein without the prior written consent of the Lender. This
Agreement and other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same instrument. Without limiting the Lender's right to share
information regarding the Borrower and its Affiliates with the Lender's
participants, accountants, lawyers and other advisors with respect to the Credit
Facility, the Lender, WFBC, and all direct and indirect subsidiaries of Lender
or WFBC, may exchange any and all information they may have in their possession
regarding the Borrower and its Affiliates with respect to the Credit Facility,
and the Borrower waives any right of confidentiality it may have with respect to
such exchange of such information with respect to the Credit Facility.
Section 8.5 Governing Law; Jurisdiction, Venue; Waiver of Jury
-----------------------------------------------------
Trial. This Agreement and the Note shall be governed by and construed in
----
accordance with the laws (other than conflict laws) of the State of California.
Each party consents to the personal jurisdiction of the state and federal courts
located in the State of California in connection with any controversy related to
25
this Agreement, waives any argument that venue in any such forum is not
convenient and agrees that any litigation initiated by any of them in connection
with this Agreement shall be venued in either the District Court of Los Angeles
County, California, or the United States District Court, Central District of
California. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.
[SIGNATURES SET FORTH ON THE NEXT PAGE.]
26
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the date first above written.
XXXXX FARGO BANK, N.A. ROCKSHOX, INC.
a Delaware corporation
By ____________________________ By ____________________________
Name:__________________________ Name:__________________________
Its: __________________________ Its:___________________________
27
Exhibit A to Credit and Security
Agreement
REVOLVING NOTE
$5,000,000, Colorado Springs, Colorado
June 28, 2001
For value received, the undersigned, ROCKSHOX, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay as provided in the Credit
--------
Agreement (defined below) to the order of XXXXX FARGO BANK, N.A. (the "Lender"),
------
at its main office in San Francisco, California, or at any other place
designated at any time by the holder hereof, in lawful money of the United
States of America and in immediately available funds, the principal sum of Five
Million Dollars and No Cents ($5,000,000) or, if less, the aggregate unpaid
principal amount of all Advances made by the Lender to the Borrower under the
Credit and Security Agreement of even date herewith by and between the Lender
and the Borrower (as the same may hereafter be amended, supplemented or restated
from time to time, the "Credit Agreement") together with interest on the
-----------------
principal amount hereunder remaining unpaid from time to time (computed on the
basis of actual days elapsed in a 360-day year) from the date of the initial
Advance until this Note is fully paid at the rate from time to time in effect
under the Credit Agreement.
This Note is the Revolving Note as defined in the Credit Agreement
and is subject to the Credit Agreement.
ROCKSHOX, INC.,
a Delaware corporation
By ____________________________
Name:__________________________
Its:___________________________
A-1
Exhibit B to Credit and Security
Agreement
FORM OF BORROWER AGREEMENT
B-1
Exhibit C to Credit and Security
Agreement
COMPLIANCE CERTIFICATE
To: ___________________
Xxxxx Fargo Bank, N.A.
___________________
___________________________
Date: __________________, 200___
Subject: Rockshox, Inc.
Financial Statements
In accordance with our Credit and Security Agreement dated as of June
28, 2001 (the "Credit Agreement"), attached are the financial statements of
-----------------
____________ (the "Borrower") as of and for ________________, 200___ (the
--------
"Reporting Date") and the year-to-date period then ended (the "Current
---------- -------
Financials"). All terms used in this certificate have the meanings given in the
----
Credit Agreement.
I certify that the Current Financials have been prepared in accordance
with GAAP, subject to year-end audit adjustments, and fairly present the
Borrower's financial condition as of the date thereof.
Events of Default. (Check one):
-------------------
[ ] The undersigned does not have knowledge of the occurrence of a
Default or Event of Default under the Credit Agreement.
[ ] The undersigned has knowledge of the occurrence of a Default
or Event of Default under the Credit Agreement and attached hereto is
a statement of the facts with respect to thereto.
Financial Covenants. I further hereby certify as follows:
--------------------
1. Minimum Tangible Net Worth. Pursuant to Section 6.10 of the
-----------------------------
Credit Agreement, the Borrower's Tangible Net Worth for the ________ period
ending on the Reporting Date, was $____________ which satisfies does not
satisfy the requirement than such amount not be less than One Dollar ($1).
C-1
Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of the financial covenants referred to above.
These computations were made in accordance with GAAP.
ROCKSHOX, INC.,
a Delaware corporation
By ____________________________
Name:__________________________
Its:___________________________
C-2
Exhibit D to Credit and Security
Agreement
FORM OF BORROWING BASE CERTIFICATE
D-1
Exhibit E to Credit and Security
Agreement
PERMITTED LIENS
---------------
E-1
