Exhibit 10.5
LOAN AND SECURITY AGREEMENT
DATED AS OF NOVEMBER 6, 2003
BETWEEN
LASALLE BUSINESS CREDIT, LLC
THE LENDER,
DIGITAL RECORDERS, INC.,
DIGITAL AUDIO CORPORATION
AND
TWINVISION OF NORTH AMERICA, INC.
THE BORROWERS
TABLE OF CONTENTS
Page
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1. DEFINITIONS ................................................................................... 1
2. LOANS ......................................................................................... 10
(a) REVOLVING LOANS ........................................................................... 10
(b) CAPITAL EXPENDITURE LOANS ................................................................. 12
(c) REPAYMENTS ................................................................................ 12
(d) NOTES ..................................................................................... 13
3. LETTERS OF CREDIT ............................................................................. 13
(a) GENERAL TERMS ............................................................................. 13
(b) REQUESTS FOR LETTERS OF CREDIT ............................................................ 13
(c) OBLIGATIONS ABSOLUTE ...................................................................... 14
(d) EXPIRATION DATES OF LETTERS OF CREDIT ..................................................... 14
4. INTEREST, FEES AND CHARGES .................................................................... 14
(a) INTEREST RATE ............................................................................. 14
(b) FEES AND CHARGES .......................................................................... 15
(c) MAXIMUM INTEREST .......................................................................... 16
5. COLLATERAL .................................................................................... 16
(a) GRANT OF SECURITY INTEREST TO LENDER ...................................................... 16
(b) OTHER SECURITY ............................................................................ 17
(c) POSSESSORY COLLATERAL ..................................................................... 17
(d) ELECTRONIC CHATTEL PAPER .................................................................. 18
6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN ....................... 18
7. POSSESSION OF COLLATERAL AND RELATED MATTERS .................................................. 18
8. COLLECTIONS ................................................................................... 19
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES .................................. 21
(a) DAILY REPORTS ............................................................................. 21
(b) MONTHLY REPORTS ........................................................................... 21
(c) FINANCIAL STATEMENTS ...................................................................... 21
(d) ANNUAL PROJECTIONS ........................................................................ 22
(e) EXPLANATION OF BUDGETS AND PROJECTIONS .................................................... 22
(f) PUBLIC REPORTING .......................................................................... 22
(g) OTHER INFORMATION ......................................................................... 22
10. TERMINATION; AUTOMATIC RENEWAL ................................................................ 23
11. REPRESENTATIONS AND WARRANTIES ................................................................ 23
(a) FINANCIAL STATEMENTS AND OTHER INFORMATION ................................................ 24
(b) LOCATIONS ................................................................................. 24
(c) LOANS BY BORROWER ......................................................................... 24
(d) ACCOUNTS AND INVENTORY .................................................................... 24
(e) LIENS ..................................................................................... 25
(f) ORGANIZATION, AUTHORITY AND NO CONFLICT ................................................... 25
(g) LITIGATION ................................................................................ 26
(h) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS ........................................... 26
(i) AFFILIATE TRANSACTIONS .................................................................... 26
(j) NAMES AND TRADE NAMES ..................................................................... 26
(k) EQUIPMENT ................................................................................. 26
(l) ENFORCEABILITY ............................................................................ 27
(m) SOLVENCY .................................................................................. 27
(n) INDEBTEDNESS .............................................................................. 27
(o) MARGIN SECURITY AND USE OF PROCEEDS ....................................................... 27
(p) PARENT, SUBSIDIARIES AND AFFILIATES ....................................................... 27
(q) NO DEFAULTS ............................................................................... 27
(r) EMPLOYEE MATTERS .......................................................................... 28
(s) INTELLECTUAL PROPERTY ..................................................................... 28
(t) ENVIRONMENTAL MATTERS ..................................................................... 28
(u) ERISA MATTERS ............................................................................. 28
12. AFFIRMATIVE COVENANTS ......................................................................... 29
(a) MAINTENANCE OF RECORDS .................................................................... 29
(b) NOTICES ................................................................................... 29
(c) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS ........................................... 30
(d) INSPECTION AND AUDITS ..................................................................... 31
(e) INSURANCE ................................................................................. 31
(f) COLLATERAL ................................................................................ 32
(g) USE OF PROCEEDS ........................................................................... 33
(h) TAXES ..................................................................................... 33
(i) INTELLECTUAL PROPERTY ..................................................................... 33
(j) CHECKING ACCOUNTS ......................................................................... 34
13. NEGATIVE COVENANTS ............................................................................ 34
(a) GUARANTIES ................................................................................ 34
(b) INDEBTEDNESS .............................................................................. 34
(c) LIENS ..................................................................................... 34
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(d) MERGERS, SALES, ACQUISITIONS, SUBSIDIARIES AND OTHER TRANSACTIONS OUTSIDE THE ORDINARY
COURSE OF BUSINESS ........................................................................ 35
(e) DIVIDENDS AND DISTRIBUTIONS ............................................................... 35
(f) INVESTMENTS; LOANS ........................................................................ 35
(g) FUNDAMENTAL CHANGES, LINE OF BUSINESS ..................................................... 35
(h) EQUIPMENT ................................................................................. 36
(i) AFFILIATE TRANSACTIONS .................................................................... 36
(j) SETTLING OF ACCOUNTS ...................................................................... 36
14. FINANCIAL COVENANTS ........................................................................... 36
(a) TANGIBLE NET WORTH ........................................................................ 36
(b) FIXED CHARGE COVERAGE ..................................................................... 37
(c) CAPITAL EXPENDITURE LIMITATIONS ........................................................... 37
15. DEFAULT ....................................................................................... 37
(a) PAYMENT ................................................................................... 37
(b) BREACH OF THIS AGREEMENT AND THE OTHER AGREEMENTS ......................................... 37
(c) BREACHES OF OTHER OBLIGATIONS ............................................................. 38
(d) BREACH OF REPRESENTATIONS AND WARRANTIES .................................................. 38
(e) LOSS OF COLLATERAL ........................................................................ 38
(f) LEVY, SEIZURE OR ATTACHMENT ............................................................... 38
(g) BANKRUPTCY OR SIMILAR PROCEEDINGS ......................................................... 38
(h) APPOINTMENT OF RECEIVER ................................................................... 39
(i) JUDGMENT .................................................................................. 39
(j) DEATH OR DISSOLUTION OF OBLIGOR ........................................................... 39
(k) DEFAULT OR REVOCATION OF GUARANTY ......................................................... 39
(l) CRIMINAL PROCEEDINGS ...................................................................... 39
(m) CHANGE OF MANAGEMENT ...................................................................... 40
(n) MATERIAL ADVERSE CHANGE ................................................................... 40
16. REMEDIES UPON AN EVENT OF DEFAULT ............................................................. 40
17. CONDITIONS PRECEDENT .......................................................................... 41
18. JOINT AND SEVERAL LIABILITY ................................................................... 42
19. INDEMNIFICATION ............................................................................... 43
20. NOTICE ........................................................................................ 44
21. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION ........................................ 44
22. MODIFICATION AND BENEFIT OF AGREEMENT ......................................................... 45
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23. HEADINGS OF SUBDIVISIONS ...................................................................... 46
24. POWER OF ATTORNEY ............................................................................. 46
25. CONFIDENTIALITY ............................................................................... 46
26. COUNTERPARTS .................................................................................. 47
27. ELECTRONIC SUBMISSIONS ........................................................................ 47
28. WAIVER OF JURY TRIAL; OTHER WAIVERS ........................................................... 47
EXHIBIT A - BUSINESS AND COLLATERAL LOCATIONS
EXHIBIT B - COMPLIANCE CERTIFICATE
EXHIBIT C - COMMERCIAL TORT CLAIMS
SCHEDULE 1 - PERMITTED LIENS
SCHEDULE 11(g) - LITIGATION
SCHEDULE 11(i) - AFFILIATE TRANSACTIONS
SCHEDULE 11(j) - NAMES & TRADE NAMES
SCHEDULE 11(n) - INDEBTEDNESS
SCHEDULE 11(p) - PARENT, SUBSIDIARIES AND AFFILIATES
SCHEDULE 17(a) - CLOSING DOCUMENT CHECKLIST
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LOAN AND SECURITY AGREEMENT
THIS
LOAN AND SECURITY AGREEMENT (as amended, modified or supplemented
from time to time, this "AGREEMENT") made this 6th day of November, 2003 by and
among LASALLE BUSINESS CREDIT, LLC, a Delaware limited liability company
("LENDER"), ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, and Digital
Recorders, Inc., a North Carolina corporation, having its principal place of
business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
("DIGITAL"), Digital Audio Corporation, a North Carolina corporation, having its
principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ("DIGITAL AUDIO") and TwinVision of North America, Inc., a
North Carolina corporation, having its principal place of business at ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ("TWINVISION")
(Digital, Digital Audio and TwinVision are collectively referred to as
"BORROWERS").
WITNESSETH:
WHEREAS, Borrowers may, from time to time, request Loans from Lender,
and the parties wish to provide for the terms and conditions upon which such
Loans or other financial accommodations, if made by Lender, shall be made;
NOW, THEREFORE, in consideration of any Loan (including any Loan by
renewal or extension) hereafter made to a Borrower by Lender, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Borrowers, the parties agree as follows:
1. DEFINITIONS.
"ACCOUNT", "ACCOUNT DEBTOR", "CHATTEL PAPER", "COMMERCIAL TORT CLAIMS",
"DEPOSIT ACCOUNTS", "DOCUMENTS", "ELECTRONIC CHATTEL PAPER", "EQUIPMENT",
"FIXTURES", "GENERAL INTANGIBLES", "GOODS", "INSTRUMENTS", "INVENTORY",
"INVESTMENT PROPERTY", "LETTER-OF-CREDIT RIGHT", "PROCEEDS" and "TANGIBLE
CHATTEL PAPER" shall have the respective meanings assigned to such terms in the
Illinois Uniform Commercial Code, as the same may be in effect from time to
time.
"AFFILIATE" shall mean any Person (i) which directly or indirectly
through one or more intermediaries controls, is controlled by, or is under
common control with, a Borrower, (ii) which beneficially owns or holds five
percent (5%) or more of the voting control or equity interests of a Borrower, or
(iii) five percent (5%) or more of the voting control or equity interests of
which is beneficially owned or held by a Borrower.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or
any day that banks in Chicago,
Illinois are required or permitted to close.
"CAPITAL EXPENDITURE LOANS" shall mean the Loans made pursuant to
subsection 2[b] hereof.
"CAPITAL EXPENDITURES" shall mean with respect to any period, the
aggregate of all expenditures (whether paid in cash or accrued as liabilities
and including expenditures for capitalized lease obligations) by Borrowers and
their Subsidiaries during such period that are required by generally accepted
accounting principles, consistently applied, to be included in or reflected by
the property, plant and equipment or similar fixed asset accounts (or intangible
accounts subject to amortization) on the balance sheet of Borrowers and their
Subsidiaries.
"CHANGE OF CONTROL" shall mean any of the following: (a) any person or
group of persons (within the meaning of the Securities Exchange Act of 1934)
shall have acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 20% or more of the issued and outstanding shares of
stock of any Borrower having the right to vote for the election of directors of
any Borrower under ordinary circumstances; (b) during any period of twelve
consecutive calendar months, individuals who at the beginning of such period
constituted the board of directors of any Borrower (together with any new
directors whose election by the board of directors of any Borrower or whose
nomination for election by the stockholders of any Borrower was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason other than death
or disability to constitute a majority of the directors then in office; (c)
Digital ceases to own and control all of the economic and voting rights
associated with all of the outstanding stock of any of its Subsidiaries; (d) DRI
Europa AB ceases to own and control all of the economic and voting rights
associated with all of the outstanding stock of any of its Subsidiaries and (e)
Mobitec AB ceases to own and control all of the economic and voting rights
associated with 50% of the outstanding stock of Mobitec Ltda. and all of the
outstanding stock of Mobitec Pty.
"COLLATERAL" shall mean all of the property of each Borrower described
in Section 5 hereof, together with all other real or personal property of any
Obligor or any other Person now or hereafter pledged to Lender to secure, either
directly or indirectly, repayment of any of the Liabilities.
"DEBT SERVICE COVERAGE" shall mean, with respect to any period, the
ratio of (i) Borrowers' and their Subsidiaries' net income after taxes for such
period (excluding any after-tax gains or losses on the sale of assets (other
than the sale of Inventory in the ordinary course of business) and excluding
other after-tax extraordinary gains or losses), plus depreciation and
amortization deducted in determining net income for such period, minus Capital
Expenditures for such period not financed, minus any cash dividends paid or
accrued and cash withdrawals paid or accrued to shareholders or other Affiliates
for such period
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which were not calculated in determining net income after taxes, and plus the
after-tax increase in LIFO reserves, or minus the after tax decrease in LIFO
reserves all on a consolidated basis, to (ii) Borrowers' and their Subsidiaries'
current principal maturities of long term debt and capitalized leases paid or
scheduled to be paid during such period, plus any prepayments on indebtedness
owed to any Person (except trade payables and revolving loans) and paid during
such period.
"EBITDA" shall mean, with respect to any period, Borrowers' and their
Subsidiaries' net income after taxes for such period (excluding any after-tax
gains or losses on the sale of assets (other than the sale of Inventory in the
ordinary course of business) and excluding other after-tax extraordinary gains
or losses) plus interest expense, income tax expense, depreciation and
amortization for such period, plus or minus any other non-cash charges or gains
which have been subtracted or added in calculating net income after taxes for
such period, all on a consolidated basis.
"ELIGIBLE ACCOUNT" shall mean an Account owing to a Borrower which is
acceptable to Lender in its sole discretion determined in good faith for lending
purposes (provided that Lender shall give Borrowers written notice of any
eligibility criteria established by Lender and not set forth herein). Without
limiting Lender's discretion, Lender shall, in general, consider an Account to
be an Eligible Account if it meets, and so long as it continues to meet, the
following requirements:
(i) it is genuine and in all respects what it purports to be;
(ii) it is owned by such Borrower, such Borrower has the right
to subject it to a security interest in favor of Lender or assign it to
Lender and it is subject to a first priority perfected security
interest in favor of Lender and to no other claim, lien, security
interest or encumbrance whatsoever, other than Permitted Liens;
(iii) it arises from (A) the performance of services by such
Borrower in the ordinary course of such Borrower's business, and such
services have been fully performed and acknowledged and accepted by the
Account Debtor thereunder; or (B) the sale or lease of Goods by such
Borrower in the ordinary course of such Borrower's business, and (x)
such Goods have been completed in accordance with the Account Debtor's
specifications (if any) and delivered to the Account Debtor, (y) such
Account Debtor has not refused to accept, returned or offered to
return, any of the Goods which are the subject of such Account, and (z)
such Borrower has possession of, or such Borrower has delivered to
Lender (at Lender's request) shipping and delivery receipts evidencing
delivery of such Goods;
(iv) it is evidenced by an invoice rendered to the Account
Debtor thereunder, is due and payable within ninety (90) days (or one
hundred twenty
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(120) days with respect to Accounts acceptable to Lender in its sole
discretion) after the date of the invoice and does not remain unpaid
ninety (90) days past the invoice date thereof (or one hundred twenty
(120) days with respect to Accounts acceptable to Lender in its sole
discretion); provided, however, that if more than twenty-five percent
(25%) of the aggregate dollar amount of invoices owing by a particular
Account Debtor remain unpaid ninety (90) days (or one hundred twenty
(120) days with respect to Accounts acceptable to Lender in its sole
discretion) after the respective invoice dates thereof, then all
Accounts owing by that Account Debtor shall be deemed ineligible;
(v) it is a valid, legally enforceable and unconditional
obligation of the Account Debtor thereunder, and it shall not be an
Eligible Account to the extent of any setoff, counterclaim, credit,
allowance or adjustment by such Account Debtor, or if it is subject to
any claim by such Account Debtor denying liability thereunder in whole
or in part;
(vi) it does not arise out of a contract or order which fails
in any material respect to comply with the requirements of applicable
law;
(vii) the Account Debtor thereunder is not a director,
officer, employee or agent of a Borrower, or a Subsidiary, Parent or
Affiliate;
(viii) it is not an Account with respect to which the Account
Debtor is the United States of America or any state or local
government, or any department, agency or instrumentality thereof,
unless such Borrower assigns its right to payment of such Account to
Lender pursuant to, and in full compliance with, the Assignment of
Claims Act of 1940, as amended, or any comparable state or local law,
as applicable;
(ix) it is not an Account with respect to which the Account
Debtor is located in a state which requires such Borrower, as a
precondition to commencing or maintaining an action in the courts of
that state, either to (A) receive a certificate of authority to do
business and be in good standing in such state; or (B) file a notice of
business activities report or similar report with such state's taxing
authority, unless (x) such Borrower has taken one of the actions
described in clauses (A) or (B); (y) the failure to take one of the
actions described in either clause (A) or (B) may be cured
retroactively by such Borrower at its election; or (z) such Borrower
has proven, to Lender's satisfaction, that it is exempt from any such
requirements under any such state's laws;
(x) the Account Debtor is located within the United States of
America or Canada;
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(xi) it is not an Account with respect to which the Account
Debtor's obligation to pay is subject to any repurchase obligation or
return right, as with sales made on a ▇▇▇▇-and-hold, guaranteed sale,
sale on approval, sale or return or consignment basis;
(xii) it is not an Account (A) with respect to which any
representation or warranty contained in this Agreement is untrue; or
(B) which violates any of the covenants of such Borrower contained in
this Agreement;
(xiii) it is not an Account which, when added to a particular
Account Debtor's other indebtedness to such Borrower, exceeds the
lesser of thirty-five percent (35%) of all Accounts of such Borrower or
Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) or
a credit limit determined by Lender in its sole discretion determined
in good faith for that Account Debtor (except that Accounts excluded
from Eligible Accounts solely by reason of this clause (xiii) shall be
Eligible Accounts to the extent of such credit limit), provided that
Lender shall give such Borrower written notice of any such credit
limit; and
(xiv) it is not an Account with respect to which the prospect
of payment or performance by the Account Debtor is or will be impaired,
as determined by Lender in its sole discretion determined in good
faith.
"ELIGIBLE INVENTORY" shall mean Inventory consisting solely of raw
materials and finished goods of a Borrower which is acceptable to Lender in its
sole discretion determined in good faith for lending purposes (provided that
Lender shall give Borrowers written notice of any eligibility criteria
established by Lender and not set forth herein). Without limiting Lender's
discretion, Lender shall, in general, consider Inventory to be Eligible
Inventory if it meets, and so long as it continues to meet, the following
requirements:
(i) it is owned by such Borrower, such Borrower has the right
to subject it to a security interest in favor of Lender and it is
subject to a first priority perfected security interest in favor of
Lender and to no other claim, lien, security interest or encumbrance
whatsoever, other than Permitted Liens;
(ii) it is located on one of the premises listed on Exhibit A
(or other locations of which Lender has been advised in writing
pursuant to subsection 12(b)(i) hereof) and is not in transit;
(iii) if held for sale or lease or furnishing under contracts
of service, it is (except as Lender may otherwise consent in writing)
new and unused and free from defects which would, in Lender's sole
determination determined in good faith, affect its market value;
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(iv) it is not stored with a bailee, consignee, warehouseman,
processor or similar party unless Lender has given its prior written
approval and such Borrower has caused any such bailee, consignee,
warehouseman, processor or similar party to issue and deliver to
Lender, in form and substance acceptable to Lender, such Uniform
Commercial Code financing statements, warehouse receipts, waivers and
other documents as Lender shall require;
(v) Lender has determined in good faith, in accordance with
Lender's customary business practices, that it is not unacceptable due
to age, type, category or quantity; and
(vi) it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Agreement are untrue;
or (B) which violates any of the covenants of such Borrower contained
in this Agreement.
"ENVIRONMENTAL LAWS" shall mean all federal, state, district, local and
foreign laws, rules, regulations, ordinances, and consent decrees relating to
health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect, applicable to a Borrower's business or
facilities owned or operated by a Borrower, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contamination, chemicals, or hazardous, toxic or dangerous substances, materials
or wastes into the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) or otherwise
relating to the generation, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, modified or restated from time to time.
"EVENT OF DEFAULT" shall have the meaning specified in Section 15
hereof.
"EXCESS AVAILABILITY" shall mean, as of any date of determination by
Lender, the excess, if any, of the lesser of (i) the Maximum Revolving Loan
Limit less the sum of the outstanding Revolving Loans and Letter of Credit
Obligations and (ii) the Revolving Loan Limit less the sum of the outstanding
Revolving Loans and Letter of Credit Obligations, in each case as of the close
of business on such date and assuming, for purposes of calculation, that all
accounts payable which remain unpaid more than sixty (60) days after the due
dates thereof as the close of business on such date are treated as additional
Revolving Loans outstanding on such date.
"FISCAL YEAR" shall mean each twelve (12) month accounting period of
Borrowers, which ends on December 31 of each year.
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"FIXED CHARGES" shall mean for any period, without duplication,
scheduled payments of principal during the applicable period with respect to all
indebtedness of Borrowers and their Subsidiaries, on a consolidated basis, for
borrowed money, plus scheduled payments of principal during the applicable
period with respect to all capitalized lease obligations of Borrowers and their
Subsidiaries, on a consolidated basis, plus scheduled payments of interest
during the applicable period with respect to all indebtedness of Borrowers and
their Subsidiaries, on a consolidated basis, for borrowed money including
capital lease obligations, plus unfinanced Capital Expenditures of Borrowers and
their Subsidiaries, on a consolidated basis, during the applicable period, plus
payments during the applicable period in respect of income or franchise taxes of
Borrowers and their Subsidiaries, on a consolidated basis.
"HAZARDOUS MATERIALS" shall mean any hazardous, toxic or dangerous
substance, materials and wastes, including, without limitation, 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, without limitation, 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, without
limitation any that are or become classified as hazardous or toxic under any
Environmental Law).
"INDEMNIFIED PARTY" shall have the meaning specified in Section 18
hereof.
"LASALLE BANK" shall mean LaSalle Bank National Association, Chicago,
Illinois.
"LETTER OF CREDIT" shall mean any Letter of Credit issued on behalf of
a Borrower in accordance with this Agreement.
"LETTER OF CREDIT OBLIGATIONS" shall mean, as of any date of
determination, the sum of (i) the aggregate undrawn face amount of all Letters
of Credit, and (ii) the aggregate unreimbursed amount of all drawn Letters of
Credit not already converted to Loans hereunder.
"LIABILITIES" shall mean any and all obligations, liabilities and
indebtedness of Borrowers to Lender or to any parent, affiliate or subsidiary of
Lender of any and every kind and nature, howsoever created, arising or evidenced
and howsoever owned, held or acquired, whether now or hereafter existing,
whether now due or to become due, whether primary, secondary, direct, indirect,
absolute, contingent or otherwise (including, without limitation, obligations of
performance), whether several, joint or joint and several, and whether arising
or existing under written or oral agreement or by operation of law.
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"LOANS" shall mean all loans and advances made by Lender to or on
behalf of Borrowers hereunder.
"LOCK BOX" and "LOCK BOX ACCOUNT" shall have the meanings specified in
subsection 8(a) hereof.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
business, property, assets, prospects, operations or condition, financial or
otherwise, of a Person.
"MAXIMUM LOAN LIMIT" shall mean Ten Million and No/100 Dollars
($10,000,000.00).
"MAXIMUM REVOLVING LOAN LIMIT" shall have the meaning specified in
subsection 2(a) hereof.
"OBLIGOR" shall mean Borrowers and each other Person who is or shall
become primarily or secondarily liable for any of the Liabilities.
"ORIGINAL TERM" shall have the meaning specified in Section 10 hereof.
"OTHER AGREEMENTS" shall mean all agreements, instruments and
documents, other than this Agreement, including, without limitation, guaranties,
mortgages, trust deeds, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements and all
other writings heretofore, now or from time to time hereafter executed by or on
behalf of a Borrower or any other Person and delivered to Lender or to any
parent, affiliate or subsidiary of Lender in connection with the Liabilities or
the transactions contemplated hereby, as each of the same may be amended,
modified or supplemented from time to time.
"PARENT" shall mean any Person now or at any time or times hereafter
owning or controlling (alone or with any other Person) at least a majority of
the issued and outstanding equity of a Borrower and, if a Borrower is a
partnership, the general partner of such Borrower.
"PBGC" shall have the meaning specified in subsection 12(b)(v) hereof.
"PERMITTED LIENS" shall mean (i) statutory liens of landlords,
carriers, warehousemen, processors, mechanics, materialmen or suppliers incurred
in the ordinary course of business and securing amounts not yet due or declared
to be due by the claimant thereunder or amounts which are being contested in
good faith and by appropriate proceedings and for which the applicable Borrower
has maintained adequate reserves; (ii) liens or security interests in favor of
Lender; (iii) zoning restrictions and easements, licenses, covenants and other
restrictions affecting the use of real property that do not individually or in
the aggregate have a material adverse effect on a Borrower's ability to use
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such real property for its intended purpose in connection with such Borrower's
business; (iv) liens in connection with purchase money indebtedness and
capitalized leases otherwise permitted pursuant to this Agreement, provided,
that such liens attach only to the assets the purchase of which was financed by
such purchase money indebtedness or which is the subject of such capitalized
leases; (v) liens set forth on Schedule 1; (vi) liens specifically permitted by
Lender in writing; and (vii) involuntary liens securing amounts less than
$100,000.00 and which are released or for which a bond acceptable to Lender in
its sole discretion, determined in good faith, has been posted within ten (10)
days of its creation.
"PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, entity, party or foreign or United
States government (whether federal, state, county, city, municipal or
otherwise), including, without limitation, any instrumentality, division,
agency, body or department thereof.
"PLAN" shall have the meaning specified in subsection 12(b)(v) hereof.
"PRIME RATE" shall mean LaSalle Bank's publicly announced prime rate
(which is not intended to be LaSalle Bank's lowest or most favorable rate in
effect at any time) in effect from time to time.
"PRIME RATE LOANS" shall mean the Loans bearing interest with reference
to the Prime Rate.
"RENEWAL TERM" shall have the meaning specified in Section 10 hereof.
"REVOLVING LOAN LIMIT" shall have the meaning specified in subsection
2(a) hereof.
"REVOLVING LOANS" shall have the meaning specified in subsection 2(a)
hereof.
"SUBSIDIARY" shall mean any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time stock of any other class of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned by a Borrower, or any partnership, joint
venture or limited liability company of which more than fifty percent (50%) of
the outstanding equity interests are at the time, directly or indirectly, owned
by a Borrower or any partnership of which a Borrower is a general partner.
"TANGIBLE NET WORTH" shall have the meaning specified in subsection
14(a) hereof.
"TAX" shall mean, in relation to any LIBOR Rate Loans and the
applicable LIBOR Rate, any tax, levy, impost, duty, deduction, withholding or
charges of whatever
-9-
nature required to be paid by Lender and/or to be withheld or deducted from any
payment otherwise required hereby to be made by a Borrower to Lender; provided,
that the term "Tax" shall not include any taxes imposed upon the net income of
Lender.
"TERM LOAN" shall mean the Capital Expenditure Loans.
2. LOANS.
(a) REVOLVING LOANS.
Subject to the terms and conditions of this Agreement and the Other
Agreements, during the Original Term and any Renewal Term, Lender may, in its
sole discretion, determined in good faith, make revolving loans and advances to
each Borrower (the "REVOLVING LOANS") in an amount up to the sum of the
following sublimits (the "REVOLVING LOAN LIMIT"):
(i) Up to eighty-five percent (85%) of the face amount (less
maximum discounts, credits and allowances which may be taken by or
granted to Account Debtors in connection therewith in the ordinary
course of such Borrower's business) of such Borrower's Eligible
Accounts; plus
(ii) Up to thirty percent (30%) of the lower of cost or market
value of such Borrower's Eligible Inventory consisting solely of raw
materials; plus
(iii) Up to fifty percent (50%) of the lower of cost or market
value of such Borrower's Eligible Inventory consisting solely of
finished goods; minus
(iv) such reserves as Lender elects, in its sole discretion
determined in good faith, to establish from time to time, including,
without limitation a reserve of Five Hundred Thousand and No/100
Dollars ($500,000.00) which shall be released within five (5) Business
Days of receipt of Borrowers' certified 2004 Fiscal Year end financial
statements so long as such financial statements reflect a ratio of
EBITDA to Fixed Charges of not less than 1.15:1.00 and no Event of
Default has occurred;
provided, that (x) the sum of the advances to all Borrowers with respect to
clauses (ii) and (iii) above shall at no time exceed Three Million Five Hundred
Thousand and No/100 Dollars ($3,500,000.00) and (y) the Revolving Loan Limit
shall in no event exceed Ten Million and No/100 Dollars ($10,000,000.00) less
the then-outstanding principal balance of the Term Loan (the "MAXIMUM REVOLVING
LOAN LIMIT") except as such amount may be increased or decreased by Lender, in
its sole discretion.
The aggregate unpaid principal balance of the Revolving Loans shall not
at any time exceed the lesser of the (i) Revolving Loan Limit minus the Letter
of Credit
-10-
Obligations and (ii) the Maximum Revolving Loan Limit minus the Letter of Credit
Obligations. If at any time the outstanding Revolving Loans exceeds either the
Revolving Loan Limit or the Maximum Revolving Loan Limit, in each case minus the
Letter of Credit Obligations, or any portion of the Revolving Loans and Letter
of Credit Obligations exceeds any applicable sublimit within the Revolving Loan
Limit, Borrowers shall immediately, and without the necessity of demand by
Lender, pay to Lender such amount as may be necessary to eliminate such excess
and Lender shall apply such payment to the Revolving Loans to eliminate such
excess.
Each Borrower hereby authorizes Lender, in its sole discretion, to
charge any of such Borrower's accounts or advance Revolving Loans to make any
payments of principal, interest, fees, costs or expenses required to be made
under this Agreement or the Other Agreements.
A request for a Revolving Loan shall be made or shall be deemed to be
made, each in the following manner: the Borrower requesting such Revolving Loan
shall give Lender same day notice, no later than 1:00 P.M. (determined based on
the local time of each Borrower at its principal place of business) for such
day, of its request for a Revolving Loan as a Prime Rate Loan. In the event that
a Borrower maintains a controlled disbursement account at LaSalle Bank, each
check presented for payment against such controlled disbursement account and any
other charge or request for payment against such controlled disbursement account
shall constitute a request for a Revolving Loan as a Prime Rate Loan. As an
accommodation to Borrowers, Lender may permit telephone requests for Revolving
Loans and electronic transmittal of instructions, authorizations, agreements or
reports to Lender by Borrowers. Unless a Borrower specifically directs Lender in
writing not to accept or act upon telephonic or electronic communications from
such Borrower, Lender shall have no liability to Borrowers for any loss or
damage suffered by a Borrower as a result of Lender's honoring of any requests,
execution of any instructions, authorizations or agreements or reliance on any
reports communicated to it telephonically or electronically and purporting to
have been sent to Lender by a Borrower and Lender shall have no duty to verify
the origin of any such communication or the authority of the Person sending it.
Each Borrower hereby irrevocably authorizes Lender to disburse the
proceeds of each Revolving Loan requested by such Borrower, or deemed to be
requested by such Borrower, as follows: the proceeds of each Revolving Loan
requested under Section 2(a) shall be disbursed by Lender in lawful money of the
United States of America in immediately available funds, in the case of the
initial borrowing, in accordance with the terms of the written disbursement
letter from such Borrower, and in the case of each subsequent borrowing, by wire
transfer or Automated Clearing House (ACH) transfer to such bank account as may
be agreed upon by such Borrower and Lender from time to time, or elsewhere if
pursuant to a written direction from such Borrower.
-11-
(b) CAPITAL EXPENDITURE LOANS.
Subject to the terms and conditions of this Agreement and the Other
Agreements, from time to time after the initial Loans are advanced hereunder,
Lender shall make advances to each Borrower up to eighty percent (80%) of the
purchase price (exclusive of sales taxes, delivery charges and other "soft"
costs related to such purchase) of Equipment to be purchased with the proceeds
of such advances, which Equipment is acceptable to Lender in its sole
discretion, and upon which Lender shall have a first priority perfected security
interest; provided, that (i) the aggregate amount advanced for such purchases
shall not exceed Five Hundred Thousand and No/100 Dollars ($500,000.00), (ii) at
least three (3) Business Days prior to any such advance hereunder, such Borrower
shall have furnished to Lender an invoice and acceptance letter for the
Equipment being purchased and shall have executed such documents and taken such
other actions as Lender shall require to assure that Lender has a first priority
perfected security interest in such Equipment, and (iii) each advance hereunder
shall be in an amount not less than Fifty Thousand and No/100 Dollars
($50,000.00). Amounts repaid with respect to the Capital Expenditure Loans may
not be reborrowed.
(c) REPAYMENTS.
The Liabilities shall be repaid as follows:
(i) Repayment of Revolving Loans. The Revolving Loans and all
other Liabilities (other than the Term Loan) shall be repaid on the
last day of the Original Term or any Renewal Term if this Agreement is
renewed pursuant to Section 10 hereof.
(ii) Repayment of Capital Expenditure Loans. Each Capital
Expenditure Loan shall be repaid in forty-eight (48) equal monthly
installments in an amount sufficient to repay such Capital Expenditure
Loan in full by the final payment. Such payments shall be made on the
thirtieth (30th) day following the date of each such advance, and on
the corresponding day of each month thereafter; provided, that any
remaining outstanding principal balance of the Capital Expenditures
Loan shall be repaid at the end of the Original Term or any Renewal
Term if this Agreement is renewed pursuant to Section 10 hereof. If any
such payment due date is not a Business Day, then such payment may be
made on the next succeeding Business Day and such extension of time
shall be included in the computation of the amount of interest and fees
due hereunder.
(iii) Mandatory Prepayments of the Term Loan.
(a) Sales of Assets. Upon receipt of the proceeds of
the sale or other disposition of any Equipment or real
property of a Borrower which is subject to a mortgage in favor
of Lender, or if any of the Equipment or real
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property subject to such mortgage is damaged, destroyed or
taken by condemnation in whole or in part, the proceeds
thereof shall be paid by such Borrower to Lender as a
mandatory prepayment of the Capital Expenditure Loan which was
advanced against the value of such asset, such payment to be
applied against the remaining installments of principal in the
inverse order of their maturities until such Capital
Expenditure Loan is repaid in full, and then against the other
Liabilities, as determined by Lender, in its sole discretion.
(d) NOTES.
The Loans shall, in Lender's sole discretion, be evidenced by one or
more promissory notes in form and substance satisfactory to Lender. However, if
such Loans are not so evidenced, such Loans may be evidenced solely by entries
upon the books and records maintained by Lender.
3. LETTERS OF CREDIT.
(a) GENERAL TERMS.
Subject to the terms and conditions of this Agreement and the Other
Agreements, during the Original Term or any Renewal Term, Lender may, in its
sole discretion, from time to time cause to be issued and co-sign for or
otherwise guarantee, upon a Borrower's request, commercial and/or standby
Letters of Credit; provided, that the aggregate undrawn face amount of all such
Letters of Credit shall at no time exceed Two Million and No/100 Dollars
($2,000,000.00). Payments made by the issuer of a Letter of Credit to any Person
on account of any Letter of Credit shall be immediately payable by Borrowers
without notice, presentment or demand and each Borrower agrees that each payment
made by the issuer of a Letter of Credit in respect of a Letter of Credit shall
constitute a request by each Borrower for a Loan to reimburse such issuer. In
the event such Loan is not advanced by Lender for any reason, such reimbursement
obligations (whether owing to the issuer of the Letter of Credit or Lender if
Lender is not the issuer) shall become part of the Liabilities hereunder and
shall bear interest at the rate then applicable to Revolving Loans constituting
Prime Rate Loans until repaid. Borrowers shall remit to Lender a Letter of
Credit fee equal to two and one-half percent (2-1/2%) per annum on the aggregate
undrawn face amount of all Letters of Credit outstanding, which fee shall be
payable monthly in arrears on the last Business Day of each month. Borrowers
shall also pay on demand the normal and customary administrative charges of the
issuer of the Letter of Credit for issuance, amendment, negotiation, renewal or
extension of any Letter of Credit.
(b) REQUESTS FOR LETTERS OF CREDIT.
Each Borrower shall make requests for Letters of Credit in writing at
least two (2) Business Days prior to the date such Letter of Credit is to be
issued. Each such request shall specify the date such Letter of Credit is to be
issued, the amount thereof, the name and
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address of the beneficiary thereof and a description of the transaction to be
supported thereby. Any such notice shall be accompanied by the form of Letter of
Credit requested and any application or reimbursement agreement required by the
issuer of such Letter of Credit. If any term of such application or
reimbursement agreement is inconsistent with this Agreement, then the provisions
of this Agreement shall control to the extent of such inconsistency.
(c) OBLIGATIONS ABSOLUTE.
Each Borrower shall be obligated to reimburse the issuer of any Letter
of Credit, or Lender if Lender has reimbursed such issuer on a Borrower's
behalf, for any payments made in respect of any Letter of Credit, which
obligation shall be unconditional and irrevocable and shall be paid regardless
of: (i) any lack of validity or enforceability of any Letter of Credit, (ii) any
amendment or waiver of or consent or departure from all or any provisions of any
Letter of Credit, this Agreement or any Other Agreement, (iii) the existence of
any claim, set off, defense or other right which a Borrower or any other Person
may have against any beneficiary of any Letter of Credit, Lender or the issuer
of the Letter of Credit, (iv) any draft or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect,
(v) any payment under any Letter of Credit against presentation of a draft or
other document that does not comply with the terms of such Letter of Credit, and
(vi) any other act or omission to act or delay of any kind of the issuer of such
Letter of Credit, the Lender or any other Person or any other event or
circumstance that might otherwise constitute a legal or equitable discharge of a
Borrower's obligations hereunder. It is understood and agreed by each Borrower
that the issuer of any Letter of Credit may accept documents that appear on
their face to be in order without further investigation or inquiry, regardless
of any notice or information to the contrary.
(d) EXPIRATION DATES OF LETTERS OF CREDIT.
The expiration date of each Letter of Credit shall be no later than the
earlier of (i) one (1) year from the date of issuance and (ii) the thirtieth
(30th) day prior to the end of the Original Term or any Renewal Term.
Notwithstanding the foregoing, a Letter of Credit may provide for automatic
extensions of its expiration date for one or more one (1) year periods, so long
as the issuer thereof has the right to terminate the Letter of Credit at the end
of each one (1) year period and no extension period extends past the thirtieth
(30th) day prior to the end of the Original Term or any Renewal Term.
4. INTEREST, FEES AND CHARGES.
(a) INTEREST RATE.
Each Loan shall bear interest at the rate of one percent (1%) per annum
in excess of the Prime Rate in effect from time to time, payable on the last
Business Day of each
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month in arrears. Said rate of interest shall increase or decrease by an amount
equal to each increase or decrease in the Prime Rate effective on the effective
date of each such change in the Prime Rate. Upon the occurrence of an Event of
Default and during the continuance thereof, each Loan shall bear interest at the
rate of two percent (2%) per annum in excess of the interest rate otherwise
payable thereon, which interest shall be payable on demand. All interest shall
be calculated on the basis of a 360-day year.
(b) FEES AND CHARGES.
(i) Closing Fee: Borrowers shall jointly and severally pay to
Lender a closing fee of One Hundred Thousand and No/100 Dollars
($100,000.00), which fee shall be fully earned and payable on the date
of disbursement of the initial Loans hereunder.
(ii) Unused Line Fee: Borrowers shall jointly and severally
pay to Lender an unused line fee of one-half of one percent (1/2 of 1%)
of the difference between the Maximum Revolving Loan Limit and the
average daily balance of the Revolving Loans plus the Letter of Credit
Obligations for each month, which fee shall be fully earned by Lender
and payable monthly in arrears on the first Business Day of each month.
Said fee shall be calculated on the basis of a 360 day year.
(iii) Transaction Fee: Borrowers shall jointly and severally
pay to Lender a transaction fee of Twenty Thousand and No/100 Dollars
($20,000.00) with respect to internal costs and expenses (in addition
to any reimbursable out-of-pocket costs and expenses of Lender) related
to the closing of the loan transaction contemplated hereby, which fee
shall be fully earned and payable on the date that Lender makes its
initial disbursement of Loans hereunder.
(iv) Costs and Expenses: Borrowers shall jointly and severally
reimburse Lender for all costs and expenses, including, without
limitation, legal expenses and reasonable attorneys' fees (whether for
internal or outside counsel), incurred by Lender in connection with the
(i) documentation and consummation of this transaction and any other
transactions between Borrowers and Lender, including, without
limitation, Uniform Commercial Code and other public record searches
and filings, overnight courier or other express or messenger delivery,
appraisal costs, surveys, title insurance and environmental audit or
review costs; (ii) collection, protection or enforcement of any rights
in or to the Collateral; (iii) collection of any Liabilities; and (iv)
administration and enforcement of any of Lender's rights under this
Agreement or any Other Agreement. Borrowers shall also pay all normal
service charges with respect to all accounts maintained by each
Borrower with Lender and LaSalle Bank and any additional services
requested by a Borrower from Lender and LaSalle Bank. All such costs,
expenses and charges shall, if owed to LaSalle Bank, be reimbursed by
Lender and in such event or in the event such costs and expenses are
owed to Lender, shall constitute Liabilities hereunder, shall be
payable by Borrowers
-15-
to Lender on demand, and, until paid, shall bear interest at the
highest rate then applicable to Loans hereunder.
(v) Capital Adequacy Charge. If Lender shall have determined
that the adoption of any law, rule or regulation regarding capital
adequacy, or any change therein or in the interpretation or application
thereof, or compliance by Lender with any request or directive
regarding capital adequacy (whether or not having the force of law)
from any central bank or governmental authority enacted after the date
hereof, does or shall have the effect of reducing the rate of return on
such party's capital as a consequence of its obligations hereunder to a
level below that which Lender could have achieved but for such
adoption, change or compliance (taking into consideration Lender's
policies with respect to capital adequacy) by a material amount, then
from time to time, after submission by Lender to Borrowers of a written
demand therefor ("CAPITAL ADEQUACY DEMAND") together with the
certificate described below, Borrowers shall pay to Lender such
additional amount or amounts ("CAPITAL ADEQUACY CHARGE") as will
compensate Lender for such reduction, such Capital Adequacy Demand to
be made with reasonable promptness following such determination. A
certificate of Lender claiming entitlement to payment as set forth
above shall be conclusive in the absence of manifest error. Such
certificate shall set forth the nature of the occurrence giving rise to
such reduction, the amount of the Capital Adequacy Charge to be paid to
Lender, and the method by which such amount was determined. In
determining such amount, Lender may use any reasonable averaging and
attribution method, applied on a non-discriminatory basis.
(c) MAXIMUM INTEREST.
It is the intent of the parties that the rate of interest and other
charges to each Borrower under this Agreement and the Other Agreements shall be
lawful; therefore, if for any reason the interest or other charges payable under
this Agreement are found by a court of competent jurisdiction, in a final
determination, to exceed the limit which Lender may lawfully charge such
Borrower, then the obligation to pay interest and other charges shall
automatically be reduced to such limit and, if any amount in excess of such
limit shall have been paid, then such amount shall be refunded to such Borrower.
5. COLLATERAL.
(a) GRANT OF SECURITY INTEREST TO LENDER.
As security for the payment of all Loans now or in the future made by
Lender to Borrowers hereunder and for the payment or other satisfaction of all
other Liabilities, each Borrower hereby assigns to Lender and grants to Lender a
continuing security interest in the following property of such Borrower, whether
now or hereafter owned, existing, acquired or arising and wherever now or
hereafter located: (a) all Accounts (whether or not Eligible Accounts) and all
Goods whose sale, lease or other disposition by such Borrower has given
-16-
rise to Accounts and have been returned to, or repossessed or stopped in transit
by, such Borrower; (b) all Chattel Paper, Instruments, Documents and General
Intangibles (including, without limitation, all patents, patent applications,
trademarks, trademark applications, trade names, trade secrets, goodwill,
copyrights, copyright applications, registrations, licenses, software,
franchises, customer lists, tax refund claims, claims against carriers and
shippers, guarantee claims, contract rights, payment intangibles, security
interests, security deposits and rights to indemnification); (c) all Inventory
(whether or not Eligible Inventory); (d) all Goods (other than Inventory),
including, without limitation, Equipment, vehicles and Fixtures; (e) all
Investment Property; (f) all Deposit Accounts, bank accounts, deposits and cash;
(g) all Letter-of-Credit Rights; (h) Commercial Tort Claims listed on Exhibit C
hereto, (i) any other property of such Borrower now or hereafter in the
possession, custody or control of Lender or any agent or any parent, affiliate
or subsidiary of Lender or any participant with Lender in the Loans, for any
purpose (whether for safekeeping, deposit, collection, custody, pledge,
transmission or otherwise) and (j) all additions and accessions to,
substitutions for, and replacements, products and Proceeds of the foregoing
property, including, without limitation, proceeds of all insurance policies
insuring the foregoing property, and all of such Borrower's books and records
relating to any of the foregoing and to such Borrower's business.
(b) OTHER SECURITY.
Lender, in its sole discretion, without waiving or releasing any
obligation, liability or duty of a Borrower under this Agreement or the Other
Agreements or any Event of Default, may at any time or times hereafter, but
shall not be obligated to, pay, acquire or accept an assignment of any security
interest, lien, encumbrance or claim asserted by any Person in, upon or against
the Collateral, provided, that Lender may take such actions with respect to
Permitted Liens only after the occurrence and during the continuance of an Event
of Default. All sums paid by Lender in respect thereof and all costs, fees and
expenses including, without limitation, reasonable attorney fees, all court
costs and all other charges relating thereto incurred by Lender shall constitute
Liabilities, payable by Borrowers to Lender on demand and, until paid, shall
bear interest at the highest rate then applicable to Loans hereunder.
(c) POSSESSORY COLLATERAL.
Immediately upon a Borrower's receipt of any portion of the Collateral
evidenced by an agreement, Instrument or Document, including, without
limitation, any Tangible Chattel Paper and any Investment Property consisting of
certificated securities, such Borrower shall deliver the original thereof to
Lender together with an appropriate endorsement or other specific evidence of
assignment thereof to Lender (in form and substance acceptable to Lender). If an
endorsement or assignment of any such items shall not be made for any reason,
Lender is hereby irrevocably authorized, as each Borrower's attorney and
agent-in-fact, to endorse or assign the same on such Borrower's behalf.
-17-
(d) ELECTRONIC CHATTEL PAPER.
To the extent that a Borrower obtains or maintains any Electronic
Chattel Paper, such Borrower shall create, store and assign the record or
records comprising the Electronic Chattel Paper in such a manner that (i) a
single authoritative copy of the record or records exists which is unique,
identifiable and except as otherwise provided in clauses (iv), (v) and (vi)
below, unalterable, (ii) the authoritative copy identifies Lender as the
assignee of the record or records, (iii) the authoritative copy is communicated
to and maintained by the Lender or its designated custodian, (iv) copies or
revisions that add or change an identified assignee of the authoritative copy
can only be made with the participation of Lender, (v) each copy of the
authoritative copy and any copy of a copy is readily identifiable as a copy that
is not the authoritative copy and (vi) any revision of the authoritative copy is
readily identifiable as an authorized or unauthorized revision.
6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN.
Each Borrower shall, at Lender's request, at any time and from time to
time, authenticate, execute and deliver to Lender such financing statements,
documents and other agreements and instruments (and pay the cost of filing or
recording the same in all public offices deemed necessary or desirable by
Lender) and do such other acts and things or cause third parties to do such
other acts and things as Lender may deem necessary or desirable in its sole
discretion in order to establish and maintain a valid, attached and perfected
security interest in the Collateral in favor of Lender (free and clear of all
other liens, claims, encumbrances and rights of third parties whatsoever,
whether voluntarily or involuntarily created, except Permitted Liens) to secure
payment of the Liabilities, and in order to facilitate the collection of the
Collateral. Each Borrower irrevocably hereby makes, constitutes and appoints
Lender (and all Persons designated by Lender for that purpose) as such
Borrower's true and lawful attorney and agent-in-fact to execute and file such
financing statements, documents and other agreements and instruments and do such
other acts and things as may be necessary to preserve and perfect Lender's
security interest in the Collateral. Each Borrower further agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement shall be sufficient as a financing statement. Each Borrower
further ratifies and confirms the prior filing by Lender of any and all
financing statements which identify such Borrower as debtor, Lender as secured
party and any or all Collateral as collateral.
7. POSSESSION OF COLLATERAL AND RELATED MATTERS.
Until otherwise notified by Lender following the occurrence of an Event
of Default, each Borrower shall have the right, except as otherwise provided in
this Agreement, in the ordinary course of such Borrower's business, to (a) sell,
lease or furnish under contracts of service any of such Borrower's Inventory
normally held by such Borrower for any such purpose; (b) use and consume any raw
materials, work in process or other materials normally
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held by such Borrower for such purpose; and (c) dispose of obsolete or unuseful
Equipment so long as all of the proceeds thereof are paid to Lender for
application to the Liabilities (except for such proceeds which are required to
be delivered to the holder of a Permitted Lien which is prior in right of
payment); provided, however, that a sale in the ordinary course of business
shall not include any transfer or sale in satisfaction, partial or complete, of
a debt owed by such Borrower.
8. COLLECTIONS.
(a) Each Borrower shall direct all of its Account Debtors to make all
payments on the Accounts directly to a post office box (the "LOCK BOX")
designated by, and under the exclusive control of, Lender, at a financial
institution acceptable to Lender. Each Borrower shall establish an account (the
"LOCK BOX ACCOUNT") in Lender's name with a financial institution acceptable to
Lender, into which all payments received in the Lock Box shall be deposited, and
into which such Borrower will immediately deposit all payments received by such
Borrower on Accounts in the identical form in which such payments were received,
whether by cash or check. If a Borrower, any Affiliate or Subsidiary, any
shareholder, officer, director, employee or agent of a Borrower or any Affiliate
or Subsidiary, or any other Person acting for or in concert with a Borrower
shall receive any monies, checks, notes, drafts or other payments relating to or
as Proceeds of Accounts or other Collateral, such Borrower and each such Person
shall receive all such items in trust for, and as the sole and exclusive
property of, Lender and, immediately upon receipt thereof, shall remit the same
(or cause the same to be remitted) in kind to the Lock Box Account. The
financial institution with which the Lock Box Account is established shall
acknowledge and agree, in a manner satisfactory to Lender, that the amounts on
deposit in such Lock Box and Lock Box Account are the sole and exclusive
property of Lender, that such financial institution will follow the instructions
of Lender with respect to disposition of funds in the Lock Box and Lock Box
Account without further consent from Borrowers, that such financial institution
has no right to setoff against the Lock Box or Lock Box Account or against any
other account maintained by such financial institution into which the contents
of the Lock Box or Lock Box Account are transferred, and that such financial
institution shall wire, or otherwise transfer in immediately available funds to
Lender in a manner satisfactory to Lender, funds deposited in the Lock Box
Account on a daily basis as such funds are collected. Each Borrower agrees that
all payments made to such Lock Box Account or otherwise received by Lender,
whether in respect of the Accounts or as Proceeds of other Collateral or
otherwise (except for proceeds of Collateral which are required to be delivered
to the holder of a Permitted Lien which is prior in right of payment), will be
applied on account of the Liabilities in accordance with the terms of this
Agreement. Each Borrower agrees to pay all customary fees, costs and expenses in
connection with opening and maintaining the Lock Box and Lock Box Account. All
of such fees, costs and expenses if not paid by a Borrower, may be paid by
Lender and in such event all amounts paid by Lender shall constitute Liabilities
hereunder, shall be payable to Lender by Borrowers upon demand, and, until paid,
shall bear interest at the highest rate then applicable to Loans hereunder. All
checks, drafts, instruments and other items of
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payment or Proceeds of Collateral shall be endorsed by the applicable Borrower
to Lender, and, if that endorsement of any such item shall not be made for any
reason, Lender is hereby irrevocably authorized to endorse the same on such
Borrower's behalf. For the purpose of this section, each Borrower irrevocably
hereby makes, constitutes and appoints Lender (and all Persons designated by
Lender for that purpose) as such Borrower's true and lawful attorney and
agent-in-fact (i) to endorse such Borrower's name upon said items of payment
and/or Proceeds of Collateral and upon any Chattel Paper, Document, Instrument,
invoice or similar document or agreement relating to any Account of such
Borrower or Goods pertaining thereto; (ii) to take control in any manner of any
item of payment or Proceeds thereof and (iii) to have access to any lock box or
postal box into which any of such Borrower's mail is deposited, and open and
process all mail addressed to such Borrower and deposited therein.
(b) Lender may, at any time and from time to time after the occurrence
of an Event of Default, whether before or after notification to any Account
Debtor and whether before or after the maturity of any of the Liabilities, (i)
enforce collection of any of Borrowers' Accounts or other amounts owed to a
Borrower by suit or otherwise; (ii) exercise all of such Borrower's rights and
remedies with respect to proceedings brought to collect any Accounts or other
amounts owed to such Borrower; (iii) surrender, release or exchange all or any
part of any Accounts or other amounts owed to such Borrower, or compromise or
extend or renew for any period (whether or not longer than the original period)
any indebtedness thereunder; (iv) sell or assign any Account of such Borrower or
other amount owed to such Borrower upon such terms, for such amount and at such
time or times as Lender deems advisable; (v) prepare, file and sign such
Borrower's name on any proof of claim in bankruptcy or other similar document
against any Account Debtor or other Person obligated to such Borrower; and (vi)
do all other acts and things which are necessary, in Lender's sole discretion,
to fulfill such Borrower's obligations under this Agreement and the Other
Agreements and to allow Lender to collect the Accounts or other amounts owed to
such Borrower. In addition to any other provision hereof, Lender may at any
time, after the occurrence of an Event of Default, at Borrowers' expense, notify
any parties obligated on any of the Accounts to make payment directly to Lender
of any amounts due or to become due thereunder.
(c) For purposes of calculating interest and fees, Lender shall, within
two (2) Business Days after receipt by Lender at its office in Chicago,
Illinois
of (i) checks and (ii) one (1) Business Day after receipt By Lender at its
office in Chicago,
Illinois of cash or other immediately available funds from
collections of items of payment and Proceeds of any Collateral, apply the whole
or any part of such collections or Proceeds against the Liabilities in such
order as Lender shall determine in its sole discretion. For purposes of
determining the amount of Loans available for borrowing purposes, checks and
cash or other immediately available funds from collections of items of payment
and Proceeds of any Collateral shall be applied in whole or in part against the
Liabilities, in such order as Lender shall determine in its sole discretion, on
the day of receipt, subject to actual collection.
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(d) On a monthly basis, Lender shall deliver to Borrowers an account
statement showing all Loans, charges and payments, which shall be deemed final,
binding and conclusive upon Borrowers unless a Borrower notifies Lender in
writing, specifying any error therein, within thirty (30) days of the date such
account statement is sent to Borrowers and any such notice shall only constitute
an objection to the items specifically identified.
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.
(a) DAILY REPORTS.
Each Borrower shall deliver to Lender an executed daily loan report and
certificate in Lender's then current form on each day on which such Borrower
requests a Revolving Loan, and in any event at least once each week, which shall
be accompanied by copies of such Borrower's sales journal, cash receipts journal
and credit memo journal for the relevant period. Such report shall reflect the
activity of such Borrower with respect to Accounts for the immediately preceding
week, and shall be in a form and with such specificity as is satisfactory to
Lender and shall contain such additional information concerning Accounts and
Inventory as may be requested by Lender including, without limitation, but only
if specifically requested by Lender, copies of all invoices prepared in
connection with such Accounts.
(b) MONTHLY REPORTS.
Borrowers shall deliver to Lender, in addition to any other reports, as
soon as practicable and in any event: (i) within fifteen (15) days after the end
of each month, (A) a detailed trial balance of each Borrower's Accounts aged per
invoice date, in form and substance reasonably satisfactory to Lender including,
without limitation, the names and addresses of all Account Debtors of each
Borrower, and (B) a summary and detail of accounts payable (such Accounts and
accounts payable divided into such time intervals as Lender may require in its
sole discretion), including a listing of any held checks; and (ii) within ten
(10) days after the end of each month, the general ledger inventory account
balance, a perpetual inventory report and Lender's standard form of Inventory
report then in effect or the form most recently requested from Borrowers by
Lender, for each Borrower by each category of Inventory, together with a
description of the monthly change in each category of Inventory.
(c) FINANCIAL STATEMENTS.
Borrowers shall deliver to Lender the following financial information,
all of which shall be prepared on a consolidated and consolidating basis with
each of Borrowers' domestic and foreign Subsidiaries in accordance with
generally accepted accounting principles consistently applied, and shall be
accompanied by a compliance certificate in the form of Exhibit B hereto, which
compliance certificate shall include a calculation of all
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financial covenants contained in this Agreement: (i) no later than twenty-five
(25) days after each calendar month, copies of internally prepared financial
statements, including, without limitation, balance sheets and statements of
income, retained earnings and cash flow of Borrowers on a consolidated and
consolidating basis, certified by the Chief Financial Officer of each Borrower;
and (ii) no later than seventy-five (75) days after the end of each of
Borrowers' Fiscal Years, audited annual financial statements with an unqualified
opinion by independent certified public accountants selected by Borrowers and
reasonably satisfactory to Lender, which financial statements shall be
accompanied by (A) a letter from such accountants acknowledging that they are
aware that a primary intent of Borrowers in obtaining such financial statements
is to influence Lender and that Lender is relying upon such financial statements
in connection with the exercise of its rights hereunder, provided, that
Borrowers shall only be required to use their reasonable efforts exercised in
good faith to obtain such letter; and (B) copies of any management letters sent
to a Borrower by such accountants.
(d) ANNUAL PROJECTIONS.
As soon as practicable and in any event prior to the beginning of each
Fiscal Year, Borrowers shall deliver to Lender projected balance sheets,
statements of income and cash flow for Borrowers on a consolidated and
consolidating basis, for each of the twelve (12) months during such Fiscal Year,
which shall include the assumptions used therein, together with appropriate
supporting details as reasonably requested by Lender.
(e) EXPLANATION OF BUDGETS AND PROJECTIONS.
In conjunction with the delivery of the annual presentation of
projections or budgets referred to in subsection 9(d) above, Borrowers shall
deliver a letter signed by the President or a Vice President of each Borrower
and by the Treasurer or Chief Financial Officer of each Borrower, describing,
comparing and analyzing, in detail, all changes and developments between the
anticipated financial results included in such projections or budgets and the
historical financial statements of Borrowers.
(f) PUBLIC REPORTING.
Promptly upon the filing thereof, each Borrower shall deliver to Lender
copies of all registration statements and annual, quarterly, monthly or other
regular reports which such Borrower or any of its Subsidiaries files with the
Securities and Exchange Commission, as well as promptly providing to Lender
copies of any reports and proxy statements delivered to its shareholders.
(g) OTHER INFORMATION.
Promptly following request therefor by Lender, such other business or
financial data, reports, appraisals and projections as Lender may reasonably
request.
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10. TERMINATION; AUTOMATIC RENEWAL.
THIS AGREEMENT SHALL BE IN EFFECT FROM THE DATE HEREOF UNTIL NOVEMBER
15, 2006 (THE "ORIGINAL TERM") AND SHALL AUTOMATICALLY RENEW ITSELF FROM YEAR TO
YEAR THEREAFTER (EACH SUCH ONE-YEAR RENEWAL BEING REFERRED TO HEREIN AS A
"RENEWAL TERM") UNLESS (A) THE DUE DATE OF THE LIABILITIES IS ACCELERATED
PURSUANT TO SECTION 16 HEREOF; OR (B) A BORROWER OR LENDER ELECTS TO TERMINATE
THIS AGREEMENT AT THE END OF THE ORIGINAL TERM OR AT THE END OF ANY RENEWAL TERM
BY GIVING THE OTHER PARTY WRITTEN NOTICE OF SUCH ELECTION AT LEAST NINETY (90)
DAYS PRIOR TO THE END OF THE ORIGINAL TERM OR THE THEN CURRENT RENEWAL TERM IN
WHICH CASE BORROWER SHALL PAY ALL OF THE LIABILITIES IN FULL ON THE LAST DAY OF
SUCH TERM. If the term of this Agreement expires or one or more of the events
specified in clauses (A) and (B) occurs or this Agreement otherwise expires,
then (i) Lender shall not make any additional Loans on or after the date
identified as the date on which the Liabilities are to be repaid; and (ii) this
Agreement shall terminate on the date thereafter that the Liabilities are paid
in full. At such time as Borrowers have repaid all of the Liabilities and this
Agreement has terminated, each Borrower shall deliver to Lender a release, in
form and substance satisfactory to Lender, of all obligations and liabilities of
Lender and its officers, directors, employees, agents, parents, subsidiaries and
affiliates to such Borrower, and if such Borrower is obtaining new financing
from another lender, such Borrower shall deliver such lender's indemnification
of Lender, in form and substance satisfactory to Lender, for checks which Lender
has credited to such Borrower's account, but which subsequently are dishonored
for any reason or for automatic clearinghouse or wire transfers not yet posted
to such Borrower's account. If, during the term of this Agreement, Borrowers
prepay all of the Liabilities from any source other than income from the
ordinary course operations of Borrowers' business and this Agreement is
terminated, Borrowers jointly and severally agree to pay to Lender as a
prepayment fee, in addition to the payment of all other Liabilities, an amount
equal to (i) three percent (3%) of the Maximum Loan Limit if such prepayment
occurs two (2) years or more prior to the end of the Original Term, (ii) one and
one-half percent (1-1/2%) of the Maximum Loan Limit if such prepayment occurs
less than two (2) years, but at least one (1) year prior to the end of the
Original Term, or (iii) one-fourth of one percent (1/4th of 1%) of the Maximum
Loan Limit if such prepayment occurs less than one (1) year prior to the end of
the Original Term or any then current Renewal Term.
11. REPRESENTATIONS AND WARRANTIES.
Each Borrower hereby represents and warrants to Lender, which
representations and warranties (whether appearing in this Section 11 or
elsewhere) shall be true at the time of Borrowers' execution hereof and the
closing of the transactions described herein or related hereto, shall remain
true until the repayment in full and satisfaction of all the Liabilities and
termination of this Agreement, and shall be remade by each Borrower at the
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time each Loan is made pursuant to this Agreement, provided, that
representations and warranties made as of a particular date shall be true and
correct as of such date.
(a) FINANCIAL STATEMENTS AND OTHER INFORMATION.
The financial statements and other information delivered or to be
delivered by Borrowers to Lender at or prior to the date of this Agreement
fairly present in all material respects the financial condition of Borrowers,
and there has been no material adverse change in the financial condition, the
operations or any other status of a Borrower since the date of the financial
statements delivered to Lender most recently prior to the date of this
Agreement. All written information now or heretofore furnished by each Borrower
to Lender is true and correct as of the date with respect to which such
information was furnished.
(b) LOCATIONS.
The office where each Borrower keeps its books, records and accounts
(or copies thereof) concerning the Collateral, each Borrower's principal place
of business and all of each Borrower's other places of business, locations of
Collateral and post office boxes and locations of bank accounts are as set forth
in Exhibit A and at other locations within the continental United States of
which Lender has been advised by a Borrower in accordance with subsection
12(b)(i). The Collateral, including, without limitation, the Equipment (except
any part thereof which a Borrower shall have advised Lender in writing consists
of Collateral normally used in more than one state) is kept, or, in the case of
vehicles, based, only at the addresses set forth on Exhibit A, and at other
locations within the continental United States of which Lender has been advised
by a Borrower in writing in accordance with subsection 12(b)(i) hereof.
(c) LOANS BY BORROWER.
No Borrower has made any loans or advances to any Affiliate or other
Person except for advances authorized hereunder to employees, officers and
directors of such Borrower for travel and other expenses arising in the ordinary
course of such Borrower's business.
(d) ACCOUNTS AND INVENTORY.
Each Account or item of Inventory which a Borrower shall, expressly or
by implication, request Lender to classify as an Eligible Account or as Eligible
Inventory, respectively, shall, as of the time when such request is made,
conform in all respects to the requirements of such classification as set forth
in the respective definitions of "Eligible Account" and "Eligible Inventory" as
set forth herein and as otherwise established by Lender from time to time.
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(e) LIENS.
Each Borrower is the lawful owner of all Collateral now purportedly
owned or hereafter purportedly acquired by such Borrower, free from all liens,
claims, security interests and encumbrances whatsoever, whether voluntarily or
involuntarily created and whether or not perfected, other than the Permitted
Liens.
(f) ORGANIZATION, AUTHORITY AND NO CONFLICT.
Digital is a corporation, duly organized, validly existing and in good
standing in the State of North Carolina, its state organizational identification
number is 225036BUS and such Borrower is duly qualified and in good standing in
all states where the nature and extent of the business transacted by it or the
ownership of its assets makes such qualification necessary or, if such Borrower
is not so qualified, such Borrower may cure any such failure without losing any
of its rights, incurring any liens or material penalties, or otherwise affecting
Lender's rights. Digital Audio is a corporation, duly organized, validly
existing and in good standing in the State of North Carolina, its state
organizational identification number is 364867BUS and such Borrower is duly
qualified and in good standing in all states where the nature and extent of the
business transacted by it or the ownership of its assets makes such
qualification necessary or, if such Borrower is not so qualified, such Borrower
may cure any such failure without losing any of its rights, incurring any liens
or material penalties, or otherwise affecting Lender's rights. TwinVision is a
corporation, duly organized, validly existing and in good standing in the State
of North Carolina, its state organizational identification number is 396891BUS
and such Borrower is duly qualified and in good standing in all states where the
nature and extent of the business transacted by it or the ownership of its
assets makes such qualification necessary or, if such Borrower is not so
qualified, such Borrower may cure any such failure without losing any of its
rights, incurring any liens or material penalties, or otherwise affecting
Lender's rights. Each Borrower has the right and power and is duly authorized
and empowered to enter into, execute and deliver this Agreement and the Other
Agreements and perform its obligations hereunder and thereunder. Each Borrower's
execution, delivery and performance of this Agreement and the Other Agreements
does not conflict with the provisions of the organizational documents of such
Borrower, any statute, regulation, ordinance or rule of law, or any agreement,
contract or other document which may now or hereafter be binding on such
Borrower except for conflicts with agreements, contracts or other documents
which would not have a Material Adverse Effect on a Borrower, and each
Borrower's execution, delivery and performance of this Agreement and the Other
Agreements shall not result in the imposition of any lien or other encumbrance
upon any of such Borrower's property (other than Permitted Liens) under any
existing indenture, mortgage, deed of trust, loan or credit agreement or other
agreement or instrument by which such Borrower or any of its property may be
bound or affected.
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(g) LITIGATION.
Except as disclosed to Lender on Schedule 11(g) hereto, there are no
actions or proceedings which are pending or threatened against a Borrower or, to
the best of Borrowers' knowledge, threatened against a Borrower which are, in
the determination of Lender, reasonably likely to have a Material Adverse Effect
on such Borrower, and each Borrower shall, promptly upon becoming aware of any
such pending or threatened action or proceeding, give written notice thereof to
Lender. No Borrower has any Commercial Tort Claims pending other than those set
forth on Exhibit C hereto as Exhibit C may be amended from time to time.
(h) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS.
Each Borrower has obtained all governmental consents, franchises,
certificates, licenses, authorizations, approvals and permits, the lack of which
would have a Material Adverse Effect on such Borrower. Each Borrower is in
compliance in all material respects with all applicable federal, state, local
and foreign statutes, orders, regulations, rules and ordinances (including,
without limitation, Environmental Laws and statutes, orders, regulations, rules
and ordinances relating to taxes, employer and employee contributions and
similar items, securities, ERISA or employee health and safety) the failure to
comply with which would have a Material Adverse Effect on such Borrower.
(i) AFFILIATE TRANSACTIONS.
Except as set forth on Schedule 11(i) hereto or as permitted pursuant
to subsection 11(c) hereof, no Borrower is conducting, permitting or suffering
to be conducted, transactions with any Affiliate other than transactions with
Affiliates for the purchase or sale of Inventory or services in the ordinary
course of business pursuant to terms that are no less favorable to such Borrower
than the terms upon which such transactions would have been made had they been
made to or with a Person that is not an Affiliate.
(j) NAMES AND TRADE NAMES.
Each Borrower's name has always been as set forth on the first page of
this Agreement and no Borrower uses trade names, assumed names, fictitious names
or division names in the operation of its business, except as set forth on
Schedule 11(j) hereto.
(k) EQUIPMENT.
Except for Permitted Liens, each Borrower has good and indefeasible and
merchantable title to and ownership of all Equipment. No Equipment is a Fixture
to real estate unless such real estate is owned by such Borrower and is subject
to a mortgage in favor of Lender, or if such real estate is leased, is subject
to a landlord's agreement in favor of
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Lender on terms acceptable to Lender, or an accession to other personal property
unless such personal property is subject to a first priority lien in favor of
Lender.
(l) ENFORCEABILITY.
This Agreement and the Other Agreements to which a Borrower is a party
are the legal, valid and binding obligations of such Borrower and are
enforceable against such Borrower in accordance with their respective terms.
(m) SOLVENCY.
Each Borrower is, after giving effect to the transactions contemplated
hereby, solvent, able to pay its debts as they become due, has capital
sufficient to carry on its business, now owns property having a value both at
fair valuation and at present fair saleable value greater than the amount
required to pay its debts, and will not be rendered insolvent by the execution
and delivery of this Agreement or any of the Other Agreements or by completion
of the transactions contemplated hereunder or thereunder.
(n) INDEBTEDNESS.
Except as set forth on Schedule 11(n) hereto, no Borrower is obligated
(directly or indirectly), for any loans or other indebtedness for borrowed money
other than the Loans.
(o) MARGIN SECURITY AND USE OF PROCEEDS.
No Borrower owns any margin securities, and none of the proceeds of the
Loans hereunder shall be used for the purpose of purchasing or carrying any
margin securities or for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase any margin securities or for any other
purpose not permitted by Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
(p) PARENT, SUBSIDIARIES AND AFFILIATES.
Except as set forth on Schedule 11(p) hereto, no Borrower has any
Parents, Subsidiaries or other Affiliates or divisions, nor is any Borrower
engaged in any joint venture or partnership with any other Person.
(q) NO DEFAULTS.
No Borrower is in default under any material contract, lease or
commitment to which it is a party or by which it is bound, nor does any Borrower
know of any dispute regarding any contract, lease or commitment which would have
a Material Adverse Effect on such Borrower.
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(r) EMPLOYEE MATTERS.
There are no controversies pending or threatened between a
Borrower and any of its employees, agents or independent contractors other than
employee grievances arising in the ordinary course of business which would not,
in the aggregate, have a Material Adverse Effect on such Borrower, and each
Borrower is in compliance with all federal and state laws respecting employment
and employment terms, conditions and practices except for such non-compliance
which would not have a Material Adverse Effect on such Borrower.
(s) INTELLECTUAL PROPERTY.
Each Borrower possesses adequate licenses, patents, patent
applications, copyrights, service marks, trademarks, trademark applications,
trade styles and trade names to continue to conduct its business as heretofore
conducted by it except to the extent that the failure to possess such items
would not have a Material Adverse Effect on such Borrower.
(t) ENVIRONMENTAL MATTERS.
No Borrower has generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which at any time
violates in any material respect any Environmental Law or any license, permit,
certificate, approval or similar authorization thereunder and the operations of
each Borrower comply in all material respects with all Environmental Laws and
all licenses, permits, certificates, approvals and similar authorizations
thereunder. 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 each Borrower's knowledge
threatened with respect to any non-compliance with or violation of the
requirements of any Environmental Law by a Borrower or the release, spill or
discharge, threatened or actual, of any Hazardous Materials or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or any other environmental, health or safety
matter, which affects a Borrower or its business, operations or assets or any
properties at which a Borrower has transported, stored or disposed of any
Hazardous Materials. No Borrower has any material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
(u) ERISA MATTERS.
Each Borrower has paid and discharged all obligations and
liabilities arising under ERISA of a character which, if unpaid or unperformed,
might result in the imposition of a lien against any of its properties or
assets.
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12. AFFIRMATIVE COVENANTS.
Until payment and satisfaction in full of all Liabilities and
termination of this Agreement, unless Borrowers obtain Lender's prior written
consent waiving or modifying any of Borrowers' covenants hereunder in any
specific instance, each Borrower covenants and agrees as follows:
(a) MAINTENANCE OF RECORDS.
Each Borrower shall at all times keep accurate and complete
books, records and accounts with respect to all of such Borrower's business
activities, in accordance with sound accounting practices and generally accepted
accounting principles consistently applied, and shall keep such books, records
and accounts, and any copies thereof, only at the addresses indicated for such
purpose on Exhibit A.
(b) NOTICES.
Each Borrower shall:
(i) Locations. Promptly (but in no event less than
ten (10) days prior to the occurrence thereof) notify Lender of the
proposed opening of any new place of business or new location of
Collateral, the closing of any existing place of business or location
of Collateral, any change of in the location of such Borrower's books,
records and accounts (or copies thereof), the opening or closing of any
post office box, the opening or closing of any bank account or, if any
of the Collateral consists of Goods of a type normally used in more
than one state, the use of any such Goods in any state other than a
state in which such Borrower has previously advised Lender that such
Goods will be used.
(ii) Eligible Accounts and Inventory. Promptly upon
becoming aware thereof, notify Lender if any Account or Inventory
identified by such Borrower to Lender as an Eligible Account or
Eligible Inventory becomes ineligible for any reason.
(iii) Litigation and Proceedings. Promptly upon
becoming aware thereof, notify Lender of any actions or proceedings
which are pending or threatened against such Borrower which might have
a Material Adverse Effect on such Borrower and of any Commercial Tort
Claims of such Borrower which may arise, which notice shall constitute
such Borrower's authorization to amend Exhibit C to add such Commercial
Tort Claim.
(iv) Names and Trade Names. Notify Lender within ten
(10) days of the change of its name or the use of any trade name,
assumed name, fictitious name or division name not previously disclosed
to Lender in writing.
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(v) ERISA Matters. Promptly notify Lender of (x) the
occurrence of any "reportable event" (as defined in ERISA) which might
result in the termination by the Pension Benefit Guaranty Corporation
(the "PBGC") of any employee benefit plan ("Plan") covering any
officers or employees of such Borrower, any benefits of which are, or
are required to be, guaranteed by the PBGC, (y) receipt of any notice
from the PBGC of its intention to seek termination of any Plan or
appointment of a trustee therefor or (z) its intention to terminate or
withdraw from any Plan.
(vi) Environmental Matters. Immediately notify Lender
upon becoming aware of any investigation, proceeding, complaint, order,
directive, claim, citation or notice with respect to any non-compliance
with or violation of the requirements of any Environmental Law by such
Borrower or the generation, use, storage, treatment, transportation,
manufacture handling, production or disposal of any Hazardous Materials
or any other environmental, health or safety matter which affects such
Borrower or its business operations or assets or any properties at
which such Borrower has transported, stored or disposed of any
Hazardous Materials unless the foregoing could not reasonably be
expected to have a Material Adverse Effect on such Borrower.
(vii) Default; Material Adverse Change. Promptly
advise Lender of any material adverse change in the business, property,
assets, prospects, operations or condition, financial or otherwise, of
such Borrower, the occurrence of any Event of Default hereunder or the
occurrence of any event which, if uncured, will become an Event of
Default after notice or lapse of time (or both).
All of the foregoing notices shall be provided by Borrowers to Lender in
writing.
(c) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS.
Each Borrower shall maintain all governmental consents,
franchises, certificates, licenses, authorizations, approvals and permits, the
lack of which would have a Material Adverse Effect on such Borrower and each
Borrower shall remain in compliance with all applicable federal, state, local
and foreign statutes, orders, regulations, rules and ordinances (including,
without limitation, Environmental Laws and statutes, orders, regulations, rules
and ordinances relating to taxes, employer and employee contributions and
similar items, securities, ERISA or employee health and safety) the failure with
which to comply would have a Material Adverse Effect on such Borrower. Following
any determination by Lender that there is non-compliance, or any condition which
requires any action by or on behalf of a Borrower in order to avoid
non-compliance, with any Environmental Law, at such Borrower's expense cause an
independent environmental engineer acceptable to Lender to conduct such tests of
the relevant site(s) as are appropriate and prepare and deliver a report setting
forth the results of such tests, a proposed plan for remediation and an estimate
of the costs thereof.
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(d) INSPECTION AND AUDITS.
Each Borrower shall permit Lender, or any Persons designated
by it, to call at such Borrower's places of business at any reasonable times,
and, without hindrance or delay, to inspect the Collateral and to inspect,
audit, check and make extracts from such Borrower's books, records, journals,
orders, receipts and any correspondence and other data relating to such
Borrower's business, the Collateral or any transactions between the parties
hereto, and shall have the right to make such verification concerning such
Borrower's business as Lender may consider reasonable under the circumstances.
Each Borrower shall furnish to Lender such information relevant to Lender's
rights under this Agreement and the Other Agreements as Lender shall at any time
and from time to time request. Lender, through its officers, employees or agents
shall have the right, at any time and from time to time, in Lender's name, to
verify the validity, amount or any other matter relating to any of such
Borrower's Accounts, by mail, telephone, telecopy, electronic mail, or
otherwise, provided that prior to the occurrence of an Event of Default, Lender
shall conduct such verification in the name of a nominee of Lender or in such
Borrower's name. Each Borrower authorizes Lender to discuss the affairs,
finances and business of such Borrower with any officers, employees or directors
of such Borrower or with its Parent or any Affiliate or the officers, employees
or directors of its Parent or any Affiliate, and to discuss the financial
condition of such Borrower with such Borrower's independent public accountants.
Any such discussions shall be without liability to Lender or to Borrowers'
independent public accountants. Borrowers shall pay to Lender all customary fees
and all costs and out-of-pocket expenses incurred by Lender in the exercise of
its rights hereunder, and all of such fees, costs and expenses shall constitute
Liabilities hereunder, shall be payable on demand and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder.
(e) INSURANCE.
Each Borrower shall:
(i) Keep the Collateral properly housed and insured
for the full insurable value thereof against loss or damage by fire,
theft, explosion, sprinklers, collision (in the case of motor vehicles)
and such other risks as are customarily insured against by Persons
engaged in businesses similar to that of such Borrower, with such
companies, in such amounts, with such deductibles, and under policies
in such form, as shall be satisfactory to Lender. Original (or
certified) copies of such policies of insurance have been or shall be,
within ninety (90) days of the date hereof, delivered to Lender,
together with evidence of payment of all premiums therefor, and shall
contain an endorsement, in form and substance acceptable to Lender,
showing loss under such insurance policies payable to Lender. Such
endorsement, or an independent instrument furnished to Lender, shall
provide that the insurance company shall give Lender at least thirty
(30) days written notice before any such policy of insurance is altered
or canceled and that no act, whether willful or negligent, or default
of such Borrower or any other Person shall affect the right of Lender
to
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recover under such policy of insurance in case of loss or damage. In
addition, each Borrower shall cause to be executed and delivered to
Lender an assignment of proceeds of its business interruption insurance
policies. Each Borrower hereby directs all insurers under all policies
of insurance to pay all proceeds payable thereunder directly to Lender.
Each Borrower irrevocably makes, constitutes and appoints Lender (and
all officers, employees or agents designated by Lender) as such
Borrower's true and lawful attorney (and agent-in-fact) for the purpose
of making, settling and adjusting claims under such policies of
insurance, endorsing the name of such Borrower on any check, draft,
instrument or other item of payment for the proceeds of such policies
of insurance and making all determinations and decisions with respect
to such policies of insurance, provided however, that if no Event of
Default shall have occurred and is continuing, Borrowers may make,
settle and adjust claims involving less than $500,000.00 in the
aggregate without Lender's consent.
(ii) Maintain, at its expense, such public liability
and third party property damage insurance as is customary for Persons
engaged in businesses similar to that of such Borrower with such
companies and in such amounts, with such deductibles and under policies
in such form as shall be satisfactory to Lender and original (or
certified) copies of such policies have been or shall be, within ninety
(90) days after the date hereof, delivered to Lender, together with
evidence of payment of all premiums therefor; each such policy shall
contain an endorsement showing Lender as additional insured thereunder
and providing that the insurance company shall give Lender at least
thirty (30) days written notice before any such policy shall be altered
or canceled.
If a Borrower at any time or times hereafter shall fail to obtain or maintain
any of the policies of insurance required above or to pay any premium relating
thereto, then Lender, without waiving or releasing any obligation or default by
Borrowers hereunder, may (but shall be under no obligation to) obtain and
maintain such policies of insurance and pay such premiums and take such other
actions with respect thereto as Lender deems advisable upon notice to such
Borrower. Such insurance, if obtained by Lender, may, but need not, protect such
Borrower's interests or pay any claim made by or against such Borrower with
respect to the Collateral. Such insurance may be more expensive than the cost of
insurance such Borrower may be able to obtain on its own and may be cancelled
only upon such Borrower providing evidence that it has obtained the insurance as
required above. All sums disbursed by Lender in connection with any such
actions, including, without limitation, court costs, expenses, other charges
relating thereto and reasonable attorneys' fees, shall constitute Loans
hereunder, shall be payable on demand by Borrowers to Lender and, until paid,
shall bear interest at the highest rate then applicable to Loans hereunder.
(f) COLLATERAL.
Each Borrower shall keep the Collateral in good condition,
repair and order and shall make all necessary repairs to the Equipment and
replacements thereof so that the
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operating efficiency and the value thereof shall at all times be preserved and
maintained in all material respects. Each Borrower shall permit Lender to
examine any of the Collateral at any time and wherever the Collateral may be
located and, each Borrower shall, immediately upon request therefor by Lender,
deliver to Lender any and all evidence of ownership of any of the Equipment
including, without limitation, certificates of title and applications of title.
Each Borrower shall, at the request of Lender, indicate on its records
concerning the Collateral a notation, in form satisfactory to Lender, of the
security interest of Lender hereunder.
(g) USE OF PROCEEDS.
All monies and other property obtained by a Borrower from
Lender pursuant to this Agreement shall be used solely for business purposes of
such Borrower.
(h) TAXES.
Each Borrower shall file all required tax returns and pay all
of its taxes when due, subject to any extensions granted by the applicable
taxing authority, including, without limitation, taxes imposed by federal, state
or municipal agencies, and shall cause any liens for taxes to be promptly
released; provided, that such Borrower shall have the right to contest the
payment of such taxes in good faith by appropriate proceedings so long as (i)
the amount so contested is shown on such Borrower's financial statements; (ii)
the contesting of any such payment does not give rise to a lien for taxes; (iii)
such Borrower keeps on deposit with Lender (such deposit to be held without
interest) or a reserve is maintained against such Borrower's availability to
borrow money under subsection 2(a), in either case, in an amount of money which,
in the sole judgment of Lender, is sufficient to pay such taxes and any interest
or penalties that may accrue thereon; and (iv) if such Borrower fails to
prosecute such contest with reasonable diligence, Lender may apply the money so
deposited in payment of such taxes. If a Borrower fails to pay any such taxes
and in the absence of any such contest by such Borrower, Lender may (but shall
be under no obligation to) advance and pay any sums required to pay any such
taxes and/or to secure the release of any lien therefor, and any sums so
advanced by Lender shall constitute Loans hereunder, shall be payable by such
Borrower to Lender on demand, and, until paid, shall bear interest at the
highest rate then applicable to Loans hereunder.
(i) INTELLECTUAL PROPERTY.
Each Borrower shall maintain adequate licenses, patents,
patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles and trade names to continue its business as heretofore
conducted by it or as hereafter conducted by it unless the failure to maintain
any of the foregoing could not reasonably be expected to have a Material Adverse
Effect on such Borrower.
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(j) CHECKING ACCOUNTS.
Each Borrower shall maintain all of its demand deposit accounts, including its
controlled disbursement account, with LaSalle Bank; provided that each Borrower
may maintain payroll accounts and ▇▇▇▇▇ cash accounts at other financial
institutions so long as the aggregate amount of funds contained in all such
▇▇▇▇▇ cash accounts shall not exceed $100,000.00 at any time. Normal charges
shall be assessed thereon.
13. NEGATIVE COVENANTS.
Until payment and satisfaction in full of all Liabilities and
termination of this Agreement, unless Borrowers obtain Lender's prior written
consent waiving or modifying any of Borrowers' covenants hereunder in any
specific instance, each Borrower agrees as follows:
(a) GUARANTIES.
No Borrower shall assume, guarantee or endorse, or otherwise
become liable in connection with, the obligations of any Person, except by
endorsement of instruments for deposit or collection or similar transactions in
the ordinary course of business.
(b) INDEBTEDNESS.
No Borrower shall create, incur, assume or become obligated
(directly or indirectly), for any loans or other indebtedness for borrowed money
other than the Loans, except that a Borrower may (i) borrow money from a Person
other than Lender on an unsecured and subordinated basis if a subordination
agreement in favor of Lender and in form and substance satisfactory to Lender is
executed and delivered to Lender relative thereto; (ii) maintain its present
indebtedness listed on Schedule 11(n) hereto; (iii) incur unsecured indebtedness
to trade creditors in the ordinary course of business; (iv) incur purchase money
indebtedness or capitalized lease obligations in connection with Capital
Expenditures permitted pursuant to subsection 14(c) hereof; and (v) incur
operating lease obligations requiring payments not to exceed Five Hundred
Thousand and No/100 Dollars ($500,000.00) in the aggregate during any Fiscal
Year of Borrowers.
(c) LIENS.
No Borrower shall grant or permit to exist (voluntarily or
involuntarily) any lien, claim, security interest or other encumbrance
whatsoever on any of its assets, other than Permitted Liens.
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(d) MERGERS, SALES, ACQUISITIONS, SUBSIDIARIES AND OTHER
TRANSACTIONS OUTSIDE THE ORDINARY COURSE OF BUSINESS.
No Borrower shall (i) enter into any merger or consolidation;
(ii) change its state of organization or enter into any transaction which has
the effect of changing its state of organization (iii) sell, lease or otherwise
dispose of any of its assets other than in the ordinary course of business; (iv)
purchase the stock, other equity interests or all or a material portion of the
assets of any Person or division of such Person; or (v) enter into any other
transaction outside the ordinary course of such Borrower's business, including,
without limitation, any purchase, redemption or retirement of any shares of any
class of its stock or any other equity interest, and any issuance of any shares
of, or warrants or other rights to receive or purchase any shares of, any class
of its stock or any other equity interest, provided that Digital may issue stock
in accordance with the terms of its 2003 Stock Option Plan in effect as of the
date hereof; provided further that Digital may issue shares, warrants or other
rights to receive or purchase any shares of any class of its stock or any other
equity interest so long as no Event of Default would occur as a result thereof.
No Borrower shall form any Subsidiaries or enter into any joint ventures or
partnerships with any other Person.
(e) DIVIDENDS AND DISTRIBUTIONS.
No Borrower shall declare or pay any dividend or other distribution
(whether in cash or in kind) on any class of its stock (if such Borrower is a
corporation) or on account of any equity interest in such Borrower (if such
Borrower is a partnership, limited liability company or other type of entity).
Notwithstanding the foregoing and provided that (i) each such dividend payment
is permitted under all applicable laws; and (ii) no Event of Default shall have
occurred prior to, or would occur as a result of, any such dividend payment,
Digital may pay the regularly scheduled dividends on its preferred stock in
accordance with the terms of such stock. Digital hereby agrees not to
accelerate, increase or prepay said dividends.
(f) INVESTMENTS; LOANS.
No Borrower shall purchase or otherwise acquire, or contract
to purchase or otherwise acquire, the obligations or stock of any Person, other
than direct obligations of the United States, obligations insured by the Federal
Deposit Insurance Corporation and obligations unconditionally guaranteed by the
United States; nor shall a Borrower lend or otherwise advance funds to any
Person except for advances made to employees, officers and directors for travel
and other expenses arising in the ordinary course of business.
(g) FUNDAMENTAL CHANGES, LINE OF BUSINESS.
No Borrower shall amend its organizational documents or change
its Fiscal Year or enter into a new line of business materially different from
such Borrower's current business unless (i) such actions would not have a
Material Adverse Effect on such Borrower; (ii) such actions would not affect the
obligations of such Borrower to Lender; (iii) such
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actions would not affect the interpretation of any of the terms of this
Agreement or the Other Agreements and (iv) Lender has received ten (10) days
prior written notice of such amendment or change.
(h) EQUIPMENT.
No Borrower shall (i) permit any Equipment to become a Fixture
to real property unless such real property is owned by such Borrower and is
subject to a mortgage in favor of Lender, or if such real property is leased, is
subject to a landlord's agreement in favor of Lender on terms acceptable to
Lender, or (ii) permit any Equipment to become an accession to any other
personal property unless such personal property is subject to a first priority
lien in favor of Lender.
(i) AFFILIATE TRANSACTIONS.
Except as set forth on Schedule 11(i) hereto or as permitted
pursuant to subsection 11(c) hereof, no Borrower shall conduct, permit or suffer
to be conducted, transactions with Affiliates other than transactions for the
purchase or sale of Inventory or services in the ordinary course of business
pursuant to terms that are no less favorable to such Borrower than the terms
upon which such transactions would have been made had they been made to or with
a Person that is not an Affiliate.
(j) SETTLING OF ACCOUNTS.
Each Borrower shall not settle or adjust any Account
identified by such Borrower as an Eligible Account or with respect to which the
Account Debtor is an Affiliate without the consent of Lender, provided, that
following the occurrence of an Event of Default, such Borrower shall not settle
or adjust any Account without the consent of Lender.
14. FINANCIAL COVENANTS.
Each Borrower shall maintain and keep in full force and effect
each of the financial covenants set forth below:
(a) TANGIBLE NET WORTH.
Borrowers' Tangible Net Worth shall not at any time be less
than the Minimum Tangible Net Worth; "MINIMUM TANGIBLE NET WORTH" being defined
for purposes of this subsection as (i) Two Million Five Hundred Thousand and
No/100 Dollars ($2,500,000.00) at all times from the date hereof through
December 30, 2003, (ii) Two Million Seven Hundred Thousand and No/100 Dollars
($2,700,000.00) at all times from December 31, 2003 through December 30, 2004
and (iii) thereafter, from the last day of each Fiscal Year of Borrowers through
the day prior to the last day of each immediately succeeding Fiscal Year of
Borrowers, the Minimum Tangible Net Worth during the immediately preceding
period plus Six Hundred Thousand and No/100 Dollars ($600,000.00) ; and
"TANGIBLE NET WORTH"
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being defined for purposes of this subsection as Borrowers' shareholders' equity
(including retained earnings) less the book value of all intangible assets as
determined solely by Lender on a consistent basis plus the amount of any LIFO
reserve plus the amount of any debt subordinated to Lender, all as determined
under generally accepted accounting principles applied on a basis consistent
with the financial statement dated September 30, 2003 except as set forth
herein;
(b) FIXED CHARGE COVERAGE.
Borrowers shall not permit the ratio of their EBITDA to Fixed
Charges for each period set forth below to be less than the ratio set forth
below for the corresponding period set forth below:
Period Ratio
------ -----
For the three (3) fiscal quarters ending 1.0:1.0
June 30, 2004
For the twelve (12) month period ending 1.15:1.0
September 30, 2004 and each twelve (12)
month period ending on the last day
of each fiscal quarter thereafter
(c) CAPITAL EXPENDITURE LIMITATIONS.
Borrowers and their Subsidiaries shall not make any Capital
Expenditures if, after giving effect to such Capital Expenditure, the aggregate
cost of all Capital Expenditures would exceed One Million Five Hundred Thousand
and No/100 Dollars ($1,500,000.00) during any Fiscal Year.
15. DEFAULT.
The occurrence of any one or more of the following events
shall constitute an "Event of Default" by Borrowers hereunder:
(a) PAYMENT.
The failure of any Obligor to pay when due, declared due, or
demanded by Lender, any of the Liabilities.
(b) BREACH OF THIS AGREEMENT AND THE OTHER AGREEMENTS.
The failure of any Obligor to perform, keep or observe any of
the covenants, conditions, promises, agreements or obligations of such Obligor
under this Agreement or any of the Other Agreements; provided that any such
failure by a Borrower under subsections
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12(b)(i), (iv), (v), (vi) 12(c) and 12(i) of this Agreement shall not constitute
an Event of Default hereunder until the fifteenth (15th) day following the
occurrence thereof.
(c) BREACHES OF OTHER OBLIGATIONS.
The failure of any Obligor to perform, keep or observe (after
any applicable notice and cure period) any of the covenants, conditions,
promises, agreements or obligations of such Obligor under any other agreement
with any Person if such failure might have a Material Adverse Effect on such
Obligor.
(d) BREACH OF REPRESENTATIONS AND WARRANTIES.
The making or furnishing by any Obligor to Lender of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with this Agreement or the Other Agreements or in
connection with any other agreement between such Obligor and Lender, which is
untrue or misleading in any material respect as of the date made.
(e) LOSS OF COLLATERAL.
The loss, theft, damage or destruction of any of the
Collateral in an amount in excess of $500,000.00 in the aggregate for all such
events during any year of the Original Term or any Renewal Term as determined by
Lender in its sole discretion determined in good faith, or (except as permitted
hereby) sale, lease or furnishing under a contract of service of, any of the
Collateral.
(f) LEVY, SEIZURE OR ATTACHMENT.
The making or any attempt by any Person to make any levy,
seizure or attachment upon any of the Collateral.
(g) BANKRUPTCY OR SIMILAR PROCEEDINGS.
The commencement of any proceedings in bankruptcy by or
against any Obligor or for the liquidation or reorganization of any Obligor, or
alleging that such Obligor is insolvent or unable to pay its debts as they
mature, or for the readjustment or arrangement of any Obligor's debts, whether
under the United States Bankruptcy Code or under any other law, whether state or
federal, now or hereafter existing, for the relief of debtors, or the
commencement of any analogous statutory or non-statutory proceedings involving
any Obligor; provided, however, that if such commencement of proceedings against
such Obligor is involuntary, such action shall not constitute an Event of
Default unless such proceedings are not dismissed within forty-five (45) days
after the commencement of such proceedings.
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(h) APPOINTMENT OF RECEIVER.
The appointment of a receiver or trustee for any Obligor, for
any of the Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation, limited liability company or a partnership; provided, however, that
if such appointment or commencement of proceedings against such Obligor is
involuntary, such action shall not constitute an Event of Default unless such
appointment is not revoked or such proceedings are not dismissed within
forty-five (45) days after the commencement of such proceedings.
(i) JUDGMENT.
The entry of any judgments or orders aggregating in excess of
$500,000.00 against any Obligor which remains unsatisfied or undischarged and in
effect for thirty (30) days after such entry without a stay of enforcement or
execution.
(j) DEATH OR DISSOLUTION OF OBLIGOR.
The death of any Obligor who is a natural Person, or of any
general partner who is a natural Person of any Obligor which is a partnership,
or any member who is a natural Person of any Obligor which is a limited
liability company or the dissolution of any Obligor which is a partnership,
limited liability company, corporation or other entity.
(k) DEFAULT OR REVOCATION OF GUARANTY.
The occurrence of an event of default under, or the revocation
or termination of, any agreement, instrument or document executed and delivered
by any Person to Lender pursuant to which such Person has guaranteed to Lender
the payment of all or any of the Liabilities or has granted Lender a security
interest in or lien upon some or all of such Person's real and/or personal
property to secure the payment of all or any of the Liabilities.
(l) CRIMINAL PROCEEDINGS.
The institution in any court of a criminal proceeding against
any Obligor which would have a Material Adverse Effect on such Obligor, or the
indictment of any Obligor for any crime other than traffic and boating tickets
and misdemeanors not punishable by jail terms.
(m) CHANGE OF CONTROL.
A Change of Control has occurred.
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(n) CHANGE OF MANAGEMENT.
If ▇▇▇▇▇ ▇▇▇▇▇▇ shall cease to be the Chairman and President
of Digital or Executive Vice President of Digital Audio and TwinVision at any
time.
(o) MATERIAL ADVERSE CHANGE.
Any material adverse change in the Collateral, business,
property, assets, prospects, operations or condition, financial or otherwise of
any Obligor, as determined by Lender in its sole judgment or the occurrence of
any event which, in Lender's sole judgment, could have a Material Adverse
Effect.
16. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence and during the continuance of an Event
of Default described in subsection 15(g) hereof, all of the Liabilities shall
immediately and automatically become due and payable, without notice of any
kind. Upon the occurrence of any other Event of Default, all Liabilities may, at
the option of Lender, and without demand, notice or legal process of any kind,
be declared, and immediately shall become, due and payable.
(b) Upon the occurrence and during the continuance of an Event
of Default, Lender may exercise from time to time any rights and remedies
available to it under the Uniform Commercial Code and any other applicable law
in addition to, and not in lieu of, any rights and remedies expressly granted in
this Agreement or in any of the Other Agreements and all of Lender's rights and
remedies shall be cumulative and non-exclusive to the extent permitted by law.
In particular, but not by way of limitation of the foregoing, Lender may,
without notice, demand or legal process of any kind, take possession of any or
all of the Collateral (in addition to Collateral of which it already has
possession), wherever it may be found, and for that purpose may pursue the same
wherever it may be found, and may enter onto any of Borrowers' premises where
any of the Collateral may be, and search for, take possession of, remove, keep
and store any of the Collateral until the same shall be sold or otherwise
disposed of, and Lender shall have the right to store the same at any of
Borrowers' premises without cost to Lender. At Lender's request, each Borrower
shall, at Borrowers' expense, assemble the Collateral and make it available to
Lender at one or more places to be designated by Lender and reasonably
convenient to Lender and such Borrower. Each Borrower recognizes that if a
Borrower fails to perform, observe or discharge any of its Liabilities under
this Agreement or the Other Agreements, no remedy at law will provide adequate
relief to Lender, and agrees that Lender shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages. Any notification of intended disposition of any of the
Collateral required by law will be deemed to be a reasonable authenticated
notification of disposition if given at least ten (10) days prior to such
disposition and such notice shall (i) describe Lender and the applicable
Borrower(s), (ii) describe the Collateral that is the subject to the intended
disposition, (iii)
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state the method of the intended disposition, (iv) state that the applicable
Borrower(s) is entitled to an accounting of the Liabilities and state the
charge, if any, for an accounting and (v) state the time and place of any public
disposition or the time after which any private sale is to be made. Lender may
disclaim any warranties that might arise in connection with the sale, lease or
other disposition of the Collateral and has no obligation to provide any
warranties at such time. Any Proceeds of any disposition by Lender of any of the
Collateral may be applied by Lender to the payment of expenses in connection
with the Collateral, including, without limitation, legal expenses and
reasonable attorneys' fees, and any balance of such Proceeds may be applied by
Lender toward the payment of such of the Liabilities, and in such order of
application, as Lender may from time to time elect.
17. CONDITIONS PRECEDENT.
The obligation of Lender to fund the Term Loan, to fund the
initial Revolving Loan, and to issue or cause to be issued the initial Letter of
Credit, is subject to the satisfaction or waiver on or before the date hereof of
the following conditions precedent:
(a) Lender shall have received each of the agreements,
opinions, reports, approvals, consents, certificates and other documents set
forth on the closing document list attached hereto as Schedule 17(a) (the
"CLOSING DOCUMENT LIST") in each case in form and substance satisfactory to
Lender;
(b) Since September 30, 2003, no event shall have occurred
which has had or could reasonably be expected to have a Material Adverse Effect
on any Obligor, as determined by Lender in its sole discretion, determined in
good faith;
(c) Lender shall have received payment in full of all fees and
expenses payable to it by Borrowers or any other Person in connection herewith,
on or before disbursement of the initial Loans hereunder;
(d) Lender shall have determined that immediately after giving
effect to (A) the making of the initial Loans, including without limitation the
Term Loan and the Revolving Loans, if any, requested to be made on the date
hereof, (B) the issuance of the initial Letter of Credit, if any, requested to
be made on such date, (C) the payment of all fees due upon such date and (D) the
payment or reimbursement by Borrowers of Lender for all closing costs and
expenses incurred in connection with the transactions contemplated hereby,
Borrowers have Excess Availability of not less than Five Hundred Thousand and
No/100 Dollars ($500,000.00);
(e) The Obligors shall have executed and delivered to Lender
all such other documents, instruments and agreements which Lender determines are
reasonably necessary to consummate the transactions contemplated hereby,
including, without limitation, a secured Continuing Unconditional Guaranty of
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ International, Inc.; and
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(f) Renaissance US Growth and Income Trust PLC, Renaissance
Capital Group, Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Begnt ▇▇▇▇▇ shall each execute and
deliver a Subordination Agreement in form and substance satisfactory to Lender.
In addition, the maturity dates with respect to all such indebtedness shall be
extended to a date subsequent to the Original Term.
18. JOINT AND SEVERAL LIABILITY.
(a) Notwithstanding anything to the contrary contained herein,
all Liabilities of each Borrower hereunder shall be joint and several
obligations of Borrowers.
(b) Notwithstanding any provisions of this Agreement to the
contrary, it is intended that the joint and several nature of the Liabilities of
Borrowers and the liens and security interests granted by Borrowers to secure
the Liabilities, not constitute a "Fraudulent Conveyance" (as defined below).
Consequently, Lender and Borrowers agree that if the Liabilities of a Borrower,
or any liens or security interests granted by such Borrower securing the
Liabilities would, but for the application of this sentence, constitute a
Fraudulent Conveyance, the Liabilities of such Borrower and the liens and
security interests securing such Liabilities shall be valid and enforceable only
to the maximum extent that would not cause such Liabilities or such lien or
security interest to constitute a Fraudulent Conveyance, and the Liabilities of
such Borrower and this Agreement shall automatically be deemed to have been
amended accordingly. For purposes hereof, "Fraudulent Conveyance" means a
fraudulent conveyance under Section 548 of Chapter 11 of Title II of the United
States Code (11 U.S.C. Section 101, et seq.), as amended (the "Bankruptcy Code")
or a fraudulent conveyance or fraudulent transfer under the applicable
provisions of any fraudulent conveyance or fraudulent transfer law or similar
law of any state, nation or other governmental unit, as in effect from time to
time.
(c) Each Borrower assumes responsibility for keeping itself
informed of the financial condition of each other Borrower, and any and all
endorsers and/or guarantors of any instrument or document evidencing all or any
part of such other Borrower's Liabilities and of all other circumstances bearing
upon the risk of nonpayment by such other Borrowers of their Liabilities and
each Borrower agrees that Lender shall not have any duty to advise such Borrower
of information known to Lender regarding such condition or any such
circumstances or to undertake any investigation not a part of its regular
business routine. If Lender, in its sole discretion, undertakes at any time or
from time to time to provide any such information to a Borrower, Lender shall
not be under any obligation to update any such information or to provide any
such information to such Borrower on any subsequent occasion.
(d) Lender is hereby authorized, without notice or demand and
without affecting the liability of a Borrower hereunder, to, at any time and
from time to time, (i) renew, extend, accelerate or otherwise change the time
for payment of, or other terms relating to a Borrower's Liabilities or otherwise
modify, amend or change the terms of any promissory note or other agreement,
document or instrument now or hereafter executed by a
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Borrower and delivered to Lender; (ii) accept partial payments on a Borrower's
Liabilities; (iii) take and hold security or collateral for the payment of a
Borrower's Liabilities hereunder or for the payment of any guaranties of a
Borrower's Liabilities or other liabilities of a Borrower and exchange, enforce,
waive and release any such security or collateral; (iv) apply such security or
collateral and direct the order or manner of sale thereof as Lender, in its sole
discretion, may determine; and (v) settle, release, compromise, collect or
otherwise liquidate a Borrower's Liabilities and any security or collateral
therefor in any manner, without affecting or impairing the obligations of the
other Borrowers. Lender shall have the exclusive right to determine the time and
manner of application of any payments or credits, whether received from a
Borrower or any other source, and such determination shall be binding on such
Borrower. All such payments and credits may be applied, reversed and reapplied,
in whole or in part, to any of a Borrower's Liabilities as Lender shall
determine in its sole discretion without affecting the validity or
enforceability of the Liabilities of the other Borrowers.
(e) Each Borrower hereby agrees that, except as hereinafter
provided, its obligations hereunder shall be unconditional, irrespective of (i)
the absence of any attempt to collect a Borrower's Liabilities from any Borrower
or any guarantor or other action to enforce the same; (ii) the waiver or consent
by Lender with respect to any provision of any instrument evidencing Borrowers'
Liabilities, or any part thereof, or any other agreement heretofore, now or
hereafter executed by a Borrower and delivered to Lender; (iii) failure by
Lender to take any steps to perfect and maintain its security interest in, or to
preserve its rights to, any security or collateral for Borrowers' Liabilities;
(iv) the institution of any proceeding under the Bankruptcy Code, or any similar
proceeding, by or against a Borrower or Lender's election in any such proceeding
of the application of Section 1111(b)(2) of the Bankruptcy Code; (v) any
borrowing or grant of a security interest by any Borrower as
debtor-in-possession, under Section 364 of the Bankruptcy Code; (vi) the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of
Lender's claim(s) for repayment of any of Borrowers' Liabilities; or (vii) any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.
(f) No payment made by or for the account of a Borrower
including, without limitations, (i) a payment made by such Borrower on behalf of
another Borrower's Liabilities or (ii) a payment made by any other person under
any guaranty, shall entitle such Borrower, by subrogation or otherwise, to any
payment from such other Borrower or from or out of such other Borrower's
property and such Borrower shall not exercise any right or remedy against such
other Borrower or any property of such other Borrower by reason of any
performance of such Borrower of its joint and several obligations hereunder.
19. INDEMNIFICATION.
Each Borrower agrees to defend (with counsel satisfactory to
Lender), protect, indemnify and hold harmless Lender, each affiliate or
subsidiary of Lender, and each of their respective shareholders, members,
officers, directors, managers, employees, attorneys and
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agents (each an "INDEMNIFIED PARTY") from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature (including, without
limitation, the disbursements and the reasonable fees of counsel for each
Indemnified Party in connection with any investigative, administrative or
judicial proceeding, whether or not the Indemnified Party shall be designated a
party thereto), which may be imposed on, incurred by, or asserted against, any
Indemnified Party (whether direct, indirect or consequential and whether based
on any federal, state or local laws or regulations, including, without
limitation, securities laws and regulations, Environmental Laws and commercial
laws and regulations, under common law or in equity, or based on contract or
otherwise) in any manner relating to or arising out of this Agreement or any
Other Agreement, or any act, event or transaction related or attendant thereto,
the making or issuance and the management of the Loans or any Letters of Credit
or the use or intended use of the proceeds of the Loans or any Letters of
Credit; provided, however, that no Borrower shall have any obligation hereunder
to any Indemnified Party with respect to matters caused by or resulting from the
willful misconduct or gross negligence of such Indemnified Party. To the extent
that the undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, each Borrower
shall satisfy such undertaking to the maximum extent permitted by applicable
law. Any liability, obligation, loss, damage, penalty, cost or expense covered
by this indemnity shall be paid to each Indemnified Party on demand, and,
failing prompt payment, shall, together with interest thereon at the highest
rate then applicable to Loans hereunder from the date incurred by each
Indemnified Party until paid by Borrowers, be added to the Liabilities of
Borrowers and be secured by the Collateral. The provisions of this Section 18
shall survive the satisfaction and payment of the other Liabilities and the
termination of this Agreement.
20. NOTICE.
All written notices and other written communications with
respect to this Agreement shall be sent by ordinary, certified or overnight
mail, by telecopy or delivered in person, and in the case of Lender shall be
sent to it at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, attention:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇, and in the case of Borrowers
shall be sent to them at their respective principal places of business set forth
on Exhibit A hereto or as otherwise directed by Borrowers in writing. All
notices shall be deemed received upon actual receipt thereof or refusal of
delivery.
21. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.
This Agreement and the Other Agreements are submitted by
Borrowers to Lender for Lender's acceptance or rejection at Lender's principal
place of business as an offer by Borrowers to borrow monies from Lender now and
from time to time hereafter, and shall not be binding upon Lender or become
effective until accepted by Lender, in writing, at said place of business. If so
accepted by Lender, this Agreement and the Other Agreements shall
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be deemed to have been made at said place of business. THIS AGREEMENT AND THE
OTHER AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE
STATE OF
ILLINOIS AS TO INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION,
EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING, WITHOUT LIMITATION, THE LEGALITY
OF THE INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY
INTERESTS IN COLLATERAL LOCATED OUTSIDE OF THE STATE OF
ILLINOIS, WHICH SHALL BE
GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION IN WHICH SUCH
COLLATERAL IS LOCATED. If any provision of this Agreement shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or remaining provisions of this
Agreement.
To induce Lender to accept this Agreement, each Borrower
irrevocably agrees that, subject to Lender's sole and absolute election, ALL
ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR
RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF
ILLINOIS.
EACH BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE OR FEDERAL COURTS LOCATED WITHIN SAID CITY AND STATE. EACH BORROWER HEREBY
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE
OF PROCESS MAY BE MADE UPON SUCH BORROWER BY CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH BORROWER, AT THE ADDRESS SET FORTH
FOR NOTICE IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS
AFTER THE SAME HAS BEEN POSTED. Lender agrees to endeavor to provide a copy of
such process to the law firm of ▇▇▇▇, Layton, Kersh, Solomon, Sigmon, ▇▇▇▇ &
▇▇▇▇▇, P.A. by mail at the address of ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ or by facsimile transmission at facsimile number (704)
866-8010. Failure of Lender to provide a copy of such process shall not impair
Lender's rights hereunder, create a cause of action against Lender or create any
claim or right on behalf of Borrowers or any third party. EACH BORROWER HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION
BROUGHT AGAINST SUCH BORROWER BY LENDER IN ACCORDANCE WITH THIS SECTION.
22. MODIFICATION AND BENEFIT OF AGREEMENT.
This Agreement and the Other Agreements may not be modified,
altered or amended except by an agreement in writing signed by each Borrower or
such other Person who is a party to such Other Agreement and Lender. No Borrower
may sell, assign or transfer this Agreement, or the Other Agreements or any
portion thereof, including, without
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limitation, such Borrower's rights, titles, interest, remedies, powers or duties
hereunder and thereunder. Each Borrower hereby consents to Lender's sale,
assignment, transfer or other disposition, at any time and from time to time
hereafter, of this Agreement, or the Other Agreements, or of any portion
thereof, or participations therein, including, without limitation, Lender's
rights, titles, interest, remedies, powers and/or duties and agrees that it
shall execute and deliver such documents as Lender may request in connection
with any such sale, assignment, transfer or other disposition.
23. HEADINGS OF SUBDIVISIONS.
The headings of subdivisions in this Agreement are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of this Agreement.
24. POWER OF ATTORNEY.
Each Borrower acknowledges and agrees that its appointment of
Lender as its attorney and agent-in-fact for the purposes specified in this
Agreement is an appointment coupled with an interest and shall be irrevocable
until all of the Liabilities are satisfied and paid in full and this Agreement
is terminated.
25. CONFIDENTIALITY.
Lender hereby agrees to use commercially reasonable efforts to
assure that any and all information relating to such Borrower which is (i)
furnished by such Borrower to Lender (or to any affiliate of Lender); and (ii)
non-public, confidential or proprietary in nature, shall be kept confidential by
Lender or such affiliate in accordance with applicable law; provided, however,
that such information and other credit information relating to such Borrower may
be distributed by Lender or such affiliate to Lender's or such affiliate's
directors, managers, officers, employees, attorneys, affiliates, assignees,
participants, auditors, agents and regulators, and upon the order of a court or
other governmental agency having jurisdiction over Lender or such affiliate, to
any other party. Each Borrower and Lender further agree that this provision
shall survive the termination of this Agreement. Notwithstanding the foregoing,
each Borrower hereby consents to Lender publishing a tombstone or similar
advertising material relating to the financing transaction contemplated by this
Agreement. Notwithstanding anything to the contrary set forth herein or in any
other agreement to which the parties hereto are parties or by which they are
bound, the obligations of confidentiality contained herein and therein, as they
relate the transactions contemplated by this Agreement and the Other Agreements
(the "Transaction"), shall not apply to the federal tax structure or federal tax
treatment of the Transaction, and each party hereto (and any employee,
representative, agent or any party hereto) may disclose to any and all persons,
without limitation of any kind, the federal tax structure and federal tax
treatment of the Transaction. In addition, each party hereto acknowledges that
it has no proprietary or
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exclusive rights to the federal tax structure of the Transaction or any federal
tax matter or federal tax treatment related to the Transaction.
26. COUNTERPARTS.
This Agreement, any of the Other Agreements and any
amendments, waivers, consents or supplements may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which, when so executed and delivered, shall be deemed an original, but all of
which counterparts together shall constitute but one agreement.
27. ELECTRONIC SUBMISSIONS.
Upon not less than thirty (30) days' prior written notice (the
"APPROVED ELECTRONIC FORM NOTICE"), Lender may permit or require that any of the
documents, certificates, forms, deliveries or other communications, authorized,
required or contemplated by this Agreement or the Other Agreements, be submitted
to Lender in "APPROVED ELECTRONIC FORM" (as hereafter defined), subject to any
reasonable terms, conditions and requirements in the applicable Approved
Electronic Forms Notice. For purposes hereof "ELECTRONIC FORM" means e-mail,
e-mail attachments, data submitted on web-based forms or any other communication
method that delivers machine readable data or information to Lender, and
"APPROVED ELECTRONIC FORM" means an Electronic Form that has been approved in
writing by Lender (which approval has not been revoked or modified by Lender)
and sent to Borrowers in an Approved Electronic Form Notice. Except as otherwise
specifically provided in the applicable Approved Electronic Form Notice, any
submissions made in an applicable Approved Electronic Form shall have the same
force and effect that the same submissions would have had if they had been
submitted in any other applicable form authorized, required or contemplated by
this Agreement or the Other Agreements.
28. WAIVER OF JURY TRIAL; OTHER WAIVERS.
(a) EACH BORROWER AND LENDER EACH HEREBY WAIVES ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY
TO THIS AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL,
ANY ALLEGED TORTIOUS CONDUCT BY A BORROWER OR LENDER OR WHICH, IN ANY WAY,
DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN A
BORROWER AND LENDER. IN NO EVENT SHALL LENDER BE LIABLE FOR LOST PROFITS OR
OTHER SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.
(b) Each Borrower hereby waives demand, presentment, protest
and notice of nonpayment, and further waives the benefit of all valuation,
appraisal and exemption laws.
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(c) Each Borrower hereby waives the benefit of any law that
would otherwise restrict or limit Lender or any affiliate of Lender in the
exercise of its right, which is hereby acknowledged and agreed to, to set-off
against the Liabilities, without notice at any time hereafter, any indebtedness,
matured or unmatured, owing by Lender or such affiliate of Lender to such
Borrower, including, without limitation any Deposit Account at Lender or such
affiliate.
(d) EACH BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND
HEARING OF ANY KIND PRIOR TO THE EXERCISE BY LENDER OF ITS RIGHTS TO REPOSSESS
THE COLLATERAL OF SUCH BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH
OR LEVY UPON SUCH COLLATERAL, PROVIDED THAT IN THE EVENT THAT LENDER SEEKS TO
ENFORCE ITS RIGHTS HEREUNDER BY JUDICIAL PROCESS OR SELF HELP, LENDER SHALL
PROVIDE BORROWERS WITH SUCH NOTICES AS ARE REQUIRED BY LAW.
(e) Lender's failure, at any time or times hereafter, to
require strict performance by a Borrower of any provision of this Agreement or
any of the Other Agreements shall not waive, affect or diminish any right of
Lender thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Lender of an Event of Default under this Agreement or
any default under any of the Other Agreements shall not suspend, waive or affect
any other Event of Default under this Agreement or any other default under any
of the Other Agreements, whether the same is prior or subsequent thereto and
whether of the same or of a different kind or character. No delay on the part of
Lender in the exercise of any right or remedy under this Agreement or any Other
Agreement shall preclude other or further exercise thereof or the exercise of
any right or remedy. None of the undertakings, agreements, warranties, covenants
and representations of Borrowers contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any of
the Other Agreements shall be deemed to have been suspended or waived by Lender
unless such suspension or waiver is in writing, signed by a duly authorized
officer of Lender and directed to Borrowers specifying such suspension or
waiver.
[THE REMAINDER OF THE PAGE IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
DIGITAL RECORDERS, INC. LASALLE BUSINESS CREDIT, LLC
By /s/▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By /s/▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------- ---------------------------
Title Executive Vice President Title Senior Vice President
----------------------------- ---------------------------
DIGITAL AUDIO CORPORATION
By /s/▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Title Vice President
TWINVISION OF NORTH AMERICA, INC.
By /s/▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Title Executive Vice President
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