$15,000,000
LOAN AGREEMENT
Dated as of September 19, 1996
between
MIDLAND USA, INC.
as Borrower
and
SECURICOR COMMUNICATIONS LIMITED
as Lender
LOAN AGREEMENT, dated as of September 19, 1996,
between MIDLAND USA, INC., a Delaware corporation having an
office at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ("Borrower") and a wholly-owned subsidiary of INTEK
DIVERSIFIED CORPORATION ("Intek"), and SECURICOR
COMMUNICATIONS LIMITED, a company incorporated under the laws
of England and Wales having an office at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ("Lender").
W I T N E S S E T H:
WHEREAS, Midland International Corporation, a
Delaware corporation ("Midland"), Intek and ▇▇▇▇▇▇▇▇ Capital
Limited, an Ontario corporation ("▇▇▇▇▇▇▇▇"), entered into an
Amended and Restated Sale of Assets and Trademark License
Agreement, dated as of September 19, 1996 (the "Asset and
Trademark Agreement"), pursuant to which Midland agreed to
sell to Intek the Trademark (as defined herein) and certain
other assets, as described therein (collectively, the
"Acquired Assets"), in consideration for up to 2,500,000
shares of common stock, par value $0.01 per share of Intek,
an assumption of certain liabilities of Midland (the "Assumed
Liabilities") and a cash payment, all as set forth in the
Asset and Trademark Agreement (the "Midland Transaction"); and
WHEREAS, Intek has assigned and transferred to
Borrower all of its right, title and interest in and to the
Acquired Assets and the Asset and Trademark Agreement (and all
other agreements entered into by Intek in connection
therewith) and Borrower has assumed the Assumed Liabilities
and all obligations of Intek under the Asset and Trademark
Agreement (and all other agreements entered into by Intek in
connection therewith), all in accordance with the terms of the
Assignment and Assumption Agreement (as defined herein) and
referred to herein as the "Intek-Borrower Transfer"; and
WHEREAS, Intek and Lender entered into a Stock
Purchase Agreement, dated as of June 18, 1996, as amended by
agreement of the parties dated as of September 19, 1996 (the
"Stock Agreement"), pursuant to which Lender agreed to sell to
Intek all of the outstanding securities (other than certain
preferred shares) of Lender's wholly-owned subsidiary,
Securicor Radiocoms Limited ("Radiocoms"), in consideration
for 25,000,000 shares of Common Stock (the "Securicor
Transaction"); and
WHEREAS, pursuant to the Stock Agreement, Lender has
agreed, among other things, to loan up to $15 million to Intek
following the consummation of the Securicor Transaction to
finance the combined business of Intek, the U.S. LMR
Distribution Business and Radiocoms (the "New Intek Loan");
and
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WHEREAS, it is currently contemplated that the
Midland Transaction will be consummated on or about September
19, 1996; and
WHEREAS, it is currently contemplated that the
Securicor Transaction will be consummated during the fourth
quarter of 1996; and
WHEREAS, following the consummation of the Midland
Transaction, Borrower will require significant funding to
finance its operations until such time as the Securicor
Transaction is consummated and the proceeds of the New Intek
Loan are available and has requested that Lender provide such
funding on the terms and subject to the conditions set forth
herein; and
WHEREAS, Borrower has secured the Obligations by a
perfected first priority security interest in the Collateral
(as defined herein); and
WHEREAS, Lender, Borrower and Intek have agreed that
in the event the Securicor Transaction is consummated, the
Obligations (as defined herein) outstanding hereunder on the
date of such consummation shall thereafter be assumed by Intek
and become obligations under the New Intek Loan (subject to
the terms thereof), as set forth in that certain letter
agreement between the parties, dated September 19, 1996 (the
"Intek Loan Assumption Agreement"); and
NOW, THEREFORE, in consideration of the premises and
the mutual covenants hereinafter contained, the parties hereto
agree as follows:
1. DEFINITIONS
In addition to the defined terms appearing above,
capitalized terms used in this Agreement shall have (unless
otherwise provided elsewhere in this Agreement) the following
respective meanings when used herein:
"Acquired Assets" shall have the meaning ascribed to
it in the recitals hereof.
"Affiliate" shall mean, with respect to any Person,
any other Person that controls such Person or is controlled by
or under common control with such Person.
"Agreement" shall mean this Loan Agreement,
including all amendments, modifications and supplements hereto
and any appendices, exhibits or schedules to any of the
foregoing, and shall refer to the Agreement as the same may be
in effect at the time such reference becomes operative.
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"Ancillary Agreements" shall mean all supplemental
agreements, undertakings, instruments, documents or other
writings executed by Borrower.
"Asset and Trademark Agreement" shall have the
meaning ascribed to it in the recitals hereof.
"Assignment and Assumption Agreement" shall mean the
Assignment and Assumption Agreement, dated as of September 19,
1996, by and between Intek and Borrower.
"Balance Sheet Date" shall have the meaning ascribed
to it in the recitals hereof.
"Business Day" shall mean any day that is not a
Saturday, a Sunday or a day on which banks are required or
permitted to be closed in the State of New York.
"Cash Collateral Account" shall have the meaning
ascribed to it in Section 2.2(c) hereof.
"Cash Equivalents" shall mean (i) marketable direct
obligations issued or unconditionally guaranteed by the United
States of America or any agency thereof maturing within one
year from the date of acquisition thereof; (ii) commercial
paper maturing no more than one year from the date of creation
thereof and at the time of their acquisition having the
highest rating obtainable from either Standard & Poor's
Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.; and (iii)
certificates of deposit, maturing no more than one year from
the date of creation thereof, issued by commercial banks
incorporated under the laws of the United States of America,
each having combined capital, surplus and undivided profits of
not less than $200,000,000 and having a rating of "A" or
better by a nationally recognized rating agency.
"Charges" shall mean all federal, state, county,
city, municipal, local, foreign or other governmental taxes at
the time due and payable, levies, assessments, charges, liens,
claims or encumbrances upon or relating to (i) the Collateral,
(ii) the Obligations, (iii) Borrower's or any of its
Subsidiaries' ownership or use of any of its assets, or (iv)
any other aspect of Borrower's or any of the Subsidiaries'
business.
"Closing Date" shall mean the date of the initial
Revolving Credit Advance.
"Code" shall mean the Uniform Commercial Code of the
jurisdiction with respect to which such term is used, as in
effect from time to time.
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"Collateral" shall mean the collateral covered by
the Security Agreement, the Trademark Agreement and the Non-
Recourse Guaranty and Pledge Agreement.
"Collateral Documents" shall mean the Security
Agreement, Trademark Agreement and the Non-Recourse Guaranty
and Pledge Agreement.
"Common Stock" shall mean common stock, par value
$0.01 of Intek.
"Default" shall mean any event which, with the
passage of time or notice or both would, unless cured or
waived, become an Event of Default.
"Event of Default" shall have the meaning ascribed
to it in Section 9.1 hereof.
"Extension Fee" shall have the meaning ascribed to
it in Section 2.5 hereof.
"FCC" shall mean the Federal Communications
Commission, or any successor thereto.
"Federal Reserve Board" shall have the meaning
ascribed to it in Section 4.8 hereof.
"Fiscal Year" shall mean the calendar year.
Subsequent changes of the fiscal year of Borrower shall not
change the term "Fiscal Year," unless Lender shall consent in
writing to such changes.
"GAAP" shall mean generally accepted accounting
principles in the United States of America as in effect from
time to time.
"Governmental Authority" means any nation or
government, any state or other political subdivision thereof
and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
"Guaranteed Indebtedness" shall mean, as to any
Person, any obligation of such Person guaranteeing any
indebtedness, lease, dividend, or other obligation ("primary
obligations") of any other Person (the "primary obligor") in
any manner including, without limitation, any obligation or
arrangement of such Person (a) to purchase or repurchase any
such primary obligation, (b) to advance or supply funds: (i)
for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or
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solvency or any balance sheet condition of the primary
obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to
make payment of such primary obligation, or (d) to indemnify
the owner of such primary obligation against loss in respect
thereof.
"Hitachi Supply Agreement" shall mean the agreement
between Midland and Hitachi Denshi Ltd., a Japanese
corporation ("Hitachi"), dated as of May 12, 1994 and pursuant
to which Hitachi agreed, among other things, to manufacture
and sell to Midland certain mobile radios.
"Indebtedness" of any Person shall mean (i) all
indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (including,
without limitation, reimbursement and all other obligations
with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured, but not including
obligations to trade creditors incurred in the ordinary course
of business), (ii) all obligations evidenced by notes, bonds,
debentures or similar instruments, (iii) all indebtedness
created or arising under any conditional sale or other title
retention agreements with respect to property acquired by such
Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are
limited to repossession or sale of such property), (iv) all
Guaranteed Indebtedness, (v) all Indebtedness referred to in
clause (i), (ii), (iii) or (iv) above secured by (or for which
the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in
property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness,
and (vi) the Obligations.
"Intek-Borrower Transfer" shall have the meaning
ascribed to it in the recitals hereof.
"Intek Loan Assumption Agreement" shall have the
meaning ascribed to it in the recitals hereof.
"Letter of Credit Obligations" shall mean all
outstanding obligations incurred by Lender at the request of
Borrower, whether direct or indirect, contingent or otherwise,
due or not due, in connection with the issuance or guarantee,
by Lender or another, of letters of credit, bank acceptances
in respect of letters of credit, or the like. The amount of
such Letter of Credit Obligations shall equal the maximum
amount which may be payable by Lender thereupon or pursuant
thereto.
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"Letters of Credit" shall mean commercial or standby
letters of credit issued at the request and for the account of
Borrower, and bankers' acceptances issued by Borrower, for
which Lender has incurred Letter of Credit Obligations
pursuant thereto.
"Lien" shall mean any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, lien,
charge, claim, security interest, easement or encumbrance, or
preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever
(including, without limitation, any lease or title retention
agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or
agreement to give, any financing statement perfecting a
security interest under the Code or comparable law of any
jurisdiction).
"Loan Documents" shall mean this Agreement, the
Note, the Collateral Documents, those other Ancillary
Agreements as to which Lender is a party or a beneficiary and
all other agreements, instruments, documents and certificates,
including, without limitation, pledges, powers of attorney,
consents, assignments, contracts, notices, and all other
written matter whether heretofore, now or hereafter executed
by or on behalf of Borrower or any of its Affiliates, or any
employee of Borrower or any of its Affiliates, and delivered
to Lender in connection with this Agreement or the
transactions contemplated hereby.
"Material Adverse Effect" or "Material Adverse
Change" shall mean an event or circumstance which materially
adversely affects the business, properties, financial
condition or operations (taken as a whole) of Borrower.
"Maximum Lawful Rate" shall have the meaning
ascribed to it, in Section 2.4(c) hereof.
"Maximum Revolving Credit Loan" shall mean, at any
particular time, an amount equal to $15,000,000.
"Mees Pierson" shall mean Mees Pierson ICS Limited,
a company incorporated under the laws of England and Wales.
"Midland" shall have the meaning ascribed to it in
the recitals hereof.
"Net Cash Proceeds" shall have the meaning ascribed
to it in Section 2.4(a) hereof.
"New Intek Loan" shall have the meaning ascribed to
it in the recitals hereof.
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"Non-Recourse Guaranty and Pledge Agreement" shall
mean the Agreement made in favor of Lender by Intek,
substantially in the form attached as Exhibit C hereto,
including all amendments, modifications and supplements
thereto, and shall refer to the Non-Recourse Guaranty and
Pledge Agreement as the same may be in effect at the time such
reference becomes operative.
"Note" shall mean the Revolving Credit Note.
"Obligations" shall mean all loans, advances, debts,
liabilities, and obligations, for monetary amounts (whether or
not such amounts are liquidated or determinable) owing by
Borrower to Lender (including all Letter of Credit
Obligations), and all covenants and duties regarding such
amounts, of any kind or nature, present or future, whether or
not evidenced by any note, agreement or other instrument,
arising under any of the Loan Documents. This term includes,
without limitation, all interest (whether capitalized or
otherwise), charges, expenses, attorneys' fees and any other
sum chargeable to Borrower (including the Extension Fee) under
any of the Loan Documents.
"Permitted Encumbrances" shall mean the following
encumbrances: (i) Liens for taxes or assessments or other
governmental charges or levies, either not yet due and payable
or to the extent that nonpayment thereof is permitted by the
terms of this Agreement; (ii) pledges or deposits securing
obligations under workmen's compensation, unemployment
insurance, social security or public liability laws or similar
legislation; (iii) pledges or deposits securing bids, tenders,
contracts (other than contracts for the payment of money) or
leases to which Borrower is a party as lessee made in the
ordinary course of business; (iv) deposits securing public or
statutory obligations of Borrower; (v) workers', mechanics',
suppliers', carriers', warehousemen's or other similar liens
arising in the ordinary course of business and securing
indebtedness aggregating not in excess of $100,000 at any time
outstanding, not yet due and payable; (vi) deposits securing,
or in lieu of, surety, appeal or customs bonds in proceedings
to which Borrower is a party; (vii) any attachment or judgment
lien, unless the judgment it secures shall not, within 60 days
after the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall not have been
discharged within 60 days after the expiration of any such
stay; and (viii) zoning restrictions, easements, licenses, or
other restrictions on the use of real property or other minor
irregularities in title (including leasehold title) thereto,
so long as the same do not materially impair the use, value,
or marketability of such real property, leases or leasehold
estates.
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"Person" shall mean any individual, sole
proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division,
agency, body or department thereof).
"Radiocoms" shall have the meaning ascribed to it in
the recitals hereof.
"Repayment Date" means the first to occur of the
following: (a) the date (the "Specified Repayment Date") 30
days after the Termination Date, provided that if the Intek
shareholder meeting to consider the Securicor Transaction is
held after October 31, 1996 but before November 30, 1996 then
the Specified Repayment Date shall be extended by such number
of days (up to a maximum of 30 days) as is equal to the number
of days between October 31, 1996 and the date of such meeting
and (b) the date on which the Securicor Transaction is
consummated.
"Restricted Payment" shall mean (i) the declaration
of any dividend or the incurrence of any liability to make any
other payment or distribution of cash or other property or
assets in respect of Borrower's Stock or (ii) any payment on
account of the purchase, redemption or other retirement of
Borrower's Stock or any other payment or distribution made in
respect thereof, either directly or indirectly.
"Revolving Credit Advance" shall have the meaning
ascribed to it in Section 2.1(a) hereof.
"Revolving Credit Loan" shall mean the aggregate
amount of Revolving Credit Advances outstanding at any time.
"Revolving Credit Note" shall have the meaning
ascribed to it in Section 2.1(b) hereof.
"Securicor Transaction" shall have the meaning
ascribed to it in the recitals hereof.
"Security Agreement" shall mean the agreement
entered into between Lender and Borrower, substantially in the
form attached as Exhibit D hereto, including all amendments,
modifications and supplements thereto, and shall refer to the
Security Agreement as the same may be in effect at the time
such reference becomes operative.
"▇▇▇▇▇▇▇▇" shall have the meaning ascribed to it in
the recitals hereof.
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"Solvent" shall mean, when used with respect to any
Person, that:
(a) the present fair saleable value of such
Person's assets (including, without limitation, the fair
saleable value of the goodwill arising in connection with
the Midland Transaction and other intangible assets) is
in excess of the total amount of such Person's
liabilities;
(b) such Person is able to pay its debts as
they become due; and
(c) such Person does not have unreasonably
small capital to carry on such Person's business as
theretofore operated and all businesses in which such
Person is about to engage.
"Stock" shall mean all shares, options, warrants,
general or limited partnership interests, participations or
other equivalents (regardless of how designated) of or in a
corporation, partnership or equivalent entity whether voting
or nonvoting, including, without limitation, common stock,
preferred stock, or any other "equity security" (as such term
is defined in Rule 3a11-1 of the General Rules and Regulations
promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended).
"Subsidiary" shall mean any Person 50% or more of
whose issued and outstanding voting securities is owned or
controlled, directly or indirectly, by the specified Person.
"Taxes" shall have the meaning ascribed thereto in
Section 2.11 hereof.
"Termination Date" shall mean the first to occur of
the following: (i) the date on which the Stock Agreement is
terminated pursuant to Section 3.2 thereof or (ii) December
31, 1996.
"Trademark Agreement" shall mean the Trademark
Agreement relating to the grant of a security interest in the
Trademark, made in favor of Lender by Borrower, substantially
in the form attached as Exhibit E hereto.
"Trademark" shall mean the Trademark described on
Schedule 4.13(b) hereto and the trade name "Midland" and
similar variations thereof, and all registrations,
applications and renewals thereof and all logos, whether or
not registered, used in connection therewith.
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"US LMR Distribution Business" shall mean the
business consisting of the sale and distribution of LMR
Products bearing the Trademark within the US LMR Distribution
Territory as conducted by Borrower and in no event shall
include the business carried on directly by Intek or any of
its subsidiaries other than Borrower.
"US LMR Distribution Territory" shall mean the
United States of America and the territories and possessions
thereof.
Any accounting term used in this Agreement shall
have, unless otherwise specifically provided herein, the
meaning customarily given such term in accordance with GAAP,
and all financial computations hereunder shall be computed,
unless otherwise specifically provided herein, in accordance
with GAAP consistently applied. That certain terms or
computations are explicitly modified by the phrase "in
accordance with GAAP" shall in no way be construed to limit
the foregoing. All other undefined terms contained in this
Agreement shall, unless the context indicates otherwise, have
the meanings provided for by the Code as in effect in the
State of New York to the extent the same are used or defined
therein. The words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a
whole, including the Exhibits and Schedules hereto, as the
same may from time to time be amended, modified or
supplemented, and not to any particular section, subsection or
clause contained in this Agreement.
Wherever from the context it appears appropriate,
each term stated in either the singular or plural shall
include the singular and the plural, and pronouns stated in
the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
2. AMOUNT AND TERMS OF CREDIT
2.1. REVOLVING CREDIT ADVANCES. (a) Upon and
subject to the terms and conditions hereof, Lender shall make
available, from time to time, until the Termination Date, for
Borrower's use and upon the request of Borrower therefor,
advances (each, a "Revolving Credit Advance") in an aggregate
amount outstanding (which amount shall include all outstanding
Letter of Credit Obligations, whether or not then due and
payable) which shall not at any given time exceed the Maximum
Revolving Credit Loan. Subject to the provisions of Section
2.4 hereof and the applicable conditions set forth in Section
3 hereof, and until all amounts outstanding in respect of the
Revolving Credit Loan shall become due and payable on the
Repayment Date, Borrower may from time to time borrow, repay
and reborrow under this Section 2.1(a). Each Revolving Credit
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Advance shall be made on notice, given no later than 1:00 P.M.
(New York City time) on the second Business Day prior to the
proposed Revolving Credit Advance, by Borrower to Lender.
Each such notice (a "Notice of Revolving Credit Advance")
shall be in writing in substantially the form of Exhibit A
hereto, executed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (or such other officer of
Borrower approved by Lender in its sole and absolute
discretion in writing) and either ▇▇▇▇▇ ▇▇▇▇▇▇▇ or ▇▇▇▇▇
▇▇▇▇▇▇▇ specifying therein the requested date and amount of
such Advance. Lender shall, before 5:00 P.M. (New York City
time) on the date of the proposed Revolving Credit Advance,
upon fulfillment of the applicable conditions set forth in
Section 3, wire to a bank designated by Borrower and
reasonably acceptable to Lender the amount of such Revolving
Credit Advance.
(b) The Revolving Credit Loan made by Lender shall
be evidenced by a promissory note to be executed and delivered
by Borrower at the time of the Revolving Credit Loan, the form
of which is attached hereto and made a part hereof as Exhibit
B (the "Revolving Credit Note"). The Revolving Credit Note
shall be payable to the order of Lender and shall represent
the obligation of Borrower to pay the amount of the Maximum
Revolving Credit Loan or, if less, the aggregate unpaid
principal amount of all Revolving Credit Advances made by
Lender to Borrower, with interest thereon as prescribed in
Section 2.4(a). The date and amount of each Revolving Credit
Advance and each payment of principal and interest or
capitalization of interest with respect thereto shall be
recorded on the books and records of Lender, which books and
records shall constitute PRIMA FACIE evidence of the accuracy
of the information therein recorded. The entire unpaid
balance of the Revolving Credit Loan (including capitalized
interest thereon) and all other Obligations shall be due and
payable on the Repayment Date.
2.2. LETTERS OF CREDIT. (a) Lender shall, subject
to the terms and conditions hereinafter set forth, (i) incur
Letter of Credit Obligations in respect of the issuance, on
the Closing Date, of such Letters of Credit supporting
obligations of Borrower, as Borrower shall request by written
notice to Lender (executed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (or such other
officer of Borrower approved by Lender in its sole and
absolute discretion in writing) and either ▇▇▇▇▇ ▇▇▇▇▇▇▇ or
▇▇▇▇▇ ▇▇▇▇▇▇▇) which is received by Lender not less than 2
Business Days prior to the Closing Date, and (ii) incur from
time to time on written request of Borrower, additional Letter
of Credit Obligations in respect of Letters of Credit
supporting obligations of Borrower; PROVIDED, HOWEVER, that
no such Letter of Credit shall have an expiry date which is
after March 31, 1997. It is understood that the determination
of the bank or other legally authorized Person (including
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Lender) which shall issue or accept, as the case may be, any
letter of credit or bankers acceptance contemplated by this
Section 2.2(a) shall be made by Lender, in its sole
discretion.
(b) In the event that Lender shall make any payment
on or pursuant to any Letter of Credit Obligation, such
payment shall then be deemed to constitute a Revolving Credit
Advance under Section 2.1(a) hereof.
(c) In the event that any Letter of Credit
Obligation, whether or not then due and payable, shall for any
reason be outstanding on the Termination Date, Borrower will
pay to Lender cash or Cash Equivalents in an amount equal to
the maximum amount then available to be drawn under the Letter
of Credit. Such funds or Cash Equivalents shall be held by
Lender in a cash collateral account (the "Cash Collateral
Account"). The Cash Collateral Account shall be in the name
of Lender (as a cash collateral account), and shall be under
the sole dominion and control of Lender and subject to the
terms of this Section 2.2. Borrower hereby pledges, and
grants to Lender a security interest in, all such funds or
Cash Equivalents held in the Cash Collateral Account from time
to time and all proceeds thereof, as security for the payment
of all amounts due in respect of the Letter of Credit
Obligations, whether or not then due.
From time to time after funds are deposited in the
Cash Collateral Account, Lender may apply such funds or Cash
Equivalents then held in the Cash Collateral Account to the
payment of any amounts, in such order as Lender may elect, as
shall be or shall become due and payable by Borrower to Lender
with respect to such Letter of Credit Obligations.
Neither Borrower nor any person or entity claiming
on behalf of or through Borrower shall have any right to
withdraw any of the funds or Cash Equivalents held in the Cash
Collateral Account, except that upon the termination of any
Letter of Credit Obligation in accordance with its terms and
the payment of all amounts payable by Borrower to Lender in
respect thereof, any funds remaining in the Cash Collateral
Account in excess of the then remaining Letter of Credit
Obligations shall be promptly returned to Borrower.
Lender shall not have any obligation to invest the
funds in the Cash Collateral Account or deposit such funds in
an interest-bearing account, and interest and earnings
thereon, if any, shall be the property of Lender. Interest
and earnings on the Cash Equivalents in the Cash Collateral
Account shall be the property of Borrower.
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(d) In the event that Lender shall incur any Letter
of Credit Obligations pursuant hereto at the request or on
behalf of Borrower hereunder, Borrower shall pay to Lender, as
compensation to Lender for such Letter of Credit Obligation,
all fees and charges paid by Lender on account of such Letter
of Credit Obligation to the issuer or like party. Fees
payable in respect of Letter of Credit Obligations shall be
paid to Lender, in arrear, on the first day of each month for
the preceding month.
2.3. USE OF PROCEEDS. Borrower shall apply the
proceeds of the Revolving Credit Advances only for the US LMR
Distribution Business (including for the repayment of Intek
for the outstanding deposits made in connection with the
equipment relating to the US LMR Distribution Business ordered
by Intek and evidenced by the purchase orders listed on
Schedule 2.3 hereto).
2.4. INTEREST ON REVOLVING CREDIT LOAN. (a)
Interest accrues on the amount outstanding from time to time
under the Revolving Credit Loan at the rate of 11% per annum,
calculated on the basis of a 360 day year for the number of
days elapsed. Interest will be capitalized on a monthly basis
and shall be added to the principal amount outstanding from
time to time under the Revolving Credit Loan. Interest
accrued and uncapitalized on the Repayment Date shall be
payable on such date.
(b) So long as any Event of Default shall be
continuing, the interest rate applicable to the Revolving
Credit Loan shall be increased by 3% per annum above the rate
otherwise applicable.
(c) Notwithstanding anything to the contrary set
forth in this Section 2.4, if at any time until payment in
full of all of the Obligations 11% exceeds the highest rate of
interest permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable
hereto (the "Maximum Lawful Rate"), then in such event and so
long as the Maximum Lawful Rate would be so exceeded, the rate
of interest payable hereunder shall be equal to the Maximum
Lawful Rate; PROVIDED, HOWEVER, that if at any time thereafter
the 11% is less than the Maximum Lawful Rate, Borrower shall
continue to pay interest hereunder at the Maximum Lawful Rate
until such time as the total interest received by Lender from
the making of advances hereunder is equal to the total
interest which Lender would have received had the 11% been
(but for the operation of this paragraph) the interest rate
payable since the Closing Date. Thereafter, the interest rate
payable hereunder shall be the 11%, unless and until such rate
shall again exceed the Maximum Lawful Rate, in which event
this paragraph shall again apply.
13
2.5. EXTENSION FEE. Borrower shall pay to Lender a
fee (the "Extension Fee") equal to $500,000 payable on the
Repayment Date in the event that all the Obligations have not
been repaid (or assumed by Intek) in full on or prior to the
Termination Date.
2.6. RECEIPT OF PAYMENTS. (a) Borrower shall make
each payment under this Agreement not later than 11:00 A.M.
(New York City time) on the day when due in lawful money of
the United States of America in immediately available funds to
Lender's depositary bank as designated by Lender from time to
time for deposit in Lender's depositary account. For purposes
only of computing interest hereunder, all payments shall be
applied by Lender on the day payment has been credited by
Lender's depository bank to Lender's account in immediately
available funds. For purposes of determining the amount of
funds available for borrowing by Borrower pursuant to Section
2.1(a) hereof, such payments shall be applied by Lender
against the outstanding amount of the Revolving Credit Loan at
the time they are credited to its account.
2.7. APPLICATION OF PAYMENTS. Borrower irrevocably
waives the right to direct the application of any and all
payments at any time or times hereafter received by Lender
from or on behalf of Borrower, and Borrower irrevocably agrees
that Lender shall have the continuing exclusive right to apply
any and all such payments against the then due and payable
Obligations of Borrower and in repayment of the Revolving
Credit Loan as Lender may deem advisable. Lender is
authorized to, and at its option may, make advances on behalf
of Borrower for payment of all fees, expenses, charges, costs,
principal and interest incurred by Borrower hereunder when and
as Borrower fails to promptly pay any such amounts. At
Lender's option and to the extent permitted by law, any
advances so made may be deemed Revolving Credit Advances
constituting part of the Revolving Credit Loan hereunder.
2.8. ACCOUNTING. Lender will provide a monthly
accounting of transactions under the Revolving Credit Loan to
Borrower within 10 days of the end of the month. Each and
every such accounting shall (absent manifest error) be deemed
final, binding and conclusive upon Borrower in all respects as
to all matters reflected therein, unless Borrower, within 20
days after the date any such accounting is rendered, shall
notify Lender in writing of any objection which Borrower may
have to any such accounting, describing the basis for such
objection with specificity. In that event, only those items
expressly objected to in such notice shall be deemed to be
disputed by Borrower. Lender's determination, based upon the
facts available, of any item objected to by Borrower in such
notice shall (absent manifest error) be final, binding and
conclusive on Borrower, unless Borrower shall commence a
14
judicial proceeding to resolve such objection within 45 days
following Lender's notifying Borrower of such determination.
2.9. INDEMNITY. Borrower shall indemnify and hold
Lender and its officers, directors, employees, agents,
Affiliates and shareholders (collectively, the "Indemnified
Persons") harmless from and against any and all suits,
actions, proceedings, claims, damages, losses, liabilities and
expenses (including, without limitation, reasonable attorneys'
fees and disbursements, including those incurred upon any
appeal) which may be instituted or asserted against or
incurred by any Indemnified Person as the result of the
execution of the Loan Documents or extension of credit
hereunder; PROVIDED, HOWEVER, that Borrower shall not be
liable for such indemnification to such Indemnified Person to
the extent that any such suit, action, proceeding, claim,
damage, loss, liability or expense results from such
Indemnified Person's negligence or willful misconduct.
2.10. ACCESS. Lender and any of its officers,
employees and/or agents shall have the right, exercisable as
frequently as Lender determines to be appropriate, during
normal business hours (or at such other times as may
reasonably be requested by Lender), to inspect the properties
and facilities of Borrower and to inspect, audit and make
extracts from all of Borrower's records, files and books of
account. Borrower shall deliver any document or instrument
reasonably necessary for Lender, to obtain records from any
service bureau maintaining records for Borrower, and shall
maintain duplicate records or supporting documentation on
media, including, without limitation, computer tapes and discs
owned by Borrower. Borrower shall instruct its banking and
other financial institutions to make available to Lender such
information and records as Lender may reasonably request.
2.11. TAXES. (a) Any and all payments by Borrower
hereunder or under the Note shall be made, in accordance with
this Section 2.11, free and clear of and without deduction for
any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with
respect thereto, excluding taxes imposed on or measured by the
net income of Lender by the jurisdiction under the laws of
which Lender is organized or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable
hereunder or under the Note to Lender, (i) the sum payable
shall be increased as may be necessary so that after making
all required deductions (including deductions applicable to
additional sums payable under this Section 2.11) Lender
receives an amount equal to the sum it would have received had
15
no such deductions been made, (ii) Borrower shall make such
deductions, and (iii) Borrower shall pay the full amount
deducted to the relevant taxing or other authority in
accordance with applicable law.
(b) In addition, Borrower shall pay any present or
future stamp or documentary taxes or any other sales,
transfer, excise, mortgage recording or property taxes,
charges or similar levies that arise from any payment made
hereunder or under the Note or from the execution, sale,
transfer, delivery or registration of, or otherwise with
respect to the Loan Documents and any other agreements and
instruments contemplated thereby (hereinafter referred to as
"Other Taxes").
(c) Borrower shall indemnify Lender for the full
amount of Taxes or Other Taxes (including without limitation,
any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.11) paid by Lender and
any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date
such Lender makes written demand therefor.
(d) Within 30 days after the date of any payment of
Taxes, Borrower shall furnish to Lender, at its address
referred to in Section 10.10, the original or a certified copy
of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other
agreement of Borrower hereunder, the agreements and
obligations of Borrower contained in this Section 2.11 shall
survive both (i) the payment in full of principal and interest
hereunder and under the Notes and (ii) the Termination of this
Agreement.
3. CONDITIONS PRECEDENT
3.1. CONDITIONS TO THE INITIAL REVOLVING CREDIT
ADVANCE AND LETTER OF CREDIT. Notwithstanding any other
provision of this Agreement and without affecting in any
manner the rights of Lender hereunder, Borrower shall have no
rights under this Agreement (but shall have all applicable
obligations hereunder), and Lender shall not be obligated to
make available any Revolving Credit Advance or Letter of
Credit, unless and until Borrower shall have delivered to
Lender, in form and substance satisfactory to Lender and
(unless otherwise indicated) each dated the Closing Date:
(a) A Revolving Credit Note to the order of Lender
duly executed by Borrower.
16
(b) Opinions of Manatt, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
(counsel to Borrower), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ (counsel to
Intek) and ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇ (counsel to Borrower and
Intek with respect to issues involving New York law),
substantially in the forms attached as, respectively, Exhibits
F, G and H hereto.
(c) Opinion of ▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇ counsel
to Midland, substantially in the form attached as Exhibit I
hereto.
(d) Resolutions of the boards of directors of
Borrower, Midland and Intek, certified by the Secretary or
Assistant Secretary of such entity, as the case may be, as of
the Closing Date, to be duly adopted and in full force and
effect on such date, authorizing (i) the consummation of each
of the transactions contemplated by the Loan Documents and
(ii) specific officers to execute and deliver this Agreement
and the other Loan Documents.
(e) A copy of the organizational charter and all
amendments thereto of each of Borrower and Intek, certified as
of a recent date by the Secretary of State of the jurisdiction
of its organization, and copies of each of Borrower's and
Intek's by-laws, certified by the Secretary or Assistant
Secretary of Borrower or Intek, as the case may be, as true
and correct as of the Closing Date.
(f) Governmental certificates, dated the most
recent practicable date prior to the Closing Date, with
telegram updates where available, showing that the Borrower is
organized and in good standing in the jurisdiction of its
organization and is qualified as a foreign corporation and in
good standing in all other jurisdictions in which it is
qualified to transact business.
(g) The Asset and Trademark Agreement duly executed
and delivered by Midland, Intek and ▇▇▇▇▇▇▇▇, together with:
(i) copies of all closing documents and
certificates delivered in connection therewith,
including a letter from each counsel delivering an
opinion in connection therewith stating that Lender
can rely on such opinion as if addressed to it; and
(ii) a certificate from the chief executive
officer of Intek certifying that the transactions
contemplated by the Asset and Trademark Agreement
have been completed.
(h) The Assignment and Assumption Agreement duly
executed and delivered by Borrower and Intek.
17
(i) The Security Agreement and the Trademark
Agreement, duly executed and delivered by Borrower; the Non-
Recourse Guaranty and Pledge Agreement duly executed and
delivered by Intek; together with:
(i) acknowledgement copies of proper
Financing Statements (Form UCC-1) duly filed under
the Uniform Commercial Code of each jurisdiction as
may be necessary or, in the opinion of Lender,
desirable to perfect the security interests created
by the Security Agreement,
(ii) certified copies of Requests for
Information or Copies (Form UCC-11), or equivalent
reports, listing the Financing Statements referred
to in paragraph (i) above and all other effective
financing statements which name Borrower or Intek
(under their present names and any previous names)
as debtor and which are filed in the jurisdictions
referred to in said paragraph (i), together with
copies of such other financing statements (none of
which shall cover the Collateral purported to be
covered by the Security Agreement),
(iii) evidence of the completion of all
recordings and filings of the Security Agreement and
Trademark Agreement as may be necessary or, in the
opinion of Lender, desirable to perfect the security
interests and liens created by the Security
Agreement and Trademark Agreement,
(iv) certificates representing the Pledged
Shares referred to in the Non-Recourse and Guaranty
and Pledge Agreement and undated stock powers for
such certificates executed in blank,
(v) evidence that all other actions necessary
or, in the opinion of Lender, desirable to perfect
and protect the security interests created by the
Security Agreement, Trademark Agreement and Non-
Recourse Guaranty and Pledge Agreement have been
taken.
(j) Releases duly executed and delivered by Mees
Pierson and Octagon Capital Canada Corporation (with respect
to Midland) and Mees Pierson (with respect to Intek),
releasing any liens or claims on or security interests in, the
Collateral or in the rights in the Asset and Trademark
Agreement, as well as waiving any claims each may have arising
from the Midland Transaction or the transactions contemplated
by the Loan Documents, together with acknowledgement copies
of proper Financing Statements (Form UCC-2 or 3) duly filed
18
under the Uniform Commercial Code of each jurisdiction as may
be necessary to evidence the foregoing releases.
(k) A certificate of the chief executive officer of
Borrower that Borrower is Solvent after giving effect to the
initial Revolving Credit Advance and the payment of all
estimated legal, investment banking, accounting and other fees
related hereto and thereto (such certificate may state that in
making the representation therein Borrower has relied on the
projections attached thereto, provided that Borrower states
that it believes that the assumptions underlying such
projections are reasonable).
(l) A certificate of the chief executive officer of
Borrower stating that all of the representations and
warranties of the Borrower contained herein or in any of the
Loan Documents are correct on and as of the Closing Date as
though made on and as of such date, and no event has occurred
and is continuing, or would result from the Revolving Credit
Advance, if made on the Closing Date, which constitutes or
would constitute a Default or an Event of Default.
(m) Certificates of the Secretary or an Assistant
Secretary of each of Borrower and Intek, dated the Closing
Date, as to the incumbency and signatures of the officers of,
respectively, Borrower or Intek executing any of the Loan
Documents and any other certificate or other document to be
delivered pursuant hereto or thereto, together with evidence
of the incumbency of such Secretary or Assistant Secretary.
(n) Evidence satisfactory to Lender that ▇▇▇▇▇▇▇▇
shall have paid to Lender in cash $2,187,603.00 in
satisfaction of all outstanding invoices payable by ▇▇▇▇▇▇▇▇
or Midland issued on or prior to the date hereof (as set forth
on Schedule 3.1(n) hereto).
(o) Such additional information and materials as
Lender may reasonably request, including, without limitation,
copies of any debt agreements, security agreements and other
material contracts.
3.2. FURTHER CONDITIONS TO EACH REVOLVING CREDIT
ADVANCE AND LETTER OF CREDIT. It shall be a further condition
to the funding of each subsequent Revolving Credit Advance and
incurrence of Letter of Credit Obligations that the following
statements shall be true on the date of each such funding or
advance:
(a) All of the representations and warranties of
the Loan Parties contained herein or in any of the Loan
Documents shall be correct on and as of the Closing Date and
the date of each such Revolving Credit Advance as though made
19
on and as of such date, except to the extent that any such
representation or warranty expressly relates to an earlier
date and for changes therein permitted or contemplated by this
Agreement.
(b) No event shall have occurred and be continuing,
or would result from the funding of any Revolving Credit
Advance, which constitutes or would constitute a Default or an
Event of Default.
(c) The aggregate unpaid principal amount of the
Revolving Credit Loan after giving effect to such Revolving
Credit Advance shall not exceed the Maximum Revolving Credit
Loan.
The acceptance by Borrower of the proceeds of any
Revolving Credit Advance or the incurrence by Lender of Letter
of Credit Obligations shall be deemed to constitute, as of the
date of such acceptance, (i) a representation and warranty by
Borrower that the conditions in this Section 3.2 have been
satisfied and (ii) a confirmation by Borrower of the granting
and continuance of Lender's Lien pursuant to the Collateral
Documents.
Notwithstanding the foregoing, the satisfaction of
the conditions set out in clause (a) and (b) above shall not
be required in respect of a $450,000 Revolving Credit Advance
to be made on or after October 20, 1996 to be used solely to
repay Intek for the outstanding deposits made in respect of
equipment relating to the US LMR Distribution Business ordered
by Intek and evidenced by the purchase orders listed on
Schedule 2.3 hereto.
4. REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Revolving Credit Loan,
as herein provided for, Borrower makes the following
representations and warranties to Lender, each and all of
which shall be true and correct as of the date of execution
and delivery of this Agreement:
4.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW.
Borrower (i) is a corporation duly organized, validly existing
and in good standing under the laws of its state of
20
incorporation; (ii) except as indicated on Schedule 4.1(ii)
hereto, is duly qualified to do business and is in good
standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business
requires such qualification (except for jurisdictions in which
such failure to so qualify or to be in good standing would not
have a Material Adverse Effect); (iii) has the requisite
corporate power and authority and the legal right to own,
pledge, mortgage or otherwise encumber and operate its prop
erties, to lease the property it operates under lease, and to
conduct its business as now, heretofore and proposed to be
conducted; (iv) except as indicated on Schedule 4.1(iv)
hereto, has all material licenses, permits, consents or
approvals from or by, and has made all material filings with,
and has given all material notices to, all Governmental
Authorities having jurisdiction, to the extent required for
such ownership, operation and conduct; (v) is in compliance
with its certificate of incorporation and by-laws; and (vi) is
in compliance with all applicable provisions of law where the
failure to comply would have a Material Adverse Effect.
4.2. EXECUTIVE OFFICES. The current location of
Borrower's executive offices and principal place of business
is set forth in Schedule 4.2 hereto.
4.3. SUBSIDIARIES. Borrower currently has no
Subsidiaries.
4.4. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE
OBLIGATIONS. The execution, delivery and performance by
Borrower of the Loan Documents, Ancillary Agreements and all
instruments and documents to be delivered by Borrower, to the
extent it is a party thereto, hereunder and thereunder and the
creation of all Liens provided for herein and therein: (i) are
within Borrower's corporate power; (ii) have been duly
authorized by all necessary or proper corporate action; (iii)
are not in contravention of any provision of Borrower's
certificates or articles of incorporation or by-laws; (iv)
will not violate any law or regulation, or any order or decree
of any court or governmental instrumentality in any material
respect; (v) will not conflict with or result in the breach or
termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of
trust, lease, agreement or other instrument to which Borrower
is a party or by which Borrower or any of its property is
bound; (vi) will not result in the creation or imposition of
any Lien upon any of the property of Borrower other than those
in favor of Lender, all pursuant to the Loan Documents; and
(vii) do not require the consent or approval of any
Governmental Authority or any other Person. Each of the Loan
Documents has been duly executed and delivered for the benefit
of or on behalf of Borrower and each constitutes a legal,
21
valid and binding obligation of Borrower, to the extent it is
a party thereto, enforceable against it in accordance with its
terms.
4.5. SOLVENCY. After giving effect to the initial
Revolving Credit Advance, if made on the Closing Date, and the
payment of all estimated legal, investment banking, accounting
and other fees related hereto, Borrower will be Solvent as of
and on the Closing Date (it being understood that in making
such representation Borrower has relied on the projections
previously provided to Lender, which are based on assumptions
that Borrower believes are reasonable).
4.6. LABOR MATTERS. There are no strikes or other
labor disputes against Borrower pending or, to Borrower's
knowledge, threatened which would have a Material Adverse
Effect.
4.7. INVESTMENT COMPANY ACT. Borrower is not an
"investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment
company", as such terms are defined in the Investment Company
Act of 1940, as amended. The making of the Revolving Credit
Advances by Lender, the application of the proceeds and
repayment thereof by Borrower and the consummation of the
transactions contemplated by this Agreement and the other Loan
Documents will not violate any provision of such Act or any
rule, regulation or order issued by the Securities and
Exchange Commission thereunder.
4.8. MARGIN REGULATIONS. Borrower does not own any
"margin security," as that term is defined in Regulations G
and U of the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"), and the proceeds of the
Revolving Credit Advances will be used only for the purposes
contemplated hereunder. The Revolving Credit Advances will
not be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security, for the purpose of
reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any
other purpose which might cause any of the loans under this
Agreement to be considered a "purpose credit" within the
meaning of Regulations G, T, U or X of the Federal Reserve
Board. Borrower will not take or permit any agent acting on
its behalf to take any action which might cause this Agreement
or any document or instrument delivered pursuant hereto to
violate any regulation of the Federal Reserve Board.
4.9. NO LITIGATION. No action, claim or proceeding
is now pending or, to the knowledge of Borrower, threatened
against Borrower at law, in equity or otherwise, before any
court, board, commission, agency or instrumentality of any
22
federal, state, or local government or of any agency or
subdivision thereof, or before any arbitrator or panel of
arbitrators, which, if determined adversely, could have a
Material Adverse Effect, nor to the knowledge of Borrower does
a state of facts exist which is reasonably likely to give rise
to such proceedings.
4.10. ASSET AND TRADEMARK AGREEMENT. The closing
of the Midland Transaction and the consummation of the Intek-
Borrower Transfer will occur immediately prior to the Closing
Date. A true and complete copy of each of the Asset and
Trademark Agreement (including all exhibits, schedules and
amendments thereto) and all documents delivered by any party
in connection therewith has been delivered to Lender.
4.11. HITACHI SUPPLY AGREEMENT. Borrower is a
"Midland Affiliate" under the Hitachi Supply Agreement and
entitled to make purchases thereunder.
4.12. OUTSTANDING STOCK; OPTIONS; WARRANTS, ETC.
The Stock of Borrower owned by Intek as at the date of this
Agreement constitutes all of the issued and outstanding Stock
of Borrower. Borrower has no outstanding rights, options,
warrants or agreements pursuant to which it may be required to
issue or sell any Stock or other equity security.
4.13. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES.
Borrower owns all material patents, patent applications,
copyrights, trademarks, trademark applications, and know-how
(collectively, "Intangible Property") necessary to continue to
conduct its business as heretofore conducted by it, now
conducted by it and proposed to be conducted by it, each of
which is listed, together with Patent and Trademark Office
application or registration numbers, where applicable, on
Schedule 4.13(a) hereto. Further, (i) Borrower has good and
lawful title to the Intangible Property (subject to the
licenses set forth on Schedule 4.13(d) hereto); (ii) to
Borrower's knowledge, the Intangible Property is valid and
subsisting and is enforceable; (iii) to Borrower's knowledge,
there are no actual or threatened claims by third parties
regarding the Intangible Property; (iv) to Borrower's
knowledge, the Intangible Property does not infringe or
otherwise violate any rights of any third party, except where
any violation or infringement would not have a Material
Adverse Effect.
4.14. LIENS. The Liens granted to Lender pursuant
to the Collateral Documents will at the Closing Date be fully
perfected first priority Liens in and to the Collateral
described therein.
23
4.15. NO MATERIAL ADVERSE EFFECT. No event has
occurred and is continuing which has had or could have a
Material Adverse Effect.
5. FINANCIAL STATEMENTS AND INFORMATION
5.1. REPORTS AND NOTICES. Borrower covenants and
agrees that from and after the Closing Date and until the
Termination Date, it shall deliver to Lender:
(a) Within 30 days after the end of each fiscal
month, (i) a copy of the unaudited balance sheets of Borrower
as of the end of such month and the related statements of
income and cash flows for that portion of the Fiscal Year
ending as of the end of such month, and (ii) a copy of the
unaudited statements of income of Borrower for such month, all
prepared in accordance with GAAP (subject to normal year-end
adjustments), accompanied by the certification of the chief
executive officer or chief financial officer of Borrower that
all such financial statements are complete and correct and
present fairly in accordance with GAAP (subject to normal
year-end adjustments), the financial position, the results of
operations and the statements of cash flows of Borrower as at
the end of such month and for the period then ended, and that
there was no Default or Event of Default in existence as of
such time.
(b) As soon as practicable, but in any event within
two (2) Business Days after Borrower becomes aware of the
existence of any Default or Event of Default, or any
development or other information which would have a Material
Adverse Effect, telephonic or telegraphic notice specifying
the nature of such Default or Event of Default or development
or information, including the anticipated effect thereof,
which notice shall be promptly confirmed in writing within
five (5) days.
(c) If requested by Lender, copies of all federal,
state, local and foreign tax returns and reports in respect of
income, franchise or other taxes on or measured by income
(excluding sales, use or like taxes) filed by Borrower.
(d) Such other information respecting Borrower's
business (including with respect to orders received and
inventory purchased), financial condition or prospects as
Lender may, from time to time, reasonably request.
5.2. COMMUNICATION WITH ACCOUNTANTS. Borrower
authorizes Lender to communicate directly with its independent
certified public accountants and tax advisors and authorizes
those accountants to disclose to Lender any and all financial
statements and other supporting financial documents and
24
schedules including copies of any management letter with
respect to the business, financial condition and other affairs
of Borrower. At Lender's request, Borrower shall deliver a
letter addressed to such accountants and tax advisors
instructing them to comply with the provisions of this Section
5.2.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, unless Lender
shall otherwise consent in writing, from and after the date
hereof and until the Repayment Date:
6.1. MAINTENANCE OF EXISTENCE AND CONDUCT OF
BUSINESS. Borrower shall: (a) do or cause to be done all
things necessary to preserve and keep in full force and effect
its corporate existence, and its rights and franchises; (b)
transact business only in such names as Borrower shall specify
to Lender in writing not less than thirty days prior to the
first date such name is used by Borrower and (c) at all times
maintain, preserve and protect all of its Trademarks and any
tradenames.
6.2. PAYMENT OF OBLIGATIONS. (a) Borrower shall:
(i) pay and discharge or cause to be paid and discharged all
its Indebtedness, including, without limitation, all the
Obligations as and when due and payable, and (ii) pay and
discharge or cause to be paid and discharged promptly all (A)
Charges imposed upon it, its income and profits, or any of its
property (real, personal or mixed), and (B) lawful claims for
labor, materials, supplies and services or otherwise before
any thereof shall become in default.
(b) Borrower may in good faith contest, by proper
legal actions or proceedings diligently pursued, the validity
or amount of any Charges or claims arising under Section
6.2(a)(ii), provided that at the time of commencement of any
such action or proceeding, and during the pendency thereof (i)
adequate reserves with respect thereto are maintained on the
books of Borrower, in accordance with GAAP; (ii) such contest
operates to suspend collection of the contested Charges or
claims and is maintained and prosecuted continuously with
diligence; (iii) none of the Collateral would be subject to
forfeiture or loss or any Lien by reason of the institution or
prosecution of such contest; (iv) no Lien shall exist for such
Charges or claims during such action or proceeding; (v)
Borrower shall promptly pay or discharge such contested
Charges and all additional charges, interest, penalties and
expenses, if any, and shall deliver to Lender evidence
acceptable to Lender of such compliance, payment or discharge,
if such contest is terminated or discontinued adversely to
Borrower; and (vi) Lender has not advised Borrower in writing
25
that Lender reasonably believes that nonpayment or
nondischarge thereof would have a Material Adverse Effect.
(c) Notwithstanding anything to the contrary
contained in Section 6.2(b) above, Borrower shall have the
right to pay the charges or claims arising under Section
6.2(a)(ii) and in good faith contest, by proper legal actions
or proceedings, the validity or amount of such Charges or
claims.
6.3. BOOKS AND RECORDS. Borrower shall keep its
books, accounts and records in the ordinary course of
business.
6.4. LITIGATION. Borrower shall notify Lender in
writing, promptly upon learning thereof, of any litigation
commenced against Borrower, and of the institution against any
of them of any suit or administrative proceeding that may have
a Material Adverse Effect.
6.5. INSURANCE. Borrower shall maintain insurance
covering, without limitation, fire, theft, burglary, public
liability, property damage, product liability and insurance on
all property and assets, all in amounts customary for its
business and in any event in compliance with any insurance
requirements under any Loan Documents and with a lender's loss
payable clause for the benefit of Lender.
6.6. COMPLIANCE WITH LAW. Borrower shall comply in
all material respects with all federal, state and local laws
and regulations applicable to it.
6.7. SUPPLEMENTAL DISCLOSURE. From time to time as
may be necessary (in the event that such information is not
otherwise delivered by Borrower to Lender pursuant to this
Agreement), so long as there are Obligations outstanding
hereunder, Borrower will supplement each Schedule (if any) or
representation herein with respect to any matter hereafter
arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or
described in such Schedule or as an exception to such
representation or which is necessary to correct any
information in such Schedule or representation which has been
rendered inaccurate thereby; PROVIDED, HOWEVER, that such
supplement to such Schedule or representation shall not be
deemed an amendment thereof unless otherwise consented to by
the Lender.
26
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, without Lender's
prior written consent, from and after the date hereof and
until the Repayment Date:
7.1. MERGERS, ETC. Borrower shall not directly or
indirectly, by operation of law or otherwise, merge with,
consolidate with, acquire all or substantially all of the
assets or capital stock of, or otherwise combine with, any
Person or form any Subsidiary.
7.2. INVESTMENTS; LOANS AND ADVANCES. Borrower
shall not make any investment in, or make or accrue loans or
advances of money to any Person, through the direct or
indirect holding of securities or otherwise.
7.3. INDEBTEDNESS. (a) Except as otherwise
expressly permitted by this Section 7.3 or by any other
section of this Agreement or as set forth on Schedule 7.3
hereto, Borrower shall not create, incur, assume or permit to
exist any Indebtedness, except (i) Indebtedness secured by
Liens permitted under Section 7.8 hereof, (ii) the Revolving
Credit Loan, and (iii) the Letter of Credit Obligations.
(b) Except as otherwise expressly permitted by
Section 7.9 hereof, Borrower shall not sell or transfer,
either with or without recourse, any assets, of any nature
whatsoever, in respect of which a Lien is granted or to be
granted pursuant to any Loan Document or engage in any sale-
leaseback or similar transaction involving any of such assets.
7.4. CAPITAL STRUCTURE. Borrower shall not make
any changes in its capital structure (including, without
limitation, in the terms of its outstanding Stock) or amend
its certificate of incorporation or by-laws.
7.5. MAINTENANCE OF BUSINESS. Borrower shall not
engage in any business other than the US LMR Distribution
Business.
7.6. TRANSACTIONS WITH AFFILIATES. (a) Borrower
shall not enter into or be a party to any transaction with any
Affiliate of Borrower, other than with Intek, and then only in
the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and
reasonable terms that are fully disclosed to Lender and are no
less favorable to Borrower than would be obtained in a
comparable arm's-length transaction with a Person not an
Affiliate of Borrower.
27
(b) Except as set forth on Schedule 7.6(b) hereto,
Borrower shall not enter into any agreement or transaction to
pay to any Person any management or similar fee based on or
related to Borrower's operating performance or income or any
percentage thereof, nor pay any management or similar fee to
an Affiliate.
7.7. GUARANTEED INDEBTEDNESS. Borrower shall not
incur any Guaranteed Indebtedness except (i) by endorsement of
instruments or items of payment for deposit to the general
account of Borrower, and (ii) for Guaranteed Indebtedness
incurred for the benefit of Borrower if the primary obligation
is permitted by this Agreement.
7.8. LIENS. Borrower shall not create or permit
any Lien on any of its properties or assets except:
(a) presently existing or hereafter created Liens
in favor of Lender; and
(b) Permitted Encumbrances.
7.9. SALES OF ASSETS. Borrower shall not sell,
transfer, convey or otherwise dispose of any assets or
properties; PROVIDED, HOWEVER, that the foregoing shall not
prohibit (i) the sale of inventory in the ordinary course of
business, (ii) the sale of surplus or obsolete equipment and
fixtures, and (iii) transfers resulting from any casualty or
condemnation of assets or properties.
7.10. EVENTS OF DEFAULT. Borrower shall not take
or omit to take any action, which act or omission would
constitute (i) a default or an event of default pursuant to,
or noncompliance with any of, the terms of any of the Loan
Documents or (ii) a material default or an event of default
pursuant to, or noncompliance with any other contract, lease,
mortgage, deed of trust or instrument to which it is a party
or by which it or any of its property is bound, or any
document creating a Lien, unless such default, event of
default or non-compliance would not have a Material Adverse
Effect.
7.11. RESTRICTED PAYMENTS. Borrower shall not make
any Restricted Payments.
8. TERM
8.1. TERMINATION. Subject to the provisions of
Section 2 hereof, the financing arrangement contemplated
hereby in respect of the Revolving Credit Loan shall be in
effect until the Termination Date.
28
8.2. SURVIVAL OF OBLIGATIONS UPON TERMINATION OF
FINANCING ARRANGEMENT. Except as otherwise expressly provided
for in the Loan Documents, no termination or cancellation
(regardless of cause or procedure) of any financing
arrangement under this Agreement shall in any way affect or
impair the powers, obligations, duties, rights and liabilities
of Borrower or the rights of Lender relating to any
transaction or event occurring prior to such termination.
Except as otherwise expressly provided herein or in any other
Loan Document, all undertakings, agreements, covenants,
warranties and representations contained in the Loan Documents
shall survive such termination or cancellation and shall
continue in full force and effect until such time as all of
the Obligations have been paid in full in accordance with the
terms of the agreements creating such Obligations, at which
time the same shall terminate.
9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
9.1. EVENTS OF DEFAULT. The occurrence of any one
or more of the following events (regardless of the reason
therefor) shall constitute an "Event of Default" hereunder:
(a) Borrower shall fail to make any payment of
principal of, or interest on or any other amount owing in
respect of, the Revolving Credit Loan or any of the other
Obligations when due and such failure continues for a period
of five (5) days.
(b) Borrower shall fail or neglect to perform, keep
or observe any of the provisions of Section 7 hereof.
(c) Borrower shall fail or neglect to perform, keep
or observe any other provision of this Agreement or of any of
the other Loan Documents and the same shall remain unremedied
for a period ending on the first to occur of twenty (20) days
after Borrower shall receive written notice of any such
failure from any Lender or forty five (45) days after Borrower
shall become aware thereof.
(d) A default shall occur under any other
agreement, document or instrument to which Borrower is a party
or by which Borrower's property is bound, and such default (i)
involves the failure to make any payment (whether of
principal, interest or otherwise) due (whether by scheduled
maturity, required prepayment, acceleration, demand or
otherwise) in respect of any Indebtedness of Borrower in an
aggregate amount exceeding $50,000, or (ii) causes (or permits
any holder of such Indebtedness or a trustee to cause) such
Indebtedness or a portion thereof in an aggregate amount
exceeding $50,000, to become due prior to its stated maturity
or prior to its regularly scheduled dates of payment.
29
(e) Any representation or warranty herein or in any
Loan Document or in any written statement pursuant thereto or
hereto, report, financial statement or certificate made or
delivered to Lender by Borrower shall be untrue or incorrect
in any material respect, as of the date when made or deemed
made (including those made or deemed made pursuant to Section
3.2).
(f) Any provision of any Collateral Document, after
delivery thereof pursuant to Section 3.1, shall for any reason
cease to be valid or enforceable in accordance with its terms,
or any security interest created under any Collateral Document
shall cease to be a valid and perfected first priority
security interest or Lien (except as otherwise stated therein)
in any of the Collateral purported to be covered thereby.
(g) Any of the assets of Borrower shall be
attached, seized, levied upon or subjected to a writ or
distress warrant, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of
creditors of Borrower and shall remain unstayed or undismissed
for thirty (30) consecutive days; or any Person other than
Borrower shall apply for the appointment of a receiver,
trustee or custodian for any of the assets of Borrower and
shall remain unstayed or undismissed for thirty (30)
consecutive days; or Borrower shall have concealed, removed or
permitted to be concealed or removed, any part of its
property, with intent to hinder, delay or defraud its
creditors or any of them or made or suffered a transfer of any
of its property or the incurring of an obligation which may be
fraudulent under any bankruptcy, fraudulent conveyance or
other similar law.
(h) A case or proceeding shall have been commenced
against Borrower in a court having competent jurisdiction
seeking a decree or order in respect of Borrower (i) under
title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) appointing a
custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of Borrower or of any
substantial part of its or their properties, or (iii) ordering
the winding-up or liquidation of the affairs of Borrower and
such case or proceeding shall remain undismissed or unstayed
for thirty (30) consecutive days or such court shall enter a
decree or order granting the relief sought in such case or
proceeding.
(i) Borrower shall (i) file a petition seeking
relief under title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable
federal, state or foreign bankruptcy or other similar law,
30
(ii) consent to the institution of proceedings thereunder or
to the filing of any such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of
Borrower or of any substantial part of its properties, (iii)
fail generally to pay its debts as such debts become due, or
(iv) take any corporate action in furtherance of any such
action.
(j) There shall have been a change of control of
Intek or a sale of a material part of its assets and for this
purpose, "change of control" means the acquisition, whether
directly or indirectly by an entity other than Midland of more
than 20% of the Stock or assets of Intek.
(k) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (or such replacement as is
approved by Lender in its reasonable discretion) for any
reason ceases to serve as a consultant to Borrower and is not
replaced within ten (10) days with a replacement approved by
Lender in its reasonable discretion or the responsibilities of
his position are materially diminished from those he had with
respect to the US LMR Distribution Business when employed by
Midland prior to the consummation of the Midland Transaction.
(l) The Hitachi Supply Agreement is terminated for
any reason without the prior written agreement of Lender, such
agreement is amended without the prior written agreement of
Lender or Borrower ceases to be able to make purchases
thereunder on the terms in effect on the date of this
Agreement.
9.2. REMEDIES. If any Event of Default shall have
occurred and be continuing, Lender shall without notice, (i)
terminate this facility with respect to further Revolving
Credit Advances, whereupon no Revolving Credit Advances may be
made hereunder, and/or (ii) declare all Obligations to be
forthwith due and payable, whereupon all Obligations shall
become and be due and payable, without presentment, demand,
protest or further notice of any kind, all of which are
expressly waived by Borrower.
9.3. WAIVERS BY BORROWER. Except as otherwise
provided for in this Agreement and applicable law, Borrower
waives (i) presentment, demand and protest and notice of
presentment, dishonor, notice of intent to accelerate, notice
of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any
or all commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by
Lender on which Borrower may in any way be liable and hereby
ratifies and confirms whatever Lender may do in this regard,
(ii) all rights to notice and a hearing prior to Lender's
31
taking possession or control of, or to Lender's replevy,
attachment or levy upon, the Collateral or any bond or
security which might be required by any court prior to
allowing Lender to exercise any of its remedies, and (iii) the
benefit of all valuation, appraisal and exemption laws.
Borrower acknowledges that it has been advised by counsel of
its choice with respect to this Agreement, the other Loan
Documents and the transactions evidenced by this Agreement and
the other Loan Documents.
9.4. RIGHT OF SET-OFF. Upon the occurrence and
during the continuance of any Event of Default, Lender is
hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time
owing by Lender to or for the credit or the account of
Borrower against any and all of the obligations of Borrower
now or hereafter existing under this Agreement, and the Note
held by Lender irrespective of whether or not Lender shall
have made any demand under this Agreement or such Note and
although such obligations may be unmatured. Lender agrees
promptly to notify Borrower after any such set-off and
application made by Lender; PROVIDED, HOWEVER, that the
failure to give such notice shall not affect the validity of
such set-off and application. The rights of Lender under this
Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which
Lender may have.
10. MISCELLANEOUS
10.1. COMPLETE AGREEMENT; MODIFICATION OF
AGREEMENT; SALE OF INTEREST. (a) The Loan Documents
constitute the complete agreement between the parties with
respect to the subject matter hereof and may not be modified,
altered or amended except by an agreement in writing signed by
Borrower and Lender. Borrower may not sell, assign or
transfer any of the Loan Documents or any portion thereof
(other than pursuant to the Intek Assumption Agreement),
including, without limitation, Borrower's rights, title,
interests, remedies, powers and duties hereunder or
thereunder. Borrower hereby consents to Lender's sale of
participations, assignment, transfer or other disposition, at
any time or times, of any of the Loan Documents or of any
portion thereof or interest therein, including, without
limitation, Lender's rights, title, interests, remedies,
powers or duties thereunder, whether evidenced by a writing or
not. Borrower agrees that it will use its best efforts to
assist and cooperate with Lender in any manner reasonably
requested by Lender to effect the sale of participations in or
32
assignments of any of the Loan Documents or of any portion
thereof or interest therein.
(b) In the event Lender assigns or otherwise
transfers all or any part of the Revolving Credit Note
Borrower shall, upon the request of Lender, issue a new
Revolving Credit Note to effectuate such assignment or
transfer.
10.2. FEES AND EXPENSES. If, at any time or times,
regardless of the existence of an Event of Default (except
with respect to paragraphs (ii) and (iii), which shall be
subject to an Event of Default having occurred and be
continuing), Lender shall employ counsel or other advisors for
advice or other representation or shall incur reasonable legal
or other costs and expenses in connection with:
(i) any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Lender,
Borrower or any other Person) in any way relating to
the Collateral, any of the Loan Documents or any
other agreements to be executed or delivered in
connection herewith;
(ii) any attempt to enforce any rights of
Lender;
(iii) any attempt to verify, protect, collect,
sell, liquidate or otherwise dispose of the
Collateral;
then, and in any such event, the attorneys' and other parties'
fees reasonably arising from such services, including those of
any appellate proceedings, and all expenses, costs, charges
and other fees reasonably incurred by such counsel and others
in any way or respect arising in connection with or relating
to any of the events or actions described in this Section
shall be payable, on demand, by Borrower to Lender and shall
be additional Obligations secured under this Agreement and the
other Loan Documents. Without limiting the generality of the
foregoing, such expenses, costs, charges and fees may include:
paralegal fees, costs and expenses; accountants' and
investment bankers' fees, costs and expenses; court costs and
expenses; photocopying and duplicating expenses; court
reporter fees, costs and expenses; long distance telephone
charges; air express charges; telegram charges; secretarial
overtime charges; and expenses for travel, lodging and food
paid or incurred in connection with the performance of such
legal services.
10.3. NO WAIVER BY LENDER. Lender's failure, at
any time or times, to require strict performance by Borrower
33
or Intek of any provision of this Agreement any of the other
Loan Documents 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 by Borrower under the Loan Documents shall
not suspend, waive or affect any other Event of Default by
Borrower under this Agreement and any of the other Loan
Documents whether the same is prior or subsequent thereto and
whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any
of the other Loan Documents and no Event of Default by
Borrower under this Agreement and no defaults by Borrower or
Intek under any of the other Loan Documents shall be deemed to
have been suspended or waived by Lender, unless such
suspension or waiver is by an instrument in writing signed by
an officer of Lender and directed to Borrower or Intek
specifying such suspension or waiver.
10.4. REMEDIES. Lender's rights and remedies under
this Agreement shall be cumulative and nonexclusive of any
other rights and remedies which Lender may have under any
other agreement, including without limitation, the Loan
Documents, by operation of law or otherwise.
10.5. WAIVER OF JURY TRIAL. THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THE LOAN DOCUMENTS.
10.6. SEVERABILITY. Wherever possible, each
provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but
if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
10.7. PARTIES. This Agreement and the other Loan
Documents shall be binding upon, and inure to the benefit of,
the successors of Borrower and Lender and the assigns,
transferees and endorsees of Lender.
10.8. CONFLICT OF TERMS. Except as otherwise
provided in this Agreement or any of the other Loan Documents
by specific reference to the applicable provisions of this
Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of
the other Loan Documents, the provision contained in this
Agreement shall govern and control.
34
10.9. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. LENDER AND
BORROWER AGREE TO SUBMIT TO PERSONAL JURISDICTION AND TO WAIVE
ANY OBJECTION AS TO VENUE IN THE COUNTY OF NEW YORK, STATE OF
NEW YORK. SERVICE OF PROCESS ON BORROWER OR LENDER IN ANY
ACTION ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS
SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY AT THE ADDRESS
LISTED IN SECTION 10.10 HEREOF. NOTHING HEREIN SHALL PRECLUDE
LENDER OR BORROWER FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION.
10.10. NOTICES. Except as otherwise provided
herein, whenever it is provided herein that any notice,
demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of
the parties by another, or whenever any of the parties desires
to give or serve upon another any communication with respect
to this Agreement, each such notice, demand, request, consent,
approval, declaration or other communication shall be in
writing and either shall be delivered in person with receipt
acknowledged or by registered or certified mail, return
receipt requested, postage prepaid, or telecopied and
confirmed by telecopy answerback addressed as follows:
(a) If to Lender at:
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇
Attention: ▇▇ ▇▇▇▇▇
Telecopy No. (▇▇▇▇) ▇▇▇ ▇▇▇▇
With copies to:
Weil, Gotshal & ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy No. 0171 426 0990
35
(b) If to Borrower, at:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopy No. ▇▇▇ ▇▇▇ ▇▇▇▇
With copies to:
Intek Diversified Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No. 310 366 7712
Manatt, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy No. ▇▇▇ ▇▇▇ ▇▇▇▇
or at such other address as may be substituted by notice given
as herein provided. The giving of any notice required
hereunder may be waived in writing by the party entitled to
receive such notice. Every notice, demand, request, consent,
approval, declaration or other communication hereunder shall
be deemed to have been duly given or served on the date on
which personally delivered, with receipt acknowledged,
telecopied and confirmed by telecopy answerback or seven (7)
Business Days after the same shall have been deposited (i) in
the United States mail (in the case of notice being given by
Borrower or any other Person in the United States) or (ii) in
the United Kingdom mail (in the case of notice being given by
Lender or any other Person located in the United Kingdom).
Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication
to the persons designated above to receive copies shall in no
way adversely affect the effectiveness of such notice, demand,
request, consent, approval, declaration or other
communication.
10.11. SURVIVAL. The representations and
warranties of Borrower in this Agreement shall survive the
execution, delivery and acceptance hereof by the parties
hereto and the closing of the transactions described herein or
related hereto.
10.12. SECTION TITLES. The Section titles and
Table of Contents contained in this Agreement are and shall be
without substantive meaning or content of any kind whatsoever
36
and are not a part of the agreement between the parties
hereto.
10.13. COUNTERPARTS. This Agreement may be
executed in any number of separate counterparts, each of which
shall, collectively and separately, constitute one agreement.
37
IN WITNESS WHEREOF, this Agreement has been duly
executed as of the date first written above.
MIDLAND USA, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
SECURICOR COMMUNICATIONS LIMITED
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇▇
Name: ▇.▇. ▇▇▇▇▇▇▇▇▇
Title: Director
The undersigned hereby guarantees to Borrower the performance
by Lender of all of its obligations under this Agreement.
SECURITY SERVICES PLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Director
Date: September 19, 1996
38
TABLE OF CONTENTS
SECTION PAGE
1. DEFINITIONS..........................................................2
2. AMOUNT AND TERMS OF CREDIT...........................................10
2.1. REVOLVING CREDIT ADVANCES..........................10
2.2. LETTERS OF CREDIT..................................11
2.3. USE OF PROCEEDS....................................13
2.4. INTEREST ON REVOLVING CREDIT LOAN..................13
2.5. EXTENSION FEE......................................14
2.6. RECEIPT OF PAYMENTS................................14
2.7. APPLICATION OF PAYMENTS............................14
2.8. ACCOUNTING.........................................14
2.9. INDEMNITY..........................................15
2.10. ACCESS.............................................15
2.11. TAXES..............................................15
3. CONDITIONS PRECEDENT.................................................16
3.1. CONDITIONS TO THE INITIAL REVOLVING CREDIT
ADVANCE AND LETTER OF CREDIT.......................16
3.2. FURTHER CONDITIONS TO EACH REVOLVING CREDIT
ADVANCE AND LETTER OF CREDIT.......................19
4. REPRESENTATIONS AND WARRANTIES.......................................20
4.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW...........20
4.4. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE
OBLIGATIONS........................................21
4.5. SOLVENCY...........................................22
4.6. LABOR MATTERS......................................22
4.7. INVESTMENT COMPANY ACT.............................22
4.8. MARGIN REGULATIONS.................................22
4.9. NO LITIGATION......................................22
4.10. ASSET AND TRADEMARK AGREEMENT......................23
4.11. HITACHI SUPPLY AGREEMENT...........................23
4.12. OUTSTANDING STOCK; OPTIONS; WARRANTS, ETC..........23
4.13. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES.......23
4.14. LIENS..............................................23
4.15. NO MATERIAL ADVERSE EFFECT.........................24
5. FINANCIAL STATEMENTS AND INFORMATION.................................24
5.1. REPORTS AND NOTICES................................24
5.2. COMMUNICATION WITH ACCOUNTANTS.....................24
6. AFFIRMATIVE COVENANTS................................................25
6.1. MAINTENANCE OF EXISTENCE AND CONDUCT OF
BUSINESS...........................................25
6.2. PAYMENT OF OBLIGATIONS.............................25
6.3. BOOKS AND RECORDS..................................26
6.4. LITIGATION.........................................26
i
6.5. INSURANCE..........................................26
6.6. COMPLIANCE WITH LAW................................26
6.7. SUPPLEMENTAL DISCLOSURE............................26
7. NEGATIVE COVENANTS...................................................27
7.1. MERGERS, ETC.......................................27
7.2. INVESTMENTS; LOANS AND ADVANCES....................27
7.3. INDEBTEDNESS.......................................27
7.4. CAPITAL STRUCTURE..................................27
7.5. MAINTENANCE OF BUSINESS............................27
7.6. TRANSACTIONS WITH AFFILIATES.......................27
7.7. GUARANTEED INDEBTEDNESS............................28
7.8. LIENS..............................................28
7.9. SALES OF ASSETS....................................28
7.10. EVENTS OF DEFAULT..................................28
7.11. RESTRICTED PAYMENTS................................28
8. TERM ................................................................28
8.1. TERMINATION........................................28
8.2. SURVIVAL OF OBLIGATIONS UPON TERMINATION OF
FINANCING ARRANGEMENT..............................29
9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES...............................29
9.1. EVENTS OF DEFAULT..................................29
9.2. REMEDIES...........................................31
9.3. WAIVERS BY BORROWER................................31
9.4. RIGHT OF SET-OFF...................................32
10. MISCELLANEOUS.......................................................32
10.1. COMPLETE AGREEMENT; MODIFICATION OF
AGREEMENT; SALE OF INTEREST........................32
10.2. FEES AND EXPENSES..................................33
10.3. NO WAIVER BY LENDER................................33
10.4. REMEDIES...........................................34
10.5. WAIVER OF JURY TRIAL...............................34
10.6. SEVERABILITY.......................................34
10.7. PARTIES............................................34
10.8. CONFLICT OF TERMS..................................34
10.9. GOVERNING LAW......................................35
10.10. NOTICES............................................35
10.11. SURVIVAL...........................................36
10.12. SECTION TITLES.....................................36
10.13. COUNTERPARTS.......................................37
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SCHEDULES
Schedule 2.3 Intek Purchase Orders
Schedule 3.1(n) ▇▇▇▇▇▇▇▇ and Midland Invoices
Schedule 4.1 Corporate Matters
Schedule 4.2 Executive Office
Schedule 4.13 Patents, Trademarks, Copyrights and Licenses
Schedule 7.3 Indebtedness
Schedule 7.6 Certain Transactions
EXHIBITS
Exhibit A - Form of Notice of Revolving Credit Advance
Exhibit B - Form of Revolving Credit Note
Exhibit C - Form of Non-Recourse Guaranty and Pledge Agreement
Exhibit D - Form of Security Agreement
Exhibit E - Form of Trademark Agreement
Exhibit F - Form of Legal Opinion of Counsel to Borrower
Exhibit G - Form of Legal Opinion of Counsel to Intek
Exhibit H - Form of New York Legal Opinion of Counsel to
Borrower and Intek
Exhibit I - Form of ▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇ Legal Opinion
to Intek
iii
SCHEDULE 2.3
INTEK PURCHASE ORDERS
SCHEDULE 3.1(n)
▇▇▇▇▇▇▇▇ AND MIDLAND INVOICES
SCHEDULE 4.1
CORPORATE MATTERS
4.1(ii) Qualified to Do Business
Colorado
Florida
Kansas
Indiana
Massachusetts
Michigan
Nevada
North Carolina
Ohio
Texas
4.1(iv) Licenses, Permits, Consents, Approvals
Employment Taxes:
Colorado
Florida
Kansas
Indiana
Massachusetts
Michigan
Missouri
Nevada
North Carolina
Ohio
Texas
Resale Permits:
Colorado
Florida
Missouri
North Carolina
Texas
SCHEDULE 4.2
EXECUTIVE OFFICE
The executive offices and principal place of business of Midland
USA, Inc. are located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SCHEDULE 4.13
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
4.13(a) Patents
US Patent Number 4,718,586 (Swivel Fastening Device)
4.13(b) Trademarks
The trademark "Midland" Reg. No 927193, serial number 72-277,496,
first registered on January 18, 1972 and renewed on December 13,
1991.
The trademark "Midland" Reg. No 895483, serial number 72-156,089,
first registered on July 28, 1970 and renewed on December 18,
1990.
4.13(c) Copyrights
None
4.13(d) Licenses
1) Midland USA - Midland International Corp. Trademark License
Agreement dated September 19, 1996.
2) Midland International Corp. - Midland Consumer Int'l.
Exclusive License Agreement dated June 30, 1995.
3) Midland International Corp. - LETT Electronics Private Label
Agreement dated March 1, 1995.
4) Midland International Corp. - American Digital
Communications, Inc. Asset Purchase Agreement dated December
29, 1995.
SCHEDULE 7.3
INDEBTEDNESS
1. Equipment leases (i) which Midland is assigning pursuant to
the Asset and Trademark Agreement or (ii) entered into by the
Borrower having annual payments less than or equal to $50,000.
2. Purchase orders for product to be purchased from vendors for
use in the U.S. LMR Distribution Business.
SCHEDULE 7.6
CERTAIN TRANSACTIONS
1. The Product Purchasing Services Agreement, dated September
19, 1996, between Midland and Borrower.
2. The Computer Services Agreement, dated September 19, 1996,
between Borrower and ▇▇▇▇▇▇▇▇ Capital Limited.
3. The Consignment Agreement, dated as of September 19, 1996,
between Borrower and Midland.
4. The License Agreement, dated September 19, 1996, between
Borrower and Midland.