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EXHIBIT 4.5
FINANCING AGREEMENT
THE CIT GROUP/BUSINESS CREDIT, INC.
(AS LENDER)
AND
PROCOM TECHNOLOGY, INC.
(AS BORROWER)
DATED: OCTOBER __, 2000
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TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS ....................................................... 3
SECTION 2. CONDITIONS PRECEDENT .............................................. 14
SECTION 3. REVOLVING LOANS ................................................... 19
SECTION 4. TERM LOAN ......................................................... 22
SECTION 5. BRIDGE LOAN ....................................................... 23
SECTION 6. COLLATERAL ........................................................ 23
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS ......................... 26
SECTION 8. INTEREST, FEES AND EXPENSES ....................................... 33
SECTION 9. POWERS ............................................................ 40
SECTION 10. EVENTS OF DEFAULT AND REMEDIES .................................... 40
SECTION 11. TERMINATION ....................................................... 43
SECTION 12. MISCELLANEOUS ..................................................... 44
EXHIBIT
Exhibit A - Form of Term Loan Promissory Note
Exhibit B - Form of Bridge Loan Promissory Note
SCHEDULES
Schedule 1 - Collateral Information
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THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, with
offices located at ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇., ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(hereinafter "CIT"), is pleased to confirm the terms and conditions under which
CIT shall make Revolving Loans, the Term Loan, the Bridge Loan and other
financial accommodations to Procom Technology, Inc., a California corporation
with a principal place of business at ▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(herein the "Company").
SECTION 1. DEFINITIONS
ACCOUNTS shall mean all of the Company's now existing and future: (a) accounts
(as defined in the UCC), and any and all other receivables (whether or not
specifically listed on schedules furnished to CIT), including, without
limitation, all accounts created by, or arising from, all of the Company's
sales, leases, rentals of goods or renditions of services to its customers,
including but not limited to, those accounts arising under any of the Company's
trade names or styles, or through any of the Company's divisions; (b) any and
all instruments, documents, chattel paper (including electronic chattel paper)
(all as defined in the UCC); (c) unpaid seller's or lessor's rights (including
rescission, replevin, reclamation, repossession and stoppage in transit)
relating to the foregoing or arising therefrom; (d) rights to any goods
represented by any of the foregoing, including rights to returned, reclaimed or
repossessed goods; (e) reserves and credit balances arising in connection with
or pursuant hereto; (f) guarantees, supporting obligations, payment intangibles
and letter of credit rights (all as defined in the UCC); (g) insurance policies
or rights relating to any of the foregoing; (h) general intangibles pertaining
to any and all of the foregoing (including all rights to payment, including
those arising in connection with bank and non-bank credit cards), and including
books and records and any electronic media and software thereto; (i) notes,
deposits or property of account debtors securing the obligations of any such
account debtors to the Company; and (j) cash and non-cash proceeds (as defined
in the UCC) of any and all of the foregoing.
ADMINISTRATIVE MANAGEMENT FEE shall mean the sum of $12,000.00 which shall be
paid to CIT in accordance with Section 8, paragraph 8.11 hereof to offset the
expenses and costs (excluding Out-of-Pocket Expenses and auditor fees) of CIT in
connection with administration, record keeping, analyzing and evaluating the
Collateral.
ANNIVERSARY DATE shall mean the date occurring three (3) years from the Closing
Date and the same date in every year thereafter.
AVAILABILITY shall mean at any time the amount by which: (a) the Borrowing Base
exceeds (b) the sum of (i) the outstanding aggregate amount of all Obligations,
including without limitation, all Obligations with respect to Revolving Loans,
but excluding the Term Loan and the Bridge Loan, and (ii) the Availability
Reserve.
AVAILABILITY RESERVE shall mean the sum of: (a) (i) three months rental payments
or similar charges for any of the Company's leased premises or other Collateral
locations for which the Company has not delivered to CIT a landlord's waiver in
form and substance reasonably satisfactory to CIT, plus (ii) three months
estimated payments plus any other fees or charges owing by the Company to any
applicable warehousemen or third party processor (as determined by CIT in its
reasonable business
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judgement), provided that any of the foregoing amounts shall be adjusted from
time to time hereafter upon (x) delivery to CIT of any such acceptable waiver,
(y) the opening or closing of a Collateral location and/or (z) any change in the
amount of rental, storage or processor payments or similar charges; (b) any
reserve which CIT may reasonably require from time to time pursuant to this
Financing Agreement; and (c) such other reserves as CIT deems necessary in its
reasonable judgment as a result of (x) negative forecasts and/or trends in the
Company's business, industry, prospects, profits, operations or financial
condition or (y) other issues, circumstances or facts that could otherwise
negatively impact the Company, its business, prospects, profits, operations,
industry, financial condition or assets.
BORROWING BASE shall mean the sum of (a) eighty five percent (85%) of the
Company's aggregate outstanding Eligible Accounts Receivable, plus (b) the
lesser of (i) thirty five percent (35%) of the aggregate value of the Company's
Eligible Inventory, valued at the lower of cost or market, on a first in, first
out basis, or (ii) the Inventory Loan Cap; provided that the advance rate
against Eligible Accounts Receivable will be reduced by one percentage point for
each percentage point that dilution exceeds 3% and in no event shall advances
against Eligible Accounts Receivable exceed the collections of Trade Accounts
Receivable for the then prior forty five days. Dilution will include, without
limitation, an amount representing, historically, returns, discounts, claims,
credits, allowances and applicable terms.
BRIDGE FACILITY FEE shall have the meaning given in Section 5.3 of this
Financing Agreement.
BRIDGE LOAN shall mean the bridge loan in the principal amount of $1,000,000
made by CIT pursuant to, and repayable in accordance with, the provisions of
Section 5 of this Financing Agreement.
BRIDGE LOAN PROMISSORY NOTE shall mean the promissory note in the form of
Exhibit B attached hereto executed by the Company to evidence the Bridge Loan
made by CIT under Section 5 hereof.
BRIDGE LOAN TERMINATION DATE shall be the date described in Section 5.3 of this
Financing Agreement.
BUSINESS DAY shall mean any day on which CIT and The Chase Manhattan Bank are
open for business.
CAPITAL EXPENDITURES shall mean, for any period, the aggregate expenditures of
the Company during such period on account of, property, plant, equipment or
similar fixed assets that, in conformity with GAAP, are required to be reflected
in the balance sheet of the Company.
CAPITAL IMPROVEMENTS shall mean operating Equipment and facilities (other than
land) acquired or installed for use in the Company's business operations.
CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure in the balance sheet of the Company.
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CHASE BANK RATE shall mean the rate of interest per annum announced by The Chase
Manhattan Bank from time to time as its prime rate in effect at its principal
office in New York City. (The prime rate is not intended to be the lowest rate
of interest charged by The Chase Manhattan Bank to its borrowers).
CHASE BANK RATE LOANS shall mean any loans or advances pursuant to this
Financing Agreement made or maintained at a rate of interest based upon the
Chase Bank Rate.
CLOSING DATE shall mean the date that this Financing Agreement has been duly
executed by the parties hereto and delivered to CIT.
COLLATERAL shall mean all present and future Accounts, Equipment, Inventory,
Documents of Title, General Intangibles, Real Estate, Pledged Stock of the
Company's subsidiaries and Other Collateral.
COLLECTION DAYS shall mean one (1) Business Day to provide for the deposit,
clearance and collection of checks or other instruments representing the
proceeds of Collateral, the amount of which has been credited to the Company's
Revolving Loan Account, and for which interest may be charged on the aggregate
amount of such deposits, at the rate provided for in Paragraph 8.1 of Section 8
of this Financing Agreement.
COMMITMENT LETTER shall mean the Commitment Letter, dated August 31, 2000,
issued by CIT to, and accepted by, the Company.
CONSOLIDATED BALANCE SHEET shall mean a consolidated or compiled, as applicable,
balance sheet for the Company and the consolidated subsidiaries of the Company,
eliminating all inter-company transactions and prepared in accordance with GAAP.
CONSOLIDATING BALANCE SHEET shall mean a Consolidated Balance Sheet plus
individual balance sheets for the Company and its consolidated subsidiaries,
showing all eliminations of inter-company transactions, including a balance
sheet for the Company exclusively, all prepared in accordance with GAAP.
COPYRIGHTS shall mean all present and hereafter acquired copyrights,
copyrightable material, copyright registrations, recordings, applications,
designs, styles, licenses, marks, prints and labels bearing any of the
foregoing, goodwill, any and all general intangibles, intellectual property and
rights pertaining thereto, and all cash and non-cash proceeds thereof.
CURRENT ASSETS shall mean those assets of the Company which, in accordance with
GAAP, are classified as current.
CURRENT LIABILITIES shall mean those liabilities of the Company which, in
accordance with GAAP, are classified as "current", provided however, that,
notwithstanding GAAP, the Revolving Loans and the current portion of Permitted
Indebtedness shall be considered "current liabilities".
CURRENT RATIO shall mean the ratio determined by dividing Current Assets by
Current Liabilities.
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DEFAULT shall mean any event specified in Section 10 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum on any
Obligations hereunder, equal to the sum of: (a) two percent (2%) and (b) the
applicable increment over the Chase Bank Rate (as set forth in paragraph 8.1
hereof) plus the Chase Bank Rate, or the applicable increment over the LIBOR
Rate (as set forth in paragraph 8.14 hereof) plus the LIBOR Rate, which CIT
shall be entitled to charge the Company on all Obligations due CIT by the
Company, as further set forth in Paragraph 10.2 of Section 10 of this Financing
Agreement.
DEPOSITORY ACCOUNTS shall mean the collection accounts, which are subject to
CIT's instructions, as specified in Paragraph 3.4 of Section 3 of this Financing
Agreement.
DOCUMENTATION FEE shall mean subsequent to the Closing Date, CIT's standard fees
relating to any and all modifications, waivers, releases, amendments or
additional collateral with respect to this Financing Agreement, the Collateral
and/or the Obligations.
DOCUMENTS OF TITLE shall mean all present and future documents (as defined in
the UCC), and any and all warehouse receipts, bills of lading, shipping
documents, chattel paper, instruments and similar documents, all whether
negotiable or not and all goods and Inventory relating thereto and all cash and
non-cash proceeds of the foregoing.
EARLY TERMINATION DATE shall mean the date on which the Company terminates this
Financing Agreement or the Revolving Line of Credit which date is prior to an
Anniversary Date .
EARLY TERMINATION FEE shall: (a) mean the fee CIT is entitled to charge the
Company in the event the Company terminates the Revolving Line of Credit or this
Financing Agreement on a date prior to an Anniversary Date; and be determined as
follows: (x) $112,000 minus $6,000 for each month which has elapsed prior to
termination if the Early Termination Date occurs on or before one (1) year from
the Closing Date, (y) $56,250 minus $2,500 for each month which has elapsed
during the second year prior to termination if the Early Termination Date occurs
after one (1) year from the Closing Date but on or before two (2) years from the
Closing Date; and (z) $18,750 if the Early Termination Date occurs after two (2)
years from the Closing Date.
EBIT shall mean, in any period, all earnings of the Company for said period
before all interest and tax obligations of the Company for said period,
determined in accordance with GAAP on a consistent basis with the latest audited
financial statements of the Company, but excluding the effect of extraordinary
or non-reoccurring gains or losses for such period.
EBITDA means, in any period, the Company's net income for such period of the
Company determined in accordance with GAAP (other than extraordinary or
non-recurring income including, without limitation, gain on sale of assets,
income relating to foreign exchange, swap or other derivative transactions and
changes in GAAP), plus the following items, to the extent deducted from the
revenues of the Company in the calculation of net income or loss (i)
depreciation, (ii) amortization of intangibles and any other non-cash items,
(iii) cash interest expense (excluding any interest paid in kind) and (iv) tax
expense.
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ELIGIBLE ACCOUNTS RECEIVABLE shall mean the gross amount of the Company's Trade
Accounts Receivable that are subject to a valid, exclusive, first priority and
fully perfected security interest in favor of CIT, which conform to the
warranties contained herein and which, at all times, continue to be acceptable
to CIT in the exercise of its reasonable business judgment, less, without
duplication, the sum of: (a) any returns, discounts, claims, credits and
allowances of any nature (whether issued, owing, granted, claimed or
outstanding), and (b) reserves for any such Trade Accounts Receivable that arise
from or are subject to or include: (i) sales to the United States of America,
any state or other governmental entity or to any agency, department or division
thereof, except for any such sales as to which the Company has complied with the
Assignment of Claims Act of 1940 or any other applicable statute, rules or
regulation, to CIT's satisfaction in the exercise of its reasonable business
judgment; (ii) foreign sales, other than sales which otherwise comply with all
of the other criteria for eligibility hereunder and are (x) secured by letters
of credit (in form and substance satisfactory to CIT) issued or confirmed by,
and payable at, banks having a place of business in the United States of
America, or (y) to customers residing in Canada provided such Accounts do not
exceed $329,000 in the aggregate at any one time; (iii) Accounts that remain
unpaid more than ninety (90) days from invoice date; (iv) contra accounts; (v)
sales to any subsidiary, or to any company affiliated with the Company in any
way; (vi) ▇▇▇▇ and hold (deferred shipment) or consignment sales; (vii) sales to
any customer which is: (A) insolvent, (B) the debtor in any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceedings
under any federal or state law, (C) negotiating, or has called a meeting of its
creditors for purposes of negotiating, a compromise of its debts, or (D)
financially unacceptable to CIT or has a credit rating unacceptable to CIT;
(viii) all sales to any customer if fifty percent (50%) or more of the aggregate
dollar amount of all outstanding invoices to such customer are unpaid more than
ninety (90) days from invoice date; (ix) pre-billed receivables and receivables
arising from progress billing; (x) sales not payable in United States currency;
and (xi) any other reasons deemed necessary by CIT in its reasonable business
judgment, including without limitation those which are customary either in the
commercial finance industry or in the lending practices of CIT.
ELIGIBLE INVENTORY shall mean the gross amount of the Company's Inventory that
is subject to a valid, exclusive, first priority and fully perfected security
interest in favor of CIT and which conforms to the warranties contained herein
and which, at all times, continues to be acceptable to CIT in the exercise of
its reasonable business judgment, less, without duplication, any (a)
work-in-process other than eligible raw material that is included in
work-in-process, (b) supplies (other than raw materials), (c) Inventory not
present in the United States of America, (d) Inventory returned or rejected by
the Company's customers (other than goods that are undamaged and resalable in
the normal course of business) and goods to be returned to the Company's
suppliers, (e) Inventory in transit to third parties (other than the Company's
agents or warehouses), or in the possession of a warehouseman, bailee, third
party processor, or other third party, unless such warehouseman, bailee or third
party has executed a notice of security interest agreement (in form and
substance satisfactory to CIT) and CIT shall have a first priority perfected
security interest in such Inventory, and (f) less any reserves required by CIT
in its reasonable discretion, including without limitation for special order
goods, discontinued, slow-moving and obsolete Inventory, market value declines,
▇▇▇▇ and hold (deferred shipment), consignment sales, shrinkage and any
applicable customs, freight, duties and Taxes.
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EQUIPMENT shall mean all present and hereafter acquired equipment (as defined in
the UCC) including, without limitation, all machinery, equipment, furnishings
and fixtures, and all additions, substitutions and replacements thereof,
wherever located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto and all proceeds thereof of
whatever sort.
ERISA shall mean the Employee Retirement Income Security Act or 1974, as amended
from time to time and the rules and regulations promulgated thereunder from time
to time.
EUROCURRENCY RESERVE REQUIREMENTS for any day, as applied to a LIBOR Loan, shall
mean the aggregate (without duplication) of the maximum rates of reserve
requirements (expressed as a decimal fraction) in effect with respect to CIT
and/or any present or future lender or participant on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
Regulation D or any other applicable regulations of the Board of Governors of
the Federal Reserve System or other governmental authority having jurisdiction
with respect thereto, as now and from time to time in effect, dealing with
reserve requirements prescribed for Eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by CIT
and/or any such lenders or participants (such rate to be adjusted to the nearest
one sixteenth of one percent (1/16 of 1%) or, if there is not a nearest one
sixteenth of one percent (1/16 of 1%), to the next higher one sixteenth of one
percent (1/16 of 1%)).
EVENT(s) OF DEFAULT shall have the meaning provided for in Section 10 of this
Financing Agreement.
EXECUTIVE OFFICERS shall mean the Chairman, President, Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer, Executive Vice President(s),
Senior Vice President(s), Treasurer, Controller and Secretary of the Company.
FISCAL QUARTER shall mean, with respect to the Company, each three (3) month
period ending on October 31, January 31, April 30 and July 31 of each Fiscal
Year.
FISCAL YEAR shall mean each twelve (12) month period commencing on August 1 of
each year and ending on the following July 31.
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply, provided that in the event the Company
modifies its accounting principles and procedures as applied as of the Closing
Date, the Company shall provide such statements of reconciliation as shall be in
form and substance acceptable to CIT.
GENERAL INTANGIBLES shall mean all present and hereafter acquired general
intangibles (as defined in the UCC), and shall include, without limitation, all
present and future right, title and interest in and to: (a) all Trademarks,
tradenames, corporate names, business names, logos and any other designs or
sources of business identities, (b) Patents, together with any improvements on
said Patents, utility models, industrial models, and designs, (c) Copyrights,
(d) trade secrets, (e) licenses, permits and franchises, (f) all applications
with respect to the foregoing, (g) all investment property, (h) all right, title
and interest in and to any and all extensions and renewals, (i) goodwill with
respect
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to any of the foregoing, (j) any other forms of similar intellectual property,
(k) all customer lists, distribution agreements, supply agreements, blueprints,
indemnification rights and tax refunds, together with all monies and claims for
monies now or hereafter due and payable in connection with any of the foregoing
or otherwise, and (l) all cash and non-cash proceeds thereof, including, without
limitation, the proceeds or royalties of any licensing agreements between the
Company and any licensee of any of the Company's General Intangibles.
INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of
borrowed money or for the deferred purchase price of property, services or
assets, other than Inventory, or (b) lease obligations which, in accordance with
GAAP, have been, or which should be capitalized.
INSURANCE PROCEEDS shall mean proceeds or payments from an insurance carrier
with respect to any loss, casualty or damage to Collateral.
INTEREST PERIOD shall mean:
(a) with respect to any initial request by the Company for a LIBOR
Loan, a one month, two month, three month or six month period commencing on the
borrowing or conversion date with respect to a LIBOR Loan and ending one, two,
three or six months thereafter, as applicable; and
(b) thereafter with respect to any continuation of, or conversion to, a
LIBOR Loan, at the option of the Company, any one month, two month, three month
or six month period commencing on the last day of the immediately preceding
Interest Period applicable to such LIBOR Loan and ending one, two, three or six
months thereafter, as applicable;
provided that, the foregoing provisions relating to Interest Periods are subject
to the following:
(i) if any Interest Period would otherwise end on a day which is not a
Working Day, that Interest Period shall be extended to the next
succeeding Working Day, unless the result of such extension would
extend such payment into another calendar month in which event such
Interest Period shall end on the immediately preceding Working Day;
(ii) any Interest Period that begins on the last Working Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month, at the end of such Interest
Period) shall end on the last Working Day of a calendar month; and
(iii) for purposes of determining the availability of Interest Periods,
such Interest Periods shall be deemed available if (x) Chase Manhattan
Bank quotes an applicable rate or CIT determines LIBOR, as provided in
the definition of LIBOR, (y) the LIBOR determined by Chase Manhattan
Bank or CIT will adequately and fairly reflect the cost of maintaining
or funding its loans bearing interest at LIBOR, for such Interest
Period, and (z) such Interest Period will end on or before the earlier
of Anniversary Date or the last day of the then current term of this
Financing Agreement. If a requested Interest Period shall be
unavailable in accordance with the foregoing sentence, the Company
shall continue to pay interest on the Obligations at the applicable per
annum rate based upon the Chase Bank Rate.
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INVENTORY shall mean all of the Company's present and hereafter acquired
inventory (as defined in the UCC) and including, without limitation, all
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same in all
stages of production from raw materials through work-in-process to finished
goods - and all proceeds thereof of whatever sort.
INVENTORY LOAN CAP shall mean the amount of $1,500,000.
LIBOR shall mean, at any time of determination, and subject to availability, for
each applicable Interest Period, a variable rate of interest equal to: (a) at
CIT's election (i) the applicable LIBOR quoted to CIT by The Chase Manhattan
Bank (or any successor thereof), or (ii) the rate of interest determined by CIT
at which deposits in U.S. dollars are offered for the relevant Interest Period
based on information presented on Telerate Systems at Page 3750 as of 11:00 A.M.
(London time) on the day which is two (2) Business Days prior to the first day
of such Interest Period, provided that, if at least two such offered rates
appear on the Telerate System at Page 3750 in respect of such Interest Period,
the arithmetic mean of all such rates (as determined by CIT) will be the rate
used; divided by (b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of Eurocurrency
Reserve Requirements in effect on the day which is two (2) Business Days prior
to the beginning of such Interest Period.
LIBOR LENDING OFFICE with respect to CIT, shall mean the office of The Chase
Manhattan Bank, or any successor thereof, maintained at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇.
LIBOR LOAN shall mean any loans made pursuant to this Financing Agreement which
are made or maintained at a rate of interest based upon LIBOR, provided that (i)
no Default or Event of Default has occurred hereunder, which has not been waived
in writing by CIT, and (ii) no LIBOR Loan shall be made with an Interest Period
that ends subsequent to an Anniversary Date or any applicable Early Termination
Date.
LINE OF CREDIT shall mean the aggregate commitment of CIT to (a) make Revolving
Loans pursuant to Section 3 of this Financing Agreement, (b) make the Term Loan
pursuant to Section 4 of this Financing Agreement and (c) make the Bridge Loan
pursuant to Section 5 of this Financing Agreement, in the aggregate amount equal
to $10,000,000. LINE OF CREDIT FEE shall: (a) mean the fee due CIT at the end of
each month for the Line of Credit, and (b) be determined by multiplying the
difference between (i) the Revolving Line of Credit, and (ii) the sum, for said
month, of the average daily balance of Revolving Loans by one quarter of one
percent (.25%) per annum for the number of days in said month.
LOAN DOCUMENTS shall mean this Financing Agreement, the Promissory Notes, the
mortgages and/or deeds of trust, the other closing documents and any other
ancillary loan and security agreements executed from time to time in connection
with this Financing Agreement, all as may be renewed, amended, extended,
increased or supplemented from time to time.
LOAN FACILITY FEE shall mean the fees payable to CIT in accordance with, and
pursuant to, the provisions of Paragraph 8.4 of Section 8 of this Financing
Agreement.
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OBLIGATIONS shall mean all loans, advances and extensions of credit made or to
be made by CIT to the Company or to others for the Company's account (including,
without limitation, all Revolving Loans, letter of credit guaranties, the Term
Loan and the Bridge Loan); any and all indebtedness and obligations which may at
any time be owing by the Company to CIT howsoever arising, whether now in
existence or incurred by the Company from time to time hereafter; whether
principal, interest, fees, costs, expenses or otherwise; whether secured by
pledge, lien upon or security interest in any of the Company's Collateral,
assets or property or the assets or property of any other person, firm, entity
or corporation; whether such indebtedness is absolute or contingent, joint or
several, matured or unmatured, direct or indirect and whether the Company is
liable to CIT for such indebtedness as principal, surety, endorser, guarantor or
otherwise. Obligations shall also include indebtedness owing to CIT by the
Company under any Loan Document or under any other agreement or arrangement now
or hereafter entered into between the Company and CIT; indebtedness or
obligations incurred by, or imposed on, CIT as a result of environmental claims
arising out of the Company's operations, premises or waste disposal practices or
sites in accordance with paragraph 7.7 hereof; the Company's liability to CIT as
maker or endorser of any promissory note or other instrument for the payment of
money; the Company's liability to CIT under any instrument of guaranty or
indemnity, or arising under any guaranty, endorsement or undertaking which CIT
may make or issue to others for the Company's account, including any letter of
credit guaranties or other accommodation extended by CIT with respect to
applications for Letters of Credit, CIT's acceptance of drafts or CIT's
endorsement of notes or other instruments for the Company's account and benefit.
OPERATING LEASES shall mean all leases of property (whether real, personal or
mixed) other than Capital Leases.
OTHER COLLATERAL shall mean all now owned and hereafter acquired lockbox,
blocked account and any other deposit accounts maintained with any bank or
financial institutions into which the proceeds of Collateral are or may be
deposited; all cash and other monies and property in the possession or control
of CIT; all books, records, ledger cards, disks and related data processing
software at any time evidencing or containing information relating to any of the
Collateral described herein or otherwise necessary or helpful in the collection
thereof or realization thereon; and all cash and non-cash proceeds of the
foregoing.
OUT-OF-POCKET EXPENSES shall mean all of CIT's present and future expenses
incurred relative to this Financing Agreement or any other Loan Documents,
whether incurred heretofore or hereafter, which expenses shall include, without
being limited to: the cost and expense incurred in connection with the
negotiation, documentation and closing of this Financing Agreement and any
amendments thereto and all documents in connection therewith, the cost of record
searches, all costs and expenses incurred by CIT in opening bank accounts,
depositing checks, receiving and transferring funds, and wire transfer charges,
any charges imposed on CIT due to returned items and "insufficient funds" of
deposited checks and CIT's standard fees relating thereto, any amounts paid by,
incurred by or charged to, CIT by the issuing bank under a letter of credit
guaranty if applicable or the Company's reimbursement agreement, application for
letters of credit or other like document which pertain either directly or
indirectly to such letters of credit, and CIT's standard fees relating to the
letters of credit and any drafts thereunder, travel, lodging and similar
expenses of CIT's personnel in connection with inspecting and monitoring the
Collateral from time to time hereunder, any
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applicable counsel fees and disbursements, fees and taxes relative to the filing
of financing statements, all expenses, costs and fees set forth in Paragraph
10.3 of Section 10 of this Financing Agreement, and title insurance premiums,
real estate survey costs, costs of preparing and recording mortgages/deeds of
trust against the Real Estate.
OVERADVANCE RATE shall mean a rate equal to one percent (1%) per annum, in
excess of the applicable contract rate of interest determined in accordance with
Section 8, Paragraph 8.1(a) of this Financing Agreement or such other rate as
the parties hereto may mutually agree in writing.
OVERADVANCES shall mean the amount by which (a) the sum of all outstanding
Revolving Loans and advances made hereunder exceed (b) the Borrowing Base.
PATENTS shall mean all of the Company's present and hereafter acquired patents,
patent applications, registrations, any reissues or renewals thereof, licenses,
any inventions and improvements claimed thereunder, and all general intangible,
intellectual property and patent rights with respect thereto of the Company, and
all income, royalties, cash and non-cash proceeds thereof.
PERMITTED ENCUMBRANCES shall mean: (a) liens existing on the date hereof on
specific items of Equipment and other liens expressly permitted, or consented to
in writing by CIT; (b) Purchase Money Liens; (c) liens of local or state
authorities for franchise or other like Taxes, provided that the aggregate
amounts of such liens shall not exceed $100,000.00 in the aggregate at any one
time; (d) statutory liens of landlords and liens of carriers, warehousemen,
bailees, mechanics, materialmen and other like liens imposed by law, created in
the ordinary course of business and for amounts not yet due (or which are being
contested in good faith, by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such liens) and with
respect to which adequate reserves or other appropriate provisions are being
maintained by the Company in accordance with GAAP; (e) deposits made (and the
liens thereon) in the ordinary course of business of the Company (including,
without limitation, security deposits for leases, indemnity bonds, surety bonds
and appeal bonds) in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids, contracts (other than for the repayment or
guarantee of borrowed money or purchase money obligations), statutory
obligations and other similar obligations arising as a result of progress
payments under government contracts; (f) easements (including, without
limitation, reciprocal easement agreements and utility agreements),
encroachments, minor defects or irregularities in title, variation and other
restrictions, charges or encumbrances (whether or not recorded) affecting the
Real Estate, if applicable, and which in the aggregate (A) do not materially
interfere with the occupation, use or enjoyment by the Company of its business
or property so encumbered and (B) in the reasonable business judgment of CIT do
not materially and adversely affect the value of such Real Estate; and (g) liens
granted CIT by the Company; (h) liens of judgment creditors provided such liens
do not exceed, in the aggregate, at any time, $50,000.00 (other than liens
bonded or insured to the reasonable satisfaction of CIT); and (i) tax liens
which are not yet due and payable or which are being diligently contested in
good faith by the Company by appropriate proceedings, and which liens are not
(x) filed on any public records, (y) other than with respect to Real Estate,
senior to the liens of CIT or (z) for Taxes due the United States of America or
any state thereof having similar priority statutes, as further set forth in
paragraph 7.6 hereof.
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PERMITTED INDEBTEDNESS shall mean: (a) current Indebtedness maturing in less
than one year and incurred in the ordinary course of business for raw materials,
supplies, equipment, services, Taxes or labor; (b) the Indebtedness secured by
Purchase Money Liens; (c) Subordinated Debt; (d) Indebtedness arising under this
Financing Agreement; (e) deferred Taxes and other expenses incurred in the
ordinary course of business; and (f) other Indebtedness existing on the date of
execution of this Financing Agreement and listed in the most recent financial
statement delivered to CIT or otherwise disclosed to CIT in writing prior to the
Closing Date.
PROMISSORY NOTES shall mean the note, in the form of Exhibit A attached hereto,
delivered by the Company to CIT to evidence the Term Loan pursuant to, and
repayable in accordance with, the provisions of Section 4 of this Financing
Agreement, and the note, in the form of Exhibit B attached hereto, delivered by
the Company to CIT to evidence the Bridge Loan pursuant to, and repayable in
accordance with, the provisions of Section 5 of this Financing Agreement.
PURCHASE MONEY LIENS shall mean liens on any item of Equipment acquired after
the date of this Financing Agreement provided that (a) each such lien shall
attach only to the property to be acquired, (b) a description of the Equipment
so acquired is furnished to CIT, and (c) the debt incurred in connection with
such acquisitions shall not exceed, in the aggregate, $250,000.00 in any Fiscal
Year.
REAL ESTATE shall mean the Company's fee and/or leasehold interests in the real
property, including any such real property which has been, or will be,
encumbered, mortgaged, pledged or assigned to CIT or its designee.
REVOLVING LINE OF CREDIT shall mean the aggregate commitment of CIT to make
loans and advances pursuant to Section 3 of this Financing Agreement, in the
aggregate amount of $5,000,000.
REVOLVING LOAN ACCOUNT shall mean the account on CIT's books, in the Company's
name, in which the Company will be charged with all Obligations under this
Financing Agreement.
REVOLVING LOANS shall mean the loans and advances made, from time to time, to or
for the account of the Company by CIT pursuant to Section 3 of this Financing
Agreement.
SUBORDINATED DEBT shall mean the debt due a Subordinating Creditor (and the
note(s) evidencing such) which has been subordinated, by a Subordination
Agreement, to the prior payment and satisfaction of the Obligations of the
Company to CIT.
SUBORDINATING CREDITOR shall mean Seagate Technology, Inc. and any other
creditor of Borrower who executes and delivers a Subordination Agreement in form
and substance satisfactory to CIT.
SUBORDINATION AGREEMENT shall mean the agreement (in form and substance
satisfactory to CIT) among the Company, a Subordinating Creditor and CIT
pursuant to which Subordinated Debt is subordinated to the prior payment and
satisfaction of the Company's Obligations to CIT.
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TAXES shall mean all federal, state, municipal and other governmental taxes,
levies, charges, claims and assessments which are or may be due by the Company
with respect to its business, operations, Collateral or otherwise.
TERM LOAN PROMISSORY NOTE shall mean the promissory note in the form of Exhibit
A attached hereto executed by the Company to evidence the Term Loan made by CIT
under Section 4 hereof.
TERM LOAN shall mean the term loan in the principal amount of $4,000,000.00
(herein the "Term Loan") made by CIT pursuant to, and repayable in accordance
with, the provisions of Section 4 of this Financing Agreement.
TRADE ACCOUNTS RECEIVABLE shall mean that portion of the Company's Accounts
which arises from the sale of Inventory or the rendition of services in the
ordinary course of the Company's business.
TRADEMARKS shall mean all present and hereafter acquired trademarks, trademark
registrations, recordings, applications, tradenames, trade styles, service
marks, prints and labels (on which any of the foregoing may appear), licenses,
reissues, renewals, and any other intellectual property and trademark rights
pertaining to any of the foregoing, together with the goodwill associated
therewith, and all cash and non-cash proceeds thereof.
UCC shall mean the Uniform Commercial Code as the same may be amended and in
effect from time to time in the state of California.
WORKING DAY shall mean any Business Day on which dealings in foreign currencies
and exchanges between banks may be transacted.
SECTION 2. CONDITIONS PRECEDENT
The obligation of CIT to make the initial loans hereunder is subject to
the satisfaction of, extension of or waiver of in writing, on or prior to, the
Closing Date, the following conditions precedent:
(a) LIEN SEARCHES - CIT shall have received tax, judgment and Uniform
Commercial Code searches satisfactory to CIT for all locations presently
occupied or used by the Company.
(b) CASUALTY INSURANCE - The Company shall have delivered to CIT
evidence satisfactory to CIT that casualty insurance policies listing CIT as
additional insured, loss payee or mortgagee, as the case may be, are in full
force and effect, all as set forth in Paragraph 7.5 of Section 7 of this
Financing Agreement.
(c) UCC FILINGS - Any financing statements required to be filed in
order to create, in favor of CIT, a first perfected security interest in the
Collateral, subject only to the Permitted Encumbrances, shall have been properly
filed in each office in each jurisdiction required in order to create in favor
of CIT a perfected lien on the Collateral. CIT shall have received
acknowledgment copies of all such filings (or, in lieu thereof, CIT shall have
received other evidence satisfactory to
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CIT that all such filings have been made) and CIT shall have received evidence
that all necessary filing fees and all taxes or other expenses related to such
filings have been paid in full.
(d) BOARD RESOLUTION - CIT shall have received a copy of the
resolutions of the Board of Directors of the Company authorizing the execution,
delivery and performance of (i) this Financing Agreement and (ii) any related
agreements, in each case certified by the Secretary or Assistant Secretary of
the Company as of the date hereof, together with a certificate of the Secretary
or Assistant Secretary of the Company as to the incumbency and signature of the
officers of the Company executing such Loan Documents and any certificate or
other documents to be delivered by them pursuant hereto, together with evidence
of the incumbency of such Secretary or Assistant Secretary.
(e) CORPORATE ORGANIZATION - CIT shall have received (i) a copy of the
Certificate of Incorporation of the Company certified by the Secretary of State
of the state of its incorporation, and (ii) a copy of the By-Laws of the Company
certified by the Secretary or Assistant Secretary thereof, all as amended
through the date hereof.
(f) OFFICER'S CERTIFICATE - CIT shall have received an executed
Officer's Certificate of the Company, satisfactory in form and substance to CIT,
certifying that (i) the representations and warranties contained herein are true
and correct in all material respects on and as of the Closing Date; (ii) the
Company is in compliance with all of the terms and provisions set forth herein;
and (iii) no Default or Event of Default has occurred
(g) OPINIONS - Counsel for the Company shall have delivered to CIT
opinions satisfactory to CIT opining, inter alia, that, subject to the (i)
filing, priority and remedies provisions of the Uniform Commercial Code, (ii)
the provisions of the Bankruptcy Code, insolvency statutes or other like laws,
(iii) the equity powers of a court of law and (iv) such other matters as may be
agreed upon with CIT: (x) this Financing Agreement and all other Loan Documents
of the Company are (A) valid, binding and enforceable according to their terms,
(B) are duly authorized, executed and delivered, and (C) do not violate any
terms, provisions, representations or covenants in the charter or by-laws of the
Company or, to the best knowledge of such counsel, of any loan agreement,
mortgage, deed of trust, note, security or pledge agreement, indenture or other
contract to which the Company are signatories or by which the Company or its
assets are bound.
(h) ABSENCE OF DEFAULT - No Default or Event of Default shall have
occurred and no material adverse change shall have occurred in the financial
condition, business, prospects, profits, operations or assets of the Company or
the Company's subsidiaries.
(i) LEGAL RESTRAINTS/LITIGATION - As of the Closing Date, there shall
be no: (x) litigation, investigation or proceeding (judicial or administrative)
pending or threatened against the Company or its assets, by any agency, division
or department of any county, city, state or federal government arising out of
this Financing Agreement; (y) injunction, writ or restraining order restraining
or prohibiting the financing arrangements contemplated under this Financing
Agreement; or (z) suit, action, investigation or proceeding (judicial or
administrative) pending against the
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Company or its assets, which, in the opinion of CIT, if adversely determined,
could have a material adverse effect on the business, operation, assets,
financial condition or Collateral of the Company.
(j) SUBORDINATION AGREEMENT - The Subordinating Creditor shall have
executed and delivered to CIT a Subordination Agreement, in form and substance
satisfactory to CIT, subordinating the debt due the Subordinating Creditor by
the Company to the prior payment and satisfaction of the Obligations of the
Company.
(k) INTENTIONALLY DELETED.
(l) INTENTIONALLY DELETED.
(m) ADDITIONAL DOCUMENTS - The Company shall have executed and
delivered to CIT all Loan Documents necessary to consummate the lending
arrangement contemplated between the Company and CIT.
(n) DISBURSEMENT AUTHORIZATION - The Company shall have delivered to
CIT all information necessary for CIT to issue wire transfer instructions on
behalf of the Company for the initial and subsequent loans and/or advances to be
made under this Financing Agreement including, but not limited to, disbursement
authorizations in form acceptable to CIT.
(o) EXAMINATION & VERIFICATION - CIT shall have completed, to its
satisfaction , an examination and verification of the Accounts, Inventory,
financial statements, books and records of the Company which examination shall
indicate that, after giving effect to all Revolving Loans, advances and
extensions of credit to be made at closing, the Company shall have an opening
additional Availability of at least $3,500,000 (including unrestricted cash on
hand) but less any reserves, fees due CIT on the Closing Date and the amount of
accrued but unpaid building construction costs, as evidenced by a Borrowing Base
certificate delivered by the Company to CIT as of the Closing Date, all as more
fully required by the CIT Commitment Letter. For the purpose of this subsection
2(o), Obligations as referenced in the definition of Availability shall be
inclusive of Obligations with respect to the Term Loan. It is understood that
such requirement contemplates that all debts and obligations are current, and
that all payables are being handled in the normal course of the Company's
business and consistent with its past practice.
(p) DEPOSITORY ACCOUNTS - The Company shall have established a system
of lockbox and bank accounts with respect to the collection of Accounts and the
deposit of proceeds of Collateral as shall be acceptable to CIT in all respects.
Such accounts shall be subject to three party agreements (between the Company,
CIT and the depository bank), which shall be in form and substance satisfactory
to CIT.
(q) EXISTING REVOLVING CREDIT AGREEMENT - The Company's existing credit
agreement with FINOVA Capital Corporation (the "Existing Lender") shall be: (i)
terminated; (ii) all loans and obligations of the Company thereunder shall be
paid or satisfied in full, including through utilization of the proceeds of the
initial Revolving Loans, the Term Loan and the Bridge Loan to be made under this
Financing Agreement; and (iii) all liens or security interests in favor of the
Existing Lender on
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the Collateral and otherwise in connection therewith shall be terminated and/or
released upon such payment.
(r) MORTGAGES/DEEDS OF TRUST - The Company shall have executed and
delivered to CIT, an agent of CIT or to a title insurance company acceptable to
CIT, such mortgages and/or deeds of trust as CIT may reasonably require to
obtain first liens on the Real Estate.
(s) TITLE INSURANCE POLICIES - CIT shall have received, in respect of
each mortgage or deed of trust, a mortgagee's title policy or marked-up
unconditional binder for such insurance. Each such policy shall (i) be in an
amount satisfactory to CIT; (ii) insure that the mortgage or deed of trust
insured thereby creates a valid first lien on the property covered by such
mortgage or deed of trust, free and clear of all defects and encumbrances except
those acceptable to CIT; (iii) name CIT as the insured thereunder; and (iv)
contain such endorsements and effective coverage as CIT may reasonably request,
including, without limitation, the revolving line of credit endorsement. CIT
shall also have received evidence that all premiums in respect of such policies
have been paid and that all charges for mortgage recording taxes, if any, shall
have been paid.
(t) APPRAISALS - CIT shall have received appraisals satisfactory to CIT
on the Company's Inventory and Real Estate, which appraisals: (i) shall be by an
appraiser acceptable to CIT, and (ii) shall indicate an orderly liquidation
value with respect to Inventory and a fair market and quick sale value with
respect to Real Estate.
(u) ENVIRONMENTAL REPORT - CIT shall have received environmental audit
reports on (i) all of the Company's leasehold and fee interests, and (ii) the
Company's waste disposal practices. The reports must (x) be satisfactory to CIT
and (y) not disclose or indicate any material liability (real or potential)
stemming from the Company's premises, its operations, its waste disposal
practices or waste disposal sites used by Company.
(v) SCHEDULES The Company or its counsel shall provide CIT with
schedules of: (a) any of the Company's and its subsidiaries (i) Trademarks, (ii)
Patents, and (iii) Copyrights, as applicable and all in such detail as to
provide appropriate recording information with respect thereto, (b) any
tradenames, (c) monthly rental payments for any leased premises or any other
premises where any Collateral may be stored or processed, and (d) Permitted
Liens, all of the foregoing in form and substance satisfactory to CIT.
(w) CIT COMMITMENT LETTER - The Company shall have fully complied, to
the reasonable satisfaction of CIT, with all of the terms and conditions of the
CIT Commitment Letter.
(x) MATERIAL CHANGE. The absence of any material adverse change in the
financial condition, business, prospects, profitability, assets or operations of
the Company - It is understood and agreed that any adverse change in the terms,
conditions, assumption or projections supplied to CIT by the Company and on
which CIT based its decision to issue the CIT Commitment Letter may, in CIT's
reasonable business discretion, be construed by CIT as a material adverse
change.
(y) REAL ESTATE - CIT's satisfaction and confirmation that the Real
Estate is free and clear of all mechanics' and construction liens and Lender has
received an agreement from the general
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contractor of the Real Estate whereby the contractor waives its rights to file
any liens against the property generally known as ▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇.
(z) ACCOUNTS PAYABLE - Confirmation of the open accounts payable terms
from vendors under the flooring facility, primarily the Company's largest
vendors such as Seagate, ▇▇▇▇ Micro, Wyle Laboratories and FCPA and a comparison
and approval by CIT of the vendor terms to the accounts payable turnover days
assumed in the financial projections of Company.
(aa) HEWLETT PACKARD - CIT's review and approval of the Hewlett Packard
agreement with the Company.
(bb) TAX REFUND - CIT's verification that the tax refund of
approximately $2,500,000 was received by the Company prior to the Closing Date.
Upon the execution of this Financing Agreement and the initial disbursement of
loans hereunder, all of the above Conditions Precedent shall have been deemed
satisfied except as otherwise set forth hereinabove or as the Company and CIT
shall otherwise agree in writing.
2.2 CONDITIONS TO EACH EXTENSION OF CREDIT
Except to the extent expressly set forth in this Financing Agreement,
the agreement of CIT to make any extension of credit requested to be made by it
to the Company on any date (including without limitation, the initial extension
of credit) is subject to the satisfaction of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES - Each of the representations and
warranties made by the Company in or pursuant to this Financing Agreement shall
be true and correct in all material respects on and as of such date as if made
on and as of such date.
(b) NO DEFAULT - No Default or Event of Default shall have occurred and
be continuing on such date or after giving effect to the extension of credit
requested to be made on such date.
(c) BORROWING BASE - Except as may be otherwise agreed to from time to
time by CIT and the Company in writing, after giving effect to the extension of
credit requested to be made by the Company on such date, the aggregate
outstanding balance of the Revolving Loans will not exceed the lesser of (i) the
Revolving Line of Credit or (ii) the Borrowing Base.
Each borrowing by the Company hereunder shall constitute a representation and
warranty by the Company as of the date of such loan or advance that each of the
representations, warranties and covenants contained in the Financing Agreement
have been satisfied and are true and correct, except as the Company and CIT
shall otherwise agree herein or in a separate writing.
SECTION 3. REVOLVING LOANS
3.1 CIT agrees, subject to the terms and conditions of this Financing
Agreement, from time to time (but subject to CIT's right to make
"Overadvances"), to make loans and advances to the
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Company on a revolving basis (i.e., subject to the limitations set forth herein,
the Company may borrow, repay and re-borrow Revolving Loans). Notwithstanding
anything to the contrary herein, (i) the advances against Eligible Inventory
shall not be available if at any time CIT does not have a first priority deed of
trust on the property generally located at 58 Discovery, Irvine, California,
(ii) no advances under the Revolving Loans shall be made until the lockbox
account referred to in Section 2(p) hereof shall be in place and fully
operational. In the event that CIT is no longer making inventory loans, the
Company shall be permitted to attain a lending facility with an inventory lender
provided that an intercreditor agreement satisfactory in form and substance to
CIT has been executed among the new lender, CIT and the Company. Requests for
loans and advances shall be in amounts not to exceed the lesser of (a) the
Availability or (b) the Revolving Line of Credit. All requests for loans and
advances must be received by an officer of CIT no later than (i) 1:00 p.m., New
York time, of the Business Day on which any such Chase Bank Rate Loans and
advances are required or (ii) three Business Days prior to any requested LIBOR
Loan. Should CIT for any reason honor requests for Overadvances, any such
Overadvances shall be made in CIT's sole discretion and subject to any
additional terms CIT deems necessary.
3.2 In furtherance of the continuing assignment and security interest
in the Company's Accounts and Inventory, the Company will, upon the creation of
Accounts and purchase or acquisition of Inventory, execute and deliver to CIT in
such form and manner as CIT may reasonably require, solely for CIT's convenience
in maintaining records of Collateral, such confirmatory schedules of Accounts
and Inventory as CIT may reasonably request, including, without limitation,
daily schedules of Accounts, daily schedules of Inventory and monthly reports of
revenue ($ and units) for the Net Force products, all in form and substance
satisfactory to CIT, and such other appropriate reports designating, identifying
and describing the Accounts and Inventory as CIT may reasonably request, and
provided further that CIT may request any such information more frequently, from
time to time, upon its reasonable prior request. In addition, upon CIT's
request, the Company shall provide CIT with copies of agreements with, or
purchase orders from, the Company's customers, and copies of invoices to
customers, proof of shipment or delivery, access to its computers, electronic
media and software programs associated therewith (including any electronic
records, contracts and signatures) and such other documentation and information
relating to said Accounts and other Collateral as CIT may reasonably require.
Failure to provide CIT with any of the foregoing shall in no way affect,
diminish, modify or otherwise limit the security interests granted herein. The
Company hereby authorizes CIT to regard the Company's printed name or rubber
stamp signature on assignment schedules or invoices as the equivalent of a
manual signature by one of the Company's authorized officers or agents.
3.3 The Company hereby represents and warrants that: each Trade Account
Receivable is based on an actual and bona fide sale and delivery of Inventory or
rendition of services to customers, made by the Company in the ordinary course
of its business; the Inventory being sold, and the Trade Accounts Receivable
created, are the exclusive property of the Company and are not and shall not be
subject to any lien, consignment arrangement, encumbrance, security interest or
financing statement whatsoever, other than the Permitted Encumbrances; the
invoices evidencing such Trade Accounts Receivable are in the name of the
Company; and the customers of the Company have accepted the Inventory or
services, owe and are obligated to pay the full amounts stated in the invoices
according to their terms, without dispute, offset, defense, counterclaim or
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contra, except for disputes and other matters arising in the ordinary course of
business with respect to which the Company has complied with the notification
requirements of Paragraph 3.5 of this Section 3. The Company confirms to CIT
that any and all Taxes or fees relating to its business, its sales, the Accounts
or Inventory relating thereto, are its sole responsibility and that same will be
paid by the Company when due, subject to Paragraph 7.6 of Section 6 of this
Financing Agreement, and that none of said Taxes or fees represent a lien on or
claim against the Accounts. The Company hereby further represents and warrants
that it shall not acquire any Inventory on a consignment basis, nor co-mingle
its Inventory with any of its customers or any other person, including pursuant
to any ▇▇▇▇ and hold sale or otherwise, and that its Inventory is marketable to
its customers in the ordinary course of business of the Company, except as it
may otherwise report in writing to CIT pursuant to Paragraph 3.5 hereof from
time to time. The Company also warrants and represents that it is a duly and
validly existing corporation and is qualified in all states where the failure to
so qualify would have a material adverse effect on the business of the Company
or the ability of the Company to enforce collection of Accounts due from
customers residing in that state. The Company agrees to maintain such books and
records regarding Accounts and Inventory as CIT may reasonably require and
agrees that the books and records of the Company will reflect CIT's interest in
the Accounts and Inventory. All of the books and records of the Company will be
available to CIT at normal business hours, upon CIT's reasonable prior notice
(provided that notice need not be given by CIT during the continuance of an
Event of Default or if CIT reasonably believes that the Company may be in breach
of this Agreement, whether or not an actual breach has occurred), including any
records handled or maintained for the Company by any other company or entity.
3.4 (a) Until CIT has advised the Company to the contrary after the
occurrence of an Event of Default, the Company, at its expense, will enforce,
collect and receive all amounts owing on the Accounts in the ordinary course of
its business and any proceeds it so receives shall be subject to the terms
hereof, and held on behalf of and in trust for CIT. Such privilege shall
terminate at the election of CIT, upon the occurrence of an Event of Default.
Any checks, cash, credit card sales and receipts, notes or other instruments or
property received by the Company with respect to any Collateral, including
Accounts, shall be held by the Company in trust for CIT, separate from the
Company's own property and funds, and promptly turned over to CIT with proper
assignments or endorsements by deposit to the Depository Accounts. The Company
shall: (i) indicate on all of its invoices that funds should be delivered to and
deposited in a Depository Account; (ii) direct all of its account debtors to
deposit any and all proceeds of Collateral into the Depository Accounts; (iii)
irrevocably authorize and direct any banks which maintain the Company's initial
receipt of cash, checks and other items to promptly wire transfer all available
funds to a Depository Account; and (iv) advise all such banks of CIT's security
interest in such funds. The Company shall provide CIT with prior written notice
of any and all deposit accounts opened or to be opened subsequent to the Closing
Date. Subject to Collection Days, all amounts received by CIT in payment of
Accounts will be credited to the Revolving Loan Account when CIT is advised by
its bank of its receipt of "collected funds" at CIT's bank account in New York,
New York on the Business Day of such advise if advised no later than 1:00 p.m.
EST or on the next succeeding Business Day if so advised after 1:00 PM EST. No
checks, drafts or other instrument received by CIT shall constitute final
payment to CIT unless and until such instruments have actually been collected.
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(b) The Company shall establish and maintain, in its name and
at its expense, deposit accounts with such banks as are acceptable to CIT (the
"Blocked Accounts") into which the Company shall promptly cause to be deposited:
(i) all proceeds of Collateral received by the Company, including all amounts
payable to the Company from credit card issuers and credit card processors, and
(ii) all amounts on deposit in deposit accounts used by the Company at each of
its locations, all as further provided in Paragraph 3.4(a) above. The banks at
which the Blocked Accounts are established shall enter into an agreement, in
form and substance satisfactory to CIT (the "Blocked Account Agreements"),
providing that all cash, checks and items received or deposited in the Blocked
Accounts are the property of CIT, that the depository bank has no lien upon, or
right of set off against, the Blocked Accounts and any cash, checks, items,
wires or other funds from time to time on deposit therein, except as otherwise
provided in the Blocked Account Agreements, and that automatically, on a daily
basis the depository bank will wire, or otherwise transfer, in immediately
available funds, all funds received or deposited into the Blocked Accounts to
such bank account as CIT may from time to time designate for such purpose. The
Company hereby confirms and agrees that all amounts deposited in such Blocked
Accounts and any other funds received and collected by CIT, whether as proceeds
of Inventory or other Collateral or otherwise, shall be the property of CIT.
3.5 The Company agrees to notify CIT: (a) of any matters materially
affecting the value, enforceability or collectibility of any Account and of all
customer disputes, offsets, defenses, counterclaims, returns, rejections and all
reclaimed or repossessed merchandise or goods, and of any material adverse
effect in the value of its Inventory, in its daily and weekly collateral reports
(as applicable) provided to CIT hereunder, in such detail and format as CIT may
reasonably require from time to time; and (b) promptly of any such matters which
are material, as a whole, to the Accounts and/or the Inventory. The Company
agrees to issue credit memoranda promptly (with duplicates to CIT upon request
after the occurrence of an Event of Default) upon accepting returns or granting
allowances. Upon the occurrence of an Event of Default (which is not waived in
writing by CIT) and on notice from CIT, the Company agrees that all returned,
reclaimed or repossessed merchandise or goods shall be set aside by the Company,
marked with CIT's name (as secured party) and held by the Company for CIT's
account.
3.6 CIT shall maintain a Revolving Loan Account on its books in which
the Company will be charged with all loans and advances made by CIT to it or for
its account, and with any other Obligations, including any and all reasonable
costs and expenses and reasonable attorney's fees which CIT may incur in
connection with the exercise by or for CIT of any of the rights or powers herein
conferred upon CIT, or in the prosecution or defense of any action or proceeding
to enforce or protect any rights of CIT in connection with this Financing
Agreement, the other Loan Documents or the Collateral assigned hereunder, or any
Obligations owing by the Company. The Company will be credited with all amounts
received by CIT from the Company or from others for the Company's account,
including, as above set forth, all amounts received by CIT in payment of
Accounts, and such amounts will be applied to payment of the Obligations as set
forth herein. In no event shall prior recourse to any Accounts or other security
granted to or by the Company be a prerequisite to CIT's right to demand payment
of any Obligation. Further, it is understood that CIT shall have no obligation
whatsoever to perform in any respect any of the Company's contracts or
obligations relating to the Accounts.
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3.7 After the end of each month, CIT shall promptly send the Company a
statement showing the accounting for the charges, loans, advances and other
transactions occurring between CIT and the Company during that month. The
monthly statements shall be deemed correct and binding upon the Company and
shall constitute an account stated between the Company and CIT unless CIT
receives a written statement of the exceptions within forty-five (45) days of
the date of the monthly statement.
3.8 In the event that any requested advance exceeds Availability or
that (a) the sum of the outstanding balance of Revolving Loans exceeds (b)(x)
the Borrowing Base or (y) the Revolving Line of Credit, any such nonconsensual
Overadvance shall be due and payable to CIT immediately upon CIT's demand
therefor.
SECTION 4. TERM LOAN
4.1 The Company hereby agrees to execute and deliver to CIT Term Loan
Promissory Note to evidence the Term Loan to be extended by CIT.
4.2 Upon receipt of such Term Loan Promissory Note, CIT hereby agrees
to extend to the Company the Term Loan.
4.3 The principal amount of the Term Loan shall be repaid to CIT by the
Company as follows: (i) interest only until April 1, 2001, and (ii) twelve (12)
equal monthly principal installments of $333,333.33 each, whereof the first
installment shall be due and payable on April 1, 2001 and the subsequent
installments shall be due and payable on the first Business Day of each month
thereafter until paid in full.
4.4 In the event this Financing Agreement or the Line of Credit is
terminated by either CIT or the Company in accordance with this Financing
Agreement for any reason whatsoever, the Term Loan shall become due and payable
on the effective date of such termination notwithstanding any provision to the
contrary in the Term Loan Promissory Note or this Financing Agreement.
4.5 The Company may prepay at any time, at its option, in whole or in
part, the Term Loan, provided that on each such prepayment, the Company shall
pay: (a) accrued interest on the principal so prepaid to the date of such
prepayment, and (b) the Early Termination Fee, if applicable.
4.6 Each prepayment (whether voluntary or mandatory) shall be applied
to the then last maturing installments of principal of the Term Loan.
4.7 The Company hereby authorizes CIT to charge its Revolving Loan
Account with the amount of all obligations owing under this Section 4 as such
amounts become due. The Company confirms that any charges which CIT may so make
to its Revolving Loan Account as herein provided will be made as an
accommodation to the Company and solely at CIT's discretion.
SECTION 5. BRIDGE LOAN
5.1 The Company hereby agrees to execute and deliver to CIT the Bridge
Loan Promissory Note to evidence the Bridge Loan to be extended by CIT.
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5.2 Upon receipt of such Bridge Loan Promissory Note, CIT hereby agrees
to extend to the Company the Bridge Loan.
5.3 The principal amount of the Bridge Loan and any accrued but unpaid
interest thereon shall be repaid in full to CIT by the Company upon the earlier
of the following: (i) the date 90 days from the Closing Date, or (ii) the date
of any public or private debt or equity offering of the Company. If the full
amount of the Obligations outstanding with respect to the Bridge Loan are not
paid by the date 90 days from the Closing Date, the Company shall pay to CIT a
one time fee equal to $20,000 (the "Bridge Facility Fee"). Without affecting the
foregoing, including the obligations of the Company to pay the Bridge Facility
Fee, the Bridge Loan Termination Date may be extended at the sole option and
discretion of CIT.
5.4 In the event this Financing Agreement or the Line of Credit is
terminated by either CIT or the Company in accordance with this Financing
Agreement for any reason whatsoever, the Bridge Loan shall become due and
payable on the effective date of such termination notwithstanding any provision
to the contrary in the Bridge Loan Promissory Note or this Financing Agreement.
5.5 The Company may prepay at any time, at its option, in whole or in
part, the Bridge Loan, provided that on each such prepayment, the Company shall
pay: (a) accrued interest on the principal so prepaid to the date of such
prepayment, and (b) the Early Termination Fee, if applicable.
5.6 Each prepayment (whether voluntary or mandatory) made during the
term of the Bridge Loan shall be applied to the principal of the Bridge Loan.
5.7 THE COMPANY HEREBY AUTHORIZES CIT TO CHARGE ITS REVOLVING LOAN
ACCOUNT WITH THE AMOUNT OF ALL OBLIGATIONS OWING UNDER THIS SECTION 5 AS SUCH
AMOUNTS BECOME DUE. THE COMPANY CONFIRMS THAT ANY CHARGES WHICH CIT MAY SO MAKE
TO ITS REVOLVING LOAN ACCOUNT AS HEREIN PROVIDED WILL BE MADE AS AN
ACCOMMODATION TO THE COMPANY AND SOLELY AT CIT'S DISCRETION.
SECTION 6. COLLATERAL
6.1 As security for the prompt payment in full of all Obligations, the
Company hereby pledges and grants to CIT a continuing general lien upon, and
security interest in, all of its:
(a) Accounts;
(b) Inventory;
(c) General Intangibles;
(d) Documents of Title;
(e) Other Collateral;
(f) Equipment; and
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(g) Real Estate.
6.2 The security interests granted hereunder shall extend and attach
to:
(a) All Collateral which is owned by the Company or in which
the Company has any interest, whether held by the Company or others for its
account, and, if any Collateral is Equipment, whether the Company's interest in
such Equipment is as owner, finance lessee or conditional vendee;
(b) All Equipment, whether the same constitutes personal
property or fixtures, including, but without limiting the generality of the
foregoing, all dies, jigs, tools, benches, molds, tables, accretions, component
parts thereof and additions thereto, as well as all accessories, motors, engines
and auxiliary parts used in connection with, or attached to, the Equipment; and
(c) All Inventory and any portion thereof which may be
returned, rejected, reclaimed or repossessed by either CIT or the Company from
the Company's customers, as well as to all supplies, goods, incidentals,
packaging materials, labels and any other items which contribute to the finished
goods or products manufactured or processed by the Company, or to the sale,
promotion or shipment thereof.
6.3 The Company agrees to safeguard, protect and hold all Inventory for
CIT's account and make no disposition thereof except in the ordinary course of
its business of the Company, as herein provided. The Company represents and
warrants that Inventory will be sold and shipped by the Company to its customers
only in the ordinary course of the Company's business, and then only on open
account and on terms currently being extended by the Company to its customers,
provided that, absent the prior written consent of CIT, the Company shall not
sell Inventory on a consignment basis nor retain any lien or security interest
in any sold Inventory. Upon the sale, exchange, or other disposition of
Inventory, as herein provided, the security interest in the Inventory provided
for herein shall, without break in continuity and without further formality or
act, continue in, and attach to, all proceeds, including any instruments for the
payment of money, Trade Accounts Receivable, documents of title, shipping
documents, chattel paper and all other cash and non-cash proceeds of such sale,
exchange or disposition. As to any such sale, exchange or other disposition, CIT
shall have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation. The Company hereby agrees to immediately
forward any and all proceeds of Collateral to the Depository Account, and to
hold any such proceeds (including any notes and instruments), in trust for CIT
pending delivery to CIT. Irrespective of CIT's perfection status in any and all
of the General Intangibles, including, without limitations, any Patents,
Trademarks, Copyrights or licenses with respect thereto, the Company hereby
irrevocably grants CIT, subject to the rights of or restrictions imposed by any
third party licensees or licensors, a royalty free license to sell, or otherwise
dispose or transfer, in accordance with Paragraph 10.3 of Section 10 of this
Financing Agreement, and the applicable terms hereof, of any of the Inventory
upon the occurrence of an Event of Default which has not been waived in writing
by CIT.
6.4 The Company agrees at its own cost and expense to keep the
Equipment in as good and substantial repair and condition as the same is now or
at the time the lien and security interest
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granted herein shall attach thereto, reasonable wear and tear excepted, making
any and all repairs and replacements when and where necessary. The Company also
agrees to safeguard, protect and hold all Equipment in accordance with the terms
hereof and subject to CIT's security interest. Absent CIT's prior written
consent, any sale, exchange or other disposition of any Equipment shall be made
by the Company in the ordinary course of business and as set forth herein. The
Company may, in the ordinary course of its business, sell, exchange or otherwise
dispose of obsolete or surplus Equipment provided, however, that: (a) the then
value of the Equipment so disposed of in any Fiscal Year does not exceed
$250,000 in the aggregate; and (b) the proceeds of any such sales or
dispositions shall be held in trust by the Company for CIT and shall be
immediately delivered to CIT by deposit to the Depository Account, except that
the Company may retain and use such proceeds to purchase forthwith replacement
Equipment which the Company determines in its reasonable business judgment to
have a collateral value at least equal to the Equipment so disposed of or sold;
provided, however, that the aforesaid right shall automatically cease upon the
occurrence of a Default or an Event of Default which is not waived in writing by
CIT. Upon the sale, exchange, or other disposition of the Equipment, as herein
provided, the security interest provided for herein shall, without break in
continuity and without further formality or act, continue in, and attach to, all
proceeds, including any instruments for the payment of money, Accounts,
documents of title, shipping documents, chattel paper and all other cash and
non-cash proceeds of such sales, exchange or disposition. As to any such sale,
exchange or other disposition, CIT shall have all of the rights of an unpaid
seller, including stoppage in transit, replevin, rescission and reclamation.
6.5 The rights and security interests granted to CIT hereunder are to
continue in full force and effect, notwithstanding the termination of this
Financing Agreement or the fact that the Revolving Loan Account may from time to
time be temporarily in a credit position, until the final payment in full to CIT
of all Obligations and the termination of this Financing Agreement. Any delay,
or omission by CIT to exercise any right hereunder shall not be deemed a waiver
thereof, or be deemed a waiver of any other right, unless such waiver shall be
in writing and signed by CIT. A waiver on any one occasion shall not be
construed as a bar to, or waiver of, any right or remedy on any future occasion.
6.6 Notwithstanding CIT's security interest in the Collateral and to
the extent that the Obligations are now or hereafter secured by any assets or
property other than the Collateral or by the guarantee, endorsement, assets or
property of any other person, CIT shall have the right in its sole discretion to
determine which rights, liens, security interests or remedies CIT shall at any
time pursue, foreclose upon, relinquish, subordinate, modify or take any other
action with respect to, without in any way modifying or affecting any of them,
or any of CIT's rights hereunder.
6.7 Any balances to the credit of the Company and any other property or
assets of the Company in the possession or control of CIT may be held by CIT as
security for any Obligations and applied in whole or partial satisfaction of
such Obligations when due. The liens and security interests granted herein, and
any other lien or security interest CIT may have in any other assets of the
Company, shall secure payment and performance of all now existing and future
Obligations. CIT may in its discretion charge any or all of the Obligations to
the Revolving Loan Account when due.
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6.8 The Company possesses all General Intangibles and rights thereto
necessary to conduct its business as conducted as of the Closing Date and the
Company shall use commercially reasonable efforts to maintain its rights in, and
the value of, the foregoing in the ordinary course of its business, including,
without limitation, by making timely payment with respect to any applicable
licensed rights. The Company shall deliver to CIT, and/or shall cause the
appropriate party to deliver to CIT, from time to time such pledge or security
agreements with respect to General Intangibles (now or hereafter acquired) of
the Company as CIT shall reasonably require to obtain valid first liens thereon.
In furtherance of the foregoing, the Company shall provide timely notice to CIT
of any additional Patents, Trademarks, tradenames, service marks, Copyrights,
brand names, trade names, logos and other trade designations acquired or applied
for subsequent to the Closing Date and the Company shall execute such
documentation as CIT may reasonably require to obtain and perfect its lien
thereon. The Company hereby confirms that it shall deliver, or cause to be
delivered, any pledged stock issued subsequent to the Closing Date to CIT in
accordance with the applicable terms of the Pledge Agreement and prior to such
delivery, shall hold any such stock in trust for CIT. Subject to the rights of
and any restrictions imposed by third party licensees or licensors, the Company
hereby irrevocably grants to CIT a royalty-free, non-exclusive license in the
General Intangibles, including tradenames, Trademarks, Copyrights, Patents,
licenses, and any other proprietary and intellectual property rights and any and
all right, title and interest in any of the foregoing, for the sole purpose,
upon the occurrence of an Event of Default, of the right to: (i) advertise for
sale and sell or transfer any Inventory bearing any of the General Intangibles,
and (ii) make, assemble, prepare for sale or complete, or cause others to do so,
any applicable raw materials or Inventory bearing any of the General
Intangibles, including use of the Equipment and Real Estate for the purpose of
completing the manufacture of unfinished goods, raw materials or work-in-process
comprising Inventory, and apply the proceeds thereof to the Obligations
hereunder, all as further set forth in this Financing Agreement and irrespective
of CIT's lien and perfection in any General Intangibles.
6.9 This Financing Agreement and the obligation of the Company to
perform all of its covenants and Obligations hereunder are further secured by
mortgage(s), deed(s) of trust or assignment(s) on the Real Estate.
6.10 The Company shall give to CIT from time to time such mortgage(s),
deed(s) of trust or assignment(s) on the Real Estate as CIT shall require to
obtain a valid first lien thereon subject only to those exceptions of title as
set forth in future title insurance policies that are satisfactory to CIT.
Notwithstanding the foregoing, provided no Event of Default has occurred and is
continuing, CIT agrees to release its deed of trust upon the real estate located
at ▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ upon payment in full of the Term Loan and
the Bridge Loan and upon such release, real estate shall be deemed deleted from
the definition of Collateral hereunder.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 The Company hereby warrants, represents and covenants that: (a) the
fair value of the Total Assets exceeds the book value of the Total Liabilities;
(b) the Company is generally able to pay its debts as they become due and
payable; and (c) the Company does not have unreasonably small capital to carry
on its business as it is currently conducted absent extraordinary and unforeseen
circumstances. The Company further warrants and represents that: (i) Schedule 1
hereto correctly
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and completely sets forth the Company's (A) chief executive office, (B)
Collateral locations, (C) tradenames , and (D) all the other information listed
on said Schedule; (ii) except for the Permitted Encumbrances, after filing of
financing statements in the applicable filing clerks office at the locations set
forth in Schedule 1, this Financing Agreement creates a valid, perfected and
first priority security interest in the Collateral and the security interests
granted herein constitute and shall at all times constitute the first and only
liens on the Collateral; (iii) except for the Permitted Encumbrances, the
Company is, or will be, at the time additional Collateral is acquired by it, the
absolute owner of the Collateral with full right to pledge, sell, consign,
transfer and create a security interest therein, free and clear of any and all
claims or liens in favor of others; (iv) the Company will, at its expense,
forever warrant and, at CIT's request, defend the same from any and all claims
and demands of any other person other than a holder of a Permitted Encumbrance;
(v) the Company will not grant, create or permit to exist, any lien upon, or
security interest in, the Collateral, or any proceeds thereof, in favor of any
other person other than the holders of the Permitted Encumbrances; and that the
Equipment does not comprise a part of the Inventory of the Company; and (vi) the
Equipment is and will only be used by the Company in its business and will not
be held for sale or lease, or removed from its premises, or otherwise disposed
of by the Company except as otherwise permitted in this Financing Agreement.
7.2 The Company agrees to maintain books and records pertaining to the
Collateral in accordance with GAAP and in such additional detail, form and scope
as CIT shall reasonably require. The Company agrees that CIT or its agents may
enter upon the Company's premises at any time during normal business hours, and
from time to time in its reasonable business judgement, for the purpose of
inspecting the Collateral and any and all records pertaining thereto. The
Company agrees to afford CIT thirty (30) days prior written notice of any change
in the location of any Collateral, other than (i) to locations, that as of the
Closing Date, are known to CIT and at which CIT has filed financing statements
and otherwise fully perfected its liens thereon, (ii) temporary transfers of
Inventory to trade shows or (iii) transfers of Inventory to sales offices not to
exceed $50,000 per office. The Company is also to advise CIT promptly, in
sufficient detail, of any material adverse change relating to the type, quantity
or quality of the Collateral or on the security interests granted to CIT
therein.
7.3 The Company agrees to: (a) execute and deliver to CIT, from time to
time, solely for CIT's convenience in maintaining a record of the Collateral,
such written statements, and schedules as CIT may reasonably require,
designating, identifying or describing the Collateral; and (b) provide CIT, on
request but not more often than semi-annually, with an appraisal of the
Inventory which appraisal shall be at the Company's expense and otherwise
acceptable to CIT. The Company's failure, however, to promptly give CIT such
statements, or schedules shall not affect, diminish, modify or otherwise limit
CIT's security interests in the Collateral.
7.4 The Company agrees to comply with the requirements of all state and
federal laws in order to grant to CIT valid and perfected first security
interests in the Collateral, subject only to the Permitted Encumbrances. CIT is
hereby authorized by the Company to file (including pursuant to the applicable
terms of the UCC) from time to time any financing statements, continuations or
amendments covering the Collateral whether or not the Company's signature
appears thereon. The Company hereby consents to and ratifies any and all
execution and/or filing of financing statements
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on or prior to the Closing Date by CIT. The Company agrees to do whatever CIT
may reasonably request, from time to time, by way of: (a) filing notices of
liens, financing statements, amendments, renewals and continuations thereof; (b)
cooperating with CIT's agents and employees; (c) keeping Collateral records; (d)
transferring proceeds of Collateral to CIT's possession; and (e) performing such
further acts as CIT may reasonably require in order to effect the purposes of
this Financing Agreement.
7.5 (a) The Company agrees to maintain insurance on the Real Estate,
Equipment and Inventory under such policies of insurance, with such insurance
companies, in such reasonable amounts and covering such insurable risks as are
at all times reasonably satisfactory to CIT. All policies covering the Real
Estate, Equipment and Inventory are, subject to the rights of any holders of
Permitted Encumbrances holding claims senior to CIT, to be made payable to CIT,
in case of loss, under a standard non-contributory "mortgagee", "lender" or
"secured party" clause and are to contain such other provisions as CIT may
require to fully protect CIT's interest in the Real Estate, Inventory and
Equipment and to any payments to be made under such policies. All original
policies or true copies thereof are to be delivered to CIT, premium prepaid,
with the loss payable endorsement in CIT's favor, and shall provide for not less
than thirty (30) days prior written notice to CIT of the exercise of any right
of cancellation. At the Company's request, or if the Company fails to maintain
such insurance, CIT may arrange for such insurance, but at the Company's expense
and without any responsibility on CIT's part for: (i) obtaining the insurance;
(ii) the solvency of the insurance companies; (iii) the adequacy of the
coverage; or (iv) the collection of claims. Upon the occurrence of an Event of
Default which is not waived in writing by CIT, CIT shall, subject to the rights
of any holders of Permitted Encumbrances holding claims senior to CIT, have the
sole right, in the name of CIT or the Company, to file claims under any
insurance policies, to receive, receipt and give acquittance for any payments
that may be payable thereunder, and to execute any and all endorsements,
receipts, releases, assignments, reassignments or other documents that may be
necessary to effect the collection, compromise or settlement of any claims under
any such insurance policies, provided however that CIT shall not, without the
Company's prior written consent, settle any such claim if such settlement would
result in any liability to the Company.
(b) (i) In the event of any loss or damage by fire or other
casualty, insurance proceeds relating to Inventory shall first reduce the
Company's Revolving Loan, second to the Bridge Loan and then to the Term Loan.
Upon the occurrence of a Default or Event of default, CIT may apply Insurance
Proceeds to the Obligations in such manner as it may deem advisable in its sole
discretion;
(ii) In the event any part of the Company's Real Estate or
Equipment is damaged by fire or other casualty and the Insurance Proceeds for
such damage or other casualty is less than or equal to $100,000.00, CIT shall
promptly apply such Proceeds to reduce the Company's outstanding balance in the
Revolving Loan Account. Upon the occurrence of a Default or Event of Default,
CIT may apply Insurance Proceeds to the Obligations in such manner as it may
deem advisable in its sole discretion;
(iii) Absent the occurrence of an Event of Default, and
provided that (x) the Company has sufficient business interruption insurance to
replace the lost profits of any of the
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Company's facilities, and (y) the Insurance Proceeds are in excess of
$100,000.00, the Company may elect (by delivering written notice to CIT) to use
any such Insurance Proceeds to replace, repair or restore such Real Estate or
Equipment damaged by fire or casualty to substantially the equivalent condition
prior to such fire or other casualty as set forth herein. If the Company does
not, or cannot, elect to use the Insurance Proceeds as set forth above, CIT may,
subject to the rights of any holders of Permitted Encumbrances holding claims
senior to CIT, apply the Insurance Proceeds to the payment of the Obligations in
such manner and in such order as CIT may reasonably elect; and
(iv) If the Company elects to use the Insurance Proceeds for
the repair, replacement or restoration of any Real Estate and/or Equipment, and
there is then no Event of Default, (x) Insurance Proceeds for any loss in excess
of $100,000.00 on Equipment and/or Real Estate will be applied to the reduction
of the Revolving Loans and (y) CIT may set up an Availability Reserve in an
amount equal to said Insurance Proceeds. The Availability Reserve will be
reduced dollar-for-dollar upon receipt of non-cancelable executed purchase
orders, delivery receipts or contracts for the replacement, repair or
restoration of Equipment and/or the Real Estate and disbursements in connection
therewith. Prior to the commencement of any material restoration, repair or
replacement of Real Estate, the Company shall provide CIT with a restoration
plan and a total budget certified by an independent third party experienced in
construction costing. If there are insufficient Insurance Proceeds to cover the
cost of restoration as so determined, the Company shall be responsible for the
amount of any such insufficiency, prior to the commencement of restoration and
shall demonstrate evidence of such before the reserve will be reduced.
Completion of restoration shall be evidenced by a final, unqualified
certification of the design architect employed, if any; an unconditional
Certificate of Occupancy, if applicable; such other certification as may be
required by law; or if none of the above is applicable, a written good faith
determination of completion by the Company (herein collectively the
"Completion"). Upon Completion, any remaining reserve as established hereunder
will be automatically released.
(c) In the event the Company fails to provide CIT with timely evidence,
reasonably acceptable to CIT, of its maintenance of insurance coverage required
pursuant to paragraph 7.5(a) above, CIT may purchase, at the Company's expense,
commercially reasonable insurance to protect CIT's interests in the Collateral.
The insurance acquired by CIT may, but need not, protect the Company's interest
in the Collateral, and therefore such insurance may not pay claims which the
Company may have with respect to the Collateral or pay any claim which may be
made against the Company in connection with the Collateral. In the event CIT
purchases, obtains or acquires insurance covering all or any portion of the
Collateral, the Company shall be responsible for all of the applicable costs of
such insurance, including premiums, interest (at the applicable Chase Bank Rate
for Revolving Loans set forth in paragraph 8.1 of Section 8 hereof), fees and
any other charges with respect thereto, until the effective date of the
cancellation or the expiration of such insurance. CIT may charge all of such
premiums, fees, costs, interest and other charges to the Company's Revolving
Loan Account. The Company hereby acknowledges that the costs of the premiums of
any such insurance acquired by CIT may exceed the costs of insurance which the
Company may be able to purchase on its own. In the event that CIT purchases such
insurance, CIT will notify the Company of said purchase within thirty (30) days
of the date of such purchase. If, within thirty (30) days of the date of such
notice, the Company provides CIT with proof that the Company had the insurance
coverage required pursuant to 7.5(a) above (in form and substance satisfactory
to CIT) as of the date on which CIT purchased
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insurance and the Company continued at all times to have such insurance, then
CIT agrees to cancel the insurance purchased by CIT and credit the Company's
Revolving Loan Account with the amount of all costs, interest and other charges
associated with any insurance purchased by CIT, including with any amounts
previously charged to the Revolving Loan Account.
7.6 The Company agrees to pay, when due, all Taxes, including sales
taxes, assessments, claims and other charges lawfully levied or assessed upon
the Company or the Collateral unless such Taxes are being diligently contested
in good faith by the Company by appropriate proceedings and adequate reserves
are established in accordance with GAAP. Notwithstanding the foregoing, if any
lien shall be filed or claimed thereunder (a) for Taxes due the United States of
America, or (b) which in CIT's opinion might create a valid obligation having
priority over the rights granted to CIT herein (exclusive of Real Estate), such
lien shall not be deemed to be a Permitted Encumbrance hereunder and the Company
shall immediately pay such tax and remove the lien of record. If the Company
fails to do so promptly, then at CIT's election, CIT may (i) create an
Availability Reserve in such amount as it may deem appropriate in its business
judgement, or (ii) upon the occurrence of a Default or Event of Default,
imminent risk of seizure, filing of any priority lien, forfeiture, or sale of
the Collateral, pay Taxes on the Company's behalf, and the amount thereof shall
be an Obligation secured hereby and due on demand.
7.7 The Company: (a) agrees to comply with all acts, rules, regulations
and orders of any legislative, administrative or judicial body or official,
which the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the business or operations of
the Company, provided that the Company may contest any acts, rules, regulations,
orders and directions of such bodies or officials in any reasonable manner which
will not, in CIT's reasonable opinion, materially and adversely effect CIT's
rights or priority in the Collateral; (b) agrees to comply with all
environmental statutes, acts, rules, regulations or orders as presently existing
or as adopted or amended in the future, applicable to the Collateral, the
ownership and/or use of its real property and operation of its business, which
the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the operation of the business of
the Company; and (c) shall not be deemed to have breached any provision of this
Paragraph 7.7 if (i) the failure to comply with the requirements of this
Paragraph 7.7 resulted from good faith error or innocent omission, (ii) the
Company promptly commences and diligently pursues a cure of such breach, and
(iii) such failure is cured within (30) days following the Company's receipt of
notice of such failure, or if such cannot in good faith be cured within thirty
(30) days, then such breach is cured within a reasonable time frame based upon
the extent and nature of the breach and the necessary remediation, and in
conformity with any applicable consent order, consensual agreement and
applicable law.
7.8 Until termination of this Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Company agrees that, unless
CIT shall have otherwise consented in writing, the Company will furnish to CIT:
(a) within ninety (90) days after the end of each Fiscal Year of the Company, an
audited Consolidated Balance Sheet, with a Consolidating Balance Sheet attached
thereto, as at the close of such year, and statements of profit and loss, cash
flow and reconciliation of surplus of the Company and its consolidated
subsidiaries for such year, audited by independent public accountants selected
by the Company and satisfactory to CIT; (b) within sixty
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(60) days after the end of each Fiscal Quarter a Consolidated Balance Sheet and
Consolidating Balance Sheet as at the end of such period and statements of
profit and loss, cash flow and surplus of the Company and its consolidated
subsidiaries, certified by an authorized financial or accounting officer of the
Company; (c) within thirty (30) days after the end of each month a Consolidated
Balance Sheet as at the end of such period and statements of profit and loss,
cash flow and surplus of the Company and all subsidiaries for such period,
certified by an authorized financial or accounting officer of the Company; and
(d) from time to time, such further information regarding the business affairs
and financial condition of the Company and its consolidated subsidiaries as CIT
may reasonably request, including, without limitation (i) the accountant's
management practice letter and (ii) annual cash flow projections in form
satisfactory to CIT. Each financial statement which the Company is required to
submit hereunder must be accompanied by an officer's certificate, signed by the
President, Vice President, Controller, or Treasurer, pursuant to which any one
such officer must certify that: (x) the financial statement(s) fairly and
accurately represent(s) the Company's financial condition at the end of the
particular accounting period, as well as the Company's operating results during
such accounting period, subject to year-end audit adjustments; and (y) during
the particular accounting period: (A) there has been no Default or Event of
Default under this Financing Agreement, provided, however, that if any such
officer has knowledge that any such Default or Event of Default, has occurred
during such period, the existence of and a detailed description of same shall be
set forth in such officer's certificate; (B) the Company has not received any
notice of cancellation with respect to its property insurance policies; (C) the
Company has not received any notice that could reasonably be expected to result
in a material adverse effect on the value of the Collateral taken as a whole;
and (D) the exhibits attached to such financial statement(s) constitute detailed
calculations showing compliance with all financial covenants contained in this
Financing Agreement.
7.9 Until termination of the Financing Agreement and payment and
satisfaction of all Obligations hereunder, the Company agrees that, without the
prior written consent of CIT, except as otherwise herein provided, the Company
will not:
(a) Mortgage, assign, pledge, transfer or otherwise permit any
lien, charge, security interest, encumbrance or judgment, (whether as a result
of a purchase money or title retention transaction, or other security interest,
or otherwise) to exist on any of the Company's Collateral or any other assets,
whether now owned or hereafter acquired, except for the Permitted Encumbrances;
(b) Incur or create any Indebtedness other than the Permitted
Indebtedness;
(c) Sell, lease, assign, transfer or otherwise dispose of (i)
Collateral, except as otherwise permitted by this Financing Agreement, or (ii)
either all or substantially all of the Company's assets, which do not constitute
Collateral;
(d) Merge, consolidate or otherwise alter or modify its corporate
name, principal place of business, structure, or existence, re-incorporate or
re-organize, or enter into or engage in any operation or activity materially
different from that presently being conducted by the Company, except that the
Company may change its corporate name or address; provided that: (i) the Company
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shall give CIT thirty (30) days prior written notice thereof and (ii) the
Company shall execute and deliver, prior to or simultaneously with any such
action, any and all documents and agreements requested by CIT to confirm the
continuation and preservation of all security interests and liens granted to CIT
hereunder;
(e) Assume, guarantee, endorse, or otherwise become liable upon
the obligations of any person, firm, entity or corporation, except by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, except that the Company may
guarantee the performance of a mortgage of a single purpose entity in connection
with a permanent long term financing of its Real Estate;
(f) Declare or pay any dividend or distributions of any kind on,
or purchase, acquire, redeem or retire, any of the capital stock or equity
interest, of any class whatsoever, whether now or hereafter outstanding, except
that the Company may transfer to its subsidiaries up to $250,000 of product per
month in the aggregate (including any markup over product cost) provided, there
is then no existing Default or Event of Default, and that after giving effect to
such transfer, there shall not be any Overadvance.
(g) Make any advance or loan to, or any investment in, any firm,
entity, person or corporation or purchase or acquire all or substantially all of
the stock or assets of any entity, person or corporation, excepting loans to
employees which do not exceed $100,000 individually or $250,000 in the aggregate
for all such transactions;
(h) Pay any management, consulting or other similar fees to any
person, corporation or other entity affiliated with the Company, OR
7.10 Until termination of the Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, the Company shall:
(a) have at the end of each quarter on a cumulative trailing basis for
the period referenced below from August 1, 2000, minimum EBITDA of not less than
the following:
Period Amount
------ ------
Six months ending January 31, 2001 $(3,700,000)
Nine months ending April 30, 2001 $(3,700,000)
Twelve months ending July 31, 2001 $(2,500,000)
and each quarter thereafter on a
cumulative trailing twelve month basis
The minimum EBITDA requirements set forth in this Section 7.10(a) shall
be reset by CIT in CIT's reasonable business judgment upon CIT's receipt of the
Company's quarterly financial
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projections for the Fiscal Year ending July 31, 2002 and subsequently upon CIT's
receipt of the Company's quarterly financial projections for the Fiscal Year
ending July 31, 2003.
(b) Without the prior written consent of CIT, the Company will not:
(i) enter into any Operating Lease if after giving effect thereto the
aggregate obligations with respect to Operating Leases of the Company
during any Fiscal Year would exceed $250,000.00;
(ii) contract for, purchase, make expenditures for, lease pursuant to a
Capital Lease or otherwise incur obligations with respect to Capital
Expenditures (whether subject to a security interest or otherwise) in
the aggregate amount in excess of $1,000,000.00 per Fiscal Year.
7.11 The Company agrees to advise CIT in writing of: (a) all
expenditures (actual or anticipated) in excess of $150,000.00 from the budgeted
amount therefor in any Fiscal Year for (i) environmental clean-up, (ii)
environmental compliance or (iii) environmental testing and the impact of said
expenses on the Company's Working Capital; and (b) any notices the Company
receives from any local, state or federal authority advising the Company of any
environmental liability (real or potential) stemming from the Company's
operations, its premises, its waste disposal practices, or waste disposal sites
used by the Company and to provide CIT with copies of all such notices if so
required.
7.12 The Company hereby agrees to indemnify and hold harmless CIT and
its officers, directors, employees, attorneys and agents (each an "Indemnified
Party") from, and holds each of them harmless against, any and all actual
losses, liabilities, obligations, claims, actions, damages, costs and expenses
(including attorney's fees) and any payments made by CIT pursuant to any
indemnity provided by CIT with respect to or to which any Indemnified Party
could be subject insofar as such losses, liabilities, obligations, claims,
actions, damages, costs, fees or expenses with respect to the Loan Documents,
including without limitation those which may arise from or relate to: (a) the
Depository Account, the Blocked Accounts, the lockbox and/or any other
depository account and/or the agreements executed in connection therewith; and
(b) any and all claims or expenses asserted against CIT as a result of any
environmental pollution, hazardous material or environmental clean-up relating
to the Real Estate; or any claim or expense which results from the Company's
operations (including, but not limited to, the Company's off-site disposal
practices) and use of the Real Estate, which CIT may sustain or incur (other
than solely as a result of the physical actions of CIT on the Company's premises
which are determined to constitute gross negligence or willful misconduct by a
court of competent jurisdiction), all whether through the alleged or actual
negligence of such person or otherwise, except and to the extent that the same
results from the gross negligence or willful misconduct of such Indemnified
Party as finally determined by a court of competent jurisdiction. The Company
hereby agrees that this indemnity shall survive termination of this Financing
Agreement, as well as payments of Obligations which may be due hereunder. CIT
may, in its reasonable business judgement, establish such Availability Reserves
with respect thereto as it may deem advisable under the circumstances and, upon
any termination hereof, hold such reserves as cash reserves for any such
contingent liabilities.
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7.13 Without the prior written consent of CIT, the Company agrees that
it will not enter into any transaction, including, without limitation, any
purchase, sale, lease, loan or exchange of property with the Parent or any
subsidiary or affiliate of either the Company or Parent, provided that, except
as otherwise set forth in this Financing Agreement, the Company may enter into
sale and service transactions in the ordinary course of its business and
pursuant to the reasonable requirements of the Company, and upon standard terms
and conditions and fair and reasonable terms, no less favorable to the Company
than the Company could obtain in a comparable arms length transaction with an
unrelated third party, provided further that no Default or Event of Default
exists or will occur hereunder prior to and after giving effect to any such
transaction.
SECTION 8. INTEREST, FEES AND EXPENSES
8.1 (a) Interest on the Revolving Loans, whether bearing interest based
on the Chase Bank Rate or LIBOR, shall be payable monthly as of the end of each
month. Chase Bank Rate Loans shall be an amount equal to the Chase Bank Rate
plus one quarter of one percent (.25%) per annum on the average of the net
balances owing by the Company to CIT in the Revolving Loan Account at the close
of each day during such month. In the event of any change in said Chase Bank
Rate, the rate hereunder for Chase Bank Rate Loans shall change, as of the date
of such change, so as to remain one quarter of one percent (.25%) above the
Chase Bank Rate. The rate hereunder for Chase Bank Rate Loans shall be
calculated based on a 360-day year. CIT shall be entitled to charge the
Company's Revolving Loan Account at the rate provided for herein when due until
all Obligations have been paid in full.
(b) Notwithstanding any provision to the contrary contained in this
section 8, in the event that the sum of the outstanding Revolving Loans exceed
the lesser of either (x) the maximum aggregate amount available under Sections 3
and 5 of this Financing Agreement or (y) the Revolving Line of Credit: (A) as a
result of Revolving Loans advanced by CIT at the request of the Company (herein
"Requested Overadvances"), for any one (1) or more days in any month, or (B) for
any other reason whatsoever (herein "Other Overadvances") and such Other
Overadvances continue for five (5) or more days in any month , the average net
balance of all Revolving Loans for such month shall bear interest at the
Overadvance Rate.
(c) Upon and after the occurrence of an Event of Default and the giving
of any required notice by CIT in accordance with the provisions of Section 10,
Paragraph 10.2 hereof, all Obligations shall bear interest at the Default Rate
of Interest.
8.2 Interest on the Term Loan shall be payable monthly as of the end of
each month on the unpaid balance or on payment in full prior to maturity. Chase
Bank Rate Loans shall be in an amount equal to the Chase Bank Rate plus one half
of one percent (.50%) per annum. In the event of any change in said Chase Bank
Rate the rate hereunder for any such Chase Bank Rate Loans shall change, as of
the date of such change, so as to remain one half of one percent (.50%) above
the Chase Bank Rate. The rate hereunder shall be calculated based on a 360 day
year. CIT shall be entitled to charge the Revolving Loan Account at the rate
provided for herein when due until all Obligations have been paid in full.
Notwithstanding the foregoing, if the Term Loan is not repaid in full by April
1, 2001, the rate of interest set forth in this Section 8.2 shall increase by
one-half of
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one percentage point (.50%) beginning April 1, 2001 and on each six month
anniversary thereafter until the Term Loan is repaid in full.
8.3 Interest on the Bridge Loan shall be payable monthly as of the end
of each month on the unpaid balance or on payment in full prior to maturity.
Chase Bank Rate Loans shall be in an amount equal to the Chase Bank Rate plus
one half of one percent (.50%) per annum. In the event of any change in said
Chase Bank Rate the rate hereunder for any such Chase Bank Rate Loans shall
change, as of the date of such change, so as to remain one half of one percent
(.50%) above the Chase Bank Rate. The rate hereunder shall be calculated based
on a 360 day year. CIT shall be entitled to charge the Revolving Loan Account at
the rate provided for herein when due until all Obligations have been paid in
full. Notwithstanding the foregoing, if the Bridge Loan is not repaid in full by
the Bridge Loan Termination Date, the rate of interest set forth in this Section
8.3 shall increase by one-half of one percentage point (.50%) beginning on such
date and on each six month anniversary thereafter until the Bridge Loan is
repaid in full.
8.4 The Company shall pay to CIT a Revolving Line of Credit fee in the
amount of $50,000. Additionally, the Company shall pay a Term Loan Facility Fee
in the amount of $80,000. Both the Revolving Line of Credit Fee and the Term
Loan Facility Fee shall be payable upon the execution of this Financing
Agreement. CIT acknowledges prior receipt of a prior deposit in the amount of
$55,000, and that any amounts remaining from such deposit after application to
the Expenses as described in the Commitment Letter dated August 31, 2000 from
CIT to the Company shall be applied to the Revolving Line of Credit Fee. If the
Term Loan is repaid in full prior to the end of December 2000, CIT will refund
$30,000 of the Term Loan Facility Fee; and if the Term Loan is repaid in full
prior to April 1, 2001, CIT will refund $20,000 of the Term Loan Facility Fee,
so long as no Event of Default has occurred and is continuing. The Company shall
pay the Bridge Facility Fee in accordance with the terms of Section 5.3.
8.5 The Company shall reimburse or pay CIT, as the case may be, for: (a)
all Out-of-Pocket Expenses and (b) any applicable Documentation Fee.
8.6 Upon the last Business Day of each month, commencing on October 31,
2000, the Company shall pay to CIT (i) the Line of Credit Fee, and (ii) interest
on the Collection Days. Interest will be computed at the rate, and in the
manner, set forth in Paragraph 8.1 of this Financing Agreement.
8.7 Intentionally Deleted.
8.8 On the Closing Date and each anniversary of the Closing Date
thereafter, the Company shall pay to CIT the Administrative Management Fee,
which shall be deemed fully earned when paid.
8.9 The Company shall pay CIT's standard charges and fees for CIT's
personnel used by CIT for reviewing the books and records of the Company
(currently $250 per person per day not to increase in excess of 10% in any 12
month period provided that during the continuance of an Event of Default, CIT
may charge its then prevailing rate) and for verifying, testing, protecting,
safeguarding, preserving or disposing of all or any part of the Collateral
(which fees shall be in addition to the Administrative Management Fee and any
Out-of-Pocket Expenses).
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8.10 The Company hereby authorizes CIT to charge the Revolving Loan
Account with the amount of all payments due hereunder as such payments become
due. The Company confirms that any charges which CIT may so make to the
Revolving Loan Account as herein provided will be made as an accommodation to
the Company and solely at CIT's discretion.
8.11 In the event that CIT or any participant hereunder (or any
financial institution which may from time to time become a participant or lender
hereunder) shall have determined in the exercise of its reasonable business
judgement that, subsequent to the Closing Date, any change in applicable law,
rule, regulation or guideline regarding capital adequacy, or any change in the
interpretation or administration thereof, or compliance by CIT or such
participant with any new request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on CIT's or such participant's capital as a consequence of its obligations
hereunder to a level below that which CIT or such participant could have
achieved but for such adoption, change or compliance (taking into consideration
CIT or such participant's policies with respect to capital adequacy) by an
amount reasonably deemed by CIT or such participant to be material, then, from
time to time, the Company shall pay no later than five (5) days following demand
to CIT or such participant such additional amount or amounts as will compensate
CIT's or such participant's for such reduction. In determining such amount or
amounts, CIT or such participant may use any reasonable averaging or attribution
methods. The protection of this Paragraph 8.11 shall be available to CIT or such
participant regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or condition. A
certificate of CIT or such participant setting forth such amount or amounts as
shall be necessary to compensate CIT or such participant with respect to this
Section 8 and the calculation thereof when delivered to the Company shall be
conclusive on the Company absent manifest error. Notwithstanding anything in
this paragraph to the contrary, in the event CIT or such participant has
exercised its rights pursuant to this paragraph, and subsequent thereto
determines that the additional amounts paid by the Company in whole or in part
exceed the amount which CIT or such participant actually required to be made
whole, the excess, if any, shall be returned to the Company by CIT or such
participant.
8.12 In the event that any applicable law, treaty or governmental
regulation, or any change therein or in the interpretation or application
thereof, or compliance by CIT or such participant with any request or directive
(whether or not having the force of law) from any central bank or other
financial, monetary or other authority, shall:
(a) subject CIT or such participant to any tax of any kind whatsoever
with respect to this Financing Agreement or change the basis of taxation of
payments to CIT or such participant of principal, fees, interest or any other
amount payable hereunder or under any other documents (except for changes in the
rate of tax on the overall net income of CIT or such participant by the federal
government or the jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by CIT or such
participant by reason of or in respect to this Financing Agreement
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and the Loan Documents, including (without limitation) pursuant to Regulation D
of the Board of Governors of the Federal Reserve System; or
(c) impose on CIT or such participant any other condition with respect
to this Financing Agreement or any other document, and the result of any of the
foregoing is to increase the cost to CIT or such participant of making, renewing
or maintaining its loans hereunder by an amount that CIT or such participant
deems to be material in the exercise of its reasonable business judgement or to
reduce the amount of any payment (whether of principal, interest or otherwise)
in respect of any of the loans by an amount that CIT or such participant deems
to be material in the exercise of its reasonable business judgement, then, in
any case the Company shall pay CIT or such participant, within five (5) days
following its demand, such additional cost or such reduction, as the case may
be. CIT or such participant shall certify the amount of such additional cost or
reduced amount to the Company and the calculation thereof and such certification
shall be conclusive upon the Company absent manifest error. Notwithstanding
anything in this paragraph to the contrary, in the event CIT or such participant
has exercised its rights pursuant to this paragraph, and subsequent thereto
determine that the additional amounts paid by the Company in whole or in part
exceed the amount which CIT or such participant actually required pursuant
hereto, the excess, if any, shall be returned to the Company by CIT or such
participant.
8.13 The Company may request LIBOR Loans on the following terms and
conditions:
(a) The Company may elect, subsequent to the Closing Date and
from time to time thereafter (i) to request any Revolving Loan made hereunder to
be a LIBOR Loan as of the date of such loan or (ii) to convert Chase Bank Rate
Loans to LIBOR Loans, and may elect from time to time to convert LIBOR Loans to
Chase Bank Rate Loans by giving CIT at least three (3) Business Days' prior
irrevocable notice of such election, provided that any such conversion of LIBOR
Loans to Chase Bank Rate Loans shall only be made, subject to the second
following sentence, on the last day of an Interest Period with respect thereto.
Should the Company elect to convert Chase Bank Rate Loans to LIBOR Loans, it
shall give CIT at least four Business Days' prior irrevocable notice of such
election. If the last day of an Interest Period with respect to a loan that is
to be converted is not a Business Day or Working Day, then such conversion shall
be made on the next succeeding Business Day or Working Day, as the case may be,
and during the period from such last day of an Interest Period to such
succeeding Business Day, as the case may be, such loan shall bear interest as if
it were an Chase Bank Rate Loan. All or any part of outstanding Chase Bank Rate
Loans then outstanding with respect to Revolving Loans may be converted to LIBOR
Loans as provided herein, provided that partial conversions shall be in
multiples in an aggregate principal amount of $1,000,000 or more and CIT shall
be entitled to charge the Company a $500 fee upon the first effective day of any
such election for a LIBOR Loan.
(b) Any LIBOR Loans may be continued as such upon the expiration
of an Interest Period, provided the Company so notifies CIT, at least three (3)
Business Days' prior to the expiration of said Interest Period, and provided
further that no LIBOR Loan may be continued as such upon the occurrence of any
Default or Event of Default under this Financing Agreement, but shall be
automatically converted to a Chase Bank Rate Loan on the last day of the
Interest Period during which occurred such Default or Event of Default. Absent
such notification, LIBOR Rate
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Loans shall convert to Chase Bank Rate Loans on the last day of the applicable
Interest Period. Each notice of election, conversion or continuation furnished
by the Company pursuant hereto shall specify whether such election, conversion
or continuation is for a one, two, three or six month period. Notwithstanding
anything to the contrary contained herein, CIT (or any participant, if
applicable) shall not be required to purchase United States Dollar deposits in
the London interbank market or from any other applicable LIBOR Rate market or
source or otherwise "match fund" to fund LIBOR Rate Loans, but any and all
provisions hereof relating to LIBOR Rate Loans shall be deemed to apply as if
CIT (and any participant, if applicable) had purchased such deposits to fund any
LIBOR Rate Loans.
(c) The Company may request a LIBOR Loan, convert any Chase Bank
Rate Loan or continue any LIBOR Loan provided there is then no Default or Event
of Default in effect.
8.14 (a) The LIBOR Loans shall bear interest for each Interest Period
with respect thereto on the unpaid principal amount thereof at a rate per annum
equal to the LIBOR determined for each Interest Period in accordance with the
terms hereof plus:
(i) 2.5% with respect to Revolving Loans;
(b) If all or a portion of the outstanding principal amount of the
Obligations shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such outstanding amount, to the extent it is a LIBOR
Loan, shall be converted to a Chase Bank Rate Loan at the end of the last
Interest Period therefor.
(c) The Company may not have more than three (3) LIBOR Loans outstanding
at any given time.
8.15 (a) Interest in respect of the LIBOR Loans shall be calculated on
the basis of a 360 day year and shall be payable as of the end of each month.
(b) CIT shall, at the request of the Company, deliver to the Company a
statement showing the quotations given by The Chase Manhattan Bank and the
computations used in determining any interest rate pursuant to Paragraph 8.14 of
Section 8 hereof.
8.16 As further set forth in paragraph 8.12 above, in the event that CIT
(or any financial institution which may become a participant hereunder) shall
have determined in the exercise of its reasonable business judgement (which
determination shall be conclusive and binding upon the Company) that by reason
of circumstances affecting the interbank LIBOR market, adequate and reasonable
means do not exist for ascertaining LIBOR applicable for any Interest Period
with respect to: (a) a proposed loan that the Company has requested be made as a
LIBOR Loan; (b) a LIBOR Loan that will result from the requested conversion of a
Chase Bank Rate Loan into a LIBOR Loan; or (c) the continuation of LIBOR Loans
beyond the expiration of the then current Interest Period with respect thereto,
CIT shall forthwith give written notice of such determination to the Company at
least one day prior to, as the case may be, the requested borrowing date for
such LIBOR Loan, the conversion date of such Chase Bank Rate Loan or the last
day of such Interest Period. If such notice is given (i) any requested LIBOR
Loan shall be made as a Chase Bank Rate Loan, (ii) any Chase
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Bank Rate Loan that was to have been converted to a LIBOR Loan shall be
continued as a Chase Bank Rate Loan, and (iii) any outstanding LIBOR Loan shall
be converted, on the last day of then current Interest Period with respect
thereto, to a Chase Bank Rate Loan. Until such notice has been withdrawn by CIT,
in the exercise of its reasonable business judgment, no further LIBOR Loan shall
be made nor shall the Company have the right to convert a Chase Bank Rate Loan
to a LIBOR Loan.
8.17 If any payment on a LIBOR Loan becomes due and payable on a day
other than a Business Day or Working Day, the maturity thereof shall be extended
to the next succeeding Business Day or Working Day unless the result of such
extension would be to extend such payment into another calendar month in which
event such payment shall be made on the immediately preceding Business Day or
Working Day.
8.18 Notwithstanding any other provisions herein, if any law,
regulation, treaty or directive or any change therein or in the interpretation
or application thereof, shall make it unlawful for CIT to make or maintain LIBOR
Loans as contemplated herein, the then outstanding LIBOR Loans, if any, shall be
converted automatically to Chase Bank Rate Loans as of the end of such month, or
within such earlier period as required by law. The Company hereby agrees
promptly to pay CIT, upon demand, any additional amounts necessary to compensate
CIT for any costs incurred by CIT in making any conversion in accordance with
this Section 8 including, but not limited to, any interest or fees payable by
CIT to lenders of funds obtained by CIT in order to make or maintain LIBOR Loans
hereunder.
8.19 The Company agrees to indemnify and to hold CIT (including any
participant ) harmless from any actual loss or expense which CIT or such
participant may sustain or incur as a consequence of: (a) Default by the Company
in payment of the principal amount of or interest on any LIBOR Loans, as and
when the same shall be due and payable in accordance with the terms of this
Financing Agreement, including, but not limited to, any such loss or expense
arising from interest or fees payable by CIT or such participant to lenders of
funds obtained by either of them in order to maintain the LIBOR Loans hereunder;
(b) default by the Company in making a borrowing or conversion after the Company
has given a notice in accordance with Paragraph 8.13 of Section 8 hereof; (c)
any prepayment of LIBOR Loans on a day which is not the last day of the Interest
Period applicable thereto, including, without limitation, prepayments arising as
a result of the application of the proceeds of Collateral to the Revolving
Loans; and (d) default by the Company in making any prepayment after the Company
had given notice to CIT thereof. The determination by CIT of the amount of any
such loss or expense, when set forth in a written notice to the Company,
containing CIT's calculations thereof in reasonable detail, shall be conclusive
on the Company in the absence of manifest error. Calculation of all amounts
payable under this paragraph with regard to LIBOR Loans shall be made as though
CIT had actually funded the LIBOR Loans through the purchase of deposits in the
relevant market and currency, as the case may be, bearing interest at the rate
applicable to such LIBOR Loans in an amount equal to the amount of the LIBOR
Loans and having a maturity comparable to the relevant interest period;
provided, however, that CIT may fund each of the LIBOR Loans in any manner CIT
sees fit and the foregoing assumption shall be used only for calculation of
amounts payable under this paragraph. In addition, notwithstanding anything to
the contrary contained herein, CIT shall apply all proceeds of Collateral and
all other amounts received by it from or on behalf of the Company (i) initially
to the Chase Bank Rate Loans and
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(ii) subsequently to LIBOR Loans; provided, however, (x) upon the occurrence of
an Event of Default or (y) in the event the aggregate amount of outstanding
LIBOR Rate Loans exceeds Availability or the applicable maximum levels set forth
therefor, CIT may apply all such amounts received by it to the payment of
Obligations in such manner and in such order as CIT may elect in its reasonable
business judgment. In the event that any such amounts are applied to Revolving
Loans which are LIBOR Loans, such application shall be treated as a prepayment
of such loans and CIT shall be entitled to indemnification hereunder. This
covenant shall survive termination of this Financing Agreement and payment of
the outstanding Obligations.
8.20 Notwithstanding anything to the contrary in this Agreement, in the
event that, by reason of any Regulatory Change (for purposes hereof "Regulatory
Change" shall mean, with respect to CIT, any change after the date of this
Financing Agreement in United States federal, state or foreign law or
regulations (including, without limitation, Regulation D) or the adoption or
making after such date of any interpretation, directive or request applying to a
class of banks including CIT of or under any United States federal, state or
foreign law or regulations (whether or not having the force of law and whether
or not failure to comply therewith would be unlawful), CIT either (a) incurs any
material additional costs based on or measured by the excess above a specified
level of the amount of a category of deposits or other liabilities of such bank
which includes deposits by reference to which the interest rate on LIBOR Loans
is determined as provided in this Financing Agreement or a category of
extensions of credit or other assets of CIT which includes LIBOR Loans; or (b)
becomes subject to any material restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if CIT so elects by notice to the
Company, the obligation of CIT to make or continue, or to convert Chase Bank
Rate Loans into LIBOR Loans hereunder shall be suspended until such Regulatory
Change ceases to be in effect.
8.21 For purposes of this Financing Agreement and Section 8 thereof, any
reference to CIT shall include any financial institution which may become a
participant or co-lender subsequent to the Closing Date.
SECTION 9. POWERS
The Company hereby constitutes CIT, or any person or agent CIT may
designate, as its attorney-in-fact, at the Company's cost and expense, to
exercise all of the following powers, which being coupled with an interest,
shall be irrevocable until all Obligations to CIT have been paid in full:
(a) To receive, take, endorse, sign, assign and deliver, all in the name
of CIT or the Company, any and all checks, notes, drafts, and other documents or
instruments relating to the Collateral;
(b) To receive, open and dispose of all mail addressed to the Company
and to notify postal authorities to change the address for delivery thereof to
such address as CIT may designate;
(c) To request from customers indebted on Accounts at any time, in the
name of CIT information concerning the amounts owing on the Accounts;
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(d) To request from customers indebted on Accounts at any time, in the
name of the Company, in the name of certified public accountant designated by
CIT or in the name of CIT's designee, information concerning the amounts owing
on the Accounts;
(e) To transmit to customers indebted on Accounts notice of CIT's
interest therein and to notify customers indebted on Accounts to make payment
directly to CIT for the Company's account; and
(f) To take or bring, in the name of CIT or the Company, all steps,
actions, suits or proceedings deemed by CIT necessary or desirable to enforce or
effect collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the
powers set forth in (b), (c), (e) and (f) above may only be exercised after the
occurrence of an Event of Default and until such time as such Event of Default
is waived in writing by CIT.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Notwithstanding anything hereinabove to the contrary, CIT may
terminate this Financing Agreement immediately upon the occurrence of any of the
following Events of Default:
(a) cessation of the business of the Company or the calling of a meeting
of the creditors of the Company for purposes of compromising the debts and
obligations of the Company;
(b) the failure of the Company to generally meet its debts as they
mature;
(c) (i) the commencement by the Company of any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceedings under any
federal or state law; (ii) the commencement against the Company, of any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceeding under any federal or state law by creditors of the Company, provided
that such Default shall not be deemed an Event of Default if such proceeding is
controverted within ten (10) days and the proceeding dismissed and vacated
within thirty (30) days of commencement, except in the event that any of the
actions sought in any such proceeding shall occur or the Company shall take
action to authorize or effect any of the actions in any such proceeding; or
(iii) to the extent it may reasonably be expected to result in a material change
in the financial condition of the Company, the commencement (x) by the Company's
subsidiaries, or any one of them, of any bankruptcy, insolvency, arrangement,
reorganization, receivership or similar proceeding under any applicable state
law, or (y) against the Company's subsidiaries, or any one of them, of any
involuntary bankruptcy, insolvency, arrangement, reorganization, receivership or
similar proceeding under applicable law, provided that such Default shall not be
deemed an Event of Default if such proceeding is controverted within fifteen
(15) days and dismissed or vacated within forty-five (45) days of commencement,
except in the event that any of the actions sought in any such proceeding shall
occur or the Company's subsidiaries, or any one of them, shall take action to
authorize or effect any of the actions in any such proceeding;
(d) breach by the Company, in any material respect, of any warranty,
representation or covenant contained herein (other than those referred to in
sub-paragraph [e] below) or in any other
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written agreement between the Company or CIT, provided that such Default by the
Company of any of the warranties, representations or covenants referred in this
clause (d) shall not be deemed to be an Event of Default unless and until such
Default shall remain unremedied to CIT's reasonable satisfaction for a period of
ten (10) days from the date of such breach;
(e) breach by the Company, in any material respect, of any warranty,
representation or covenant of Paragraphs 3.3 (other than the fourth sentence of
Paragraph 3.3) and Paragraph 3.4 of Section 3 hereof; Paragraphs 6.3 and 6.4
(other than the first sentence of Paragraph 6.4) of Section 6 hereof; Paragraphs
7.1, 7.5, 7.6, and 7.8 through 7.14 hereof;
(f) failure of the Company to pay any of the Obligations within five (5)
Business Days of the due date thereof, provided that nothing contained herein
shall prohibit CIT from charging such amounts to the Revolving Loan Account on
the due date thereof;
(g) the Company shall (i) engage in any "prohibited transaction" as
defined in ERISA, (ii) have any "accumulated funding deficiency" as defined in
ERISA, (iii) have any "reportable event" as defined in ERISA, (iv) terminate any
"plan", as defined in ERISA or (v) be engaged in any proceeding in which the
Pension Benefit Guaranty Corporation shall seek appointment, or is appointed, as
trustee or administrator of any "plan", as defined in ERISA, and with respect to
this sub-paragraph (h) such event or condition (x) remains uncured for a period
of thirty (30) days from date of occurrence and (y) could reasonably be
expected, in the opinion of CIT, subject the Company to any tax, penalty or
other liability material to the business, operations or financial condition of
the Company;
(h) without the prior written consent of CIT and, except as permitted in
the Subordination Agreement, the Company shall amend or modify the Subordination
Debt; or
(i) the occurrence of any default or event of default (after giving
effect to any applicable grace or cure periods) under any instrument or
agreement evidencing (x) Subordinated Debt or (y) any other Indebtedness of the
Company having a principal amount in excess of $250,000.
10.2 Upon the occurrence of a Default and/or an Event of Default, at the
option of CIT, all loans, advances and extensions of credit provided for in
Sections 3, 4 and 5 of this Financing Agreement shall be thereafter in CIT's
sole discretion and the obligation of CIT to make Revolving Loans, shall cease
unless such Default is cured to CIT reasonable satisfaction or Event of Default
is waived in writing by CIT, and at the option of CIT upon the occurrence of an
Event of Default: (a) all Obligations shall become immediately due and payable;
(b) CIT may charge the Company the Default Rate of Interest on all then
outstanding or thereafter incurred Obligations in lieu of the interest provided
for in Section 8 of this Financing Agreement, provided that, with respect to
this clause "(b)" CIT has given the Company written notice of the Event of
Default; provided, however, that no notice is required if the Event of Default
is the Event listed in Paragraph 10.1(c) of this Section 10, and (c) CIT may
immediately terminate this Financing Agreement upon notice to the Company;
provided, however, that upon the occurrence of an Event of Default listed in
Paragraph 10.1(c) of this Section 10, this Financing Agreement shall
automatically terminate and all Obligations shall become due and payable,
without any action, declaration, notice or demand by
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CIT. The exercise of any option is not exclusive of any other option, which may
be exercised at any time by CIT.
10.3 Immediately upon the occurrence of any Event of Default, CIT may,
to the extent permitted by law: (a) remove from any premises where same may be
located copies of any and all books and records, computers, electronic media and
software programs associated with any Collateral (including any electronic
records, contracts and signatures pertaining thereto), documents, instruments,
files and records, and any receptacles or cabinets containing same, relating to
the Accounts, or CIT may use, at the Company's expense, such of the Company's
personnel, supplies or space at the Company's places of business or otherwise,
as may be necessary to properly administer and control the Accounts or the
handling of collections and realizations thereon; (b) bring suit, in the name of
the Company or CIT, and generally shall have all other rights respecting said
Accounts, including without limitation the right to: accelerate or extend the
time of payment, settle, compromise, release in whole or in part any amounts
owing on any Accounts and issue credits in the name of the Company or CIT; (c)
sell, assign and deliver the Collateral and any returned, reclaimed or
repossessed Inventory, in any commercially reasonable manner, with or without
advertisement, at public or private sale, for cash, on credit or otherwise, at
CIT's sole option and discretion, and CIT may bid or become a purchaser at any
such sale, free from any right of redemption, which right is hereby expressly
waived by the Company; (d) foreclose the security interests in the Collateral
created herein or by the Loan Documents by any available judicial procedure, or
to take possession of any or all of the Collateral, including any Inventory,
Equipment and/or Other Collateral without judicial process, and to enter any
premises where any Inventory and Equipment and/or Other Collateral may be
located for the purpose of taking possession of or removing the same; and (e)
exercise any other rights and remedies provided in law, in equity, by contract
or otherwise. CIT shall have the right, without notice or advertisement, to
sell, lease, or otherwise dispose of all or any part of the Collateral, whether
in its then condition or after further preparation or processing, in the name of
the Company or CIT, or in the name of such other party as CIT may designate,
either at public or private sale or at any broker's board, in lots or in bulk,
for cash or for credit, with or without warranties or representations, and upon
such other terms and conditions as CIT in its sole discretion may deem
advisable, and CIT shall have the right to purchase at any such sale. If any
Inventory and Equipment shall require rebuilding, repairing, maintenance or
preparation, CIT shall have the right, at its option, to do such of the
aforesaid as is reasonably necessary, for the purpose of putting the Inventory
and Equipment in such saleable form as CIT shall deem reasonably appropriate and
any such costs shall be deemed an Obligations hereunder. The Company agrees, at
the request of CIT, to assemble the Inventory and Equipment and to make it
available to CIT at premises of the Company or elsewhere and to make available
to CIT the premises and facilities of the Company for the purpose of CIT's
taking possession of, removing or putting the Inventory and Equipment in
saleable form. If notice of intended disposition of any Collateral is required
by law, it is agreed that ten (10) days notice shall constitute reasonable
notification. The net cash proceeds resulting from CIT's exercise of any of the
foregoing rights, (after deducting all reasonable charges, costs and expenses,
including reasonable attorneys' fees) shall be applied by CIT to the payment of
the Obligations, whether due or to become due, in such order as CIT may elect,
and the Company shall remain liable to CIT for any deficiencies, and CIT in turn
agrees to remit to the Company or its successors or assigns, any surplus
resulting therefrom. The enumeration of the foregoing rights is not intended to
be exhaustive and the exercise of any right shall not preclude the exercise of
any
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other rights, all of which shall be cumulative. The Company hereby indemnifies
CIT and holds CIT harmless from any and all actual costs, expenses, claims,
liabilities, Out-of-Pocket Expenses or otherwise, incurred or imposed on CIT by
reason of the exercise of any of its rights, remedies and interests hereunder,
including, without limitation, from any sale or transfer of Collateral,
preserving, maintaining or securing the Collateral, defending its interests in
Collateral (including pursuant to any claims brought by the Company, the Company
as debtor-in-possession, any secured or unsecured creditors of the Company, any
trustee or receiver in bankruptcy, or otherwise), and the Company hereby agrees
to so indemnify and hold CIT harmless, absent CIT's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction. The
foregoing indemnification shall survive termination of this Financing Agreement
until such time as all Obligations (including the foregoing) have been finally
and indefeasibly paid in full. In furtherance thereof CIT, may establish such
reserves for Obligations hereunder (including any contingent Obligations) as it
may deem advisable in its reasonable business judgement. Any applicable
mortgage(s), deed(s) of trust or assignment(s) issued to CIT on the Real Estate
shall govern the rights and remedies of CIT thereto.
SECTION 11. TERMINATION
Except as otherwise permitted herein, CIT may terminate this Financing
Agreement only as of the initial or any subsequent Anniversary Date and then
only by giving the Company at least ninety (90) days prior written notice of
termination. Notwithstanding the foregoing CIT may terminate the Financing
Agreement immediately upon the occurrence of an Event of Default; provided,
however, that if the Event of Default is an event listed in Paragraph 10.1(c) of
Section 10 of this Financing Agreement, this Financing Agreement shall terminate
in accordance with paragraph 10.2 of Section 10. This Financing Agreement,
unless terminated as herein provided, shall automatically continue from
Anniversary Date to Anniversary Date. The Company may terminate this Financing
Agreement at any time upon ninety (90) days' prior written notice to CIT,
provided that the Company pays to CIT an Early Termination Fee. All Obligations
shall become due and payable as of any termination hereunder or under Section 10
hereof and, pending a final accounting, CIT may withhold any balances in the
Company's account (unless supplied with an indemnity satisfactory to CIT) to
cover all of the Obligations, whether absolute or contingent, including, but not
limited to, cash reserves for any contingent Obligations. All of CIT's rights,
liens and security interests shall continue after any termination until all
Obligations have been paid and satisfied in full.
SECTION 12. MISCELLANEOUS
12.1 The Company hereby waives diligence, notice of intent to
accelerate, notice of acceleration, demand, presentment and protest and any
notices thereof as well as notice of nonpayment. No delay or omission of CIT or
the Company to exercise any right or remedy hereunder, whether before or after
the happening of any Event of Default, shall impair any such right or shall
operate as a waiver thereof or as a waiver of any such Event of Default. No
single or partial exercise by CIT of any right or remedy precludes any other or
further exercise thereof, or precludes any other right or remedy.
12.2 This Financing Agreement and the Loan Documents executed and
delivered in connection therewith constitute the entire agreement between the
Company and CIT; supersede any
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prior agreements; can be changed only by a writing signed by both the Company
and CIT; and shall bind and benefit the Company and CIT and their respective
successors and assigns.
12.3 In no event shall the Company, upon demand by CIT for payment of
any Indebtedness relating hereto, by acceleration of the maturity thereof, or
otherwise, be obligated to pay interest and fees in excess of the amount
permitted by law. Regardless of any provision herein or in any agreement made in
connection herewith, CIT shall never be entitled to receive, charge or apply, as
interest on any indebtedness relating hereto, any amount in excess of the
maximum amount of interest permissible under applicable law. If CIT ever
receives, collects or applies any such excess, it shall be deemed a partial
repayment of principal and treated as such; and if principal is paid in full,
any remaining excess shall be refunded to the Company. This paragraph shall
control every other provision hereof, the Loan Documents and of any other
agreement made in connection herewith.
12.4 If any provision hereof or of any other agreement made in
connection herewith is held to be illegal or unenforceable, such provision shall
be fully severable, and the remaining provisions of the applicable agreement
shall remain in full force and effect and shall not be affected by such
provision's severance. Furthermore, in lieu of any such provision, there shall
be added automatically as a part of the applicable agreement a legal and
enforceable provision as similar in terms to the severed provision as may be
possible.
12.5 THE COMPANY AND CIT EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING ARISING OUT OF THE LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREUNDER. THE COMPANY HEREBY IRREVOCABLY WAIVES
PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED. IN NO EVENT WILL CIT BE LIABLE FOR
LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
12.6 Except as otherwise herein provided, any notice or other
communication required hereunder shall be in writing (provided that, any
electronic communications from the Company with respect to any request,
transmission, document, electronic signature, electronic mail or facsimile
transmission shall be deemed binding on the Company for purposes of this
Financing Agreement, provided further that any such transmission shall not
relieve the Company from any other obligation hereunder to communicate further
in writing), and shall be deemed to have been validly served, given or delivered
when hand delivered or sent by facsimile, or three days after deposit in the
United State mails, with proper first class postage prepaid and addressed to the
party to be notified or to such other address as any party hereto may designate
for itself by like notice, as follows:
(A) if to CIT, at:
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The CIT Group/Business Credit, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇., ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Regional Credit Manager
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
(B) if to the Company at:
Procom Technology, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, General Counsel
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
provided, however, that the failure of CIT to provide the Company's counsel with
a copy of such notice shall not invalidate any notice given to the Company and
shall not give the Company any rights, claims or defenses due to the failure of
CIT to provide such additional notice.
12.7 THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF CALIFORNIA, EXCEPT TO THE EXTENT THAT ANY OTHER LOAN DOCUMENT INCLUDES
AN EXPRESS ELECTION TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
12.8 CIT shall use reasonable efforts to keep all financial statements,
reports, notices from third parties or otherwise (collectively, "Company
Information") delivered or provided to CIT in writing by or at the direction of
the Company in confidence other than the following:
(i) information which becomes generally available to the public
other than as a result of a disclosure by CIT;
(ii) information which CIT discloses to any governmental or
regulatory authority to which CIT is or becomes subject to in connection
with any examination by such authority;
(iii) information disclosed pursuant to subpoena or other legal
process;
(iv) information disclosed to any person and in any proceeding
necessary in CIT's reasonable judgment to protect the interest of CIT in
connection with any claim or dispute involving CIT or any of its
affiliated companies, employees, officers, directors or attorneys
provided that, if not prohibited by law, CIT will use its reasonable
efforts to provide prior written notice to Company; and
(v) information disclosed to any prospective assignee or
participant of CIT if such assignee or participant has executed in favor
of Company a confidentiality agreement substantial in the form of the
terms herein.
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IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be effective, executed, accepted and delivered at Los Angeles,
California by their proper and duly authorized officers as of the date set forth
above.
PROCOM TECHNOLOGY, INC. THE CIT GROUP/
BUSINESS CREDIT, INC.
By: By:
---------------------------- --------------------------------
Title: Title: Vice President
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EXHIBIT A
TERM LOAN PROMISSORY NOTE A
October ___, 2000
$4,000,000
FOR VALUE RECEIVED, the undersigned, Procom Technology, Inc., a California
corporation (the "Company"), promises to pay to the order of THE CIT
GROUP/BUSINESS CREDIT, INC. (herein "CIT") at its office located at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, in lawful money of the United
States of America and in immediately available funds, the principal amount of
Four Million Dollars ($4,000,000.00) as follows: (A) Eleven (11) equal monthly
principal installments of $333,333.33 each, followed by (B) one (1) final
principal installment of $333,333.33, whereof the first such installment shall
be due and payable on April 1, 2001 and subsequent installments shall be due and
payable on the first Business Day of each month thereafter until this Note is
paid in full.
The Company further agrees to pay interest at said office, in like money, on the
unpaid principal amount owing hereunder from time to time from the date hereof
on the date and at the rate specified in Section 8 of the Financing Agreement,
of even date herewith between the Company and CIT (the "Financing Agreement").
Capitalized terms used herein and defined in the Financing Agreement shall have
the same meanings as set forth therein unless otherwise specifically defined
herein.
If any payment on this Note becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is Term Loan Promissory Note referred to in the Financing Agreement,
evidences the Term Loan thereunder, and is subject to, and entitled to, all
provisions and benefits thereof and is subject to optional and mandatory
prepayment, in whole or in part, as provided therein.
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Upon the occurrence of any Event of Default specified in the Financing Agreement
or upon termination of the Financing Agreement, all amounts then remaining
unpaid on this Note may become, or be declared to be, at the sole election of
CIT, immediately due and payable as provided in the Financing Agreement.
PROCOM TECHNOLOGY, INC.
By:
-----------------------------------
Title:
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EXHIBIT B
BRIDGE LOAN PROMISSORY NOTE
October ___, 2000
$1,000,000
FOR VALUE RECEIVED, the undersigned, Procom Technology, Inc., a California
corporation (the "Company"), promises to pay to the order of THE CIT
GROUP/BUSINESS CREDIT, INC. (herein "CIT") at its office located at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, in lawful money of the United
States of America and in immediately available funds, the principal amount of
One Million Dollars ($1,000,000.00) as follows: one (1) principal installment of
$1,000,000.00, due and payable in full on the Bridge Loan Termination Date.
The Company further agrees to pay interest at said office, in like money, on the
unpaid principal amount owing hereunder from time to time from the date hereof
on the date and at the rate specified in Section 8 of the Financing Agreement,
of even date herewith between the Company and CIT (the "Financing Agreement").
Capitalized terms used herein and defined in the Financing Agreement shall have
the same meanings as set forth therein unless otherwise specifically defined
herein.
If any payment on this Note becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is Bridge Loan Promissory Note referred to in the Financing Agreement,
evidences the Bridge Loan thereunder, and is subject to, and entitled to, all
provisions and benefits thereof and is subject to optional and mandatory
prepayment, in whole or in part, as provided therein.
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Upon the occurrence of any Event of Default specified in the Financing Agreement
or upon termination of the Financing Agreement, all amounts then remaining
unpaid on this Note may become, or be declared to be, at the sole election of
CIT, immediately due and payable as provided in the Financing Agreement.
PROCOM TECHNOLOGY, INC.
By:
----------------------------------
Title:
51