EXHIBIT 10.i
PEMSTAR INC.
AND
TURTLE MOUNTAIN CORPORATION
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
Table of Contents
Section 1. DEFINITIONS; ATTACHMENTS 1
1.1. Special Definitions. 1
1.2. Other Defined Terms. 10
1.3. Attachments. 10
Section 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES 10
2.1. Credit Line. 10
2.2. A/R Advances. 10
2.3. Finance and Other Charges. 11
2.4. Customer Account Statements. 12
2.5. Shortfall. 12
2.6. Application of Payments. 12
2.7. Prepayment and Reborrowing By Customer. 13
2.8. Requirements of Law. 13
2.9. Taxes. 14
Section 3. CREDIT LINE ADDITIONAL PROVISIONS 14
3.1. Ineligible Accounts. 14
3.2. Reimbursement for Charges. 16
3.3. Lockbox and Special Account. 16
3.4. Collections. 16
3.5. Application of Remittances and Credits. 17
3.6. Power of Attorney. 17
3.7. Concentration Accounts. 18
Section 4. SECURITY -- COLLATERAL 18
4.1. Grant. 18
4.2. Further Assurances. 19
Section 5. CONDITIONS PRECEDENT. 19
5.1. Conditions Precedent to the Effectiveness of this Agreement. 19
5.2. Conditions Precedent to Each Advance. 20
Section 6. REPRESENTATIONS AND WARRANTIES 20
6.1. Organization and Qualifications. 20
6.2. Rights in Collateral; Priority of Liens. 21
6.3. No Conflicts. 21
6.4. Enforceability. 21
6.5. Locations of Offices, Records and Inventory. 21
6.6. Fictitious Business Names. 21
6.7. Organization. 21
6.8. No Judgments or Litigation. 21
6.9. No Defaults. 21
6.10. Labor Matters. 22
6.11. Compliance with Law. 22
6.12. ERISA. 22
6.13. Compliance with Environmental Laws. 22
6.14. Federal Regulations 23
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6.15. Intellectual Property. 23
6.16. Licenses and Permits. 23
6.17. Investment Company. 23
6.18. Taxes and Tax Returns. 23
6.19. Status of Accounts. 23
6.20. Affiliate/Subsidiary Transactions. 24
6.21. Accuracy and Completeness of Information. 24
6.22. Recording Taxes. 24
6.23. Indebtedness. 24
6.24. Limitations on Lockboxes and Special Accounts. 24
6.25. Solvency. 24
6.26. Security Interest. 24
6.27. Investment Property. 24
6.28. Use of Proceeds. 24
Section 7. AFFIRMATIVE COVENANTS 25
7.1. Financial and Other Information. 25
7.2. Location of Collateral. 27
7.3. Changes in Customer. 27
7.4. Corporate Existence. 27
7.5. Payment of Obligations. 27
7.6. ERISA. 27
7.7. Environmental Matters. 27
7.8. Collateral Books and Records/Collateral Audit. 28
7.9. Insurance; Casualty Loss. 28
7.10. Taxes. 29
7.11. Compliance With Laws. 29
7.12. Fiscal Year. 29
7.13. Intellectual Property. 29
7.14. Maintenance of Property. 30
7.15. Collateral. 30
7.16. Additional Collateral, etc. 31
7.17. Subsidiaries. 33
7.18. Financial Covenants; Additional Covenants. 33
Section 8. NEGATIVE COVENANTS 33
8.1. Liens. 33
8.2. Disposition of Assets. 33
8.3. Corporate Changes. 33
8.4. Guaranties. 33
8.5. Restricted Payments. 34
8.6. Capital Expenditures. 34
8.7. Investments. 34
8.8. Affiliate/Subsidiary Transactions. 34
8.9. ERISA. 34
8.10. Additional Negative Pledges. 35
8.11. Storage of Collateral with Bailees and Warehousemen. 35
8.12. Use of Proceeds. 35
8.13. Accounts. 35
8.14. Indebtedness. 35
8.15. Loans. 35
8.16. Changes in Accounting Practices. 36
8.17. Hedge Agreements. 36
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8.18. Clauses Restricting Subsidiary Distributions. 36
8.19 New Foreign Subsidiaries. 36
Section 9. DEFAULT 36
9.1. Event of Default. 36
9.2. Acceleration. 38
9.3. Remedies. 38
9.4. Waiver. 39
Section 10. JOINT AND SEVERAL GUARANTY 39
Section 11. MISCELLANEOUS 40
11.1. Term; Termination. 40
11.2. Indemnification. 41
11.3. Additional Obligations. 41
11.4. Participations. 41
11.5. Limitation of Liability. 41
11.6. Alteration/Waiver. 41
11.7. Severability. 42
11.8. One Loan. 42
11.9. Additional Collateral. 42
11.10. No Merger or Novations. 42
11.11. Paragraph Titles. 42
11.12. Binding Effect; Assignment. 42
11.13. Notices; E-Business Acknowledgment. 42
11.14. Counterparts. 44
11.15. Submission and Consent to Jurisdiction and Choice of Law. 44
11.16. Jury Trial Waiver. 44
11.17. Participation Assistance. 44
Schedule 6.14 Intellectual Property 44
Schedule 6.27 Investment Property 47
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AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
This AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (as amended,
supplemented or otherwise modified from time to time, this "Agreement") is
hereby made this 29th day of June, 2001, by and between IBM Credit Corporation,
a Delaware corporation with a place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇.
▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("IBM Credit"), and PEMSTAR INC., a Minnesota
corporation with a place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ("Customer") and Turtle Mountain Corporation, a North Dakota corporation
with its principal place of business at ▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇, ▇▇
▇▇▇▇▇ ("Turtle Mountain") (Customer and Turtle Mountain collectively the "Credit
Parties", individually, a "Credit Party"). This Agreement amends and restates in
its entirety that certain Revolving Credit Agreement executed between IBM Credit
and Customer on May 5, 2000 (as amended, modified or supplemented from time to
time, the "Original Financing Agreement").
WITNESSETH
WHEREAS, Customer has requested that IBM Credit continue to finance
certain of its working capital requirements, and IBM Credit is willing to
provide such financing to Customer subject to the terms and conditions set forth
in this Agreement; and
WHEREAS, Turtle Mountain wishes to become a Credit Party hereunder; and
WHEREAS, the Credit Parties and IBM Credit wish to amend and restate
the Original Financing Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree that the Original Financing Agreement is
hereby amended and restated in its entirety as follows:
Section 1. DEFINITIONS; ATTACHMENTS
1.1. Special Definitions. The following terms shall have the following
respective meaning in this Agreement:
"A/R Advance": any loan or advance of funds made by IBM Credit to or on behalf
of Customer pursuant to Section 2.2 of this Agreement.
"A/R Advance Date": the Business Day on which IBM Credit makes an A/R Advance
under this Agreement.
"Accounts": as defined in the U.C.C. (as defined pursuant to Section 1.2).
"Advance": any loan or other extension of credit by IBM Credit to or on behalf
of Customer pursuant to this Agreement including, without limitation, Prime Rate
Advances and LIBOR Rate Advances.
"Affiliate": with respect to any Person, any other Person (the "Affiliate")
meeting one of the following: (i) at least 10% of the Affiliate's equity is
owned, directly or indirectly, by such Person; (ii) at least 10% of such
Person's equity is owned, directly or indirectly, by the Affiliate; or (iii) at
least 10% of such Person's equity and at least 10% of the Affiliate's equity is
owned, directly or indirectly, by the same Person or Persons. All of the Credit
Parties's officers, directors, joint venturers, and partners shall also be
deemed to be Affiliates of Customer for purposes of this Agreement.
"Agreement": as defined in the caption.
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"Applicable Finance Charge": with respect a LIBOR Advance, LIBOR plus the
Applicable Margin determined as of the date when such Advance is made; or with
respect to a Prime Rate Advance, Prime Rate plus Applicable Margin determined as
of the date when such Advance is made.
"Applicable Margin": shall mean that Prime Rate Margin with respect a Prime Rate
Advance or LIBOR Margin with respect to a LIBOR Advance.
"Average Daily Balance": for each Advance for a given period of time, the sum of
the unpaid principal of such Advance as of each day during such period of time,
divided by the number of days in such period of time.
"Auditors": a nationally recognized firm of independent certified public
accountants selected by Customer and reasonably satisfactory to IBM Credit.
"Available Credit": at any time, (1) the Maximum Advance Amount less (2) the
Outstanding Advances at such time.
"Bloomberg": shall mean the on-line financial service provided by Bloomberg,
L.P. or any successor financial services company.
"Board": the Board of Governors of the Federal Reserve System of the United
States (or any successor).
"Borrowing Base": as defined in Attachment A.
"Business Day": any day other than a Saturday, Sunday or other day on which
commercial banks in New York, New York are generally closed or on which IBM
Credit is closed.
"Capital Expenditures": for any period, with respect to any Person, the
aggregate of all expenditures by such Person and its Subsidiaries for the
acquisition or leasing (pursuant to a capital lease) of fixed or capital assets
or additions to equipment (including replacements, capitalized repairs and
improvements during such period) that should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries.
"Celestica": shall mean Celestica Inc.
"Closing Date": the date on which the conditions precedent to the effectiveness
of this Agreement set forth in Section 5.1 hereof are satisfied or waived in
writing by IBM Credit.
"Code": the Internal Revenue Code of 1986, as amended or any successor statute.
"Collateral": as defined in Section 4.1.
"Collateral Management Report": a report to be delivered by Customer to IBM
Credit from time to time, as provided herein, signed by the chief executive
officer or chief financial officer of Customer, substantially in the form and
detail of Attachment E hereto, detailing and certifying, among other items: a
summary of the Credit Parties's inventory on hand financed by IBM Credit and
each Credit Parties's Eligible Accounts, the amounts and aging of all of the
Credit Parties's Accounts, the amounts and aging of the Credit Parties's
accounts payable as of a specified date, all of the Credit Parties's IBM Credit
borrowing activity during a specified period and the total amount of the
Borrowing Base as well as Outstanding A/R Advances, Available Credit and any
Shortfall Amount as of a specified date.
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"Commercial Tort Claim": a claim arising in tort with respect to which (a) the
claimant is an organization or (b) the claimant is an individual and the claim
(i) arose in the course of the claimant's business or profession and (ii) does
not include damages arising out of personal injury to or the death of an
individual.
"Commonly Controlled Entity": an entity, whether or not incorporated, that is
under common control with any Credit Party within the meaning of Section 4001 of
ERISA or is part of a group that includes any Credit Party and that is treated
as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate substantially in the form of Attachment
C.
"Concentration Accounts": shall mean an Eligible Account that, individually, or
when aggregated with all other outstanding Accounts of the same Account debtor
and such Account debtor's Affiliates, constitute more than five percent (5%) of
the net outstanding balance of all Eligible Accounts of the Credit Parties,
either individually or on a consolidated basis, then outstanding for all Account
debtors, other than Eligible Accounts due from IBM or its subsidiaries.
"Concentration Account Debtor": shall mean, at any time, any Account debtor
obligated to a Credit Party with respect to, or on account of, a Concentration
Account.
"Copyrights": (i) all copyrights arising under the laws of the United States,
any other country or any political subdivision thereof, whether registered or
unregistered and whether published or unpublished (including, without
limitation, those listed in Schedule 6.14), all registrations and recordings
thereof, and all applications in connection therewith, including, without
limitation, all registrations, recordings and applications in the United States
Copyright Office, and (ii) the right to obtain all renewals thereof.
"Credit Line": as defined in Section 2.1.
"Credit Party": as defined in the caption.
"Customer": as defined in the caption.
"Customer Recipient": as defined in Section 11.18.
"Default": either (1) an Event of Default or (2) any event or condition which,
but for the requirement that notice be given or time lapse or both, would be an
Event of Default.
"Delinquency Fee Rate": as defined on Attachment A.
"Designated Senior Indebtedness": as defined in Section 8.17.
"Disposition": with respect to any property, any sale, lease, sale and
leaseback, assignment, conveyance, transfer or other disposition thereof. The
terms "Dispose" and "Disposed of" shall have correlative meanings.
"Dollars" and "$": dollars in lawful currency of the United States.
"Domestic Subsidiary": any Subsidiary that is organized under the laws of any
state of the United States of America or the District of Columbia.
"EDI": as defined in Section 11.13.
"E-Documents": as defined in Section 11.13.
"Eligible Accounts": as defined in Section 3.1.
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"Environmental Laws": all statutes, laws, judicial decisions, regulations,
ordinances, and other governmental restrictions relating to pollution, the
protection of the environment, occupational health and safety, or to emissions,
discharges or release of pollutants, contaminants, hazardous substances or
wastes into the environment.
"Environmental Liability": any claim, demand, obligation, cause of action,
allegation, order, violation, injury, judgment, penalty or fine, cost or
expense, resulting from the violation or alleged violation of any Environmental
Laws or the imposition of any Lien pursuant to any Environmental Laws.
"Equity Interests": with respect to any Person, means (a) all shares, interests,
participations, rights or other equivalents (however designated, whether voting
or non-voting) of or interests in corporate or capital stock, including without
limitation, shares of preferred or preference stock of such Person, (b) all
partnership interests (whether general or limited) of such Person, (c) all
membership interests or limited liability company interests in such Person, (d)
all other equity or ownership interests in such Person of any other type and (e)
all warrants, rights or options to purchase any of the foregoing.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended, or any
successor statutes.
"Event of Default": as defined in Section 9.1.
"Financial Statements": the consolidated and consolidating balance sheets
(including, without limitation, securities such as stocks and investment bonds),
statements of operations, statements of cash flows and statements of changes in
shareholder's equity of Customer and its Subsidiaries for the period specified,
prepared in accordance with GAAP and consistent with prior practices.
"Foreign Subsidiary" means any Subsidiary that is organized under the laws of
the jurisdiction other than the United States of America or any state thereof or
the District of Columbia.
"GAAP": generally accepted accounting principles in the United States as in
effect from time to time.
"General Intangibles": all "general intangibles" as such term is defined in the
U.C.C. and, in any event, including, without limitation, with respect to each
Credit Party, (a) all tax refunds, claims for tax refunds, and tax credits, (b)
all permits, licenses, approvals, authorizations, consents, variances, and
certifications of any Governmental Authority, (c) all claims, tort claims and
causes of action, (d) all property, casualty, liability, and other insurance of
any kind or character, and all insurance claims and insurance refund claims, (e)
all payment intangibles, (f) all lists, books, records, recorded knowledge,
ledgers, files (whether in printed form or stored electronically), designs,
blueprints, data, specifications, engineering reports, manuals, computer
records, computer programs and computer software (including source codes), (g)
all internet domain names and websites and related licenses and agreements, and
(h) all contracts, agreements, instruments and indentures in any form, and
portions thereof, to which such Credit Party is a party or under which such
Credit Party has any right, title or interest or to which such Credit Party or
any property of such Credit Party is subject, as the same may from time to time
be amended, supplemented or otherwise modified, including, without limitation,
(i) all rights of such Credit Party to receive moneys due and to become due to
it thereunder or in connection therewith, (ii) all rights of such Credit Party
to damages arising thereunder and (iii) all rights of such Credit Party to
perform and to exercise all remedies thereunder.
"Governmental Authority": any nation or government, any state or other political
subdivision thereof, and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled (through stock or capital
ownership or otherwise) by any of the foregoing.
"Guarantor": a guarantor under a Guaranty.
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"Guaranty": any guaranty of any or all of the Obligations in favor of IBM Credit
that may be entered into from time to time.
"Hazardous Substances": all substances, wastes or materials, to the extent
subject to regulation as "hazardous substances" or "hazardous waste" under any
Environmental Laws.
"Hedge Agreements": all interest swaps, caps or collar agreements or similar
arrangements dealing with interest rates or currency exchange rates or the
exchange of nominal interest obligations, either generally or under specific
contingencies.
"IBM": shall mean International Business Machines Corporation.
"IBM Credit": as defined in the caption.
"Indebtedness": with respect to any Person, (1) all obligations of such Person
for borrowed money or for the deferred purchase price of property or services
(other than trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices) or which is evidenced by a note,
bond, debenture or similar instrument, (2) all obligations of such Person under
capital leases (including obligations under any leases a Credit Party may enter
into, now or in the future, with IBM Credit), (3) all obligations of such Person
in respect of letters of credit, banker's acceptances or similar obligations
issued or created for the account of such Person, (4) liabilities arising under
any interest rate protection, future, option swap, cap or hedge agreement or
arrangement under which such Person is a party or beneficiary, (5) all
obligations under guaranties of such Person and (6) all liabilities secured by
any Lien on any property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof.
"Insolvency": with respect to any Multi-employer Benefit Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intercreditor Agreement": as defined in Section 5.1(H).
"Interest Period": with respect to each LIBOR Advance, the period commencing on
the date of such Advance or on the last day of the immediately preceding
Interest Period, if any, applicable to an outstanding Advance and ending one,
two, three or six months thereafter, as the Customer may elect in the applicable
notice of borrowing, continuation or conversion; provided that:
(a) any Interest Period that would otherwise end on a day
which is not a Business day shall be extended to the next succeeding Business
Day unless such Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Business Day;
(b) any Interest Period that begins on the last Business Day
of a calendar month (or 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 Business Day of a calendar month; and
(c) any Interest Period that would otherwise end after the
Termination Date shall end on the Termination Date.
"Investment": with respect to any Person (the "Investor"), any investment by the
Investor in any other Person excluding domestic Subsidiaries that have provided
a guaranty, in form and substance satisfactory to IBM Credit, or foreign
Subsidiaries that have provided a pledge of their stock, in form and substance
satisfactory to IBM Credit, whether by means of share purchase, capital
contribution, purchase or other acquisition of a partnership or joint venture
interest, loan, time deposit, demand deposit or otherwise.
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"Investment Property": the collective reference to (i) all "investment property"
as such term is defined in the U.C.C. and (ii) whether or not constituting
"investment property" as so defined, all Pledged Notes and all Pledged
Interests.
"Issuers": the collective reference to each issuer of any Investment Property.
"Leverage Ratio": as defined in Attachment A.
"LIBOR": with respect to each Interest Period the average offered rate for
deposits on the first day of such Interest Period, for the number of days in
such Interest Period, the London Interbank Offered Rate as published by
Bloomberg for the previous calendar month or, in the event such average is no
longer published by Bloomberg, such other thirty (30) day average as IBM Credit
may use for determining "LIBOR" in its reasonable discretion.
"LIBOR Margin": as defined in Attachment A.
"LIBOR Advance": an Advance the finance charge of which is based on LIBOR.
"Lien(s)": any lien, claim, charge, pledge, security interest, deed of trust,
mortgage, other encumbrance or other arrangement having the practical effect of
the foregoing, including the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement.
"Material Adverse Effect": a material adverse effect (1) on the business,
operations, results of operations, assets, or financial condition or prospects
of a Credit Party, (2) on the aggregate value of the Collateral or the aggregate
amount which IBM Credit would be likely to receive (after giving consideration
to reasonably likely delays in payment and reasonable costs of enforcement) in
the liquidation of such Collateral to recover the Obligations in full, or (3) on
the rights and remedies of IBM Credit under this Agreement.
"Maximum Advance Amount": at any time, the lesser of (1) the Credit Line and (2)
the Borrowing Base at such time.
"Multi-employer Benefit Plan": as defined in Section 6.12.
"Obligations": all covenants, agreements, warranties, duties, representations,
loans, advances, interest (including interest accruing on or after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to a Credit Party, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding),
guaranties, fees, reasonable expenses, indemnities, liabilities and Indebtedness
of any kind and nature whatsoever now or hereafter arising, owing, due or
payable from any Credit Party to IBM Credit under this Agreement, the Other
Documents, or otherwise.
"Original Financing Agreement": as defined in the caption.
"Other Charges": as set forth in Attachment A.
"Other Documents": all security agreements, mortgages, leases, instruments,
documents, guarantees, schedules of assignment, contracts and similar agreements
executed by any Credit Party and delivered to IBM Credit, pursuant to this
Agreement or otherwise, and all amendments, supplements and other modifications
to the foregoing from time to time.
"Other Lender Collateral": shall mean that Collateral as identified in Section
4.1 of the Agreement.
"Outstanding Advances": at any time of determination, the sum of (1) the unpaid
principal amount of all Advances made by IBM Credit under this Agreement, and
(2) any finance charge, interest due and
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payable, fee, expense or other amount related to Advances charged to any Credit
Party's account with IBM Credit.
"Outstanding A/R Advances": at any time of determination, the sum of (1) the
unpaid principal amount of all A/R Advances made by IBM Credit under this
Agreement; and (2) any finance charge, interest due and payable, fee, expense or
other amount related to A/R Advances charged to any Credit Party's account with
IBM Credit.
"Participant": as defined in Section 11.4.
"Patents": (i) all letters patent including, without limitation, all utility
patents, design patents, industrial designs and utility model registrations of
the United States or any other country, or any political subdivision thereof and
all reissues and extensions thereof, including, without limitation, those listed
on Schedule 6.14, (ii) all applications for letters (patent)? of the United
States or any other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, those listed on
Schedule 6.14, and (iii) all rights to obtain any reissues, reexaminations, or
extensions of the foregoing.
"PBGC": as defined in Section 6.12.
"Permitted Indebtedness": any of the following:
(1) Indebtedness to IBM Credit;
(2) Indebtedness described in Section VII of Attachment B;
(3) Purchase Money Indebtedness;
(4) guaranties in favor of IBM Credit; and
(5) other Indebtedness consented to by IBM Credit in writing prior to
incurring such Indebtedness.
"Permitted Liens": any of the following:
(1) Liens which are the subject of an Intercreditor Agreement, in effect
from time to time between IBM Credit and any other secured creditor;
(2) Purchase Money Security Interests on inventory and equipment except to
the of any Purchase Money Security Interest on inventory or equipment included
in the Borrowing Base;
(3) Liens described in Section I of Attachment B;
(4) Liens of warehousemen, mechanics, materialmen, workers, repairmen,
common carriers, landlords and other similar Liens arising by operation of law
or otherwise, not waived in connection herewith, for amounts that are not yet
due and payable or being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted if an adequate reserve or other
appropriate provisions shall have been made therefor as required to be in
conformity with GAAP and an adverse determination in such proceedings could not
reasonably be expected to have a Material Adverse Effect;
(5) attachment or judgment Liens individually or in the aggregate not in
excess of $250,000.00 (exclusive of (A) any amounts that are duly bonded to the
satisfaction of IBM Credit or (B) any amount fully covered by insurance as to
which the insurance company has acknowledged its obligation to pay such judgment
in full);
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(6) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, are not
substantial in amount and which do not materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of any Credit Party;
(7) extensions and renewals of the foregoing Permitted Liens; provided that
(A) the aggregate amount of such extended or renewed Liens do not exceed the
original principal amount of the Indebtedness which it secures, (B) such Liens
do not extend to any property other than property already previously subject to
the Lien and (C) such extended or renewed Liens are on terms and conditions no
more restrictive than the terms and conditions of the Liens being extended or
renewed;
(8) Liens arising from deposits or pledges to secure bids, tenders,
contracts, leases, surety and appeal bonds and other obligations of like nature
arising in the ordinary course of the applicable Credit Party's business;
(9) Liens for taxes, assessments or governmental charges not delinquent or
being contested, in good faith, by appropriate proceedings promptly instituted
and diligently conducted if an adequate reserve or other appropriate provisions
shall have been made therefor as required in order to be in conformity with GAAP
and an adverse determination in such proceedings could not reasonably be
expected to have a Material Adverse Effect;
(10) Liens arising out of deposits in connection with workers' compensation,
unemployment insurance or other social security or similar legislation;
(11) Liens arising pursuant to this Agreement; and
(12) other Liens consented to by IBM Credit in writing prior to incurring
such Lien.
"Person": any individual, association, firm, corporation, partnership, trust,
unincorporated organization or other entity whatsoever.
"Plans": as defined in Section 6.12.
"Pledged Interests": all Equity Interests of or in any Person that may be issued
or granted to, or held or owned by, Customer, including, without limitation, the
Equity Interests described on Schedule 6.30 hereto, and all certificates
representing such Equity Interests.
"Policies": all policies of insurance required to be maintained by the Credit
Parties under this Agreement or any of the Other Documents.
"Prepayment Fee": as defined in Attachment A.
"Prime Rate": as of the date of determination, the average of the rates of
interest announced by Citibank, N.A., Chase Manhattan Bank and Bank of America
National Trust & Savings Association (or any other bank which IBM Credit uses in
its normal course of business of determining Prime Rate) as their prime or base
rate, as of the last Business Day of the calendar month immediately preceding
the date of determination, whether or not such announced rates are the actual
rates charged by such banking institutions to their most creditworthy borrowers.
"Prime Rate Advance": an Advance the finance charge of which is based on Prime
Rate.
"Prime Rate Margin": as defined in Attachment A.
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"Purchase Money Indebtedness": any Indebtedness (including capital leases)
incurred to finance the acquisition of assets to be used in a Credit Party's
business not to exceed the lesser of (1) the purchase price or acquisition cost
of such asset and (2) the fair market value of such asset.
"Purchase Money Security Interest": any security interest securing Purchase
Money Indebtedness, which security interest applies solely to the particular
asset acquired with the Purchase Money Indebtedness.
"Regulation U": Regulation U of the Board as in effect from time to time.
"Request for A/R Advance": as defined in Section 2.2.
"Reorganization": with respect to any Multi-employer Benefit Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Requirement of Law": as to any Person, the articles of incorporation and
by-laws or other organizational or governing documents of such Person, and any
law, treaty, rule or regulation or determination of an arbitrator or a court or
other governmental authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"Revolving A Credit Facility": a senior secured line of credit as defined in
Attachment A.
"Revolving B Credit Facility": a senior secured line of credit as defined in
Attachment A, that is incremental to the Revolving A Credit Facility.
"Shortfall Amount": as defined in Section 2.5.
"Shortfall Transaction Fee": as defined in Attachment A.
"Single Employer Plan": as defined in Section 6.12.
"Solvent": when used with respect to any Person, means that, as of any date of
determination, (a) the amount of the "present fair saleable value" of the assets
of such Person will, as of such date, exceed the amount of all "liabilities of
such Person, contingent or otherwise," as of such date, as such quoted terms are
determined in accordance with applicable federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair saleable value
of the assets of such Person will, as of such date, be greater than the amount
that will be required to pay the liability of such Person on its debts as such
debts become absolute and matured, (c) such Person will not have, as of such
date, an unreasonably small amount of capital with which to conduct its
business, and (d) such Person will be able to pay its debts as they mature. For
purposes of this definition, (i) "debt" means liability on a "claim," and (ii)
"claim" means any (x) right to payment, whether or not such a right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an
equitable remedy for breach of performance if such breach gives rise to a right
to payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured
or unsecured.
"Subsidiary": with respect to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Supporting Obligation": any secondary obligation that supports the payment or
performance of an Account, chattel paper, a document, a General Intangible, an
instrument, Investment Property, or any other Collateral.
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"Termination Date": shall mean the third anniversary of the date of this
Agreement or such other date as IBM Credit and Customer may agree to from time
to time.
"Trademarks": (i) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, service marks, logos, words, terms,
names, symbols and devices and all combinations thereof, and all other source or
business identifiers, and all goodwill of the business connected with the use
thereof as symbolized thereby, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, or
otherwise, and all common-law rights related thereto, including, without
limitation, those listed on Schedule 6.14, and (ii) the right to obtain all
renewals and extensions thereof.
"U.C.C.": as defined in Section 1.2.
"Unrestricted Domestic Subsidiary" means any direct or indirect Subsidiary of a
Credit Party which Subsidiary is located in the United States of America and IBM
Credit does not have a pledge of 100% of such Subsidiary's stock or a perfected
first priority security interest in such Subsidiary's assets.
"Unrestricted Foreign Subsidiary" means a direct or indirect Subsidiary of
Credit Party (x) that is borrowing money in the form of a loan, note or similar
instrument from a financial institution other than IBM Credit, and (y) is owned
directly or indirectly by a Subsidiary for which the shares (one share less than
two-thirds of the shares of the Subsidiary) have been pledged to IBM Credit. As
of the date hereof the Unrestricted Foreign Subsidiaries are Pemstar (Tianjin)
Enterprise Ltd and Pemstar B.V.
"Unrestricted Subsidiary" means collectively the Unrestricted Domestic
Subsidiaries and Unrestricted Foreign Subsidiaries.
"Unused Line Fee": as defined in Attachment A.
"U.S. Bank": shall mean U.S. Bank National Association, together with its
assigns and successors.
"Voting Stock": securities, the holders of which are ordinarily, in the absence
of contingencies, entitled to elect the corporate directors (or persons
performing similar functions).
1.2. Other Defined Terms. Terms not otherwise defined in this Agreement which
are defined in the Uniform Commercial Code as in effect in the State of New York
(the "U.C.C.") shall have the meanings assigned to them therein.
1.3. Attachments. All attachments, exhibits, schedules and other addenda
hereto, including, without limitation, Attachment A and Attachment B, are
specifically incorporated herein and made a part of this Agreement.
Section 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES
2.1. Credit Line. (A) Subject to the terms and conditions set forth in this
Agreement, on and after the Closing Date to but not including the date that is
the earlier of (x) the date on which this Agreement is terminated pursuant to
Section 10. and (y) the date on which IBM Credit terminates the Credit Line
pursuant to Section 9., the "Termination Date", IBM Credit agrees to extend to
the Customer a credit line ("Credit Line"), as further defined in Section 2.1.
(B), in the amounts set forth in Attachment A pursuant to which IBM Credit will
make to the Customer, from time to time, Advances in an aggregate amount at any
one time outstanding not to exceed the Maximum Advance Amount.
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(B) The Credit Line is comprised of a Revolving A Credit Facility and a
Revolving B Credit Facility in respective amounts specified in Attachment A. The
Customer may not request an Advance under the Revolving B Credit Facility, and
IBM Credit shall have no obligation to make an Advance under the Revolving B
Credit Facility, unless and until the Outstanding Advances shall be equal to the
Revolving A Credit Facility and the Borrowing Base shall exceed the Revolving A
Credit Facility. Notwithstanding any other term of this Agreement, Customer
shall provide IBM Credit with no less than thirty (30) days prior written notice
of its initial request for an Advance under the Revolving B Credit Facility.
Upon Customer's initial Request for A/R Advance under the Revolving B Credit
Facility, IBM Credit may modify such terms and conditions of this Agreement
prior to the funding of such A/R Advance, including, but not limited to, advance
rates, interest rates and fees, as IBM Credit may require from time to time in
its reasonable opinion for purposes of assigning or participating out portions
of the Credit Line and the Obligations to other financial institutions, which
modifications shall be effective, and agreed to in writing by the Credit
Parties, prior to any such Advance pursuant to the Revolving B Credit Facility.
In addition, in the event an initial Advance is made under the Revolving B
Credit Facility, IBM Credit may, from time to time thereafter, make additional
reasonable modifications to the terms and conditions of this Agreement in order
to successfully assign or participate out a satisfactory portion, as determined
by IBM Credit, of the Credit Line to other financial institutions. IBM Credit
shall have no obligations to make Advances under the Revolving B Credit Facility
if (i) it cannot successfully assign or participate out a satisfactory portion
(as determined by IBM Credit) of the Credit Line to other financial institutions
or (ii) the Credit Parties do not agree to the modifications to the Agreement as
requested by IBM Credit pursuant to this Section 2.1 (B).
2.2. Advances. (A) Whenever Customer shall desire IBM Credit to provide an A/R
Advance, Customer shall deliver to IBM Credit written notice of Customer's
request for such an Advance ("Request for A/R Advance"). Request for Advance
shall be delivered to IBM Credit (i) if such A/R Advance is a Prime Rate
Advance, on or prior to 1:00 p.m. (eastern time) one Business Day prior to the
requested A/R Advance Date, or (ii) if such A/R Advance is a LIBOR Advance, on
or prior to 1:00 p.m. (eastern time) two Business Days prior to the requested
A/R Advance Date. The Request for A/R Advance shall specify (i) the requested
A/R Advance Date; (ii) whether the requested A/R Advance will be a LIBOR Advance
or a Prime Rate Advance, and (iii) the amount of the requested A/R Advance,
provided, however, that if Customer desires to borrow a LIBOR Advance, such
LIBOR Advance shall not be in an amount less than $10,000,000.00. Customer may
deliver a Request for A/R Advance via facsimile. Any Request for A/R Advance
delivered to IBM Credit shall be irrevocable.
In no event may Customer have more than four (4) LIBOR Advances outstanding
at any one time.
(B) Subject to the terms and conditions of this Agreement, on the A/R
Advance Date specified in a Request for A/R Advance, IBM Credit shall make the
principal amount of each such A/R Advance available to the Customer in
immediately available funds to an account maintained by Customer. If IBM Credit
is making an A/R Advance hereunder on a day on which Customer is to repay all or
any part of an Outstanding Advance (or any other amount owing hereunder), IBM
Credit shall apply the proceeds of the A/R Advance to such repayment and only an
amount equal to the difference, if any, between the amount of the A/R Advance
and the amount being repaid shall be made available to Customer as provided in
the immediately preceding sentence.
(C) Each A/R Advance shall accrue a finance charge on the Average Daily
Balance thereof, from and including the date of each A/R Advance to and
including the date such A/R Advance is paid by Customer to IBM Credit, at a per
annum rate equal to the lesser of (a) the Applicable Finance Charge, and (b) the
highest rate from time to time permitted by applicable law. If it is determined
that amounts received from the Customer were in excess of such highest rate,
then the amount representing such excess shall be considered reductions to
principal of Advances.
2.3. Finance and Other Charges. (A) Finance charges for an A/R Advance for a
calendar month shall be equal to (i) one twelfth (1/12) of the Applicable
Finance Charge multiplied by (ii) the Average Daily Balance of such Advance for
the period when such finance charge accrues during such
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calendar month multiplied by (iii) the actual number of days during such
calendar month when such finance charge accrues divided by (iv) thirty (30).
(B) Finance Charges for a LIBOR Advance shall be billed in advance for a
thirty (30) day period and such LIBOR Advance shall be converted to a Prime Rate
Advance on the 31st day after such A/R Advance Date if not paid by then. Should
Customer pay such LIBOR Advance prior to its due date, the remaining interest on
such LIBOR Advance remains due and payable to IBM Credit. On the terms and
subject to the limitations hereof, the Customer shall have the option at any
time and from time to time to convert all or any portion of the Advances into
Prime Rate Advances or LIBOR Advances, or to continue a LIBOR Advance as such;
provided, however that a LIBOR Advance may be continued or converted only on the
last day of the Interest Period applicable thereto. The Customer shall give IBM
Credit written notice of any continuation or conversion of any Advances and such
notice must be given so as to be received by IBM Credit not later than 1:00 P.M.
(Eastern time) two Business Days prior to the requested date of conversion or
continuation in the case of continuation of, or conversion to, LIBOR Advances
and on the date of the requested conversion to Prime Rate Advances. Each such
notice shall specify (a) the amount to be continued or converted, (b) the date
for the continuation or conversion (which must be (i) the last day of the
preceding Interest Period for any continuation or conversion of LIBOR Advances,
and (ii) a Business Day and (c) in the case of conversions to or continuations
as LIBOR Advances, the Interest Period applicable thereto. Any notice given by
Customer under this Agreement shall be irrevocable.
(C) The Customer hereby agrees to pay to IBM Credit the charges set forth
as "Other Charges" in Attachment A. The Customer also agrees to pay IBM Credit
additional charges for any returned items of payment received by IBM Credit. The
Customer hereby acknowledges that any such charges are not interest but that
such charges, if unpaid, will constitute part of the Outstanding Advances.
(D) The finance charges and Other Charges owed under this Agreement, and
any charges hereafter agreed to in writing by the parties, are payable monthly
on receipt of IBM Credit's ▇▇▇▇ or statement therefor or IBM Credit may, in its
sole discretion, add unpaid finance charges and Other Charges to the Outstanding
Advances.
(E) Late charges pursuant to this subsection (E) for an Advance for a
calendar month shall be equal to (i) one twelfth (1/12) of the Delinquency Fee
Rate multiplied by (ii) the Average Daily Balance of such Advance for the period
when such Advance is past due during such calendar month multiplied by (iii) the
actual number of days during such calendar month when such Advance is past due
divided by (iv) thirty (30).
(F) All payments (including prepayments) to be made by Customer herein,
whether on account of principal, interest, fees or otherwise, shall be made
prior to 12:00 Noon, New York City time, on the due date thereof to IBM Credit
in Dollars and in immediately available funds. Any payments received by IBM
Credit after such time shall be deemed to have been received on the next
succeeding Business Day. If any payment herein becomes due and payable on a day
other than a Business Day, such payment shall be extended to the next succeeding
Business Day. In the case of any extension of any payment of principal pursuant
to the preceding sentence, interest thereon shall be payable at the then
applicable rate during such extension.
(G) If any amount owed under this Agreement, including, without limitation,
any Advance, is not paid when due (whether at maturity, by acceleration or
otherwise), the unpaid amount thereof will bear a late charge from and including
the day after such Advance was due and payable to and including the date IBM
Credit receives payment thereof, at a per annum rate equal to the lesser of (a)
the amount set forth in Attachment A to this Agreement as the "Delinquency Fee
Rate" and (b) the highest rate from time to time permitted by applicable law. In
addition, if any Shortfall Amount shall not be paid when due pursuant to Section
2.6 hereof, Customer shall pay IBM Credit a Shortfall Transaction Fee. If it is
determined that amounts received from Customer were in excess of such highest
rate, then the amount representing such excess shall be considered reductions to
principal of Advances.
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(H) The Customer shall compensate IBM Credit, upon its written request, for
all losses, expenses and liabilities (including any interest paid by IBM Credit
to lenders of funds borrowed by it to make or carry LIBOR Advances to the extent
not recovered by IBM Credit in connection with the re-employment of such funds
and including loss of anticipated profits) which IBM Credit may sustain: (i) if
for any reason, other than a default by IBM Credit, a funding of a LIBOR Advance
does not occur on the date specified therefor in the Customer's request or
notice as to such Advance under Section 2.2, or ii) if, for whatever reason
(including, but not limited to, acceleration of the maturity of Advances, occurs
on any day other than the last day of the Interest Period applicable thereto.
IBM Credit's request for compensation shall set forth the basis for the amount
requested.
2.4. Customer Account Statements. IBM Credit will send statements of each
transaction hereunder as well as monthly billing statements to Customer with
respect to Advances and other charges due on Customer's account with IBM Credit.
Each statement of transaction and monthly billing statement shall be deemed,
absent manifest error, to be correct and shall constitute an account stated with
respect to each transaction or amount described therein unless within seven (7)
Business Days after such statement of transaction or billing statement is
received by Customer, Customer provides IBM Credit written notice objecting that
such amount or transaction is incorrectly described therein and specifying the
error(s), if any, contained therein. IBM Credit may at any time adjust such
statements of transaction or billing statements to comply with applicable law
and this Agreement.
2.5. Shortfall. If, on any date, the Outstanding Advances shall exceed the
Maximum Advance Amount (such excess, the "Shortfall Amount"), then the Customer
shall on such date prepay the Outstanding Advances in an amount equal to such
Shortfall Amount.
2.6. Application of Payments. Each of the Credit Parties hereby agrees that
all checks and other instruments delivered to IBM Credit on account of the
Obligations shall constitute conditional payment until such items are actually
collected by IBM Credit. Each of the Credit Parties waives the right to direct
the application of any and all payments at any time or times hereafter received
by IBM Credit on account of the Obligations. Each of the Credit Parties agrees
that IBM Credit shall have the continuing exclusive right to apply and reapply
any and all such payments to the Obligations in such manner as IBM Credit may
deem advisable notwithstanding any entry by IBM Credit upon any of its books and
records.
2.7. Prepayment and Reborrowing By Customer. (A) Customer may at any time pay
principal, without notice or penalty, in whole or in part amounts owed under
this Agreement. IBM Credit may apply payments made to it (whether by the
Customer or otherwise) to pay finance charges and other amounts owing under this
Agreement first and then to the principal amount owed by the Customer.
(B) Subject to the terms and conditions of this Agreement, any amount
prepaid or repaid to IBM Credit in respect to the Outstanding Advances may be
reborrowed by Customer in accordance with the provisions of this Agreement.
2.8. Requirements of Law.
(A) If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof or compliance by IBM Credit with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the date hereof:
(i) shall subject IBM Credit to any tax of any kind whatsoever with
respect to this Agreement, or change the basis of taxation of payments to
IBM Credit in respect thereof (except for Non-Excluded Taxes covered by
Section 2.10 and changes in the rate of tax on the overall net income of
IBM Credit);
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(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, IBM
Credit; or
(iii) shall impose on IBM Credit any other condition;
(B) and the result of any of the foregoing is to increase the cost to IBM
Credit, by an amount that IBM Credit deems to be material, of making, converting
into, continuing or maintaining any Advance, or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, Customer shall promptly
pay IBM Credit, upon its demand, any additional amounts necessary to compensate
IBM Credit for such increased cost or reduced amount receivable. If IBM Credit
becomes entitled to claim any additional amounts pursuant to this paragraph, it
shall promptly notify Customer of the event by reason of which it has become so
entitled. If IBM Credit shall have determined that the adoption of or any change
in any Requirement of Law regarding capital adequacy or in the interpretation or
application thereof or compliance by IBM Credit or any corporation controlling
IBM Credit with any request or directive regarding capital adequacy (whether or
not having the force of law) from any Governmental Authority made subsequent to
the date hereof shall have the effect of reducing the rate of return on IBM
Credit's or such corporation's capital as a consequence of its obligations
hereunder to a level below that which IBM Credit or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
IBM Credit's or such corporation's policies with respect to capital adequacy) by
an amount deemed by IBM Credit to be material, then from time to time, after
submission by IBM Credit to Customer of a written request therefor, Customer
shall pay to IBM Credit such additional amount or amounts as will compensate IBM
Credit or such corporation for such reduction; provided that Customer shall not
be required to compensate IBM Credit pursuant to this paragraph for any amounts
incurred more than six (6) months prior to the date that IBM Credit notifies
Customer of IBM Credit's intention to claim compensation therefor; and provided
further that, if the circumstances giving rise to such claim have a retroactive
effect, then such six (6) month period shall be extended to include the period
of such retroactive effect.
(C) A certificate as to any additional amounts payable pursuant to this
Section submitted by IBM Credit to Customer shall be conclusive in the absence
of manifest error. The obligations of Customer pursuant to this Section shall
survive the termination of this Agreement and the payment of the Advances and
all other amounts payable hereunder.
2.9. Taxes. (A) All payments made by Customer under this Agreement shall be
made free and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding net
income taxes and franchise taxes (imposed in lieu of net income taxes) imposed
on IBM Credit as a result of a present or former connection between IBM Credit
and the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from IBM Credit having executed, delivered or
performed its obligations or received a payment under, or enforced, this
Agreement or any Other Document). If any such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions or withholdings (Non-Excluded Taxes)
or Other Taxes are required to be withheld from any amounts payable to IBM
Credit hereunder, the amounts so payable to IBM Credit shall be increased to the
extent necessary to yield to IBM Credit (after payment of all Non-Excluded Taxes
and Other Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement, provided, however, that
Customer shall not be required to increase any such amounts payable to IBM
Credit with respect to any Non-Excluded Taxes (i) that are attributable to IBM
Credit's failure to comply with the requirements of paragraph D.
(B) In addition, Customer shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
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(C) Whenever any Non-Excluded Taxes or Other Taxes are payable by Customer,
as promptly as possible thereafter Customer shall send to IBM Credit a certified
copy of an original official receipt received by Customer showing payment
thereof. If Customer fails to pay any Non-Excluded Taxes or Other Taxes when due
to the appropriate taxing authority or fails to remit to IBM Credit required
receipts or other required documentary evidence, Customer shall indemnify IBM
Credit for any incremental taxes, interest or penalties that may become payable
by IBM Credit as a result of any such failure.
(D) IBM Credit shall take reasonable efforts to move its lending office to
reduce or eliminate the taxes referred to in this Section 2.9.
(E) The agreements in this Section shall survive the termination of this
Agreement and the payment of the Advances and all other amounts payable
hereunder.
Section 3. CREDIT LINE ADDITIONAL PROVISIONS
3.1. Ineligible Accounts. IBM Credit and each of the Credit Parties agree that
IBM Credit shall have the sole right to determine eligibility of Accounts from
an Account debtor for purposes of determining the Borrowing Base; however,
without limiting such right, the following Accounts will be deemed to be
ineligible for purposes of determining the Borrowing Base:
(A) Accounts created from the sale of goods and/or performance of services
on non-standard terms or that allow for payment to be made more than thirty (30)
days from the date of such sale or performance of services, unless as otherwise
agreed to in writing by IBM Credit;
(B) Accounts unpaid more than ninety (90) days from date of invoice;
(C) Accounts payable by an Account debtor if fifty percent (50%) or more of
the aggregate outstanding balance of all such Accounts payable by such Account
debtor or such Account debtor's Affiliates to any Credit Party remain unpaid for
more than ninety (90) days from the date of invoice;
(D) Accounts payable by an Account debtor that is an Affiliate of any
Credit Party, or an officer, employee, agent, Guarantor, stockholder of any
Credit Party or of an Affiliate of any Credit Party, or is related to or has
common shareholders, officers or directors with any Credit Party;
(E) Accounts arising from consignment sales;
(F) Except for state, local and United States government institutions and
public educational institutions, Accounts with respect to which the payment by
the Account debtor is or may be conditional;
(G) Except for state, local and United States government institutions and
public educational institutions, and except for those Accounts that are owed to
a Credit Party either generated directly in the US or by enforceable transfer or
assignment from Customer's foreign subsidiaries to Customer, provided that such
transfer or assignment is supported by documents satisfactory to IBM Credit,
including a legal opinion from counsel to Customer regarding the validity and
legality of such transfer or assignment;
Accounts with respect to which:
(i) the Account debtor is not a commercial entity, or
(ii) the Account debtor is not a resident of the United States (it
being understood that non-U.S. Resident affiliates of IBM and Celestica,
and possibly others as agreed to in writing by IBM Credit, are anticipated
to be permitted Account debtors subject to the limitations above);
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(H) Accounts payable by any Account debtor to which any Credit Party is or
may become liable for goods sold or services rendered by such Account debtor to
a Credit Party;
(I) Accounts arising from the sale or lease of goods purchased for a
personal, family or household purpose;
(J) Accounts arising from the sale or other disposition of goods that have
been used for demonstration purposes or loaned or leased by any Credit Party to
another party;
(K) Accounts which are progress payment accounts or contra accounts;
(L) Accounts upon which IBM Credit does not have a valid, perfected, first
priority security interest, or which are not the subject of an intercreditor
agreement to which IBM Credit is a party and has obtained a subordination from
any prior filer;
(M) Accounts payable by an Account debtor that is or any Credit Party knows
will become, subject to proceedings under United States Bankruptcy Law or other
law for the relief of debtors;
(N) Accounts that are not payable in US Dollars:
(O) Accounts payable by any Account debtor that is a remarketer of computer
hardware and software products and whose purchases of such products from any
Credit Party have been financed by another person who pays the proceeds of such
financing directly to a Credit Party on behalf of such debtor ("Third Party
Financier") unless (i) such Third Party Financier does not have a separate
financing relationship with any Credit Party or (ii) such Third Party Financer
has a separate financing relationship with a Credit Party and has waived its
right to set off its obligations to the Credit Parties;
(P) Accounts arising from the sale or lease of goods which are billed to
any Account debtor but have not yet been shipped by the Credit Party;
(Q) Accounts to the extent a Credit Party has permitted or agreed to any
extension, compromise or settlement, or made any change or modification of any
kind or nature, including, but not limited to, any change or modification to the
terms relating thereto, but only to the extent of such extension, compromise,
settlement, change or modification;
(R) Accounts that do not arise from undisputed bona fide transactions
completed in accordance with the terms and conditions contained in the invoices,
purchase orders and contracts relating thereto;
(S) Accounts that are discounted for the full payment term specified in a
Credit Party's terms and conditions with its Account debtors, or for any longer
period of time;
(T) Accounts on cash on delivery (C.O.D.) terms;
(U) Accounts arising from maintenance or service contracts that are billed
in advance of full performance of service;
(V) Accounts arising from bartered transactions;
(W) Accounts arising from incentive payments, rebates, discounts, credits,
and refunds from a supplier; and
(X) Any and all other Accounts that IBM Credit deems, from time to time, in
its sole and absolute discretion, to be ineligible.
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The aggregate of all Accounts that are not ineligible Accounts shall hereinafter
be referred to as "Eligible Accounts."
3.2. Reimbursement for Charges. Each of the Credit Parties agrees to pay for
all costs and expenses of the Credit Parties's bank(s) in respect to collection
of checks and other items of payment, all fees relating to the use and
maintenance of the Lockbox(es) and the Special Account(s) (each as defined in
Section 3.3) and with respect to remittances of proceeds of the Advances
hereunder.
3.3. Lockbox and Special Account. Each Credit Party shall establish and
maintain lockbox(es) (each, a "Lockbox") at the address(es) set forth in
Attachment A with the financial institution(s) listed in Attachment A (each, a
"Bank") pursuant to an agreement between such Credit Party and each Bank in form
and substance satisfactory to IBM Credit. Each Credit Party shall also establish
and maintain a deposit account with each Bank ("Special Account") that shall
contain only proceeds of such Credit Party's Accounts (other than any Accounts
constituting U.S. Bank Collateral). Each Credit Party shall enter into and
maintain a contingent blocked account agreement with each Bank for the benefit
of IBM Credit in form and substance satisfactory to IBM Credit pursuant to
which, among other things, such Bank shall agree that disbursements from the
Special Account shall be made only as IBM Credit shall direct.
3.4. Collections. Each Credit Party shall instruct all Account debtors (other
than Account debtors of Accounts constituting U.S. Bank Collateral) to remit
payments directly to a Lockbox and shall deliver to IBM Credit written
agreements from each such Account obligor that such Account obligor agrees to
make all payments due such Credit Party to the Lockbox unless otherwise
instructed by IBM Credit. In addition, Each Credit Party shall have such
instruction printed in conspicuous type on all invoices (other than invoices
related to Accounts constituting U.S. Bank Collateral. Each Credit Party shall
instruct such Bank to deposit all remittances to such Bank's Lockbox into its
Special Account. Each Credit Party further agrees that it shall not deposit or
permit any deposits of funds, including, without limitation, any U.S. Bank
Collateral, other than remittances paid in respect of the Accounts into the
Special Account(s) or permit any commingling of funds with such remittances in
any Lockbox or Special Account.
Without limiting the Credit Parties's foregoing obligations, if, at any time,
any Credit Party receives a remittance directly from an Account debtor, then
such Credit Party shall make entries on its books and records in a manner that
shall reasonably identify such remittances and shall keep a separate account on
its record books of all remittances so received and deposit the same into a
Special Account. Until so deposited into the Special Account, such Credit Party
shall keep all remittances received in respect of Accounts separate and apart
from its other property so that they are capable of identification as the
proceeds of Accounts in which IBM Credit has a security interest.
3.5. Application of Remittances and Credits. Each Credit Party shall apply all
remittances against the aggregate of its outstanding Accounts no later than the
end of the Business Day on which such remittances are deposited into the Special
Account. Each Credit Party also agrees to apply each remittance against its
respective Account no later than three (3) Business Days from the date such
remittance is deposited into the Special Account. In addition, each Credit Party
shall promptly apply any credits owing in respect to any Account when due.
3.6. Power of Attorney. Each Credit Party hereby irrevocably appoints IBM
Credit, with full power of substitution, as its true and lawful attorney-in-fact
with full power, in good faith and in compliance with commercially reasonable
standards, in the discretion of IBM Credit, to:
(A) sign the name of such Credit on any document or instrument that IBM
Credit shall deem necessary or appropriate to perfect and maintain perfected the
security interest in the Collateral contemplated under this Agreement and the
Other Documents;
17
(B) endorse the name of such Credit Party upon any of the items of payment
of proceeds and deposit the same in the account of IBM Credit for application to
the Obligations; and
upon the occurrence and during the continuance of an Event of Default as defined
in Section 9.1 hereof:
(C) demand payment, enforce payment and otherwise exercise all such Credit
Party's rights and remedies with respect to the collection of any Accounts;
(D) settle, adjust, compromise, extend or renew any Accounts;
(E) settle, adjust or compromise any legal proceedings brought to collect
any Accounts;
(F) sell or assign any Accounts upon such terms, for such amounts and at
such time or times as IBM Credit may deem advisable;
(G) discharge and release any Accounts;
(H) prepare, file and sign such Credit Party's name on any Proof of Claim
in Bankruptcy or similar document against any Account debtor;
(I) prepare, file and sign such Credit Party's name on any notice of lien,
claim of mechanic's lien, assignment or satisfaction of lien or mechanic's lien,
or similar document in connection with any Accounts;
(J) endorse the name of such Credit Party upon any chattel paper, document,
instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of lading or similar document or
agreement relating to any Account or goods pertaining thereto;
(K) endorse the name of such Credit party upon any of the items of payment
of proceeds and deposit the same in the account of IBM Credit for application to
the Obligations;
(L) sign the name of such Credit Party to requests for verification of
Accounts and notices thereof to Account debtors;
(M) sign the name of such Credit Party on any document or instrument that
IBM Credit shall deem necessary or appropriate to enforce any and all remedies
it may have under this Agreement, at law or otherwise;
(N) make, settle and adjust claims under the Policies with respect to the
Collateral and endorse such Credit Party's name on any check, draft, instrument
or other item of payment of the proceeds of the Policies with respect to the
Collateral; and
(O) take control in any manner of any term of payment or proceeds and for
such purpose to notify the postal authorities to change the address for delivery
of mail addressed to such Credit Party to such address as IBM Credit may
designate.
The power of attorney granted by this Section is for value and coupled with an
interest and is irrevocable so long as this Agreement is in effect or any
Obligations remain outstanding. Nothing done by IBM Credit pursuant to such
power of attorney will reduce any of the Obligations other than payment
Obligations to the extent IBM Credit has received monies.
3.7. Concentration Accounts. Without limiting IBM Credit's other rights, IBM
Credit reserves the right to, from time to time in its sole discretion, modify
the percentage of the amount of Concentration Accounts
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used in calculating the Borrowing Base or eliminate Concentration Accounts in
calculating the Borrowing Base.
Section 4. SECURITY -- COLLATERAL
4.1. Grant. To secure the full and punctual payment and performance of the
Obligations (including obligations under any leases any Credit Party may enter
into, now or in the future, with IBM Credit) when due (whether at the stated
maturity, by acceleration or otherwise), each of the Credit Parties hereby,
jointly and severally, grants IBM Credit a security interest in all of its
right, title and interest in and to the following property, whether now owned or
hereafter acquired or existing and wherever located:
(A) all goods, inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor;
(B) all accounts, contract rights, chattel paper, instruments, deposit
accounts, obligations of any kind owing to it, whether or not arising out of or
in connection with the sale or lease of goods or the rendering of services and
all books, invoices, documents and other records in any form evidencing or
relating to any of the foregoing;
(C) all General Intangibles;
(D) all Commercial Tort Claims;
(E) all Intellectual Property;
(F) all Investment Property;
(G) all Supporting Obligations;
(H) all other obligations of any kind owing to it, whether or not arising
out of or in connection with the sale or lease of goods or the rendering of
services;
(I) all rights now or hereafter existing in and to all mortgages, security
agreements, leases or other contracts securing or otherwise relating to any of
the foregoing; and
(J) all substitutions and replacements for all of the foregoing, all
proceeds of all of the foregoing and, to the extent not otherwise included, all
payments under insurance or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the foregoing'
provided, however, that Other Lender Collateral shall specifically be
excluded from the foregoing.
All of the above assets (excluding any Other Lender Collateral) shall be
collectively defined herein as the "Collateral". Each Credit Party covenants and
agrees with IBM Credit that: (a) the security constituted to by this Agreement
is in addition to any other security from time to time held by IBM Credit and
(b) the security hereby created is a continuing security interest and will cover
and secure the payment of all Obligations both present and future to IBM Credit.
4.2. Further Assurances. Each Credit Party shall, from time to time upon the
request of IBM Credit, execute and deliver to IBM Credit, or cause to be
executed and delivered, at such time or times as IBM Credit may request such
other and further documents, certificates and instruments that IBM Credit may
deem necessary to perfect and maintain perfected IBM Credit's security interests
in the Collateral and in order to fully consummate all of the transactions
contemplated under this Agreement and the Other
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Documents. Each Credit Party shall make appropriate entries on its books and
records disclosing IBM Credit's security interests in the Collateral.
Section 5. CONDITIONS PRECEDENT
5.1. Conditions Precedent to the Effectiveness of this Agreement. The
effectiveness of this Agreement is subject to the receipt by IBM Credit of the
following documents, certificates, opinions and instruments to the satisfaction
of, or waiver in writing by IBM Credit of compliance with, the following
conditions precedent set forth below:
(A) this Agreement executed and delivered by each Credit Party and IBM
Credit;
(B) a favorable opinion of counsel for each Credit Party in substantially
the form of Attachment G;
(C) a certificate of the secretary or an assistant secretary of each Credit
Party, substantially in the form and substance of Attachment H hereto,
certifying that, among other items, (i) such Credit Party is a corporation
organized under the laws of the State of its incorporation and has its principal
place of business as stated therein, (ii) such Credit Party is registered to
conduct business in specified states and localities, (iii) true and complete
copies of the articles of incorporation and by-laws of such Credit Party are
delivered therewith, together with all amendments and addenda thereto as in
effect on the date thereof, (iv) the resolution as stated in the certificate is
a true, accurate and completed copy of the resolution adopted by the such Credit
Party's Board of Directors authorizing the execution, delivery and performance
of this Agreement and each Other Document executed and delivered in connection
herewith, and (v) the names and true signatures of the officers of such Credit
Party authorized to sign this Agreement and the Other Documents;
(D) certificates dated as of a recent date from the Secretary of State or
other appropriate authority evidencing the good standing of each Credit Party in
the jurisdiction of its organization and in each other jurisdiction where the
ownership or lease of its property or the conduct of its business requires it to
qualify to do business;
(E) copies of all approvals and consents from any Person, in each case in
form and substance satisfactory to IBM Credit, which are required to enable each
Credit Party to authorize, or required in connection with, (a) the execution,
delivery or performance of this Agreement and each of the Other Documents, and
(b) the legality, validity, binding effect or enforceability of this Agreement
and each of the Other Documents;
(F) lockbox agreement(s) executed by each Credit Party and each Bank, in
form and substance satisfactory to IBM Credit;
(G) contingent blocked account agreement(s) executed by each Credit Party
and each Bank in form and substance satisfactory to IBM Credit;
(H) intercreditor agreement(s) ("Intercreditor Agreement"), in form and
substance satisfactory to IBM Credit, executed by each other secured creditor of
each Credit Party as set forth in Attachment A, or otherwise in form and
substance satisfactory to IBM Credit;
(I) UCC-1 financing statements for each jurisdiction reasonably requested
by IBM Credit executed by each Credit Party and each other Guarantor whose
Guaranty to IBM Credit is intended to be secured by a pledge of its assets;
(J) the statements, certificates, documents, instruments, financing
statements, agreements and information set forth in Attachment A and Attachment
B;
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(K) all such other statements, certificates, documents, instruments,
financing statements, agreements and other information with respect to the
matters contemplated by this Agreement as IBM Credit shall have reasonably
requested; and
(L) Customer shall have repaid to IBM Credit the remaining obligations due
IBM Credit under the terms of the Amendment to the Revolving Credit Agreement,
dated August 1, 2000.
5.2. Conditions Precedent to Each Advance. No Advance will be required to be
made or renewed by IBM Credit under this Agreement unless, on and as of the date
of such Advance, the following statements shall be true to the satisfaction of
IBM Credit:
(A) The representations and warranties contained in this Agreement or in
any document, instrument or agreement executed in connection herewith are true
and correct in all material respects on and as of the date of such Advance as
though made on and as of such date;
(B) No event has occurred and is continuing or after giving effect to such
Advance or the application of the proceeds thereof would result in or would
constitute a Default;
(C) No event has occurred and is continuing which could reasonably be
expected to have a Material Adverse Effect;
(D) Both before and after giving effect to the making of such Advance, no
Shortfall Amount exists; and
(E) Each Credit Party and each of Customer's other guarantor Subsidiaries
are Solvent, and no event has occurred and is continuing that would result in or
would constitute an Insolvency.
Except as Customer has otherwise disclosed to IBM Credit in writing prior to
each request, each request for an Advance hereunder and the receipt (or deemed
receipt) by the Customer or any other Credit Party of the proceeds of any
Advance hereunder shall be deemed to be a representation and warranty by each of
the Credit Parties that, as of and on the date of such Advance, the statements
set forth in (A) through (E) above are true statements. No such disclosures by
Customer to IBM Credit shall in any manner be deemed to satisfy the conditions
precedent to each Advance that are set forth in this Section 5.2.
Section 6. REPRESENTATIONS AND WARRANTIES
To induce IBM Credit to enter into this Agreement, each of the Credit Parties
hereby represents and warrants to IBM Credit as follows:
6.1. Organization and Qualifications. Each Credit Party and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) has the
corporate or other power and authority, and the legal right, to own its
properties and assets and to transact the businesses in which it presently is
engaged and (iii) is duly qualified and is authorized to do business and is in
good standing in each jurisdiction where it presently is engaged in business and
is required to be so qualified.
6.2. Rights in Collateral; Priority of Liens. Each Credit Party and each of
its Subsidiaries owns the property granted by it respectively as Collateral to
IBM Credit, free and clear of any and all Liens in favor of third parties except
for the Liens otherwise permitted pursuant to Section 8.1. The Liens granted by
each Credit Party and each of its Subsidiaries pursuant to this Agreement, the
Guaranties, if any, and the Other Documents in the Collateral constitute the
valid and enforceable first, prior and perfected Liens on the Collateral, except
to the extent any Liens that are prior to IBM Credit's Liens are (i) the subject
of an
21
Intercreditor Agreement or (ii) Purchase Money Security Interests on inventory
and equipment except to the of any Purchase Money Security Interest on inventory
or equipment included in the Borrowing Base.
6.3. No Conflicts. The execution, delivery and performance by each Credit
Party of this Agreement and each of the Other Documents (i) are within its
corporate power; (ii) are duly authorized by all necessary corporate action;
(iii) are not in contravention in any respect of any Requirement of Law or any
indenture, contract, lease, agreement, instrument or other commitment to which
it is a party or by which it or any of its properties are bound; (iv) do not
require the consent, registration or approval of any Governmental Authority or
any other Person (except such as have been duly obtained, made or given, and are
in full force and effect); and (v) will not, except as contemplated herein,
result in the imposition of any Liens upon any of its properties.
6.4. Enforceability. This Agreement and all of the other documents executed
and delivered by any Credit Party in connection herewith are the legal, valid
and binding obligations of such Credit Party, and are enforceable in accordance
with their terms, except as such enforceability may be limited by the effect of
any applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws affecting creditors' rights generally or the general
equitable principles relating thereto.
6.5. Locations of Offices, Records and Inventory. The address of the principal
place of business and chief executive office of each Credit Party is as set
forth on Attachment B or on any notice provided by Customer to IBM Credit
pursuant to Section 7.7(C) of this Agreement. The books and records of each
Credit Party, and all of its chattel paper (other than the chattel paper
delivered to IBM Credit pursuant to Section 7.14(E)) and records of Accounts,
are maintained exclusively at such location.
There is no jurisdiction in which any Credit Party has any assets, other than
those jurisdictions identified on Attachment B or on any notice provided by
Customer to IBM Credit pursuant to Section 7.7(C) of this Agreement. None of the
receipts received by any Credit Party from any warehouseman states that the
goods covered thereby are to be delivered to bearer or to the order of a named
person or to a named person and such named person's assigns.
6.6. Fictitious Business Names. No Credit Party has used any corporate or
fictitious name during the five (5) years preceding the date of this Agreement,
other than those listed on Attachment B.
6.7. Organization. All of the outstanding capital stock of each Credit Party
has been validly issued, is fully paid and nonassessable.
6.8. No Judgments or Litigation. Except as set forth on Attachment B, no
judgments, orders, writs or decrees are outstanding against any Credit Party nor
is there now pending or, to the best of any Credit Party's knowledge after due
inquiry, threatened, any litigation, contested claim, investigation,
arbitration, or governmental proceeding by or against any Credit Party or
against any of the Credit Parties's respective properties or revenues (a) with
respect to this Agreement or any of the Other Documents or any of the
transactions contemplated hereby or thereby, or (b) that could reasonably be
expected to have a Material Adverse Effect.
6.9. No Defaults. No Credit Party is in material default (for purposes of this
Section 6.9 only, a default shall be deemed material if it exceeds
$1,000,000.00) under any term of any indenture, contract, lease, agreement,
instrument or other commitment to which it is a party or by which it, or any of
its properties are bound, that gives the other party the right to accelerate its
obligations under such other party's agreement with such Credit Party. No Credit
Party has any knowledge of any dispute regarding any such indenture, contract,
lease, agreement, instrument or other commitment. No Default or Event of Default
has occurred and is continuing.
6.10. Labor Matters. Except as set forth on any notice provided by Customer to
IBM Credit pursuant to Section 7.1(G) of this Agreement, no Credit Party is a
party to any labor dispute. There are no strikes or
22
walkouts or labor controversies pending or threatened against any Credit Party
which could reasonably be expected to have a Material Adverse Effect.
6.11. Compliance with Law. No Credit Party has violated or failed to comply
with any material Requirement of Law or any material requirement of any self
regulatory organization.
6.12. ERISA. Each "single employer plan," "employee benefit plan," "employee
pension benefit plan," "defined benefit plan," or "multi-employer benefit
plan,'" which any Credit Party has established, maintained, or to which it is
required to contribute (collectively, the "Plans") is in compliance with all
applicable provisions of ERISA and the Code and the rules and regulations
thereunder as well as the Plan's terms and conditions. There have been no
"prohibited transactions" and no "reportable event" has occurred within the last
sixty (60) month period prior to the date on which this representation is made
or deemed made with respect to any Plan. No Credit Party has any "multi-employer
benefit plan."
No termination of a Single Employer Plan has occurred, and no Lien in favor of
the PBGC or a Plan has arisen, during such sixty (60) month period. The present
value of all accrued benefits under each Single Employer Plan (based on those
assumptions used to fund such Plans) did not, as of the last annual valuation
date prior to the date on which this representation is made or deemed made,
exceed the value of the assets of such Plan allocable to such accrued benefits
by a material amount. Neither any Credit Party nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multi-employer Benefit
Plan that has resulted or could reasonably be expected to result in a material
liability under ERISA, and neither any Credit Party nor any Commonly Controlled
Entity would become subject to any material liability under ERISA if such Credit
Party or any such Commonly Controlled Entity were to withdraw completely from
all Multi-employer Benefit Plans as of the valuation date most closely preceding
the date on which this representation is made or deemed made. No such
Multi-employer Benefit Plan is in Reorganization or Insolvent.
As used in this Agreement the terms "employee benefit plan," "employee pension
benefit plan," "defined benefit plan," and "multi-employer benefit plan," have
the respective meanings assigned to them in Section 3 of ERISA and any
applicable rules and regulations thereunder. No Credit Party has incurred any
"accumulated funding deficiency" within the meaning of ERISA or incurred any
liability to the Pension Benefit Guaranty Corporation (the "PBGC") in connection
with a Plan (other than for premiums due in the ordinary course).
6.13. Compliance with Environmental Laws. Except as otherwise disclosed in
Attachment B:
(A) Each Credit Party has obtained all government approvals required with
respect to the operation of their businesses under any Environmental Law.
(B) (i) no Credit Party has generated, transported or disposed of any
Hazardous Substances; (ii) no Credit Party is currently generating, transporting
or disposing of any Hazardous Substances; (iii) no Credit Party has any
knowledge that (a) any of its real property (whether owned, leased, or otherwise
directly or indirectly controlled) has been used for the disposal of or has been
contaminated by any Hazardous Substances, or (b) any of its business operations
have contaminated lands or waters of others with any Hazardous Substances; (iv)
no Credit Party nor any of its respective assets are subject to any
Environmental Liability and, to the best of any Credit Party's knowledge, any
threatened Environmental Liability; (v) no Credit Party has received any notice
of or otherwise learned of any governmental investigation evaluating whether any
remedial action is necessary to respond to a release or threatened release of
any Hazardous Substances for which any Credit Party may be liable; (vi) no
Credit Party is in violation of any Environmental Law; (vii) there are no
proceedings or investigations pending against any Credit Party with respect to
any violation or alleged violation of any Environmental Law; provided however,
that the parties acknowledge that any generation, transportation, use, storage
and disposal of certain such Hazardous Substances in any Credit Party's or its
Subsidiaries' business shall be excluded from representations (i) and (ii)
above, provided, further, that each such Credit Party is at all times
generating,
23
transporting, utilizing, storing and disposing such Hazardous Substances in
accordance with all applicable Environmental Laws and in a manner designed
to minimize the risk of any spill, contamination, release or discharge of
Hazardous Substances other than as authorized by Environmental Laws.
6.14. Federal Regulations. No part of the proceeds of any Advance will be used
for buying or carrying any margin stock within the respective meanings of each
of the quoted terms under Regulation U as now and from time to time hereafter in
effect or for any purpose that violates the provisions of the Regulations of the
Board. If requested by IBM Credit, each Credit Party will furnish to IBM Credit
a statement to the foregoing effect in conformity with the requirements of FR
Form G-3 or FR Form U-1, as applicable, referred to in Regulation U.
6.15. Intellectual Property. Each Credit Party possesses such assets, licenses,
Patents, patent applications, Copyrights, service marks, Trademarks, trade names
and trade secrets and all rights, priorities, privileges and other property
relating thereto or arising therefrom ("Intellectual Property") as are necessary
or advisable to continue to conduct its present and proposed business
activities. No material claim has been asserted and is pending by any Person
challenging or questioning the use of any Intellectual Property or the validity
or effectiveness of any Intellectual Property, nor does any Credit Party know of
any valid basis for any such claim. All Intellectual Property is valid,
subsisting, unexpired and enforceable, and the use of Intellectual Property by
each Credit Party and its Subsidiaries does not infringe on the rights of any
Person in any material respect.
6.16. Licenses and Permits. Each Credit Party has obtained and holds in full
force and effect all material franchises, licenses, leases, permits,
certificates, authorizations, qualifications, easements, rights of way and other
material rights and approvals which are necessary for the operation of its
businesses as presently conducted. No Credit Party is in violation of the terms
of any such material franchise, license, lease, permit, certificate,
authorization, qualification, easement, right of way, right or approval.
6.17. Investment Company. No Credit Party is (i) an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, (ii) a holding company or a
subsidiary of a holding company, or an Affiliate of a holding company or of a
subsidiary of a holding company, within the meaning of the Public Utility
Holding Company Act of 1935, as amended, or (iii) subject to any other law which
purports to regulate or restrict its ability to borrow money or to consummate
the transactions contemplated by this Agreement or the Other Documents or to
perform its obligations hereunder or thereunder.
6.18. Taxes and Tax Returns. Each Credit Party has timely filed all federal,
state, and local tax returns and other reports which it is required by law to
file, and has either duly paid all taxes, fees and other governmental charges
indicated to be due on the basis of such reports and returns or pursuant to any
assessment received by any Credit Party, or made provision for the payment
thereof in accordance with GAAP. The charges and reserves on the books of each
Credit Party in respect of taxes or other governmental charges are in accordance
with GAAP. No tax liens have been filed against any Credit Party or any of its
respective property, and, to the knowledge of the Credit Parties, no claim is
being asserted, with respect to such tax, fee or other charge.
6.19. Status of Accounts. Each Account is based on an actual and bona fide sale
and delivery of goods or rendition of services to customers, made by a Credit
Party, in the ordinary course of its business; the goods and inventory being
sold and the Accounts created are its exclusive property and are not and shall
not be subject to any Lien, consignment arrangement, encumbrance, security
interest or financing statement whatsoever (other than Permitted Liens). The
Credit Parties's customers have accepted goods or services and owe and are
obligated to pay the full amounts stated in the invoices according to their
terms. There are no proceedings or actions known to any Credit Party which are
pending or threatened against any Material Account Debtor (as defined in Section
7.14(B) of this Agreement) of any of the Accounts which could reasonably be
expected to result in a Material Adverse Effect on the debtor's ability to pay
the full amounts due to the Credit Parties.
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6.20. Affiliate/Subsidiary Transactions. No Credit Party is a party to or bound
by any agreement or arrangement (whether oral or written) to which any Affiliate
or Subsidiary of such Credit Party is a party except (i) in the ordinary course
of and pursuant to the reasonable requirements of such Credit Party's business
and (ii) upon fair and reasonable terms no less favorable to such Credit Party
than it could obtain in a comparable arm's-length transaction with an
unaffiliated Person. Except as disclosed to IBM Credit by Customer in writing
from time to time after the Closing Date, Schedule 6.20 sets forth the name and
jurisdiction of incorporation of each Subsidiary and, as to each such
Subsidiary, the percentage of each class of capital stock owned by Customer.
6.21. Accuracy and Completeness of Information. All factual information
furnished by or on behalf of any Credit Party to IBM Credit or the Auditors for
purposes of or in connection with this Agreement or any Other Document, or any
transaction contemplated hereby or thereby is or will be true and accurate in
all material respects on the date as of which such information is dated or
certified and not incomplete by omitting to state any material fact necessary to
make such information not misleading at such time. The projections and pro forma
financial information contained in the materials referenced above are based upon
good faith estimates and assumptions believed by management of the Credit
Parties to be reasonable at the time made, it being recognized by IBM Credit
that such financial information as it relates to future events is not to be
viewed as fact and that actual results during the period or periods covered by
such financial information may differ from the projected results set forth
therein by a material amount. There is no fact known to any Credit Party that
could reasonably be expected to have a Material Adverse Effect that has not been
expressly disclosed herein, in the Other Documents, certificates and statements
furnished to IBM Credit for use in connection with the transactions contemplated
hereby and by the Other Documents.
6.22. Recording Taxes. All recording taxes, recording fees, filing fees and
other charges payable by each Credit Party in connection with the filing and
recording of this Agreement have either been paid in full by such Credit Party
or arrangements for the payment of such amounts by such Credit Party have been
made to the satisfaction of IBM Credit.
6.23. Indebtedness. No Credit Party (i) has any Indebtedness, other than
Permitted Indebtedness; and (ii) has guaranteed any obligations of any other
Person (except as permitted by Section 8.13). The Obligations constitute "senior
indebtedness" of each of the Credit Parties, and the obligations of each
Subsidiary guarantor constitute "guarantor senior indebtedness" of such
Subsidiary guarantor.
6.24. Limitations on Lockboxes and Special Accounts. No Credit Party has any
Lockbox, Special Account or other deposit accounts with any banks except as
provided in Section 3.3 of this Agreement.
6.25. Solvency. Each Credit Party is, and after giving effect to the incurrence
of all Indebtedness and Obligations being incurred in connection herewith and
therewith will be and will continue to be, Solvent.
6.26. Security Interest. Each Credit Party represents that all filings and
other actions necessary to perfect and protect the security interest in the
Collateral created under this Agreement have been duly made or taken and are in
full force and effect, and this Agreement creates in favor of IBM Credit a valid
first priority security interest in the Collateral, and all filings and other
actions necessary or desirable to perfect and protect such security interest
have been duly taken.
6.27. Investment Property. (A) The Pledged Interests constitute all of the
issued and outstanding Equity Interests of each Issuer owned by the Credit
Parties.
(B) All the Pledged Interests have been duly and validly issued and are
fully paid and nonassessable. There is no amount or other obligation owing by
any Credit Party to any Issuer of the Pledged Interests in exchange for or in
connection with the issuance of the Pledged Interests or any Credit Party's
status as a stockholder, member, or partner of any Issuer.
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(C) Each Credit Party is the record and beneficial owner of, and has good
and marketable title to, the Investment Property pledged by it hereunder, free
of any and all Liens or options in favor of, or claims of, any other Person,
except the security interest created by this Agreement.
6.28. Use of Proceeds. The proceeds of the Advances shall be used for general
corporate purposes of the Credit Parties, including without limitation
acquisition financing, to the extent such acquisition financing does not exceed
$20,000,000 per year, in the aggregate and to pay fees and expenses related to
such Advances.
Section 7. AFFIRMATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment and
satisfaction of all Obligations:
7.1. Financial and Other Information. The Credit Parties shall cause the
following information to be delivered to IBM Credit within the following time
periods:
(A) as soon as available and in any event within ninety (90) days after the
end of each fiscal year of Customer (i) audited Financial Statements as of the
close of the fiscal year and for the fiscal year, together with a comparison to
the Financial Statements for the prior year, in each case accompanied by (a)
either an opinion of the Auditors without a "going concern" or like
qualification or exception, or qualification arising out of the scope of the
audit or, if so qualified, an opinion which shall be in scope and substance
reasonably satisfactory to IBM Credit, (b) such Auditors' "Management Letter" to
Customer, if any, (c) a written statement signed by the Auditors stating that in
the course of the regular audit of the business of Customer and its consolidated
Subsidiaries, which audit was conducted by the Auditors in accordance with
generally accepted auditing standards, the Auditors have not obtained any
knowledge of the existence of any Default under any provision of this Agreement,
or, if such Auditors shall have obtained from such examination any such
knowledge, they shall disclose in such written statement the existence of the
Default and the nature thereof, it being understood that such Auditors shall
have no liability, directly or indirectly, to anyone for failure to obtain
knowledge of any such Default; and (ii) a Compliance Certificate along with a
schedule, in substantially the form of Attachment C hereto, of the calculations
used in determining, as of the end of such fiscal year, whether the Credit
Parties are in compliance with the financial covenants set forth in Attachment
A;
(B) as soon as available and in any event within forty-five (45) days after
the end of each fiscal quarter of Customer (i) Financial Statements as of the
end of such period and for the fiscal year to date, together with a comparison
to the Financial Statements for the same periods in the prior year, all in
reasonable detail and duly certified (subject to normal year-end audit
adjustments and except for the absence of footnotes) by the chief executive
officer or chief financial officer of Customer as having been prepared in
accordance with GAAP; and (ii) a Compliance Certificate along with a schedule,
in substantially the form of Attachment C hereto, of the calculations used in
determining, as of the end of such fiscal quarter, whether the Credit Parties
are in compliance with the financial covenants set forth in Attachment A;
(C) as soon as available and in any event within twenty (20) days after the
end of each fiscal month of Customer (i) Financial Statements as of the end of
such period and for the fiscal year to date, together with a comparison to the
Financial Statements for the same periods in the prior year, all in reasonable
detail and duly certified (subject to normal year-end audit adjustments and
except for the absence of footnotes) by the chief executive officer or chief
financial officer of Customer as having been prepared in accordance with GAAP;
and (ii) a Compliance Certificate along with a schedule, in substantially the
form of Attachment C hereto, of the calculations used in determining, as of the
end of such fiscal month, whether the Credit Parties are in compliance with the
financial covenants set forth in Attachment A;
26
(D) as soon as available and in any event within sixty (60) days after the
end of each fiscal year of Customer (i) projected Financial Statements, broken
down by quarter, for the current and following fiscal year; and (ii) if
composed, a narrative discussion relating to such projected Financial
Statements;
(E) promptly after any Credit Party obtains knowledge of (i) the occurrence
of a Default or Event of Default, or (ii) the existence of any condition or
event which would result in any Credit Party's failure to satisfy the conditions
precedent to Advances set forth in Section 5, a certificate of the chief
executive officer or chief financial officer of Customer specifying the nature
thereof and the Credit Parties's proposed response thereto, each in reasonable
detail;
(F) promptly after any Credit Party obtains knowledge of (i) any
proceeding(s) being instituted or threatened to be instituted by or against any
Credit Party in any federal, state, local or foreign court or before any
commission or other regulatory body (federal, state, local or foreign), or (ii)
any actual or prospective change, development or event which, in any such case,
has had or could reasonably be expected to have a Material Adverse Effect, a
certificate of the chief executive officer or chief financial officer of
Customer specifying the nature thereof and the Credit Parties's proposed
response thereto, each in reasonable detail;
(G) promptly after any Credit Party obtains knowledge that (i) any order,
judgment or decree in excess of $250,000.00 shall have been entered against a
Credit Party or any of its properties or assets, or (ii) it has received any
notification of a material violation of any Requirement of Law from any
Governmental Authority, a certificate of the chief executive officer or chief
financial officer of Customer specifying the nature thereof and the Credit
Parties's proposed response thereto, each in reasonable detail;
(H) promptly after any Credit Party learns of any material labor dispute to
which a Credit Party may become a party, any strikes or walkouts relating to any
of its plants or other facilities, and the expiration of any labor contract to
which any Credit Party is a party or by which it is bound, a certificate of the
chief executive officer or chief financial officer of Customer specifying the
nature thereof and the Credit Parties's proposed response thereto, each in
reasonable detail;
(I) within five (5) Business Days after request by IBM Credit, any written
certificates, schedules and reports together with all supporting documents as
IBM Credit may reasonably request relating to the Collateral or any Credit
Party's or any guarantor's business affairs and financial condition;
(J) by the fifth (5th) day of each month, or as otherwise agreed in
writing, a Collateral Management Report as of a date no earlier than the last
day of the immediately preceding month;
(K) along with the Financial Statements set forth in Section 7.1(A) and
(B), the name, address and phone number of each of the Credit Parties's Account
debtors' primary contacts for each Account on the Accounts aging report
contained in its most recent Collateral Management Report; and
(L) within five (5) days after the same are sent, copies of all Financial
Statements and reports which Customer sends to its stockholders, and within five
(5) days after the same are filed, copies of all Financial Statements and
reports which Customer may make to, or file with, the Securities and Exchange
Commission or any successor or analogous governmental authority.
Each certificate, schedule and report provided by a Credit Party to IBM Credit
shall be signed by an authorized officer of such Credit Party, and which
signature shall be deemed a representation and warranty that the information
contained in such certificate, schedule or report is true and accurate in all
material respects on the date as of which such certificate, schedule or report
is made and does not omit to state a material fact necessary in order to make
the statements contained therein not misleading at such time. Each Financial
Statement delivered pursuant to this Section 7.1 shall be prepared in accordance
with GAAP applied consistently throughout the periods reflected therein and with
prior periods. The Credit
27
Parties shall cause the audited Financial Statements and accompanying documents
set forth in Section 7.1(A)(i) to be delivered directly by the Auditors to IBM
Credit only via first class mail.
7.2. Location of Collateral. The inventory, equipment and other tangible
Collateral shall be kept or sold at the addresses as set forth on Attachment B
or on any notice provided by Customer to IBM Credit in accordance with Section
7.8(C). Such locations shall be certified quarterly to IBM Credit substantially
in the form of Attachment F.
7.3. Changes in Credit Party. The Credit Parties shall provide thirty (30)
days prior written notice to IBM Credit of any change in a Credit Party's
"location" (as defined in Article 9 of the U.C.C.), name, chief executive office
and principal place of business, organization, form of ownership or corporate
structure; provided, however, that a Credit Party's compliance with this
covenant shall not relieve it of any of its other obligations or any other
provisions under this Agreement or any Other Document limiting actions of the
type described in this Section.
7.4. Corporate Existence. Each Credit Party shall (A) maintain its corporate
existence, maintain in full force and effect all rights, privileges, licenses,
bonds, franchises, leases and qualifications to do business, and all Properties,
contracts and other rights necessary to the profitable conduct of its business,
(B) cause each of its Subsidiaries to maintain its legal entity existence,
maintain in full force and effect all rights, privileges, licenses, bonds,
franchises, leases and qualification to do business, and all properties,
contracts and other rights necessary to the profitable conduct of its business,
(C) authorize for itself and, if applicable, cause each of its Subsidiaries to
authorize IBM Credit to file revised UCC-1 financing statements if such Credit
Party or such Subsidiary changes its legal name, (D) continue in, and limit its
operations to, the same general lines of business as presently conducted by it
unless otherwise permitted in writing by IBM Credit and (E) comply with all
Requirements of Law.
7.5. Payment of Obligations. Each Credit Party and its Subsidiaries shall pay,
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its material obligations of whatever nature,
except where the amount or validity thereof is currently being contested in good
faith by appropriate proceedings and reserves in conformity with GAAP with
respect thereto have been provided on the books of such Credit Party or its
Subsidiaries, as the case may be.
7.6. ERISA. Each Credit Party shall promptly notify IBM Credit in writing
after it learns of (i) the occurrence of any event which would constitute a
"reportable event" under ERISA or any regulations thereunder with respect to any
Plan, ii) a failure to make any required contribution to a Plan, the creation of
any Lien in favor of the PBGC or a Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multi-employer Benefit Plan or
(iii) the institution of proceedings or the taking of any other action by the
PBGC or Customer or any Commonly Controlled Entity or any Multi-employer Benefit
Plan with respect to the withdrawal from, or the termination, Reorganization or
Insolvency of, any Plan. Notwithstanding the foregoing, a Credit Party shall
have no obligation to notify IBM Credit as to any "reportable event" as to which
the 30-day notice requirement of Section 4043(b) has been waived by the PBGC,
until such time as such Credit Party is required to notify the PBGC of such
reportable event.
Such notification shall include a certificate of the chief financial officer of
Customer setting forth details as to such "reportable event" and the action
which the Credit Party proposes to take with respect thereto, together with a
copy of any notice of such "reportable event" which may be required to be filed
with the PBGC, or any notice delivered by the PBGC evidencing its intent to
institute such proceedings. Upon request of IBM Credit, the Credit Parties shall
furnish, or cause the plan administrator to furnish, to IBM Credit the most
recently filed annual report for each Plan.
7.7. Environmental Matters. (A) The Credit Parties and any other Person under
the Credit Parties's control (including, without limitation, agents and
Affiliates under such control) shall (i) comply with all Environmental Laws in
all material respects, and (ii) undertake to use commercially reasonable efforts
to prevent any unlawful release of any Hazardous Substance by such Credit Party
or such Person into,
28
upon, over or under any property now or hereinafter owned, leased or otherwise
controlled (directly or indirectly) by it.
(B) The Credit Parties shall notify IBM Credit, promptly upon its obtaining
knowledge of (i) any non-routine proceeding or investigation by any Governmental
Authority with respect to the presence of any Hazardous Substances on or in any
property now or hereinafter owned, leased or otherwise controlled (directly or
indirectly) by any Credit Party, (ii) all claims made or threatened by any
Person or Governmental Authority against any Credit Party or any of its assets
relating to any loss or injury resulting from any Hazardous Substance, (iii) a
Credit Party's discovery of evidence of unlawful disposal of or environmental
contamination by any Hazardous Substance on any property now or hereinafter
owned, leased or otherwise controlled (directly or indirectly) by a Credit
Party, and (iv) any occurrence or condition which could constitute a violation
of any Environmental Law.
7.8. Collateral Books and Records/Collateral Audit. (A) Each Credit Party
agrees to maintain books and records pertaining to the Collateral in such
detail, form and scope as is consistent with GAAP and good business practice,
and agrees that such books and records will reflect IBM Credit's interest in the
Accounts.
(B) Each Credit Party agrees that IBM Credit or its agents may enter upon
the premises of such Credit Party at any time and from time to time, during
normal business hours and upon reasonable notice under the circumstances, and at
any time at all on and after the occurrence and during the continuance of an
Event of Default for the purposes of (i) inspecting the Collateral, (ii)
inspecting and/or copying (at such Credit Party's expense) any and all records
pertaining thereto, (iii) discussing the affairs, finances and business of the
Credit Parties with any officers, employees and directors of the Credit Parties
or with the Auditors and (iv) verifying Eligible Accounts and other Collateral.
Each of the Credit Parties also agrees to provide IBM Credit with such
reasonable information and documentation that IBM Credit deems necessary to
conduct the foregoing activities, including, without limitation, reasonably
requested samplings of purchase orders, invoices and evidences of delivery or
other performance.
Upon the occurrence and during the continuance of an Event of Default which has
not been waived by IBM Credit in writing, IBM Credit may conduct any of the
foregoing activities in any manner that IBM Credit deems reasonably necessary.
(C) Each Credit Party shall give IBM Credit thirty (30) days prior written
notice of any change in the location of any Collateral, the location of its
books and records or in the location of its chief executive office or place of
business from the locations specified in Attachment B, and will execute in
advance of such change and cause to be filed and/or delivered to IBM Credit any
financing statements, landlord or other lien waivers, or other documents
reasonably required by IBM Credit, all in form and substance reasonably
satisfactory to IBM Credit.
(D) Each Credit Party agrees to advise IBM Credit promptly, in reasonably
sufficient detail, of any substantial change relating to the type, quantity or
quality of the Collateral, or any event which could reasonably be expected to
have a Material Adverse Effect on the value of the Collateral or on the security
interests granted to IBM Credit therein.
(E) Each Credit Party shall, and shall cause each of its subsidiaries to,
from time to time, do and perform any and all acts and execute any and all
instruments, notices and other documents, reasonably required or recommended by
IBM Credit to address concerns identified by IBM Credit during the course of any
audit of any Credit Party, or any of its subsidiaries' books and records, or
assets.
7.9. Insurance; Casualty Loss. Each Credit Party agrees to maintain with
financially sound and reputable insurance companies: (i) insurance on its
properties, (ii) public liability insurance against claims for personal injury
or death as a result of the use of any products sold by it and (iii) insurance
coverage against other business risks, in each case, in at least such amounts
and against at least such risks as are
29
usually and prudently insured against in the same general geographical area by
companies of established repute engaged in the same or a similar business. Each
Credit Party will furnish to IBM Credit, upon its written request and thirty
(30) days after the end of each fiscal year, the insurance certificates with
respect to such insurance. In addition, all Policies so maintained are to name
IBM Credit as an additional insured as its interest may appear.
If a Credit Party fails to pay any cost, charges or premiums, or if a Credit
Party fails to insure the Collateral, IBM Credit may pay such costs, charges or
premiums. Any amounts paid by IBM Credit hereunder shall be considered an
additional debt owed by the Credit Parties to IBM Credit and are due and payable
immediately upon receipt of an invoice by IBM Credit.
7.10. Taxes. Each Credit Party agrees to pay and cause each Subsidiary to pay,
when due, all taxes, fees or other charges lawfully levied or assessed against
it or any of the Collateral before any penalty or interest accrues thereon
unless such taxes are being contested, in good faith, by appropriate proceedings
promptly instituted and diligently conducted and an adequate reserve or other
appropriate provisions have been made therefor as required in order to be in
conformity with GAAP and an adverse determination in such proceedings could not
reasonably be expected to have a Material Adverse Effect no tax lien has been
filed, and, to the knowledge of any Credit Party's or any of its Subsidiaries,
no claim is being asserted, with respect to any such tax, fee or other charge.
7.11. Compliance With Laws. Each Credit Party agrees to comply with all
material Requirements of Law applicable to the Collateral or any part thereof,
or to the operation of its business.
7.12. Fiscal Year. Each Credit Party agrees to maintain its fiscal year as a
year ending March 31 unless Customer provides IBM Credit at least thirty (30)
days prior written notice of any change thereof.
7.13. Intellectual Property. (A) Each Credit Party (either itself or through
licensees) will (i) use each material Trademark on each and every trademark
class of goods applicable to its current line as reflected in its current
catalogs, brochures and price lists in order to maintain such Trademark in full
force free from any claim of abandonment for non-use, (ii) maintain as in the
past the quality of products and services offered under such Trademark, (iii)
use such Trademark with the appropriate notice of registration and all other
notices and legends required by applicable Requirements of Law, (iv) not adopt
or use any ▇▇▇▇ which is confusingly similar or a colorable imitation of such
Trademark unless IBM Credit shall obtain a perfected security interest in such
▇▇▇▇ pursuant to this Agreement, and (v) not (and not permit any licensee or
sublicensee thereof to) do any act or omit to do any act whereby such Trademark
may become invalidated or impaired in any way.
(B) No Credit Party (either itself or through licensees) will do any act,
or omit to do any act, whereby any material Patent may become forfeited,
abandoned or dedicated to the public.
(C) Each Credit Party (either itself or through licensees) (i) will employ
each [material] Copyright and (ii) will not (and will not permit any licensee or
sublicensee thereof to) do any act or omit to do any act whereby any material
portion of the Copyrights may become invalidated or otherwise impaired. No
Credit Party will (either itself or through licensees) do any act whereby any
material portion of the Copyrights may fall into the public domain.
(D) No Credit Party (either itself or through licensees) will use any
material Intellectual Property to infringe the intellectual property rights of
any other Person.
(E) Each Credit Party will notify IBM Credit immediately if it knows, or
has reason to know, that any application or registration relating to any
material Intellectual Property may become forfeited, abandoned or dedicated to
the public, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any other Governmental
30
Authority in any country) regarding Customer's ownership of, or the validity of,
any material Intellectual Property or Customer's right to register the same or
to own and maintain the same.
(F) Whenever any Credit Party, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Credit Party shall report
such filing to IBM Credit within five (5) Business Days after the last day of
the fiscal quarter in which such filing occurs. Upon request of IBM Credit, such
Credit Party shall execute and deliver, and have recorded, any and all
agreements, instruments, documents, and papers as IBM Credit may request to
evidence IBM Credit's security interest in any Copyright, Patent or Trademark
and the goodwill and General Intangibles of such Credit Party relating thereto
or represented thereby.
(G) Each Credit Party will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the material Intellectual Property, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(H) In the event that any material Intellectual Property is infringed,
misappropriated or diluted by a third party, the applicable Credit Party shall
(i) take such actions as it shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) promptly notify IBM
Credit after it learns thereof and ▇▇▇ for infringement, misappropriation or
dilution, to seek injunctive relief where appropriate and to recover any and all
damages for such infringement, misappropriation or dilution.
7.14. Maintenance of Property. Each Credit Party shall maintain all of its
material properties (business and otherwise) in good condition and repair
(ordinary wear and tear excepted) and pay and discharge all costs of repair and
maintenance thereof and all rental and mortgage payments and related charges
pertaining thereto and not commit or permit any waste with respect to any of its
material properties.
7.15. Collateral. Each Credit Party shall:
(A) from time to time upon request of IBM Credit, provide IBM Credit with
access to copies of all invoices, delivery evidences and other such documents
relating to each Account;
(B) promptly upon a Credit Party obtaining knowledge thereof, furnish to
and inform IBM Credit of all material adverse information relating to the
financial condition of any Account debtor whose outstanding obligations to such
Credit Party constitute two percent (2%) or more of the Accounts at such time (a
"Material Account Debtor");
(C) promptly upon a Credit Party learning thereof, notify IBM Credit in
writing of any event which would cause any obligation of a Material Account
Debtor to become an Ineligible Account;
(D) keep all goods rejected or returned by any Account debtor and all goods
repossessed or stopped in transit by any Credit Party from any Account debtor
segregated from other property of such Credit Party, holding the same in trust
for IBM Credit until such Credit Party applies a credit against such Account
debtor's outstanding obligations to such Credit Party or sells such goods in the
ordinary course of business, whichever occurs earlier;
(E) stamp or otherwise ▇▇▇▇ chattel paper and instruments now owned or
hereafter acquired by it in conspicuous type to show that the same are subject
to IBM Credit's security interest and immediately thereafter deliver or cause
such chattel paper and instruments to be delivered to IBM Credit or
31
any agent designated by IBM Credit with appropriate endorsements and assignments
to vest title and possession in IBM Credit;
(F) use commercially reasonable efforts to collect all Accounts owed;
(G) promptly notify IBM Credit of any material loss, theft or destruction
of or damage to any of the Collateral. Each Credit Party shall diligently file
and prosecute its claim for any award or payment in connection with any such
material loss, theft, destruction of or damage to Collateral. Each Credit Party
shall, upon demand of IBM Credit, make, execute and deliver any assignments and
other instruments sufficient for the purpose of assigning any such award or
payment to IBM Credit, free of any encumbrances of any kind whatsoever;
(H) consistent with reasonable commercial practice, observe and perform all
matters and things necessary or expedient to be observed or performed under or
by virtue of any lease, license, concession or franchise forming part of the
Collateral in order to preserve, protect and maintain all the rights of IBM
Credit thereunder;
(I) consistent with reasonable commercial practice, maintain, use and
operate the Collateral and carry on and conduct its business in a proper and
efficient manner so as to preserve and protect the Collateral and the earnings,
incomes, rents, issues and profits thereof; and
(J) at any time and from time to time, upon the request of IBM Credit, and
at the sole expense of the Credit Parties, each Credit Party will promptly and
duly execute and deliver such further instruments and documents and take such
further action as IBM Credit may reasonably request for the purpose of obtaining
or preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the security interests granted herein and the
payment of any and all recording taxes and filing fees in connection therewith.
7.16. Additional Collateral. (A) With respect to any property acquired after
the Closing Date by any Credit Party or its domestic Subsidiary (other than any
property described in paragraph (b), (c) or (d) below as to which IBM Credit
does not have a perfected Lien, such Credit Party or its domestic Subsidiary
shall promptly (i) execute and deliver to IBM Credit such amendments such other
documents as IBM Credit deems necessary or advisable to grant to IBM Credit, a
security interest in such property, (ii) in the case of Investment Property,
Deposit Accounts, and any other relevant Collateral, take any actions requested
by IBM Credit to enable IBM Credit to obtain control (within the meaning of
U.C.C.) with respect thereto, (iii) cause IBM Credit's name to be noted as
secured party on any certificate of title for a titled good if such notation is
deemed necessary or advisable by IBM Credit for the attachment, perfection or
priority of, or the ability of IBM Credit to enforce or realize on, IBM Credit's
security interest in such Collateral, (iv) comply with any material Requirement
of Law as to any Collateral if such compliance is deemed necessary or advisable
by IBM Credit for the attachment, perfection or priority of, or the ability of
IBM Credit to enforce, IBM Credit's security interest in such Collateral, (v)
obtain consents and approvals from any Governmental Authority or other Person,
including without limitation any consent of licensor, lessor or other Person
obligated on Collateral, (vi) execute and deliver such documents, agreements,
and instruments as may be required by IBM Credit to further evidence and perfect
its security interests in all Intellectual Property, (vii) obtain waivers from
mortgagees and landlords in form and substance satisfactory to IBM Credit, and
(viii) take all actions necessary or advisable to grant to IBM Credit a
perfected first priority security interest in such property, including the
filing of Uniform Commercial Code financing statements in such jurisdictions as
may be required by law or as may be requested by IBM Credit.
(B) If any Credit Party shall at any time hold or acquire a Commercial Tort
Claim, then Customer shall immediately notify IBM Credit in a writing signed by
such Credit Party of the details thereof
32
and grant to IBM in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement, with such writing to be in form
and substance satisfactory to IBM Credit.
(C) Each Credit Party will permit IBM Credit, or its designee, to inspect
the Collateral at any reasonable time or times, wherever located.
(D) With respect to any new Domestic Subsidiary created or acquired after
the Closing Date by a Credit Party or its Domestic Subsidiary, such Credit Party
or such Domestic Subsidiary shall promptly (i) execute and deliver to IBM Credit
such amendments to this Agreement, and execute such other documents, instruments
and agreements, as IBM Credit deems necessary or advisable to grant to IBM
Credit a perfected first priority security interest in the capital stock of such
new Subsidiary that is owned by such Credit Party or its Domestic Subsidiary,
(ii) deliver to IBM Credit the certificates representing such capital stock,
together with undated stock powers, in blank, executed and delivered by a duly
authorized officer of such Credit Party or the relevant Domestic Subsidiary,
(iii) cause such new Domestic Subsidiary (A) to become a party to this Agreement
or such other agreements, documents or Instruments, as IBM Credit deems
necessary or advisable (B) to take such actions necessary or advisable to grant
to IBM Credit a perfected first priority with respect to such new Domestic
Subsidiary including the filing of Uniform Commercial Code financing statements
in such jurisdictions as may be required or by law or as may be requested by IBM
Credit and (iv) if requested by IBM Credit, deliver to the IBM Credit legal
opinions relating to the matters described above, which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to the IBM Credit.
(E) Notwithstanding the foregoing:
(i) if a Credit Party or its Domestic Subsidiary of Credit Party acquires a
Domestic Subsidiary after the Closing Date and provided that (a) no Default or
Event of Default shall have occurred and be continuing at the time of or after
giving effect to the acquisition, (b) such acquisition is not financed by IBM
Credit, and (c) the Borrowing Base equals or exceeds the Revolving A Credit
Facility (and the Revolving B Facility if such facility has been drawn upon)
such Credit Party and new Domestic Subsidiary shall not be required to take any
action under Section 7.16(D) in connection with such acquisition.
(ii) if a Credit Party or a Domestic Subsidiary of a Credit Party acquires a
Domestic Subsidiary (and such acquisition is financed by IBM Credit), such
Credit Party or such Subsidiary can request that it not be required to comply
with Section 7.16 (D) with respect to such acquisition, and IBM Credit will not
unreasonably withhold its consent to such request provided that the Borrowing
Base exceeds the Revolving A Credit Facility (and the Revolving B Credit
Facility if it has been drawn upon) and no Default or Event of Default shall
have occurred and be continuing at the time of or after giving effect to such
acquisition.
(iii) if a Credit Party or its Domestic Subsidiary otherwise creates or forms a
Domestic Subsidiary (other than in connection with an acquisition), such Credit
Party or such Subsidiary can request that it not be required to comply with
Section 7.16 (D) and IBM Credit will not unreasonably withhold its consent to
such request provided that the Borrowing Base exceeds the Revolving A Credit
Facility (and the Revolving B Credit Facility if it has been drawn upon) and no
Default or Event of Default shall have occurred and be continuing at the time of
such request and after giving effect to the creation of such Domestic
Subsidiary. No Unrestricted Domestic Subsidiary or Foreign Subsidiary may own
capital stock of a Credit Party or Subsidiary of a Credit Party (other than an
Unrestricted Subsidiary).
(F) Notwithstanding anything herein to the contrary, no Credit Party nor
any Subsidiary of a Credit Party shall at any time (i) provide a guarantee of
any Indebtedness of any Unrestricted Domestic Subsidiary or Foreign Subsidiary
except that (x) the Customer may guarantee the obligations of Pemstar de Mexico
S.A. ("Pemstar Mexico") in connection with a credit facility to be provided by a
financial institution to Pemstar Mexico in an aggregate amount not to exceed Ten
Million Dollars ($10,000,000) and (y) the Customer may provide guaranties to
support Foreign Subsidiaries obligations under operating
33
leases provided that the obligations under all such guaranties do not exceed Ten
Million Dollars ($10,000,000) in the aggregate, (ii) be liable for any other
Indebtedness of any Unrestricted Domestic Subsidiary or Foreign Subsidiary, or
(iii) be liable for any other Indebtedness (other than Indebtedness to U.S.
Bank) which provides that the holder thereof may (upon notice, lapse of time or
both) declare a default therein (or cause such Indebtedness or the payment
thereof to be accelerated, payable or subject to repurchase prior to its final
scheduled maturities) upon the occurrence of a default with respect to any
Indebtedness of an Unrestricted Domestic Subsidiary or Foreign Subsidiary (iv)
make loans, advances, payment of money or goods to an Unrestricted Domestic
Subsidiary or Foreign Subsidiary except as otherwise provided in Section 8.15
hereof (v) make Restricted Payments to an Unrestricted Domestic Subsidiary or
Foreign Subsidiary or (vi) make any Investment or equity contribution in an
Unrestricted Domestic Subsidiary or Foreign Subsidiary except that a Credit
Party may make an equity contribution in (x) the Unrestricted Foreign
Subsidiaries and Pemstar Mexico provided that the aggregate amount of all such
Investments and equity contributions in all the Unrestricted Foreign
Subsidiaries do not exceed Thirty-one Million Six Hundred Fifty-three Thousand
Nine Hundred Seventy-three Dollars ($31,653,973) in the aggregate and (y)
Foreign Subsidiaries (other than Unrestricted Foreign Subsidiaries) provided
that the aggregate amount of all equity investments made by the Credit Parties
in any Foreign Subsidiary (other than Unrestricted Foreign Subsidiaries) shall
not exceed One Million Five Hundred Thousand Dollars ($1,500,000) in the
aggregate per such Foreign Subsidiary. No Unrestricted Domestic Subsidiary or
Foreign Subsidiary may be merged into the Customer or any Credit Party or
liquidate into or transfer substantially all of its assets to the Customer or
any other Subsidiary (other than an Unrestricted Subsidiary).
7.17. Subsidiaries. IBM Credit may require that any Domestic Subsidiaries of a
Credit Party (subject to Section 7.16 (D)), of a Credit Party become parties to
this Agreement as a Credit Party or to any other agreement executed in
connection with this Agreement as guarantors or sureties. Each Credit Party will
comply, and cause all of its Subsidiaries to comply with Sections 7 and 8 of
this Agreement, as if such sections applied directly to such Subsidiaries except
as otherwise provided herein.
7.18. Financial Covenants; Additional Covenants. Each Credit Party acknowledges
and agrees that it shall maintain the financial covenants and other covenants
set forth in the attachments, exhibits and other addenda incorporated in this
Agreement.
Section 8. NEGATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment and
satisfaction of all Obligations hereunder:
8.1. Liens. No Credit Party will, directly or indirectly assign, pledge,
transfer, create, incur, assume, permit to exist or otherwise permit any Lien or
judgment to exist on any of its personal property or any property of its
Subsidiary, assets, revenues or goods, whether real, personal or mixed, whether
now owned or hereafter acquired except for (i) Permitted Liens and (ii) liens on
the assets of any of the Unrestricted Foreign Subsidiaries to the extent such
liens were granted to financial institutions in connection with financing
provided to such Unrestricted Foreign Subsidiary.
8.2. Disposition of Assets. No Credit Party will, directly or indirectly,
sell, lease, assign, transfer or otherwise dispose of any assets other than (i)
sales of inventory in the ordinary course of business and short term rental of
inventory as demonstrations in amounts not material to it, and (ii) voluntary
dispositions of individual assets and obsolete or worn out property in the
ordinary course of business, provided, that the aggregate book value of all such
assets and property so sold or disposed of under this section 8.2 (ii) in any
fiscal year shall not exceed 5% of the consolidated assets of such Credit Party
as of the beginning of such fiscal year, and (iii) dispositions permitted in
Section 8.2.
8.3. Corporate Changes. No Credit Party will, without the prior written
consent of IBM Credit, directly or indirectly, merge, consolidate, liquidate,
wind up, dissolve itself or suffer any liquidation or
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dissolution, or enter into or engage in any operation or activity materially
different from that presently being conducted by it except that:
(A) any Domestic Subsidiary (but not a Foreign Subsidiary) of Customer may
be merged or consolidated with or into Customer (provided that Customer shall be
the continuing or surviving corporation) ; and
(B) any Subsidiary of Customer may Dispose of any or all of its assets
(upon voluntary liquidation or otherwise) to Customer.
8.4. Guaranties. No Credit Party will, directly or indirectly, assume,
guaranty, endorse, or otherwise become liable upon the obligations of any other
Person, except (i) by the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business, (ii) by
the giving of indemnities in connection with the sale of inventory or other
asset dispositions permitted hereunder, (iii) for guaranties in favor of IBM
Credit, and (iv) guaranty to suppliers of the Credit Parties's subsidiaries'
obligations in the aggregate less than ten million dollars ($10,000,000.00).
8.5. Restricted Payments. No Credit Party will, directly or indirectly: (i)
declare or pay any dividend (other than dividends payable solely in common stock
of such Credit Party, except for those dividends payable from Turtle Mountain to
Customer) on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of capital stock of
such Credit Party or any warrants, options or rights to purchase any such
capital stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of such Credit Party; or (ii) make any optional
payment or prepayment on or redemption (including, without limitation, by making
payments to a sinking or analogous fund) or repurchase of any Indebtedness
(other than the Obligations) in the aggregate not to exceed $250,000.00.
8.6. Capital Expenditures. No Credit Party or Subsidiary shall make or commit
to make any Capital Expenditure, except Capital Expenditures of Customer and its
Subsidiaries in the ordinary course of business as defined in Attachment A.
8.7. Investments. The Customer will not, directly or indirectly, make,
maintain or acquire any Investment in any Person other than:
(A) interest bearing deposit accounts (including certificates of deposit)
which are insured by the Federal Deposit Insurance Corporation ("FDIC") or a
similar federal insurance program;
(B) direct obligations of the government of the United States of America or
any agency or instrumentality thereof or obligations guaranteed as to principal
and interest by the United States of America or any agency thereof;
(C) stock or obligations issued to Customer in settlement of claims against
others by reason of an event of bankruptcy or a composition or the readjustment
of debt or a reorganization of any debtor of Customer; and
(D) commercial paper of any company organized under the laws of any State
of the United States or any bank organized or licensed to conduct a banking
business under the laws of the United States or any State thereof having the
short-term highest rating then given by ▇▇▇▇▇'▇ Investor's Services, Inc. or
Standard & Poor's Corporation.
8.8. Affiliate/Subsidiary Transactions. Subject to Section 8.15, no Credit
Party will, directly or indirectly, enter into any transaction with any
Affiliate or Subsidiary, including, without limitation, the
35
purchase, sale or exchange of property or the rendering of any service to any
Affiliate or Subsidiary of such Credit Party except in the ordinary course of
business and pursuant to the reasonable requirements of its business upon fair
and reasonable terms no less favorable to such Credit Party than could be
obtained in a comparable arm's-length transaction with an unaffiliated Person.
8.9. ERISA. No Credit Party will (A) terminate any Plan so as to incur a
material liability to the PBGC (as defined in Section 6.12 of this Agreement),
(B) permit any "prohibited transaction" involving any Plan (other than a
"multi-employer benefit plan") which would subject the such Credit Party to a
material tax or penalty on "prohibited transactions" under the Code or ERISA,
(C) fail to pay to any Plan any contribution which they are obligated to pay
under the terms of such Plan, if such failure would result in a material
"accumulated funding deficiency", whether or not waived, (D) allow or suffer to
exist any occurrence of a "reportable event" or any other event or condition,
which presents a material risk of termination by the PBGC of any Plan (other
than a "multi-employer benefit plan"), or (E) fail to notify IBM Credit as
required in Section 7.5. As used in this Agreement, the terms "accumulated
funding deficiency" and "reportable event" shall have the respective meanings
assigned to them in ERISA, and the term "prohibited transaction" shall have the
meaning assigned to it in the Code and ERISA. For purposes of this Section 8.8,
the terms "material liability", "tax", "penalty", "accumulated funding
deficiency" and "risk of termination" shall mean a liability, tax, penalty,
accumulated funding deficiency or risk of termination which could reasonably be
expected to have a Material Adverse Effect.
8.10. Additional Negative Pledges. No Credit Party will, directly or
indirectly, create or otherwise cause or permit to exist or become effective (i)
any contractual obligation which may restrict or inhibit IBM Credit's rights or
ability to sell or otherwise dispose of the Collateral or any part thereof after
the occurrence and during the continuance of an Event of Default (ii) any
agreement that prohibits or limits the ability of any Credit Party or any of its
Subsidiaries, other than foreign Subsidiaries, to create, incur, assume or
suffer to exist any Lien upon any of its property or revenues, whether now owned
or hereafter acquired, other than (a) this Agreement and the Other Documents and
(b) any agreements governing any purchase money Liens otherwise permitted hereby
(in which case, any prohibition or limitation shall only be effective against
the assets financed thereby).
8.11. Storage of Collateral with Bailees and Warehousemen. Collateral shall not
be stored with a bailee, warehouseman or similar party without the prior written
consent of IBM Credit unless the Credit Parties will, concurrently with the
delivery of such Collateral to such party, cause such party to issue and deliver
to IBM Credit, warehouse receipts in the name of IBM Credit evidencing the
storage of such Collateral.
8.12. Use of Proceeds. No Credit Party shall use any portion of the proceeds of
any Advances other than for its general working capital requirements and for
acquisitions consented to by IBM Credit.
8.13. Accounts. No Credit Party shall permit or agree to any extension,
compromise or settlement or make any change or modification of any kind or
nature with respect to any Account, including any of the terms relating thereto,
which would affect IBM Credit's ability to collect payment on any Account in
whole or in part, except for such extensions, compromises or settlements made by
such Credit Party in the ordinary course of its business, provided, however,
that the aggregate amount of such extensions, compromises or settlements does
not exceed five percent (5%) of the such Credit Party's Accounts at any time.
8.14. Indebtedness. No Credit Party will create, incur, assume or permit to
exist any Indebtedness, except for Permitted Indebtedness.
8.15. Loans. No Credit Party, without the prior written consent of IBM Credit,
will make any loans, advances, contributions or payments of money or goods to
any Subsidiary, affiliate or parent corporation or to any officer, director, or
stockholder of such Credit Party or of any such Credit Party or of any such
company (except for compensation for personal services actually rendered) except
for
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transactions expressly authorized in this Agreement. Notwithstanding the
foregoing, and provided that no Default or Event of Default has occurred and is
continuing or will result from the following:
(a) Credit Parties may make loans, advances or contributions to each other;
(b) Credit Parties may make loans and advances either individually or jointly
and otherwise make payment of money to Unrestricted Foreign Subsidiaries
provided that after giving effect to such loan or advance or payment of money,
the aggregate amount of all loans, advances and other payment of money made by
all of the Credit Parties to all Unrestricted Foreign Subsidiaries and Pemstar
Mexico does not exceed $44,000,000 in the aggregate;
(c) Credit Parties may make loans and advances individually or jointly and
payment of money to Foreign Subsidiaries (other than Unrestricted Foreign
Subsidiaries) provided that after giving effect to such loan or advance or
payment of money, the aggregate amount of all loans, advances and other payment
of money made to all such Foreign Subsidiaries (excluding Unrestricted Foreign
Subsidiaries and Pemstar Mexico pursuant to clause (b) hereof) shall not exceed
$20,000,000 in the aggregate.
8.16. Changes in Accounting Practices. No Credit Party nor any of its
Subsidiaries shall change, modify or alter its accounting policies or reporting
practices, except as in accordance with GAAP and only twice during the term of
the Agreement.
8.17. Hedge Agreements. Unless in the ordinary course of business, no Credit
Party shall enter into or permit its Subsidiaries to enter into any Hedge
Agreements, whether or not such Hedge Agreement was for interest rate protection
purpose only and was non-speculative in nature or purpose.
8.18. Clauses Restricting Subsidiary Distributions. No Credit Party shall enter
into or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Subsidiary of Customer to (a) make Restricted
Payments in respect of any capital stock of such Subsidiary held by, or pay any
Indebtedness owed to, Customer or any other Subsidiary of Customer, (b) make
loans or advances to, or other Investments in, any Credit Party or any other
Subsidiary of Customer or (c) transfer any of its assets to a Credit Party or
any other Subsidiary of Customer, except for such encumbrances or restrictions
existing under or by reason of (i) any restrictions existing under this
Agreement or the Other Documents and (ii) any restrictions with respect to a
Subsidiary imposed pursuant to an agreement that has been entered into in
connection with the Disposition of all or substantially all of the Capital Stock
or assets of such Subsidiary.
8.19. New Foreign Subsidiaries. (i) No Credit Party shall permit any of its
Domestic Subsidiaries to and (ii) and Pemstar Luxembourg S.a.r.l shall not
directly establish or acquire any Foreign Subsidiary not existing as of the date
of this Agreement and listed on Schedule 6.20 hereto. The Customer and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇.▇. ("▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇") may create directly owned
Foreign Subsidiaries subject to the fulfillment of the conditions set forth in
this Section 8.19 to the satisfaction of IBM Credit in its sole discretion. If
the new Foreign Subsidiary is directly owned by the Customer, the Customer shall
(i) pledge two-thirds (less one share) of all of such Foreign Subsidiary's stock
to IBM Credit (ii) and shall cause the new Foreign Subsidiary's to execute such
documents, instruments and agreements as IBM Credit deems necessary or advisable
and grant IBM Credit a first perfected security interest in the capital stock
(or equivalent) of such new Foreign Subsidiary (iii) deliver to IBM Credit the
certificates representing the capital stock with undated stock powers and (iv)
deliver to IBM Credit opinions in form and substance and from counsel
satisfactory to IBM Credit. If the new Foreign Subsidiary is wholly owned
(directly) by Pemstar Netherlands, the Customer shall deliver or cause to be
delivered opinions in form and substance satisfactory to IBM Credit.
Section 9. DEFAULT
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9.1. Event of Default. Any one or more of the following events shall
constitute an Event of Default by the Credit Parties under this Agreement and
the Other Documents:
(A) The failure to make timely payment of the Obligations or any part
thereof when due and payable;
(B) Any Credit Party fails to comply with or observe any term, covenant or
agreement contained in this Agreement or any Other Documents (and such failure
shall not constitute an Event of Default under any of the other provisions of
this Section 9.1) and such failure to comply shall continue for a period of 30
days after the earlier to occur of Customer's receipt of notice of such failure
from IBM Credit or the date on which such failure first becomes known to any
Credit Parties's officers;
(C) Any representation, warranty, statement, report or certificate made or
delivered by or on behalf of a Credit Party or any of its officers, employees or
agents or by or on behalf of any Guarantor to IBM Credit was false in any
material respect at the time when made or deemed made;
(D) The occurrence of any event or circumstance which has a Material
Adverse Effect;
(E) Any Credit Party, any Subsidiary or any Guarantor shall generally not
pay its debts as such debts become due, become or otherwise declare itself
insolvent, file a voluntary petition for bankruptcy protection, have filed
against it any involuntary bankruptcy petition, cease to do business as a going
concern, make any assignment for the benefit of creditors, or a custodian,
receiver, trustee, liquidator, administrator or person with similar powers shall
be appointed for any Credit Party, any Subsidiary or any Guarantor or any of its
respective properties or have any of its respective properties seized or
attached, or take any action to authorize, or for the purpose of effectuating,
the foregoing, provided, however, that any Credit Party, any Subsidiary or any
guarantor shall have a period of sixty (60) days within which to discharge any
involuntary petition for bankruptcy or similar proceeding;
(F) The use of any funds borrowed from IBM Credit under this Agreement for
any purpose other than as provided in this Agreement;
(G) The entry of any judgment against any Credit Party or any Guarantor in
an amount in excess of $250,000.00 and such judgment is not satisfied,
dismissed, stayed or superseded by bond within thirty (30) days after the day of
entry thereof (and in the event of a stay or supersedeas bond, such judgment is
not discharged within thirty (30) days after termination of any such stay or
bond) or such judgment is not fully covered by insurance as to which the
insurance company has acknowledged its obligation to pay such judgment in full;
(H) The dissolution or liquidation of any Credit Party, any Subsidiary or
any Guarantor, or any Credit Party or any Guarantor or its directors or
stockholders shall take any action to dissolve or liquidate any Credit Party or
any Guarantor;
(I) Any "going concern" or like qualification or exception, or
qualification arising out of the scope of an audit by an Auditor of its opinion
relative to any Financial Statement delivered to IBM Credit under this
Agreement;
(J) There issues a warrant of distress for any rent or taxes with respect
to any premises occupied by a Credit Party in or upon which the Collateral, or
any part thereof, may at any time be situated and such warrant shall continue
for a period of ten (10) Business Days from the date such warrant is issued;
(K) a Credit Party suspends business;
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(L) The occurrence of any event or condition that permits the holder of any
material Indebtedness arising in one or more related or unrelated transactions
to accelerate the maturity thereof or the failure of a Credit Party to pay when
due any such Indebtedness in an amount, in the aggregate, not to exceed
$1,000,000.00;
(M) Any Guaranty shall at any time for any reason cease to be in full force
and effect or shall be declared to be null and void by a court of competent
jurisdiction or the validity or enforceability thereof shall be contested or
denied by any such Guarantor, or any such Guarantor shall deny that it has any
further liability or obligation thereunder or any such Guarantor shall fail to
comply with or observe any of the terms, provisions or conditions contained in
any such Guaranty;
(N) Any Credit Party is in default under the material terms of any of the
Other Documents after the expiration of any applicable cure periods;
(O) There shall occur a "reportable event" with respect to any Plan, or any
Plan shall be subject to termination proceedings (whether voluntary or
involuntary) and there shall result from such "reportable event" or termination
proceedings a liability of Customer to the PBGC which in the reasonable opinion
of IBM Credit will have a Material Adverse Effect;
(P) Any "person" (as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended) acquires a beneficial interest in 50% or more of the
Voting Stock of Customer or Customer shall cease to own, directly or indirectly,
less than 100% of the Voting Stock of each Credit Party (other than Customer);
(Q) the Customer shall cease to own directly 100% of the voting stock of
Pemstar FSC, Inc. or Pemstar Luxembourg S.a.r.l or any new Foreign Subsidiary
created or acquired by the Customer or (ii) 100% ownership interest in Pemstar
Luxembourg S.a.r.l or Pemstar FSC, Inc. or any new Foreign Subsidiary created or
acquired by the Customer; or
(R) Pemstar Luxembourg S.a.r.l shall cease to own directly (i) 100% of the
voting stock of Pemstar Netherlands or (ii) 100% ownership interest in Pemstar
Netherlands; or
(S) Pemstar Netherlands shall cease to own directly (i) 100% of the voting
stock of Pemstar Brasil Ltda., Pemstar Ireland Ltd., Pemstar (Tianjin)
Enterprise Ltd., Pemstar Thailand Ltd., Pemstar Mexico or Pemstar BV or (ii)
100% ownership interest in Pemstar Brasil Ltda., Pemstar Ireland, Ltd., Pemstar
(Tianjin) Enterprise Ltd., Pemstar Thailand Ltd., Pemstar Mexico, or Pemstar
B.V. or (iii) 100% of the voting stock or 100% of the ownership interest of any
new Foreign Subsidiary created or acquired by it; or
(T) The Customer or Pemstar Netherlands ceases to own directly (i) 100% of
the voting stock of Pemstar Singapore Pte, Ltd or (ii) 100% of the ownership
interests of Pemstar Singapore Pte, Ltd.
9.2. Acceleration. Upon the occurrence and during the continuance of an Event
of Default which has not been waived in writing by IBM Credit, IBM Credit may,
in its sole discretion, take any or all of the following actions, without
prejudice to any other rights it may have at law or under this Agreement to
enforce its claims against the Credit Parties: (a) declare all Obligations to be
immediately due and payable (except with respect to any Event of Default set
forth in Section 9.1(E) hereof, in which case all Obligations shall
automatically become immediately due and payable without the necessity of any
notice or other demand) without presentment, demand, protest or any other action
or obligation of IBM Credit; and (b) immediately terminate the Credit Line
hereunder.
9.3. Remedies. (A) Upon the occurrence and during the continuance of any Event
of Default which has not been waived in writing by IBM Credit, IBM Credit may
exercise all rights and remedies of a secured party under the U.C.C. Without
limiting the generality of the foregoing, IBM Credit may: (i) remove
39
from any premises where same may be located any and all documents, instruments,
files and records (including the copying of any computer records), and any
receptacles or cabinets containing same, relating to the Accounts, or IBM Credit
may use (at the expense of the Credit Parties) such of the supplies or space of
the Credit Parties at the Credit Parties's place of business or otherwise, as
may be necessary to properly administer and control the Accounts or the handling
of collections and realizations thereon; (ii) bring suit, in the name of any
Credit Parties or IBM Credit 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 any Credit
Party or IBM Credit; (iii) sell, assign and deliver the Accounts and any
returned, reclaimed or repossessed merchandise, with or without advertisement,
at public or private sale, for cash, on credit or otherwise, at IBM Credit's
sole option and discretion, and IBM Credit may bid or become a purchaser at any
such sale; and (iv) foreclose the security interests created pursuant to this
Agreement by any available judicial procedure, or to take possession of any or
all of the Collateral without judicial process and to enter any premises where
any Collateral may be located for the purpose of taking possession of or
removing the same.
(B) Upon the occurrence and during the continuance of any Event of Default
which has not been waived in writing by IBM Credit, IBM Credit shall have the
right 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 any Credit Party or IBM Credit, or in the name of such other party as
IBM Credit 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 IBM Credit in its
sole discretion may deem advisable, and IBM Credit shall have the right to
purchase at any such sale.
If IBM Credit, in its sole discretion determines that any of the Collateral
requires rebuilding, repairing, maintenance or preparation, IBM Credit shall
have the right, at its option, to do such of the aforesaid as it deems necessary
for the purpose of putting such Collateral in such saleable form as IBM Credit
shall deem appropriate. Each Credit Party hereby agrees that any disposition by
IBM Credit of any Collateral pursuant to and in accordance with the terms of a
repurchase agreement between IBM Credit and the manufacturer or any supplier
(including any Authorized Supplier) of such Collateral constitutes a
commercially reasonable sale. Each Credit Party agrees, at the request of IBM
Credit, to assemble the Collateral and to make it available to IBM Credit at
places which IBM Credit shall select, whether at the premises of such Credit
Party or elsewhere, and to make available to IBM Credit the premises and
facilities of such Credit Party for the purpose of IBM Credit's taking
possession of, removing or putting such Collateral in saleable form. If notice
of intended disposition of any Collateral is required by law, it is agreed that
ten (10) Business Days notice shall constitute reasonable notification.
(C) Unless expressly prohibited by the licensor thereof, if any, IBM Credit
is hereby granted, upon the occurrence and during the continuance of any Event
of Default which has not been waived in writing by IBM Credit, an irrevocable,
non-exclusive license to use, assign, license or sublicense all computer
software programs, data bases, processes and materials used by any Credit Party
in its businesses or in connection with any of the Collateral.
(D) The net cash proceeds resulting from IBM Credit's exercise of any of
the foregoing rights (after deducting all charges, costs and expenses, including
reasonable attorneys' fees) shall be applied by IBM Credit to the payment of the
Obligations, whether due or to become due, in such order as IBM Credit may in it
sole discretion elect. Each Credit Party shall remain liable to IBM Credit for
any deficiencies, and IBM Credit in turn agrees to remit to the applicable
Credit Party or its successors or assigns, any surplus resulting therefrom.
(E) 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
other rights, all of which shall be cumulative.
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9.4. Waiver. If IBM Credit seeks to take possession of any of the Collateral
by any court process each Credit Party hereby irrevocably waives to the extent
permitted by applicable law any bonds, surety and security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession and any demand for possession of the Collateral prior to the
commencement of any suit or action to recover possession thereof. In addition,
each Credit Party waives to the extent permitted by applicable law all rights of
set-off it may have against IBM Credit. Each Credit Party further waives to the
extent permitted by applicable law presentment, demand and protest, and notices
of non-payment, non-performance, any right of contribution, dishonor, and any
other demands, and notices required by law.
Section 10. JOINT AND SEVERAL GUARANTY
(1) Each Credit Party hereby jointly and severally guarantees to IBM Credit
the prompt payment when due and the full, prompt, and faithful performance of
any and all Obligations upon which any other Credit Party is in any manner
obligated, heretofore, now, or hereafter owned, contracted or acquired by IBM
Credit, whether the same are individual, joint or several, primary, secondary,
direct, contingent or otherwise. Each Credit Party irrevocably waives any and
all rights to which it may be entitled, by operation of law or otherwise, upon
making any payment hereunder (a) to be subrogated to the rights of IBM Credit
against the other Credit Parties hereto with respect to such payment, in each
such case, until such time as all Obligations have been paid in full or
otherwise to be reimbursed, indemnified or exonerated by the other Credit
Parties in respect thereof, or (b) to receive any payment, in the nature of
contribution or for any other reason, from the other Credit Parties hereto with
respect to such payment.
(2) Notwithstanding any provision herein to the contrary, the liability of
each Credit Party under this guaranty, shall in no event exceed the maximum
amount that is valid and enforceable in any action or proceeding involving any
applicable state corporate law or any applicable state or federal bankruptcy,
insolvency, reorganization, fraudulent conveyance or other law involving the
rights of creditors generally.
(3) The liability of each Credit Party hereunder is direct and
unconditional and shall not be affected by any extension, renewal or other
change in the terms of payment or performance thereof, or the release,
settlement or compromise of or with any party liable for the payment or
performance thereof, the release or nonperfection of any security thereunder, or
any change in the other Credit Parties's financial condition. Each Credit
Party's obligation pursuant to this section shall continue for so long as any
sums owing to IBM Credit by any Credit Party remains outstanding and unpaid,
unless terminated in the manner provided herein. Each Credit Party acknowledges
that its obligations hereunder are in addition to and independent of any
agreement or transaction between IBM Credit and the other Credit Parties or any
other person creating or reserving any lien, encumbrance or security interest in
any property of the other Credit Parties's or any other person as security for
any obligation of such Credit Party.
(4) Each Credit Party has made an independent investigation of the
financial condition of the other Credit Parties and guarantees the Obligations
based on that investigation and not upon any representations made by IBM Credit.
Each Credit Party acknowledges that it has access to current and future
financial information of the other Credit Parties which will enable each Credit
Party to continuously remain informed of the other Credit Parties's financial
condition. Each Credit Party also consents to and agrees that the Obligations
shall not be affected by IBM Credit's subsequent increases or decreases in the
credit line that IBM Credit may grant to the other Credit Parties;
substitutions, exchanges or releases of all or any part of the collateral now or
hereafter securing any of the Obligations; sales or other dispositions of any or
all of the collateral now or hereafter securing any of the Obligations;
realizing on the collateral to the extent IBM Credit, in its sole discretion
deems proper.
(5) Each Credit Party waives to the extent permitted by applicable law (a)
demand, protest and all notices of protest or dishonor, (b) all notices of
payment and nonpayment, (c) all notices required by law, and (d) all notices of
nonpayment at maturity, release, compromise, settlement, extension or renewal of
any or all commercial paper, accounts, contract rights, documents, instruments,
chattel paper
41
and guarantees at any time held by IBM Credit on which any of the other Credit
Parties may, in any way, be liable and each Credit Party hereby ratifies and
confirms whatever IBM Credit may do in that regard.
(6) This guaranty obligation and any and all obligations, liabilities,
terms and provisions herein shall survive any and all bankruptcy or insolvency
proceedings, actions and/or claims brought by or against any Credit Party,
whether such proceedings, actions and/or claims are federal and/or state.
(7) The Obligations are joint and several, shall be binding upon each
Credit Party and each Credit Party's respective successors and assigns, and will
be for IBM Credit's benefit and the benefit of IBM Credit's successors and
assigns. The Obligations and any terms or provisions herein may be modified or
amended only by a document signed by both IBM Credit and the Credit Parties.
Section 11. MISCELLANEOUS
11.1. Term; Termination. (A) This Agreement shall remain in force until the
earlier of (i) the Termination Date, (ii) the date specified in a written notice
by the Customer that they intend to terminate this Agreement which date shall be
no less than ninety (90) days following the receipt by IBM Credit of such
written notice, and (iii) termination by IBM Credit after the occurrence and
during the continuance of an Event of Default. Upon the date that this Agreement
is terminated, all of the Obligations shall be immediately due and payable in
their entirety, notwithstanding any other provisions of this Agreement.
(B) Until the indefeasible payment in full of all of the Obligations, no
termination of this Agreement or any of the Other Documents shall in any way
affect or impair (i) the Obligations to IBM Credit including, without
limitation, any transaction or event occurring prior to and after such
termination, or (ii) IBM Credit's rights hereunder, including, without
limitation IBM Credit's security interest in the Collateral. On and after the
Termination Date, IBM Credit may, but shall not be obligated to, upon the
request of Customer, continue to provide Advances hereunder.
11.2. Indemnification. Each Credit Party hereby agrees to indemnify and hold
harmless IBM Credit and each of its officers, directors, agents and assigns
(collectively, the "Indemnified Persons") against all losses, claims, damages,
liabilities or other expenses (including reasonable attorneys' fees and court
costs now or hereinafter arising from the enforcement of this Agreement, the
"Losses") to which any of them may become subject insofar as such Losses arise
out of or are based upon any event, circumstance or condition (a) occurring or
existing on or before the date of this Agreement relating to any financing
arrangements IBM Credit may from time to time have with (i) any Credit Party,
(ii) any Person that shall be acquired by any Credit Party or (iii) any Person
that a Credit Party may acquire all or substantially all of the assets of, or
(b) directly or indirectly, relating to the execution, delivery or performance
of this Agreement or the consummation of the transactions contemplated hereby or
thereby or to any of the Collateral or to any act or omission of any Credit
Party in connection therewith. Notwithstanding the foregoing, the no Credit
Party shall be obligated to indemnify IBM Credit for any Losses incurred by IBM
Credit which are a result of IBM Credit's gross negligence or willful
misconduct. The indemnity provided herein shall survive the termination of this
Agreement.
11.3. Additional Obligations. IBM Credit, without waiving or releasing any
Obligation or Default of any Credit Party, may perform any Obligations of any
Credit Party that such Credit Party shall fail or refuse to perform and IBM
Credit may, at any time or times hereafter, but shall be under no obligation to
do so, pay, acquire or accept any assignment of any security interest, lien,
encumbrance or claim against the Collateral asserted by any person. All sums
paid by IBM Credit in performing in satisfaction or on account of the foregoing
and any expenses, including reasonable attorney's fees, court costs, and other
charges relating thereto, shall be a part of the Obligations, payable on demand
and secured by the Collateral.
42
11.4. Participations. IBM Credit may, without the consent of the Credit
Parties, sell, assign, or other transfer, interests or participations to one or
more banks, finance companies, or other entities (a "Participant") in all or any
portion of this Agreement and the Obligations hereunder.
11.5. LIMITATION OF LIABILITY. NEITHER IBM CREDIT NOR ANY OTHER INDEMNIFIED
PERSON SHALL HAVE ANY LIABILITY WITH RESPECT TO ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES SUFFERED BY ANY CREDIT PARTY IN CONNECTION WITH THIS
AGREEMENT, ANY OTHER AGREEMENT, ANY DELAY, OMISSION OR ERROR IN THE ELECTRONIC
TRANSMISSION OR RECEIPT OF ANY E-DOCUMENT, OR ANY CLAIMS IN ANY MANNER RELATED
THERETO. NOR SHALL IBM CREDIT NOR ANY OTHER INDEMNIFIED PERSON HAVE ANY
LIABILITY TO ANY CREDIT PARTY OR ANY OTHER PERSON FOR ANY ACTION TAKEN OR
OMITTED TO BE TAKEN BY IT OR THEM HEREUNDER, EXCEPT FOR ITS OR THEIR OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. IN THE EVENT ANY CREDIT PARTY REQUESTS IBM
CREDIT TO EFFECT A WITHDRAWAL OR DEBIT OF FUNDS FROM AN ACCOUNT OF A CREDIT
PARTY, THEN IN NO EVENT SHALL IBM CREDIT BE LIABLE FOR ANY AMOUNT IN EXCESS OF
ANY AMOUNT INCORRECTLY DEBITED, EXCEPT IN THE EVENT OF IBM CREDIT'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. NO PARTY SHALL BE LIABLE FOR ANY FAILURE TO
PERFORM ITS OBLIGATIONS IN CONNECTION WITH ANY E-DOCUMENT, WHERE SUCH FAILURE
RESULTS FROM ANY ACT OF GOD OR OTHER CAUSE BEYOND SUCH PARTY'S REASONABLE
CONTROL (INCLUDING, WITHOUT LIMITATION, ANY MECHANICAL, ELECTRONIC OR
COMMUNICATIONS FAILURE) WHICH PREVENTS SUCH PARTY FROM TRANSMITTING OR RECEIVING
E-DOCUMENTS.
11.6. Alteration/Waiver. This Agreement and the Other Documents may not be
altered or amended except by an agreement in writing signed by the Credit
Parties and by IBM Credit. No delay or omission of IBM Credit to exercise any
right or remedy hereunder, whether before or after the occurrence of any Event
of Default, shall impair any such right or remedy or shall operate as a waiver
thereof or as a waiver of any such Event of Default. In the event that IBM
Credit at any time or from time to time dispenses with any one or more of the
requirements specified in this Agreement or any of the Other Documents, such
dispensation may be revoked by IBM Credit at any time and shall not be deemed to
constitute a waiver of any such requirement subsequent thereto. IBM Credit's
failure at any time or times to require strict compliance and performance by any
Credit Party of any undertakings, agreements, covenants, warranties and
representations of this Agreement or any Other Document shall not waive, affect
or diminish any right of IBM Credit thereafter to demand strict compliance and
performance thereof. Any waiver by IBM Credit of any Default by any Credit Party
under this Agreement or any of the Other Documents shall not waive or affect any
other Default by any Credit Party under this Agreement or any of the Other
Documents, whether such Default is prior or subsequent to such other Default and
whether of the same or a different type. None of the undertakings, agreements,
warranties, covenants, and representations of the Credit Parties contained in
this Agreement or the Other Documents and no Default by any Credit Party shall
be deemed waived by IBM Credit unless such waiver is in writing signed by an
authorized representative of IBM Credit.
11.7. Severability. If any provision of this Agreement or the Other Documents
or the application thereof to any Person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the Other Documents and the
application of such provision to other Persons or circumstances will not be
affected thereby, the provisions of this Agreement and the Other Documents being
severable in any such instance.
11.8. One Loan. All Advances heretofore, now or at any time or times hereafter
made by IBM Credit to a Credit Party under this Agreement or the Other Documents
shall constitute one loan secured by IBM Credit's security interests in the
Collateral and by all other security interests, liens and encumbrances
heretofore, now or from time to time hereafter granted by the Credit Parties to
IBM Credit or any assignor of IBM Credit.
11.9. Additional Collateral. All monies, reserves and proceeds received or
collected by IBM Credit with respect to Accounts and other property of the
Credit Parties in possession of IBM Credit at any time or times hereafter are
hereby pledged by any Credit Party to IBM Credit as security for the payment of
the
43
Obligations and shall be applied promptly by IBM Credit on account of the
Obligations; provided, however, IBM Credit may release to any Credit Party such
portions of such monies, reserves and proceeds as IBM Credit may from time to
time determine, in its sole discretion.
11.10. No Merger or Novations. (A) Notwithstanding anything contained in any
document to the contrary, it is understood and agreed by the Credit Parties and
IBM Credit that the claims of IBM Credit arising hereunder and existing as of
the date hereof constitute continuing claims arising out of the Obligations of
Customer under the Original Financing Agreement and any Other Document. Each
Credit Party acknowledges and agrees that such Obligations outstanding as of the
date hereof have not been satisfied or discharged and that this Agreement is not
intended to effect a novation of the Obligations under the Original Financing
Agreement or any Other Document.
(B) Neither the obtaining of any judgment nor the exercise of any power of
seizure or sale shall operate to extinguish the Obligations to IBM Credit
secured by this Agreement and shall not operate as a merger of any covenant in
this Agreement, and the acceptance of any payment or alternate security shall
not constitute or create a novation and the obtaining of a judgment or judgments
under a covenant herein contained shall not operate as a merger of that covenant
or affect IBM Credit's rights under this Agreement.
11.11. Paragraph Titles. The Section titles used in this Agreement and the Other
Documents are for convenience only and do not define or limit the contents of
any Section.
11.12. Binding Effect; Assignment. This Agreement and the Other Documents shall
be binding upon and inure to the benefit of IBM Credit and the Credit Parties
and their respective successors and assigns; provided, that the Credit Parties
shall have no right to assign this Agreement or any of the Other Documents
without the prior written consent of IBM Credit.
11.13. Notices; E-Business Acknowledgment. (A) Except as otherwise expressly
provided in this Agreement, any notice required or desired to be served, given
or delivered hereunder shall be in writing, and shall be deemed to have been
validly served, given or delivered (i) upon receipt if deposited in the United
States mails, first class mail, with proper postage prepaid, (ii) upon receipt
of confirmation or answerback if sent by telecopy, or other similar facsimile
transmission, (iii) one Business Day after deposit with a reputable overnight
courier with all charges prepaid, or (iv) when delivered, if hand-delivered by
messenger, all of which shall be properly addressed to the party to be notified
and sent to the address or number indicated as follows:
(i) To IBM Credit for Requests for (ii) If to any Credit Party at:
Advances and Delivery of Collateral
Management Reports: PEMSTAR INC>
IBM Credit Corporation ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
Attention: Region Credit Manager Director of Treasury
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) To IBM Credit for delivery of all Other Documents:
IBM Credit Corporation
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Credit Manager
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
44
or to such other address or number as each party designates to the other in the
manner prescribed herein. Each of the Credit Parties hereby appoints Customer as
its agent to receive notices hereunder.
(B) (i) Each party may electronically transmit to or receive from the other
party certain documents set forth in Attachment I ("E-Documents") via the
Internet or electronic data interchange ("EDI"). Any transmission of data which
is not an E-Document shall have no force or effect between the parties. EDI
transmissions may be sent directly or through any third party service provider
("Provider") with which either party may contract. Each party shall be liable
for the acts or omissions of its Provider while handling E-Documents for such
party, provided, that if both parties use the same Provider, the originating
party shall be liable for the acts or omissions of such Provider as to such
E-Document. Some information to be made available to the Credit Parties will be
specific to the Credit Parties and will require the Credit Parties's
registration with IBM Credit before access is provided. After IBM Credit has
approved the registration submitted by the Credit Parties, IBM Credit shall
provide an ID and password(s) to an individual designated by Customer ("Customer
Recipient"). Each Credit Party accepts responsibility for the designated
individual's distribution of the ID and password(s) within its organization and
will take reasonable measures to ensure that passwords are not shared or
disclosed to unauthorized individuals. Each Credit Party will conduct an annual
review of all IDs and passwords to ensure they are accurate and properly
authorized. IBM CREDIT MAY CHANGE OR DISCONTINUE USE OF AN ID OR PASSWORD AT ITS
DISCRETION AT ANY TIME. E-Documents shall not be deemed to have been properly
received, and no E-Document shall give rise to any obligation, until accessible
to the receiving party at such party's receipt computer at the address specified
herein. Upon proper receipt of an E-Document, the receiving party shall promptly
transmit a functional acknowledgment in return. A functional acknowledgment
shall constitute conclusive evidence that an E-Document has been properly
received. If any transmitted E-Document is received in an unintelligible or
garbled form, the receiving party shall promptly notify the originating party in
a reasonable manner. In the absence of such a notice, the originating party's
records of the contents of such E-Document shall control.
(ii) Each party shall use those security procedures which are reasonably
sufficient to ensure that all transmissions of E-Documents are authorized and to
protect its business records and data from improper access. Any E-Document
received pursuant to this Section 11.13 shall have the same effect as if the
contents of the E-Document had been sent in paper rather than electronic form.
The conduct of the parties pursuant to this Section 11.13 shall, for all legal
purposes, evidence a course of dealing and a course of performance accepted by
the parties. The parties agree not to contest the validity or enforceability of
E-Documents under the provisions of any applicable law relating to whether
certain agreements are to be in writing or signed by the party to be bound
thereby. The parties agree, as to any E-Document accompanied by the Customer's
ID, that IBM Credit can reasonably rely on the fact that such E-Document is
properly authorized by the Credit Parties. E-Documents, if introduced as
evidence on paper in any judicial, arbitration, mediation or administrative
proceedings, will be admissible as between the parties to the same extent and
under the same conditions as other business records originated and maintained in
documentary form. Neither party shall contest the admissibility of copies of
E-Documents under either the business records exception to the hearsay rule or
the best evidence rule on the basis that the E-Documents were not originated or
maintained in documentary form.
CUSTOMER RECIPIENT INFORMATION for Internet transmissions:
Name of the Credit Parties's Designated Central Contact Authorized to Receive
IDs and Passwords:
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
e-mail Address: ▇▇▇▇.▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
Phone Number: (▇▇▇) ▇▇▇-▇▇▇▇
11.14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto were upon the same instrument.
45
11.15. SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW. TO INDUCE IBM
CREDIT TO ACCEPT THIS AGREEMENT AND THE OTHER DOCUMENTS, EACH CREDIT PARTY
HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT AND ANY OTHER DOCUMENT, OR FOR THE RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND ANY FEDERAL DISTRICT
COURT IN NEW YORK, NEW YORK.
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREINAFTER HAVE TO THE VENUE
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME.
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE
EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO CUSTOMER AT ITS ADDRESS
SET FORTH IN SECTION 11.14 OR AT SUCH OTHER ADDRESS OF WHICH IBM CREDIT SHALL
HAVE BEEN NOTIFIED PURSUANT THERETO;
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO ▇▇▇ IN
ANY OTHER JURISDICTION.
(E) AGREES THAT THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS (WITHOUT GIVING EFFECT TO CONFLICT OF
LAW PROVISIONS) OF THE STATE OF NEW YORK.
11.16. JURY TRIAL WAIVER. EACH OF IBM CREDIT AND THE CREDIT PARTIES HEREBY
IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
(INCLUDING ANY COUNTERCLAIM) OF ANY TYPE IN WHICH IBM CREDIT AND ANY CREDIT
PARTY ARE PARTIES AS TO ALL MATTERS ARISING DIRECTLY OR INDIRECTLY OUT OF THIS
AGREEMENT OR ANY DOCUMENT, INSTRUMENT OR AGREEMENT EXECUTED IN CONNECTION
HEREWITH.
11.17. PARTICIPATION ASSISTANCE. Each of the Credit Parties, if requested by IBM
Credit, shall cooperate with IBM Credit, from time to time, in IBM Credit's
syndication and participation efforts, if any, including, without limitation,
by: (i) providing, or causing its advisors to provide, IBM Credit and other
potential participants with all information with respect to the business of the
Credit Parties and their subsidiaries and affiliates and the transactions to be
financed in connection with the Agreement as IBM Credit may request, (ii)
assisting, or causing its advisors to assist, IBM Credit in the preparation of
an information memorandum to be used in connection with the syndication of
participation of this Agreement, and (iii) otherwise assisting IBM Credit in its
syndication and participation efforts, including by making its officers
available to attend, and participate in, presentations regarding the business
and prospects of the Credit Parties, as appropriate. In addition, each of the
Credit Parties agrees that IBM Credit may disclose confidential information
received by IBM Credit regarding the Credit Parties to any participant or
potential participant in the Credit Line and the Obligations.
46
IN WITNESS WHEREOF, each Credit Party has read this entire Agreement, and
has caused its authorized representatives to execute this Agreement and has
caused its corporate seal to be affixed hereto as of the date first written
above.
IBM CREDIT CORPORATION PEMSTAR INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------- ---------------------
Print Name: ▇▇▇ ▇▇▇▇▇▇ Print Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------- ---------------------
Title: Manager of Credit Title: VP, General Counsel
--------------------- ---------------------
& Corporate Secretary
---------------------
TURTLE MOUNTAIN CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Print Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Title: President
---------------------
TURTLE MOUNTAIN CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------
Print Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------
Title: VP, General Counsel
---------------------
& Corporate Secretary
---------------------
47
ATTACHMENT A, ("ATTACHMENT A") TO
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT ("AGREEMENT")
DATED June 29, 2001
Customer Name: PEMSTAR INC.
TURTLE MOUNTAIN CORPORATION (together, the "Credit Parties")
Effective Date of this Attachment A: June 29, 2001
--------------------------------
I. Fees, Rates and Repayment Terms:
(A) Credit Facility:
Revolving A: Eighty Million Dollar ($80,000,000) Revolving Credit
Facility
Revolving B: Fifty Million Dollar ($50,000,000) Incremental Revolving
Credit Facility, available only upon full utilization of Revolving A
Facility and a minimum of thirty (30) days prior written notice from
Customer to IBM Credit and subject to the other terms and conditions
set forth in this Agreement.
(B) Borrowing Base:
(i) 95% of the amount of each Credit Party's Eligible Accounts from
International Business Machines Corp. ("IBM") or its subsidiaries as
account debtor pursuant to agreements between such Credit Party and
IBM in form and substance satisfactory to IBM Credit as of the date of
determination as reflected in the Customer's most recent Collateral
Management Report;
(ii) 90% of the amount of each Credit Party's Eligible Accounts from
Celestica Inc. ("Celestica"), Solectron Corp. ("Solectron"), Honeywell
Inc. ("Honeywell"), Minnesota Mining & Manufacturing Company ("3M"),
Motorola, Inc. ("Motorola"), Efficient Networks, Inc. ("ENI") and
Applied Materials, Inc. ("Applied Materials") as account debtor,
provided such account debtors remain investment grade, in IBM Credit's
sole discretion, and pursuant to agreements between such Credit Party
and such account debtor, in form and substance satisfactory to IBM
Credit as of the date of determination as reflected in the Customer's
most recent Collateral Management Report;
(iii) 85% of the amount of each Credit Party's other Eligible
Accounts, other than Concentration Accounts, as of the date of
determination as reflected in the Customer's most recent Collateral
Management Report provided, however, IBM Credit has a first priority
security interest in such Eligible Account;
(iv) a percentage, determined from time to time by IBM Credit in its
sole discretion, of the amount of Customer's Concentration Accounts
for a specific Concentration Account Debtor as of the date of
determination as reflected in the Customer's most recent Collateral
Management Report; unless otherwise notified by IBM Credit, in
writing, the percentage for Concentration Accounts for a specific
Concentration Account Debtor shall be the same as the percentage set
forth in paragraph (iii) of the Borrowing Base;
(v) 100% of the lower of (x) book value or (y) fair market value of
each Credit Party's Eligible Finished Goods Inventory destined for
IBM;
(vi) 90% of the lower of (x) book value or (y) fair market value of
each Credit Party's
48
Eligible Parts Inventory destined for IBM;
(vii) 80% of the lower of (x) book value or (y) fair market value of
each Credit Party's Eligible Inventory destined for Celestica,
Solectron, Honeywell, 3M, Motorola, ENI and Applied Materials;
(viii) 54% of the lower of (x) book value or (y) fair market value of
each Credit Party's other Eligible Inventory provided, however, IBM
Credit has a first priority security interest in such Eligible
Inventory.
(ix) Less $10,000,000.00 (Ten Million Dollars).
The reduction to the Borrowing Base set forth in subparagraph (ix)
will be eliminated after the Conditions Subsequent, as noted in
Section IV (a), have been completed by the Credit Parties to the
satisfaction of IBM Credit in its sole discretion.
Eligible Finished Goods Inventory shall mean finished goods inventory
in salable condition, owned by a Credit Party free and clear of any
Liens (other than Liens pursuant to this Agreement), and designated
and identified as product to be sold to IBM as evidenced by (i)
non-cancellable purchase orders from IBM or (ii) a non-cancellable
written agreement that IBM will purchase such inventory, in each case,
in form and substance satisfactory to IBM Credit.
Eligible Parts Inventory shall mean parts inventory and floor stock
raw materials in good condition, owned by a Credit Party free and
clear of any Liens (other than Liens pursuant to this Agreement), and
designated and identified as parts to be used to manufacture product
(the Eligible Finished Goods Inventory) to be sold to IBM as evidenced
by (i) non-cancellable purchase orders from IBM to such Credit Party
or (ii) a non-cancellable written agreement that IBM will purchase
such inventory, in each case, in form and substance satisfactory to
IBM Credit.
Eligible Inventory shall mean raw materials, floor stock raw materials
and finished goods inventory owned by a Credit Party free and clear of
any Liens (other than Liens pursuant to this Agreement) designated and
identified by the Customer in its periodic collateral report or
borrowing request to IBM Credit as inventory applicable to product
sold, or to be manufactured and sold, by a Credit Party to an end user
pursuant to non-cancellable purchase orders or other written
agreements binding such end user to purchase such product, in each
case, in form and substance satisfactory to IBM Credit.
(C) Collateral Insurance Amount: Fifty Million Dollars ($50,000,000).
(D) Applicable Margin:
The Applicable Margin for determining an A/R Advance shall be based
upon the previous fiscal quarter's Cash Flow Leverage Ratio as of the
relevant date of determination, as set forth below.
Cash Flow Leverage Ratio LIBOR Margin Prime Rate Margin
------------- ------------------
* 1.5:1.0 1.75% 0.00%
** 1.5:1.0 and * 2.5:1.0 2.25% 0.375%
** 2.5:1.0 and * 3.5:1.0 2.75% 0.875%
** 3.5:1.0 and * 4.50:1.0 3.00% 1.125%
** 4.50:1.0 3.50% 1.625%
* Denotes less than
** Denotes greater than
49
The date of determination shall be the first day of the calendar month
following the earlier of (i) receipt by IBM Credit of the financial
statements required by Section 7.1 showing a change in the Cash Flow
Leverage Ratio, and (ii) receipt and consent by IBM Credit of a notice
from the Customer requesting a change in the Applicable Margin based
on the Customer's Cash Flow Leverage Ratio. Each subsequent change in
the Applicable Margin shall be effective on the first day of the
calendar month following the earlier of (i) receipt by IBM Credit of
the financial statements required by Section 7.1 showing a change in
the Cash Flow Leverage Ratio from the prior fiscal quarter, and (ii)
receipt and consent by IBM Credit of a notice requesting a change in
the Applicable Margin.
As of any date, the Cash Flow Leverage Ratio shall be the Cash Flow
Leverage Ratio as calculated in the quarterly financial statements
last received by IBM Credit pursuant to Section 7.1, provided that a
change in the Applicable Margin shall not be effective until the first
day of the calendar month following the receipt by IBM Credit of such
financial statements, and provided further that for any period during
which Customer fails to deliver the quarterly financial statements as
required under Section 7.1, the Cash Flow Leverage Ratio shall be
deemed to be greater than 4.50:1.0.
(E) Delinquency Fee Rate: Prime Rate plus 6.500%.
(F) Shortfall Transaction Fee: Shortfall Amount multiplied by 0.30%.
(G) Other Charges:
(i) Commitment Fee: Two Hundred Fifty Thousand Dollars $250,000.00
fully earned, and refundable (net of Expenses) only if IBM Credit is
not able due to a disruption of market conditions or is not willing
due to a material adverse change in the financial condition of
Borrower, to close the Credit Facility on the terms set forth in this
Commitment Letter
(ii) Closing Fee: Four Hundred Thirty-five Thousand Dollars
($435,000.00) due and payable on the closing date.
(iii) Unused Line Fee: 0.375% per annum on the daily average unused
portion of the Credit Line for each day from the closing date of the
Agreement and shall be computed on the basis of a 360 day year and
payable monthly in arrears and upon the maturity or termination of the
Agreement. But with respect to the Revolving B Credit Facility no
Unused Line Fee shall accrue unless and until such time as the
Revolving B Credit Facility is made available.
(iv) Prepayment Fee: A prepayment premium, payable to IBM Credit in
the event that the Customer terminates the Credit Line prior to the
third year anniversary of the closing date, in an amount equal to the
amount of the Credit Line in effect as of the date of notice of
termination or date of default, multiplied by one half of one percent
(0.50%). But with respect to the Revolving B Credit Facility only, if
such Revolving B Credit Facility is never made available by IBM Credit
despite a request therefor by the Customer, then such prepayment
premium shall not apply to the Revolving B Credit Facility amount of
the Credit Line.
I. Bank Account
Credit Parties' Lockbox(es) and Special Account(s) will be maintained at the
following Bank(s):
Name of Bank: U.S. Bank
Address: ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
50
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
Ms. ▇▇▇▇ Persons (▇▇▇) ▇▇▇-▇▇▇▇
Lockbox Address: PEMSTAR INC.
SDS-12-1905
▇.▇. ▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Special Account #: 1-047-5581-5495
Lockbox # SDS-12-1905
--------------------------------------------------------------------------------
Name of Bank: Citizens Bank of Massachusetts Inc.
Address: ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Lockbox Address: PEMSTAR INC.
▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Special Account #: 1-047-5581-5495
Lockbox # SDS-12-1905
--------------------------------------------------------------------------------
Name of Bank: U.S. Bank
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Lockbox Address: Turtle ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇-▇▇-▇▇▇▇
▇.▇. ▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Lockbox # SDS-12-2077
--------------------------------------------------------------------------------
Name of Bank: U.S. Bank
Address: ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
Ms. ▇▇▇▇ Persons (507) 285-7937Address:
Lockbox Address: PEMSTAR INC. (San ▇▇▇▇ location)
SDS81930
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Lockbox # SDS81930
52
III. Financial Covenants:
Definitions: The following terms shall have the following respective meanings in
this Attachment A. All amounts shall be determined in accordance with generally
accepted accounting principles (GAAP).
"Capital Expenditure" shall mean any amount debited to the fixed asset
account on the Customer's consolidated balance sheet in respect of: (a)
the acquisition (including, without limitation, acquisition by entry
into a capitalized lease), construction, improvement, replacement or
betterment of land, buildings, machinery, equipment or of any other
fixed assets or capitalized leaseholds; and (b) to the extent related
to and not included in (a) above, materials, contract labor and direct
labor (excluding expenditures charged to repairs or maintenance in
accordance with GAAP.
"Consolidated Net Income" shall mean, for any period, the net income
(or loss), after taxes, of Customer on a consolidated basis for such
period determined in accordance with GAAP.
"Current" shall mean within the ongoing twelve month period.
"Current Assets" shall mean assets that are cash or expected to become
cash within the ongoing twelve months.
"Current Liabilities" shall mean payment obligations resulting from
past or current transactions that require settlement within the ongoing
twelve month period, as determined in accordance with GAAP.
"EBITDA" shall mean, for any period (determined on a consolidated basis
in accordance with GAAP), (a) the Consolidated Net Income of Customer
for such period, plus (b) each of the following to the extent reflected
as an expense in the determination of such Consolidated Net Income: (i)
the Customer's provisions for taxes based on income for such period;
(ii) Interest Expense for such period; and (iii) depreciation and
amortization of tangible and intangible assets of Customer for such
period.
"Fixed Charges" shall mean, for any period, an amount equal to the sum,
without duplication, of the amounts for such as determined for the
Customer on a consolidated basis, of (i) scheduled repayments of
principal of all Indebtedness (as reduced by repayments thereon
previously made), (ii) Interest Expense, (iii) capital expenditures
(iv) dividends, (v) leasehold improvement expenditures and (vi) all
provisions for U.S. and non U.S. Federal, state and local taxes.
"Fixed Charge Coverage Ratio" shall mean the ratio as of the last day
of any fiscal period of (i) EBITDA as of the last day of such fiscal
period to (ii) Fixed Charges.
"Interest Expense" shall mean, for any period, the aggregate
consolidated interest expense of Customer during such period in respect
of Indebtedness determined on a consolidated basis in accordance with
GAAP, including, without limitation, amortization of original issue
discount on any Indebtedness and of all fees payable in connection with
the incurrence of such Indebtedness (to the extent included in interest
expense), the interest portion of any deferred payment obligation and
the interest component of any capital lease obligations.
"Long Term" shall mean beyond the ongoing twelve month period.
"Long Term Assets" shall mean assets that take longer than a year to be
converted to cash. They are divided into four categories: tangible
assets, investments, intangibles and other.
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"Long Term Debt" shall mean payment obligations of indebtedness which
mature more than twelve months from the date of determination, or
mature within twelve months from such date but are renewable or
extendible at the option of the debtor to a date more than twelve
months from the date of determination.
"Net Profit after Tax" shall mean Revenue plus all other income, minus
all costs, including applicable taxes.
"Revenue" shall mean the monetary expression of the aggregate of
products or services transferred by an enterprise to its customers for
which said customers have paid or are obligated to pay, plus other
income as allowed.
"Subordinated Debt" shall mean Customer's indebtedness to third parties
as evidenced by an executed Notes Payable Subordination Agreement in
favor of IBM Credit.
"Tangible Net Worth" shall mean:
Total Net Worth minus;
(a) goodwill, organizational expenses, pre-paid expenses,
deferred charges, research and development expenses, software
development costs, leasehold expenses, trademarks, trade
names, copyrights, patents, patent applications, privileges,
franchises, licenses and rights in any thereof, and other
similar intangibles (but not including contract rights) and
other current and non-current intangible assets as identified
in Customer's financial statements;
(b) all accounts receivable from employees, officers,
directors, stockholders and affiliates; and
(c) all callable/redeemable preferred stock.
"Total Assets" shall mean the total of Current Assets and Long Term
Assets.
"Total Liabilities" shall mean the Current Liabilities and Long Term
Debt less Subordinated Debt, resulting from past or current
transactions, that require settlement in the future.
"Total Net Worth" (the amount of owner's or stockholder's ownership in
an enterprise) is equal to Total Assets minus Total Liabilities.
"Working Capital" shall mean Current Assets minus Current Liabilities.
Customer will be required to maintain the following financial ratios,
percentages and amounts as of the last day of the fiscal period under review by
IBM Credit:
Covenant Covenant Requirement
(i) Net Profit after Tax to Revenue Equal to or Greater than 0.75 percent
quarterly and Equal to or Greater
than 1.25% annually
(ii) Total Liabilities to Tangible Greater than Zero and
Net Worth Equal to or Less than 2.50:1.0
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(iii) Current Assets to Current Greater than 1.50:1.0
Liabilities
(iv) Fixed Charge Coverage Ratio Equal to or Greater than 1.30:1.00
(v) Maximum Capital Expenditures Less than or equal to $32,000,000 for
the fiscal year ending March 2002
Less than or equal to $25,000,000 for
the fiscal year ending March 2003
Less than or equal to $25,000,000 for
the fiscal year ending March 2004
For U.S. Credit Parties operations only:
(i) Net Profit after Tax to Revenue Equal to or Greater than 0.1 percent
IV. Additional Conditions Precedent Pursuant to Section 5.1 (K) of the
Agreement:
(0) Executed Contingent Blocked Account Amendment from Customer (for
headquarters, San ▇▇▇▇ and Massachusetts locations);
(1) Fiscal year-end financial statements of Customer as of end of
Customer's prior fiscal year audited by an independent certified
public accountant;
(2) A Certificate of Location of Collateral whereby the Credit Parties
certify where they presently keep or sell inventory, equipment and
other tangible Collateral; Subordination or Intercreditor Agreements
from all creditors having a lien which is superior to IBM Credit in
any assets that IBM Credit relies on to satisfy the Obligations to IBM
Credit with the exception of a Subordination Agreement from the City
of Rochester, Minnesota;
(3) Listing of all creditors providing accounts receivable financing to
the Credit Parties;
(4) A Collateral Management Report in the form of Attachment E as of the
Closing Date;
(5) A Compliance Certificate as to Credit Parties's compliance with the
financial covenants set forth in Attachment A as of the last fiscal
month of Customer for which financial statements have been published;
(6) An Opinion of Counsel substantially in the form and substance of
Attachment G whereby the Credit Parties's counsel states his or her
opinion about the execution, delivery and performance of the Agreement
and other documents by the Credit Parties;
(7) A Corporate Secretary's Certificate substantially in the form and
substance of Attachment H certifying to, among other items, the
resolutions of each Credit Party's Board of Directors authorizing such
Credit Party's entering into this Agreement;
(8) Termination or release of Uniform Commercial Code filing by another
creditor as required by IBM Credit;
(9) Intercreditor Agreement among IBM Credit, U.S. Bank individually and
as Agent, in form and substance satisfactory to IBM Credit;
55
(10) Customer shall have repaid to IBM Credit the remaining obligations due
IBM Credit under the terms of the Amendment to the Revolving Credit
Agreement, dated August 1, 2000.
V. Additional Conditions Subsequent:
a) The following conditions subsequent must be fulfilled to the satisfaction
of IBM Credit no later than 15 days after the Closing Date.
(0) Executed Stock Pledge Agreement from Customer pledging one share less
than two-thirds of the voting stock of Pemstar Luxembourg Sarl
("Pledge Agreement") with stock certificates and stock powers (or
equivalents thereof) and such other documents as required by the
Pledge Agreement. The Pledge Agreement and the documents executed and
delivered in connection therewith shall be in form and substance
satisfactory to IBM Credit in its sole discretion. All actions
necessary or desirable (and all approvals (if any) necessary) to give
IBM Credit a perfected first lien in the stock of Pemstar Luxembourg
Sarl shall been taken to the satisfaction of IBM Credit in its sole
discretion (including all necessary filings and registrations).
(1) A favorable opinion of counsel of Customer and Pemstar Luxembourg Sarl
covering the enforceability of the Pledge Agreement and perfection of
lien of the shares (and such other matters of as IBM Credit may
request) in form and substance satisfactory to IBM Credit and from
counsel satisfactory to IBM Credit in each case, in its sole
discretion.
(2) A favorable opinion of counsel of Pemstar Luxembourg Sarl and each of
the other Foreign Subsidiaries of Pemstar Inc. (whether direct or
indirect). Such opinion shall include, without limitation, an opinion
that a pledge of one share less than two-thirds of the voting stock of
Pemstar Luxembourg Sarl would give IBM Credit control over each of the
Foreign Subsidiaries of the Customer (whether direct or indirect
subsidiaries) and in the case of an Event of Default, IBM Credit would
have the ability to replace the Board of Directors of each of Pemstar
Luxembourg Sarl, Pemstar Singapore Pte, Ltd, and each of the other
Foreign Subsidiaries of Pemstar Inc. (whether direct or indirect).
Such opinions shall be in form and substance satisfactory to IBM
Credit and from counsel, satisfactory to IBM Credit in each case, in
its sole discretion.
(3) A favorable opinion of counsel of Pemstar Luxembourg Sarl, Pemstar
HongGuan and each of the other Foreign Subsidiaries of Pemstar Inc.
(whether direct or indirect) that (i) IBM Credit, upon an Event of
Default would have the ability to cause each of the Foreign
Subsidiaries to declare and pay dividends to its parent in an amount
designated by IBM Credit or make payments to Pemstar Luxembourg Sarl,
on account of loans or other affiliate transactions, (ii) IBM Credit
would have the ability to sell or dissolve each of the Foreign
Subsidiaries and cause the proceeds from such sale or dissolution to
be distributed to Pemstar Luxembourg Sarl or IBM Credit, and (iii)
there are no restrictions under law or pursuant to any document that
would restrict IBM Credit, upon an Event of Default, from either (a)
foreclosing on the stock of Pemstar Luxembourg Sarl and selling such
Subsidiary and causing the proceeds from such sale to be distributed
to the Customer or IBM Credit, or (b) causing Pemstar Luxembourg Sarl
to declare and pay dividends to Pemstar, Inc. in such amounts as
designated by IBM Credit, and (iv) such other matters as IBM Credit
may request.
(4) An amendment to this agreement in form and substance satisfactory to
IBM Credit in its sole discretion, which amendment shall add certain
financial covenants (in addition to the existing financial covenants)
and the delivery of consolidating financial statements of the Customer
and each of its Subsidiaries and Affiliates.
56
B) The following condition subsequent must be fulfilled to the satisfaction of
IBM Credit no later than 30 days after the Closing Date.
(0) Executed Waiver of Landlord Lien for all premises in which a landlord
has the right of levy for rent.
b) The following conditions subsequent must be fulfilled to the satisfaction
of IBM Credit no later than 60 days after the Closing Date.
(0) Executed Subordination Agreement from the City of Dunseith, North
Dakota;
(1) Executed Contingent Blocked Account Amendment by and among TMC, Inc.
("TMC"), Turtle Mountain and IBM Credit;
(2) UCC-3 assignment of all assets under the Borrower's Security Agreement
between TMC, Inc. and Turtle Mountain dated September 28, 1988, in
form and substance satisfactory to IBM Credit.