EXHIBIT 10.53
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CREDIT AGREEMENT
by and between
VODAVI COMMUNICATIONS SYSTEMS, INC.
and
COMERICA BANK-CALIFORNIA,
Dated as of
April 10, 2003
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TABLE OF CONTENTS
PAGE
RECITALS ................................................................. 1
ARTICLE 1 DEFINITION OF TERMS........................................... 2
1.1 Definitions.............................................. 2
1.2 References............................................... 9
1.3 Accounting Terms......................................... 9
ARTICLE 2 PAYMENTS, FEES, AND PREPAYMENT PROVISIONS..................... 10
2.1 Payments................................................. 10
2.2 Fees..................................................... 11
2.3 Maintenance of Accounts.................................. 11
2.4 Prepayments.............................................. 11
ARTICLE 2A THE RLC....................................................... 12
2A.1 RLC Commitment........................................... 12
2A.2 Revolving Line of Credit................................. 12
2A.3 RLC Advances............................................. 12
2A.4 RLC Payments............................................. 12
2A.5 Excess Balance Payment; RLC Clean-Up..................... 13
2A.6 Conditions............................................... 13
2A.7 Other RLC Advances by Lender............................. 13
2A.8 Assignment............................................... 14
ARTICLE 2B THE TERM LOAN................................................. 15
2B.1 Term Loan Commitment..................................... 15
2B.2 Term Loan................................................ 15
2B.3 Term Loan Advance........................................ 15
2B.4 Term Loan Payments....................................... 15
2B.5 Conditions............................................... 16
2B.6 Assignment............................................... 16
ARTICLE 3 SECURITY; GUARANTEE........................................... 17
3.1 Security................................................. 17
3.2 Security Documents....................................... 17
3.3 Guarantee................................................ 17
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE 4 CONDITIONS PRECEDENT.......................................... 18
4.1 Initial or any Subsequent Advance........................ 18
4.2 No Event of Default...................................... 19
4.3 No Material Adverse Effect............................... 19
4.4 Representations and Warranties........................... 19
ARTICLE 5 REPRESENTATIONS AND WARRANTIES................................ 20
5.1 Recitals................................................. 20
5.2 Organization and Good Standing........................... 20
5.3 Authorization and Power.................................. 20
5.4 Security Documents....................................... 20
5.5 No Conflicts or Consents................................. 20
5.6 No Litigation............................................ 20
5.7 Financial Condition...................................... 21
5.8 Taxes.................................................... 21
5.9 No Stock Purchase........................................ 21
5.10 Advances................................................. 21
5.11 Enforceable Obligations.................................. 21
5.12 No Default............................................... 21
5.13 Significant Debt Agreements.............................. 21
5.14 ERISA.................................................... 22
5.15 Compliance with Law...................................... 22
5.16 Solvent.................................................. 22
5.17 Investment Company Act................................... 22
5.18 Title.................................................... 22
5.19 Survival of Representations, Etc......................... 22
5.20 Environmental Matters.................................... 22
5.21 Licenses, Tradenames..................................... 22
ARTICLE 6 AFFIRMATIVE COVENANTS......................................... 23
6.1 Financial Statements, Reports and Documents.............. 23
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TABLE OF CONTENTS
(continued)
PAGE
6.2 Maintenance of Existence and Rights; Conduct of
Business; Management .................................. 24
6.3 Operations and Properties................................ 24
6.4 Authorizations and Approvals............................. 24
6.5 Compliance with Law...................................... 24
6.6 Payment of Taxes and Other Indebtedness.................. 24
6.7 Compliance with Significant Debt Agreements and
Other Agreements ...................................... 25
6.8 Compliance with Credit Documents......................... 25
6.9 Notice of Default........................................ 25
6.10 Other Notices............................................ 25
6.11 Books and Records; Access; Audits........................ 25
6.12 ERISA Compliance......................................... 25
6.13 Further Assurances....................................... 25
6.14 Insurance................................................ 26
ARTICLE 7 NEGATIVE COVENANTS ........................................... 27
7.1 Existence................................................ 27
7.2 Amendments to Organizational Documents................... 27
7.3 Margin Stock............................................. 27
7.4 Stock Repurchase......................................... 27
7.5 Liens.................................................... 27
7.6 Transfer Collateral...................................... 27
7.7 Merger; Sale of Assets................................... 27
7.8 Loans; Investments....................................... 27
7.9 Capital Expenditures..................................... 27
7.10 Indebtedness............................................. 28
7.11 Financial Covenants...................................... 28
ARTICLE 8 EVENTS OF DEFAULT............................................. 29
8.1 Events of Default........................................ 29
8.2 Remedies Upon Event of Default........................... 31
8.3 Performance by Lender.................................... 32
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TABLE OF CONTENTS
(continued)
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ARTICLE 9 MISCELLANEOUS................................................. 33
9.1 Modification............................................. 33
9.2 Waiver................................................... 33
9.3 Payment of Expenses...................................... 33
9.4 Notices.................................................. 33
9.5 Governing Law; Jurisdiction, Venue....................... 34
9.6 Invalid Provisions....................................... 34
9.7 Binding Effect........................................... 34
9.8 Entirety................................................. 35
9.9 Headings................................................. 35
9.10 Survival................................................. 35
9.11 No Third Party Beneficiary............................... 35
9.12 Time..................................................... 35
9.13 Schedules and Exhibits Incorporated...................... 35
9.14 Counterparts............................................. 35
9.15 Waiver of Jury Trial..................................... 35
EXHIBIT "A" Form of Borrowing Notice
EXHIBIT "B" Form of Compliance Certificate
EXHIBIT "C" Form of Borrowing Base Certificate
EXHIBIT "D" Form of Subordination Agreement
EXHIBIT "E-1" Form of Waiver/Release of Lien Rights (Landlord)
EXHIBIT "E-2" Form of Waiver/Release of Lien Rights (Warehouse)
SCHEDULE 7.10 Indebtedness
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CREDIT AGREEMENT
BY THIS CREDIT AGREEMENT (together with any amendments or modifications,
the "Credit Agreement"), entered into as of the 10th day of April, 2003 by and
between VODAVI COMMUNICATIONS SYSTEMS, INC., an Arizona corporation (the
"Borrower"), and COMERICA BANK-CALIFORNIA, a California banking corporation (the
"Lender"), in consideration of the mutual promises herein contained and for
other valuable consideration, the parties hereto do hereby agree as follows:
RECITALS
A. Borrower has requested that Lender establish the following financial
accommodations:
(i) A revolving line of credit facility (the "RLC") in the
principal amount of FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00)
(the "RLC Commitment") for the purpose of funding Borrower's working
capital and stock repurchases.
(ii) A term loan (the "Term Loan") in the principal amount of One
Million and No/100 Dollars ($1,000,000.00) (the "Term Loan
Commitment") for the purpose of funding Borrower's stock repurchases.
B. As a condition for extending such financial accommodations, Lender has
required that Borrower enter into this Credit Agreement, which establishes the
terms and conditions thereof.
ARTICLE 1
DEFINITION OF TERMS
1.1 DEFINITIONS. For the purposes of this Credit Agreement, unless the
context otherwise requires, the following terms shall have the respective
meanings assigned to them in this Article 1 or in the Section hereof referred to
below:
"ADVANCE" means an RLC Advance or the Term Loan Advance, as
applicable.
"AFFILIATE" of any Person means any Person which, directly or
indirectly, controls or is controlled by such Person. For the purposes of this
definition, "control" (including, with correlative meanings, the term
"controlled by"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise. The
parties agree that LG Electronics, Inc. ("LG") shall not be deemed to be an
Affiliate of Borrower or Guarantor so long as LG does not own 40% or more of the
stock of Guarantor.
"AUTHORIZED OFFICER" means one or more officers of Borrower duly
authorized (and so certified to Lender by the corporate secretary of Borrower
pursuant to a certificate of authority and incumbency from time to time
satisfactory to Lender in the exercise of Lender's reasonable discretion),
acting alone, to request Advances under the provisions of this Credit Agreement
and execute and deliver documents, instruments, agreements, reports, statements
and certificates in connection herewith.
"BANKING DAY" means a day of the year on which banks are not required
or authorized to close in San Jose, California and Phoenix, Arizona.
"BORROWER": See the Preamble hereto.
"BORROWING BASE" means the sum of (i) seventy-five percent (75.0%) of
the Eligible Accounts (the "Accounts Availability") plus (ii) an amount not to
exceed the lesser of forty percent (40.0%) of the Eligible Inventory or fifty
percent (50.0%) of the Accounts Availability.
"BORROWING BASE CERTIFICATE" means a certificate substantially in the
form attached hereto as Exhibit "C".
"CHANGE IN CONTROL" means the acquisition by any Person or two or more
Persons acting in concert of Control of the Borrower, without the prior written
consent of Lender, if different than the state of affairs as of the Closing
Date.
"CLEAN-UP NON-COMPLIANCE": See Section 2A.5(b) hereto.
"CLOSING DATE" means the date of delivery of this Credit Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended.
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"COLLATERAL" means all property subject to the Security Documents.
"CONTROL" when used with respect to any Person means the power,
directly or indirectly, to direct the management policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"CONTROLLED GROUP" means, severally and collectively, the members of
the group controlling, controlled by and/or in common control of Borrower,
within the meaning of Section 4001(b) of ERISA.
"CREDIT AGREEMENT": See the Preamble hereto.
"CREDIT DOCUMENTS" means this Credit Agreement, the Note (including
any renewals, extensions and refundings thereof), the Security Documents, the
Guarantee and any written agreements, certificates or documents (and with
respect to this Credit Agreement and such other written agreements and
documents, any amendments or supplements thereto or modifications thereof)
executed or delivered pursuant to the terms of this Credit Agreement.
"CREDIT EXPOSURE" means the aggregate outstanding principal balance of
the RLC and the Term Loan.
"CURRENT RATIO" means current assets of Guarantor divided by its
current liabilities.
"DEFAULT RATE" means at any time five percent (5%) per annum over the
then applicable interest rate of the RLC.
"DOLLARS" and the sign "$" mean lawful currency of the United States
of America.
"EBIT" means the net income of a Person plus the interest and tax
expenses deducted in calculating such net income.
"EFFECTIVE NET WORTH" means the total equity of a Person plus the
amount of any Subordinated Debt, but less any amount owed to Borrower by any
Person that is an Affiliate of or is related to Borrower, and less any
intangible assets, all as determined in accordance with GAAP.
"ELIGIBLE ACCOUNTS" means those accounts receivable of Borrower as
Lender in its reasonable discretion shall determine are eligible from time to
time. Eligible Accounts shall not include any of the following:
(a) Account balances over ninety (90) calendar days from invoice
date.
(b) Accounts with respect to which the account debtor is an
officer, director, shareholder, employee, subsidiary or affiliate of
Borrower.
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(c) Accounts with respect to which 25% or more of the account
debtor's total accounts or obligations outstanding to Borrower are
more than 90 calendar days from invoice date.
(d) As to accounts, including without limitation accounts owed by
Affiliates of the account obligor, representing more than 25% (30% for
Graybar Electric) of Borrower's total accounts receivable, the balance
in excess of 25% (30% for Graybar Electric) is not eligible.
(e) Accounts with respect to international transactions (other
than Canadian transactions approved by Lender in its reasonable
discretion) unless insured by an insurance company acceptable to
Lender in its reasonable discretion or covered by letters of credit
issued or confirmed by a bank acceptable to Lender or unless otherwise
acceptable to Lender, in its reasonable discretion.
(f) Credit balances greater than ninety (90) calendar days from
invoice date.
(g) Accounts where the account debtor is a seller to Borrower,
whereby a potential offset (contra) exists, to the extent of the
offset.
(h) Consignment or guaranteed sales.
(i) ▇▇▇▇ and hold accounts.
(j) Contracts receivable.
(k) Progress ▇▇▇▇▇▇▇▇.
"ELIGIBLE INVENTORY" means that inventory of Borrower that consists of
finished goods, that is located in the United States and that consists of
Collateral, all of which shall be valued at the lower of actual cost or market
value in accordance with GAAP.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with all final and permanent regulations issued pursuant
thereto. References herein to sections and subsections of ERISA are deemed to
refer to any successor or substitute provisions therefor.
"EVENT OF DEFAULT": See Section 8.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"FEE": See Section 2.2(a).
"FINANCIAL COVENANTS": See Section 7.11 hereof.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through its Accounting Principles Board or by the
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Financial Accounting Standards Board or through other appropriate boards or
committees thereof and which are consistently applied for all periods after the
date hereof so as to properly reflect the financial condition, and the results
of operations and changes in the financial position, of Borrower, including
without limitation accounting rules promulgated pursuant to Regulations SX and
SK, except that any accounting principle or practice required to be changed by
the said Accounting Principles Board or Financial Accounting Standards Board (or
other appropriate board or committee of the said Boards) in order to continue as
a generally accepted accounting principle or practice may be so changed.
"GOVERNMENTAL AUTHORITY" means any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency or other
governmental authority having jurisdiction over Borrower or any of its business,
operations or properties.
"GUARANTEE": See Section 3.3 hereof.
"GUARANTOR" means VODAVI TECHNOLOGY, INC., a Delaware corporation.
"INDEBTEDNESS" of a Person means each of the following (without
duplication): (a) obligations of that Person to any other Person for payment of
borrowed money, (b) capital lease obligations, (c) notes and drafts drawn or
accepted by that Person payable to any other Person, whether or not representing
obligations for borrowed money (but without duplication of indebtedness for
borrowed money), (d) any obligation for the purchase price of property the
payment of which is deferred for more than one year or evidenced by a note or
equivalent instrument, (e) guarantees of Indebtedness of third parties, and (f)
a recourse or nonrecourse payment obligation of any other Person that is secured
by a Lien on any property of the first Person, whether or not assumed by the
first Person, up to the fair market value (from time to time) of such property
(absent manifest evidence to the contrary, the fair market value of such
property shall be the amount determined under GAAP for financial reporting
purposes).
"LENDER": See the Preamble hereto.
"LEVERAGE RATIO" means the ratio of the Indebtedness of Guarantor less
its Subordinated Debt, to its Effective Net Worth.
"LIEN" means any lien, mortgage, security interest, tax lien, pledge,
encumbrance, conditional sale or title retention arrangement, or any other
interest in property designed to secure the repayment of Indebtedness whether
arising by agreement or under any statute or law, or otherwise.
"LOAN" or "LOANS", each a Loan, means the RLC and/or the Term Loan, as
applicable.
"MATERIAL ADVERSE EFFECT" means any circumstance or event which (i)
has any material adverse effect upon the validity or enforceability of any
Credit Document, (ii) materially impairs the ability of Borrower to fulfill its
obligations under the Credit Documents, or (iii) causes an Event of Default or
any event which, with notice or lapse of time or both, could reasonably be
expected to become an Event of Default.
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"MATURITY DATE" means the RLC Maturity Date.
"NOTE" or "NOTES", each a Note, means the RLC Note and/or the Term
Loan Note, as applicable.
"OBLIGATION" means all present and future indebtedness, obligations
and liabilities of Borrower to Lender, and all renewals and extensions thereof,
or any part thereof, arising pursuant to this Credit Agreement or represented by
the Note, including without limitation the Loan and all interest accruing
thereon, and attorneys' fees incurred in the enforcement or collection thereof,
regardless of whether such indebtedness, obligations and liabilities are direct,
indirect, fixed, contingent, joint, several or joint and several; together with
all indebtedness, obligations and liabilities of Borrower evidenced or arising
pursuant to any of the other Credit Documents, and all renewals and extensions
thereof, or part thereof.
"PAYMENT DATE" means the fifth day of each month, provided that if any
such day is not a Banking Day, then such Payment Date shall be the next
successive Banking Day.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or substantially all of the Pension Benefit Guaranty
Corporation's functions under ERISA.
"PERMITTED CREDIT EXPOSURE" means:
(i) prior to the Term Loan Advance Date, the
lesser of the RLC Commitment or the Borrowing Base;
(ii) for the first year after the Term Loan Advance
Date, the lesser of (A) the aggregate amount of the RLC Commitment and
the Term Loan Commitment, and (B) the sum of the Borrowing Base and
$500,000.00; and
(iii) after the first year after the Term Loan Advance
Date, the lesser of (A) the aggregate amount of the RLC Commitment and
the Term Loan Commitment, and (B) the Borrowing Base.
"PERMITTED LIENS" means:
(a) Liens in Lender's favor.
(b) Liens for taxes or other governmental charges not delinquent
or which the nonpayment of which is permitted under Section 5.8 or
Section 6.6;
(c) Pledges or deposits securing obligations under worker's
compensation, unemployment insurance, social security or public
liability laws or similar legislation;
(d) Pledges or deposits securing bids, tenders, contracts (other
than contracts for the payment of money) or leases which Borrower is a
party as lessee, made in the ordinary course of business in an
aggregate amount at any time not to exceed $200,000.00;
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(e) Deposits securing public or statutory obligations of
Borrower;
(f) Inchoate and unperfected workers', mechanics', suppliers' or
similar liens arising in the ordinary course of business;
(g) Carriers', warehouseman's or similar possessory liens or
landlord liens arising in the ordinary course of business and securing
indebtedness not yet due and payable (or being contested in good
faith) in an aggregate amount not in excess of $50,000.00 at any time;
(h) Deposits securing, or in lieu of, surety, appeal or customs
bonds in proceedings in which Borrower is a party;
(i) Any attachment or judgment lien, unless the judgment it
secures shall not, within 60 days after the entry thereof, have been
discharged or execution thereof stayed pending an appeal, or shall not
have been discharged within 60 days after the expiration of any such
stay;
(j) Zoning restrictions, easements, licenses, or other
restrictions on the use of real property or other minor irregularities
in title (including leasehold title) thereto, so long as the same does
not materially impair the use, value or marketability of such real
property, leases or leasehold estates; or
(k) Liens or security interests securing Indebtedness permitted
to be incurred under Section 7.10.
"PERSON" includes an individual, a corporation, a joint venture, a
partnership, a trust, a limited liability Borrower, an unincorporated
organization or a government or any agency or political subdivision thereof.
"PLAN" means an employee defined benefit plan or other plan maintained
by Borrower for employees of Borrower and covered by Title IV of ERISA, or
subject to the minimum funding standards under Section 412 of the Code.
"PRIME RATE" means that rate so announced by Lender as its "base rate"
from time to time and which serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto. The Variable
Rate shall fluctuate with any change in the Prime Rate, and such fluctuation in
the interest rate shall be effective on the effective date of each and every
change in the Prime Rate as, from time to time, announced by Lender at its
corporate headquarters in San Jose, California. Should Lender no long exist or
fail to announce a "base rate," the Prime Rate shall be the annual rate of
interest publicly announced from time to time by Comerica Bank or its successors
as its "reference" rate of interest.
"QUARTERLY END DATE" means each March 31, June 30, September 30 and
December 31.
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"REGULATION U" means Regulation U promulgated by the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 221, or any other
regulation hereafter promulgated by said Board to replace the prior Regulation U
and having substantially the same function.
"REPORTABLE EVENT" means any "reportable event" as described in
Section 4043(b) of ERISA with respect to which the thirty (30) day notice
requirement has not been waived by the PBGC.
"RLC" means that revolving line of credit made available by Lender to
Borrower pursuant to Article 2A hereof.
"RLC ADVANCE" means a disbursement of the proceeds of the RLC.
"RLC COMMITMENT" means Five Million And No/100 Dollars
($5,000,000.00).
"RLC COMMITMENT FEE" means Six Thousand Two Hundred Fifty and No/100
Dollars ($6,250.00).
"RLC MATURITY DATE" means April 30, 2005.
"RLC NOTE" means that Promissory Note dated of even date herewith in
the amount of the RLC, executed by Borrower and delivered pursuant to the terms
of this Credit Agreement, together with any renewals, extensions, modifications
or replacements thereof.
"SEC" means the Securities and Exchange Commission.
"SECURITY AGREEMENT": See Section 3.1 hereof.
"SECURITY DOCUMENTS": See Section 3.2 hereof.
"SIGNIFICANT DEBT AGREEMENT" means all documents, instruments and
agreements executed by a Person, evidencing, securing or ensuring any
Indebtedness of such Person or any guaranty in excess of $100,000.00 in
outstanding principal (or principal equivalent) amount.
"SUBORDINATED DEBT" means Indebtedness of a Person subordinated to the
payment of the Obligation pursuant to written agreements acceptable to Lender.
"SUBORDINATION AGREEMENT" means a Subordination Agreement
substantially in form attached hereto as Exhibit "D".
"TERM BALANCE" means the principal balance outstanding at the end of
the fiscal year (the "Term Balance Date") during which there has occurred a
Clean-Up Non-Compliance.
"TERM BALANCE DATE": See the definition of Term Balance.
"TERM LOAN" means that term loan made available by Lender to Borrower
pursuant to Article 2B hereof.
"TERM LOAN ADVANCE" means a disbursement of the proceeds of the Term
Loan.
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"TERM LOAN ADVANCE DATE" means that date on which the Term Loan
Advance is disbursed to Borrower.
"TERM LOAN COMMITMENT" means One Million and No/100 Dollars
($1,000,000.00).
"TERM LOAN COMMITMENT FEE" means Five Thousand and No/100 Dollars
($5,000.00).
"TERM LOAN DEADLINE" means September 30, 2003.
"TERM LOAN MATURITY DATE" means the earlier of September 30, 2006 or
thirty-six (36) months after the Term Loan Advance Date.
"TERM LOAN NOTE" means that Promissory Note dated of even date
herewith in the amount of the Term Loan Commitment, executed by Borrower and
delivered pursuant to the terms of this Credit Agreement, together with any
renewals, extensions, modifications or replacements there.
"TERM LOAN VARIABLE RATE" means the rate per annum equal to one-half
percent (0.5%) in excess of the Prime Rate per annum as in effect from time to
time.
"VARIABLE RATE" means the rate per annum equal to the Prime Rate per
annum as in effect from time to time.
1.2 REFERENCES. Capitalized terms shall be equally applicable to both the
singular and the plural forms of the terms therein defined. References to
"Credit Agreement," "this Agreement," "herein," "hereof," "hereunder," or other
like words mean this Credit Agreement as amended, supplemented, restated or
otherwise modified and in effect from time to time.
1.3 ACCOUNTING TERMS. Except as expressly provided to the contrary herein,
all accounting terms shall be interpreted and all accounting determinations
shall be made in accordance with GAAP, except as otherwise specifically provided
for herein. To the extent any change in GAAP affects any computation or
determination required to be made pursuant to this Credit Agreement, such
computation or determination shall be made as if such change in GAAP had not
occurred unless Borrower and Lender agree in writing on an adjustment to such
computation or determination to account for such change in GAAP.
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ARTICLE 2
PAYMENTS, FEES, AND PREPAYMENT PROVISIONS
2.1 PAYMENTS.
(a) All payments and prepayments by the Borrower of principal of
and interest on the Note and all fees, expenses and any other
Obligation payable to Lender in connection with the Loan shall be
nonrefundable and made in Dollars or immediately available funds to
Lender not later than 2:00 p.m. (San Jose, California local time), on
the dates called for under this Credit Agreement, at the office of
Lender in San Jose, California. Funds received after such hour shall
be deemed to have been received by Lender on the next Banking Day.
(b) Unless otherwise required by applicable law, payments will be
applied first to accrued, unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs, late charges and
other charges; provided, however, upon delinquency or other default,
Lender reserve the right to apply payments among principal, interest,
late charges, collection costs and other charges at its discretion.
(c) Interest shall be due and payable on the Loan on each Payment
Date and on the Maturity Date.
(d) Whenever any payment to be made hereunder shall be stated to
be due on a day which is not a Banking Day, such payment shall be made
on the next succeeding Banking Day, and such extension of time shall
in such case be included in the computation of interest, commission or
fee, as the case may be.
(e) Borrower authorizes Lender to collect all interest, fees,
costs, and/or expenses due under this Credit Agreement by charging
Borrower's demand deposit account maintained by Borrower with Lender
as designated on the Automatic Debit Authorization of even date
herewith executed by Borrower, for the full amount thereof. Should
there be insufficient funds in any such demand deposit account to pay
all such sums when due, the full amount of such deficiency shall be
immediately due and payable by Borrower.
(f) If any payment of interest and/or principal is not received
by Lender within ten (10) days of when such payment is due, then in
addition to the remedies conferred upon the Lender under the Credit
Documents, a late charge of five percent (5%) of the amount of the
installment due and unpaid will be added to the delinquent amount to
compensate the Lender for the expense of handling the delinquency for
any payment past due in excess of ten (10) days, regardless of any
notice and cure period.
(g) Upon the occurrence of an Event of Default and after
maturity, including maturity upon acceleration, the unpaid principal
balance, all accrued and unpaid interest and all other amounts payable
hereunder shall bear interest at the Default Rate.
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2.2 FEES.
(a) Borrower agrees to pay to Lender on the Closing Date a
non-refundable RLC fee of $25,000.00 and a reasonable documentation
fee (collectively, the "Fee").
(b) Borrower agrees to pay Lender the Commitment Fee on the
Closing Date and on the first anniversary thereof.
(c) Borrower agrees to pay a non-refundable Term Loan Commitment
Fee on the Closing Date.
(d) Borrower agrees to pay to Lender, upon written notice to
Borrower, Lender's fees and costs as provided herein (including,
without limitation, reasonable attorneys' fees and costs pursuant to
Section 9.3 and the costs associated with any audit conducted pursuant
to this Credit Agreement).
2.3 MAINTENANCE OF ACCOUNTS. Lender shall maintain, in accordance with its
usual practice, an account or accounts evidencing the indebtedness of the
Borrower and the amounts payable and paid from time to time hereunder. In any
legal action or proceeding in respect of this Credit Agreement, the entries made
in the ordinary course of business in such account or accounts shall be evidence
of the existence and amounts of the obligations of the Borrower therein
recorded. The failure to record any such amount shall not, however, limit or
otherwise affect the obligations of the Borrower hereunder to repay all amounts
owed hereunder, together with all interest accrued thereon as provided in the
Note.
2.4 PREPAYMENTS. Borrower may prepay the outstanding principal balance of
the Loan in whole or in part at any time prior to the Maturity Date, without any
penalty or premium.
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ARTICLE 2A
THE RLC
2A.1 RLC COMMITMENT. Lender agrees to loan to, and Borrower agrees to draw
upon and borrow, in the manner and upon the terms and conditions contained in
this Credit Agreement, such that the aggregate outstanding balance of the RLC at
any time, including without limitation the Term Balance, shall not exceed the
RLC Commitment or that the Credit Exposure shall not exceed the Permitted Credit
Exposure. The amount of the Term Balance that may be outstanding at any time
shall be deemed to be RLC Advances outstanding at such time and shall reduce the
amount of the RLC available for further RLC Advances.
2A.2 REVOLVING LINE OF CREDIT.
(a) Subject to the terms and conditions set forth in this Credit
Agreement, the RLC shall be a revolving line of credit, against which
RLC Advances may be made to Borrower, repaid by Borrower and new RLC
Advances made to Borrower, as Borrower may request, provided that (i)
no RLC Advance shall be made if an Event of Default shall be
continuing, (ii) no RLC Advance shall be made that would cause the
outstanding principal balance of the RLC, including without limitation
the Term Balance, to exceed the RLC Commitment, (iii) no RLC Advance
shall be made that would cause the Credit Exposure to exceed the
Permitted Credit Exposure, and (iv) no RLC Advance shall be made on or
after the RLC Maturity Date.
(b) The RLC shall be evidenced by the RLC Note.
2A.3 RLC ADVANCES.
(a) An RLC Advance shall be made by Lender to Borrower upon
written notice from Borrower in substantially the form attached hereto
as Exhibit "A" hereof from an Authorized Officer (which notice
Borrower hereby authorizes Lender to accept by telefacsimile) and
shall in addition to complying with the other requirements in this
Credit Agreement, (i) specify the date and amount of the RLC Advance
and (ii) specify whether the purpose of the RLC Advance is to
repurchase stock. Subject to compliance with any other conditions
herein, RLC Advances may be made in any amount.
(b) In the event that any RLC Advance is for the purpose of
making a purchase of Borrower's stock, Borrower shall show that it
shall be in compliance with Section 7.4, after giving effect to the
purchase.
2A.4 RLC PAYMENTS. The RLC shall bear interest and be payable to Lender
upon the following terms and conditions:
(a) Interest on the RLC shall accrue at the Variable Rate.
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(b) All accrued and unpaid interest on the RLC through the end of
the preceding month shall be due and payable on each Payment Date.
(c) Except for any Term Balance, the unpaid principal balance,
all accrued and unpaid interest and all other amounts payable with
respect to the RLC shall be due and payable in full on the RLC
Maturity Date.
(d) As to any Term Balance:
(i) In addition to interest on the Term Balance, payments of
principal in an amount sufficient to fully amortize the Term
Balance over thirty-six equal monthly payments shall be due and
payable on each Payment Date, commencing on the first Payment
Date after the Term Balance Date.
(ii) The unpaid principal Term Balance and all accrued and
unpaid interest on the Term Balance shall be due and payable in
full on the third anniversary of the Term Balance Date.
2A.5 EXCESS BALANCE PAYMENT; RLC CLEAN-UP.
(a) There shall be due and payable from Borrower to Lender, and
Borrower shall repay to Lender, within five (5) days of written demand
from Lender, from time to time, any amount by which the Credit
Exposure exceeds the Permitted Credit Exposure.
(b) Borrower shall cause the unpaid balance of the RLC, other
than any outstanding Term Balance, to be Zero Dollars ($0) for at
least thirty (30) consecutive days during each fiscal year. Failure to
do so shall be a "Clean-Up Non-Compliance."
2A.6 CONDITIONS. Lender shall have no obligation to make any RLC Advance
unless and until all of the conditions and requirements of this Credit Agreement
are fully satisfied. However, Lender in its sole and absolute discretion may
elect to make one or more RLC Advances prior to full satisfaction of one or more
such conditions and/or requirements. Notwithstanding that such an RLC Advance or
RLC Advances are made, such unsatisfied conditions and/or requirements shall not
be waived or released thereby. Borrower shall be and continue to be obligated to
fully satisfy such conditions and requirements, and Lender, at any time, in
Lender's sole and absolute discretion, may stop making RLC Advances until all
conditions and requirements are fully satisfied.
2A.7 OTHER RLC ADVANCES BY LENDER. Lender, after giving fifteen (15) days
prior written notice to Borrower to allow for corrective action, from time to
time, may make RLC Advances in any amount in payment of (i) insurance premiums,
taxes, assessments, liens or encumbrances existing against property encumbered
by the Security Documents, (ii) interest accrued and payable upon the RLC, (iii)
any charges and expenses that are the obligation of Borrower under this Credit
Agreement or any Security Document, and (iv) any charges or matters necessary to
preserve the property encumbered by the Security Documents or to cure any still
existing Event of Default.
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2A.8 ASSIGNMENT. Borrower shall have no right to any RLC Advance other than
to have the same disbursed by Lender in accordance with the disbursement
provisions contained in this Credit Agreement. Any assignment or transfer,
voluntary or involuntary, of this Credit Agreement or any right hereunder shall
not be binding upon or in any way affect Lender without its written consent;
Lender may make RLC Advances under the disbursement provisions herein,
notwithstanding any such assignment or transfer.
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ARTICLE 2B
THE TERM LOAN
2B.1 TERM LOAN COMMITMENT. Lender agrees to loan to, and Borrower agrees to
draw upon and borrow in a single Term Loan Advance, in the manner and upon the
terms and conditions contained in this Credit Agreement, the Term Loan, which
Term Loan Advance shall not exceed the Term Loan Commitment.
2B.2 TERM LOAN.
(a) Subject to the terms and conditions set forth in this Credit
Agreement, the Term Loan shall be a single advance line of credit,
provided that (i) the Term Loan Advance shall not be made if an Event
of Default shall be continuing, and (ii) the Term Loan Advance shall
not be made after the Term Loan Deadline.
(b) The Term Loan shall be evidenced by the Term Loan Note.
2B.3 TERM LOAN ADVANCE.
(a) The Term Loan Advance shall be made by Lender to Borrower
upon written notice from Borrower from an Authorized Officer (which
notice Borrower hereby authorizes Lender to accept by telefacsimile)
and shall, in addition to complying with the other requirements in
this Credit Agreement, specify the date and amount of the Term Loan
Advance. Subject to compliance with any other conditions herein, the
Term Loan Advance may be made in any amount.
(b) The Term Loan Advance shall be made solely for the purpose of
making a purchase of Borrower's stock.
2B.4 TERM LOAN PAYMENTS. The Term Loan shall bear interest and be payable
to Lender upon the following terms and conditions:
(a) Interest on the Term Loan shall accrue at the Term Loan
Variable Rate.
(b) All accrued and unpaid interest on the Term Loan through the
end of the preceding month shall be due and payable on each Payment
Date.
(c) In addition to interest on the principal balance of the Term
Loan, payments of principal in an amount sufficient to fully amortize
the principal balance over sixty (60) equal monthly payments shall be
due and payable on each Payment Date, commencing on the first Payment
Date after the Term Loan Advance Date.
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(d) The unpaid principal balance, all accrued and unpaid interest
and all other amounts payable with respect to the Term Loan shall be
due and payable in full on the Term Loan Maturity Date.
2B.5 CONDITIONS. Lender shall have no obligation to make the Term Loan
Advance unless and until all of the conditions and requirements of this Credit
Agreement are fully satisfied. However, Lender in its sole and absolute
discretion may elect to make the Term Loan Advance prior to full satisfaction of
one or more such conditions and/or requirements. Notwithstanding that such Term
Loan Advance is made, such unsatisfied conditions and/or requirements shall not
be waived or released thereby. Borrower shall be and continue to be obligated to
fully satisfy such conditions and requirements.
2B.6 ASSIGNMENT. Borrower shall have no right to the Term Loan Advance
other than to have the same disbursed by Lender in accordance with the
disbursement provisions contained in this Credit Agreement. Any assignment or
transfer, voluntary or involuntary, of this Credit Agreement or any right
hereunder shall not be binding upon or in any way affect Lender without its
written consent; Lender may make the Term Loan Advance under the disbursement
provisions herein, notwithstanding any such assignment or transfer.
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ARTICLE 3
SECURITY; GUARANTEE
3.1 SECURITY. So long as any Loan is outstanding, Borrower shall cause such
Loan and Borrower's obligations under this Credit Agreement to be secured at all
times by a valid and effective security agreement (the "Security Agreement"),
duly executed and delivered by or on behalf of Borrower, granting Lender a valid
and enforceable security interest in all of its personal property as described
therein, subject to no prior Liens except for Permitted Liens. Personal property
leased by Borrower from a third party pursuant to an operating lease as
determined under GAAP shall not be subject to said security interest on behalf
of Lender and any lease agreement related to such leased personal property
shall, for purposes of this Credit Agreement, not be deemed a Lien.
3.2 SECURITY DOCUMENTS. All of the documents required by this Article 3
shall be in form satisfactory to Lender and Lender's counsel, and, together with
any financing statements for filing and/or recording, and any other items
required by Lender to fully perfect and effectuate the liens and security
interests of Lender contemplated by the Security Agreement, and this Credit
Agreement, may heretofore or hereinafter be referred to as the "Security
Documents."
3.3 GUARANTEE. So long as the Loan is outstanding, Borrower shall cause the
Loan and Borrower's obligations under this Credit Agreement to be guaranteed
under a Continuing Guarantee (the "Guarantee") from the Guarantor.
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ARTICLE 4
CONDITIONS PRECEDENT
The obligation of Lender to make the Loan and to make each and any Advance
hereunder is subject to the full prior satisfaction at each such time of each of
the following conditions precedent:
4.1 INITIAL OR ANY SUBSEQUENT ADVANCE. Prior to its making the initial
Advance or any subsequent Advance, Lender shall have received the following each
in form and substance satisfactory to Lender:
(a) THIS CREDIT AGREEMENT. This Credit Agreement, duly executed
and delivered to Lender by Borrower.
(b) THE RLC NOTE AND THE TERM LOAN NOTE. The RLC Note and the
Term Loan Note, each duly executed by Borrower, drawn to the order of
Lender and otherwise as provided in Articles 2A and 2B hereof.
(c) ORGANIZATIONAL DOCUMENTS. A copy of the current
organizational documents of Borrower and Guarantor, including as to
each all amendments thereto, certified as current and complete by the
appropriate authority of the state of its formation, together with
evidence of its good standing in its state of formation.
(d) RESOLUTION. A certified copy of the resolutions of Borrower
and Guarantor, each authorizing to the extent applicable the RLC, the
execution, delivery, and performance of this Credit Agreement, the RLC
Note, the Credit Documents, all advances of credit hereunder and the
Guarantee.
(e) SECURITY AGREEMENT. The Security Agreement, duly executed and
delivered to Lender by Borrower.
(f) GUARANTEE. The Guarantee, duly executed and delivered to
Lender by Guarantor.
(g) SUBORDINATION AGREEMENTS. Subordination Agreements acceptable
to Lender executed by each Affiliate of Borrower to which it has
Indebtedness outstanding, substantially in the form of Exhibit D
hereto.
(h) LENDER'S FEES AND COSTS. Payment of the Fee, the Commitment
Fee due on the Closing Date, and the Term Loan Commitment Fee, plus
Lender's other fees and costs.
(i) COMPLIANCE CERTIFICATE. A Compliance Certificate
substantially in the form of Exhibit "B" attached hereto, indicating
that Borrower is in compliance with the Financial Covenants as of
March 31, 2003.
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(j) FINANCING STATEMENTS. A Financing Statement naming Borrower
as debtor and Lender as secured party to be filed with the Arizona
Secretary of State.
(k) ACCOUNTS RECEIVABLE. A listing and aging of the accounts
receivable of Borrower as of March 31, 2003.
(l) INVENTORY. A listing of Borrower's inventory as of March 31,
2003.
(m) FINANCIAL STATEMENTS. Financial Statements of Guarantor as of
December 31, 2002.
(n) LANDLORD WAIVERS. To the extent reasonably available on the
Closing Date, lien waivers executed by the landlord of each leased
premises where Collateral is located, substantially in the form of
Exhibit E hereto; provided that Lender in its reasonable discretion
may accept other forms of lien waivers or subordinations and that
Borrower shall provide to Lender within sixty (60) days of the Closing
Date any landlord lien waivers not reasonably available on the Closing
Date.
(o) ADDITIONAL INFORMATION. Such other information and documents
as may reasonably be required by Lender or Lender's counsel.
4.2 NO EVENT OF DEFAULT. No Event of Default known to Borrower shall have
occurred and be continuing, or result from Lender's making of any Loan.
4.3 NO MATERIAL ADVERSE EFFECT. Since the date of the most recent financial
statements provided to Lender by Borrower, no change shall have occurred in the
business or financial condition of Borrower that could have a Material Adverse
Effect.
4.4 REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained in Article 5 hereof shall be true and correct in all material
respects, with the same force and effect as though made on and as of the Closing
Date (other than those of such representations which by their express terms
speak to a date prior to that date, which representations shall, in all material
respects, be true and correct as of such respective date).
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loans, Borrower represents and warrants to
Lender that:
5.1 RECITALS. The recitals and statements of intent appearing in this
Credit Agreement are true and correct.
5.2 ORGANIZATION AND GOOD STANDING. It is duly organized, validly existing
and in good standing in all states in which the nature of its business and
property makes such qualifications necessary or appropriate, except where the
failure to so qualify would not have a Material Adverse Effect. It has the legal
power and authority to own its properties and assets and to transact the
business in which it is engaged and is or will be qualified in those states
wherein the nature of its proposed business and property will make such
qualifications necessary or appropriate in the future, except where the failure
to have such legal right or to so qualify would not have a Material Adverse
Effect.
5.3 AUTHORIZATION AND POWER. It has the power and requisite authority to
execute, deliver and perform this Credit Agreement, the Note and the other
Credit Documents to be executed by it; it is duly authorized to, and has taken
all action, corporate or otherwise, necessary to authorize it to, execute,
deliver and perform this Credit Agreement, the Note and such other Credit
Documents and is and will continue to be duly authorized to perform this Credit
Agreement, the Note and such other Credit Documents.
5.4 SECURITY DOCUMENTS. The liens, security interests and assignments
created by the Security Documents will, when granted, be valid, effective and
enforceable liens, security interests and assignments, except to the extent (if
any) otherwise agreed in writing by Lender.
5.5 NO CONFLICTS OR CONSENTS. Neither the execution and delivery of this
Credit Agreement, the Notes or the other Credit Documents to which it is a
party, nor the consummation of any of the transactions herein or therein
contemplated, nor compliance with the terms and provisions hereof or with the
terms and provisions thereof, (a) will materially contravene or conflict with:
(i) any provision of law, statute or regulation to which it is subject, (ii) any
judgment, license, order or permit applicable to it, or (iii) any Significant
Debt Agreement, or (b) will violate any provision of its organizational
documents. No consent, approval, authorization or order of any court or
Governmental Authority or other Person is required in connection with the
execution and delivery by it of the Credit Documents or to consummate the
transactions contemplated hereby or thereby, or if required, such consent,
approval, authorization or order shall have been obtained, except where the
failure to obtain such consent, approval, authorization or order would not have
a Material Adverse Effect.
5.6 NO LITIGATION. Except for those matters that have been previously
disclosed to Lender in writing, there are no actions, suits or legal, equitable,
arbitration or administrative proceedings pending, or to its actual knowledge
overtly threatened, against Borrower that would, if adversely determined, have a
Material Adverse Effect.
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5.7 FINANCIAL CONDITION. It has delivered to Lender copies of the
Borrower's most recent financial statements. Such financial statements, in all
material respects, fairly and accurately present the financial position of
Borrower as of such date, have been prepared in accordance with GAAP and neither
contain any untrue statement of a material fact nor fail to state a material
fact required in order to make such financial statement not misleading (as to
the unaudited interim financial statements, subject to the normal year-end
adjustments and the absence of footnotes). Since the date thereof, Borrower has
not discovered any obligations, liabilities or indebtedness (including
contingent and indirect liabilities and obligations or unusual forward or
long-term commitments) which in the aggregate are material and adverse to the
financial position or business of Borrower that should have been but were not
reflected in such financial statements. No changes having a Material Adverse
Effect have occurred in the financial condition or business of Borrower since
the date of such financial statements.
5.8 TAXES. It has filed or caused to be filed all returns and reports which
are required to be filed by any jurisdiction, and has paid or made provision for
the payment of all taxes, assessments, fees or other governmental charges
imposed upon its properties, income or franchises, as to which the failure to
file or pay would have a Material Adverse Effect, except such assessments or
taxes, if any, which are being contested in good faith by appropriate
proceedings.
5.9 NO STOCK PURCHASE. No part of the proceeds of any financial
accommodation made by Lender in connection with this Credit Agreement will be
used to purchase or carry "margin stock," as that term is defined in Regulation
U, or to extend credit to others for the purpose of purchasing or carrying such
margin stock.
5.10 ADVANCES. Each request for an Advance or for the extension of any
financial accommodation by Lender whatsoever shall constitute an affirmation
that the representations and warranties contained herein are, true and correct
as of the time of such request. All representations and warranties made herein
shall survive the execution of this Credit Agreement, all advances of proceeds
of the Loan and the execution and delivery of all other documents and
instruments in connection with the Loan and/or this Credit Agreement, so long as
Lender has any commitment to lend hereunder and until the Loan has been paid in
full and all of Borrower's obligations under this Credit Agreement, the Note and
all Security Documents have been fully discharged.
5.11 ENFORCEABLE OBLIGATIONS. This Credit Agreement, the Note and the other
Credit Documents are the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, except
as limited by bankruptcy, insolvency or other laws or equitable principles of
general application relating to the enforcement of creditors' rights.
5.12 NO DEFAULT. No event or condition has occurred and is continuing that
constitutes an Event of Default.
5.13 SIGNIFICANT DEBT AGREEMENTS. It is not in default in any material
respect under any Significant Debt Agreement.
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5.14 ERISA. (a) No Reportable Event has occurred and is continuing with
respect to any Plan; (b) PBGC has not instituted proceedings to terminate any
Plan; (c) neither the Borrower, any member of the Controlled Group, nor any
duly-appointed administrator of a Plan (i) has incurred any liability to PBGC
with respect to any Plan other than for premiums not yet due or payable or (ii)
has instituted or intends to institute proceedings to terminate any Plan under
Section 4041 or 4041A of ERISA; and (d) each Plan of Borrower has been
maintained and funded in all material respects in accordance with its terms and
in all material respects in accordance with all provisions of ERISA applicable
thereto. Neither the Borrower nor any of its Subsidiaries participates in, or is
required to make contributions to, any Multi-employer Plan (as that term is
defined in Section 3(37) of ERISA).
5.15 COMPLIANCE WITH LAW. It is in substantial compliance with all laws,
rules, regulations, orders, writs, injunctions and decrees that are applicable
to it, or its properties, noncompliance with which would have a Material Adverse
Effect.
5.16 SOLVENT. It (both before and after giving effect to the Loans
contemplated hereby) is solvent, has assets having a fair value in excess of the
amount required to pay its probable liabilities on its existing debts as they
become absolute and matured, and has, and will have, access to adequate capital
for the conduct of its business and the ability to pay its debts from time to
time incurred in connection therewith as such debts mature.
5.17 INVESTMENT COMPANY ACT. It is not, and is not directly or indirectly
controlled by, or acting on behalf of, any person which is, an "Investment
Borrower" within the meaning of the Investment Borrower Act of 1940, as amended.
5.18 TITLE. It has good and marketable title to the Collateral, subject to
the Permitted Lien.
5.19 SURVIVAL OF REPRESENTATIONS, ETC. All representations and warranties
by Borrower herein shall survive the making of any Loan and the execution and
delivery of any Note; any investigation at any time made by or on behalf of
Lender shall not diminish Lender's right to rely on the representations and
warranties herein.
5.20 ENVIRONMENTAL MATTERS. Except as previously disclosed to Lender in
writing, it, to the best of its knowledge after due investigation, is in
compliance in all material respects with all applicable environmental, health
and safety statutes and regulations and Borrower does not have any material
contingent liability in connection with any improper treatment, disposal or
release into the environment of any hazardous or toxic waste or substance.
5.21 LICENSES, TRADENAMES. It, as of the date hereof, possesses all
necessary trademarks, tradenames, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with valid trademarks, tradenames, copyright patents and license rights of
others, except for matters which could not reasonably be expected to have a
Material Adverse Effect.
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ARTICLE 6
AFFIRMATIVE COVENANTS
Until payment in full of the Loan and the complete performance of the
Obligation, Borrower agrees that:
6.1 FINANCIAL STATEMENTS, REPORTS AND DOCUMENTS. It shall deliver, or cause
to be delivered, to Lender each of the following:
(a) ANNUAL STATEMENTS OF GUARANTOR. As soon as available and in
any event within one hundred twenty (120) days after the close of each
fiscal year of Guarantor, audited, consolidated and consolidating
financial statements of Guarantor, including its balance sheet as of
the close of such fiscal year and statements of income of Guarantor
for such fiscal year, in each case setting forth in comparative form
the figures for the preceding fiscal year, all in reasonable detail
and accompanied by an unqualified opinion thereon of independent
public accountants of recognized national standing, to the effect that
such financial statements have been prepared in accordance with GAAP.
(b) QUARTERLY STATEMENTS OF GUARANTOR. As soon as available, and
in any event within forty-five (45) days after each Quarterly End Date
(except for that at the close of the fiscal year), copies of the
balance sheet of Guarantor as of such Quarterly End Date, and
statement of income of Guarantor for that quarter and for the portion
of the fiscal year ending with such quarter, in each case setting
forth in comparative form the figures for the corresponding period of
the preceding fiscal year, all in reasonable detail and fairly stated,
certified by Guarantor and prepared by Guarantor in accordance with
GAAP (as to the unaudited interim financial statements, subject to the
normal year-end adjustments and the absence of footnotes).
(c) COMPLIANCE CERTIFICATE. Within forty-five (45) days after
each Quarterly End Date hereafter and one hundred twenty (120) days
after the year end of each fiscal year of Guarantor, a certificate
signed by the chief financial officer of the Guarantor and the
Borrower, substantially in the form of Exhibit "B" attached hereto
certifying that after a review of the activities of Borrower during
such period, Borrower has observed, performed and fulfilled each and
every obligation and covenant contained herein and no Event of Default
exists under any of the same or, if any Event of Default shall have
occurred, specifying the nature and status thereof, and stating that
all financial statements of Guarantor delivered to Lender during the
respective period pursuant to Sections 6.1(a) and 6.1(b) hereof, to
his or her knowledge, fairly present in all material respect the
financial position of the Guarantor and the results of its operations
at the dates and for the periods indicated, and have been prepared in
accordance with GAAP, together with a calculation of the Financial
Covenants (as to the unaudited interim financial statements, subject
to the normal year-end adjustments and the absence of footnotes).
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(d) BORROWING BASE CERTIFICATE. Within twenty (20) days after the
end of each month, a Borrowing Base Certificate substantially in the
form attached hereto as Exhibit "C".
(e) OTHER MONTHLY REPORTS. Within twenty (20) days after the end
of each month, aging reports as to Borrower's accounts payable,
accounts receivable and inventory.
(f) SEC. Within twenty (20) days of filing, a complete copy,
including all schedules, of any SEC filings made by Guarantor.
(g) OTHER INFORMATION. Such other information concerning the
business, properties or financial condition of Borrower and Guarantor
as Lender shall reasonably request in writing.
6.2 MAINTENANCE OF EXISTENCE AND RIGHTS; CONDUCT OF BUSINESS; MANAGEMENT.
It will preserve and maintain its existence and all of its rights, privileges,
licenses, permits, franchises and other rights necessary in the normal conduct
of its business, conduct its business in an orderly and efficient manner
consistent with good business practices and maintain professional management of
its business.
6.3 OPERATIONS AND PROPERTIES. It will keep in good working order and
condition, ordinary wear and tear excepted, all of its assets and properties
which are necessary to the conduct of its business.
6.4 AUTHORIZATIONS AND APPROVALS. It will maintain, at its own expense, all
such governmental licenses, authorizations, consents, permits and approvals as
may be required to enable it to comply with its obligations hereunder and under
the other Credit Documents and to operate its businesses as presently or
hereafter duly conducted.
6.5 COMPLIANCE WITH LAW. It will comply with all applicable laws, rules,
regulations, and all final, nonappealable orders of any Governmental Authority
applicable to it or any of its property, business operations or transactions,
including without limitation, any environmental laws applicable to it, a breach
of which could result in a Material Adverse Effect.
6.6 PAYMENT OF TAXES AND OTHER INDEBTEDNESS. It will pay and discharge (i)
all income taxes and payroll taxes before delinquency, (ii) all taxes,
assessments, fees and other governmental charges imposed upon it or upon its
income or profits, or upon any property belonging to it, before delinquent,
which become due and payable, (iii) all lawful claims (including claims for
labor, materials and supplies), which, if unpaid, might become a Lien upon any
of its property and (iv) all of its Indebtedness arising under any Significant
Debt Agreement as it becomes due and payable, except as prohibited hereunder;
provided, however, that it shall not be required to pay any such tax,
assessment, charge, levy, claims or Indebtedness if and so long as the amount,
applicability or validity thereof shall currently be contested in good faith by
appropriate actions and appropriate accruals and reserves therefor have been
established in accordance with GAAP.
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6.7 COMPLIANCE WITH SIGNIFICANT DEBT AGREEMENTS AND OTHER AGREEMENTS. It
will comply in all material respects with (i) all Significant Debt Agreements,
and (ii) all agreements and contracts to which it is a party, a breach of which
could result in a Material Adverse Effect.
6.8 COMPLIANCE WITH CREDIT DOCUMENTS. It will comply with any and all
covenants and provisions of this Credit Agreement, the Notes and all other
Credit Documents.
6.9 NOTICE OF DEFAULT. It will furnish to Lender promptly upon becoming
actually aware of the existence of any event or condition that constitutes an
Event of Default, a written notice specifying the nature and period of existence
thereof and the action which it is taking or proposes to take with respect
thereto.
6.10 OTHER NOTICES. It will promptly notify Lender upon becoming actually
aware of (a) any Material Adverse Effect, (b) any waiver, release or default
under any Significant Debt Agreement, (c) any material claim not covered by
insurance against Borrower or any of Borrower's properties, and (d) the
commencement of, and any material determination in, any litigation with any
third party or any proceeding before any Governmental Authority affecting it,
except litigation or proceedings which, if adversely determined, would not have
a Material Adverse Effect.
6.11 BOOKS AND RECORDS; ACCESS; AUDITS. After and during the continuance of
an Event of Default, upon three (3) Banking Days notice from Lender, it will
give any authorized representative of Lender access during normal business hours
to, and permit such representative to examine, copy or make excerpts from, any
and all books, records and documents in its possession of and relating to the
Loan, and to inspect any of its properties. It will maintain complete and
accurate books and records of its transactions in accordance with good
accounting practices. In addition, it will give any authorized representative of
Lender access during normal business hours to conduct a minimum of one (1) audit
per year. The costs of such audit, which shall not exceed $3,000.00, shall be
for the account of the Borrower.
6.12 ERISA COMPLIANCE. With respect to its Plans, it shall (a) at all times
comply with the minimum funding standards set forth in Section 302 of ERISA and
Section 412 of the Code or shall have duly obtained a formal waiver of such
compliance from the proper authority; (b) at Lender's written request, within
thirty (30) days after the filing thereof, furnish to Lender copies of each
annual report/return (Form 5500 Series), as well as all schedules and
attachments required to be filed with the Department of Labor and/or the
Internal Revenue Service pursuant to ERISA, in connection with each of its Plans
for each year of the plan; (c) notify Lender within a reasonable time after
becoming actually aware of any fact, including, but not limited to, any
Reportable Event arising in connection with any of its Plans, which constitutes
grounds for termination thereof by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer such Plan,
together with a statement, if requested in writing by Lender, as to the reason
therefor and the action, if any, proposed to be taken with respect thereto; and
(d) furnish to Lender within a reasonable time, upon Lender's written request,
such additional information concerning any of its Plans as may be reasonably
requested.
6.13 FURTHER ASSURANCES. It will make, execute or endorse, and acknowledge
and deliver or file or cause the same to be done, all such notices,
certifications and additional agreements, undertakings or other assurances, and
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take any and all such other action, as Lender may, from time to time, deem
reasonably necessary or proper to fully evidence the Loan.
6.14 INSURANCE. It shall maintain in full force and effect at all times all
insurance coverages required under the terms of this Credit Agreement and/or the
Security Documents to which it is a party. In addition, it shall maintain in
full force and effect at all times:
(a) Policies of all risk coverage insurance covering all tangible
personality in which Lender has been granted or obtained a security
interest to secure the Obligation, in coverage amounts not less than,
from time to time, the fair market value thereof.
(b) Policies of insurance evidencing personal liability, property
damage liability and malpractice liability coverages in amounts
sufficient to protect its assets and reasonable for its business
operations, both as reasonably acceptable to Lender, and an umbrella
excess liability coverage in an amount reasonable for its business
operations and reasonably acceptable to Lender shall be in effect with
respect to Borrower.
(c) Policies of workers' compensation insurance in amounts and
with coverages as legally required.
(d) Such other insurance as Lender may require, which may
include, without limitation, earthquake insurance, rent abatement
and/or business loss.
Without limitation of the foregoing, it shall at all times maintain insurance
coverages in scope and amount not less than, and not less extensive than, the
scope and amount of insurance coverages customary in the trades or businesses in
which it is from time to time engaged. All of the aforesaid insurance coverages
shall be issued by insurers reasonably acceptable to Lender.
Copies of all policies of insurance evidencing such coverages in effect
from time to time and showing Lender as an additional insured and loss payee
shall be delivered to Lender within fifteen (15) days of the Closing Date and
upon issuance of new policies thereafter. From time to time, promptly upon
Lender's written request, it shall provide evidence reasonably satisfactory to
Lender (i) that required coverage in required amounts is in effect, and (ii)
that Lender is shown as an additional insured and loss payee with respect to all
such coverages, as Lender's interest may appear, by standard (non-attribution)
loss payable endorsement, additional insured endorsement, insurer's certificate
or other means acceptable to Lender in its reasonable discretion. At Lender's
option, it shall deliver to Lender certified copies of all such policies of
insurance in effect from time to time, to be retained by Lender so long as
Lender shall have any commitment to lend hereunder and/or any portion of the
Obligation shall be outstanding or unsatisfied. All such insurance policies
shall provide for at least thirty (30) days prior written notice of the
cancellation or modification thereof to Lender.
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ARTICLE 7
NEGATIVE COVENANTS
Until payment in full of the Loan and the performance of the Obligation,
Borrower shall not, without receiving the prior express written consent of
Lender:
7.1 EXISTENCE. Dissolve or liquidate, or merge or consolidate with or into
any other entity, or turn over the management or operation of its property,
assets or business to any other Person or make any substantial change in the
character of its business.
7.2 AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. Amend its organizational
documents if the result thereof could result in the occurrence directly or
indirectly of a Material Adverse Effect.
7.3 MARGIN STOCK. Use any proceeds of the Loan, or any proceeds of any
other or future financial accommodation from Lender for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any "margin stock"
as that term is defined in Regulation U or to reduce or retire any indebtedness
undertaken for such purposes within the meaning of said Regulation U, and will
not use such proceeds in a manner that would involve Borrower in a violation of
Regulation U or of any other Regulation of the Board of Governors of the Federal
Reserve System, nor use such proceeds for any purpose not permitted by Section 7
of the Exchange Act, or any of the rules or regulations respecting the
extensions of credit promulgated thereunder.
7.4 STOCK REPURCHASE. Purchase its stock in excess of $3,500,000.00 in the
aggregate during any fiscal year.
7.5 LIENS. On and after the date hereof, create, issue, assume or suffer to
exist Liens upon the Collateral, except Permitted Liens.
7.6 TRANSFER COLLATERAL. Assign, transfer or convey any of its right, title
and interest in the Collateral, other than (i) sales of inventory in the
ordinary course of business or (ii) expenditures of cash or other Collateral to
pay ordinary operating expenses as and when incurred or (iii) dispositions of
obsolete items of de minimis value in the ordinary course of business.
7.7 MERGER; SALE OF ASSETS. (i) Sell, lease, transfer or dispose of
substantially all of the Collateral to another entity; or (ii) consolidate with
or merge into another entity, or permit any other entity to merge into it or
consolidate with it, or permit any transfer of the ownership or power to
control, Borrower.
7.8 LOANS; INVESTMENTS. Make any loans, investments or advances to or in
any Person, including without limitation any Affiliates, other than loans or
advances made in the ordinary and normal course of business as now conducted.
7.9 CAPITAL EXPENDITURES. Make capital expenditures in excess of
$600,000.00 in the aggregate during any fiscal year.
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7.10 INDEBTEDNESS. Except for existing Indebtedness as shown on Schedule
7.10 hereto, permit to exist any Indebtedness from any Person other than an
Affiliate whose indebtedness is subject to a Subordination Agreement or Lender,
other than additional Indebtedness in the aggregate principal amount of
$500,000.00 at any time outstanding.
7.11 FINANCIAL COVENANTS. Permit:
(a) Current Ratio: The Current Ratio of Guarantor to be less than
1.50 to 1.00 at each Quarterly End Date.
(b) The Leverage Ratio of Guarantor to be greater than 1.25 to
1.00 at each Quarterly End Date.
(c) Interest Coverage Ratio: The ratio of Guarantor's EBIT to its
interest expense to be less than 1.50 to 1.00, measured at each
Quarterly End Date on an annualized basis on a rolling four (4)
quarter basis.
(d) Its net income after taxes to be less than $1.00 for two
consecutive fiscal quarters during any fiscal year.
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ARTICLE 8
EVENTS OF DEFAULT
8.1 EVENTS OF DEFAULT. An "Event of Default" shall exist if any one or more
of the following events (herein collectively called "Events of Default") shall
occur and be continuing:
(a) Borrower shall fail to pay any principal of, or interest on,
any Note when the same shall become due or payable and such failure
continues for five (5) Banking Days after such date.
(b) Any failure or neglect to perform or observe any of the
covenants, conditions, provisions or agreements of Borrower contained
herein, or in any of the other Credit Documents (other than a failure
or neglect described in one or more of the other provisions of this
Section 8.1) and such failure or neglect either cannot be remedied or,
if it can be remedied, it continues unremedied for a period of thirty
(30) days after written notice thereof to Borrower.
(c) Any warranty, representation or statement contained in this
Credit Agreement or any of the other Credit Documents, or which is
contained in any certificate or statement furnished or made to Lender
pursuant hereto or in connection herewith or with the Loan, shall be
or shall prove to have been false in any material respect when made or
furnished.
(d) The occurrence of any material "event of default" or
"default" by Borrower beyond any applicable notice, grace or cure
period under any Credit Document.
(e) Borrower or Guarantor shall (i) fail to pay any Indebtedness
(other than the Note) due under any Significant Debt Agreement, or any
interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) or within any
applicable grace period, (ii) fail to perform or observe any term,
covenant, or condition on its part to be performed or observed under
any agreement or instrument relating to such Indebtedness arising
under such Significant Debt Agreement, within any applicable grace
period when required to be performed or observed, if the effect of
such failure to perform or observe is to accelerate the maturity of
such Indebtedness, or any such Indebtedness shall be declared to be
due and payable in full, or required to be prepaid in full (other than
by a regularly scheduled prepayment), prior to the stated maturity
thereof, or (iii) allow the occurrence of any material event of
default with respect to such Indebtedness arising under any such
Significant Debt Agreement, which material event of default results in
such Indebtedness being declared due and payable in full.
(f) Any one or more of the Credit Documents shall have been
determined to be invalid or unenforceable against Borrower or
Guarantor the same in accordance with the respective terms thereof, or
shall in any way be terminated or become or be declared ineffective or
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inoperative, so as to deny Lender the substantial benefits
contemplated by such Credit Document or Credit Documents.
(g) Borrower or Guarantor shall (i) apply for or consent to the
appointment of a receiver, trustee, custodian, intervenor or
liquidator of itself or of all or a substantial part of its assets,
(ii) file a voluntary petition in bankruptcy or admit in writing that
it is unable to pay its debts as they become due, (iii) make a general
assignment for the benefit of creditors, (iv) file a petition or
answer seeking reorganization of an arrangement with creditors or to
take advantage of any bankruptcy or insolvency laws, (v) file an
answer admitting the material allegations of, or consent to, or
default in answering, a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding, or (vi) take corporate action
for the purpose of effecting any of the foregoing
(h) An involuntary petition or complaint shall be filed against
Borrower or Guarantor, seeking bankruptcy or reorganization of
Borrower or Guarantor, or the appointment of a receiver, custodian,
trustee, intervenor or liquidator of Borrower or Guarantor, or all or
substantially all of its assets, and such petition or complaint shall
not have been dismissed within ninety (90) days of the filing thereof;
or an order, order for relief, judgment or decree shall be entered by
any court of competent jurisdiction or other competent authority
approving a petition or complaint seeking reorganization of Borrower
or Guarantor, appointing a receiver, custodian, trustee, intervenor or
liquidator of Borrower or Guarantor, or all or substantially all of
its assets, and such order, judgment or decree shall continue unstayed
and in effect for a period of ninety (90) days.
(i) Any final judgment(s) (excluding those the enforcement of
which is suspended pending appeal) for the payment of money in excess
of the sum of $100,000 in the aggregate (other than any judgment
covered by insurance where coverage has been acknowledged by the
insurer) shall be rendered against Borrower, and such judgment or
judgments shall not be satisfied, settled, bonded or discharged at
least ten (10) days prior to the date on which any of its assets could
be lawfully sold to satisfy such judgment.
(j) Either (i) proceedings shall have been instituted to
terminate, or a notice of termination shall have been filed with
respect to, any Plans (other than a Multi-Employer Pension Plan as
that term is defined in Section 4001(a)(3) of ERISA) by Borrower, any
member of the Controlled Group, PBGC or any representative of any
thereof, or any such Plan shall be terminated, in each case under
Section 4041 or 4042 of ERISA, and such termination shall give rise to
a liability of the Borrower or the Controlled Group to the PBGC or the
Plan under ERISA having an effect in excess of $100,000 or (ii) a
Reportable Event, the occurrence of which would cause the imposition
of a lien in excess of $100,000 under Section 4062 of ERISA, shall
have occurred with respect to any Plan (other than a Multi-Employer
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Pension Plan as that term is defined in Section 4001(a)(3) of ERISA)
and be continuing for a period of ninety (90) days.
(k) Any of the following events shall occur with respect to any
Multi-Employer Pension Plan (as that term is defined in Section
4001(a)(3) of ERISA) to which Borrower contributes or contributed on
behalf of its employees and Lender determines in good faith that the
aggregate liability likely to be incurred by Borrower, as a result of
any of the events specified in Subsections (i), (ii) and (iii) below,
will have an effect in excess of $100,000; (i) Borrower incurs a
withdrawal liability under Section 4201 of ERISA; (ii) any such plan
is "in reorganization" as that term is defined in Section 4241 of
ERISA; or (iii) any such Plan is terminated under Section 4041A of
ERISA.
(l) The occurrence of a change in the ownership structure of
Borrower without the written consent of Lender, which will not be
unreasonably withheld.
(m) The dissolution, liquidation, sale, transfer, lease or other
disposal of all or substantially all of the assets or business of
Borrower.
(n) Any failure to observe any of the Financial Covenants.
(o) A Change in Control.
(p) The occurrence of any Material Adverse Event.
(q) Any levy or execution upon, or judicial seizure of, any
material portion of the Collateral.
(r) The institution of any legal action or proceedings to enforce
any lien or encumbrance upon any material portion of the Collateral,
that is not dismissed within thirty (30) days after its institution.
(s) The abandonment by Borrower of all or a material part of the
Collateral.
(t) The loss, theft or destruction of, or any substantial damage
to, a material portion of the Collateral.
8.2 REMEDIES UPON EVENT OF DEFAULT. If an Event of Default shall have
occurred and be continuing, then Lender may, at its sole option, exercise any
one or more of the following rights and remedies, and any other remedies
provided in any of the Credit Documents, as Lender in its sole discretion may
deem necessary or appropriate, all of which remedies shall be deemed cumulative,
and not alternative:
(a) Cease making Advances or extensions of financial
accommodations in any form to or for the benefit of Borrower,
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(b) Declare the principal of, and all interest then accrued on,
the Notes and any other liabilities hereunder to be forthwith due and
payable, whereupon the same shall become immediately due and payable
without presentment, demand, protest, notice of default, notice of
acceleration or of intention to accelerate or other notice of any kind
all of which Borrower hereby expressly waives, anything contained
herein or in the Note to the contrary notwithstanding,
(c) Reduce any claim to judgment, and/or
(d) Without notice of default or demand, pursue and enforce any
of Lender' rights and remedies under the Credit Documents, or
otherwise provided under or pursuant to any applicable law or
agreement; provided, however, that if any Event of Default specified
in Sections 8.1(g) and 8.1(h) shall occur, the principal of, and all
interest on, the Note and other liabilities hereunder shall thereupon
become due and payable concurrently therewith, without any further
action by Lender and without presentment, demand, protest, notice of
default, notice of acceleration or of intention to accelerate or other
notice of any kind, all of which Borrower hereby expressly waives.
Upon the occurrence and during the continuance of any Event of Default,
Lender is hereby authorized at any time and from time to time, with five (5)
days prior written notice to Borrower, to set off and apply any and all moneys,
securities or other property of Borrower and the proceeds therefrom, now or
hereafter held or received by or in transit to Lender or its agents, from or for
the account of Borrower, whether for safe keeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special) and credits of Borrower, and any and all claims of Borrower
against Lender at any time existing. The rights of Lender under this Section 8.2
are in addition to other rights and remedies (including, without limitation,
other rights of setoff) which Lender may have.
8.3 PERFORMANCE BY LENDER. Should Borrower fail to perform any covenant,
duty or agreement with respect to the payment of taxes, obtaining licenses or
permits, or any other requirement contained herein or in any of the Credit
Documents within the period provided herein, if any, for correction of such
failure, Lender may, with five (5) days prior written notice, at its option,
perform or attempt to perform such covenant, duty or agreement on behalf of
Borrower. In such event, Borrower shall, at the written request of Lender,
promptly pay any amount expended by Lender in such performance or attempted
performance to Lender at its office in San Jose, California, together with
interest thereon at the Default Rate, from the date of such expenditure until
paid. Notwithstanding the foregoing, it is expressly understood that Lender does
not assume any liability or responsibility for the performance of any duties of
Borrower hereunder or under any of the Credit Documents or other control over
the management and affairs of Borrower.
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ARTICLE 9
MISCELLANEOUS
9.1 MODIFICATION. All modifications, consents, amendments or waivers of any
provision of any Credit Document, or consent to any departure by Borrower
therefrom, shall be effective only if the same shall be in writing and accepted
by Lender.
9.2 WAIVER. No failure to exercise, and no delay in exercising, on the part
of Lender, any right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise thereof preclude any other further exercise thereof
or the exercise of any other right. The rights of Lender hereunder and under the
Credit Documents shall be in addition to all other rights provided by law. No
modification or waiver of any provision of this Credit Agreement, the Notes or
any Credit Documents, nor consent to departure therefrom, shall be effective
unless in writing and no such consent or waiver shall extend beyond the
particular case and purpose involved. No notice or demand given in any case
shall constitute a waiver of the right to take other action in the same, similar
or other instances without such notice or demand.
9.3 PAYMENT OF EXPENSES. Borrower shall pay all reasonable costs and
expenses of Lender (including, without limitation, the reasonable attorneys'
fees of Lender's legal counsel) incurred by Lender in connection with the
documentation of the Loans, and the preservation and enforcement of Lender's
rights under this Credit Agreement, the Notes, and/or the other Credit
Documents; provided, however, that notwithstanding the aforesaid, with respect
to any legal action between the parties hereto that is pursued to judgment the
prevailing party only shall be reimbursed by the other party for all reasonable
costs and expenses (including, without limitation, reasonable attorneys' fees
and costs) incurred in connection with the preservation and enforcement of its
rights under this Credit Agreement, the Notes and/or other Credit Documents. In
addition, Borrower shall pay all reasonable costs and expenses of Lender in
connection with the negotiation, preparation, execution and delivery of any and
all amendments, modifications and supplements of or to this Credit Agreement,
the Notes or any other Credit Document. Borrower shall receive a written
estimate of all legal fees and related legal costs and will have an opportunity
to review all such estimates prior to its approval, which shall not be
unreasonably withheld.
9.4 NOTICES. Except for telephonic notices permitted herein, any notices or
other communications required or permitted to be given by this Credit Agreement
or any other documents and instruments referred to herein must be (i) given in
writing and personally delivered or mailed by prepaid certified or registered
mail or sent by overnight delivery service, or (ii) made by telefacsimile
delivered or transmitted, to the party to whom such notice or communication is
directed, to the address of such party as follows:
Borrower: Vodavi Communications Systems, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, CFO
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
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Lender: Comerica Bank - California
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Lending Services
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: Comerica Bank - California
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the party to whom such notice is
directed. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as aforesaid; or, if mailed, on the third day after it is mailed as aforesaid;
or, if transmitted by telefacsimile, on the day that such notice is transmitted
as aforesaid. Any party may change its address for purposes of this Credit
Agreement by giving notice of such change to the other parties pursuant to this
Section 9.4.
9.5 GOVERNING LAW; JURISDICTION, VENUE. The Credit Documents shall be
governed by and construed in accordance with the substantive laws (other than
conflict laws) of the State of Arizona, except to the extent Lender has greater
rights or remedies under Federal law, whether as a national bank or otherwise,
in which case such choice of Arizona law shall not be deemed to deprive Lender
of any such rights and remedies as may be available under Federal law. Each
party consents to the personal jurisdiction and venue of the state courts
located in Maricopa County, State of Arizona in connection with any controversy
related to this Credit Agreement, waives any argument that venue in any such
forum is not convenient and agrees that any litigation initiated by any of them
in connection with this Credit Agreement shall be venued in the Superior Court
of Maricopa County, Arizona.
9.6 INVALID PROVISIONS. If any provision of any Credit Document is held to
be illegal, invalid or unenforceable under present or future laws during the
term of this Credit Agreement, such provision shall be fully severable; such
Credit Document shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of such Credit Document; and
the remaining provisions of such Credit Document shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from such Credit Document. Furthermore, in lieu of
each such illegal, invalid or unenforceable provision there shall be added as
part of such Credit Document a provision mutually agreeable to Borrower and
Lender as similar in terms to such illegal, invalid or unenforceable provision
as may be possible and be legal, valid and enforceable.
9.7 BINDING EFFECT. The Credit Documents shall be binding upon and inure to
the benefit of Borrower and Lender and their respective successors, assigns and
legal representatives; provided, however, that Borrower may not, without the
prior written consent of Lender, assign any rights, powers, duties or
obligations thereunder.
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9.8 ENTIRETY. The Credit Documents embody the entire agreement between the
parties and supersede all prior agreements and understandings, if any, relating
to the subject matter hereof and thereof.
9.9 HEADINGS. Section headings are for convenience of reference only and
shall in no way affect the interpretation of this Credit Agreement.
9.10 SURVIVAL. All representations and warranties made by Borrower herein
shall survive delivery of the Notes and the making of the Loans.
9.11 NO THIRD PARTY BENEFICIARY. The parties do not intend the benefits of
this Credit Agreement to inure to any third party, nor shall this Credit
Agreement be construed to make or render Lender liable to any materialman,
supplier, contractor, subcontractor, purchaser or lessee of any property owned
by Borrower, or for debts or claims accruing to any such persons against
Borrower. Notwithstanding anything contained herein or in the Notes, or in any
other Credit Document, or any conduct or course of conduct by any or all of the
parties hereto, before or after signing this Credit Agreement or any of the
other Credit Documents, neither this Credit Agreement nor any other Credit
Document shall be construed as creating any right, claim or cause of action
against Lender, or any of its officers, directors, agents or employees, in favor
of any materialman, supplier, contractor, subcontractor, purchaser or lessee of
any property owned by Borrower, nor to any other person or entity other than
Borrower.
9.12 TIME. Time is of the essence hereof.
9.13 SCHEDULES AND EXHIBITS INCORPORATED. All schedules and exhibits
attached hereto, if any, are hereby incorporated into this Credit Agreement by
each reference thereto as if fully set forth at each such reference.
9.14 COUNTERPARTS. This Credit Agreement may be executed in multiple
counterparts, each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.
9.15 WAIVER OF JURY TRIAL. LENDER AND BORROWER EACH ACKNOWLEDGE AND AGREE
THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS CREDIT AGREEMENT OR THE LENDING
RELATIONSHIP ESTABLISHED HEREBY WOULD BE BASED UPON DIFFICULT AND COMPLEX
ISSUES, AND THEREFORE, BORROWER AND LENDER EACH HEREBY WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING ACTIONS SOUNDING IN TORT)
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS CREDIT AGREEMENT OR ANY OTHER CREDIT
DOCUMENT RELATING HERETO OR ARISING FROM THE TRANSACTION CONTEMPLATED HEREUNDER
OR THE LENDING RELATIONSHIP ESTABLISHED HEREBY AND AGREE THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE AND
NOT BY A JURY.
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IN WITNESS WHEREOF, the undersigned have executed this Credit Agreement as
of the day and year first above written.
VODAVI COMMUNICATIONS SYSTEMS, INC.,
an Arizona corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: CEO and President
----------------------------------
COMERICA BANK-CALIFORNIA, a California
banking corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Title: Vice President
----------------------------------
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