SECURED PROMISSORY NOTE LOAN, SECURITY AND PLEDGE AGREEMENT
LOAN,
SECURITY AND PLEDGE AGREEMENT
THIS
SECURED PROMISSORY NOTE LOAN, SECURITY AND PLEDGE AGREEMENT (the “Loan
Agreement”)
is
entered into this 5th day of September, 2007, by and among
DEL-INC ACQUISITION LLC,
with
offices at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ “B”, East Berlin, Connecticut
06023 (the
"Borrower")
and
JMC
VENTURE PARTNERS LLC,
with
offices at ▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Lender").
W
I T N E S S E T H:
In
consideration of the premises and of the mutual covenants herein contained
and
to induce Lender to extend credit to the Borrower, the parties agree as
follows:
SECTION
1
DEFINITIONS
1.1 Definitions. Capitalized
terms that are not otherwise defined herein shall have the meanings set forth
in
Exhibit A
attached
hereto.
Terms
not otherwise defined herein or in Exhibit
A
shall
have the meanings ascribed to them, if any, in the Code.
SECTION
2
2.1 Term
Loan.
Lender
agrees, on the terms and conditions set forth in this Loan Agreement and the
Note, to make a
term
loan to the Borrower for Two Million Seven Hundred and Fifty Thousand Dollars
($2,750,000), which shall be evidenced by the Secured Promissory Note, dated
the
date hereof, in the form appended hereto as Exhibit
B,
and
shall be payable in accordance with the terms of the Note and this Loan
Agreement.
2.2 Interest.
Upon
execution of the Note, the advance of Principal and until all amounts due
hereunder are paid in full, interest shall accrue on all unpaid Principal at
the
annual rate of twelve percent (12%). Interest shall be computed daily on the
basis of a three hundred and sixty (360) day year, and a thirty (30) day month.
For the first sixty (60) days following the Closing Date (the “Deferral
Period”)
payment of interest shall be deferred, and paid over the ten (10) months
following the Deferral Period in accordance with the amortization schedule
set
forth in Exhibit
B-1.
2.3 Default
Interest and Late Charges.
Upon
and during the continuance of an Event of Default the Borrower shall also
pay, whether
or not the Lender has accelerated payment, default interest on Principal at
the
per annum rate of six (6.00%) percent, in addition to the rate of interest
set
forth in Section 2.2. Without limiting anything herein, if a payment of
Principal and/or interest hereunder, as the case may be, is not made within
ten
(10) Business Days of its due date, the Borrower will pay on demand a late
payment charge of five (5.00%) percent of the amount of such
1
payment.
Nothing in the preceding sentence shall affect the Lender’s right to accelerate
the maturity of this Note upon the occurrence and during the continuance of
an
Event of Default.
2.4 Installment
Payments.
Commencing on the sixty-first (61st)
day
after the Closing Date monthly payments of interest due under the Note will
be
paid by the Borrower to the Lender on the first business day of each month,
at
the Lender’s address set forth above or at such address that Lender directs in
writing. All Principal, unpaid interest, fees and costs that are due and owing
under the Loan Documents will be paid, in full, on the Maturity
Date.
2.5 Prepayments.
The
Borrower may, from time to time at any time, pre-pay all or part of the
principal, interest, default interest, late charges, fees, charges and expenses
due under the Note, without penalty. If Borrower intends for pre-pay all or
part
of the unpaid balance it shall notify the Lender, in writing, at least five
(5)
days prior to the payment. Amounts pre-paid may not be re-borrowed.
2.6 Application
of Amounts Paid.
Upon
the Lender’s receipt of any payments under the Note, including without
limitation any prepayments, the funds received shall be applied as follows:
(i)
first, to the reasonable costs, expenses and attorneys’ fees and expenses
incurred and billed by the Lender for collection of amounts due under the Loan
Documents and for the examination, review, acquisition, protection, sale and/or
delivery of the Collateral, (ii) second, to default interest and late charges
due under this Loan Agreement, the Note and the other Loan Documents, (iii)
third, to interest due under the Note, this Loan Agreement, and the other Loan
Documents, and (iv) fourth, to the Principal due under the Note. If any
deficiency exists the Borrower shall remain liable to the Lender.
2.7 Loan
Security.
The
Note and all obligations under the other Loan Documents shall be secured by
a
(i) first priority perfected security interest in all of the Collateral, (ii)
pledge of Borrower’s economic, equity and voting interests in the Mexican
Subsidiary, and (iii) an assignment of Borrower’s Future Lease. Additionally
Parent will execute a guaranty agreement (the “Corporate
Guaranty”),
which
will be unlimited in amount and unconditional. The Corporate Guaranty shall
be
in a form substantially similar to the Guaranty Agreement attached hereto as
Exhibit
C.
Additionally the Mexican Subsidiary will execute a guaranty agreement (the
“Mexican
Guaranty”),
which
will be unlimited in amount, unconditional and will be secured by a pledge
of
all assets owned by the Mexican Subsidiary and the Mexican Mortgage. The Mexican
Corporate Guaranty shall be in a form substantially similar to the Guaranty
Agreement attached hereto as Exhibit
C-1.
2.8 Cross
Defaults.
2.8.1 A
default
under any obligation of the Borrower with the Lender, under any of the Loan
Documents, including without limitation this Loan Agreement, shall constitute
a
default under all of the other Loan Documents.
2.8.2 Acceleration
of any amount due under either the Parent Senior Loan Documents or the Parent
PIPE Documents shall constitute a default under all of the Loan
Documents.
2
2.9 Lenders
Records and Statement of Account.
All
Advances of Principal, and interest thereon, and all fees and expenses shall
be
recorded in the books of the Lender and shall be deemed accurate and correct,
absent manifest error. If Lender provides Borrower with a statement of account,
such statement will be presumed complete and accurate and will be definitive
and
binding on Borrower, absent manifest error or unless objected to with
specificity by Borrower in writing within forty-five (45) days after
receipt.
2.10 Additional
Advances.
Any
sums expended by the Lender due to the Borrower’s failure to perform or comply
with Borrower’s obligations under this Loan Agreement or any of the other Loan
Documents may be charged to the Note as an Advance and added to the amounts
due
under the Note and the other Loan Documents.
SECTION
3
SECURITY
AGREEMENT
3.1 Grant
of Security Interest.
As
security for the payment and performance of any and all of the
Indebtedness,
including without limitation all amounts due under the Note, this Loan Agreement
and all other Loan Documents,
and the
performance of all other obligations and covenants of the Borrower hereunder
and
under the Loan Documents, certain or contingent, now existing or hereafter
arising, which are now, or may at any time or times hereafter be owing by the
Borrower to Lender, the Borrower hereby pledges to Lender and grants Lender
a
continuing security interest in and general Lien upon and right of set-off
against, all right, title and interest of the Borrower in and to the
Collateral,
including without limitation all security deposits and deposit accounts,
whether
now owned or hereafter acquired by the Borrower.
The
Borrower further grants the Lender a right of set-off against the Borrower’s
property held by the Lender, now or hereinafter in the possession, custody
or
control or in transit to the Lender.
3.2 Deposit
Accounts.
In
order to perfect the Lender’s security interest in the Borrower’s Deposit
Accounts the Borrower agrees to execute any and all deposit account control
agreements required by the Lender, which shall contain terms reasonably
satisfactory to the Lender, Borrower and holders of the Deposit Accounts. The
Borrower agrees to open and maintain Deposit Accounts at an institution that
agrees to enter into a deposit account control agreement. A list of the
Borrower’s Deposit Accounts is set froth in Exhibit
D.
3.3 Exercise
of Rights.
Except
as set forth herein, or under applicable law, Lender shall not be obligated
to
exercise any degree of care greater than the degree of care as it relates to
its
own assets in connection with any Collateral in its possession, to take any
steps necessary to preserve any rights in any of the Collateral or to preserve
any rights therein of or against all other parties. The Lender shall be deemed
to have exercised reasonable care if it shall have taken such steps for the
care
and preservation of the Collateral or rights therein as Borrower may have
reasonably requested Lender to take and Lender's omission to take any action
not
requested by Borrower shall not be deemed a failure to exercise reasonable
care.
No segregation or specific allocation by Lender of specified items of Collateral
against any liability of the Borrower shall waive or affect any
security
3
interest
in or Lien against other items of Collateral or any of Lender's options, powers
or rights under this Loan Agreement, the Loan Documents or applicable
law.
3.4 Post
Default Communications.
Following and during the continuance of an Event of Default, Lender may at
any
time and from time to time, with or without notice to the Borrower, (i) transfer
into the name of Lender or the name of Lender's nominee any of the Collateral,
(ii) notify any
holder
of any Collateral to transfer Collateral in such party’s possession directly to
the Lender, (iii) notify and direct Borrower’s account debtors to remit payments
directly to the Lender and (iv) receive and direct the settlement, compromise
and/or disposition of any proceeds of any Collateral.
Once any
such notice has been given to any Person Borrower shall not give any contrary
instruction to such Person without the Lender’s written consent.
3.5 Waiver
of Marshaling.
The
Borrower hereby waives any right it may have to require marshaling of its
assets.
3.6 Continuing
Duty of Borrower.
It is
expressly agreed by Borrower that, notwithstanding anything herein to the
contrary, Borrower remains liable under each of its contracts and each of its
licenses to which it is a party (if any), to observe and perform all of the
conditions and obligations to be observed and performed thereunder. Lender
shall
not have any obligation or liability under any contract or license by reason
of
or arising out of this Loan Agreement, or the granting of the Liens herein,
or
the receipt by Lender of any payment relating to any contract or license
pursuant hereto.
The
Lender shall not be required or obligated in any manner to perform or fulfill
any of the obligations of Borrower under or pursuant to any contract or license,
or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party under contract or license, or to present or file any claims, or
to
take any action to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be entitled at
any
time or times.
3.7 Permitted
Communications.
Following and during the continuance of an Event of Default the Lender may,
in
the name of the Borrower or a third party, communicate (by mail, email,
telephone, facsimile or otherwise) with Persons, parties to contracts or
obligors in respect of Instruments, Accounts, Chattel Paper and/or payment
intangibles to inquire about the amounts outstanding and status of such
Instruments, Accounts, Chattel Paper and/or payment intangibles. During a
continuing Event of Default the Lender may at any time, in Lender’s own name,
the name of the Borrower or in the name of Lender’s nominee, communicate by
mail, email, telephone, facsimile, email or otherwise with Persons, parties
to
or obligors under Instruments, Accounts, Chattel Paper and/or payment
intangibles.
3.8 Final
Payment Release.
Upon
payment, in full, of all amounts due under the Loan Documents, Lender shall
release all of the Collateral from the terms and provisions of the Note and
Loan
Documents, and promptly provide any release or other instruments required to
effect such release or as reasonably requested by Borrower to evidence such
release.
4
SECTION
4
PLEDGE
OF SECURITIES and
GRANT
OF SECURITY INTEREST
4.1 As
additional security for the payment and performance of any and all of the
Indebtedness, including without limitation all amounts due under the Note,
this
Loan Agreement and all other Loan Documents, and the performance of all other
obligations and covenants of the Borrower hereunder and under the Loan
Documents, certain or contingent, now existing or hereafter arising, which
are
now, or may at any time or times hereafter be owing by the Borrower, the
Borrower pledges to Lender and grants Lender a continuing security interest
in
and general Lien upon and right of set-off against, all right, title and
interests of the Borrower in and to all of the Borrower’s equity, voting and
ownership interests in the Mexican Subsidiary, whether now owned or hereafter
acquired by the Borrower,
together
with all proceeds and substitutions thereof, all cash, stock and other moneys
and property paid thereon, all rights to subscribe for securities declared
or
granted in connection therewith, and all other cash and noncash proceeds of
the
foregoing (all hereinafter called the “Mexican
Stock”).
4.1.1 The
term
“Mexican Stock” shall include, but not be limited to any securities, instruments
or distributions of any kind issuable, issued or received by the Borrower upon
conversion of, in respect of, or in exchange for any other Mexican Stock,
including, but not limited to, those arising from a stock dividend, stock split,
reclassification, reorganization, merger, consolidation, sale of assets or
other
exchange of securities or any dividends or other distributions of any kind
upon
or with respect to the Mexican Stock.
4.2 The
certificate or certificates for the securities included in the Mexican Stock
are
currently held in escrow pursuant to a joint escrow agreement by and between
Fox
Rothschild LLP and Pepe & Hazard LLP, dated August 29, 2007 (the
“Escrow
Agreement”).
Upon
execution of this Loan Agreement the Borrower shall direct Fox Rothschild and
Pepe & Hazard (collectively the “Escrow
Agents”)
to
deliver the Mexican Stock to Borrower’s counsel, to be held in escrow. Once the
Loan is funded pursuant to the terms hereof Borrower’s counsel will release the
Mexican Stock and transfer it to Lender. If the Loan is not funded within three
(3) business days of the Closing Date Borrower’s counsel shall return the
Mexican Stock to the Escrow Agents.
4.3 The
Borrower shall execute, in blank, stock powers, substantially similar to the
form stock power attached hereto as Exhibit
E,
and
together with this Agreement delivered to the Lender.
4.4 The
Borrower shall cause its books to reflect the Borrower’s pledge of the Mexican
Stock.
4.5 So
long
as no Event of Default shall have occurred and be continuing, Borrower shall
be
entitled to exercise any and all voting, management and other consensual rights
pertaining to the Mexican Stock, for any purpose not inconsistent with the
terms
of the Loan Documents.
5
4.6 With
respect to the Mexican Stock, upon the occurrence and continuation of an Event
of Default under this Loan Agreement, or any of the other Loan Documents, the
Lender may, at its election do any one or more of the following:
4.6.1 Sell
the
Mexican Stock; or
4.6.2 Exercise
management, voting or other controlling powers of Borrower in the Mexican
Subsidiary; or
4.6.3 Sell
or
otherwise dispose of the assets of the Mexican Subsidiary; or
4.6.4 Effect
the transfer of any securities included in the Mexican Stock into the name
of
Lender and cause new certificates representing such securities to be issued
in
the name of Lender.
4.7 The
remedies set froth in Section 4.6 are not inclusive.
4.8 The
Borrower will execute and deliver such documents, and take or cause to be taken
such actions, as Lender may reasonably request to perfect or continue the
perfection of Lender’s security interest in the Mexican Stock, or sell,
transfer, dispose, vote or exercise dominion and control over the Mexican
Stock.
SECTION
5
CONDITIONS
PRECEDENT TO CLOSING AND FEES
5.1 Conditions
Precedent to Funding on the Closing Date.
In
addition to any other requirements set forth in this Loan Agreement and the
Loan
Documents, Lender will not make and fund the advance of Principal under the
Note
unless and until the following conditions shall have been
satisfied:
5.1.1 Loan
Documents.
Borrower, Parent and each party to any Loan Document, as applicable, shall
have
executed and delivered this Loan Agreement and all other Loan Documents, all
in
a form and substance reasonably acceptable to the Lender.
5.1.2 Supporting
Documents.
Borrower shall cause to be delivered to Lender the following
documents:
|
(a)
|
Certified
resolutions of the board of directors of the managing member of the
Borrower, signed by the secretary, or another authorized officer
of the
Borrower, authorizing the execution, delivery and performance of
the Loan
Documents;
|
|
(b)
|
a
good standing certificate for Borrower, certified by the appropriate
official of the State of
Delaware;
|
6
| (c) |
Certified
resolutions of the board of directors of the Parent, signed by the
secretary, or another authorized officer of the Parent, authorizing
the
execution, delivery and performance of the Loan Documents that apply
to
the Parent;
|
|
(d)
|
a
good standing certificate for Parent, certified by the appropriate
official of the State of Delaware;
|
|
(e)
|
an
Affidavit from Borrower which lists all of Borrower’s Deposit
Accounts;
|
|
(f)
|
an
Affidavit from Parent’s Treasurer, certifying that all of Parent’s taxes
have been timely paid and all tax returns, notices and extensions
have
been timely filed;
|
|
(g)
|
The
legal opinion of counsel to the Borrower and Mexican Subsidiary,
all
addressed to Lender regarding due authority of the Borrower and Mexican
Subsidiary, respectively, regarding execution and delivery of the
Loan
Documents and enforceability of the Loan Documents, in a form similar
to
the opinion letter attached hereto as Exhibit
F;
|
|
(h)
|
Certified
proof of no liens that have attached to or encumber the Collateral
and
Mexican Property;
|
|
(i)
|
Payment
of all reasonable fees due and reimbursement of all costs incurred
by
Lender, which Borrower is required to pay under this Loan Agreement;
and
|
|
(j)
|
An
insurance binder covered by Section 7.4 herein, listing Lender as
loss
payee and additional insured, on terms and conditions reasonably
acceptable to the Lender, together with a lender’s loss payment
endorsement.
|
5.1.3 Perfection
of Liens.
UCC-1/financing statements and mortgages shall have been duly recorded or filed
in the manner and places required by law to establish, preserve, protect and
perfect the interests and rights created or intended to be created by the
security interest granted hereunder and under the Loan Documents; all stock
powers will be executed in blank and delivered to Lender, and all taxes, fees
and other charges in connection with the execution, delivery and filing of
such
financing statements and mortgages shall duly have been paid.
5.1.4 No
Adverse Change.
Except
for information disclosed by the Seller in Amendment No. 6 to the Asset Purchase
Agreement, since July 31, 2007 there shall have been no event or occurrence
that
has or could have a Material Adverse Effect on the condition, financial or
otherwise of the Borrower, Mexican Subsidiary, Parent, Collateral or Mexican
Collateral.
5.1.5 Lease
Agreements.
The
Lender has reviewed and approved all lease agreements to which the Borrower
is a
party, and which are assigned as additional collateral to secure all obligations
under the Loan Documents.
7
5.1.6 Licenses
and Permits to Conduct Business.
Evidence that the Borrower is either duly licensed and qualified to transact
business, or within ten (10) days after the Closing Date has applied
to
be
licensed and qualified to transact business in all jurisdictions where the
Borrower transacts business and/or where the character of property owned or
leased by the Borrower or the nature of the business transacted by the Borrower
makes licensing or qualification necessary, and where the failure to be so
licensed and qualified to do business will have a Material Adverse Effect on
the
Borrower.
5.1.8 Commitment
Fee.
The
Parent has delivered to Lender a certified copy of Parent’s letter to Parent’s
transfer agent which instructs such transfer agent to deliver to Lender the
restricted stock for the Commitment Fee, as set forth in and in accordance
with
Section 5(e)(i) of the Credit Agreement (the “Commitment
Fee”).
5.1.9 Asset
Purchase Agreement.
The
Acquisition Transaction, and all documents related to the transactions related
to the Acquisition Transaction have been finally executed, and the only
condition to the Acquisition Transaction is the execution of the Loan Documents,
funding the Loan, payment of amounts due the Seller under the Acquisition
Transaction and compliance with all matters set forth in the Escrow Agreement.
5.1.10 Additional
Documents.
Borrower shall have delivered to Lender all such other opinions, documents,
certificates and other assurances that Lender or its counsel may reasonably
require, including without limitation all executed and supporting documents
related to Borrower's purchase of the equity interests and assets of Deltron,
Inc. and it’s subsidiaries and shareholders.
5.2 Fees.
In
addition to the payment of the Commitment Fee set forth in Section 5.1.8 above
the Parent has agreed to pay the Lender the following fees:
5.2.1 Monitoring
Fee.
Parent
has agreed to pay the Lender a fee equal to two and one half percent (2.5%)
of
the Loan amount (the “Monitoring
Fee”).
This
Monitoring Fee shall be payable in shares of the Parent, which shall be issued
by the Parent’s transfer agent within ten (10) Business Days after the Closing
Date.
5.2.2 Investment
Fee.
Parent
has agreed to pay the Lender a fee equal to one percent (1%) of the Loan
balance, calculated at the end of each calendar quarter. Each investment fee
shall be prorated based on the Loan disbursement date, and any prepayments.
The
fee is due within ten (10) Business days after the end of each calendar
quarter.
5.2.3 Perfection
Fee.
Borrower has agreed to pay Lender twenty thousand seven thousand five hundred
dollars ($27,500), in Parent’s Stock valued as of the Closing Date (the
“Perfection
Fee”),
in
consideration for the delay in perfecting the Lender’s security interests in the
Mexican Subsidiary’s assets. The Perfection Fee is due on the Closing
Date.
5.2.4 Borrower’s
Obligation To Pay and Cooperate.
The
Borrower is not obligated to pay the Monitoring Fee in Section 5.2.1. The
Borrower is obligated to pay the Investment Fee in Section 5.2.2 and the
Perfection Fee in Section 5.2.3, and any failure to timely pay such Fees
constitutes a default under this Loan Agreement, and under all of the other
Loan
Documents.
8
The
Borrower will use all reasonable efforts to cause the Parent to file a
registration statement with
the
U.S. Securities and Exchange Commission within one hundred and twenty (120)
days
after the Closing Date, pursuant to which any and all restricted stock of the
Parent which has or will be transferred to the Lender will be freely tradeable.
SECTION
6
REPRESENTATIONS
AND WARRANTIES
6.1 In
order
to induce Lender to enter into this Loan
Agreement and to make the loans provided for herein, the Borrower makes the
following representations and warranties, all of which shall survive the
execution and delivery of this Loan Agreement and the Loan Documents. Unless
otherwise specified, the following representations and warranties shall be
deemed made as of the date hereof:
6.1.1 Valid
Existence.
The
Borrower is a limited liability corporation duly organized, validly existing
and
in good corporate standing under the laws of the jurisdiction of its
organization, and is duly qualified or licensed to transact business in all
places, or within ten (10) Business Days after the Closing Date will apply
to be
qualified or licensed to transaction business in all places where the failure
to
be so qualified would have a Material Adverse Effect on it.
6.1.2 Power
to Act.
Borrower
has the requisite power to make execute and perform the Loan Documents executed
by it, and all such instruments will constitute the legal, valid and binding
obligations of the Borrower, enforceable in accordance with their respective
terms, subject only to the Borrower’s bankruptcy, insolvency, reorganization, or
other similar laws relating to or staying the enforcement of remedies of
creditors generally, and the effect of rules of law governing, or practices
of
courts with respect to, specific enforcement, injunctive relief and other
equitable remedies generally.
6.1.3 Authority.
The
execution and delivery of the Loan Documents by the Borrower, and performance
thereof by Borrower, has been duly authorized by all necessary corporate action,
and do not violate any provision of law or regulation, or any writ, order or
decree of any court or governmental or regulatory authority or agency or any
provision of the governing instruments of such Person, and do not, with the
passage of time or the giving of notice, result in a breach of, or constitute
a
default or require any consent under, or result in the creation of any Lien
upon
any property or assets of such Person pursuant to, any law, regulation,
instrument or agreement to which any such Person is a party or by which any
such
Person or its respective properties may be subject, bound or
affected.
6.1.4 Financial
Condition.
Other
than as disclosed in financial statements related to Seller and Seller’s
business, which were delivered to the Lender on or prior to the date hereof,
Borrower has not assumed or guaranteed any direct or contingent obligations
or
liabilities (including any guarantees or leases) or any material unrealized
or
anticipated losses from any commitments of such Person except as described
on
Exhibit
G.
All
financial statements supplied of Seller by the Borrower and given to the Lender
have been prepared consistently and fairly present the financial condition
of
the Seller and the Sellers assets to be purchased by the Borrower, as of the
date thereof.
9
6.1.5 Knowledge
of Material Adverse Facts.
Other
than the information set forth in Amendment No. 6 to the Asset Purchase
Agreement, Borrower is not aware of any material adverse fact (other than facts
which are generally available to the public and not particular to Borrower,
such
as general economic or industry trends) concerning the conditions of the
Borrower and the assets the Borrower is purchasing from the Seller, which has
not been fully disclosed to Lender, including any material adverse change in
the
existing and future operations or financial condition of Borrower, since the
date of the most recent financial statements delivered to Lender.
6.1.6 Solvency.
Borrower is Solvent, and after consummation of the transactions set forth in
this Loan Agreement and the other Loan Documents, Borrower will be and remain
Solvent.
6.1.7 Litigation.
Except
as disclosed in Exhibit
H,
there
are no suits or proceedings
pending, or to the knowledge of the Borrower threatened, before any court or
by
or before any governmental or regulatory authority, commission, bureau or agency
or public regulatory body against or affecting the Borrower, or its assets
or
properties, which if adversely determined would have a Material Adverse
Effect.
6.1.8 Adverse
Affect of Agreements.
The
Borrower is not in default in the performance, observance or fulfillment of
any
of the material obligations, covenants or conditions contained in any agreement
or instrument to which it is a party, or any law, regulation, decree, order
or
the like applicable to it.
6.1.9 Authorizations.
All
material authorizations, consents, approvals, certificates and licenses required
under applicable law or regulation for the ownership or operation of the
property owned or operated by the Borrower, or for the conduct of any business
in which it is engaged have been duly issued and are in full force and effect,
and it is not in default, nor to its knowledge has any event occurred which
with
the passage of time or the giving of notice, or both, would constitute a
default, under any of the terms or provisions of any part thereof, or under
any
order, decree, ruling, regulation, or other decision or instrument of any
governmental commission, bureau or other administrative agency or public
regulatory body having jurisdiction over the Borrower, which default would
have
a Material Adverse Effect on the Borrower. Except for the filing of
UCC-1/Financing Statements and Mexican Mortgage as noted herein, no approval,
consent or authorization of, or filing or registration with, any governmental
commission, bureau or other regulatory authority or agency is required with
respect to the execution, delivery or performance of any Loan
Document.
6.1.10 Title.
Borrower has full rights of ownership and good title to all of the Collateral,
including without limitation the Mexican Stock, free and clear of all Liens,
except Permitted Liens.
6.1.11 Collateral.
The
security interests granted to Lender herein and pursuant to any other Loan
Document with the Lender, (a) constitute and, as to subsequently acquired
property included in the Collateral, will constitute, security interests under
the Code and applicable Mexican law and (b) are, and as to such subsequently
acquired Collateral will be superior and prior to the rights of all third
persons, now existing or hereafter arising. All of the Collateral is intended
for use solely in Borrower’s business and the Mexican Subsidiary’s business, and
all of the Mexican Collateral is intended for use solely in the Mexican
Subsidiary’s business.
10
6.1.12 Taxes.
Borrower has filed all federal, state and local income and other tax returns
which are required to be filed, and have paid all taxes as shown on said returns
and all taxes, including withholding, FICA and ad valorem
taxes,
shown on all assessments received by it to the extent that such taxes have
become due, or has set aside reserves to timely pay such taxes and/or
assessments. Borrower is not subject to any federal, state or local tax Liens
nor has such Person received any notice of deficiency or other official notice
to pay any taxes. Borrower has paid all sales and excise taxes payable by it,
to
the extent such taxes have become due.
6.1.13 Labor
Law Matters.
To the
Borrower’s knowledge no goods or services have been or will be produced,
provided or performed by Borrower in violation of any applicable labor laws
or
regulations or any collective bargaining agreement or other labor agreements
or
in violation of any minimum wage, wage-and-hour or other similar laws or
regulations applicable to Borrower, which will have a Material Adverse Effect
on
the Borrower.
6.1.14 Judgment
Liens.
Except
as set forth in Exhibit
I,
neither
the Borrower nor any of its respective assets, are subject to any unpaid
judgments (whether or not stayed) or any judgment liens in excess of fifty
thousand dollars ($50,000), in any jurisdiction.
Following the Closing Date and until all amounts due under the Loan Documents
are paid in full, the Borrower shall amend and deliver to Lender Exhibit J
as
soon as (i) judgments and judgment liens listed therein are dismissed, satisfied
and/or released and (ii) additional judgments and/or judgment liens in excess
of
fifty thousand dollars ($50,000) are entered against the Borrower or filed
against its assets.
6.1.15 Subsidiaries.
Borrower has no Subsidiaries, other than the Mexican Subsidiary.
6.1.16 Environmental.
Except
as disclosed in Exhibit
J,
and
except for ordinary and customary amounts of solvents, cleaners and similar
materials used in the ordinary course of Borrower’s business and in compliance
in all material respects with all applicable Environmental Laws, to the
Borrower’s knowledge the Borrower has not generated, stored or disposed of
any Regulated
Material on any portion of its property, or transferred any Regulated Material
from such property to any other location in violation of any applicable
Environmental Laws. Except as disclosed on
Exhibit K,
and to
the Borrower’s knowledge, no Regulated Material has been generated, stored or
disposed of on any portion of the real property currently owned, operated or
leased by Borrower, or is now located on such property. Except as disclosed
on
Exhibit
L,
Borrower is in compliance in all material respects with all applicable
Environmental Laws and Borrower has not been notified of any action, suit,
proceeding or investigation which calls into question compliance by Borrower
with any Environmental Laws, or which seeks to suspend, revoke or terminate
any
license, permit or approval necessary for the generation, handling, storage,
treatment or disposal of any Regulated Material.
6.1.17 ERISA.
Borrower has furnished to Lender, if any, true and complete copies of the latest
annual report required to be filed pursuant to Section 104 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
with
respect to each employee benefit plan or other plan maintained for employees
of
each Borrower, or any of their respective Subsidiaries and covered by Title
IV
of ERISA (a "Plan"),
and
no Termination Event (as hereinafter defined) with respect to any Plan has
occurred and is continuing. For the purposes of this Loan Agreement, a
"Termination
11
Event"
shall mean a "reportable event" as defined in Section 4043(b) of ERISA, or
the
filing of a notice of intent to terminate under Section 4041 of ERISA. Neither
Borrower nor any of their respective Subsidiaries have any unfunded liability
with respect to any such Plan.
6.1.18 Investment
Company Act.
Borrower is not an "investment company" as defined in the Investment Company
Act
of 1940, as amended.
6.1.19 Compliance
with Covenants; No Default.
Borrower is in compliance with all of the covenants hereof. No Event of Default
has occurred and is continuing, and the execution, delivery and performance
of
the Loan Documents, execution, delivery and performance of the Asset Purchase
Agreement and the funding of the Note will not cause an Event of
Default.
6.1.20 Full
Disclosure.
There
is no material fact which is known by Borrower that the Borrower has not
disclosed to Lender that would have a Material Adverse Effect. No Loan Document,
nor any agreement, document, certificate or statement delivered by the Borrower
to Lender, knowingly contains any untrue statement of a material fact or omits
to state any material fact that is known or which should be known by the
Borrower that is necessary to keep the other statements from being
misleading.
6.1.21 Warehousemen,
Consignees and Bailees.
None of
the Collateral is (i) stored or located in a warehouse or other location, which
would give the owner, tenant, sub-landlord, sub-tenant, operator, manager or
warehouseman a claim to or lien on the Collateral, (ii) in the possession or
control of a third party on consignment and (iii) in the possession or control
of a third party bailee.
SECTION
7
AFFIRMATIVE
COVENANTS
7.1 Payment
and Performance.
Borrower will duly and punctually pay all interest and principal as and when
it
becomes due to the Lender under the Loan Documents, including without limitation
this Loan Agreement and the Note, and will duly and punctually perform all
things on its part to be done or performed under this Loan Agreement, or
pursuant to any instrument, document or agreement executed pursuant
hereto.
7.2 Use
of
Loan Proceeds.
The
Borrower shall use the proceeds of the Note for the (i) purchase
of assets and equity interest as set forth in the Asset Purchase Agreement,
(ii)
working capital to fund the operation of its business and (iii) payment of
fees
and expenses related to the Loan Documents and the Acquisition
Transaction.
7.3 Maintenance
of Business and Collateral.
Borrower shall maintain all of the property and assets used or useful in the
conduct of its business, and keep the same in working order and
12
condition,
ordinary wear and tear, fire and casualty excepted, and from time to time make,
or cause to be made, all material needful and proper repairs, renewals,
replacements, betterments and improvements thereto so that the businesses
carried on in connection therewith may be conducted properly and in accordance
with standards generally accepted in businesses of a similar type and size
at
all times, and maintain and keep in full force and effect all licenses and
permits reasonably necessary for the proper conduct of its businesses and
operation of its properties.
7.4 Insurance.
On or
before the date of this Loan Agreement, and so long as any amount is due under
any of the Loan Documents, Borrower shall obtain and maintain property and
casualty insurance on all of the Collateral, liability insurance, workers’
compensation insurance and business interruption insurance, from good and
responsible insurance companies reasonably satisfactory to Lender. Additionally
the Borrower shall cause the Mexican Subsidiary to obtain and maintain property
and casualty insurance on all of the Mexican Collateral, liability insurance,
workers’ compensation insurance and business interruption insurance, from good
and responsible insurance companies reasonably satisfactory to Lender. All
insurance policies shall be in amounts and shall contain co-insurance and
deductible provisions reasonably approved in advance by Lender. The Lender
shall
be named as the creditor/loss payee in all policies, under the name “JMC VENTURE
PARTNERS LLC, its successor and assigns, as their interests may
appear.”
All such
insurance may not be cancelled without first obtaining the Lender’s written
consent, which consent must be obtained no less than thirty (30) days before
the
insurance will be cancelled. If the insurance is cancelled, for any reason,
the
Lender may maintain the existing policy or policies or obtain new insurance.
All
such premiums paid for by the Lender shall be added to, included and become
the
Borrower’s obligations to the Lender under this Loan Agreement, the Note and the
Loan Documents.
7.5 Notice
of Default.
The
Borrower shall provide to Lender prompt notice of (a) the occurrence and
continuance of an Event of Default and what action (if any) the Borrower is
taking to correct the same, (b) any litigation or changes in existing
litigation, which includes a claim or claims against the Borrower in excess
of
fifty thousand dollars ($50,000), or any judgment in excess of fifty thousand
dollars ($50,000), against it or its assets, (c) any damage or loss to property
in excess of fifty thousand dollars ($50,000), (d) any notice from taxing
authorities as to claimed deficiencies in excess of twenty thousand dollars
($20,000) or any tax lien or any notice relating to alleged ERISA violations,
(e) any ERISA Event, (f) any Termination Event, (g) any rejection, return,
offset, dispute, loss or other circumstance having a Material Adverse Effect
on
any Collateral, (h) the cancellation or termination of, or any default under,
any agreement to which Borrower is a party, the termination of which, or
default, will have a Material Adverse Effect on the Borrower, (i) any
acceleration of the maturity of any Debt of Borrower in excess of fifty thousand
dollars ($50,000), and (j) any loss or threatened loss of licenses or permits,
the loss of which will have a Material Adverse Effect on the Borrower or its
business.
7.6 Inspections.
The
Borrower shall permit inspections of the Collateral and its business premises,
inspections of records pertaining to the reviews and field examinations of
Borrower’s other records and properties, which related to the Collateral, twice
every calendar year, following three (3) days advance notice, during normal
business hours and without unnecessary interruption of Borrower’s business
operations, so long as there is no Event of Default continuing. If there occurs
and continues an Event of Default the Borrower shall permit such inspections,
verifications, reviews
13
and
field
examinations at such times and in such manner as may be required by Lender.
The
reasonable cost of all such inspections, verifications, reviews and field
examinations shall be borne and paid by the Borrower.
7.7 Appraisals.
If
there occurs and continues an Event of Default the Lender may appraise the
Collateral as often as may be reasonably required by Lender. The reasonable
cost
of all such appraisals shall be borne and paid by the Borrower.
7.8 Mexican
Opinion.
Within
fourteen (14) days after the Closing Date, the Borrower shall cause Mexican
counsel to the Mexican Subsidiary shall deliver to Lender a legal opinion
regarding due authority of the Mexican Subsidiary to execute and deliver the
Mexican Guaranty, Mexican Security Agreement and Mexican Mortgage, in a form
reasonably acceptable to the Lender in the Lender’s sole and absolute
discretion.
7.9 Application
to Conduct Business in Pennsylvania.
Within
ten (10) Business Days of the Closing Date the Borrower shall file all necessary
documents and applications with the Commonwealth of Pennsylvania to be licensed
and qualified to transact business within the Commonwealth of
Pennsylvania.
7.10 Future
Lease Agreement.
Within
four (4) months of the Closing Date the Borrower shall (i) enter into a new
lease agreement, which shall permit the assignment of such agreement to the
Lender as collateral for amounts due under the Loan Documents, (ii) execute
an
assignment of leases and rents, which assigns Borrower’s new lease to Lender as
collateral for all amounts due under the Loan Documents, in a form reasonably
acceptable to the Lender and (iii) use all reasonable efforts to cause its
landlord under the new lease to enter into a landlord waiver and consent
agreement, in a form reasonably acceptable to the Lender.
SECTION
8
FINANCIAL
INFORMATION AND DISCLOSURES
8.1 Financial
Information.
The
Borrower shall maintain its books and records in accordance with
GAAP.
8.2 Financial
Information Furnished by Borrower.
Borrower shall furnish to Lender the following periodic financial
information:
8.2.1 Monthly.
|
(i)
|
Within
thirty (30) days after the end of each calendar month an aging of
all
Accounts and a complete list of all Inventory and its
location.
|
8.2.2
Quarterly
Statements.
|
(i)
|
Within
forty-five (45) days after the end of each three month period from
the
date hereof, starting with November 30, 2007, a Covenant Compliance
Certificate, a draft copy of which is attached hereto as Exhibit
M; and
|
14
|
(ii)
|
Within
thirty (30) days after the end of each calendar quarter a management
prepared balance sheet, income statement and statement of cash flows,
which reflect the Borrower’s financial condition and operating results for
such month, together with all supporting schedules, and certified
by the
Borrower as true and correct and fairly representing the financial
condition of Borrower, and that such statements are prepared in accordance
with GAAP, except without footnotes and subject to normal year-end
adjustments.
|
|
8.2.3
|
Annual
Statements.
|
|
(i)
|
On
or before sixty (60) days prior to beginning of each fiscal year,
annual
projections, including a balance sheet, income statement and statement
of
cash flows, broken down on a quarterly
basis;
|
|
(ii)
|
Within
one hundred and twenty days (120) days after the end of each fiscal
year,
an audited balance sheet, income statement and statement of cash
flows,
which reflect the Parent’s financial condition and operating results for
such year, together with all supporting schedules, prepared in accordance
with GAAP, and any management letter or letter of recommendation
to and
from the Borrower’s auditor. The accountant that audits the foregoing
information must be reasonably approved by the Lender in
advance;
|
|
(iii)
|
Within
thirty (30) days after filing, copies of all executed and filed federal
tax returns, including without limitation all schedules to such tax
returns and requests for an extension to
file.
|
|
(iv)
|
Within
ten (10) days of receipt, any and all franchise tax bills received
by the
Borrower from the Borrower’s State of
incorporation.
|
8.2.3 Auditor’s
Management Letters.
Promptly upon receipt thereof, copies of each report submitted to Borrower
by
independent public accountants in connection with any annual, interim or special
audit made by them of the books of Borrower including, without limitation,
each
report submitted to Borrower concerning its accounting practices and systems
and
any final comment letter submitted by such accountants to management in
connection with the annual audit of Borrower;
8.2.4 Other
Information.
Such
other information reasonably requested by Lender from time to time concerning
the business, properties or financial condition of Borrower.
8.3 Material
Information.
If any
of the information disclosed by the Borrower under this Loan Agreement is
material, and Parent must disclose such information in a Security and Exchange
Commission Form 8-K, then Borrower shall use all reasonable efforts to compel
the Parent to file any and all Forms 8-K, or other related forms and press
releases. If, for any reason, the
Parent does not promptly file the necessary Forms 8-K, or other related forms
and press releases, the Lender shall have the right to disclose material
information about the Borrower to the public.
15
SECTION
9
COVENANTS
OF COMPLIANCE AND COLLATERAL
9.1 Maintenance
of Existence and Rights.
Borrower shall preserve and maintain its corporate existence, authority to
transact business, rights and franchises, trade names, patents, trademarks
and
permits material and necessary to the conduct of its business.
9.2 Payment
of Taxes
Borrower
shall pay before delinquent all of its debts and taxes, except for nonpayment
of
taxes being actively contested in accordance with law and with proper reserves
maintained on its books and records.
9.3 Compliance;
Hazardous Materials.
Borrower shall comply in all material respects with all laws, regulations,
ordinances and other legal requirements applicable to it, specifically
including, without limitation, ERISA, all securities laws and all laws relating
to hazardous materials and the environment. Unless approved in writing by
Lender, Borrower shall not engage in the storage, manufacture, disposition,
processing, handling, use or transportation of any hazardous or toxic materials,
except for ordinary and customary amounts of solvents, cleaners and similar
materials used in the ordinary course of Borrower’s business.
9.4 Compliance
with Assignment Laws.
Borrower shall, if required by the Lender, comply with the Federal Assignment
of
Claims Act and any other applicable law relating to assignment of government
contracts.
9.5 Compliance
with Intellectual Property.
Borrower shall maintain all of its Intellectual Property and License(s), and
shall actively pursue any infringement of any such Intellectual Property or
License(s). Borrower shall operate its business so as to not knowingly infringe
any patent, trademark or copyright.
9.6 Further
Assurances.
Borrower shall take such further action and provide to Lender such further
assurances as may be reasonably requested to ensure compliance with the intent
of this Loan Agreement and the other Loan Documents.
9.7 Covenants
Regarding the Collateral and Leased Premises.
Borrower makes the following covenants with Lender regarding the Collateral
and
Leased Premises:
9.7.1 Borrower
will use the Collateral and the Leased Premises only in the ordinary course
of
its business and will not permit the Collateral and Leased Premises to be
knowingly used in violation of any applicable law or policy of
insurance;
9.7.2 Borrower
will defend the Collateral against all claims and demands of all Persons, except
for Permitted Liens;
9.7.3 Borrower
will, at Lender 's request, use all reasonable efforts to obtain and deliver
to
Lender such waivers as Lender may reasonably require waiving a landlord's or
subsequent ▇▇▇▇ ▇▇▇▇▇▇’▇ enforcement rights against the Collateral and Leased
Premises and assuring Lender 's access to the Leased Premises in exercise of
its
rights hereunder;
16
9.7.4 Borrower
will not sell, assign, lease, transfer, pledge, hypothecate or otherwise dispose
of or encumber the Collateral or any interest therein, except in the ordinary
course of Borrower’s business.
9.8 Lease
Agreements.
Borrower shall deliver to Lender a list of all Future Leases, and all amendments
to such agreements which cover, relate to or effect any and all real estate
leased by the Borrower, as soon as such Future Leases and amendments are
executed by Borrower.
SECTION
10
NEGATIVE
COVENANTS
10.1 The
Borrower covenants and agrees that from the date hereof and until payment in
full of the Indebtedness and the termination of this Loan Agreement it shall
abide by the following covenants:
10.1.1 Debt.
With
the exception of Permitted Debt, Borrower shall not incur, assume, create,
permit to exist or guarantee any non-trade Debt in excess of ten thousand
dollars ($10,000).
10.1.2 Liens.
Borrower shall not create or permit any Liens on any of its property, assets,
including without limitation the Collateral, except Permitted
Liens.
10.1.3 Dividends.
Other
than Permitted Distributions, Borrower shall not pay or declare any dividends,
including without limitation stock dividends, or other distributions or
purchases, redeem or otherwise acquire any stock or other equity interests
or
pay or acquire any debt subordinate to the Indebtedness, unless it is
specifically permitted by the Lender in writing.
10.1.4 Loans
and Other Investments.
Other
than Permitted Distributions, except as may be permitted by the Lender in
writing, Borrower shall not make or permit to exist any advances or loans to,
or
guarantee or become contingently liable, directly or indirectly, in connection
with the obligations, leases, stock or dividends of, or own, purchase or make
any commitment to purchase any stock, bonds, notes, debentures or other
securities of, or any interest in, or make any capital contributions to (all
of
which are sometimes collectively referred to herein as “Investments”)
in any
Person except for (a) purchases of direct obligations of the federal government,
(b) deposits in the Lender, (c) commercial paper of any U.S. corporation having
the highest ratings then given by the ▇▇▇▇▇’▇ Investors Services, Inc. or
Standard & Poor’s Corporation, and their successors and assigns, (d)
endorsement of negotiable instruments for collection in the ordinary course
of
business, and (e) advances to employees for business travel and other expenses
incurred in the ordinary course of business which do not at any time exceed
ten
thousand dollars ($10,000) in the aggregate.
10.1.5 Capital
Expenditures.
Borrower shall not incur Capital Expenditures, in aggregate, which are greater
than fifty thousand dollars ($50,000) until all amounts due under the Loan
Documents
are paid in full and this Loan Agreement is terminated in writing.
10.1.6 Change
in Business.
Borrower shall not enter into any business that is substantially different
from
the business in which it is presently engaged.
17
10.1.7 Change
in Ownership and Control.
Borrower shall not issue or authorize any additional or new equity interests,
stock, options, securities, rights, warrants or phantom stock, that will result
in a Change in Control of the Borrower. All equity interests in the Borrower,
including without limitation all stock, equity interests, securities, rights,
options, warrants and phantom stock of the Borrower, may not be transferred,
sold, pledged or hypothecated, other than by death, in connection with estate
planning purposes, or pursuant to the Loan Documents so long as such transfer,
sale, pledge or hypothecation does not result in a Change in Control of the
Borrower, unless the Lender first consents in writing.
10.1.8 Transactions
with Affiliates and Subsidiaries.
Other
than Permitted Distributions or as listed in Exhibit
N,
Borrower shall not directly or indirectly purchase, acquire or lease any
property from, or sell, transfer or lease any property to, pay any management
fees to or otherwise deal with, in the ordinary course of business or otherwise,
the Parent or any Affiliate or Subsidiary. A list of the Borrower’s Affiliates
and Subsidiaries is set forth in Exhibit
O.
10.1.9 No
Change in Name, Offices; Removal of Collateral.
Within
two (2) Business Days of the Closing Date the Borrower will change its name
to
“Deltron LLC”. Thereafter, Borrower shall not, unless it shall have given thirty
(30) days’ advance written notice thereof to Lender, (a) change its name or the
location of its chief executive office or other office where books or records
are kept or (b) change its state of organization. Other than in the Borrower's
ordinary course of business, Borrower shall not move, remove, relocate or
transfer the Collateral to any location not approved by the Lender, in
writing.
10.1.10
No
Sale, Leaseback.
Borrower shall not enter into any sale-and-leaseback or similar
transaction.
10.1.11
Margin
Stock.
Borrower shall not use any proceeds of the Note to purchase or carry any margin
stock (within the meaning of Regulation U of the Board of Governors of Federal
Reserve System) or extend credit to others for the purpose of purchasing or
carrying any margin stock.
10.1.12
Subsidiaries.
Other
than Permitted Distributions, Borrower shall not acquire, form or dispose of
any
Subsidiaries or permit any Subsidiary to issue capital stock except to its
parent (other than the issuance of one share of capital stock in the Mexican
Subsidiary to the Parent as required by Mexican law), except with the prior
written consent of the Lender. Any new Subsidiary shall become a party to this
Loan Agreement and shall grant to the Lender a Lien on all of its Collateral
and
agree to be bound by the provisions of this Loan Agreement.
10.1.13
Trade
or Fictitious Name.
Borrower shall give the Lender thirty (30) days prior written notice of use
of
or any change of any new trade or fictitious name. The Borrower’s use of any
trade or fictitious name shall be in compliance in all material respects with
all laws regarding the use of such names.
10.1.14
Liquidation,
Mergers, Consolidations and Dispositions of Substantial Assets.
Except
with the prior written approval of the Lender, which the Lender may reasonably
withhold, Borrower shall not dissolve or liquidate, or become a party to any
merger or consolidation, or acquire by purchase, lease or otherwise, all or
a
substantial part (more than 10% in the aggregate during the term hereof) of
the
assets of any Person, or sell, transfer, lease or otherwise dispose of all
or a
substantial part (more than 10% in the aggregate during the term hereof) of
its
property or assets, other than the sale of inventory in the ordinary course
of
business.
18
10.1.15
Change
of Fiscal Year or Accounting Methods.
The
Borrower shall not change its fiscal year or its accounting methods if it will
have a Material Adverse Effect.
10.1.16
Purchase
Money Security Interests.
All of
Borrower’s purchase money security interests are listed in Exhibit
P.
SECTION
11
FINANCIAL
COVENANTS
11.1 Financial
Covenants.
Borrower covenants and agrees that from the date hereof and until payment in
full of the Indebtedness and termination of all Loan Documents including without
limitation this Loan Agreement, it shall comply with the following
covenants:
11.1.1 Interest
Coverage Ratio.
Borrower shall not permit the ratio of its EBITDA divided by Interest Expense
to
be less than (i) 0.50 to 1 on February 28, 2008 and (ii) 1.20 to 1 thereafter.
The EBITDA/Interest Expense ratio shall be first calculated on February 28,
2008, and then on May 31, 2008. Both calculations, on February 28, 2008 and
May
31, 2008, shall be based on a trailing three (3) month basis.
SECTION
12
EVENTS
OF DEFAULT
Each
of
the following shall constitute an Event of Default under this Loan Agreement
and
of the other Loan Documents:
12.1 There
shall occur any default by Borrower in the payment, when due, of any principal
or interest under the Loan Documents, including without limitation the Note,
or
any monetary covenant, condition or agreement contained in this Loan Agreement,
or any other Loan Document, including Borrower’s obligations to pay fees as set
froth in Section 5.2 herein. If the Borrower defaults under this Section 12.1
it
shall have three (3) Business Days to cure such default, however, such three
(3)
day cure period only applies to the first two (2) defaults under this Section
12.1; for all subsequent defaults there is no cure period; or
12.2 There
has
occurred and/or is continuing a non-monetary default under any of the Loan
Documents, and such non-monetary default is not cured within ten (10) Business
Days; or
12.3 The
Borrower shall fail to observe or perform any non-monetary covenant, condition
or agreement contained in this Loan Agreement, or any other Loan Document,
and
such default is not cured within ten (10) Business Days; or
19
12.4 Any
representation, warranty or certification made by Borrower in any Loan Document,
herein or therein or in any letter, certificate or report furnished in
connection herewith or therewith, shall prove to have been untrue or incorrect
in any material respect when made; or
12.5 Any
other
obligation now or hereafter owed by the Borrower to the Lender shall be in
default and not cured within the applicable grace period, if any;
or
12.6 The
Borrower shall be in default under any obligation for borrowed money in excess
of fifty thousand dollars ($50,000) owed to any other party, which default
entitles the other party to accelerate any such obligations, unless such
obligation is either (i) bonded by a surety company acceptable to the Lender
or
(ii) fully secured by a consensual lien from Borrower on Borrower’s assets or
fully secured by a lien on assets owned by a third party or parties other than
Borrower, and Borrower has notified Lender of such default in writing and
delivered to Lender all information relevant and related to this Section 12.6.
This Section 12.6 does not apply to unsecured accounts payable totaling fifty
thousand dollars ($50,000) or less, which are less than ▇▇▇▇▇▇ (30) days past
due from their respective payment due date; or
12.7 The
Borrower shall (a) voluntarily dissolve, liquidate or terminate operations
or
apply for or consent to the appointment of, or the taking of possession by,
a
receiver, custodian, trustee or liquidator of such Person or of all or of a
substantial part of its assets, (b) admit in writing its inability, or be
generally unable, to pay its debts as they become due, (c) make a general
assignment for the benefit of its/his creditors, (d) commence a voluntary
case under the federal bankruptcy code (as now or hereafter in effect), (e)
file
a petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts,
(f) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under the
bankruptcy code, or (g) take any corporate action for the purpose of
effecting any of the foregoing; or
12.8 An
involuntary petition or complaint shall be filed against either Borrower seeking
bankruptcy relief or reorganization or the appointment of a receiver, custodian,
trustee, intervenor or liquidator of Borrower, of all or substantially all
of
its assets, and such petition or complaint shall not have been dismissed within
sixty (60) 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 or ordering any of the foregoing actions;
or
12.9 There
shall occur any loss, theft, damage or destruction of any of the Collateral
or
Mexican Collateral, which loss is not fully insured, less applicable
deductibles, and which has a Material Adverse Effect; or
12.10 A
final
judgment in excess of fifty thousand dollars ($50,000) shall be rendered against
Borrower, and such judgment shall remain undischarged, undismissed, not timely
appealed and/or unstayed for more than forty-five (45) days (except judgments
validly covered by insurance or surety
bond with a deductible of not more than ten thousand dollars ($10,000)), or
there shall occur any levy upon, or attachment, garnishment or other seizure
of,
any material portion of the Collateral, which is not bonded over, dismissed
or
released within thirty (30) days of such levy, attachment, guarantee or other
seizure, by reason of the issuance of any tax levy, judicial attachment or
garnishment or levy of execution; or
20
12.11 A
Change
in Control shall occur; or
12.12 The
payment of all amounts due under all Loan Documents on the Maturity Date;
or
12.13 Parent’s
default under any of the terms, conditions, agreements and covenants under
the
Credit Agreement; or
12.14 The
acceleration of any or all amounts due under either the Parent Senior Loan
Documents or the Parent PIPE Documents.
SECTION
13
REMEDIES
13.1 Remedies.
If any
Event of Default shall occur and be continuing, under any Loan Document, the
Lender may without notice to the Borrower, at its option, takes any or all
of
the following actions:
13.1.1 Accelerate
any or all of Indebtedness and declare such Indebtedness to be immediately
due
and payable (if not earlier demanded);
13.1.2 Bring
suit against either or both of the Borrower and/or a Guarantor, to collect
the
Indebtedness;
13.1.3 Exercise
any remedy available to Lender hereunder or at law and take any action or
exercise any remedy provided herein or in any other Loan Document or under
applicable law;
13.1.4 Enforce
the Corporate Guaranty, without first enforcing any other Loan
Document;
13.1.5 Enforce
and foreclose the security interest on the Collateral, without first enforcing
any other Loan Document;
13.1.6
Enforce the Mexican Guaranty, Mexican Security Agreement and/or Mexican
Mortgage, without first enforcing any other Loan Document; or
13.1.7 Enforce
Lender’s rights set forth in Section 4.5 herein.
13.2 Without
waiving any of its other rights hereunder or under any other Loan Document
or
applicable law, Lender shall have all rights and remedies of a secured party
under the Code (and the Uniform Commercial Code of any other applicable
jurisdiction), Mexican law and such other rights and remedies as may be
available hereunder, under other applicable law or pursuant to contract;
21
13.3 If
requested by Lender, Borrower will promptly assemble any Collateral and make
it
available to Lender at a place to be designated by Lender;
13.4 The
Borrower agrees that any notice by Lender of the sale or disposition of any
of
the Collateral or any other intended action hereunder, whether required by
applicable law, the Code or otherwise, shall constitute reasonable notice to
the
Borrower if the notice is mailed to the Borrower by regular or certified mail,
postage prepaid, at least ten (10) days before the action to be
taken;
13.5 The
Borrower shall be liable for any deficiencies in the event the proceeds of
the
disposition of the Collateral do not satisfy the Indebtedness in
full;
13.6 In
addition to any other remedy available to it, Lender shall have the absolute
right, upon the occurrence and during the continuance of an Event of Default,
to
seek and obtain the appointment of a receiver or through its own employees
or
agents to take possession of and operate of the Borrower’s business, and/or
dispose of the Borrower’s business and/or dispose of the Borrower’s assets,
including without limitation the Collateral, and any reasonable costs and
expenses incurred by Lender in connection with such receivership shall bear
interest at the Default Rate, and shall be secured by the
Collateral;
13.7 After
the
occurrence and during the continuance of an Event of Default, the Borrower
authorizes Lender to collect and apply against the Indebtedness when due any
cash or deposit accounts in its possession, and any refund of insurance premiums
or any insurance proceeds payable on account of the loss or damage to the
Collateral and irrevocably appoints Lender as its attorney-in-fact to endorse
any check or draft or take other action necessary to obtain such
funds.
13.8 After
the
occurrence and during the continuance of an Event of Default the Lender may
take
over operational and management control of the Borrower and the Borrower’s
business.
13.9 No
remedy
shall be exclusive of other remedies or impair the right of Lender to exercise
any other remedies.
13.10 The
Borrower waives any and all rights they may have to require marshaling of their
assets and/or claims.
SECTION
14
MISCELLANEOUS
PROVISIONS
14.1 Continuing
Obligation to Cooperate.
Borrower agrees to execute and deliver to the Lender all such other and further
instruments and documents and take or cause to be taken all such other and
further action as the Lender may reasonably request in order to effect and
confirm or vest more securely in the Lender all rights contemplated in this
Loan
Agreement.
14.2 Amendments.
This
Loan Agreement may be amended only by an instrument in writing and duly signed
by the Borrower and an authorized officer of the Lender.
22
14.3 Enforceability.
If any
provisions of this Loan Agreement shall be held to be illegal or unenforceable,
such illegality or unenforceability shall relate solely to such provision and
shall not affect the remainder of this Loan Agreement.
14.4 Venue.
The
Borrower and Lender agree that any action or proceeding to enforce or arising
out of this Loan Agreement may be commenced in any federal or state court of
the
Commonwealth of Massachusetts sitting in the county of Suffolk.
14.5 Service
of Process.
The
Borrower waives personal service of process and agrees that a summons and
complaint commencing an action or proceeding in any such court shall be properly
served and confer personal jurisdiction if served by registered or certified
mail to the Borrower, or as otherwise provided by the laws of the Commonwealth
of Massachusetts or the United States of America.
14.6 No
Waiver, Remedies Cumulative.
No
failure on the part of Lender to exercise, and no delay in exercising, any
right
hereunder or under any other Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. All rights
and remedies herein provided are cumulative and are in addition to any other
remedies provided by law, any Loan Document or otherwise.
14.7 Survival
of Representations.
All
representations, warranties and covenants made herein shall survive the making
of the Loan hereunder and the delivery of the Loan Documents, and shall continue
in full force and effect so long as any Indebtedness is outstanding, there
exists any commitment by Lender to the Borrower, and until this Loan Agreement
is formally terminated in writing.
14.8 Indemnity
By Borrower.
In
addition to all other Indebtedness, the Borrower agrees to defend, protect,
indemnify and hold harmless the Lender, and all of its Affiliates, Subsidiaries,
officers, directors, managers, employees, advisors, attorneys, accountants,
consultants, agents and any controlling Persons (collectively the “Indemnified
Parties”)
from
and against any and all losses, claims, damages, liabilities, obligations,
penalties, fees, costs, expenses and settlement agreements, joint and several
(including, without limitation, reasonable attorneys’ and paralegals’ fees,
costs and expenses) incurred by any of the Indemnified Parties, whether prior
to
or from and after the date hereof, as a result of or arising from or relating
to
(i) any due diligence effort (including, without limitation, public record
search, recording fees, examinations and investigations of the properties of
the
Borrower, a Guarantor, Borrower’s operations, the Collateral and the Leased
Premises), negotiation, preparation, execution and/or performance of any of
the
Loan Documents or of any document executed in connection with the transactions
contemplated thereby and the perfection of Lender ’s Liens in the Collateral,
maintenance of the Loan by the Lender , and any and all amendments,
modifications, and supplements of any of the Loan Documents or restructuring
of
the Indebtedness, (ii) any suit, investigation, action or proceeding by any
Person, whether threatened or initiated, asserting a claim for any legal or
equitable remedy against any Person under any statute,
23
regulation
or common law principle, arising from or in connection with any of the Loan
Documents and/or Lender ’s furnishing of funds to the Borrower under this Loan
Agreement, (iii) the Lender’s preservation, administration and enforcement of
its rights under the Loan Documents and applicable law, including the reasonable
fees of the outstanding Indebtedness as attorneys fees if collected by or
through an attorney at law and disbursements of counsel for Lender in connection
therewith, whether suit be brought or not and whether incurred at trial or
on
appeal, and all costs of repossession, storage, disposition, protection and
collection of Collateral, (iv) periodic field exams, audits and appraisals
performed by Lender; and/or (v) any matter relating to the financing
transactions contemplated by the Loan Documents or by any document executed
in
connection with the transactions contemplated thereby, other than for such
loss,
damage, liability, obligation, penalty, fee, cost or expense, any of which
arise
from an Indemnified Parties’ gross negligence or willful misconduct. No
Indemnified Party shall be liable for any direct or consequential damages that
arise from or are related to the Commitment Letter, this Loan Agreement or
any
of the Loan Documents. Borrower’s obligation for indemnification for all of the
foregoing losses, damages, liabilities, obligations, penalties, fees, costs
and
expenses shall be part of the Indebtedness, secured by the Collateral, and
chargeable against Borrower’s loan accounts. The indemnity herein shall survive
the termination of this Loan Agreement.
14.9 Tax
Obligations.
If the
Borrower should fail to pay any tax or other amount required by this Loan
Agreement to be paid or which may be reasonably necessary to protect or preserve
any Collateral, Lender may make such payment and the amount thereof shall be
payable on demand, shall bear interest at the Default Rate from the date of
payment by the Lender until paid and shall be deemed to be Indebtedness entitled
to the benefit and security of the Loan Documents. The Borrower agrees to pay
and save Lender harmless against any liability for payment of any state
documentary stamp taxes, intangible taxes or similar taxes (including interest
or penalties, if any) which may now or hereafter be determined to be payable
in
respect to the execution, delivery or recording of any Loan Document or the
making of any Loan, whether originally thought to be due or not. The agreement
herein shall survive the termination of this Loan Agreement.
14.10 Reinstatement.
Notwithstanding anything herein to the contrary, this Loan Agreement shall
continue to be effective or be reinstated, as the case may be, if at any time
any amount received by the Lender in respect of the Indebtedness is rescinded
or
must otherwise be restored or returned by the Lender upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Borrower, or
upon
the appointment of any receiver, assignee, intervener or conservator of, or
trustee or similar official for, the Borrower or any substantial part of its
properties, or otherwise, all as though such payments had not been
made.
14.11 Notices.
Any
notice or other communication hereunder, or under any Loan Document, to any
party hereto or thereto shall be by hand delivery, overnight delivery,
facsimile, telegram, telex or registered or certified mail and unless otherwise
provided herein shall be deemed to have been given or made when delivered,
telegraphed, telexed, faxed or three (3) Business Days after having been
deposited in the mails, postage prepaid, addressed to the party at its address
specified in Exhibit
Q
(or at
any other address that the party may hereafter specify to the other parties
in
writing).
14.12 Governing
Law.
This
Loan Agreement and all Loan Documents shall be deemed contracts made under
the
laws of the Commonwealth of Massachusetts, and shall be governed by and
construed in accordance with the laws of said state (excluding its conflict
of
laws provisions if such provisions would require application of the laws of
another jurisdiction).
24
14.13 Successors.
This
Loan Agreement shall be binding upon and shall inure to the benefit of the
Borrower and the Lender, and their respective successors and
assigns.
14.14 Assignment.
The
Borrower may not assign any of their rights, obligations, covenants,
representations, warranties, duties or responsibilities hereunder and under
the
Loan Documents. Any such assignment shall be void. The Lender may assign all
or
part of its rights hereunder and under the Loan Documents, at any
time.
14.15 Counterparts.
This
Loan Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and all of which when taken together
shall
constitute but one and the same instrument.
14.16 Exhibits.
The
exhibits annexed hereto are
the
only exhibits to be annexed to this Loan Agreement, and the material contained
therein shall be incorporated herein.
14.17 Captions.
The
captions herein contained are inserted as a matter of convenience only and
such
captions do not form a part of this Loan Agreement and shall not be utilized
in
the construction hereof.
14.18 Powers.
All
powers of attorney granted to Lender are coupled with an interest and are
irrevocable.
14.19 Approvals.
If this
Loan Agreement calls for the approval or consent of Lender, such approval or
consent may be given or withheld in the discretion of Lender unless otherwise
specified herein.
14.20 No
Punitive Damages.
Each
party agrees that it shall not have a remedy of punitive or exemplary damages
against the other and hereby waives any right or claim to punitive or exemplary
damages it may have now or which may arise in the future in connection with
any
Dispute.
14.21 Waiver
of Jury Trial.
EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS LOAN AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS LOAN AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
14.21. _____ Borrower’s Initials, ___ Lender’s Initials
25
14.22 Participations.
Lender
shall have the right to enter into one or more participation agreements with
other lenders with respect to the Indebtedness. Upon prior notice to the
Borrower of such participation, Borrower shall thereafter furnish to such
participant any information furnished by Borrower to Lender pursuant to the
terms of the Loan Documents. Nothing in this Loan Agreement or any other Loan
Document shall prohibit Lender from pledging or assigning this Loan Agreement
and Lender’s rights under any of the other Loan Documents, including collateral
therefore, to any Federal Reserve Lender in accordance with applicable
law.
14.23 Joint
and Several Obligations.
All
Indebtedness, representations, warranties, covenants and indemnities set forth
herein and in the Loan Documents shall be joint and several between the Borrower
and the Guarantors. Lender shall have the right to deal with any individual
of
the Borrower with regard to all matters concerning the rights and obligations
of
Lender hereunder and pursuant to applicable law with regard to the transactions
contemplated under the Loan Documents. All actions or inactions of the officers,
managers, members and/or agents of the Borrower with regard to the transactions
contemplated under the Loan Documents shall be deemed with full authority and
binding upon the Borrower hereunder. The foregoing is a material inducement
to
the agreement of Lender to enter into the terms hereof and to consummate the
transactions contemplated hereby.
14.24 Fiduciary
and Representative Capacities.
If a
party hereto executes this Loan Agreement in a fiduciary or representative
capacity, only the estate or entity represented shall be bound by this Loan
Agreement, and the party executing this Loan Agreement, and the shareholders,
officers, directors, employees and beneficiaries of such party shall not be
personally liable for any obligation, express or implied,
hereunder.
14.25 Waiver
of Certain Defenses.
All
rights of Lender and all obligations of the Borrower hereunder and under the
Loan Documents shall be absolute and unconditional irrespective of (i) any
change in the time, manner or place of payment of, or any other term of, all
or
any of the Indebtedness, or any other amendment or waiver of or any consent
to
any departure from any provision of the Loan Documents, (ii) any exchange,
release or non-perfection of any other collateral given as security for the
Indebtedness, or any release or amendment or waiver of or consent to departure
from any guaranty for all or any of the Indebtedness, or (iii) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of Borrower, or any third party, other than payment and performance
in
full of the Indebtedness.
14.26 Terms
Generally.
The
definitions of terms herein shall apply equally to the singular and plural
forms
of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
“include”, “includes” and “including” shall be deemed to be followed by the
phrase “without limitation”. The word “will” shall be construed to have the same
meaning and effect as the word “shall”. Unless the context requires otherwise
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument
or
other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such
26
amendments,
supplements or modifications set forth herein), (b) any reference herein to
any
Person shall be construed to include such Person’s successors and assigns, (c)
the words “herein”, “hereof” and “hereunder”, and words of similar import, shall
be construed to refer to this Loan Agreement in its entirety and not to any
particular provision hereof, (d) all references herein to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections
of,
and Exhibits and Schedules to, this Loan Agreement and (e) the word “asset”
shall be construed to the have the same meaning and effect and to refer to
any
and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights.
[Remainder
of the page is blank. Signatures are on the following page.]
27
IN
WITNESS WHEREOF,
the
parties hereto have caused this Loan Agreement to be duly executed as of the
day
and year first above written.
|
BORROWER
|
|
|
WITNESSED
|
DEL-INC
ACQUISITION LLC
|
|
______________________
|
By__________________________________
|
|
▇▇▇▇
▇. ▇▇▇▇▇▇
|
|
|
Its
President
|
|
|
Duly
Authorized
|
|
|
LENDER
|
|
|
JMC
VENTURE PARTNERS LLC
|
|
|
______________________
|
By__________________________________
|
|
G.
▇▇▇▇▇▇▇▇ ▇▇▇▇
|
|
|
Its
Treasurer
|
|
|
Duly
Authorized
|
[Signature
page to Loan Agreement]
28
SCHEDULE
OF EXHIBITS
|
Exhibit
|
Section
Reference
|
Title
|
||
|
A
|
1.1
|
Definitions
|
||
|
B
|
2.1
|
|||
|
B-1
|
2.2
|
Amortization
of Deferred Interest
|
||
|
C
|
2.7
|
Corporate
Guaranty
|
||
|
C-1
|
2.7
|
Mexican
Guaranty
|
||
|
D
|
3.2
|
List
of Deposit Accounts
|
||
|
E
|
4.2
|
Stock
Power
|
||
|
F
|
5.1.2(g)
|
Opinion
Letters
|
||
|
G
|
6.1.4
|
List
of Unrealized or Anticipated Losses
|
||
|
H
|
6.1.7
|
List
of Litigation
|
||
|
I
|
6.1.14
|
List
of Judgments and Liens
|
||
|
J
|
6.1.16
|
List
of Environmental Matters
|
||
|
|
||||
|
K
|
6.1.16
|
List
of Regulated Materials
|
||
|
L
|
6.1.16
|
List
of Environmental Actions
|
||
|
M
|
8.2.2
|
Covenant
Compliance Certificate
|
||
|
N
|
10.1.8
|
List
of Permitted Distributions
|
||
|
O
|
10.1.8
|
List
of Affiliates and Subsidiaries
|
||
|
P
|
10.1.16
|
List
of Purchase Money Security Interests
|
||
|
Q
|
14.11
|
Notice
Addresses
|
||
|
R
|
Definitions
|
List
of Intellectual Property
|
29
EXHIBIT
A
Definitions
“Accounts”
means
accounts as defined in the Code.
“Acquisition
Transaction”
means
the transaction contemplated under the Asset Purchase Agreement.
“Advance”
means
a
payment and transfer of Principal from the Lender to the Borrower under the
Revolving Note, in accordance with the terms and conditions of the Revolving
Note and the Loan Agreement.
“Affiliate”
of
a
Person means (a) any Person directly or indirectly owning ten percent (10%)
or
more of the voting stock or rights of such named Person or of which the named
Person owns ten percent (10%) or more of such voting stock or rights; (b) any
Person controlling, controlled by or under common control with such named
Person; (c) any officer, director or employee of such named Person or any
Affiliate of the named Person; and (d) any family member of the named Person
or
any Affiliate of such named Person.
“Assignment
of Leases and Rents”
means
that certain Assignment of Leases and Rents, pursuant to which the Borrower
assigns all of its rights, title and interests in the Future Lease to the Lender
as security for payment of the Indebtedness.
“Asset
Purchase Agreement”
means
that certain Asset Purchase Agreement, dated June 1, 2007, by and among Solomon
technologies, Inc. and Borrower, as buyers, and Deltron, Inc. and its
subsidiaries and shareholders, as sellers, pursuant to which the buyers agreed
to purchase the sellers business and assets, all amendments, addendum and
modifications to such Asset Purchase Agreement, the Disclosure Letter dated
June
1, 2007, and agreements in relation to or in executed conjunction with such
Asset Purchase Agreement.
“Borrower”
means
Del-Inc Acquisition LLC, a Delaware limited liability corporation with a place
of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ “B”, East ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇.
“Business
Day”
means
any day that is not a Saturday, Sunday or a holiday under Massachusetts or
federal law.
“Capital
Expenditure”
means
capital expenditures as defined under GAAP, including without limitation capital
leases.
“Change
in Control”
means
the current shareholders or interest holders who control fifty-one percent
(51%)
of the economic and voting interests of the Borrower cease to own, on a fully
diluted basis, in the aggregate fifty-one percent (51%) of the economic and
voting interests of the Borrower.
30
“Change
in Law”
means
(a) the adoption of any law, rule or regulation after the closing date of
closing or (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any governmental authority after the
date of closing.
“Closing
Date”
means
the date all Loan Documents are executed and delivered by the Borrower, Lender,
Parent and Mexican Subsidiary, and the Note is funded, but in no event shall
it
be later than September 5, 2007.
“Code”
means
the
Uniform Commercial Code, including all amendments, in effect in the State of
Delaware from time to time.
“Collateral”
means
the
following property of the Borrower, wherever located and whether now owned
by
Borrower or hereafter acquired (all terms shall have the meaning provided in
the
Code), (a) all accounts, (b) all inventory, (c) all general intangibles, (c)
all
chattel paper, (d) all instruments, (e) all payment intangibles, (f) all
equipment, (g) all insurance and insurance proceeds, (h) all machinery, (i)
all
contracts, (j) all contract rights, (k) all Investment Property, (l) chattle
paper, (m) electronic chattle paper, (n) all causes of action, (o) all lender
and deposit accounts, including without limitation all Deposit Accounts, (p)
all
supporting obligations, (q) all funds on deposit with or under the control
of
Lender or its agents or correspondents, (r) all Intellectual Property, (s)
all
economic, equity and voting interests in a Person, (t) all parts, replacements,
substitutions, profits, products and cash and non-cash proceeds of any of the
foregoing (including insurance proceeds, of any kind, including those payable
by
reason of loss or damage thereto) in any form and wherever located (u) all
fixtures, (v) all Vehicles, and (w) all written or electronically recorded
books
and records relating to any such Collateral and other rights relating thereto,
wherever located and whether now owned by Borrower or hereafter
acquired.
“Corporate
Guaranty”
means
the Guaranty Agreement, dated as of the date of the Loan Agreement, executed
by
the Parent, which unconditionally guarantees all amounts due under the Loan
Documents.
“Credit
Agreement”
means
the Acquisition Line of Credit Agreement, dated August 24, 2007, by and between
Solomon Technologies, Inc. and JMC Venture Partners LLC.
“Debt”
means
all
liabilities of a Person as determined under GAAP and all obligations which
such
Person has guaranteed or endorsed or is otherwise severally, secondarily or
jointly liable for, and shall include, without limitation (a)
all
obligations for borrowed money or purchased assets, (b)
obligations secured by assets whether or not any personal liability exists,
(c)
the
capitalized amount of any capital or finance lease obligations, (d)
the
unfunded portion of pension or benefit plans or other similar liabilities,
(e)
obligations as a general partner, (f)
contingent obligations pursuant to guaranties, endorsements, letters of credit
and other secondary liabilities, and (g)
obligations for deposits.
“Default”
means
any event or condition which constitutes an Event of Default or which upon
notice, lapse of time or both would, unless cured or waived, becomes an Event
of
Default.
31
“Default
Rate”
means
the
per annum rate of six (6.00%) percent plus the rate of interest rate payable
under Sections 2.2 of the Loan Agreement and the Note.
“Deposit
Accounts”
means
all bank accounts and deposit accounts maintained by the Borrower, including
without limitation all checking accounts, savings accounts, certificate of
deposits, financial management accounts and money market accounts, maintained
with any Person.
“EBIT”
means,
for any period, Net Income of the Borrower for such period calculated before
income tax expense, Interest Expense, and before any extraordinary and unusual
gains or losses during such period and before excluding the proceeds of any
casualty event or any disposition of assets permitted hereunder.
“EBITDA”
means,
for any period, EBIT, plus
depreciation expense, plus
amortization expense.
“Environmental
Laws”
means,
collectively the following acts and laws, as amended: the Comprehensive
Environmental Response, Compensation and Liability Act of 1980; the Superfund
Amendments and Reauthorization Act of 1986; the Resource Conservation and
Recovery Act; the Toxic Substances Act; the Clean Water Act; the Clean Air
Act;
the Oil Pollution and Hazardous Substances Control Act of 1978; and any other
“Superfund” or “Superlien” law, and any other present or future federal, state
or local law statute, ordinance, code, rule, regulation, order or decree
relating to, or imposing liability or standards of conduct concerning, any
pollutants, hazardous materials or waste, hazardous substances, toxic or
dangerous waste, substance or material that may have a negative impact on human
health, including without limitation, asbestos and asbestos containing
materials, lead, radon, toxic mold, petroleum, petroleum products and
radioactive materials, as now or at any time hereafter in effect.
“Equipment”
means
equipment as defined in the Code.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended from time to
time.
“ERISA
Affiliate”
means
any trade or business (whether or not incorporated) that, together with the
Borrower, is treated as a single employer within the meaning of Section 414(b),
(c), (m) or (o) of the Code.
“ERISA
Event”
means
(a) any “reportable event”, as defined in Section 4043 of ERISA or the
regulations issued thereunder with respect to any Pension Plan, (b) the
existence with respect to any Pension Plan of an “accumulated funding
deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived, (c) the filing pursuant to Section 412(d) of the Code
or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Pension Plan, (d) the incurrence by the Borrower
or
any of its ERISA Affiliates of any liability under Title IV of ERISA with
respect to the termination of any Pension Plan, (e) the receipt by the Borrower
or any ERISA Affiliate from the PBGC or a plan administrator of any
notice
32
relating
to an intention to terminate any Pension Plan or Pension Plans or to appoint
a
trustee to administer any Pension Plan or (f) the receipt by the Borrower or
any
ERISA Affiliate of any notice, or the receipt by any Multi-employer Plan from
the Borrower or any ERISA Affiliate of any notice of Withdrawal Liability or
a
determination that a Multi-employer Plan is, or is expected to be, insolvent
or
in reorganization, within the meaning of Title IV of ERISA.
“Event
of Default”
means
any
event specified as such in Section 12 hereof (“Events
of Default”),
provided that there shall have been satisfied any requirement in connection
with
such event for the giving of notice or the lapse of time, or both.
“Future
Lease”
means
any and all lease agreements, amendments, modifications, renewals and/or
extensions thereto executed by the Borrower for the lease of real property,
which are entered into on or after the Closing Date.
“GAAP”
means
generally accepted accounting principles as in effect in the Unites States
from
time to time.
“Indebtedness”
means
all
obligations now or hereafter owed to Lender by the Borrower, under the Loan
Agreement, Loan Documents, Note, including without limitation amounts owed
or to
be owed under the terms of the Loan Documents, or arising out of the
transactions described therein, including, without limitation sums advanced
to
pay overdrafts on any account maintained by the Borrower with Lender,
reimbursement obligations for outstanding letters of credit or Lender's
acceptances issued for the account of the Borrower, together with all interest
accruing thereon, all obligations under any swap agreements as defined in 11
U.S.C. §101 between Lender and Borrower whenever executed, all taxes, fees, all
costs of collection, reasonable attorneys’ fees and expenses of or advances by
Lender which Lender pays or incurs in discharge of obligations of Borrower
or to
appraise, inspect, repossess, protect, preserve, store or dispose of any
Collateral or the Leased Premises, whether such amounts are now due or hereafter
become due, direct or indirect and whether such amounts due are from time to
time reduced or entirely extinguished and thereafter re-incurred and any and
all
amounts covered by the indemnification provisions of Section 14.8, which are
paid by an Indemnified Party.
“Intellectual
Property”
means
all patents, trademarks, copyrights, trade secrets, inventions, processes,
designs, applications for Intellectual Property, work of authorship or mask
work
protected under applicable law. A complete list of the Borrower’s Intellectual
Property is set forth in Exhibit
R
to the
Loan Agreement.
“Interest
Expense”
means,
for any period, the sum of the following: (a) all interest in respect of Debt
accrued or capitalized during such period (whether or not actually paid during
such period) plus
(b) all
fees, including letter of credit fees and expenses, incurred under the Loan
Documents, yet excluding the Commitment Fee, Monitoring Fee and Perfection
Fee.
“Inventory”
means
inventory as defined in the Code.
“Investment
Property”
means
the definition provided in Section 9-102 of the Delaware UCC.
33
“Lien”
means
any
consensual lien, non-consensual lien, mortgage, pledge, statutory lien or other
lien arising by operation of law, grant, security interest, trust arrangement,
security deed, financing lease, collateral assignment or other encumbrance,
conditional sale or title retention agreement, 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
Agreement”
means
that certain Secured Promissory Note Loan, Security and Pledge Agreement, dated
September 5, 2007, by and between the Borrower and Lender.
“Loan
Documents”
means
the
Loan Agreement, the Note, Corporate Guaranty, Mexican Guaranty, Mexican
Mortgage, Assignment of Leases and Rents, UCC-1/Financing Statements for
Borrower, Corporate Guaranty, Guarantor’s Pledged and Security Agreement,
UCC-1/Financing Statement for Corporate Guarantor, Mexican Security Agreement,
UCC-1/Financing Statement for Mexican Subsidiary and all other documents,
instruments and agreements now or hereafter evidencing, describing, relating
to,
the Loan Agreement, the Note and the guaranteeing or securing the Indebtedness
contemplated hereby or delivered in connection herewith, as they may be amended
and/or modified from time to time.
“Machinery”
means
machinery as defined in the Code.
“Material
Adverse Effect”
means
any (i) material adverse effect upon the validity, performance or enforceability
of any of the Loan Documents or any of the transactions contemplated hereby
or
thereby, (ii) material adverse effect upon the properties, business, or
condition (financial or otherwise) of the Borrower and/or any other Person
obligated under any of the Loan Documents, which will or may reasonably likely
cause the Borrower or other Person to Default under any of the Loan Documents,
or (iii) effect upon the ability of Borrower to fulfill any obligation under
any
of the Loan Documents.
“Maturity
Date”
means
September 5, 2008.
“Mexican
Collateral”
means
the following property of the Mexican Subsidiary, wherever located and whether
now owned by Mexican Subsidiary or hereafter acquired (all terms shall have
the
meaning provided in the Code), (a) all accounts, (b) all inventory, (c) all
general intangibles, (c) all chattel paper, (d) all instruments, (e) all payment
intangibles, (f) all equipment, (g) all insurance and insurance proceeds, (h)
all machinery, (i) all contracts, (j) all contract rights, (k) all Investment
Property, (l) chattle paper, (m) electronic chattle paper, (n) all causes of
action, (o) all lender and deposit accounts, including without limitation all
Deposit Accounts, (p) all supporting obligations, (q) all funds on deposit
with
or under the control of Lender or its agents or correspondents, (r) all
Intellectual Property, (s) all economic, equity and voting interests in a
Person, (t) all parts, replacements, substitutions, profits, products and cash
and non-cash proceeds of any of the foregoing (including insurance proceeds,
of
any kind, including those payable by reason of loss or damage thereto) in any
form and wherever located (u) all fixtures, (v) all Vehicles, and (w) all
written or electronically recorded books and records relating to any such
Collateral and other rights relating thereto, wherever located and whether
now
owned by Borrower or hereafter acquired.
34
“Mexican
Mortgage”
means
a
mortgage and Lien, under and pursuant to the laws of Tamaulipas, Mexico, which
creates and grants the Lender a first priority security interest in the Mexican
Property.
“Mexican
Property”
means
all land, buildings, fixtures and appurtenances located at Blvd Carrertera
Riberena KM. Maquilpark Lote #1, Apartado ▇▇▇▇▇▇ ▇▇ ▇▇▇, ▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, and all rent and income generated therefrom, and
all
proceeds generated by the sale, lease, transfer, condemnation, taking or other
disposition of such property.
“Mexican
Subsidiary”
means
Corporacion Delinc S.A. de c.v., a Reynosa, Tamaulipas, Mexico corporation.
“Mexican
Security Agreement”
means
that certain Security Agreement, dated September 5, 2007, by and between the
Lender and the Mexican Subsidiary, pursuant to which the Mexican Subsidiary
grants the Lender a first priority security interest in all of the Mexican
Collateral.
“Note”
means
the $2,750,000 Secured Promissory Note, dated September 5, 2007, executed by
Borrower and in favor of Lender. A copy of the Note is attached to the Loan
Agreement as Exhibit
B.
“Parent”
means
Solomon Technologies, Inc., a Delaware corporation with a place of business
at
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,, Building “B”, East ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, which owns one
hundred percent (100%) of the equity interests of the Borrower.
“Parent
PIPE Documents”
means
the (i) Variable Rate Self-Liquidating Senior Secured Convertible Debentures
due
March 17, 2008, and issued on January 17, 2007, executed by Solomon
Technologies, Inc., in the original aggregate principal amount of up to
$5,500,000, (ii) and amendment agreement between Solomon Technologies, Inc.
and
the investors under such Convertible Debentures, dated August 24, 2007, and
(iii) all agreements, documents, filings, disclosures and amendments which
relate to and/or are executed in connection with such Convertible
Debentures.
“Parent
Senior Loan Documents”
means
that certain Securities Purchase Agreement, dated January 17, 2007, by and
between Solomon Technologies, Inc. and each purchaser identified in such
Purchase Agreement, and all agreements, documents, filings, disclosures and
amendments which relate to and/or are executed in connection with such Purchase
Agreement.
“Permitted
Debt”
means
(a)
the Indebtedness; (b) Debt incurred for Capital Expenditures secured only by
the
capital asset purchased with such Debt, not to exceed in the aggregate fifty
thousand dollars ($50,000) in the aggregate, and (c) trade payables incurred
in
the ordinary course of business that are not past due for more than sixty (60)
days other than as may be disputed in good faith or for which adequate reserves
have been provided under GAAP.
“Permitted
Distributions”
means:
35
(a) payments
by the Borrower to Lender of principal and interest due under the Note;
and
(b) distributions
by the Borrower to the Parent to fund tax liabilities arising from Borrower’s
taxable income, which are set forth in executed tax returns prepared by
Borrower’s accountant and actually paid to a state or federal taxing authority.
“Permitted
Liens”
means:
(a) Liens
created under the Loan Documents;
(b) Liens
imposed by any governmental authority for taxes, assessments or charges not
yet
due or which are being contested in good faith and by appropriate proceedings
if
adequate reserves with respect thereto are maintained on the books of the
Borrower in accordance with GAAP;
(c) purchase
money security interests or other permitted liens, if any, listed in
Exhibit
R;
(f) pledges
or deposits under worker’s compensation, unemployment insurance and other social
security legislation;
(g) deposits
to secure the performance of bids, tenders, trade contracts (other than for
borrowed money), leases (other than capital leases), statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(h) minor
defects in title to property, none of which, individually or in the aggregate,
materially interferes with the use of such property; and
(i) liens
automatically imposed by law and incurred in the ordinary course of business
for
obligations not yet due to carriers, warehouseman, laborers, marterialmen or
the
like.
“Person”
means
any
natural person, corporation, unincorporated organization, trust, joint-stock
company, joint venture, association, company, limited or general partnership,
any government or any agency or political subdivision of any government, or
any
other entity or organization, including without limitation the
Borrower.
“Principal”
means
all principal paid and transferred by Lender to Borrower under the
Note.
“Projections”
means
Borrower’s forecasted consolidated (i) balance sheets, (ii) profit and loss
statements, (iii) cash flow statements, and (iv) capitalization statements,
all
prepared on a month by month basis and on a consistent basis with Borrower’s
historical financial statements, together with appropriate supporting details
and a statement of underlying assumptions.
“Regulated
Materials”
means
any hazardous, toxic or dangerous waste, substance or material, the generation,
handling, storage, disposal, treatment or emission of which is subject
to
36
an
Environmental Law.
“Secured
Promissory Note”
means
the Note.
“Securities”
means
the definition provided in Section 8-102 of the Delaware UCC.
“Security
Entitlement”
shall
have the meaning provided in Mass Gen Laws ch. 106, Sec 8-102.
“Seller”
means
Deltron, Inc., a Pennsylvania corporation with a place of business at ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, and the same party identified
as
“Seller” under the Asset Purchase Agreement.
“Solvent”
means,
as to any Person, that such Person has capital sufficient to carry on its
business and transactions in which it is currently engaged and all business
and
transactions in which it is about to engage, is able to pay its debts as they
mature, and has assets having a fair valuation greater than its liabilities,
at
fair valuation.
“Subsidiary”
means
any
corporation, partnership or other entity in which a Borrower, directly or
indirectly, owns more than fifty percent (50%) of the stock, capital or income
interests, or other beneficial interests, or which is effectively controlled
by
such Person.
“Term
Loan”
means
all amounts advanced, accrued and/or due under the Note.
“Vehicles”
means
all motorized and non-motorized vehicles owned by the Borrower, which are not
Equipment or Machinery, which have or are covered by a certificate of title.
Footnote
1.
All
financial terms used herein shall have the meanings assigned to them under
GAAP
unless another meaning shall be specified.
Footnote
2.
The
definitions of terms herein shall apply equally to the singular and plural
forms
of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
“include”, “includes” and “including” shall be deemed to be followed by the
phrase “without limitation”. The word “will” shall be construed to have the same
meaning and effect as the word “shall”. Unless the context requires otherwise
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument
or
other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be construed
to
include such Person’s successors and assigns, (c) the words “herein”, “hereof”
and “hereunder”, and words of similar import, shall be construed to refer to
this Loan Agreement in its entirety and not to any particular provision hereof,
(d) all references herein to Articles, Sections, Exhibits and Schedules shall
be
construed to refer to Articles and Sections of, and Exhibits and Schedules
to,
this Loan Agreement and (e) the words “asset” and “property” shall be construed
to have the same meaning
37
and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract
rights.
38
EXHIBIT
J
List
of Environmental Matters
The
following disclosures were made to Borrower by Seller as contained in the Asset
Purchase Agreement and Borrower, in reliance on such disclosures, hereby makes
the same disclosures to Lender:
| 1. |
Borrower
stores various hazardous materials at its facilities and uses such
hazardous materials in the operation of its business in the ordinary
course of business.
|
|
2.
|
As
a result of the use and storage of hazardous materials at their
facilities, as described in Item 1 above, various hazardous materials
including commercially available chemicals and substances found in
businesses such as the Borrower’s business that are used in the operation
of the Borrower’s business, may be released into the environment. Borrower
is not aware of any specific release of any such chemicals or substances
on any specific occasion(s).
|
|
3.
|
D.C.R.
Environmental Services, Inc. (“DCR”) performed a Phase I Environmental
Site Assessment of the primary property of the business on March
8, 2002.
DCR did not note any indications of any type of usage that would
create an
environmental concern requiring further investigation. DCR found
that
there was a minimal amount of regulated chemicals used on-site and
the use
and storage of these materials is in compliance with all appropriate
regulatory guidelines.
|
|
4.
|
In
1987-1988, Seller participated in discussions with the U.S. Environmental
Protection Agency (the “EPA”)
concerning environmental conditions at or affecting the Pennsylvania
Facility. In connection with that effort, Seller received a copy
of
report, dated July 7, 1986, entitled “Site Discovery of Groundwater
Contamination in the North Penn Area”. By letter dated May 7, 1987, ▇▇▇▇▇
▇▇▇▇▇, Chief of the Hazardous Waste Enforcement Branch of the EPA
notified
Seller that Seller had been identified as a potential “responsible party”
with respect to the property identified as the “North Penn Groundwater
Site” under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 and other related laws. By letter dated November
25,
1987, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Aisstnant Regional Counsel for the EPA contacted
counsel for Seller with respect to a property identified as the “Spra-Fin
Site”. By letter dated August 9, 1988, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Environmental
Scientist for the EPA, informed Seller that the EPA was in the process
of
developing a work plan for the Spra-Fin Site. Although the EPA and
other
interested parties (including Seller) attempted to negotiate an
Administrative Order on Consent relating to these matters, to the
knowledge of Seller, such Administrative Order was never finalized,
signed
or entered in any court. No further communications from, by or on
behalf
of the EPA with respect to this matter have been received by Seller
or
Borrower to date. Copies of all relevant documents were provided
to
Lender.
|
|
5.
|
By
letter dated February 11, 1992, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief of the PRP
Search
Section of the EPA contacted the Seller and made certain inquiries
concerning a release or the threat
of
|
39
release
of hazardous substances, pollutants or contaminants into the environment at
the
North Penn Area 7 Site, North Wales, Pennsylvania. By letter dated March 6,
1992, Seller responded to the EPA’s letter. No further communications from, by
or on behalf of the EPA with respect to this matter have been received by Seller
or Borrower to date. Copies of both documents were provided to Lender.
| 6. |
See
Phase I Environmental Site Assessment, prepared by D.C.R. Environmental
Services, Inc. in March 2002. Copies of the 2002 Phase I were provided
to
Lender.
|
| 7. |
See
Phase I Environmental Site Assessment, prepared by Conestoga-Rovers
&
Associates in May 2007. Copies of the May 2007 Phase I were provided
to
Lender.
|
Mexico
|
8.
|
Mexican
Subsidiary stores various hazardous materials at its facilities and
uses
such hazardous materials in the operation of its business in the
ordinary
course of business.
|
|
9.
|
The
Ministry of the State of Tamaulipas audited Mexican Subsidiary. The
audit
results and correspondence with the Environmental Ministry regarding
those
results were provided to Lender.
|
|
10.
|
2005
Federal Environmental Operating
Report.
|
| 11. |
See
Phase I Environmental Site Assessment, prepared by Conestoga-Rovers
&
Associates in March 2007. Copies of the March 2007 Phase I were provided
to Lender.
|
40
EXHIBIT
L
List
of Environmental Actions
See
Exhibit J.
41
EXHIBIT
N
Affiliate
Transactions
1.
Borrower engages in transactions with Parent, Mexican Subsidiary and Technipower
LLC in the ordinary course of business in connection with the sale, manufacture
and distribution of its products.
2.
Borrower and/or Parent intend to acquire additional businesses related to the
business currently conducted by Borrower and that such acquisitions may be
completed through either an equity or asset acquisition. To the extent that
Parent, Borrower, Mexican Subsidiary or Technipower LLC (i) acquires the equity
of a separate business or (ii) acquires the assets of a separate business
through a newly formed acquisition company, Borrower will engage in transactions
with such newly acquired or formed businesses similar to those identified in
Paragraph 1 above.
42
EXHIBIT
O
List
of Affiliates and Subsidiaries
Borrower’s
Affiliates are as follows:
Parent
Mexican
Subsidiary
Technipower
LLC
Officers
of Borrower:
▇▇▇▇
▇▇▇▇▇▇
Employees
of Borrower:
▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇
43
EXHIBIT
Q
Notice
Addresses
If
to
the Lender:
G.
▇▇▇▇▇▇▇▇ ▇▇▇▇
▇
▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
o:
(▇▇▇)
▇▇▇-▇▇▇▇
f:
(▇▇▇)
▇▇▇-▇▇▇▇
With
a
Copy to:
▇▇▇▇▇▇
▇▇▇▇▇▇, Esq.
Gesmer
▇▇▇▇▇▇▇▇▇ LLP
▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
o:
(▇▇▇)
▇▇▇-▇▇▇▇
f:
(▇▇▇)
▇▇▇-▇▇▇▇
If
to
Borrower:
As
of the
Closing Date
Del-Inc
Acquisition LLC
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
“B”
East
Berlin, Connecticut 06023
Attn:
President
On
and
after September 1, 2007
Deltron
LLC
▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
President
With
a
copy to:
▇▇▇▇
▇.
▇▇▇▇▇▇▇, Esq.
Pepe
& Hazard LLP
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
o:
(▇▇▇)
▇▇▇-▇▇▇▇
f:
(▇▇▇)
▇▇▇-▇▇▇▇
44
EXHIBIT
T
List
of Intellectual Property
The
following disclosures were made to Borrower by Seller as contained in the
Purchase Agreement and Borrower, in reliance on such disclosures, hereby makes
the same disclosures to Lender:
|
1.
|
U.S.
Patent Registration:
|
|
·
|
U.S.
Patent Registration No. 6,147,476, entitled “Two Quadrant Magamp Regulator
Control Circuit with Fast Dynamic Response and Full Holdoff Capability”,
filed on February 23, 1999 and issued on November 14, 2000. The
application was filed by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇▇▇▇, and was assigned to Seller on February 5, 1999 and assigned
to
Borrower on the Closing Date.
|
|
2.
|
U.S.
Trademark Registrations:
|
|
·
|
U.S.
Trademark Registration No. 1,002,177, for “DELTRON”, issued on January 21,
1975, and renewed as of January 21, 2005; and
|
|
·
|
U.S.
Trademark Registration No. 1,681,016, for “MODUFLEX”, issued on March 31,
1992, and renewed as of March 31. 2002.
|
3. Borrower
has common law rights in and to the following unregistered trade names and
trademarks:
|
·
|
“ACCUSONIC”
(formerly the subject of U.S. Trademark Registration No. 2,184,895,
issued
on August 25, 1998);
|
|
·
|
“POWERMEDIC
“ (formerly the subject of U.S. Trademark Registration No. 1,548,076,
issued on July 18, 1989);
|
|
·
|
“SLIMLINE”;
|
|
·
|
“SLIMLINE2”;
|
|
·
|
“SLIMLINE3”;
and
|
|
·
|
The
“DELTRON” logo:
|
4. Mexican
Subsidiary has common law rights in and to the following unregistered trade
names and trademarks:
|
·
|
“DELINC”;
and
|
|
·
|
The
“DELINC” logo:
|
5.
Seller
allowed two of its federally registered trademarks to be cancelled:
45
|
·
|
U.S.
Trademark Registration No. 2,184,895, for the ▇▇▇▇ “ACCUSONIC”, was
cancelled on May 28, 2005; and
|
|
·
|
U.S.
Trademark Registration No. 1,548,076, for the ▇▇▇▇ “POWERMEDIC” was
cancelled on January 22, 1996.
|
6. Borrower
has the right to use the following domain names:
|
·
|
▇▇▇▇▇▇▇.▇▇
|
|
·
|
▇▇▇▇▇▇▇▇▇▇.▇▇▇
|
|
·
|
▇▇▇▇▇▇▇▇▇▇.▇▇▇
|
|
·
|
▇▇▇▇▇▇▇▇▇▇.▇▇▇
|
|
·
|
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
|
7. Mexican
Subsidiary has the right to use the following domain name:
|
·
|
▇▇▇▇▇▇.▇▇▇
|
|
8.
|
Borrower
owns the unregistered copyright in various brochures, catalogs,
instruction sheets and other publications relating to Borrower’s business.
Mexican Subsidiary owns the unregistered copyright in the ▇▇▇▇▇▇.▇▇▇
website.
|
|
9.
|
Seller
licensed a Helios Burn-in Monitoring System from ▇▇▇▇ ▇▇▇▇▇ Mfg.
Co. Inc.
in 1992. This software was subsequently modified by employees of
Seller.
Although Seller owns all rights in the modifications made to this
system,
the underlying software was not owned by Seller. Borrower has the
same
rights Seller had to use this software.
|
|
10.
|
Borrower’s
website was created by employees of Seller and is maintained by various
employees of Buyer, including ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇.
The website was created by the foregoing as well as by ▇▇▇▇▇ ▇▇▇▇▇
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, a shareholder of Seller. Seller’s website was re-designed
in 2002 by Interactive Graphics, Inc. There was no written agreement
between Seller and Interactive Graphics, Inc., and the invoices issued
by
Seller to Interactive Graphics, Inc. do not address the issue of
ownership
of the changes made by Interactive Graphics, Inc. Accordingly, although
Seller’s employees were actively involved in the re-design of the website,
it is possible that Interactive Graphics, Inc. owns rights in the
website.
At a minimum, however, Borrower has an implied license to use those
changes fir the purpose for which it was intended. (See memorandum,
dated January 20, 2007, from ▇▇▇▇ ▇▇▇▇▇▇▇▇ to ▇▇▇▇ ▇▇▇▇▇▇▇▇, attached
hereto. Borrower has obtained an Assignment of Copyright from all
of the
individual employees of Borrower listed above and from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇▇, of all of their rights in and the website.
|
|
11.
|
Mexican
Subsidiary’s website was created and is maintained by ▇▇▇▇▇▇ ▇▇▇▇▇▇, an
employee of Mexican Subsidiary. Borrower has obtain an Assignment
of
Copyright from ▇▇. ▇▇▇▇▇▇ of all of his rights in and to such website.
|
46
|
12.
|
Borrower
licenses certain software pursuant to that certain Licensing Agreement
with Glovia International, Inc. assigned to Borrower on August 31,
2007.
|
|
13.
|
Borrower
has various “shrink wrap” and/or “click wrap” licenses to use the various
pieces of commercially available software in connection with its
business
operations.
|
|
14.
|
Borrower
has the right to use the following telephone
numbers:
|
|
·
|
(▇▇▇)
▇▇▇-▇▇▇▇
|
|
·
|
(▇▇▇)
▇▇▇-▇▇▇▇ (FAX)
|
|
·
|
(▇▇▇)
▇▇▇-▇▇▇▇
|
|
·
|
▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
|
|
·
|
▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
(FAX)
|
|
15.
|
None
of the employees of Seller or Mexican Subsidiary had ever been subject
to
any obligation to transfer or assign any patentable invention that
they
might develop while working for Seller or Mexican Subsidiary. Borrower
has
obtained an Assignment of Rights from ▇▇▇▇▇ ▇▇▇▇▇ with respect to
all
data, software (including source code and documentation), databases,
ideas, discoveries, inventions, patent rights, trade secrets, formulas,
patterns, copyrights, trademarks, service marks, trade names, and
all
other intangible properties as of the date of the closing of the
Acquisition Transaction pertaining to Borrower’s business. None of
Seller’s other employees signed such assignments while employed by Seller.
Borrower has obtained such assignments from the employees listed
on
Exhibit O as a condition to their employment with Borrower.
Notwithstanding the foregoing, Borrower is not aware of any employee
previously employed by Seller (other than ▇▇▇▇▇ ▇▇▇▇▇) or currently
employed by Borrower who has any such rights that could be transferred
to
Seller or to Borrower.
|
|
17.
|
Borrower
is aware of other users of the ▇▇▇▇ “DELTRON”, including:
|
|
·
|
Deltron
Designs, Inc., Bethel, Connecticut; Website: ▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇;
|
|
·
|
Deltron
Electric Corporation, Philadelphia, Pennsylvania; Website:
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇;
|
|
·
|
Deltron
Emcon Limited, North Lincolnshire, United Kingdom; Website:
▇▇▇▇▇▇▇-▇▇▇▇▇.▇▇▇;
|
|
·
|
Deltron
Engineering, Burbank, California; Website: ▇▇▇▇▇▇▇▇▇▇.▇▇▇;
|
|
·
|
Deltronic,
Santa Ana, California; Website: ▇▇▇▇▇▇▇▇▇.▇▇▇;
|
|
·
|
Deltronic
Crystal Industries, Inc., Dover, New Jersey; Website:
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇;
|
|
·
|
Del-Tron
Precision Inc., Bethel, Connecticut; Website: ▇▇▇▇▇▇▇.▇▇▇;
|
|
·
|
Deltron
Technology, Inc., Taipei, Taiwan, Republic of China; Website:
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇; and
|
|
·
|
Deltronweb,
[Address Unknown]; Website: ▇▇▇▇▇▇▇▇▇▇.▇▇▇.
|
None
of
the above entities are affiliated with Borrower. To Borrower’s Knowledge, none
of these companies does business in the power supply field.
47
|
18.
|
Borrower
is aware that various domain names that include the ▇▇▇▇ “DELTRON” are
registered to parties other than Borrower, including, but not limited
to:
|
|
·
|
▇▇▇▇▇▇▇.▇▇▇
|
|
·
|
▇▇▇▇▇▇▇.▇▇▇
|
|
·
|
▇▇▇▇▇▇▇.▇▇▇
|
|
·
|
▇▇▇▇▇▇▇.▇▇
|
|
·
|
▇▇▇▇▇▇▇-▇▇▇.▇▇▇
|
|
·
|
▇▇▇▇▇▇.▇▇▇
|
Intellectual
Property Rights
Not
Solely and Exclusively Owned by Borrower
Those
Intellectual Property Rights described or discussed under Items 5, 9, 13, 15,
16
and 17 above.
48