Exhibit 10.ii
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LOAN AND SECURITY AGREEMENT
between
U.S. BANK NATIONAL ASSOCIATION
and
PEMSTAR INC.
Dated as of June 28, 2001
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Agreement")
is made as of June 28, 2001, by and between PEMSTAR INC., a Minnesota
corporation (the "Borrower"), and U.S. BANK NATIONAL ASSOCIATION, a national
banking association (the "Lender").
RECITAL
The Lender and the Borrower have entered into a Credit Agreement, dated
as of June 4, 1999 (as thereafter amended, the "Existing Credit Agreement"),
under which the Lender made certain loans to the Borrower and issued letters of
credit for the account of the Borrower. The "Obligations" as defined in the
Existing Credit Agreement, are secured pursuant to a Security Agreement, dated
as of June 4, 1999 (as thereafter amended, the "Existing Security Agreement"),
by the Borrower in favor of the Lender. The Borrower has requested that the
Lender continue to make loans to, and issue letters of credit for the account
of, the Borrower, as more particularly described herein, and the Borrower and
the Lender have agreed that the Existing Credit Agreement and Existing Security
Agreement shall be amended and restated to read as follows to govern such loans,
letters of credit and other extensions of credit as hereinafter provided.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing and of the terms and
conditions contained in this Agreement, and of any loans or other financial
accommodations at any time made to or for the benefit of the Borrower by the
Lender, the Borrower and the Lender agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1. General Definitions. When used herein, the following
capitalized terms shall have the meanings indicated:
"Accounts" shall have the meaning set forth in the Minnesota Uniform
Commercial Code, and shall include, to the extent not otherwise included in such
definition, all rights and interests (including all liens and Security
Interests) that the Borrower may at any time have by law or agreement against
any Account Debtor or other obligor obligated to pay any Accounts or against any
of the property of such Account Debtor or other obligor and all rights to
collect the Accounts.
"Account Debtor" shall have the meaning set forth in the Minnesota
Uniform Commercial Code.
"Accounts Availability" shall have the meaning given such term in
Section 3.1(a).
"Adjusted Consolidated Tangible Net Worth" means, at any determination
date, Adjusted Total Net Worth of the Borrower and its Subsidiaries on a
consolidated basis minus:
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(a) goodwill, organizational expenses, pre-paid expenses, deferred
charges, research and development expenses, software development costs,
leasehold expenses, trademarks, trade names, copyrights, patents, patent
applications, privileges, franchises, licenses and rights in any thereof, and
other similar intangibles (but not including contract rights) and other current
and non-current intangible assets identified in the Borrower's financial
statements;
(b) all Accounts and Indebtedness payable by employees, officers,
directors, stockholders and affiliates; and
(c) all callable/redeemable preferred stock.
"Adjusted Total Liabilities" means the Current Liabilities and Long Term
Debt (less Subordinated Debt) resulting from past or current transactions, that
requires settlement in the future.
"Adjusted Total Net Worth" means Total Assets minus Adjusted Total
Liabilities.
"Advance" shall mean that portion of the outstanding Loans bearing
interest at an identical rate for an identical Interest Period, provided that
all Prime Rate Advances which constitute Loans shall be deemed a single Advance.
An Advance may be a "Eurodollar Advance" or a "Prime Rate Advance" (each, a
"type" of Advance).
"Adverse Event" shall mean the occurrence of any event that could have a
material adverse effect on the business, operations, property, assets or
condition (financial or otherwise) of the Borrower or on the ability of the
Borrower to perform its obligations under any Loan Document.
"Affiliate" shall mean at any time and respect to any Person, (a) any
other Person that at such time directly or indirectly, through one or more
intermediaries, Controls, or is Controlled by, or is under common Control with,
such first Person, (b) any Person beneficially owning or holding, directly or
indirectly, ten percent (10%) or more of any class of voting or equity interests
of such Person or any subsidiary of such Person, or any corporation or other
entity of which such Person and its subsidiaries beneficially own or hold, in
the aggregate, directly or indirectly, ten percent (10%) or more of any class of
voting or equity interests, and (c) any Person that is an officer or director of
such Person. As used in this definition, "Control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise. Unless the context otherwise clearly
requires, any reference to an "Affiliate" is a reference to an Affiliate of the
Borrower.
"Agreement" shall mean this Amended and Restated Loan and Security
Agreement, as the same may be amended, restated, supplemental or otherwise
modified from time to time.
"Applicable Margin" shall mean 3.25% per annum for Eurodollar Advances
and 1.00% per annum for Prime Rate Advances, provided, that on and after receipt
of the Borrower's annual audited financial statements for its fiscal year ending
December 31, 2001 and each subsequent fiscal year, the Applicable Margin shall
equal the following percentages, calculated with reference to the Leverage Ratio
determined under such financial statements:
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Applicable Margin
Leverage Ratio: Prime Rate Advances: Eurodollar Advances:
-------------- ------------------- -------------------
Greater than 4.50 to 1.00 1.00% 3.25%
Less than or equal to
4.50 to 1.00 but greater
than 3.50 to 1.00: 0.50% 2.85%
Less than or equal to
3.50 to 1.00 but greater
than 2.50 to 1.00: 0.25% 2.60%
Less than or equal to
2.50 to 1.00 0% 2.25%
The Applicable Margin shall be determined by the Lender based upon the
information set forth in each annual audited consolidated financial statements
of the Borrower and the Subsidiaries furnished to Lender pursuant to Section
7.1(a) for the fiscal year ending on the date of such financial statements. Any
change in the Applicable Margin shall affect all outstanding and future Loans
and shall take effect on the first day of the month following the date of
Lender's receipt of the applicable financial statement. Upon any failure of the
Borrower to deliver to the Lender the financial statements within the time
provided by Section 7.1(a), the Applicable Margin shall be the highest
Applicable Margin set forth above and such Applicable Margin shall remain in
effect until the first day following the date Lender receives the applicable
financial statements requiring a lower Applicable Margin.
"Attorneys' Fees" shall mean the reasonable value of the services (and
costs, charges and expenses related thereto) of the attorneys retained or
employed by the Lender or any of its Affiliates (including, without limitation,
attorneys and paralegals who are employees of the Lender or its Affiliates) from
time to time (a) in connection with the negotiation, preparation, execution,
delivery, administration and enforcement of the Loan Documents, (b) to prepare
documentation related to the Loans and other Liabilities, (c) to represent the
Lender in any litigation, contest, dispute, suit or proceeding or to commence,
defend or intervene in any litigation contest, dispute, suit or proceeding or to
file a petition, complaint, answer, motion or other pleading, or to take any
other action in or with respect to, any litigation, contest, dispute, suit or
proceeding (whether instituted by the Lender, the Borrower or any other Person
and whether in bankruptcy or otherwise) in any way or respect relating to the
Collateral, the Loan Documents, or the Borrower's or any other Obligor's or any
Subsidiary's affairs, (d) to protect, collect, lease, sell, take possession of,
or liquidate any of the Collateral, (e) to attempt to enforce any security
interest in any of the Collateral to give any advice with respect to such
enforcement, and (f) to enforce any of the Lender's rights to collect any of the
Liabilities.
"Borrowing Base" shall have the meaning given such term in Section 3.1.
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"Borrowing Base Certificate" shall mean a certificate in the form of
Exhibit B signed as indicated thereon, setting forth the amount of the Borrowing
Base.
"Business Acquisition" shall mean acquisition by the Borrower or any
Subsidiary of all or substantially all of the assets of another Person or
greater than 50% of the stock, membership interest, partnership interest or
other equity interests of another Person.
"Business Day" means any day (other than a Saturday, Sunday or legal
holiday in the State of Minnesota) on which national banks are permitted to be
open in Minneapolis, Minnesota and New York, New York and, with respect to
Eurodollar Advances, a day on which dealings in Dollars may be carried on by the
Lender in the interbank eurodollar market.
"Capital Expenditure" shall mean, for any period, any amounts debited to
the fixed asset account on the consolidated balance sheet of the Borrower and
its Subsidiaries in respect of (a) the acquisition (including, without
limitation, acquisition by entry into a Capitalized Lease), construction,
improvement, replacement or betterment of land, buildings, machinery, equipment
or of any other fixed assets or capitalized leaseholds; and (b) to the extent
related to and not included in (a) above, materials, contract labor and direct
labor (excluding expenditures charged to repairs or maintenance in accordance
with GAAP).
"Capitalized Lease" shall mean any lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Chattel Paper" shall have the meaning set forth in the Minnesota
Uniform Commercial Code
"Closing Fee" shall have the meaning given such term in Section 2.5.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
successor statute, together with the regulations thereunder.
"Collateral" shall mean any and all real or personal property in which
Lender may at any time have a lien or security interest, whether under or
pursuant to Section 5.1 or otherwise, to secure the Liabilities or any portion
thereof.
"Collateral Account" shall have the meaning given such term in Section
5.2(b).
"Credit Termination Fee" shall have the meaning given such term in
Section 2.5.
"Current Assets" means assets that are cash or expected to become cash
within the ongoing twelve months.
"Current Liabilities" means payment obligations resulting from past or
current transactions that require settlement within the ongoing twelve month
period, as determined in accordance with GAAP
"Current Ratio" means the ratio of Current Assets to Current
Liabilities.
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"Daily Unused Revolving Credit Amount" shall mean, for any date of
determination, the amount obtained by subtracting from the Line of Credit Amount
the outstanding principal balance of Line of Credit Advances on such date and
subtracting the face amount of outstanding Letters of Credit, determined on a
daily average basis as of (a) the last day of the month in which such date
falls, or (b) the date the Line of Credit is terminated if the Line of Credit
terminates on a day other than the last day of a month.
"Default" shall mean the occurrence or existence of: (a) an event which,
through the passage of time or the service of notice or both, would (assuming no
action is taken by Borrower or any other Person to cure the same) mature into an
Event of Default; (b) an event which requires neither the passage of time nor
the service of notice to mature into an Event of Default; or (c) the occurrence
of a breach or a default under any other agreement at any time in existence
between the Borrower or any Affiliate and Lender, including without limitation,
any of the Loan Documents.
"Default Rate" shall have the meaning given such term in Section 2.2(b).
"Disbursement Account" shall have the meaning given such term in Section
2.6(b).
"Documents" shall have the meaning set forth in the Minnesota Uniform
Commercial Code.
"Domestic Subsidiary" shall mean any Subsidiary organized under the laws
of the United States, and political subdivision thereof, or any State of the
United States.
"EBITDA" shall mean, for any period of determination, the consolidated
net income of the Borrower and the Subsidiaries before provision for income
taxes, interest expense (including without limitation, implicit interest expense
on Capitalized Leases), depreciation expense, amortization expense and other
non-cash expenses or charges, excluding (to the extent included) non-operating
gains (including without limitation, extraordinary or nonrecurring gains, gains
from discontinuance of operations and gains arising from the sale of assets
other than Inventory) during the applicable period.
"Environmental Laws" shall mean the Resource Conservation and Recovery
Act of 1987, the Comprehensive Environmental Response, Compensation and
Liability Act, any so-called "superfund" or "superlien" law, the Toxic
Substances Control Act, and any other federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning any Hazardous Materials or
other hazardous, toxic or dangerous waste, substance or constituent, or other
substance, whether solid, liquid or gas, as now or at any time hereafter in
effect.
"Environmental Lien" shall mean a Lien in favor of any Governmental
Authority for (a) any liability under any Environmental Law, or (b) damages
arising from or costs incurred by such Governmental Authority in response to a
spillage, disposal, or release into the environment of any Hazardous Material or
other hazardous, toxic or dangerous waste, substance or constituent, or other
substance.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, or any successor statute, together with the regulations thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower is a member and
which is treated as a single employer under Section 414 of the Code.
"Eurodollar Advance" shall mean an Advance designated as such in a
notice of borrowing under Section 2.1 (c) or 2.4(a) or a notice of continuation
or conversion under Section 2.4(e).
"Eurodollar Interbank Rate" shall mean the offered rate for deposits in
United States Dollars for delivery of such deposits on the first day of an
Interest Period of a Eurodollar Advance, for the number of days comprised
therein, quoted by the Lender from Page 3750 of the Dow ▇▇▇▇▇ Markets (Telerate)
screen as of approximately 11:00 a.m., London time, on the day that is two
Business Days preceding the first day of the Interest Period of such Eurodollar
Advance, or the rate for such deposits determined by the Lender at such time
based on such other published service of general application as shall be
selected by the Lender for such purpose; provided, that in lieu of determining
the rate in the foregoing manner, the Lender may determine the rate based on
rates offered to the Lender for deposits in United States Dollars in the
Interbank eurodollar market at such time for delivery on the first day of the
Interest Period for the number of days comprised therein.
"Eurodollar Rate (Reserve Adjusted)" shall mean a rate per annum
calculated for the Interest Period of a Eurodollar Advance in accordance with
the following formula:
ERRA = Eurodollar Interbank Rate
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1.00 - ERR
In such formula, "ERR" means "Eurodollar Reserve Rate" and "ERRA" means
"Eurodollar Rate (Reserve Adjusted)", in each instance determined by the Lender
for the applicable Interest Period. The Lender's determination of all such rates
for any Interest Period shall be conclusive in the absence of manifest error.
"Eurodollar Reserve Rate" shall mean a percentage equal to the daily
average during such Interest Period of the aggregate maximum reserve
requirements (including all basic, supplemental, marginal and other reserves),
(a) specified under Regulation D of the Federal Reserve Board, or any other
applicable regulation that prescribes reserve requirements applicable to
Eurocurrency liabilities (as presently defined in Regulation D) and/or (b)
applicable to extensions of credit by the Lender, the rate of interest on which
is determined with regard to rates applicable to Eurocurrency liabilities.
Without limiting the generality of the foregoing, the Eurodollar Reserve Rate
shall reflect any reserves required to be maintained by the Lender against (i)
any category of liabilities that includes deposits by reference to which the
Eurodollar Interbank Rate is to be determined, or (ii) any category of
extensions of credit or other assets that includes Eurodollar Advances.
"Event of Default" shall have the meaning given such term in Section
9.1.
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"Existing Letters of Credit" shall mean the Letters of Credit listed on
Schedule 1.1(a), issued by Lender for the account of the Borrower.
"Federal Governmental Authority" shall have the meaning given such term
in Section 3.2.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System or any successor thereto.
"Fixed Charge Coverage Ratio" shall mean the ratio, for each period of
twelve consecutive calendar months, calculated as of the last day of such
period, of:
(a) the remainder of (i) EBITDA for such period, minus (ii) taxes paid
in cash during such period, minus (iii) dividends and other distributions
in respect of stock of the Borrower paid in cash during such period, and
minus (iv) Capital Expenditures during such period reduced by the amount
of Indebtedness incurred by the Borrower to finance such Capital
Expenditures;
to
(b) the total of (i) Interest Expense during such period, plus (ii)
mandatory or scheduled principal payments of Funded Debt during such
period.
"Foreign Subsidiary" shall mean any Subsidiary other than a Domestic
Subsidiary.
"Funded Debt" shall mean, without duplication, all obligations of the
Borrower or a Subsidiary on a consolidated basis: (a) in respect of borrowed
money; (b) secured by a mortgage, pledge, security interest, lien or charge on
the assets of the Borrower or a Subsidiary, whether the obligation secured is
the obligation of the owner or another Person (provided that non-recourse
obligations will only be taken into account up to the fair market value of the
related property); (c) any obligation for the deferred purchase price of any
property or services evidenced by a note, payment contract (other than an
account payable arising in the ordinary course of business) or other instrument,
(d) any obligation as lessee under any Capitalized Lease; (e) all guaranties and
contingent or other legal obligations in respect to Funded Debt of other
Persons, excluding ordinary course endorsements; and (f) undertakings or
agreements to reimburse or indemnify issuers of letters of credit other than
commercial letters of credit.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time in the United States of America.
"General Intangibles" shall have the meaning set forth in the Minnesota
Uniform Commercial Code.
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including without limitation, any arbitration panel, any court,
any commission, any agency or any instrumentality of the foregoing.
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"Guarantor" shall mean Turtle Mountain Corporation, and each other
Domestic Subsidiary that shall execute and deliver a Guaranty (and related
documents reasonably required by the Lender) from time to time.
"Guaranty" shall mean a guaranty in the form of Exhibit C hereto.
"Hazardous Materials" shall mean any hazardous substance or pollutant or
contaminant defined as such in (or for the purposes of) any Environmental Law
including, without limitation, petroleum and petroleum products, including crude
oil or any fraction thereof which is liquid at standard conditions or
temperature or pressure (60 degrees Fahrenheit and 14.7 pounds per square inch
absolute), any radioactive material, including any source, special nuclear or
by-product material as defined at 42 U.S.C. Section 2011 et. seq., as amended or
hereafter amended, and asbestos in any form or condition.
"IBM Credit" shall mean IBM Credit Corporation and any successor or
assign thereof under the IBM Credit Loan Agreement.
"IBM Credit Loan Agreement" shall mean that certain Revolving Credit
Agreement, dated on or about June 28, 2001 (as thereafter amended, modified,
extended, renewed or replaced from time to time), between the Borrower and IBM
Credit.
"IBM Intercreditor Agreement" shall mean an Agreement, in form and
substance satisfactory to Lender, between Lender and IBM Credit respecting the
Collateral.
"IDB Letters of Credit" shall mean (a) the "Letter of Credit" described
in the 1997 IDB Reimbursement Agreement; and (b) the "Letter of Credit"
described in the 1998 IDB Reimbursement Agreement.
"IDB Reimbursement Agreements" shall mean (a) the Letter of Credit
Reimbursement Agreement dated as of May 1, 1997 (the "1997 IDB Reimbursement
Agreement") among the Borrower, the Lender and U.S. Bank Trust National
Association; and (b) the Letter of Credit Reimbursement Agreement dated as of
June 1, 1998 (the "1998 IDB Reimbursement Agreement") among the Borrower, the
Lender and U.S. Bank Trust National Association, in each case as originally
executed and as amended, modified, supplemented, restated or replaced from time
to time.
"IDB Reimbursement Obligations" shall mean (a) the "Reimbursement
Obligations" as defined in the 1997 IDB Reimbursement Agreement; and (b) the
"Reimbursement Obligations" as defined in the 1998 IDB Reimbursement Agreement.
"Indebtedness" shall mean, with respect to any Person and without
duplication, all obligations, contingent or otherwise, which in accordance with
GAAP should be classified upon such Person's balance sheet as liabilities, but
in any event including the following (whether or not they should be classified
as liabilities upon such balance sheet): (a) any obligation secured by any
mortgage, pledge, security interest, lien, charge or other encumbrance existing
on property owned or acquired subject thereto, whether or not such obligation
shall have been assumed and whether or not such obligation is the obligation of
the owner or another party; (b) any obligation on account of deposits or
advances; (c) any obligation for the deferred purchase
8
price of any property or services, except accounts payable arising in the
ordinary course of business not unpaid for a period of more than 60 days; (d)
any obligation as lessee under any Capitalized Lease; (e) any guaranty,
endorsement or other contingent obligation in respect to indebtedness of others;
and (f) any undertaking or agreement to reimburse or indemnify issuers of
letters of credit. For all purposes of this Agreement, the Indebtedness of any
Person shall include the Indebtedness of any partnership or joint venture in
which such Person is a general partner or a joint venturer.
"Instrument" shall have the meaning set forth in the Minnesota Uniform
Commercial Code.
"Interest Expense" means, for any period of determination, the aggregate
consolidated interest expense of the Borrower and its Subsidiaries during such
period in respect of Indebtedness determined in accordance with GAAP, including,
without limitation, amortization of original issue discount on any Indebtedness
and of all fees payable in connection with the incurrence of such indebtedness
(to the extent included in interest expense), the interest portion of any
deferred payment obligation and the interest component of any obligations under
Capitalized Leases.
"Interest Period" shall mean, for any Eurodollar Advance, the period
commencing on the borrowing date of such Eurodollar Advance or the date a Prime
Rate Advance is converted into such Eurodollar Advance, or the last day of the
preceding Interest Period for such Eurodollar Advance if a Eurodollar Advance is
continued, as the case may be, and ending on the numerically corresponding day
one, two or three months thereafter, as selected by the Borrower pursuant to
Section 2.4; provided, that:
(a) any Interest Period which would otherwise end on a day which is not
a Business Day shall end on the next succeeding Business Day unless such
next succeeding Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Business Day;
(b) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at the
end of such Interest Period; and
(c) no Interest Period shall extend beyond the Termination Date.
"Inventory" shall have the meaning set forth in the Minnesota Uniform
Commercial Code.
"Inventory Availability" shall have the meaning given such term in
Section 3.1(a).
"Inventory Availability Sublimit" shall have the meaning given such term
in Section 3.1(a).
"Investment" shall mean the acquisition, purchase, making or holding of
any stock or other security, any loan, advance, contribution to capital,
extension of credit (except for trade and
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customer accounts receivable for inventory sold or services rendered in the
ordinary course of business and payable in accordance with customary trade
terms), any acquisitions of real and personal property (other than real and
personal property acquired in the ordinary course of business) and any purchase
or commitment or option to purchase stock or other debt or equity securities of,
or any interest in, another Person or any integral part of any business or the
assets comprising such business or part thereof.
"Letter of Credit" shall mean (a) the Existing Letters of Credit, and
(b) any other letter of credit issued by the Lender as described in Section 2.13
hereof, as any of the foregoing may be amended or extended from time to time.
The term "Letter(s) of Credit" shall not include the IDB Letters of Credit.
"Letter of Credit Agreements" shall mean the Letter of Credit
Applications, and any and all documents, instruments and agreements between the
Borrower, Lender related to the Letter of Credit Application and/or Letter of
Credit together with any and all amendments and/or extensions thereto or
thereof.
"Letter of Credit Application" shall mean an application submitted by
the Borrower for issuance of a Letter of Credit pursuant to Section 2.13, in a
form and containing terms and provisions acceptable to the Lender.
"Letter of Credit Commission" shall have the meaning given to such term
in Section 2.5.
"Letter of Credit Draft" shall means a draft drawn on the Lender,
pursuant to a Letter of Credit.
"Letter of Credit Obligations" shall mean the aggregate amount of all
possible drawings under all Letters of Credit plus all amounts drawn under any
Letter of Credit and not reimbursed by the Borrower.
"Letter of Credit Sublimit" shall mean $10,000,000.
"Leverage Ratio" shall mean the ratio of: (a) total Indebtedness of the
Borrower and its Subsidiaries less Subordinated Debt of the Borrower and its
Subsidiaries, to (b) Adjusted Consolidated Tangible Net Worth.
"Liabilities" shall mean any and all of the liabilities, obligations and
indebtedness of the Borrower to the Lender of any kind or nature, however
created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing or due or to be due, and whether joint,
several or joint and several and including, without limitation, (a) the
obligations of the Borrower under this Loan Agreement and the other Loan
Documents, including obligations of performance, (b) the obligation of the
Borrower to reimburse the Lender for each payment made under or pursuant to any
Letter of Credit or Letter of Credit Draft, (c) the IDB Reimbursement
Obligations, and (d) the obligation of the Borrower to pay interest, fees,
charges, expenses, Attorney's Fees, overdrafts and other sums chargeable to the
Borrower by the Lender under the Loan Documents. "Liabilities" shall also
include any and all amendments, extensions, renewals, refundings or refinancings
of any of the foregoing.
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"Lien" shall mean any security interest, mortgage, pledge, lien,
hypothecation, statutory lien, judgment lien or similar legal process, charge,
encumbrance, title retention agreement or analogous instrument or device
including, without limitation, the interest of a lessor under Capitalized Leases
and the interest of a vendor under any conditional sale or other title retention
agreement.
"Line of Credit" shall mean the facility established pursuant to this
Agreement by which the Lender will make Line of Credit Advances to the Borrower
or issue, or cause an Affiliate of the Lender to issue, Letters of Credit for
the account of Borrower.
"Line of Credit Advance" shall have the meaning assigned to such term in
Section 2.1(a).
"Line of Credit Amount" shall mean $30,000,000.
"Line of Credit Availability" shall mean the lesser of (a) the Line of
Credit Amount minus the Letter of Credit Obligations, or (b) the Borrowing Base
minus the Letter of Credit Obligations.
"Line of Credit Note" shall have the meaning assigned to such term in
Section 2.1(a).
"Loan Account" shall have the meaning given such term in Section 2.6.
"Loan Documents" shall mean the Agreement, each Note, the Guaranty, the
IBM Intercreditor Agreement, each Letter of Credit Application and each other
instrument, document, guaranty, mortgage, deed of trust, chattel mortgage,
pledge, power of attorney, consent, assignment, contract, notice, security
agreement, lease, financing statement, subordination agreement, trust account
agreement, or other agreement executed and delivered by the Borrower, any
Subsidiary or any Obligor, as the same may be amended, modified, restated or
replaced from time to time.
"Loan Year" shall mean the period from the date of this Agreement (or
its anniversary date in a succeeding calendar year) through the day preceding
the anniversary date of this Agreement in the immediately following calendar
year.
"Loan(s)" shall mean any Line of Credit Advance and any other loan or
advance made by the Lender to or for the benefit of the Borrower under this
Agreement.
"Long Term Assets" means assets that take longer than a year to be
converted to cash.
"Multiemployer Plan" shall mean a multiemployer plan, as such term is
defined in Section 4001(a)(3) of ERISA, which is, or which has been, within five
years of the date of this Agreement, or at any time after the date of this
Agreement, maintained for the employees of the Borrower or any ERISA Affiliate.
"Note" shall mean the Line of Credit Note and any other promissory note
of the Borrower evidencing any loan or advance (including but not limited to the
Loans) made by the Lender to the Borrower pursuant to this Agreement, as the
same may be amended, modified, restated or replaced from time to time.
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"Obligor" shall mean the Borrower and each other Person who is or shall
become primarily or secondarily liable on any Liabilities or who grants to the
Lender a Lien on any property of such Person as security for any Liabilities.
"Occupational Safety And Health Law" shall mean the Occupational Safety
and Health Act of 1970 as amended from time to time, or any successor statute,
together with the regulations thereunder and any other federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability or standards of conduct concerning employee
health and/or safety.
"Permitted Investment" shall mean (a) Business Acquisitions, provided
that Cash Expenditures for Business Acquisitions shall not exceed $15,000,000
during any fiscal year of the Borrower; (b) loans or capital contributions to
Subsidiaries after the date of this Agreement, provided that such loans
outstanding at any time plus the amount of such capital contributions during any
fiscal year of the Borrower shall not exceed $15,000,000, and provided, further,
that Permitted Investments may only be made when no Default or Event of Default
shall have occurred and continued hereunder and when no Default or Event of
Default shall exist after giving effect to such Permitted Investments. The
amount of Cash Expenditures for Business Acquisitions shall include the amounts
of (i) payments in cash or cash equivalent, (ii) the value of assets exchanged
in kind, (iii) Indebtedness assumed or of purchase money notes or Indebtedness
under contracts or agreements requiring contingent, installment or other
payments, and (iv) all other payments, but shall not include any amount of any
payment by delivery of stock of the Borrower in exchange for the stock or assets
being acquired. [move to correct alphabetical order]
"Participant" shall mean any Person, now or at any time or times
hereafter, participating with the Lender in the Loans made to the Borrower
hereunder.
"Payment Date" shall mean the Termination Date or any other date on
which the credit extended hereunder terminates, and (a) the first day of each
month and the last day of each Interest Period for each Eurodollar Advance and,
if such Interest Period is in excess of one month after the first day of such
Interest Period, the day which is one month after the first day of such Interest
Period and thereafter each day that is one month after each succeeding Payment
Date; and (b) the first day of each month for each Prime Rate Advance.
"Payment Date" shall mean the Termination Date or any other date on
which the credit extended hereunder terminates and the first day of each month.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, established
pursuant to Subtitle A of Title IV of ERISA, or any successor thereto or to the
functions thereof.
"Person" shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or government (whether
national, federal, state, provincial, county, city, municipal or otherwise,
including without limitation, any instrumentality, division, agency, body or
department thereof).
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"Plan" shall mean each employee pension or benefit plan (as those terms
are defined in Section 3 of ERISA) maintained for the benefit of employees,
officers or directors of the Borrower or of any ERISA Affiliate.
"Prime Rate" means the rate of interest from time to time announced by
the Lender as its "prime rate." For purposes of determining any interest rate
which is based on the Prime Rate, such interest rate shall be adjusted each time
that the prime rate changes.
"Prime Rate Advance" shall mean an Advance designated as such in a
notice of borrowing under Section 2.4(a) or a notice of continuation or
conversion under Section 2.4(e).
"Proceeds" shall have the meaning set forth in the Minnesota Uniform
Commercial Code.
"Prohibited Transaction" shall have the respective meanings assigned to
such term in Section 4975 of the Code and Section 406 of ERISA.
"Property" shall mean those premises owned or operated by Borrower,
including without limitation, the real property described in Borrower's
mortgage(s) and/or deed(s) of trust referred to in Section 5.1, if any.
"Related General Intangibles" shall have the meaning given to such term
in Section 5.4.
"Reportable Event" shall mean a reportable event, as defined in Section
4043 of ERISA and the regulations issued under such Section, with respect to a
Plan, excluding, however, such events as to which the PBGC by regulation has
waived the requirement of Section 4043(a) of ERISA that it be notified within 30
days of the occurrence of such event; provided, that for purposes of this
Agreement, a failure to meet the minimum funding standard of Section 412 of the
Code and Section 302 of ERISA shall be a Reportable Event regardless of the
issuance of any waiver in accordance with Section 412(d) of the Code.
"Rochester Facilities" shall mean the Borrower's production facilities
located in Rochester, Minnesota.
"Rochester Inventory" shall mean Inventory consisting of raw materials,
work-in-progress and finished goods produced by the Borrower at the Rochester
Facilities or produced by a subcontractor or agent of the Borrower for
incorporation into goods produced by the Borrower at the Rochester Facilities
(whether or not any of the foregoing actually located at the Rochester
Facilities at the time of determination).
"Subordinated Debt" shall mean Indebtedness of the Borrower which has
been subordinated in right of payment and security to the Liabilities pursuant
to an agreement or agreements in form and substance acceptable to Lender.
"Subsidiary" shall mean any Person of which or in which the Borrower and
its other Subsidiaries own, alone or in combination, directly or indirectly, 50%
or more of: (a) the combined voting power of all classes of stock having general
voting power under ordinary circumstances to elect a majority of the board of
directors of such Person, if it is a corporation, (b) the capital interest or
profits interest of such Person, if it is a partnership, joint venture or
13
similar entity, or (c) the beneficial interest of such Person, if it is a trust,
association or other unincorporated organization.
"Supplemental Documentation" shall have the meaning given to it in
Section 5.5.
"Termination Date" shall have the meaning given such term in Section
2.1(a).
"Total Assets" shall mean the total of Current Assets and Long Term
Assets.
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of Minnesota and any successor statute, together with any regulations
thereunder, in each case as in effect from time to time. References to sections
of the UCC shall be construed to also refer to any successor sections.
"Unused Credit Fee" shall have the meaning given such term in Section
2.5.
"US Bank Account Debtor" shall mean (a) each Account Debtor identified
on Schedule 1.1(b) hereto and all Subsidiaries thereof; and (b) each other
Account Debtor that has been identified by written notice by the Borrower to IBM
Credit and the Lender, which notice has been acknowledged in writing by IBM
Credit and the Lender.
"US Bank Accounts" shall have the meaning set forth in Section 5.1.
"US Bank Inventory" shall mean at any date of determination all
Rochester Inventory that has been designated and identified by the Borrower in
any Borrowing Base Certificate or any other collateral report or borrowing
request to the Lender as Inventory applicable to product sold to, or to be
manufactured and sold to a US Bank Account Debtor.
Section 1.2. Accounting Terms. All terms of a financial or
accounting nature shall be construed in accordance with GAAP as in effect from
time to time, provided, however that if the Borrower notifies the Lender that
the Borrower desires to amend any covenant in Section 8.16 or any related
definition to eliminate the effect of any change in GAAP occurring after the
date of this Agreement, or if the Lender notifies the Borrower that the Lender
desires to amend any covenant in Section 8.16 or any related definition for such
purpose, then Borrower's compliance with such covenant shall be determined on
the basis of GAAP in effect immediately before the relevant change in GAAP
became effective, until either such notice is withdrawn or such covenant is
amended in a manner satisfactory to Borrower and Lender.
Section 1.3. Other Terms Defined in UCC. All other terms
contained in this Agreement (which are not specifically defined in this
Agreement) shall, unless the context otherwise indicates, have the meanings set
forth in the UCC to the extent the same are used or defined therein.
Section 1.4. Terms Generally. The terms defined in Section 1.1
and elsewhere in this Agreement shall apply equally to both 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." All references to Articles, Sections, Exhibits and
14
Schedules shall be deemed references to Articles and Sections of, and Exhibits
and Schedules to, this Agreement unless the context shall otherwise require.
Except as otherwise expressly provided herein, any reference in this Agreement
to any Loan Documents shall mean such document as amended, restated,
supplemented or otherwise modified from time to time.
ARTICLE 2.
LOANS, LETTERS OF CREDIT AND FEES
---------------------------------
Section 2.1. Loans. Subject to all of the terms and conditions
contained in this Agreement, Lender agrees to make the following extensions of
credit to or for the benefit of Borrower:
(a) Line of Credit. Lender agrees to make advances (each, a
"Line of Credit Advance") to Borrower, from and after the date of this
Agreement through and including the earlier of June 28, 2004, or the
date on which the Line of Credit is terminated, whether under Section
9.2(a) or otherwise (the "Termination Date"), in such amounts and at
such times as the Borrower may from time to time request in an aggregate
amount at any time outstanding not to exceed the Line of Credit
Availability. Line of Credit Advances may be repaid and, subject to the
terms and conditions hereof, reborrowed to the Termination Date. The
Line of Credit Advances shall be evidenced by and repayable in
accordance with the terms of Borrower's promissory note (the "Line of
Credit Note"), the form of which is attached as Exhibit A. The proceeds
of the Line of Credit Advances shall be used for general business
purposes, including without limitation Business Acquisitions permitted
hereunder. Lender, in its sole and absolute discretion, may elect to
make Line of Credit Advances to Borrower in excess of the amounts
available pursuant to the terms of this Agreement, and any such Line of
Credit Advances shall also be governed by the terms hereof. Lender shall
also have the option, in its sole discretion and without any obligation
to do so, to extend the Termination Date for the making of Line of
Credit Advances. In the event that Lender elects to extend such
Termination Date, Lender shall give notice to Borrower pursuant to
Section 10.19.
(b) Types of Advances. The Loans shall be Eurodollar Advances
or Prime Rate Advances, as requested by the Borrower, except as
otherwise provided herein. Any combination of types of Advances may be
outstanding at the same time. Not more than five (5) Eurodollar Advances
may at any time outstanding, and each Eurodollar Advance shall be in a
minimum amount of $1,000,000 or in an integral multiple of $1,000,000
above such amount. The Borrower may not request Eurodollar Advances
until September 30, 2001.
(c) Indemnification. In the event of (a) any failure of the
Borrower to borrow, continue or convert a Eurodollar Advance on a date
specified in a notice thereof, or (b) any payment (including, without
limitation, any payment pursuant to Section 2.3, or 9.2), prepayment or
conversion of any Eurodollar Advance on a date other than the last day
of the Interest Period for such Advance, the Borrower agrees to pay the
Lender's costs, expenses and Interest Differential (as determined by the
Lender) incurred as a result of such event. The term "Interest
Differential" shall mean that sum equal to the
15
greater of 0 or the financial loss incurred by the Lender resulting from
such event, calculated as the difference between the amount of interest
the Lender would have earned (from like investments in the Money Markets
as of the first day of the Interest Period of the relevant Advance) had
such event not occurred and the interest the Lender will actually earn
(from like investments in the Money Markets as of the date of such
event) as a result of the redeployment of funds from such event. Because
of the short-term nature of this facility, the Borrower agrees that the
Interest Differential shall not be discounted to its present value. The
term "Money Markets" refers to one or more wholesale funding markets
available to the Lender, including negotiable certificates of deposit,
commercial paper, eurodollar deposits, Lender notes, federal funds and
others. Such determinations by the Lender of shall be conclusive in the
absence of manifest error.
Section 2.2. Interest; Default Rate; Payment Dates.
-------------------------------------
(a) Interest. The unpaid principal balance of the Line of
Credit Advances shall bear interest at the following rates:
(i) Eurodollar Advances. The unpaid principal amount of
each Eurodollar Advance shall bear interest at a rate per annum
equal to the Eurodollar Rate (Reserve Adjusted) in effect for
each Interest Period for such Eurodollar Advance plus the
Applicable Margin.
(ii) Prime Rate Advances. The unpaid principal amount of
each Prime Rate Advance shall bear interest at a rate per annum
equal to the Prime Rate in effect from time to time plus the
Applicable Margin.
(b) Default Rate. At any time during which an Event of Default
has occurred and is continuing all Loans shall bear interest until paid
in full at a rate per annum equal to the greater of (i) 2.00% in excess
of the rate applicable to the unpaid principal amount immediately before
such Event of Default, or (ii) 2.00% in excess of the Prime Rate in
effect from time to time (as applicable, the "Default Rate").
(c) General Provisions. No provision of this Agreement or of
any Note shall require the payment or permit the collection of interest
in excess of the rate permitted by applicable law. Interest as aforesaid
shall be charged for the actual number of days elapsed over a year
consisting of 360 days on the actual daily balance of such Advance.
Interest on the unpaid principal of any Loan shall accrue from the date
such Loan is made to the date such Loan is paid in full.
(d) Interest Payment Dates. Interest shall be paid on the
Payment Dates for the applicable types of Loans, provided, that any
interest accrued or accruing at the Default Rate, or accrued or accruing
on or after the Termination Date or other date on which the Line of
Credit terminates, shall be payable on demand.
Section 2.3. Repayments.
----------
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(a) Generally. All Loans and other Liabilities hereunder shall
be paid by the Borrower on the Termination Date unless payable sooner
pursuant to the provisions of this Agreement. In addition, Borrower
shall pay to the Lender all proceeds of Collateral in accordance with
the provisions of this Agreement and other Loan Documents for
application against the Liabilities in such order and manner as Lender
may deem appropriate. In addition, if the aggregate outstanding
principal balance of the Line of Credit Advances exceeds the Line of
Credit Availability or there is a negative Line of Credit Availability,
then, unless the Lender shall otherwise consent in writing, the Borrower
shall immediately and without notice of any kind make such payments as
shall be necessary to eliminate such excess or negative Line of Credit
Availability or take such other action (including, without limitation,
delivery of cash collateral) as Lender may require.
(b) Prepayment. Except as otherwise provided for herein, and
subject to the provisions of Section 2.1(c), Borrower may, at any time,
without premium or penalty, prepay any portion or the entire balance of
the Liabilities.
(c) Lender's Right to Advance Against Line of Credit. The
Lender shall have the right, but not the obligation, at any time in
Lender's sole and absolute discretion, to pay all or any portion of the
Liabilities (including without limitation any interest in respect of the
Line of Credit any Unused Credit Fee, Credit Termination Fee, Closing
Fee, Annual Line Fee, Letter of Credit Commission, audit fees and other
fees and charges due hereunder, or any fees, costs or expenses paid or
incurred in connection with the negotiation, documentation, closing,
amendment, administration or enforcement of this Agreement or any of the
other Loan Documents (including Attorneys' Fees), with the proceeds of a
Line of Credit Advance initiated by the Lender, and the Borrower hereby
irrevocably consents to the initiation of such advances by the Lender
without any action or consent required on the part of the Borrower with
respect to the same. The Borrower agrees that all such advances shall
constitute Line of Credit Advances and that the Borrower shall be liable
for the same as if such advances were requested by the Borrower under
Section 2.1(a) hereof.
Section 2.4. Requests for Line of Credit Advances; Borrowing Base
Certificates; Other Information; Continuation and Conversion of Loans.
(a) Advance Requests. Except as otherwise expressly provided
elsewhere in this Agreement, Advances shall be requested in writing, and
must be given so as to be received by the Lender not later than:
(i) 12:00 noon, Minneapolis time, on the date of the
requested Advance, if the Advance is to be comprised of Prime
Rate Advances; or
(ii) 11:00 a.m., Minneapolis time, two Business Days
prior to the date of the requested Advance, if the Advance is to
be, or include, a Eurodollar Advance.
17
Each request for an Advance shall specify (A) the borrowing date (which
shall be a Business Day), (B) the amount of such Advance and the type or
types of Advances comprising such Advance (subject to the limitation on
amount set forth in Section 2.1(b)), and (C) if such Advance shall
include Eurodollar Advances, the initial Interest Periods for each such
Eurodollar Advance. The Borrower's failure to comply with the provisions
of this Section 2.4(a) shall not in any manner affect the obligation of
the Borrower to repay such Advance in accordance with the terms of this
Agreement.
(b) Additional Information. In the event that the Borrower
shall at any time, or from time to time, make a request for a Line of
Credit Advance or other Loan, the Borrower agrees to forthwith provide
the Lender with such information, at such frequency and in such format,
as is required by the Lender, such information to be current as of the
time of such request.
(c) Borrowing Base Certificate. The Borrower further agrees to
provide to the Lender a current Borrowing Base Certificate (i) not later
than 12:00 noon, Minneapolis time, on the date any advance is to be made
hereunder, (ii) not less frequently than one time during each period of
five (5) Business Days (whether or not new Loans are requested
hereunder), and (iii) at such other times as the Lender may request.
Such Borrowing Base Certificate shall include such supporting
documentation as Lender may require and shall be executed and certified
as accurate by such person or persons as the Borrower designates, from
time to time, in writing to the Lender as provided herein.]
(d) Borrower's Authorized Representatives. The Borrower shall
provide the Lender with documentation satisfactory to the Lender
indicating the names of those employees of the Borrower authorized by
the Borrower to sign, among other things, Borrowing Base Certificates,
and/or to make a request for Line of Credit Advances and other Loans,
and/or to authorize disbursement of the proceeds of Line of Credit
Advances and other Loans, by wire transfer or otherwise. The Lender
shall be entitled to rely upon such documentation until notified in
writing by the Borrower of any change(s) in the names of persons so
authorized. The Lender shall be entitled to act on the instructions of
anyone identifying himself or herself as one of the persons authorized
to request Advances or disbursements of loan proceeds and upon the
instructions any other agent or employee designated by the Borrower from
time to time, and the Borrower shall be bound thereby in the same manner
as if the person were actually so authorized. The Borrower agrees to
indemnify and hold the Lender harmless from any and all claims, damages,
liabilities, losses, costs and expenses (including Attorneys' Fees)
which may arise or be created by the acceptance of instructions
(telephonic or otherwise) for making Loans or disbursing loan proceeds
by wire transfer or otherwise, or for application of payments.
(e) Continuation and Conversion of Advances. The Borrower may
elect to continue any outstanding Eurodollar Advance from one Interest
Period into a subsequent Interest Period to begin on the last day of the
earlier Interest Period, or convert any outstanding Advance into another
type of Advance (on the last day of an Interest Period only, in the
instance of a Eurodollar Advance), by giving the Lender telephonic
notice promptly confirmed in writing, given so as to be received by the
Lender not later than:
18
(i) 12:00 noon, Minneapolis time, on the date of the
requested conversion, if requesting conversion of a Eurodollar
Advance to a Prime Rate Advance; or
(ii) 11:00 a.m., Minneapolis time, two (2) Business Days
prior to the date of the requested continuation or conversion, if
requesting the continuation of a Eurodollar Advance or the
conversion of a Prime Rate Advance to a Eurodollar Advance.
Each notice of continuation or conversion of an Advance shall specify
(A) the effective date of the continuation or conversion (which shall be
a Business Day), (B) the amount and the type or types of Advances
following such continuation or conversion (subject to the limitation on
amount set forth in Section 2.1(c), and (C) for continuation as, or
conversion into, Eurodollar Advances, the Interest Periods for such
Advances. Absent timely notice of continuation or conversion, Lender may
at any time convert the Eurodollar Advance into a Prime Rate Advance,
but until such conversion unless paid in full each Eurodollar Advance
shall continue to accrue interest at the same rate as the interest rate
prior to the expiration of the Interest Period. No Advance shall be
continued as, or converted into, a Eurodollar Advance if the shortest
Interest Period for such Advance may not transpire prior to the
Termination Date or if a Default or an Event of Default has occurred and
is continuing.
Section 2.5. Fees. Borrower agrees to pay to Lender the following
fees:
(a) Unused Credit Fee. The Borrower shall pay the Lender a fee
(the "Unused Credit Fee") for the period from and after the date hereof
through and including the date the Line of Credit Facility is terminated
in an amount equal to 0.375% per annum of the average Daily Unused Line
of Credit Amount, calculated on the basis of actual days elapsed over a
year of 360 days and twelve 30-day months. The Unused Credit Fee shall
be and is payable quarterly in arrears on the last day of each [March,
June, September and December], commencing on the first such day to occur
after the date hereof, and on the Termination Date. The Unused Credit
Fee is fully earned when due and nonrefundable when paid.
(b) Credit Termination Fee. Upon termination of the Line of
Credit the Borrower shall pay to the Lender a termination fee (the
"Credit Termination Fee") in an amount equal to (a) 1.00% of the Line of
Credit Amount in the event that the Line of Credit is terminated or
cancelled during the period from the date hereof through the one year
anniversary of such date, (b) 0.75% of the Line of Credit Amount in the
event that the Line of Credit is terminated or cancelled during the
period from the one year anniversary of such date through the two year
anniversary of such date, or (c) 0.50% in the event that the Line of
Credit is terminated during the period from the two year anniversary of
such date through the three year anniversary of such date. The Credit
Termination Fee shall be due and owing only in the event that the
Borrower terminates the Line of Credit or the Lender terminates the Line
of Credit following an Event of Default, and not if the Lender
terminates the Line of Credit for any other reason. In no event shall a
refinancing with the Lender or any of its Affiliates be deemed a
termination
19
under this provision. The Credit Termination Fee is fully earned when
due and nonrefundable when paid.
(c) Closing Fee. The Borrower shall pay the Lender a fee (the
"Closing Fee") in an amount of $75,000. The Closing Fee is fully earned
as of the date of this Agreement but may be paid by the Borrower in
three installments of $25,000 each due on (i) the date this Agreement is
signed, (ii) June 28, 2002, and (iii) June 28, 2003, provided, that if
the Line of Credit is terminated or cancelled prior to such any such
date, all of such payments not previously made shall be due and payable.
(d) Letter of Credit Commission. The Borrower shall pay the
Lender, a commission (the "Letter of Credit Commission") on the undrawn
amount of each Letter of Credit and on each Letter of Credit Draft
accepted by the Lender but not paid, at a rate equal to the
then-applicable Applicable Margin for Eurodollar Advances per annum
calculated on the basis of actual days elapsed over for year of 360
days. The Letter of Credit Commission shall be and is payable quarterly
in arrears on the last day of March, June, September and December.
Section 2.6. Loan Account; Disbursement Account.
----------------------------------
(a) Lender shall maintain a loan account (the "Loan Account")
on its books in which shall be recorded:
(i) all Line of Credit Advances made by Lender to the
Borrower pursuant to this Agreement and all payments made by the
Borrower on all such Line of Credit Advances;
(ii) all other appropriate debits and credits as provided
in this Agreement, including without limitation, all fees,
charges, expenses and interest
All entries in the Borrower's Loan Account shall be made in accordance
with Lender's customary accounting practices as in effect from time to
time. The Borrower promises to pay the amount reflected as owing by and
under its Loan Account and all other obligations hereunder as such
amounts become due or are declared due pursuant to the terms of this
Agreement.
(b) Disbursement Account. The Borrower shall maintain in its
name a commercial account (the "Disbursement Account") at Lender's
office at U.S. Bank Place, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. Unless otherwise provided in this Agreement, the
Lender will credit or cause to be credited to the Disbursement Account,
at the end of the Business Day on which any Loan is to be made
hereunder, the amount of such Loan(s). Amounts credited to the
Disbursement Account shall not be available for withdrawal by wire
transfer until the following Business Day. The Borrower, the Lender and
such depository bank shall enter into an agreement satisfactory to the
Lender regarding, among other things, the Disbursement Account and
access to amounts on deposit therein or attributable thereto.
20
Section 2.7. Making of Payments; Application of Collections;
-----------------------------------------------
Charging of Accounts.
---------------------
(a) All payments hereunder (including payments with respect to
any Note) shall be made without set-off or counterclaim and shall be
made to the Lender in immediately available funds (or as the Lender may
otherwise consent) prior to 12:00 noon, Minneapolis time, on the date
due at its office at U.S. Bank Place, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, or at such other place as may be designated
by Lender to the Borrower in writing from time to time. Unless Lender
shall otherwise consent, all loan payments shall be made by the
Borrowers through the Collateral Account. Amounts on deposit in the
Collateral Account at the end of each Business Day will be applied to
the Loans and the other Liabilities by the Lender on the next succeeding
Business Day in such order as the Lender, in its sole discretion, shall
determine. The Borrower acknowledges that deposits made and other items
credited to the Collateral Account are subject to applicable laws and
regulations governing availability of funds and to Lender's funds
availability requirements, and may not be immediately available for
application to the Loans or the other Liabilities.
(b) The Borrower authorizes the Lender to, and the Lender
will, subject to the provisions of this Section 2.7(b), apply the whole
or any part of any amounts received by the Lender or any of its
Affiliates (whether deposited in the Collateral Account or otherwise
received by the Lender or any of its Affiliates) from the collection of
items of payment and proceeds of any Collateral against the principal
and/or interest of any Loans made hereunder and/or any other
Liabilities, whether or not then due, in such order of application as
the Lender may determine, unless such payments or proceeds are, in the
Lender's sole and absolute discretion, released to the Borrower. No
checks, drafts or other instruments received by the Lender, or any
Affiliate of Lender, shall constitute final payment to the Lender unless
and until such item of payment has actually been collected. All items or
amounts which are delivered to the Lender by or on behalf of the
Borrower or any Obligor or any Account Debtor on account of partial or
full payment or otherwise as proceeds of any of the Collateral
(including any items or amounts which may have been deposited to the
Collateral Account) may from time to time, in the Lender's sole and
absolute discretion, be released to the Borrowers or may be applied by
the Lender towards such of the Liabilities, whether or not then due, in
such order of application as the Lender may determine. Notwithstanding
anything to the contrary herein, (i) solely for purposes of determining
the occurrence of an Event of Default hereunder, all cash, checks,
instruments and other items of payment shall be deemed received upon
actual receipt by the Lender unless the same is subsequently dishonored
for any reason whatsoever, (ii) solely for purposes of determining
whether, under Sections 2.1 there is Line of Credit Availability, all
cash, checks, instruments and other items of payment shall be applied
against the Liabilities no later than the first Business Day following
receipt thereof by the Lender in Minneapolis, Minnesota or the first
Business Day following the initiation by the Lender of an ACH
transaction from the Collateral Account, and (iii) solely for purposes
of interest calculation hereunder, all cash, checks, instruments and
other items of payment shall be deemed to have been applied against the
Liabilities no later than the next Business Day following receipt
thereof by the Lender in Minneapolis,
21
Minnesota or the second Business Day following the initiation by the
Lender of an ACH transaction from the Collateral Account.
(c) The Borrower hereby irrevocably authorizes the Lender and
the Lender may, in its sole and absolute discretion, at any time and
from time to time, pay all or any portion of any Liabilities including,
without limitation, interest, Attorneys' Fees and other fees, costs and
expenses of the Lender for which the Borrower is liable pursuant to the
terms of the Loan Documents, by charging the Disbursement Account or any
other bank account of the Borrower maintained with Lender or by
advancing the amount thereof to the Borrower as a Line of Credit Loan
and applying the proceeds of such Loan against such Liabilities;
provided, however, that the provisions of this Section 2.7(c) shall not
affect the Borrower's obligation to pay when due all amounts payable by
the Borrower under any of the Loan Documents whether or not there are
sufficient funds therefor in the Disbursement Account or any such other
bank account of the Borrower with Lender, or sufficient Line of Credit
Availability.
Section 2.8. Termination of Agreement. Without limiting any other
provision hereof, Lender shall have the right, without notice to the Borrower,
to terminate its commitment to make Advances pursuant to this Agreement
immediately upon the occurrence of an Event of Default. In addition, Lender's
commitment to make Loans pursuant to this Agreement shall be deemed immediately
terminated and all of the Liabilities shall be immediately due and payable,
without notice to Borrower, on the Termination Date if Lender elects not to
extend the Termination Date of the Line of Credit pursuant to Section 2.1(a). In
the event Lender's commitment to make Advances pursuant to this Agreement is
terminated, the remainder of this Agreement shall remain in full force and
effect until the payment in full of the Liabilities and the termination of any
and all Letters of Credit.
Section 2.9. All Loans One Obligation. All Loans under this
Agreement shall constitute one Loan, and all Liabilities shall constitute one
general obligation, secured by the Lien granted by the Borrower hereunder on all
of the Collateral and by all other Liens heretofore, now or at any time or times
hereafter granted by the Borrower or any other Obligor to secure the
Liabilities. The Borrower agrees that all of the rights of the Lender set forth
in the Loan Documents shall, unless otherwise agreed to in writing, apply to any
modification of or supplement to the Loan Documents.
Section 2.10. Additional Provisions Relating to Loans.
---------------------------------------
(a) Increased Costs. If, as a result of any law, rule,
regulation, treaty or directive, or any change therein or in the
interpretation or administration thereof, or compliance by the Lender or
Affiliate of Lender with any request or directive (whether or not having
the force of law) from any court, central bank, Governmental Authority,
agency or instrumentality, or comparable agency:
(i) any tax, duty or other charge with respect to any
Loan, any Note or the credit extended hereunder is imposed,
modified or deemed applicable, or the basis of taxation of
payments to the Lender of interest or principal of the Loans or
22
any fees (other than taxes imposed on the overall net income of
the Lender by the jurisdiction in which the Lender has its
principal office) is changed;
(ii) any reserve, special deposit, special assessment or
similar requirement against assets of, deposits with or for the
account of, or credit extended by, the Lender is imposed,
modified or deemed applicable;
(iii) any increase in the amount of capital required or
expected to be maintained by the Lender or any Person controlling
the Lender is imposed, modified or deemed applicable; or
(iv) any other condition affecting this Agreement or the
Credit extended hereunder is imposed on the Lender or the
relevant funding markets;
and the Lender determines that, by reason thereof, the cost to the
Lender of making or maintaining the Loans or the Credit extended
hereunder is increased, or the amount of any sum receivable by the
Lender hereunder or under any Note in respect of any Loan is reduced;
then, the Borrower shall pay to the Lender such additional amount or
amounts as will compensate the Lender (or the controlling Person in the
instance of (iii) above) for such additional costs or reduction in
amounts received (provided that the Lender has not been compensated for
such additional cost or reduction in the calculation of the Eurodollar
Reserve Rate). Lender's or its Affiliate's certificate or invoice
setting forth the amount or amounts such Person is entitled to receive
pursuant to this Section 2.10(a) shall be conclusive in the absence of
manifest error. In determining such amounts, the Lender may use any
reasonable averaging, attribution and allocation methods. The amount
shown as due on any certificate or invoice delivered under this Section
2.10(a) is payable on demand.
(b) Deposits Unavailable or Interest Rate Unascertainable or
Inadequate; Impracticability. If the Lender determines (which
determination shall be conclusive and binding on the parties hereto)
that:
(i) deposits of the necessary amount for the relevant
Interest Period for any Eurodollar Advance are not available to
the Lender in the relevant markets or that, by reason of
circumstances affecting such market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Interbank
Rate, as the case may be, for such Interest Period;
(ii) the Eurodollar Rate (Reserve Adjusted) will not
adequately and fairly reflect the cost to the Lender of making or
funding the Eurodollar Advances for a relevant Interest Period;
or
(iii) the making or funding of Eurodollar Advances has
become impracticable as a result of any event occurring after the
date of this Agreement which, in the opinion of the Lender,
materially and adversely affects such Advances or the Lender's
ability to make such Advances or the relevant market;
23
the Lender shall promptly give notice of such determination to the
Borrower, and (i) any request for a new Eurodollar Advance or for
conversion of a Prime Rate Advance to a Eurodollar Advance previously
given by the Borrower and not yet funded or converted shall be deemed to
be a request for a Prime Rate Advance, and (ii) the Borrower shall be
obligated to either (A) prepay in full any outstanding Eurodollar
Advances without premium or penalty on the last day of the current
Interest Period with respect thereto or (B) convert any such Eurodollar
Advance to a Prime Rate Advance on the last day of the current Interest
Period.
(c) Changes in Law Rendering Eurodollar Advances Unlawful. If
at any time due to the adoption of any law, rule, regulation, treaty or
directive, or any change therein or in the interpretation or
administration thereof by any court, central bank, Governmental
Authority, agency or instrumentality, or comparable agency charged with
the interpretation or administration thereof, or for any other reason
arising subsequent to the date of this Agreement, it shall become
unlawful or impossible for the Lender to make or fund any Eurodollar
Advance, the obligation of the Lender to provide such Advance shall,
upon the happening of such event, forthwith be suspended for the
duration of such illegality or impossibility. If any such event shall
make it unlawful or impossible for the Lender to continue any Eurodollar
Advance previously made by it hereunder, the Lender shall, upon the
happening of such event, notify the Borrower thereof in writing, and the
Borrower shall, at the time notified by the Lender, either (i) convert
each such Eurodollar Advance to a Prime Rate Advance, or (ii) repay such
Eurodollar Advance in full, together with accrued interest thereon,
subject to the provisions of Section 2.1(c).
(d) Discretion of the Lender as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, the
Lender shall be entitled to fund and maintain its funding of all or any
part of the Loans in any manner it elects; it being understood, however,
that for purposes of this Agreement, all determinations hereunder shall
be made as if the Lender had actually funded and maintained each
Eurodollar Advance during the Interest Period for such Advance through
the purchase of deposits having a term corresponding to such Interest
Period and bearing an interest rate equal to the Eurodollar Interbank
Rate for such Interest Period (whether or not the Lender shall have
granted any participations in such Advances).
Section 2.11. Recourse to Collateral. Borrower's payment
obligations under this Agreement and under any Note and any other Loan Document
are primary and absolute and Lender shall not be required to seek recourse to
the Collateral or other security at any time.
Section 2.12. Lender's Election Not to Enforce. Notwithstanding
any term or condition of this Agreement to the contrary, the Lender, in its sole
and absolute discretion, at any time and from time to time may suspend or
refrain from enforcing any or all of the restrictions imposed in this Article II
but no such suspension or failure to enforce shall impair the Lender's right and
power under this Agreement to refrain from making a Loan or issuing, or causing
to be issued, a Letter of Credit requested by the Borrower if all conditions
precedent to the Lender's obligation to make such Loan or issue, or cause to be
issued, such Letter of Credit have not been satisfied.
24
Section 2.13. Letters of Credit.
-----------------
(a) Application, Agreement to Issue. From time to time from
and after the date hereof to the Termination Date or, if earlier, the
date on which the Line of Credit terminates, Borrower may request Lender
to issue one or more Letters of Credit for the account of Borrower and,
upon receipt of duly executed Letter of Credit Applications and such
other Letter of Credit Agreements as the Lender may require, Lender
shall, in its sole and absolute discretion, issue Letters of Credit on
such terms as are satisfactory to the Lender; provided, however, that no
Letter of Credit will be issued if, before or after taking such Letter
of Credit into account, the Letter of Credit Obligations exceed the
least of (i) the Letter of Credit Sublimit, (ii) the Line of Credit
Amount minus the outstanding principal balance of the Line of Credit
Advances, or (iii) the Borrowing Base minus the outstanding principal
balance of the Line of Credit Advances.
(b) Fees and Commissions. The Borrower agrees to pay the
Lender, on demand, the Lender's standard administrative operating fees
and charges in effect from time to time for issuing, administering or
making payments under any Letters of Credit. The Borrower further agrees
to pay the Lender a commission on the undrawn amount of each Letter of
Credit (which amount shall include, without limitation, the amount of
each Letter of Credit Draft accepted by the Lender but unpaid) in the
amounts and at such times as are set forth in Section 2.5(e).
(c) Reimbursement Obligations. The Borrower agrees to
reimburse the Lender on demand for each payment made by the Lender under
or pursuant to any Letter of Credit or Letter of Credit Draft. The
Borrower further agrees to pay to the Lender, on demand, interest at the
Default Rate, on any amount paid by the Lender, under or pursuant to any
Letter of Credit or Letter of Credit Draft from the date of payment
until the date of reimbursement to the Lender. The Borrower hereby
authorizes Lender, at Lender's option, to make a Line of Credit Advance
under this Agreement in an amount equal to the amount paid by the
Lender, under any Letter of Credit or Letter of Credit Draft, as
reimbursement for such payment.
(d) Acceleration, Required Deposits. Notwithstanding anything
to the contrary herein or in any Letter of Credit Agreement or Letter of
Credit, without notice to Borrower or any Obligor, upon termination of
the Line of Credit, (whether pursuant to Section 9.2(a) otherwise) and,
at Lender's option, at any time that an Event of Default has occurred
and is continuing (whether or not the Line of Credit is terminated) an
amount equal to the aggregate amount of the Letter of Credit Obligations
shall be deemed (as between the Lender and the Borrower) to have been
paid or disbursed by the Lender under the Letters of Credit and Letter
of Credit Drafts accepted by the Lender, notwithstanding that such
amounts may not in fact have been so paid or disbursed.
Upon the occurrence of the events described in the preceding paragraph,
Lender is hereby authorized, at its option, to make a Line of Credit
Advance under this Agreement in an amount equal to all Letter of Credit
Obligations, which Advance shall be immediately due and payable, the
proceeds of which shall be deposited into a separate cash collateral
account as set forth in this Section 2.13(d) below. In lieu of the
foregoing, Lender, at its
25
election, may demand, and upon such demand Borrower shall deliver to
Lender, cash or cash equivalents in an amount equal to the Letter of
Credit Obligations. Cash equivalents, if acceptable, shall have the
value as determined by the Lender.
The proceeds of such Loan and/or cash or cash equivalents received by
Lender pursuant to this Section 2.13(d) shall be deposited by the Lender
in a separate account appropriately designated as a cash collateral
account in relation to this Agreement and shall be retained by the
Lender as collateral security for the Liabilities including, without
limitation, the Letter of Credit Obligations. Such amounts shall not be
used by the Lender to pay any amounts drawn under any Letter of Credit
or Letter of Credit Draft. At Lender's option, such amounts may be
applied by Lender to reimburse the Lender for payments made under a
Letter of Credit or Letter of Credit Draft or to payment of such other
Liabilities as the Lender shall determine. Following payment in full of
all Liabilities, the termination or expiration of all Letters of Credit
and the termination of the Credit, any amounts remaining in any cash
collateral account established pursuant to this Section 2.13 shall be
returned to the Borrower or other Person legally entitled thereto (after
deduction of the Lender's expenses). The deposit of cash or cash
equivalents by the Borrower shall not relieve the Borrower or any
Obligor of any Liabilities under any of the Loan Documents or any
reimbursement obligation under any Letter of Credit Application or with
respect to any Letter of Credit.
ARTICLE 3.
BORROWING BASE
--------------
Section 3.1. Borrowing Base.
--------------
(a) Definition. For purposes of this Agreement, the term
"Borrowing Base" shall mean:
(i) an amount (the "Accounts Availability") equal to 80%
(which may be increased to 85% by the Lender at its discretion
based on its examination of the Accounts) of the net amount (as
determined by the Lender after deduction of such reserves and
allowances as the Lender deems proper and necessary) of the
Borrower's Eligible Accounts; plus
(ii) an amount (the "Inventory Availability") of up to the
lesser of (1)(A) on and after the date of this Agreement until
the Lender's first appraisal of the Eligible Inventory is
completed 30% of the net value (the lower of the cost, determined
on a first in first out basis, or market value of such Eligible
Inventory) of the Borrower's Eligible Inventory, or (B) after
completion of such appraisal, a percentage of up to 75% of the
appraised orderly liquidation value (but not to exceed such
percentage of the cost of such Eligible Inventory, determined on
a first in first out basis) of the Borrower's Eligible Inventory,
which increased percentage shall be determined by the Lender at
its discretion based on its examination of such appraisals (in
both cases, as determined by the Lender after deduction of such
reserves and allowances as the Lender deems proper and
26
necessary), or (2) the lesser of (x) 50% of the amount at any
time of Accounts Availability, or (y) $10,000,000 (such dollar
amount, as adjusted from time to time, is hereinafter called the
"Inventory Availability Sublimit").
Section 3.2. Defined Terms. For purposes of this Article 3, the
following terms shall have the following meanings:
"Eligible Account" shall mean each US Bank Account owing to the
Borrower which meets the following requirements:
(a) it is a US Bank Account hereunder and is subject to a
first-priority lien in favor of the Lender, and, under the IBM
Intercreditor Agreement: (i) it is "US Bank Collateral" and a "US Bank
Account", (ii) it is not "IBM Credit Collateral" and the Account Debtor
is not an "IBM Credit Account Debtor";
(b) it is owned by the Borrower and is not subject to any
assignment, claim or Lien other than (i) a first priority Lien in favor
of the Lender, and (ii) other Liens consented to by the Lender in
writing;
(c) it is genuine and in all respects what it purports to be;
(d) it arises from either (i) the performance of services by
the Borrower, which services have been fully performed and, if
applicable, acknowledged and/or accepted by the Account Debtor with
respect thereto; or (ii) the sale or lease of goods by the Borrower and
(A) such goods comply with such Account Debtor's specifications (if any)
and have been shipped to, or delivered to and accepted by, such Account
Debtor, (B) the Borrower has possession of, or has delivered to the
Lender, at the Lender's request, shipping and delivery receipts
evidencing such shipment, delivery and acceptance, and (C) such goods
have not been returned to the Borrower;
(e) it is evidenced by an invoice rendered to the Account
Debtor with respect thereto which (i) is dated not earlier than the date
of shipment or performance, and (ii) has payment terms not unacceptable
to the Lender;
(f) it is a valid, legally enforceable and unconditional
obligation of the Account Debtor with respect thereto it is reduced in
amount by the amount of (i) accounts owing by the Borrower to the
Account Debtor, and (ii) checks outstanding payable to the Account
Debtor and is not subject to setoff, counterclaim, credit or allowance
(except any credit or allowance which has been deducted in computing the
net amount of the applicable invoice as shown in the original schedule
or Borrowing Base Certificate furnished to the Lender identifying or
including such Account) or adjustment by the Account Debtor with respect
thereto, or to any claim by such Account Debtor denying liability
thereunder in whole or in part, and such Account Debtor has not refused
to accept any of the goods or services which are the subject of such
Account or offered or attempted to return any of such goods;
(g) there are no proceedings or actions which are then
threatened or pending against the Account Debtor with respect thereto or
to which such Account Debtor is a
27
party which might result in any material adverse change in such Account
Debtor's financial condition or in its ability to pay any Account in
full when due;
(h) it does not arise out of a contract or order which, by its
terms, forbids, restricts or makes void or unenforceable the assignment
by the Borrower to the Lender of such Account;
(i) the Account Debtor with respect thereto is not a
Subsidiary, Affiliate or Obligor, or a director, officer, employee or
agent of the Borrower, any Subsidiary, any Affiliate or any Obligor;
(j) the Account Debtor with respect thereto is a resident or
citizen of and is located within the United States of America unless the
sale of goods giving rise to such Account is on letter of credit,
banker's acceptance or other credit support terms satisfactory to the
Lender;
(k) it does not arise from a "sale on approval," "sale or
return" or "consignment," nor is it subject to any other repurchase or
return agreement;
(l) it is not an Account with respect to which possession
and/or control of the goods sold giving rise thereto is held, maintained
or retained by the Borrower, any Subsidiary, any Affiliate or any
Obligor (or by any agent or custodian of the Borrower, any Subsidiary,
any Affiliate or any Obligor) for the account of or subject to further
and/or future direction from the Account Debtor with respect thereto;
(m) it does not, in any way, violate or fail to meet any
warranty, representation or covenant contained in the Loan Documents
relating directly or indirectly to the Borrower's Accounts;
(n) the Borrower has observed and complied with all laws of
the jurisdiction in which the Account Debtor with respect to such
Account is located which, if not observed or complied with would deny
the Borrower access to the courts of such jurisdiction;
(o) it arises in the ordinary course of the Borrower's
business;
(p) if the Account Debtor with respect thereto is the United
States of America or any department, agency or instrumentality thereof
(a "Federal Governmental Authority"), or any state, county or local
Governmental Authority, or any department, agency or instrumentality
thereof, the Borrower has assigned its right to payment of such Account
Receivable to the Lender pursuant to the Assignment of Claims Act of
1940 as amended in the case of the a Federal Governmental Authority, or
pursuant to applicable state law, if any, in all other instances, and
such assignment has been accepted and acknowledged by the appropriate
government officers;
(q) if the Lender, in its sole and absolute discretion, has
established a credit limit for the Account Debtor with respect thereto,
the aggregate dollar amount of
28
Accounts due from such Account Debtor, including such Account, does not
exceed such credit limit;
(r) if it is evidenced by chattel paper or instruments, (i)
the Lender shall have specifically agreed to include such Account as an
Eligible Account Receivable, (ii) only payments then due and payable
under such chattel paper or instrument shall be included as an Eligible
Account and (iii) the originals of such chattel paper or instruments
have been assigned and delivered to the Lender in a manner satisfactory
to the Lender;
(s) it has not remained unpaid more than 90 days after the
original invoice date; and
(t) 25% or more of the Accounts from the Account Debtor with
respect thereto have not remained unpaid more than 90 days after their
respective original invoice dates.
An Account which is at any time an Eligible Account but which
subsequently fails to meet any of the foregoing requirements shall
forthwith cease to be an Eligible Account. Further, with respect to any
Account, if the Lender at any time or times hereafter determines, in its
sole and absolute discretion, that the prospect of payment or
performance by the Account Debtor with respect thereto is or will be
impaired for any reason whatsoever, notwithstanding anything to the
contrary contained above, such Account shall forthwith cease to be an
Eligible Account.
"Eligible Inventory" shall mean US Bank Inventory of the Borrower
which meets the following requirements:
(a) it is US Bank Inventory hereunder and subject to a
first-priority lien in favor of the Lender, and, under the IBM
Intercreditor Agreement: (i) it is "Rochester Inventory", "US Bank
Collateral" and "US Bank Inventory", (ii) it is not "IBM Credit
Collateral";
(b) it is owned by the Borrower and is not subject to any
assignment, claim or Lien other than (i) a first priority Lien in favor
of the Lender, and (ii) other Liens consented to by the Lender in
writing;
(c) it is raw materials or finished goods and not
work-in-process;
(d) it is held and stored at the Rochester Facilities;
(e) if held for sale or lease or furnishing under contracts of
service, it is (except as the Lender may otherwise consent in writing)
new and unused;
(f) except as the Lender may otherwise consent, it is not
stored with a bailee, warehouseman or similar party; or, if so stored
with the Lender's consent, such bailee, warehouseman or similar party
has issued and delivered to the Lender, in form and substance acceptable
to the Lender, such documents and agreements as the Lender may require,
including, without limitation, warehouse receipts therefor in the
Lender's name;
29
(g) the Lender has determined, in its sole and absolute
discretion, that it is not unacceptable due to age, type, category,
quality and/or quantity;
(h) it is not held by the Borrower on "consignment" and is not
subject to any other repurchase or return agreement;
(i) it complies with all standards imposed by any governmental
agency having regulatory authority over such goods and/or their use,
manufacture or sale;
(j) it does not, in any way, violate or fail to meet any
warranty, representation or covenant contained in the Loan Documents
relating directly or indirectly to the Borrower's Inventory;
(k) it is located within the continental United States; and
(l) it does not consist of branded packaging or promotional
materials.
Inventory of a Borrower which is at any time Eligible Inventory but
which subsequently fails to meet any of the foregoing requirements shall
forthwith cease to be Eligible Inventory.
ARTICLE 4.
CONDITIONS PRECEDENT
--------------------
Section 4.1. Conditions Precedent to Initial Advances. The
obligation of the Lender to make the initial Line of Credit Advance shall be
subject to the satisfaction of the following conditions precedent, in addition
to the applicable conditions precedent set forth in Section 4.2:
(a) No Change in Condition. No change in the condition or
operations, financial or otherwise, of the Borrower, any other Obligor
or any Domestic Subsidiary, shall have occurred which change, in the
sole credit judgment of the Lender, may constitute an Adverse Event or
otherwise have a material adverse effect on the Borrower, any other
Obligor or any Domestic Subsidiary, or on any Collateral or the Lender's
interest therein.
(b) Accounting Methods. The Borrower shall not have made any
change in its accounting methods or principles which, in the opinion of
the Lender, is deemed material.
(c) Survey. The Lender shall have completed its updated survey
of the business, operations and assets of the Borrower, each Subsidiary
and each other Obligor, and such survey shall have provided the Lender
with results and information which, in the opinion of the Lender, are
satisfactory to the Lender.
(d) No Material Transaction. Neither the Borrower, nor any
Obligor, nor any Subsidiary shall have entered into any commitment or
transaction which, in the opinion
30
of the Lender, is deemed material, including, without limitation,
transactions for borrowings and Capital Expenditures which are not
entered into in the ordinary course of their respective businesses.
(e) Litigation. No litigation shall be outstanding or have
been instituted or threatened against the Borrower, any other Obligor or
any Domestic Subsidiary which the Lender determines to be material.
(f) Filing of Documents. All financing statements, mortgages,
notices and other documents relating to the Collateral shall have been
filed or recorded, as appropriate.
(g) Delivery of Documents. The Borrower shall have delivered
or caused to be delivered to the Lender with each of the following, in
form and substance satisfactory to the Lender in all respects and duly
executed and dated the date of the initial Loan or such earlier date as
shall be acceptable to the Lender:
(i) This Agreement. This Agreement, duly executed by
Borrowers and Lender.
(ii) Other Agreements. Duly executed copies of each of
the Loan Documents not specifically identified herein which the
Lender determines to be necessary or desirable, each in form and
content satisfactory to the Lender.
(iii) Resolutions of Borrower and Guarantor. A copy, duly
certified by the secretary or an assistant secretary of the
Borrower and the Guarantor, of approval resolutions of the
Borrower and the Guarantor.
(iv) Incumbency Certificate of Borrower and Guarantor. A
certificate of the secretary or an assistant secretary of the
Borrower and the Guarantor, certifying the names of the officers
of such Borrower and the Guarantor authorized to sign the Loan
Documents to which it is a party, together with the true
signatures of such officers.
(v) Bylaws. A copy, duly certified by the secretary or
an assistant secretary of the Borrower, of the Bylaws of the
Borrower and the Guarantor.
(vi) Articles of Incorporation. A copy, duly certified
by the Secretary of State of the Borrower's state of
incorporation, of the Articles of Incorporation of the Borrower
and the Guarantor.
(vii) Good Standing Certificates. Certificates of good
standing and/or foregoing qualification as to the Borrower and
the Guarantor issued by the Secretary of State of the state in
which the Borrower and the Guarantor is organized and each other
state in which the failure to qualify to or to be in good
standing would constitute an Adverse Event or have a material
adverse effect on the Lender's rights in any Collateral.
31
(viii) Other Documents. The IBM Intercreditor Agreement
shall have been executed and delivered to Lender by the parties
thereto.
(ix) Opinion. A legal opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP,
counsel to Borrower.
(x) Insurance. Evidence satisfactory to the Lender of
the existence of insurance on the Collateral in amounts and with
insurers acceptable to the Lender, together with evidence
establishing that the Lender is named as a loss payee and, if
required by the Lender, additional insured, on all related
insurance policies and a long form lender's endorsement or an
independent instrument from each issuer of an insurance policy
substantially in the form required by the Lender.
(xi) Landlord, Mortgagee and Warehousemen Waivers. If
required by the Lender, (A) from each lessor or landlord
identified on Schedule 6.5, a landlord waiver; (B) from each
mortgagee identified on Schedule 6.5, a mortgagee's waiver; and
(C) from each operator of a public warehouse where US Bank
Inventory is stored, a letter from such operator, in each case in
form and substance acceptable to the Lender.
(xii) Other. Such other documents, instruments or
agreements as the Lender shall determine to be necessary or
desirable.
(h) Security Interest. The Liens in the Collateral granted to
the Lender to secure the Liabilities shall be senior, perfected Liens,
except as otherwise agreed by the Lender.
(i) Special Accounts. The Borrower and Lender shall have
entered into a Restricted Access Lockbox, Collateral Account and
Disbursement Account Agreement in substantially in the form provided by
the Lender which provide for, among other things, the collection and
remittance to the Lender of cash proceeds of the Collateral.
(j) Controlled Disbursement Account. The Borrower and Lender
shall have entered into a Controlled Disbursement Account, substantially
in the form provided by Lender.
(k) Effect of Law. No law or regulation affecting the Lender's
entering into the secured financing transaction contemplated by this
Agreement shall impose upon the Lender any material obligation, fee,
liability, loss, cost, expense or damage.
(l) Exhibits; Schedules. All Exhibits and Schedules to the
Loan Documents shall have been completed in form and substance
satisfactory to the Lender and shall contain no material facts or
information which the Lender, in its sole judgment, determines to be
unacceptable.
Section 4.2. Conditions Precedent to All Advances. The obligation
of the Lender to make any Advance (including the initial Line of Credit Advance)
shall be subject to
32
the satisfaction of the following conditions precedent (and any request for an
Advance shall be deemed a representation that the following conditions are
satisfied):
(a) Representations and Warranties. All of the representations
and warranties of the Borrower and each other Obligor set forth in the
Loan Documents shall be true and correct.
(b) Event of Default. Immediately before and after making such
Loan, no Default or Event of Default shall exist or be continuing.
ARTICLE 5.
SECURITY
--------
Section 5.1. Grant of Security Interest. As security for the
prompt payment and performance in full when due, whether at stated maturity or
by declaration, acceleration or otherwise, of all Liabilities, together with
interest and costs of enforcement and collection thereof (including all
reasonable Attorneys' Fees and disbursements incurred by the Lender), the
Borrower hereby grants to the Lender a continuing security interest in, and
hereby assigns and pledges to the Lender, all right, title and interest of the
Borrower in and to the following property and assets of the Borrower, wherever
located, whether now owned or existing, or owned, acquired or arising hereafter
(all such property is hereinafter referred to collectively as the
"Collateral")::
(a) Accounts owed by any US Bank Account Debtor(the "US Bank
Accounts");
(b) all US Bank Inventory;
(c) insurance policies and proceed thereof and collections
under such policies to the extent that any such policies cover the
Collateral, including any credit insurance; and
(d) Proceeds of the Collateral, including without limitation
any Chattel Paper, Document, Instrument, cash and non-cash proceeds,
payments or other asset received in connection with or in exchange for
any Collateral.
Section 5.2. US Bank Accounts.
----------------
(a) Adjustments. The Borrower shall notify the Lender
immediately of all disputes and claims by any Account Debtor in excess
of $100,000, and settle or adjust
33
them at no expense to the Lender. If the Lender directs, no discount or
credit allowance shall be granted thereafter by the Borrower to any
Account Debtor. All Account Debtor payments and all net amounts received
by the Lender in settlement, adjustment or liquidation of any Account
Receivable may be applied by the Lender to the Liabilities or credited
to the Disbursement Account (subject to collection), as the Lender may
deem appropriate, as more fully described in Section 2.6. If requested
by the Lender, the Borrower will make proper entries in its books,
disclosing the assignment of US Bank Accounts to the Lender.
(b) Collateral Account. Unless otherwise consented to by the
Lender in writing, Borrower will, forthwith upon receipt by the Borrower
of any and all checks, drafts, cash and other remittances in payment or
as proceeds of, or on account of, any of the US Bank Accounts or other
Collateral, deposit the same in a special bank account in Lender's name
designated for receipt of funds of the Borrower (the "Collateral
Account") maintained by the Lender or such other bank or financial
institution as the Lender shall consent, over which the Lender alone has
power of withdrawal, and will designate with each such deposit the
particular US Bank Accounts or other item of Collateral upon which the
remittance was made. Borrower acknowledges that the maintenance of the
Collateral Account is solely for the convenience of the Lender in
facilitating its own operations. Said proceeds shall be deposited in
precisely the form received except for the endorsement of the Borrower
where necessary to permit collection of items, which endorsement the
Borrower agrees to make. Pending such deposit, the Borrower agrees not
to commingle any such checks, drafts, cash and other remittances with
any of its funds or property, but will hold them separate and apart
therefrom and upon an express trust for the Lender until deposit thereof
is made in the Collateral Account. Upon the full and final liquidation
of all Liabilities and termination of this Agreement and any obligation
of the Lender to make Advances hereunder, the Lender will pay over to
the Borrower any excess amounts received by the Lender as payment or
proceeds of Collateral, whether received by the Lender as a deposit in
the Collateral Account or received by the Lender as a direct payment on
any of the sums due hereunder. The Collateral Account and all funds at
any time therein shall constitute Collateral under this Agreement.
Before or upon final collection of any funds in the Collateral Account,
the Lender, at its discretion, may release such funds to the Borrower or
any account of the Borrower or apply any such funds to the Secured
Obligations whether or not then due. Any release of funds to the
Borrower or to any account of the Borrower shall not prevent the Lender
from subsequently applying any funds to the Secured Obligations. All
items credited to the Collateral Account and subsequently returned and
all other costs, fees and charges of the Lender in connection with the
Collateral Account may be charged by the Lender to any account of the
Borrower, and the Borrower shall pay the Lender all such amounts on
demand.
(c) Lockbox. The Borrower shall irrevocably direct all present
and future Account Debtors and other Persons obligated to make payments
on US Bank Accounts or other Collateral to make such payments to a
special lockbox (the "Lockbox") under the control of the Lender or an
Affiliate of the Lender. All of the Borrower's invoices, account
statements and other written or oral communication directing,
instructing, requesting or demanding payment of any Account or other
amount constituting Collateral
34
shall direct that all payments be made to the Lockbox and shall include
the Lockbox address. All payments received in the Lockbox shall be
processed to the Collateral Account. The Borrower agrees to execute and
deliver all documentation required by Lender related to the
establishment and maintenance of the Lockbox.
(d) Government Claims. If any US Bank Accounts, chattel paper
or General Intangible arises out of contracts or other transactions with
a Federal Governmental Authority or with any state, county of local
government authority or any department, agency or instrumentality
thereof, the Borrower will, unless the Lender shall otherwise agree in
writing, immediately notify the Lender in writing and execute any
writings and take any steps required by the Lender in order that all
monies due and to become due under such contracts or other transactions
shall be assigned and paid to the Lender and, with respect to Federal
Governmental Authorities, notice thereof given to the government under
the Federal Assignment of Claims Act of 1940, as amended, and/or with
respect to all other Governmental Authorities, notice thereof given to
the appropriate authority.
(e) Chattel Paper. If any Collateral is evidenced by chattel
paper or instruments, the Borrower will, unless the Lender shall
otherwise agree, deliver the originals of same to the Lender,
appropriately endorsed to the Lender's order and, regardless of the form
of such endorsement, the Borrower hereby expressly waives presentment,
demand, notice of dishonor, protest and notice of protest and all other
notices with respect thereto.
Section 5.3. US Bank Inventory.
-----------------
(a) Unless the Lender shall otherwise agree in writing, if the
Borrower sells US Bank Inventory for cash, all full and partial payments
therefor shall immediately be delivered by the Borrowers to the Lender
in their original form for deposit in the Collateral Account or
application to payment of the Liabilities in such order and manner as
Lender shall determine. All such cash shall be held by the Borrower in
trust for the Lender and shall be remitted to the Lender at the end of
the day received or at such other time as the Lender may designate.
(b) The Lender shall not be liable or responsible in any way
for the safekeeping of any Inventory delivered to it, to any bailee
appointed by or for it, to any warehouseman, or under any other
circumstances. The Lender shall not be responsible for collection of any
proceeds or for losses in collected proceeds held by the Borrower in
trust for the Lender. Any and all risk of loss for any or all of the
foregoing shall be upon the Borrower except for such loss as shall
result from the Lender's gross negligence or willful misconduct.
(c) Borrower shall, upon acquiring an interest in any US Bank
Inventory, deliver to the Lender schedules of such US Bank Inventory,
together with supplier's invoices, warranties, production, cost and
other records as the Lender may request. If requested by the Lender, the
Borrower shall deliver to the Lender schedules of the sale of any US
Bank Inventory immediately upon its sale. Any material change in the
value or
35
condition of any US Bank Inventory and any errors discovered in
schedules delivered to the Lender shall be reported to the Lender
immediately.
(d) Borrower shall (i) notify the Lender immediately if the
Borrower obtains possession (by return, repossession or otherwise) of
any US Bank Inventory which has been sold and which has a book or a fair
market value in each case in excess of $100,000, and shall inform the
Lender of the identity of the returned or repossessed US Bank Inventory,
the applicable Account Debtor and the amount of the applicable Account
Receivable; (ii) receive such US Bank Inventory in trust; and (iii)
resell such US Bank Inventory for the Lender unless instructed to
deliver it to the Lender.
Section 5.4. License for Use of Related General Intangibles. The
Borrower grants to the Lender and its Affiliates a non-exclusive, worldwide and
royalty-free license to use Related General Intangibles for the purposes of
selling, leasing, preparing for sale or disposing or enforcing its rights in any
or all of the Collateral. For this purpose "Related General Intangibles" shall
mean (i) licenses, trademarks, trademark applications, tradenames, patents,
patent applications, copyrights, trade secrets, designs, inventions, techniques,
franchises, contracts, agreements and other intangibles necessary to produce and
sell the US Bank Inventory without infringement of rights of any other party;
(ii) warranty rights and other rights arising in connection with the US Bank
Inventory; (iii) customer lists and information concerning customers that may
purchase the US Bank Inventory; and (iv) General Intangible arising in
connection with the US Bank Accounts or as proceeds thereof.
Section 5.5. Supplemental Documentation. At the Lender's request,
the Borrower shall execute and/or deliver to the Lender, at any time or times
hereafter, such agreements, assignments, documents, financing statements,
warehouse receipts, bills of lading, notices of assignment of US Bank Accounts,
schedules of US Bank Accounts assigned, and other written matter necessary or
requested by the Lender to perfect and maintain a perfected security interest in
the Collateral granted hereunder (all the above hereinafter referred to as
"Supplemental Documentation"), in form and substance acceptable to the Lender,
and pay all taxes, fees and other costs and expenses associated with any
recording or filing of the same. The Borrower agrees to reimburse the Lender for
the costs of all searches and updates of searches in public records reasonably
deemed necessary by the Lender in connection with the protection of its security
interest. The Borrower hereby irrevocably makes, constitutes and appoints the
Lender (and all Persons designated by the Lender for that purpose) as the
Borrower's true and lawful attorney (and agent-in-fact) to sign the name of the
Borrower on any of the Supplemental Documentation and to deliver any of the
Supplemental Documentation to such Persons as the Lender in its sole and
absolute discretion, may elect. The Borrower agrees that a carbon, photographic,
photostatic, and other reproduction of this Agreement or of a financing
statement is sufficient as a financing statement.
Section 5.6. Power of Attorney. Borrower irrevocably designates,
makes, constitutes, and appoints the Lender (and all Persons designated by the
Lender) as the Borrower's true and lawful attorney (and agent-in-fact) and the
Lender, or the Lender's agent, may, without notice to the Borrower:
36
(a) at such time or times hereafter as the Lender or said
agent, in its sole and absolute discretion, may determine, in the
Borrower's or the Lender's name, (i) receive, open and dispose of all
mail addressed to the Borrower and received at the street address or any
post office box address of the Borrower; (ii) direct and/or require the
Borrower to direct, any Account Debtor or other Person obligated under
or in respect of any Collateral, to make payment directly to the Lender
of any amounts due or to become due thereunder or with respect thereto;
(iii) endorse the Borrower's name on any checks, notes, drafts or any
other items of payment relating to and/or proceeds of the Collateral
which come into the possession of the Lender or under the Lender's
control and apply such payment or proceeds to the Liabilities in such
manner as Lender shall determine; (iv) endorse the Borrower's name on
any chattel paper, document, instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of
lading or similar document or agreement in the Lender's possession
relating to US Bank Accounts, US Bank Inventory or any other Collateral;
and (v) to demand terminations of other security interests on any of the
Collateral; and
(b) at such time or times after the occurrence and during the
continuance of an Event of Default, as the Lender or said agent, in its
sole and absolute discretion, may determine, in the Borrower's or the
Lender's name: (i) notify and/or require the Borrower to notify, any
Account Debtor or other Person obligated under or in respect of any
Collateral, of the fact of the Lender's Lien thereon and of the
collateral assignment thereof to the Lender; (ii) demand, collect,
surrender, release or exchange all or any part of any Collateral or any
amounts due thereunder or with respect thereto; (iii) settle, adjust,
compromise, extend or renew for any period (whether or not longer than
the initial period) any and all sums which are now or may hereafter
become due or owing upon or with respect to any of the Collateral; (iv)
enforce, by suit or otherwise, payment or performance of any of the
Collateral; (v) settle, adjust or compromise any legal proceedings
brought to collect any sums due or owing upon or with respect to any of
the Collateral; (vi) exercise all of the Borrower's rights and remedies
with respect to the collection of any amounts due upon or with respect
to any of the Collateral; (vii) if permitted by applicable law, sell or
assign the Collateral upon such terms, for such amounts and at such time
or times as the Lender may deem advisable; (viii) discharge and release
the Collateral; (ix) prepare, file and sign the Borrower's name on any
proof of claim in bankruptcy or similar document against any Account
Debtor; (x) prepare, file and sign the Borrower's name on any notice of
lien, assignment or satisfaction of lien or similar document in
connection with the US Bank Accounts and/or other Collateral; and (xi)
do all acts and things necessary, in the Lender's sole and absolute
discretion, to obtain repayment of the Liabilities and to fulfill the
Borrower's other obligations under this Agreement.
(c) at such time or times after the assertion by the Lender
that an Event of Default has occurred and is continuing (whether or not
an Event of Default has in fact occurred), as the Lender or said agent,
in its reasonable discretion, may determine, in the Borrower's or the
Lender's name, notify the post office authorities to change the address
for delivery of the Borrower's mail to an address designated by the
Lender.
This power, being coupled with an interest, is irrevocable until all Liabilities
are paid in full, all Letters of Credit have expired or been terminated and this
Agreement is terminated. Under no
37
circumstances shall the Lender be under any duty to act in regard to any of the
foregoing matters. The costs relating to any of the foregoing matters, including
Attorneys' Fees and out-of-pocket expenses shall be paid solely by the Borrower
whether the same are incurred by the Lender or the Borrower. The Lender and its
Affiliates, and their respective directors, officers, employees or agents, shall
not be liable for any acts of commission or omission nor for any error in
judgment or mistake of fact or law, unless the same shall have resulted from
gross negligence or willful misconduct.
Section 5.7. Collateral Appraisals. The Lender may, from time to
time, cause, or request that the Borrower cause, an appraiser acceptable to
Lender prepare, address and deliver to Lender on appraisal of all or any portion
of the Borrower's real property or tangible personal property. The Borrower
shall pay all costs and expenses incurred in connection with any such appraisal.
Section 5.8 IBM Security Interest. The Borrower will not
designate or identify any of the Collateral in any periodic collateral report or
borrowing request to IBM Credit and shall take all actions necessary to assure
that none of the Collateral shall be deemed "IBM Credit Collateral" under the
IBM Intercreditor Agreement. The Borrower will not designate or identify any IBM
Credit Collateral in any Borrowing Base Certificate or otherwise include or
attempt to include any IBM Credit Collateral as Collateral. Upon request of the
Lender, the Borrower will provide to the Lender copies of all information,
writings, certificates and notices which designate or identify IBM Credit
Collateral and "IBM Credit Account Debtors" as defined in the IBM Intercreditor
Agreement.
ARTICLE 6.
REPRESENTATION AND WARRANTIES
-----------------------------
To induce the Lender to enter into this Agreement and to make Advances
to the Borrower, the Borrower makes the following representations and
warranties:
Section 6.1. Litigation and Proceedings. Except as set forth on
Schedule 6.1, no judgments are outstanding against the Borrower or any Domestic
Subsidiary, and no action, suit, or proceeding at law or in equity or by or
before any Governmental Authority is now pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Domestic
Subsidiary, or the respective business, properties or rights of the Borrower or
any Domestic Subsidiary.
Section 6.2. No Default. No Default or Event of Default exists.
Except as set forth on Schedule 6.2, the Borrower is not in default under any
agreement or instrument to which the Borrower is a party, or by which the
Borrower or any of its assets is bound or affected, except those which are not,
in the aggregate, material to the financial condition, results of operations or
business of the Borrower, taken as a whole. The Borrower knows of no dispute,
except as set forth on Schedule 6.2, relating to any agreement or instrument
other than those which are not, in the aggregate, material to financial
condition, results of operations or business of the Borrower, taken as a whole.
38
Section 6.3. Licenses, Patents, Copyrights, Trademarks and Trade
Names. The Borrower possesses or has the right to use all of the patents,
trademarks, trade names and copyrights, and applications therefor, and all
technology, know-how, processes, methods and designs ("technology") used in or
necessary for the conduct of its business, without known conflict with the
rights of others.
Section 6.4. Ownership of Property; Liens. Except as contemplated
by this Agreement, each of the Borrower and the Guarantor has good and
marketable title to its real properties and good and sufficient title to its
respective other properties, including all properties and assets referred to as
owned by it in the audited financial statements of the Borrower and the
Subsidiaries referred to in Section 6.13 (other than property disposed of since
the date of such financial statement in the ordinary course of business as
permitted by this Agreement). None of the Collateral or other property or assets
of the Borrower or the Guarantor is subject to any Lien (including, without
limitation, Liens pursuant to Capitalized Leases under which the Borrower or the
Guarantor is a lessee) except: (a) Liens in favor of the Lender; (b) Liens for
current taxes not delinquent or taxes being contested in good faith and by
appropriate proceedings and as to which such reserves or other appropriate
provisions as may be required by GAAP are being maintained; (c) statutory Liens,
such as carriers', loggers' warehousemen's, mechanics', materialmen's and
repairmen's Liens, arising in the ordinary course of business securing
obligations which are not overdue or which are being contested in good faith and
by appropriate proceedings and as to which such reserves or other appropriate
provisions as may be required by GAAP are being maintained; and (d) Liens
described on Schedule 8.1.
Section 6.5. Location of Assets; Chief Executive Office. The
Borrower's chief executive office and principal place of business is located at
the address set forth on Schedule 6.5. As of the execution of this Agreement,
the books and records of the Borrower pertaining to the US Bank Accounts are
located at the chief executive office of the Borrower.
Section 6.6. Tax Liabilities. Each of the Borrower and the
Guarantor has each filed all federal, state and local tax reports and returns
required by any law or regulation to be filed by it and has either duly paid all
taxes, duties and charges indicated to be due on the basis of such returns and
reports or has made adequate provision for the payment thereof, and the
assessment of any material amount of additional taxes in excess of those paid
and reported is not reasonably expected. The reserves for taxes reflected on the
Borrower's and the Guarantor's respective balance sheets are adequate in amount
for the payment of all liabilities for all taxes (whether or not disputed) of
the Borrower and the Guarantor, as applicable, accrued through the date of such
balance sheet. There are no material unresolved questions or claims concerning
any tax liability of the Borrower or the Guarantor, except as described on
Schedule 6.6.
Section 6.7. Other Names. During the preceding five (5) years,
the Borrower and each Domestic Subsidiary has done business solely in the names
set forth on Schedule 6.7, and has no trade names, styles or doing business
forms except as disclosed on Schedule 6.7. The Borrower's taxpayer
identification number of the Borrower and each Domestic Subsidiary is as set
forth on Schedule 6.7.
Section 6.8. Affiliates. Neither the Borrower nor any Subsidiary
has any Affiliates, other than the Subsidiaries, their respective directors,
officers, agents and employees
39
and those Persons disclosed on Schedule 6.8, as updated from time to time by
Borrower, and the legal relationships of the Borrower and the Subsidiaries to
each such Affiliate are accurately and completely described thereon.
Section 6.9. Environmental Matters. Except as disclosed on
Schedule 6.9: (a) the operations of the Borrower and the Guarantor comply in all
respects with all applicable Environmental Laws and all applicable Occupational
Safety and Health Laws; (b) none of the operations of the Borrower or the
Guarantor are subject to any judicial or administrative proceeding alleging the
violation of any Environmental Law or Occupational Safety and Health Law; (c)
none of the operations of the Borrower or the Guarantor is the subject of
federal or state investigation evaluating whether any remedial action is needed
to respond to a spillage, disposal or release into the environment of any
Hazardous Material or other hazardous, toxic or dangerous waste, substance or
constituent, or other substance or any unsafe or unhealthful condition at any
premises of the Borrower or the Guarantor; (d) neither the Borrower nor any
Subsidiary has received or filed any notice under any Environmental Law or
Occupation Safety and Health Law indicating or reporting any past or present
spillage, disposal or release into the environment of, or treatment, storage or
disposal of, any Hazardous Material or other hazardous, toxic or dangerous
waste, substance or constituent, or other substance or any unsafe or unhealthful
condition at any premises of the Borrower or the Guarantor; (e) neither the
Borrower nor the Guarantor has any known contingent liability in connection with
any spillage, disposal or release into the environment of, or otherwise with
respect to, any Hazardous Material or other hazardous, toxic or dangerous waste,
substance or constituent, or other substance or any unsafe or unhealthful
condition at any premises of the Borrower or the Guarantor; and (f) the Borrower
and the Guarantor have each secured and is maintaining all necessary permits,
licenses and approvals necessary under any Environmental Law to Borrower's or
Guarantor's business.
Section 6.10. Organization. Schedule 6.10 accurately sets forth
as of the date hereof (a) the correct legal name and the jurisdiction of
organization of the Borrower and each Subsidiary, and the jurisdictions in which
the Borrower and each Subsidiary is qualified to transact business as a foreign
organization. The Borrower and each Subsidiary is duly qualified to do business
and is in good standing in all states where, because of the nature of its
activities or properties, such qualification is required and the failure to be
so qualified would have a material adverse effect on the Borrower or such
Subsidiary. The Borrower and each Subsidiary has the requisite power and
authority to own its properties and assets and to carry on its business as now
being conducted and as contemplated in the Loan Documents.
Section 6.11. Authority; No Conflict. The Borrower is duly
authorized to execute and deliver the Loan Documents and is and will continue to
be duly authorized to borrow monies hereunder and to perform its obligations
under the Loan Documents and the borrowings hereunder and the incurring of the
obligations and the granting of Liens pursuant to the Loan Documents do not and
will not require any consent or approval of any Governmental Authority. The
execution, delivery and performance by the Borrower of the Loan Documents, do
not and will not conflict with (a) any provision of law, (b) the charter or
by-laws of the Borrower, (c) any agreement binding upon the Borrower, or (d) any
court or administrative order or decree applicable to the Borrower, and do not
and will not require, or result in, the creation or imposition of any Lien on
any asset of the Borrower except in favor of the Lender.
40
Section 6.12. Validity; Binding Effect. The Loan Documents
applicable to the Borrower constitute the legal, valid and binding obligations
of the Borrower and are enforceable against the Borrower in accordance with
their respective terms. The Loan Documents applicable to the Guarantor
constitute the legal, valid and binding obligations of the Guarantor and are
enforceable against the Guarantor in accordance with their respective terms. The
execution, delivery and performance of the Loan Documents by the Borrower and
the Guarantor, and the borrowing of money, incurring of obligations and granting
of Liens thereunder by the Borrower are within the Borrower's organizational
powers and have been duly authorized by all necessary action of the Borrower.
Section 6.13. Financial Statements. The Borrower's audited
consolidated and consolidating financial statement as at March 31, 2000, and the
Borrower's unaudited consolidated and consolidating financial statement as at
April 30, 2001, copies of which have been furnished to the Lender, have been
prepared in conformity with GAAP and applied on a basis consistent with that of
the preceding fiscal year and period and present fairly the financial condition
of the Borrower and the Subsidiaries as at such dates and the results of their
operations for the periods then ended, subject (in the case of the interim
financial statement) to year-end audit adjustments. Since March 31, 2000, no
Adverse Event has occurred.
Section 6.14. Contracts; Labor Matters. Except as disclosed on
Schedule 6.14: (a) neither the Borrower nor the Guarantor is a party to any
contract or agreement, or subject to any charge, corporate restriction,
judgment, decree or order, the performance of which constitutes an Adverse
Event; (b) no labor contract to which the Borrower or the Guarantor is subject
is scheduled to expire during the original term of this Agreement; and (c) on
the date of this Agreement, neither the Borrower nor the Guarantor is a party to
any labor dispute and there are no strikes or walkouts relating to any labor
contracts to which the Borrower or the Guarantor is subject.
Section 6.15. Compliance with Law. The Borrower and each
Subsidiary is in material compliance with all statutes and governmental rules
and regulations applicable to it.
Section 6.16. Eligibility of Collateral. (a) All of the US Bank
Accounts are and will continue to be bona fide existing obligations created by
the sale or lease of goods or the rendering of services and all shipping or
delivery receipts and other documents furnished or to be furnished to the Lender
in connection therewith are and will be genuine; (b) each US Bank Account, or
item of US Bank Inventory which the Borrower shall, expressly or by implication,
request the Lender to classify as an Eligible Account Receivable or as Eligible
Inventory, respectively, will, as of the time when such request is made, conform
in all respects to the requirements of such classification set forth in the
respective definitions of "Eligible Account" and "Eligible Inventory" set forth
herein; (c) with respect to each schedule of US Bank Inventory delivered to the
Lender pursuant to Section 5.3: (i) the descriptions, origins, size, qualities,
quantities, weights, and markings of all goods stated thereon or on any
attachment thereto, are true and correct in all material respects; (ii) all
goods stated thereon have been produced by the Borrower in compliance with all
requirements of the Fair Labor Standards Act; (iii) none of the goods stated
thereon are defective, of second quality, used, or goods returned after
shipment, except where described as such; and (iv) all US Bank Inventory not
included on such schedule has been previously scheduled.
41
Section 6.17. Solvency. The Borrower and the Guarantor have
capital sufficient to carry on their respective businesses as conducted and as
proposed to be conducted and are solvent and able to pay their respective debts
as they mature, and the Borrower now owns property having a value greater than
the amount required to pay the Borrower's debts.
Section 6.18. ERISA. Each Plan is in substantial compliance with
all applicable requirements of ERISA and the Code and with all material
applicable rulings and regulations issued under the provisions of ERISA and the
Code setting forth those requirements. No Reportable Event has occurred and is
continuing with respect to any Plan. All of the minimum funding standards
applicable to such Plans have been satisfied and there exists no event or
condition which would reasonably be expected to result in the institution of
proceedings to terminate any Plan under Section 4042 of ERISA. With respect to
each Plan subject to Title IV of ERISA, as of the most recent valuation date for
such Plan, the present value (determined on the basis of reasonable assumptions
employed by the independent actuary for such Plan and previously furnished in
writing to the Lender) of such Plan's projected benefit obligations did not
exceed the fair market value of such Plan's assets. Except as required under
Section 4890B of the Code, Section 601 of ERISA or applicable state law, the
Borrower is not obligated to provide post-retirement medical or insurance
benefits with respect to employees or former employees.
Section 6.19. Federal Reserve Regulations. The Borrower is not
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (as defined in Regulation U of the Federal Reserve Board),
and no part of the proceeds of any Loan will be used to purchase or carry margin
stock or for any other purpose which would violate any of the margin
requirements of the Federal Reserve Board.
Section 6.20. Insurance. The Borrower and the Guarantor currently
maintains the insurance coverages required to be maintained under Section 7.4
hereof and under the other Loan Documents. Except as set forth on Schedule 6.20,
neither the Borrower nor the Guarantor has any retrospective rating plan,
fronting arrangement or any other self-insurance or risk assumption arrangement,
or participates in any agreed to by the Borrower or imposed upon the Borrower by
any such insurer.
Section 6.21. Subsidiaries, Ownership. The Borrower has no
Subsidiaries except as listed on Schedule 6.21. The ownership of the Borrower
and each Subsidiary and the jurisdiction of organization of each Subsidiary, is
as set forth on Schedule 6.21, which schedule shows the name(s) of each Person
having an ownership interest, and the percentage of such ownership interest in
the respective entity. Except as set forth on Schedule 6.21, no part of the
ownership interest of any Person in the Borrower or any Subsidiary is subject to
any shareholder agreement, voting trust or other agreement limiting or otherwise
pertaining to the ownership interest of such Person.
Section 6.22. Partnerships; Joint Ventures; LLCs. Schedule 6.22
sets forth an accurate and complete statement of the direct and indirect
partnership, joint venture, or other equity interests, if any, of the Borrower
and each Subsidiary in any Person that is not a corporation.
42
Section 6.23. Control of Collateral; Lease of Property. Except as
set forth on Schedule 6.23, no portion of the Collateral is now or will be
(while any Liabilities exist or this Agreement is in effect) in the possession
or control of any Person other than the Borrower.
Section 6.24. Investment Company Act. Neither the Borrower nor
any Subsidiary is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
Section 6.25. Public Utility Holding Company Act. Neither the
Borrower nor any Subsidiary is a "holding company" or a "subsidiary company" of
a "holding company" or an "affiliate" of a "holding company" within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
Section 6.26. Securities Act. Borrower has not issued any
unregistered securities in violation of the registration requirements of Section
5 of the Securities Act of 1933, as amended, or any other law, and is not
violating any rule, regulation or requirement under the Securities Act of 1933,
as amended, or the Securities Act of 1934, as amended, in any material respect.
Section 6.27. Consents. No consent of the shareholders of the
Borrower or the Guarantor or any other Person, and no order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with, or exemption by, any Governmental Authority, is required on the part of
the Borrower or the Guarantor to authorize, or is required in connection with
the execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, the Loan Documents.
ARTICLE 7.
AFFIRMATIVE COVENANTS
---------------------
The Borrower covenants and agrees that so long as any Liabilities remain
outstanding, and (even if there shall be no Liabilities outstanding) so long as
Lender remains committed to make loans under this Agreement, the Borrower shall:
Section 7.1. Financial and Other Information. Deliver to Lender:
-------------------------------
(a) Annual Audit Report. As soon as available and in any event
within 120 days after the end of each fiscal year of the Borrower, the
annual audit report of the Borrower and the Subsidiaries prepared on a
consolidating and consolidated basis in conformity with GAAP, consisting
of at least statements of income, cash flow and stockholders' equity,
and a consolidated and consolidating balance sheet as at the end of such
year, setting forth in each case in comparative form corresponding
figures from the previous annual audit, certified, without
qualification, by independent certified public accountants of recognized
standing selected by the Borrower and acceptable to the Lender, together
with any management letters, management reports or other supplementary
comments or reports to the Borrower or its board of directors furnished
by such accountants.
43
(b) Accountant's Certificate. Together with the audited
financial statements required under Section 7.1(a), a certificate from
the accounting firm performing such audit (i) acknowledging its
understanding that the Lender and any Participant is relying on such
audit report and (ii) stating that it has reviewed this Agreement and
that in performing its examination, nothing came to its attention that
caused it to believe that any Default or Event of Default exists, or, if
such Default or Event of Default exists, describing its nature.
(c) Monthly Financial Statement. As soon as available and in
any event within 30 days after the end of each month, a copy of the
unaudited financial statement of the Borrower and the Subsidiaries
prepared in the same manner as the audit report referred to in Section
7.1(a), signed by the Borrower's chief financial officer and consisting
of at least consolidated statements of income, cash flow and
stockholders' equity for the Borrower and the Subsidiaries for such
month and for the period from the beginning of such fiscal year to the
end of such month, and a consolidated and consolidating balance sheet of
the Borrower as at the end of such month.
(d) Projections. As soon as available and in any event not
later than 60 days preceding the last day of each fiscal year of the
Borrower, a projected financial statement of the Borrower and the
Subsidiaries prepared in the same manner as the audit report referred to
in Section 7.1(a), and a projected borrowing base availability statement
of the Borrower and the Subsidiaries signed by the Borrower's chief
financial officer and presenting fairly the Borrower's best good faith
projections of the financial position and results of operations of the
Borrower and the Subsidiaries for each month of the following fiscal
year.
(e) Officer's Certificate. Together with the financial
statements furnished by the Borrower under Section 7.1(a) and (c), a
certificate of the Borrower's chief financial officer, in the form
provided by Lender, dated the date of such annual audit report or such
monthly financial statement, as the case may be, to the effect that no
Default or Event of Default has occurred and is continuing, or, if there
is any such event, describing it and the steps, if any, being taken to
cure it, and containing a computation of, and showing compliance with,
each of the financial ratios and restrictions contained in Section 8.16.
Section 7.2. Conduct of Business. Except as contemplated by this
Agreement, (a) maintain and preserve, and cause each Domestic Subsidiary to
maintain and preserve, its respective existence as a corporation or other form
of business organization, as the case may be, and all rights, privileges,
licenses, patent rights, copyrights, trademarks, trade names, franchises and all
permits, certifications, approvals and other authority to the extent material
and necessary for the conduct of its respective business in the ordinary course
as conducted from time to time; (b) continue in and limit, and cause each
Domestic Subsidiary to continue and limit, its operations to the same general
line of business as that presently conducted by it; (c) comply with, and cause
each Domestic Subsidiary to comply with, all federal, state and local statutes
and governmental rules and regulations applicable to it; (d) keep and conduct
its business separate and apart from the business of its Affiliates; and (e)
otherwise do all things necessary to make the representations and warranties set
forth in Article 6 of this Agreement true and correct at all times.
44
Section 7.3. Maintenance of Properties. Keep the Borrower's real
estate, leaseholds, equipment and other fixed assets in good condition, repair
and working order, normal wear and tear excepted, and keep the US Bank Inventory
in good and merchantable condition.
Section 7.4. Insurance. Maintain, and cause the Guarantor to
maintain, insurance to such extent and against such hazards and liabilities as
is commonly maintained by companies similarly situated or as the Lender may
request from time to time. Keep the Collateral properly housed and insured for
its full insurable value against loss or damage by fire, theft, explosion,
sprinklers, and such other risks as are customarily insured against by persons
engaged in business similar to that of the Borrower, with such companies, in
such amounts and under policies in such form as shall be satisfactory to the
Lender. From time to time, prior to the expiration of any such insurance, the
Borrower shall deliver to Lender certificates evidencing the renewal of such
policies of insurance and showing Lender as loss payee (under a lender's or
mortgagee's loss payee endorsement) with respect to any casualty loss covering
the Collateral and an additional insured with respect to any liability insurance
together with evidence of payment of all premiums therefor. The Borrower hereby
directs all insurers under such policies of insurance to pay all proceeds
payable thereunder directly to the Lender. The Borrower irrevocably makes,
constitutes and appoints the Lender and any Person whom the Lender may from time
to time designate (and all officers, employees or agents designated by the
Lender or such Person) as the Borrower's true and lawful attorney (and
agent-in-fact) for the purpose of making, settling and adjusting claims under
such policies of insurance, endorsing the name of the Borrower on any check,
draft, instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect to such
policies of insurance. In the event the Borrower at any time or times hereafter
shall fail to obtain or maintain any of the policies of insurance required
herein or to pay any premium in whole or in part relating thereto, the Lender,
without waiving or releasing any obligations or default by the Borrower
hereunder, may at any time or times thereafter (but shall be under no obligation
to do so) obtain and maintain such policies of insurance and pay such premiums
and take any other action with respect thereto which the Lender deems advisable.
All sums so disbursed by the Lender, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall be deemed an Advance
hereunder and shall be payable on demand by the Borrower to the Lender.
Section 7.5. ERISA. Maintain, and cause each ERISA Affiliate to
maintain, each Plan in compliance with all material applicable requirements of
ERISA and of the Code and with all applicable rulings and regulations issued
under the provisions of ERISA and of the Code.
Section 7.6. Notices. Notify the Lender in writing of any of the
following immediately upon learning of the occurrence thereof, describing the
same and, if applicable, the steps being taken by the Person(s) affected with
respect thereto:
(a) Default. The occurrence of (i) any Default or Event of
Default, and (ii) to the extent not included in clause (i) above, the
default by the Borrower, or any Subsidiary under any note, indenture,
loan agreement, mortgage, lease, deed or other material similar
agreement to which the Borrower, or any Subsidiary, as appropriate, is a
party or by which it is bound.
45
(b) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding affecting the Borrower, any
Subsidiary or any Collateral, whether or not covered by insurance.
(c) Judgment. The entry of any judgment or decree against the
Borrower or any Subsidiary, if the amount of such judgment exceeds
$250,000.
(d) ERISA. With respect to any Plan, the occurrence of a
Reportable Event or Prohibited Transaction, and, when received, copies
of any notice from PBGC of intention to terminate or have a trustee
appointed for any Plan.
(e) Change in Collateral Locations. Any change in location of
any of the US Bank Inventory to locations other than those identified in
this Agreement or in Schedule 6.5, together with a list of such new
location(s) and the name and address of any landlord and/or mortgagee.
At Lender's request, the Borrower shall deliver to the Lender a
landlord's waiver and/or mortgagee's waiver in form and substance
satisfactory to the Lender with respect to Collateral at such new
locations.
(f) Change in Place(s) of Business. Any proposed opening,
closing or other change in the list of offices and other places of
business of the Borrower and each Domestic Subsidiary set forth in
Schedule 6.5, together with a list of such new location(s), the legal
description of the location and the name and address of any landlord
and/or mortgagee. At the Lender's request, the Borrower shall deliver to
the Lender a landlord's waiver and/or mortgagee's waiver in form and
substance satisfactory to the Lender with respect to Collateral at such
new locations.
(g) Change of Name. Any change in the name of the Borrower or
any Subsidiary, or the adoption by the Borrower or any Subsidiary of any
trade name not set forth in Schedule 6.7.
(h) Environmental and Safety and Health Matters.
Non-compliance with and/or receipt of any notice that the operations of
the Borrower or any Domestic Subsidiary are not in full compliance with
the requirements of any applicable Environmental Law or any Occupational
Safety and Health Law; the occurrence of or receipt of notice that the
Borrower or any Domestic Subsidiary is subject to federal, state or
local investigation evaluating whether any remedial action is needed to
respond to (i) any spillage, disposal or release into the environment of
any Hazardous Material or other hazardous, toxic or dangerous waste,
substance or constituent, or other substance, or (ii) any unsafe or
unhealthful condition at any premises of the Borrower or any Domestic
Subsidiary; or receipt of notice that any properties or assets of the
Borrower or any Domestic Subsidiary are subject to an Environmental
Lien.
(i) Default by Others. Any material default by any Account
Debtor or other Person obligated to the Borrower or any Subsidiary,
under any contract, chattel paper, note or other evidence of amounts
payable or due or to become due to the Borrower or such Subsidiary if
the amount payable under such contract, chattel paper, note or other
evidence of amounts payable or due or to become due is material.
46
(j) Change in Management or Line(s) of Business. Any
substantial change in the senior management of the Borrower or any
Subsidiary, or any change in the Borrower's or any Subsidiary's line(s)
of business.
(k) Change in Insurance. The Borrower shall (a) notify the
Lender in writing at least 30 days prior to any cancellation or material
change of any such insurance by the Borrower or any Subsidiary and (b)
within five business days after receipt of any notice (whether formal or
informal) of any cancellation or change in any of its insurance by any
of its insurers or any material change in the cost thereof or which
reduces the policyholder's or financial size ratings of the insurance
carriers of the Borrower or any Subsidiary, as established by Best's
Insurance Reports.
(l) Other Events. The occurrence of such other events as the
Lender may from time to time specify.
The provision or acceptance of any notice under this Section 7.6 shall not
constitute a waiver of any Default or Event of Default, or a waiver of the
obligation of the Borrower to comply with any term, condition or covenant
hereof.
Section 7.7. Use of Proceeds. Borrower shall use the proceeds of
all Loans only for the purposes stated in Section 2.1 and for no other purpose.
Section 7.8. Books and Records, Access. Maintain, and cause each
Subsidiary to maintain, complete and accurate books and records (including,
without limitation, records relating to US Bank Accounts, US Bank Inventory and
other Collateral), in which full and correct entries in conformity with GAAP
shall be made of all dealings and transactions in relation to its respective
business and activities. Cause its books and records as at the end of any
calendar month to be posted and closed not more than thirty (30) days after the
last business day of such month. Permit, and cause each Domestic Subsidiary to
permit, access by the Lender and its agents or employees to the books and
records of the Borrower and such Domestic Subsidiary at the Borrower's or such
Domestic Subsidiary's place or places of business at intervals to be determined
by the Lender and without hindrance or delay, and permit, and cause each
Domestic Subsidiary to permit, the Lender or its agents and employees to inspect
the Borrower's Inventory and such Domestic Subsidiary's inventory and equipment,
and to inspect, audit, check and make copies and/or extracts from the books,
records, journals, orders, receipts, correspondence and other data relating to
US Bank Inventory, US Bank Accounts and any other Collateral, or to any other
transactions between the parties hereto. Any and all such inspections and/or
audits shall be at the Borrower's expense; provided, however, that so long as no
Default or Event of Default has occurred and is continuing, Borrower's
obligations to pay for such inspections and/or audits, other than the initial
audit, shall be limited to $600 per day per auditor plus expenses and to four
such audits per fiscal year.
Section 7.9. Collateral Monitoring. Permit the Lender to (a) use
the Borrower's stationery and sign the name of the Borrower to request
verification of US Bank Accounts or other Collateral from Account Debtors, and
(b) use the information recorded on or contained in any data processing
equipment and computer hardware and software to which the Borrower has access
relating to US Bank Accounts, US Bank Inventory and/or other Collateral.
47
Section 7.10. Reports. Furnish to Lender:
(a) Agings; Ineligible Accounts Certification. Within 15 days
after the end of each month, (i) a detailed aging of all US Bank
Accounts by invoice, including, without limitation, a reconciliation to
the aging report delivered to the Lender for the preceding month, (ii) a
certification of ineligible US Bank Accounts, (iii) an aging of all
accounts payable as of the end of the preceding month, (iv) a
reconciliation of US Bank Accounts to the Borrower's general ledger and
the Lender's records, and (v) at Lender's request, a list of the names
and addresses of each Account Debtor of US Bank Accounts, each in form
and content acceptable to the Lender.
(b) Inventory Certification. Within 15 days after the end of
each month, (i) an US Bank Inventory certification report as of the end
of the preceding month for all US Bank Inventory locations, and (ii) a
certification of Ineligible Inventory and Inventory that is not US Bank
Inventory in form and content acceptable to the Lender.
(c) Sales and Collection Reports. Not later than 12:00 noon,
Minneapolis time, on each Business Day, a report of the Borrower's sales
and collections for such day, and for any other day for which sales and
collections have not been reported, in form and content acceptable to
the Lender.
(d) Reconciliations. Within 30 days after the end of each
month, reconciliations of US Bank Inventory and US Bank Accounts to the
Borrowing Base Certificate.
(e) Payroll Tax Certification. Within 5 days after request of
the Lender, a certificate of an officer of the Borrower as to the
payment of payroll taxes and other taxes collected by the Borrower from
or on behalf of any Person to the appropriate Governmental Authority.
(f) Other Reports.
-------------
(i) SEC and Other Reports. Promptly upon the making or
filing thereof, copies of all financial statements, reports and
proxy statements mailed to the Borrower's shareholders, and
copies of all registration statements, periodic reports and other
documents filed with the Securities and Exchange Commission (or
any successor thereto) or any national securities exchange.
(ii) Report of Change in Subsidiaries or Other Entities.
Promptly upon the occurrence thereof, a written report of any
change in the list of the Borrower's Subsidiaries set forth on
Schedule 6.21 or in the list of partnerships, joint ventures or
limited liability companies set forth on Schedule 6.22 or in the
list of Affiliates set forth on Schedule 6.8.
(iii) Insurance Updates. If requested, provide to the
Lender within 45 days of such request, a certificate signed by
its chief financial officer that attests to and updates the
information described in Section 6.20 and disclosed on Schedule
6.20.
48
(iv) Other Reports. The information required to be
provided pursuant to other provisions of this Agreement, and such
other reports from time to time requested by the Lender.
Section 7.11. Tax Liabilities. File, and cause each Domestic
Subsidiary to file, all federal, state and local tax reports and returns
required by any law or regulation to be filed by it and pay, and cause each
Domestic Subsidiary to pay, all taxes, duties and charges and any other
obligation which, if unpaid, would become a Lien against any of its properties,
except liabilities being contested in good faith by appropriate proceedings
diligently conducted and against which adequate reserves acceptable to the
Borrower's independent certified public accountants have been established,
unless and until any Lien resulting therefrom attaches to any of its property
and becomes enforceable against its creditors.
Section 7.12. Environmental Compliance. If the Borrower or any
Domestic Subsidiary shall receive any letter, notice, complaint, order,
directive, claim or citation alleging that the Borrower or any Domestic
Subsidiary has violated any Environmental Law, has released any Hazardous
Material, or is liable for the costs of cleaning up, removing, remediating or
responding to a release of Hazardous Materials, then within the time period
permitted and to the extent required by the applicable Environmental Law or the
Governmental Authority responsible for enforcing such Environmental Law, remove
or remedy, or cause the applicable Domestic Subsidiary to remove or remedy, such
violation or release or satisfy such liability, unless and only during the
period that the applicability of the Environmental Law, the fact of such
violation or liability or the action required to remove or remedy such violation
is being contested by the Borrower or the applicable Domestic Subsidiary by
appropriate proceedings diligently conducted and all reserves with respect
thereto as may be required under GAAP, if any, have been made, and no Lien in
connection therewith shall have attached to any property of the Borrower or the
applicable Domestic Subsidiary which shall have become enforceable against
creditors of such Person.
Section 7.13. Further Assurances. At the Borrower's cost and
expense, upon request of the Lender, duly execute and deliver or cause to be
duly executed and delivered, to the Lender such further instruments, documents,
certificates, financing and continuation statements, and do and cause to be done
such further acts that may be reasonably necessary or advisable in the
reasonable opinion of the Lender to carry out more effectively the provisions
and purposes of this Agreement and the other Loan Documents.
Section 7.14. Deposit Accounts. Maintain the Borrower's deposit
accounts with the Lender.
ARTICLE 8.
NEGATIVE COVENANTS
------------------
The Borrower covenants and agrees that so long as any Liabilities remain
outstanding, and (even if there shall be no Liabilities outstanding) so long as
the Lender remains committed to
49
make Loans under this Agreement (unless Lender shall give Lender's prior written
consent) the Borrower shall not, and shall not permit the Guarantor to:
Section 8.1. Liens. Create, incur, assume or suffer to exist any
Lien with respect to any property, revenues or assets now owned or hereafter
arising or acquired, except:
(a) Liens for current taxes not delinquent or taxes being
contested in good faith by appropriate proceedings and as to which such
reserves or other appropriate provisions as may be required by GAAP are
being maintained;
(b) statutory Liens, such as carriers', loggers',
warehousemen's, mechanics', materialmen's, and repairmen's Liens,
arising in the ordinary course of business securing obligations which
are not overdue or which are being contested in good faith and by
appropriate proceedings and as to which such reserves or other
appropriate provisions as may be required by GAAP are being maintained;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation;
(d) Liens in connection with purchase money financing of
Capital Expenditures permitted under this Agreement provided that such
Liens attach only to the property being acquired and the Indebtedness
secured thereby does not exceed 100% of the fair market value of such
property at the time of acquisition thereof;
(e) Liens in connection with purchase money financing of
Business Acquisitions that constitute Permitted Investments (subject to
the terms and limitations of the definition thereof) provided that such
Liens attach only to the assets being acquired or the assets of the
Person being acquired in such Business Acquisitions;
(f) Liens in favor of the Lender;
(g) Liens subject to the IBM Intercreditor Agreement;
(h) Liens described on Schedule 8.1; and
(i) Liens consented to by the Lender in writing.
Section 8.2. Consolidations, Mergers or Acquisitions. Consolidate
with, merge with, or otherwise acquire all or substantially all of the assets or
properties of any other Person, except:
(a) Business Acquisitions constituting Permitted Investments
(subject to the terms and limitations of the definition thereof); and
(b) any merger or consolidation of one wholly-owned Domestic
Subsidiary with or into another or of one Foreign Subsidiary with or
into another; and
50
(c) mergers or consolidations of the Borrower with other
Persons, provided, such mergers may only be consummated if no Default or
Event of Default shall have occurred and continued hereunder and no
Default or Event of Default shall exist after giving effect to such
mergers, and (i) the Borrower is the surviving entity of any such
merger.
Section 8.3. Investments. Acquire for value, make, have or hold
any Investments, except:
(a) advances to employees of the Borrower or any Subsidiary
for travel or other ordinary business expenses, provided that the
aggregate amount outstanding at any one time shall not exceed $10,000
for any single employee and $25,000 in the aggregate for all employees;
(b) advances to subcontractors and suppliers in maximum
aggregate amounts reasonably acceptable to the Lender;
(c) extensions of credit in the nature of Accounts or notes
receivable arising from the sale of goods and services in the ordinary
course of business;
(d) shares of stock, obligations or other securities received
in settlement of claims arising in the ordinary course of business;
(e) Investments outstanding on the date hereof in Subsidiaries
by the Borrower and its Subsidiaries;
(f) Investments outstanding on the date hereof by the Borrower
and its Subsidiaries in Affiliates identified on Schedule 6.8 and other
entities identified on Schedule 6.22;
(f) other Investments outstanding on the date hereof listed on
Schedule 8.3;
(g) Permitted Investments (subject to the terms and
limitations of the definition thereof); and
(g) other Investments consented to the Lender in writing.
Section 8.4. Indebtedness. Incur, create, issue, assume or suffer
to exist any Indebtedness, including, without limitation, Indebtedness as lessee
under any Capitalized Lease except:
(a) Indebtedness under the terms of this Agreement;
(b) Subordinated Debt listed on Schedule 8.4;
(c) Indebtedness hereafter incurred in connection with Liens
permitted under Section 8.1(d);
51
(d) Indebtedness hereafter incurred in connection with
purchase money financing of a Business Acquisition, which could be
secured by Liens described in Section 8.1(e) (whether or not such
financing is actually secured);
(e) Indebtedness to IBM Credit Corporation, as described in
the IBM Credit Loan Agreement,
(f) Indebtedness under the Bonds that are supported by the IDB
Letters of Credit,
(g) other Indebtedness outstanding on the date hereof and
listed on Schedule 8.4; and
(h) other Indebtedness approved in writing by the Lender.
Section 8.5. Contingent Liabilities. Except as permitted under
Section 8.4, guarantee, endorse or otherwise in any way become or be responsible
for obligations of any other Person, whether by agreement to purchase the
indebtedness of such Person or through the purchase of goods, supplies or
services, or maintenance of working capital or other balance sheet covenants or
conditions, or by way of stock purchase, capital contribution, advance or loan
for the purpose of paying or discharging any indebtedness or obligation of such
Person or otherwise, except for endorsements of negotiable instruments for
collection in the ordinary course of business
Section 8.6. Transfer of Assets. Sell, transfer, convey, lease,
assign or otherwise dispose (with or without recourse) of any of its assets
(including any Accounts, instruments or chattel paper) except for (a) sales and
leases of Inventory in the ordinary course of business, (b) dispositions of
property that is substantially worn, damaged, obsolete or, in the judgment of
the Borrower, no longer best used or useful in its business or that of any
Subsidiary, (c) transfers of assets necessary to give effect to merger or
consolidation transactions permitted by Section 8.2, or (d) sales or transfers
by a Subsidiary to the Borrower or another Subsidiary.
Section 8.7. Accounting Practices. Make any significant change in
accounting treatment or reporting practices, except as required by GAAP, or
change its fiscal year.
Section 8.8. Transactions with Affiliates. Enter into or be a
party to any transaction or arrangement, including, without limitation, the
purchase, sale, lease or exchange of property or the rendering of any service,
with any Affiliate, except in the ordinary course of and pursuant to the
reasonable requirements of such Person's business and upon fair and reasonable
terms no less favorable to such Person than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate.
Section 8.9. Jurisdiction of Incorporation. Change its
jurisdiction of incorporation without giving the Lender 30 days prior notice.
Section 8.10. Use of Names. Change its name or use any names
other than those set forth on Schedule 6.7.
Section 8.11. Financial Covenants
-------------------
52
(a) Adjusted Consolidated Tangible Net Worth. At any time,
permit the Adjusted Consolidated Tangible Net Worth of the Borrower and
the Subsidiaries to be less than $120,000,000.
(b) Leverage Ratio. Permit the Leverage Ratio to exceed 2.50
to 1.00 at any time.
(c) Fixed Charge Coverage Ratio. Permit the Fixed Charge
Coverage Ratio for any period of twelve consecutive calendar months to
be less than 1.25 to 1.00.
(d) Current Ratio. Permit the Current Ratio to be less than
1.50 to 1.00 at any time.
(e) Capital Expenditure. Make Capital Expenditures during any
year exceeding, on a consolidated basis for the Borrower and its
Subsidiaries, (i) $32,000,000 during the fiscal year ending March 31,
2002, or (ii) $25,000,000 during any other fiscal year.
Section 8.12. ERISA. Permit any of the ERISA Affiliates to (a)
engage in any transaction in connection with which the Borrower of any of the
ERISA Affiliates would be subject to either a civil penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code, in either
case in an amount exceeding $50,000, (b) fail to make full payment when due of
all amounts which, under the provisions of any Plan, the Borrower or any ERISA
Affiliate is required to pay as contributions thereto, or permit to exist an
accumulated funding deficiency (as such term is defined in Section 302 of ERISA
and Section 412 of the Code), whether or not waived, with respect to any Plan in
an aggregate amount exceeding $50,000 or (c) fail to make any payments in an
aggregate amount exceeding $50,000 to any Multiemployer Plan that the Borrower
or any of the ERISA Affiliates may be required to make under any agreement
relating to such Multiemployer Plan or any law pertaining thereto.
Section 8.13. Chief Executive Office; Location of Collateral.
Permit the Borrower's client executive office or any of the Collateral to be
moved from the locations set forth on Schedule 6.5, or to place any of the
Collateral on consignment, without the prior written consent of the Lender.
ARTICLE 9.
DEFAULT AND RIGHTS AND REMEDIES
-------------------------------
Section 9.1. Events of Default. The occurrence of any one
or more of the following events shall constitute an "Event of Default":
(a) Non-Payment. The Borrower shall fail to pay, when due,
whether by acceleration, maturity or otherwise, any Liabilities;
(b) Non-Payment of Excess Line of Credit Advances. The
Borrower shall fail to make any payment required under Section 2.3(a) to
eliminate any excess of the aggregate outstanding principal balance of
the Line of Credit Advances over the Line of
53
Credit Availability or any negative Line of Credit Availability and, if
such excess does not exceed $500,000 such failure shall continue for
more than five (5) days, provided, that if such excess exceeds $500,000
it shall be an Event of Default if such excess is not immediately
reduced to $500,000 and eliminated within five (5) days;
(c) Non-Payment of Other Indebtedness. The Borrower, any other
Obligor or any Subsidiary shall fail to pay, when due, whether by
acceleration or otherwise (subject to any applicable grace period), any
Indebtedness of, or guaranteed by, the Borrower, such other Obligor or
such Subsidiary in an aggregate amount of more than $500,000;
(d) Acceleration of Other Indebtedness. Any event or condition
shall occur which results in the acceleration of the maturity of any
Indebtedness of, or guaranteed by, the Borrower, any other Obligor or
any Subsidiary or enables the holder or holders of such other
Indebtedness or any trustee or agent for such holders (any required
notice of default having been given and any applicable grace period
having expired) to accelerate the maturity of such other Indebtedness in
an aggregate amount of more than $500,000;
(e) Other Liabilities. The Borrower or the Guarantor shall
fail to pay, when due, whether by acceleration or otherwise, or perform
or observe (subject to any applicable grace period or waiver of such
default) (i) any obligation or agreement of the Borrower or the
Guarantor to or with the Lender (other than any obligation or agreement
of the Borrower hereunder and under any Notes) or (ii) any obligation or
agreement involving an obligation or agreement to pay $500,000 or more
of the Borrower or the Guarantor to or with any other Person (other than
(A) any such material obligation or agreement constituting or related to
Indebtedness, (B) accounts payable arising in the ordinary course of
business, and (C) any material obligation or agreement of any Subsidiary
to the Borrower or to any other Subsidiary), except only to the extent
that the occurrence of any such failure is being contested by the
Borrower or the Guarantor, as the case may be, in good faith and by
appropriate proceedings and the Borrower or the Guarantor, as
applicable, shall have set aside on its books such reserves or other
appropriate provisions therefor as may be required by GAAP;
(f) Insolvency. The Borrower or the Guarantor becomes
insolvent, or generally fails to pay, or admits in writing its inability
to pay, its debts as they mature, or applies for, consents to, or
acquiesces in, the appointment of a trustee, receiver or other custodian
for the Borrower or the Guarantor, or for a substantial part of the
property of the Borrower or the Guarantor, or makes a general assignment
for the benefit of creditors; or, in the absence of such application,
consent or acquiescence, a trustee, receiver or other custodian is
appointed for the Borrower or the Guarantor or for a substantial part of
the property of the Borrower or the Guarantor; or any bankruptcy,
reorganization, debt arrangement or other proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation
proceeding, is instituted by or against the Borrower or the Guarantor;
or any warrant of attachment or similar legal process is issued against
any substantial part of the property of the Borrower or the Guarantor,
provided that in the instance of any such proceeding instituted against
the Borrower or the Guarantor or warrant of attachment or legal process
against property of the Borrower or the Guarantor, it is consented to or
acquiesced in by the Borrower or the Guarantor or remains
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undismissed for sixty (60) days or an order for relief shall have been
entered against the Borrower or the Guarantor in such proceeding or
legal process;
(g) ERISA. The institution by the Borrower or any ERISA
Affiliate of steps to terminate any Plan if, in order to effectuate such
termination, the Borrower or any ERISA Affiliate would be required to
make a contribution to such Plan or would incur a liability or
obligation to such Plan, in excess of $250,000; or the institution by
the PBGC of steps to terminate any Plan;
(h) Non-Compliance With this Agreement.
----------------------------------
(i) The Borrower shall fail to comply with any of the
Borrower's agreements set forth in Section 8.11 or shall fail to
deliver financial statements or reports required under Section
7.1, or
(ii) The Borrower shall fail to comply with any of the
Borrower's agreements set forth in this Agreement (and not
constituting an Event of Default under any of the other
subsections of this Section 9.1, including, without limitation,
Section 9.1(h)(i)), and such failure to comply shall continue for
ten (10) days;
(i) Non-Compliance With Other Loan Documents. Failure by the
Borrower, any other Obligor or any Guarantor to comply with any of its
respective agreements set forth in any Loan Documents other than this
Agreement (and not constituting an Event of Default under any of the
other subsections of this Section 9.1), and such failure to comply shall
continue after the grace period (if any) set forth therein or if any
other Loan Document shall not be, or shall cease to be, enforceable in
accordance with its terms or the Guarantor shall contest or disavow or
attempt to contest or disavow its obligations under the Guaranty;
(j) Representations and Warranties. Any representation or
warranty made by the Borrower or any other Obligor in any of the Loan
Documents is untrue or misleading in any material respect when made or
deemed made; or any schedule, statement, report, notice, certificate or
other writing furnished by the Borrower or any other Obligor to the
Lender is untrue or misleading in any material respect on the date as of
which the facts set forth therein are stated or certified; or any
certification made or deemed made by the Borrower or any other Obligor
to the Lender is untrue or misleading in any material respect on or as
of the date made or deemed made;
(k) Litigation. There shall be entered against any one of the
Borrower, any other Obligor or any Subsidiary one or more judgments or
decrees in excess of $250,000 in the aggregate at any one time
outstanding, excluding those judgments or decrees (i) that shall have
been outstanding less than 30 calendar days from the entry thereof or
(ii) for and to the extent which the Borrower, such Obligor or such
Subsidiary, as applicable, is insured and with respect to which the
insurer has assumed responsibility in writing or for and to the extent
which the Borrower, such Obligor or such Subsidiary, as applicable,
55
is otherwise indemnified if the terms of such indemnification are
satisfactory to the Lender;
(l) Validity. If the validity or enforceability of any of the
Loan Documents shall be challenged by the Borrower, any other Obligor or
any other Person, or shall fail to remain in full force and effect;
(m) Conduct of Business. If the Borrower or the Guarantor is
enjoined, restrained or in any way prevented by court order, which has
not been dissolved or stayed within five Business Days, from conducting
all or any material part of its business affairs;
(n) Impairment of Collateral or Prospect of Payment. The
Lender shall have determined in good faith (which determination shall be
conclusive) that (i) the Lender's interest in any material Collateral
has been adversely affected or impaired, or the value thereof to the
Lender has been diminished to a material extent, or (ii) the prospect of
payment or performance of any obligation or agreement of the Borrower or
any other Obligor under any of the Loan Documents is materially
impaired, and the condition giving rise to such determination does not
constitute an Event of Default under any of the other subsections of
this Section 9.1;
(o) IDB Reimbursement Agreements. Any "Event of Default" shall
occur under any IDB Reimbursement Agreement; or
(p) IBM Credit Loan Agreement. Any Event of Default or other
event that would permit acceleration of indebtedness shall occur under
the IBM Credit Loan Agreement.
Section 9.2. Effect of Event of Default; Remedies.
------------------------------------
(a) In the event that one or more Events of Default described
in Section 9.1(f) shall occur, then the credit extended under this
Agreement shall terminate and all Liabilities shall be immediately due
and payable without demand, notice or declaration of any kind
whatsoever.
(b) Upon the occurrence of an Event of Default, or at any time
thereafter during the continuance thereof, (other than as described in
Section 9.1(f)) the Lender may declare all Liabilities immediately due
and payable without demand or notice of any kind whatsoever, whereupon
the credit extended under this Agreement shall terminate and all
Liabilities shall be immediately due and payable without demand or
notice of any kind whatsoever. The Lender shall promptly advise the
Borrower of any such declaration, but failure to do so shall not impair
the effect of such declaration.
(c) Upon the occurrence of an Event of Default, or at any time
thereafter during the continuance thereof, the Lender may exercise any
one or more or all of the following remedies, all of which are
cumulative and non-exclusive:
(i) any other remedy contained in this Agreement or the
other Loan Documents;
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(ii) any rights and remedies available to the Lender
under the Uniform Commercial Code as enacted in Minnesota as of
the date of this Agreement, and any other applicable law;
(iii) without notice, demand or legal process of any
kind, the Lender may take possession of any or all of the
Collateral (in addition to Collateral which it might already have
in its possession), wherever it might be found, and for that
purpose may pursue the same wherever it may be found, and may
enter into any premises where any of the Collateral may be or is
supposed to be, and search for, take possession of, remove, keep
and store any of the Collateral until the same shall be sold or
otherwise disposed of, and the Lender shall have the right to
store the same in any of the Borrower's premises without cost to
the Lender;
(iv) at the Lender's request, the Borrower will, at the
Borrower's expense, assemble the Collateral and make it available
to the Lender at a place or places to be designated by the Lender
and reasonably convenient to the Lender and the Borrower; and/or
(v) the Lender at its option, and pursuant to
notification given to the Borrower as provided for below, may
sell any Collateral actually or constructively in its possession
at public or private sale and apply the proceeds thereof as
herein provided or as provided by applicable law.
Section 9.3. Use of Premises. The Borrower hereby irrevocably
grants to Lender the right, subject to the rights of any landlord of the
premises, to enter upon the hold the premises of the Borrower wherever located
at any time following the occurrence of an Event of Default and during the
continuation thereof. Lender may use the premises to hold, process, manufacture,
sell, use, store, liquidate, realize upon or otherwise dispose of Collateral and
for other purposes that the Lender may in good ▇▇▇▇▇ ▇▇▇▇ to be related or
incidental purposes. Lender's right to hold the premises shall cease and
terminate upon the earlier of (i) payment in full of all Liabilities, expiration
or termination of all Letters of Credit and termination of the credit or (ii)
final sale or disposition of all goods constituting Collateral and delivery of
all such goods to purchasers. The Lender shall not be obligated to pay any rent
or other compensation for the occupancy or use of any of the premises unless
required by the landlord of such premises, provided, however, if Lender does not
pay or account for any rent or other compensation for the occupancy or use of
any of the premises, such rent or compensation shall be considered an Advance
under this Agreement and shall constitute part of the Liabilities.
Section 9.4. Sale or Other Disposition of Collateral by Lender.
Any notice required to be given by Lender of a sale, lease or other disposition
or other intended action by Lender with respect to any of the Collateral which
is deposited in the United States mail, postage prepaid and duly addressed to
the Borrower at the address specified in Section 10.19, at least ten (10)
business days prior to such proposed action, shall constitute fair and
commercially reasonable notice to the Borrower of any such action. The net
proceeds realized by Lender upon any such sale or other disposition, after
deduction for the expense of retaking, holding, preparing for sale, selling or
the like, and the reasonable legal fees and expenses and other proper fees and
expenses incurred by the Lender in connection therewith, shall be applied toward
satisfaction of
57
the Liabilities. The Lender shall account to the Borrower for any surplus
realized upon such sale or other disposition, and the Borrower shall remain
liable for any deficiency. The commencement of any action, legal or equitable,
or the rendering of any judgment or decree for any deficiency, shall not affect
the Lender's security interest in the Collateral until the Liabilities shall
have been paid in full.
Section 9.5. Waiver of Demand. Demand, presentment, protest and
notice of nonpayment are waived by the Borrower. The Borrower also waives the
benefit of all valuation, appraisal and exemption laws.
Section 9.6. Waiver of Notice. Upon an Event of Default, the
Borrower waives, to the fullest extent permitted by applicable law, all rights
to notice and hearing of any kind prior to the exercise by Lender of Lender's
rights to repossess the Collateral without judicial process or to reply, attach
or levy upon the Collateral.
Section 9.7. Setoff. In addition to and not in limitation of all
rights of offset that the Lender, any Affiliate, or any other holder of any
interest in this Agreement or any Note may have under applicable law, upon the
occurrence and during the continuation of any Event of Default, or any Default,
Lender and any Affiliate shall have the right, in its sole discretion and
without demand and without notice to anyone, to appropriate or set off and apply
to the payment of the Liabilities, whether or not due, any and all balances,
credits, deposits, accounts or moneys of the Borrower then or thereafter with
such Person and any and all other liabilities owed to the Borrower by such
Person.
ARTICLE 10.
MISCELLANEOUS
-------------
Section 10.1. Timing of Payments. For purposes of determining the
outstanding balance of the Liabilities, including without limitation, the
computations of interest which may from time to time be owing to the Lender, the
receipt by the Lender of any check or any other item of payment whether through
a blocked account or lockbox described in Section 5.2 or otherwise, shall not be
treated as a payment on account of the Liabilities until such check or other
item of payment is actually received by the Lender at its office in Minneapolis,
Minnesota and is paid to the Lender in cash or a cash equivalent.
Section 10.2. Attorneys' Fees and Costs. If at any time the
Lender employs counsel in connection with protecting or perfecting the Lender's
security interest in the Collateral or in connection with any matters
contemplated by or arising out of this Agreement, whether: (a) to commence,
defend, or intervene in any litigation or to file a petition, complaint, answer,
motion or other pleading; (b) to take any other action in or with respect to any
suit or proceeding (bankruptcy or otherwise); (c) to consult with officers of
the Lender to advise the Lender or to draft documents for the Lender in
connection with any of the foregoing or in connection with any release of the
Lender's claims or security interests or any proposed extension, amendment or
refinancing of the Liabilities; (d) to protect, collect, lease, sell, take
possession of, or liquidate any of the Collateral; or (e) to attempt to enforce
or to enforce any security interest in any of the Collateral, or to enforce any
rights of the Lender to collect any of the Liabilities; then in any of
58
such events, all of the reasonable attorneys' fees arising from such services,
and any related expenses, costs and charges, including without limitation, all
fees of all paralegals, legal assistants and other staff employed by such
attorneys, whether or not employed in the Lender's internal legal department,
together with interest at the Default Rate provided for in Section 2.2 if an
Event of Default has occurred, or at the highest interest rate set forth in any
promissory note referred to herein, shall constitute additional Liabilities,
payable on demand and secured by the Collateral. This Section 10.2 shall survive
the termination of this Agreement.
Section 10.3. Expenditures by Lender. In the event that the
Borrower shall fail to pay taxes, insurance, assessments, costs or expenses
which the Borrower is, under any of the terms hereof or of any of the other
Financing Agreements, required to pay, or fails to keep the Collateral free from
other security interests, liens or encumbrances, except as permitted herein, the
Lender may, in the Lender's sole discretion and without obligation to do so,
make expenditures for any or all of such purposes, and the amount so expended,
together with interest at the Default Rate provided for in Section 2.2, shall
constitute additional Liabilities, payable on the earlier of demand or five (5)
days after notice of the same is provided to Borrower, and secured by the
Collateral.
Section 10.4. Lender's Costs and Expenses as Additional
Liabilities. The Borrower shall reimburse the Lender for all expenses and fees
paid or incurred in connection with the documentation, negotiation and closing
of the loans and other financial accommodations described in this Agreement
(including without limitation, filing fees, recording fees, document or
recording taxes, search fees, appraisal fees and expenses, and Attorney's Fees).
The Borrower further agrees to reimburse the Lender for all expenses and fees
paid or incurred in connection with the documentation of any renewal or
extension of the loans, any additional financial accommodations, or any other
amendments to this Agreement. All costs and expenses incurred by the Lender with
respect to such negotiation and documentation together with interest at the
highest interest rate set forth in any promissory note referred to herein, shall
constitute additional Liabilities, payable on the earlier of demand or five (5)
days after notice of the same is provided to Borrower, and secured by the
Collateral.
Section 10.5. Claims and Taxes. The Borrower agrees to indemnify
and hold the Lender harmless from and against any and all claims, demands,
liabilities, losses, damages, penalties, costs, and expenses (including without
limitation, reasonable attorneys' fees) relating to or in any way arising out of
the possession, use, operation or control of any of the Borrower's assets. The
Borrower shall pay or cause to be paid all license fees, bonding premiums and
related taxes and charges, and shall pay or cause to be paid all of the
Borrower's real and personal property taxes, assessments and charges and all of
the Borrower's franchise, income, unemployment, use, excise, old age benefit,
withholding, sales and other taxes and other governmental charges assessed
against the Borrower, or payable by the Borrower, at such times and in such
manner as to prevent any penalty from accruing or any lien or charge from
attaching to the Borrower's property, provided, however, that the Borrower shall
have the right to contest in good faith, by an appropriate proceeding promptly
initiated and diligently conducted, the validity, amount or imposition of any
such tax, and upon such good faith contest to delay or refuse payment thereof,
if: (a) the Borrower establishes adequate reserves to cover such contested
taxes; and (b) such contest does not have a material adverse effect on the
financial
59
condition of the Borrower, the ability of the Borrower to pay any of the
Liabilities, or the priority or value of the Lender's security interests in the
Collateral.
Section 10.6. Custody and Preservation of Collateral. The Lender
shall be deemed to have exercised reasonable care in the custody and
preservation of any of the Collateral in the Lender's possession if the Lender
takes such action for that purpose as the Borrower shall request in writing, but
failure by the Lender to comply with any such request shall not of itself be
deemed a failure to exercise reasonable care, and no failure by the Lender to
preserve or protect any right with respect to such Collateral against prior
parties, or to do any act with respect to the preservation of such Collateral
not so requested by the Borrower, shall of itself be deemed a failure to
exercise reasonable care in the custody or preservation of such Collateral.
Section 10.7. Inspection. The Lender (by and through its officers
and employees), or any Person designated by the Lender in writing, shall have
the right from time to time, to call at the Borrower's place or places of
business (or any other place where Collateral or any information as to
Collateral is kept or located) during reasonable business hours, and, without
hindrance or delay, to: (a) inspect, audit, check and make copies of and
extracts from the Borrower's books, records, journals, orders, receipts and any
correspondence and other data relating to the Borrower's business or to any
transactions between the parties to this Agreement; (b) make such verification
concerning the Collateral as the Lender may consider reasonable under the
circumstances; and (c) review operating procedures, review maintenance of
property and discuss the affairs, finances and business of the Borrower with the
Borrower's officers, employees or directors.
Section 10.8. Examination of Banking Records. The Borrower
consents to the examination by the Lender, the Lender's officers, employees and
agents, or any of them, whether or not there shall have occurred a Default or an
Event of Default, of any and all of the Borrower's banking records, wherever
they may be found, and directs any Person which may be in control or possession
of such records (including without limitation, any bank, other financial
institution, accountant or lawyer) to provide such records to the Lender and the
Lender's officers, employees and agents, upon their request. Such examination
may be conducted by the Lender with or without notice to the Borrower at the
option of the Lender, any such notice being waived by the Borrower. Expenses of
such examination shall be allocated as provided in Section 7.8.
Section 10.9. Governmental Reports. The Borrower shall furnish to
the Lender, upon the reasonable request of the Lender, copies of the reports of
examinations or inspections of the Borrower by all Governmental Authorities, and
if the Borrower fails to furnish such copies to the Lender, the Borrower
authorizes all such Government Authorities to furnish to the Lender copies of
their reports of examinations or inspections of the Borrower.
Section 10.10. Reliance by Lender. All covenants, agreements,
representations and warranties made by the Borrower shall, notwithstanding any
investigation by the Lender, be deemed to be material to and to have been relied
upon by the Lender.
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Section 10.11. Parties. Whenever in this Agreement there is
reference made to any of the parties, such reference shall be deemed to include,
wherever applicable, a reference to the respective successors and assigns of the
Borrower and the Lender.
Section 10.12. Applicable Law; Severability. THIS AGREEMENT SHALL
BE CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL
LAWS AND DECISIONS OF THE STATE OF MINNESOTA WITHOUT REGARD TO ANY CHOICE OF LAW
RULES WHICH WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
Wherever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provisions or the
remaining provisions of this Agreement.
Section 10.13. SUBMISSION TO JURISDICTION. WITH RESPECT TO ANY
AND ALL ACTIONS, CAUSES OF ACTION, SUITS, CLAIMS, DEMANDS, DEBTS, DAMAGES, COSTS
AND EXPENSES, WHATSOEVER, WHETHER BASED ON STATUTE, COMMON LAW, PRINCIPLES OF
EQUITY OR OTHERWISE, ARISING OUT OF ANY MATTER, THING OR EVENT WHICH IS DIRECTLY
OR INDIRECTLY RELATED TO THIS AGREEMENT, BORROWER CONSENTS TO THE JURISDICTION
OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED WITHIN THE CITY AND COUNTY OF
MINNEAPOLIS, MINNESOTA AND WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED ON
IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY
SUCH COURT AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON BORROWER, AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED
TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 10.19. SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS
AFTER THE SAME SHALL HAVE BEEN POSTED.
Section 10.14. WAIVER OF TRIAL BY JURY. THE BORROWER AND THE
LENDER EACH WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THE LOAN DOCUMENTS OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Section 10.15. Application of Payments Waiver. Notwithstanding
any contrary provision contained in this Agreement or in any of the other Loan
Documents, the Borrower irrevocably waives the right to direct the application
of any and all payments at any time received by the Lender from the Borrower or
with respect to any of the Collateral, and the Borrower irrevocably agrees that
the Lender shall have the continuing exclusive right to apply and reapply any
and all payments received at any time, whether with respect to the Collateral
61
or otherwise, against the Liabilities, in such manner as the Lender may deem
advisable, notwithstanding any entry by the Lender upon any of the Lender's
books and records.
Section 10.16. Marshaling; Payments Set Aside. The Lender shall
be under no obligation to marshal any assets in favor of the Borrower or against
or in payment of any or all of the Liabilities. To the extent that the Borrower
makes a payment or payments to the Lender or the Lender receives any payment or
proceeds of the Collateral for the Borrower's benefit or enforces the Lender's
security interests or exercises the Lender's rights of setoff, and such payment
or payments or the proceeds of such Collateral, enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
Section 10.17. Section Titles. The section titles contained in
this Agreement shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties.
Section 10.18. Continuing Effect. This Agreement, the Lender's
security interests in the Collateral, and all of the other Loan Documents shall
continue in full force and effect so long as any Liabilities shall be owed to
Lender and, even if there shall be no Liabilities outstanding, so long as the
Lender remains committed to make Advances under this Agreement or any Letter of
Credit remains outstanding.
Section 10.19. No Waiver. The Lender's failure at any time to
require strict performance by the Borrower of any provision of this Agreement
shall not waive, affect or diminish any right of the Lender thereafter to demand
strict compliance and performance therewith. Any suspension or waiver by the
Lender of any Default or Event of Default under this Agreement or any of the
other Loan Documents, shall not suspend, waive or affect any other Default or
Event of Default under this Agreement or any of the other Loan Documents,
whether the same is prior or subsequent and whether of the same or of a
different kind or character. None of the undertakings, agreements, warranties,
covenants and representations of Borrower contained in this Agreement or any of
the other Loan Documents and no Default or Event of Default under this Agreement
or any of the other Loan Documents, shall be deemed to have been suspended or
waived by the Lender unless such suspension or waiver is in writing signed by an
officer of the Lender, and directed to the Borrower specifying such suspension
or waiver.
Section 10.20. Notices. Except as otherwise expressly provided
herein, any notice hereunder to the Borrower or the Lender shall be in writing
(including telecopy communication) and shall be given to the Borrower or the
Lender at its address or facsimile number set forth on the signature pages
hereof or at such other address, or telecopier number as the Borrower or the
Lender may, by written notice, designate as its address or fax number for
purposes of notice hereunder. All such notices shall be deemed to be given (a)
when transmitted by fax on the date the appropriate answer back is received, (b)
when delivered by a commercially recognized courier service on the date
specified for delivery in the instructions to the courier, (c) on the date
personally delivered, or (d) in the case of notice by mail, three days
following
62
deposit in the United States mails, certified mail, return receipt requested
properly addressed as herein provided, with proper postage prepaid provided,
however, that any notice to the Lender under Article 2 hereof shall be deemed to
have been given only when received by the Lender.
Section 10.21. Maximum Interest. No agreements, conditions,
provisions or stipulations contained in this Agreement or in any of the other
Loan Documents, or any Default or Event of Default, or any exercise by the
Lender of the right to accelerate the payment of the maturity of principal and
interest, or to exercise any option whatsoever, contained in this Agreement or
any of the other Loan Documents, or the arising of any contingency whatsoever,
shall entitle the Lender to collect, in any event, interest exceeding the
maximum authorized by law, and in no event shall the Borrower be obligated to
pay interest exceeding such rate, and all agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel the Borrower to pay a rate of interest exceeding the
maximum allowed by law, shall be without binding force or effect, at law or in
equity, to the extent only of the excess of interest over such maximum interest
allowed by law. In the event any interest is charged in excess of the maximum
allowed by law ("Excess"), the Borrower acknowledges and stipulates that any
such charge shall be the result of an accidental and bona fide error, and such
Excess shall be, first, applied to reduce the principal of any Liabilities due,
and, second, returned to the Borrower, it being the intention of the parties not
to enter at any time into a usurious or otherwise illegal relationship. The
Borrower and the Lender both recognize that, with fluctuations in the Prime
Rate, such an unintended result could inadvertently occur. By the execution of
this Agreement, the Borrower covenants that: (a) the credit or return of any
Excess shall constitute the acceptance by the Borrower of such Excess; and (b)
the Borrower shall not seek or pursue any other remedy, legal or equitable,
against the Lender based, in whole or in part, upon the charging or receiving of
any interest in excess of the maximum authorized by law. For the purpose of
determining whether or not any Excess has been contracted for, charged or
received by the Lender, all interest at any time contracted for, charged or
received by the Lender in connection with the Liabilities shall be amortized,
prorated, allocated and spread in equal parts during the entire term of this
Agreement.
(final and signature page follows)
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Section 10.22. Additional Advances. All fees, charges, expenses,
costs, expenditures, obligations, liabilities, losses, penalties and damages
incurred or suffered by Lender and for which Borrower is bound to indemnify or
reimburse Lender under this Agreement (other than those which may be paid
without demand therefor, by Lender initiated Advances pursuant to Section 2.1)
may, at the option of Lender, be paid by Lender initiated Advances pursuant to
Section 2.1 if such amounts remain unpaid for a period of ten (10) days after
Lender has made demand therefor.
Section 10.23. Final Agreement. This written Agreement and the
other Loan Documents represent the final agreement between the parties and may
not be contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
PEMSTAR INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: VP, General Counsel and Corp Secretary
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Address:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
U.S. BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------
Title: Vice President
-------------------------------------------
Address:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇. ▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
67
Exhibits and Schedules
Exhibit: Content:
A Note
B Borrowing Base Certificate
C Guaranty
Schedule:
1.1(a) Existing Letters of Credit
1.1(b) US Bank Account Debtors
6.1 Judgments; Litigations
6.2 Defaults; Disputes
6.5 Locations, etc.
6.6 Tax Liabilities
6.7 Other Names; Tax ID
6.8 Affiliates
6.9 Environmental Matters
6.10 Jurisdiction of Organization of Subsidiaries
6.14 Contracts; Labor Matters
6.20 Self-Insurance, etc.
6.21 Subsidiaries
6.22 Partnerships and Joint Ventures
6.23 Collateral in Possession of Other Parties
8.1 Liens
8.3 Investments
8.4 Indebtedness
Exhibit A
REVOLVING NOTE
$30,000,000 Minneapolis, Minnesota
June 28, 2001
FOR VALUE RECEIVED, the undersigned, PEMSTAR INC., a Minnesota
corporation (the "Borrower"), hereby promises to pay to the order of U.S. BANK
NATIONAL ASSOCIATION, a national banking association (the "Lender"), at its
offices located at U.S. Bank Place, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or at any other place designated at any time by the holder
hereof, in lawful money of the United States of America and in immediately
available funds, the principal sum of THIRTY MILLION DOLLARS ($30,000,000) or,
if less, the aggregate unpaid principal amount of all Line of Credit Advances
made by the Lender to the Borrowers pursuant to the Loan Agreement referred to
below, together with interest on the principal amount hereunder from the date
hereof until this Note is fully paid at the rates from time to time in effect
under the Loan Agreement.
The principal hereof and interest accruing thereon shall be due
and payable as provided in the Loan Agreement. This Note may be prepaid only in
accordance with the Loan Agreement.
This Note is the "Line of Credit Note" referred to in the Loan
and Security Agreement, dated as of June 28, 2001, by and among the Borrowers
and the Lender (as the same may hereafter be amended, supplemented or restated
from time to time, the "Loan Agreement") and is issued pursuant to and is
entitled to the benefits of the Loan Agreement, which provides, among other
things, for acceleration hereof upon the occurrence of certain events. This Note
is secured pursuant to the Loan Agreement and may now or hereafter be secured by
one or more other security agreements, mortgages, deeds of trust, assignments or
other instruments or agreements.
The Borrowers hereby agree to pay all costs of collection,
including attorneys' fees and legal expenses in the event this Note is not paid
when due, whether or not legal proceedings are commenced.
All parties now or hereafter liable with respect to this Note,
whether maker, principal, surety, endorser or otherwise, hereby waive
presentment or other demand for payment, protest, notice of dishonor and all
other notices of any kind.
THIS NOTE SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF MINNESOTA WITHOUT REGARD TO ANY CHOICE OF LAW
RULES WHICH WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
PEMSTAR INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------
Title: VP, General Counsel and Corp Secretary
----------------------------------------
EXHIBIT B
Form of Borrowing Base Certificate
B-1
EXHIBIT C
GUARANTY
Section 1. Guaranty of Payment. For value received and in
consideration of any loan or other financial accommodation heretofore or
hereafter at any time made or granted to PEMSTAR, INC. (hereinafter called the
"Borrower") by U.S. BANK NATIONAL ASSOCIATION, a national banking association
(hereinafter, together with its successors and assigns, called the "Lender"),
U.S. Bank Place, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, the
undersigned hereby unconditionally guarantee(s) the full and prompt payment when
due, whether by acceleration or otherwise, and at all times thereafter, of all
obligations of the Borrower to the Lender, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, or now or
hereafter existing, or due or to become due, including, without limitation, all
obligations of the Borrower to the Lender pursuant to that certain Amended and
Restated Loan and Security Agreement dated as of June 28, 2001 (as the same may
be amended, modified, supplemented, restated or replaced from time to time, the
"Loan Agreement") by and between the Borrower and the Lender (all such
obligations being hereinafter collectively called the "Obligations"), and the
undersigned further agree(s) to pay all reasonable expenses, including fees of
attorneys (who may be employees of the Lender or any affiliate) and reasonable
legal expenses, paid or incurred by the Lender in endeavoring to collect the
Obligations, or any part thereof, and in enforcing this Guaranty.
Section 2. Acceleration of the Time of Payment of Amount Payable
Under the Guaranty. The undersigned agrees that if an "Event of Default", as
defined in the Loan Agreements, shall occure with respect to the undersigned
(including expiration of any grace period), and if such event shall occur at a
time when any of the Obligations may not then be due and payable, such
undersigned will pay to the Lender forthwith the full amount which would be
payable hereunder by such undersigned if all Obligations were then due and
payable.
Section 3. Security Interest in Deposits and Other Property. To
secure all obligations of the undersigned hereunder, the Lender shall have a
lien upon and security interest in (and may, without demand or notice of any
kind, at any time and from time to time when any amount shall be due and payable
by such undersigned hereunder, appropriate and apply toward the payment of such
amount, in such order of application as the Lender may elect) any and all
balances, credits, deposits (general or special, time or demand, provisional or
final), accounts or moneys of or in the name of such undersigned now or
hereafter with the Lender or any affiliate and any and all property of every
kind or description of or in the name of such undersigned now or hereafter with
the Lender or any affiliate and any and all property of every kind or
description of or in the name of such undersigned now or hereafter, for any
reason or purpose whatsoever, in the possession or control of, or in transit to,
the Lender or any affiliate or any agent or bailee for the Lender or any
affiliate.
Section 4. Continuing Guaranty. This Guaranty shall in all
respects be a continuing, absolute and unconditional Guaranty, and shall remain
in full force and effect (notwithstanding, without limitation, the dissolution
of the undersigned or that at any time or from time to time all Obligations may
have been paid in full), subject to discontinuance as to the undersigned only
upon actual receipt by the Lender of written notice from such undersigned, or
any person duly authorized and acting on behalf of such undersigned,
of the discontinuance hereof as to such undersigned; provided, however, that no
such notice of discontinuance shall affect or impair any of the agreements and
obligations of such undersigned hereunder with respect to any and all
Obligations existing prior to the time of actual receipt of such notice by the
Lender, any and all Obligations created or acquired thereafter pursuant to any
previous commitments made by the Lender, any and all extensions or renewals of
any of the foregoing, any and all interest on any of the foregoing, and any and
all expenses paid or incurred by the Lender in endeavoring to collect any of the
foregoing and in enforcing this Guaranty against such undersigned; and all of
the agreements and obligations of such undersigned under this Guaranty shall,
notwithstanding any such notice of discontinuance, remain fully in effect until
all such Obligations (including any extensions or renewals of any thereof) and
all such interest and expenses shall have been paid in full. Any such notice of
discontinuance by or on behalf of theundersigned shall not affect or impair the
obligations hereunder of any other of the undersigned.
Section 5. Recission or Return of Payment on Obligations. The
undersigned further agree(s) that, if at any time all or any part of any payment
theretofore applied by the Lender to any of the Obligations is or must be
rescinded or returned by the Lender for any reason whatsoever (including,
without limitation, the insolvency, bankruptcy or reorganization of the
Borrower), such Obligations shall, for the purposes of this Guaranty, to the
extent that such payment is or must be rescinded or returned, be deemed to have
continued in existence, notwithstanding such application by the Lender, and this
Guaranty shall continue to be effective or be reinstated, as the case may be, as
to such Obligations, all as though such application by the Lender had not been
made.
Section 6. Lender Permitted to Take Certain Actions. The Lender
may, from time to time (but shall not be obligated to), whether before or after
any discontinuance of this Guaranty, at its sole discretion and without notice
to the undersigned (or any of them), take any or all of the following actions:
(a) retain or obtain a security interest in any property to secure any of the
Obligations or any obligation hereunder; (b) retain or obtain the primary or
secondary obligation of any obligor or obligors, in addition to the undersigned,
with respect to any of the Obligations; (c) extend or renew for one or more
periods (whether or not longer than the original period), alter or exchange any
of the Obligations, or release or compromise any obligation of theundersigned
hereunder or any obligation of any nature of any other obligor with respect to
any of the Obligations; (d) release its security interest in, or surrender,
release or permit any substitution or exchange for, all or any part of any
property securing any of the Obligations or any obligation hereunder, or extend
or renew for one or more periods (whether or not longer than the original
period) or release, compromise, alter or exchange any obligations of any nature
of any obligor with respect to any such property; and (e) resort to the
undersigned (or any of them) for payment of any of the Obligations, whether or
not the Lender (i) shall have resorted to any property securing any of the
Obligations or any obligation hereunder or (ii) shall have proceeded against any
other of the undersigned or any other obligor primarily or secondarily obligated
with respect to any of the Obligations (all of the actions referred to in
preceding clauses (i) and (ii) being hereby expressly waived by the
undersigned).
2
Section 7. Application of Payments. Any amounts received by the
Lender from whatsoever source on account of the Obligations may be applied by it
toward the payment of such of the Obligations, and in such order of application,
as the Lender may from time to time elect.
Section 8. Subrogation. Until such time as this Guaranty shall
have been discontinued as to all of the undersigned and the Lender shall have
received payment of the full amount of all Obligations and of all obligations of
the undersigned hereunder, no payment made by or for the account of the
undersigned (or any of them) pursuant to this Guaranty shall entitle
theundersigned by subrogation or otherwise to any payment by the Borrower or
from or out of any property of the Borrower, and none of the undersigned shall
exercise any right or remedy against the Borrower or any property of the
Borrower by reason of an performance by such undersigned of this Guaranty.
Section 9. Waiver of Notice and Other Matters. The undersigned
hereby expressly waive(s): (a) notice of the acceptance by the Lender of this
Guaranty; (b) notice of the existence or creation or non-payment of all or any
of the Obligations; (c) presentment, demand, notice of dishonor, protest, and
all other notices whatsoever; and (d) all diligence in collection or protection
of or realization upon the Obligations or any thereof, any obligation hereunder,
or any security for or guaranty of any of the foregoing.
Section 10. Assignment of Obligations. The Lender may, from time
to time, whether before or after any discontinuance of this Guaranty, without
notice to the undersigned (or any of them), assign or transfer any or all of the
Obligations or any interest therein; and, notwithstanding any such assignment or
transfer or any subsequent assignment or transfer thereof, such Obligations
shall be and remain Obligations for the purposes of this Guaranty, and each and
every immediate and successive assignee or transferee of any of the Obligations
or of any interest therein shall, to the extent of the interest of such assignee
or transferee in the Obligations, be entitled to the benefits of this Guaranty
to the same extent as if such assignee or transferee were the Lender; provided,
however, that, unless the Lender shall otherwise consent in writing, the Lender
shall have an unimpaired right, prior and superior to that of any such assignee
or transferee, to enforce this Guaranty, for the benefit of the Lender, as to
those of the Obligations which the Lender has not assigned or transferred.
Section 11. Information Concerning Borrower. The undersigned
hereby warrants to the Lender that such undersigned now has and will continue to
have independent means of obtaining information concerning the affairs,
financial condition and business of the Borrower. The Lender shall not have any
duty or responsibility to provide the undersigned (or any of them) with any
credit or other information concerning the affairs, financial condition or
business of the Borrower which may come into the Lender's possession.
Section 12. Waiver and Modifications. No delay on the part of the
Lender in the exercise of any right or remedy shall operate as a waiver thereof,
and no single or partial exercise by the Lender of any right or remedy shall
preclude other or further exercise thereof or the exercise of any other right or
remedy; nor shall any modification or waiver of any of the
3
provisions of this Guaranty be binding upon the Lender or the undersigned except
as expressly set forth in a writing duly signed and delivered on behalf of the
Lender and the undersigned.
Section 13. Obligations Under Guaranty. No action of the Lender
permitted hereunder shall in any way affect or impair the rights of the Lender
and the obligations of the undersigned under this Guaranty. For the purposes of
this Guaranty, Obligations shall include all obligations of the Borrower to the
Lender, notwithstanding any right or power of the Borrower or anyone else to
assert any claim or defense as to the invalidity or un enforceability of any
such obligation, and no such claim or defense shall affect or impair the
obligations of the undersigned hereunder. The obligations of the undersigned
under this Guaranty shall be absolute and unconditional irrespective of any
circumstance whatsoever which might constitute a legal or equitable discharge or
defense of the undersigned (or any of them). The undersigned hereby acknowledges
that there are no conditions to the effectiveness of this Guaranty.
Section 14. Successors. This Guaranty shall be binding upon the
undersigned, and upon the successors and assigns of the undersigned; all
references herein to the Borrower and to the undersigned, respectively, shall be
deemed to include any successor or successors.
Section 15. Law. THIS GUARANTY HAS BEEN DELIVERED IN MINNEAPOLIS,
MINNESOTA, AND THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS GUARANTY
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING
EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS
OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS.
Section 16. Severability. Wherever possible, each provision of
this Guaranty shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Guaranty shall be prohibited
by or invalid under such law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty. In any action or
proceeding involving any state law, or any state or federal bankruptcy,
insolvency, reorganization or other law affecting the rights of creditors
generally, if the obligations of the undersigned hereunder would otherwise be
held or determined to be void, invalid or unenforceable on account of the amount
of the undersigned's liability under this Guaranty, then, notwithstanding any
other provision of this Guaranty to the contrary, the amount of such liability
shall, without any further action by the undersigned, the Lender or any other
person, be automatically limited and reduced to the highest amount which is
valid and enforceable as determined in such action or proceeding.
Section 17. Captions. Section captions used in this Guaranty are
for convenience only, and shall not affect the construction of this Guaranty.
Section 18. Waiver of Jury Trial. THE LENDER AND THE UNDERSIGNED
HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS (A) UNDER THIS GUARANTY OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR
4
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH, OR (B) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS GUARANTY; AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
Section 19. Consent to Jurisdiction. AT THE OPTION OF THE LENDER,
THIS GUARANTY MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT
SITTING IN MINNEAPOLIS OR ST. ▇▇▇▇, MINNESOTA; AND THE UNDERSIGNED CONSENTS TO
THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE
IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE UNDERSIGNED COMMENCES ANY
ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS GUARANTY
THE LENDER, AT ITS OPTION, SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE
OF THE JURISDICTIONS AND VENUES ABOVE DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Section 20. Certain Representations and Warranties. The
undersigned represents and warrants to the Lender that: (a) it is a corporation
duly organized and existing in good standing and has full power and authority to
make and deliver this Guaranty; (b) the execution, delivery and performance of
this Guaranty by such undersigned have been duly authorized by all necessary
corporation action and approvals and do not and will not violate the provisions
of, or constitute a default under, any presently applicable law or its articles
of incorporation or by-laws
5
or any agreement presently binding on it; (c) this Guaranty has been duly
executed and delivered by the authorized officer of such undersigned and
constitutes its lawful, binding and legally enforceable obligation; (d) the
authorization, execution, delivery and performance of this Guaranty do not
require notification to, registration with, or consent or approval by, any
federal, state or local regulatory body or administrative agency; (e) each of
the representations and warranties contained in the Loan Agreement pertaining to
the undersigned as a "Subsidiary" of the Borrower or as an "Obligor" are true
and correct; and (f) (i) the Borrower and the undersigned make up a related
organization of various entities constituting a single economic and business
enterprise so that the Borrower and the undersigned share an identity of
interests such that any benefit received by any one of them benefits the others;
(ii) the Borrower and the undersigned render services for the benefit of the one
another, purchases or sells and supplies goods to or from or for the benefit of
one another, makes loans, advances and provides other financial accommodations
to or for the benefit of one another; (iii) in some cases, the Borrower and the
undersigned have centralized accounting and legal service and common officers
and directors; and (iv) while the Borrower and the undersigned operate as a
single economic enterprise, nothing contained in this subsection (f) should be
construed or imply that the Borrower and each of the undersigned are not
separate legal entities.
SIGNED AND DELIVERED as of June 28, 2001.
TURTLE MOUNTAIN CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Title: President
------------------------------