EXHIBIT 10.20
AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
(Eximbank Guaranteed Loan No. AP072433XX)
Dated as of April 16, 1998
RSI SYSTEMS, INC., a Minnesota corporation (the "Borrower"), and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association
(the "Lender"), hereby agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. For all purposes of this Agreement, except
as otherwise expressly provided or unless the context otherwise requires:
"Accounts" means the aggregate unpaid obligations of customers and
other account debtors to the Borrower arising out of the sale or lease of
goods or rendition of services by the Borrower on an open account or
deferred payment basis, whether now existing or hereafter arising.
"Advance" means a Revolving Advance.
"Affiliate" or "Affiliates" means any Person controlled by,
controlling or under common control with the Borrower, including (without
limitation) any subsidiary of the Borrower. For purposes of this
definition, "control," when used with respect to any specified Person,
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Amended and Restated Credit and Security
Agreement, as amended, supplemented and restated from time to time.
"Availability" means the Borrowing Base less the outstanding
principal balance of the Revolving Advances.
"Base Rate" means the rate of interest publicly announced from time
to time by the Lender as its "base rate" or, if such bank ceases to
announce a rate so designated, any similar successor rate designated by
the Lender.
"Book Net Worth" means the aggregate of the common and preferred
stockholders' equity of the Borrower, determined in accordance with GAAP.
"Borrower Agreement" means the Borrower Agreement dated as of June
26, 1997, by and between the Borrower and the Lender.
"Borrowing Base" means, at any time and subject to change from time
to time in the Lender's sole discretion, the least of
(a) the Maximum Line; or
(b) the difference of $1,000,000 and the NBCI Revolving Advances; or
(c) the sum of:
(i) 80% of Eligible Foreign Accounts; and
(ii) 60% of Eligible Export Inventory; provided, however, that
the Lender and/or the Servicer may, in their sole discretion,
establish reserves for fees which have become or may become due
pursuant to any or all of the Borrower's license agreements with
licensor's with whom the Lender has not entered into a License
Acknowledgment and Agreement, in form and substance acceptable to
the Lender.
"Borrowing Base Certificate" means a certificate, substantially in
the form attached hereto as Exhibit C, executed by the Borrower and
accepted by the Lender.
"Business Day" means any day on which the Federal Reserve Bank of
New York is open for business.
"Closing Date" means the date of this Agreement.
"Collateral" has the meaning given in Section 3.1.
"Collateral Account" has the meaning given in the Collateral Account
Agreement.
"Collateral Account Agreement" means the Collateral Account
Agreement by and among the Borrower, Norwest Bank International New York
Branch and the Lender dated as of June 26, 1997, as the same may hereafter
be amended, supplemented or restated from time to time.
"Country Limitation Schedule" shall mean the most recent schedule
published by Eximbank and provided to the Borrower by the Lender which
sets forth on a country by country basis whether and under what conditions
Eximbank will provide coverage for the financing of export transactions to
countries listed therein.
"Commitment" means the Lender's commitment to make Advances pursuant
to Article II.
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"Control Agreement" means that certain Notice of Pledge and Control
Agreement by and among NISI, NBCI, the Lender and the Borrower of even
date herewith.
"Credit Facility" means the credit facility made available to the
Borrower pursuant to Article II.
"Debt" of any Person means all items of indebtedness or liability
which in accordance with GAAP would be included in determining total
liabilities as shown on the liabilities side of a balance sheet of that
Person as at the date as of which Debt is to be determined. For purposes
of determining a Person's aggregate Debt at any time, "Debt" shall also
include the aggregate payments required to be made by such Person at any
time under any lease that is considered a capitalized lease under GAAP.
"Default" means an event that, with giving of notice or passage of
time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the first day
of any month during which a Default or Event of Default has occurred and
ending on the date the Lender notifies the Borrower in writing that such
Default or Event of Default has been cured or waived.
"Default Rate" means an annual rate equal to three percent (3%) over
the Floating Rate, which rate shall change when and as the Floating Rate
changes.
"Eligible Export Inventory" means all Inventory consisting of Items,
raw materials and components to be used to manufacture or assemble Items,
and work-in-process relating to Items, and raw materials and components
the Borrower must purchase to manufacture or assemble Items, at the lower
of cost or market value as determined in accordance with GAAP; provided,
however, that the following shall not in any event be deemed Eligible
Export Inventory:
(i) Inventory that is: in-transit; located at any warehouse or
other premises not approved by the Lender in writing; located
outside of the states, or localities, as applicable, in which the
Lender has filed financing statements to perfect a first priority
security interest in such Inventory; covered by any negotiable or
non-negotiable warehouse receipt, ▇▇▇▇ of lading or other document
of title; on consignment from any Person; on consignment to any
Person or subject to any bailment;
(ii) Inventory consisting of proprietary software;
(iii) Inventory that is damaged, slow moving, obsolete,
returned, defective, recalled or unfit for further processing or not
currently saleable in the normal course of the Borrower's
operations;
(iv) Inventory that is perishable or live;
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(v) Inventory that the Borrower has returned, has attempted to
return, is in the process of returning or intends to return to the
vendor thereof;
(vi) Inventory that is subject to a security interest in favor
of any Person other than the Lender or NBCI;
(vii) Sample or demonstration Inventory;
(viii) Inventory which has been previously exported from the
US;
(ix) Inventory which constitutes defense articles or defense
services;
(x) Inventory consisting of or to be incorporated into Items
destined for shipment to a Prohibited Country;
(xi) The Foreign Content portion of Items containing less than
fifty percent (50%) US Content;
(xii) For Items containing at least fifty percent (50%) US
Content, any Foreign Content not incorporated into such Items in the
US;
(xiii) That portion of Inventory consisting of or to be
incorporated into Items whose sale would result in an Account deemed
ineligible under clauses (ii), (viii), (x), or (xi) of the
definition of "Eligible Foreign Accounts"; and
(xiv) Inventory otherwise deemed ineligible by the Lender in
its discretion.
"Eligible Foreign Accounts" means all Accounts owed by Account
debtors located outside the US for the sale or provision of Items, except
the following shall not in any event be deemed Eligible Foreign Accounts:
(i) That portion of Accounts not yet earned by the final
delivery of goods or rendition of services, as applicable, by the
Borrower to the customer;
(ii) That portion of Accounts not providing for payment in
full within 180 days of shipment date;
(iii) That portion of Accounts (A) over 60 days past the
original due date, (B) over 90 days past the original due date if
insured through Eximbank export credit insurance for comprehensive
commercial and political risk or through an Eximbank approved
private insurer for comparable coverage, or (C) or over 180 days
past shipping date;
(iv) Accounts owed by a shareholder, Affiliate, officer or
employee of the Borrower;
(v) Accounts owed by an account debtor that is insolvent, the
subject of bankruptcy proceedings or has gone out of business;
(vi) Accounts not subject to a duly perfected security
interest in favor of the Lender or which are subject to any lien,
security interest or claim in favor of any Person other than the
Lender or NBCI;
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(vii) That portion of Accounts that constitutes finance
charges, service charges or sales or excise taxes;
(viii) That portion of Accounts that is payable in a currency
other than US Dollars unless prior written approval has been
received from Eximbank;
(ix) That portion of Accounts owed by military buyers or for
defense articles or services, except as may be approved in writing
by the Lender and Eximbank;
(x) That portion of Accounts due and collectible outside the
US;
(xi) That portion of Accounts owed by Account debtors located
in, or arising from sales of Items delivered to a Prohibited
Country;
(xii) That portion of Accounts, or portions thereof, otherwise
deemed uncollectible for any reason by the Lender or Eximbank in its
discretion.
"Eligible Marketable Securities" means, in the Lender's sole
discretion, government/agency securities, in the NISI Account, and for
which the Lender has received a Control Agreement executed and
acknowledged by the Borrower and NISI.
"Event of Default" has the meaning specified in Section 7.1.
"Eximbank" means the Export-Import Bank of the United States.
"Existing Revolving Advances" has the meaning specified in Section
2.1.
"Export Order" means a bona fide written export order or contract to
purchase Items from the Borrower from a customer outside the US.
"Floating Rate" means an annual rate equal to the sum of the Base
Rate plus the Spread, which Floating Rate shall change when and as the
Base Rate changes.
"Foreign Content" means that portion of the cost of an Item arising
from materials which are not of US origin or from labor and services not
performed in the US.
"Funding Date" has the meaning given in Section 2.2.
"GAAP" means generally accepted accounting principles, applied on a
basis consistent with the accounting practices applied in the financial
statements described in Section 5.2.
"Inventory" means all of the Borrower's inventory, as such term is
defined in the UCC, whether now owned or hereafter acquired.
"Items" means the goods and services to be sold by the Borrower to
customers located outside the US pursuant to Export Orders.
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"Loan Documents" means (i) this Agreement, the Note, the Pledge
Agreement and the Control Agreement, each of even date herewith, and (ii)
the Borrower Agreement, the Old Security Documents and the Disclosure by
the Borrower in favor of the Lender each dated as of June 26, 1998.
"Master Guaranty" means that certain Master Guaranty Agreement No.
MN-MGA-96-001, dated as of November 13, 1996, by and between the Lender
and Eximbank.
"Maturity Date" means June 25, 1998.
"Maximum Line" means $500,000.
"Minimum Interest Charge" has the meaning given in Section 2.4(b).
"NBCI" means Norwest Business Credit, Inc., a Minnesota corporation.
"NBCI Credit Agreement" means that certain Amended and Restated
Credit and Security Agreement of even date herewith by and between the
Borrower and NBCI, as the same may hereafter be amended, supplemented or
restated from time to time.
"NBCI Credit Facility" means the credit facility extended to the
Borrower pursuant to the NBCI Credit Agreement.
"NBCI Revolving Advances" means the Revolving Advances as defined in
the NBCI Credit Agreement, or as the context requires, the outstanding
principal balance thereof.
"NISI" means Norwest Investment Services, Inc., a Minnesota
corporation.
"NISI Account" means account no. ▇▇▇▇▇▇▇▇ maintained with NISI.
"Note" means the Revolving Note.
"Old Credit Documents" means that certain Credit and Security
Agreement dated as of June 26, 1997 by and between the Borrower and the
Lender.
"Old Revolving Note" means the Borrower's revolving promissory note
dated as of June 26, 1997, payable to the order of the Lender in the
original principal amount of $500,000.
"Old Security Documents" means the Old Credit Documents, the Patent
and Trademark Security Agreement and the Collateral Account Agreement,
each dated as of June 26, 1997.
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"Obligations" means each and every debt, liability and obligation of
every type and description which the Borrower may now or at any time
hereafter owe to the Lender, including all indebtedness arising under this
Agreement, the Note or any other loan or credit agreement or guaranty
between the Borrower and the Lender, whether now in effect or hereafter
entered into.
"Patent and Trademark Security Agreement" means the Patent and
Trademark Security Agreement by the Borrower in favor of the Lender and
NBCI dated as of June 26, 1997, as the same may hereafter be amended,
supplemented or restated from time to time.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Permitted Liens" means security interests, liens and encumbrances
acceptable to the Lender in its sole discretion including without
limitation those liens described on Exhibit E.
"Pledge Agreement" means the Collateral Pledge Agreement by the
Borrower in favor of the Lender and NBCI of even date herewith.
"Premises" means all premises where the Borrower conducts its
business and has any rights of possession.
"Prohibited Country" means any country in which Eximbank coverage is
not available for commercial reasons or in which Eximbank is legally
prohibited from doing business, as designated in the Country Limitation
Schedule.
"Revolving Advance" has the meaning given in Section 2.2.
"Revolving Note" means the Borrower's revolving promissory note,
payable to the order of the Lender in substantially the form of Exhibit A
hereto.
"Security Coverage" means the ratio of the value of the Eligible
Marketable Securities to the outstanding Revolving Advances.
"Security Interest" has the meaning given in Section 3.1.
"Servicer" means NBCI.
"Spread" means for each month a percentage based on the number of
days during the month that are a Tier One Period, Tier Two Period or Tier
Three Period as set forth below:
Period Type Spread
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Tier One Period 0%
Tier Two Period 1.0%
Tier Three Period 4.0%
"Tier One Period" means any Tier One Period as defined in the NBCI
Credit Agreement.
"Tier Two Period" means any Tier Two Period as defined in the NBCI
Credit Agreement.
"Tier Three Period" means any Tier Three Period as defined in the
NBCI Credit Agreement.
"Tangible Net Worth" means the difference between (i) the tangible
assets of the Borrower, which, in accordance with GAAP are tangible
assets, after deducting adequate reserves in each case where, in
accordance with GAAP, a reserve is proper and (ii) all Debt of the
Borrower; provided, however, that notwithstanding the foregoing in no
event shall there be included as such tangible assets patents, trademarks,
trade names, copyrights, licenses, goodwill, receivables from Affiliates,
directors, officers or employees, prepaid expenses, deposits, deferred
charges or treasury stock or any securities or Debt of the Borrower or any
other securities unless the same are readily marketable in the US or
entitled to be used as a credit against federal income tax liabilities,
non-compete agreements and any other assets designated from time to time
by the Lender, in its sole discretion.
"Termination Date" means the earliest of (i) the Maturity Date, (ii)
the date the Borrower terminates the Credit Facility, or (iii) the date
the Lender demands payment of the Obligations after an Event of Default
pursuant to Section 7.1.
"UCC" means the Uniform Commercial Code as in effect from time to
time in the State of Minnesota.
"US" means the United States of America.
"US Content" means that portion of the cost of an Item arising from
materials which are of US origin or from labor and services performed in
the US.
ARTICLE II
Amount and Terms of the Credit Facility
Section 2.1 Existing Revolving Advances. The Lender has made various
advances to the Borrower (the "Existing Revolving Advances") as evidenced by the
Old
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Credit Documents. As of April 15, 1998, the outstanding principal balance of the
Existing Revolving Advances was $0. Upon execution and delivery of this
Agreement, the Existing Revolving Advances shall be deemed to be Revolving
Advances made pursuant to Section 2.2 and repayable in accordance with the
Revolving Note. To the extent the Revolving Note evidences the Existing
Revolving Advances, the Revolving Note shall be issued in substitution for and
replacement of but not in payment of the Old Credit Documents.
Section 2.2 Revolving Advances. The Lender agrees, on the terms and
conditions set forth herein, to make advances (each a "Revolving Advance") to
the Borrower from time to time from the date all of the conditions set forth in
Section 4.1 are satisfied (the "Funding Date") to the Termination Date, on the
terms and subject to the conditions herein set forth, to provide the Borrower
with working capital to fulfill Export Orders. The Lender shall have no
obligation to make a Revolving Advance to the extent that the amount of the
requested Revolving Advance exceeds Availability. The Borrower's obligation to
pay the Revolving Advances shall be evidenced by the Revolving Note and shall be
secured by the Collateral. Within the limits set forth in this Section 2.2, the
Borrower may request Revolving Advances, prepay, and request additional
Revolving Advances.
Section 2.3 Requests for Advances. The Borrower shall make each
request for a Revolving Advance to the Lender before 11:00 a.m. (Minneapolis
time) of the day of the requested Revolving Advance. Requests may be made in
writing or by telephone. The Lender shall have no obligation to make a Revolving
Advance unless the Lender has received from the Borrower, among other things, a
Borrowing Base Certificate as of a date not more than five (5) Business Days
before the date of the requested Advance and copies of the Export Orders (or a
summary thereof) against which the Borrower is requesting such Advance. Whenever
the Borrower makes a request for an Advance based on Eligible Export Inventory,
it shall also indicate in its books and records that such Inventory has been
designated to fulfill an Export Order and shall no longer be considered Eligible
Inventory under the NBCI Credit Facility. Any request for an Advance shall be
deemed to be a representation by the Borrower that the conditions set forth in
Section 4.2 have been satisfied as of the date of the request.
Section 2.4 Interest; Minimum Interest Charge; Default Interest. All
interest shall be payable monthly in arrears on the first day of the month and
on demand.
(a) REVOLVING NOTE. Except as set forth in subsection (c) and (d),
the outstanding principal balance of the Advances shall bear interest at
the Floating Rate.
(b) MINIMUM INTEREST CHARGE. Notwithstanding the interest payable
pursuant to subsections (a) and (c), the Borrower, during any Tier Two
Period or Tier Three Period, shall pay to the Lender interest of not less
than (i) $2083.33 per month during a Tier Two Period (prorated for less
than full months), and (ii) $3750 per month during a Tier Three Period
(prorated for less than full months). The Borrower shall pay any
deficiency between (i) such minimum interest charge and (ii) the sum of
the amount of interest otherwise calculated under Sections (a) and (c)
hereof plus the amount of interest paid during the same period under the
NBCI Credit Agreement.
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Such minimum interest charge deficiency shall be payable in arrears on the
first day of the following month, provided that the sum of the Minimum
Interest Charge and the Minimum Interest Charge under the NBCI Credit
Facility shall not exceed (i) $2083.33 per month during a Tier Two Period
(prorated for less than full months), and (ii) $3750 per month during a
Tier Three Period (prorated for less than full months).
(c) DEFAULT INTEREST RATE. At any time during any Default Period, in
the Lender's sole discretion and without waiving any of its other rights
and remedies, the principal of the Advances outstanding from time to time
shall bear interest at the Default Rate, effective for any periods
designated by the Lender from time to time during that Default Period.
(d) USURY. In any event no rate change shall be put into effect
which would result in a rate greater than the highest rate permitted by
law.
Section 2.5 Fees.
(a) FACILITY FEES. If the Credit Facility is renewed the Borrower
shall pay the Lender a fee equal to one percent (1.00%) of the Maximum
Line, due and payable 60 days in advance of the Maturity Date.
(b) AUDIT FEES. The Borrower hereby agrees to pay the Lender, on
demand, audit fees in connection with any audits or inspections conducted
by the Lender of any Collateral or the Borrower's operations or business
at the rates established from time to time by the Lender as its audit fees
(which fees are currently $62.50 per hour per auditor), together with all
actual out-of-pocket costs and expenses incurred in conducting any such
audit or inspection; provided that so long as NBCI is the Servicer the
Borrower shall not have to reimburse such costs and expenses to the extent
it has already done so pursuant to the NBCI Credit Facility.
Section 2.6 Termination by Borrower. The Borrower may terminate this
Agreement at any time and, subject to payment and performance of all
Obligations, may obtain any release or termination of the Security Interest to
which the Borrower is otherwise entitled by law by: (i) giving at least 30 days'
prior written notice to the Lender of the Borrower's intention to terminate this
Agreement, and (ii) terminating the NBCI Credit Agreement pursuant to the terms
thereof.
Section 2.7 Mandatory Prepayment. Without notice or demand, if the
outstanding principal balance of the Revolving Advances shall at any time exceed
the Borrowing Base, the Borrower shall immediately prepay the Revolving Advances
to the extent necessary to eliminate such excess.
Section 2.8 Advances Without Request. The Borrower hereby authorizes
the Lender, in its discretion, at any time or from time to time without the
Borrower's request, to
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make Revolving Advances to pay accrued interest, fees, uncollected items that
have been applied to the Obligations, and other Obligations due and payable from
time to time.
Section 2.9 Capital Adequacy; Increased Costs and Reduced Return. If
any Related Lender determines at any time that its Return has been reduced as a
result of any Rule Change, such Related Lender may require the Borrower to pay
it the amount necessary to restore its Return to what it would have been had
there been no Rule Change. The Borrower may terminate the Credit Facility
pursuant to Section 2.6 without incurring the prepayment fee set forth in
Section 2.6 if the Borrower terminates the Credit Facility within 45 days after
the date the Lender gives notice of the Rule Change. For purposes of this
Section 2.9:
(a) "Capital Adequacy Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital adequacy,
or the interpretation or administration thereof by any governmental or
regulatory authority, central bank or comparable agency, whether or not
having the force of law, that applies to any Related Lender. Such rules
include rules requiring financial institutions to maintain total capital
in amounts based upon percentages of outstanding loans, binding loan
commitments and letters of credit.
(b) "Return", for any period, means the return as determined by such
Related Lender on the Advances based upon its total capital requirements
and a reasonable attribution formula that takes account of the Capital
Adequacy Rules then in effect. Return may be calculated for each calendar
quarter and for the shorter period between the end of a calendar quarter
and the date of termination in whole of this Agreement.
(c) "Rule Change" means any change in any Capital Adequacy Rule
occurring after the Closing Date, but the term does not include any
changes in applicable requirements that on the Closing Date are scheduled
to take place under the existing Capital Adequacy Rules or any increases
in the capital that any Related Lender is required to maintain to the
extent that the increases are required due to a regulatory authority's
assessment of the financial condition of such Related Lender.
(d) "Related Lender" includes (but is not limited to) the Lender,
any parent corporation of the Lender and any assignee of any interest of
the Lender hereunder and any participant in the loans made hereunder.
Certificates of any Related Lender sent to the Borrower from time to
time claiming compensation under this Section 2.9, stating the reason therefor
and setting forth in reasonable detail the calculation of the additional amount
or amounts to be paid to the Related Lender hereunder to restore its Return
shall be conclusive absent manifest error. In determining such amounts, the
Related Lender may use any reasonable averaging and attribution methods.
Section 2.10 Use of Proceeds. The Borrower shall use the proceeds of
Advances for working capital to finance the manufacture, assembly, production or
purchase
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and subsequent sale of Items only. Without limiting the generality of the
foregoing, the Borrower shall not use any proceeds of Advances for any purpose
prohibited by the Borrower Agreement or (i) to acquire fixed assets or capital
goods for use in the Borrower's business; (ii) to acquire, equip or rent
commercial space overseas; (iii) to employ non-US residents in offices outside
the US; (iv) to serve as a retainage or warranty bond; or (v) to repay
pre-existing Debt or future indebtedness of the Borrower unrelated to the
Advances.
Section 2.11 Facility Subject to Eximbank Rules. The Borrower
acknowledges that the Lender is willing to make the Credit Facility available to
the Borrower because the Eximbank is willing to guaranty payment of a
significant portion of the Obligations pursuant to the Master Guaranty.
Accordingly, in the event of any inconsistency among the Loan Documents and the
Master Guaranty or related documents, the provision that is the more stringent
on the Borrower shall control.
ARTICLE III
Security Interest
Section 3.1 Grant of Security Interest. The Borrower hereby grants
to the Lender a security interest (the "Security Interest") in the following
collateral (the "Collateral"), as security for the payment and performance of
the Obligations:
INVENTORY: All inventory of the Borrower, as such term is defined in the
UCC, whether now owned or hereafter acquired, whether consisting of whole
goods, spare parts or components, supplies or materials, whether acquired,
held or furnished for sale, for lease or under service contracts or for
manufacture or processing, and wherever located;
ACCOUNTS AND OTHER RIGHTS TO PAYMENT: Each and every right of the Borrower
to the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a rendering
of services, out of a loan, out of the overpayment of taxes or other
liabilities, or otherwise arises under any contract or agreement, whether
such right to payment is created, generated or earned by the Borrower or
by some other Person who subsequently transfers such Person's interest to
the Borrower, whether such right to payment is or is not already earned by
performance, and howsoever such right to payment may be evidenced,
together with all other rights and interests (including all liens and
security interests) which the Borrower may at any time have by law or
agreement against any account debtor or other obligor obligated to make
any such payment or against any property of such account debtor or other
obligor; all including all of the Borrower's rights to payment in the form
of all present and future accounts, contract rights, loans and obligations
receivable, chattel papers, bonds, notes and other debt instruments, tax
refunds and rights to payment in the nature of general intangibles;
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EQUIPMENT: All of the Borrower's equipment, as such term is defined in the
UCC whether now or hereafter owned, including all present and future
machinery, vehicles, furniture, fixtures, manufacturing equipment, shop
equipment, office and recordkeeping equipment, parts, tools, supplies, and
including specifically the goods described in any equipment schedule or
list herewith or hereafter furnished to the Lender by the Borrower;
GENERAL INTANGIBLES: All of the Borrower's general intangibles, as such
term is defined in the UCC, whether now owned or hereafter acquired,
including all present and future contract rights, patents, patent
applications, copyrights, trademarks, trade names, trade secrets, customer
or supplier lists and contracts, manuals, operating instructions, permits,
franchises, the right to use the Borrower's name, and the goodwill of the
Borrower's business; and
INVESTMENT PROPERTY: All of the Borrower's investment property, as such
term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all securities, security entitlements,
securities accounts, commodity contracts, commodity accounts, stocks,
bonds, mutual fund shares, money market shares and U.S. Government
securities;
together with all substitutions and replacements for and products of any
of the foregoing property and together with proceeds of any and all of the
foregoing property and, in the case of all tangible property, together
with all accessions and together with (i) all accessories, attachments,
parts, equipment and repairs now or hereafter attached or affixed to or
used in connection with any such goods, and (ii) all warehouse receipts,
bills of lading and other documents of title now or hereafter covering
such goods.
Section 3.2 Notification of Account Debtors and Other Obligors. The
Lender may at any time (either before or after the occurrence of an Event of
Default) notify any account debtor or other Person obligated to pay the amount
due that such right to payment has been assigned or transferred to the Lender
for security and shall be paid directly to the Lender. The Borrower will join in
giving such notice if the Lender so requests. At any time after the Borrower or
the Lender gives such notice to an account debtor or other obligor, the Lender
may, but need not, as the Borrower's agent and attorney-in-fact, notify the US
Postal Service to change the address for delivery of the Borrower's mail to any
address designated by the Lender, otherwise intercept the Borrower's mail, and
receive, open and dispose of the Borrower's mail, applying all Collateral as
permitted under this Agreement and holding all other mail for the Borrower's
account or forwarding such mail to the Borrower's last known address.
Section 3.3 Occupancy.
(a) The Borrower hereby irrevocably grants to the Lender the right
to take possession of each premises where Borrower conducts its business
and has any rights of possession (the "Premises") at any time during any
Default Period.
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(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender in good faith considers related.
(c) The Lender's right to hold the Premises shall terminate upon the
earlier of payment in full of all Obligations and termination of the
Commitment, or final sale or disposition of all goods constituting
Collateral and delivery of all such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for any rent
or other compensation for the possession or use of any of the Premises;
provided, however, that if the Lender does pay or account for any rent or
other compensation for the possession or use of any of the Premises, the
Borrower shall reimburse the Lender promptly for the full amount thereof.
Section 3.4 License. Without limiting the generality of the Patent
and Trademark Security Agreement, the Borrower hereby grants to the Lender a
non-exclusive, worldwide and royalty-free license to use, sub-license or
otherwise exploit all trademarks, franchises, trade names, copyrights and
patents of the Borrower for the purpose of selling, leasing or otherwise
disposing of any or all Collateral following an Event of Default.
Section 3.5 Filing a Copy. A carbon, photographic, or other
reproduction of this Agreement or of a financing statement signed by Borrower is
sufficient as a financing statement.
ARTICLE IV
Conditions of Lending
Section 4.1 Conditions Precedent to the Initial Revolving Advance.
The Lender's obligation to make the initial Revolving Advance hereunder shall be
subject to the condition precedent that the Lender shall have received all of
the following, each in form and substance satisfactory to the Lender:
(a) A Certificate of the Secretary of the Borrower certifying as to
(1) the resolutions of the board of directors of the Borrower approving
the execution and delivery of this Amended and Restated Credit and
Security Agreement and the Revolving Note, (2) the fact that the Articles
of Incorporation and Bylaws of the Borrower, which were certified and
delivered to the Lender pursuant to the Certificate of the Borrower's
Secretary dated as of June 26, 1997, continue in full force and effect and
have not been amended or otherwise modified except as set forth in
Certificates previously delivered or the Certificate to be delivered, and
(3) certifying that the officers and agents of the Borrower who have been
certified to the Lender, pursuant to the Certificate of Authority of the
Borrower's Secretary dated as of June 26, 1997, as being authorized to
sign and to act on behalf of the Borrower continue to be so
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authorized or setting forth the sample signatures of each of the officers
and agents of the Borrower authorized to execute and deliver this
Agreement and all other documents, agreements and certificates on behalf
of the Borrower.
(b) Payment of the fee described in Section 2.5.
(c) The Control Agreement, properly executed by the Borrower and
NISI.
(d) The Pledge Agreement, properly executed by the Borrower.
(e) Such other documents as the Lender in its sole discretion may
require.
Section 4.2 Conditions Precedent to All Advances. The Lender's
obligation to make each Advance shall be subject to the further conditions
precedent that on such date:
(a) the representations and warranties contained in Article V and
the Disclosure are correct on and as of the date of such Advance as though
made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result from
such Advance which constitutes a Default or an Event of Default.
ARTICLE V
Representations and Warranties
The Borrower represents and warrants to the Lender as follows:
Section 5.1 Name; Locations; Tax ID No.; Subsidiaries. During its
existence, the Borrower has done business solely under its corporate name as set
forth herein and under such trade names and such other corporate names as
disclosed to Lender in writing before this Agreement is signed and delivered.
The address of Borrower's chief executive office and principal place of business
and its federal tax identification number are set forth below its signature to
this Agreement. All Inventory is located at that location or at one of the other
locations disclosed to Lender in writing before this Agreement is signed and
delivered. The Borrower has no subsidiaries except as disclosed to Lender in
writing before this Agreement is signed and delivered.
Section 5.2 Financial Condition; No Adverse Change. Before this
Agreement was signed and delivered, the Borrower furnished the Lender its
audited financial statements for its fiscal year ended June 30, 1997 and its
unaudited financial statements for the fiscal year to day ending December 31,
1997, each certified by the Borrower. Those statements fairly present the
Borrower's financial condition as of the dates indicated therein and the results
of its operations for the periods then ended and were prepared in accordance
with GAAP. Since
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the date of the most recent financial statements, there has been no material
adverse change in the business, properties or condition (financial or otherwise)
of the Borrower.
Section 5.3. Suspension and Debarment, etc. On the date of this
Agreement neither the Borrower nor any of its Principals (as defined below) are
(A) debarred, suspended, proposed for debarment with a final determination skill
pending, declared ineligible or voluntarily excluded (as such terms are defined
under any of the Debarment Regulations referred to below) from participating in
procurement or nonprocurement transactions with any US federal government
department or agency pursuant to any of the Debarment Regulations (as defined
below) or (B) indicted, convicted or had a civil judgment rendered against the
Borrower or any of its Principals for any of the offenses listed in any of the
Debarment Regulations. Unless authorized by Eximbank, the Borrower will not
knowingly enter into any transactions in connection with the Items with any
person who is debarred, suspended, declared ineligible or voluntarily excluded
from participation in procurement or nonprocurement transactions with any US
federal government department or agency pursuant to any of the Debarment
Regulations. The Borrower will provide immediate written notice to the Lender if
at any time it learns that the certification set forth in this Section 5.3 was
erroneous when made or has become erroneous by reason of changed circumstances.
For the purposes hereof, (1) "Principals" shall mean any officer, director,
owner, partner, key employee, or other person with primary management or
supervisory responsibilities with respect to the Borrower; or any other person
(whether or not an employee) who has critical influence on or substantive
control over the transaction covered by this Agreement and (2) the Debarment
Regulations shall mean (x) the Government wide Debarment and Suspension
(Nonprocurement) regulations (Common Rule), 53 Fed. Reg. 19204 (May 26, 1988),
(y) Subpart 9.4 (Debarment, Suspension and Ineligibility) of the Federal
Acquisition Regulations, 48 C.F.R. 9.400-9.409 and (z) the revised Government
wide Debarment and Suspension (Nonprocurement) regulations (Common Rule), 60
Fed. Reg. 33037 (June 26, 1995). The Borrower acknowledges that any statement,
certification or representation made by it in connection with the Credit
Facility is subject to the penalties provided in Article 18 U.S.C. Section 1001.
Section 5.4 Legal Agreements. The Old Credit Documents constitute
the legal, valid and binding obligations of the Borrower, enforceable against
the Borrower in accordance with their respective terms. The Borrower has no
claim, defense or offset to enforcement of the Old Credit Documents.
ARTICLE VI
Covenants of the Borrower
So long as the Advances or any amount owing to Lender hereunder
shall remain unpaid, the Borrower will comply with the requirements in this
Article, unless the Lender shall otherwise consent in writing.
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Section 6.1 Reporting Requirements. The Borrower will deliver to the
Lender each of the following in form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 90 days after the
end of each fiscal year of the Borrower, the Borrower's audited financial
statements prepared in accordance with GAAP; together with (i) copies of
all management letters prepared by such accountants; (ii) a report signed
by such accountants stating that in making the investigations necessary
for said opinion they obtained no knowledge, except as specifically
stated, of any Default or Event of Default hereunder and all relevant
facts in reasonable detail to evidence, and the computations as to,
whether or not the Borrower is in compliance with the requirements set
forth in Section 6.8 and (iii) a certificate of the Borrower's chief
financial officer stating that such financial statements have been
prepared in accordance with GAAP, that they fairly present the Borrower's
financial condition and the results of its operations, and whether or not
such officer has knowledge of the occurrence of any Default or Event of
Default hereunder and, if so, stating in reasonable detail the facts with
respect thereto;
(b) as soon as available and in any event within 20 days after the
end of each month, an unaudited/internal balance sheet and statement of
income and retained earnings of the Borrower as at the end of and for such
month and for the year to date period then ended, prepared in accordance
with GAAP, subject to year-end audit adjustments; and accompanied by a
certificate of the Borrower's chief financial officer, substantially in
the form of Exhibit B hereto stating (i) that such financial statements
have been prepared in accordance with GAAP subject to year-end audit
adjustments, and fairly represent the Borrower's financial condition and
the results of its operations, (ii) whether or not such officer has
knowledge of the occurrence of any Default or Event of Default hereunder
not theretofore reported and remedied and, if so, stating in reasonable
detail the facts with respect thereto, and (iii) all relevant facts in
reasonable detail to evidence, and the computations as to, whether or not
the Borrower is in compliance with the requirements set forth in Section
6.8;
(c) as soon as available and in any event within five (5) Business
Days after the end of each month, a properly completed Borrowing Base
Certificate as at the end of such month, signed by the Borrower's chief
financial officer;
(d) during a Tier Two Period, as soon as available and in any event
within two (2) Business Days after the end of each week, a properly
completed Borrowing Base Certificate as at the end of such week, signed by
the Borrower's chief financial officer;
(e) as soon as available and in any event within five (5) Business
Days after the end of each month inventory certifications as at the end of
such month;
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(f) within five (5) Business Days after the end of each month,
agings of the Borrower's accounts receivable and accounts payable and an
accounts receivable certification as of the end of such month;
(g) at least 30 days before the beginning of each fiscal year of the
Borrower, the projected balance sheets and income statements for each
month of such year, each in reasonable detail, representing the Borrower's
good faith projections and certified by the Borrower's chief financial
officer as being the most accurate projections available and identical to
the projections used by the Borrower for internal planning purposes,
together with such supporting schedules and information as the Lender may
in its discretion require;
(h) as soon as available and in any event within 15 days of receipt
thereof, a copy of the checking account statement of the Borrower as of
the last day of each month from each bank with which Borrower maintains a
checking account, such statements to be provided to the Lender directly by
each such bank or by the Borrower with respect to a bank that is unwilling
to send them to the Lender;
(i) as soon as available and in any event within three (3) days
after they are due, copies of tax payments due and paid and written notice
of any and all taxes due but not paid;
(j) at a minimum during any Tier Three Period and at the Lender's
Sole Discretion, from time to time, with reasonable promptness, any and
all receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices to account debtors, shipment documents and
delivery receipts for goods sold, and such other material, reports,
records or information as the Lender may request.
(k) promptly upon knowledge thereof, notice of any Items (and the
corresponding invoice amount) which are articles, services, or related
technical data that are listed on the United States Munitions List (part
121 of title 22 of the Code of Federal Regulations);
(l) immediately after a proceeding in bankruptcy or an action for
debtor's relief is filed by, against, or on behalf of the Borrower;
(m) immediately after the Borrower fails to obtain the dismissal or
termination within thirty (30) calendar days of the commencement of any
proceeding or action referred to in (l) above; and
(n) immediately after the Borrower begins any procedure for its
dissolution or liquidation, or a procedure therefor has been commenced
against it.
So long as the Servicer is actively servicing the Loan Documents on behalf of
the Lender as described in Section 8.3, the Borrower shall provide to the
Servicer all reports required under this Section 6.1.
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Section 6.2 Inspection. Upon the Lender's request, the Borrower will
permit any officer, employee, attorney, agent or accountant for the Lender to
audit, review, make extracts from or copy any and all records of the Borrower
and to inspect the Collateral at all times during ordinary business hours.
Section 6.3 Account Verification. The Lender may at any time and
from time to time send, or request the Borrower to send, requests for
verification of Accounts or notices of assignment to account debtors and other
obligors. The Borrower authorizes the Lender to verify Accounts as frequently as
daily and the Borrower understands the Lender intends to do so by telephone
and/or in writing.
Section 6.4 Account Debtors to Pay to Designated Account; Pledge of
Account. The Borrower shall instruct all of its Account debtors located outside
the US to make all payments for Items directly to the Collateral Account.
Section 6.5 No Other Liens. The Borrower will keep all Collateral
free and clear of all security interests, liens and encumbrances except the
Security Interest, the Permitted Liens, purchase money security interests in
equipment, and other security interests approved by the Lender in writing.
Section 6.6 Insurance. The Borrower will at all times keep all
tangible Collateral insured against risks of fire (including so-called extended
coverage), theft, collision (for Collateral consisting of motor vehicles) and
such other risks and in such amounts as the Lender may reasonably request, with
a lender's loss payable clause in favor of Lender to the extent of its interest.
Section 6.7 Collateral Account. The Borrower has provided the Lender
with agreements regarding a collateral account in connection with the collection
of Accounts.
Section 6.8 Minimum Tangible Net Worth. The Borrower will maintain
its Tangible Net Worth, determined as at the end of each month, at an amount not
less than $350,000.
Section 6.9 No Sale or Transfer of Collateral and Other Assets. The
Borrower will not sell, lease, assign, transfer or otherwise dispose of (i) the
stock of any subsidiary, (ii) all or a substantial part of its assets, or (iii)
any Collateral or any interest therein (whether in one transaction or in a
series of transactions) to anyone other than the sale of Inventory in the
ordinary course of business.
Section 6.10 Consolidation and Merger; Asset Acquisitions. The
Borrower will not consolidate with or merge into any Person, or permit any other
Person to merge into it, or acquire (in a transaction analogous in purpose or
effect to a consolidation or merger) all or substantially all the assets of any
other Person.
Section 6.11 Place of Business; Name. The Borrower will not change
the location of its chief executive office or principal place of business from
that disclosed
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pursuant to Section 5.1. The Borrower will not permit any tangible Collateral to
be located in any state or area in which, in the event of such location, a
financing statement covering such Collateral would be required to be, but has
not in fact been, filed in order to perfect the Security Interest. The Borrower
will not change its name.
ARTICLE VII
Events of Default, Rights and Remedies
Section 7.1 Events of Default. An "Event of Default", as used
herein, shall mean any one of the following:
(a) Failure to pay the Note when due, and in this connection
Borrower hereby waives presentment, notice of dishonor and protest;
(b) Any payment default shall occur under any agreement (other than
this Agreement) between the Borrower and the Lender, or the Lender shall
accelerate or demand payment of any obligations (other than arising under
this Agreement) owed to it by the Borrower, or the Lender shall begin
exercising its remedies against the Borrower;
(c) Any payment default shall occur under any agreement between the
Borrower and the Servicer, or the Servicer shall accelerate or demand
payment of any obligations owed to it by the Borrower, or the Servicer
shall begin exercising its remedies against the Borrower;
(d) Eximbank shall repudiate, purport to revoke or fail to perform
its obligations under the Master Guaranty;
(e) Any material litigation is commenced against the Borrower and is
not withdrawn within thirty (30) calendar days of filing;
(f) A petition shall be filed by or against the Borrower under the
United States Bankruptcy Code naming the Borrower as debtor;
(g) The Borrower begins any procedure for its liquidation or
dissolution or any such procedure is commenced against it; or
(h) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in any Loan Document not specifically
addressed in this Section 7.1, which shall remain uncured for 30 days
after notice from the Lender.
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Section 7.2 Rights and Remedies. During any Default Period, the
Lender may exercise any or all of the following rights and remedies:
(a) The Lender, may by notice to the Borrower, declare the
Commitment to be terminated, whereupon the same shall forthwith terminate;
(b) The Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including the right to take possession of Collateral, or any evidence
thereof, proceeding without judicial process or by judicial process
(without a prior hearing or notice thereof, which the Borrower hereby
expressly waives) and the right to sell, lease or otherwise dispose of any
or all of the Collateral, and in connection therewith, the Borrower will
on demand assemble the Collateral and make it available to the Lender at a
place to be designated by the Lender which is reasonably convenient to
both parties;
(c) The Lender may exercise any other rights and remedies available
to it by law or agreement.
The remedies provided hereunder are cumulative.
Section 7.3 Certain Notices. If notice to the Borrower of any
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 8.2) at least 10
calendar days before the date of intended disposition or other action.
ARTICLE VIII
Miscellaneous
Section 8.1 Restatement of Old Credit Documents. This Agreement is
executed for the purpose of amending and restating the Old Credit Documents.
Section 8.2 Addresses for Notices, Etc. Except as otherwise
expressly provided herein, all notices, requests, demands and other
communications provided for hereunder shall be in writing and shall be (i)
personally delivered, (ii) sent by first class US mail, (iii) sent by overnight
courier of national reputation, or (iv) transmitted by telecopy, in each case
addressed or telecopied to the party to whom notice is being given at its
address or telecopy number as set forth below its signature to this Agreement.
Section 8.3 Servicing of Credit Facility.
(a) The Lender has requested that the Servicer service and enforce
the Loan Documents, make all Advances and collect all Obligations on the
Lender's behalf and the Servicer has agreed to do so. The Borrower
acknowledges and accepts the Servicer's appointment as such.
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(b) The Servicer shall have no duties or responsibilities to the
Borrower hereunder, but only to the Lender. Neither the Servicer nor any
of its officers, directors, employees or agents shall be liable for any
action taken or omitted by them hereunder or in connection herewith,
unless caused by its or their willful misconduct. The Servicer's duties
shall be mechanical and administrative in nature; nothing in this
Agreement, express or implied, is intended to or shall be so construed as
to impose upon the Servicer any obligations with respect to the Loan
Documents except as expressly set forth herein. The Borrower shall not in
any way be construed to be a third party beneficiary of any relationship
between the Servicer and the Lender.
(c) The Servicer shall be entitled to rely, and shall be fully
protected in relying, upon any communication whether written or oral
believed by it to be genuine and correct and to have been signed, sent or
made by the proper Person, and, with respect to all legal matters
pertaining to this Agreement and its duties hereunder, upon advice of
counsel selected by it.
(d) The Borrower shall be entitled to rely upon any communication
whether written or oral sent or made by the Servicer for and on behalf of
the Lender with respect to all matters pertaining to the Loan Documents
and the Borrower's duties and obligations hereunder, unless and until the
Borrower receives written notice from the Lender that the Servicer is no
longer servicing this credit facility.
(e) The Servicer shall hold and be the custodian of the Loan
Documents on the Lender's behalf for so long as the Servicer is servicing
the Credit Facility.
Section 8.4 Costs and Expenses. The Borrower agrees to pay on demand
all costs and expenses (including legal fees) incurred by the Lender in
connection with the Loan Documents and any other document or agreement related
thereto, and the transactions contemplated hereby, including wire transfer and
ACH charges, the cost of credit reports, overadvance fees, the expense of any
auditors and fees and expenses in enforcing this Agreement.
Section 8.5 Indemnity. In addition to the payment of expenses
pursuant to Section 8.4, the Borrower agrees to indemnify, defend and hold
harmless the Lender, and any of its participants, parent corporations,
subsidiary corporations, affiliated corporations, successor corporations, and
all present and future officers, directors, employees, attorneys and agents of
the foregoing (the "Indemnitees") from and against any of the following
(collectively, "Indemnified Liabilities"):
(i) any and all transfer taxes, documentary taxes, assessments
or charges made by any governmental authority by reason of the
execution and delivery of this Agreement and the other Loan
Documents or the making of the Advances;
(ii) any and all liabilities, losses, damages, penalties,
judgments, suits, claims, costs and expenses of any kind or nature
whatsoever (including,
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without limitation, the reasonable fees and disbursements of
counsel) in connection with any investigative, administrative or
judicial proceedings, whether or not such Indemnitee shall be
designated a party thereto, which may be imposed on, incurred by or
asserted against any such Indemnitee, in any manner related to or
arising out of or in connection with the making of the Advances,
this Agreement and the other Loan Documents or the use or intended
use of the proceeds of the Advances; and
(iii) any claim, loss or damage to which any Indemnitee may be
subjected as a result of any violation of any federal, state, local
or other governmental statute, regulation, law, or ordinance dealing
with the protection of human health and the environment.
If any investigative, judicial or administrative proceeding arising from
any of the foregoing is brought against any Indemnitee, then the Borrower or
counsel designated by the Borrower and satisfactory to the Indemnitee, will
resist and defend such action, suit or proceeding to the extent and in the
manner directed by the Indemnitee. Each Indemnitee will use its best efforts to
cooperate in the defense of any such action, suit or proceeding. If the
foregoing undertaking to indemnify, defend and hold harmless may be held to be
unenforceable because it violates any law or public policy, the Borrower shall
nevertheless make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
The Borrower's obligation under this Section 8.5 shall survive the termination
of this Agreement and the discharge of the Borrower's other obligations
hereunder. If Eximbank makes payment of a claim to the Lender under the Master
Guaranty in connection with the Credit Facility, Eximbank shall be assigned all
the Lender's rights and remedies under the Loan Documents and may enforce any
such rights or remedies against the Borrower and the Collateral. Additionally,
the Borrower shall hold Eximbank harmless from agrees to indemnify it against
any and all liabilities, damages, claims, costs and losses incurred or suffered
by it resulting from (a) any materially incorrect certification or statement
knowingly made by or on behalf of the Borrower to Eximbank or the Lender in
connection with an Advance , this Agreement or any of the other Loan Documents
or (b) any breach by the Borrower of the terms and conditions of this Agreement
or any of the other Loan Documents.
Section 8.6 Binding Effect; Assignment; Counterparts; Exchanging
Information. The Loan Documents shall be binding upon and inure to the benefit
of the Borrower and the Lender and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the prior written consent of the
Lender. This Agreement and other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same instrument. Without limiting the Lender's right to share
information regarding the Borrower and its Affiliates with the Lender's
participants, accountants, lawyers and other advisors, the Lender, Norwest
Corporation, and all direct and indirect subsidiaries of Norwest Corporation,
may exchange any and all information they may have in their possession
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regarding the Borrower and its Affiliates, and the Borrower waives any right of
confidentiality it may have with respect to such exchange of such information.
Section 8.7 Waiver of Default. The Borrower is in default of
Sections 6.1(b) and 6.1(f) of the Credit Agreement relating to reporting
requirements, (the "Default"). Upon the terms and subject to the conditions set
forth in this Amendment, the Lender hereby waives the default. This waiver shall
be effective only in this specific instance and for the specific purpose for
which it is given, and this waiver shall not entitle the Borrower to any other
or further waiver in any similar or other circumstances.
Section 8.8 Waiver. The Borrower hereby absolutely and
unconditionally releases and forever discharges the Bank, and any and all
participants, parent corporations, subsidiary corporations, affiliated
corporations, insurers, indemnitors, successors and assigns thereof, together
with all of the present and former directors, officers, agents and employees of
any of the foregoing, from any and all claims, demands or causes of action of
any kind, nature or description, whether arising in law or equity or upon
contract or tort or under any state or federal law or otherwise, which the
Borrower has had, now has or has made claim to have against any such person for
or by reason of any act, omission, matter, cause or thing whatsoever arising
from the beginning of time to and including the date of this Agreement, whether
such claims, demands and causes of action are matured or unmatured or known or
unknown.
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Section 8.9 Governing Law; Jurisdiction, Venue; Waiver of Jury
Trial. This Agreement and the Note shall be governed by and construed in
accordance with the laws (other than conflict laws) of the State of Minnesota.
Each party consents to the personal jurisdiction of the state and federal courts
located in the State of Minnesota in connection with any controversy related to
this Agreement, waives any argument that venue in any such forum is not
convenient and agrees that any litigation initiated by any of them in connection
with this Agreement shall be venued in either the District Court of Hennepin
County, Minnesota located in Minneapolis, Minnesota, or the United States
District Court, District of Minnesota, Fourth Division. THE PARTIES WAIVE ANY
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO
THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the date first above written.
NORWEST BUSINESS CREDIT, INC., as RSI SYSTEMS, INC.
Servicer for
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION By
-----------------------------------
▇▇▇▇▇▇ ▇. Lies
By Its President and Chief Executive
----------------------------------- Officer
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its Vice President Address:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Address: ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Norwest Center Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ Federal Tax I.D. No. ▇▇-▇▇▇▇▇▇▇
Telecopy No. 612/341-2472
Federal Tax ID No. ▇▇-▇▇▇▇▇▇▇
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Exhibit A to Credit and Security
Agreement
REVOLVING NOTE
$500,000 Minneapolis, Minnesota
April 16, 1998
For value received, the undersigned, RSI SYSTEMS, INC., a Minnesota
corporation (the "Borrower"), hereby promises to pay on the Termination Date
under the Credit Agreement (defined below) to the order of NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, a national banking association (the "Lender"),
at its main office in Minneapolis, Minnesota, 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 Five Hundred
Thousand Dollars ($500,000) or, if less, the aggregate unpaid principal amount
of all Advances made by the Lender to the Borrower under the Amended and
Restated Credit and Security Agreement of even date herewith by and between the
Lender and the Borrower (as the same may hereafter be amended, supplemented or
restated from time to time, the "Credit Agreement") together with interest on
the principal amount hereunder remaining unpaid from time to time (computed on
the basis of actual days elapsed in a 360-day year) from the date of the initial
Advance until this Note is fully paid at the rate from time to time in effect
under the Credit Agreement.
This Note is the Revolving Note as defined in the Credit Agreement
and is subject to the Credit Agreement. To the extent this Note evidences the
Borrower's obligation to pay Existing Revolving Advances, this Note is issued in
substitution for and replacement of but not in payment of the Borrower's
promissory note dated as of June 26, 1997 payable to the order of the Lender in
the original principal amount of $500,000.
RSI SYSTEMS, INC.
By
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▇▇▇▇▇▇ ▇. Lies
Its President and Chief Executive Officer
Exhibit B to Credit and Security
Agreement
COMPLIANCE CERTIFICATE
To: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Norwest Business Credit, Inc., as Servicer
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Norwest Bank Minnesota, National Association
Date: __________________, 199___
Subject: RSI Systems, Inc.
Financial Statements
In accordance with our Amended and Restated Credit and Security
Agreement dated as of April 16, 1998 (the "Credit Agreement"), attached are the
financial statements of RSI Systems, Inc. (the "Borrower") as of and for
________________, 19___ (the "Reporting Date") and the year-to-date period then
ended (the "Current Financials"). All terms used in this certificate have the
meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in
accordance with GAAP, subject to year-end audit adjustments, and fairly present
the Borrower's financial condition as of the date thereof.
Events of Default. (Check one):
[ ] The undersigned does not have knowledge of the occurrence of a
Default or Event of Default under the Credit Agreement.
[ ] The undersigned has knowledge of the occurrence of a Default or
Event of Default under the Credit Agreement and attached hereto is a
statement of the facts with respect to thereto.
Financial Covenants. I further hereby certify as follows:
1. Minimum Tangible Net Worth. Pursuant to Section 6.8 of the Credit
Agreement, as of the Reporting Date the Borrower's Tangible Net Worth was
$____________ which [ ] satisfies [ ] does not satisfy the requirement that such
amount be not less than $350,000.
Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of the financial covenants referred to above.
These computations were made in accordance with GAAP.
RSI SYSTEMS, INC.
By
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Its Chief Financial Officer
Exhibit C to Credit and Security
Agreement
FORM OF BORROWING BASE CERTIFICATE
Exhibit D to Credit and Security
Agreement
PERMITTED LIENS
Creditor Collateral Jurisdiction Filing Date Filing No.
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NONE