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EXHIBIT 10.1
FINANCING AGREEMENT
THE CIT GROUP/BUSINESS CREDIT, INC.
(AS LENDER)
AND
CRAY INC.
(AS BORROWER)
DATED: JUNE 29, 2000
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TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS ......................................................... 1
SECTION 2. CONDITIONS PRECEDENT ................................................ 13
SECTION 3. REVOLVING LOANS ..................................................... 18
SECTION 4. TERM LOAN............................................................ 21
SECTION 5. INTENTIONALLY OMITTED ............................................... 21
SECTION 6. COLLATERAL........................................................... 23
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS ........................... 26
SECTION 8. INTEREST, FEES AND EXPENSES ......................................... 37
SECTION 9. POWERS .............................................................. 43
SECTION 10. EVENTS OF DEFAULT AND REMEDIES ..................................... 44
SECTION 11. TERMINATION ........................................................ 47
SECTION 12. MISCELLANEOUS ...................................................... 47
EXHIBIT
Exhibit A - Form of Term Loan A Promissory Note
SCHEDULES
Schedule 1 - Collateral Information
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THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, with offices
located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (hereinafter
"CIT"), is pleased to confirm the terms and conditions under which CIT shall
make revolving loans, the term loan and other financial accommodations to CRAY
INC., a Washington corporation with a principal place of business at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (herein the "Company").
SECTION 1. DEFINITIONS
ACCOUNTS shall mean all of the Company's now existing and future: (a) accounts
(as now or hereafter defined in the UCC), and any and all other receivables
(whether or not specifically listed on schedules furnished to CIT), including,
without limitation, all accounts created by, or arising from, all of the
Company's sales, leases, rentals of goods or renditions of services to its
customers, including but not limited to, those accounts arising under any of the
Company's trade names or styles, or through any of the Company's divisions; (b)
any and all instruments, documents, chattel paper (including electronic chattel
paper) (all as now or hereafter defined in the UCC); (c) unpaid seller's or
lessor's rights (including rescission, replevin, reclamation, repossession and
stoppage in transit) relating to the foregoing or arising therefrom; (d) rights
to any goods represented by any of the foregoing, including rights to returned,
reclaimed or repossessed goods; (e) reserves and credit balances arising in
connection with or pursuant hereto; (f) guarantees, supporting obligations,
payment intangibles and letter of credit rights (all as now or hereafter defined
in the UCC); (g) insurance policies or rights relating to any of the foregoing;
(h) general intangibles pertaining to any and all of the foregoing (including
all rights to payment, including those arising in connection with bank and
non-bank credit cards), and including books and records and any electronic media
and software thereto; (i) notes, deposits or property of account debtors
securing the obligations of any such account debtors to the Company; and (j)
cash and non-cash proceeds (as now or hereafter defined in the UCC) of any and
all of the foregoing.
ANNIVERSARY DATE shall mean the date occurring three (3) years from the Closing
Date and the same date in every year thereafter.
AVAILABILITY shall mean at any time the amount by which: (a) the sum of (i) the
Borrowing Base and (ii) Cash Collateral, if any, exceeds (b) the sum of (i) the
outstanding aggregate amount of all Obligations, including without limitation,
all Obligations with respect to Revolving Loans and (ii) the Availability
Reserve.
AVAILABILITY RESERVE shall mean the sum of: (a) one (1) months rental payments
or similar charges for any of the Company's leased premises or other Collateral
locations for which the Company has not delivered to CIT a landlord's waiver in
form and substance reasonably satisfactory to CIT, provided that any of the
foregoing amounts shall be adjusted from time to time hereafter upon: (x)
delivery to CIT of any such acceptable waiver; (y) the opening or closing of a
Collateral location; and/or (z) any change in the amount of rental, storage or
processor payments or similar charges; and (b) such other reserves as CIT deems
necessary in its reasonable judgment as a result of (x) negative forecasts
and/or trends in the Company's business, industry, prospects, profits,
operations or financial condition or (y) other issues,
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circumstances or facts that could otherwise negatively impact the Company, its
business, prospects, profits, operations, industry, financial condition or
assets.
BORROWING BASE shall mean an amount equal to eighty-five percent (85%) of the
Company's aggregate outstanding Eligible Accounts Receivable, provided that the
Dilution Percentage does not exceed five percent (5%). The Dilution Percentage
is the sum of the Company's credits, allowances, discounts, write-offs,
contra-accounts and offsets and deductions which reduce the value of accounts
receivable divided by gross invoices. The Dilution Percentage shall be
calculated on a rolling 90 day average. If the Dilution Percentage exceeds five
percent (5%) then the "eighty-five percent (85%)" referenced above shall be
reduced by such excess Dilution Percentage.
BUSINESS DAY shall mean any day on which CIT and The Chase Manhattan Bank are
open for business.
CAPITAL EXPENDITURES shall mean, for any period, the aggregate expenditures of
the Company during such period on account of, property, plant, equipment or
similar fixed assets that, in conformity with GAAP, are required to be reflected
in the balance sheet of the Company.
CAPITAL IMPROVEMENTS shall mean operating Equipment, facilities (other than
land) acquired or installed for use in the Company's business operations.
CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure in the balance sheet of the Company.
CASH COLLATERAL shall mean the amount of cash collateral in the form of cash
deposited in an account in the name of CIT.
CHASE BANK RATE shall mean the rate of interest per annum announced by The Chase
Manhattan Bank from time to time as its prime rate in effect at its principal
office in New York City. (The prime rate is not intended to be the lowest rate
of interest charged by The Chase Manhattan Bank to its borrowers). If The Chase
Manhattan Bank ceases to announce a prime rate of interest, CIT may by notice to
the Company substitute a prime rate of interest issued by another commercial
bank of its reasonable choice.
CLOSING DATE shall mean the date that this Financing Agreement has been duly
executed by the parties hereto and delivered to CIT.
COLLATERAL shall mean all present and future Accounts, Equipment, Inventory,
Documents of Title, General Intangibles, Real Estate, and Other Collateral.
CONSOLIDATED BALANCE SHEET shall mean a consolidated or compiled, as applicable,
balance sheet for the Company and its consolidated subsidiaries, if any,
eliminating all inter-company transactions and prepared in accordance with GAAP.
CONSOLIDATING BALANCE SHEET shall mean a Consolidated Balance Sheet plus
individual balance sheets for the Company and its consolidated subsidiaries, if
any, showing all eliminations of
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inter-company transactions, including a balance sheet for the Company
exclusively, all prepared in accordance with GAAP.
COPYRIGHTS shall mean all present and hereafter acquired copyrights, copyright
registrations, recordings, applications, designs, styles, licenses, marks,
prints and labels bearing any of the foregoing, goodwill, any and all general
intangibles, intellectual property and rights pertaining thereto, and all cash
and non-cash proceeds thereof.
CURRENT ASSETS shall mean those assets of the Company which, in accordance with
GAAP, are classified as current.
CURRENT LIABILITIES shall mean those liabilities of the Company which, in
accordance with GAAP, are classified as "current," provided however, that,
notwithstanding GAAP, the Revolving Loans and the current portion of Permitted
Indebtedness shall be considered "current liabilities."
DEFAULT shall mean any event specified in Section 10 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum on any
Obligations hereunder, equal to the sum of: (a) two percent (2%) and (b) the
applicable increment over the Chase Bank Rate (as set forth in Paragraph 8.1
hereof) plus the Chase Bank Rate, which CIT shall be entitled to charge the
Company on all Obligations due CIT by the Company, as further set forth in
Paragraph 10.2 of Section 10 of this Financing Agreement.
DEPOSITORY ACCOUNTS shall mean the collection accounts, which are subject to
CIT's instructions, as specified in Paragraph 3.4 of Section 3 of this Financing
Agreement.
DOCUMENTS OF TITLE shall mean all present and future documents (as now or
hereafter defined in the UCC), and any and all warehouse receipts, bills of
lading, shipping documents, chattel paper, instruments and similar documents,
all whether negotiable or not and all goods and Inventory relating thereto and
all cash and non-cash proceeds of the foregoing.
EARLY TERMINATION DATE shall mean the date on which the Company or CIT
terminates this Financing Agreement or the Revolving Line of Credit which date
is prior to an Anniversary Date.
EARLY TERMINATION FEE shall: (a) mean the fee CIT is entitled to charge the
Company in the event the Company terminates the Revolving Line of Credit or this
Financing Agreement on a date prior to an Anniversary Date; and (b) be
determined by multiplying the Revolving Line of Credit by (x) three percent (3%)
if the Early Termination Date occurs on or before one (1) year from the Closing
Date, (y) two percent (2%) if the Early Termination Date occurs after one (1)
year from the Closing Date but on or before two (2) years from the Closing Date;
and (z) one percent (1%) if the Early Termination Date occurs after two (2)
years from the Closing Date. Notwithstanding the foregoing, the Early
Termination Fee shall be waived if the Company refinances its Obligations under
this Financing Agreement with U.S. Bank at any time after twelve (12) months
from the Closing Date.
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EBIT shall mean, in any period, all earnings of the Company for said period
before all interest and tax obligations of the Company for said period,
determined in accordance with GAAP on a consistent basis with the latest audited
financial statements of the Company, but excluding the effect of extraordinary
or non-reoccurring gains or losses for such period.
EBITDA shall mean, in any period, all earnings of the Company before all (i)
interest and tax obligations, (ii) depreciation and (iii) amortization for said
period, all determined in accordance with GAAP on a consistent basis with the
latest audited financial statements of the Company, but excluding the effect of
extraordinary and/or non-reoccurring gains or losses for such period.
ELIGIBLE ACCOUNTS RECEIVABLE shall mean the gross amount of the Company's Trade
Accounts Receivable that are subject to a valid, exclusive, first priority and
fully perfected security interest in favor of CIT, which conform to the
warranties contained herein and which, at all times, continue to be acceptable
to CIT in the exercise of its reasonable business judgment, less, without
duplication, the sum of: (a) any returns, discounts, claims, credits and
allowances of any nature (whether issued, owing, granted, claimed or
outstanding), and (b) reserves for any such Trade Accounts Receivable that arise
from or are subject to or include: (i) to the extent CIT requests compliance
with the Assignment of Claims Act of 1940 or any other similar applicable
statute, rules or regulation in its reasonable business judgment, sales to the
United States of America, any state or other governmental entity or to any
agency, department or division thereof as to which the Company has not complied
with the Assignment of Claims Act of 1940 or any other similar applicable
statute, rules or regulation, to CIT's satisfaction in the exercise of its
reasonable business judgment; (ii) foreign sales, other than sales which
otherwise comply with all of the other criteria for eligibility hereunder and
are (x) secured by letters of credit (in form and substance satisfactory to CIT)
issued or confirmed by, and payable at, banks having a place of business in the
United States of America, or (y) to customers residing in Canada provided such
Accounts do not exceed $5,000,000.00 in the aggregate at any one time; (iii)
Accounts that remain unpaid more than ninety (90) days from invoice date; (iv)
contra accounts; (v) sales to any subsidiary, if any, or to any company
affiliated with the Company in any way; (vi) ▇▇▇▇ and hold (deferred shipment)
or consignment sales; (vii) sales to any customer which is: (A) insolvent, (B)
the debtor in any bankruptcy, insolvency, arrangement, reorganization,
receivership or similar proceedings under any federal or state law, (C)
negotiating, or has called a meeting of its creditors for purposes of
negotiating, a compromise of its debts, or (D) financially unacceptable to CIT
or has a credit rating unacceptable to CIT; (viii) all sales to any customer if
fifty percent (50%) or more of the aggregate dollar amount of all outstanding
invoices to such customer are unpaid more than ninety (90) days from invoice
date; (ix) pre-billed receivables and receivables arising from progress billing;
(x) an amount representing, historically, returns, discounts, claims, credits,
allowances and applicable terms; (xi) sales not payable in United States
currency; and (xii) any other reasons deemed necessary by CIT in its reasonable
business judgment, and which are customary either in the commercial finance
industry or in the lending practices of CIT.
EQUIPMENT shall mean all present and hereafter acquired equipment (as now or
hereafter defined in the UCC) including, without limitation, all machinery,
equipment, furnishings and fixtures, and all additions, substitutions and
replacements thereof, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto and all proceeds thereof of whatever sort.
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ERISA shall mean the Employee Retirement Income Security Act or 1974, as amended
from time to time and the rules and regulations promulgated thereunder from time
to time.
EVENT(S) OF DEFAULT shall have the meaning provided for in Section 10 of this
Financing Agreement.
FISCAL QUARTER shall mean, with respect to the Company, each three (3) month
period ending March 31, June 30, September 30, and December 31 of each Fiscal
Year.
FISCAL YEAR shall mean each twelve (12) month period commencing on January 1 of
each year and ending on the following December 31.
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply, provided that in the event the Company
modifies its accounting principles and procedures as applied as of the Closing
Date, the Company shall provide such statements of reconciliation as shall be in
form and substance acceptable to CIT.
GENERAL INTANGIBLES shall mean all present and hereafter acquired general
intangibles (as now or hereafter defined in the UCC), and shall include, without
limitation, all present and future right, title and interest in and to: (a) all
Trademarks, tradenames, corporate names, business names, logos and any other
designs or sources of business identities, (b) Patents, together with any
improvements on said Patents, utility models, industrial models, and designs,
(c) Copyrights, (d) trade secrets, (e) licenses, permits and franchises, (f) all
applications with respect to the foregoing, (g) all right, title and interest in
and to any and all extensions and renewals, (h) goodwill with respect to any of
the foregoing, (i) any other forms of similar intellectual property, (j) all
customer lists, distribution agreements, supply agreements, blue prints,
indemnification rights and tax refunds, together with all monies and claims for
monies now or hereafter due and payable in connection with any of the foregoing
or otherwise, and all cash and non-cash proceeds thereof, including, without
limitation, the proceeds or royalties of any licensing agreements between the
Company and any licensee of any of the Company's General Intangibles.
INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of
borrowed money or for the deferred purchase price of property, services or
assets, other than Inventory, or (b) lease obligations which, in accordance with
GAAP, have been, or which should be capitalized.
INSURANCE PROCEEDS shall mean proceeds or payments from an insurance carrier
with respect to any loss, casualty or damage to Collateral.
Interest Expense shall mean the total interest obligations (paid or accrued) of
the Company, determined in accordance with GAAP, on a consistent basis with the
latest audited statements of the Company.
INVENTORY shall mean all of the Company's present and hereafter acquired
inventory (as now or hereafter defined in the UCC) and including, without
limitation, all merchandise, inventory and goods, and all additions,
substitutions and replacements thereof, wherever located, together with all
goods and materials used or usable in manufacturing, processing, packaging or
shipping same
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in all stages of production from raw materials through work-in-process to
finished goods, and all proceeds thereof of whatever sort.
LOAN DOCUMENTS shall mean this Financing Agreement, the Promissory Notes, if
any, the mortgages, the other closing documents and any other ancillary loan and
security agreements executed from time to time in connection with this Financing
Agreement, all as may be renewed, amended, extended, increased or supplemented
from time to time.
LOAN FACILITY FEE shall mean the fee payable to CIT in accordance with, and
pursuant to, the provisions of Paragraph 8.3 of Section 8 of this Financing
Agreement.
OBLIGATIONS shall mean all loans, advances and extensions of credit made or to
be made by CIT to the Company or to others for the Company's account (including,
without limitation, all Revolving Loans and the Term Loan); any and all
indebtedness and obligations which may at any time be owing by the Company to
CIT howsoever arising, whether now in existence or incurred by the Company from
time to time hereafter; whether principal, interest, fees, costs, expenses or
otherwise; whether secured by pledge, lien upon or security interest in any of
the Company's Collateral, assets or property or the assets or property of any
other person, firm, entity or corporation; whether such indebtedness is absolute
or contingent, joint or several, matured or unmatured, direct or indirect and
whether the Company is liable to CIT for such indebtedness as principal, surety,
endorser, guarantor or otherwise. Obligations shall also include indebtedness
owing to CIT by the Company under any Loan Document or under any other agreement
or arrangement now or hereafter entered into between the Company and CIT;
indebtedness or obligations incurred by, or imposed on, CIT as a result of
environmental claims arising out of the Company's operations, premises or waste
disposal practices or sites in accordance with Paragraph 7.7 hereof; the
Company's liability to CIT as maker or endorser of any promissory note or other
instrument for the payment of money; the Company's liability to CIT under any
instrument of guaranty or indemnity, or arising under any guaranty, endorsement
or undertaking which CIT may make or issue to others for the Company's account,
including any other accommodation extended by CIT, CIT's acceptance of drafts or
CIT's endorsement of notes or other instruments for the Company's account and
benefit.
OTHER COLLATERAL shall mean the Depositary Account, the Blocked Account and all
now owned and hereafter acquired lockbox, blocked account and any other deposit
accounts maintained with any bank or financial institutions into which the
proceeds of Collateral are or may be deposited; all cash and other monies and
property in the possession or control of CIT; all books, records, ledger cards,
disks and related data processing software at any time evidencing or containing
information relating to any of the Collateral described herein or otherwise
necessary or helpful in the collection thereof or realization thereon; and all
cash and non-cash proceeds of the foregoing.
OUT-OF-POCKET EXPENSES shall mean all of CIT's present and future expenses
incurred relative to this Financing Agreement or any other Loan Documents,
whether incurred heretofore or hereafter, which expenses shall include, without
being limited to: the cost of record searches, all costs and expenses incurred
by CIT in opening bank accounts, depositing checks, receiving and transferring
funds, and wire transfer charges, any charges imposed on CIT due to returned
items and "insufficient funds" of deposited checks and CIT's standard fees
relating thereto, travel, lodging and similar expenses of CIT's personnel in
connection with inspecting and monitoring
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the Collateral from time to time hereunder, any reasonable applicable counsel
fees and disbursements, fees and taxes relative to the filing of financing
statements, all expenses, costs and fees set forth in Paragraph 10.3 of Section
10 of this Financing Agreement, and title insurance premiums, real estate survey
costs, costs of preparing and recording mortgages/deeds of trust against the
Real Estate.
OVERADVANCES shall mean the amount by which (a) the sum of all outstanding
Revolving Loans, and the outstanding portion of the Term Loan and advances made
hereunder exceed (b) the Borrowing Base.
PATENTS shall mean all of the Company's present and hereafter acquired patents,
patent applications, registrations, any reissues or renewals thereof, licenses,
any inventions and improvements claimed thereunder, and all general intangible,
intellectual property and patent rights with respect thereto of the Company, and
all income, royalties, cash and non-cash proceeds thereof.
PERMITTED ENCUMBRANCES shall mean: (a) liens existing on the date hereof on
specific items of Equipment and other liens expressly permitted, or consented to
in writing by CIT; (b) subject to Paragraph 7.11 of Section 7, Purchase Money
Liens; (c) liens of local or state authorities for franchise or other like
Taxes, provided that the aggregate amounts of such liens shall not exceed
$100,000.00 in the aggregate at any one time; (d) statutory liens of landlords
and liens of carriers, warehousemen, bailees, mechanics, materialmen and other
like liens imposed by law, created in the ordinary course of business and for
amounts not yet due (or which are being contested in good faith, by appropriate
proceedings or other appropriate actions which are sufficient to prevent
imminent foreclosure of such liens) and with respect to which adequate reserves
or other appropriate provisions are being maintained by the Company in
accordance with GAAP; (e) deposits made (and the liens thereon) in the ordinary
course of business of the Company (including, without limitation, security
deposits for leases, indemnity bonds, surety bonds and appeal bonds) in
connection with workers' compensation, unemployment insurance and other types of
social security benefits or to secure the performance of tenders, bids,
contracts (other than for the repayment or guarantee of borrowed money or
purchase money obligations), statutory obligations and other similar obligations
arising as a result of progress payments under government contracts; (f)
easements (including, without limitation, reciprocal easement agreements and
utility agreements), encroachments, minor defects or irregularities in title,
variation and other restrictions, charges or encumbrances (whether or not
recorded) affecting the Real Estate, if applicable, and which in the aggregate
(A) do not materially interfere with the occupation, use or enjoyment by the
Company of its business or property so encumbered and (B) in the reasonable
business judgment of CIT do not materially and adversely affect the value of
such Real Estate; and (g) liens granted CIT by the Company; (h) liens of
judgment creditors provided such liens do not exceed, in the aggregate, at any
time, $50,000.00 (other than liens bonded or insured to the reasonable
satisfaction of CIT); and (i) tax liens which are not yet due and payable or
which are being diligently contested in good faith by the Company by appropriate
proceedings, and which liens are not (x) filed on any public records, (y) other
than with respect to Real Estate, senior to the liens of CIT or (z) for Taxes
due the United States of America or any state thereof having similar priority
statutes, as further set forth in Paragraph 7.6 hereof.
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PERMITTED INDEBTEDNESS shall mean: (a) current Indebtedness maturing in less
than one year and incurred in the ordinary course of business for raw materials,
supplies, equipment, services, Taxes or labor; (b) subject to Paragraph 7.11 of
Section 7, the Indebtedness secured by Purchase Money Liens; (c) Indebtedness
arising under this Financing Agreement; (d) deferred Taxes and other expenses
incurred in the ordinary course of business; and (e) other Indebtedness existing
on the date of execution of this Financing Agreement and listed in the most
recent financial statement delivered to CIT or otherwise disclosed to CIT in
writing prior to the Closing Date.
PREPAYMENT PREMIUM shall: (a) mean the amount due CIT by the Company upon any
voluntary prepayment, in whole or in part, of the Term Loan, and (b) be computed
by multiplying the amount so prepaid by:
(i) three percent (3%) if such prepayment occurs on or before the
expiration of one (1) year from the Closing Date;
(ii) two percent (2%) if such prepayment occurs after one (1) from
the Closing Date but on or before the expiration of two (2) years from the
Closing Date; and
(iii) one percent (1%) if such prepayment occurs after two (2) years
from the Closing Date.
Notwithstanding the foregoing, the Prepayment Premium shall be
waived if the Company refinances its Obligations under this Financing Agreement
with U.S. Bank at any time after twelve (12) months from the Closing Date.
PROMISSORY NOTE shall mean the note, in the form of Exhibit A attached hereto,
delivered by the Company to CIT to evidence the Term Loan pursuant to, and
repayable in accordance with, the provisions of Section 4 of this Financing
Agreement.
PURCHASE MONEY LIENS shall mean liens on any item of Equipment acquired after
the date of this Financing Agreement provided that (a) each such lien shall
attach only to the property to be acquired, (b) a description of the Equipment
so acquired is furnished to CIT, and (c) the debt incurred in connection with
such acquisitions shall not exceed the limitations set forth in Paragraph 7.11
of Section 7 in any Fiscal Year.
REAL ESTATE shall mean the Company's fee interest in real property, including
any such real property which has been, or will be, encumbered, mortgaged,
pledged or assigned to CIT or its designee.
REVOLVING LINE OF CREDIT shall mean the aggregate commitment of CIT to make
loans and advances pursuant to Section 3 (and Term Loan A advances under Section
4 as a subline of the Revolving Line of Credit) of this Financing Agreement in
the aggregate amount not to exceed $10,000,000.
REVOLVING LOAN ACCOUNT shall mean the account on CIT's books, in the Company's
name, in which the Company will be charged with all Obligations under this
Financing Agreement.
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REVOLVING LOANS shall mean the loans and advances made, from time to time, to or
for the account of the Company by CIT pursuant to Section 3 of this Financing
Agreement.
TANGIBLE NET WORTH shall mean, at any date of determination, an amount equal to
(a) Total Assets minus (b) (i) Total Liabilities, and (ii) all goodwill,
Patents, Trademarks, Copyrights, franchises, formulas, leasehold interests,
leasehold improvements, non-compete agreements, engineering plans, deferred tax
benefits, organization costs, prepaid items and any other assets of the Company
that would be treated as intangible assets on the Company's balance sheet, and
shall be determined in accordance with GAAP, on a consistent basis with the
latest audited financial statements of the Company.
TAXES shall mean all federal, state, municipal and other governmental taxes,
levies, charges, claims and assessments which are or may be due by the Company
with respect to its business, operations, Collateral or otherwise.
TERM LOAN PROMISSORY NOTE A shall mean the promissory note in the form of
Exhibit A hereto executed by the Company to evidence Term Loan A made by CIT
under Section 4 hereof.
TERM LOAN shall mean, collectively, the capital expenditure term loans not to
exceed $5,000,000.00 in the aggregate outstanding at any one time (herein "Term
Loan A") made by CIT pursuant to, and repayable in accordance with, the
provisions of Section 4 of this Financing Agreement.
TOTAL ASSETS shall mean total assets determined in accordance with GAAP, on a
basis consistent with the latest audited financial statements of the Company.
TOTAL LIABILITIES shall mean total liabilities determined in accordance with
GAAP, on a basis consistent with the latest audited financial statements of the
Company.
TRADE ACCOUNTS RECEIVABLE shall mean (i) that portion of the Company's Accounts
which arises from the sale of Inventory or the rendition of services in the
ordinary course of the Company's business and (ii) the payments made to the
Company by Silicon Graphics, Inc. which are the subject of the Non-Offset
Agreement among CIT, the Company and Silicon Graphics, Inc.
TRADEMARKS shall mean all present and hereafter acquired trademarks, trademark
registrations, recordings, applications, tradenames, trade styles, service
marks, prints and labels (on which any of the foregoing may appear), licenses,
reissues, renewals, and any other intellectual property and trademark rights
pertaining to any of the foregoing, together with the goodwill associated
therewith, and all cash and non-cash proceeds thereof.
UCC shall mean the Uniform Commercial Code as the same may be amended and in
effect from time to time in the state of California.
WORKING CAPITAL shall mean Current Assets in excess of Current Liabilities.
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SECTION 2. CONDITIONS PRECEDENT
2.1 The obligation of CIT to make the initial loans hereunder is subject
to the satisfaction of, extension of or waiver (in writing), of on or prior to,
the Closing Date, the following conditions precedent:
(a) LIEN SEARCHES - CIT shall have received tax, judgment and
Uniform Commercial Code searches satisfactory to CIT for all locations presently
occupied or used by the Company.
(b) CASUALTY INSURANCE - The Company shall have delivered to CIT
evidence satisfactory to CIT that casualty insurance policies listing CIT as
additional insured, loss payee or mortgagee, as the case may be, are in full
force and effect, all as set forth in Paragraph 7.5 of Section 7 of this
Financing Agreement.
(c) UCC FILINGS - Any financing statements required to be filed in
order to create, in favor of CIT, a first perfected security interest in the
Collateral, subject only to the Permitted Encumbrances, shall have been properly
filed in each office in each jurisdiction required in order to create in favor
of CIT a perfected lien on the Collateral. CIT shall have received
acknowledgment copies of all such filings (or, in lieu thereof, CIT shall have
received other evidence satisfactory to CIT that all such filings have been
made) and CIT shall have received evidence that all necessary filing fees and
all taxes or other expenses related to such filings have been paid in full.
(d) BOARD RESOLUTION - CIT shall have received a copy of the
resolutions of the Board of Directors of each of the Company authorizing the
execution, delivery and performance of (i) this Financing Agreement, and (ii)
any related agreements, in each case certified by the Secretary or Assistant
Secretary of the Company as of the date hereof, together with a certificate of
the Secretary or Assistant Secretary of the Company as to the incumbency and
signature of the officers of the Company executing such Loan Documents and any
certificate or other documents to be delivered by them pursuant hereto, together
with evidence of the incumbency of such Secretary or Assistant Secretary.
(e) CORPORATE ORGANIZATION - CIT shall have received (i) a copy of
the Certificate of Incorporation of the Company certified by the Secretary of
State of the state of its incorporation, and (ii) a copy of the By-Laws of the
Company certified by the Secretary or Assistant Secretary thereof, all as
amended through the date hereof.
(f) OFFICER'S CERTIFICATE - CIT shall have received an executed
Officer's Certificate of the Company, satisfactory in form and substance to CIT,
certifying that (i) the representations and warranties contained herein are true
and correct in all material respects on and as of the Closing Date; (ii) the
Company is in compliance with all of the terms and provisions set forth herein;
and (iii) no Default or Event of Default has occurred.
(g) OPINIONS - Counsel for the Company shall have delivered to CIT
opinions satisfactory to CIT opining, inter alia, that, subject to the (i)
filing, priority and remedies provisions of the Uniform Commercial Code, (ii)
the provisions of the Bankruptcy Code, insolvency statutes or other like laws,
(iii) the equity powers of a court of law and (iv) such other
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matters as may be agreed upon with CIT: this Financing Agreement and all other
Loan Documents of the Company are (A) valid, binding and enforceable according
to their terms, (B) are duly authorized, executed and delivered, and (C) do not
violate any terms, provisions, representations or covenants in the charter or
bylaws of the Company or, to the best knowledge of such counsel, of any loan
agreement, mortgage, deed of trust, note, security or pledge agreement,
indenture or other contract to which the Company is a signatory or by which the
Company or its assets are bound.
(h) ABSENCE OF DEFAULT - No Default or Event of Default shall have
occurred and no material adverse change shall have occurred in the financial
condition, business, prospects, profits, operations or assets of the Company or
the Company's subsidiaries, if any.
(i) LEGAL RESTRAINTS/LITIGATION - As of the Closing Date, there
shall be no: (x) litigation, investigation or proceeding (judicial or
administrative) pending or threatened against the Company or its assets, by any
agency, division or department of any county, city, state or federal government
arising out of this Financing Agreement; (y) injunction, writ or restraining
order restraining or prohibiting the consummation of the financing arrangements
contemplated under this Financing Agreement or; (z) suit, action, investigation
or proceeding (judicial or administrative) pending against the Company or its
assets, which, in the opinion of CIT, if adversely determined, could have a
material adverse effect on the business, operation, assets, financial condition
or Collateral of the Company.
(j) CASH BUDGET PROJECTIONS - CIT shall have received, reviewed and
been satisfied with a twelve (12) month cash budget projection prepared by the
Company on the form provided by CIT.
(k) ADDITIONAL DOCUMENTS - The Company shall have executed and
delivered to CIT all Loan Documents necessary to consummate the lending
arrangement contemplated between the Company and CIT, including but not limited
to, a Security Agreement (Intellectual Property) in form and substance
satisfactory to CIT covering the Company's Patents, Trademarks, Copyrights and
maskworks or applications or licenses with respect thereto. In connection with
this Financing Agreement and the Security Agreement (Intellectual Property), the
Company shall cause all unregistered copyrightable material, to be registered
with the appropriate governmental office as required by CIT in its discretion.
(1) SUBSIDIARIES - The Company shall have executed and delivered
(and cause any intervening subsidiaries to have executed and delivered) to CIT
pledge agreements and related documents in form and substance satisfactory to
CIT pledging no less than 65% (or such greater amount so long as there are no
negative tax implications) of the stock or other ownership interests of any of
the Company's now existing direct or indirect subsidiaries.
(m) DISBURSEMENT AUTHORIZATION - The Company shall have delivered to
CIT all information necessary for CIT to issue wire transfer instructions on
behalf of the Company for the initial and subsequent loans and/or advances to be
made under this Financing Agreement including, but not limited to, disbursement
authorizations in form acceptable to CIT.
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(n) EXAMINATION & VERIFICATION - CIT shall have completed, to its
satisfaction, an examination and verification of the Accounts, Inventory,
financial statements, books and records of the Company which examination shall
indicate that, after giving effect to all Revolving Loans, advances and
extensions of credit to be made at closing, the Company shall have an opening
additional Availability of at least $1,000,000, as evidenced by a Borrowing Base
certificate delivered by the Company to CIT as of the Closing Date. It is
understood that such requirement is measured after (i) the application of the
initial loan proceeds (including closing costs), and (ii) bringing all debts and
obligations current, such that there are no payables over 60 days past due.
(o) DEPOSITORY ACCOUNTS - The Company shall have established a
system of lockbox and/or bank accounts with respect to the collection of
Accounts and the deposit of proceeds of Collateral as shall be acceptable to CIT
in all respects. Such accounts shall be subject to three party agreements
(between the Company, CIT and the depository bank) or other agreements, which
shall be in form and substance satisfactory to CIT.
(p) MORTGAGES/DEEDS OF TRUST - The Company shall have executed and
delivered to CIT, an agent of CIT or to a title insurance company acceptable to
CIT, such mortgages and/or deeds of trust as CIT may reasonably require to
obtain first liens on the Company's Real Estate located in Wisconsin.
(q) TITLE INSURANCE POLICIES - CIT shall have received, in respect
of each mortgage or deed of trust, a mortgagee's title policy or marked-up
unconditional binder for such insurance. Each such policy shall (i) be in an
amount satisfactory to CIT; (ii) insure that the mortgage or deed of trust
insured thereby creates a valid first lien on the property covered by such
mortgage or deed of trust, free and clear of all defects and encumbrances except
those acceptable to CIT; (iii) name CIT as the insured thereunder; and (iv)
contain such endorsements and effective coverage as CIT may reasonably request,
including, without limitation, the revolving line of credit endorsement. CIT
shall also have received evidence that all premiums in respect of such policies
have been paid and that all charges for mortgage recording taxes, if any, shall
have been paid.
(r) SURVEYS - CIT and the title insurance company issuing each
policy referred to in the immediately preceding paragraph (each, a "Title
Insurance Company") shall have received maps or plats of a perimeter or boundary
of the site of each of the properties covered by the mortgages or deeds of
trust, dated a date satisfactory to CIT and the relevant Title Insurance Company
prepared by an independent professional licensed land surveyor satisfactory to
CIT and the relevant Title Insurance Company, which maps or plats and the
surveys on which they are based shall be made in accordance with the Minimum
Standard Detail Requirements for Land Title Surveys jointly established and
adopted by the American Land Title Association and the American Congress on
Surveying and Mapping; and, without limiting the generality of the foregoing,
there shall be surveyed and shown on the maps or plats or surveys the following:
(i) the locations on such sites of all the buildings, structures and other
improvements and the established building setback lines insofar as the foregoing
affect the perimeter or boundary of such property; (ii) the lines of streets
abutting the sites and width thereof; (iii) all access and other easements
appurtenant to the sites or necessary or desirable to use the sites; (iv) all
roadways, paths, driveways, easements, encroachments and overhanging projections
and similar
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encumbrances affecting the sites, whether recorded, apparent from a physical
inspection of the sites or otherwise known to the surveyor; (v) any
encroachments on any adjoining property by the building, structures and
improvements on the sites; and (vi) if the site is designated as being on a
filed map, a legend relating the survey to said map. Further, the survey shall
(x) be certified to CIT and the Title Insurance Company and (y) contain a legend
reciting as to whether or not the site is located in a flood zone.
(s) APPRAISALS - CIT shall have received satisfactory a appraisal on
the Company's Real Estate, which appraisal: (i) shall be by an appraiser
acceptable to CIT, and (ii) shall indicate a fair market value of not less than
$7,000,000.
(t) ENVIRONMENTAL REPORT - CIT shall have received environmental
audit reports on (i) all of the Company's leasehold and fee interests, and (ii)
the Company's waste disposal practices. The reports must (x) be satisfactory to
CIT and (y) not disclose or indicate any material liability (real or potential)
stemming from the Company's premises, its operations, its waste disposal
practices or waste disposal sites used by Company.
(u) SCHEDULES - The Company or its counsel shall provide CIT with
schedules of: (a) any of the Company's and its subsidiaries, if any, (i)
Trademarks, (ii) Patents, and (iii) Copyrights, as applicable and all in such
detail as to provide appropriate recording information with respect thereto, (b)
any tradenames, (c) monthly rental payments for any leased premises or any other
premises where any Collateral may be stored or processed, and (d) Permitted
Liens, all of the foregoing in form and substance satisfactory to CIT.
(v) SILICON GRAPHICS NON-OFFSET AGREEMENT - The Company and Silicon
Graphics, Inc. shall have delivered to CIT a Non-Offset Agreement in form and
substance satisfactory to CIT and its counsel with respect to certain payments
which Silicon Graphics, Inc. has agreed to make to the Company.
Except as provided in the next paragraph, upon the execution of this
Financing Agreement and the initial disbursement of loans hereunder, all of the
above Conditions Precedent shall have been deemed satisfied except as otherwise
set forth hereinabove or as the Company and CIT shall otherwise agree in
writing.
Except as the Company and CIT shall otherwise agree in writing, to the
extent any condition precedent in this Paragraph 2.1 of Section 2 has not been
satisfied as of the execution of this Financing Agreement and the initial
disbursement of loans hereunder, the Company agrees to do all things to cause
such condition precedent(s) to be satisfied (as determined by CIT in its
discretion) within 45 days of the date hereof. The Company's failure to cause
any such condition precedent(s) to be satisfied shall be an immediate Event of
Default and shall not be subject to any cure or grace periods hereunder.
2.2 CONDITIONS TO EACH EXTENSION OF CREDIT
Except to the extent expressly set forth in this Financing Agreement, the
agreement of CIT to make any extension of credit requested to be made by it to
the Company on any date (including without limitation, the initial extension of
credit) is subject to the satisfaction of the following conditions precedent:
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(a) REPRESENTATIONS AND WARRANTIES - Each of the representations and
warranties made by the Company in or pursuant to this Financing Agreement shall
be true and correct in all material respects on and as of such date as if made
on and as of such date.
(b) NO DEFAULT - No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the extension of credit
requested to be made on such date.
(c) BORROWING BASE - Except as may be otherwise agreed to from time
to time by CIT and the Company in writing, after giving effect to the extension
of credit requested to be made by the Company on such date, the aggregate
outstanding balance of the Revolving Loans owing by the Company will not exceed
the lesser of (i) the Revolving Line of Credit or (ii) the Borrowing Base.
Each borrowing by the Company hereunder shall constitute a representation and
warranty by the Company as of the date of such loan or advance that each of the
representations, warranties and covenants contained in the Financing Agreement
have been satisfied and are true and correct, except as the Company and CIT
shall otherwise agree herein or in a separate writing.
SECTION 3. REVOLVING LOANS
3.1 CIT agrees, subject to the terms and conditions of this Financing
Agreement, from time to time (but subject to CIT's right to make
"Overadvances"), to make loans and advances to the Company on a revolving basis
(i.e. subject to the limitations set forth herein, the Company may borrow, repay
and re-borrow Revolving Loans). Such requests for loans and advances shall be in
amounts not to exceed the lesser of (a) the Availability or (b) the Revolving
Line of Credit. All requests for loans and advances must be received by an
officer of CIT no later than 10:00 a.m., Los Angeles time, of the Business Day
on which any such Revolving Loans and advances are required. Should CIT for any
reason honor requests for Overadvances, any such Overadvances shall be made in
CIT's sole discretion and subject to any additional terms CIT deems necessary.
3.2 In furtherance of the continuing assignment and security interest in
the Company's Accounts and Inventory, the Company will, upon the creation of
Accounts and purchase or acquisition of Inventory, execute and deliver to CIT in
such form and manner as CIT may reasonably require, solely for CIT's convenience
in maintaining records of Collateral, such confirmatory schedules of Accounts
and Inventory as CIT may reasonably request, including, without limitation,
weekly schedules of Accounts and monthly schedules of Inventory, all in form and
substance satisfactory to CIT, and such other appropriate reports designating,
identifying and describing the Accounts and Inventory as CIT may reasonably
request, and provided further that CIT may request any such information more
frequently, from time to time, upon its reasonable prior request. In addition,
upon CIT's request, the Company shall provide CIT with copies of agreements
with, or purchase orders from, the Company's customers, and copies of invoices
to customers, proof of shipment or delivery, access to its computers, electronic
media and software programs associated therewith (including any electronic
records, contracts and signatures) and such other documentation and information
relating to said Accounts and other Collateral as CIT may reasonably require.
Failure to provide CIT with any of the
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foregoing shall in no way affect, diminish, modify or otherwise limit the
security interests granted herein. The Company hereby authorizes CIT to regard
the Company's printed name or rubber stamp signature on assignment schedules or
invoices as the equivalent of a manual signature by one of the Company's
authorized officers or agents.
3.3 The Company hereby represents and warrants that: each Trade Account
Receivable is based on an actual and bona fide sale and delivery of Inventory or
rendition of services to customers, made by the Company in the ordinary course
of its business; the Inventory being sold, and the Trade Accounts Receivable
created, are the exclusive property of the Company and are not and shall not be
subject to any lien, consignment arrangement, encumbrance, security interest or
financing statement whatsoever, other than the Permitted Encumbrances; the
invoices evidencing such Trade Accounts Receivable are in the name of the
Company; and the customers of the Company have accepted the Inventory or
services, owe and are obligated to pay the full amounts stated in the invoices
according to their terms, without dispute, offset, defense, counterclaim or
contra, except for disputes and other matters arising in the ordinary course of
business with respect to which the Company has complied with the notification
requirements of Paragraph 3.5 of this Section 3. The Company confirms to CIT
that any and all Taxes or fees relating to its business, its sales, the Accounts
or Inventory relating thereto, are its sole responsibility and that same will be
paid by the Company when due, subject to Paragraph 7.6 of Section 7 of this
Financing Agreement, and that none of said Taxes or fees represent a lien on or
claim against the Accounts. The Company hereby further represents and warrants
that it shall not acquire any Inventory on a consignment basis, nor co-mingle
its Inventory with any of its customers or any other person, including pursuant
to any ▇▇▇▇ and hold sale or otherwise, and that its Inventory is marketable to
its customers in the ordinary course of business of the Company, except as it
may otherwise report in writing to CIT pursuant to Paragraph 3.5 hereof from
time to time. The Company also warrants and represents that it is a duly and
validly existing corporation and is qualified in all states where the failure to
so qualify would have an adverse effect on the business of the Company or the
ability of the Company to enforce collection of Accounts due from customers
residing in that state. The Company agrees to maintain such books and records
regarding Accounts and Inventory as CIT may reasonably require and agrees that
the books and records of the Company will reflect CIT's interest in the Accounts
and Inventory. All of the books and records of the Company will be available to
CIT at normal business hours, including any records handled or maintained for
the Company by any other company or entity.
3.4 (a) Until CIT has advised the Company to the contrary after the
occurrence of an Event of Default, the Company, at its expense, will enforce,
collect and receive all amounts owing on the Accounts in the ordinary course of
its business and any proceeds it so receives shall be subject to the terms
hereof, and held on behalf of and in trust for CIT. Such privilege shall
terminate at the election of CIT, upon the occurrence of an Event of Default.
Any checks, cash, credit card sales and receipts, notes or other instruments or
property received by the Company with respect to any Collateral, including
Accounts, shall be held by the Company in trust for CIT, separate from the
Company's own property and funds, and promptly turned over to CIT with proper
assignments or endorsements by deposit to the Depository Accounts. The Company
shall: (i) indicate on all of its invoices that funds should be delivered to and
deposited in a Depository Account; (ii) direct all of its account debtors to
deposit any and all proceeds of Collateral into the Depository Accounts; (iii)
irrevocably authorize and direct any banks which
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maintain the Company's initial receipt of cash, checks and other items to
promptly wire transfer all available funds to a Depository Account; and (iv)
advise all such banks of CIT's security interest in such funds. The Company
shall provide CIT with prior written notice of any and all deposit accounts
opened or to be opened subsequent to the Closing Date. All amounts received by
CIT in payment of Accounts will be credited to the Revolving Loan Account when
CIT is advised by its bank of its receipt of "collected funds" at CIT's bank
account in New York, New York on the Business Day of such advise if advised no
later than 10:00 a.m. Los Angeles time or on the next succeeding Business Day if
so advised after 10:00 a.m. Los Angeles time. However, the Company's Revolving
Loan Account will be charged monthly with the cost of one (1) additional
Business Days on all such Collections at the interest rate (based upon the Chase
Bank Rate) applicable to Revolving Loans. No checks, drafts or other instrument
received by CIT shall constitute final payment to CIT unless and until such
instruments have actually been collected.
(b) The Company shall establish and maintain, in the Company's name or
CIT's name as CIT may instruct and at the Company's expense, a collateral
proceeds account or other deposit accounts, as instructed by CIT, with such
banks as are acceptable to CIT (the "Blocked Accounts") into which the Company
shall promptly cause to be deposited: (i) all proceeds of Collateral received by
the Company, including all amounts payable to the Company from credit card
issuers and credit card processors, and (ii) all amounts on deposit in deposit
accounts used by the Company at each of its locations, all as further provided
in Paragraph 3.4(a) above. The banks at which the Blocked Accounts are
established shall enter into an agreement, in form and substance satisfactory to
CIT (the "Blocked Account Agreements"), providing that all cash, checks and
items received or deposited in the Blocked Accounts are the property of CIT,
that the depository bank has no lien upon, or right of set off against, the
Blocked Accounts and any cash, checks, items, wires or other funds from time to
time on deposit therein, except as otherwise provided in the Blocked Account
Agreements, and that automatically, on a daily basis the depository bank will
wire, or otherwise transfer, in immediately available funds, all funds received
or deposited into the Blocked Accounts to such bank account as CIT may from time
to time designate for such purpose. The Company hereby confirms and agrees that
all amounts deposited in such Blocked Accounts and any other funds received and
collected by CIT, whether as proceeds of Inventory or other Collateral or
otherwise, shall be the property of CIT.
3.5 The Company agrees to notify CIT: (a) of any matters affecting the
value, enforceability or collectibility of any Account and of all customer
disputes, offsets, defenses, counterclaims, returns, rejections and all
reclaimed or repossessed merchandise or goods, and of any adverse effect in the
value of its Inventory, in its weekly and monthly collateral reports (as
applicable) provided to CIT hereunder, in such detail and format as CIT may
reasonably require from time to time and (b) promptly of any such matters which
are material, as a whole, to the Accounts and/or the Inventory. The Company
agrees to issue credit memoranda promptly (with duplicates to CIT upon request
after the occurrence of an Event of Default) upon accepting returns or granting
allowances. Upon the occurrence of an Event of Default (which is not waived in
writing by CIT) and on notice from CIT, the Company agrees that all returned,
reclaimed or repossessed merchandise or goods shall be set aside by the Company,
marked with CIT's name (as secured party) and held by the Company for CIT's
account.
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3.6 CIT shall maintain a Revolving Loan Account on its books in which the
Company will be charged with all loans and advances made by CIT to it or for its
account, and with any other Obligations, including any and all costs, expenses
and reasonable attorney's fees which CIT may incur in connection with the
exercise by or for CIT of any of the rights or powers herein conferred upon CIT,
or in the prosecution or defense of any action or proceeding to enforce or
protect any rights of CIT in connection with this Financing Agreement, the other
Loan Documents or the Collateral assigned hereunder, or any Obligations owing by
the Company. The Company will be credited with all amounts received by CIT from
the Company or from others for the Company's account, including, as above set
forth, all amounts received by CIT in payment of Accounts, and such amounts will
be applied to payment of the Obligations as set forth herein. In no event shall
prior recourse to any Accounts or other security granted to or by the Company be
a prerequisite to CIT's right to demand payment of any Obligation. Further, it
is understood that CIT shall have no obligation whatsoever to perform in any
respect any of the Company's contracts or obligations relating to the Accounts.
3.7 After the end of each month, CIT shall promptly send the Company a
statement showing the accounting for the charges, loans, advances and other
transactions occurring between CIT and the Company during that month. The
monthly statements shall be deemed correct and binding upon the Company and
shall constitute an account stated between the Company and CIT unless CIT
receives a written statement of the exceptions within thirty (30) days of the
date of the monthly statement.
3.8 In the event that any requested advance exceeds Availability or that
(a) the outstanding balance of Revolving Loans and the Term Loan exceed (b)
either of (x) the Borrowing Base or (y) the Revolving Line of Credit, any such
nonconsensual Overadvance shall be due and payable to CIT immediately upon CIT's
demand therefor.
3.9 The Company shall execute and deliver (and cause any intervening
subsidiaries to execute and deliver) to CIT pledge agreements and related
documents in form and substance satisfactory to CIT pledging no less than 65%
(or such greater amount so long as there are no negative tax implications) of
the stock or other ownership interests of any of the Company's hereafter created
or acquired direct or indirect subsidiaries.
SECTION 4. TERM LOAN
4.1 The Company hereby agrees to execute and deliver to CIT the Term Loan
Promissory Note A, to evidence Term Loan A to be extended by CIT on the terms
and subject to the conditions set forth below.
4.2 The aggregate amount of Term Loan A advances shall not exceed the
lesser of (i) the Company's Availability and (ii) $5,000,000. Any Overadvance
caused by a shortfall in Availability for any reason shall be subject to the
terms and conditions of this Financing Agreement, including, but not limited to,
Paragraph 3.8 of Section 3.
4.3 Term Loan A advances shall be up to one hundred percent (100%) of the
cost of the machinery or equipment (excluding transportation, installation,
taxes, and other start up costs) with minimum advances of $500,000 and
additional increments of $100,000.
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4.4 Beginning August 1, 2000 on the first Business Day of each month
thereafter, the principal amount of Term Loan A shall be repaid monthly to CIT
by the Company as follows: (i) the initial advances of Term Loan A made on the
Closing Date shall be amortized over thirty six (36) months, (ii) each
subsequent advance shall be shall be amortized on a schedule equal to the number
of months remaining from the month following such advance through the first
Anniversary Date, and (iii) with a final payment of all principal and accrued
but unpaid interest owing on Term Loan A due and payable on the first
Anniversary Date of this Financing Agreement.
4.5 In the event this Financing Agreement or the Revolving Line of Credit
is terminated by either CIT or the Company for any reason whatsoever, the Term
Loan shall become due and payable on the effective date of such termination
notwithstanding any provision to the contrary in the Promissory Notes or this
Financing Agreement.
4.6 The Company may prepay at any time, at its option, in whole or in
part, the Term Loan, provided that on each such prepayment, the Company shall
pay: (a) accrued interest on the principal so prepaid to the date of such
prepayment and (b) the Prepayment Premium, if any.
4.7 Each prepayment (whether voluntary or mandatory) shall be applied to
the then last maturing installments of principal of the Term Loan.
4.8 CIT shall create an Availability Reserve against Eligible Accounts
Receivable for all outstanding amounts due under this Section 4 to the extent
CIT has not received Cash Collateral in an amount not less than the amount of
the Availability Reserve that would otherwise have been created under this
Paragraph 4.8.
4.9 The Company hereby authorizes CIT to charge its Revolving Loan Account
with the amount of all amounts due under this Section 4 as such amounts become
due. The Company confirms that any charges which CIT may so make to its
Revolving Loan Account as herein provided will be made as an accommodation to
the Company and solely at CIT's discretion.
SECTION 5. INTENTIONALLY OMITTED
SECTION 6. COLLATERAL
6.1 As security for the prompt payment in full of all Obligations, the
Company hereby pledges and grants to CIT a continuing general lien upon, and
security interest in, all of its:
(a) Accounts;
(b) Inventory;
(c) General Intangibles;
(d) Documents of Title;
(e) Other Collateral;
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(f) Equipment; and
(g) Real Estate.
6.2 The security interests granted hereunder shall extend and attach to:
(a) All Collateral which is owned by the Company or in which the
Company has any interest, whether held by the Company or others for its account,
and, if any Collateral is Equipment, whether the Company's interest in such
Equipment is as owner, finance lessee or conditional vendee;
(b) All Equipment, whether the same constitutes personal property or
fixtures, including, but without limiting the generality of the foregoing, all
dies, jigs, tools, benches, molds, tables, accretions, component parts thereof
and additions thereto, as well as all accessories, motors, engines and auxiliary
parts used in connection with, or attached to, the Equipment; and
(c) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either CIT or the Company from the
Company's customers, as well as to all supplies, goods, incidentals, packaging
materials, labels and any other items which contribute to the finished goods or
products manufactured or processed by the Company, or to the sale, promotion or
shipment thereof.
6.3 The Company agrees to safeguard, protect and hold all Inventory for
CIT's account and make no disposition thereof except in the ordinary course of
its business of the Company, as herein provided. The Company represents and
warrants that Inventory will be sold and shipped by the Company to its customers
only in the ordinary course of the Company's business, and then only on open
account and on terms currently being extended by the Company to its customers,
provided that, absent the prior written consent of CIT, the Company shall not
sell Inventory on a consignment basis nor retain any lien or security interest
in any sold Inventory. Upon the sale, exchange, or other disposition of
Inventory, as herein provided, the security interest in the Inventory provided
for herein shall, without break in continuity and without further formality or
act, continue in, and attach to, all proceeds, including any instruments for the
payment of money, Trade Accounts Receivable, documents of title, shipping
documents, chattel paper and all other cash and non-cash proceeds of such sale,
exchange or disposition. As to any such sale, exchange or other disposition, CIT
shall have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation. The Company hereby agrees to immediately
forward any and all proceeds of Collateral to the Depository Account, and to
hold any such proceeds (including any notes and instruments), in trust for CIT
pending delivery to CIT. Irrespective of CIT's perfection status in any and all
of the General Intangibles, including, without limitations, any Patents,
Trademarks, Copyrights or licenses with respect thereto, the Company hereby
irrevocably grants CIT a royalty free license to sell, or otherwise dispose or
transfer, in accordance with Paragraph 10.3 of Section 10 of this Financing
Agreement, and the applicable terms hereof, of any of the Inventory upon the
occurrence of an Event of Default which has not been waived in writing by CIT.
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6.4 The Company agrees at its own cost and expense to keep the Equipment
in as good and substantial repair and condition as the same is now or at the
time the lien and security interest granted herein shall attach thereto,
reasonable wear and tear excepted, making any and all repairs and replacements
when and where necessary. The Company also agrees to safeguard, protect and hold
all Equipment in accordance with the terms hereof and subject to CIT's security
interest. Absent CIT's prior written consent, any sale, exchange or other
disposition of any Equipment shall be made by the Company in the ordinary course
of business and as set forth herein. The Company may, in the ordinary course of
its business, sell, exchange or otherwise dispose of obsolete or surplus
Equipment provided, however, that: (a) the then value of the Equipment so
disposed of in any Fiscal Year does not exceed $1,000,000 in the aggregate; and
(b) the proceeds of any such sales or dispositions shall be held in trust by the
Company for CIT and shall be immediately delivered to CIT by deposit to the
Depository Account, except that the Company may retain and use such proceeds to
purchase forthwith replacement Equipment which the Company determines in its
reasonable business judgment to have a collateral value at least equal to the
Equipment so disposed of or sold; provided, however, that the aforesaid right
shall automatically cease upon the occurrence of a Default or an Event of
Default which is not waived in writing by CIT. Upon the sale, exchange, or other
disposition of the Equipment, as herein provided, the security interest provided
for herein shall, without break in continuity and without further formality or
act, continue in, and attach to, all proceeds, including any instruments for the
payment of money, Accounts, documents of title, shipping documents, chattel
paper and all other cash and non-cash proceeds of such sales, exchange or
disposition. As to any such sale, exchange or other disposition, CIT shall have
all of the rights of an unpaid seller, including stoppage in transit, repletion,
rescission and reclamation.
6.5 The rights and security interests granted to CIT hereunder are to
continue in full force and effect, notwithstanding the termination of this
Financing Agreement or the fact that the Revolving Loan Account may from time to
time be temporarily in a credit position, until the final payment in full to CIT
of all Obligations and the termination of this Financing Agreement. Any delay,
or omission by CIT to exercise any right hereunder shall not be deemed a waiver
thereof, or be deemed a waiver of any other right, unless such waiver shall be
in writing and signed by CIT. A waiver on any one occasion shall not be
construed as a bar to, or waiver of, any right or remedy on any future occasion.
6.6 Notwithstanding CIT's security interest in the Collateral and to the
extent that the Obligations are now or hereafter secured by any assets or
property other than the Collateral or by the guarantee, endorsement, assets or
property of any other person, CIT shall have the right in its sole discretion to
determine which rights, liens, security interests or remedies CIT shall at any
time pursue, foreclose upon, relinquish, subordinate, modify or take any other
action with respect to, without in any way modifying or affecting any of them,
or any of CIT's rights hereunder.
6.7 Any balances to the credit of the Company and any other property or
assets of the Company in the possession or control of CIT may be held by CIT as
security for any Obligations and applied in whole or partial satisfaction of
such Obligations when due. The liens and security interests granted herein, and
any other lien or security interest CIT may have in any other assets of the
Company, shall secure payment and performance of all now existing and future
Obligations. CIT may in its discretion charge any or all of the Obligations to
the Revolving Loan Account when due.
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6.8 The Company represents and warrants that it possess all General
Intangibles and rights thereto necessary to conduct its business as conducted as
of the Closing Date and the Company shall maintain its rights in, and the value
of, the foregoing in the ordinary course of its business, including, without
limitation, by making timely payment with respect to any applicable licensed
rights. The Company shall deliver to CIT, and/or shall cause the appropriate
party to deliver to CIT, from time to time such pledge or security agreements
with respect to General Intangibles (now or hereafter acquired) of the Company
and its subsidiaries, if any, as CIT shall require to obtain valid first liens
thereon. In furtherance of the foregoing, the Company shall provide written
notice to CIT no later than 30 days after the acquisition of or application for
any additional Patents, Trademarks, tradenames, service marks, Copyrights, brand
names, trade names, logos and other trade designations subsequent to the Closing
Date and the Company shall execute such documentation as CIT may reasonably
require to obtain and perfect its lien thereon. The Company hereby irrevocably
grants to CIT a royalty-free, non-exclusive license in the General Intangibles,
including tradenames, Trademarks, Copyrights, Patents, licenses, and any other
proprietary and intellectual property rights and any and all right, title and
interest in any of the foregoing, for the sole purpose, upon the occurrence of
an Event of Default, of the right to: (i) advertise for sale and sell or
transfer any Inventory bearing any of the General Intangibles, and (ii) make,
assemble, prepare for sale or complete, or cause others to do so, any applicable
raw materials or Inventory bearing any of the General Intangibles, including use
of the Equipment and Real Estate for the purpose of completing the manufacture
of unfinished goods, raw materials or work-in-process comprising Inventory, and
apply the proceeds thereof to the Obligations hereunder, all as further set
forth in this Financing Agreement and irrespective of CIT's lien and perfection
in any General Intangibles.
6.9 This Financing Agreement and the obligation of the Company to perform
all of its covenants and obligations hereunder are further secured by
mortgage(s), deed(s) of trust or assignment(s) on the Company's Real Estate
located in Wisconsin.
6.10 The Company shall give to CIT from time to time such mortgage(s),
deed(s) of trust or assignment(s) on the Real Estate located in Wisconsin or
real estate acquired after the date hereof as CIT shall require to obtain a
valid first lien thereon subject only to those exceptions of title as set forth
in future title insurance policies that are satisfactory to CIT.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 The Company hereby warrants, represents and covenants that: (a) the
fair value of the Total Assets exceeds the book value of the Total Liabilities;
(b) taking into account the transactions contemplated by this Financing
Agreement, the Company is generally able to pay its debts as they become due and
payable; and (c) the Company does not have unreasonably small capital to carry
on its business as it is currently conducted absent extraordinary and unforeseen
circumstances. The Company further warrants and represents that: (i) Schedule 1
hereto correctly and completely sets forth the Company's (A) chief executive
office, (B) Collateral locations, (C) tradenames, and (D) all the other
information listed on said Schedule; (ii) except for the Permitted Encumbrances,
after filing of financing statements in the applicable filing clerks office at
the locations set forth in Schedule 1, this Financing Agreement creates a valid,
perfected and first priority security interest in the Collateral and the
security interests granted herein constitute and shall at all times constitute
the first and only liens on the Collateral; (iii)
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except for the Permitted Encumbrances, the Company is, or will be, at the time
additional Collateral is acquired by it, the absolute owner of the Collateral
with full right to pledge, sell, consign, transfer and create a security
interest therein, free and clear of any and all claims or liens in favor of
others; (iv) the Company will, at its expense, forever warrant and, at CIT's
request, defend the same from any and all claims and demands of any other person
other than a holder of a Permitted Encumbrance; (v) the Company will not grant,
create or permit to exist, any lien upon, or security interest in, the
Collateral, or any proceeds thereof, in favor of any other person other than the
holders of the Permitted Encumbrances; and that the Equipment does not comprise
a part of the Inventory of the Company; and (vi) the Equipment is and will only
be used by the Company in its business and will not be held for sale or lease,
or removed from its premises, or otherwise disposed of by the Company except as
otherwise permitted in this Financing Agreement.
7.2 The Company agrees to maintain books and records pertaining to the
Collateral in accordance with GAAP and in such additional detail, form and scope
as CIT shall reasonably require. The Company agrees that CIT or its agents may
enter upon the Company's premises at any time during normal business hours, and
from time to time in its reasonable business judgement, for the purpose of
inspecting the Collateral and any and all records pertaining thereto. The
Company agrees to afford CIT thirty (30) days prior written notice of any change
in the location of any Collateral, other than to locations, that as of the
Closing Date, are known to CIT and at which CIT has filed financing statements
and otherwise fully perfected its liens thereon. The Company is also to advise
CIT promptly, in sufficient detail, of any material adverse change relating to
the type, quantity or quality of the Collateral or on the security interests
granted to CIT therein.
7.3 The Company agrees to: execute and deliver to CIT, from time to time,
solely for CIT's convenience in maintaining a record of the Collateral, such
written statements, and schedules as CIT may reasonably require, designating,
identifying or describing the Collateral. The Company's failure, however, to
promptly give CIT such statements, or schedules shall not affect, diminish,
modify or otherwise limit CIT's security interests in the Collateral.
7.4 The Company agrees to comply with the requirements of all state and
federal laws in order to grant to CIT valid and perfected first security
interests in the Collateral, subject only to the Permitted Encumbrances. CIT is
hereby authorized by the Company to file (including pursuant to the applicable
terms of the UCC) from time to time any financing statements, continuations or
amendments covering the Collateral whether or not the Company's signature
appears thereon. The Company hereby consents to and ratifies any and all
execution and/or filing of financing statements on or prior to the Closing Date
by CIT. The Company agrees to do whatever CIT may reasonably request, from time
to time, by way of: (a) filing notices of liens, financing statements,
amendments, renewals and continuations thereof; (b) cooperating with CIT's
agents and employees; (c) keeping Collateral records; (d) transferring proceeds
of Collateral to CIT's possession; and (e) performing such further acts as CIT
may reasonably require in order to effect the purposes of this Financing
Agreement. Without limiting the generality of the foregoing, such documents and
actions may include, without limitation, Company's cooperation with CIT (i) in
obtaining a control agreement in form and substance satisfactory to CIT in its
discretion with respect to Collateral consisting of deposit accounts, investment
property, letter of credit rights and electronic chattel paper and (ii) in
notifying a third
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party in possession of Collateral of CIT's security interest and obtaining an
acknowledgement from the third party that it is holding the Collateral for the
benefit of CIT.
7.5 (a) The Company agrees to maintain insurance on the Real Estate,
Equipment and Inventory under such policies of insurance, with such insurance
companies, in such reasonable amounts and covering such insurable risks as are
at all times reasonably satisfactory to CIT. All policies covering the Real
Estate, Equipment and Inventory are, subject to the rights of any holders of
Permitted Encumbrances holding claims senior to CIT, to be made payable to CIT,
in case of loss, under a standard non-contributory "mortgagee", "lender" or
"secured party" clause and are to contain such other provisions as CIT may
require to fully protect CIT's interest in the Real Estate, Inventory and
Equipment and to any payments to be made under such policies. All original
policies or true copies thereof are to be delivered to CIT, premium prepaid,
with the loss payable endorsement in CIT's favor, and shall provide for not less
than thirty (30) days prior written notice to CIT of the exercise of any right
of cancellation. At the Company's request, or if the Company fails to maintain
such insurance, CIT may arrange for such insurance, but at the Company's expense
and without any responsibility on CIT's part for: (i) obtaining the insurance;
(ii) the solvency of the insurance companies; (iii) the adequacy of the
coverage; or (iv) the collection of claims. Upon the occurrence of an Event of
Default which is not waived in writing by CIT, CIT shall, subject to the rights
of any holders of Permitted Encumbrances holding claims senior to CIT, have the
sole right, in the name of CIT or the Company, to file claims under any
insurance policies, to receive, receipt and give acquittance for any payments
that may be payable thereunder, and to execute any and all endorsements,
receipts, releases, assignments, reassignments or other documents that may be
necessary to effect the collection, compromise or settlement of any claims under
any such insurance policies.
(b) (i) In the event of any loss or damage by fire or other casualty,
insurance proceeds relating to Inventory shall first reduce the Company's
Revolving Loan, the Term Loan, and then any other Obligations. Upon the
occurrence of a Default or Event of Default, such Insurance Proceeds may be
applied to the Obligations in such order as CIT may elect;
(ii) In the event any part of the Company's Real Estate or Equipment
is damaged by fire or other casualty and the Insurance Proceeds for such damage
or other casualty is less than or equal to $100,000.00, CIT shall promptly apply
such Proceeds to reduce the Company's outstanding balance in the Revolving Loan
Account. Upon the occurrence of a Default or Event of Default, such Insurance
Proceeds may be applied to the Obligations in such order as CIT may elect;
(iii) Absent the occurrence of an Event of Default, and provided
that (x) the Company has sufficient business interruption insurance to replace
the lost profits of any of the Company's facilities, and (y) the Insurance
Proceeds are in excess of $100,000.00, the Company may elect (by delivering
written notice to CIT) to replace, repair or restore such Real Estate or
Equipment to substantially the equivalent condition prior to such fire or other
casualty as set forth herein. If the Company does not, or cannot, elect to use
the Insurance Proceeds as set forth above, CIT may, subject to the rights of any
holders of Permitted Encumbrances holding claims senior to CIT, apply the
Insurance Proceeds to the payment of the Obligations in such manner and in such
order as CIT may reasonably elect.
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(iv) If the Company elects to use the Insurance Proceeds for the
repair, replacement or restoration of any Real Estate and/or Equipment, and
there is then no Event of Default, (x) Insurance Proceeds in excess of
$100,000.00 on Equipment and/or Real Estate will be applied to the reduction of
the Revolving Loans and (y) CIT may set up an Availability Reserve for an amount
equal to said Insurance Proceeds. The Availability Reserve will be reduced
dollar-for-dollar upon receipt of non-cancelable executed purchase orders,
delivery receipts or contracts for the replacement, repair or restoration of
Equipment and/or the Real Estate and disbursements in connection therewith.
Prior to the commencement of any material restoration, repair or replacement of
Real Estate, the Company shall provide CIT with a restoration plan and a total
budget certified by an independent third party experienced in construction
costing. If there are insufficient Insurance Proceeds to cover the cost of
restoration as so determined, the Company shall be responsible for the amount of
any such insufficiency, prior to the commencement of restoration and shall
demonstrate evidence of such before the reserve will be reduced. Completion of
restoration shall be evidenced by a final, unqualified certification of the
design architect employed, if any; an unconditional Certificate of Occupancy, if
applicable; such other certification as may be required by law; or if none of
the above is applicable, a written good faith determination of completion by the
Company (herein collectively the "Completion"). Upon Completion, any remaining
reserve as established hereunder will be automatically released.
(c) In the event the Company fails to provide CIT with timely evidence,
acceptable to CIT, of its maintenance of insurance coverage required pursuant to
Paragraph 7.5(a) above, CIT may purchase, at the Company's expense, insurance to
protect CIT's interests in the Collateral. The insurance acquired by CIT may,
but need not, protect the Company's interest in the Collateral, and therefore
such insurance may not pay claims which the Company may have with respect to the
Collateral or pay any claim which may be made against the Company in connection
with the Collateral. In the event CIT purchases, obtains or acquires insurance
covering all or any portion of the Collateral, the Company shall be responsible
for all of the applicable costs of such insurance, including premiums, interest
(at the applicable Chase Bank Rate for Revolving Loans set forth in Paragraph
8.1 of Section 8 hereof), fees and any other charges with respect thereto, until
the effective date of the cancellation or the expiration of such insurance. CIT
may charge all of such premiums, fees, costs, interest and other charges to the
Company's Revolving Loan Account. The Company hereby acknowledges that the costs
of the premiums of any insurance acquired by CIT may exceed the costs of
insurance which the Company may be able to purchase on its own. In the event
that CIT purchases such insurance, CIT will notify the Company of said purchase
within thirty (30) days of the date of such purchase. If, within thirty (30)
days of the date of such notice, the Company provides CIT with proof that the
Company had the insurance coverage required pursuant to 7.5(a) above (in form
and substance satisfactory to CIT) as of the date on which CIT purchased
insurance and the Company continued at all times to have such insurance, then
CIT agrees to cancel the insurance purchased by CIT and credit the Company's
Revolving Loan Account with the amount of all costs, interest and other charges
associated with any insurance purchased by CIT, including with any amounts
previously charged to the Revolving Loan Account.
7.6 The Company agrees to pay, when due, all Taxes, including sales taxes,
assessments, claims and other charges lawfully levied or assessed upon the
Company or the Collateral unless such Taxes are being diligently contested in
good faith by the Company by
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appropriate proceedings and adequate reserves are established in accordance with
GAAP. Notwithstanding the foregoing, if any lien shall be filed or claimed
thereunder (a) for Taxes due the United States of America, or (b) which in CIT's
opinion might create a valid obligation having priority over the rights granted
to CIT herein (exclusive of Real Estate), such lien shall not be deemed to be a
Permitted Encumbrance hereunder and the Company shall immediately pay such tax
and remove the lien of record. If the Company fails to do so promptly, then at
CIT's election, CIT may (i) create an Availability Reserve in such amount as it
may deem appropriate in its business judgement, or (ii) upon the occurrence of a
Default or Event of Default, imminent risk of seizure, filing of any priority
lien, forfeiture, or sale of the Collateral, pay Taxes on the Company's behalf,
and the amount thereof shall be an Obligation secured hereby and due on demand.
7.7 The Company: (a) agrees to comply with all acts, rules, regulations
and orders of any legislative, administrative or judicial body or official,
which the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the business or operations of
the Company, provided that the Company may contest any acts, rules, regulations,
orders and directions of such bodies or officials in any reasonable manner which
will not, in CIT's reasonable opinion, materially and adversely effect CIT's
rights or priority in the Collateral; (b) agrees to comply with all
environmental statutes, acts, rules, regulations or orders as presently existing
or as adopted or amended in the future, applicable to the Collateral, the
ownership and/or use of its real property and operation of its business, which
the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the operation of the business of
the Company; and (c) shall not be deemed to have breached any provision of this
Paragraph 7.7 if (i) the failure to comply with the requirements of this
Paragraph 7.7 resulted from good faith error or innocent omission, (ii) the
Company promptly commences and diligently pursues a cure of such breach, and
(iii) such failure is cured within (30) days following the Company's receipt of
notice of such failure, or if such cannot in good faith be cured within thirty
(30) days, then such breach is cured within a reasonable time frame based upon
the extent and nature of the breach and the necessary remediation, and in
conformity with any applicable consent order, consensual agreement and
applicable law.
7.8 Until termination of this Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Company agrees that, unless
CIT shall have otherwise consented in writing, the Company will furnish to CIT:
(a) within ninety (90) days after the end of each Fiscal Year of the Company, an
audited Consolidated Balance Sheet, with a Consolidating Balance Sheet attached
thereto, as at the close of such year, and statements of profit and loss, cash
flow and reconciliation of surplus of the Company and its consolidated
subsidiaries, if any, for such year, audited by independent public accountants
selected by the Company and satisfactory to CIT; (b) within sixty (60) days
after the end of each Fiscal Quarter a Consolidated Balance Sheet and
Consolidating Balance Sheet as at the end of such period and statements of
profit and loss, cash flow and surplus of the Company and its consolidated
subsidiaries, if any, certified by an authorized financial or accounting officer
of the Company; (c) within thirty (30) days after the end of each month a
Consolidated Balance Sheet as at the end of such period and statements of profit
and loss, cash flow and surplus of the Company and all subsidiaries, if any, for
such period, certified by an authorized financial or accounting officer of the
Company; and (d) from time to time, such further information regarding the
business affairs and financial
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condition of the Company and its consolidated subsidiaries, if any, as CIT may
reasonably request, including, without limitation (i) the accountant's
management practice letter and (ii) annual cash flow projections in form
satisfactory to CIT. Each financial statement which the Company is required to
submit hereunder must be accompanied by an officer's certificate, signed by the
President, Vice President, Controller, or Treasurer, pursuant to which any one
such officer must certify that: (x) the financial statement(s) fairly and
accurately represent(s) the Company's financial condition at the end of the
particular accounting period, as well as the Company's operating results during
such accounting period, subject to year-end audit adjustments; and (y) during
the particular accounting period: (A) there has been no Default or Event of
Default under this Financing Agreement, provided, however, that if any such
officer has knowledge that any such Default or Event of Default, has occurred
during such period, the existence of and a detailed description of same shall be
set forth in such officer's certificate; (B) the Company has not received any
notice of cancellation with respect to its property insurance policies; (C) the
Company has not received any notice that could result in a material adverse
effect on the value of the Collateral taken as a whole; and (D) the exhibits
attached to such financial statement(s) constitute detailed calculations showing
compliance with all financial covenants contained in this Financing Agreement.
7.9 Until termination of the Financing Agreement and payment and
satisfaction of all Obligations hereunder, the Company agrees that, without the
prior written consent of CIT, except as otherwise herein provided, the Company
will not:
(a) Mortgage, assign, pledge, transfer or otherwise permit any lien,
charge, security interest, encumbrance or judgment, (whether as a result of a
purchase money or title retention transaction, or other security interest, or
otherwise) to exist on any of the Company's Collateral or any other assets,
whether now owned or hereafter acquired, except for the Permitted Encumbrances;
(b) Incur or create any Indebtedness other than the Permitted
Indebtedness;
(c) Sell, lease, assign, transfer or otherwise dispose of (i)
Collateral, except as otherwise specifically permitted by this Financing
Agreement, or (ii) either all or substantially all of the Company's assets,
which do not constitute Collateral;
(d) Merge, consolidate or otherwise alter or modify its corporate
name, principal place of business, structure, or existence, re-incorporate or
re-organize or otherwise change its state of incorporation, or enter into or
engage in any operation or activity materially different from that presently
being conducted by the Company, except that the Company may change its corporate
name or address; provided that: (i) the Company shall give CIT thirty (30) days
prior written notice thereof; and (ii) the Company shall execute and deliver,
prior to or simultaneously with any such action, any and all documents and
agreements requested by CIT to confirm the continuation and preservation of all
security interests and liens granted to CIT hereunder;
(e) Assume, guarantee, endorse, or otherwise become liable upon the
obligations of any person, firm, entity or corporation, except by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business;
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(f) Declare or pay any dividend or distributions of any kind on, or
purchase, acquire, redeem or retire, any of the capital stock or equity
interest, of any class whatsoever, whether now or hereafter outstanding;
(g) Make any advance or loan to, or any investment in, any firm,
entity, person or corporation, or purchase or acquire all or substantially all
of the stock or assets of any entity, person or corporation; or
(h) Pay any management, consulting or other similar fees to any
person, corporation or other entity affiliated with the Company;
7.10 Until termination of the Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, the Company shall maintain at
all times during each Fiscal Year ending below a Tangible Net Worth of not less
than $15,000,000 as of the Closing Date, increasing quarterly by 50% of the
Company's reported positive net income.
7.11 Without the prior written consent of CIT, the Company will not
contract for, purchase, make expenditures for or otherwise incur obligations
with respect to Capital Expenditures where the assets acquired are subject to
Purchase Money Liens or Capital Leases in an aggregate amount in excess of
$6,000,000 per Fiscal Year.
7.12 The Company agrees to advise CIT in writing of: (a) all expenditures
(actual or anticipated) in excess of $150,000.00 from the budgeted amount
therefor in any Fiscal Year for (x) environmental clean-up, (y) environmental
compliance or (z) environmental testing and the impact of said expenses on the
Company's Working Capital; and (b) any notices the Company receives from any
local, state or federal authority advising the Company of any environmental
liability (real or potential) stemming from the Company's operations, its
premises, its waste disposal practices, or waste disposal sites used by the
Company and to provide CIT with copies of all such notices if so required.
7.13 The Company hereby agrees to indemnify and hold harmless CIT and its
officers, directors, employees, attorneys and agents (each an "Indemnified
Party") from, and holds each of them harmless against, any and all losses,
liabilities, obligations, claims, actions, damages, costs and expenses
(including attorney's fees) and any payments made by CIT pursuant to any
indemnity provided by CIT with respect to or to which any Indemnified Party
could be subject insofar as such losses, liabilities, obligations, claims,
actions, damages, costs, fees or expenses with respect to the Loan Documents,
including without limitation those which may arise from or relate to: (a) the
Depository Account, the Blocked Accounts, the lockbox and/or any other
depository account and/or the agreements executed in connection therewith; and
(b) any and all claims or expenses asserted against CIT as a result of any
environmental pollution, hazardous material or environmental clean-up relating
to the Real Estate; or any claim or expense which results from the Company's
operations (including, but not limited to, the Company's off-site disposal
practices) and use of the Real Estate, which CIT may sustain or incur (other
than solely as a result of the physical actions of CIT on the Company's premises
which are determined to constitute gross negligence or willful misconduct by a
court of competent jurisdiction), all whether through the alleged or actual
negligence of such person or otherwise, except and to the extent that the same
results solely and directly from the gross negligence or willful misconduct
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of such Indemnified Party as finally determined by a court of competent
jurisdiction. The Company hereby agrees that this indemnity shall survive
termination of this Financing Agreement, as well as payments of Obligations
which may be due hereunder. CIT may, in its sole business judgement, establish
such Availability Reserves with respect thereto as it may deem advisable under
the circumstances and, upon any termination hereof, hold such reserves as cash
reserves for any such contingent liabilities.
7.14 Without the prior written consent of CIT, the Company agrees that it
will not enter into any transaction, including, without limitation, any
purchase, sale, lease, loan or exchange of property with any subsidiary, if any,
or affiliate of the Company, provided that, except as otherwise set forth in
this Financing Agreement, the Company may enter into sale and service
transactions in the ordinary course of its business and pursuant to the
reasonable requirements of the Company, and upon standard terms and conditions
and fair and reasonable terms, no less favorable to the Company than the Company
could obtain in a comparable arms length transaction with an unrelated third
party, provided further that no Default or Event of Default exists or will occur
hereunder prior to and after giving effect to any such transaction.
7.15 The Company and CIT acknowledge that due to the nature of the
Company's business and its customers certain items comprising the Collateral
and/or books, records or other documents related to the Collateral contain
"classified" information or data ("Classified Material") which may not be
legally disclosed without proper authorization and/or security clearance (a
"Security Clearance"). CIT agrees that to the extent any representation,
warranty or covenant of the Company or right or remedy of CIT contained in this
Financing Agreement would otherwise require the Company to disclose Classified
Material without a proper Security Clearance, such representation, warranty,
covenant, right or remedy shall not apply with respect to obligations which
would lead to such illegal disclosure; provided that any time the Company
refuses, declines or otherwise fails to fulfill an obligation under this
Financing Agreement due to an invocation of this Paragraph 7.15 or the substance
hereof, the Company shall promptly provide written notice to CIT of that fact
certifying that it has complied with its obligations hereunder to the fullest
extent possible without illegally disclosing Classified Material and, upon the
reasonable request of CIT, the Company shall provide evidence reasonably
satisfactory to CIT that the requested items of Collateral or information are in
fact "classified."
The Company represents and warrants that the Classified Material is
not necessary nor would it otherwise prohibit or impede (i) CIT's enforcement
rights related to Collateral consisting of the Company's Accounts, or (ii) the
sale by CIT of the Collateral consisting of the Company's Accounts, Inventory
and Equipment (except for non-material amounts of Equipment which may contain
Classified Material).
SECTION 8. INTEREST, FEES AND EXPENSES
8.1 (a) Interest on the Revolving Loans and Term Loan A shall be payable
monthly as of the end of each month on the unpaid balance or on payment in full
prior to maturity. The Revolving Loans and Term Loan A shall bear interest at a
rate equal to the Chase Bank Rate plus one and one half percent (1.50%) per
annum on the average of the net balances owing by the Company to CIT in the
Revolving Loan Account at the close of each day during such month. In the event
of any change in said Chase Bank Rate, the rate hereunder shall change, as of
the date
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of such change, so as to remain one and one half percent (1.50%) above the Chase
Bank Rate. The rate hereunder shall be calculated based on a 360-day year. CIT
shall be entitled to charge the Company's Revolving Loan Account at the rate
provided for herein when due until all Obligations have been paid in full. If
the Company's audited financial statement for the Fiscal Year ending December
31, 2000 reflects EBITDA of not less than $15,000,000, and no Event of Default
has occurred and is continuing, the interest rate under this Paragraph 8.1 shall
be reduced by one half of one percent (0.50%).
(b) Upon and after the occurrence of an Event of Default and the giving of
any required notice by CIT in accordance with the provisions of Section 10,
Paragraph 10.2 hereof, all Obligations shall bear interest at the Default Rate
of Interest.
8.2 The Company shall reimburse or pay CIT, as the case may be, for: (a)
all Out-of-Pocket Expenses and (b) any other applicable fees.
8.3 To induce CIT to enter into this Financing Agreement and to extend to
the Company the Revolving Loans and the Term Loan, the Company shall pay to CIT
a Loan Facility Fee in the amount of $200,000.00 payable upon execution of this
Financing Agreement. The Commitment Fee, less Out-of-Pocket Expenses, shall be
credited toward the Loan Facility Fee upon consummation of this financing
transaction on the Closing Date.
8.4 The Company shall pay CIT's standard charges and fees (currently $750
per person per day subject to change) for CIT's personnel used by CIT for
reviewing the books and records of the Company and for verifying, testing,
protecting, safeguarding, preserving or disposing of all or any part of the
Collateral (which fees shall be in addition to any Out-of-Pocket Expenses).
8.5 The Company hereby authorizes CIT to charge the Revolving Loan Account
with the amount of all payments due hereunder as such payments become due. The
Company confirms that any charges which CIT may so make to the Revolving Loan
Account as herein provided will be made as an accommodation to the Company and
solely at CIT's discretion.
8.6 In the event that CIT or any participant hereunder (or any financial
institution which may from time to time become a participant or lender
hereunder) shall have determined in the exercise of its reasonable business
judgement that, subsequent to the Closing Date, any change in applicable law,
rule, regulation or guideline regarding capital adequacy, or any change in the
interpretation or administration thereof, or compliance by CIT or such
participant with any new request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on CIT's or such participant's capital as a consequence of its obligations
hereunder to a level below that which CIT or such participant could have
achieved but for such adoption, change or compliance (taking into consideration
CIT or such participant's policies with respect to capital adequacy) by an
amount reasonably deemed by CIT or such participant to be material, then, from
time to time, the Company shall pay no later than five (5) days following demand
to CIT or such participant such additional amount or amounts as will compensate
CIT's or such participant's for such reduction. In determining such amount or
amounts, CIT or such participant may use any reason-able averaging or
attribution methods. The protection of this
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Paragraph 8.6 shall be available to CIT or such participant regardless of any
possible contention of invalidity or inapplicability with respect to the
applicable law, regulation or condition. A certificate of CIT or such
participant setting forth such amount or amounts as shall be necessary to
compensate CIT or such participant with respect to this Section 8 and the
calculation thereof when delivered to the Company shall be conclusive on the
Company absent manifest error. Notwithstanding anything in this paragraph to the
contrary, in the event CIT or such participant has exercised its rights pursuant
to this paragraph, and subsequent thereto determines that the additional amounts
paid by the Company in whole or in part exceed the amount which CIT or such
participant actually required to be made whole, the excess, if any, shall be
returned to the Company by CIT or such participant.
8.7 In the event that any applicable law, treaty or governmental
regulation, or any change therein or in the interpretation or application
thereof, or compliance by CIT or such participant with any request or directive
(whether or not having the force of law) from any central bank or other
financial, monetary or other authority, shall:
(a) subject CIT or such participant to any tax of any kind
whatsoever with respect to this Financing Agreement or change the basis of
taxation of payments to CIT or such participant of principal, fees, interest or
any other amount payable hereunder or under any other documents (except for
changes in the rate of tax on the overall net income of CIT or such participant
by the federal government or the jurisdiction in which it maintains its
principal office);
(b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by CIT or such
participant by reason of or in respect to this Financing Agreement and the Loan
Documents, including (without limitation) pursuant to Regulation D of the Board
of Governors of the Federal Reserve System; or
(c) impose on CIT or such participant any other condition with
respect to this Financing Agreement or any other document, and the result of any
of the foregoing is to increase the cost to CIT or such participant of making,
renewing or maintaining its loans hereunder by an amount that CIT or such
participant deems to be material in the exercise of its reasonable business
judgement or to reduce the amount of any payment (whether of principal, interest
or otherwise) in respect of any of the loans by an amount that CIT or such
participant deems to be material in the exercise of its reasonable business
judgement, then, in any case the Company shall pay CIT or such participant,
within five (5) days following its demand, such additional cost or such
reduction, as the case may be. CIT or such participant shall certify the amount
of such additional cost or reduced amount to the Company and the calculation
thereof and such certification shall be conclusive upon the Company absent
manifest error. Notwithstanding anything in this paragraph to the contrary, in
the event CIT or such participant has exercised its rights pursuant to this
paragraph, and subsequent thereto determine that the additional amounts paid by
the Company in whole or in part exceed the amount which CIT or such participant
actually required pursuant hereto, the excess, if any, shall be returned to the
Company by CIT or such participant.
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8.8 For purposes of this Financing Agreement and Section 8 thereof, any
reference to CIT shall include any financial institution which may become a
participant or co-lender subsequent to the Closing Date.
SECTION 9. POWERS
The Company hereby constitutes CIT, or any person or agent CIT may
designate, as its attorney-in-fact, at the Company's cost and expense, to
exercise all of the following powers, which being coupled with an interest,
shall be irrevocable until all Obligations to CIT have been paid in full:
(a) To receive, take, endorse, sign, assign and deliver, all in the
name of CIT or the Company, any and all checks, notes, drafts, and other
documents or instruments relating to the Collateral;
(b) To receive, open and dispose of all mail addressed to the
Company and to notify postal authorities to change the address for delivery
thereof to such address as CIT may designate;
(c) To request from customers indebted on Accounts at any time, in
the name of CIT information concerning the amounts owing on the Accounts;
(d) To request from customers indebted on Accounts at any time, in
the name of the Company, in the name of certified public accountant designated
by CIT or in the name of CIT's designee, information concerning the amounts
owing on the Accounts;
(e) To transmit to customers indebted on Accounts notice of CIT's
interest therein and to notify customers indebted on Accounts to make payment
directly to CIT for the Company's account; and
(f) To take or bring, in the name of CIT or the Company, all steps,
actions, suits or proceedings deemed by CIT necessary or desirable to enforce or
effect collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the powers set
forth in (b), (c), (e) and (f) above may only be exercised after the occurrence
of an Event of Default and until such time as such Event of Default is waived in
writing by CIT.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Notwithstanding anything hereinabove to the contrary, CIT may
terminate this Financing Agreement immediately upon the occurrence of any of the
following Events of Default:
(a) cessation of the business of the Company or the calling of a
meeting of the creditors of the Company for purposes of compromising the debts
and obligations of the Company;
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(b) the failure of the Company to generally meet its debts as they
mature;
(c) (i) the commencement by the Company of any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceedings
under any federal or state law; (ii) the commencement against the Company, of
any bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceeding under any federal or state law by creditors of the Company, provided
that such Default shall not be deemed an Event of Default if such proceeding is
controverted within ten (10) days and dismissed and vacated within thirty (30)
days of commencement, except in the event that any of the actions sought in any
such proceeding shall occur or the Company shall take action to authorize or
effect any of the actions in any such proceeding; or (iii) the commencement (x)
by the Company's subsidiaries, if any, or any one of them, of any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceeding
under any applicable state law, or (y) against the Company's subsidiaries, if
any, or any one of them, of any involuntary bankruptcy, insolvency, arrangement,
reorganization, receivership or similar proceeding under applicable law,
provided that such Default shall not be deemed an Event of Default if such
proceeding is controverted within ten (10) days and dismissed or vacated within
thirty (30) days of commencement, except in the event that any of the actions
sought in any such proceeding shall occur or the Company's subsidiaries, if any,
or any one of them, shall take action to authorize or effect any of the actions
in any such proceeding;
(d) breach by the Company of any warranty, representation or
covenant contained herein (other than those referred to in subparagraph (e)
below) or in any other written agreement between the Company or CIT, provided
that such Default by the Company of any of the warranties, representations or
covenants referred in this clause (d) shall not be deemed to be an Event of
Default unless and until such Default shall remain unremedied to CIT's
satisfaction for a period of ten (10) days from the date of such breach;
(e) breach by the Company of any warranty, representation or
covenant of Paragraphs 3.3 (other than the fourth sentence of Paragraph 3.3) and
3.4 of Section 3 hereof; Paragraphs 6.3 and 6.4 (other than the first sentence
of Paragraph 6.4) of Section 6 hereof; Paragraphs 7.1, 7.5, 7.6, and 7.8 through
7.14 hereof;
(f) failure of the Company to pay any of the Obligations within five
(5) Business Days of the due date thereof, provided that nothing contained
herein shall prohibit CIT from charging such amounts to the Revolving Loan
Account on the due date thereof;
(g) the Company shall (i) engage in any "prohibited transaction" as
defined in ERISA, (ii) have any "accumulated funding deficiency" as defined in
ERISA, (iii) have any "reportable event" as defined in ERISA, (iv) terminate any
"plan", as defined in ERISA in violation of ERISA or (v) be engaged in any
proceeding in which the Pension Benefit Guaranty Corporation shall seek
appointment, or is appointed, as trustee or administrator of any "plan", as
defined in ERISA, and with respect to this subparagraph (h) such event or
condition (x) remains uncured for a period of thirty (30) days from date of
occurrence and (y) could, in the reasonable opinion of CIT, subject the Company
to any tax, penalty or other liability material to the business, operations or
financial condition of the Company;
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(h) the occurrence of any default or event of default (after giving
effect to any applicable grace or cure periods) under any instrument or
agreement evidencing any other Indebtedness of the Company having a principal
amount in excess of $250,000; or
(i) (i) ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ceases for any reason whatsoever (other
than as a result of death) to be the Chief Scientist of the Company or other key
role in the Company and actively engaged in the management of the Company or
(ii) ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ceases for any reason whatsoever (other than as a
result of death) to be the President of the Company or other key role in the
Company and actively engaged in the management of the Company.
10.2 Upon the occurrence of a Default and/or an Event of Default, at the
option of CIT, all loans, advances and extensions of credit provided for in
Sections 3 and 4 of this Financing Agreement shall be thereafter in CIT's sole
discretion and the obligation of CIT to make Revolving Loans or Term Loans shall
cease or such Event of Default is waived in writing by CIT, and at the option of
CIT upon the occurrence of an Event of Default: (a) all Obligations shall become
immediately due and payable; (b) CIT may charge the Company the Default Rate of
Interest on all then outstanding or thereafter incurred Obligations in lieu of
the interest provided for in Section 8 of this Financing Agreement, provided
that, with respect to this clause "(b)" CIT has given the Company written notice
of the Event of Default, provided, however, that no notice is required if the
Event of Default is the Event listed in Paragraph 10.1(c) of this Section 10;
and (c) CIT may immediately terminate this Financing Agreement upon notice to
the Company, provided, however, that upon the occurrence of an Event of Default
listed in Paragraph 10.1(c) of this Section 10, this Financing Agreement shall
automatically terminate and all Obligations shall become due and payable,
without any action, declaration, notice or demand by CIT. The exercise of any
option is not exclusive of any other option, which may be exercised at any time
by CIT.
10.3 Immediately upon the occurrence of any Event of Default, CIT may, to
the extent permitted by law: (a) remove from any premises where same may be
located any and all books and records, computers, electronic media and software
programs associated with any Collateral (including any electronic records,
contracts and signatures pertaining thereto), documents, instruments, files and
records, and any receptacles or cabinets containing same, relating to the
Accounts, or CIT may use, at the Company's expense, such of the Company's
personnel, supplies or space at the Company's places of business or otherwise,
as may be necessary to properly administer and control the Accounts or the
handling of collections and realizations thereon; (b) bring suit, in the name of
the Company or CIT, and generally shall have all other rights respecting said
Accounts, including without limitation the right to: accelerate or extend the
time of payment, settle, compromise, release in whole or in part any amounts
owing on any Accounts and issue credits in the name of the Company or CIT; (c)
sell, assign and deliver the Collateral and any returned, reclaimed or
repossessed Inventory, with or without advertisement, at public or private sale,
for cash, on credit or otherwise, at CIT's sole option and discretion, and CIT
may bid or become a purchaser at any such sale, free from any right of
redemption, which right is hereby expressly waived by the Company; (d) foreclose
the security interests in the Collateral created herein or by the Loan Documents
by any available judicial procedure, or to take possession of any or all of the
Collateral, including any Inventory, Equipment and/or Other Collateral without
judicial process, and to enter any premises where any Inventory and Equipment
and/or Other Collateral may be located for the purpose of taking possession of
or
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removing the same; and (e) exercise any other rights and remedies provided in
law, in equity, by contract or otherwise. CIT shall have the right, without
notice or advertisement, to sell, lease, or otherwise dispose of all or any part
of the Collateral, whether in its then condition or after further preparation or
processing, in the name of the Company or CIT, or in the name of such other
party as CIT may designate, either at public or private sale or at any broker's
board, in lots or in bulk, for cash or for credit, with or without warranties or
representations, and upon such other terms and conditions as CIT in its sole
discretion may deem advisable, and CIT shall have the right to purchase at any
such sale. If any Inventory and Equipment shall require rebuilding, repairing,
maintenance or preparation, CIT shall have the right, at its option, to do such
of the aforesaid as is necessary, for the purpose of putting the Inventory and
Equipment in such saleable form as CIT shall deem appropriate and any such costs
shall be deemed an Obligation hereunder. The Company agrees, at the request of
CIT, to assemble the Inventory and Equipment and to make it available to CIT at
premises of the Company or elsewhere and to make available to CIT the premises
and facilities of the Company for the purpose of CIT's taking possession of,
removing or putting the Inventory and Equipment in saleable form. If notice of
intended disposition of any Collateral is required by law, it is agreed that
five (5) days notice shall constitute reasonable notification and full
compliance with the law. The net cash proceeds resulting from CIT's exercise of
any of the foregoing rights, (after deducting all charges, costs and expenses,
including reasonable attorneys' fees) shall be applied by CIT to the payment of
the Obligations, whether due or to become due, in such order as CIT may elect,
and the Company shall remain liable to CIT for any deficiencies, and CIT in turn
agrees to remit to the Company or its successors or assigns, any surplus
resulting therefrom. The enumeration of the foregoing rights is not intended to
be exhaustive and the exercise of any right shall not preclude the exercise of
any other rights, all of which shall be cumulative. The Company hereby
indemnifies CIT and holds CIT harmless from any and all costs, expenses, claims,
liabilities, Out-of-Pocket Expenses or otherwise, incurred or imposed on CIT by
reason of the exercise of any of its rights, remedies and interests hereunder,
including, without limitation, from any sale or transfer of Collateral,
preserving, maintaining or securing the Collateral, defending its interests in
Collateral (including pursuant to any claims brought by the Company, the Company
as debtor-in-possession, any secured or unsecured creditors of the Company, any
trustee or receiver in bankruptcy, or otherwise), and the Company hereby agrees
to so indemnify and hold CIT harmless, absent CIT's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction. The
foregoing indemnification shall survive termination of this Financing Agreement
until such time as all Obligations (including the foregoing) have been finally
and indefeasibly paid in full. In furtherance thereof CIT, may establish such
reserves for Obligations hereunder (including any contingent Obligations) as it
may deem advisable in its reasonable business judgement. Any applicable
mortgage(s), deed(s) of trust or assignment(s) issued to CIT on the Real Estate
shall govern the rights and remedies of CIT thereto.
SECTION 11. TERMINATION
Except as otherwise permitted herein, CIT may terminate this Financing
Agreement only as of the initial or any subsequent Anniversary Date and then
only by giving the Company at least sixty (60) days prior written notice of
termination. Notwithstanding the foregoing CIT may terminate the Financing
Agreement immediately upon the occurrence of an Event of Default, provided,
however, that if the Event of Default is an event listed in Paragraph 10.1(c)
of Section 10 of this Financing Agreement, this Financing Agreement shall
terminate in accordance with
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Paragraph 10.2 of Section 10. This Financing Agreement, unless terminated as
herein provided, shall automatically continue from Anniversary Date to
Anniversary Date. The Company may terminate this Financing Agreement at any time
upon sixty (60) days' prior written notice to CIT, provided that the Company
pays to CIT immediately on demand an Early Termination Fee and/or the Prepayment
Premium, if applicable. All Obligations shall become due and payable as of any
termination hereunder or under Section 10 hereof and, pending a final
accounting, CIT may withhold any balances in the Company's account (unless
supplied with an indemnity satisfactory to CIT) to cover all of the Obligations,
whether absolute or contingent, including, but not limited to, cash reserves for
any contingent Obligations. All of CIT's rights, liens and security interests
shall continue after any termination until all Obligations have been paid and
satisfied in full.
SECTION 12. MISCELLANEOUS
12.1 The Company hereby waives diligence, notice of intent to accelerate,
notice of acceleration, demand, presentment and protest and any notices thereof
as well as notice of nonpayment. No delay or omission of CIT or the Company to
exercise any right or remedy hereunder, whether before or after the happening of
any Event of Default, shall impair any such right or shall operate as a waiver
thereof or as a waiver of any such Event of Default. No single or partial
exercise by CIT of any right or remedy precludes any other or further exercise
thereof, or precludes any other right or remedy.
12.2 This Financing Agreement and the Loan Documents executed and
delivered in connection therewith constitute the entire agreement between the
Company and CIT; supersede any prior agreements; can be changed only by a
writing signed by both the Company and CIT; and shall bind and benefit the
Company and CIT and their respective successors and assigns.
12.3 In no event shall the Company, upon demand by CIT for payment of any
Indebtedness relating hereto, by acceleration of the maturity thereof, or
otherwise, be obligated to pay interest and fees in excess of the amount
permitted by law. Regardless of any provision herein or in any agreement made in
connection herewith, CIT shall never be entitled to receive, charge or apply, as
interest on any indebtedness relating hereto, any amount in excess of the
maximum amount of interest permissible under applicable law. If CIT ever
receives, collects or applies any such excess, it shall be deemed a partial
repayment of principal and treated as such; and if principal is paid in full,
any remaining excess shall be refunded to the Company. This paragraph shall
control every other provision hereof, the Loan Documents and of any other
agreement made in connection herewith.
12.4 If any provision hereof or of any other agreement made in connection
herewith is held to be illegal or unenforceable, such provision shall be fully
severable, and the remaining provisions of the applicable agreement shall remain
in full force and effect and shall not be affected by such provision's
severance. Furthermore, in lieu of any such provision, there shall be added
automatically as a part of the applicable agreement a legal and enforceable
provision as similar in terms to the severed provision as may be possible.
12.5 THE COMPANY AND CIT EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING ARISING OUT OF THE LOAN
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DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREUNDER. THE COMPANY HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF
PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED. IN NO EVENT
WILL CIT BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
12.6 Except as otherwise herein provided, any notice or other
communication required hereunder shall be in writing (provided that, any
electronic communications from the Company with respect to any request,
transmission, document, electronic signature, electronic mail or facsimile
transmission shall be deemed binding on the Company for purposes of this
Financing Agreement, provided further that any such transmission shall not
relieve the Company from any other obligation hereunder to communicate further
in writing), and shall be deemed to have been validly served, given or delivered
when hand delivered or sent by facsimile, or three days after deposit in the
United State mails, with proper first class postage prepaid and addressed to the
party to be notified or to such other address as any party hereto may designate
for itself by like notice, as follows:
(A) if to CIT, at:
The CIT Group/Business Credit, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Regional Credit Manager
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
(B) if to the Company at:
Cray Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a courtesy copy of any material notice to the Company's counsel at:
Stoel Rives LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
provided, however, that the failure of CIT to provide the Company's counsel with
a copy of such notice shall not invalidate any notice given to the Company and
shall not give the Company any rights, claims or defenses due to the failure of
CIT to provide such additional notice.
12.7 THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF CALIFORNIA, EXCEPT TO THE
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EXTENT THAT ANY OTHER LOAN DOCUMENT INCLUDES AN EXPRESS ELECTION TO BE GOVERNED
BY THE LAWS OF ANOTHER JURISDICTION.
[This space intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be effective, executed, accepted and delivered at Los Angeles,
California, by their proper and duly authorized officers as of the date set
forth above.
CRAY INC. THE CIT GROUP/
BUSINESS CREDIT, INC.
By: /s/ By: /s/
--------------------------- ---------------------------------
Title Title: Senior Vice President
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