SECOND AMENDED AND RESTATED TERM AND REVOLVING CREDIT AGREEMENT
Table of Contents
Section 1. DEFINITIONS; ATTACHMENTS 1
1.1. Special Definitions. 1
1.2. Other Defined Terms. 8
1.3. Attachments. 8
Section 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES 8
2.1. Credit Line. 8
2.2. R/C Advances. 8
2.3. Term Loan A Advance. 9
2.4 Term Loan C Advance 9
2.5. Finance and Other Charges. 10
2.6. Customer Account Statements. 10
2.7. Shortfall. 10
2.8. Application of Payments 11
2.9 Prepayment and Reborrowing By Customers. 11
2.10 Currencies 11
2.11 Letter of Credit 11
Section 3. POWER OF ATTORNEY. 11
3.1. Power of Attorney. 11
3.2. Lockbox and Special Account 12
3.3. Reimbursement for Charges 12
3.4. Collections 12
Section 4. SECURITY -- COLLATERAL 13
4.1. Grant. 13
4.2. Further Assurances. 13
Section 5. CONDITIONS PRECEDENT 13
5.1. Conditions Precedent to the Effectiveness of this Agreement. 13
5.2. Conditions Precedent to Each Advance. 14
5.3 Post Closing 14
5.4 Conditions Precedent for Obligations of IBM Canada 15
5.5 Miscellaneous 15
Section 6. REPRESENTATIONS AND WARRANTIES 15
6.1. Organization and Qualifications. 15
6.2. Rights in Collateral: Priority of Liens. 15
6.3. No Conflicts. 15
6.4. Enforceability. 15
6.5. Locations of Offices, Records and Inventory. 15
6.6. Fictitious Business Names. 16
6.7. Organization. 16
6.8. No Judgments or Litigation. 16
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6.9. Defaults. 16
6.10. Labor Matters. 16
6.11. Compliance with Law. 16
6.12. ERISA. 16
6.13. Compliance with Environmental Laws. 16
6.14. Intellectual Property. 17
6.15. Licenses and Permits. 17
6.16. Investment Company. 17
6.17. Taxes and Tax Returns. 17
6.18. Status of Accounts. 18
6.19. Affiliate/Subsidiary Transactions. 18
6.20. Accuracy and Completeness of Information. 18
6.21. Indebtedness. 18
Section 7. AFFIRMATIVE COVENANTS 18
7.1. Financial and Other Information. 18
7.2. Location of Collateral. 19
7.3. Changes in Customer. 20
7.4. Corporate Existence. 20
7.5. ERISA. 20
7.6. Environmental Matters. 20
7.7. Collateral Books and Records/Collateral Audit. 20
7.8. Insurance; Casualty Loss. 21
7.9. Taxes. 21
7.10. Compliance With Laws. 22
7.11. Fiscal Year. 22
7.12. Intellectual Property. 22
7.13. Maintenance of Property. 22
7.14. Collateral. 22
7.15. Subsidiaries. 22
7.16. Financial Covenants; Additional Covenants. 23
7.17. Guaranty 23
Section 8. NEGATIVE COVENANTS 24
8.1. Liens. 24
8.2. Disposition of Assets. 24
8.3. Corporate Changes. 24
8.4. Guaranties. 24
8.5. Restricted Payments. 24
8.6. Investments. 25
8.7. Affiliate/Subsidiary Transactions. 25
8.8. ERISA. 25
8.9. Additional Negative Pledges. 25
8.10. Use of Proceeds. 25
8.11. Indebtedness. 25
8.12. Loans. 26
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Section 9. DEFAULT 26
9.1. Event of Default. 26
9.2. Acceleration. 27
9.3. Remedies. 27
9.4. Waiver. 28
Section 10. MISCELLANEOUS 28
10.1. Term; Termination. 28
10.2. Indemnification. 29
10.3. Additional Obligations. 29
10.4. LIMITATION OF LIABILITY. 29
10.5. Alteration/Waiver. 30
10.6. Severability. 30
10.7. One Loan. 30
10.8. Additional Collateral. 30
10.9. No Merger or Novations. 30
10.10. Paragraph Titles. 30
10.11. Binding Effect; Assignment. 30
10.12. Notices. 30
10.13. Counterparts. 31
10.14. SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW. 31
10.15. JURY TRIAL WAIVER. 32
10.16 Entire Agreement 32
10.17 Non-Cross Guaranties and Non-Cross Collateralization 32
EXHIBITS/ATTACHMENTS/SCHEDULES 33
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SECOND AMENDED AND RESTATED TERM AND REVOLVING CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED TERM AND REVOLVING CREDIT AGREEMENT
(as amended, supplemented or otherwise modified from time to time, this
"Agreement") is hereby made as of this 17th day of October , 2000, by and among
IBM Credit Corporation with a place of business at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America ("USA"), a Delaware corporation, ("IBM
Credit") and IBM Financing, a division of IBM Canada Limited with a place of
business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ ("IBM Canada")
(each a "Lender" and jointly the "Lenders"), Applied Digital Solutions, Inc.
(formerly known as "Applied Cellular Technology, Inc.") with a place of business
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇, a Missouri corporation,
("USA Customer") and Ground Effects Ltd. with a place of business at ▇▇▇▇ ▇▇.
▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ("Canadian Customer") (USA
Customer and Canadian Customer are each referred to herein as a "Customer" or,
collectively, the "Customers).
WITNESSETH
WHEREAS, USA Customer and IBM Credit entered into the Term and
Revolving Credit Agreement dated as of May 25, 1999 (the "Existing Agreement");
WHEREAS, Customers and others entered into an Amendment and
Restatement of the Existing Agreement as of July 30, 1999 (as amended from time
to time prior to the date hereof, the "First Restatement");
WHEREAS, Customers have requested that Lenders amend and restate the
First Restatement as set forth in more detail below.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
Section 1. DEFINITIONS; ATTACHMENTS
1.1. Special Definitions. The following terms shall have the following
respective meaning in this Agreemen (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Accounts": with respect to USA Customer; as defined in the U.C.C.; and
with respect to Canadian Customer, all now existing and/or hereafter created or
arising accounts receivable of such Customer arising but specifically including
accounts arising from the acquisition of software or the sale of inventory,
and/or performance of services by it, including any interest, finance charges
and other amounts payable with respect thereto, and for greater certainty
including all monetary obligations owed to such Customer including, without
limitation, all book accounts, book debts, accounts, debits, dues claims, choses
in action, and demands of every nature and kind and howsoever arising or secured
which are due or accruing or growing due to such Customer or owned by such
Customer.
"Advance": any loan or other extension of credit by any Lender to or on
behalf of any Customer pursuant to this Agreement including, without limitation,
(i) R/C Advances, (ii) Term Loan A, (iii) Term Loan C and (v) a drawing under a
Letter of Credit.
"Affiliate": with respect to any Person, any other Person (the "Affiliate")
meeting one of the following: (i) at least 10% of the Affiliate's equity is
owned, directly or indirectly, by such Person; (ii) at least 10% of such
Person's equity is owned, directly or indirectly, by the Affiliate; or (iii) at
least 10% of such Person's equity and at least 10% of the Affiliate's equity is
owned, directly or indirectly, by the same Person or Persons. All of Customers'
officers, directors, joint venturers, and partners shall also be deemed to be
Affiliates of Customers for purposes of this Agreement.
"Agreement": as defined in the caption.
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"Applicable Credit Line": with respect to IBM Credit or USA Customer, USA
Credit Line; and with respect to IBM Canada or Canadian Customer, Canadian
Credit Line.
"Applicable Customer": with respect to IBM Credit, USA Customer; and with
respect to IBM Canada, the Canadian Customer.
"Applicable Lender": with respect to the USA Customer, IBM Credit; and with
respect to Canadian Customer, IBM Canada.
"Applicable R/C Finance Charge": with respect to an R/C Advance to USA
Customer, the USA Finance Charge set forth in Attachment A; and with respect to
an R/C Advance to Canadian Customer, the Canadian Finance Charge set forth in
Attachment A.
"Approved Inventory: as of the date of determination, the value of
information technology products, including computer hardware and software
products, manufactured or distributed by or bearing any trademark or trade name
of Authorized Suppliers as such term is defined in the Inventory Financing
Agreement (as defined herein) in such Domestic Subsidiaries' possession provided
that such products are new and in manufacturer sealed boxes or used products in
open containers purchased directly from IBM Credit; in each case in which IBM
Credit has a perfected first priority security interest.
"Auditors": a nationally recognized firm of independent certified public
accountants or independent chartered accountants, as applicable, selected by
a\Customer ~in the country of its incorporation.
"Available Credit": with respect to a Customer at any time, (1) the Maximum
Advance Amount less (2) the Outstanding Advances other than the Outstanding Term
Loan A, at such time owed by the Customers to Applicable Lender.
"Average Daily Balance": for each Advance for a given period of time, the
sum of the unpaid principal of such Advance as of each day during such period of
time, divided by the number of days in such period of time.
"Base Rate": (1) for USA Customer, as of the date of determination, the
thirty-day average of the one-month London Interbank Offered Rate ("LIBOR") as
published by Bloomberg for the previous calendar month or, in the event such
average is no longer published by Bloomberg, such other thirty (30) day average
as IBM Credit may use for determining "LIBOR" in its reasonable discretion. The
LIBOR is based on a 360 day calendar year, and (2) for Canadian Customer, as of
the date of determination, the annual rate of interest announced by the
Toronto-Dominion Bank ("Canadian Base Rate") as being its reference rate of
interest in order to determine interest rates for loans in Canadian Dollars to
Canadian borrowers in effect at the close of business on the last Business Day
of the previous month.
"Borrowing Base": as defined in Attachment A.
"Business Day": (1) for USA Customer, any day other than a Saturday, Sunday
or other day on which commercial banks in New York, New York are generally
closed or on which IBM Credit is closed, and (2) for Canadian Customer, any day
other than a Saturday, Sunday or other day on which commercial banks in ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ are generally closed or on which IBM Canada is closed.
"Canadian Credit Line": as defined in Section 2.1.
"Canadian Security Agreement": the Security Agreement dated as of July 30,
1999 between IBM Canada and Ground Effects Ltd, as amended from time to time, or
any other Security Agreement that may be entered into between IBM Canada and a
Customer organized under the laws of Canada.
"Closing Date": the date on which the conditions precedent to the
effectiveness of this Agreement set forth in Section 5.1 hereof are satisfied or
waived in writing by Lenders.
"Code": the Internal Revenue Code of 1986.
"Collateral": Collateral as defined in Attachment 4 and Collateral as
defined in any of the Canadian Security Agreement.
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"Collateral Management Report": a report to be delivered by USA Customer to
IBM Credit from time to time, as provided herein, signed by the chief executive
officer or chief financial officer of USA Customer, substantially in the form
and detail of Attachment D hereto, detailing and certifying, among other items:
a summary of the Unencumbered Inventory, Approved Inventory and Accounts of USA
Customer, its Domestic Subsidiaries and Canadian Customer, the amounts and aging
of all of such Accounts, the amounts and aging of such accounts payable as of a
specified date, the total amount of the Borrowing Base as well as Outstanding
Advances, Available Credit and any Shortfall Amount as of a specified date.
"Compliance Certificate": a certificate substantially in the form of
Attachment C.
"Customer": as defined in the caption.
"Customer Agent": as defined in Section 2.2.
"Credit Line": as defined in Attachment A
"Default": either (1) an Event of Default or (2) any event or condition
which, but for the requirement that notice be given or time lapse or both, would
be an Event of Default.
"Delinquency Fee Rate": as defined on Attachment A.
"Domestic Subsidiary": a direct Subsidiary of the USA Customer, which
direct Subsidiary is incorporated in the United States or in the District of
Columbia.
"Environmental Laws": all statutes, laws, judicial decisions, regulations,
ordinances, and other governmental restrictions applicable to any of the
Customers in the United States or Canada, as applicable, relating to pollution,
the protection of the environment, occupational health and safety, or to
emissions, discharges or release of pollutants, contaminants, hazardous
substances or wastes into the environment.
"Environmental Liability": any claim, demand, obligation, cause of action,
allegation, order, violation, injury, judgment, penalty or fine, cost or
expense, resulting from the violation or alleged violation of any Environmental
Laws or the imposition of any Lien pursuant to any Environmental Laws.
"ERISA": the Employee Retirement Income Security Act of 1974.
"Event of Default": as defined in Section 9.1.
"Extraordinary Receipt": any cash received by or paid to or for the account
of any Person not in the ordinary course of business, including, without
limitation, cash received by way of tax refunds, pension plan reversions,
proceeds of insurance (other than proceeds of business interruption insurance to
the extent such proceeds constitute compensation for lost earnings),
condemnation awards (and payments in lieu thereof), indemnity payments and any
purchase price adjustment received in connection with any purchase agreement;
provided, however, that an Extraordinary Receipt shall not include cash receipts
received from proceeds of insurance, condemnation awards (or payments in lieu
thereof) or indemnity payments to the extent that such proceeds, awards or
payments in respect of loss or damage to equipment, fixed assets or real
property are applied (or in respect of which expenditures were previously
incurred) to replace or repair the equipment, fixed assets or real property in
respect of which such proceeds were received in accordance with the terms of the
Agreement, so long as such application is made within 6 months after the
occurrence of such damage or loss.
"Finance Charge": the Applicable R/C Finance Charge, the Term Loan A
Finance Charge, or the Term Loan C Finance Charge.
"Financial Statements": the consolidated balance sheet and consolidated
statements of operations (income statement), of cash flows and of changes in
shareholder's equity, and the consolidating balance sheets and statements of
operations (income statements) of the USA Customer and its Subsidiaries for the
period specified, prepared in accordance with GAAP and consistent with prior
practices.
"GAAP": generally accepted accounting principles of the country in which
the relevant Customer or Subsidiary is incorporated as in effect from time to
time.
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"Governmental Authority": any nation or government, any state or other
political subdivision thereof, any province or municipality, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled (through stock or capital ownership or otherwise) by any of
the foregoing.
"Guarantor": each Domestic Subsidiary as of the Closing Date, and each
Subsidiary of Canadian Customer that guarantees the Obligations of such
Customer, and each other Person that becomes a Guarantor from time to time.
"Guaranty": each guaranty entered into by a Guarantor for the benefit of
the Lenders.
"Hazardous Substances": all substances, wastes, pollutants, contaminants or
hazardous or toxic chemicals or materials, to the extent subject to regulation
as "hazardous substances" or "hazardous waste" under any Environmental Laws.
"Indebtedness": with respect to any Person, (1) all obligations of such
Person for borrowed money or for the deferred purchase price of property or
services (other than trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices) or which is
evidenced by a note, bond, debenture or similar instrument, (2) all obligations
of such Person under capital leases (including obligations under any leases a
Customer may enter into, now or in the future, with any Lender), (3) all
obligations of such Person in respect of letters of credit, banker's acceptances
or similar obligations issued or created for the account of such Person, (4)
liabilities arising under any interest rate protection, future, option swap, cap
or hedge agreement or arrangement under which such Person is a party or
beneficiary, (5) all obligations under guaranties of such Person and (6) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof.
"Inventory Financing Agreement": the agreement entered into or that may be
entered into from time to time by certain Domestic Subsidiaries and IBM Credit
whereby IBM Credit finances the acquisition of certain inventory by such
Domestic Subsidiaries.
"Investment": with respect to any Person (the "Investor"), any investment
by the Investor in any other Person, whether by means of share purchase, capital
contribution, purchase or other acquisition of a partnership or joint venture
interest, loan, time deposit, demand deposit or otherwise.
"Letter of Credit": any of the letters of credit that IBM Canada may
obtain, at the request of a Canadian Customer, pursuant to Section 2.11.
"Lien(s)": any lien, claim, charge, pledge, security interest, deed of
trust, mortgage, other encumbrance or other arrangement having the practical
effect of the foregoing, including the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement.
"Lockbox": as defined in Section 3.2.
"Knowledge": when included in any reference to a Customer's knowledge or
its obtaining of knowledge means the actual knowledge thereof by the President,
Chief Financial Officer or Treasurer of that Customer and any reference to a
Customer's "learning" of a particular event, fact or circumstance refers
(without implying any duty of inquiry) to knowledge (as referred to in this
Definition) of such event, fact or circumstance by the President, Chief
Financial Officer or Treasurer of the relevant Customer.
"Material Adverse Effect": a material adverse effect (1) on the business,
operations, results of operations, assets, or financial condition of the
Customers when taken as a whole, (2) on the aggregate value of the Collateral or
the aggregate amount which Lenders would be likely to receive (after giving
consideration to reasonably likely delays in payment and reasonable costs of
enforcement) in the liquidation of such Collateral when taken as a whole to
recover the Obligations in full, or (3) on the rights and remedies of Lenders
under this Agreement when taken as a whole.
"Maximum Advance Amount": at any time, the lesser of (1) the Credit Line
and (2) the Borrowing Base.
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"Net Cash Proceeds": with respect to any sale, lease, transfer or other
disposition of any asset by any Person, or any Extraordinary Receipt received by
or paid to or for the account of any Person, the aggregate amount of cash
received from time to time (whether as initial consideration or through payment
or disposition of deferred consideration) by or on behalf of such Person in
connection with such transaction after deducting therefrom only (without
duplication) (a) reasonable and customary brokerage commissions, underwriting
fees and discounts, legal fees, finder's fees and other similar fees and
commissions and (b) the amount of taxes payable in connection with or as a
result of such transaction is required to be paid upon such disposition, in each
case to the extent, but only to the extent, that the amounts so deducted are, at
the time of receipt of such cash, actually paid to a Person that is not an
Affiliate of such Person and are properly attributable to such transaction or to
the asset that is subject thereof.
"Non-Guarantor Subsidiary": a Subsidiary of a Canadian Customer that cannot
for reasons of law quaranty the Obligations of such Customer.
"Obligations": all covenants, agreements, warranties, duties,
representations, loans, advances, interest (including interest accruing on or
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to Customers, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding), fees, reasonable expenses, indemnities, liabilities and
Indebtedness of any kind and nature whatsoever now or hereafter arising, owing,
due or payable from Customers to Lenders provided, however, with reference to
the Canadian Customer, the term "Obligations" refers to the foregoing solely
with respect to that particular Customer and not to any other obligations.
"Other Documents": all security agreements, mortgages, leases, instruments,
documents, guarantees, schedules of assignment, contracts and similar agreements
executed by a Customer and delivered to Lenders, pursuant to this Agreement or
otherwise, and all amendments, supplements and other modifications to the
foregoing from time to time.
"Other Charges": as set forth in Attachment A.
"Outstanding Advances": at any time of determination, the sum of (1) the
unpaid principal amount of all Advances made by Lenders under this Agreement,
(2) the unpaid principal amount of all Product Advances and (3) any due and
unpaid finance charge, fee, expense or other amount related to Advances charged
to Customers' accounts with Lenders.
"Outstanding R/C Advances": at any time of determination, the sum of (1)
the unpaid principal amount of all R/C Advances made by a Lender under this
Agreement; and (2) any finance charge, fee, expense or other amount related to
R/C Advances charged to Applicable Customers' accounts with such Lender.
"Outstanding Term Loan A": at any time of determination, the sum of (1) the
unpaid principal amount of the Term Loan A made by IBM Credit under this
Agreement; and (2) any finance charge, fee, expense or other amount related to
the Term Loan A charged to USA Customer's account with IBM Credit.
"Outstanding Term Loan C": at any time of determination, the sum of (1) the
unpaid principal amount of all Term Loan C made by IBM Canada under this
Agreement; and (2) any finance charge, fee, expense or other amount related to
the Term Loan C charged to the accounts of the Canadian Customer with IBM
Canada.
"Permitted Acquisition": any acquisition by USA Customer or any Subsidiary
of a Person or of any Person's assets provided such acquisition is approved in
advance by IBM Credit whose approval will not be unreasonably withheld.
"Permitted Disposition": any disposition by any Customer, no matter how
structured, of all or any material part of the capital stock or assets of a
Subsidiary where such disposition does not result in the breach of any of the
financial covenants included in this Agreement.
"Permitted Indebtedness": any of the following:
(1) Indebtedness to Lenders;
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(2) Indebtedness described in Section VII of Attachment B;
(3) Purchase Money Indebtedness;
(4) guaranties in favor of Lenders;
(5) guaranties of Subsidiaries or Customers of indebtedness owed to any
Person;
(6) Indebtedness incurred on account of loans permitted under Section 8.12,
and
(7) other Indebtedness consented to by IBM Credit in writing prior to
incurring such Indebtedness.
"Permitted Liens": any of the following:
(1) Liens which are the subject of an Intercreditor Agreement, in effect
from time to time between Lenders and any other secured creditors;
(2) Purchase Money Security Interests;
(3) Liens described in Section I of Attachment B;
(4) Liens of warehousemen, mechanics, materialmen, workers, repairmen,
common carriers, landlords and other similar Liens arising by operation of law
or otherwise, not waived in connection herewith, for amounts that are not yet
due and payable or being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted if an adequate reserve or other
appropriate provisions shall have been made therefor as required to be in
conformity with GAAP and an adverse determination in such proceedings could not
reasonably be expected to have a Material Adverse Effect;
(5) attachment or judgment Liens individually or in the aggregate not in
excess of U.S.$1,000,000 (exclusive of (A) any amounts that are duly bonded to
the satisfaction of IBM Credit or (B) any amount fully covered by insurance as
to which the insurance company has acknowledged its obligation to pay such
judgment in full);
(6) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate, are not
substantial in amount and which do not materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of Customers;
(7) extensions and renewals of the foregoing Permitted Liens; provided that
(A) the aggregate amount of such extended or renewed Liens do not exceed the
original principal amount of the Indebtedness which it secures, (B) such Liens
do not extend to any property other than property already previously subject to
the Lien and (C) such extended or renewed Liens are on terms and conditions no
more restrictive than the terms and conditions of the Liens being extended or
renewed;
(8) Liens arising from deposits or pledges to secure bids, tenders,
contracts, leases, surety and appeal bonds and other obligations of like nature
arising in the ordinary course of the Customers' businesses;
(9) Liens for taxes, assessments or governmental charges not delinquent or
being contested, in good faith, by appropriate proceedings promptly instituted
and diligently conducted if an adequate reserve or other appropriate provisions
shall have been made therefor as required in order to be in conformity with GAAP
and an adverse determination in such proceedings could not reasonably be
expected to have a Material Adverse Effect;
(10)Liens arising out of deposits in connection with workers' compensation,
unemployment insurance or other social security or similar legislation;
(11)Liens arising pursuant to this Agreement or the Other Documents; and
(12)other Liens consented to by IBM Credit in writing prior to incurring
such Lien.
"Person": any individual, association, firm, corporation, partnership,
trust, unincorporated organization or other entity whatsoever.
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"Policies": all policies of insurance required to be maintained by a
Customer under this Agreement or any of the Other Documents.
"Prepayment Premium": as defined in Section 10.1(D).
"Product Advances": any loan or other extension of credit by IBM Credit to
or on behalf of any Domestic Subsidiary plus any due and unpaid finance charge,
fee, expense or other amount related to Product Advances pursuant to an
Inventory Financing Agreement.
"Purchase Money Indebtedness": any Indebtedness (including capital leases)
incurred to finance the acquisition of assets to be used in a Customer's
business not to exceed the lesser of (1) the purchase price or acquisition cost
of such asset and (2) the fair market value of such asset at the time of such
acquisition.
"Purchase Money Security Interest": any security interest securing Purchase
Money Indebtedness, which security interest applies solely to the particular
asset acquired with the Purchase Money Indebtedness.
"R/C Advance": any loan or advance of funds made by Applicable Lenders to
or on behalf of the Canadian Customer or the USA Customer pursuant to Section
2.2. or any drawing under the Letter of Credit that has not been repaid by the
Canadian Customer pursuant to Section 2.11.
"R/C Advance Date": the Business Day on which any Lender makes an R/C
Advance under this Agreement.
"Request for R/C Advance": as defined in Section 2.2.
"Request for Term Loan A ": as defined in Section 2.3.
"Request for Term Loan C": as defined in Section 2.4.
"Requirement of Law": as to any Person, the articles of incorporation and
by-laws of such Person, and any law, treaty, rule or regulation or determination
of an arbitrator or a court or other governmental authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
"Shortfall Amount": as defined in Section 2.7.
"Shortfall Transaction Fee": as defined in Attachment A.
"Special Account": as defined in Section 3.2.
"Subsidiary": with respect to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Term Loan A": the loan or advance of funds made by IBM Credit to or on
behalf of USA Customer pursuant to Section 2.3.
"Term Loan A Commencement Date": as defined in Section 2.3.
"Term Loan A Commitment": as defined in Exhibit 2.3.1.
"Term Loan A Finance Charge": as defined in Exhibit 2.3.1..
"Term Loan A Stated Maturity Date": as set forth in Exhibit 2.3.1.
"Term Loan C": the loan or advance of funds made by IBM Canada to or on
behalf of either Canadian Customer pursuant to Section 2.4.
"Term Loan C Commencement Date": as defined in Section 2.4.
"Term Loan C Commitment": as defined in Exhibit 2.4.1.
"Term Loan C Finance Charge": as defined in Exhibit 2.4.1.
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"Term Loan C Stated Maturity Date": as set forth in Exhibit 2.4.1.
"Termination Date": shall mean May 25, 2002 or such other date as IBM
Credit and USA Customer may agree to from time to time.
"Unencumbered Inventory": as of the date of determination, (i) the value of
inventory (other than Approved Inventory) in USA Customer's or any of its
Domestic Subsidiaries' premises, provided, however, that IBM Credit has a
perfected first priority security interest in such other inventory plus (ii) the
value of all inventory in Canadian Customer's premises, provided, however, that
IBM Canada has a perfected first priority security interest in such inventory,
in each case as reported net of any applicable reserves as set forth in USA
Customer's most recent monthly Financial Statement.
"USA Credit Line": as defined in Section 2.1.
"Voting Stock": securities, the holders of which are ordinarily, in the
absence of contingencies, entitled to elect the corporate directors (or persons
performing similar functions).
1.2. Other Defined Terms. Terms not otherwise defined in this Agreement
which are defined (1) in the US, in the Uniform Commercial Code as in effect in
the State of New York (the "U.C.C."), and (2) in Canada, in the Personal
Property Security Act of Ontario ("PPSA"), in each case shall have the meanings
assigned to them therein.
1.3. Attachments. All attachments, exhibits, schedules and other addenda
hereto, including, without limitation, Attachment A and Attachment B, are
specifically incorporated herein and made a part of this Agreement.
Section 2. CREDIT LINE/FINANCE CHARGES/OTHER CHARGES
2.1. Credit Line. Subject to the terms and conditions set forth in this
Agreement, on and after the Closing Date to but not including the date that is
the earlier of (x) the date on which this Agreement is terminated pursuant to
Section 10 and (y) the date on which IBM Credit terminates the Credit Line
pursuant to Section 9, (1) IBM Credit agrees to extend to USA Customer a credit
line provided the Outstanding R/C Advances by IBM Credit do not exceed the USA
Credit Line set forth in Attachment A (the "USA Credit Line"), and (2) IBM
Canada agrees to extend to Canadian Customer a credit line provided the
aggregate Outstanding R/C Advances of the Canadian Customer do not exceed the
Canadian Credit Line set forth in Attachment A (the "Canadian Credit Line"),
provided further that the Lenders do not have the obligation to make an Advance
under this Section 2.1 if the Available Credit is zero or negative before or
after giving effect to such requested Advance.
2.2. R/C Advances. (A) Canadian Customer and USA Customer hereby designate
ACT Financial, Inc. (the "Customer Agent") as the Customer's Agent to obtain R/C
Advances. The Customer Agent may make a written request ("Request for R/C
Advance") to the Applicable Lender for an R/C Advance in the name of and on
behalf of a Canadian Customer or the USA Customer. The designation of the
Customer Agent may be terminated or may be changed from time to time on not less
than seven (7) days written notice to IBM Credit by USA Customer. For any
requested R/C Advance pursuant to which monies will be disbursed to Applicable
Customer or any Person other than Applicable Lender, a Request for R/C Advance
shall be delivered to Applicable Lender on or prior to 1:00 p.m. (local time of
the place of business of the Applicable Lender referenced in the Preamble to
this Agreement) one Business Day prior to the requested R/C Advance Date. The
Request for R/C Advance shall specify (i) the requested R/C Advance Date; and
(ii) the amount of the requested R/C Advance. The Customer Agent (or the
Customer in the event of the termination of the designation of any Customer
Agent) may deliver a Request for R/C Advance via facsimile. Any Request for R/C
Advance delivered to an Applicable Lender shall be irrevocable.
(B) Subject to the terms and conditions of this Agreement, on the R/C
Advance Date specified in a Request for R/C Advance, Applicable Lender shall
make the principal amount of each R/C Advance available to the Customer in
immediately available funds to an account maintained by such Customer. An
Applicable Lender may, in its sole discretion, make an R/C Advance to itself
8
hereunder on a day on which such Customer is to repay all or any part of an
Outstanding Advance (or any amount owing hereunder).
(C) Each R/C Advance shall accrue a finance charge on the Average
Daily Balance thereof, from and including the date of each R/C Advance to and
including the date such R/C Advance is paid by the Customer to Applicable
Lender, at a per annum rate equal to the lesser of (a) the Applicable Finance
Charge, and (b) the highest rate from time to time permitted by applicable law.
If it is determined that amounts received from the Customer were in excess of
such highest rate, then the amount representing such excess shall be considered
reductions to principal of Advances.
(D) Unless otherwise due and payable at an earlier date, the unpaid
principal amount of each R/C Advance shall be due and payable on the Termination
Date.
2.3. Term Loan A Advance: (A) Subject to the terms and conditions of this
Agreement, IBM Credit made a loan (the "Term Loan A") to USA Customer on the
date of the First Restatement (the "Term Loan A Commencement Date").
(B) (i) The Term Loan A shall accrue a finance charge on the Average
Daily Balance thereof, from and including the Term Loan A Commencement Date to
and including the date such Term Loan A is repaid in full in accordance with the
terms of this Agreement or as otherwise agreed to in writing by IBM Credit, at a
per annum rate equal to the lesser of (a) the Term Loan A Finance Charge and (b)
the highest rate from time to time permitted by applicable law.
(ii) If it is determined that the amounts received from USA Customer
pursuant to this subparagraph (B) shall otherwise be in excess of the highest
rate permitted by applicable law, then the amount representing such excess shall
be considered reductions to principal of Advances.
(iii) The finance charges accrued on the Term Loan A shall be paid in
accordance with Section 2.5(C) of the Agreement.
(C) USA Customer shall, within three (3) Business Days of the date of
receipt of the Net Cash Proceeds by the USA Customer or any of its Subsidiaries
from the sale, lease, transfer or other disposition of any assets (other than
the sale by any Customer or any Subsidiary of inventory in the ordinary course
of business) of the USA Customer or any Subsidiary prepay an aggregate principal
amount of the Outstanding Term Loan A equal to 50% of such Net Cash Proceeds.
(D) USA Customer shall pay the principal of the Term Loan A on the
date and in the amount set forth in Exhibit 2.3.1 (the "Term Loan A Principal
Payment Schedule") and in any event, shall pay in full the Outstanding Term Loan
A on the Term Loan A Stated Maturity Date (or, such earlier date as such Term
Loan A may become or be declared due and payable pursuant to Section 9 of the
Agreement).
2.4. Term Loan C Advance: (A) (i) Subject to the terms and conditions of
this Agreement, IBM Canada made a loan (the "Term Loan C") to the Canadian
Customer on the date of the First Restatement (the "Term Loan C Commencement
Date").
(B) (i) Term Loan C shall accrue a finance charge on the Average Daily
Balance thereof, from and including the Term Loan C Commencement Date to and
including the date such Term Loan C is repaid in full in accordance with the
terms of this Agreement or as otherwise agreed to in writing by IBM Canada, at a
per annum rate equal to the lesser of (a) the Term Loan C Finance Charge and (b)
the highest rate from time to time permitted by applicable law.
(ii) If it is determined that the amounts received from Canadian
Customer pursuant to this subparagraph (B) shall otherwise be in excess of the
highest rate permitted by applicable law, then the amount representing such
excess shall be considered reductions to principal of Advances.
(iii) The finance charges accrued on the Term Loan C shall be paid in
accordance with Section 2.5(C) of the Agreement.
(C) Canadian Customer shall pay the principal of the Term Loan C on
the date and in the amount set forth in Exhibit 2.4.1 (the "Term Loan C
Principal Payment Schedule") and in any event, shall pay in full the Outstanding
9
Term Loan C on the Term Loan C Stated Maturity Date (or, such earlier date as
such Term Loan C may become or be declared due and payable pursuant to Section 9
of the Agreement).
2.5. Finance and Other Charges. (A) Finance charges for an Advance to
theCanadian Customer or the USA Customer for a calendar month shall be equal to
(i) one twelfth (1/12) of the Applicable R/C Finance Charge multiplied by (ii)
the Average Daily Balance of such Advance for the period when such finance
charge accrues during such calendar month multiplied by (iii) the actual number
of days during such calendar month when such finance charge accrues divided by
(iv) thirty (30).
Late charges pursuant to subsection (D) of this Section 2.5 for an Advance
other than a Cash Advance or Section 2.11 for a calendar month shall be equal to
(i) one twelfth (1/12) of the Delinquency Fee Rate multiplied by (ii) the
Average Daily Balance of such Advance for the period when such Advance is past
due during such calendar month multiplied by (iii) the actual number of days
during such calendar month when such Advance is past due divided by (iv) thirty
(30).
(B) USA Customer hereby agrees to pay to USA Lender the applicable
charges set forth as "Other Charges" in Attachment A. Each Customer also agrees
to pay Applicable Lender additional charges for any returned items of payment
received by Applicable Lenders. The Applicable Customer hereby acknowledges that
any such charges are not interest but that such charges, if unpaid, will
constitute part of the Outstanding Advances.
(C) The finance charges and Other Charges owed under this Agreement,
and any charges hereafter agreed to in writing by the parties, shall be included
in a billing statement to be delivered by Applicable Lender to Customer by the
5th day of each month and are payable monthly in arrears by the fifteenth (15th)
day of the month following that during which such charges have accrued or a
Lender may, in its sole discretion, add unpaid finance charges and Other Charges
to the Applicable Customer's Outstanding Advances.
(D) If any amount owed under this Agreement, including, without
limitation, any Advance, is not paid when due (whether at maturity, by
acceleration or otherwise), the unpaid amount thereof will bear a late charge
from and including the day after such Advance was due and payable to and
including the date the Applicable Lender receives payment thereof, at a per
annum rate equal to the lesser of (a) the amount set forth in Attachment A to
this Agreement as the "Delinquency Fee Rate" and (b) the highest rate from time
to time permitted by applicable law. In addition, if any Shortfall Amount shall
not be paid when due pursuant to Section 2.7 hereof, the USA Customer shall pay
IBM Credit a Shortfall Transaction Fee. If it is determined that amounts
received from a Customer were in excess of such highest rate, then the amount
representing such excess shall be considered reductions to principal of
Advances.
2.6. Customer Account Statements. Each Lender will send statements of each
transaction hereunder as well as monthly billing statements to Applicable
Customers with respect to Advances and other charges due on Applicable
Customers' account with such Lender. Each statement of transaction and monthly
billing statement shall be deemed, absent manifest error, to be correct and
shall constitute an account stated with respect to each transaction or amount
described therein unless within forty five (45) days after such statement of
transaction or billing statement is received by Applicable Customer, Applicable
Customer provides such Lender written notice objecting that such amount or
transaction is incorrectly described therein and specifying the error(s), if
any, contained therein. A Lender may at any time adjust such statements of
transaction or billing statements to comply with applicable law and this
Agreement.
2.7. Shortfall. If, on any Business Day, IBM Credit shall provide the USA
Customer with written notice (with reasonable detail as to the calculation
thereof) that the Outstanding Advancesother than the Outstanding Term Loan A in
or converted to USA Dollars shall exceed the Maximum Advance Amount (such
excess, the "Shortfall Amount"), then the USA Customer shall on such date prepay
the Outstanding Advances in an amount equal to such Shortfall Amount if such
notice is actually received by the USA Customer by 10:00 a.m. (eastern time);
otherwise, the USA Customer shall make such prepayment by the end of the second
next Business Day, provided however, payment of any such excess which is
occasioned by a change in currency conversion rates shall not be due until the
end of the next Business Day and shall only then be due if such excess has not
10
otherwise been eliminated (such as by a countervailing change in currency
conversion rates).
2.8. Application of Payments. Each Customer hereby agrees that all checks
and other instruments delivered to Applicable Lender on account of such
Customer's Obligations shall constitute conditional payment until such items are
actually collected by Applicable Lender. If any Customer fails to provide
direction to the Applicable Lender as to how a payment should be applied, ~such
Lender shall have the right to apply and reapply any and all such payments to
such Customer's Obligations in such manner as such Lender may deem advisable.
2.9. Prepayment and Reborrowing By Customer. (A) Subject to Section
10.1(i), a Customer may at any time prepay, without notice or penalty, in whole
or in part amounts owed under this Agreement. A Lender may apply payments made
to it (whether by an Applicable Customer or by any other Person on behalf of an
Applicable Customer) to pay finance charges and other amounts owing under this
Agreement by such Customer first and then to the principal amount owed by such
Customer.
(B) Subject to the terms and conditions of this Agreement, any amount
prepaid or repaid to a Lender in respect to the Outstanding Advances may be
reborrowed by an Applicable Customer in accordance with the provisions of this
Agreement. Term Loan A and Term Loan C may not be reborrowed notwithstanding
repayment or prepayment thereof.
2.10. Currencies. All Advances made by IBM Credit and all payments by the
USA Customer pursuant to this Agreement shall be in U.S. Dollars. All Advances
made by IBM Canada and all payments by the Canadian Customer pursuant to this
Agreement shall be in Canadian dollars.
2.11 Letter of Credit. If requested by a Canadian Customer for the purpose
of credit enhancement for the overdraft arrangement between such Canadian
Customer and its commercial bank, IBM Canada shall obtain one and only one
Letter of Credit for the account of the Canadian Customer, provided that the
Letter of Credit for the account of Ground Effects Ltd. shall be for an amount
not exceeding Two Hundred Fifty Thousand Canadian Dollars (CND$250,000). The USA
Customer hereby agrees that if any Letter of Credit is issued for the account of
the Canadian Customer, it shall pay IBM Canada an annual L/C Fee ("L/C Fee")
that is equal to one percent (1%) of the total amount drawable under the Letter
of Credit on the date such Letter of Credit is issued and every anniversary
thereof. The Canadian Customer hereby agrees to repay IBM Canada any amount that
is drawn under the Letter of Credit issued for its account, which amount will be
included in the monthly billing statements. A drawing under a Letter of Credit
shall be repaid by the relevant Canadian Customer, and shall accrue finance
charges, in the same manner as if it were a R/C Advance under this Agreement.
Section 3. POWER OF ATTORNEY
3.1. Power of Attorney. Each Customer hereby irrevocably appoints
Applicable Lender, with full power of substitution, as its true and lawful
attorney-in-fact with full power, in good faith and in compliance with
commercially reasonable standards, in the discretion of such Applicable Lender,
to:
(A) sign the name of such Customer on any document or instrument that
Applicable Lender shall deem necessary or appropriate to perfect and maintain
perfected the security interest in the Collateral contemplated under this
Agreement and the Other Documents;
upon the acceleration of the Obligations following the occurrence and
continuance of an Event of Default as defined in Section 9.1 hereof
(B) endorse the name of such Customer upon any of the items of payment
of proceeds and deposit the same in the account of such Applicable Lender for
application to the Obligations; and
(C) demand payment, enforce payment and otherwise exercise all such
Customer's rights and remedies with respect to the collection of any Accounts;
(D) settle, adjust, compromise, extend or renew any Accounts;
(E) settle, adjust or compromise any legal proceedings brought to
collect any Accounts;
11
(F) sell or assign any Accounts upon such terms, for such amounts and
at such time or times as such Applicable Lender may deem advisable;
(G) discharge and release any Accounts;
(H) prepare, file and sign such Customer's name on any Proof of Claim
in bankruptcy or similar document against any Account debtor;
(I) prepare, file and sign such Customer's name on any notice of lien,
claim of mechanic's lien, assignment or satisfaction of lien or mechanic's lien,
or similar document in connection with any Accounts;
(J) endorse the name of such Customer upon any chattel paper,
document, instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of lading or similar document
or agreement relating to any Account or goods pertaining thereto;
(K) endorse the name of such Customer upon any of the items of payment
of proceeds, checks or bankers drafts and deposit the same in the account of the
Applicable Lender for application to the Obligations;
(L) sign the name of such Customer to requests for verification of
Accounts and notices thereof to Account debtors;
(M) sign the name of such Customer on any document or instrument that
the Applicable Lender shall deem necessary or appropriate to enforce any and all
remedies it may have under this Agreement, at law or otherwise;
(N) make, settle and adjust claims under the Policies with respect to
the Collateral and endorse such Customer's name on any check, draft, instrument
or other item of payment of the proceeds of the Policies with respect to the
Collateral; and
(O) take control in any manner of any term of payment or proceeds and
for such purpose to notify the postal authorities to change the address for
delivery of mail addressed to Customer to such address as Applicable Lender may
designate. Each Lender agrees that in the event any Lender exercises the power
granted in this Clause O, such Lender shall promptly forward to the Applicable
Customer all mails other than the payments or proceeds.
The power of attorney granted by this Section is for value and coupled with
an interest and is irrevocable so long as this Agreement is in effect or any
Obligations remain outstanding. Nothing done by a Lender pursuant to such power
of attorney will reduce any of Applicable Customer's Obligations other than such
Applicable Customer's payment Obligations to the extent the Lender has received
monies.
3.2. Lockbox and Special Account. Subject to Section 5.3 hereof, USA
Customer shall and shall cause each Domestic Subsidiary to establish and
maintain lockbox(es) (each, a "Lockbox") at the address(es) set forth in
Attachment A with the financial institution(s) listed in Attachment A (each, a
"Bank") pursuant to an agreement between the USA Customer, each Domestic
Subsidiary and each Bank in form and substance satisfactory to IBM Credit. USA
Customer shall also establish and maintain a deposit account which shall contain
only proceeds of USA Customer's and its Domestic Subsidiaries' Accounts
("Special Account") with each Bank. USA Customer and each Domestic Subsidiary
shall enter into and maintain a contingent blocked account agreement with each
Bank for the benefit of IBM Credit in form and substance satisfactory to IBM
Credit pursuant to which, among other things, such Bank shall agree that
disbursements from the Special Account shall be made only as IBM Credit shall
direct.
3.3. Reimbursement for Charges. USA Customer agrees to pay for all costs
and expenses of its and its Domestic Subsidiaries' bank(s) in respect to
collection of checks and other items of payment, all fees relating to the use
and maintenance of the Lockbox(es) and the Special Account(s) and with respect
to remittances of proceeds of the Advances hereunder.
3.4. Collections. USA Customer shall instruct and shall cause each Domestic
Subsidiary to instruct all Account debtors to remit payments directly to a
12
Lockbox. In addition, USA Customer shall have and shall cause each Domestic
Subsidiary to have such instruction printed in conspicuous type on all invoices.
USA Customer shall instruct and shall cause each Domestic Subsidiary to instruct
such Bank to deposit all remittances to such Bank's Lockbox into its Special
Account. USA Customer further agrees that it shall not and shall cause each
Domestic Subsidiary not to deposit or permit any deposits of funds other than
remittances paid in respect of the Accounts into the Special Account(s) or
permit any commingling of funds with such remittances in any Lockbox or Special
Account.
Without limiting the USA Customer's foregoing obligations, if, at any time,
USA Customer or any of its Domestic Subsidiaries receives a remittance directly
from an Account debtor, then USA Customer shall make and shall cause each
Domestic Subsidiary to make entries on its books and records in a manner that
shall reasonably identify such remittances and shall keep a separate account on
its record books of all remittances so received and deposit the same into a
Special Account. Until so deposited into the Special Account, USA Customer shall
keep and shall cause each Domestic Subsidiary to keep all remittances received
in respect of Accounts separate and apart from USA Customer's and each Domestic
Subsidiary's other property so that they are capable of identification as the
proceeds of Accounts in which IBM Credit has a security interest.
Section 4. SECURITY CLAUSE -- COLLATERAL
4.1. Grant. To secure prompt payment and performance of the Obligations,
the USA Customer agrees to grant the security interest pursuant to Attachment 4.
To secure the prompt payment and performance of the Obligations of the Canadian
Customer, the Canadian Customer agrees to grant IBM Canada a security interest
pursuant to the applicable Canadian Security Agreement.
4.2. Further Assurances. Each Customer shall, from time to time upon the
request of Applicable Lender, execute and deliver to Applicable Lender, or cause
to be executed and delivered, at such time or times as Applicable Lender may
request such other and further documents, certificates and instruments that
Applicable Lender may reasonably deem necessary to perfect and maintain
perfected Applicable Lender's security interests in the Collateral and in order
to fully consummate all of the transactions contemplated under this Agreement
and the Other Documents. Applicable Customer shall make appropriate entries on
its books and records disclosing Applicable Lender's security interests in the
Collateral.
Section 5. CONDITIONS PRECEDENT
5.1. Conditions Precedent to the Effectiveness of this Agreement. The
obligation of IBM Credit to make its initial Advances is subject to the receipt
by IBM Credit of, or waiver in writing by IBM Credit of compliance with, the
following documents (all of which have been received or waived in writing by IBM
Credit):
(A) this Agreement executed and delivered by USA Customer;
(B) a favorable opinion of counsel for USA Customer in substantially
the form of Attachment F;
(C) a certificate of the secretary or an assistant secretary of USA
Customer, substantially in the form and substance of Attachment G hereto,
certifying that, among other items, (i) such Customer is a corporation organized
under the laws of the jurisdiction of its incorporation and has its principal
place of business as stated therein, (ii) such Customer is registered to conduct
business in specified states or provinces and localities, (iii) true and
complete copies of the articles of incorporation and by-laws or similar
constitutional documents of such Customer are delivered therewith, together with
all amendments and addenda thereto as in effect on the date thereof, (iv) the
resolution as stated in the certificate is a true, accurate and compared copy of
the resolution adopted by the such Customer's Board of Directors authorizing the
execution, delivery and performance of this Agreement and each Other Document
executed and delivered in connection herewith to which such Customer is a party,
and (v) the names and true signatures of the officers of such Customer
authorized to sign this Agreement and the Other Documents;
13
(D) certificates dated as of a recent date from the Secretary of State
or other appropriate authority evidencing the good standing of USA Customer in
the jurisdiction of its organization and in each other jurisdiction where the
ownership or lease of its property or the conduct of its business requires it to
qualify to do business;
(E) copies of all approvals and consents from any Person, in each case
in form and substance satisfactory to the Lenders, which are required to enable
USA Customer to authorize, or required in connection with, (a) the execution,
delivery or performance of this Agreement and each of the Other Documents, and
(b) the legality, validity, binding effect or enforceability of this Agreement
and each of the Other Documents;
(F) intercreditor agreements ("Intercreditor Agreement"), in form and
substance satisfactory to Lenders, executed by each other perfected secured
creditor of USA Customer;
(G) UCC-1 financing statements for each jurisdiction reasonably
requested by IBM Credit executed by USA Customer and each Guarantor incorporated
in a state of USA;
(H) the statements, certificates, documents, instruments, financing
statements, agreements and information set forth in Attachment A and Attachment
B;
(I) the pledges by the USA Customer of the stock of its Domestic
Subsidiaries and Sixty Six percent (66%) of the stock of each of its
Subsidiaries incorporated outside the USA (the "Stock Pledge Agreement");
(J) a collateralized guaranty ~by the Domestic Subsidiaries of USA
Customer; and
(K) all such other statements, certificates, documents, instruments,
financing statements, agreements and other information with respect to the
matters contemplated by this Agreement as Lenders shall have reasonably
requested.
5.2. Conditions Precedent to Each Advance. No Advance will be required to
be made or renewed by any Lender under this Agreement unless, on and as of the
date of such Advance, the following statements shall be true to the satisfaction
of such Lender:
(A) The representations and warranties contained in this Agreement or
in any document, instrument or agreement executed in connection herewith are
true and correct on and, except for those representations which are of a date
certain, as of the date of such Advance as though made on and as of such date;
(B) No event has occurred and is continuing or after giving effect to
such Advance or the application of the proceeds thereof would result in or would
constitute a Default;
(C) No event has occurred and is continuing which could reasonably be
expected to have a Material Adverse Effect;
(D) Both before and after giving effect to the making of such Advance,
no Shortfall Amount exists.
Except as a Customer has otherwise disclosed to Applicable Lender in
writing prior to each request, each request for an Advance hereunder and the
receipt (or deemed receipt) by the Customer of the proceeds of any Advance
hereunder shall be deemed to be a representation and warranty by the Customer
that, as of and on the date of such Advance, the statements set forth in (A)
through (D) above are true statements. No such disclosures by a Customer to
Applicable Lender shall in any manner be deemed to satisfy the conditions
precedent to each Advance that are set forth in this Section 5.2.
5.3. Post Closing. USA Customer agrees to provide, within ninety (90) days
after the Closing Date, (A) a Contingent Blocked Account Amendment, in form and
substance satisfactory to IBM Credit with each Bank listed in Attachment A, and
(B) a subordination signed by each secured creditor of a Guarantor, who then has
a security interest in the general assets of such Guarantor. Such subordination
shall provide that the security interest of such secured creditor is
subordinated to that granted to IBM Credit hereunder.
14
5.4. Conditions Precedent for Obligations to IBM Canada.
The obligation of IBM Canada to make its initial Advances is subject to the
receipt by IBM Canada of, or waiver in writing by IBM Canada of compliance with,
the following documents:
(A) this Agreement executed and delivered by the Canadian Customer;
and
(B) all such other statements, certificates, documents, instruments,
financing statements, agreements and other information with respect to the
matters contemplated by this Agreement as the Applicable Lender shall have
reasonably requested.
5.5 Miscellaneous. On the Closing Date, (a) the Term Loans B made under the
First Restatement shall be due and payable and may be refinanced by the R/C
Advances or Term Loan A made hereunder, (b) all R/C Advances, Term Loans A and
Term Loans C made under the First Restatement shall be deemed R/C Advances, Term
Loans A and Term Loans C made under this Agreement respectively, and (c) any
Letter of Credit issued under the First Restatement shall be deemed a Letter of
Credit issued under this Agreement.
Section 6. REPRESENTATIONS AND WARRANTIES
To induce Lenders to enter into this Agreement, each Customer represents
and warrants to Lenders as follows:
6.1. Organization and Qualifications.Each Customer and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) has the
power and authority to own its properties and assets and to transact the
businesses in which it presently is engaged and (iii) is duly qualified and is
authorized to do business and is in good standing in each jurisdiction where it
presently is engaged in business and is required to be so qualified except where
the failure to have so qualified is not likely to have a Material Adverse
Effect.
6.2. Rights in Collateral; Priority of Liens. Each Customer and each of its
Subsidiaries owns the property granted by it respectively as Collateral to
Applicable Lender, free and clear of any and all Liens in favor of third parties
except for the Liens otherwise permitted pursuant to Section 8.1.
6.3. No Conflicts. The execution, delivery and performance by each Customer
and each of its Subsidiaries of this Agreement and each of the Other Documents
(i) are within its corporate power; (ii) are duly authorized by all necessary
corporate action; (iii) are not in contravention in any respect of any
Requirement of Law or any indenture, contract, lease, agreement, instrument or
other commitment to which it is a party or by which it or any of its properties
are bound; (iv) do not require the consent, registration or approval of any
Governmental Authority or any other Person (except such as have been duly
obtained, made or given, and are in full force and effect); and (v) will not,
except as contemplated herein, result in the imposition of any Liens upon any of
its properties, except where the effect of the Customer's failure of any of the
representations included in this Section is not likely to have a Material
Adverse Effect.
6.4. Enforceability. This Agreement and all of the other documents executed
and delivered by each Customer in connection herewith are the legal, valid and
binding obligations of each such Customer, and are enforceable in accordance
with their terms, except as such enforceability may be limited by the effect of
any applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws affecting creditors' rights generally or the general
equitable principles relating thereto.
6.5. Locations of Offices, Records and Inventory. The address of the
principal place of business and chief executive office of each Customer is as
set forth on Attachment B or on any notice provided by such Customer to Lenders
pursuant to Section 7.7(C) of this Agreement. The books and records related to
the Collateral and the financial conditions of each Customer, and all of its
chattel paper (other than the chattel paper delivered to Lenders pursuant to
Section 7.14(E)) and records of Accounts, are maintained at such location and
only as otherwise indicated on Attachment B.
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There is no jurisdiction in which Customers have any material tangible
assets, other than those jurisdictions identified on Attachment B or on any
notice provided by any Customer to Lenders pursuant to Section 7.7(C) of this
Agreement. Attachment B, as amended from time to time by any notice provided by
any Customer to Lenders in accordance with Section 7.7(C) of this Agreement.
6.6. Fictitious Business Names. USA Customer has not used any corporate or
fictitious name during the five (5) years preceding the date of this Agreement,
other than those listed on Attachment B. Canadian Customer has not used any
corporate name other than those listed on Attachment B, for the periods
indicated on Attachment B.
6.7. Organization. All of the outstanding capital stock of each Customer
has been validly issued, is fully paid and nonassessable.
6.8. No Judgments or Litigation. Except as set forth on Attachment B, no
material judgments, orders, writs or decrees are outstanding against any
Customer nor is there now pending or, to the best of Customers' knowledge after
due inquiry, threatened, any material litigation, contested claim,
investigation, arbitration, or governmental proceeding by or against any
Customer.
6.9. No Defaults. No Customer is in default under any term of any
indenture, contract, lease, agreement, instrument or other commitment to which
it is a party or by which it, or any of its properties are bound except where
the effect of the Customer's failure of any of the representations included in
this Section is not likely to have a Material Adverse Effect. No Customer has
knowledge of any material dispute regarding any such indenture, contract, lease,
agreement, instrument or other commitment. No Default or Event of Default has
occurred and is continuing.
6.10. Labor Matters. Except as set forth on any notice provided by
Customers to Lenders pursuant to Section 7.1(G) of this Agreement, no Customer
is a party to any material labor dispute except where the effect of the
Customer's failure of any of the representations included in this Section is not
likely to have a Material Adverse Effect. There are no strikes or walkouts or
labor controversies pending or threatened against the Customers which could
reasonably be expected to have a Material Adverse Effect.
6.11. Compliance with Law. No Customer has violated or failed to comply
with any material Requirement of Law.
6.12. ERISA. Each "employee benefit plan", "employee pension benefit plan",
"defined benefit plan", or "multi-employer benefit plan", which USA Customer or
any of its Subsidiaries has established, maintained, or to which it is required
to contribute (collectively, the "Plans") is in compliance with all applicable
provisions of ERISA and the Code and the rules and regulations thereunder as
well as the Plan's terms and conditions, except where the effect of the
Customer's failure of any of the representations included in this Section is not
likely to have a Material Adverse Effect. There have been no "prohibited
transactions" and no "reportable event" has occurred within the last 60 months
with respect to any Plan. Neither USA Customer nor any of its Subsidiaries has a
"multi-employer benefit plan", except where the effect of the Customer's failure
of any of the representations included in this Section is not likely to have a
Material Adverse Effect.
As used in this Agreement the terms "employee benefit plan", "employee
pension benefit plan", "defined benefit plan", and "multi-employer benefit plan"
have the respective meanings assigned to them in Section 3 of ERISA and any
applicable rules and regulations thereunder. Neither USA Customer nor any of its
Subsidiaries has incurred any "accumulated funding deficiency" within the
meaning of ERISA or incurred any liability to the Pension Benefit Guaranty
Corporation (the "PBGC") in connection with a Plan (other than for premiums due
in the ordinary course).
Ground Effects Ltd. makes the representation and warranties as set forth in
Schedule 6.12 hereto.
6.13. Compliance with Environmental Laws. Except as otherwise disclosed in
Attachment B:
(A) Each Customer and each of its Subsidiaries has obtained all
government approvals required with respect to the operation of their businesses
under any Environmental Law except where the effect of the Customer's failure of
16
any of the representations included in this Section is not likely to have a
Material Adverse Effect.
(B) (i) No Customer or any of its Subsidiaries has generated,
transported or disposed of any Hazardous Substances; (ii) ~no Customer or any of
its Subsidiaries is currently generating, transporting or disposing of any
material Hazardous Substances; (iii) no Customer or any of its Subsidiaries has
knowledge that (a) any of its real property (whether owned, leased, or otherwise
directly or indirectly controlled) has been used for the disposal of or has been
contaminated by any material Hazardous Substances, or (b) any of its business
operations have contaminated lands or waters of others with any material
Hazardous Substances; (iv) ~no Customer or any of its Subsidiaries or its
respective assets is subject to any material Environmental Liability and, to the
best of the each Customer's knowledge, any material threatened Environmental
Liability; (v) ~no Customer or any of its Subsidiaries has received any notice
of or otherwise learned of any governmental investigation evaluating whether any
material remedial action is necessary to respond to a release or threatened
release of any Hazardous Substances for which ~any Customer may be liable; (vi)
~no Customer or any of its Subsidiaries is in material violation of any
Environmental Law; (vii) there are no material proceedings or investigations
pending against any Customer or any of its Subsidiaries with respect to any
violation or alleged violation of any Environmental Law; provided however, that
the parties acknowledge that any generation, transportation, use, storage and
disposal of certain such Hazardous Substances in Customers' or any of its
Subsidiaries' business shall be excluded from representations (i) and (ii)
above, so long as such Customer or its Subsidiary is at all times generating,
transporting, utilizing, storing and disposing such Hazardous Substances in
accordance with all applicable Environmental Laws and in a manner designed to
minimize the material risk of any spill, contamination, release or discharge of
Hazardous Substances other than as authorized by Environmental Laws.
6.14. Intellectual Property. Each Customer possesses such assets, licenses,
patents, patent applications, copyrights, service marks, trademarks, trade names
and trade secrets and all rights and other property relating thereto or arising
therefrom ("Intellectual Property") as are necessary or advisable to continue to
conduct its present and proposed business activities, except where the effect of
the Customer's failure to possess such assets, rights or property is not likely
to have a Material Adverse Effect.
6.15. Licenses and Permits. Each Customer has obtained and holds in full
force and effect all franchises, licenses, leases, permits, certificates,
authorizations, qualifications, easements, rights of way and other rights and
approvals which are necessary for the operation of its businesses as presently
conducted except where the effect of the Customer's failure of any of the
representations included in this Section is not likely to have a Material
Adverse Effect. No Customer is in violation of the terms of any such franchise,
license, lease, permit, certificate, authorization, qualification, easement,
right of way, right or approval except where the effect of the Customer's
failure of any of the representations included in this Section is not likely to
have a Material Adverse Effect.
6.16. Investment Company. The USA Customer is not (i) an investment company
or a company controlled by an investment company within the meaning of the
Investment Company Act of 1940, as amended, (ii) a holding company or a
subsidiary of a holding company, or an Affiliate of a holding company or of a
subsidiary of a holding company, within the meaning of the Public Utility
Holding Company Act of 1935, as amended, or (iii) subject to any other law which
purports to regulate or restrict its ability to borrow money or to consummate
the transactions contemplated by this Agreement or the Other Documents or to
perform its obligations hereunder or thereunder.
6.17. Taxes and Tax Returns. Except as disclosed on Exhibit 6.17, each
Customer has timely filed all federal, state, provincial and local tax returns
and other reports which it is required by law to file or has obtained an
extension of the requirement to so file, and has either duly paid all taxes,
fees and other governmental charges indicated to be due on the basis of such
reports and returns or pursuant to any assessment received by any Customer, or
is disputing such tax, fee, or other governmental charge and has established
appropriate reserves therefor in accordance with GAAP. The charges and reserves
17
on the books of the USA Customer in respect of taxes or other governmental
charges are in accordance with GAAP. No tax liens have been filed against any
Customer or any of its property.
6.18. Status of Accounts. Other than any inadvertent bookkeeping errors,
each Account is based on an actual and bona fide sale and delivery of goods or
rendition of services to customers, made by a Customer, in the ordinary course
of its business; the goods and inventory being sold and the Accounts created are
its exclusive property and are not and shall not be subject to any Lien,
consignment arrangement, encumbrance, security interest or financing statement
whatsoever (other than Permitted Liens) unless otherwise approved by Applicable
Lender. Each of Customer's customers have accepted goods or services and owe and
are obligated to pay the full amounts stated in the invoices according to their
terms or in the event a customer does not accept the goods and services such
invoices are adjusted within a reasonable period of time in the ordinary course
of such Customer's business. There are no proceedings or actions known to any
Customer which are pending against any of the Accounts which could reasonably be
expected to result in a Material Adverse Effect on the debtor's ability to pay
the full amounts due to any Customer.
6.19. Affiliate/Subsidiary Transactions. No Customer is a party to or bound
by any agreement or arrangement (whether oral or written) to which any Affiliate
or Subsidiary (other than a Guarantor or another Customer) of any Customer is a
party except (i) in the ordinary course of and pursuant to the reasonable
requirements of any Customer's business and (ii) upon fair and reasonable terms
no less favorable to any Customer than it could obtain in a comparable
arm's-length transaction with an unaffiliated Person.
6.20. Accuracy and Completeness of Information. All material factual
information furnished by or on behalf of each Customer to Applicable Lender or
the Auditors for purposes of or in connection with this Agreement or any Other
Document, or any transaction contemplated hereby or thereby is or will be true
and accurate in all material respects on the date as of which such information
is dated or certified and not incomplete by omitting to state any material fact
necessary to make such information not misleading at such time.
6.21. Indebtedness. No Customer (i) has Indebtedness, other than Permitted
Indebtedness; and (ii) has guaranteed the obligations of any other Person
(except as permitted by Section 8.4).
Section 7. AFFIRMATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment and
satisfaction of all Obligations:
7.1. Financial and Other Information. USA Customer shall cause the
following information to be delivered to IBM Credit within the following time
periods:
(A) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of USA Customer (i) audited Financial
Statements (provided that, to the extent not otherwise audited by the Auditors,
the consolidating Financial Statements may be unaudited) as of the close of the
fiscal year and for the fiscal year, together with a comparison to the Financial
Statements for the prior year, in each case accompanied by (a) either an opinion
of the Auditors without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit or, if so qualified, an
opinion which shall be in scope and substance reasonably satisfactory to IBM
Credit, and (b) such Auditors' "Management Letter" to Customer, if any, and (ii)
a Compliance Certificate along with a schedule, in substantially the form of
Attachment C hereto, of the calculations used in determining, as of the end of
such fiscal year, whether USA Customer is in compliance with the financial
covenants set forth in Attachment A;
(B) as soon as available and in any event within forty-five (45) days
after the end of each fiscal quarter of USA Customer (i) Financial Statements as
of the end of such period and for the fiscal year to date, together with a
comparison to the Financial Statements for the same periods in the prior year,
all in reasonable detail and duly certified (subject to normal year-end audit
adjustments and except for the absence of footnotes) by the chief executive
officer or chief financial officer of USA Customer as having been prepared in
accordance with GAAP; and (ii) a Compliance Certificate along with a schedule,
18
in substantially the form of Attachment C hereto, of the calculations used in
determining, as of the end of such fiscal quarter, whether USA Customer is in
compliance with the financial covenants set forth in Attachment A;
(C) as soon as available and in any event within thirty five (35) days
after the end of each fiscal month of USA Customer, USA Customer's internally
generated consolidated and consolidating balance sheets and income statements,
prepared in accordance with GAAP (subject to normal year-end audit adjustments
and except for the absence of consolidated statements of cash flows and of
shareholders' equity and except for the absence of footnotes);
(D) as soon as available and in any event within sixty (60) days after
the end of each fiscal year of USA Customer (i) projected Financial Statements,
broken down by quarter, for the current and following fiscal year; and (ii) if
composed, a narrative discussion relating to such projected Financial
Statements;
(E) promptly after any Customer obtains knowledge of (i) the occurrence
of a Default or Event of Default, or (ii) the existence of any condition or
event which would result in ~such Customer's failure to satisfy the conditions
precedent to Advances set forth in Section 5, a certificate of the chief
executive officer or chief financial officer of USA Customer specifying the
nature thereof and the Customer's proposed response thereto, each in reasonable
detail;
(F) promptly after any Customer obtains knowledge of (i) any
proceeding(s) being instituted or threatened to be instituted by or against any
Customer in any federal, state, provincial, local or foreign court or before any
commission or other regulatory body (federal, state, provincial, local or
foreign), or (ii) any actual or prospective change, development or event which,
in any such case, has had or could reasonably be expected to have a Material
Adverse Effect, a certificate of the chief executive officer or chief financial
officer of USA Customer specifying the nature thereof and the Customer's
proposed response thereto, each in reasonable detail;
(G) promptly after any Customer obtains knowledge that (i) any order,
judgment or decree in excess of U.S.$1,000,000 shall have been entered against
such Customer or any of its properties or assets, or (ii) it has received any
notification of a material violation of any Requirement of Law from any
Governmental Authority, a certificate of the chief executive officer or chief
financial officer of USA Customer specifying the nature thereof and the
Customer's proposed response thereto, each in reasonable detail;
(H) within five (5) days after the same are sent, copies of all
Financial Statements and reports which USA Customer sends to its stockholders,
and within five (5) days after the same are filed, copies of all Financial
Statements and reports which USA Customer may make to, or file with, the
Securities and Exchange Commission or any successor or analogous governmental
authority; and
(I) by the thirtieth (30th) day of each month, or as otherwise agreed
in writing, a Collateral Management Report as of a date no earlier than the last
day of the immediately preceding month;
Each certificate, schedule and report provided by a Customer to the Lenders
shall be signed by an authorized officer of such Customer, and which signature
shall be deemed a representation and warranty that the information contained in
such certificate, schedule or report is true and accurate in all material
respects on the date as of which such certificate, schedule or report is made
and does not omit to state a material fact necessary in order to make the
statements contained therein not misleading at such time. Each Financial
Statement delivered pursuant to this Section 7.1 shall be prepared in accordance
with GAAP applied consistently throughout the periods reflected therein and with
prior periods. USA Customer shall request that its Auditors forward the audited
financial statements and accompanying documents set forth in Section 7.1(A)(i)
by first class mail, it being understood that, notwithstanding the provisions of
Section 10.12 of this Agreement, compliance with the time frame within which to
provide such statements shall be measured by the date on which such audited
financial statements and accompanying documents are placed in the mails or are
otherwise forwarded to IBM Credit.
7.2. Location of Collateral. Except as described in Exhibit 7.2, the
inventory, equipment and other tangible Collateral shall be kept or sold at the
addresses as set forth on Attachment B or on any notice provided by a Customer
19
to Applicable Lender in accordance with Section 7.7(C). Such locations shall be
certified within thirty (30) days after the end of each fiscal year to
Applicable Lender substantially in the form of Attachment E.
7.3. Changes in Customer. Each Customer shall provide thirty (30) days
prior written notice to Applicable Lender of any change in such Customer's name,
chief executive office and principal place of business, organization, form of
ownership or corporate structure; provided, however, that such Customer's
compliance with this covenant shall not relieve it of any of its other
obligations or any other provisions under this Agreement or any Other Document
limiting actions of the type described in this Section.
7.4. Corporate Existence. Except as described in Exhibit 7.4, each Customer
shall (A) maintain its corporate existence, maintain in full force and effect
all material licenses, bonds, franchises, leases and qualifications to do
business, and all contracts and other rights necessary to the profitable conduct
of its business, (B) continue in, and limit its operations to, the same general
lines of business as presently conducted by it unless otherwise permitted in
writing by Applicable Lender and (C) comply in all material respects with all
Requirements of Law.
7.5. ERISA.USA Customer shall promptly notify IBM Credit in writing after
it learns of the occurrence of any event which would constitute a "reportable
event" under ERISA or any regulations thereunder with respect to any Plan, or
that the PBGC (as defined in Section 6.12 of this Agreement) has instituted or
will institute proceedings to terminate any Plan. Notwithstanding the foregoing,
the Customer shall have no obligation to notify IBM Credit as to any "reportable
event" as to which the 30-day notice requirement of Section 4043(b) has been
waived by the PBGC, until such time as such USA Customer is required to notify
the PBGC of such reportable event.
Such notification shall include a certificate of the chief financial
officer of USA Customer setting forth details as to such "reportable event" and
the action which USA Customer proposes to take with respect thereto, together
with a copy of any notice of such "reportable event" which may be required to be
filed with the PBGC, or any notice delivered by the PBGC evidencing its intent
to institute such proceedings. Upon request of IBM Credit, USA Customer shall
furnish, or cause the plan administrator to furnish, to IBM Credit the most
recently filed annual report for each Plan.
7.6. Environmental Matters. (A) Each Customer and any other Person under
such Customer's control (including, without limitation, agents and Affiliates
under such control) shall (i) comply with all Environmental Laws in all material
respects, and (ii) undertake to use commercially reasonable efforts to prevent
any unlawful release of any Hazardous Substance by such Customer or such Person
into, upon, over or under any property now or hereinafter owned, leased or
otherwise controlled (directly or indirectly) by such Customer.
(B) A Customer shall notify Applicable Lender, promptly upon its
obtaining knowledge of (i) any non-routine proceeding or investigation by any
Governmental Authority with respect to the presence of any Hazardous Substances
on or in any property now or hereinafter owned, leased or otherwise controlled
(directly or indirectly) by such Customer, (ii) all claims made or threatened by
any Person or Governmental Authority against Customer or any of Customer's
assets relating to any loss or injury resulting from any Hazardous Substance,
(iii) such Customer's discovery of evidence of unlawful disposal of or
environmental contamination by any Hazardous Substance on any property now or
hereinafter owned, leased or otherwise controlled (directly or indirectly) by
such Customer, and (iv) any occurrence or condition which could constitute a
violation of any Environmental Law.
7.7. Collateral Books and Records/Collateral Audit. (A) Each Customer
agrees to maintain books and records pertaining to the Collateral in such
detail, form and scope as is consistent with good business practice.
(B) Each ~Customer agrees that Applicable Lender or its agents may
enter upon the premises of such Customer at any time and from time to time,
during normal business hours and upon reasonable notice under the circumstances
for the purposes of (i) inspecting the Collateral, (ii) inspecting and/or
copying (at such Customer's expense) any and all records pertaining thereto,
(iii) discussing the affairs, finances and business of Applicable Customer with
any officers of such Customer or with the Auditors and (iv) verifying Accounts
and other Collateral. Each Customer also agrees to provide Applicable Lender
20
with such reasonable information and documentation that Applicable Lender
reasonably deems necessary to conduct the foregoing activities, including,
without limitation, reasonably requested samplings of purchase orders, invoices
and evidences of delivery or other performance. The Lenders shall exercise their
rights under this Section with a view towards not interrupting the Customer's
routine business operations and functions
Upon the occurrence and during the continuance of an Event of Default which
has not been waived by Lenders in writing, Lenders may conduct any of the
foregoing activities upon twenty four hours notice and beginning during normal
business hours in a manner that Lenders deem reasonably necessary.
(C) Each Customer shall give Applicable Lender thirty (30) days prior
written notice of any change in the location of any material Collateral, the
location of its books and records or in the location of its chief executive
office or place of business from the locations specified in Attachment B, and
will execute such change and cause to be filed and/or delivered to IBM Credit
any financing statements, landlord or other lien waivers, or other documents
reasonably required by such Lender, all in form and substance reasonably
satisfactory to such Lender.
(D) Each Customer agrees to advise Applicable Lender promptly, in
reasonably sufficient detail, of any substantial change relating to the type,
quantity or quality of the Collateral, or any event which could reasonably be
expected to have a Material Adverse Effect on the value of the Collateral or on
the security interests granted to Applicable Lender therein.
7.8. Insurance; Casualty Loss. (A) Each Customer agrees and shall cause
each of its Subsidiaries to maintain with financially sound and reputable
insurance companies: (i) insurance on its properties, (ii) public liability
insurance against claims for personal injury or death as a result of the use of
any products sold by it and (iii) insurance coverage against other business
risks, in each case, in at least such amounts and against at least such risks as
are usually and prudently insured against in the same general geographical area
by companies of established repute engaged in the same or a similar business.
Each Customer will furnish to Applicable Lender, upon its written request, the
insurance certificates with respect to such insurance. In addition, all Policies
so maintained are to name Applicable Lender as lender loss payee as its interest
may appear.
(B) Without limiting the generality of the foregoing, each Customer
and each of its Subsidiaries shall keep and maintain, at its sole expense, the
Collateral (and the collateral granted pursuant to the Other Documents) insured
for an amount not less than the amount set forth on Attachment A from time to
time opposite the caption "Collateral Insurance Amount" against all loss or
damage under an "all risk" Policy with companies mutually acceptable to
Applicable Lender and each Customer, with a lender's loss payable endorsement or
mortgagee clause in form and substance reasonably satisfactory to Applicable
Lender designating that any loss payable thereunder with respect to such
Collateral (and the collateral granted pursuant to the Other Documents) shall be
payable to Applicable Lender. Customer agrees to instruct each insurer to give
Applicable Lender, by endorsement upon the Policy issued by it or by independent
instruments furnished to Applicable Lender, at least ten (10) days written
notice before any Policy shall be altered or cancelled and that no act or
default of Customer or any other person shall affect the right of Applicable
Lender to recover under the Policies. Customer hereby agrees to direct all
insurers under the Policies to pay all proceeds with respect to the Collateral
(and the collateral granted pursuant to the Other Documents) directly to
Applicable Lender.
If a Customer fails to pay any cost, charges or premiums, or if a Customer
fails to insure the Collateral, Applicable Lender may pay such costs, charges or
premiums. Any amounts paid by Applicable Lender hereunder shall be considered an
additional debt owed by such Customer to Applicable Lender and are due and
payable immediately upon receipt of an invoice by Applicable Lender.
7.9. Taxes.Each Customer agrees to pay, when due (as such date may be
extended from time to time), all taxes lawfully levied or assessed against such
Customer or any of the Collateral before any penalty or interest accrues thereon
unless such taxes are being contested, in good faith, by appropriate proceedings
promptly instituted and diligently conducted and an adequate reserve or other
21
appropriate provisions have been made therefor as required in order to be in
conformity with applicable accounting principles.
7.10. Compliance With Laws. Each Customer agrees to comply in all material
respects with all Requirements of Law applicable to the Collateral or any part
thereof, or to the operation of its business.
7.11. Fiscal Year. USA Customer agrees to maintain its fiscal year as a
year ending December 31 unless USA Customer provides IBM Credit at least thirty
(30) days prior written notice of any change thereof.
7.12. Intellectual Property. Each Customer shall do and cause to be done
all things necessary to preserve and keep in full force and effect all
registrations of Intellectual Property which the failure to do or cause to be
done could reasonably be expected to have a Material Adverse Effect.
7.13. Maintenance of Property. Each Customer shall maintain all of its
material tangible properties (business and otherwise) in good condition and
repair (ordinary wear and tear excepted) and pay and discharge all costs of
repair and maintenance thereof and all rental and mortgage payments and related
charges pertaining thereto and not commit or permit any waste with respect to
any of its material properties, provided, however, the foregoing shall not
prohibit or limit the disposition, by any Customer, of any asset which is
obsolete, surplus, redundant, worn out, or not in compliance with applicable
law.
7.14. Collateral. Each Customer shall:
(A) from time to time upon request of Applicable Lender with
reasonable prior notice, provide such Lender with access to copies of all
invoices during normal business hours, delivery evidences and other such
documents relating to each Account;
(B) use commercially reasonable efforts to collect all Accounts owed;
(C) promptly notify Applicable Lender of any loss, theft or
destruction of or damage to any of the Collateral if such loss, theft or
destruction of or damage to any of the Collateral shall have a Material Adverse
Effect. ~Each Customer shall diligently file and prosecute its claim for any
award or payment in connection with any such loss, theft, destruction of or
damage to Collateral as applicable. ~Each Customer shall, upon demand of
Applicable Lender, make, execute and deliver any assignments and other
instruments sufficient for the purpose of assigning any such award or payment to
such Lender, free of any encumbrances of any kind whatsoever;
(D) consistent with reasonable commercial practice, observe and
perform all matters and things necessary or expedient to be observed or
performed under or by virtue of any lease, license, concession or franchise
forming part of the Collateral in order to preserve, protect and maintain all
the rights of Applicable Lender thereunder;
(E) consistent with reasonable commercial practice, maintain, use and
operate the Collateral and carry on and conduct its business in a proper and
efficient manner so as to preserve and protect the Collateral and the earnings,
incomes, rents, issues and profits thereof; and
(F) at any time and from time to time, upon the request of Applicable
Lender, and at the sole expense of the Customer, Customer will promptly and duly
execute and deliver such further instruments and documents and take such further
action as such Lender may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, the filing of any financing or
continuation statements under the U. C. C., PPSA, or other applicable law in
effect in any jurisdiction with respect to the security interests granted herein
and the payment of any and all recording taxes and filing fees in connection
therewith.
For the purpose of this Section 7.14, Lenders acknowledge that Customers'
current operational practices are commercially reasonable.
7.15. Subsidiaries. Lenders may require that any Domestic Subsidiaries
become parties to this Agreement or any other agreement executed in connection
with this Agreement as guarantors or sureties. Upon acquisition of a
22
wholly-owned Subsidiary by a Canadian Customer, such Subsidiary shall give, in
favor of IBM Canada, a Guaranty supported by pledge of general security interest
in the form of documents acceptable to IBM Canada. Upon acquisition of a
Subsidiary by a Canadian Customer which is not wholly-owned by such Customer,
IBM Canada, in its reasonable discretion, shall have the ability to require
other security for the transaction. USA Customer hereby agrees that, promptly
after it acquires any Subsidiary after the Closing Date, it shall execute a
supplement to the Stock Pledge Agreement for the purpose of pledging to IBM
Credit (i) all shares of stock of the Subsidiary owned by the USA Customer, if
the new Subsidiary is a Domestic Subsidiary or (ii) all shares of stock of the
new Subsidiary owned by USA Customer, up to sixty six percent of the total
outstanding shares of stock of the Subsidiary, if the new Subsidiary is not a
Domestic Subsidiary. For the purpose of this Section 7.15, each Customer agrees
to notify the Applicable Lender 10 days before it acquires a new Subsidiary.
7.16. Financial Covenants; Additional Covenants. USA Customer acknowledges
and agrees that USA Customer shall maintain the financial covenants and each
Customer acknowledges and agrees other covenants set forth in the attachments,
exhibits and other addenda incorporated in this Agreement.
7.17. Guaranty. (A) ~USA Customer hereby guarantees to Lenders the prompt
payment when due and the full, prompt, and faithful performance of any and all
Obligations upon which any Customer is in any manner obligated, heretofore, now,
or hereafter owned, contracted or acquired by Lenders pursuant to this
Agreement, whether the same are individual, joint or several, primary,
secondary, direct, contingent or otherwise. ~USA Customer irrevocably
subordinates to the full payment of amounts due Lenders any and all rights to
which it may be entitled, by operation of law or otherwise, (i) to be subrogated
to the rights of Lenders against another Customer hereto with respect to such
payment or otherwise to be reimbursed, indemnified or exonerated by another
Customer in respect thereof, or (ii) to receive any payment, in the nature of
contribution or for any other reason, from another Customer hereto with respect
to such payment.
(B) Notwithstanding any provision herein to the contrary, the
liability of ~USA Customer hereunder shall in no event exceed the maximum amount
that is valid and enforceable in any action or proceeding involving any
applicable state corporate law or any applicable state or federal bankruptcy or
other law, insolvency, reorganization, fraudulent conveyance or other law
involving the rights of creditors generally.
(C) The liability of USA Customer under this Section 7.17 is direct,
absolute and unconditional and shall not be affected by any extension, renewal
or other change in the terms of payment or performance thereof, or the release,
settlement or compromise of or with any party liable for the payment or
performance thereof, the release or nonperfection of any security thereunder, or
any change in any Customer's financial condition. ~USA Customer's obligation
pursuant to this Section 7.17 shall continue for so long as any sums owing to
Lenders by any Customer remains outstanding and unpaid, unless terminated in the
manner provided herein. ~USA Customer acknowledges that its obligations
hereunder are in addition to and independent of any agreement or transaction
between any Lender and any other Customer or any other Person creating or
reserving any lien, encumbrance or security interest in any property of any
other Customer or any other Person as security for any obligation of such
Customer.
(D) USA Customer has made an independent investigation of the
financial condition of each other Customer and guarantees the Obligations based
on that investigation and not upon any representations made by any Lender. ~USA
Customer acknowledges that it has access to current and future Customer
financial information which will enable ~USA Customer to continuously remain
informed of each other Customer's financial condition. ~USA Customer also
consents to and agrees that the guarantees provided in this Section 7.17 and the
Obligations shall not be affected by Lenders's subsequent increases or decreases
in any credit line that any Lender may grant to any Customer; substitutions,
exchanges or releases of all or any part of the Collateral or hereafter securing
any of the Obligations; sales or other dispositions of any or all of the
Collateral now or hereafter securing any of the Obligations without demands,
advertisement or notice of the time or place of the sales or other dispositions,
realizing on the Collateral to the extent Lenders, in their sole discretion
deems proper.
23
(E) With respect to the guarantees provided hereunder, ~USA Customer,
in its capacity as a guarantor, waives if permitted by applicable law (1)
demand, protest and all notices of protest or dishonor, (2) all notices of
payment and nonpayment, (3) all notices required by law, any and all defenses,
including but not limited to any defense which it may have against any
manufacturer or, distributor, (5) any and all rights of set-off such USA
Customer may have against any Lender and (6) all notices of nonpayment at
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guarantees at any time held by any Lender on which any Customer may,
in any way, be liable and ~USA Customer hereby ratifies and confirms whatever
Lenders may do in that regard.
(F) This guaranty obligation and any and all obligations, liabilities,
terms and provisions herein shall survive any and all bankruptcy or insolvency
proceedings, actions and/or claims brought by or against USA Customer, whether
such proceedings, actions and/or claims are federal and/or state.
Section 8. NEGATIVE COVENANTS
Until termination of this Agreement and the indefeasible payment and
satisfaction of all Obligations hereunder:
8.1. Liens. No Customer will, directly or indirectly mortgage, assign,
pledge, transfer, create, incur, assume, permit to exist or otherwise permit any
Lien to exist on any of its property, assets, revenues or goods, whether real,
personal or mixed, whether now owned or hereafter acquired, except for Permitted
Liens.
8.2. Disposition of Assets. (A) No Customer will, directly or indirectly,
sell, lease, assign, transfer or otherwise dispose of any assets other than (i)
sales of inventory in the ordinary course of business and short term rental of
inventory as demonstrations in amounts not material to such Customer, (ii)
voluntary dispositions of individual assets and obsolete or worn out property in
the ordinary course of business, and (iii) Permitted Dispositions provided,
however, that no Permitted Disposition shall represent an amount in excess of
Fifteen Percent (15%) of the combined assets of the Customers and Subsidiaries
without the prior written consent of IBM Credit.
(B) In the event of a Permitted Disposition, Applicable Lender shall
provide USA Customer with all such documentation (including, without limitation,
the execution and delivery of termination statements) and shall take all such
steps (including, without limitation, the redelivery of stock certificates) as
USA Customer, from time to time may reasonably request in connection with, and
to facilitate such, Permitted Disposition.
8.3. Corporate Changes. Except as described on Exhibit 8.3, no Customer
will, without the prior written consent of Applicable Lender, directly or
indirectly, merge, consolidate, liquidate, dissolve or enter into or engage in
any operation or activity materially different from that presently being
conducted by such Applicable Customer.
8.4. Guaranties. No Customer will, directly or indirectly, assume,
guaranty, endorse, or otherwise become liable upon the obligations of any other
Person other than a Subsidiary, except (i) by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, (ii) by the giving of indemnities in connection with the
sale of inventory or other asset dispositions permitted hereunder, and (iii) for
guaranties in favor of Lenders.
8.5. Restricted Payments. Except as provided in Exhibit 8.5, no Customer
will, and no Customer will permit any Subsidiary to, directly or indirectly: (i)
declare or pay any dividend (other than dividends payable solely in common stock
of such Customer) on, or make any payment on account of, or set apart assets for
a sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of capital stock of
such Customer or any warrants, options or rights to purchase any such capital
stock, whether now or hereafter outstanding, or make any other distribution in
respect thereof, either directly or indirectly, whether in cash or property or
in obligations of such Customer; or (ii) make any optional payment or prepayment
24
on or redemption (including, without limitation, by making payments to a sinking
or analogous fund) or repurchase of any Indebtedness (other than the
Obligations).
8.6. Investments. No Customer will, directly or indirectly, make, maintain
or acquire any Investment in any Person other than:
(A) interest bearing deposit accounts (including certificates of
deposit) which are insured by the Federal Deposit Insurance Corporation ("FDIC")
or a similar federal insurance program;
(B) direct obligations of the government of the United States of
America, Canada or Great Britain or any agency or instrumentality thereof or
obligations guaranteed as to principal and interest by the United States of
America, Canada or Great Britain or any agency thereof;
(C) stock or obligations issued to Customers in settlement of claims
against others by reason of an event of bankruptcy or a composition or the
readjustment of debt or a reorganization of any debtor of such Customer;
(D) commercial paper of any corporation organized under the laws of
Canada, Great Britain of any State of the United States or any bank organized or
licensed to conduct a banking business under the laws of Canada, Great Britain,
the United States or any State thereof having not less than the third highest
rating then given by ~▇▇▇▇▇'▇ Investor's Services, Inc. or Standard & Poor's
Corporation; and
(E) any Person, the acquisition of which is a Permitted Acquisition.
8.7. Affiliate/Subsidiary Transactions. No Customer will, directly or
indirectly, enter into any transaction with any Affiliate or Subsidiary, other
than with a Guarantor, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service to any Affiliate or
Subsidiary, other than with a Guarantor, of such Customer except in the ordinary
course of business and pursuant to the reasonable requirements of such
Customer's business upon fair and reasonable terms no less favorable to such
Customer than could be obtained in a comparable arm's-length transaction with an
unaffiliated Person.
8.8. ERISA. USA Customer will not (A) terminate any Plan so as to incur a
material liability to the PBGC (as defined in Section 6.12 of this Agreement),
(B) permit any "prohibited transaction" involving any Plan (other than a
"multi-employer benefit plan") which would subject the Customer to a material
tax or penalty on "prohibited transactions" under the Code or ERISA, (C) fail to
pay to any Plan any contribution which they are obligated to pay under the terms
of such Plan, if such failure would result in a material "accumulated funding
deficiency", whether or not waived, (D) allow or suffer to exist any occurrence
of a "reportable event" or any other event or condition, which presents a
material risk of termination by the PBGC of any Plan (other than a
"multi-employer benefit plan"), or (E) fail to notify IBM Credit as required in
Section 7.5. As used in this Agreement, the terms "accumulated funding
deficiency" and "reportable event" shall have the respective meanings assigned
to them in ERISA, and the term "prohibited transaction" shall have the meaning
assigned to it in the Code and ERISA. For purposes of this Section 8.8, the
terms "material liability", "tax", "penalty", "accumulated funding deficiency"
and "risk of termination" shall mean a liability, tax, penalty, accumulated
funding deficiency or risk of termination which could likely be expected to have
a Material Adverse Effect.
8.9. Additional Negative Pledges. No Customer will, directly or indirectly,
create or otherwise cause or permit to exist or become effective, other than in
its ordinary course of business, any contractual obligation which may restrict
or inhibit Applicable Lender's ~rights or ability to sell or otherwise dispose
of the Collateral or any part thereof after the occurrence and during the
continuance of an Event of Default.
8.10. Use of Proceeds. The Customers shall not use any portion of the
proceeds of any R/C Advances other than for its general working capital
requirements, capital expenditures, Permitted Acquisitions, and other corporate
purposes which are not otherwise specifically prohibited hereby or in any Other
Documents.
8.11. Indebtedness. The Customers will not create, incur, assume or permit
to exist any Indebtedness, except for Permitted Indebtedness.
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8.12. Loans. The Customers will not make any loans, advances, contributions
or payments of money or goods to any Subsidiary, Affiliate or parent corporation
or to any officer, director or stockholder of Customers or of any such
corporation (except for compensation for personal services actually rendered),
except for:
(A) transactions expressly authorized by this Agreement;
(B) as described in Exhibit 8.12;
(C) loans, advances and payments of money or goods to other Customers
or Guarantors;
(D) with respect to the Canadian Customer, loans, advances and
payments of money or goods to (x) those of its Subsidiaries which have
guaranteed to IBM Canada the Obligations of the Canadian Customer of which such
Person is a Subsidiary and secured such guarantee with a security interest (or
the functional equivalent if located in a province in which the PPSA has not
been adopted in substantially all assets of that Person or (y) a Non-Guarantor
Subsidiary which have evidenced the resulting obligation to TigerTel Inc. with a
promissory note which is secured with a security interest (or the functional
equivalent if located in a Province in which the PPSA has not been adopted) in
substantially all assets of such borrowing Non-Guarantor Subsidiary, which note
has been pledged to IBM Canada, provided the aggregate of loans made under this
clause (y) to all Non-Guarantor Subsidiaries shall not exceed CND$ 1,200,000
(One Million Two Hundred Thousand Canadian Dollar) without the prior written
consent of IBM Canada.
Section 9. DEFAULT
9.1. Event of Default. Any one or more of the following events shall
constitute an Event of Default by a Customer under this Agreement and the Other
Documents:
(A) The failure of any Customer to make timely payment of the
Obligations or any part thereof when due and payable if such failure shall
remain unremedied for more than five (5) days after written notice thereof shall
have been given to Customer by IBM Credit during which period Customer shall be
charged the Delinquency Fee Rate set forth in Attachment A beginning on the day
after the payment was due and including the day payment is received;
(B) Any Customer fails to comply with or observe any term, covenant or
agreement contained in this Agreement or any Other Documents and such failure is
not cured within fifteen (15) Business Days of written notice (with reasonable
particularity) to USA Customer of such failure;
(C) Any representation, warranty, statement, report or certificate
made or delivered by or on behalf of any Customer or any of its officers,
employees or agents or by or on behalf of any Guarantor to Lenders was false in
any material respect at the time when made or deemed made;
(D) Any Customer, any Subsidiary or any Guarantor shall generally not
pay its debts as such debts become due, become or otherwise declare itself
insolvent, file a voluntary petition for bankruptcy protection, have filed
against it any involuntary bankruptcy petition, cease to do business as a going
concern, make any assignment for the benefit of creditors, or a custodian,
receiver, trustee, liquidator, administrator or person with similar powers shall
be appointed for any Customer, any Subsidiary or any Guarantor or any of its
respective properties or have any of its respective properties seized or
attached, or take any action to authorize, or for the purpose of effectuating,
the foregoing, provided, however, that a Customer, any Subsidiary or any
Guarantor shall have a period of forty-five (45) days within which to discharge
any involuntary petition for bankruptcy or similar proceeding;
(E) The entry of any judgment against any Customer or any Guarantor in
an amount in excess of U.S.$1,000,000 and such judgment is not satisfied,
dismissed, stayed or superseded by bond within thirty (30) days after the day of
entry thereof (and in the event of a stay or supersedeas bond, such judgment is
not discharged within thirty (30) days after termination of any such stay or
bond) or such judgment is not covered by insurance (subject to commercially
reasonable deductable) as to which the insurance company has acknowledged its
obligation to pay such judgment in full;
26
(F) The dissolution or liquidation of any Customer, any material
Domestic Subsidiary or any Guarantor, or its directors or stockholders shall
take any action to dissolve or liquidate any Customer or any Guarantor;
(G) Any Customer suspends business for fifteen (15) consecutive
Business Days for any reason other than an Act of God, war; or other
catastrophic event beyond the control of the Customers;
(H) The occurrence of any event or condition that permits the holder
of any Indebtedness aggregately in excess of U.S.$1,000,000 arising in one or
more related or unrelated transactions to accelerate the maturity thereof or the
failure of any Customer to pay when due any such Indebtedness;
(I) Any Guaranty of any or all of the Customers' Obligations executed
by any Guarantor, whose assets are substantially relied upon by the Lenders to
secure the Obligations, in favor of Lenders, shall at any time for any reason
cease to be in full force and effect or shall be declared to be null and void by
a court of competent jurisdiction or the validity or enforceability thereof
shall be contested or denied by any such Guarantor, or any such Guarantor shall
deny that it has any further liability or obligation thereunder or any such
Guarantor shall fail to comply with or observe any of the terms, provisions or
conditions contained in any such Guaranty;
(J) Any Customer is in default under the material terms of any of the
Other Documents after the expiration of any applicable grace and/or cure
periods;
(K) There shall occur a "reportable event" with respect to any Plan,
or any Plan shall be subject to termination proceedings (whether voluntary or
involuntary) and there shall result from such "reportable event" or termination
proceedings a liability of USA Customer to the PBGC which in the reasonable
opinion of IBM Credit will have a Material Adverse Effect; or
(L) Any "person" (as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended) acquires a beneficial interest in 50% or more
of the Voting Stock of USA Customer.
9.2. Acceleration. Upon the occurrence and during the continuance of an
Event of Default which has not been waived in writing by Lenders, Lenders may,
in their sole discretion, take any or all of the following actions, without
prejudice to any other rights they may have at law or under this Agreement to
enforce its claims against the Customers: (a) declare all Obligations to be
immediately due and payable (except that in the Event of Default consists of the
filing of a petition under the Bankruptcy Code or analogous laws in Canada or
UK, in which case all Obligations shall automatically become immediately due and
payable without the necessity of any notice or other demand) without
presentment, demand, protest or any other action or obligation of Lenders; and
(b) immediately terminate the Credit Line hereunder.
9.3. Remedies. (A) Upon the occurrence and during the continuance of any
Event of Default which has not been waived in writing by Lenders and the
acceleration of the Obligations in accordance with Section 9.2, Lenders may
exercise all rights and remedies of a secured party under the U.C.C., PPSA, or
any other provisions, laws or statutes as applicable. Without limiting the
generality of the foregoing, a Lender may: (i) remove from any premises where
same may be located any and all documents, instruments, files and records
(including the copying of any computer records), and any receptacles or cabinets
containing same, relating to the Accounts, or the Lender may use (at the expense
of the Customers) such of the supplies or space of a Customer at Customer's
place of business or otherwise, as may be necessary to properly administer and
control the Accounts or the handling of collections and realizations thereon
provided in all events, the Lenders shall not hinder or limit access by each of
the Customers to all of such records and shall make all of such records
available to the Customers; (ii) bring suit, in the name of the Customer or ~the
Lender 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 ~Customer or Lender; (iii)
sell, assign and deliver the Accounts and any returned, reclaimed or repossessed
merchandise, with or without advertisement, at public or private sale, for cash,
on credit or otherwise, at such ~Lender's sole option and discretion, and any
Lender may bid or become a purchaser at any such sale; and (iv) foreclose the
security interests created pursuant to this Agreement by any available judicial
27
procedure, or to take possession of any or all of the Collateral without
judicial process and to enter any premises where any Collateral may be located
for the purpose of taking possession of or removing the same.
(B) Upon the occurrence of any Event of Default, each Customer agrees
to provide to Applicable Lender (i) within three (3) Business Days after request
by a Lender, any written certificates, schedules and reports together with all
supporting documents relating to the Collateral or the Applicable Customer's or
any Guarantor's business affairs and financial condition; and (ii) the name,
address and phone number of each of its Account debtors' primary contacts for
each Account if requested by IBM Credit. Upon the occurrence and during the
continuance of any Event of Default which has not been waived in writing by
Lenders, and the acceleration of the Obligations in accordance with Section 9.2
a Lender shall have the right 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 Applicable Customer or such Lender, or
in the name of such other party as such Lender 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 such Lender in its sole discretion may deem advisable, and any
Lender shall have the right to purchase at any such sale.
If a Lender, in its sole discretion determines that any of the Collateral
requires rebuilding, repairing, maintenance or preparation, such Lender shall
have the right, at its option, to do such of the aforesaid as it deems necessary
for the purpose of putting such Collateral in such saleable form as such Lender
shall deem appropriate. ~Each Customer hereby agrees that any disposition by
Applicable Lender of any Collateral pursuant to and in accordance with the terms
of a repurchase agreement between Applicable Lender and the manufacturer or any
supplier of such Collateral constitutes a commercially reasonable sale. Each
Customer agrees, at the request of Applicable Lender, to assemble the Collateral
and to make it available to Applicable Lender at places which such Applicable
Lender shall select, whether at the premises of the Customer or elsewhere, and
to make available to Applicable Lender the premises and facilities of the
Customer for the purpose of Applicable Lender's taking possession of, removing
or putting such Collateral in saleable form. If notice of intended disposition
of any Collateral is required by law, it is agreed that ten (10) Business Days
notice shall constitute reasonable notification.
(C) Unless expressly prohibited by the licensor thereof, if any, each
Lender is hereby granted by each Applicable Customer, upon the occurrence and
during the continuance of any Event of Default which has not been waived in
writing by Lenders, an irrevocable, non-exclusive license to use, assign,
license or sublicense all computer software programs, data bases, processes and
materials used by the Applicable Customer in its businesses or in connection
with any of the Collateral.
(D) The net cash proceeds resulting from a Lender's exercise of any of
the foregoing rights (after deducting all charges, costs and expenses, including
reasonable attorneys' fees) shall be applied by such Lender to the payment of
the Obligations, whether due or to become due, in such order as such Lender may
in it sole discretion elect. Applicable Customer shall remain liable to such
Lender for any deficiencies, and such Lender in turn agrees to remit to
Applicable Customer or its successors or assigns, any surplus resulting
therefrom.
(E) 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.
9.4. Waiver. Each Customer waives to the extent permitted by applicable law
all rights of set-off it may have against any Lender. Each Customer further
waives to the extent permitted by applicable law presentment, demand and
protest, and notices of non-payment, non-performance, any right of contribution,
dishonor, and any other demands, and notices required by law.
Section 10. MISCELLANEOUS
10.1. Term; Termination. (A) This Agreement shall remain in force until the
earlier of (i) the Termination Date, (ii) the date specified in a written notice
by the USA Customer that they intend to terminate this Agreement which date
shall be no less than thirty (30) days following the receipt by IBM Credit of
such written notice, and (iii) termination by Lenders after the occurrence and
28
during the continuance of an Event of Default. Upon the date that this Agreement
is terminated, all of Customers' Obligations shall be immediately due and
payable in their entirety, notwithstanding any other provisions of this
Agreement.
(B) Until the payment in full of all of Customers' Obligations, no
termination of this Agreement or any of the Other Documents shall in any way
affect or impair (i) Customers' Obligations to Lenders including, without
limitation, any transaction or event occurring prior to and after such
termination, or (ii) Lenders' rights hereunder, including, without limitation
Lenders' security interest in the Collateral. On and after a Termination Date, a
Lender may, but shall not be obligated to, upon the request of Applicable
Customer, continue to provide Advances hereunder.
(C) In the event of the payment in full of all of the then Outstanding
Advances and the termination of the Credit Line, each Applicable Lender shall
provide USA Customer with all such documentation (including, without limitation,
the execution and delivery of termination statements) and shall take all such
steps (including, without limitation, the redelivery of stock certificates) as
USA Customer, from time to time may reasonably request in connection with, and
to facilitate the release of all security and Collateral interests which any
Applicable Lender has in any Customer, Subsidiary or other Person.
(D) A prepayment premium shall be payable by USA Customer to IBM
Credit in the event that the USA Customer terminates the Credit Line prior to
the third anniversary of the Closing Date, in an amount equal to Eighty Five
Million Dollars multiplied by (i) if the termination occurs on a date that is
between the Closing Date to and including May 25, 2001 Fifty basis points
(0.5%), and (ii) thereafter Twenty Five basis points (0.25%).
10.2. Indemnification. Each Customer hereby agrees to indemnify and hold
harmless the Lenders and each of their officers, directors, agents and assigns
(collectively, the "Indemnified Persons") against all losses, claims, damages,
liabilities or other expenses (including reasonable attorneys' fees and court
costs now or hereinafter arising from the enforcement of this Agreement, the
"Losses") to which any of them may become subject insofar as such Losses arise
out of or are based upon any event, circumstance or condition (a) occurring or
existing on or before the date of this Agreement relating to any financing
arrangements the Lenders may from time to time have with (i) such Customer, (ii)
any Person that shall be acquired by such Customer or (iii) any Person that such
Customer may acquire all or substantially all of the assets of, or (b) directly
or indirectly, relating to the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby or thereby
or to any of the Collateral or or to any act or omission of the Customer in
connection therewith. Notwithstanding the foregoing, a Customer shall not be
obligated to indemnify a Lender for any Losses incurred by such Lender which are
a result of such Lender's gross negligence or willful misconduct. The indemnity
provided herein shall survive the termination of this Agreement.
10.3. Additional Obligations. A Lender, without waiving or releasing any
Obligation or Default of the Customers, may perform any Obligations of a
Customer that such Customer shall fail or refuse to perform and such Lender may,
at any time or times hereafter, but shall be under no obligation to, pay,
acquire or accept any assignment of any security interest, lien, encumbrance or
claim against the Collateral asserted by any person. All sums paid by such
Lender in performing in satisfaction or on account of the foregoing and any
expenses, including reasonable attorney's fees, court costs, and other charges
relating thereto, shall be a part of the Obligations, payable on demand and
secured by the Collateral.
10.4. LIMITATION OF LIABILITY. NO LENDER NOR ANY OTHER INDEMNIFIED PERSON
SHALL HAVE ANY LIABILITY WITH RESPECT TO ANY PUNITIVE, INDIRECT OR CONSEQUENTIAL
DAMAGES SUFFERED BY CUSTOMERS IN CONNECTION WITH THIS AGREEMENT, ANY OTHER
AGREEMENT, OR ANY CLAIMS IN ANY MANNER RELATED THERETO. NOR SHALL LENDERS OR ANY
OTHER INDEMNIFIED PERSON HAVE ANY LIABILITY TO CUSTOMERS OR ANY OTHER PERSON FOR
ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY IT OR THEM HEREUNDER, EXCEPT FOR ITS
OR THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IN THE EVENT ANY CUSTOMER
REQUESTS APPLICABLE LENDER TO EFFECT A WITHDRAWAL OR DEBIT OF FUNDS FROM AN
ACCOUNT OF SUCH CUSTOMER, THEN IN NO EVENT SHALL APPLICABLE LENDER BE LIABLE FOR
29
ANY AMOUNT IN EXCESS OF ANY AMOUNT INCORRECTLY DEBITED, EXCEPT IN THE EVENT OF
SUCH APPLICABLE LENDER'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
10.5. Alteration/Waiver. This Agreement and the Other Documents may not be
altered or amended except by an agreement in writing signed by Customers and by
Lenders. No delay or omission of any Lender to exercise any right or remedy
hereunder, whether before or after the occurrence of any Event of Default, shall
impair any such right or remedy or shall operate as a waiver thereof or as a
waiver of any such Event of Default. In the event that Lenders at any time or
from time to time dispenses with any one or more of the requirements specified
in this Agreement or any of the Other Documents, such dispensation may be
revoked by Lenders at any time and shall not be deemed to constitute a waiver of
any such requirement subsequent thereto. Lenders' failure at any time or times
to require strict compliance and performance by any Customer of any
undertakings, agreements, covenants, warranties and representations of this
Agreement or any Other Document shall not waive, affect or diminish any right of
Lenders thereafter to demand strict compliance and performance thereof. Any
waiver by Lenders of any Default by the Customers under this Agreement or any of
the Other Documents shall not waive or affect any other Default by the Customers
under this Agreement or any of the Other Documents, whether such Default is
prior or subsequent to such other Default and whether of the same or a different
type. None of the undertakings, agreements, warranties, covenants, and
representations of the Customers contained in this Agreement or the Other
Documents and no Default by the Customers shall be deemed waived by Lenders
unless such waiver is in writing signed by an authorized representative of
Lenders.
10.6. Severability. If any provision of this Agreement or the Other
Documents or the application thereof to any Person or circumstance is held
invalid or unenforceable, the remainder of this Agreement and the Other
Documents and the application of such provision to other Persons or
circumstances will not be affected thereby, the provisions of this Agreement and
the Other Documents being severable in any such instance.
10.7. One Loan. All Advances heretofore, now or at any time or times
hereafter made by a Lender to an Applicable Customer under this Agreement or the
Other Documents shall constitute one loan secured by such Lender's security
interests in the Collateral and by all other security interests, liens and
encumbrances heretofore, now or from time to time hereafter granted by the
Applicable Customer to such Lender or any assignor of such Lender.
10.8. Additional Collateral. All monies, reserves and proceeds received or
collected by a Lender with respect to Accounts and other property of an
Applicable Customer in possession of such Lender at any time or times hereafter
are hereby pledged by Applicable Customer to such Lender as security for the
payment of Applicable Customer's Obligations and shall be applied promptly by
such Lender on account of the Applicable Customer's Obligations; provided,
however, such Lender may release to the Applicable Customer such portions of
such monies, reserves and proceeds as such Lender may from time to time
determine, in its sole discretion.
10.9. No Merger or Novations. Neither the obtaining of any judgment nor the
exercise of any power of seizure or sale shall operate to extinguish the
Obligations of a Customer to the Lenders secured by this Agreement and shall not
operate as a merger of any covenant in this Agreement, and the acceptance of any
payment or alternate security shall not constitute or create a novation and the
obtaining of a judgment or judgments under a covenant herein contained shall not
operate as a merger of that covenant or affect the Lenders' rights under this
Agreement.
10.10. Paragraph Titles. The Section titles used in this Agreement and the
Other Documents are for convenience only and do not define or limit the contents
of any Section.
10.11. Binding Effect; Assignment. This Agreement and the Other Documents
shall be binding upon and inure to the benefit of Lenders and the Customers and
their respective successors and assigns; provided, that no Customer shall have
the right to assign this Agreement or any of the Other Documents without the
prior written consent of Applicable Lender.
10.12. Notices. Except as otherwise expressly provided in this Agreement,
any notice required or desired to be served, given or delivered hereunder shall
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be in writing, and shall be deemed to have been validly served, given or
delivered (i) upon receipt if deposited in the first class or equivalent mail,
with proper postage prepaid, (ii) upon receipt of confirmation or answerback if
sent by telecopy, or other similar facsimile transmission if received during
customary business hours at the offices of the recipient, otherwise, at the
opening of business on the recipient's then next Business Day, (iii) one
Business Day after deposit with a reputable overnight courier with all charges
prepaid if intended for delivery in the same country as that in which so
deposited, otherwise, at the opening of the business on the recipient's then
next Business Day, or (iv) when delivered, if hand-delivered by messenger during
customary business hours, all of which shall be properly addressed to the party
to be notified and sent to the address or number indicated as follows:
(i) If to IBM Credit at: (ii) If to a Customer at:
IBM Credit Corporation Applicable Customer's Name
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ c/o Applied Cellular Technology
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Financial, Corp.
Attention: Region Manager, ▇▇▇▇ ▇▇▇▇ #▇▇, ▇▇▇▇ ▇▇▇▇ Condominium
Facsimile: 1 (770) 644-4826 ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Facsimile:
(iii) If to IBM Canada at:
IBM Financing, a division of IBM Canada Limited
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ East, f4/938
Markam, Ontario L3R 9Z7Attention: Manager,
Commercial Financing
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or number as each party designates to the other in
the manner prescribed herein. A copy of all material notices under the
Agreement, including any notice of, or which starts the beginning of any grace
and/or cure periods applicable to, any Event of Default and any notice which
consists of a reservation of rights or claiming or suggesting any departure from
the provisions of the Agreement and Other Documents shall also be delivered to
Applied Digital Solutions, Inc. located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel or such other address, written
notice of which is provided by USA Customer to Lenders. Lenders reserve the
right to serve notices of legal proceedings directly to Customers.
10.13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto were upon the same instrument.
10.14. SUBMISSION AND CONSENT TO JURISDICTION AND CHOICE OF LAW. TO INDUCE
LENDERS TO ACCEPT THIS AGREEMENT AND THE OTHER DOCUMENTS, ~EACH CUSTOMER HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT AND ANY OTHER DOCUMENT, OR FOR THE RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK CITY, NEW YORK AND THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK.
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREINAFTER HAVE TO THE VENUE
31
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME.
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR
ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO USA CUSTOMER AT ITS
ADDRESS SET FORTH IN SECTION 10.13 OR AT SUCH OTHER ADDRESS OF WHICH IBM CREDIT
SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
TO ▇▇▇ IN ANY OTHER JURISDICTION.
(E) AGREES THAT THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
10.15. JURY TRIAL WAIVER. EACH OF THE LENDERS AND THE CUSTOMERS HEREBY
IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
(INCLUDING ANY COUNTERCLAIM) OF ANY TYPE IN WHICH ANY LENDER AND A CUSTOMER ARE
PARTIES AS TO ALL MATTERS ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT
OR ANY DOCUMENT, INSTRUMENT OR AGREEMENT EXECUTED IN CONNECTION HEREWITH.
10.16. Entire Agreement. This Agreement embodies the entire agreement among
the Customers and the Lenders relating to the subject matter hereof and
supersede all prior agreements, representations and understandings, if any,
relating to the subject matter hereof.
10.17. Non-Cross Guaranties and Non-Cross Collateralization. The Canadian
Customer has not guarantied the Obligations of any other Customer. The security
interests and charges created in the Canadian Security Agreements by the
Canadian Customer secure only those specific Obligations of the Canadian
Customer that created such security interest and does not secure any Obligations
of any other Person, it being the intention of the parties that no
cross-collateralization be created with respect to any such Collateral granted
by any Canadian Customer.
IN WITNESS WHEREOF, each Customer has read the entire Agreement, and
has caused its authorized representatives to execute this Agreement and has
caused its corporate seal, if any, to be affixed hereto as of the date first
written above.
IBM CREDIT CORPORATION IBM FINANCING, A DIVISION OF IBM
CANADA LIMITED
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------ -----------------
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Print Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Manager, Commercial & Title: Manager, Commercial Finance
Specialty Financing Sales
APPLIED DIGITAL SOLUTIONS, INC. GROUND EFFECTS LTD.
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ By: /S/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------- -----------------
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Print Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President Title: President
32
EXHIBIT 2.3.1
Term Loan A
Term Loan A Commitment: Twenty Five Million United States Dollars
(U.S.$25,000,000)
Term Loan A Finance Charge: as set forth in Attachment A
Term Loan A Stated Maturity Date: May 25, 2002.
Term Loan A Repayment Schedule: The principal amount of Term Loan A shall
be amortized over six years and shall be payable by USA Customer at the end of
each calendar quarter, provided that all unpaid principal of such Term Loan A
shall be paid in full on the Term Loan A Stated Maturity Date.
33
EXHIBIT 2.4.1
Term Loan C
Term Loan C Commitment: Four Million Canadian Dollars (CND$4,000,000)
Term Loan C Finance Charge: as set forth in Attachment A
Term Loan C Stated Maturity Date: May 25, 2002.
Term Loan C Repayment Schedule: The principal amount of Term Loan C shall
be amortized over six years and shall be payable by Canadian Customer at the end
of each calendar quarter, provided that all unpaid principal of such Term Loan C
shall be paid in full on the Term Loan C Stated Maturity Date.
[OTHER EXHIBITS OMITTED]
34
ATTACHMENT A, ("ATTACHMENT A") TO*
SECOND AMENDED AND RESTATED TERM AND REVOLVING CREDIT AGREEMENT
("AGREEMENT") DATED OCTOBER 17, 2000
Customers' Names: USA Customer - Applied Digital Solutions, Inc.
Canadian Customer- Ground Effects Ltd.
Effective Date of this Attachment A: October 17, 200
***
III. Financial Covenants:
Definitions: The following terms shall have the following respective
meanings in this Attachment. All amounts shall be determined in accordance with
generally accepted accounting principles (GAAP).
"Consolidated Earnings before Income Taxes" shall be defined as
consolidated income before provision for income taxes, minority interest
and extraordinary items as determined in accordance with GAAP.
"Consolidated Net Income" shall mean, for any period, the net
income (or loss), after taxes, of Customer on a consolidated basis for
such period determined in accordance with GAAP.
"Current" shall mean within the ongoing twelve month period.
"Current Assets" shall mean assets that are cash or expected to
become cash within the ongoing twelve months.
"Current Liabilities" shall mean payment obligations resulting
from past or current transactions that require settlement within the
ongoing twelve month period.
"EBITDA" shall mean, for any period (determined on a consolidated
basis in accordance with GAAP), (a) the Consolidated Earnings before
Income Taxes of Customer for such period, plus (b) each of the following
to the extent reflected as an expense in the determination of such
Consolidated Earnings before Income Taxes: (i) Interest Income and
Interest Expense for such period; and (ii) depreciation and amortization
of tangible and intangible assets of Customer for such period.
"Fixed Charges" shall mean, for any period, an amount equal to the
sum, without duplication, of the amounts for such as determined for the
Customer on a consolidated basis, of (i) scheduled repayments of
principal of all Indebtedness (as reduced by repayments thereon
previously made), (ii) Interest Expense, (iii) capital expenditures (iv)
dividends, (v) leasehold improvement expenditures and (vi) all provisions
for U.S. and non U.S. Federal, state and local taxes.
"Fixed Charge Coverage Ratio" shall mean the ratio as of the last
day of any fiscal period of (i) EBITDA as of the last day of such fiscal
period to (ii) Fixed Charges.
"Interest Expense" shall mean, for any period, the aggregate
consolidated interest expense of Customer during such period in respect
of Indebtedness determined on a consolidated basis in accordance with
GAAP, including, without limitation, amortization of original issue
discount on any Indebtedness and of all fees payable in connection with
the incurrence of such Indebtedness (to the extent included in interest
expense), the interest portion of any deferred payment obligation and the
interest component of any capital lease obligations.
"Interest Income" shall mean, for any period, the aggregate
consolidated interest income of Customer during such period determined on
a consolidated basis in accordance with GAAP.
"Long Term" shall mean beyond the ongoing twelve month period.
"Long Term Assets" shall mean assets that take longer than a year
to be converted to cash. They are divided into four categories: tangible
assets, investments, intangibles and other.
"Long Term Debt" shall mean payment obligations of indebtedness
which mature more than twelve months from the date of determination, or
mature within twelve months from such date but are renewable or
extendible at the option of the debtor to a date more than twelve months
from the date of determination.
"Net Profit/Loss after Tax" shall mean Revenue plus all other
income, minus all costs, including applicable taxes.
"Revenue" shall mean the monetary expression of the aggregate of
products or services transferred by an enterprise to its customers for
which said customers have paid or are obligated to pay, plus other
income as allowed.
"Subordinated Debt" shall mean Customer's indebtedness to third
parties as evidenced by an executed Notes Payable Subordination Agreement
in favor of IBM Credit.
"Tangible Net Worth" shall mean:
Total Net Worth minus;
(a) goodwill, intangible assets, prepaid expenses and
other current and non-current assets as identified in
Customer's financial statements; and
(b) all accounts receivable from employees, officers,
directors, stockholders and affiliates; and
(c) all callable/redeemable preferred stock.
"Total Assets" shall mean the total of Current Assets and Long
Term Assets.
"Total Liabilities" shall mean the Current Liabilities and Long
Term Debt less Subordinated Debt, resulting from past or current
transactions, that require settlement in the future.
"Total Net Worth" (the amount of owner's or stockholder's
ownership in an enterprise) is equal to Total Assets minus Total
Liabilities.
"Working Capital" shall mean Current Assets minus Current
Liabilities.
USA Customer will be required to maintain the following financial ratios,
percentages and amounts as of the last day of the fiscal period under review by
IBM Credit:
Compliance with the covenants set forth below will be based on the
consolidated financial statements of USA Customer.
Covenant
Covenant Requirement
-------- -----------
(i) Tangible Net Worth As of the following dates not less than:
09/30/00 ($15,500,000)
12/31/00 ( 11,750,000)
03/31/01 ( 9,700,000)
06/30/01 ( 6,000,000)
09/30/01 ( 500,000)
12/31/01 5,250,000
03/31/02 5,250,000
(ii) Current Assets to Current As of the following dates greater than:
Liabilities
09/30/00 1.0:1.0
12/31/00 1.0:1.0
03/31/01 1.0:1.0
06/30/01 1.0:1.0
09/31/01 1.0:1.0
12/31/01 1.0:1.0
03/31/02 1.0:1.0
(iii) Minimum EBITDA with no
Net Loss after Tax in more
than two consecutive
quarters As of the following dates not less than:
09/30/00 $ 350,000
12/31/00 $6,100,000
03/31/01 $2,200,000
06/30/01 $4,300,000
09/30/01 $6,600,000
12/31/01 $7,000,000
03/31/02 $2,500,000
* A portion of this Attachment A is omitted from this filing, the omitted
portion will be provided at the request of the Staff of the Commission.
[OTHER ATTACHMENTS OMITTED]