LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
CONGRESS FINANCIAL CORPORATION (WESTERN)
AS LENDER
AND
MICROTEL INTERNATIONAL, INC.
XIT CORPORATION
CXR TELCOM CORPORATION
AND
HYCOMP, INC.
AS BORROWER
DATED: JUNE 23, 1998
TABLE OF CONTENTS
PAGE(S)
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SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Revolving Loans. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Letter of Credit Accommodations. . . . . . . . . . . . . . . . . . 9
2.3 Term Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.4 Cap Ex Loans . . . . . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 3. INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.2 Closing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.3 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.4 Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.5 Unused Line Fee. . . . . . . . . . . . . . . . . . . . . . . . . .13
3.6 Compensation Adjustment. . . . . . . . . . . . . . . . . . . . . .13
SECTION 4. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . . .14
1.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations . . . . . . . . . . . . . . . . . . . . . . . . . .14
1.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations . . . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 5. GRANT OF SECURITY INTEREST. . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 6. COLLECTION AND ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . .17
6.1 Borrower's Loan Account. . . . . . . . . . . . . . . . . . . . . .17
6.2 Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
6.3 Collection of Accounts . . . . . . . . . . . . . . . . . . . . . .17
6.4 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
6.5 Authorization to Make Loans. . . . . . . . . . . . . . . . . . . .19
6.6 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 7. COLLATERAL REPORTING AND COVENANTS. . . . . . . . . . . . . . . . . . . .19
7.1 Collateral Reporting . . . . . . . . . . . . . . . . . . . . . . .19
7.2 Accounts Covenants . . . . . . . . . . . . . . . . . . . . . . . .19
7.3 Inventory Covenants. . . . . . . . . . . . . . . . . . . . . . . .21
7.4 Equipment Covenants. . . . . . . . . . . . . . . . . . . . . . . .21
7.5 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . .22
7.6 Right to Cure. . . . . . . . . . . . . . . . . . . . . . . . . . .22
7.7 Access to Premises . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 8. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . .23
8.1 Corporate Existence, Power and Authority; Subsidiaries . . . . . .23
8.2 Financial Statements; No Material Adverse Change . . . . . . . . .23
8.3 Chief Executive Office; Collateral Locations . . . . . . . . . . .23
8.4 Priority of Liens; Title to Properties . . . . . . . . . . . . . .23
8.5 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
8.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
8.7 Compliance with Other Agreements and Applicable Laws . . . . . . .24
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PAGE(S)
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8.8 Environmental Compliance . . . . . . . . . . . . . . . . . . . . .24
8.9 Employee Benefits... . . . . . . . . . . . . . . . . . . . . . . .25
8.10 Accuracy and Completeness of Information . . . . . . . . . . . . .25
8.11 Survival of Warranties; Cumulative . . . . . . . . . . . . . . . .25
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . .26
9.1 Maintenance of Existence . . . . . . . . . . . . . . . . . . . . .26
9.2 New Collateral Locations . . . . . . . . . . . . . . . . . . . . .26
9.3 Compliance with Laws, Regulations. . . . . . . . . . . . . . . . .26
9.4 Payment of Taxes and Claims. . . . . . . . . . . . . . . . . . . .27
9.5 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
9.6 Financial Statements and Other Information . . . . . . . . . . . .28
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. . . . . .29
9.8 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . .29
9.9 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . .29
9.10 Loans, Investments, Guarantees, Etc. . . . . . . . . . . . . . . .30
9.11 Dividends and Redemptions. . . . . . . . . . . . . . . . . . . . .30
9.12 Transactions with Affiliates . . . . . . . . . . . . . . . . . . .30
9.13 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . .30
9.14 Adjusted Net Worth . . . . . . . . . . . . . . . . . . . . . . . .30
9.15 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . . .30
9.16 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . .31
9.17 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . .31
SECTION 10. EVENTS OF DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . . . . .32
10.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . .32
10.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND
CONSENTS; GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . .34
11.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver. . . . . . . . . . . . . . . . . . . . . . . . .34
11.2 Waiver of Notices. . . . . . . . . . . . . . . . . . . . . . . . .35
11.3 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . .35
11.4 Waiver of Counterclaims. . . . . . . . . . . . . . . . . . . . . .36
11.5 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . .36
12.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
12.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
12.3 Partial Invalidity . . . . . . . . . . . . . . . . . . . . . . . .37
12.4 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
12.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . .38
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INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
iii
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated June 23, 1998 is entered into by and
between Congress Financial Corporation (Western), a California corporation
("Lender") and Microtel International, Inc. ("Microtel"), a Delaware
corporation, XIT Corporation ("XIT"), a New Jersey Corporation, CXR Telcom
Corporation ("CXR"), a Delaware corporation, and Hycomp, Inc. ("Hycomp"), a
Massachusetts corporation. (Microtel, XIT, CXR and Hycomp are sometimes
referred to in this Agreement, jointly and severally, as the "Borrower".)
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS.
All terms used herein which are defined in Article 1 or Article 9 of the
California Uniform Commercial Code shall have the respective meanings given
therein unless otherwise defined in this Agreement. All references to the
plural herein shall also mean the singular and to the singular shall also mean
the plural. All references to Borrower and Lender pursuant to the definitions
set forth in the recitals hereto, or to any other person herein, shall include
their respective successors and assigns. The words "hereof", "herein",
"hereunder", "this Agreement" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. An
Event of Default shall exist or continue or be continuing until such Event of
Default is waived in accordance with Section 11.3. Any accounting term used
herein unless otherwise defined in this Agreement shall have the meaning
customarily given to such term in accordance with GAAP. For purposes of this
Agreement, the following terms shall have the respective meanings given to them
below:
1.1 "ACCOUNTS" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "ADJUSTED NET WORTH" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any, but not
including foreign subsidiaries), the amount equal to: (a) the difference
between: (i) the aggregate net book value of all assets of such Person and its
subsidiaries, calculating the book value of inventory for this purpose on a
first-in-first-out basis,
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after deducting from such book values all appropriate reserves in accordance
with GAAP (including all reserves for doubtful receivables, obsolescence,
depreciation and amortization) and (ii) the aggregate amount of the
indebtedness and other liabilities of such Person and its subsidiaries
(including tax and other proper accruals) PLUS (b) indebtedness of such
Person and its subsidiaries which is subordinated in right of payment to the
full and final payment of all of the Obligations on terms and conditions
acceptable to Lender.
1.3 "AVAILABILITY RESERVES" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Revolving Loans and Letter of Credit Accommodations which
would otherwise be available to Borrower under the lending formula(s) provided
for herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, do or may affect either (i) the Collateral
or any other property which is security for the Obligations or its value
(including without limitation any increase in any dilution with respect to the
Accounts of any Borrower), (ii) the assets, business or prospects of Borrower or
any Obligor or (iii) the security interests and other rights of Lender in the
Collateral (including the enforceability, perfection and priority thereof) or
(b) to reflect Lender's good faith belief that any collateral report or
financial information furnished by or on behalf of Borrower or any Obligor to
Lender is or may have been incomplete, inaccurate or misleading in any material
respect or (c) to reflect any state of facts which Lender determines in good
faith constitutes an Event of Default or may, with notice or passage of time or
both, constitute an Event of Default. Without limiting the generality of the
foregoing, Lender (i) shall establish on the date hereof and maintain throughout
the term of this Agreement and throughout any renewal term an Availability
Reserve for an amount equal to three (3) months of Borrower's gross rent and
other obligations as lessee for each leased premises of Borrower which is
located in a state where a landlord may be entitled to a priority lien on
Collateral to secure unpaid rent and with respect to each such property the
landlord has not executed a form of waiver and consent acceptable to Lender,
(ii) may establish an additional Availability Reserve on the date hereof, and
from time to time hereafter, and maintain such reserve throughout the term of
this Agreement and throughout any renewal term in an amount determined by Lender
in its discretion to be sufficient to cover the anticipated moving expenses and
other costs associated with the transfer of Inventory from each of Borrower's
locations to another location acceptable to Lender, and (iii) may establish and
maintain an additional Availability Reserve from time to time to compensate for
types of Inventory in an amount equal to more than the sales of such Inventory
during the prior 18 months.
1.4 "BLOCKED ACCOUNT" shall have the meaning set forth in Section 6.3
hereof.
1.5 "BUSINESS DAY" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of New York, the Commonwealth of Pennsylvania or the State
of California, and a day on which First Union National Bank or such other bank
as Lender may from time to time designate, and Lender are open for the
transaction of business.
1.6 "CODE" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
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1.7 "COLLATERAL" shall have the meaning set forth in Section 5 hereof.
1.8 "ELIGIBLE ACCOUNTS" shall mean Accounts created by Borrower which are
and continue to be acceptable to Lender based on the criteria set forth below.
In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and BONA FIDE sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than 60 days after their
original due date or more than 90 days after the date of the original invoice
for them;
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America or Canada, or, at
Lender's option, if either: (i) the account debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank in the United States
satisfactory to Lender, sufficient to cover such Account, payable in the United
States of America and in U.S. Dollars, in form and substance satisfactory to
Lender and, if required by Lender, the original of such letter of credit has
been delivered to Lender or Lender's agent and the issuer thereof notified of
the assignment of the proceeds of such letter of credit to Lender, or (ii) such
Account is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender, or (iii) such Account is
otherwise acceptable in all respects to Lender including, but not limited to,
the creditworthiness of the account debtor and the political risk associated
therewith, and the ability of the Lender to collect the foreign Account, subject
to such lending formulas with respect to each foreign Account as Lender may
determine, and each such foreign Account is payable to Borrower at a location in
the United States of America and in U.S. Dollars;
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇, ▇▇▇▇ and hold
invoices or retainage invoices, except as to ▇▇▇▇ and hold invoices, if Lender
shall have received an agreement in writing from the account debtor, in form and
substance satisfactory to Lender, confirming the unconditional obligation of the
account debtor to take the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not asserted
a counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Accounts;
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(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or agent of
or affiliated with Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition;
(m) such Accounts of a single account debtor or its affiliates do not
constitute more than twenty percent (20%) of all otherwise Eligible Accounts
(but the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has Accounts
unpaid more than 60 days after their original due date or more than 90 days
after the date of the original invoice for them which constitute more than fifty
percent (50%) of the total Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit with respect to such
account debtors as determined by Lender from time to time (but the portion of
the Accounts not in excess of such credit limit may still be deemed Eligible
Accounts); and
(p) such Accounts are owed by account debtors deemed creditworthy at
all times by Lender, as determined by Lender.
General criteria for Eligible Accounts may be established and revised from
time to time by Lender in good faith. Any Accounts which are not Eligible
Accounts shall nevertheless be part of the Collateral.
1.9 "ELIGIBLE INVENTORY" shall mean Inventory consisting of
finished goods held for resale in the ordinary course of the business of
Borrower and raw materials for such finished
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goods which are acceptable to Lender based on the criteria set forth below.
In general, Eligible Inventory shall not include (a) work-in-process; (b)
components which are not part of finished goods; (c) spare parts for
equipment; (d) packaging and shipping materials; (e) supplies used or
consumed in Borrower's business; (f) Inventory at premises other than those
owned and controlled by Borrower, except if Lender shall have received an
agreement in writing from the person in possession of such Inventory and/or
the owner or operator of such premises in form and substance satisfactory to
Lender acknowledging Lender's first priority security interest in the
Inventory, waiving security interests and claims by such person against the
Inventory and permitting Lender access to, and the right to remain on, the
premises so as to exercise Lender's rights and remedies and otherwise deal
with the Collateral; (g) Inventory in-transit; (h) Inventory subject to a
security interest or lien in favor of any person other than Lender except
those permitted in this Agreement; (i) ▇▇▇▇ and hold goods; (j)
unserviceable, obsolete or slow moving Inventory; (k) Inventory which is not
subject to the first priority, valid and perfected security interest of
Lender; (l) returned, damaged and/or defective Inventory; and (m) Inventory
purchased or sold on consignment. General criteria for Eligible Inventory
may be established and revised from time to time by Lender in good faith.
Any Inventory which is not Eligible Inventory shall nevertheless be part of
the Collateral.
1.10 "ENVIRONMENTAL LAWS" shall mean all federal, state, district, local
and foreign laws, rules, regulations, ordinances, and consent decrees relating
to health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect, applicable to Borrower's business and
facilities (whether or not owned by it), including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or hazardous, toxic or dangerous substances, materials or wastes into
the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals, or
hazardous, toxic or dangerous substances, materials or wastes.
1.11 "EQUIPMENT" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.12 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.13 "ERISA AFFILIATE" shall mean any person required to be aggregated with
Borrower or any of its affiliates under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.
1.14 "EVENT OF DEFAULT" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.
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1.15 "EXCESS AVAILABILITY" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of: (i) the amount of the
Revolving Loans available to Borrower as of such time based on the applicable
lender formulas multiplied by the Net Amount of Eligible Accounts and the Value
of Eligible Inventory, as determined by Lender, and subject to the sublimits and
Availability Reserves from time to time established by Lender hereunder, and
(ii) the Maximum Credit (less the then outstanding principal amount of the Term
Loan), MINUS (b) the sum of: (i) the amount of all then outstanding and unpaid
Obligations (but not including for this purpose the then outstanding principal
amount of the Term Loan), (ii) the aggregate amount of all then outstanding and
unpaid trade payables of Borrower which are more than sixty (60) days past due
as of such time, (iii) the aggregate amount of Borrower's book overdrafts, and
(iv) the aggregate amount of Borrower's past due lease and notes payable.
1.16 "FINANCING AGREEMENTS" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by Borrower
or any Obligor in connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.17 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.13 and 9.14 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
1.18 "HAZARDOUS MATERIALS" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without
limitation any that are or become classified as hazardous or toxic under any
Environmental Law).
1.19 "INFORMATION CERTIFICATE" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.20 "INVENTORY" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
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1.21 "LETTER OF CREDIT ACCOMMODATIONS" shall mean the letters
of credit, merchandise purchase or other guaranties which are from time to
time either (a) issued, opened or provided by Lender for the account of
Borrower or any Obligor or (b) with respect to which Lender has agreed to
indemnify the issuer or guaranteed to the issuer the performance by Borrower
of its obligations to such issuer.
1.22 "LOANS" shall mean the Revolving Loans, the Cap Ex Loans
and the Term Loan.
1.23 "MAXIMUM CREDIT" shall mean the amount of $10,500,000.
1.24 "NET AMOUNT OF ELIGIBLE ACCOUNTS" shall mean the gross
amount of Eligible Accounts less (a) sales, excise or similar taxes included
in the amount thereof and (b) returns, discounts, claims, credits and
allowances of any nature at any time issued, owing, granted, outstanding,
available or claimed with respect thereto.
1.25 "OBLIGATIONS" shall mean any and all Revolving Loans, the
Cap Ex Loans, the Term Loan, Letter of Credit Accommodations and all other
obligations, liabilities and indebtedness of every kind, nature and
description owing by Borrower to Lender and/or its affiliates, including
principal, interest, charges, fees, costs and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, whether
arising under this Agreement or otherwise, whether now existing or hereafter
arising, whether arising before, during or after the initial or any renewal
term of this Agreement or after the commencement of any case with respect to
Borrower under the United States Bankruptcy Code or any similar statute
(including, without limitation, the payment of interest and other amounts
which would accrue and become due but for the commencement of such case),
whether direct or indirect, absolute or contingent, joint or several, due or
not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by Lender.
1.26 "OBLIGOR" shall mean any guarantor, endorser, acceptor,
surety or other person liable on or with respect to the Obligations or who is
the owner of any property which is security for the Obligations, other than
Borrower.
1.27 "PARTICIPANT" shall mean any person which at any time
participates with Lender in respect of the Loans, the Letter of Credit
Accommodations or other Obligations or any portion thereof.
1.28 "PAYMENT ACCOUNT" shall have the meaning set forth in
Section 6.3 hereof.
1.29 "PERSON" or "PERSON" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Internal Revenue Code
of 1986, as amended), business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.30 "PRIME RATE" shall mean the rate from time to time
publicly announced by First Union National Bank or its successors, at its
office in Philadelphia, Pennsylvania, as its prime rate, whether or not such
announced rate is the best rate available at such bank.
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1.31 "RECORDS" shall mean all of Borrower's present and future
books of account of every kind or nature, purchase and sale agreements,
invoices, ledger cards, bills of lading and other shipping evidence,
statements, correspondence, memoranda, credit files and other data relating
to the Collateral or any account debtor, together with the tapes, disks,
diskettes and other data and software storage media and devices, file
cabinets or containers in or on which the foregoing are stored (including any
rights of Borrower with respect to the foregoing maintained with or by any
other person).
1.32 "REVOLVING LOANS" shall mean the loans now or hereafter
made by Lender to or for the benefit of Borrower on a revolving basis
(involving advances, repayments and readvances) as set forth in Section 2.1
hereof.
1.33 "TERM LOAN" shall mean collectively the term loans made
by Lender to Borrower as provided for in Section 2.3 hereof.
1.34 "VALUE" shall mean, as determined by Lender in good
faith, with respect to Inventory, the lower of (a) cost computed on a
first-in-first-out basis in accordance with GAAP or (b) market value.
SECTION 2. CREDIT FACILITIES.
2.1 REVOLVING LOANS.
(a) Subject to, and upon the terms and conditions
contained herein, Lender agrees to make Revolving Loans to Borrower from time
to time in amounts requested by Borrower up to the amount equal to the sum
of:
(i) EIGHTY-FIVE PERCENT (85%) of the Net Amount of
Eligible Accounts, plus
(ii) the lesser of:
(A) the sum of FORTY PERCENT (40%) of the Value
of Eligible Inventory consisting of finished goods plus
TWENTY-FIVE PERCENT (25%) of the Value of Eligible Inventory
consisting of raw materials for such finished goods, or
(B) the amount equal to: (1) $500,000 minus
FORTY PERCENT (40%) of the then undrawn amounts of the
outstanding Letter of Credit Accommodations for the purpose of
purchasing finished goods, plus (2) $1,000,000 minus
TWENTY-FIVE PERCENT (25%) of the then undrawn amounts of the
outstanding Letter of Credit Accommodations for the purpose of
purchasing raw materials for such finished goods, less
(iii) any Availability Reserves;
PROVIDED THAT:
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(1) Total Revolving Loans to all Borrowers shall not at any
time exceed $9,000,000;
(2) Total Loans to all Borrowers with respect to finished
goods shall not exceed $500,000 at any time outstanding;
(3) Total Loans to all Borrowers with respect to raw
materials shall not exceed $1,000,000 at any time outstanding;
(4) Borrower shall have the right, not more frequently
than once per fiscal year, to have the Eligible Inventory
appraised by an appraiser acceptable to Lender in its sole
discretion, at Borrower's expense, and to have the percentages
set forth in Section 2.1.(a)(ii)(A) and (B) adjusted to the
lesser of 80% of the orderly liquidation value of such
Eligible Inventory as determined by said appraiser, or 100% of
the auction value of such Eligible Inventory as determined by
said appraiser, in each case net of Lender's estimate as to
the costs and expenses of sale of such Eligible Inventory in
an auction or orderly liquidation.
Revolving Loans will be made separately to each Borrower based on the
Eligible Accounts and Eligible Inventory of each Borrower, but subject to the
dollar limits set forth above, which shall apply to the total Revolving Loans
to all Borrowers.
(b) Lender may, in its discretion, from time to time,
upon not less than five (5) days prior notice to Borrower, (i) reduce the
lending formula with respect to Eligible Accounts to the extent that Lender
determines in good faith that: (A) the dilution with respect to the Accounts
for any period (based on the ratio of (1) the aggregate amount of reductions
in Accounts other than as a result of payments in cash to (2) the aggregate
amount of total sales) has increased in any material respect or may be
reasonably anticipated to increase in any material respect above historical
levels, or (B) the general creditworthiness of account debtors has declined
or (ii) reduce the lending formula(s) with respect to Eligible Inventory to
the extent that Lender determines that: (A) the number of days of the
turnover, or the mix, of the Inventory for any period has changed in any
material respect or (B) the liquidation value of the Eligible Inventory, or
any category thereof, has decreased, or (C) the nature and quality of the
Inventory has deteriorated in any material respect. In determining whether
to reduce the lending formula(s), Lender may consider events, conditions,
contingencies or risks which are also considered in determining Eligible
Accounts, Eligible Inventory or in establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount
of the Loans, the Letter of Credit Accommodations and other Obligations
outstanding at any time shall not exceed the Maximum Credit. In the event
that the outstanding amount of any component of the Loans, or the aggregate
amount of the outstanding Loans, Letter of Credit Accommodations and other
Obligations exceed the amounts available under the lending formulas set forth
in Section 2.1(a) hereof, the sublimits for Letter of Credit Accommodations
set forth in Section 2.2(c) or the Maximum Credit, as applicable, such event
shall not limit, waive or otherwise affect any rights of Lender in that
circumstance or on any future occasions and Borrower shall, upon demand by
Lender, which may be made at any time or from time to time, immediately repay
to Lender the entire amount of any such excess(es) for which payment is
demanded.
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(d) Without limiting any of the other provisions of this
Agreement, all payments of principal and interest and all other sums received
by Borrower under that certain promissory note dated March 31, 1998 in the
original principal amount of $650,000, which Borrower represents has an
unpaid principal balance of $650,000, made by ▇▇▇▇▇▇ Circuits, Inc. (the
"▇▇▇▇▇▇'▇ Note") shall be remitted by Borrower to Lender to be applied to the
Revolving Loans.
2.2 LETTER OF CREDIT ACCOMMODATIONS.
(a) Subject to, and upon the terms and conditions
contained herein, at the request of Borrower, Lender agrees to provide or
arrange for Letter of Credit Accommodations for the account of Borrower
containing terms and conditions acceptable to Lender and the issuer thereof.
Any payments made by Lender to any issuer thereof and/or related parties in
connection with the Letter of Credit Accommodations shall constitute
additional Revolving Loans to Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged
by any bank or issuer in connection with the Letter of Credit Accommodations,
Borrower shall pay to Lender a letter of credit fee at a rate equal to ONE
PERCENT (1%) per annum on the daily outstanding balance of the Letter of
Credit Accommodations for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month; PROVIDED,
HOWEVER, that such letter of credit fee shall be increased, at Lender's
option, without notice, to three percent (3%) per annum for the period on or
after the date of termination or non-renewal of this Agreement, or the date
of the occurrence of an Event of Default. Such letter of credit fee shall be
calculated on the basis of a three hundred sixty (360) day year and actual
days elapsed and the obligation of Borrower to pay such fee shall survive the
termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be
available unless on the date of the proposed issuance of any Letter of Credit
Accommodations, the Revolving Loans available to Borrower (subject to the
Maximum Credit and any Availability Reserves) are equal to or greater than:
(i) if the proposed Letter of Credit Accommodation is for the purpose of
purchasing Eligible Inventory, the sum of (A) the product of the Value of
such Eligible Inventory multiplied by an amount equal to one minus the then
applicable Inventory advance rate under Section 2.1(a)(ii), plus (B) freight,
taxes, duty and other amounts which Lender estimates must be paid in
connection with such Inventory upon arrival and for delivery to one of
Borrower's locations for Eligible Inventory within the United States of
America and (ii) if the proposed Letter of Credit Accommodation is for
standby letters of credit guaranteeing the purchase of Eligible Inventory or
for any other purpose, an amount equal to one hundred percent (100%) of the
face amount thereof and all other commitments and obligations made or
incurred by Lender with respect thereto. Effective on the issuance of each
Letter of Credit Accommodation, the amount of Revolving Loans which might
otherwise be available to Borrower shall be reduced by the applicable amount
set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, (i) the amount of all
outstanding Letter of Credit Accommodations and all other commitments and
obligations made or incurred by Lender in connection therewith, shall not at
any time exceed $1,000,000, and (ii) the amount of all outstanding Letter of
Credit Accommodations for the purpose of purchasing Eligible Inventory
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and all other commitments and obligations made or incurred by Lender in
connection therewith shall not at any time exceed: (A) $500,000 minus the
amount of the then outstanding Revolving Loans based on Eligible Inventory
consisting of finished goods, pursuant to Section 2.1(a)(ii) hereof, plus (B)
$1,000,000 minus the amount of the then outstanding Revolving Loans based on
Eligible Inventory consisting of raw materials, pursuant to Section
2.1(a)(ii) hereof. At any time an Event of Default exists or has occurred
and is continuing, upon Lender's request, Borrower will either furnish cash
collateral to secure the reimbursement obligations to the issuer in
connection with any Letter of Credit Accommodations or furnish cash
collateral to Lender for the Letter of Credit Accommodations, and in either
case, the Revolving Loans otherwise available to Borrower shall not be
reduced as provided in Section 2.2(c) to the extent of such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless
from and against any and all losses, claims, damages, liabilities, costs and
expenses which Lender may suffer or incur in connection with any Letter of
Credit Accommodations and any documents, drafts or acceptances relating
thereto, including, but not limited to, any losses, claims, damages,
liabilities, costs and expenses due to any action taken by any issuer or
correspondent with respect to any Letter of Credit Accommodation. Borrower
assumes all risks with respect to the acts or omissions of the drawer under
or beneficiary of any Letter of Credit Accommodation and for such purposes
the drawer or beneficiary shall be deemed Borrower's agent. Borrower assumes
all risks for, and agrees to pay, all foreign, Federal, State and local
taxes, duties and levies relating to any goods subject to any Letter of
Credit Accommodations or any documents, drafts or acceptances thereunder.
Borrower hereby releases and holds Lender harmless from and against any acts,
waivers, errors, delays or omissions, whether caused by Borrower, by any
issuer or correspondent or otherwise, unless caused by the gross negligence
or willful misconduct of Lender, with respect to or relating to any Letter of
Credit Accommodation. The provisions of this Section 2.2(e) shall survive
the payment of Obligations and the termination or non-renewal of this
Agreement.
(f) Nothing contained herein shall be deemed or
construed to grant Borrower any right or authority to pledge the credit of
Lender in any manner. Lender shall have no liability of any kind with respect
to any Letter of Credit Accommodation provided by an issuer other than Lender
unless Lender has duly executed and delivered to such issuer the application
or a guarantee or indemnification in writing with respect to such Letter of
Credit Accommodation. Borrower shall be bound by any interpretation made in
good faith by Lender, or any other issuer or correspondent under or in
connection with any Letter of Credit Accommodation or any documents, drafts
or acceptances thereunder, notwithstanding that such interpretation may be
inconsistent with any instructions of Borrower. Lender shall have the sole
and exclusive right and authority to, and Borrower shall not: (i) at any time
an Event of Default exists or has occurred and is continuing, (A) approve or
resolve any questions of non-compliance of documents, (B) give any
instructions as to acceptance or rejection of any documents or goods or (C)
execute any and all applications for steamship or airway guaranties,
indemnities or delivery orders, and (ii) at all times, (A) grant any
extensions of the maturity of, time of payment for, or time of presentation
of, any drafts, acceptances, or documents, and (B) agree to any amendments,
renewals, extensions, modifications, changes or cancellations of any of the
terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances
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thereunder or any letters of credit included in the
Collateral. Lender may take such actions either in its own name or in
Borrower's name.
(g) Any rights, remedies, duties or obligations granted
or undertaken by Borrower to any issuer or correspondent in any application
for any Letter of Credit Accommodation, or any other agreement in favor of
any issuer or correspondent relating to any Letter of Credit Accommodation,
shall be deemed to have been granted or undertaken by Borrower to Lender.
Any duties or obligations undertaken by Lender to any issuer or correspondent
in any application for any Letter of Credit Accommodation, or any other
agreement by Lender in favor of any issuer or correspondent relating to any
Letter of Credit Accommodation, shall be deemed to have been undertaken by
Borrower to Lender and to apply in all respects to Borrower.
2.3 TERM LOAN.
(a) Lender is making Term Loans to Borrower in the
following original principal amounts (which, as provided in Section 1.33, are
collectively referred to in this Agreement as the "Term Loan"):
Microtel International, Inc. $729,000
XIT Corporation $379,000
CXR Telcom Corporation $193,000
Hycomp, Inc. $334,000
The Term Loan is (a) evidenced by Term Promissory Notes in the above original
principal amounts duly executed and delivered by above Borrowers to Lender
concurrently herewith; (b) to be repaid, together with interest and other
amounts, in accordance with this Agreement, the Term Promissory Notes, and
the other Financing Agreements and (c) secured by all of the Collateral.
Borrower represents and warrants that the appraisal of its equipment, on
which the amount of the Term Loan was based, did not include any equipment
which was subject to any liens or security interests in favor of any other
party (other than those being terminated concurrently herewith).
(b) The Term Loan shall be repayable in 60 equal monthly
installments of principal commencing on the first day of the first month
following the date the Term Loan is made and continuing on the same day of
each succeeding month, provided that the entire unpaid principal balance of
the Term Loan shall be due and payable on expiration of the term of this
Agreement or termination of this Agreement by either party as provided
herein.
(c) Borrower may, at its expense, have all (but not less
than all) of its machinery and equipment located in the State of California,
which is free and clear of any and all other liens and security interests
(including Permitted Liens), appraised by ▇▇▇▇▇▇ ▇▇▇▇ Co. within 30 days
after the date hereof, and in the event such appraisal is acceptable to
Lender in its discretion, the amount of the Term Loan shall be adjusted to an
amount not to exceed the lesser of (i) 100% of the auction value of all of
such equipment net of Lender's estimate as to the costs and expenses of sale
thereof (without duplication), or (ii) 80% of the orderly liquidation value
of
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all such equipment net of Lender's estimate as to the costs and expenses
of sale thereof (without duplication), or (iii) $3,500,000. In the event the
amount of the Term Loan is so adjusted, the regular principal payments
thereunder shall be adjusted so that each regular principal payment is in an
amount equal to the adjusted principal amount thereof divided by the number
of remaining payments.
2.4 CAP EX LOANS.
Subject to, and upon the terms and conditions contained
herein, Lender agrees to make loans (the "Cap Ex Loans") to Borrower from
time to time in amounts requested by Borrower up to 75% of the net purchase
price of new Equipment purchased after the date hereof and acceptable to
Lender in its discretion (provided that not more than $1,000,000 in Cap Ex
Loans shall be made hereunder). Cap Ex Loans may not be re-borrowed after
being repaid. The net purchase price of Equipment means the purchase price
thereof, as shown on the applicable invoice, net of all charges for taxes,
freight, delivery, insurance, installation, set-up, training, manuals, fees,
service charges and other similar items. Cap Ex Loans shall be made in
disbursements of not less than $200,000 each and the proceeds of Cap Ex Loans
shall be used exclusively to purchase the applicable Equipment. Each Cap Ex
Loan shall be repaid by the Borrower to Lender in 60 equal monthly payments
of principal, commencing on the first day of the first month after such Cap
Ex Loan was disbursed and continuing until the earlier of the date such Cap
Ex Loan has been paid in full or the date this Agreement terminates by its
terms or is terminated, at which date the entire unpaid principal balance of
the Cap Ex Loans, plus all accrued and unpaid interest thereon, shall be due
and payable.
SECTION 3. INTEREST AND FEES.
3.1 INTEREST.
(a) Borrower shall pay to Lender interest on the
outstanding principal amount of the non-contingent Obligations as follows:
(1) Borrower shall pay to Lender interest on the
outstanding principal amount of the Revolving Loans at the rate of one
percent (1%) per annum in excess of the Prime Rate; provided that, regardless
of the amount of Revolving Loans outstanding in any month, Borrower shall pay
Lender minimum interest on the Revolving Loans in an amount equal to the
interest which would have been payable thereon at the interest rate in effect
during such month, if the unpaid principal balance of the Revolving Loans was
$2,500,000 throughout such month.
(2) Borrower shall pay to Lender interest on the
outstanding principal amount of the Term Loan and the Cap Ex Loans at the
rate of one and one-quarter percent (1.25%) per annum in excess of the Prime
Rate.
Notwithstanding the foregoing, Borrower shall pay to Lender interest, at
Lender's option, without notice, (i) at the rate of 3% per annum in excess of
the Prime Rate (in the case of the Revolving Loans) and at the rate of 3.25%
per annum in excess of the Prime Rate (in the case of the Term Loan and the
Cap Ex Loans) on the non-contingent Obligations for the period from and after
the date of termination or non-renewal hereof, or the date of the occurrence
of an Event of Default,
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and for so long as such Event of Default is continuing as determined by
Lender and until such time as Lender has received full and final payment of
all such Obligations (notwithstanding entry of any judgment against
Borrower), and (ii) at the rate of 3% per annum in excess of the Prime Rate
on the Revolving Loans at any time outstanding in excess of the amounts
available to Borrower under Section 2 (whether or not such excess(es), arise
or are made with or without Lender's knowledge or consent and whether made
before or after an Event of Default). All interest accruing hereunder on and
after the occurrence of any of the events referred to in Sections 3.1(a)(i)
or 3.1(a)(ii) above shall be payable on demand.
(b) Interest shall be payable by Borrower to Lender
monthly in arrears not later than the first day of each calendar month and
shall be calculated on the basis of a three hundred sixty (360) day year and
actual days elapsed. The interest rate shall increase or decrease by an
amount equal to each increase or decrease in the Prime Rate effective on the
first day of the month after any change in such Prime Rate is announced based
on the Prime Rate in effect on the last day of the month in which any such
change occurs. In no event shall charges constituting interest payable by
Borrower to Lender exceed the maximum amount or the rate permitted under any
applicable law or regulation, and if any part or provision of this Agreement
is in contravention of any such law or regulation, such part or provision
shall be deemed amended to conform thereto.
3.2 CLOSING FEE. Borrower shall pay to Lender as a closing
fee the amount of $105,000, which shall be fully earned as of the date
hereof. Said closing fee shall be payable $75,000 on the date hereof, and
the balance of $30,000 shall be payable on the earlier of (i) the first
anniversary of the date hereof, or (ii) the date this Loan Agreement
terminates by its terms or is terminated by either party as provided herein.
3.3 FACILITY FEE. [Intentionally Omitted.]
3.4 SERVICING FEE. Borrower shall pay to Lender annually a
servicing fee in an amount equal to $36,000 in respect of Lender's services
for each year (or part thereof) while this Agreement remains in effect and
for so long thereafter as any of the Obligations are outstanding, which fee
shall be fully earned in advance as of the date hereof and on each annual
anniversary hereafter, such annual servicing fee to be payable on a
semi-annual basis, in advance, with the first such semi-annual payment, in
the amount of $18,000, payable on the date hereof and successive semi-annual
payments hereafter, each in the amount of $18,000, on the first day of each
six month period hereafter.
3.5 UNUSED LINE FEE. [Intentionally Omitted.]
3.6 COMPENSATION ADJUSTMENT.
(a) If after the date of this Agreement the introduction
of, or any change in, any law or any governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any
interpretation thereof, or compliance by Lender or any Participant therewith:
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(i) subjects Lender to any tax, duty, charge or
withholding on or from payments due from Borrower (excluding
franchise taxes imposed upon, and taxation of the overall net
income of, Lender or any Participant), or changes the basis of
taxation of payments, in either case in respect of amounts due
it hereunder, or
(ii) imposes or increases or deems applicable any
reserve requirement or other reserve, assessment, insurance
charge, special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended by
Lender or any Participant, or
(iii) imposes any other condition the result of
which is to increase the cost to Lender or any Participant of
making, funding or maintaining the Revolving Loans or Letter
of Credit Accommodations or reduces any amount receivable by
Lender or any Participant in connection with the Loans or
Letter of Credit Accommodations, or requires Lender or any
Participant to make payment calculated by references to the
amount of loans held or interest received by it, by an amount
deemed material by Lender or any Participant, or
(iv) imposes or increases any capital requirement or
affects the amount of capital required or expected to be
maintained by Lender or any Participant or any corporation
controlling Lender or any Participant, and Lender or any
Participant determines that such imposition or increase in
capital requirements or increase in the amount of capital
expected to be maintained is based upon the existence of this
Agreement or the Loans or Letter of Credit Accommodations
hereunder, all of which may be determined by Lender's
reasonable allocation of the aggregate of its impositions or
increases in capital required or expected to be maintained,
and the result of any of the foregoing is to increase the cost
to Lender or any Participant of making, renewing or
maintaining the Loans or Letter of Credit Accommodations, or
to reduce the rate of return to Lender or any Participant on
the Loans or Letter of Credit Accommodations, then upon demand
by Lender, Borrower shall pay to Lender, and continue to make
periodic payments to Lender or any Participant, such
additional amounts as may be necessary to compensate Lender or
any Participant for any such additional cost incurred or
reduced rate of return realized.
(b) A certificate of Lender claiming entitlement to
compensation as set forth above will be conclusive in the absence of manifest
error. Such certificate will set forth the nature of the occurrence giving
rise to such compensation, the additional amount or amounts to be paid and
the compensation and the method by which such amounts were determined. In
determining any additional amounts due from Borrower under this Section 3.6,
Lender shall act reasonably and in good faith and will, to the extent that
the increased costs, reductions, or amounts received or receivable relate to
the Lender's or a Participant's loans or commitments generally and are not
specifically attributable to the Loans and commitments hereunder, use
averaging and attribution methods which are reasonable and equitable and
which cover all loans and commitments under this Agreement by the Lender or
such Participant, as the case may be, whether or not the loan documentation
for such other loans and commitments permits the Lender or such Participant
to receive compensation costs of the type described in this Section 3.6.
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SECTION 4. CONDITIONS PRECEDENT.
4.1 CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTER OF
CREDIT ACCOMMODATIONS. Each of the following is a condition precedent to
Lender making the initial Loans and providing the initial Letter of Credit
Accommodations hereunder:
(a) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other documents
as Lender may request to evidence and effectuate the termination of any
interest in and to any assets and properties of Borrower, duly authorized,
executed and delivered by it or each of them, including, but not limited to,
UCC termination statements for all UCC financing statements and Lender shall
have satisfied itself that it has valid, perfected and first priority
security interests in and liens upon the Collateral and any other property
which is intended as security for the Obligations, or the liability of any
Obligor in respect thereto, subject only to the security interests and liens
permitted herein or in the other Financing Agreements;
(b) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received
all information and copies of all documents, including, without limitation,
records of requisite corporate action and proceedings which Lender may have
requested in connection therewith, such documents where requested by Lender
or its counsel to be certified by appropriate corporate officers or
governmental authorities;
(c) no material adverse change shall have occurred in
the assets, business or prospects of Borrower since the date of Lender's
latest field examination and no change or event shall have occurred which
would impair the ability of Borrower or any Obligor to perform its
obligations hereunder or under any of the other Financing Agreements to which
it is a party or of Lender to enforce the Obligations or realize upon the
Collateral;
(d) Lender shall have completed a field review of the
Records and of such other financial information, projections, budgets,
business plans and cash flows as Lender shall reasonably request from time to
time, including, but not limited to, current agings of receivables, current
perpetual inventory records and/or rollforwards of Accounts and Inventory
through the date of closing (including a physical count of the Inventory by a
third party acceptable to Lender), together with supporting documentation,
including documentation with respect to Inventory in-transit, goods in bonded
warehouses or at other third-party locations, that will enable Lender to
accurately identify and verify the eligible Collateral at or before closing
in a manner satisfactory to Lender, the results of which shall be
satisfactory to Lender;
(e) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement
and the other Financing Agreements, including, without limitation,
acknowledgments by lessors, mortgagees and warehousemen of Lender's security
interests in the Collateral, waivers by such persons of any security
interests, liens or other claims by such persons to the Collateral and
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agreements permitting Lender access to, and the right to remain on, the
premises to exercise its rights and remedies and otherwise deal with the
Collateral;
(f) Lender shall have received evidence of insurance and
loss payee endorsements required hereunder and under the other Financing
Agreements, in form and substance satisfactory to Lender, and certificates of
insurance policies and/or endorsements naming Lender as loss payee;
(g) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrower with
respect to the Financing Agreements and such other matters as Lender may
request, provided that the legal opinion with respect to the due
incorporation, valid existence and good-standing of Hycomp, Inc. shall be
provided by Borrower to Lender within 30 days after the date hereof;
(h) the Excess Availability as determined by Lender as
of the date hereof, shall be satisfactory to Lender, in its discretion, after
giving effect to the initial Loans made or to be made hereunder and the
payment of all fees and expenses payable upon the consummation of the initial
transactions contemplated by this Agreement;
(i) Lender shall have received, in form and substance
satisfactory to Lender and its counsel, the assignment of all of Borrower's
rights in registered patents, trademarks, service marks and copyrights, as
Collateral hereunder, on Lender's standard forms of Collateral Assignments;
(j) Lender shall have received, in form and substance
satisfactory to Lender, an executed copy of a Blocked Account Agreement,
pursuant to Section 6.3(ii) hereof, among Lender, Borrower and such banks as
Lender shall specify; and
(k) the other Financing Agreements and all instruments
and documents hereunder and thereunder shall have been duly executed and
delivered to Lender, in form and substance satisfactory to Lender; and
(l) Imperial Bank shall have terminated its security
interests in all assets of all Borrowers, and any other holders of a security
interest in Borrower's assets including, without limitation, vendors of
Inventory to Borrower, shall have executed intercreditor and subordination
agreements in form and substance satisfactory to Lender; and
(m) Borrower shall have executed and delivered to Lender
a Security Agreement, in such form as Lender shall specify, with respect to
Borrower's partnership interest in Capital Source Partners, a Real Estate
Partnership, a California general partnership, which is the owner of the real
property located at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, California, acknowledged and
agreed to by said partnership and the other partner therein.
(n) Borrower shall have received additional cash equity
contributions, concurrently herewith, in an amount not less than $900,000,
and Lender shall have received evidence thereof satisfactory to Lender.
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(o) Lender shall have received cross-corporate
continuing guaranties executed by each Borrower with respect to the
Obligations of the other Borrowers, on such form as it shall specify.
(p) Lender shall have received the original ▇▇▇▇▇▇'▇
Note, duly endorsed to Lender.
(q) Lender shall have received, reviewed and approved
Borrower's audited December 31, 1997 financial statements.
4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTER OF CREDIT
ACCOMMODATIONS. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein
and in the other Financing Agreements shall be true and correct in all
material respects with the same effect as though such representations and
warranties had been made on and as of the date of the making of each such
Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto; and
(b) no Event of Default and no event or condition which,
with notice or passage of time or both, would constitute an Event of Default,
shall exist or have occurred and be continuing on and as of the date of the
making of such Loan or providing each such Letter of Credit Accommodation and
after giving effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST.
To secure payment and performance of all Obligations, Borrower
hereby grants to Lender a continuing security interest in, a lien upon, and a
right of set off against, and hereby assigns to Lender as security, the
following property and interests in property, whether now owned or hereafter
acquired or existing, and wherever located (collectively, the "Collateral"):
5.1 Accounts;
5.2 All present and future contract rights, general
intangibles (including, but not limited to, tax and duty refunds, registered
and unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, choses
in action and other claims and existing and future leasehold interests in
equipment, real estate and fixtures), chattel paper, documents, instruments,
investment property, letters of credit, bankers' acceptances and guaranties,
(including without limitation the ▇▇▇▇▇▇'▇ Note);
5.3 All present and future monies, securities, credit
balances, deposits, deposit accounts and other property of Borrower now or
hereafter held or received by or in transit to Lender or its affiliates or at
any other depository or other institution from or for the account of
Borrower, whether for safekeeping, pledge, custody, transmission, collection
or otherwise, and
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all present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including,
without limitation, (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (c) goods described in invoices, documents,
contracts or instruments with respect to, or otherwise representing or
evidencing, Accounts or other Collateral, including, without limitation,
returned, repossessed and reclaimed goods, and (d) deposits by and property
of account debtors or other persons securing the obligations of account
debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Records; and
5.7 All products and proceeds of the foregoing, in any form,
including, without limitation, insurance proceeds and all claims against
third parties for loss or damage to or destruction of any or all of the
foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 BORROWER'S LOAN ACCOUNT. Lender shall maintain one or
more loan account(s) on its books in which shall be recorded (a) all Loans,
all Letter of Credit Accommodations and other Obligations and the Collateral,
(b) all payments made by or on behalf of Borrower and (c) all other
appropriate debits and credits as provided in this Agreement, including,
without limitation, fees, charges, costs, expenses and interest. All entries
in the loan account(s) shall be made in accordance with Lender's customary
practices as in effect from time to time.
6.2 STATEMENTS. Lender shall render to Borrower each month a
statement setting forth the balance in the Borrower's loan account(s)
maintained by Lender for Borrower pursuant to the provisions of this
Agreement, including principal, interest, fees, costs and expenses. Each
such statement shall be subject to subsequent adjustment by Lender but shall,
absent manifest errors or omissions, be considered correct and deemed
accepted by Borrower and conclusively binding upon Borrower as an account
stated except to the extent that Lender receives a written notice from
Borrower of any specific exceptions of Borrower thereto within thirty (30)
days after the date such statement has been mailed by Lender. Until such time
as Lender shall have rendered to Borrower a written statement as provided
above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing to Lender by Borrower.
6.3 COLLECTION OF ACCOUNTS.
(a) Borrower shall establish and maintain, at its
expense, blocked accounts or lockboxes and related blocked accounts (in
either case, "Blocked Accounts"), as Lender may specify, with such banks as
are acceptable to Lender into which Borrower shall promptly deposit and
direct its account debtors to directly remit all payments on Accounts and all
payments constituting proceeds of Inventory or other Collateral in the
identical form in which such
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payments are made, whether by cash, check or other manner. The banks at
which the Blocked Accounts are established shall enter into an agreement, in
form and substance satisfactory to Lender, providing that all items received
or deposited in the Blocked Accounts are the property of Lender, that the
depository bank has no lien upon, or right to setoff against, the Blocked
Accounts, the items received for deposit therein, or the funds from time to
time on deposit therein and that the depository bank will wire, or otherwise
transfer, in immediately available funds, on a daily basis, all funds
received or deposited into the Blocked Accounts to such bank account of
Lender as Lender may from time to time designate for such purpose ("Payment
Account"). Borrower agrees that all payments made to such Blocked Accounts
or other funds received and collected by Lender, whether on the Accounts or
as proceeds of Inventory or other Collateral or otherwise shall be the
property of Lender.
(b) For purposes of calculating interest on the
Obligations, such payments or other funds received will be applied
(conditional upon final collection) to the Obligations one (1) Business Days
following the date of receipt of immediately available funds by Lender in the
Payment Account, or one (1) Business Day following the date of receipt of
funds that are not immediately available to Lender in the Payment Account, as
applicable. For purposes of calculating the amount of the Revolving Loans
available to Borrower such payments will be applied (conditional upon final
collection) to the Obligations on the Business Day of receipt by Lender in
the Payment Account, if such payments are received within sufficient time (in
accordance with Lender's usual and customary practices as in effect from time
to time) to credit Borrower's loan account on such day, and if not, then on
the next Business Day. In the event that there are no outstanding monetary
Obligations at the time such payments or other funds are received, Borrower
shall pay a Lender a charge (the "Float Charge") in an amount equal to
interest at the Reduced Prime Rate on the amount of such payment or other
funds, for one (1) Business Day following the date of receipt of immediately
available funds by Lender in the Payment Account, or two (2) Business Days
following the date of receipt of funds that are not immediately available to
Lender in the Payment Account, as applicable.
(c) Borrower and all of its affiliates, subsidiaries,
shareholders, directors, employees or agents shall, acting as trustee for
Lender, receive, as the property of Lender, any monies, checks, notes, drafts
or any other payment relating to and/or proceeds of Accounts or other
Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to be
deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Lender. In no event shall the same be commingled with
Borrower's own funds. Borrower agrees to reimburse Lender on demand for any
amounts owed or paid to any bank at which a Blocked Account is established or
any other bank or person involved in the transfer of funds to or from the
Blocked Accounts arising out of Lender's payments to or indemnification of
such bank or person, unless such payment or indemnification obligation of
Lender was a result of Lender's gross negligence or willful misconduct. The
obligation of Borrower to reimburse Lender for such amounts pursuant to this
Section 6.3 shall survive the termination or non-renewal of this Agreement.
6.4 PAYMENTS. All Obligations shall be payable to the
Payment Account as provided in Section 6.3 or such other place as Lender may
designate from time to time. Lender may apply payments received or collected
from Borrower or for the account of Borrower (including, without
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limitation, the monetary proceeds of collections or of realization upon any
Collateral) to such of the Obligations, whether or not then due, in such
order and manner as Lender determines. At Lender's option, all principal,
interest, fees, costs, expenses and other charges provided for in this
Agreement or the other Financing Agreements may be charged directly to the
loan account(s) of Borrower. Borrower shall make all payments to Lender on
the Obligations free and clear of, and without deduction or withholding for
or on account of, any setoff, counterclaim, defense, duties, taxes, levies,
imposts, fees, deductions, withholding, restrictions or conditions of any
kind. If after receipt of any payment of, or proceeds of Collateral applied
to the payment of, any of the Obligations, Lender is required to surrender or
return such payment or proceeds to any Person for any reason, then the
Obligations intended to be satisfied by such payment or proceeds shall be
reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Lender.
Borrower shall be liable to pay to Lender, and does hereby indemnify and hold
Lender harmless for the amount of any payments or proceeds surrendered or
returned. This Section 6.4 shall remain effective notwithstanding any
contrary action which may be taken by Lender in reliance upon such payment or
proceeds. This Section 6.4 shall survive the payment of the Obligations and
the termination or non-renewal of this Agreement.
6.5 AUTHORIZATION TO MAKE LOANS. Lender is authorized to
make the Loans and provide the Letter of Credit Accommodations based upon
telephonic or other instructions received from anyone purporting to be an
officer of Borrower or other authorized person or, at the discretion of
Lender, if such Loans are necessary to satisfy any Obligations. All requests
for Loans or Letter of Credit Accommodations hereunder shall specify the date
on which the requested advance is to be made or Letter of Credit
Accommodations established (which day shall be a Business Day) and the amount
of the requested Loan. Requests received after 10:30 a.m. (Los Angeles time)
on any day shall be deemed to have been made as of the opening of business on
the immediately following Business Day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have
been made to, and at the request of and for the benefit of, Borrower when
deposited to the credit of Borrower or otherwise disbursed or established in
accordance with the instructions of Borrower or in accordance with the terms
and conditions of this Agreement.
6.6 USE OF PROCEEDS. Borrower shall use the initial proceeds
of the Loans provided by Lender to Borrower hereunder only for: (a) payments
to each of the persons listed in the disbursement direction letter furnished
by Borrower to Lender on or about the date hereof and (b) costs, expenses and
fees in connection with the preparation, negotiation, execution and delivery
of this Agreement and the other Financing Agreements. All other Loans made
or Letter of Credit Accommodations provided by Lender to Borrower pursuant to
the provisions hereof shall be used by Borrower only for general operating,
working capital and other proper corporate purposes of Borrower not otherwise
prohibited by the terms hereof. None of the proceeds will be used, directly
or indirectly, for the purpose of purchasing or carrying any margin security
or for the purposes of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Loans to be considered a "purpose
credit" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System, as amended.
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SECTION 7. COLLATERAL REPORTING AND COVENANTS.
7.1 COLLATERAL REPORTING. Borrower shall provide Lender with
the following documents in a form satisfactory to Lender: (a) on a regular
basis as required by Lender, a schedule of Accounts; (b) on a monthly basis
or more frequently as Lender may request, (i) perpetual inventory reports,
(ii) inventory reports by category, and reports as to inventory reserves, and
(iii) agings of accounts payable, (c) upon Lender's request, (i) copies of
customer statements and credit memos, remittance advices and reports, and
copies of deposit slips and bank statements, (ii) copies of shipping and
delivery documents, and (iii) copies of purchase orders, invoices and
delivery documents for Inventory and Equipment acquired by Borrower; (d)
agings of accounts receivable on a monthly basis or more frequently as Lender
may request; and (e) such other reports as to the Collateral as Lender shall
request from time to time. If any of Borrower's records or reports of the
Collateral are prepared or maintained by an accounting service, contractor,
shipper or other agent, Borrower hereby irrevocably authorizes such service,
contractor, shipper or agent to deliver such records, reports, and related
documents to Lender and to follow Lender's instructions with respect to
further services at any time that an Event of Default exists or has occurred
and is continuing.
7.2 ACCOUNTS COVENANTS.
(a) Borrower shall notify Lender promptly of: (i) any
material delay in Borrower's performance of any of its obligations to any
account debtor or the assertion of any claims, offsets, defenses or
counterclaims by any account debtor, or any disputes with account debtors, or
any settlement, adjustment or compromise thereof, (ii) all material adverse
information relating to the financial condition of any account debtor and
(iii) any event or circumstance which, to Borrower's knowledge would cause
Lender to consider any then existing Accounts as no longer constituting
Eligible Accounts. No credit, discount, allowance or extension or agreement
for any of the foregoing shall be granted to any account debtor without
Lender's consent, except in the ordinary course of Borrower's business in
accordance with practices and policies previously disclosed in writing to
Lender. So long as no Event of Default exists or has occurred and is
continuing, Borrower shall settle, adjust or compromise any claim, offset,
counterclaim or dispute with any account debtor. At any time that an Event
of Default exists or has occurred and is continuing, Lender shall, at its
option, have the exclusive right to settle, adjust or compromise any claim,
offset, counterclaim or dispute with account debtors or grant any credits,
discounts or allowances.
(b) Borrower shall promptly report to Lender any return
of Inventory by an account debtor having a sales price in excess of $10,000.
At any time that Inventory is returned, reclaimed or repossessed, the related
Account shall not be deemed an Eligible Account. In the event any account
debtor returns Inventory when an Event of Default exists or has occurred and
is continuing, Borrower shall, upon Lender's request, (i) hold the returned
Inventory in trust for Lender, (ii) segregate all returned Inventory from all
of its other property, (iii) dispose of the returned Inventory solely
according to Lender's instructions, and (iv) not issue any credits, discounts
or allowances with respect thereto without Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown
on any invoice delivered to Lender or schedule thereof delivered to Lender
shall be true and complete, (ii) no
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payments shall be made thereon except payments immediately delivered to
Lender pursuant to the terms of this Agreement, (iii) no credit, discount,
allowance or extension or agreement for any of the foregoing shall be granted
to any account debtor except as reported to Lender in accordance with this
Agreement and except for credits, discounts, allowances or extensions made or
given in the ordinary course of Borrower's business in accordance with
practices and policies previously disclosed to Lender, (iv) there shall be no
setoffs, deductions, contras, defenses, counterclaims or disputes existing or
asserted with respect thereto except as reported to Lender in accordance with
the terms of this Agreement, (v) none of the transactions giving rise thereto
will violate any applicable State or Federal laws or regulations, all
documentation relating thereto will be legally sufficient under such laws and
regulations and all such documentation will be legally enforceable in
accordance with its terms.
(d) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by
mail, telephone, facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to
Lender, with appropriate endorsement and assignment, with full recourse to
Borrower, all chattel paper and instruments which Borrower now owns or may at
any time acquire immediately upon Borrower's receipt thereof, except as
Lender may otherwise agree.
(f) Lender may, at any time or times that an Event of
Default exists or has occurred and is continuing, (i) notify any or all
account debtors that the Accounts have been assigned to Lender and that
Lender has a security interest therein and Lender may direct any or all
accounts debtors to make payment of Accounts directly to Lender, (ii) extend
the time of payment of, compromise, settle or adjust for cash, credit, return
of merchandise or otherwise, and upon any terms or conditions, any and all
Accounts or other obligations included in the Collateral and thereby
discharge or release the account debtor or any other party or parties in any
way liable for payment thereof without affecting any of the Obligations,
(iii) demand, collect or enforce payment of any Accounts or such other
obligations, but without any duty to do so, and Lender shall not be liable
for its failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Lender may deem necessary or desirable for the
protection of its interests. At any time that an Event of Default exists or
has occurred and is continuing, at Lender's request, all invoices and
statements sent to any account debtor shall state that the Accounts and such
other obligations have been assigned to Lender and are payable directly and
only to Lender and Borrower shall deliver to Lender such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Lender may require.
7.3 INVENTORY COVENANTS. With respect to the Inventory: (a)
Borrower shall at all times maintain inventory records reasonably
satisfactory to Lender, keeping correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, Borrower's cost
therefor and daily withdrawals therefrom and additions thereto; (b) Borrower
shall conduct a physical count of the Inventory at least once each year, but
at any time or times as Lender may request on or after an Event of Default,
and promptly following such physical inventory shall supply Lender with a
report in the form and with such specificity as may be reasonably
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satisfactory to Lender concerning such physical count; (c) Borrower shall not
remove any Inventory from the locations set forth or permitted herein,
without the prior written consent of Lender, except for sales of Inventory in
the ordinary course of Borrower's business and except to move Inventory
directly from one location set forth or permitted herein to another such
location; (d) upon Lender's request, Borrower shall, at its expense, no more
than once in any twelve (12) month period, but at any time or times as Lender
may request on or after an Event of Default, deliver or cause to be delivered
to Lender written reports or appraisals as to the Inventory in form, scope
and methodology acceptable to Lender and by an appraiser acceptable to
Lender, addressed to Lender or upon which Lender is expressly permitted to
rely; (e) Borrower shall produce, use, store and maintain the Inventory, with
all reasonable care and caution and in accordance with applicable standards
of any insurance and in conformity with applicable laws (including, but not
limited to, the requirements of the Federal Fair Labor Standards Act of 1938,
as amended and all rules, regulations and orders related thereto); (f)
Borrower assumes all responsibility and liability arising from or relating to
the production, use, sale or other disposition of the Inventory; (g) Borrower
shall not sell Inventory to any customer on approval, or any other basis
which entitles the customer to return or may obligate Borrower to repurchase
such Inventory; (h) Borrower shall keep the Inventory in good and marketable
condition; and (i) Borrower shall not, without prior written notice to
Lender, acquire or accept any Inventory on consignment or approval.
7.4 EQUIPMENT COVENANTS. With respect to the Equipment: (a)
upon Lender's request, Borrower shall, at its expense, at any time or times
as Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to the Equipment in
form, scope and methodology acceptable to Lender and by an appraiser
acceptable to Lender; (b) Borrower shall keep the Equipment in good order,
repair, running and marketable condition (ordinary wear and tear excepted);
(c) Borrower shall use the Equipment with all reasonable care and caution and
in accordance with applicable standards of any insurance and in conformity
with all applicable laws; (d) the Equipment is and shall be used in
Borrower's business and not for personal, family, household or farming use;
(e) Borrower shall not remove any Equipment from the locations set forth or
permitted herein, except to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of Borrower or
to move Equipment directly from one location set forth or permitted herein to
another such location and except for the movement of motor vehicles used by
or for the benefit of Borrower in the ordinary course of business; (f) the
Equipment is now and shall remain personal property and Borrower shall not
permit any of the Equipment to be or become a part of or affixed to real
property; and (g) Borrower assumes all responsibility and liability arising
from the use of the Equipment.
7.5 POWER OF ATTORNEY. Borrower hereby irrevocably
designates and appoints Lender (and all persons designated by Lender) as
Borrower's true and lawful attorney-in-fact, and authorizes Lender, in
Borrower's or Lender's name, to: (a) at any time an Event of Default or event
which with notice or passage of time or both would constitute an Event of
Default exists or has occurred and is continuing (i) demand payment on
Accounts or other proceeds of Inventory or other Collateral, (ii) enforce
payment of Accounts by legal proceedings or otherwise, (iii) exercise all of
Borrower's rights and remedies to collect any Account or other Collateral,
(iv) sell or assign any Account upon such terms, for such amount and at such
time or times as the Lender
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deems advisable, (v) settle, adjust, compromise, extend or renew an Account,
(vi) discharge and release any Account, (vii) prepare, file and sign
Borrower's name on any proof of claim in bankruptcy or other similar document
against an account debtor, (viii) notify the post office authorities to
change the address for delivery of Borrower's mail to an address designated
by Lender, and open and dispose of all mail addressed to Borrower, and (ix)
do all acts and things which are necessary, in Lender's determination, to
fulfill Borrower's obligations under this Agreement and the other Financing
Agreements and (b) at any time to (i) take control in any manner of any item
of payment or proceeds thereof, (ii) have access to any lockbox or postal box
into which Borrower's mail is deposited, (iii) endorse Borrower's name upon
any items of payment or proceeds thereof and deposit the same in the Lender's
account for application to the Obligations, (iv) endorse Borrower's name upon
any chattel paper, document, instrument, invoice, or similar document or
agreement relating to any Account or any goods pertaining thereto or any
other Collateral, (v) sign Borrower's name on any verification of Accounts
and notices thereof to account debtors and (vi) execute in Borrower's name
and file any UCC financing statements or amendments thereto. Borrower hereby
releases Lender and its officers, employees and designees from any
liabilities arising from any act or acts under this power of attorney and in
furtherance thereof, whether of omission or commission, except as a result of
Lender's own gross negligence or willful misconduct as determined pursuant to
a final non-appealable order of a court of competent jurisdiction.
7.6 RIGHT TO CURE. Lender may, at its option, (a) cure any
default by Borrower under any agreement with a third party or pay or bond on
appeal any judgment entered against Borrower, (b) discharge taxes, liens,
security interests or other encumbrances at any time levied on or existing
with respect to the Collateral and (c) pay any amount, incur any expense or
perform any act which, in Lender's judgment, is necessary or appropriate to
preserve, protect, insure or maintain the Collateral and the rights of Lender
with respect thereto. Lender may add any amounts so expended to the
Obligations and charge Borrower's account therefor, such amounts to be
repayable by Borrower on demand. Lender shall be under no obligation to
effect such cure, payment or bonding and shall not, by doing so, be deemed to
have assumed any obligation or liability of Borrower. Any payment made or
other action taken by Lender under this Section shall be without prejudice to
any right to assert an Event of Default hereunder and to proceed accordingly.
7.7 ACCESS TO PREMISES. From time to time as requested by
Lender, at the cost and expense of Borrower, (a) Lender or its designee shall
have complete access to all of Borrower's premises during normal business
hours and after notice to Borrower, or at any time and without notice to
Borrower if an Event of Default exists or has occurred and is continuing, for
the purposes of inspecting, verifying and auditing the Collateral and all of
Borrower's books and records, including, without limitation, the Records, and
(b) Borrower shall promptly furnish to Lender such copies of such books and
records or extracts therefrom as Lender may request, and (c) use during
normal business hours such of Borrower's personnel, equipment, supplies and
premises as may be reasonably necessary for the foregoing and if an Event of
Default exists or has occurred and is continuing for the collection of
Accounts and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES.
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Borrower hereby represents and warrants to Lender the
following (which shall survive the execution and delivery of this Agreement),
the truth and accuracy of which are a continuing condition of the making of
Loans and the providing of Letter of Credit Accommodations by Lender to
Borrower:
8.1 CORPORATE EXISTENCE, POWER AND AUTHORITY; SUBSIDIARIES.
Borrower is a corporation duly organized and in good standing under the laws
of its state of incorporation and is duly qualified as a foreign corporation
and in good standing in all states or other jurisdictions where the nature
and extent of the business transacted by it or the ownership of assets makes
such qualification necessary, except for those jurisdictions in which the
failure to so qualify would not have a material adverse effect on Borrower's
financial condition, results of operation or business or the rights of Lender
in or to any of the Collateral. The execution, delivery and performance of
this Agreement, the other Financing Agreements and the transactions
contemplated hereunder and thereunder are all within Borrower's corporate
powers, have been duly authorized and are not in contravention of law or the
terms of Borrower's certificate of incorporation, by-laws, or other
organizational documentation, or any indenture, agreement or undertaking to
which Borrower is a party or by which Borrower or its property are bound.
This Agreement and the other Financing Agreements constitute legal, valid and
binding obligations of Borrower enforceable in accordance with their
respective terms. Borrower does not have any subsidiaries except as set
forth on the Information Certificate.
8.2 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. All
financial statements relating to Borrower which have been or may hereafter be
delivered by Borrower to Lender have been prepared in accordance with GAAP
and fairly present the financial condition and the results of operations of
Borrower as at the dates and for the periods set forth therein. Except as
disclosed in any interim financial statements furnished by Borrower to Lender
prior to the date of this Agreement, there has been no material adverse
change in the assets, liabilities, properties and condition, financial or
otherwise, of Borrower, since the date of the most recent audited financial
statements furnished by Borrower to Lender prior to the date of this
Agreement.
8.3 CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS. The chief
executive office of Borrower and Borrower's Records concerning Accounts are
located only at the address set forth below and its only other places of
business and the only other locations of Collateral, if any, are the
addresses set forth in the Information Certificate, subject to the right of
Borrower to establish new locations in accordance with Section 9.2 below.
The Information Certificate correctly identifies any of such locations which
are not owned by Borrower and sets forth the owners and/or operators thereof
and to the best of Borrower's knowledge, the holders of any mortgages on such
locations.
8.4 PRIORITY OF LIENS; TITLE TO PROPERTIES. The security
interests and liens granted to Lender under this Agreement and the other
Financing Agreements constitute valid and perfected first priority liens and
security interests in and upon the Collateral subject only to the liens
permitted under Section 9.8 hereof. Borrower has good and marketable title
to all of its properties and assets subject to no liens, mortgages, pledges,
security interests, encumbrances or charges of any kind, except those granted
to Lender and such others as are permitted under Section 9.8 hereof.
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8.5 TAX RETURNS. Borrower has filed, or caused to be filed,
in a timely manner all tax returns, reports and declarations which are
required to be filed by it (without requests for extension except as
previously disclosed in writing to Lender). All information in such tax
returns, reports and declarations is complete and accurate in all material
respects. Borrower has paid or caused to be paid all taxes due and payable
or claimed due and payable in any assessment received by it, except taxes the
validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower and with respect to
which adequate reserves have been set aside on its books. Adequate provision
has been made for the payment of all accrued and unpaid Federal, State,
county, local, foreign and other taxes whether or not yet due and payable and
whether or not disputed.
8.6 LITIGATION. Except as set forth on the Information
Certificate, there is no present investigation by any governmental agency
pending, or to the best of Borrower's knowledge threatened, against or
affecting Borrower, its assets or business and there is no action, suit,
proceeding or claim by any Person pending, or to the best of Borrower's
knowledge threatened, against Borrower or its assets or goodwill, or against
or affecting any transactions contemplated by this Agreement, which if
adversely determined against Borrower would result in any material adverse
change in the assets, business or prospects of Borrower or would impair the
ability of Borrower to perform its obligations hereunder or under any of the
other Financing Agreements to which it is a party or of Lender to enforce any
Obligations or realize upon any Collateral.
8.7 COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS.
Borrower is not in default in any material respect under, or in violation in
any material respect of any of the terms of, any agreement, contract,
instrument, lease or other commitment to which it is a party or by which it
or any of its assets are bound and Borrower is in compliance in all material
respects with all applicable provisions of laws, rules, regulations,
licenses, permits, approvals and orders of any foreign, Federal, State or
local governmental authority.
8.8 ENVIRONMENTAL COMPLIANCE.
(a) Borrower has not generated, used, stored, treated,
transported, manufactured, handled, produced or disposed of any Hazardous
Materials, on or off its premises (whether or not owned by it) in any manner
which at any time violates any applicable Environmental Law or any license,
permit, certificate, approval or similar authorization thereunder and the
operations of Borrower complies in all material respects with all
Environmental Laws and all licenses, permits, certificates, approvals and
similar authorizations thereunder.
(b) There has been no investigation, proceeding,
complaint, order, directive, claim, citation or notice by any governmental
authority or any other person nor is any pending or to the best of Borrower's
knowledge threatened, with respect to any non-compliance with or violation of
the requirements of any Environmental Law by Borrower or the release, spill
or discharge, threatened or actual, of any Hazardous Material or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental,
health or safety matter, which affects Borrower or its business, operations
or assets or any properties at which Borrower has transported, stored or
disposed of any Hazardous Materials.
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(c) Borrower has no material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of
any Hazardous Materials.
(d) Borrower has all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or filed in
connection with the operations of Borrower under any Environmental Law and
all of such licenses, permits, certificates, approvals or similar
authorizations are valid and in full force and effect.
8.9 EMPLOYEE BENEFITS.
(a) Borrower has not engaged in any transaction in
connection with which Borrower or any of its ERISA Affiliates could be
subject to either a civil penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by Section 4975 of the Code, including any accumulated
funding deficiency described in Section 8.9(c) hereof and any deficiency with
respect to vested accrued benefits described in Section 8.9(d) hereof.
(b) No liability to the Pension Benefit Guaranty
Corporation has been or is expected by Borrower to be incurred with respect
to any employee pension benefit plan of Borrower or any of its ERISA
Affiliates. There has been no reportable event (within the meaning of
Section 4043(b) of ERISA) or any other event or condition with respect to any
employee pension benefit plan of Borrower or any of its ERISA Affiliates
which presents a risk of termination of any such plan by the Pension Benefit
Guaranty Corporation.
(c) Full payment has been made of all amounts which
Borrower or any of its ERISA Affiliates is required under Section 302 of
ERISA and Section 412 of the Code to have paid under the terms of each
employee pension benefit plan as contributions to such plan as of the last
day of the most recent fiscal year of such plan ended prior to the date
hereof, and no accumulated funding deficiency (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, exists with
respect to any employee pension benefit plan, including any penalty or tax
described in Section 8.9(a) hereof and any deficiency with respect to vested
accrued benefits described in Section 8.9(d) hereof.
(d) The current value of all vested accrued benefits
under all employee pension benefit plans maintained by Borrower that are
subject to Title IV of ERISA does not exceed the current value of the assets
of such plans allocable to such vested accrued benefits, including any
penalty or tax described in Section 8.9(a) hereof and any accumulated funding
deficiency described in Section 8.9(c) hereof. The terms "current value" and
"accrued benefit" have the meanings specified in ERISA.
(e) Neither Borrower nor any of its ERISA Affiliates is
or has ever been obligated to contribute to any "multiemployer plan" (as such
term is defined in Section 4001(a)(3) of ERISA) that is subject to Title IV
of ERISA.
8.10 ACCURACY AND COMPLETENESS OF INFORMATION. All
information furnished by or on behalf of Borrower in writing to Lender in
connection with this Agreement or any of the other
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Financing Agreements or any transaction contemplated hereby or thereby,
including, without limitation, all information on the Information Certificate
is true and correct in all material respects on the date as of which such
information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or could reasonably be expected to
have a material adverse affect on the business, assets or prospects of
Borrower, which has not been fully and accurately disclosed to Lender in
writing.
8.11 SURVIVAL OF WARRANTIES; CUMULATIVE. All representations
and warranties contained in this Agreement or any of the other Financing
Agreements shall survive the execution and delivery of this Agreement and
shall be deemed to have been made again to Lender on the date of each
additional borrowing or other credit accommodation hereunder and shall be
conclusively presumed to have been relied on by Lender regardless of any
investigation made or information possessed by Lender. The representations
and warranties set forth herein shall be cumulative and in addition to any
other representations or warranties which Borrower shall now or hereafter
give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS.
9.1 MAINTENANCE OF EXISTENCE. Borrower shall at all times
preserve, renew and keep in full, force and effect its corporate existence
and rights and franchises with respect thereto and maintain in full force and
effect all permits, licenses, trademarks, trade names, approvals,
authorizations, leases and contracts necessary to carry on the business as
presently or proposed to be conducted. Borrower shall give Lender thirty
(30) days prior written notice of any proposed change in its corporate name,
which notice shall set forth the new name and Borrower shall deliver to
Lender a copy of the amendment to the Certificate of Incorporation of
Borrower providing for the name change certified by the Secretary of State of
the jurisdiction of incorporation of Borrower as soon as it is available.
9.2 NEW COLLATERAL LOCATIONS. Borrower may open any new
location within the continental United States provided Borrower (a) gives
Lender thirty (30) days prior written notice of the intended opening of any
such new location and (c) executes and delivers, or causes to be executed and
delivered, to Lender such agreements, documents, and instruments as Lender
may deem reasonably necessary or desirable to protect its interests in the
Collateral at such location, including, without limitation, UCC financing
statements and, if Borrower leases such new location, provides a favorable
landlord waiver or subordination, or, in the alternative, Lender may apply an
Availability Reserve in an amount equal to three (3) months gross rent in a
manner consistent with the Availability Reserve established to cover rent as
defined in Section 1.5 hereof.
9.3 COMPLIANCE WITH LAWS, REGULATIONS.
(a) Borrower shall, at all times, comply in all material
respects with all laws, rules, regulations, licenses, permits, approvals and
orders applicable to it and duly observe all requirements of any Federal,
State or local governmental authority, including, without limitation, the
Employee Retirement Security Act of 1974, as amended, the Occupational Safety
and Hazard Act of 1970, as amended, the Fair Labor Standards Act of 1938, as
amended, and all statutes,
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rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including, without
limitation, all of the Environmental Laws.
(b) Borrower shall establish and maintain, at its
expense, a system to assure and monitor its continued compliance with all
Environmental Laws in all of its operations, which system shall include
annual reviews of such compliance by employees or agents of Borrower who are
familiar with the requirements of the Environmental Laws. Copies of all
environmental surveys, audits, assessments, feasibility studies and results
of remedial investigations shall be promptly furnished, or caused to be
furnished, by Borrower to Lender. Borrower shall take prompt and appropriate
action to respond to any non-compliance with any of the Environmental Laws
and shall regularly report to Lender on such response.
(c) Borrower shall give both oral and written notice to
Lender immediately upon Borrower's receipt of any notice of, or Borrower's
otherwise obtaining knowledge of, (i) the occurrence of any event involving
the release, spill or discharge, threatened or actual, of any Hazardous
Material or (ii) any investigation, proceeding, complaint, order, directive,
claims, citation or notice with respect to: (A) any non-compliance with or
violation of any Environmental Law by Borrower or (B) the release, spill or
discharge, threatened or actual, of any Hazardous Material or (C) the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or (D) any other
environmental, health or safety matter, which affects Borrower or its
business, operations or assets or any properties at which Borrower
transported, stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing,
whenever Lender reasonably determines that there is non-compliance, or any
condition which requires any action by or on behalf of Borrower in order to
avoid any material non-compliance, with any Environmental Law, Borrower
shall, at Lender's request and Borrower's expense: (i) cause an independent
environmental engineer acceptable to Lender to conduct such tests of the site
where Borrower's non-compliance or alleged non-compliance with such
Environmental Laws has occurred as to such non-compliance and prepare and
deliver to Lender a report as to such non-compliance setting forth the
results of such tests, a proposed plan for responding to any environmental
problems described therein, and an estimate of the costs thereof and (ii)
provide to Lender a supplemental report of such engineer whenever the scope
of such non-compliance, or Borrower's response thereto or the estimated costs
thereof, shall change in any material respect.
(e) Borrower shall indemnify and hold harmless Lender,
its directors, officers, employees, agents, invitees, representatives,
successors and assigns, from and against any and all losses, claims, damages,
liabilities, costs, and expenses (including attorneys' fees and legal
expenses) directly or indirectly arising out of or attributable to the use,
generation, manufacture, reproduction, storage, release, threatened release,
spill, discharge, disposal or presence of a Hazardous Material, including,
without limitation, the costs of any required or necessary repair, cleanup or
other remedial work with respect to any property of Borrower and the
preparation and implementation of any closure, remedial or other required
plans. All representations, warranties, covenants and indemnifications in
this Section 9.3 shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
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9.4 PAYMENT OF TAXES AND CLAIMS. Borrower shall duly pay and
discharge all taxes, assessments, contributions and governmental charges upon
or against it or its properties or assets, except for taxes the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books. Borrower shall be liable for any tax or
penalties imposed on Lender as a result of the financing arrangements
provided for herein and Borrower agrees to indemnify and hold Lender harmless
with respect to the foregoing, and to repay to Lender on demand the amount
thereof, and until paid by Borrower such amount shall be added and deemed
part of the Loans, PROVIDED, THAT, nothing contained herein shall be
construed to require Borrower to pay any income or franchise taxes
attributable to the income of Lender from any amounts charged or paid
hereunder to Lender. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
9.5 INSURANCE. Borrower shall, at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and
similarly situated. Said policies of insurance shall be satisfactory to
Lender as to form, amount and insurer. Borrower shall furnish certificates,
policies or endorsements to Lender as Lender shall require as proof of such
insurance, and, if Borrower fails to do so, Lender is authorized, but not
required, to obtain such insurance at the expense of Borrower. All policies
shall provide for at least thirty (30) days prior written notice to Lender of
any cancellation or reduction of coverage and that Lender may act as attorney
for Borrower in obtaining, and at any time an Event of Default exists or has
occurred and is continuing, adjusting, settling, amending and canceling such
insurance. Borrower shall cause Lender to be named as a loss payee and an
additional insured (but without any liability for any premiums) under such
insurance policies and Borrower shall obtain non-contributory lender's loss
payable endorsements to all insurance policies in form and substance
satisfactory to Lender. Such lender's loss payable endorsements shall
specify that the proceeds of such insurance shall be payable to Lender as its
interests may appear and further specify that Lender shall be paid regardless
of any act or omission by Borrower or any of its affiliates. At its option,
Lender may apply any insurance proceeds received by Lender at any time to the
cost of repairs or replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations.
9.6 FINANCIAL STATEMENTS AND OTHER INFORMATION.
(a) Borrower shall keep proper books and records in
which true and complete entries shall be made of all dealings or transactions
of or in relation to the Collateral and the business of Borrower and its
subsidiaries (if any) in accordance with GAAP and Borrower shall furnish or
cause to be furnished to Lender: (i) within thirty (30) days after the end
of each fiscal month (or 45 days after the end of a month which is also the
end of Borrower's fiscal year), monthly unaudited consolidated financial
statements, and, if Borrower has any subsidiaries, unaudited consolidating
financial statements (including in each case balance sheets, statements of
income and loss and statements of shareholders' equity), all in reasonable
detail, fairly presenting the financial position and the results of the
operations of Borrower and its subsidiaries as of the
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end of and through such fiscal month and (ii) within 105 days after the end
of each fiscal year, audited consolidated financial statements and, if
Borrower has any subsidiaries, audited consolidating financial statements of
Borrower and its subsidiaries (including in each case balance sheets,
statements of income and loss, statements of cash flow and statements of
shareholders' equity), and the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and the results of the
operations of Borrower and its subsidiaries as of the end of and for such
fiscal year, together with the opinion of independent certified public
accountants, which accountants shall be an independent accounting firm
selected by Borrower and reasonably acceptable to Lender, that such financial
statements have been prepared in accordance with GAAP, and present fairly the
results of operations and financial condition of Borrower and its
subsidiaries as of the end of and for the fiscal year then ended.
(b) Borrower shall promptly notify Lender in writing of
the details of (i) any loss, damage, investigation, action, suit, proceeding
or claim relating to the Collateral or any other property which is security
for the Obligations or which would result in any material adverse change in
Borrower's business, properties, assets, goodwill or condition, financial or
otherwise and (ii) the occurrence of any Event of Default or event which,
with the passage of time or giving of notice or both, would constitute an
Event of Default.
(c) Borrower shall promptly after the sending or filing
thereof furnish or cause to be furnished to Lender copies of all financial
reports which Borrower sends to its stockholders generally and copies of all
reports and registration statements which Borrower files with the Securities
and Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc.
(d) Borrower shall furnish or cause to be furnished to
Lender such budgets, forecasts, projections and other information in respect
of the Collateral and the business of Borrower, as Lender may, from time to
time, reasonably request. Lender is hereby authorized to deliver a copy of
any financial statement or any other information relating to the business of
Borrower to any court or other government agency or to any participant or
assignee or prospective participant or assignee. Borrower hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Lender, at
Borrower's expense, copies of the financial statements of Borrower and any
reports or management letters prepared by such accountants or auditors on
behalf of Borrower and to disclose to Lender such information as they may
have regarding the business of Borrower. Any documents, schedules, invoices
or other papers delivered to Lender may be destroyed or otherwise disposed of
by Lender one (1) year after the same are delivered to Lender, except as
otherwise designated by Borrower to Lender in writing.
9.7 SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC.
Borrower shall not, directly or indirectly, (a) merge into or with or
consolidate with any other Person or permit any other Person to merge into or
with or consolidate with it, or (b) sell, assign, lease, transfer, abandon or
otherwise dispose of any stock or indebtedness to any other Person or any of
its assets to any other Person (except for (i) sales of Inventory in the
ordinary course of business and (ii) the disposition of worn-out or obsolete
Equipment or Equipment no longer used in the business of Borrower so long as
(A) if an Event of Default exists or has occurred and is continuing, any
proceeds are paid to Lender and (B) such sales do not involve Equipment
having an aggregate
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fair market value in excess of $25,000 for all such Equipment disposed of in
any fiscal year of Borrower), or (c) form or acquire any subsidiaries, or (d)
wind up, liquidate or dissolve or (e) agree to do any of the foregoing.
9.8 ENCUMBRANCES. Borrower shall not create, incur, assume
or suffer to exist any security interest, mortgage, pledge, lien, charge or
other encumbrance of any nature whatsoever on any of its assets or
properties, including, without limitation, the Collateral, EXCEPT: (a) liens
and security interests of Lender; (b) liens securing the payment of taxes,
either not yet overdue or the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrower
and with respect to which adequate reserves have been set aside on its books;
(c) non-consensual statutory liens (other than liens securing the payment of
taxes) arising in the ordinary course of Borrower's business to the extent:
(i) such liens secure indebtedness which is not overdue or (ii) such liens
secure indebtedness relating to claims or liabilities which are fully insured
and being defended at the sole cost and expense and at the sole risk of the
insurer or being contested in good faith by appropriate proceedings
diligently pursued and available to Borrower, in each case prior to the
commencement of foreclosure or other similar proceedings and with respect to
which adequate reserves have been set aside on its books; (d) zoning
restrictions, easements, licenses, covenants and other restrictions affecting
the use of real property which do not interfere in any material respect with
the use of such real property or ordinary conduct of the business of Borrower
as presently conducted thereon or materially impair the value of the real
property which may be subject thereto; and (e) purchase money security
interests in Equipment (including capital leases) and purchase money
mortgages on real estate not to exceed $100,000 in the aggregate at any time
outstanding so long as such security interests and mortgages do not apply to
any property of Borrower other than the Equipment or real estate so acquired,
and the indebtedness secured thereby does not exceed the cost of the
Equipment or real estate so acquired, as the case may be.
9.9 INDEBTEDNESS. Borrower shall not incur, create, assume,
become or be liable in any manner with respect to, or permit to exist, any
obligations or indebtedness, EXCEPT (a) the Obligations; (b) trade
obligations and normal accruals in the ordinary course of business not yet
due and payable, or with respect to which the Borrower is contesting in good
faith the amount or validity thereof by appropriate proceedings diligently
pursued and available to Borrower, and with respect to which adequate
reserves have been set aside on its books; (c) purchase money indebtedness
(including capital leases) to the extent not incurred or secured by liens
(including capital leases) in violation of any other provision of this
Agreement; and (d) obligations or indebtedness set forth on the Information
Certificate; PROVIDED, THAT, (i) Borrower may only make regularly scheduled
payments of principal and interest in respect of such indebtedness in
accordance with the terms of the agreement or instrument evidencing or giving
rise to such indebtedness as in effect on the date hereof, (ii) Borrower
shall not, directly or indirectly, (A) amend, modify, alter or change the
terms of such indebtedness or any agreement, document or instrument related
thereto as in effect on the date hereof, or (B) except as otherwise permitted
under this Agreement, redeem, retire, defease, purchase or otherwise acquire
such indebtedness, or set aside or otherwise deposit or invest any sums for
such purpose, and (iii) Borrower shall furnish to Lender all notices or
demands in connection with such indebtedness either received by Borrower or
on its behalf, promptly after the receipt thereof, or sent by Borrower or on
its behalf, concurrently with the sending thereof, as the case may be.
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9.10 LOANS, INVESTMENTS, GUARANTEES, ETC. Borrower shall not,
directly or indirectly, make any loans or advance money or property to any
person, or invest in (by capital contribution, dividend or otherwise) or
purchase or repurchase the stock or indebtedness or all or a substantial part
of the assets or property of any person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the indebtedness,
performance, obligations or dividends of any Person or agree to do any of the
foregoing, EXCEPT: (a) the endorsement of instruments for collection or
deposit in the ordinary course of business; (b) investments in: (i)
short-term direct obligations of the United States Government, (ii)
negotiable certificates of deposit issued by any bank satisfactory to Lender,
payable to the order of the Borrower or to bearer and delivered to Lender,
and (iii) commercial paper rated A1 or P1; PROVIDED, THAT, as to any of the
foregoing, unless waived in writing by Lender, Borrower shall take such
actions as are deemed necessary by Lender to perfect the security interest of
Lender in such investments, (c) the guarantees set forth in the Information
Certificate, (d) loans in the ordinary course of business from one Borrower
to another Borrower, and (e) guarantees by a Borrower of a foreign subsidiary
of such Borrower in an aggregate amount outstanding at any one time for all
Borrowers not to exceed $250,000.
9.11 DIVIDENDS AND REDEMPTIONS. Borrower shall not, directly
or indirectly, declare or pay any dividends on account of any shares of any
class of capital stock of Borrower now or hereafter outstanding, or set aside
or otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital
stock (or set aside or otherwise deposit or invest any sums for such purpose)
for any consideration other than common stock or apply or set apart any sum,
or make any other distribution (by reduction of capital or otherwise) in
respect of any such shares or agree to do any of the foregoing.
9.12 TRANSACTIONS WITH AFFILIATES. Borrower shall not enter
into any transaction for the purchase, sale or exchange of property or the
rendering of any service to or by any affiliate, except in the ordinary
course of and pursuant to the reasonable requirements of Borrower's business
and upon fair and reasonable terms no less favorable to the Borrower than
Borrower would obtain in a comparable arm's length transaction with an
unaffiliated person; provided that Borrower may sell Inventory in the
ordinary course of business to its foreign subsidiaries at not less than 80%
of Borrower's regular seller price for such Inventory, provided that the
total of such sales to foreign subsidiaries shall be not more than $2,500,000
in the aggregate for all Borrowers in any fiscal year and such sales shall be
at a positive gross profit margin.
9.13 [Intentionally Omitted.]
9.14 ADJUSTED NET WORTH. Borrower shall, at all times,
maintain Adjusted Net Worth of not less than $_____________.
9.15 COMPLIANCE WITH ERISA. Borrower shall not with respect
to any "employee pension benefit plan" maintained by Borrower or any of its
ERISA Affiliates:
(a) (i) terminate any of such employee pension benefit
plans so as to incur any liability to the Pension Benefit Guaranty
Corporation established pursuant to ERISA, (ii) allow or suffer to exist any
prohibited transaction involving any of such employee pension benefit plans
or any trust created thereunder which would subject Borrower or such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under Section
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4975 of the Code or ERISA, (iii) fail to pay to any such employee pension
benefit plan any contribution which it is obligated to pay under Section 302
of ERISA, Section 412 of the Code or the terms of such plan, (iv) allow or
suffer to exist any accumulated funding deficiency, whether or not waived,
with respect to any such employee pension benefit plan, (v) 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 Pension Benefit Guaranty
Corporation of any such employee pension benefit plan that is a single
employer plan, which termination could result in any liability to the Pension
Benefit Guaranty Corporation or (vi) incur any withdrawal liability with
respect to any multiemployer pension plan.
(b) As used in this Section 9.15, the term "employee
pension benefit plans," "employee benefit plans", "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 Section 4975 of the Code and ERISA.
9.16 COSTS AND EXPENSES. Borrower shall pay to Lender on
demand all costs, expenses, filing fees and taxes paid or payable in
connection with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Lender's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including, but not limited to: (a) all costs and expenses of filing
or recording (including Uniform Commercial Code financing statement filing
taxes and fees, documentary taxes, intangibles taxes and mortgage recording
taxes and fees, if applicable); (b) costs and expenses and fees for title
insurance and other insurance premiums, environmental audits, surveys,
assessments, engineering reports and inspections, appraisal fees and search
fees; (c) costs and expenses of remitting loan proceeds, collecting checks
and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Lender's customary charges and fees with respect
thereto; (d) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (e) costs and expenses
of preserving and protecting the Collateral; (f) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing
the security interests and liens of Lender, selling or otherwise realizing
upon the Collateral, and otherwise enforcing the provisions of this Agreement
and the other Financing Agreements or defending any claims made or threatened
against Lender arising out of the transactions contemplated hereby and
thereby (including, without limitation, preparations for and consultations
concerning any such matters); (g) all out-of-pocket expenses and costs
heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and Borrower's
operations, plus a per diem charge at the rate of $650 per person per day for
Lender's examiners in the field and office; and (h) the fees and
disbursements of counsel (including legal assistants) to Lender in connection
with any of the foregoing.
9.17 FURTHER ASSURANCES. At the request of Lender at any time
and from time to time, Borrower shall, at its expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as
may be necessary or proper to evidence, perfect, maintain and enforce the
security
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interests and the priority thereof in the Collateral and to otherwise
effectuate the provisions or purposes of this Agreement or any of the other
Financing Agreements. Lender may at any time and from time to time request a
certificate from an officer of Borrower representing that all conditions
precedent to the making of Loans and providing Letter of Credit
Accommodations contained herein are satisfied. In the event of such request
by Lender, Lender may, at its option, cease to make any further Loans or
provide any further Letter of Credit Accommodations until Lender has received
such certificate and, in addition, Lender has determined that such conditions
are satisfied. Where permitted by law, Borrower hereby authorizes Lender to
execute and file one or more UCC financing statements signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.
10.1 EVENTS OF DEFAULT. The occurrence or existence of any
one or more of the following events are referred to herein individually as an
"EVENT OF DEFAULT", and collectively as "EVENTS OF DEFAULT":
(a) Borrower fails to pay when due any of the
Obligations or fails to perform any of the terms, covenants, conditions or
provisions contained in this Agreement or any of the other Financing
Agreements;
(b) Any representation, warranty or statement of fact
made by Borrower to Lender in this Agreement, the other Financing Agreements
or any other agreement, schedule, confirmatory assignment or otherwise shall
when made or deemed made be false or misleading in any material respect;
(c) Any Obligor revokes, terminates or fails to perform
any of the terms, covenants, conditions or provisions of any guarantee,
endorsement or other agreement of such party in favor of Lender;
(d) Any judgment for the payment of money is rendered
against Borrower or any Obligor in excess of $25,000 in any one case or in
excess of $50,000 in the aggregate and shall remain undischarged or unvacated
for a period in excess of thirty (30) days or execution shall at any time not
be effectively stayed, or any judgment other than for the payment of money,
or injunction, attachment, garnishment or execution is rendered against
Borrower or any Obligor or any of their assets;
(e) Any Obligor (being a natural person or a general
partner of an Obligor which is a partnership) dies or Borrower or any
Obligor, which is a partnership, limited liability company or corporation,
dissolves or suspends or discontinues doing business;
(f) Borrower or any Obligor becomes insolvent (however
defined or evidenced), makes an assignment for the benefit of creditors,
makes or sends notice of a bulk transfer or calls a meeting of its creditors
or principal creditors;
(g) A case or proceeding under the bankruptcy laws of
the United States of America now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction now or hereafter
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in effect (whether at law or in equity) is filed against Borrower or any
Obligor or all or any part of its properties and such petition or application
is not dismissed within thirty (30) days after the date of its filing or
Borrower or any Obligor shall file any answer admitting or not contesting
such petition or application or indicates its consent to, acquiescence in or
approval of, any such action or proceeding or the relief requested is granted
sooner;
(h) A case or proceeding under the bankruptcy laws of
the United States of America now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at a law or equity) is filed by Borrower or any Obligor or for all
or any part of its property; or
(i) Any default by Borrower or any Obligor under any
agreement, document or instrument relating to any indebtedness for borrowed
money owing to any person other than Lender, or any capitalized lease
obligations, contingent indebtedness in connection with any guarantee, letter
of credit, indemnity or similar type of instrument in favor of any person
other than Lender, in any case in an amount in excess of $25,000, which
default continues for more than the applicable cure period, if any, with
respect thereto, or any default by Borrower or any Obligor under any material
contract, lease, license or other obligation to any person other than Lender,
which default continues for more than the applicable cure period, if any,
with respect thereto;
(j) any change in the controlling ownership of Borrower;
(k) the indictment or threatened indictment of Borrower
or any Obligor under any criminal statute, or commencement or threatened
commencement of criminal or civil proceedings against Borrower or any
Obligor, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of any of the property of Borrower or
such Obligor;
(l) there shall be a material adverse change in the
business, assets or prospects of Borrower or any Obligor after the date
hereof; or
(m) there shall be an event of default under any of the
other Financing Agreements.
10.2 REMEDIES.
(a) at any time an Event of Default exists or has
occurred and is continuing, Lender shall have all rights and remedies
provided in this Agreement, the other Financing Agreements, the Uniform
Commercial Code and other applicable law, all of which rights and remedies
may be exercised without notice to or consent by Borrower or any Obligor,
except as such notice or consent is expressly provided for hereunder or
required by applicable law. All rights, remedies and powers granted to
Lender hereunder, under any of the other Financing Agreements, the Uniform
Commercial Code or other applicable law, are cumulative, not exclusive and
enforceable, in Lender's discretion, alternatively, successively, or
concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of
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equity for an injunction to restrain a breach or threatened breach by
Borrower of this Agreement or any of the other Financing Agreements. Lender
may, at any time or times, proceed directly against Borrower or any Obligor
to collect the Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its
discretion and without limitation, (i) accelerate the payment of all
Obligations and demand immediate payment thereof to Lender (PROVIDED, THAT,
upon the occurrence of any Event of Default described in Sections 10.1(g) and
10.1(h), all Obligations shall automatically become immediately due and
payable), (ii) with or without judicial process or the aid or assistance of
others, enter upon any premises on or in which any of the Collateral may be
located and take possession of the Collateral or complete processing,
manufacturing and repair of all or any portion of the Collateral, (iii)
require Borrower, at Borrower's expense, to assemble and make available to
Lender any part or all of the Collateral at any place and time designated by
Lender, (iv) collect, foreclose, receive, appropriate, setoff and realize
upon any and all Collateral, (v) remove any or all of the Collateral from any
premises on or in which the same may be located for the purpose of effecting
the sale, foreclosure or other disposition thereof or for any other purpose,
(vi) sell, lease, transfer, assign, deliver or otherwise dispose of any and
all Collateral (including, without limitation, entering into contracts with
respect thereto, public or private sales at any exchange, broker's board, at
any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender
having the right to purchase the whole or any part of the Collateral at any
such public sale, all of the foregoing being free from any right or equity of
redemption of Borrower, which right or equity of redemption is hereby
expressly waived and released by Borrower and/or (vii) terminate this
Agreement. If any of the Collateral is sold or leased by Lender upon credit
terms or for future delivery, the Obligations shall not be reduced as a
result thereof until payment therefor is finally collected by Lender. If
notice of disposition of Collateral is required by law, five (5) days prior
notice by Lender to Borrower designating the time and place of any public
sale or the time after which any private sale or other intended disposition
of Collateral is to be made, shall be deemed to be reasonable notice thereof
and Borrower waives any other notice. In the event Lender institutes an
action to recover any Collateral or seeks recovery of any Collateral by way
of prejudgment remedy, Borrower waives the posting of any bond which might
otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of
the Collateral to payment of the Obligations, in whole or in part and in such
order as Lender may elect, whether or not then due. Borrower shall remain
liable to Lender for the payment of any deficiency with interest at the
highest rate provided for herein and all costs and expenses of collection or
enforcement, including attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both
would constitute an Event of Default, Lender may, at its option, without
notice, (i) cease making Loans or arranging for Letter of Credit
Accommodations or reduce the lending formulas or amounts of Revolving Loans
and Letter of Credit Accommodations available to Borrower and/or (ii)
terminate any provision of
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this Agreement providing for any future Loans or Letter of Credit
Accommodations to be made by Lender to Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERSAND CONSENTS; GOVERNING LAW.
11.1 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL
WAIVER.
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of California
(without giving effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the state courts of the County of Los Angeles,
State of California and of the United States District Court for the Central
District of California and waive any objection based on venue or FORUM NON
CONVENIENS with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected
with or related or incidental to the dealings of the parties hereto in
respect of this Agreement or any of the other Financing Agreements or the
transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and whether in contract, tort, equity or otherwise, and
agree that any dispute with respect to any such matters shall be heard only
in the courts described above (except that Lender shall have the right to
bring any action or proceeding against Borrower or its property in the courts
of any other jurisdiction which Lender deems necessary or appropriate in
order to realize on the Collateral or to otherwise enforce its rights against
Borrower or its property).
(c) Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth
on the signature pages hereof and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited in the
U.S. mails, or, at Lender's option, by service upon Borrower in any other
manner provided under the rules of any such courts. Within thirty (30) days
after such service, Borrower shall appear in answer to such process, failing
which Borrower shall be deemed in default and judgment may be entered by
Lender against Borrower for the amount of the claim and other relief
requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO
IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.
BORROWER AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY
OF THIS
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AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses
were the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit
of the rebuttable presumption that it acted in good faith and with the
exercise of ordinary care in the performance by it of the terms of this
Agreement.
11.2 WAIVER OF NOTICES. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with
respect to any and all instruments and commercial paper, included in or
evidencing any of the Obligations or the Collateral, and any and all other
demands and notices of any kind or nature whatsoever with respect to the
Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein. No notice to or demand on Borrower which Lender may
elect to give shall entitle Borrower to any other or further notice or demand
in the same, similar or other circumstances.
11.3 AMENDMENTS AND WAIVERS. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course
of conduct, but only by a written agreement signed by an authorized officer
of Lender. Lender shall not, by any act, delay, omission or otherwise be
deemed to have expressly or impliedly waived any of its rights, powers and/or
remedies unless such waiver shall be in writing and signed by an authorized
officer of Lender. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Lender of any right, power
and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy which Lender would otherwise
have on any future occasion, whether similar in kind or otherwise.
11.4 WAIVER OF COUNTERCLAIMS. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other than
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 INDEMNIFICATION. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and
all losses, claims, damages, liabilities, costs or expenses imposed on,
incurred by or asserted against any of them in connection with any
litigation, investigation, claim or proceeding commenced or threatened
related to the negotiation, preparation, execution, delivery, enforcement,
performance or administration of this Agreement, any other Financing
Agreements, or any undertaking or proceeding related to any of the
transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including, without limitation, amounts paid in
settlement, court costs, and the fees and expenses of counsel. To the extent
that the undertaking to indemnify, pay and hold harmless set forth in this
Section may be unenforceable because it violates any law or public policy,
Borrower shall pay the maximum portion which it is permitted to pay under
applicable law to Lender in satisfaction of indemnified matters under this
Section.
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The foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS.
12.1 TERM.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date two (2) years
from the date hereof (the "Renewal Date"), and from year to year thereafter,
unless sooner terminated pursuant to the terms hereof. Lender or Borrower
may terminate this Agreement and the other Financing Agreements effective on
the Renewal Date or on the anniversary of the Renewal Date in any year by
giving to the other party at least sixty (60) days prior written notice.
Borrower may terminate this Agreement prior to the end of the then current
term, including any renewal term, for any reason upon sixty (60) days prior
written notice to Lender, and in such case Borrower agrees to pay to Lender
the applicable early termination fee provided for in Section 12.1(c) hereof.
Regardless of the timing of termination, this Agreement and all other
Financing Agreements must be terminated simultaneously. Upon the effective
date of termination or non-renewal of the Financing Agreements, Borrower
shall pay to Lender, in full, all outstanding and unpaid Obligations and
shall furnish cash collateral to Lender in such amounts as Lender determines
are reasonably necessary to secure Lender from loss, cost, damage or expense,
including attorneys' fees and legal expenses, in connection with any
contingent Obligations, including issued and outstanding Letter of Credit
Accommodations and checks or other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final and
indefeasible payment. Such cash collateral shall be remitted by wire
transfer in Federal funds to such bank account of Lender, as Lender may, in
its discretion, designate in writing to Borrower for such purpose. Interest
shall be due until and including the next Business Day, if the amounts so
paid by Borrower to the bank account designated by Lender are received in
such bank account later than 10:30 a.m., Los Angeles time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing
Agreements until all Obligations have been fully and finally discharged and
paid, and Lender's continuing security interest in the Collateral and the
rights and remedies of Lender hereunder, under the other Financing Agreements
and applicable law, shall remain in effect until all such Obligations have
been fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the
end of the then current term or renewal term of this Agreement, Borrower
agrees to pay to Lender, upon the effective date of such termination, an
early termination fee in the amount set forth below if such termination is
effective in the period indicated:
AMOUNT PERIOD
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(i) 3% of the Maximum Credit from the date of this Agreement to and
including the day preceding the first
anniversary of this Agreement
(ii) 2% of the Maximum Credit from the first anniversary of this
Agreement to and including the Renewal
Date, and if the Renewal Date is
extended as provided in Section 12.1(a),
at any time during a renewal term, if
any.
The early termination fee provided for in this Section 12.1 shall be deemed
included in the Obligations.
12.2 NOTICES. All notices, requests and demands hereunder shall be
in writing and (a) made to Lender at its address set forth below and to
Borrower at its chief executive office set forth below, or to such other
address as either party may designate by written notice to the other in
accordance with this provision, and (b) deemed to have been given or made: if
delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with
instructions to deliver the next Business Day, one (1) Business Day after
sending; and if by certified mail, return receipt requested, five (5) days
after mailing.
12.3 PARTIAL INVALIDITY. If any provision of this Agreement is
held to be invalid or unenforceable, such invalidity or unenforceability
shall not invalidate this Agreement as a whole, but this Agreement shall be
construed as though it did not contain the particular provision held to be
invalid or unenforceable and the rights and obligations of the parties shall
be construed and enforced only to such extent as shall be permitted by
applicable law.
12.4 SUCCESSORS. This Agreement, the other Financing Agreements
and any other document referred to herein or therein shall be binding upon
and inure to the benefit of and be enforceable by Lender, Borrower and their
respective successors and assigns, except that Borrower may not assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Lender. Lender may, after notice to Borrower, assign its rights and delegate
its obligations under this Agreement and the other Financing Agreements and
further may assign, or sell participations in, all or any part of the Loans,
the Letter of Credit Accommodations or any other interest herein to another
financial institution or other person, in which event, the assignee or
participant shall have, to the extent of such assignment or participation,
the same rights and benefits as it would have if it were the Lender
hereunder, except as otherwise provided by the terms of such assignment or
participation.
12.5 ENTIRE AGREEMENT. This Agreement, the other Financing
Agreements, any supplements hereto or thereto, and any instruments or
documents delivered or to be delivered in connection herewith or therewith
represents the entire agreement and understanding concerning the subject
matter hereof and thereof between the parties hereto, and supersede all other
prior agreements, understandings, negotiations and discussions,
representations, warranties,
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commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
Lender: Borrower:
CONGRESS FINANCIAL CORPORATION MICROTEL INTERNATIONAL, INC.
(WESTERN)
By: By:
------------------------------ ------------------------------
Title: Title:
--------------------------- ---------------------------
Address: Chief Executive Office:
---------------------------------
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ---------------------------------
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Borrower: Borrower:
XIT CORPORATION CXR TELCOM CORPORATION
By: By:
------------------------------ ------------------------------
Title: Title:
--------------------------- ---------------------------
Chief Executive Office: Chief Executive Office:
--------------------------------- ---------------------------------
--------------------------------- ---------------------------------
Borrower:
HYCOMP, INC.
By:
------------------------------
Title:
---------------------------
Chief Executive Office:
---------------------------------
---------------------------------
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