REVOLVING LOAN AND SECURITY AGREEMENT
REVOLVING LOAN AND SECURITY AGREEMENT ("Agreement") by and between IBM CREDIT
CORPORATION ("IBM Credit") and the undersigned customer ("Customer") of IBM
Credit.
1. DEFINITIONS
1.1 Special Definitions. The following terms shall have the following
respective meanings in this Agreement:
"Accounts": as defined in the UCC.
"Advance": any loan or advance made by IBM Credit to or for the account
of Customer pursuant to this Agreement.
"Advance Date": for a specific Advance, the Business Day on which IBM
Credit makes an Advance under this Agreement.
"Available Credit": at any time, (1) the Maximum Advance Amount less (2)
the Outstanding Advances at such time.
"Borrowing Base": as set forth in Attachment A, the percentage of the
amount of the Customer's Eligible Accounts as of the date of
determination as reflected in Customer's most recent Collateral reports
pursuant to Section 3.8(j) of this Agreement.
"Business Day": any day other than a Saturday, Sunday, other day on
which commercial banks in New York, NY are authorized or required by law
to close or other day on which IBM Credit is closed.
"Closing Date": the date upon which all conditions precedent to the
effectiveness of this Agreement are performed to the satisfaction of IBM
Credit or waived in writing by IBM Credit.
"Collateral": as defined in Section 4.1.
"Default": either (1) an Event of Default, or (2) any event or condition
which, but for the requirement that notice be given or time lapse or
both, would be an Event of Default.
"Delinquency Fee Rate": as defined in Attachment A.
"Eligible Accounts": as defined in Section 3.3.
"Event of Default": as defined in Section 6.1.
"Guarantor": the guarantors as set forth in Attachment B.
"Intellectual Property": Customer's possession of such assets, licenses,
patents, patent applications, copyrights, service marks, trademarks,
trade names, trade dress and trade secrets and all rights and other
property relating thereto or arising therefrom as are necessary or
advisable for the continuance of its present and proposed business
activities.
"Line of Credit": as defined in Section 2.1.
"Material Adverse Effect": a material adverse effect (1) on the
business, operations, results of operations, assets, or financial
condition of Customer, (2) on the aggregate value of the Collateral or
the aggregate amount which IBM Credit would be likely to receive (after
giving consideration to reasonably likely delays in payment and
reasonable cost of enforcement) in the liquidation of such Collateral to
recover the Obligations in full, or (3) on the rights and remedies of
IBM Credit under this Agreement.
"Maximum Advance Amount": at any time, the lesser of (1) the amount of
the Line of Credit at such time and (2) the Borrowing Base at such time.
"Obligations": all covenants, agreements, warranties, duties,
representations, loans, advances, liabilities and indebtedness Of any
kind and nature whatsoever now or hereafter arising, owing, due or
payable from Customer to IBM Credit or whether primary or secondary,
joint or several, direct, contingent, fixed or otherwise, secured,
unsecured or arising under this Agreement, the Other Agreements or any
agreements previously, now or hereafter executed by Customer and
delivered to IBM Credit, or by oral agreement or operation of law and
whether or not evidenced by instruments of indebtedness. Obligations
shall include, without limitation, any third party claims against
Customer satisfied or acquired by IBM Credit.
"Other Agreements": all security agreements, mortgages, leases,
instruments, documents, guarantees, schedules of assignment, contracts
and other agreements previously, now or hereafter executed by Customer
and delivered to IBM Credit or delivered by or on behalf of Customer to
a third party and assigned to IBM Credit by operation of law or
otherwise.
"Outstanding Advances": at the time of determination, the unpaid
principal amount of all Advances made by IBM Credit.
"Periodic Rate": the Revolver Financing Charge or Delinquency Fee Rate,
as the case may be, multiplied by the quotient of the number of days
elapsed in the applicable billing period divided by 360.
"Permitted Liens": as defined in Attachment B.
"Permitted Prior Liens": as defined in Attachment B. "Person": any
individual, association, firm, corporation, governmental body, agency or
instrumentality whatsoever. "Policies": as defined in Section 5.1 (r).
"Person": any individual, association, firm, corporation, governmental
body, agency or instrumentality whatsoever.
"Policies": as defined in Section 5.1(r).
"Prime Rate": as of the date of determination, the average of the rates
of interest announced by Citibank, N.A., Chase Manhattan Bank and Bank
of America National Trust & Savings Association (or any other bank which
IBM Credit uses in its normal course of business of determining Prime
Rate) as their prime or base rate, as of the last Business Day of the
calendar month immediately preceding the date of determination, whether
or not such announced rates are the actual rates charged by such banking
institutions to their most creditworthy borrowers.
"Revolver Financing Charge": as defined in Attachment A.
"UCC": the Uniform Commercial Code in effect from time to time in the
state set forth in Attachment A.
"Voting Stock": securities, the holders of which are ordinarily, in the
absence of contingencies, entitled to elect the corporate directors (or
persons performing similar functions).
1.2 Other Defined Terms. Terms not otherwise defined in this Agreement
which are defined in the UCC shall have the meanings assigned to them
therein.
2. LINE OF CREDIT/INTEREST RATES/CHARGES
2.1 Line of Credit. Subject to the terms and conditions set forth in this
Agreement, on and after the Closing Date to but not including the date that
is the earlier of (i) the date on which this Agreement is terminated pursuant
to Section 7 and (ii) the date on which IBM Credit terminates the Credit Line
pursuant to Section 6, IBM Credit agrees to extend to the Customer a line of
credit (the "Line of Credit") in the amount set forth in Attachment A
pursuant to which IBM Credit will make to the Customer, from time to time,
Advances in an aggregate amount at any one time outstanding not to exceed the
Maximum Advance Amount. Notwithstanding any other term or provision of this
Agreement, IBM Credit may, at any time and from time to time, in its sole
discretion (x) temporarily increase the amount of the Line of Credit above
the amount set forth in Attachment A and decrease the amount of the Line of
Credit back to the amount of the Line of Credit set forth in Attachment A, in
each case upon written notice to the Customer and (y) make Advances pursuant
to this Agreement upon the request of Customer in an aggregate amount at any
one time outstanding in excess of the Line of Credit.
2.1.1 Interest. (A) Subject to paragraph (B) below, each Advance shall
accrue interest at a rate per annum equal to the lesser of (i) the Revolver
Financing Charge and (ii) the highest rate from time to time permitted by
applicable law. Amounts received from Customer in excess of such highest
rate from time to time permitted by applicable law shall be considered
reductions to principal to the extent of such excess.
(B) If any amount owed under this Agreement is not paid when due (whether at
maturity, by acceleration or otherwise), the unpaid amount will bear interest
from and including its due date to and including the date IBM Credit receives
payment. Such interest will accrue at a rate per annum equal to the lesser
of (i) the Delinquency Fee Rate and (ii) the highest rate from time to time
permitted by applicable law. Amounts received from Customer in excess of
such highest rate from time to time permitted by applicable law shall be
considered reductions to principal to the extent of such excess.
(C) The Revolver Financing Charge and the Delinquency Fee Rate are computed
on the basis of a 360-day year for the actual number of days elapsed. The
Revolver Financing Charge for each billing period shall be calculated by
multiplying the Periodic Rate for the billing period by the Average Daily
Balance (as hereinafter defined) of the Advances outstanding during said
period which were not past-due. The Delinquency Fee Rate for each billing
period shall be calculated by multiplying the applicable Periodic Rate for
the billing period by the applicable Average Daily Balance of the Advances
outstanding during said period which were past-due. The "Average Daily
Balance" of the outstanding Advances shall be equal to the sum of the
principal balances of the Advances as of each day during the billing period,
divided by the number of days in the billing period.
2.1.2 Charges. Customer hereby agrees to pay to IBM Credit the charges
set forth in the "Other Charges" section of Attachment A to this Agreement.
Customer hereby acknowledges that any such charges are not interest but that
such charges, if unpaid, will constitute part of the principal from time to
time outstanding.
2.1.3 Voluntary Prepayment. Customer may at any time prepay in whole
or in part all amounts owed under this Agreement. IBM Credit may, in its
sole discretion, if amounts owed to IBM Credit are delinquent, apply payments
first to pay interest and other amounts owing under this Agreement and then
to pay the principal amount owed by the Customer. IBM Credit may, but shall
not be obligated to, apply principal payments to the oldest (earliest)
Advances first.
2.2 Payments. (A) If, on any date, the Outstanding Advances shall exceed
the Maximum Advance Amount (such excess, the "Shortfall Amount"), the
Customer shall within two (2) Business Days from such date pay the Advances
in an amount equal to the Shortfall Amount plus interest at the Delinquency
Fee Rate for the period from and including the initial date of the occurrence
of the Shortfall Amount to and including the date IBM Credit receives payment
for such Shortfall Amount.
(B) Interest and Other Charges owed under this Agreement, and any charges
hereafter agreed to by the parties are payable monthly on receipt of IBM
Credit's ▇▇▇▇ or statement and IBM Credit may, in its sole discretion, if
amounts owed to IBM Credit are delinquent, add interest and Other Charges to
Customer's outstanding loan balance. In accordance with the provisions of
Section 2.1.1 and Section 2.1.2, each statement of account rendered by IBM
Credit to Customer and relating to the Obligations shall be presumed to be
correct and accurate and shall constitute an account stated that is fully
binding upon Customer unless, within ten (10) Business Days after the
statement is received by Customer, Customer shall give to IBM Credit written
objection specifying the error or errors, if any, contained in that
statement. Customer shall be deemed to have received such statement five (5)
Business Days from the date IBM Credit mails such statement by United States
first-class mail, postage prepaid, and properly addressed to Customer.
3. LINE OF CREDIT - ADDITIONAL PROVISIONS
3.1 Procedures for Advances. (A) Customer shall deliver to IBM Credit a
written request ("Request for Advance") for each Advance. Customer may
deliver a Request for Advance via facsimile transmission. The Request for
Advance shall specify (i) the requested Advance Date and (ii) the amount of
the requested Advance. Customer shall include with each Request for Advance
a list ("Schedule of Accounts") of all Accounts created or acquired by
Customer since the previous Schedule of Accounts. Customer shall not request
an Advance in excess of the Available Credit on the requested Advance Date
for an Advance after giving effect to the repayment of any Outstanding
Advances to be made on such date.
(B) In the event Customer utilizes an IBM Credit inventory financing plan,
it will be pursuant to the terms of the Agreement for Wholesale Financing (as
amended or otherwise modified from time to time, the "AWF") between Customer
and IBM Credit dated as set forth in Attachment A to this Agreement. IBM
Credit may, in its sole and absolute discretion, make an advance to itself
under the Line of Credit to satisfy Customer's obligations under the AWF.
Customer hereby authorizes IBM Credit to make such advances. Any such
advance shall constitute an Advance under this Agreement. Customer
acknowledges that unless and until IBM Credit makes such an Advance the
obligations of the Customer to IBM Credit under the AWF shall be due and
payable in accordance with the terms and conditions of the AWF and nothing in
this Agreement relieves Customer of any payment or other obligations under
the AWF.
3.2 Each Advance. The submission by Customer of a Request for Advance and
the receipt by the Customer of the proceeds of any Advance on an Advance Date
shall be deemed to be a representation and warranty by the Customer that, as
of and on such Advance Date, the following statements set forth in (A)
through (C) are true:
(A) The representations and warranties contained in this Agreement and in
each Other Agreement are true and correct as though made on and as of such
Advance Date;
(B) No event has occurred and is continuing, or would result from such
Advance or the application of the proceeds thereof, which could reasonably be
expected to have a Material Adverse Effect; and
(C) Both before and after giving effect to the making of such Advance, no
Shortfall Amount exists.
3.3 Ineligible Accounts. IBM Credit and Customer agree that IBM Credit
shall have the sole right to determine eligibility of Accounts from an
Account debtor (the "Eligible Accounts") for purposes of determining the
Borrowing Base; however, without limiting such right, the following Accounts
will be deemed to be not Eligible Accounts for purposes of determining the
Borrowing Base:
(a) Accounts created from the sale of goods and services on non-standard
terms and/or that allow for payment to be made later than thirty (30)
days from the date of sale;
(b) Accounts unpaid more than ninety (90) days from date of invoice;
(c) Accounts payable by an Account debtor if fifty percent (50%) or more of
the outstanding balance of all Accounts payable by such Account debtor
remains unpaid for more than ninety (90) days from the date of invoice;
(d) Accounts payable by an Account debtor that is an officer, employee,
agent, parent, guarantor, subsidiary, stockholder or affiliate of
Customer or is related to or has common shareholders, officers or
directors with Customer;
(e) Accounts arising from consignment sales;
(f) Accounts with respect to which the payment by the Account debtor is or
may be conditional;
(g) Accounts payable by any Account debtor (other than any wholly owned
subsidiaries of International Business Machines Corporation located
outside of the United States) that (i) is not a commercial or
institutional entity, or (ii) is not a resident of the United States;
(h) Accounts payable by any Account debtor to which Customer is or may
become liable for goods sold or services rendered by such Account debtor
to Customer;
(i) Accounts arising from the sale or lease of goods purchased for a
personal, family or household purpose;
(j) Accounts arising from the sale or lease of goods that have been used for
demonstration purposes or loaned by the Customer to another party;
(k) Accounts which are progress payment accounts;
(l) Accounts payable by any Account debtor that is, or Customer knows will
become, subject to proceedings under United States Bankruptcy Law or
other law for the relief of debtors;
(m) Accounts which are not payable in US dollars;
(n) Accounts payable by any Account debtor that is a remarketer of computer
hardware and software products and whose purchases of such products from
Customer have been financed by another person, other than IBM Credit,
who pays the proceeds of such financing directly to Customer on behalf
of such debtor ("Third Party Financer") unless (i) such Third Party
Financer does not have a separate financing relationship with Customer
or (ii) such Third Party Financer has a separate financing relationship
with Customer and has waived its right to set off its obligations to
Customer;
(o) Accounts arising from the sale or lease of goods which are billed in
advance of shipment by Customer;
(p) Accounts as to which IBM Credit does not have a valid, perfected, first
priority security interest;
(q) Accounts with respect to which Customer has permitted or agreed to any
extension, compromise or settlement, or made any change or modification
of any kind or nature, including, but not limited to, any change or
modification to the terms relating thereto;
(r) Accounts which do not arise from undisputed bona fide transactions
completed in accordance with the terms and conditions contained in the
invoices and purchase orders relating thereto;
(s) Accounts which are discounted for the full payment term specified in
Customer's terms and conditions with its Account debtors, or for any
longer period of time;
(t) Accounts on cash on delivery (COD) terms;
(u) Accounts arising from maintenance or service contracts which are billed
in advance of full performance of service;
(v) Accounts arising from bartered transactions;
(w) Accounts arising from incentive payments, rebates, discounts, credits,
and refunds from a supplier; and
(x) For any and all other Accounts which IBM Credit deems, in its sole and
absolute discretion, to be ineligible, IBM Credit will provide Customer
with 10 days notice.
3.4 Reimbursement for Charges. Customer agrees to reimburse IBM Credit for
all charges paid by IBM Credit with respect to collection of checks and
other items of payment, all fees relating to the use and maintenance of a
lockbox account and with respect to remittances of proceeds of the loans
hereunder.
3.5 Collections. (A) Customer shall establish and maintain a lockbox (the
"Lockbox"), at the address set forth in Attachment A with the financial
institution listed in Attachment A (the "Bank") pursuant to an agreement
between Customer and Bank in form and substance satisfactory to IBM Credit.
Customer shall also establish and maintain a deposit account which shall
contain only proceeds of Customer's Accounts (the "Special Account") with the
Bank. Customer shall enter into and maintain a blocked account agreement
with the Bank for the benefit of IBM Credit in form and substance
satisfactory to IBM Credit.
(B) Customer shall instruct all Account debtors to remit payments directly
to the Lockbox. In addition, Customer shall have such instruction printed in
conspicuous type on all invoices. Customer further agrees that it shall not
deposit or permit any deposits of funds other than remittances paid in
respect of the Account into the Special Account or permit any commingling of
funds with such remittances in the Lockbox or Special Account.
(C) IBM Credit may at its option notify any Account debtor or debtors of the
assignment of Accounts, and directly collect the same. All payments received
by Customer from its Account debtors, whether in the form of money, checks,
notes, drafts, or other things of value or items of payment, shall be
received by Customer solely as agent and in trust for IBM Credit. Customer
shall properly endorse and immediately deposit into the Special Account, on
the day of receipt thereof, all original checks, drafts, acceptances, notes
and other evidences of, or properties constituting payment of, or on
account of, Accounts, including all cash. Customer shall have no right and
agrees not to commingle with its own funds or to use, divert or withhold any
of the proceeds of any collections received thereon. Customer shall make
entries on its books and records in a form satisfactory to IBM Credit and
shall keep a separate account on its record books of all collections
received thereon. Until delivery to IBM Credit, Customer shall keep all
remittances received separate and apart from Customer's funds so that they
are capable of identification as the property of IBM Credit.
3.6 Collection Days. All amounts received by IBM Credit in respect of any
Account may be credited by IBM Credit to the repayment of the Obligations
under this Agreement or, in IBM Credit's sole and absolute discretion, may be
disbursed to Customer. Should no Obligations exist, as defined in the
Agreement, then such amounts will be disbursed to Customer, provided that no
pending legal action or judgment exists against the Customer. The crediting
of amounts received by IBM Credit in respect of such Obligations shall in all
cases be subject to the final collection thereof.
3.7 Power of Attorney. Customer hereby irrevocably appoints IBM Credit (and
any person designated by it) as Customer's true and lawful attorney- in-fact
with full power to at any time, in good faith and in compliance with
commercially reasonable standards, in the sole and absolute discretion of IBM
Credit:
(a) upon the occurrence and during the continuance of an Event of
Default, demand payment, enforce payment and otherwise exercise all
Customer's rights and remedies with respect to the collection of
any Accounts;
(b) upon the occurrence and during the continuance of an Event of
Default, settle, adjust, compromise, extend or renew any Accounts;
(c) to settle, adjust or compromise any legal proceedings brought to
collect any Accounts;
(d) upon the occurrence and during the continuance of an Event of
Default, sell or assign any Accounts upon such terms, for such
amounts and at such time or times as IBM Credit may deem advisable;
(e) upon the occurrence and during the continuance of an Event of
Default, discharge and release any Accounts;
(f) to prepare, file and sign Customer's name on any proof of claim or
similar document against any Account debtor;
(g) to prepare, file and sign Customer's name on any notice of lien,
claim of mechanic's lien, assignment or satisfaction of lien or
mechanic's lien, or similar document in connection with any
Accounts;
(h) to endorse the name of Customer upon any chattel paper, document,
instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of lading or similar
document or agreement relating to any Account or goods pertaining
thereto;
(i) to endorse the name of Customer upon any of the items of payment of
proceeds and deposit the same in the account of IBM Credit for
application to the Obligations;
(j) to sign the name of Customer to requests for verification of
Accounts and notices thereof to Account debtors;
(k) to sign the name of Customer on any document or instrument that IBM
Credit shall deem necessary or appropriate to perfect and maintain
perfected the security interest in the Collateral contemplated
under this Agreement and the Other Agreements;
(l) upon the occurrence and during the continuance of an Event of
Default, to make, settle and adjust claims under the Policies and
endorse Customer's name on any check, draft, instrument or other
item of payment of the proceeds of the Policies; and
(m) upon the occurrence and during the continuance of an Event of
Default, to take control in any manner of any item of payment or
proceeds (excluding any rebates, discounts or credits) and for such
purpose to notify the postal authorities to change the address for
delivery of mail addressed to Customer to such address as IBM
Credit may designate.
The power of attorney granted by this Section is for value and coupled with
an interest and is irrevocable until the later of the payment in full of the
Obligations and the termination of this Agreement.
3.8 Continuing Requirements. Customer shall:
(a) from time to time, if required by IBM Credit, immediately upon
their creation, deliver to IBM Credit copies of all invoices,
delivery evidences and other documents relating to each Account;
(b) within three (3) Business Days after Customer's learning thereof,
inform IBM Credit in writing of any rejection of goods or services
by any Account debtor, delays in delivery of goods or performance
of services, non-performance of contracts and of any assertion of
any claim, offset or counterclaim by any Account debtor, if such
return or rejection could reasonably be expected to have a Material
Adverse Effect;
(c) not permit or agree to any extension, compromise or settlement or
make any change or modification of any kind or nature with respect
to any Account, including any of the terms relating thereto;
(d) within three (3) Business Days after Customer's learning thereof,
furnish to and inform IBM Credit in writing of all adverse
information relating to the financial condition of any Account
debtor if such information could reasonably be expected to have a
Material Adverse Effect;
(e) affix appropriate endorsements or assignments upon all items of
payment and proceeds so that the same may be properly deposited by
IBM Credit to IBM Credit's account;
(f) within three (3) Business Days after Customer's learning thereof,
notify IBM Credit in writing which Accounts may be deemed
ineligible as defined in Subsection 3.3 herein;
(g) keep all goods rejected or returned by any Account debtor and all
goods repossessed or stopped in transit by Customer from any
Account debtor segregated from other property of Customer, holding
the same in trust and as trustee for IBM Credit until Customer
applies a credit against such Account debtor's outstanding
obligations to Customer or sells such goods in the ordinary course
of business, whichever occurs first, if such returned goods could
reasonably be expected, as determined by IBM Credit, to have a
Material Adverse Affect;
(h) stamp or otherwise ▇▇▇▇ chattel paper and instruments now owned or
hereafter acquired by it to show that the same are subject to IBM
Credit's security interest and immediately thereafter deliver or
cause such chattel paper and instruments to be delivered to IBM
Credit or any agent designated by IBM Credit with appropriate
endorsements and assignments to vest title and possession in IBM
Credit;
(i) together with each Request for Advance, provide IBM Credit with a
summary of the aging of the Accounts; and
(j) provide to IBM Credit a detailed aging report of its Accounts,
which shall include its accounts receivable ledger and its on-line
aging of Accounts and any other report listing other Collateral
that IBM Credit may request, in a format acceptable to IBM Credit,
no later than the fifteenth (15th) day of each month and containing
information as of the close of business on the last day of the
preceding month.
3.9 Rights of IBM Credit. IBM Credit may, without notice to Customer and at
any time or times hereafter, when Customer has any Obligations to IBM Credit:
(a) verify with Account debtors or others the validity, amount or any
other matter relating to any Account by mail, telephone or other
means in the name of Customer or IBM Credit; and
(b) take control in any manner of any cash or non-cash items of payment
or proceeds of Accounts and of any rejected, returned, repossessed
or stopped in transit goods relating to Accounts.
3.10 Release. Customer releases IBM Credit from any and all claims and
causes of action which Customer may now or hereafter have for any loss or
damage to it claimed to be caused by or arising from:
(a) any failure of IBM Credit to protect, enforce or collect, in whole
or in part, any Account;
(b) IBM Credit's notification to any Account debtors thereon of IBM
Credit's security interest in any of the Accounts;
(c) IBM Credit's directing any Account debtor to pay any sum owing to
Customer directly to IBM Credit; and
(d) any other act or omission to act on the part of IBM Credit, its
officers, agents or employees, except for its gross negligence or
willful misconduct.
IBM Credit shall have no obligation to preserve rights to Accounts against
prior parties.
3.11 Additional Requirements. Customer agrees to comply with the
requirements set forth in Attachment A to this Agreement.
3.12 Audit. Customer shall at all times permit IBM Credit (or any person
designated by it) upon notification, during Customer's usual business hours,
to have access to audit, examine and check the Collateral, Customer's other
assets and any and all of Customer's books, records, files and business
procedures and practices, and permit the copying of the same and the making
of abstracts therefrom as part of IBM Credit's customary audit procedures.
4. SECURITY - COLLATERAL
4.1 Grant. To secure Customer's payment and performance of the Obligations
and to secure Customer I s prompt, full and faithful performance and
observance of all of the provisions under this Agreement and the Other
Agreements, Customer hereby grants IBM Credit a security interest in all of
Customer's right, title and interest in and to the following, whether now
owned or hereafter acquired or existing and wherever located:
(a) all inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents
therefor;
(b) all accounts, contract rights, chattel paper, instruments, deposit
accounts, general intangibles (other than any Intellectual
Property) and other obligations of any kind, and all rights now or
hereafter existing in and to all mortgages, security agreements,
leases or other contracts securing or otherwise relating to any of
the same;
(c) all substitutions and replacements for all of the foregoing;
(d) all books and records pertaining to any of the foregoing: and
(e) all proceeds of all of the foregoing and, to the extent not
otherwise included, all payments under insurance or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing.
All of the above assets are hereinafter collectively referred to as
"Collateral."
Customer covenants and agrees with IBM Credit that: (a) the security interest
granted under this Agreement is in addition to any other security interest
from time to time held by IBM Credit; (b) IBM Credit may realize upon all or
part of any Collateral in any order it desires and any realization by any
means upon any Collateral will not bar realization upon any other Collateral;
and (c) the security interest hereby created is a continuing security
interest and will cover and secure the payment of all Obligations both
present and future of Customer to IBM Credit pursuant to this Agreement and
the Other Agreements.
4.2 Instruments. Customer shall execute and deliver, or cause to be
executed and delivered, to IBM Credit at such time or times as IBM Credit may
request, all financing statements, continuation statements, security
agreements, assignments, certificates, certificates of title, applications
for vehicle titles, affidavits, reports, notices, schedules of accounts, and
other documents, instruments, agreements and other papers, and take any other
action, that IBM Credit may deem desirable to create, confirm, perfect or
maintain perfected IBM Credit's security interest in the Collateral.
Customer shall make appropriate entries on its books and records disclosing
IBM Credit's security interest in the Collateral.
5. WARRANTIES, REPRESENTATIONS, AND COVENANTS
5.1 Affirmative Warranties, Representations and Covenants. Except as
otherwise specifically provided in any of the Other Agreements, Customer
warrants and represents to and covenants with IBM Credit that:
(a) Each Account is based on an actual and bona fide sale and delivery
of goods or rendition of services, made or performed by Customer,
in the ordinary course of its business; the Account debtors have
accepted such goods or services, owe and are obligated to pay the
full amounts stated in the invoices according to their terms,
without any dispute, offset, defense or counterclaim and have the
ostensible authority to contract; and there are no proceedings or
actions known to Customer which are pending or threatened against
any Account debtor that might result in any material adverse change
in such Account debtor's financial condition;
(b) Customer has and shall at all times have good and valid title to
all Collateral free and clear of all liens, security interests,
encumbrances and claims of any Person, except for Permitted Liens;
(c) IBM Credit's security interest in the Collateral is and shall at
all times constitute a perfected security interest in the
Collateral which security interest is not and shall at no time
become subordinate or junior to the security interest, lien,
encumbrance or claim of any other Person except for Permitted Prior
Liens;
(d) Customer is and shall at all times during the term of this
Agreement be a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation set
forth in Attachment A and qualified and licensed to do business in
each state, county, or parish in which the nature of its business
or property requires it to be qualified or licensed;
(e) Customer has the right and is duly authorized to enter into this
Agreement and the Other Agreements and the execution, delivery and
performance of this Agreement and the Other Agreements by the
Customer do not and will not violate Customer's articles of
incorporation or by-laws, any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award presently in
effect having applicability to Customer or any provisions of any
indenture, agreement, document, instrument or undertaking to which
Customer is now or hereafter becomes a party or by which it is, may
be or hereafter becomes bound;
(f) each Guarantor has the right and power to and is duly authorized to
make any guaranty given to IBM Credit;
(g) all financial statements and information relating to Customer and
any Guarantor which have been or may hereafter be delivered by
Customer or any Guarantor to IBM Credit are true and correct and
have been, and upon delivery will be, prepared in accordance with
generally accepted accounting principles and there has been no
material adverse change in the financial or business condition of
Customer since the submission of any such financial information to
IBM Credit;
(h) there are, and shall be, no actions or proceedings pending or
threatened against Customer and no change or development involving
a prospective change which in any such case, has had or could
reasonably be expected to have a material adverse effect on
(i) Customer's business (financial or otherwise), (ii) the value of
the Collateral or the amount which IBM Credit would be likely to
receive in the liquidation of such Collateral, (iii) the Customer's
ability to perform its Obligations, or (iv) the rights and remedies
of IBM Credit under this Agreement or the Other Agreements;
(i) Customer shall maintain all of its properties (business and
otherwise) in good condition and repair and pay and discharge all
costs of necessary repair and maintenance thereof and all rental
and mortgage payments and related charges pertaining thereto,
except where adequate reserves (as defined by GAAP) have been made;
(j) Customer will use commercially reasonable efforts to collect all
Accounts owed;
(k) Customer has duly filed and shall hereafter duly file all federal,
state, local and other governmental tax returns which it is
required by law to file;
(l) all taxes, levies, assessments and governmental charges of any
nature which are or may become due by Customer have been and will
be fully paid when due and Customer shall promptly pay when due all
such tax liabilities which may hereafter accrue;
(m) Customer shall maintain a system of accounting in accordance with
generally accepted accounting principles and ledger and account
records which contain such information as may be requested by IBM
Credit;
(n) Customer shall deliver to IBM Credit:
1) within ninety (90) days after the end of each of Customer's
fiscal years, a reasonably detailed balance sheet and a
reasonably detailed profit and loss statement covering
Customer's operations for such fiscal year, prepared in
accordance with generally accepted accounting standards, audited
by an independent certified public accountant satisfactory to
IBM Credit and containing an opinion of such public accountant
in form and substance satisfactory to IBM Credit,
2) within forty-five (45) days after the end of each of Customer's
first three fiscal quarters, Customer shall deliver to IBM
Credit a reasonably detailed balance sheet as of the last day of
such quarter and profit and loss statement covering Customer's
operations for such quarter (subject to normal year-end audit
adjustments) prepared in accordance with generally accepted
accounting standards,
3) promptly upon the request therefor by IBM Credit, any other
report requested by IBM Credit relating to the Collateral or the
financial condition of Customer.
Each report, statement, or document delivered or caused to be delivered
to IBM Credit under this Subsection 5.1 (n) shall be accompanied by the
certificate of an authorized officer of Customer to the effect that to
the best of such officer's knowledge, after due diligence and following
a reasonably independent investigation and review, the same is complete
and correct and thoroughly and accurately presents the financial
condition of Customer and that there exists on the date of delivery of
said certificate no condition or event which constitutes a Default or
Event of Default under this Agreement or any of the Other Agreements;
(o) Customer shall promptly supply IBM Credit with such other
information concerning its or any Guarantor's affairs as IBM Credit
from time to time hereafter may reasonably request;
(p) The address of the principal place of business and chief executive
office of Customer is as set forth in Attachment B to this
Agreement. The books and records of Customer, and all of its
chattel paper and records of Accounts, are maintained at such
location. There is no location in which Customer has any assets,
equipment or inventory (except for vehicles and inventory in
transit for processing) other than those locations identified in
Attachment B. There is no location in which Customer has a place
of business other than those locations identified in Attachment B
pursuant to the preceding sentence and those other locations
identified in Attachment B. Attachment B also contains a complete
list of the legal names and addresses of each warehouse at which
Customer's inventory is stored. All receipts received by Customer
from any warehouseman shall state that the goods covered shall be
delivered only to Customer. Customer agrees to notify IBM Credit
in writing at least thirty (30) days prior to the effective date of
any change in the information listed in Attachment B.
(q) Customer agrees that it shall give IBM Credit thirty (30) days
advance notice prior to any change in Customer's identity, name,
form of ownership or management.
(r) Customer, at its sole expense, shall keep and maintain the
Collateral insured for its full insurable value against loss or
damage by fire, theft, explosion, sprinklers and all other hazards
and risks ordinarily insured against by other owners or users of
such properties and interests in properties in similar businesses.
All such insurance policies ("Policies") shall be in form, with
companies, in amounts and with deductibles satisfactory to IBM
Credit. Customer shall deliver to IBM Credit true and correct
copies of the Policies as well as such evidence of insurance as IBM
Credit may from time to time require, and, on IBM Credit's request,
evidence of payment of all premiums therefor. Each of the Policies
shall contain an endorsement, in a form satisfactory to IBM Credit,
showing loss payable to IBM Credit; upon receipt of proceeds by IBM
Credit the same shall be applied on account of Obligations.
Customer agrees to instruct each insurer to give IBM Credit, by
endorsement upon the Policy issued by it or by independent
instruments furnished to IBM Credit, at least ten (10) days'
written notice before any Policy shall be altered or cancelled and
that no act or default of Customer or any other person shall affect
the right of IBM Credit to recover under the Policies. Customer
hereby directs all insurers under the Policies to pay all proceeds
directly to IBM Credit.
Without limiting the generality of the foregoing, Customer shall
keep and maintain, at its sole expense, the Collateral insured for
an amount not less than the amount set forth in writing by IBM
Credit from time to time against all loss or damage under an "all
risk" Policy with companies mutually acceptable to IBM Credit and
Customer, with a lender's loss payable endorsement or mortgagee
clause in form and substance reasonably satisfactory to IBM Credit
designating that any loss payable thereunder with respect to such
Collateral shall be payable to IBM Credit. Customer agrees to
instruct each insurer to give IBM Credit, by endorsement upon the
Policy issued by it or by independent instruments furnished to IBM
Credit, at least ten (10) days written notice before any Policy
shall be altered or cancelled and that no act or default of
Customer or any other person shall affect the right of IBM Credit
to recover under the Policies. Customer hereby agrees to direct
all insurers under the Policies to pay all proceeds with respect to
the Collateral directly to IBM Credit.
If Customer fails to pay any cost, charges or premiums, or if
Customer fails to insure the Collateral, IBM Credit may pay such
costs, charges or premiums. Any amounts paid by IBM Credit
hereunder shall be considered an additional debt owed by Customer
to IBM Credit and are due and payable immediately upon receipt of
an invoice by IBM Credit.
(s) Customer shall advise IBM Credit of the commencement or institution
of legal proceedings filed against the Customer subsequent to the
execution of this Agreement before any court, administrative board
or tribunal which, in the event of an adverse decision to Customer,
could have a material adverse effect on the Customer's condition
(financial or otherwise), operations, properties or prospects or
the Customer's ability to perform its Obligations or the rights and
remedies of IBM Credit under this Agreement and the Other
Agreements.
5.2 Negative Covenants. Customer agrees with IBM Credit that Customer will
not at any time (without IBM Credit's express prior written consent):
(a) other than in the ordinary course of its business, sell, lease or
otherwise dispose of or transfer any of its assets;
(b) merge or consolidate with another corporation;
(c) acquire any other corporation;
(d) enter into any transaction not in the usual course of its business
which might be expected in any material way adversely affect the
ability of Customer to repay the Obligations;
(e) guarantee or indemnify or otherwise become in any way liable with
respect to the obligations of any person, except by endorsement of
instruments or items of payment for deposit to the general account
of Customer or which are transmitted or turned over to IBM Credit
on account of the Obligations;
(f) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any material portion of Customer's capital stock which
might be expected in any way to materially adversely affect the
ability of the Customer to repay the Obligations;
(g) make any change in Customer's capital structure or in any of its
business objectives, purposes or operations which might be expected
in any way to materially adversely affect the ability of Customer
to repay the Obligations;
(h) make any distribution of Customer's property or assets with an
aggregate value not to exceed 1% of Customer's Total Net Worth as
defined in Attachment A;
(i) incur any debts outside of the ordinary course of Customer's
business except renewals or extensions of existing debts and
interest thereon; and
(j) make any loans, advances, contributions or payments of money or
goods to any subsidiary, affiliated or parent corporation or to any
officer, director or stockholder of Customer or of any such
corporation including, without limitation, paying any dividend on
or making any payment on account of any capital stock of Customer
or indebtedness of Customer to any of the foregoing (except for
compensation for personal services actually rendered in an amount
not to exceed that available on an arms length basis).
6. DEFAULT
6.1 Definition. Any one or more of the following events shall constitute
an event of default ("Event of Default") by Customer under this Agreement and
the Other Agreements:
(a) Customer or any Guarantor breaches any term, provision, condition
or covenant contained in this Agreement, in any of the Other
Agreements or any guaranty;
(b) Any warranty, representation, statement, report, or certificate
made or delivered by Customer or any of its officers, employees, or
agents or by any Guarantor to IBM Credit is not true and correct;
(c) Customer fails to immediately pay any of the Obligations when due
and payable or declared to be due and payable;
(d) IBM Credit shall determine that it is insecure with respect to any
of the Collateral that would materially and adversely affect its
value or a known event or condition which may adversely affect
repayment of any part of the Obligations;
(e) Customer attempts to or shall sell, transfer, convey, exchange,
assign, mortgage, pledge, charge, grant a security interest in or
otherwise dispose of or in any way part with the possession of the
Collateral, other than in the ordinary course of business or as
otherwise permitted under this Agreement;
(f) Customer removes, other than by sale to the extent allowed under
this Agreement, any part of the Collateral from any of Customer's
locations specified in Attachment B to this Agreement;
(g) Customer abandons the Collateral or any part thereof;
(h) Any judgment is entered against Customer and such judgment is not
satisfied, dismissed, stayed or superseded by bond within thirty
(30) days after the date of entry thereof (and in the event of a
stay or supersedeas bond such judgment is not discharged within 30
days after termination of such stay or bond);
(i) There issues a warrant of distress for any rent or taxes with
respect to any premises occupied by Customer in or upon which the
Collateral, or any part thereof, may at any time be situated;
(j) Customer suffers or permits the Collateral to be seized or taken in
execution without the consent of IBM Credit;
(k) Customer fails to insure or keep insured the Collateral within the
provisions of this Agreement;
(l) Customer suspends business;
(m) (i) Customer shall become insolvent or generally fail to pay, or
shall admit its inability or refusal to pay debts as they
become due;
(ii) Customer shall apply for, consent to, or acquiesce in the
appointment of a trustee, receiver or other custodian for
Customer or for its properties, assets, business or
undertakings;
(iii) any bankruptcy, reorganization, debt arrangement or other case
or proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, shall be commenced in
respect to Customer; or
(iv) Customer shall take any action to authorize, or in the
furtherance of, any of the foregoing;
(n) Any guaranty of any or all of the Customer's Obligations executed
by any Guarantor in favor of IBM Credit shall at any time for any
reason cease to be in full force and effect or shall be declared to
be null and void by a court of competent jurisdiction, or the
validity or enforceability thereof shall be contested or denied by
any Guarantor, or any Guarantor shall deny that it, he or she has
any further liability or obligation thereunder or any Guarantor
shall fail to comply with or observe any of the terms, provisions
or conditions contained in said Guaranty;
(o) Any event shall occur or condition shall exist under any agreement
or instrument relating to any debt of the Customer and shall
continue after the applicable grace period, if any, specified in
such agreement or instrument if the effect of such nonpayment,
other condition or conditions is to accelerate, or permit the
acceleration of the maturity of such debt, for any reason
whatsoever;
(p) Any "person" (as defined in Section 13(d) (3) of the Securities
Exchange Act of 1934, as amended) acquires a beneficial interest in
50% or more of the Voting Stock of Customer;
(q) Customer is in default under the terms of any of the Other
Agreements.
6.2 Rights of IBM Credit. Upon the occurrence and during the continuance
of any Event of Default, IBM Credit may:
(a) declare all or any of the Obligations immediately due and payable
together with all court costs and all costs and expenses of
repossession and collection activity, including, but not limited
to, reasonable attorney's fees;
(b) terminate the Line of Credit;
(c) exercise any or all of the rights accruing to a secured party upon
default by a debtor under the Uniform Commercial Code and any other
applicable laws;
(d) sell, lease or otherwise dispose of the Collateral at public or
private sale;
(e) at its sole election and without demand enter, with or without
process of law, any premises where Collateral might be and, without
charge or liability to IBM Credit therefor, do one or more of the
following:
(i) take possession of the Collateral and use or store it in said
premises or remove it to such other place or places as IBM
Credit may deem convenient;
(ii) take possession of all or part of such premises and the
Collateral and place a custodian in the exclusive control
thereof until completion of enforcement, under the UCC or
other applicable law, of IBM Credit's security interest in the
Collateral or until IBM Credit's removal of the Collateral to
such other place or places as IBM Credit may deem convenient;
(iii) remain on such premises and use the same, together with
Customer's materials, supplies, books and records, for the
purpose of liquidating or collecting such Collateral and
conducting and preparing for disposition of such Collateral;
and
(iv) remove the same to such place or places as IBM Credit may deem
convenient for the purpose of IBM Credit's using the same in
connection with IBM Credit's liquidation and collection of
such Collateral and to conduct and prepare for the disposition
of such Collateral (and Customer grants IBM Credit a security
interest in all Customer's contract-related material,
supplies, books, and records for such purpose as those
described above);
provided that upon the occurrence of any Event of Default set forth in
Section 6.1(m) all of the Obligations automatically shall become
immediately due and payable together with all such costs and expenses.
6.3 Customer's Obligations. Upon the occurrence and during the continuance
of an Event of Default, Customer shall if IBM Credit requests, assemble the
Collateral and make it available to IBM Credit at a place or places to be
designated by IBM Credit. Customer recognizes that if Customer fails to
perform, observe or discharge any of its Obligations under this Agreement or
the Other Agreements no remedy at law will provide adequate relief to IBM
Credit; therefore, Customer agrees that IBM Credit shall be entitled to
temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages. All of IBM Credit's rights and remedies
granted under this Agreement and Other Agreements are cumulative and non-
exclusive.
6.4 Waiver. Upon the occurrence and during the continuance of an Event of
Default, Customer waives and releases: any and all claims and causes of
action which it may now or ever have against IBM Credit as a result of any
possession, repossession, collection or sale by IBM Credit of any of the
Collateral, notwithstanding the effect of such possession, repossession,
collection or sale upon Customer's business; all rights of redemption from
any such sale; and the benefit of all valuation, appraisal and exemption
laws. IBM Credit's only obligation in respect to its repossession,
collection or sale of any Collateral is to act in a commercially reasonable
manner. If IBM Credit seeks to take possession of any of the Collateral by
replevin or other court process Customer hereby irrevocably waives any bonds,
surety and security relating thereto required by any statute, court rule or
otherwise as an incident to such possession and any demand for possession of
the Collateral prior to the commencement of any suit or action to recover
possession thereof.
7. MISCELLANEOUS
7.1 Termination. This Agreement shall be effective until the first
anniversary of the date of the execution and delivery by Customer of this
Agreement and shall automatically renew itself from year to year thereafter
unless terminated as hereinafter provided. This Agreement may be terminated
by either party at any time by giving written notice of such termination by
registered mail or certified mail addressed to the other party at the address
provided for in this Agreement. Termination shall be effective on the date
specified in the written notification (the "Effective Date of Termination")
which date shall be no less than thirty (30) days from the date the written
notification is delivered by the terminating party. Customer shall not be
relieved from any Obligations to IBM Credit until such time as all of the
Obligations of Customer shall have been indefeasibly paid in full. Upon the
termination of this Agreement by IBM Credit or Customer, all of Customer's
Obligations incurred under this Agreement shall be immediately due and
payable in their entirety, even if they are not yet due under their terms, on
the Effective Date of Termination. IBM Credit's rights under this Agreement
and IBM Credit's security interest in the Collateral shall continue after
termination of this Agreement until all of Customer's Obligations to IBM
Credit are indefeasibly paid in full. The covenants, warranties and
representations of this Agreement shall survive termination of the Agreement.
7.2 Collection. Customer agrees that checks and other instruments delivered
to IBM Credit on account of Customer's Obligations shall constitute
conditional payment until such items are actually paid to IBM Credit. Upon
the continuance of any default by the Customer, Customer waives the right to
direct the application of any and all payments hereafter received by IBM
Credit on account of Customer's Obligations. Customer agrees that IBM Credit
shall have the continuing exclusive right to apply and reapply any such
payments in such manner as IBM Credit may deem advisable notwithstanding any
entry by IBM Credit upon any of its books and records.
7.3 Demand, Etc. Customer waives to the extent permitted by law:
(a) demand, protest and all notices of protest, default or dishonor;
(b) all notices of payment and non-payment;
(c) all notices required by law; and
(d) except as otherwise specifically provided for in this Agreement,
all notices of default, non-payment at maturity, release,
compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guarantees at any time held by IBM
Credit on which Customer may, in any way, be liable and Customer
hereby ratifies and confirms whatever IBM Credit may do in that
regard.
7.4 Additional Obligations. IBM Credit, without waiving or releasing any
Obligation or Default of Customer, may perform any Obligations of Customer
that Customer shall fail to perform. IBM Credit may, at any time or times
hereafter, but shall be under no obligation so to do, pay, acquire or accept
any assignment of any security interest, lien, encumbrance or claim against
the Collateral asserted by any person. All sums paid by IBM Credit in
performing in satisfaction or on account of the foregoing and any expenses,
including reasonable attorney's fees, court costs, and other charges relating
thereto, shall be a part of the Obligations, payable on demand and secured by
the Collateral.
7.5 Indemnification. Customer hereby agrees to indemnify and hold harmless
IBM Credit against all loss or liability relating, directly or indirectly, to
any of the activities of the Customer or its predecessors in interest, to the
execution, delivery or performance of this Agreement or the Other Agreements
or the consummation of the transactions contemplated hereby or thereby or to
any of the Collateral. Notwithstanding the foregoing, Customer shall not be
obligated to indemnify IBM Credit for any loss or liability which is the
direct result of IBM Credit's gross negligence or willful misconduct. The
indemnity provided herein shall survive this Agreement.
7.6 Alterations/Waiver. In the event that IBM Credit at any time or from
time to time dispenses with any one or more of the Obligations specified in
this Agreement or any of the Other Agreements, such dispensation may be
revoked by IBM Credit at any time and shall not be deemed to constitute a
waiver of any such Obligation subsequent thereto. IBM Credit's failure at
any time or times to require strict performance by Customer of any
Obligations shall not waive, affect or diminish any right of IBM Credit
thereafter to demand strict compliance and performance. Any waiver by IBM
Credit of any Default by Customer under this Agreement or any of the Other
Agreements shall not waive or affect any other Default by Customer under this
Agreement or any of the Other Agreements, whether such Default is prior or
subsequent to such other Default and whether of the same or a different type.
None of the Obligations of Customer contained in this Agreement or the Other
Agreements and no Default by Customer shall be deemed waived by IBM Credit
unless such waiver is in writing signed by an authorized representative of
IBM Credit and delivered to Customer.
7.7 Notices. Except as otherwise expressly provided herein, any notice
required or desired to be served, given or delivered hereunder shall be in
writing, and shall be deemed to have been validly served, given or delivered
(i) three (3) Business Days after deposit in the United States mails,
registered or certified return receipt with proper postage prepaid, (ii) when
sent after receipt of confirmation or answerback if sent by telecopy, or
other similar facsimile transmission, (iii) one Business Day after being
deposited with a reputable overnight courier with all charges prepaid, or
(iv) when delivered, if hand-delivered by messenger, all of which shall be
properly addressed to the party to be notified and sent to the address or
number indicated in Attachment B or to such other address or number as each
party designates to the other in the manner herein prescribed.
7.8 Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Agreement.
7.9 One Loan. All loans and advances heretofore, now or hereafter made by
IBM Credit to Customer under this Agreement or the Other Agreements shall
constitute one loan secured by IBM Credit's security interests in the
Collateral and by all other security interests, liens and encumbrances
previously, presently or in the future granted by Customer to IBM Credit or
any assignor of IBM Credit.
7.10 Additional Collateral. All monies, reserves and proceeds received or
collected by IBM Credit with respect to Accounts and other property of
Customer in possession of IBM Credit at any time or times hereafter are
hereby pledged by Customer to IBM Credit as security for the payment of
Customer's Obligations and may be held by IBM Credit (without interest to
Customer) until Customer's Obligations are paid in full or applied by IBM
Credit on account of Customer's Obligations. IBM Credit may release to
Customer such portions of such monies, reserves and proceeds as IBM Credit
may from time to time determine, in its sole discretion.
7.11 Offsets. Customer hereby waives any right of set-off it may have
against IBM Credit.
7.12 Limitation of Liability. IBM Credit shall not have any liability with
respect to any special, indirect or consequential damages suffered by
Customer in connection with this Agreement, any other Agreement or any claims
in any manner related thereto.
7.13 Time. Time shall be of the essence hereof.
7.14 Entire Agreement. This Agreement, together with the Other Agreements
and any other documents to be delivered pursuant hereto and thereto,
constitutes the entire Agreement between the Customer and IBM Credit
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, with
respect to the subject matter hereof.
7.15 Paragraph Titles. The Section titles used in this Agreement and the
Other Agreements are for convenience only and do not define or limit the
contents of any Section.
7.16 Binding Effect. This Agreement and the Other Agreements shall be
binding upon and inure to the benefit of IBM Credit and Customer and their
respective successors and assigns but Customer shall have no right to assign
this Agreement or any of the Other Agreements without the prior written
consent of IBM Credit.
7.17 Conditions To Effectiveness. The effectiveness of this Agreement shall
be conditioned upon the receipt by IBM Credit of the instruments and other
documents specified in Attachment A to this Agreement including IBM Credit's
receipt of an agreement, in form and substance satisfactory to IBM Credit,
between Customer and a financial institution acceptable to IBM Credit, which
creates a lockbox account arrangement which is blocked in favor of IBM Credit
so that the only disbursements made against the account shall be in favor of
IBM Credit.
7.18 Submission by Customer. This Agreement and the Other Agreements are
submitted by Customer to IBM Credit (for IBM Credit's acceptance or rejection
thereof) at IBM Credit's place of business specified in Attachment B of this
Agreement, as an offer by Customer to borrow monies from IBM Credit and shall
not be binding upon IBM Credit or become effective until and unless accepted
in writing by IBM Credit at its said place of business. If so accepted, this
Agreement and the Other Agreements shall be deemed to have been made at IBM
Credit's said place of business. This Agreement and the Other Agreements and
all transactions pursuant thereto shall be governed and controlled as to
interpretation, enforcement, validity, construction, effect and in all other
respects (including, but not limited to, the legality of the interest charged
to Customer pursuant thereto) by the laws, statutes and decisions of the
state of IBM Credit's said place of business. Customer, in order to induce
IBM Credit to accept this Agreement and the Other Agreements, agrees that all
actions or proceedings arising directly or indirectly in connection with this
Agreement or the Other Agreements may be litigated, at IBM Credit's sole
discretion and election, in courts having situs within the state where IBM
Credit's aforesaid place of business is located. Customer hereby consents
and submits to the jurisdiction of any local, state or federal court located
within such state. Customer hereby waives any right it may have to transfer
or change the venue of any litigation brought against it by IBM Credit in
accordance with this paragraph.
CUSTOMER AND IBM CREDIT HEREBY IRREVOCABLY WAIVE THEIR RIGHT TO TRIAL BY JURY
WITH RESPECT TO ANY ACTION OR PROCEEDING IN WHICH IBM CREDIT AND CUSTOMER
ARE PARTIES.
IN WITNESS WHEREOF, the duly authorized representatives of Customer have
executed and delivered this Agreement as of the date set forth below.
Date: 9/23/97
Customer: ▇▇▇▇▇▇ Electronics
Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Print Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Title: EVP/CFO
-------------------------------
ATTEST: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------
(Secretary)
ACCEPTED this 15th day of October, 1997, at IBM Credit's place of business
specified at the beginning of this Agreement.
IBM Credit Corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
Title: Account Executive
---------------------------
SECRETARY'S CERTIFICATE
(Revolving Loan and Security Agreement)
I, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, do hereby certify that I am the duly elected and acting
Secretary of ▇▇▇▇▇▇ Electronics, a New York corporation, and as such I am the
keeper of the corporate records and seal of said corporation; that the
following is a true and correct copy of resolutions duly adopted and ratified
by action of the board of directors of said corporation on June 19, 1997 as
ratified and approved by the stockholders of said corporation by action of
said stockholders on June 19, 1997, all in accordance with its by-laws and
articles of incorporation and the laws of its jurisdiction of incorporation;
and that the same have not been modified, repealed, rescinded or withdrawn,
are in full force and effect and do not contravene any provisions of said
corporation's articles of incorporation or by-laws:
RESOLVED, that the President, each Vice-President, the Secretary, the
Treasurer and each other officer and each agent of this Corporation, or
any one or more of them, be and they are hereby authorized and empowered
on behalf of this Corporation: to obtain from IBM Credit Corporation
("IBM Credit") loans in such amounts and on such terms and conditions as
such officers deem proper; to execute notes and other evidences of this
corporation's indebtedness with respect thereto; to enter into financing
and other agreements with IBM Credit relating to the terms and
conditions upon which any such loans may be obtained and the security to
be furnished by this corporation therefore; from time to time to modify,
supplement or amend any such agreements, any such terms or conditions
and any such security; from time to time to pledge, assign, guaranty,
mortgage, consign, grant security interest in and otherwise transfer to
IBM Credit as collateral security for any and all debts and obligations
of this corporation to IBM Credit, whenever and however arising, any and
all accounts and other forms of obligations, receivables, choses in
action, inventory, warehouse receipts, machinery, equipment, land,
buildings and other real, personal or fixed property, tangible or
intangible, now or hereafter belonging to or acquired by this
corporation; for said purposes to execute and deliver any and all
assignments, schedules, transfers, endorsements, contracts, debentures,
guarantees, agreements, designations, consignments, deeds of trust,
mortgages, instruments of pledge or other instruments in respect thereof
and to make remittances and payments in respect thereof by checks,
drafts or otherwise; and to do and perform all other acts and things
deemed by such officer or agent necessary, convenient or proper to carry
out any of the foregoing; hereby ratifying, approving and confirming all
that any said officers and agents have done or may do in the premises.
(Revolving Loan and Security Agreement)
I do further certify that the following are the names and specimen signatures
of the officers and agents of said corporation so empowered and authorized,
namely:
Co-President:
▇▇▇▇ ▇. Andilea
-------------------------
(Print Name)
/s/ ▇▇▇▇ ▇. Andilea
-------------------------
(Signature)
Co-President:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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(Print Name)
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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(Signature)
EVP/CFO:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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(Print Name)
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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(Signature)
Treasurer:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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(Print Name)
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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(Signature)
Agent:
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(Print Name)
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(Signature)
Witness my hand and seal of said corporation this 23rd day of September,
1997. (Attach corporate seal here.)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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(Secretary of said corporation)
ATTACHMENT A TO
REVOLVING LOAN AID SECURITY AGREEMENT
Dated 9/23 , 1997
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Customer's Name: ▇▇▇▇▇▇ Electronic Corporation
1. A/R Revolver Credit Line Fees, Rates and Repayment Terms:
(a) Line of Credit in the amount of:
Eight Million dollars ($8,000,000.00);
(b) Borrowing Base:
(i) Percentage on invoice amount of Eligible Accounts: 85%;
including, but not limited to, Accounts arising from incentive
payments, rebates, discounts and refunds relating to Approved
Inventory, to be later defined in an agreement, which are
(i) verifiable by suppliers, and (ii) payable by suppliers, and
(iii) paid by suppliers by check to a lockbox approved by IBM
Credit Corporation.
(ii) Valuation Percentage of Additional Collateral: 20%;
Type of Additional Collateral: Raw Materials and Finished Goods (to
be further defined in an agreement).
(c) Monthly Service Fees $1,000.00;
(d) Revolver Financing Charge: Prime Rate plus 0.75%;
(e) Delinquency Fee Rate: Prime Rate plus 6.50%.
2. Documentation Requirements: (Other Agreements)
Executed Revolving Loan and Security Agreement;
Executed Blocked Account Amendment to a Lockbox Agreement;
Executed Corporate Guaranty of all Affiliates, including: ▇▇▇▇▇▇
Direct Marketing, Inc., ▇▇▇▇▇▇ ANC Manufacturing, Inc., ▇▇▇▇▇▇
Marketing, Inc., ▇▇▇▇▇▇ Electronics Europe, Inc. and ▇▇▇▇▇▇
Military Communications, Inc., LLC.
Executed Waiver of Landlord Lien for all premises in which a
landlord had the right of levy for rent.
Proof of "All risk" insurance policy in amount of $5,OOOK naming
IBMCC as lender loss payee;
Execute Agreement for Non-Transfer of Assets from owners with
10% or more holdings;
ATTACHMENT A TO
LETTER OF UNDERSTANDING (Continued)
1. Customer must submit the following within ninety (90) days after the end
of Customer's fiscal year, and as requested by IBM Credit from time to
time:
Pro forma income statement, balance sheet and cash flow
statement for the next 12 months or through the current fiscal
year and the following fiscal year; and
business narrative that at a minimum should include an
explanation on how Customer plans to accomplish significant
changes in revenue, gross profit margin, expenses, operating
profit margin and net profit. The Customer's business strategy,
anticipated business climate, and the headcount that will
produce the projected financial results should also be included.
2. Documentation Requirements (Other Agreements) (continued):
A list of all creditors possessing a security interest or 1ien
on accounts receivable; all creditors will be required to
subordinate to IBM Credit or terminate their filings; and
all creditors possessing a security interest or lien which is
superior to IBM Credit's in any Collateral; creditors may be
required to subordinate to IBM Credit.
3. Financial Covenants:
Definitions: The following terms shall have the following respective
meanings in this Letter of Understanding. All amounts shall be determined in
accordance with generally accepted accounting principles (GAAP).
Current shall mean within the on-going twelve month period.
Current Assets shall mean assets that are cash or expected to become
cash within the on-going twelve months.
Current Liabilities shall mean payment obligations resulting from past
or current transactions that require settlement within the on-going
twelve month period. All indebtedness to IBM Credit shall be considered
a Current Liability for purposes of determining compliance with the
Financial Covenants.
Current Ratio shall mean Current Assets divided by Current Liabilities.
Long Term shall mean beyond the on-going twelve month period.
Long Term Assets shall mean assets that take longer than a year to be
converted to cash. They are divided into four categories:
tangible assets, investments, intangibles and other.
Long Term Debt shall mean payment obligations of indebtedness which
mature more than twelve months from the date of determination, or mature
within twelve months from such date but are renewable or extendible at
the option of the debtor to a date more than twelve months from the date
of determination.
Net Profit after Tax shall mean Revenue plus all other income, minus all
costs, including applicable taxes.
Revenue shall mean the monetary expression of the aggregate of products
or services transferred by an enterprise to its customers for which said
customers have paid or are obligated to pay, plus other income as
allowed.
Subordinated Debt shall mean Customer's indebtedness to third parties as
evidenced by an executed Notes Payable Subordination Agreement in favor
of IBM Credit.
ATTACHMENT A TO
REVOLVING LOAN AND SECURITY AGREEMENT (Continued)
3. Financial Covenants (continued):
Tangible Net Worth shall mean:
Total Net Worth minus;
(a) goodwill, organizational expenses, pre-paid expenses,
deferred charges, research and development expenses,
software development costs, leasehold expenses,
trademarks, trade names, copyrights, patents, patent
applications, privileges, franchises, licenses and rights
in any thereof, and other similar intangibles (but not
including contract rights) and other current and non-
current assets as identified in Customer's financial
statements;
(b) all accounts receivable from employees, officers,
directors, stockholders and affiliates; and
(c) all callable/redeemable preferred stock.
Total Assets shall mean the total of Current Assets and Long Term
Assets.
Total Liabilities shall mean the Current Liabilities and Long Term Debt
less Subordinated Debt, resulting from past or current transactions,
that require settlement in the future.
Total Net Worth (the amount of owner's or stockholder's ownership in an
enterprise) is equal to Total Assets minus Total Liabilities.
Working Capital shall mean Current Assets minus Current Liabilities.
Customer will be required to maintain the following financial percentage and
ratios as of the last day of the fiscal period under review by IBM Credit:
a) Net Profit after Tax to Revenue percentage equal to or greater
than 1.20%;
b) Total Liabilities to Tangible Net Worth greater than zero and
equal to or less than 1.3:1.0;
c) Revenue (on an annual basis) to Working Capital ratio greater
than zero and equal to or less than 5.0:1.0.
4. Customer's state of incorporation is: New York
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5. Lockbox Information: 6. IBM Credit Account
Information:
Bank Name: European American Bank Bank Name: First
Chicago Bank
Address: Long Island City, Address: Chicago,
Illinois
New York
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6. Uniform Commercial Code:
The Uniform Commercial Code in effect from time to time in the state of
New York will apply to this Agreement.
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