EXHIBIT 10.2
LOAN AND SECURITY AGREEMENT
(AR)
THIS LOAN AND SECURITY AGREEMENT is entered into as of April 23,
2008 by and among (1) AMERICAN TONERSERV CORP., a Delaware corporation
("Borrower"), (2) each of the parties identified on the signature pages
hereof as a "Guarantor" and each other party that becomes a Guarantor
pursuant to Section 8.8 (the "Guarantors"), and (3) CELTIC CAPITAL
CORPORATION, a California corporation ("Lender").
1. Rules of Construction; Definitions. Unless otherwise
specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be
prepared, in accordance with generally accepted accounting principles
and practices consistently applied. All references herein to the
singular or plural shall also mean the plural or singular,
respectively. Words importing any gender include the other genders.
References to statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute referred
to. References to "writing" include printing, typing, lithography and
other means of reproducing words in a tangible, visible form. The words
"including," "includes" and "include" are deemed to be followed by the
words "without limitation." References to articles, sections (or
subdivisions of sections), recitals, exhibits, annexes and schedules
are to those of this Agreement unless otherwise specified. References
to agreements and other contractual instruments are deemed to include
all amendments and other modifications to such instruments, but only to
the extent such amendments and other modifications are not prohibited
by the terms of this Agreement. References to persons and entities
include their respective permitted successors and assigns. All terms
used herein that are defined in the California Uniform Commercial Code
shall have the meanings ascribed thereto therein unless otherwise
defined in this Agreement. As used herein, the following terms shall
have the following meanings:
1.1 "Account Debtor" - any obligor to a Credit Party on an
account, chattel paper, instrument or general intangible, or otherwise,
including any customer of a Credit Party that makes payment to such
Credit Party before, or simultaneously with, such Credit Party's
delivery of goods or services to such customer.
1.2 "Agreement" - this Loan and Security Agreement,
together with all exhibits and schedules hereto.
1.3 "Anniversary Date" - the date that is one year after
the day on which the first Credit Accommodation is made hereunder, and
each successive date that is one year after such date or any such
successive date.
1.4 "A/R Advances" - as defined in Section 2.1.1.
1.5 "A/R Administrative Fee" - a fee at the rate of twenty-
four one hundredths of one percent (.24%) per month on the average
daily balance of the gross face amount of the Credit Parties' accounts
outstanding, as determined by Lender in its sole discretion.
1.6 "A/R Allowable Amount" - the lesser of the A/R
Borrowing Base and the A/R Maximum Commitment.
1.7 "A/R Borrowing Base" - eighty percent (80%) of the Net
Face Amount of Eligible Accounts.
1.8 "A/R Maximum Commitment" - $2,000,000.00.
1.9 "Availability Reserves" - as of any date of
determination, such amounts as Lender may from time to time establish
and revise in good faith to reduce the amount of A/R Advances that
would otherwise be available to Borrower hereunder: (a) to reflect
events, conditions, contingencies and risks that, as determined by
Lender in good faith, do or may affect (i) the Collateral or any other
property that is security for the Obligations, including the value of
the Collateral or such other property, (ii) the assets, business or
prospects of Borrower or any other Credit Party or (iii) the security
interest and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof); (b) to reflect
Lender's good-faith belief that any Collateral report or financial
information furnished by or on behalf of Borrower or any other Credit
Party to Lender is or may have been incomplete, inaccurate or
misleading in any material respect; or (c) in respect of any state of
facts that 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.
1.10 "Borrower's Account" - the deposit account of
Borrower, account number __________, maintained by Borrower with
_________________________ at its office located at
_________________________.
1.11 "Claim" - any claim, cause of action, action, dispute
or controversy between one or more of the Credit Parties, on the one
hand, and Lender, on the other hand, whether sounding in contract, tort
or otherwise, that arises out of or relates to (a) any of the
Documents, (b) any negotiations or communications relating to any of
the Documents, whether or not incorporated into the Documents or any
indebtedness evidenced thereby, or (c) any alleged agreements,
promises, representations or transactions in connection with any of the
foregoing.
1.12 "Collateral" - all of each Credit Party's right, title
and interest in and to the following, whether now owned or hereafter
acquired, whether now or hereafter existing and wherever located,
together with all collateral now or hereafter described in any UCC
Financing Statement filed against any Credit Party naming Lender as the
secured party:
1.12.1 accounts; returned, reclaimed or repossessed goods,
and rights as an unpaid vendor, with respect to accounts; contract
rights; chattel paper; general intangibles (including tax and duty
refunds, registered and unregistered patents, trademarks, service
marks, copyrights, trade names and applications for the foregoing,
trade secrets, goodwill, processes, drawings, blueprints, customer
lists, software, licenses, whether as licensor or licensee, choses in
action and other claims, and existing and future leasehold interests in
equipment and fixtures); money; documents; instruments including
promissory notes; letters of credit and letter of credit rights; and
deposit accounts;
1.12.2 goods, including:
1.12.2.1 inventory, wherever located, including raw
materials, work-in-process, finished goods, and all names or marks
affixed or to be affixed thereto for purposes of selling the same by
the seller, manufacturer, lessor or licensor thereof;
1.12.2.2 equipment and fixtures, including motor
vehicles, furniture, and any and all additions, substitutions,
replacements (including spare parts) and accessions thereof and thereto
and any and all software embedded therein; and
1.12.2.3 goods in any Credit Party's possession,
custody or control;
1.12.3 investment property;
1.12.4 books and records relating to any of the above,
including all computer programs, printed output and computer-readable
data in the possession or control of any Credit Party, any computer
service bureau or any other third party;
1.12.5 claims of any Credit Party on any policy of
insurance, including claims for premium refund under any workmen's
compensation policy and claims under any business-interruption or
similar coverage; and
1.12.6 products, proceeds and supporting obligations
of the foregoing in whatever form and wherever located, including
insurance proceeds, claims against third parties for loss or
destruction of, or damage to, any of the foregoing, and income from the
lease or rental of any of the foregoing.
1.13 "Credit Accommodation" - any A/R Advance, loan or
other extension of credit by Lender to or on behalf of Borrower
hereunder, including any Special Credit Accommodation.
1.14 "Credit Parties" - Borrower and Guarantors.
1.15 "Default Rate" - four percentage points (4.0%) per
annum in excess of the Interest Rate; provided, however, that, to the
extent that the Default Rate is calculated with reference to the Prime
Rate, any change in the Default Rate shall be effective as of the date
of any change in the Prime Rate.
1.16 "Delinquent Account" - an account owing to any Credit
Party that remains uncollected more than ninety (90) days from invoice
date.
1.17 "Documents" - this Agreement, any riders, supplements
and amendments hereto, and all other documents, instruments or
agreements now or hereafter executed and/or delivered in connection
with this Agreement, including any promissory notes, evidences of
Special Credit Accommodations, mortgages, deeds of trust, security
agreements, assignments, pledges, debt or lien subordination
agreements, intercreditor agreements and guaranties.
1.18 "Eligible Account" - any account owing to any Credit
Party, excluding the following:
1.18.1 any Delinquent Account;
1.18.2 any account due from an Account Debtor that has
suffered a business failure or the termination of its existence, or as
to which a dissolution, insolvency or bankruptcy proceeding has been
commenced, any assignment for the benefit of creditors has been made,
or a trustee, receiver or conservator has been appointed for all or any
part of the assets of such Account Debtor;
1.18.3 any account due from an Account Debtor
affiliated with any Credit Party in any manner, including as
stockholder, owner, partner, member, officer, director, agent or
employee;
1.18.4 any account with respect to which payment is or
may be conditional;
1.18.5 any account due from an Account Debtor that is
not a resident or citizen of, not located in, or not subject to service
of process in, the United States of America; provided, however, that no
account shall be excluded from being an Eligible Account pursuant to
this Section 1.18.5 if such account is supported by credit insurance or
a letter of credit acceptable to Lender in its sole discretion;
1.18.6 any account due from an Account Debtor that is
a unit of government, including any instrumentality, division, agency,
body or department thereof, except if the Account Debtor is the United
States of America, and the United States of America, Lender and the
Credit Party concerned enter into an assignment of claims agreement in
form and substance satisfactory to Lender;
1.18.7 any account arising from progress billing,
retainage, a "▇▇▇▇ and hold" sale or any similar arrangement;
1.18.8 any account due from an Account Debtor as to
which 25% or more of the aggregate dollar amount of all outstanding
accounts owing from such Account Debtor to the Credit Parties are
Delinquent Accounts;
1.18.9 that portion of any accounts due from an
Account Debtor that is in excess of 15% of the aggregate dollar amount
of all outstanding accounts of the Credit Parties;
1.18.10 any account due from an Account Debtor to a
Credit Party as to which the ratio of (a) the aggregate dollar amount
owing, or claimed by such Account Debtor to be owing, by such Credit
Party to such Account Debtor to (b) the aggregate dollar amount of all
outstanding accounts owing by such Account Debtor to such Credit Party
exceeds 20% (or, with respect to particular Account Debtors, such
higher percentage as Lender may from time to time agree to in its sole
discretion); provided, however, that, if such ratio is 20% (or such
higher percentage as so agreed to) or less, then the foregoing shall
not apply, and instead the aggregate dollar amount owing, or claimed by
such Account Debtor to be owing, from such Credit Party to such Account
Debtor shall be deducted from the aggregate amount of Eligible Accounts
due from such Account Debtor to such Credit Party;
1.18.11 any account that is not free of all liens,
encumbrances, charges, rights and interests of any kind (other than in
favor of Lender);
1.18.12 any account that is supported or represented
by a promissory note, post-dated check or letter of credit, unless such
instrument is actually delivered to Lender and endorsed or assigned to
the satisfaction of Lender;
1.18.13 any account as to which the related Account
Debtor disputes liability or is unwilling to verify the outstanding
amount; and
1.18.14 any account that is unsuitable for purposes of
determining the A/R Borrowing Base, as determined by Lender in its sole
discretion.
1.19 "Event of Default" - as defined in Section 10.1.
1.20 "Guaranty" - a continuing guaranty in form and
substance acceptable to Lender by which a Guarantor guarantees the
Obligations of Borrower.
1.21 "Interest Rate" - the variable rate of interest per
annum equal to the greater at all times of: (a) three percent (3%) per
annum in excess of the Prime Rate in effect from time to time; or (b)
nine percent (9%) per annum; provided, however, that, to the extent the
Interest Rate is calculated with reference to the Prime Rate, any
change in the Interest Rate shall be effective as of the first day of
the month following the date of any change in the Prime Rate.
1.22 "Key Employees" - ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. Vice.
1.23 "Lending Office" - Lender's office referred to in
Section 21.1.
1.24 "Lien" - any lien, pledge, security interest,
encumbrance or charge of any kind, including any conditional-sale or
other title-retention arrangement and any similar preferential
arrangement.
1.25 "Loan Agreement Supplement" - a supplement to this
Agreement substantially in the form attached hereto as Exhibit C.
1.26 "Loan Fee" - $20,000.00.
1.27 "Minimum Monthly Charge" - $4,000.00.
1.28 "Monetary Collateral" - money, cash, checks and other
means of payment in tangible form.
1.29 "Negotiable Collateral" - as defined in Section 5.5.1.
1.30 "Net Face Amount" - with respect to an account, the
gross face amount of such account, less all trade discounts or other
deductions to which the Account Debtor is entitled.
1.31 "Obligated Party" - as defined in Section 5.2.
1.32 "Obligations" - all present and future obligations
owing by the Credit Parties to Lender, whether or not for the payment
of money, whether or not evidenced by a note or other instrument or an
A/R Advance, whether direct or indirect, absolute or contingent, due or
to become due, joint or several, primary or secondary, liquidated or
unliquidated, secured or unsecured, original or renewed or extended,
whether arising before, during or after the commencement of any case
with respect to any Credit Party under the United States Bankruptcy
Code or any similar statute, including the following: obligations in
respect of the Revolving Credit Facility (including the A/R Advances
and Special Credit Accommodations); obligations arising pursuant to
letters of credit, acceptance transactions or any other financial
accommodations; and all principal, interest, fees, charges, expenses,
indemnities, attorneys' fees and accountants' fees chargeable to any
Credit Party or incurred by Lender in connection with this Agreement,
any other Document and/or the transaction(s) related hereto and
thereto.
1.33 "Prime Rate" - at any time any determination thereof
is to be made, the prime rate, base rate or reference rate announced by
▇▇▇▇▇ Fargo Bank, N.A. at its head office in San Francisco, California.
1.34 "Reference" - a judicial reference conducted pursuant
to this Agreement in accordance with the law of the State of
California, as in effect at the time the referee is selected pursuant
to Section 21.8.1.
1.35 "Revolving Credit Facility" - Lender's agreement to
make A/R Advances to Borrower pursuant to Section 2.1.
1.36 "Special Credit Accommodation" - as defined in Section
2.1.3.
1.37 "Special Credit Accommodation Fee" - three percent
(3%) of the original amount of any Special Credit Accommodation.
1.38 "Subordinating Creditor" - each of Brody Enterprises
and TonerType of Florida, LLC.
1.39 "Subordination Agreement" - a subordination agreement
in form and substance acceptable to Lender whereby a Subordinating
Creditor subordinates in favor of Lender (a) obligations owed to such
Subordinating Creditor by a Credit Party and/or (b) a Lien on property
of a Credit Party in favor of such Subordinating Creditor.
1.40 "Termination Charge" - the greater of:
1.40.1 the daily average of all interest and fees paid
by Borrower to Lender hereunder for the six full calendar months (or
portion thereof if obligations have not been outstanding hereunder for
at least six full calendar months) preceding the date of calculation,
applied pro rata to the period of computation determined pursuant to
Section 3.3.11; and
1.40.2 the Minimum Monthly Charge, applied pro rata to
the period of computation determined pursuant to Section 3.3.11.
1.41 "Termination Date" - the date on which this Agreement
is terminated in accordance with the terms hereof.
2. Credit Facilities.
2.1 Revolving Credit Facility. Subject to the terms and
conditions of this Agreement, from the date on which this Agreement
becomes effective until termination pursuant to the terms hereof:
2.1.1 Advances. Lender will from time to time make
advances ("A/R Advances") to Borrower, less any Availability Reserves,
so long as, before and after each such A/R Advance, the Obligations
relating only to A/R Advances do not exceed the A/R Allowable Amount.
2.1.2 Reduction of A/R Borrowing Base. Lender may, in
its sole discretion from time to time, reduce the A/R Borrowing Base to
the extent Lender determines in good faith that: (a) the dilution with
respect to the accounts of the Credit Parties for any period (based on
the ratio of (i) the aggregate amount of reductions in such accounts
other than as a result of payments in cash to (ii) 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; (b) the accuracy of any Credit Party's record-
keeping with respect to accounts is called into question; or (c) the
general creditworthiness of Account Debtors has declined. In
determining whether to reduce the A/R Borrowing Base, Lender may
consider events, conditions, contingencies or risks that are also
considered in determining Eligible Accounts or in establishing
Availability Reserves.
2.1.3 Special Credit Accommodations. Lender may, in
its sole and absolute discretion from time to time, make A/R Advances
to Borrower in excess of the A/R Allowable Amount (any A/R Advance
extended to Borrower pursuant to this section being a "Special Credit
Accommodation").
2.1.4 General Provisions Relating to Revolving Credit
Facility.
2.1.4.1 Crediting of Borrower's Account. A/R
Advances by Lender may be made by deposits or transfers to Borrower's
Account.
2.1.4.2 Authorization for Credit Accommodations.
Subject to the terms and conditions of this Agreement, Lender is
authorized to make Credit Accommodations:
2.1.4.2.1 upon telephonic, facsimile or other
instructions received from anyone purporting to be an officer, employee
or representative of Borrower;
2.1.4.2.2 upon electronic instructions received
from anyone with access to request A/R Advances through Lender's
website; or
2.1.4.2.3 at the sole discretion of Lender, and
notwithstanding any other provision of this Agreement, if necessary to
meet any Obligations, including any interest not paid when due.
2.2 Use of Proceeds. The A/R Advances and Special Credit
Accommodations shall be used by Borrower for ordinary working capital
purposes, including for making advances to Borrower's direct and
indirect subsidiaries, unless otherwise agreed in writing by Lender.
3. Payments by Borrower.
3.1 Payment of Credit Accommodations and Other Obligations.
Borrower will repay the Credit Accommodations and pay its other
Obligations in accordance with the terms of this Agreement and the
other Documents. The Credit Accommodations and other Obligations of
Borrower may be evidenced by a promissory note, invoice, statement,
electronic record, entry on Lender's records or otherwise.
3.1.1 Advances. Borrower will repay the outstanding
A/R Advances in full on the Termination Date.
3.1.2 Special Credit Accommodations. Borrower will
repay all Special Credit Accommodations on the earlier to occur of (a)
the date on which demand for repayment is made by Lender and (b) the
Termination Date.
3.2 Interest.
3.2.1 Basic Interest. Subject to Section 3.2.2,
interest on the Obligations shall be payable monthly in arrears and
shall be computed at the Interest Rate. All interest payable hereunder
shall be due on the first day of each calendar month following the
accrual thereof.
3.2.2 Default Interest. Upon the occurrence and during
the continuation of an Event of Default, Borrower will pay interest to
Lender on the Obligations at the Default Rate, in lieu of basic
interest as described in Section 3.2.1, payable monthly in arrears (or
from time to time upon demand by Lender), before as well as after
judgment.
3.3 Fees.
3.3.1 Loan Fee. Borrower will pay the Loan Fee to
Lender, without offset, deduction, demand or proration, (a)
concurrently with the first Credit Accommodation hereunder (the "Loan
Fee Date") and (b) on each anniversary of the Loan Fee Date. Any
portion of the Loan Fee not paid when due shall accrue interest at the
applicable interest rate set forth herein.
3.3.2 Administrative Fee. Borrower will pay Lender the
A/R Administrative Fee monthly, in arrears, on the first day of each
calendar month following the accrual thereof.
3.3.3 Special Credit Accommodation Fee. Simultaneously
with the making of each Special Credit Accommodation, Borrower will pay
to Lender the applicable Special Credit Accommodation Fee.
3.3.4 Late-Reporting Fee. If Borrower fails to deliver
or cause to be delivered to Lender, within five (5) business days
after the date on which Borrower is obligated to deliver or cause to be
delivered the same to Lender pursuant to this Agreement or any other
Document, any accounts receivable aging report, accounts payable aging
report, inventory report, customer master report or other information
specified by Lender that Borrower is obligated to provide or cause to
be provided to Lender pursuant to this Agreement or any other Document,
Borrower will pay Lender a late-reporting fee of $50 for each instance
in which any such report or information is not delivered to Lender
within five (5) business days after the required date. In addition,
Borrower will pay Lender a late-reporting fee of $250 for each week or
part thereof that any financial statement required to be provided by
Borrower to Lender pursuant to Section 8.1.1 or 8.1.2 is not delivered
to Lender by the applicable date specified therein.
3.3.5 Misdirected-Payment Fee. If any payment on an
account is received by any Credit Party and not delivered in kind to
Lender within three (3) business days thereafter, Borrower will
immediately pay to Lender, in addition to such payment, the amount
equal to fifteen percent (15%) of the amount of such payment.
3.3.6 Manual-Processing Fee. If, within sixty (60)
days after the date of this Agreement, Borrower does not commence
delivering accounts receivable aging reports and customer master
reports to Lender in an electronic format acceptable thereto, Borrower
will thereafter pay Lender a manual-processing fee of $250 for each
such report that is not so delivered to Lender.
3.3.7 Funds-Transfer Fee. Borrower will pay to Lender,
without duplication, (a) a fee of $20 for the first wire-transfer of
funds to Borrower on any business day, (b) a fee of $50 for each
subsequent wire-transfer of funds to Borrower on the same business day,
(c) a fee of $50 for each wire-transfer of funds other than to Borrower
and (d) a fee of $75 for each wire-transfer of funds outside the United
States of America.
3.3.8 Funds-Receipt Fee. Borrower will pay Lender a
fee of $10 for each electronic transfer of funds received by Lender
from an Account Debtor into any deposit account other than one of the
accounts, if any, maintained by Lender at ▇▇▇▇▇ Fargo Bank, N.A., or
one or more other banks, for the benefit of the Credit Parties (each a
"Blocked Account").
3.3.9 Returned-Check Fee. Borrower will pay Lender a
returned-check fee of $25 for each check of an Account Debtor that is
deposited into any deposit account other than a Blocked Account (as
defined in Section 3.3.8) and thereafter returned because of the
maker's failure to pay the same.
3.3.10 Minimum Monthly Charge.
3.3.10.1 For any full calendar month in which the
sum of (i) interest and (ii) the A/R Administrative Fee earned by
Lender is less than the Minimum Monthly Charge, Lender will debit the
difference to the Obligations as of the first day of the following
calendar month, until the date on which all Obligations have been paid
(whether or not this Agreement has theretofore been terminated).
3.3.10.2 In the event that this Agreement begins
on other than the first day of a calendar month or that the Obligations
are fully paid on other than the last day of a calendar month, the
preceding section shall apply pro rata to such month.
3.3.11 Termination Charge.
3.3.11.1 If this Agreement and all of Lender's
obligations hereunder are terminated pursuant to Section 10.2.1.1 or
10.2.2.1 (irrespective of whether Lender has previously given notice of
termination to Borrower pursuant to Section 11.1), Borrower will pay
Lender the Termination Charge, computed from the date on which all
other Obligations have been fully paid to the next Anniversary Date
that is at least sixty (60) days after the day on which Lender's
obligations hereunder are terminated pursuant to Section 10.2.1.1 or
10.2.2.1.
3.3.11.2 If Borrower requests Lender to consent
to termination of the Revolving Credit Facility on a date earlier than
Section 11.2 permits, Borrower will pay Lender the Termination Charge,
computed from the date on which all other Obligations have been fully
paid to the next Anniversary Date that is at least sixty (60) days
after the date on which such request is actually received by Lender.
3.4 In General.
3.4.1 Place of Payments. All payments by any Credit
Party hereunder shall be made to Lender at the Lending Office, or at
such other place as Lender may designate to Borrower in writing.
3.4.2 Crediting of Payments.
3.4.2.1 Interest Calculations. All payments
received by Lender for the account of Borrower shall, for the purpose
of computation of interest on the A/R Advances under the Revolving
Credit Facility, be credited to the A/R Advances under the Revolving
Credit Facility on the fifth (5th) business day after receipt by
Lender.
3.4.2.2 Generally. No payments received by Lender
purportedly in satisfaction of any of the Obligations shall constitute
payment thereof unless and until final payment thereof. All fees paid
by Borrower pursuant to this Agreement shall be nonrefundable.
3.4.3 Prepayments; Application of Payments. Borrower
shall have the right to make payments at any time in reduction of the
A/R Advances, in whole or in part; provided, however, that Lender may
apply any payments received to the A/R Advances in any manner and in
any order as Lender may determine in its sole discretion,
notwithstanding any contrary instructions.
3.4.4 Calculation of Interest and Fees. All interest
and fees charged hereunder shall be computed on the basis of a 360-day
year for the actual number of days elapsed. Notwithstanding anything to
the contrary contained herein, any interest rate calculated hereunder
shall be rounded to the closest 1/8 of 1%, with no adjustments made for
rate changes of less than 1/8 of 1%.
4. Grant of Security Interest. To secure the payment and
performance of the Obligations, including, in the case of each
Guarantor, such Guarantor's obligations under its Guaranty, each Credit
Party hereby pledges, assigns and grants to Lender a continuing
security interest in the Collateral owned by such Credit Party.
5. Collection and Administration of Accounts.
5.1 Collection.
5.1.1 Monetary Collateral. Each Credit Party is
authorized to collect Monetary Collateral on behalf of and in trust for
Lender, in accordance with the terms hereof and at such Credit Party's
expense; provided, however, that, after the occurrence of an Event of
Default, Lender may modify or terminate such authority at any time, in
its sole discretion, and may collect any of the Monetary Collateral
directly. Each Credit Party will, at such Credit Party's expense and in
the manner requested by Lender from time to time, direct that Monetary
Collateral be (or, if received by such Credit Party, will immediately
cause the same in kind to be) (a) sent to a post office box designated
by Lender and maintained in the name of Lender or a Credit Party, but
in either case as to which access is limited solely to Lender, and/or
(b) deposited into a bank account maintained in the name of Lender
and/or into a blocked bank account under arrangements with the
depository bank under which all funds deposited to such blocked bank
account are required to be transferred to Lender. In connection with
the foregoing, the Credit Parties will execute such post office box
and/or blocked bank account agreements as Lender requires.
5.1.2 Electronic Proceeds of Collateral. If any
Account Debtor is to make payment to a Credit Party by wire transfer or
other electronic funds-transfer mechanism, such Credit Party will
direct such Account Debtor to make such payment directly to a bank
account designated by Lender from time to time. In the event that any
Credit Party otherwise receives any proceeds of Collateral from any
person or entity in the form of a wire transfer or other electronic
funds-transfer mechanism, such Credit Party will immediately pay such
proceeds to Lender (or cause the same to be paid to Lender) by wire
transfer.
5.2 Lender's Powers. Each Credit Party hereby authorizes
Lender and any designee of Lender, at such Credit Party's sole expense,
to exercise in Lender's or such designee's sole discretion any or all
of the following powers, which powers are irrevocable until the
Obligations have been paid in full and Lender's obligation to make
Credit Accommodations has terminated: (a) to receive, take, endorse,
assign, deliver, accept and deposit, at any time and in the name of
Lender or such Credit Party, any and all cash, checks, commercial
paper, drafts, remittances and other instruments and documents relating
to the Collateral or the proceeds thereof; (b) to request from any
person or entity, including any Account Debtor, obligated with respect
to any Collateral, including accounts (an "Obligated Party"), or any
bailee, at any time and in the name of such Credit Party, Lender or any
designee of Lender (or by a pseudonym), verification of any amounts
owing with respect to the Collateral or any other information
concerning the Collateral; (c) at any time after the occurrence of an
Event of Default, to notify any Obligated Party, by means of a letter
substantially in the form of the letters attached hereto as ▇▇▇▇▇▇▇▇ ▇-
▇ through A-4, that the Collateral has been assigned to Lender by such
Credit Party and that payment of accounts and other Collateral is to be
made to the order of and directly and solely to Lender, or to notify
any bailee as to the disposition of Collateral; (d) at any time after
the occurrence of an Event of Default, to require that all invoices and
statements sent by such Credit Party to any Obligated Party or any
bailee state that the Collateral has been assigned to Lender and that
any payments in respect thereof are to be made directly and solely to
Lender; (e) at any time after the occurrence of an Event of Default, to
take or bring, in the name of Lender or such Credit Party, all such
actions, suits or proceedings as Lender may deem necessary or desirable
to demand, collect, enforce payment of and otherwise realize upon the
Collateral (but without any duty to do so, and Lender shall not be
liable for any failure to collect or enforce payment thereof); (f) at
any time after the occurrence of an Event of Default, to change the
address for delivery of mail to such Credit Party, and to receive and
open mail addressed to such Credit Party; (g) at any time after the
occurrence of an Event of Default, upon any terms and conditions, to
extend the time of payment of, compromise, or settle for cash, credit
or return of merchandise, any and all accounts or other Collateral, and
to discharge or release any Obligated Party without affecting any of
the Obligations; (h) to execute in the name of such Credit Party and to
file against such Credit Party in favor of Lender, at any time,
financing statements or amendments thereto with respect to any or all
of the Collateral; and (i) to execute in the name of such Credit Party,
and to file on behalf of such Credit Party with such governmental
authorities as are appropriate, at any time, such documents (including
applications and certificates) as may be required for the purpose of
having such Credit Party qualified to transact business in a particular
state or geographic location.
5.3 Release. Each Credit Party hereby releases and
exculpates Lender and its officers, employees, agents, designees,
attorneys and accountants from any liability arising from any acts
under this Agreement or in furtherance thereof, whether of omission or
commission and whether based upon any error of judgment or mistake of
law or fact, except for gross negligence or willful misconduct. In no
event shall Lender have any liability to any Credit Party for lost
profits or other special or consequential damages.
5.4 No Modification of Accounts. After written notice by
Lender to Borrower, and automatically, without notice, after an Event
of Default, no Credit Party will, without the prior written consent of
Lender in each instance, (a) grant any extension of time for payment of
any account, (b) compromise or settle any account for less than the
full amount thereof, (c) release in whole or in part any Obligated
Party or (d) grant any credits, discounts, allowances, deductions,
return authorizations or the like with respect to any account.
5.5 Delivery of Collateral and Information Concerning
Collateral. At such times as Lender may request to Borrower and in the
manner specified by Lender, Borrower will deliver or cause to be
delivered to Lender or Lender's representative original invoices,
agreements, proofs of rendition of services and delivery of goods, and
other documents evidencing or relating to the transactions that gave
rise to any of the Collateral, together with customer statements,
schedules describing the accounts, statements of account and/or
confirmatory assignments to Lender of the accounts, in form and
substance satisfactory to Lender and duly executed by the Credit
Parties as requested by Lender to Borrower. Without limiting the
provisions of any other section of this Agreement, Borrower will
promptly notify Lender in writing of any Credit Party's granting of
credits, discounts, allowances, deductions, return authorizations or
the like with respect to any accounts, other than in the ordinary
course of such Credit Party's business. In no event shall any such
schedule or confirmatory assignment (or the absence thereof or omission
of any account therefrom) limit or in any way be construed as a waiver,
limitation or modification of any Lien or right of Lender or any
warranty, representation or covenant of any Credit Party under this
Agreement.
5.5.1 In addition, in the event that any Collateral,
including proceeds, is evidenced by or includes a letter of credit,
advice of credit, instrument, money, negotiable document, chattel paper
or similar property (collectively "Negotiable Collateral"), the Credit
Party owning the same will, immediately upon written request therefor
from Lender to Borrower, endorse and assign such Negotiable Collateral
over to Lender, and Borrower will deliver or cause to be delivered to
Lender actual physical possession of such Negotiable Collateral.
5.6 Inspection. From time to time as requested by Lender
and at the sole expense of the Credit Parties, Lender or its designee
shall have access, during reasonable business hours if prior to an
Event of Default and at any time if after an Event of Default, to all
premises where Collateral is located for the purposes of inspecting
(and removing, if after the occurrence of an Event of Default) any of
the Collateral, including each Credit Party's books and records, and
each Credit Party will permit Lender or its designee to make such
copies of such books and records or extracts therefrom as Lender may
request. Without expense to Lender, Lender may use any Credit Party's
personnel, equipment (including computer equipment, programs, printed
output and computer-readable media), supplies and premises for the
collection of accounts and realization on other Collateral as Lender,
in its sole discretion, deems appropriate. Each Credit Party hereby
irrevocably authorizes all accountants and third parties, substantially
in the form attached hereto as Exhibit B, to disclose and deliver to
Lender at the Credit Parties' expense all financial information, books
and records, work papers, management reports and other information in
their possession relating to such Credit Party. In addition to the
foregoing, each Credit Party hereby authorizes Lender at any time to
access electronically any information concerning accounts maintained by
such Credit Party with any bank or other financial institution, so long
as such access is in furtherance of, or to monitor compliance with, the
terms of this Agreement.
6. Conditions Precedent to All Credit Accommodations.
6.1 Subject to the other terms and conditions contained in
this Agreement, Lender's obligation to make the first and all
subsequent Credit Accommodations available to Borrower is subject to
the satisfaction or waiver of, immediately prior to or concurrently
with the making of such Credit Accommodation, the conditions precedent
set forth below.
6.1.1 Documents. This Agreement and all other
Documents required by Lender shall have been executed by the Credit
Parties and all other parties thereto.
6.1.2 Representations and Warranties. All
representations and warranties to Lender set forth herein or in any of
the other Documents shall be true, accurate and complete in all
respects.
6.1.3 No Event of Default. There shall not exist an
Event of Default or an event that, with the giving of notice or the
passage of time, or both, would be or become an Event of Default.
6.1.4 Payment of All Fees. Borrower shall have paid to
Lender all accrued and unpaid fees and other amounts due and payable
under this Agreement, including all of Lender's attorneys' fees.
6.2 Conditions to Lender's Obligation to Lend. All
conditions to Lender's obligation to make Credit Accommodations
hereunder are imposed solely and exclusively for the benefit of Lender
and may be freely waived or modified in whole or in part by Lender at
any time.
7. Representations and Warranties of Credit Parties. Each Credit
Party, with respect to itself and the Collateral provided thereby,
represents and warrants to Lender as set forth below, the truth and
accuracy of which and compliance with which shall be continuing
conditions to the making of any Credit Accommodations.
7.1 Priority Interest. No person or entity other than
Lender has (or, in the case of after-acquired Collateral, will have, at
the time such Credit Party acquires rights therein) any interest in the
Collateral, including any Lien on the Collateral, except as permitted
by Section 9.
7.2 Accounts. As to each account composing part of the
Collateral, except as disclosed in writing to Lender at the time such
account arises: (a) each is valid and legally enforceable and
represents an undisputed bona fide indebtedness incurred by the Account
Debtor thereon for the sum reported to Lender; (b) each arises from an
absolute and unconditional sale of goods, without any right of return
or consignment, or from a completed rendition of services; (c) none is
subject, at the time it arises, to any defense, offset, dispute, contra
relationship or counterclaim or to any given or claimed credit,
allowance or discount; and (d) all statements made, and all unpaid
balances and other information appearing, in the invoices, agreements,
proofs of rendition of services and delivery of goods, and other
documentation relating to each account, and all confirmatory
assignments, schedules, statements of account, and books and records
with respect thereto, are true and correct and in all respects what
they purport to be.
7.3 Condition of Equipment. All of such Credit Party's
equipment is, and such Credit Party will keep all of its equipment, in
good order and repair and in running and marketable condition, ordinary
wear and tear excepted.
8. Affirmative Covenants. Until payment in full of the
Obligations and termination of all obligation of Lender to extend
credit to Borrower hereunder, the Credit Parties agree for the benefit
of Lender as set forth below.
8.1 Financial Statements, Reports and Certifications.
Borrower will furnish to Lender, in form and scope satisfactory
thereto:
8.1.1 Annual Financial Statements. As soon as possible
after the end of each fiscal year of Borrower and in any event within
ninety (90) days thereafter, (a) a complete copy of Borrower's
consolidated financial statements, including (i) the management letter,
if any, (ii) the consolidated balance sheet as of the close of the
fiscal year, (iii) the consolidated income statement for such year and
(iv) the consolidated statement of cash flows for such year, all
reviewed by certified public accountants selected by Borrower and
satisfactory to Lender, and (b) a statement certified by the chief
financial officer or president of Borrower that the Credit Parties are
in compliance with all the terms, conditions, covenants,
representations and warranties of this Agreement;
8.1.2 Other Financial Statements. Not later than sixty
(60) days after the close of each fiscal quarter of Borrower (an
"Accounting Period"), Borrower's consolidated balance sheet as of the
close of such Accounting Period and its consolidated income statement
for that portion of the then current fiscal year through the end of
such Accounting Period, certified by Borrower's chief financial officer
or president as being complete and correct and fairly representing
Borrower's consolidated financial condition and consolidated results of
operations for such Accounting Period;
8.1.3 Account Reports.
8.1.3.1 On or before (a) the fifteenth day of
each month and (b) the last day of each month, or more frequently if
Borrower so desires, such information concerning the Credit Parties'
accounts as Lender may request, including names and addresses of
Account Debtors, sales journals, credit memos, debit memos and cash
discounts;
8.1.3.2 On or before (a) the fifteenth day of
each month and (b) the last day of each month, an aging report as of
such day with respect to the Credit Parties' accounts, together with,
in the case of the latter such report, a reconciliation of the Credit
Parties' records with Lender's; and
8.1.3.3 On or before the fifteenth day of each
month, an aging report with respect to the Credit Parties' accounts
payable, aged by invoice date, as of the last day of the preceding
month;
8.1.4 Legal Proceedings. Promptly after the
commencement thereof, notice of all actions, suits, investigations,
litigation, arbitrations, judicial reference proceedings and
administrative proceedings to which any Credit Party is a party or
otherwise affecting any Credit Party;
8.1.5 Defaults. Promptly upon the occurrence
thereof, notice of any Event of Default, including any material adverse
change in the business, condition (financial or otherwise), operations,
performance, properties or prospects of any Credit Party; and
8.1.6 Other Information. Promptly upon request by
Lender, such other information concerning the business, condition
(financial or otherwise), operations, performance, properties or
prospects of any Credit Party as Lender may from time to time request.
Lender shall be entitled to rely upon any financial
statements, reports, certifications, appraisals, notices and other
information provided to Lender under Section 8 or under any other
provision of this Agreement or any of the other Documents, whether
provided in original, by facsimile, electronically or otherwise, by
anyone purporting to be an officer, employee or representative of any
Credit Party or with access to Lender's website.
8.2 Expenses.
8.2.1 Generally. Borrower will pay all reasonable out-
of-pocket expenses of Lender (including fees and disbursements of
Lender's counsel) incident to or arising from any of the following
(whether or not in connection with any judicial or other dispute-
resolution proceedings involving tort, contract or other claims):
8.2.1.1 the preparation, negotiation, execution,
administration and enforcement of the Documents, any amendments,
extensions and renewals thereof, and any other documents prepared in
connection with any transactions between any Credit Party and Lender,
whether or not executed;
8.2.1.2 any reasonable expenses incurred by
Lender (whether or not for the benefit of any Credit Party) under this
Agreement, including all expenses for postage relating to the mailing
of statements, invoices and verifications and expenses for background
checks and investigations of the Credit Parties and their respective
shareholders, principals and Key Employees;
8.2.1.3 the protection of Lender's rights under
the Documents;
8.2.1.4 defending against any and all claims
against Lender relating to any of its acts of commission or omission
directly or indirectly relating to the Documents; and/or
8.2.1.5 in any way arising out of a bankruptcy,
reorganization or similar proceeding commenced by or against any Credit
Party, including expenses incurred in enforcing or defending Lender's
claims against any Credit Party or against any collateral granted to
Lender under the Documents, in defending any avoidance actions and in
administering or monitoring said proceeding.
8.2.2 Indemnification. Borrower will indemnify Lender
against, and save Lender harmless from, any and all liability with
respect to any stamp or other taxes (other than income taxes) that may
be determined to be payable in connection with the execution of the
Documents or any action of Lender with respect to the collateral
granted to Lender under the Documents, including the transfer of the
collateral to Lender's name or that of Lender's nominee or any
purchaser at a foreclosure sale.
8.2.3 Audit Expenses. Borrower will reimburse Lender
at the rate of $800 per person per day, together with all out-of-pocket
expenses incurred, for all audits conducted by Lender with respect to
all or any portion of the Collateral and/or the Credit Parties'
financial and other records. Such audits may be conducted by Lender
from time to time in its sole discretion and may be handled by Lender's
own personnel and/or by outside auditors engaged by Lender (and in
either such case shall be reimbursed as specified above).
8.3 Costs and Expenses - Enforcement of Judgments. Borrower
will reimburse Lender for all reasonable costs and expenses, including
attorneys' fees, that Lender incurs in enforcing any judgment rendered
in connection with this Agreement or any of the other Documents. This
provision is severable from all other provisions hereof and shall
survive, and not be deemed merged into, any such judgment.
8.4 Taxes and Expenses Regarding Credit Parties' Assets.
Each Credit Party will make timely payment or deposit of all taxes,
assessments and contributions required of such Credit Party. If any
Credit Party fails to make any such payment or deposit or to furnish
proof of the same, Lender may, in its sole discretion and without
notice to any Credit Party, (a) make payment of all or any portion
thereof or (b) set up such reserves against the A/R Allowable Amount as
Lender deems necessary to satisfy the liability therefor, or both.
Lender may conclusively rely on statements of the amount owing or other
official statements issued by the appropriate governmental agency. No
payment made by Lender shall constitute either (i) an agreement by
Lender to make similar payments in the future or (ii) a waiver by
Lender of any default under the Documents. Lender shall have no
obligation to inquire into or contest the validity of any expense, tax
or Lien, and the receipt of an official notice requiring the payment
thereof shall be conclusive evidence that the same is validly due and
owing.
8.5 Location of Collateral. Immediately upon any Credit
Party's forming an intention to change the location of its chief place
of business or of any of the Collateral, Borrower will give Lender
written notice of the same.
8.6 Change in Name. Immediately upon any Credit Party's
forming an intention to change its name or form of business
organization, Borrower will give Lender written notice of the same.
8.7 Insurance. The Credit Parties will at all times
maintain, with financially sound and reputable insurers, casualty
insurance with respect to the Collateral and the Credit Parties' other
assets. All such insurance policies shall be in such form, substance,
amounts and coverage as may be satisfactory to Lender and shall provide
for thirty (30) days' prior written notice to Lender of cancellation or
reduction of coverage. Each Credit Party hereby irrevocably authorizes
Lender and any designee of Lender to obtain at such Credit Party's
expense, and, after an Event of Default, to adjust or settle any claim
or other matter under or arising pursuant to, such insurance or to
amend or cancel such insurance. Borrower will deliver to Lender
evidence of such insurance and a lender's loss-payable endorsement
naming Lender as loss payee as to all existing and future insurance
policies relating to the Collateral. Borrower will deliver to Lender,
in kind, all instruments representing proceeds of insurance received by
any Credit Party. Lender may apply any and all insurance proceeds
received at any time to the cost of repairs to or replacement of any
portion of the Collateral and/or, at Lender's option, to the payment of
or as security for any of the Obligations, whether or not due, in any
order or manner as Lender determines.
8.8 Additional Guarantors. Borrower will cause each entity
that becomes a direct or indirect subsidiary of Borrower after the date
hereof to deliver to Lender, within 10 days after such entity becomes
such a subsidiary, the following documents in form and substance
reasonably satisfactory to Lender and in the number of originals
requested thereby: (a) a Guaranty and a Loan Agreement Supplement, duly
executed by such entity; and (b) certificates and other documents for
such entity equivalent to those (including Exhibits A-2 through A-4)
provided by the other Guarantors. Upon the execution and delivery by
any such entity of a Guaranty and a Loan Agreement Supplement, such
entity shall become and be a Guarantor, and each reference in this
Agreement to "Guarantor" or "Guarantors" (or, accordingly, to "Credit
Party" or "Credit Parties") shall also mean and be a reference to such
entity.
9. Negative Covenant. Until payment in full of the Obligations
and termination of all obligation of Lender to extend credit hereunder,
no Credit Party will suffer to exist any Lien upon any of its assets,
except for (a) Liens in favor of Lender and (b) any purchase-money Lien
on new equipment acquired by such Credit Party.
10. Events of Default and Remedies.
10.1 Events of Default. Each of the following events or
conditions shall constitute an "Event of Default":
10.1.1 Borrower defaults in the payment of any
Obligation in respect of principal when due, whether at stated
maturity, upon acceleration or otherwise; or Borrower defaults in the
payment of any interest, fee or other Obligation when due, and such
default continues unremedied for three (3) business days.
10.1.2 any certification, representation or warranty
to Lender in or in connection with any of the Documents is incorrect in
any material respect when made;
10.1.3 any Credit Party is in default with respect to
any term, covenant or condition (other than any referred to in Section
10.1.1) contained in any of the Documents or in any other document,
instrument, agreement or indebtedness entered into by such Credit Party
with or in favor of Lender;
10.1.4 the Obligations in respect of the A/R Advances
at any time exceed the A/R Allowable Amount;
10.1.5 any Credit Party (a) fails to pay any
indebtedness thereof (other than any of the Obligations) when due or
(b) is in default with respect to any term, covenant or condition
contained in any document, instrument or agreement entered into in
connection with any such indebtedness, in either case beyond any
applicable grace period;
10.1.6 any Credit Party fails to pay any payroll tax
obligation when due;
10.1.7 an order for relief is entered against any
Credit Party by any United States Bankruptcy Court; any Credit Party
does not generally pay its debts as they become due (within the meaning
of 11 U.S.C. 303(h)); any Credit Party makes an assignment for the
benefit of creditors; any Credit Party applies for or consents to the
appointment of a custodian, receiver, trustee or similar officer for it
or for any substantial part of its assets; any proceeding seeking the
appointment of such a custodian, receiver, trustee or similar officer
in respect of any Credit Party is commenced without its application or
consent, and such proceeding continues undischarged or unstayed for
thirty (30) days or an order or decree approving or ordering such an
appointment is entered; any Credit Party institutes (by petition,
application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, moratorium, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it under the
laws of any jurisdiction; any such proceeding is instituted (by
petition, application or otherwise) against any Credit Party, and such
proceeding continues undismissed or unstayed for thirty (30) days or an
order for relief is entered in any such proceeding; or any judgment,
writ, warrant of attachment, execution or similar process is issued or
levied against a material portion of the assets of any Credit Party;
10.1.8 an adverse change occurs with respect to the
financial condition or operations of any Credit Party, which change
results in a material impairment, in the reasonable judgment of Lender,
in the prospect of payment of the Obligations;
10.1.9 a sale, hypothecation or other disposition is
made of a beneficial interest in any class of voting stock of, or other
equity interest in, any Credit Party, resulting in a change in control
of such Credit Party;
10.1.10 any material provision of any Document for
any reason ceases to be valid and binding on, or enforceable against,
any party thereto other than Lender; or any such party so states in
writing;
10.1.11 any Subordinating Creditor fails to perform or
observe any of its obligations under any Subordination Agreement or
notifies Lender of such Subordinating Creditor's intention to rescind,
modify, terminate or revoke any Subordination Agreement with respect to
future transactions; or any Subordination Agreement ceases to be in
full force and effect for any reason whatsoever;
10.1.12 except as permitted by Section 9 or as
otherwise permitted by Lender in writing, any security agreement,
pledge agreement, mortgage, deed of trust or other Document granting a
security interest or other Lien in favor of Lender ceases to create for
any reason (except pursuant to the terms thereof) a valid and perfected
first-priority Lien on any of the collateral purported to be covered;
or
10.1.13 any of the Key Employees fails to devote 100%
of his or her efforts in furtherance of the business affairs of the
Credit Parties for any 30-day period or ceases to be employed by
Borrower;
10.1.14 loss, theft, destruction, or sale (other than
sale of inventory in the ordinary course of business) of any collateral
with respect to which Lender has been granted a security interest or
other Lien under any Document; or
10.1.15 any Credit Party liquidates, dissolves,
terminates or suspends its business operations or otherwise fails to
operate its business in the ordinary course, or sells all or
substantially all of its assets, without Lender's prior written
consent.
10.2 Remedies.
10.2.1 Upon the occurrence of any Event of Default
(other than an Event of Default arising under Section 10.1.7), at
Lender's option:
10.2.1.1 Lender may declare this Agreement and
all of Lender's obligations hereunder to be immediately terminated
and/or Lender may refuse to make any requested A/R Advance, effective
either immediately or at a future date;
10.2.1.2 Lender may declare all Obligations to be
immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived by the
Credit Parties;
10.2.1.3 the Obligations may accrue interest as
provided in Section 3.2.2; and/or
10.2.1.4 Lender may, immediately and without
expiration of any period of grace, enforce payment of all Obligations
and exercise any and all other rights and remedies granted to it under
the Documents, at law, in equity or otherwise.
10.2.2 Upon the occurrence of any Event of Default
arising under Section 10.1.7:
10.2.2.1 this Agreement and all of Lender's
obligations hereunder shall automatically terminate and/or Lender may
refuse to make any requested A/R Advances;
10.2.2.2 all Obligations shall be immediately due
and payable, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Credit Parties;
10.2.2.3 all Obligations shall accrue interest as
provided in Section 3.2.2; and
10.2.2.4 Lender may, immediately and without
expiration of any period of grace, enforce payment of all Obligations
and exercise any and all other rights and remedies granted to it under
the Documents, at law, in equity or otherwise.
10.3 Liquidation Success Premium. To induce Lender to
collect, sell or otherwise dispose of the Collateral ("Liquidation") in
accordance with standards higher than those that may be commercially
reasonable (but without obligating Lender to exercise such higher
standards), the Credit Parties agree that, if one or more of them cease
to operate as a going concern and the proceeds from Liquidation after
the occurrence of an Event of Default are in excess of the Obligations
at the time of such Event of Default, the Credit Parties will pay
Lender a liquidation success premium of ten (10%) percent of the amount
of such excess.
11. Termination. The Revolving Credit Facility shall continue in
effect until the first Anniversary Date and shall thereafter be
automatically renewed successively to the next Anniversary Date,
subject to the terms of this Agreement, unless:
11.1 Lender gives Borrower notice of termination, in which
event the Revolving Credit Facility shall terminate sixty (60) days
after the date of such notice; or
11.2 Borrower gives Lender notice of nonrenewal, in which
event the Revolving Credit Facility shall terminate on the next
Anniversary Date that is at least sixty (60) days after the date on
which such notice of termination is actually received by Lender.
12. Revocation of Right to Sell Inventory Free and Clear of
Lender's Security Interest. Lender may, upon the occurrence of an Event
of Default, (a) revoke the Credit Parties' right to sell inventory free
and clear of Lender's security interest therein and (b) notify Account
Debtors, or any other parties, of such revocation by means of language
substantially equivalent to that contained in Exhibits A-1 through A-4.
13. No Lien Termination Without Release. Notwithstanding the
payment in full of all Obligations, Lender shall not be required to
record any terminations or satisfactions of any of its Liens on the
Collateral unless and until the Credit Parties have executed and
delivered to Lender general releases that conform to California Civil
Code Sections 1541 and 1542.
14. Indemnification. Each Credit Party hereby agrees, jointly and
severally with the other Credit Parties, to indemnify and hold harmless
Lender and each of its officers, directors, employees, agents, advisors
and affiliates (each an "Indemnified Person") from and against any and
all claims, damages, losses, liabilities, costs and expenses (including
reasonable attorneys' fees and expenses, whether or not such
Indemnified Person is named as a party to any proceeding or is
otherwise subjected to judicial or legal process arising from any such
proceeding) that any of them may incur, or that may be claimed,
asserted or awarded against any of them by any person or entity, in
each case arising out of, related to or in connection with, or in
connection with the preparation for a defense of any investigation,
litigation or proceeding arising out of, related to or in connection
with, any Document, any Credit Accommodation, the consummation of any
transaction contemplated hereby or thereby, the use by Borrower of any
Credit Accommodation or any activity contrary to the provisions of any
law relating to the environment or any hazardous material, except to
the extent that any such claim, damage, loss, liability, cost or
expense is found in a final, nonappealable judgment by a court of
competent jurisdiction to have resulted from such Indemnified Person's
gross negligence or willful misconduct.
15. Limitation of Liability. Lender shall not be liable or
responsible for (a) any claims, demands, losses or damages made,
claimed or suffered by any Credit Party (including any arising from any
Credit Party's use of e-mail, Lender's website or other electronic
means to send financial and other information to Lender, to request
Credit Accommodations or otherwise), except such as may arise through
or be caused by Lender's gross negligence or willful misconduct, or (b)
any lost profits of any Credit Party arising from any breach of
contract, any tort (excluding any arising from Lender's gross
negligence or willful misconduct) or any other wrong arising from the
establishment, administration or collection of the Obligations.
16. Account Stated. Lender may from time to time make available
to Borrower statements concerning the transactions arising hereunder,
including with respect to Credit Accommodations outstanding, payments
of principal and interest in respect of Credit Accommodations,
ineligible accounts and availability of Credit Accommodations. Each
such statement, whether made available by Lender in writing or by
posting on its website (which method of availability shall be
determined by Lender in its sole discretion), shall be considered
correct and binding upon the Credit Parties as an account stated except
to the extent that Lender receives, within thirty (30) days after the
sending or posting of such statement, written notice from Borrower of
any specific exceptions by Borrower to that statement.
17. Retention of Records. Lender will retain any documents,
schedules, invoices or other papers delivered by the Credit Parties
only for such period as Lender, in its sole discretion, may determine
necessary, after which time Lender may destroy such records without
notice to or consent from any Credit Party.
18. Notices to Third Parties. Upon the occurrence of an Event of
Default, Lender shall have the right to give any Credit Party or
Subordinating Creditor notice of any fact or event relating to this
Agreement, as Lender may deem necessary or desirable in Lender's sole
discretion, including any Credit Party's financial condition.
19. Information to Participants. Lender may furnish any financial
or other information concerning the Credit Parties or any of their
respective subsidiaries, whether provided to Lender pursuant to this
Agreement or otherwise, to (a) any prospective or actual purchaser of
any participation or other interest in any extensions of credit made by
Lender to Borrower (whether under this Agreement or otherwise), (b) any
prospective purchaser of any securities issued or to be issued by
Lender and/or (c) any prospective lender to Lender.
20. Entire Agreement. This Agreement supersedes all prior
agreements and understandings relating to the subject matter hereof. No
course of prior dealings between the parties, no usage of trade, and no
parol or extrinsic evidence of any nature, shall be used or be relevant
to supplement, explain or modify any term used herein. In the event of
any conflict between a term or condition of this Agreement and a term
or condition of any document(s) executed in connection herewith, the
term or condition of this Agreement shall govern. This Agreement has
been fully reviewed and negotiated between the parties, and no
uncertainty or ambiguity in any term or provision of this Agreement
shall be construed strictly against Lender or any Credit Party under
any rule of construction or otherwise.
21. Miscellaneous.
21.1 Notices. All notices required to be given to any
person or entity other than Lender shall be deemed given upon the first
to occur of (a) deposit thereof into a mail receptacle under the
control of the United States Postal Service, (b) transmittal by
electronic means to a receiver under the control of such person or
entity or (c) actual receipt by such person or entity or an employee or
agent thereof. All notices required to be given to Lender hereunder
shall be deemed given upon actual receipt by a responsible officer of
Lender. For the purposes hereof, notices hereunder shall be sent to the
following addresses or to such other addresses as each such person or
entity may hereafter specify in writing:
Credit Parties
American TonerServ Corp.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telefacsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President & CEO
Lender
Celtic Capital Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telefacsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, President and CEO
21.2 Survival. All representations, warranties and
agreements of the Credit Parties herein shall survive the extension of
Credit Accommodations hereunder, and all such representations,
warranties and agreements shall be effective so long as any obligation
owed to Lender by any Credit Party remains unsatisfied or for such
longer periods as may be expressly stated.
21.3 Amendment and Waiver. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or
termination is sought.
21.4 No Waiver. No failure to exercise or delay in
exercising any right, power or remedy of Lender shall impair any right,
power or remedy that Lender may have; no such delay shall be construed
to be a waiver of any of such right, power or remedy or an acquiescence
in any breach or default hereunder; and no waiver of any breach or
default of any Credit Party hereunder shall be deemed a waiver of any
breach or default subsequently occurring. All rights and remedies
granted to Lender hereunder shall remain in full force and effect
notwithstanding any single or partial exercise of, or any
discontinuance of action begun to enforce, any such right or remedy.
The rights and remedies specified herein are cumulative and not
exclusive of each other or of any rights or remedies that Lender might
otherwise have. Any waiver, permission, consent or approval by Lender
of any breach or default hereunder must be in writing and shall be
effective only to the extent set forth in such writing and only as to
that specific instance.
21.5 GOVERNING LAW. ALL ISSUES ARISING IN CONNECTION WITH
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
21.6 Waiver of Statute of Limitations. Each Credit Party
waives the pleading of any statute of limitations with respect to any
and all actions in connection herewith.
21.7 Binding Effect. This Agreement and the other Documents
shall be binding upon, and shall inure to the benefit of, the Credit
Parties and Lender and their respective successors and assigns, except
that no Credit Party may assign any right or obligation hereunder or
thereunder without the prior written consent of Lender, which consent
may be granted or withheld by Lender in its sole discretion. Lender
shall have the right to assign its rights and obligations under this
Agreement and the other Documents, and to grant participations herein
and therein, in whole or in part, without the consent of any Credit
Party.
21.8 Alternative Dispute Resolution.
21.8.1 Claims Subject to Judicial Reference; Selection
of Referee. Each Claim, including any and all questions of law or fact
relating thereto, shall, at the written request of Lender or Borrower,
as representative (the "Credit Party Representative") of the Credit
Parties party to such Claim (Lender and such Credit Parties herein
called the "Parties"), be determined by Reference. Lender and the
Credit Party Representative shall select a single neutral referee, who
shall be a retired state- or federal-court judge with at least 5 years
of judicial experience in civil matters. In the event that Lender and
the Credit Party Representative cannot agree upon a referee, the
referee shall be appointed by a court having jurisdiction over the
same. The Credit Parties, on the one hand, and Lender, on the other
hand, shall bear equally the fees and expenses of the referee unless
the referee provides otherwise in the statement of decision.
21.8.2 Conduct of Reference. Except as otherwise
provided in this Section 21.8, any Reference shall be conducted
pursuant to Sections 638 through 645.1 of the California Code of Civil
Procedure. The referee shall determine all issues relating to the
applicability, interpretation, legality and enforceability of this
Agreement and the other Documents.
21.8.3 Provisional Remedies, Self-Help and
Foreclosure. No provision of this Section 21.8 shall limit the right of
any Party (a) to exercise self-help remedies (including setoff), (b) to
foreclose against or sell any collateral, by power of sale or
otherwise, or (c) to obtain or oppose provisional or ancillary remedies
from a court of competent jurisdiction before, after or during the
pendency of a Reference. The exercise of, or opposition to, any such
remedy does not waive the right of any Party to Reference pursuant to
this Section 21.8.
21.8.4 Limitation on Damages. In the event that
punitive damages are permitted under the law of the State of
California, the amount thereof shall not exceed a sum equal to three
times the amount of actual damages as determined by the referee.
21.8.5 Severability. In the event that any provision
of any Document is found to be illegal or unenforceable, the remainder
of such Document shall remain in full force and effect.
21.8.6 Miscellaneous. In the event that multiple
claims are asserted, some of which are found not subject to the
provisions of this Section 21.8, the Parties agree to stay the
proceedings of the claims not subject to this Section 21.8 until all
other claims are resolved in accordance with this Section 21.8. In the
event that claims are asserted against multiple parties, some of which
are not subject to this Section 21.8, the Parties agree to sever the
claims subject to this Section 21.8 and resolve them in accordance with
this Section 21.8. In the event of any challenge to the legality or
enforceability of this Section 21.8, the prevailing Party shall be
entitled to recover the costs and expenses, including reasonable
attorneys' fees, incurred by it in connection therewith.
21.8.7 WAIVER OF JURY TRIAL. IN CONNECTION WITH ANY
REFERENCE OR ANY OTHER ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER
BROUGHT IN STATE OR FEDERAL COURT, THE CREDIT PARTIES AND LENDER HEREBY
EXPRESSLY, INTENTIONALLY AND IRREVOCABLY WAIVE ANY RIGHT THEY MAY
OTHERWISE HAVE TO TRIAL BY JURY OF ANY CLAIM.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first written above.
AMERICAN TONERSERV CORP.,
as Borrower
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President & CEO
CELTIC CAPITAL CORPORATION,
as Lender
By:/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Executive Vice President
& Chief Credit Officer
OPTIMA TECHNOLOGIES, LLC,
as Guarantor
By: AMERICAN TONERSERV CORP.
Sole and Managing Member
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President & CEO
TONERTYPE, LLC,
as Guarantor
By: AMERICAN TONERSERV CORP.
Sole and Managing Member
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President & CEO
NC TONERSERVE, LLC,
as Guarantor
By: AMERICAN TONERSERV CORP.
Sole and Managing Member
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President & CEO
EXHIBIT A-1
(CELTIC LETTERHEAD)
Attention: Accounts Payable
Re: American TonerServ Corp. (the "Client")
Ladies and Gentlemen:
We are pleased to inform you that, to enable the Client to better
service its customers, the Client has assigned its present and future
accounts receivable to Celtic Capital Corporation.
To the extent that you are now indebted to the Client or may in the
future become indebted to the Client, payment of such indebtedness is
to be made to Celtic Capital and not to the Client or any other person
or entity. The payments should be mailed to Celtic Capital at the
following address:
Celtic Capital Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The payment instructions contained in this letter may be revoked only
by a writing signed by an officer of Celtic Capital and acknowledged
before a notary public.
To assist us in applying payments, please fax a copy of this letter to
Celtic Capital at [▇▇▇-▇▇▇-▇▇▇▇], showing your Federal Tax
Identification Number in the following space: _____________________.
Please let us at Celtic Capital Corporation know if you have any
questions concerning this matter. We thank you in advance for
continuing your fine payment record.
Very truly yours,
CELTIC CAPITAL CORPORATION
By:
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Executive Vice President &
Chief Credit Officer AUTHORIZED
AMERICAN TONERSERV CORP.
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President & CEO
EXHIBIT A-2
(CELTIC LETTERHEAD)
Attention: Accounts Payable
Re: Optima Technologies, LLC (the "Client")
Ladies and Gentlemen:
We are pleased to inform you that, to enable the Client to better
service its customers, the Client has assigned its present and future
accounts receivable to Celtic Capital Corporation.
To the extent that you are now indebted to the Client or may in the
future become indebted to the Client, payment of such indebtedness is
to be made to Celtic Capital and not to the Client or any other person
or entity. The payments should be mailed to Celtic Capital at the
following address:
Celtic Capital Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The payment instructions contained in this letter may be revoked only
by a writing signed by an officer of Celtic Capital and acknowledged
before a notary public.
To assist us in applying payments, please fax a copy of this letter to
Celtic Capital at [▇▇▇-▇▇▇-▇▇▇▇], showing your Federal Tax
Identification Number in the following space: _____________________.
Please let us at Celtic Capital Corporation know if you have any
questions concerning this matter. We thank you in advance for
continuing your fine payment record.
Very truly yours,
CELTIC CAPITAL CORPORATION
By:
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Executive Vice President &
Chief Credit Officer AUTHORIZED
OPTIMA TECHNOLOGIES, LLC
By: AMERICAN TONERSERV CORP.
Sole and Managing Member
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President & CEO
EXHIBIT A-3
(CELTIC LETTERHEAD)
Attention: Accounts Payable
Re: TonerType, LLC (the "Client")
Ladies and Gentlemen:
We are pleased to inform you that, to enable the Client to better
service its customers, the Client has assigned its present and future
accounts receivable to Celtic Capital Corporation.
To the extent that you are now indebted to the Client or may in the
future become indebted to the Client, payment of such indebtedness is
to be made to Celtic Capital and not to the Client or any other person
or entity. The payments should be mailed to Celtic Capital at the
following address:
Celtic Capital Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The payment instructions contained in this letter may be revoked only
by a writing signed by an officer of Celtic Capital and acknowledged
before a notary public.
To assist us in applying payments, please fax a copy of this letter to
Celtic Capital at [▇▇▇-▇▇▇-▇▇▇▇], showing your Federal Tax
Identification Number in the following space: ____________________.
Please let us at Celtic Capital Corporation know if you have any
questions concerning this matter. We thank you in advance for
continuing your fine payment record.
Very truly yours,
CELTIC CAPITAL CORPORATION
By:
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Executive Vice President &
Chief Credit Officer AUTHORIZED
TONERTYPE, LLC
By: AMERICAN TONERSERV CORP.
Sole and Managing Member
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President & CEO
EXHIBIT A-4
(CELTIC LETTERHEAD)
Attention: Accounts Payable
Re: NC TonerServ, LLC (the "Client")
Ladies and Gentlemen:
We are pleased to inform you that, to enable the Client to better
service its customers, the Client has assigned its present and future
accounts receivable to Celtic Capital Corporation.
To the extent that you are now indebted to the Client or may in the
future become indebted to the Client, payment of such indebtedness is
to be made to Celtic Capital and not to the Client or any other person
or entity. The payments should be mailed to Celtic Capital at the
following address:
Celtic Capital Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The payment instructions contained in this letter may be revoked only
by a writing signed by an officer of Celtic Capital and acknowledged
before a notary public.
To assist us in applying payments, please fax a copy of this letter to
Celtic Capital at [▇▇▇-▇▇▇-▇▇▇▇], showing your Federal Tax
Identification Number in the following space: ______________________.
Please let us at Celtic Capital Corporation know if you have any
questions concerning this matter. We thank you in advance for
continuing your fine payment record.
Very truly yours,
CELTIC CAPITAL CORPORATION
By:
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Executive Vice President &
Chief Credit Officer AUTHORIZED
NC TONERSERVE, LLC
By: AMERICAN TONERSERV CORP.
Sole and Managing Member
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President & CEO
EXHIBIT B
[LETTERHEAD OF BORROWER]
Mr. ▇▇▇ ▇▇▇▇▇-▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
We hereby instruct you to:
(1) send to Celtic Capital Corporation ("Lender") (a) all financial
statements prepared by your office on our behalf, whether such
financial statements are preliminary or final, (b) all tax returns
prepared by your office on our behalf, including quarterly payroll tax
returns, and (c) all reports prepared by your office as a result of any
audit or other review of our operations, finances or internal controls,
including any reports dealing with improper accounting practices,
defalcations, financial reporting errors or misstatements, or fraud
perpetrated on or by us or by any of our employees or agents;
(2) upon Lender's request, meet with representatives of Lender (a) to
discuss the financial information described in paragraph (1) above, (b)
to answer any questions regarding the same and (c) to make available to
Lender any of the books and records concerning us that may be in your
possession.
Please be advised that one of the principal purposes of the [reviewed]
financial statements that you may be asked to prepare is to provide
Lender with information regarding our financial condition.
All of the financial information described above must be sent to Lender
prior to or simultaneously with its being sent to us.
These instructions, which cover American TonerServ Corp. and all of its
direct and indirect subsidiaries, may be revoked only by a writing
signed by an officer of Lender and acknowledged before a notary public.
Thank you.
Very truly yours,
American TonerServ Corp.
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President & CEO
cc: Celtic Capital Corporation
EXHIBIT C
LOAN AGREEMENT SUPPLEMENT
__________, 200_
Celtic Capital Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Re: Loan and Security Agreement dated as of April __, 2008 among
American TonerServ Corp., the Guarantors referred to therein and Celtic
Capital Corporation
Ladies and Gentlemen:
Reference is made to the above-captioned Loan and Security Agreement
(said Agreement, as in effect on the date hereof and as it may
hereafter be amended, restated, supplemented or otherwise modified from
time to time, herein called the "Loan Agreement"). Terms defined in the
Loan Agreement and not otherwise defined herein are used herein as
defined therein.
The undersigned hereby agrees that, as of the date first set forth
above, (1) it is a party to the Loan Agreement as a Guarantor as if it
were an original party thereto and (2) each reference in the Loan
Agreement to "Guarantor" or "Guarantors" (or, accordingly, to "Credit
Party" or "Credit Parties") also means and is a reference to the
undersigned.
The undersigned hereby makes each representation and warranty set
forth in Section 7 of the Loan Agreement to the same extent as each
other Credit Party and hereby agrees to be bound by all of the terms
and provisions of the Loan Agreement to the same extent as each other
Guarantor.
THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THE STATE OF CALIFORNIA.
Very truly yours,
[Name of Additional Guarantor],
a ____________________
By:
Name:
Title: