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EXHIBIT 10.66
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made on December 21, 1995, between
the undersigned Borrower and the undersigned Lender concerning loans and other
credit accommodations to be made by Lender to Borrower.
SECTION 1. PARTIES
1.1 The "BORROWER" is Xxxxx Microcomputer Products, Inc., a
Georgia corporation, and its successors and assigns, which has its chief
executive office and principal place of business at the address shown on Section
10.6(b).
1.2 The "LENDER" is The CIT Group/Credit Finance, Inc. and its
successors and assigns.
SECTION 2. LOANS AND OTHER CREDIT ACCOMMODATIONS
2.1 Revolving Loans. Lender shall, subject to the terms and
conditions contained herein and in the Conditions Precedent Rider attached
hereto (the "CONDITIONS PRECEDENT RIDER"), make revolving loans to Borrower
("REVOLVING LOANS") in amounts requested by Borrower from time to time, but not
in excess of the Net Availability existing immediately prior to the making of
the requested loan and provided the requested loan would not cause the
outstanding Obligations to exceed the Maximum Credit.
(a) The "MAXIMUM CREDIT" is set forth in Section 10.1(a) hereof.
(b) The "GROSS AVAILABILITY" shall be calculated at any time as
the sum of:
(i) the product obtained by multiplying the outstanding
amount of Eligible Domestic Accounts, net of all
taxes, discounts, allowances, and credits and
accruals for price protection, coop advertising and
warranty claims, given or claimed, by the Eligible
Domestic Accounts Percentage set forth in Section
10.1(b), plus
(ii) the product obtained by multiplying the applicable
Eligible Domestic Inventory Percentage set forth in
Section 10.1(b) by the Value of Eligible Domestic
Inventory, but not to exceed the Inventory Sublimit
set forth in Section 10.1(c), plus
(iii) the sum of the products obtained by (x) multiplying
the outstanding amount of Eligible UK Accounts, net
of all taxes, discounts, allowances, and credits and
accruals for price protection, coop advertising and
warranty claims, given or claimed, by the Eligible UK
Accounts Percentage as set forth in Section 10.1(b),
and (y)
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multiplying the Eligible UK Inventory Percentage set forth in
Section 10.1(b) by the Values of Eligible UK Inventory, but
not to exceed $4,000,000, plus
(iv) the product obtained by multiplying the outstanding
amount of Eligible Foreign Accounts, net of all
taxes, discounts, allowances, and credits and
accruals for price protection, coop advertising and
warranty claims, given or claimed, by the Eligible
Foreign Accounts Percentage set forth in Section
10.1(b), but not to exceed $2,000,000,
minus (subtract from the sum of clauses (i)
through (iv) above)
(v) the Reserves.
(c) "NET AVAILABILITY" shall be calculated at any time as an
amount equal to the Gross Availability minus the aggregate amount of all
then-outstanding Revolving Loans and Accommodations.
(d) "ELIGIBLE DOMESTIC ACCOUNTS" are accounts which arise in the
ordinary course of Borrower's business for goods sold or services rendered (but
excluding royalty and franchise receivables), and which are and remain
acceptable to Lender for lending purposes. General criteria for Eligible
Domestic Accounts are set forth below but may be revised from time to time by
Lender, in its sole judgment, on fifteen (15) days' prior written notice to
Borrower. Lender shall, in general, deem accounts to be Eligible Domestic
Accounts if: (1) such accounts arise from bona fide completed transactions and
have not remained unpaid for more than the number of days after the invoice date
set forth in Section 10.1(d); (2) the amounts of the accounts reported to Lender
are absolutely owing to Borrower and do not arise from sales on consignment,
guaranteed sale or other terms under which payment by the account debtors may be
conditional or contingent; (3) the account debtor's chief executive office and
principal place of business is located in the United States; (4) such accounts
do not arise from progress xxxxxxxx, retainages or xxxx and hold sales; (5)
there are no contra relationships, setoffs, counterclaims or disputes existing
with respect thereto and there are no other facts existing or threatened which
would impair or delay the collectibility of all or any portion thereof; (6) the
goods giving rise thereto were not at the time of the sale subject to any liens
except those permitted in this Agreement; (7) such accounts are not accounts
with respect to which the account debtor or any officer or employee thereof is
an officer, employee or agent of or is affiliated with Borrower, directly or
indirectly, whether by virtue of family membership, ownership, control,
management or otherwise; (8) such accounts are not accounts with respect to
which the account debtor is the United States or any State or political
subdivision thereof or any department, agency or instrumentality of the United
States, any State or political subdivision, unless there has been compliance
with the Assignment of Claims Act or any similar State or local law, if
applicable; (9) Borrower has delivered to Lender or Lender's representative such
documents as Lender may have
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requested pursuant to Section 5.8 hereof in connection with such accounts and
Lender shall have received a verification of such account, satisfactory to it,
if sent to the account debtor or any other obligor or any bailee pursuant to
Section 5.4 hereof; (10) there are no facts existing or threatened which might
result in any adverse change in the account debtor's financial condition; (11)
such accounts owed by a single account debtor or its affiliates do not represent
more than twenty (20%) percent of all otherwise Eligible Domestic Accounts
(accounts excluded from Eligible Domestic Accounts solely by reason of this
subsection (11) shall nevertheless be considered Eligible Domestic Accounts to
the extent of the amount of such accounts which does not exceed twenty (20%)
percent of all otherwise Eligible Domestic Accounts); (12) such accounts are not
owed by an account debtor who is or whose affiliates are past due upon other
accounts owed to Borrower comprising more than fifty (50%) percent of the
accounts of such account debtor or its affiliates owed to Borrower; (13) such
accounts are owed by account debtors whose total indebtedness to Borrower does
not exceed the amount of any customer credit limits as established, and changed,
from time to time by Lender on notice to Borrower (accounts excluded from
Eligible Domestic Accounts solely by reason of this subsection (13) shall
nevertheless be considered Eligible Domestic Accounts to the extent the amount
of such accounts does not exceed such customer credit limit); and (14) such
accounts are owed by account debtors deemed creditworthy at all times by Lender.
(e) "ELIGIBLE DOMESTIC INVENTORY" is inventory owned by Borrower
which is and remains acceptable to Lender for lending purposes, is subject to
Lender's duly perfected, first priority security interest and no other lien
except liens described in SCHEDULE A hereto ("PERMITTED LIENS"), is not the
subject of any technology license agreement or any other agreement that
restricts or prohibits in any way Borrower's or Lender's right to sell or
otherwise dispose of any such inventory, and is located at one of the locations
owned or leased by Borrower in the United States of America that is set forth in
Section 10.6, other than a leased location with respect to which Lender has not
received from the owner thereof a landlord's waiver agreement in form and
substance satisfactory to Lender.
(f) "ELIGIBLE FOREIGN ACCOUNTS" are accounts which arise in the
ordinary course of Borrower's business for goods sold or services rendered,
which are and remain acceptable to Lender for lending purposes, which are owed
by account debtors having their chief executive office and principal place of
business in a country other than the United States or the United Kingdom, which
would be Eligible Domestic Accounts except for the location of the account
debtor's chief executive office or principal place of business, and with respect
to which the account debtor has procured and delivered to Borrower, and Borrower
has (if so requested by Lender) collaterally assigned to Lender all of
Borrower's rights under, an irrevocable standby letter of credit that is in form
acceptable to Lender, issued by a domestic U.S. bank acceptable to Lender in its
sole discretion and, if so requested by Lender, delivered to Lender. General
criteria for Eligible Foreign Accounts may be revised from time to time by
Lender, in its sole judgment, on fifteen (15) days' prior written notice to
Borrower.
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(g) "ELIGIBLE UK ACCOUNTS" are accounts which arise in the
ordinary course of Borrower's business for goods sold or services rendered,
which are and remain acceptable to Lender for lending purposes, which are owing
by account debtors having their chief executive office and principal place of
business in the United Kingdom and which would otherwise qualify as Eligible
Domestic Accounts except for the location of the chief executive office or
principal place of business of the account debtors with respect thereto. General
criteria for Eligible UK Accounts may be revised from time to time by Lender, in
its sole judgment, on fifteen (15) days' prior written notice to Borrower.
(h) "ELIGIBLE UK INVENTORY" is inventory which, but for its
location in the United Kingdom, would constitute Eligible Domestic Inventory and
which is at all times subject to Lender's duly perfected, first priority
security interest and no other lien except a Permitted Lien.
(i) "VALUE" means the value of Borrower's inventory at any date,
determined by Lender at the lower of cost or market on such date, with the
market value of inventory being the liquidation value in continued use of such
inventory.
(j) Lender shall have a continuing right to deduct reserves
("RESERVES") in determining the Gross Availability, and to increase and decrease
such Reserves from time to time, if and to the extent that, in the exercise of
Lender's customary credit judgement, such Reserves which are necessary to
protect Lender against (1) any state of facts which constitute an Event of
Default or (2) against a loss that might result from any state of facts which
might reasonably be expected to have a Material Adverse Effect. Lender may, at
its option, implement Reserves by designating as ineligible a sufficient amount
of accounts or inventory which would otherwise be Eligible Domestic Accounts,
Eligible Foreign Accounts, or Eligible UK Accounts, or which would otherwise be
Eligible Domestic Inventory or Eligible UK Inventory, so as to reduce Gross
Availability by the amount of the intended Reserve. As used herein, the term
"MATERIAL ADVERSE EFFECT" shall mean the effect of any event, condition or state
of facts that is material with respect to (i) Borrower's business, operations,
properties or condition (financial or otherwise) or (ii) the quantity, quality
or value of any Collateral or the priority of Lender's liens therein, which in
either case materially impairs the ability of Borrower timely to pay and perform
the Obligations or the value of the Collateral.
2.2 Term Loans.
(a) Subject to all of the terms and conditions contained herein
and in the Conditions Precedent Rider, Lender shall make two term loans to
Borrower (collectively, the "TERM LOANS" and individually a "TERM LOAN"), the
first of which ("TERM LOAN A") shall be in the amount of $2,608,000 and the
second of which ("TERM LOAN B") shall be in the amount of $7,500,000. Each of
the Term Loans shall be evidenced by a promissory note made by Borrower to the
order of Lender in substantially the form of Exhibits A and B, respectively
(each, as at any time amended or modified, a "TERM NOTE" and collectively the
"TERM NOTES") and shall be repaid, together with
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interest as provided therein, in accordance with this Agreement and the Term
Note evidencing such Term Loan. The final maturity date of each Term Loan shall
be as set forth in Section 10.2.
(b) Borrower acknowledges and agrees that Lender shall have the
right to appraise, or cause an appraisal to be conducted of, all of Borrower's
machinery and equipment on an annual basis, and the cost of each such appraisal
shall be borne solely by Borrower. If based upon any such appraisal Lender
determines that the then outstanding principal balance of Term Loan A exceeds an
amount equal to eighty percent (80%) of the auction value of Eligible Equipment
(such excess being herein called the "TERM LOAN A OVERAGE"), then Lender, at its
option (and whether or not an Event of Default exists), may require Borrower to
increase the amount of each of the next six (6) monthly installments to become
due under Term Note A after such determination (or, if there are fewer than six
(6) remaining installments due, the number of remaining installments then due
under Term Note A) by an amount equal to such Term Loan A Overage divided by six
(6) (or, if fewer in number, the then remaining number of installments payable
under Term Note A). If requested to do so, Borrower shall execute and deliver to
Lender a modification of Term Note A, in form and content acceptable to Lender,
to reflect such increase in monthly principal payments thereunder. As used
herein, the term "ELIGIBLE EQUIPMENT" shall mean equipment owned by Borrower
(and not subject to any lease or conditional sale agreement) that is located at
one of the addresses in the United States of America shown in Section 10.6(c)
with respect of which Lender has received a landlord waiver from the applicable
owner of such premises and a mortgagee waiver from each mortgagee with respect
to such premises, is subject to Lender's duly perfected, first priority security
interest and no other lien that is not a Permitted Lien, is in good and
serviceable condition and is not obsolete or unmerchantable.
(c) Borrower acknowledges and agrees that Lender shall have the
right at any time or times to appraise, or cause an appraisal to be conducted
of, any or all of Borrower's intellectual property assets, including, without
limitation, all patents, trademarks, tradenames and copyrights ("Intellectual
Property"), and the cost of each such appraisal shall be borne solely by
Borrower. Each such appraisal shall be conducted by an appraiser selected by
Lender and shall employ an appraisal methodology consistent with that employed
by Xxxxxxxx & Xxxxxxx of Philadelphia, Pennsylvania in its appraisal of such
assets prepared for Lender and Borrower and determined in October, 1995. Each
such appraisal shall take into account the effect, if any, upon the value of any
such Intellectual Property as collateral security for the Obligations of any
license or other agreement with respect to such assets entered into by Borrower
after the date hereof. If based upon any such appraisal Lender determines that
the unpaid balance of Term Loan B exceeds an amount equal to the Applicable
Percentage of the value of such Intellectual Property (such excess being herein
called the "TERM LOAN B OVERAGE"), then Lender, at its option (and whether or
not an Event of Default exists), may require Borrower to increase the amount of
each of the next six (6) monthly installments to become due under Term Note B
after such determination (or, if there are fewer than six (6) remaining
installments due, the number of remaining installments then due under Term Note
B) by an amount equal to such Term Loan B Overage divided by six (6) (or, a
fewer in number, the then remaining number of installments payable under Term
Note B). If requested to do so, Borrower will
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promptly execute and deliver to Lender a modification of Term Note B, in form
and content acceptable to Lender, to reflect any such increase in monthly
principal payments thereunder. As used herein, the term "APPLICABLE PERCENTAGE"
shall mean 10% during the first Loan Year (as defined in Section 9.2), 9% during
the second Loan Year, and 8% at all times after the second Loan Year.
(d) If on any date that the Applicable Interest Margin as set
forth in Section 10.4(a) is 2- 1/8%, then Lender may, at its option, increase
the rate of monthly amortization on either or both of the Term Loans in such
amount as may be determined by CIT in its sole and absolute discretion (but in
no event to exceed, unless an Event of Default has occurred, two times the then
existing monthly amortization) and, if requested to do so, Borrower shall
promptly execute and deliver to Lender a modification of either or both of the
Term Notes, in form and content acceptable to Lender, to reflect such increase
in monthly principal payments thereunder.
2.3 Accommodations.
(a) Lender may, in its sole discretion, issue or cause to be
issued, from time to time at Borrower's request and on terms and conditions and
for purposes satisfactory to Lender, credit accommodations consisting of letters
of credit, bankers' acceptances, merchandise purchase guaranties or other
guaranties or indemnities for Borrower's account ("ACCOMMODATIONS"). Borrower
shall execute and perform additional agreements relating to the Accommodations
in form and substance acceptable to Lender and the issuer of any Accommodations,
all of which shall supplement the rights and remedies granted herein. Any
payments made by Lender or any affiliate of Lender in connection with the
Accommodations shall constitute additional Revolving Loans to Borrower.
(b) In addition to the fees and costs of any issuer in connection
with issuing or administering Accommodations, Borrower shall pay monthly to
Lender, on the first day of each month, charges (the "ACCOMMODATION CHARGES") on
open Accommodations at the rate per annum set forth in Section 10.3(a).
(c) No Accommodation will be issued unless the full amount of the
Accommodation requested, plus fees and costs for issuance, is less than the Net
Availability existing immediately prior to the issuance of the requested
Accommodation, or if the requested Accommodation would cause the outstanding
Obligations to exceed the Maximum Credit, or cause the open amount of
Accommodations to exceed, at any time, the Accommodation sublimit set forth in
Section 10.3(b).
(d) All indebtedness, liabilities and obligations of any sort
whatsoever, however arising, whether present or future, fixed or contingent,
secured or unsecured, due or to become due, paid or incurred, arising or
incurred in connection with any Accommodation shall be included in the term
"OBLIGATIONS", as defined herein, and shall include, without limitation, (i) all
amounts due or which may become due under any Accommodation; (ii) all amounts
charged or chargeable to Borrower or
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to Lender by any bank, other financial institution or correspondent bank which
opens, issues or is involved with such Accommodations; (iii) Lender's
Accommodation Charges and all fees, costs and other charges of any issuer of any
Accommodation; and (iv) all duties, freight, taxes, costs, insurance and all
such other charges and expenses which may pertain directly or indirectly to any
Obligations or Accommodations or to the goods or documents relating thereto.
(e) Borrower unconditionally agrees to indemnify, defend and hold
Lender harmless from any and all loss, claim or liability (including, without
limitation, reasonable attorneys' fees) arising from any transactions or
occurrences relating to any Accommodation established or opened for Borrower's
account, the Collateral relating thereto and any drafts or acceptances
thereunder, including, without limitation, any such loss or claim due to any
action taken by an issuer of any Accommodation. Borrower further agrees to
indemnify and hold Lender harmless for any errors or omissions in connection
with the Accommodations, whether caused by Lender, by the issuer of any
Accommodation or otherwise. Borrower's unconditional obligation to indemnify and
hold Lender harmless under this provision shall not be modified or diminished
for any reason or in any manner whatsoever, except for Lender's gross negligence
or wilful misconduct. Borrower agrees that any charges made to Lender by any
issuer of any Accommodation shall be conclusive on Borrower and may be charged
to Borrower's account.
(f) Lender shall not be responsible for: the conformity of any
goods to the documents presented; the validity or genuineness of any documents;
delay, default, or fraud by the Borrower or shipper and/or anyone else in
connection with the Accommodations or any underlying transaction; or any act or
failure to act, or any delay in acting or negligence in the issuance of any
letter of credit.
(g) Borrower agrees that any action taken by Lender, if taken in
good faith, or any action taken by an issuer of any Accommodation, under or in
connection with any Accommodation, shall be binding on Borrower and shall not
create any resulting liability to Lender. In furtherance thereof, Lender shall
have the full right and authority to clear and resolve any questions of
non-compliance of documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute for Borrower's account any and
all applications for steamship or airway guarantees, indemnities or delivery
orders; to grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents; and to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications or Accommodations. All of
the foregoing actions may be taken in Lender's sole name, and the issuer thereof
shall be entitled to comply with and honor any and all such documents or
instruments executed by or received solely from Lender, all without any notice
to or any consent from Borrower. None of the foregoing actions described in this
subsection (g) may be taken by Borrower without Lender's express written
consent.
2.4 Certain Amounts Due Without Demand. Lender may, in its sole
discretion, make or permit Revolving Loans, Accommodations or other Obligations
in excess of the Maximum Credit,
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Gross or Net Availability or applicable formulas or sublimits. All or any
portion of such excess(es) shall be immediately due and payable without Lender's
demand.
SECTION 3. INTEREST AND FEES
3.1 Interest. (a) Interest on the Revolving Loans and Term Loans
shall be payable by Borrower on the first day of each month, calculated upon the
closing daily balances in the loan account of Borrower for each day during the
immediately preceding month, at the per annum rate set forth as the Interest
Rate in Section 10.4(a). The Interest Rate shall increase or decrease by an
amount equal to each increase or decrease, respectively, in the Prime Rate (as
defined below), effective as of the date of each such change. On and after any
Event of Default or termination or non-renewal hereof, interest on the unpaid
principal amount of all unpaid Obligations shall accrue at a rate equal to two
percent (2%) per annum in excess of the Interest Rate otherwise payable until
such time as all Obligations are indefeasibly paid in full (notwithstanding
entry of any judgment against Borrower or the exercise of any other right or
remedy by Lender), and all such interest shall be payable on demand. The "PRIME
RATE" is the rate of interest publicly announced by Chemical Bank in New York,
New York, or its successors, and assigns from time to time as its prime rate
(the Prime Rate is not intended to be the lowest rate of interest charged by
Chemical Bank to its borrowers). The Prime Rate on the date hereof is 8.50% and
therefore the rate of interest in effect under this Agreement on the date
hereof, expressed in simple interest terms, is 10.125% per annum.
(b) If the amount of interest to be paid in any month based upon
the outstanding principal amount of the Obligations during the immediately
preceding month is less than the Minimum Interest Amount, then, subject to the
provisions of Section 3.8 hereof, Borrower shall be obligated to pay the Minimum
Interest Amount on the date that accrued interest is due and payable for such
immediately preceding month. As used herein, the term "MINIMUM INTEREST AMOUNT"
shall mean the interest amount that would have been paid for such month if the
average principal amount of Obligations outstanding during such month was at
least equal to the Base Loan Amount for such month. As used herein, the term
"BASE LOAN AMOUNT" shall mean, for any month, an amount equal to $30,000,000 if
such month is in the first Loan Year (as defined in Section 9.2), $15,000,000 if
such month is in the second Loan Year, and $10,000,000 if such month is in the
third or any subsequent Loan Year.
3.2 Annual Commitment Fee. Borrower shall pay Lender on each
anniversary of the "CLOSING DATE" (as defined in the Conditions Precedent Rider)
an Annual Commitment Fee in the amount set forth in Section 10.4(b), which fee
shall be fully earned as of each such anniversary date.
3.3 Closing Fee. Borrower shall pay Lender on the Closing Date a
closing fee in the amount set forth in Section 10.4(c), which fee shall be
deemed fully earned as of the Closing Date and shall be non-refundable except to
the extent otherwise required by applicable law.
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3.4 Account Servicing Fee. Borrower shall pay Lender monthly, on
the first day of each month during the initial and each renewal Term an Account
Servicing Fee for the immediately preceding month (or part thereof) in the
amount set forth in Section 10.4(d).
3.5 Unused Line Fee. Borrower shall pay Lender monthly, on the
first day of each month, in arrears, an Unused Line Fee for each month during
the initial and each renewal Term at the rate per annum set forth in Section
10.4(e), calculated upon the amount, if any, by which the Maximum Credit exceeds
the average outstanding daily principal balance during the preceding month of
all Revolving Loans, Accommodations and Term Loans.
3.6 Charges to Loan Account. At Lender's option, all payments of
principal, interest, fees, costs, expenses and other charges provided for in
this Agreement, or in any other agreement now or hereafter existing between
Lender and Borrower, may be charged on the date when due, as principal to any
loan account of Borrower maintained by Lender.
3.7 Calculation of Interest and Fees. Interest, fees for
Accommodations, the Unused Line Fee and any other amounts payable by Borrower to
Lender based on a per annum rate shall be calculated on the basis of actual days
elapsed over a 360-day year.
3.8 Maximum Interest Charges. Regardless of any provision
contained in this Agreement, any of the other "TRANSACTION DOCUMENTS" (as
defined in the Conditions Precedent Rider), or any other instrument or agreement
now or hereafter evidencing or securing the payment of any of the Obligations,
in no contingency or event whatsoever shall the aggregate of all amounts that
are contracted for, charged or collected pursuant to the terms of this
Agreement, or any other agreement, that are deemed interest under applicable law
exceed the highest rate permissible under any applicable law. No agreements,
conditions, provisions or stipulations contained in this Agreement or the
exercise by Lender of the right to accelerate the payment or the maturity of all
or any portion of the Obligations, or the exercise of any option whatsoever
contained in this Agreement, or the prepayment by Borrowers of any of the
Obligations, or the occurrence of any contingency whatsoever, shall entitle
Lender to charge or receive in any event, interest or any charges, premiums,
fees or other amounts deemed interest by applicable law in excess of the maximum
rate authorized by applicable law and in no event shall Borrower be obligated to
pay interest exceeding such maximum rate, and all agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel Borrower to pay interest exceeding the maximum rate
shall be without binding force or effect, at law or in equity, to the extent
only of the excess of interest over such maximum rate. If any interest is
charged or received in excess of the maximum rate, Borrower acknowledges and
agrees that such charge or receipt shall be the result of an accident and bona
fide error, in such excess, to the extent received, shall be applied first to
reduce the principal amount of the Obligations and the balance, if any, returned
to Borrower, it being the intent of the parties hereto not to enter into a
usurious or otherwise illegal relationship. The right to accelerate the maturity
of any of the Obligations does not include the right to accelerate any interest
that is not otherwise accrued on the date of such acceleration, and Lender does
not intend
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to collect any unearned interest in the event of any such acceleration. For the
purpose of determining whether or not any excess of interest has been contracted
for, charged or received by Lender, all interest at any time contracted for,
charged or received from Borrower in connection with any of the Obligations
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread in equal parts throughout the full term of the Obligations.
SECTION 4. GRANT OF SECURITY INTEREST
4.1 Grant of Security Interest. To secure the payment and
performance in full of all Obligations, Borrower hereby grants to Lender a
continuing security interest in and lien upon, and a right of setoff against,
and Borrower hereby assigns and pledges to Lender, all of the Collateral,
including, without limitation, any Collateral not deemed eligible for lending
purposes.
4.2 The term "OBLIGATIONS" shall mean any and all Revolving Loans,
Term Loans, Accommodations and all other indebtedness, liabilities and
obligations of every kind, nature and description owing by Borrower to Lender
and/or its affiliates, including, without limitation, principal, interest,
charges, fees and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, whether arising under this Agreement or
otherwise, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal Term or after the commencement of any
case with respect to Borrower under the United States Bankruptcy Code or any
similar statute, whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated,
secured or unsecured, original, renewed or extended and whether arising directly
or howsoever acquired by Lender including, without limitation, from any other
entity outright, conditionally or as collateral security, by assignment, merger
with any other entity, participations or interests of Lender in the obligations
of Borrower to others, assumption, operation of law, subrogation or otherwise
and shall also include all amounts chargeable to Borrower under this Agreement
or in connection with any of the foregoing.
4.3 "COLLATERAL" shall mean all of the following property of
Borrower:
All now owned and hereafter acquired right, title and interest of
Borrower in, to and in respect of all: accounts, interests in goods represented
by accounts, returned, reclaimed or repossessed goods with respect thereto and
rights as an unpaid vendor; contract rights; chattel paper; general intangibles,
including, but not limited to, tax and duty refunds, registered and unregistered
patents, trademarks, service marks, copyrights, trade names, applications for
the foregoing, trade secrets, goodwill, software, processes, equipment
formulations, manufacturing and quality control procedures, drawings,
schematics, blueprints, customer lists, licenses (whether as licensor or
licensee), choses in action and other claims, and existing and future leasehold
interests in equipment and fixtures; documents; instruments; letters of credit,
bankers' acceptances or guaranties; cash monies, deposits, securities,
securities accounts, bank accounts, deposit accounts, credits and other property
now or hereafter held in any capacity by Lender, its affiliates or any entity
which, at any
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time, participates in Lender's financing of Borrower or at any other depository
or other institution; agreements or property securing or relating to any of the
items referred to above;
All now owned and hereafter acquired right, title and interest of
Borrower in, to and in respect of goods, including, but not limited to:
All inventory, wherever located, whether now owned or
hereafter acquired, of whatever kind, nature or description, including,
without limitation, all raw materials, work-in-process, finished goods,
and materials to be used or consumed in Borrower's business; and all
names or marks affixed to or to be affixed thereto for purposes of
selling same by the seller, manufacturer, lessor or licensor thereof;
All equipment and fixtures, wherever located, whether now
owned or hereafter acquired, including, without limitation, all
machinery, equipment, motor vehicles, furniture and fixtures, and any
and all additions, substitutions, replacements (including, without
limitation, spare parts), and accessions thereof and thereto;
All consumer goods, farm products, crops, timber, minerals or
the like (including, without limitation, oil and gas), wherever
located, whether now owned or hereafter acquired, of whatever kind,
nature or description;
All now owned and hereafter acquired right, title and
interests of Borrower in, to and in respect of any personal property in
or upon which Lender has or may hereafter have a security interest,
lien or right of setoff;
All present and future books, records and manuals relating to
any of the above, including, without limitation, all computer programs,
printed output and computer readable data in the possession or control
of the Borrower, any computer service bureau or other third party, and
all technical manuals and advertising materials;
All products and proceeds of the foregoing in whatever form
and wherever located, including, without limitation, all insurance
proceeds and all claims against third parties for loss or destruction
of or damage to any of the foregoing.
SECTION 5. COLLECTION AND ADMINISTRATION
5.1 Collections. Borrower shall, at Borrower's expense and in the
manner requested by Lender from time to time, direct that remittances and all
other proceeds of accounts and other Collateral shall be sent to a lock box
designated by and/or maintained in the name of Lender, and deposited into a bank
account now or hereafter selected by Lender and maintained in the name of Lender
under arrangements with the depository bank under which all funds deposited to
such bank account are required to be transferred solely to Lender. Borrower
shall bear all risk of loss of any
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funds deposited into such account. In connection therewith, Borrower shall
execute such lock box and bank account agreements as Lender shall specify. Any
collections or other proceeds received by Borrower shall be held in trust for
Lender and immediately remitted to Lender in kind.
5.2 Payments. All Obligations shall be payable at Lender's office
set forth below or at Lender's bank designated in Section 10.6(a) or at such
other bank or place as Lender may expressly designate from time to time for
purposes of this Section. Lender shall apply all proceeds of accounts or other
Collateral received by Lender and all other payments in respect of the
Obligations to the Revolving Loans whether or not then due or to any other
Obligations then due, in whatever order or manner Lender shall determine. For
purposes of determining Gross and Net Availability, remittances and other
payments with respect to the Collateral and Obligations will be treated as
credited to the loan account of Borrower maintained by Lender and Collateral
balances to which they relate, upon the date of Lender's receipt of advice from
Lender's bank that such remittances or other payments have been credited to
Lender's account or in the case of remittances or other payments received
directly in kind by Lender, upon the date of Lender's deposit thereof at
Lender's bank, subject to final payment and collection. In computing interest
charges, the loan account of Borrower maintained by Lender will be credited with
remittances and other payments two (2) Business Days after the day Lender has
received advice of receipt of remittances in Lender's account at Lender's Bank.
For purposes of this Agreement, "BUSINESS DAY" shall mean any day other than a
Saturday, Sunday or any other day on which banks located in the State of New
York are authorized to close.
5.3 Loan Account Statements. Lender shall render to Borrower
monthly a loan account statement. Each statement shall be considered correct and
binding upon Borrower as an account stated, except to the extent that Lender
receives, within sixty (60) days after the mailing of such statement, written
notice from Borrower of any specific exceptions by Borrower to that statement.
5.4 Direct Collections. Lender may, at any time, whether or not an
Event of Default has occurred, without notice to or assent of Borrower, (a)
notify any account debtor that the accounts and other Collateral which includes
a monetary obligation have been assigned to Lender by Borrower and that payment
thereof is to be made to the order of and directly to Lender, (b) send, or cause
to be sent by its designee, requests (which may identify the sender by a
pseudonym) for verification of accounts and other Collateral directly to any
account debtor or any other obligor or any bailee with respect thereto, and (c)
demand, collect or enforce payment of any accounts or such other Collateral, but
without any duty to do so, and Lender shall not be liable for any failure to
collect or enforce payment thereof. At Lender's request, all invoices and
statements sent to any account debtor, other obligor or bailee, shall state that
the accounts and such other Collateral have been assigned to Lender and are
payable directly and only to Lender.
5.5 Attorney-in-Fact. Borrower hereby appoints Lender and any
designee of Lender as Borrower's attorney-in-fact and authorizes Lender or such
designee, at Borrower's sole expense, to exercise at any times in Lender's or
such designee's discretion all or any of the following powers, which powers of
attorney, being coupled with an interest, shall be irrevocable until all
Obligations
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have been paid in full: (a) receive, take, endorse, assign, deliver, accept and
deposit, in the name of Lender or Borrower, any and all cash, checks, commercial
paper, drafts, remittances and other instruments and documents relating to the
Collateral or the proceeds thereof, (b) transmit to account debtors, other
obligors or any bailees notice of the interest of Lender in the Collateral or
request from account debtors or such other obligors or bailees at any time, in
the name of Borrower or Lender or any designee of Lender, information concerning
the Collateral and any amounts owing with respect thereto, (c) notify account
debtors or other obligors to make payment directly to Lender, or notify bailees
as to the disposition of Collateral, (d) after an Event of Default, take or
bring, in the name of Lender or Borrower, all steps, actions, suits or
proceedings deemed by Lender necessary or desirable to effect collection of or
other realization upon the accounts and other Collateral, (e) after an Event of
Default, change the address for delivery of mail to Borrower and to receive and
open mail addressed to Borrower, (f) after an Event of Default, extend the time
of payment of, compromise or settle for cash, credit, return of merchandise, and
upon any terms or conditions, any and all accounts or other Collateral which
includes a monetary obligation and discharge or release the account debtor or
other obligor, without affecting any of the Obligations, and (g) execute in the
name of Borrower and file against Borrower in favor of Lender financing
statements or amendments with respect to the Collateral.
5.6 Limitation on Liability. Borrower hereby releases and
exculpates Lender, its officers, employees and designees, from any liability
arising from any acts under this Agreement or in furtherance thereof, whether as
attorney-in-fact or otherwise, 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 will Lender have any liability to
Borrower for lost profits or other special or consequential damages.
5.7 Administration of Accounts. After the occurrence of an Event
of Default, Borrower shall not (a) grant any extension of time of payment of any
of the accounts or any other Collateral which includes a monetary obligation,
(b) compromise or settle any of the accounts or any such other Collateral for
less than the full amount thereof, (c) release in whole or in part any account
debtor or other person liable for the payment of any of the accounts or any such
other Collateral, or (d) grant any credits, discounts, allowances, deductions,
return authorizations or the like with respect to any of the accounts or any
such other Collateral. Prior to the occurrence of an Event of Default, Borrower
may take any of the foregoing actions in the ordinary course of its business as
presently conducted, unless Lender has in writing directed Borrower not to do so
in a specific instance.
5.8 Documents. At such times as Lender may request and in the
manner specified by Lender, Borrower shall deliver to Lender or Lender's
representative, as Lender shall designate, copies or original invoices,
agreements, proofs of rendition of services and delivery of goods and other
documents evidencing or relating to the transactions which gave rise to accounts
or other Collateral, together with customer statements, schedules describing the
accounts or other Collateral and/or statements of account and confirmatory
assignments to Lender of the accounts or other Collateral, in form and substance
satisfactory to Lender and duly executed by Borrower. Without
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limiting the provisions of Section 5.7, Borrower's granting of credits,
discounts, chargebacks, allowances, deductions, return authorizations or the
like will be promptly reported to Lender in writing. In no event shall any such
schedule or confirmatory assignment (or the absence thereof or omission of any
of the accounts or other Collateral therefrom) limit or in any way be construed
as a waiver, limitation or modification of the security interests or rights of
Lender or the warranties, representations and covenants of Borrower under this
Agreement. Any documents, schedules, invoices or other paper delivered to Lender
by Borrower may be destroyed or otherwise disposed of by Lender six (6) months
after receipt by Lender, unless Borrower requests their return in writing in
advance and makes prior arrangements for their return at Borrower's expense.
5.9 Access. From time to time as requested by Lender, at the sole
expense of Borrower, Lender or its designee shall have access, prior to an Event
of Default during reasonable business hours and on or after an Event of Default
at any time, to all of the premises where Collateral is located for the purposes
of inspecting the Collateral, and all Borrower's books and records, and Borrower
shall 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 such of Borrower's personnel, equipment, including, without
limitation, 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. Borrower
hereby irrevocably authorizes all accountants and third parties to disclose and
deliver to Lender at Borrower's expense all financial information, books and
records, work papers, management reports and other information in their
possession regarding Borrower (except that the foregoing shall not be deemed to
waive any applicable attorney-client privilege).
5.10 Environmental Audits. From time to time, as requested by
Lender, at the sole expense of Borrower, Borrower shall provide Lender, or its
designee, complete access to all of Borrower's facilities for the purpose of
conducting an environmental audit of such facilities as Lender or its designees
may deem necessary. Borrower agrees to cooperate with Lender with respect to any
environmental audit conducted by Lender or its designee pursuant to this Section
5.10.
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SECTION 6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Borrower hereby represents, warrants and covenants to Lender the
following, the truth and accuracy of which, and compliance with which, shall be
continuing conditions of the making of loans or other credit accommodations by
Lender to Borrower:
6.1 Financial and Other Reports. Borrower shall keep and maintain
its books and records in accordance with generally accepted accounting
principles, consistently applied. Borrower shall, at its expenses deliver to
Lender: (a) true and complete monthly agings of its accounts receivable,
accounts payable and notes payable; (b) weekly inventory reports; (c) monthly
internally prepared interim financial statements. Annually, Borrower shall
deliver audited financial statements of Borrower accompanied by the report and
opinion thereon of independent certified public accountants acceptable to
Lender, as soon as available, but in no event later than ninety (90) days after
the end of Borrower's fiscal year. Except for audited financial statements
prepared in accordance with generally accepted accounting principles, all of the
foregoing shall be in such form and together with such information with respect
to the business of Borrower or any Guarantor, as Lender may in each case
request.
6.2 Trade Names. Borrower may from time to time render invoices to
account debtors under any trade names set forth in Section 10.6(e) after Lender
has received prior written notice from Borrower of the use of such trade names
and as to which, Borrower agrees that: (a) each trade name does not refer to
another corporation or other legal entity, (b) all accounts and proceeds thereof
(including, without limitation, any returned merchandise) invoiced under any
such trade names are owned exclusively by Borrower and are subject to the
security interest of Lender and the other terms of this Agreement, and (c) all
schedules of accounts and confirmatory assignments including, without
limitation, any sales made or services rendered using the trade name shall show
Borrower's name as assignor and Lender is authorized to receive, endorse and
deposit to any loan account of Borrower maintained by Lender all checks or other
remittances made payable to any trade name of Borrower representing payment with
respect to such sales or services.
6.3 Losses. Borrower shall promptly notify Lender in writing of
any loss, damage, investigation, action, suit, proceeding or claim relating to a
material portion of the Collateral or which may result in any material adverse
change in Borrower's business, assets, liabilities or condition, financial or
otherwise.
6.4 Books and Records. Borrower's books and records concerning
accounts and its chief executive office are and shall be maintained only at the
address set forth in Section 10.6(d). Borrower's only other places of business
and the only other locations of Collateral, if any, are and shall be the
addresses set forth in Section 10.6(b) hereof, except Borrower may change such
locations or open a new place of business after thirty (30) days prior written
notice to Lender. Prior to any change in location or opening of any new place of
business, Borrower shall execute and
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deliver or cause to be executed and delivered to Lender such financing
statements, financing documents and security and other agreements as Lender may
reasonably require, including, without limitation, those described in Section
6.14.
6.5 Title and Liens. Borrower has and at all times will continue
to have good and marketable title to all of the Collateral, free and clear of
all liens, security interests, claims or encumbrances of any kind except in
favor of Lender and except for Permitted Liens.
6.6 Asset Dispositions; Fundamental Changes. Borrower shall not
directly or indirectly: (a) sell, lease, transfer, assign, abandon or otherwise
dispose of any part of the Collateral (other than sales of inventory to buyers
in the ordinary course of business) or any material portion of its other assets
(other than the sale of its real estate in the 7th District, Gwinnett County,
Georgia, to the extent approved by the Court (as defined in the Condition
Precedent Rider)) or (b) consolidate with or merge with or into any other
entity, or permit any other entity to consolidate with or merge with or into
Borrower except as provided in the "MERGER AGREEMENT" (as defined in the
Condition Precedent Rider) or (c) form or acquire any interest in any firm,
corporation or other entity (other than a majority owned subsidiary in which
Borrower invests no more than $100,000 and which is engaged in substantially the
same business as is engaged in on the date hereof by Borrower or Borrower's
existing subsidiaries).
6.7 Insurance. Borrower shall at all times maintain, with
financially sound and reputable insurers, insurance (including, without
limitation, at the option of Lender, earthquake insurance if and to the extent
available at commercially reasonable rates) with respect to the Collateral and
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. Borrower hereby irrevocably appoints Lender and any designee of Lender
as attorney-in-fact for Borrower to obtain at Borrower's expense, any such
insurance should Borrower fail to do so 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 shall deliver to Lender
evidence of such insurance and a lender's loss payable endorsement satisfactory
to Lender as to all existing and future insurance policies with respect to the
Collateral. Borrower shall deliver to Lender, in kind, all instruments
representing proceeds of insurance received by Borrower. Lender may apply any
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 payment of or as
security for any of the Obligations, whether or not due, in any order or manner
as Lender determines. Borrower shall also maintain in full force and effect (i)
a policy or policies of business interruption insurance in an amount not less
than the amount of coverage in effect on the date hereof, and (ii) the life
insurance policy insuring the life of Xxxxxx X. Xxxxx in an amount not less than
$4,000,000, the benefits of which policies shall be collaterally assigned to
Lender as security for the payment of the Obligations.
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6.8 Compliance With Laws. Borrower is and at all times will
continue to be in compliance with the requirements of all applicable laws,
rules, regulations and orders of any governmental authority relating to its
business (including, without limitation, laws, rules, regulations and orders
relating to taxes, payment and withholding of payroll taxes, employer and
employee contributions and similar items, securities, employee retirement and
welfare benefits, employee health and safety, or environmental matters) to the
extent that noncompliance therewith might reasonably be expected to have a
Material Adverse Effect, and is and will remain in compliance with all material
agreements or other instruments binding on Borrower or its property to the
extent that noncompliance therewith might reasonably be expected to have a
Material Adverse Effect. All of Borrower's inventory shall be produced in
accordance with the requirements of the Federal Fair Labor Standards Act of
1938, as amended and all rules, regulations and orders related thereto. Borrower
shall pay and discharge all taxes, assessments and governmental charges against
Borrower or any Collateral prior to the date on which penalties are imposed or
liens attach with respect thereto, unless the same are being actively contested
in good faith any by appropriate proceedings, no lien results therefrom that is
not a Permitted Lien, Borrower has established appropriate reserves therefor in
accordance with generally accepted accounting principles, and, at Lender's
option, Reserves are established for the amount contested and penalties which
may accrue thereon to the extent reasonably determined by Lender to be necessary
to insure that Borrower has sufficient Net Availability to pay such contested
items in the event of a resolution thereof requiring payment in whole or in part
of any such items.
6.9 Accounts. With respect to each account deemed an Eligible
Domestic Account, Eligible UK Account or Eligible Foreign Account, except as
reported in writing to Lender, Borrower has no knowledge that any of the
criteria for eligibility are not or are no longer satisfied. As to each account,
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 for the sum reported to Lender, (b)
each arises from an absolute and unconditional sale of goods, without any right
of return or consignment (except in the ordinary course of Borrower's business
as presently conducted in connection with warranty returns and stock adjustments
and price protection programs offered by Borrower to its customers), or from a
completed rendition of services, (c) each is not, at the time such account
arises, subject to any defense, offset, dispute, contra relationship,
counterclaim, or 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 the accounts, and all confirmatory assignments,
schedules, statements of account and books and records with respect thereto, are
true and correct and in all material respects what they purport to be.
6.10 Equipment. With respect to Borrower's equipment, Borrower
shall keep the equipment in good order and repair, and in running and marketable
condition, ordinary wear and tear excepted.
6.11 Reserved.
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6.12 Affiliated Transactions. Borrower will not, directly or
indirectly: (a) lend or advance money or property to, guarantee or assume
indebtedness of, or invest (by capital contribution or otherwise) in any person,
firm, corporation or other entity; or (b) declare, pay or make any dividend,
redemption or other distribution on account of any shares of any class of stock
of Borrower now or hereafter outstanding; or (c) make any payment of the
principal amount of or interest on any indebtedness owing to any officer,
director, shareholder, or Affiliate of Borrower; or (d) make any loans or
advances to any officer, director, employee, shareholder or Affiliate of
Borrower; or (e) enter into any sale, lease or other transaction with any
officer, director, employee, shareholder or Affiliate of Borrower on terms that
are less favorable to Borrower than those which might be obtained at the time
from persons who are not an officer, director, employee, shareholder or
Affiliate of Borrower. Notwithstanding the foregoing, the following transactions
shall not be prohibited: (i) the redemption of Borrower's stock to the extent
provided by the "REORGANIZATION PLAN" (as defined in the Conditions Precedent
Rider); (ii) the funding of loans by shareholders of Borrower in the amounts, at
the times and on the terms provided in the "MERGER DOCUMENTS" (as defined in the
Conditions Precedent Rider) as in effect on the date hereof and the repayment of
such loans to the extent allowed by a Subordination Agreement (as defined in the
Conditions Precedent Rider); (iii) the loans outstanding from time to time to
Xxxxxx X. Xxxxx (not to exceed $250,000 outstanding at any time) that are
evidenced by a promissory note dated March 15, 1991, in the original principal
amount of $250,000, which note and all security therefor shall be pledged by
Borrower to Lender as security for the Obligations; (iv) transactions between
Borrower and Northern Telecom Inc. in furtherance of their strategic business
relationship as described in Exhibit A to the Shareholders' Agreement forming a
part of the Merger Documents; and (v) sales of goods by Borrower to a Subsidiary
in the ordinary course of business as presently conducted. As used herein, the
term "AFFILIATE" shall mean a person or entity (i) which directly or indirectly
through one or more intermediaries controls, or as controlled by, or as under
control with, Borrower; (ii) which beneficially owns or holds 10% or more of any
class of the voting stock of Borrower; or (iii) 10% or more of the voting stock
(or in the case of a person or entity that is not a corporation, 10% or more of
the equity interest) of which is beneficially owned or held by Borrower or a
subsidiary of Borrower. For purposes hereof, "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a person or entity, whether through the ownership of
voting stock, by contract or otherwise.
6.13 Fees and Expenses. Borrower shall pay, on Lender's demand, all
costs, expenses, filing fees and taxes payable in connection with the
preparation, execution, delivery, recording, administration, collection,
liquidation, enforcement and defense of the Obligations, Lender's rights in the
Collateral, this Agreement, the other Transaction Documents, and all other
existing and future agreements or documents contemplated herein or related
hereto, including, without limitation, any amendments, waivers, supplements or
consents which may hereafter be made or entered into in respect hereof, or in
any way involving claims or defenses asserted by Lender or claims or defenses
against Lender asserted by Borrower, any guarantor or any third party directly
or indirectly arising out of or related to the relationship between Borrower and
Lender or any guarantor and Lender, including, but not limited to, the
following, whether incurred before, during or after the initial or any
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renewal Term or after the commencement of any case with respect to Borrower or
any guarantor under the United States Bankruptcy Code or any similar statute:
(a) all costs and expenses of filing or recording (including, without
limitation, Uniform Commercial Code financing statement filing taxes and fees,
documentary taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable); (b) all insurance premiums, appraisal fees, fees incurred in
connection with any environmental report, audit or survey and search fees; (c)
all fees as then in effect relating to the wire transfer of loan proceeds and
other funds and fees then in effect for returned checks and credit reports; (d)
all expenses and costs heretofore and from time to time hereafter incurred by
Lender during the course of periodic field examinations of the Collateral and
Borrower's operations, plus a per diem charge at the rate set forth in Section
10.4(f) for Lender's examiners in the field and office; and (e) the costs, fees
and disbursements of in-house and outside counsel to Lender, including, but not
limited to, such fees and disbursements incurred as a result of litigation
between the parties hereto, any third party and in any appeals arising
therefrom.
6.14 Further Assurances. At the request of Lender, at any time and
from time to time, at Borrower's sole expense, Borrower shall execute and
deliver or cause to be executed and delivered to Lender, such agreements,
documents and instruments, including, without limitation, waivers, consents and
subordination agreements from mortgagees or other holders of security interests
or liens, landlords or bailees, and do or cause to be done such further acts as
Lender, in its discretion, deems necessary or desirable to create, preserve,
perfect or validate any security interest of Lender or the priority thereof in
the Collateral and otherwise to effectuate the provisions and purposes of this
Agreement and the other Transaction Documents. Borrower hereby authorizes Lender
to file financing statements or amendments against Borrower in favor of Lender
with respect to the Collateral, without Borrower's signature and to file as
financing statements any carbon, photographic or other reproductions of this
Agreement or any financing statements signed by Borrower.
6.15 Revolving Loans. The unpaid balance of Revolving Loans
outstanding from time to time shall not at any time exceed the Net Availability
at such time unless Lender has consented in writing. If on any date the
aggregate amount of Revolving Loans shall exceed the Net Availability on such
date, such excess shall be payable by Borrower immediately without demand.
6.16 Environmental Condition. Except as otherwise disclosed in the
Certificate Regarding Environmental Matters dated the date hereof from Borrower
to Lender, none of Borrower's properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection statute as a
hazardous waste or hazardous substance disposal site, or a candidate for closure
pursuant to any environmental protection statute. No lien arising under any
environmental protection statute has attached to any revenues or to any real or
personal property owned by Borrower. Borrower has not received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal or state governmental agency any action or omission by Borrower
resulting in the releasing, or otherwise exposing of hazardous waste or
hazardous substances into the environment. Borrower has not received any notice
of noncompliance, and is in compliance in all material respects, with all
statutes, regulations, ordinances and other legal
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requirements pertaining to the production, storage, handling, treatment,
release, transportation or disposal of any hazardous waste or hazardous
substance.
6.17 Litigation. SCHEDULE B attached hereto sets forth all pending
litigation against Borrower on the date hereof any and all litigation known by
Borrower to be threatened against it.
6.18 Subsidiaries; Tax Identification Numbers. SCHEDULE C attached
hereto identifies each corporation, partnership, limited liability company,
limited liability partnership, or other entity in which Borrower owns 50% or
more of the beneficial interests, and the tax identification number for Borrower
and each of the foregoing described entities.
6.19 Intellectual Property. SCHEDULE D attached hereto sets forth
all patents, trademarks, service marks, copyrights and other similar rights
owned by Borrower or any of its subsidiaries on the date hereof.
6.20 Benefit Plans. Except as disclosed on SCHEDULE E attached
hereto, neither Borrower nor any of its subsidiaries has any employee benefit
plan, and Borrower and each subsidiary is in compliance with all laws applicable
to the administration and funding of each such plan and reporting concerning
each such plan, except to the extent that any noncompliance does not have a
Material Adverse Effect.
6.21 Inventory Reappraisals. Borrower acknowledges and agrees that
Lender may, on an annual basis when no Event of Default exists, and at any time
after the occurrence of an Event of Default, cause the inventory of Borrower,
wherever located, to be appraised, the cost of which appraisals shall be paid
for by Borrower.
6.22 Inventory Recordkeeping. Within 60 days after the date hereof,
Borrower shall enter into an agreement with MB Valuation Services, Inc. by which
MB Valuation Services, Inc. shall allow Borrower to use (and permit Lender to
have access to) its computer programs to enable Borrower to keep records with
respect to its inventory, the value thereof and categories of inventory in order
to enable Borrower to report to Lender, and Lender to determine, which inventory
is Eligible Domestic Inventory or Eligible UK Inventory, and the Value thereof.
6.23 No Finder's Fees. Except for fees that may be payable by
Borrower to Emerald Group International, L.L.C., there are no finder's, broker's
or other fees, commissions or other compensation of any nature which Borrower is
liable to pay to any person or entity in connection with this Agreement or any
of the transactions contemplated hereby (other than the fees payable pursuant to
the terms of this Agreement to Lender), and Borrower hereby agrees to indemnify
and hold harmless Lender from any liability for any such fees, commissions or
other compensation.
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SECTION 7. EVENTS OF DEFAULT AND REMEDIES
7.1 Events of Default. All Obligations shall be immediately due
and payable, without notice or demand, and any provisions of this Agreement as
to future loans and credit accommodations by Lender shall terminate
automatically, upon the termination or non-renewal of this Agreement or, at
Lender's option, upon or at any time after the occurrence or existence of any
one or more of the following "EVENTS OF DEFAULT":
(a) Borrower fails to pay when due any of the Obligations (whether
due at stated maturity, on acceleration or otherwise);
(b) Any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, any of the other Transaction Documents or
any other agreement, schedule, confirmatory assignment or otherwise, or to any
Affiliate of Lender, shall prove to have been inaccurate or misleading in any
material respect when made or deemed made;
(c) Borrower fails or neglects to perform, keep or observe (i) any
covenant contained in Sections 5.1, 5.7, 5.9, 5.10, 6.4, 6.6, 6.7, 6.12 and
6.14; or (ii) any other covenant contained in this Agreement (other than a
default in the performance or observance of which is dealt with specifically
elsewhere in this Section 7.1) and the breach of such other covenant is not
cured to Lender's satisfaction within fifteen (15) days after the sooner to
occur of Borrower's receipt of notice of such breach from Lender or the date on
which such failure or neglect first becomes known to any officer of the
Borrower, provided that such notice and opportunity to cure shall not apply in
the case of the failure to perform, keep or observe any covenant that is not
capable of being cured at all or within such fifteen (15)-day period, or which
has been the subject of a prior failure within the preceding one hundred eighty
(180) days or which is a willful and knowing breach by Borrower;
(d) Either (1) an event of default shall occur under, or (2)
Borrower shall default in the performance or observance of any material term,
condition or agreement contained in, any of the other Transaction Documents or
any other existing or future financing, security or other agreement between
Borrower and Lender or any affiliate of Lender;
(e) Any guarantor of the whole or any part of the Obligations
(including any Subsidiary) revokes, terminates or fails to perform any of the
terms of any guaranty, security agreement, endorsement or other agreement of
such party in favor of Lender or any Affiliate of Lender;
(f) Any judgment or judgments aggregating in excess of $500,000 or
any injunction or attachment is obtained against Borrower or any guarantor which
remains unsatisfied or unstayed for a period of ten (10) days or is enforced;
(g) Borrower or any guarantor is dissolved, fails to maintain its
corporate existence and good standing, or the usual business of Borrower or any
guarantor ceases or is suspended;
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(h) Borrower or any guarantor of the whole or any part of the
Obligations becomes insolvent, makes an assignment for the benefit of creditors,
makes or sends notice of a bulk transfer or calls a general meeting of its
creditors or principal creditors;
(i) Any petition or application for any relief under the
bankruptcy laws of the United States now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed by or against Borrower or any guarantor
(and, if against Borrower or any guarantor, such proceeding continues
undismissed for sixty (60) days);
(j) The indictment of Borrower or any guarantor under any criminal
statute, or commencement of criminal or civil proceedings against Borrower or
any guarantor, pursuant to which statute or proceedings the penalties or
remedies sought or available include forfeiture of any of the property of
Borrower or such guarantor;
(k) Any default or event of default occurs on the part of Borrower
under any agreement, document or instrument to which Borrower is now or
hereafter a party or by which Borrower or any of its property is now or
hereafter bound, creating or relating to any indebtedness for money borrowed by
Borrower from any person or entity other than Lender in an amount exceeding
$350,000, if (1) payment of such indebtedness is not subordinated to the payment
of the Obligations pursuant to an agreement between each holder of such
indebtedness and Lender and (2) the effect of such default is to accelerate the
maturity of all or any part of such indebtedness, or all or any part of any such
indebtedness shall be declared to be due and payable or required to be prepaid
or any other reason, in either event prior to the stated maturity thereof;
(l) Borrower shall default in the observance or performance of any
condition or covenant contained in the Reorganization Plan, such default is not
timely cured within any period of cure set forth in the Reorganization Plan and
such default has or may reasonably be expected to have a Material Adverse
Effect;
(m) Any license agreement that is material to Borrower's business,
including, but not limited to, Borrower's license with American Telegraph &
Telephone Company under Patent License Agreement made effective as of January 1,
1988, shall be terminated; or
(n) Any event occurs or any condition exists that has a Material
Adverse Effect.
7.2 Remedies. Upon the occurrence of an Event of Default and at
any time thereafter, Lender shall have all rights and remedies provided in this
Agreement, any other agreements between Borrower and Lender, the Uniform
Commercial Code or other applicable law, all of which rights and remedies may be
exercised without notice to Borrower, all such notices being hereby waived,
except such notice as is expressly provided for hereunder or is not waivable
under applicable law. All rights and remedies of Lender are cumulative and not
exclusive and are enforceable, in Lender's
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discretion, alternatively, successively, or concurrently on any one or more
occasions and in any order Lender may determine. Without limiting the foregoing,
Lender may (a) accelerate the payment of all Obligations and demand immediate
payment thereof to Lender, (b) with or without judicial process or the aid or
assistance of others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(c) require Borrower, at Borrower's expense, to assemble and make available to
Lender any part or all of the Collateral at any place and time designated by
Lender, (d) collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (e) extend the time of payment of, compromise or settle
for cash, credit, return of merchandise, and upon any terms or conditions, any
and all accounts or other Collateral which includes a monetary obligation and
discharge or release the account debtor or other obligor, without affecting any
of the Obligations, (f) sell, lease, transfer, assign, deliver or otherwise
dispose of any and all Collateral (including, without limitation, entering into
contracts with respect thereto, by public or private sales at any exchange,
broker's board, any office of Lender or elsewhere) at such prices or terms as
Lender may deem reasonable, for cash, upon credit or for future delivery, with
the Lender having the right to purchase the whole or any part of the Collateral
at any such public sale, all of the foregoing being free from any right or
equity of redemption of Borrower, which right or equity of redemption is hereby
expressly waived and released by Borrower. If any of the Collateral is sold or
leased by Lender upon credit terms or for future delivery, the Obligations shall
not be reduced as a result thereof until payment therefor is finally collected
by Lender. If notice of disposition of Collateral is required by law, seven (7)
days prior notice by Lender to Borrower designating the time and place of any
public sale or the time after which any private sale or other intended
disposition of Collateral is to be made, shall be deemed to be reasonable notice
thereof and Borrower waives any other notice. In the event Lender institutes an
action to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, Borrower waives the posting of any bond which might
otherwise be required.
7.3 Application of Proceeds. Lender may apply the cash proceeds of
Collateral actually received by Lender from any sale, lease, foreclosure or
other disposition of the Collateral to payment of any of the Obligations, in
whole or in part (including, without limitation, reasonable attorneys' fees and
legal expenses incurred by Lender with respect thereto or otherwise chargeable
to Borrower) and in such order as Lender may elect, whether or not then due.
Borrower shall remain liable to Lender for the payment of any deficiency
together with interest at the highest rate provided for herein and all costs and
expenses of collection or enforcement, including, without limitation, reasonable
attorneys' fees and legal expenses.
7.4 Lender's Cure of Third Party Agreement Default. Lender may, at
its option, cure any default by Borrower under any agreement with a third party
or pay or bond on appeal any judgment entered against Borrower, discharge taxes,
liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and pay any amount, incur any expense or
perform any act which, in Lender's sole judgment, is necessary or appropriate to
preserve, protect, insure, maintain, or realize upon the Collateral. Lender may
charge Borrower's loan account for any
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amounts so expended, such amounts to be repayable by Borrower on demand. Lender
shall be under no obligation to effect such cure, payment, bonding or discharge,
and shall not, by doing so, be deemed to have assumed any obligation or
liability of Borrower.
SECTION 8. JURY TRIAL WAIVER; CERTAIN OTHER WAIVERS AND CONSENTS
8.1 JURY TRIAL WAIVER. BORROWER AND LENDER EACH WAIVE ALL RIGHTS
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER OF THEM
AGAINST THE OTHER WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE
OBLIGATIONS, THE COLLATERAL, ANY ALLEGED TORTUOUS CONDUCT BY BORROWER OR LENDER,
OR, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE
RELATIONSHIP BETWEEN BORROWER AND LENDER. IN NO EVENT WILL LENDER BE LIABLE FOR
LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
8.2 Counterclaims. Borrower waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any kind, nature or description
in any action or proceeding instituted by Lender with respect to this Agreement,
the Obligations, the Collateral or any matter arising therefrom or relating
thereto, except compulsory counterclaims.
8.3 Jurisdiction. Borrower hereby irrevocably submits and consents
to the nonexclusive jurisdiction of the State and Federal Courts located in the
State in which the office of Lender designated in Section 10.6(a) is located and
any other State where any Collateral is located with respect to any action or
proceeding arising out of this Agreement, the Obligations, the Collateral or any
matter arising therefrom or relating thereto. In any such action or proceeding,
Borrower waives personal service of the summons and complaint or other process
and papers therein and agrees that the service thereof may be made by mail
directed to Borrower at its chief executive office set forth herein or other
address thereof of which Lender has received notice as provided herein, service
to be deemed complete five (5) days after mailing, or as permitted under the
rules of either of said Courts. Any such action or proceeding commenced by
Borrower against Lender will be litigated only in a Federal Court located in the
district, or a State Court in the State and County, in which the office of
Lender designated in Section 10.6(a) is located and Borrower waives any
objection based on FORUM NON CONVENIENS and any objection to venue in connection
therewith.
8.4 No Waiver by Lender. Lender shall not, by any act, delay,
omission or otherwise be deemed to have expressly or impliedly waived any of its
rights or remedies unless such waiver shall be in writing and signed by an
authorized officer of Lender. A waiver by Lender of any right or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right or
remedy which Lender would otherwise have on any future occasion, whether similar
in kind or otherwise.
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SECTION 9. TERM OF AGREEMENT; MISCELLANEOUS
9.1 Term. This Agreement shall only become effective upon
execution and delivery by Borrower and Lender in Atlanta, Georgia, and shall
continue in full force and effect for a term of three (3) years from the Closing
Date hereof and shall be deemed automatically renewed for successive terms of
three (3) years thereafter unless terminated as of the end of the initial or any
renewal term (each a "TERM") by either party giving the other written notice at
least sixty (60) days' prior to the end of the then-current Term.
9.2 Early Termination. Borrower may terminate this Agreement by
giving Lender at least thirty (30) days prior written notice at any time upon
payment in full of all of the Obligations as provided herein, including, without
limitation, the early termination fee provided below. Lender shall have the
right to terminate this Agreement (i) at any time upon or after the occurrence
of an Event of Default or (ii) upon ninety (90) days' prior written notice to
Borrower if (A) there shall occur any change in the controlling ownership of
Borrower (other than a change of ownership contemplated by the Merger Documents)
or any person now or hereafter occupying the position of Borrower's chief
executive officer, chief financial officer or chief operating officer shall
cease for any reason to occupy such position, and (B) Northern Telecom Inc. does
not own at the time in question at least 20.2% of the outstanding equity
securities in Borrower. If Lender or Borrower shall terminate this Agreement
effective as of any date other than the last day of the then current Term,
Borrower shall pay to Lender (in addition to all other Obligations) upon the
effective date of such termination, in view of the impracticality and extreme
difficulty of ascertaining actual damages and by mutual agreement of the parties
as to a reasonable calculation of Lender's lost profits, an early termination
fee calculated as follows:
IF TERMINATION OCCURS THE TERMINATION FEE SHALL BE:
AT ANY TIME:
(a) before the last (a) 3% of the greater of the Base
day of the first Loan Amount in the month during
Loan Year which notice of termination
is given or the Average Daily
Loan Balance for the period
(not to exceed 180 days)
immediately preceding the
effective date of termination
(b) after the first (b) 2% of the greater of the Base
Loan Year but Loan Amount in the month during
before the last which notice of termination is
day of the second is given or the Average Daily
Loan Year Loan Balance for the 180-day
period
(c) after the seond (c) 1% of the greater of the Base
Loan Year Loan Amount in the month during
which notice of termination is
is given or the Average Daily
Loan Balance for the 180-day
period prior to the effective
date of termination
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If the effective date of termination pursuant to a properly given notice occurs
on the last day of any Term, then no termination charge shall be payable. As
used herein, the term "LOAN YEAR" shall mean a period commencing on the Closing
Date or an anniversary thereof and ending on the next anniversary; and the term
"AVERAGE DAILY LOAN BALANCE" shall mean, for any period, an amount equal to the
aggregate principal balance of Revolving Loans, Term Loans and Accommodations
outstanding at the end of each day during such period divided by the number of
days in such period.
9.3 Additional Costs Collateral. Upon termination of this
Agreement by Borrower, as permitted herein, in addition to payment of all
Obligations which are not contingent, Borrower shall deposit such amount of cash
collateral as Lender determines is necessary to secure Lender from loss, cost,
damage or expense, including, without limitation, reasonable attorneys' fees, in
connection with any open Accommodations or remittance items or other payments
provisionally credited to the Obligations and/or to which Lender has not yet
received final and indefeasible payment.
9.4 Notices. Except as otherwise provided, all notices, requests
and demands hereunder shall be (a) made to Lender at its address set forth in
Section 10.6(a) and to Borrower at its chief executive office set forth in
Section 10.6(b), or to such other address as either party may designate by
written notice to the other in accordance with this provision, and (b) deemed to
have been given or made: if by hand, immediately upon delivery; if by telex,
telegram or telecopy (fax), immediately upon receipt; if by overnight delivery
service, one day after dispatch; and if by first class or certified mail, three
(3) days after mailing.
9.5 Severability. If any provision of this Agreement is held to be
invalid or unenforceable, such provision shall not affect this Agreement as a
whole, but this Agreement shall be construed as though it did not contain the
particular provision held to be invalid or unenforceable.
9.6 Entire Agreement; Amendments; Assignments. This Agreement, the
Term Notes referred to in Section 2.2 and the Conditions Precedent Rider contain
the entire agreement of the parties as to the subject matter hereof, all prior
commitments, proposals and negotiations concerning the subject matter hereof
being merged herein and superseded hereby. Neither this Agreement nor any
provision hereof shall be amended, modified or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender. This Agreement shall be binding upon and inure to the benefit of each of
the parties hereto and their respective successors and assigns, except that any
obligation of Lender under this Agreement shall not be assignable nor inure to
the successors and assigns of Borrower.
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9.7 Discharge of Borrower. No termination of this Agreement shall
relieve or discharge Borrower of its Obligations, grants of Collateral, duties
and covenants hereunder or otherwise until such time as all Obligations to
Lender have been indefeasibly paid and satisfied in full, including, without
limitation, the continuation and survival in full force and effect of all
security interests and liens of Lender in and upon all then existing and
thereafter-arising or acquired Collateral and all warranties and waivers of
Borrower.
9.8 Usage. All terms used herein which are defined in the Uniform
Commercial Code shall have the meanings given therein unless otherwise defined
in this Agreement and all references to the singular or plural herein shall also
mean the plural or singular, respectively.
9.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Georgia.
9.10 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts taken together shall constitute but
one and the same instrument. In proving this Agreement in any judicial
proceeding, it shall not be necessary to produce or account for more than one
such counterpart signed by the party against whom such enforcement is sought.
9.11 Confidentiality. Lender agrees to exercise reasonable efforts
(and, in any event, with at least the same degree of care as it ordinarily
exercises with respect to Proprietary Information (as hereinafter defined) of
its other customers) to keep any Proprietary Information delivered or made
available by Borrower to it, including information obtained by Lender in
connection with a visit or investigation authorized by this Agreement,
confidential from any person or entity other than individuals employed or
retained by Lender who are or are expected to become engaged in evaluating,
approving, structuring, administering or otherwise giving professional advice
with respect to any of the Transaction Documents, Obligations or Collateral, and
other than its legal counsel; provided, however, that nothing herein shall
prevent Lender from disclosing such Proprietary Information (i) to any party to
this Agreement from time to time or to any participant, (ii) pursuant to an
order of any court or administrative agency, (iii) upon the request or demand of
any regulatory agency or authority having jurisdiction over Lender, (iv) which
has been publicly disclosed other than by an act or omission of Lender that is
not permitted herein, (v) to the extent required in connection with any
litigation with respect to any of the other Transaction Documents or any of the
transactions contemplated thereby, or (vi) to the extent required in connection
with the exercise of any remedies hereunder. As used herein, the term
"PROPRIETARY INFORMATION" shall mean any information that is received by Lender
from Borrower and designated by Borrower in writing to be proprietary in nature
and that consists of confidential information relating to Borrower's trade
secrets, patents, processes or business strategies.
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SECTION 10. ADDITIONAL DEFINITIONS AND TERMS
10.1 Maximum Credit; Availability Calculations
(a) Maximum Credit: $70,000,000.
(b) Gross Availability Formulas:
(i) Eligible Domestic Accounts Percentage:
85% for so long as Dilution (as hereinafter defined)
does not exceed 3%; but if on any date Dilution,
calculated on a rolling 90-day average, exceeds 3%,
then the foregoing 85% advance percentage with
respect to Eligible Domestic Accounts shall be
reduced by one percentage point, or fraction thereof,
for each percentage point, or fraction thereof,
increase in Dilution above 3%. As used herein,
"DILUTION" shall mean on any date an amount derived
by dividing the gross invoice amount of all accounts
outstanding on such date into the aggregate of all
credits (including accrued credits for price
protection and coop advertising), returns,
allowances, discounts, write-offs, and offsets with
respect to such accounts.
(ii) Eligible UK Accounts Percentage:
85% for so long as Dilution does not exceed 3%; but
if on any date Dilution, calculated on a rolling
90-day average, exceeds 3%, then the foregoing 85%
advance percentage with respect to Eligible UK
Accounts shall be reduced by one percentage point, or
fraction thereof, for each percentage point, or
fraction thereof, increase in Dilution above 3%.
(iii) Eligible Foreign Accounts Percentage:
85% for so long as Dilution does not exceed 3%; but
if on any date Dilution, calculated on a rolling
90-day average, exceeds 3%, then the foregoing 85%
advance percentage with respect to Eligible Foreign
Accounts shall be reduced by one percentage point, or
fraction thereof, for each percentage point, or
fraction thereof, increase in Dilution above 3%.
(iv) Eligible Domestic Inventory Percentage: 80%
(v) Eligible UK Inventory Percentage: 80%
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(c) Inventory Sublimit:
On any date, the lesser of $25,000,000 or 150% of the Accounts
Margin Amount on such date. As used herein, the term "ACCOUNTS
MARGIN AMOUNT" shall mean, on any date of determination
thereof, an amount derived by application of the Eligible
Domestic Accounts Percentage set forth in Section 10.1(b)(i)
to the net amount of Eligible Domestic Accounts outstanding on
such date.
(d) Maximum days after Invoice
Date for Eligible Domestic,
Eligible Foreign and Eligible
UK Accounts: 90 Days
10.2 Term Loans:
(a) Term Loan A
Amount: $2,608,000
Final Maturity Date: the earlier of (i) January 2, 2002,
or (ii) the date of termination
under Section 9.2
(b) Term Loan B
Amount: $7,500,000
Final Maturity Date: the earlier of (i) January 2, 2002,
or (ii) the date of termination
under Section 9.2
10.3 Accommodations:
(a) Lender's Charge for Accommodations:
1-7/8% per annum of the face amount of outstanding letter of
credit plus any costs or fees incurred by Lender to the issuer
of such letter of credit.
(b) Sublimit for Accommodations: $3,000,000
10.4 Interest, Fees and Charges:
(a) Interest Rate:
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A fluctuating rate per annum equal to the Prime Rate plus the
Applicable Interest Margin. The "APPLICABLE INTEREST MARGIN"
shall be 1-5/8%; provided, however, that (1) if Borrower shall
have Net Income for its fiscal year ending September 30, 1996,
of less than $2,500,000, or Net Income for its fiscal year
ending September 30, 1997, of less than $5,000,000, or a
Tangible Net Worth at the end of any fiscal year of Borrower
that is less than the Base Tangible Net Worth, then the
Applicable Interest Margin shall be 2-1/8%; and (2) if
Borrower shall conduct an initial public offering of its
capital stock from which Borrower shall receive net proceeds
of not less than $15,000,000 and at the time of Borrower's
receipt of such proceeds there does not exist any Default or
Event of Default, then the Applicable Interest Margin shall be
1-3/8%. As used herein, the term "NET INCOME" shall mean, for
any period, the net income of Borrower for the period in
question after giving effect to deduction of or provision for
all operating expenses, all taxes and reserves (including
reserves for deferred taxes) and all other proper deductions,
all determined in accordance with generally accepted
accounting principles consistently applied, provided that
there shall be excluded: (i) any restoration of any
contingency reserve, except to the extent that provision for
such reserve was made out of income during such period, (ii)
any net gain or losses on the sale or other disposition, not
in the ordinary course of business, of capital assets,
provided that there shall also be excluded any related charges
for taxes thereon, (iii) any net gain arising from the
collection of the proceeds of any insurance policy, (iv) any
write-up of any asset, and (v) any other extraordinary items.
"TANGIBLE NET WORTH" shall mean, on any date of determination
thereof, the book net worth of Borrower on such date plus the
total amount of indebtedness of Borrower on such date that is
subordinated in right of payment to the payment of all or any
part of the Obligations, minus prepaid expenses and other
assets, all determined in accordance with generally accepted
accounting principles consistently applied; the term "BASE
TANGIBLE NET WORTH" shall mean the Tangible Net Worth of
Borrower as of the Closing Date, after (i) giving effect to
the transactions contemplated by the Merger Documents,
including the addition to Borrower's equity capital of the
$35,000,000 investment to be made in Borrower pursuant to the
Merger Documents, (ii) deducting all adjustments necessary to
pay all claims under the Reorganization Plan and to redeem all
shares of capital stock of Borrower held on the Closing Date
by non-employee shareholders (other than former employees and
other than the interest of former employees in Borrower's
pension, profit sharing and stock plan), and (iii) subtracting
$2,000,000.
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(b) Annual Commitment Fee:
$325,000 each year, earned and payable on each anniversary
date after the Closing Date.
(c) Closing Fee: $325,000
(d) Account Servicing Fee: Not Applicable
(e) Unused Line Fee: Not Applicable
(f) Field Examination per diem: $650
10.5 Reserved.
10.6 (a) Lender's Address:
The CIT Group/Credit Finance, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Lender's Bank:
Chemical Bank, N.A.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
(b) Borrower's Chief Executive Office:
0000 Xxxxxxxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Telecopy: (000) 000-0000
(c) Leased Locations:
Borrower leases the following locations and Collateral may be
found at each of these locations:
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Location Landlord
----------------------------------------------------------
5835 Peachtree Corners East Xxxxxxxx Xxxx Company
Xxxxxxxx Xxxxxxx 00000 0000 Xxxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
5923 Peachtree Industrial Xxxxxxxx Xxxx Company
Boulevard 0000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxxx 00000 Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
5804 Peachtree Corners East Xxxxxxxx Xxxx Company
Xxxxxxxx, Xxxxxxx 00000 0000 Xxxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
5953 Peachtree Industrial Xxxxxxxx Xxxx Company
Boulevard 0000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxxx 00000 Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
5854 Peachtree Corners East Xxxxxxx Xxxx Company
Xxxxxxxx, Xxxxxxx 00000 0000 Xxxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
One Xxxxxxxxx Corporate Interoffice/Chicago-Itasca
Center Xxx Xxxxxx Xxxxx
Xxxxx 000 Xxxxx 000-X
Xxxxxxxxxxx, Xxxxxxxx 00000 Xxxxxx, Xxxxxxxx 00000
00000 Xxxxx Xxxxx Xxxxx REMC Enterprises, Inc.
Xxxxx 000 Xxxx: Xxx XxXxxxx
Xxxxxx Xxxxx, XX 00000 Lakehills Executive Suites
00000 Xxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxx Xxxxx, XX 00000
000 Xxxxxx Xxxxx Xxxxxx Xxxxxxxxxxx (Xxxxxx
Xxxxxxxx Xxxx, XX 00000 States), Inc.
c/o Citibank, N.A.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
0000 Xxxxxxxx Xxxx X.X. Xxxxxxx Construction
Xxxxxxxx Xxxx, XX 00000 0000 Xxxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000
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(d) Other Locations of Collateral:
Collateral of Borrower may be stored or located at one or more
of the following other locations:
(1) Facilities maintained by Borrower's Subsidiaries:
Xxxxx Government Services, Inc.
0000 Xxxxxxxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Enterprise Technologies, Inc.
0000 Xxxxxxxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Xxxxx Microcomputer Products (Australia) PTY Limited
Xxxxx 00
000 Xxxxxx Xxxxxx
Xxxxx Xxxxxx XXX 0000
Xxxxxxxxx
39/F., Unit B
Xxxxxxxx Xxxxx
000 Xxxxxxxx Xxxx
Xxxxx Xxxxx
Xxxx Xxxx
Unit 10
8th Floor
Xxxxxxxx Xxxxx
000 Xxxx'x Xxxx
Xxxx Xxxx
Xxxxx Microcomputer Products (Canada), Ltd.
000 Xxxxxxx Xxx Xxxxx
Xxxx X
Xxxxxxxxx, Xxxxxxx X0X 0X0
Xxxxxx
Tour Neptune Xxxxx 00
00000 Xxxxx La Defense
France
Xxxxx Microcomputer Products (Scandinavia) ApS
Regus Copenhagen APS
Regus House
Xxxxxxxxxxxxxxxxx 0
0000 Xxxxxxxxxx K
Denmark
Xxxxx Microcomputer Products de Mexico S.A. de C.V.
Xx. Xxxxxxxxxxx Xxx #000-X
Xxxxx 000
Xxx. Xxxx
Xxxxxx D.F. 00000
Xxxxxx
-33-
34
Practical Peripherals (Europe) Limited
Millennium House
Fleetwood Park
Barley Way
Fleet, Hants GU13 8UT
England
AEI Dateline Logistics, Limited
Xxxx 0, Xxxxxxxxx Xxxx
Xxxxxxxxx XX 00 0XX
Xxxxxxx
Xxxxx Microcomputer Products (International) Limited
Suite 208
Citibank Building
Charlotte Amalie
St. Xxxxxx, U.S.V.I.
(2) Manufacturing facilities maintained by subcontractors
to Borrower:
Comptronix Corporation
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
and
0000 Xxxxxxx 00 Xxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Kaifa Technology (H.K.) Limited
2201 H.K. Worsted Xxxxx Ind. Xxxx.
00-00 Xx Xxxx Xxxx Xx.
Xxxx Xxxxx, Xxx Xxxxxxxxxxx
Xxxx Xxxx
P.T. Singatronics Batam
Kawasn Industri Batamindo
Blok 10 Lantai 0
Xxxxx X. Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxx, 00000
Xxxxxxxxx
Xxxx'x Electronics Co., Limited
000 Xxx Xxx Xxxxxx
Xxxx'x Ind. Centre
Xxxx Xxxx
Hong Kong
-34-
35
China National Postal and Telecommunications
Appliances Corporation (Service Center)
40 Xxx Xxxx Xxxx
Xxxxxxx, Xxxxx 000000
AEI Dateline Logistics, Limited (Warehouse)
Xxxx 0, Xxxxxxxxx Xxxx
Xxxxxxxxx, XX00 0XX
Xxxxxxx
(e) Borrower's Trade Names for
Invoicing:
Practical Peripherals, Inc.
10.7 Conditions Precedent
Borrower acknowledges and agrees that the terms of the Conditions
Precedent Rider are incorporated herein and made a part hereof. Without limiting
the foregoing, capitalized terms used herein that are not defined in this
Agreement shall have the meaning ascribed to them in the Conditions Precedent
Rider.
IN WITNESS WHEREOF, Borrower and Lender have duly executed this
Agreement in Atlanta, Georgia, on the day and year first written above.
LENDER: BORROWER:
THE CIT GROUP/CREDIT XXXXX MICROCOMPUTER PRODUCTS,
FINANCE, INC. INC.
By: /s/ Friedberg By: /s/ Xxxxxx X. Xxxxx
------------------------- ------------------------------
Title: Executive VP Title:
Attest: /s/
---------------------------
Secretary
[CORPORATE SEAL]
-35-
