Exhibit 10.6
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SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Between
RFC CAPITAL CORPORATION,
As Lender
and
CIERA NETWORK SYSTEMS, INC.
As Borrower
and
CCC GLOBALCOM CORPORATION
As Guarantor
Dated as of December 31, 2002
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TABLE OF CONTENTS
RECITALS...........................................................1
DEFINTIONS.........................................................2
ARTICLE I - LOANS; RENEWAL AND TERMINATION........................16
1.1 - Revolving Credit Facility................................16
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SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Dated as of December 31, 2002
This Second Amended and Restated Loan and Security Agreement (this
"Agreement") is made and entered into as of this 31st day of December, 2002, by
and among Ciera Network Systems, Inc., a Texas corporation located at ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ (as such, together with its
successors and permitted assigns, "Borrower"), CCC GLOBALCOM CORPORATION, a
Nevada corporation located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ (as such, together with its successor and permitted assigns,
"Guarantor"), and RFC CAPITAL CORPORATION, a Delaware corporation, located at
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ (as such, together
with its successors and assigns, "Lender").
RECITALS
The indebtedness and obligations evidenced by this Agreement and all
instruments, agreements, and documents executed in connection herewith
constitute an amendment, renewal, and restatement of all indebtedness and
obligations of the Borrower evidenced by a certain Amended and Restated Loan and
Security Agreement dated as of September 7, 2001, between the Borrower,
Guarantor and Lender, as amended by that certain First Amendment to Amended and
Restated Loan and Security Agreement and Acknowledgement of Consent to Asset
Purchase dated November 30, 2001, and as further amended from time to time (the
"Existing Loan Agreement"), and by promissory notes, security agreements,
collateral assignments, uniform commercial code financing statements or
equivalent perfection documents, and any other document, agreement, waiver or
other instrument executed in connection therewith or prior thereto (collectively
with the Existing Loan Agreement, the "Existing Loan Documents").
Various Events of Default (as defined in the Existing Loan Agreement)
have occurred and are continuing under the Existing Loan Agreement, and have not
been cured or waived as of the date hereof. As a result, Lender is entitled to
terminate the Existing Loan Documents and accelerate the indebtedness due
thereunder. The Borrower has requested that Lender restructure, amend, renew and
restate the loans and financial accommodations outstanding under the Existing
Loan Documents in accordance with the terms and conditions hereof, to provide
working capital to be used in the Borrower's business, and to waive all Events
of Default in existence as of the date hereof. Lender is willing to do so, upon
the terms and conditions contained herein.
Borrower and Guarantor acknowledge that each derives material benefit
and valuable consideration from loans and financial accommodations provided by
Lender hereunder.
As security for the performance of Borrower's and Guarantor's
obligations hereunder, and under the documents and instruments executed in
connection herewith, Borrower shall grant to Lender a security interest in
substantially all of Borrower's assets, and Guarantor shall grant to Lender a
security interest in the capital stock of Borrower, all as more fully described
herein.
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The Existing Loan Documents shall remain in full force and effect,
except to extent modified by this Agreement, as if the indebtedness and
obligations secured and perfected with respect to the Existing Loan Documents
had been payable originally as provided by this Agreement and by the
instruments, agreements and documents executed in connection herewith. The terms
and conditions of this Agreement and Lender's rights and remedies hereunder,
shall apply to all of the obligations incurred under the Existing Loan Agreement
and the Existing Loan Documents. It is expressly understood and agreed by the
parties hereto that this Agreement is in no way intended to constitute a
novation of the obligations and liabilities existing under the Existing Loan
Documents or evidence payment of all or any of such obligations and liabilities.
The Borrower reaffirms the security interests and liens granted to Lender
pursuant to each of the Existing Loan Documents, which security interests and
liens shall continue in full force and effect during the terms of this Agreement
and any renewals thereof and shall continue to secure the obligations identified
in the Existing Loan Documents. All references to the Existing Loan Agreement in
the Existing Loan Documents shall be deemed to refer to this Agreement. If any
inconsistency exists between this Agreement and the Existing Loan Agreement, the
terms of this Agreement shall prevail.
NOW, THEREFORE, in order to secure performance of Borrower's and
Guarantor's obligations hereunder, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
DEFINTIONS
As used in this Agreement:
"Account" or "Accounts" means each account as such term is defined in
the Uniform Commercial Code.
"Account Debtor" means a Person who is obligated on a Receivable.
"Affiliate" means, with respect to a Person, (a) any partner, officer,
shareholder or member (if holding more than 10% of the outstanding interest in
such Person), director or managing agent of such Person, and (b) any other
Person (other than a Subsidiary) that, (i) directly or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, such given Person, (ii) directly or indirectly beneficially owns or holds
10% or more of any class of voting stock or partnership or other voting interest
of such Person or any Subsidiary of such Person, or (iii) 10% or more of the
voting stock or partnership or other voting interest of which is directly or
indirectly beneficially owned or held by such Person or a Subsidiary of such
Person. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities or partnership or other
voting interest, by contract or otherwise.
"Agreement" means this Second Amended and Restated Loan and Security
Agreement, as the same may be amended, supplemented, extended or restated from
time to time.
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"Agreement Date" means the date as of which this Agreement is dated.
"Applicable Law" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of governmental bodies and orders and
decrees of courts and arbitrators.
"Asset Disposition" means the disposition of any asset of Borrower or
any of its Subsidiaries, other than sales of Inventory in the ordinary course of
business.
"Blocked Account" means a special account established by Borrower at a
bank selected by Borrower, but acceptable to Lender in its discretion, in which
Lender shall have been granted a first priority lien and security interest which
lien shall be perfected pursuant to the Deposit Account Control Agreement.
"Board" means the duly elected and serving members of the Board of
Directors of Borrower.
"Borrower" is defined in the preamble to this Agreement.
"Borrowing" means a borrowing of Revolving Loan Advances.
"Borrowing Base" means, with respect to Borrower, an amount in dollars
equal to the sum, without duplication, of the following:
(i) ninety percent (90%) of the Eligible Billed Receivables;
(ii) plus seventy percent (70%) of Eligible Unbilled
Receivables;
(iii) minus the applicable Reserves.
"Borrowing Base Certificate" means the Borrowing Base Certificate
referred to in Section 1.2, substantially in the form attached hereto as Exhibit
A.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks in Columbus, Ohio are authorized or required to close.
"Capital Expenditures" means, with respect to any Person, all
expenditures made and liabilities incurred which are not, in accordance with
GAAP, treated as expense items for such Person in the year made or incurred or
as a prepaid expense applicable to a future year or years.
"Capitalized Lease Obligation" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Change of Control" means the occurrence of any of the following
events: (i) the sale or transfer of all or substantially all of the assets of
Borrower as an entirety to any person or related group of persons other than an
Affiliate or Affiliates of Borrower; (ii) Guarantor fails at any time to have
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the right, directly or through one or more of its Affiliates, to elect a
majority of the members of the Board of Borrower; or (iii) Borrower is
liquidated, dissolved, or adopts a plan of liquidation pursuant to the
Bankruptcy Code or any other bankruptcy law.
"Closing Date" shall mean the latter of the Agreement Date or the date
upon which the Agreement has been fully executed and all conditions to the
making of an initial Revolving Loan Advance under this Agreement have been
satisfied or waived in writing by Lender.
"Collateral" means all of Borrower's assets, including all of the
following property and interests in property of Borrower, wherever located and
whether now or hereafter existing or now owned or hereafter acquired or arising:
(i) all Receivables,
(ii) all Inventory,
(iii) all Equipment,
(iv) all Contract Rights,
(v) all General Intangibles,
(vi) all Investment Property,
(vii) each Deposit Account and all certificates of deposit
maintained with a bank, savings and loan association, credit union
or like organization, other than an account evidenced by a
certificate of deposit that is an instrument under the UCC,
(viii) all goods and other property, whether or not delivered, (a)
the sale or lease of which gives or purports to give rise to any
Receivable, including, but not limited to, all merchandise
returned or rejected by or repossessed from customers, or (b)
securing any Receivable, including, without limitation, all rights
as an unpaid vendor or lienor (including, without limitation,
stoppage in transit, replevin and reclamation) with respect to
such goods and other property,
(ix) all mortgages, deeds to secure debt and deeds of trust on
real or personal property, guaranties, leases, security
agreements, and other agreements and property which secure or
relate to any Receivable or other Collateral, or are acquired for
the purpose of securing and enforcing any item thereof,
(x) all documents of title, policies and certificates of
insurance, securities, chattel paper and other documents and
instruments,
(xi) all other goods and personal property, whether tangible or
intangible, wherever located, including money, letters of credit,
supporting obligations, and each Letter-of-credit right,
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(xii) all files, correspondence, computer programs, tapes, discs
and related data processing software which contain information
identifying or pertaining to any of the Receivables, or any
Account Debtor, or showing the amounts thereof or payments thereon
or otherwise necessary or helpful in the realization thereon or
the collection thereof, and
(xiii) any and all products and proceeds of the foregoing
(including, but not limited to, any claim to any item referred to
in this definition, and any claim against any third party for loss
of, damage to or destruction of any or all of, the Collateral or
for proceeds payable under, or unearned premiums with respect to,
policies of insurance) in whatever form, including, but not
limited to, cash, negotiable instruments and other instruments for
the payment of money, chattel paper, security agreements and other
documents.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste.
"Contract Rights" means any rights under contracts not yet earned by
performance and not evidenced by an instrument or chattel paper.
"Copyrights" means and includes, in each case whether now existing or
hereafter arising, all of Borrower's right, title and interest in and to (i) all
copyrights, rights and interests in copyrights, works protectable by copyright,
copyright registrations and copyright applications; (ii) all renewals of any of
the foregoing; (iii) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing, including, without
limitation, damages or payments for past or future infringements of any of the
foregoing; (iv) the right to ▇▇▇ for past, present and future infringements of
any of the foregoing; and (v) all rights corresponding to any of the foregoing
throughout the world.
"Covenant Compliance Certificate" means the Covenant Compliance
Certificate referred to in Section 6.1.
"Credit Support Document" means each guaranty, letter of credit or
other undertaking of any Guarantor or other party given for the benefit of
Lender relating to the Obligations, including each stock pledge agreement by a
Guarantor or any other party.
"Default" shall mean an event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, become an Event
of Default.
"Deposit Account" has the meaning given to it in the UCC.
"Deposit Account Control Agreement" means the Deposit Account Control
Agreement, dated the Closing Date, among Borrower, Lender and the bank named
therein, pursuant to which Lender shall have been granted a first priority lien
and security interest in the deposit account more particularly described
therein.
"Dollar" and "$" means freely transferable United States dollars.
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"EBITDA" means, for any period, (a) Net Income plus, (without
duplication) to the extent deducted in the determination of Net Income for such
period, (b) Interest Expense, (c) taxes imposed on or measured by income or
excess profits (for such period and without regard to any prior periods), and
(d) the amount of all depreciation and amortization allowances and other
non-cash expenses of Borrower, minus (e) to the extent added in the
determination of Net Income for such period, non-cash income of Borrower.
"Eligible Billed Receivable" means a Receivable that consists of the
unpaid portion of the obligation stated on the invoice issued to an Account
Debtor with respect to Inventory sold and shipped to or services performed for
such Account Debtor in the ordinary course of business, net of any commissions
payable by the Borrower to third parties, which meets all of the following
requirements unless otherwise agreed to in writing by Lender:
(a) such Receivable is owned by the Borrower and represents a
complete bona fide transaction which requires no further act under any
circumstances on the part of the Borrower to make such Receivable
payable by the Account Debtor;
(b) such Receivable does not require payment more than thirty (30)
days from its invoice date;
(c) such Receivable is paid in full within ninety (90) days from
its due date;
(d) such Receivable does not relate to any Account Debtor, or
affiliated group of Account Debtors, for which fifty percent (50%) or
more of the dollar amount of such Receivables remains unpaid for more
than sixty (60) days from the date of its invoice;
(e) such Receivable is not owed by an Account Debtor, or
affiliated group of Account Debtors, which is obligated to Borrower
respecting Receivables, the aggregate unpaid balance of which exceeds,
at all times five percent (5%) of the aggregate unpaid balance of all
otherwise Eligible Receivables owed to Borrower at such time by all of
Borrower's Account Debtors, but only to the extent of such excess;
(f) such Receivable is not owed by an Account Debtor to which
Borrower is indebted in any way, or which is subject to any right of
setoff or recoupment by the Account Debtor, except for warranty and
service claims in the ordinary course of business;
(g) such Receivable does not relate to any Account Debtor who has
given Borrower written notice of any defense or counterclaim against
Borrower thereon;
(h) such Receivable does not related to any Account Debtor located
outside of the United States of America, unless such Receivable is
supported by security acceptable to Lender;
(i) the Account Debtor for such Receivable is not an Interested
Party or Borrower Affiliate;
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(j) the Account Debtor for such Receivable is not the government
of the United States of America, any state, or any political
subdivision of either of the foregoing, unless Borrower assigns its
right to payment of such Receivable to Lender in compliance with the
provisions of the Assignment of Claims Act of 1940 or any other
applicable laws
(k) the financial condition of the Account Debtor for such
Receivable is satisfactory to Lender;
(l) the Account Debtor for such Receivable is not the subject of
bankruptcy, insolvency, receivership or other similar proceedings; and
(m) Lender believes, in good faith, that such Receivable is, or
will not be, impaired as the result of any Lien, claim or other risk,
in the exercise of its reasonable business judgment.
For purposes of this definition, and except as specifically set
forth herein with respect to Eligible Unbilled Receivables, any
Receivable that at any time is or becomes an Eligible Billed
Receivable, but which subsequently fails to meet any of the
requirements of this definition, shall cease to be an Eligible Billed
Receivable (but shall continue to be part of the Collateral) for so
long as the same fails to meets such requirements.
"Eligible Receivables" means, collectively, Eligible Billed Receivables
and Eligible Unbilled Receivables.
"Eligible Unbilled Receivable" means a Receivable that meets all
criteria of an Eligible Billed Receivable except that the Borrowers have not yet
rendered an invoice to the Account Debtor for such obligations, but which must
be evidenced by an electronic Call Detail Record.
"Environmental Laws" means all federal, state, local and foreign laws
now or hereafter in effect relating to pollution or protection of the
environment, including laws relating to emissions, discharges, Releases or
threatened Releases of pollutants, Contaminants, chemicals, or industrial, toxic
or hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, removal, transport, or handling of pollutants, Contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes, and all
regulations, notices or demand letters issued, entered, promulgated or approved
thereunder.
"Equipment" means and includes, all machinery, apparatus, equipment,
motor vehicles, tractors, trailers, rolling stock, fittings, fixtures and other
tangible personal property (other than Inventory) of every kind and description
used in Borrower's business operations or owned by Borrower or in which Borrower
has an interest, and all parts, accessories and special tools and all increases
and accessions thereto and substitutions and replacements therefor.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
in effect from time to time.
"Event of Default" means any of the events specified in Section 9.1
provided that any requirement for notice or lapse of time or any other condition
has been satisfied.
"Excess Cash Flow" means an amount, determined as of the end of each
fiscal quarter for the quarter then ended, equal to one-half (1/2) of the
difference of (i) Borrower's EBITDA for the quarter then ended minus (ii) the
aggregate sum, if any, of regular payments of principal on the Term Loans made
by Borrower to Lender during such quarter minus (iii) the total capital
expenditures (as allowed under this Agreement) paid in cash by Borrower during
such quarter.
"Existing Loan Agreement" is defined in the recitals to this Agreement.
"Existing Loan Documents" is defined in the recitals to this Agreement.
"Financing Statements" means any and all Uniform Commercial Code
financing statements, in form and substance satisfactory to Lender, naming
Lender as secured party, and Borrower as debtor, whether executed and delivered
by Borrower or Lender or otherwise authorized by Borrower.
"Fiscal Year" means the fiscal year of Borrower which ends on December
31 of each year.
"GAAP" means generally accepted accounting principles consistently
applied and maintained throughout the period indicated and, when used with
reference to Borrower or any Subsidiary of Borrower, consistent with the prior
financial practices of Borrower.
"General Intangibles" means all of Borrower's now owned or hereafter
acquired general intangibles, choses in action and causes of action and all
other intangible personal property of Borrower of every kind and nature (other
than Accounts), including, without limitation, all Proprietary Rights, payment
intangibles, corporate or other business records, inventions, designs,
blueprints, plans, specifications, goodwill, computer software, customer lists,
registrations, licenses, franchises, tax refund claims, reversions or any rights
thereto and any other amounts payable to Borrower from any Plan or other
employee benefit plan, rights and claims against carriers and shippers, rights
to indemnification, business interruption insurance and proceeds thereof,
property, casualty or any similar type of insurance and any proceeds thereof,
proceeds of insurance covering the lives of key employees on which Borrower is
beneficiary and any letter of credit, guarantee, claims, security interest or
other security held by or granted to Borrower to secure payment by an Account
Debtor of any of the Accounts.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
governmental bodies, whether federal, state, local or foreign national or
provincial and all agencies thereof.
"Guarantor" shall have the meaning ascribed thereto in the preamble to
this Agreement, and each other Person guaranteeing to Lender all or part of the
Obligations.
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"Guaranty" means that certain Second Amended and Restated Continuing
Guaranty Agreement of even date herewith executed by Guarantor in favor of
Lender, pursuant to which Guarantor has guaranteed payment of the Obligations
subject to the limitation of liability set forth therein.
"Indebtedness" of any Person means, without duplication, all
Liabilities of such Person, and to the extent not otherwise included in
Liabilities, the following: (a) all obligations for Money Borrowed or for the
deferred purchase price of property or services, (b) all obligations (including,
during the noncancellable term of any lease in the nature of a title retention
agreement, all future payment obligations under such lease discounted to their
present value in accordance with GAAP) secured by any Lien to which any property
or asset owned or held by such Person is subject, whether or not the obligation
secured thereby shall have been assumed by such Person, (c) all obligations of
other Persons which such Person has guaranteed, including, but not limited to,
all obligations of such Person consisting of recourse liability with respect to
accounts receivable sold or otherwise disposed of by such Person, and (d) in the
case of Borrower (without duplication) all obligations under the Revolving
Credit Facility and Term Loans.
"Information Certificates" means the Information Certificates of
Borrower and Guarantor attached as Exhibit B.
"Interest Expense" means interest on Indebtedness during the period for
which computation is being made, excluding (a) the amortization of fees and
costs incurred with respect to the closing of loans which have been capitalized
as transaction costs, and (b) interest paid in kind and other non-cash interest.
"Interest Rate" means a variable rate, adjusted monthly, equal to the
Prime Rate plus 200 basis points (2%).
"Interested Party" means any employee, agent, owner, partner, member,
or shareholder of Borrower.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as in
effect from time to time.
"Inventory" means all inventory as such term is defined in the Uniform
Commercial Code and shall include, without limitation, (a) all work in process,
(b) all raw materials or other materials and supplies of every nature and
description used or which might be used in connection with the manufacture,
packing, shipping, advertising, selling, leasing or furnishing of such goods or
otherwise used or consumed in Borrower's business, and (c) all documents
evidencing and general intangibles relating to any of the foregoing.
"Investment" means, with respect to any Person; (a) the acquisition or
ownership by such Person of any share of capital stock, evidence of Indebtedness
(which shall not include funds on deposit in demand deposit accounts) or other
security issued by any other Person, (b) any loan, advance or extension of
credit to, or contribution to the capital of, any other Person, excluding
advances to employees in the ordinary course of business for business expenses,
(c) the obligations of any other Person that are guaranteed by such Person, (d)
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any other investment in any other Person, and (e) any commitment or option to
make any of the investments listed in clauses (a) through (d) above.
"Investment Property" has the meaning given to it in the UCC.
"Lender" is defined in the preamble to this Agreement.
"Letter-of-credit right" has the meaning given to it in the UCC.
"Liabilities" of any Person means all items (except for items of
capital stock, additional paid-in capital or retained earnings, or of general
contingency or deferred tax reserves) which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Liabilities are to be
determined.
"Lien" as applied to the property of Borrower or any Person means: (a)
any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, lease
constituting a Capitalized Lease Obligation, conditional sale or other title
retention agreement, or other security interest, security title or encumbrance
of any kind in respect of any property of such Person, or upon the income or
profits therefrom, (b) any arrangement, express or implied, under which any
property of such Person is transferred, sequestered or otherwise identified for
the purpose of subjecting the same to the payment of Indebtedness or performance
of any other obligation in priority to the payment of the general, unsecured
creditors of such Person, and (c) the filing of, or any agreement to give, any
financing statement under the Uniform Commercial Code or its equivalent in any
jurisdiction, excluding informational financing statements relating to property
leased by such Person.
"Loan Documents" means collectively this Agreement, the Guaranty, the
Security Documents, the Credit Support Documents, and each other instrument,
agreement or document executed by Borrower, a Guarantor, or any other Person in
connection with this Agreement, whether prior to, on or after the Agreement
Date.
"Loans" means, collectively, the Revolving Loan Advances and the Term
Loans.
"Lockbox" means each U.S. Post Office Box specified in the Lockbox
Agreements.
"Lockbox Agreements" means each agreement between Borrower and a bank
concerning the establishment of the Lockbox for the collection of Receivables.
"Materially Adverse Effect" means any act, omission, situation,
circumstance, event or undertaking which would, singly or in any combination
with one or more other acts, omissions, situations, circumstances, events or
undertakings have, or reasonably be expected to have, a materially adverse
effect upon (a) the business, prospects, assets, properties, liabilities,
financial condition and results of operations of Borrower and its Subsidiaries
taken as a whole, (b) the value of the Collateral, (c) the Security Interest or
the priority of the Security Interest, (d) the respective ability of Borrower or
any other obligor to perform any obligations under this Agreement or any other
Loan Document to which it is a party, or (e) the legality, validity, binding
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effect, enforceability or admissibility into evidence of any Loan Document or
the ability of Lender to enforce any rights or remedies under or in connection
with any Loan Document.
"Maximum Revolving Credit Amount" means Six Million Dollars
($6,000,000), or such lesser or greater amount as shall be agreed upon from time
to time in writing by Lender and Borrower.
"Money Borrowed" means, as applied to Indebtedness, (a) Indebtedness
for money borrowed, (b) Indebtedness, whether or not in any such case the same
was for money borrowed, (i) represented by notes payable, and drafts accepted,
that represent extensions of credit, (ii) constituting obligations evidenced by
bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid or that was issued or assumed as full or partial
payment for property (other than trade credit that is incurred in the ordinary
course of business), (c) Indebtedness that constitutes a Capitalized Lease
Obligation, and (d) Indebtedness that is such by virtue of clause (c) of the
definition thereof, but only to the extent that the obligations guaranteed are
obligations that would constitute Indebtedness for Money Borrowed.
"Net Income" means, as applied to any Person, the net income (or net
loss) of such Person 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 GAAP, provided that there shall be excluded: (a) the net income
(or net loss) of any Person accrued prior to the date it becomes a Subsidiary
of, or is merged into or consolidated with, the Person whose Net Income is being
determined or a Subsidiary of such Person, (b) the net income (or net loss) of
any Person in which the Person whose Net Income is being determined or any
Subsidiary of such Person has an ownership interest, except, in the case of net
income, to the extent that any such income has actually been received by such
Person or such Subsidiary in the form of cash dividends or similar
distributions, (c) any restoration of any contingency reserve, except to the
extent that provision for such reserve was made out of income during such
period, (d) any net gains or losses on the sale or other disposition, not in the
ordinary course of business, of Investments, business units and other capital
assets, provided that there shall also be excluded any related charges for taxes
thereon, (e) any net gain arising from the collection of the proceeds of any
insurance policy, (f) any write-up of any asset, and (g) any other extraordinary
item.
"Net Proceeds" means proceeds received by Borrower or any of its
Subsidiaries in cash from any Asset Disposition (including, without limitation,
payments under notes or other debt securities received in connection with any
Asset Disposition), net of: (a) the transaction costs of such sale, lease,
transfer or other disposition; (b) any tax liability arising from such
transaction; and (c) amounts applied to repayment of Indebtedness (other than
the Obligations) secured by a Lien on the asset or property disposed.
"Notice of Borrowing" means a telephonic or electronic notice followed
by a confirming same-day written notice requesting a Borrowing, which is given
by telex or facsimile transmission in accordance with the applicable provisions
of this Agreement and which specifies (i) the amount of the requested Borrowing,
and (ii) the date of the requested Borrowing.
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"Obligations" means, in each case whether now in existence or hereafter
arising, (a) the principal of, and interest and premium, if any, on, the
Revolving Loan Advances, (b) the principal of, and interest and premium, if any,
on, the Term Loans, and (c) all indebtedness, liabilities, obligations,
covenants and duties of Borrower to Lender of every kind, nature and description
arising under this Agreement, or any of the other Loan Documents, or in
connection with the Revolving Credit Facility or Term Loans, whether direct or
indirect, absolute or contingent, due or not due, contractual or tortious,
liquidated or unliquidated, and whether or not evidenced by any note, and
whether or not for the payment of money, including without limitation, fees and
expenses required to be paid or reimbursed pursuant to Article II.
"Obligor" means Borrower, the Guarantor and any Person who may now or
in the future guaranty the payment and performance of the whole or any part of
the Obligations.
"Overadvances" is defined in Section 1.1.
"Patents" means and includes, in each case whether now existing or
hereafter arising, all of Borrower's right, title and interest in and to (a) any
and all patents and patent applications, (b) inventions and improvements
described and claimed therein, (c) reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, (d) income, royalties, damages,
claims and payments now or hereafter due and/or payable under and with respect
thereto, including, without limitation, damages and payments for past and future
infringements thereof, (e) rights to ▇▇▇ for past, present and future
infringements thereof, and (f) all rights corresponding to any of the foregoing
throughout the world.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
agency.
"Permitted Investments" means Investments of Borrower in: (a)
negotiable certificates of deposit or time deposits issued by a state bank or by
any United States bank or trust company having capital, surplus and undivided
profits in excess of $1,000,000.00; (b) any direct obligation of the United
States of America or any agency or instrumentality thereof which has a remaining
maturity at the time of purchase of not more than one year and repurchase
agreements relating to the same and (c) loans, advances or extensions of credit
made by Borrower in the ordinary course of its business in the form of supplier
advances, advances for component parts and other similar extensions of credit,
not to exceed $100,000.00 in the aggregate outstanding at any time.
"Permitted Liens" means: (a) Liens securing taxes, assessments and
other governmental charges or levies (excluding any Lien imposed pursuant to any
of the provisions of ERISA) or the claims of materialmen, mechanics, carriers,
warehousemen or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, but (i) in all cases only if payment shall not
at the time be required to be made, and (ii) in the case of warehousemen or
landlords, only if such liens are junior to the Security Interest in any of the
Collateral, (b) Liens consisting of deposits or pledges made in the ordinary
course of business in connection with, or to secure payment of, obligations
under workers' compensation, unemployment insurance or similar legislation or
under payment or performance bonds, (c) other Liens on the real property owned
by Borrower in the nature of zoning restrictions, easements, and rights or
restrictions of record on the use of real property, which do not materially
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detract from the value of such property or impair the use thereof in the
business of Borrower, (d) purchase money Liens, including Liens securing
Capitalized Lease Obligations, (e) Liens shown on Schedule 5.5(a), and (f) Liens
of Lender arising under this Agreement and the other Loan Documents.
"Person" means any individual, limited liability company, corporation,
partnership, association, trust or unincorporated organization, or a government
or any agency or political subdivision thereof.
"Plan" means any employee benefit plan as defined in Section 3(3) of
ERISA in respect of which Borrower or any Affiliate of Borrower is, or within
the immediately preceding six years was, an "employer" as defined in Section
3(5) of ERISA.
"Prime Rate" means for any month the rate of interest per annum
announced or quoted by JPMorgan Chase Bank on the last day of the preceding
month as its prime rate for commercial loans, whether or not such rate is the
lowest rate charged by JPMorgan Chase Bank to its most preferred borrower and,
if such prime rate for commercial loans is discontinued by JPMorgan Chase Bank
as a standard, a comparable reference rate designated by Lender as a substitute
therefor shall be the Prime Rate.
"Proprietary Rights" means all of Borrower's now owned and hereafter
arising or acquired Patents, Copyrights and Trademarks, trade names, service
marks, computer software, licenses, and other intangible property, and all other
rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing, and
all rights to ▇▇▇ for past, present and future infringement of any of the
foregoing.
"Receivable" means and includes (a) any and all rights to the payment
of money or other forms of consideration of any kind (whether classified under
the Uniform Commercial Code as Accounts, contract rights, chattel paper, general
intangibles, or otherwise) including, but not limited to, Accounts, accounts
receivable, letters of credit and the right to receive payment thereunder,
chattel paper, tax refunds, insurance proceeds, Contract Rights, notes, drafts,
instruments, documents, acceptances, and all other debts, obligations and
liabilities in whatever form from any Person, (b) all guarantees, security and
Liens for payment thereof, (c) all goods, whether now owned or hereafter
acquired, and whether sold, delivered, undelivered, in transit or returned,
which may be represented by, or the sale or lease of which may have given rise
to, any such right to payment or other debt, obligation or liability, and (d)
all proceeds of any of the foregoing.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System (or any successor).
"Release" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the outdoor
environment or into or out of any property, including the movement of
Contaminants through or in the air, soil, surface water or groundwater.
"Remedial Action" means actions required to (a) clean up, remove, treat
or in any other way address Contaminants in the outdoor environment; (b) prevent
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the Release or threat of Release or minimize the further Release of Contaminants
so they do not migrate or endanger or threaten to endanger public health or
welfare or the outdoor environment; or (c) perform pre-remedial studies and
investigations and post-remedial monitoring and care.
"Reportable Event" has the meaning set forth in Section 4043(b) of
ERISA, but shall not include a Reportable Event as to which the provision for 30
days notice to the PBGC is waived under applicable regulations.
"Reserves" means reserves established against the amount of the
Revolving Loan Advances, which Lender in the exercise of its reasonable credit
judgment and discretion deems necessary to ensure payment of the Obligations.
"Revenues" shall mean all money, funds, cash, proceeds, or payments of
any kind received by Borrower from all sources, including without limitation,
all proceeds of Collateral, including Net Proceeds, and all proceeds from the
sale of Inventory or other Collateral, whether received in cash, by check, by
other instrument, or otherwise.
"Revolving Credit Facility" means the revolving credit facility
established under this Agreement in an aggregate principal amount outstanding at
any one time not to exceed the Maximum Revolving Credit Amount.
"Revolving Loan Advance" means a revolving loan made to Borrower
pursuant to Section 1.1 and "Revolving Loan Advances" means more than one
Revolving Loan Advance.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Security Documents" means each of the following: (a) the Financing
Statements, (b) the Deposit Account Control Agreement, and (c) each other
writing executed and delivered by Borrower or any other Obligor securing the
Obligations or any part thereof.
"Security Interest" means the Liens of Lender on and in the Collateral
created or effected hereby or by any of the Security Documents or pursuant to
the terms hereof or thereof.
"Subordinated Indebtedness" means any Indebtedness for Money Borrowed
of Borrower that is expressly subordinated to the Obligations on terms and
conditions acceptable to Lender in its discretion.
"Subsidiary" means, (a) when used to determine the relationship of a
Person to another Person, a Person of which an aggregate of 50% or more of the
stock of any class or classes or 50% or more of other ownership interests is
owned of record or beneficially by such other Person, or by one or more
Subsidiaries of such other Person, or by such other Person and one or more
Subsidiaries of such Person, (i) if the holders of such stock, or other
ownership interests, (A) are ordinarily, in the absence of contingencies,
entitled to vote for the election of a majority of the directors (or other
individuals performing similar functions) of such Person, even though the right
so to vote has been suspended by the happening of such a contingency, or (B) are
entitled, as such holders, to vote for the election of a majority of the
directors (or individuals performing similar functions) of such Person, whether
or not the right so to vote exists by reason of the happening of a contingency,
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or (ii) in the case of such other ownership interests, if such ownership
interests constitute a majority voting interest, and (b) when used with respect
to a Plan, ERISA or a provision of the Internal Revenue Code pertaining to
employee benefit plans, any other corporation, trade or business (whether or not
incorporated) which is under common control with Borrower and is treated as a
single employer with Borrower under Section 414(b) or (c) of the Internal
Revenue Code and the regulations thereunder.
"Term Loans" means, collectively, Term Loan A, Term Loan B, Term Loan C
and Term Loan D.
"Term Loan A" is defined in Section 1.7.
"Term Loan B" is defined in Section 1.7.
"Term Loan C" is defined in Section 1.7.
"Term Loan D" is defined in Section 1.7.
"Termination Date" means the earliest to occur of: (a) December 31,
2007, (b) such date as the Obligations shall have been accelerated pursuant to
the provisions of Section 9.2, or (c) such date as all Obligations shall have
been irrevocably and indefeasibly paid in full and the Revolving Credit Facility
shall have been terminated.
"Termination Event" means (a) a Reportable Event, or (b) the filing of
a notice of intent to terminate a Plan, or the treatment of a Plan amendment as
a termination, under Section 4041(c) of ERISA, or (c) the institution of
proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or the
appointment of a trustee to administer any Plan.
"Trademarks" means and includes in each case whether now existing or
hereafter arising, all of Borrower's rights, title and interest in and to (a)
trademarks (including service marks), trade names and trade styles and the
registrations and applications for registration thereof and the goodwill of the
business symbolized by the trademarks, (b) licenses of the foregoing, whether as
licensee or licensor, (c) renewals thereof, (d) income, royalties, damages and
payments now or hereafter due and/or payable with respect thereto, including,
without limitation, damages, claims and payments for past and future
infringements thereof, (e) rights to ▇▇▇ for past, present and future
infringements thereof, including the right to settle suits involving claims and
demands for royalties owing, and (f) all rights corresponding to any of the
foregoing throughout the world.
"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code as
in effect from time to time in the state of Ohio.
"Warrant Agreement" means that certain Warrant to Purchase 2,000,000
Shares of Common Stock of CCC GlobalCom Corporation dated the date hereof.
General. Unless otherwise defined, all terms used in this Agreement
that are defined in the UCC shall have the meaning give them in the UCC. All
terms of an accounting nature not specifically defined in this Agreement shall
have the meaning ascribed them by GAAP. References to any legislation or statute
or code, or to any provision thereof, shall include any modification or
15
reenactment of, or any legislative, statutory or code provision substituted for,
such legislation, statute or code or provision thereof. References to any Person
include its successor or permitted substitutes and assigns. Use of the word
"including" shall be deemed to mean "including but not limited to."
ARTICLE I - LOANS, RENEWAL AND TERMINATION
1.1 Revolving Credit Facility.
(a) Revolving Loan Advances. Lender agrees, for so long as no Default
or Event of Default exists and subject to the terms of this Agreement, to make
Revolving Loan Advances to Borrower in an aggregate amount at any time
outstanding up to the amount of the Borrowing Base at such time; provided,
however, the aggregate amount of all Revolving Loan Advances Loans outstanding
at any time shall not exceed the Maximum Revolving Credit Amount. Under the
Revolving Credit Facility, Borrower from time to time may borrow, repay, prepay
and reborrow the Revolving Loan Advances pursuant to the terms of this
Agreement.
(b) Overadvances. It is expressly understood and agreed that Lender
intends to use the Borrowing Base as a maximum ceiling on Revolving Loan
Advances to Borrower; provided, however, that it is agreed that should the
Revolving Loan Advances ever exceed the ceiling so determined or any other
limitation set forth in this Agreement (an "Overadvance," and collectively,
"Overadvances"), such Overadvances shall nevertheless constitute Obligations
secured by the Security Interest of Lender and, as such, shall be entitled to
all benefits thereof and security therefor. In the event that Lender is willing
in its sole and absolute discretion to make Overadvances, such Overadvances
shall be payable on demand and shall bear interest as provided in this Agreement
for Revolving Credit Advances generally or at such higher rate of interest as
Lender may require as a condition to making such Overadvances.
1.2 Borrowing Procedures.
(a) Borrower may, from time to time, request Lender to make Revolving
Loan Advances. Subject to the provisions of Section 8.1 of this Agreement, and
provided that there does not then exist a Default or an Event of Default, Lender
shall fund Borrower's request for Revolving Loan Advances as follows: (i) by the
close of business on the Business Day such request is received if the request is
received prior to 10:00 a.m. east coast time; and (ii) by the close of the next
Business Day if the request is received after that time.
(b) Each request for a Revolving Loan Advance shall be made by
transmission to Lender of a Notice of Borrowing and shall, if requested by
Lender or required pursuant to Section 6.7, be accompanied by a complete and
accurate Borrowing Base Certificate, and shall be confirmed by Borrower with
Lender by telephone; provided, that Lender shall at any time have the right to
review and adjust, in the exercise of its reasonable discretion, any calculation
set forth in the Borrowing Base Certificate or the Notice of Borrowing (i) to
reflect Lender's reasonable estimate of declines in value of any of the
Collateral described in such Borrowing Base Certificate, and (ii) to the extent
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such calculation is not in accordance with this Agreement. Borrower shall make
no more than three (3) requests for Revolving Loan Advances per calendar week.
(c) Borrower shall reimburse Lender and hold Lender harmless from any
loss or expense that Lender may sustain or incur as a consequence of the failure
of Borrower to borrow additional Loans after Borrower has requested (or is
deemed to have requested) such additional Loans, including any such loss or
expense arising from the liquidation or re-employment of funds obtained by
Lender to maintain the Loans or from fees payable to terminate the deposits from
which such funds were obtained.
1.3 Interest.
(a) Interest shall accrue on the outstanding principal balance of the
Loans at the Interest Rate. All interest accrued on the outstanding principal
balance of the Loans shall be calculated on the basis of a year of 360 days and
the actual number of days elapsed in each month. Accrued interest shall be due
and payable monthly, in arrears, on the first day of the month following the
month in which such interest accrues.
(b) Upon the occurrence and during the continuation of an Event of
Default, which Event of Default is not cured to the satisfaction of Lender
within ten (10) days from the date such Event of Default first occurred, the
unpaid principal balance of the Loans shall bear interest at a per annum rate
equal to the Interest Rate plus 200 basis points (2%) effective as of and from
the date such Event of Default first occurred, as determined by Lender.
1.4 Payment as Revolving Loan Advance. The becoming due of any amount
required to be paid under this Agreement as principal, accrued interest, fees,
and other charges and amounts shall be deemed irrevocably to be a request by
Borrower for a Revolving Loan Advance on the due date of, and in an aggregate
amount required to pay, such principal, accrued interest, fees, and other
charges and amounts, and the proceeds of each such Revolving Loan Advance may,
at Lender's option, be disbursed by Lender by way of direct payment of the
relevant Obligation. All such disbursements in payment of the relevant
Obligation shall be deemed to be a Revolving Loan Advance for all purposes of
this Agreement.
1.5 Allocation of Payments and Limit of Interest. All Revenues received
by Lender from Borrower shall be applied pro tanto to the Obligations in such
manner as Lender shall determine. Lender does not intend to charge interest at a
rate in excess of the highest rate permitted by Applicable Law. In the event any
interest is changed or received in excess of the highest rate permitted by
Applicable Law, or any loan charges are collected or received in excess of the
maximum amounts collectible under Applicable Law (such excess(es) being referred
to herein individually and collectively as "Excess"), Borrower acknowledges and
stipulates that any such charge or receipt shall be the result of an accident
and bona fide error, and that any Excess received by Lender shall be applied,
first, to the payment of the then outstanding and unpaid principal hereunder;
second, to the payment of the Other Obligations then outstanding and unpaid; and
third, returned to Borrower, it being the intent of the parties hereto not to
enter into a usurious or otherwise illegal relationship. Borrower recognizes
that, with fluctuations in the Prime Rate, such an unintentional result could
17
inadvertently occur. Interest on any outstanding principal balance shall be
spread over the entire period that such principal balance is outstanding. Any
excess interest charges paid by Borrower to Lender shall be applied to reduce
the outstanding principal balance of the Obligations.
1.6 Renewal and Termination.
(a) This Agreement shall expire on the Termination Date. Lender may
terminate this Agreement at any time during the existence of an Event of Default
as provided in Section 9.2.
(b) Upon the termination of this Agreement for any reason as herein
provided, Borrower shall be required to pay, discharge and satisfy, no later
than the effective date of such termination, the Revolving Loan Advances, the
Term Loans, all accrued and unpaid interest and fees, and all other
non-contingent Obligations outstanding.
(c) All undertakings, agreements, covenants, warranties and
representations of Borrower contained in this Agreement and the other Loan
Documents shall survive any such termination, and Lender shall retain each and
every Security Interest, and all other rights and remedies of Lender under this
Agreement and the other Loan Documents, notwithstanding such termination until
Borrower has paid the amounts described in Section 1.6(b).
(d) Notwithstanding the payment in full of the Revolving Loan Advances,
all Term Loans, all accrued and unpaid interest and fees, and all other
non-contingent Obligations outstanding, Lender shall not be required to
terminate its Security Interests unless, with respect to any loss or damage
Lender may incur as a result of dishonored checks or other items of payment
received by Lender from Borrower or any Account Debtor and applied to the
Obligations, Lender shall (i) have received a written agreement, executed by
Borrower and by any Person whose loans or other advances to Borrower are used in
whole or in part to satisfy the Obligations, indemnifying Lender from any such
loss or damage; or (ii) have retained such monetary reserves and its Security
Interest for such period of time as Lender, in its reasonable discretion, may
deem necessary to protect Lender from any such loss or damage.
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1.7 Term Loans.
(a) Term Loan A. Subject to the terms and conditions hereof, the Lender
agrees to make a Term Loan to Borrower in the amount of $3,500,000.00 ("Term
Loan A"). There shall be a single borrowing under the Term Loan A made by the
Lender to Borrower. The indebtedness represented by the Term Loan A shall bear
interest as provided in Section 1.3, payable monthly in arrears in the manner
described in that section. The principal balance of the Term Loan A shall be
repaid in installments as follows: (i) commencing on the first Business Day of
February, 2005, and for eleven consecutive months thereafter, monthly
installments of $25,000, then (ii) commencing on the first Business Day of
February, 2006, and for twenty-three consecutive months thereafter, monthly
installments of $37,500, and (iii) the final payment of all outstanding
principal shall be due and payable on the Termination Date. The principal
repayments set forth herein shall be in addition to payments of all accrued and
unpaid interest due monthly in accordance with Section1.3.
(b) Term Loan B. Subject to the terms and conditions hereof, the Lender
agrees to make a Term Loan to Borrower in the amount of $3,500,000.00 ("Term
Loan B"). There shall be a single borrowing under the Term Loan B made by the
Lender to Borrower. The indebtedness represented by the Term Loan B shall bear
interest as provided in Section 1.3, payable monthly in arrears in the manner
described in that section. The principal balance of the Term Loan B shall be
repaid in installments as follows: (i) commencing on the first Business Day of
February, 2005, and for eleven consecutive months thereafter, monthly
installments of $25,000, then (ii) commencing on the first Business Day of
February, 2006, and for twenty-three consecutive months thereafter, monthly
installments of $37,500, and (iii) the final payment of all outstanding
principal shall be due and payable on the Termination Date. The principal
repayments set forth herein shall be in addition to payments of all accrued and
unpaid interest due monthly in accordance with Section1.3.
(c) Term Loan C. Subject to the terms and conditions hereof, the Lender
agrees to make a Term Loan to Borrower in the amount of $3,500,000.00 ("Term
Loan C"). There shall be a single borrowing under the Term Loan C made by the
Lender to Borrower. The indebtedness represented by the Term Loan C shall bear
interest as provided in Section 1.3, payable monthly in arrears in the manner
described in that section. The principal balance of the Term Loan C shall be
repaid in installments as follows: (i) commencing on the first Business Day of
February, 2005, and for eleven consecutive months thereafter, monthly
installments of $25,000, then (ii) commencing on the first Business Day of
February, 2006, and for twenty-three consecutive months thereafter, monthly
installments of $37,500, and (iii) the final payment of all outstanding
principal shall be due and payable on the Termination Date. The principal
repayments set forth herein shall be in addition to payments of all accrued and
unpaid interest due monthly in accordance with Section1.3.
(d) Term Loan D. Subject to the terms and conditions hereof, the Lender
agrees to make a Term Loan to Borrower in the amount of $3,500,000.00 ("Term
Loan D"). There shall be a single borrowing under the Term Loan D made by the
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Lender to Borrower. The indebtedness represented by the Term Loan D shall bear
interest as provided in Section 1.3, payable monthly in arrears in the manner
described in that section. The principal balance of the Term Loan D shall be
repaid in installments as follows: (i) commencing on the first Business Day of
February, 2005, and for eleven consecutive months thereafter, monthly
installments of $25,000, then (ii) commencing on the first Business Day of
February, 2006, and for twenty-three consecutive months thereafter, monthly
installments of $37,500, and (iii) the final payment of all outstanding
principal shall be due and payable on the Termination Date. The principal
repayments set forth herein shall be in addition to payments of all accrued and
unpaid interest due monthly in accordance with Section1.3.
1.8 Mandatory Prepayments of Excess Cash Flow. In addition to the
regular payments of principal and interest required in respect of the Term
Loans, Borrower shall remit to Lender on or before the 15th day after the close
of each fiscal quarter, all Excess Cash Flow earned in the immediately preceding
quarter. All such Excess Cash Flow payments remitted to Lender shall be applied
by Lender pro rata among the four Term Loans as a reduction in the outstanding
principal thereof.
1.9 Promise to Pay. Borrower hereby promises to pay to Lender the
principal, interest, fees and other charges comprising the Loans in accordance
with the terms of this Agreement.
ARTICLE II - FEES
2.1 Facility Fee. Borrower agrees to pay to Lender a Facility Fee in
the amount of $30,000 per annum, which Facility Fee shall be due and payable on
each anniversary date of this Agreement shall be non-refundable when paid, and
shall be fully earned by Lender as of each due date thereof.
2.2 Field Examination Fee. For each field examination of the books,
records and other assets of Borrower performed by one or more employees or
agents of Lender, Borrower shall pay to Lender a field examination fee in an
amount of the per diem amount then customarily charged by Lender for such
examinations for each day spent by each such employee in performing and/or
summarizing the results of such examination (including all necessary travel
time) plus all reasonable "out-of-pocket" expenses. Field examinations shall be
performed by Lender no less frequently than quarterly, and each field
examination fee shall be payable by Borrower to Lender within 30 days of
delivery of invoices therefor.
2.3 Costs and Expenses. Borrower agrees to reimburse Lender for all
reasonable out-of-pocket expenses incurred by Lender in connection with the
negotiation, preparation and execution of this Agreement and the administration
and enforcement hereof, including, but not limited to, filing fees, tax, lien
and judgment search fees, fees of outside auditors, bank fees, wire transfer
fees, outside attorneys' fees, allocated costs of internal counsel, and any
other reasonable fees or expenses; provided, however, that Borrower's
reimbursement to Lender under this Section 2.3 in respect of Lender's outside
attorneys' fees incurred in the negotiation, preparation and execution of this
Agreement shall be limited to $25,000; provided further, that limitation
contained in the preceding proviso shall not apply to any fees or expenses
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incurred by Lender following the execution hereof in respect of the
administration or enforcement of this Agreement, the negotiation or preparation
of any amendments hereto, or otherwise.
ARTICLE III - GRANT OF SECURITY INTEREST
3.1 Grant of Security Interest. To secure the payment, performance and
observance of the Obligations, Borrower grants, and hereby assigns, mortgages,
and pledges, to Lender all of the Collateral, and grants to Lender a continuing
security interest in, and a Lien upon, and a right of set off against, all of
the Collateral.
3.2 Continued Priority of Security Interest.
(a) The Security Interest granted by Borrower shall at all times be
valid, perfected and enforceable against Borrower and all third parties in
accordance with the terms of this Agreement, as security for the Obligations,
and the Collateral shall not be at any time subject to any Liens that are prior
to, or on parity with or junior to the Security Interest, other than Permitted
Liens. Borrower represents and warrants to Lender that none of the creditors
holding a Permitted Lien has a security interest in the Collateral superior in
priority to the Lien of Lender granted under this Agreement.
(b) Borrower shall, at it sole cost and expense, take all action that
may be necessary or desirable, or that Lender may reasonably request, so as at
all times to maintain the validity, perfection, enforceability and priority of
the Security Interest in the Collateral in conformity with the requirements of
Section 3.2(a), or to enable Lender to exercise or enforce its rights hereunder.
(c) Lender is authorized to file one or more financing or continuation
statements, or amendments thereto, without the signature of or in the name of
Borrower for any purpose under this Agreement, including without limitation, any
purpose under Section 3.2(b).
(d) Borrower shall ▇▇▇▇ its books and records as directed by Lender and
as may be necessary or appropriate to evidence, protect and perfect the Security
Interest and shall cause its financial statements to reflect the Security
Interest.
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ARTICLE IV - PROCEEDS OF COLLATERAL, RECEIVABLES AND COLLECTIONS
4.1 Borrower's Proceeds of Collateral. Borrower shall pay to Lender all
proceeds of Collateral, including Net Proceeds, immediately upon Borrower's
receipt thereof. For purposes of calculating interest owing by Borrower
hereunder, Lender shall apply the amount of such Revenues to the Obligations on
the next Business Day following the date upon which Lender receives such
Revenues in immediately available funds.
4.2 Collection of Receivables and other Collateral.
(a) Borrower shall establish and maintain, at its expense, a Lockbox in
the sole discretion of Lender, with such banks as are acceptable to Lender
pursuant to documentation satisfactory to Lender, in its discretion, into which
Borrower shall promptly deposit or cause to be deposited all Revenues. Borrower
shall direct and instruct all of its Account Debtors to directly remit to such
Lockbox all payments on Receivables and all other payments constituting
Revenues, in the identical form in which such payments are made, whether by
cash, check or other manner of payment. If, notwithstanding such instructions,
Borrower receives any Revenues, and upon receipt by Borrower of any such
Revenues, Borrower shall receive such payments as Lender's trustee, and Borrower
shall immediately deliver such payments to Lender in their original form duly
endorsed in blank. Borrower agrees that all payments made to the Lockbox or
other funds received and collected by Lender, whether in respect of the
Receivables, as other Revenues, or otherwise, shall be subject to Lender's sole
control and shall be treated as payments to Lender in respect of the Obligations
and therefore shall constitute the property of Lender to the extent of the
amount of the outstanding Obligations.
(b) Lender or its designee may, in Lender's sole discretion, at any
time during which an Event of Default exists, notify Account Debtors of the
Security Interest and collect Receivables directly from Account Debtors and
charge the collection costs and expenses to Borrower as additional Loans.
Whether or not a Default or an Event of Default has occurred, any of Lender's
officers, employees or agents shall have the right, at any time or times
hereafter, in the name of Lender, any designee of Lender, or Borrower, to verify
the validity, amount or any other matter relating to any Receivables by mail,
telephone, electronic communication or otherwise. Borrower shall cooperate fully
with Lender in an effort to facilitate and promptly conclude any such
verification process.
ARTICLE V - REPRESENTATIONS AND WARRANTIES
Borrower and Guarantor each represents and warrants to Lender, as of
the date of this Agreement and at all times that Lender makes Loans to Borrower,
as follows:
5.1 Existence, Power and Authority; Borrower Affiliates.
(a) Organization; Qualification. Each Obligor is a corporation duly
formed, validly existing and in good standing under the laws of its jurisdiction
of incorporation or formation, as identified in Schedule 5.1(a), having the
corporate power and authority to own its properties and to carry on its business
as now being and hereafter proposed to be conducted, and each Obligor is duly
22
qualified and authorized to do business in the jurisdictions listed on Schedule
5.1(a) and in each jurisdiction in which the nature of its business or the
ownership and characteristics of its property requires such qualification or
authorization, except where the failure to be so qualified would not have a
Materially Adverse Effect. The jurisdictions in which each Obligor is qualified
to do business as a foreign entity are listed on Schedule 5.1(a).
(b) Power. Each Obligor has the right and power, and has taken all
necessary action to authorize it, to execute, deliver and perform the Loan
Documents in accordance with their respective terms. Each of the Loan Documents
has been duly executed and delivered by the duly authorized officers of each
Obligor and each is, or each when executed and delivered in accordance with this
Agreement will be, a legal, valid and binding obligation of such Obligor,
enforceable against such Obligor in accordance with its terms. All of the
transactions contemplated under the Loan Documents are within such Obligor's
powers and are not in contravention of law or the terms of such Obligor's
certificate of incorporation, articles of incorporation, certificate of
formation, by-laws, limited liability company agreement, or other organizational
documentation, or any material agreement or undertaking to which Borrower is a
party or by which such Obligor or its property is bound, and does not result in
the creation or imposition of any lien, charge or encumbrance upon any assets of
Borrower, other than the Lien of Lender.
(c) Borrower Affiliates. Borrower has no Borrower Affiliates or
Subsidiaries except as set forth on Schedule 5.1(c).
(d) Capitalization. The outstanding shares of capital stock or
membership interests of Borrower have been duly and validly issued and are fully
paid and nonassessable, and the number and owners of such stock or membership
interests of Borrower are set forth on Schedule 5.1(d). Except as set forth on
Schedule 5.1(d), there are no existing warrants, options, or commitments of any
kind or nature convertible into capital stock or membership interests of any
class of Borrower.
(e) Business. Obligors are engaged principally in the business(es)
described on Schedule 5.1(e).
5.2 Compliance with Other Agreements and Applicable Law. Except as set
forth on Schedule 5.2, no Obligor is in default under, or in violation in any
respect of, any material agreement, contract, instrument or other commitment to
which such Obligor is a party or by which such Obligor or its property is bound,
and such Obligor is in compliance in all material respects with all Governmental
Approvals applicable to or required in connection with the conduct of such
Obligor's business and affairs, and such Obligor is otherwise in compliance in
all material respects with all Applicable Laws.
5.3 Absence of Litigation. Except as set forth on Schedule 5.3, there
are no actions, proceedings or investigations pending or threatened against any
Obligor, or any of its assets, which, if adversely determined against such
Obligor can reasonably be expected to have a Materially Adverse Effect on the
assets, financial condition or business prospects of the Obligors.
23
5.4 Taxes and Returns. Except as set forth on Schedule 5.4, each
Obligor has timely filed all tax returns which such Obligor is required by law
to file or has obtained valid extensions, and all taxes and other sums related
to the payment of taxes owing by such Obligor to any governmental authority have
been fully paid and such Obligor maintains adequate reserves to pay such tax
liabilities as they accrue.
5.5 Lien Priority and Nature of Certain Collateral.
(a) Liens. Lender has a perfected first priority security interest in
the Collateral and, except for the Liens described on Schedule 5.5(a) and the
other Permitted Liens, none of the properties and assets of any Obligor is
subject to any Lien. Other than the Financing Statements of Lender pursuant to
this Agreement or the Existing Loan Agreement, no financing statement under the
Uniform Commercial Code of any state or other instrument evidencing a Lien that
names any Obligor as debtor has been filed (and has not been terminated) in any
state or other jurisdiction, and no Obligor has signed, authenticated or
authorized any such financing statement or other instrument or any security
agreement authorizing any secured party thereunder to file any such financing
statement or instrument, except to perfect the Liens listed on Schedule 5.5(a)
and the other Permitted Liens.
(b) Title. Except as set forth on Schedule 5.5(b), each Obligor has
valid and legal title to or leasehold interest in all personal property, real
property, and other assets used in its business.
(c) Receivables. Each Eligible Receivable has arisen from the sale and
delivery of goods or from services rendered by Borrower, is genuine, complete
and, in all other respects, what it purports to be, and is not otherwise
ineligible under the standards set forth in this Agreement.
(d) Inventory. All Inventory is located on the premises set forth on
Schedule 5.5(d) or is Inventory in transit to one of such locations, except as
otherwise disclosed in writing to Lender. No Obligor has, within the twelve (12)
months preceding the Agreement Date, located any Inventory at premises other
than those set forth on Schedule 5.5(d).
(e) Equipment. All Equipment is in good order and repair in all
material respects and is located on the premises set forth on Schedule 5.5(e).
No Obligor has within the twelve-(12) months preceding the Agreement Date,
located any Equipment at premises other than those set forth on Schedule 5.5(e).
(f) Real Estate. No Obligor owns or leases any real property other than
that described on Schedule 5.5(f).
(g) Corporate and Fictitious Names. Except as otherwise disclosed on
Schedule 5.5(g), during the five-year period preceding the Agreement Date,
neither any Obligor nor any predecessor of any Obligor has been known as or used
any corporate or fictitious name other than the name of such Obligor as first
set forth in this Agreement.
5.6 Principal Place of Business. Each Obligor's principal places of
business or, if such Obligor has more than one principal place of business, such
Obligor's chief executive office, is located at the address set forth on the
24
signature page of this Agreement. All books and records pertaining to the
Collateral are kept by each Obligor at its principal place of business or, if
such Obligor has one, its chief executive office.
5.7 Environmental Compliance.
(a) Except as set forth on Schedule 5.7, to the best of Obligors'
knowledge, no Obligor has Released, generated, used, stored, treated,
transported, manufactured, handled, produced or disposed of any Contaminants on
or off its premises (whether or not owned by either Obligor), in any manner that
violates in any material respect any applicable Environmental Laws or any
Governmental Approvals, and the business and operations of Obligors comply in
all material respects with all Environmental Laws and all Governmental Approvals
and similar authorizations.
(b) Except as set forth on Schedule 5.7, (i) there is not and has not
been any Remedial Action taken with respect to any real estate leased by any
Obligor, (ii) there has not been nor is there now pending any investigation,
proceeding, complaint, order, directive, claim, citation or notice by any
governmental authority or any other person with respect to any non-compliance
with or violation of the requirements of any Environmental Laws by any Obligor,
or (iii) there has not been any Release, threatened or actual, of any
Contaminants, or generation, use, storage, treatment, transportation,
manufacture, handling, production, or disposal of any Contaminants, or any other
environmental, health or safety matter, which affects (A) any Obligor, (B) its
business, operations, or assets, or (C) any properties at which such Obligor has
transported, or stored any Contaminants.
(c) Except as set forth on Schedule 5.7, no Obligor has liability
(contingent or otherwise) with a known Release, threatened or actual, from any
real property owned or leased by such Obligor, or the generation, use, storage,
treatment, transportation, manufacture, handling, production, or disposal of any
Contaminant, on the owned or leased real property.
(d) All material Governmental Approvals or similar authorizations
required to be obtained or filed in connection with the operations of Obligors
under any Environmental Laws have been obtained, and all Governmental Approvals
and similar authorizations are valid and in full force and effect in all
material respects.
5.8 Proprietary Rights. A correct and complete schedule of all of each
Obligor's Proprietary Rights is set forth in Schedule 5.8 and none of the
Proprietary Rights is subject to any licensing agreement or similar arrangement,
except as set forth on Schedule 5.8 or as entered into in the ordinary course of
such Obligor's business. To the best knowledge of Obligors none of the
Proprietary Rights infringes on the valid trademark, trade name, copyright, or
patent right of any other person or entity, and no other person's or entity's
property infringes on the Proprietary Rights, in any material respect. The
Proprietary Rights described on Schedule 5.8 constitute all of the property of
such type necessary to the current and anticipated future conduct of the
business of Obligors.
25
5.9 Trade Names. All trade names or styles under which either Obligor
sells Inventory or Equipment or creates Accounts, or to which instruments in
payment of Accounts are made payable, are listed on Schedule 5.9.
5.10 Employee Relations. Obligors have a stable work force in place and
neither Obligor is, except as disclosed on Schedule 5.10, party to any
collective bargaining agreement nor has any labor union been recognized as the
representative of either Obligor's employees, and either Obligor knows of any
pending, threatened, or contemplated strikes, work stoppage or other labor
disputes involving any of such Obligor's employees.
5.11 Employee Pension Benefit Plans. Each Plan meets the minimum
funding standards of Section 302 of ERISA, if applicable, and no Termination
Event has occurred with respect to any Plan of either Obligor.
5.12 Bank Accounts. The information on Schedule 5.12 is a complete and
correct list of all checking accounts, deposit accounts, and other bank accounts
maintained by Obligors.
5.13 Accuracy and Completeness of Information. All representations and
warranties set forth in this Article V, and all statements and other information
furnished by or on behalf of either Obligor in connection with this Agreement or
any of the Loan Documents, including without limitation, all information on the
Information Certificate, is true and correct in all material respects and does
not omit any material fact. Each financial statement furnished by or on behalf
of either Obligor presents fairly the financial condition of such Obligor as of
the date of such statement and for the relevant period(s) then ended.
5.14 Software License Compliance. Each Obligor warrants and represents
that all software used by such Obligor on any of such Obligor's computers is
either such Obligor's proprietary software or is duly licensed, maintained and
operated in compliance with the software owner's license terms and conditions.
5.15 Survival of Warranties; Cumulative.All representations and
warranties contained in this Agreement or any of the other Loan Documents shall
survive the execution and delivery of this Agreement, any investigation made by
or on behalf of Lender, or any borrowing hereunder, and shall be deemed to have
been made again to Lender on the date of each additional borrowing or other
credit accommodation under this Agreement, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties shall have been true and accurate on
and as of such earlier date), and shall be conclusively presumed to have been
relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth in this
Agreement and in the other Loan Documents shall be cumulative and shall be in
addition to any other representations or warranties which either Obligor shall
now or hereafter give, or cause to be given, to Lender.
ARTICLE VI - AFFIRMATIVE COVENANTS
Until this Agreement has been terminated and all Obligations have been
paid in full, unless Lender shall otherwise consent in writing, covenants and
agrees with Lender as follows:
26
6.1 Financial Statements. Borrower shall deliver to Lender, within 120
days following the close of each Fiscal Year, Obligors' consolidated audited
financial statements, certified by a recognized firm of certified public
accountants acceptable to Lender (▇▇▇▇▇▇ & Co. being deemed acceptable to
Lender) as having been prepared in accordance with GAAP and as presenting fairly
the financial condition of Obligors as of the date thereof and for the period
then ended (and including a management letter to Obligors from such accountants,
if prepared by such accountants at Borrower's or Guarantor's request, to be
delivered not later than 30 days thereafter, which summarizes operating results
and addresses operating issues historically and facing the Obligors in the
coming years). Obligors shall deliver to Lender such other financial information
as Lender shall reasonably request, including, (i) within 30 days after the
close of each month, reasonably detailed monthly and fiscal year-to-date
financial statements, including income statement, balance sheet, and statement
of cash flow, prepared in accordance with GAAP (subject to the absence of notes
and to annual audit adjustment), certified by the chief financial officer or
other authorized individual of Borrower as presenting fairly the financial
condition of Obligors, which, for the end of each month, shall also include a
Covenant Compliance Certificate, setting forth a calculation of the financial
covenants described in Section 7.6 below, and the status of all other monetary
covenants set forth in this Agreement, (ii) within 45 days after the close of
each calendar quarter, unaudited consolidated and consolidating quarterly and
year-to-date financial statements, including including income statement, balance
sheet, and statement of cash flow, prepared in accordance with GAAP (subject to
the absence of notes and to annual audit adjustment), certified by the chief
financial officer or other authorized individual of Borrower as presenting
fairly the financial condition of Obligors, and (iii) at least 60 days prior to
the end of Borrower's Fiscal Year an annual operating budget showing a projected
income statement, balance sheet and cash flows as of each month end for the
forthcoming Fiscal Year.
6.2 Books and Records. Borrower shall keep accurate and complete
records of the Collateral and permit Lender to: (a) visit Borrower's business
locations during normal business hours at intervals to be determined by Lender;
and (b) inspect, audit and make extracts from or copies of Borrower's books,
records, journals, receipts, computer tapes and disks. All governmental
authorities are authorized to furnish Lender with copies of reports of
examinations of either Obligor made by such parties. Banks, Account Debtors and
other third parties (without waiving any attorney-client privilege) with whom
Borrower has contractual relationships pertaining to the Collateral or the Loan
Documents, are authorized to furnish Lender with copies of such contracts and
related materials. Lender is authorized, in its own name or any other name, to
communicate with Account Debtors in order to verify the existence, amount and
terms of any Receivable.
6.3 Additional Documentation. Obligors shall execute and deliver to
Lender all additional documents which Lender may, from time to time, reasonably
determine are necessary or appropriate to evidence the Loans or to continue or
perfect Lender's Security Interest in the Collateral.
6.4 Existence, Name, Organization and Chief Executive Office. Each
Obligor shall maintain its existence in good standing and shall deliver to
Lender written notice, at least thirty (30) days in advance, of any proposed
change in such Obligor's state of incorporation, a change in such Obligor's
name, a change in the use of any trade name, new trade names, fictitious name or
27
new fictitious names, such Obligor's business locations, the location of such
Obligor's principal place of business or chief executive office, the mailing
address of such Obligor, the location of any Inventory or Equipment, or the
location of such Obligor's books and records, and shall execute or cause to be
executed any and all documents that Lender reasonably requests in connection
therewith, including, in the case of any new location of Inventory that is not
owned by such Obligor, the waiver and consent from the lessor of such premises
that is more particularly described in clause (g) of the definition of Eligible
Inventory. If either Obligor does not have an organizational identification
number and later obtains one, such Obligor shall forthwith notify Lender of such
organizational identification number and shall execute or cause to be executed
any and all documents that Lender reasonably requests in connection therewith.
6.5 Compliance with Laws and Taxes. Each Obligor shall comply in all
material respects with all Applicable Laws. Each Obligor shall pay all real and
personal property taxes, assessments and charges, and all franchise, income,
unemployment, social security, withholding, sales and all other taxes assessed
against such Obligor or the Collateral, at such times and in such manner so as
to avoid any penalty from accruing against such Obligor or any Lien or charge
from attaching to the Collateral (except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books). Each Obligor shall promptly deliver to Lender, upon
request, receipted bills evidencing payment of such taxes and assessments.
6.6 Performance of Obligations. Each Obligor shall perform, in a timely
manner, all of its obligations pursuant to all leases, mortgages, deeds of trust
or other agreements to which such Obligor is a party, and shall pay when due all
debt owed by such Obligor and all claims of mechanics, materialmen, carriers,
landlords, warehousemen and other like persons, except only, and to the extent
that, the amount of any such debt and claims is being contested by such Obligor
in good faith by appropriate proceedings and such Obligor maintains on its books
reasonable reserves therefor in accordance with GAAP.
6.7 Reporting as to Revenues, Receivables and Inventory.
(a) With such frequency as Lender shall direct, Borrower shall deliver
to Lender such information as Lender shall request with respect to the Revenues,
Receivables and Inventory, including, but not limited to:
(i) no later than the Monday of each week, a Borrowing Base
Certificate based upon the Receivables and Inventory as of the end of
the preceding week, together with a detailed summary of the sources of
all of the Revenues, including sales of Inventory and credits and
collections associated with Receivables, for the preceding week;
(ii) no later than the 10th day of each month, detailed schedules
showing the aging of Receivables and Borrower's accounts payable as of
the end of the preceding month; and
(iii) no later than 30 days following the last day of each Fiscal
Year following the Closing Date, a complete and updated list of
Borrower's customers, including the name, address and telephone number
of each customer.
28
(b) Borrower shall notify Lender promptly if:
(i) Borrower enters into a long-term contract with the United
States of America, and, if requested by Lender, Borrower shall execute
all instruments and take all steps necessary to insure that all amounts
due and to become due under such long-term contract are properly
assigned to Lender pursuant to the Assignment of Claims Act of 1940 or
otherwise;
(ii) Borrower receives information with regard to any type or item
of Collateral which might have in any way a Materially Adverse Effect
on the value of the Collateral as a whole or the rights and remedies of
Lender with respect thereto; and
(iii) any accounts due and owing in which amounts in dispute by
any single Account Debtor on an Eligible Receivable are in excess of
$25,000, and Borrower shall explain in detail the reason for the
dispute, all claims related to the dispute, and the amount in
controversy.
6.8 Breach or Default. Obligor shall notify Lender immediately upon the
occurrence of any circumstance which: (a) makes any representation or warranty
of any Obligor contained in this Agreement or any other Loan Document incorrect
or misleading in any material respect; or (b) constitutes an Event of Default.
6.9 Maintenance of Assets. Borrower shall maintain all of its real and
personal property in good repair, working order and condition, shall make all
necessary replacements to such property so that the value and the operating
efficiency of such property will be preserved, shall prevent any personal
property from becoming a fixture to real estate (unless owned by Borrower and
encumbered by a mortgage, deed of trust, security deed or similar agreement in
favor of Lender), and will pay all rental or mortgage payments due on its real
property.
6.10 Insurance. Obligors shall procure and continuously maintain: (a)
"All Risk Extended Coverage" property insurance covering each Obligor's tangible
personal property for the full replacement value thereof; (b) "All Risk Extended
Coverage" business interruption insurance in an amount acceptable to Lender; (c)
liability insurance in an amount acceptable to Lender; and (d) such other
customary insurance coverages as are specified by Lender in its reasonable
business judgment from time to time. Each property and business interruption
insurance policy shall contain a standard Lender's Loss Payable Endorsement in
favor of Lender, providing for, among other things, thirty (30) days prior
written notice to Lender of any cancellation, non-renewal or modification of
such coverage. Obligors shall deliver to Lender certified copies of such
policies and all required endorsements, or other evidence of such insurance
acceptable to Lender. All amounts received by Lender from any such insurance
policies may be applied by Lender to the Obligations. If Obligors fail to
procure required insurance or such insurance is canceled or otherwise lapses,
Lender may procure such insurance and add the cost of such insurance to the
principal balance of the Loans.
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6.11 Use of Proceeds.
(a) Borrower shall use the proceeds of the Loans (i) to repay in full
all obligations owed to Lender under or in connection with the Existing Loan
Agreement, and (ii) for general working capital needs; and
(b) not use any part of such proceeds to purchase or to carry or reduce
or retire or refinance any credit incurred to purchase or carry, any margin
stock (within the meaning of Regulation U or T of the Board of Governors of the
Federal Reserve System) or, in any event, for any purpose which would involve a
violation of Regulation U, T or X of such Board of Governors, or for any purpose
prohibited by law or by the terms and conditions of this Agreement or any of the
Loan Documents.
6.12 Disclosure. Promptly and in no event later than five (5) Business
Days after obtaining knowledge thereof, Borrower shall (i) notify Lender if any
written information, exhibit, or report furnished to Lender contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which made, and (ii) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgment,
filing, or recordation thereof.
ARTICLE VII - NEGATIVE COVENANTS
Each Obligor covenants and agrees with Lender as follows:
7.1 Business, Management and Organization. Neither Obligor shall: (a)
make any material change in its management, which includes the following:
removing ▇▇▇▇ ▇▇▇▇▇▇ as President of Borrower; (b) make any material change in
the nature of the business that such Obligor presently conducts; (c) amend,
modify or supplement (without Lender's consent) Borrower's certificate of
formation in any manner which prevents Guarantor directly or indirectly through
one or more of its Affiliates, from electing a majority of the Board of
Borrower; (d) change its name except after first complying with Section 7.4 of
this Agreement; (e) change its state of formation or its type of organization;
(f) as to Borrower, merge or consolidate with any Person or purchase any stock
or assets of any other Person, other than assets used by Borrower in the
ordinary course of its business and other than Permitted Investments.
7.2 Disposition of Assets. Neither Obligor shall, without Lender's
written consent: (a) encumber the Collateral in favor of any party other than
Lender, whether voluntarily or involuntarily, other than the Permitted Liens; or
(b) sell, consign, lease or remove from such Obligor's business locations any of
Borrower's assets except that, until Lender gives Borrower notice to the
contrary during the existence of any Event of Default, Borrower may (i) sell
Inventory in the ordinary course of its business (any sale or exchange of
Inventory in satisfaction of indebtedness of Borrower shall not be deemed a sale
of Inventory in the ordinary course of business); (ii) sell or dispose of
obsolete assets that constitute Collateral which Borrower has determined, in
good faith, not to be useful in the conduct of its business and which, in any
Fiscal Year, do not have an aggregate fair market value in excess of $100,000;
30
and (iii) sell or dispose of obsolete assets that do not constitute Collateral
which Borrower has determined, in good faith, not to be useful in the conduct of
its business.
7.3 Loans and Guarantees. Borrower shall not make any loan or
contribute money, goods or services to, or guaranty or agree to become liable
for any obligation of, any other Person, including any Affiliates of any obligor
or any Interested Party, other than: (a) loans to employees of Borrower for
reimbursable expenses incurred by such employees in the normal course of
Borrower's business; (b) sales of Inventory on credit in the ordinary course of
business; (c) the Guaranty of Guarantor; and (d) Permitted Investments.
7.4 Capital Expenditures and Investments. Borrower shall not: (a) make
any Capital Expenditures in any Fiscal Year, in the aggregate in excess of
$250,000, or (b) make any Investment other than Permitted Investments.
7.5 Distributions and Salaries.
(a) Borrower shall not make any dividend, distribution or payment on or
with respect to any shares (other than dividends payable solely in shares of its
stock), or purchase, redeem or otherwise acquire or retire any of its stock
(except shares acquired on the conversion thereof into other shares of stock).
(b) Neither Obligor shall increase, whether by election, promotion or
otherwise, the aggregate salaries and other compensation paid to the officers of
either Obligor by more than ten percent (10%) in the aggregate in any Fiscal
Year.
[remainder of page intentionally left blank]
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7.6 Minimum EBITDA. Borrower shall achieve as the case may be, (a)
positive EBITDA as of the end of each quarter, of at least the amount shown
below for the quarter then ended, or (b) negative EBITDA as of the end of each
quarter, of no more than the amount shown below for the quarter then ended,
based upon the most recent financial statements of Borrower delivered to Lender
in accordance with Section 6.1 hereof for the immediately preceding quarter:
------------------------------------- ----------------------------------
Quarter Ending: EBITDA Amount
------------------------------------- ----------------------------------
March 31, 2003 ($850,000)
------------------------------------- ----------------------------------
June 30, 2003 ($600,000)
------------------------------------- ----------------------------------
September 30, 2003 ($400,000)
------------------------------------- ----------------------------------
December 31, 2003 ($300,000)
------------------------------------- ----------------------------------
March 31, 2004 ($200,000)
------------------------------------- ----------------------------------
June 30, 2004 ($100,000)
------------------------------------- ----------------------------------
September 30, 2004 - $0 -
------------------------------------- ----------------------------------
December 31, 2004 $100,000
------------------------------------- ----------------------------------
March 31, 2005 $200,000
------------------------------------- ----------------------------------
June 30, 2005 $300,000
------------------------------------- ----------------------------------
September 30, 2005 $400,000
------------------------------------- ----------------------------------
December 31, 2005 $500,000
------------------------------------- ----------------------------------
March 31, 2006 $600,000
------------------------------------- ----------------------------------
June 30, 2006 $700,000
------------------------------------- ----------------------------------
September 30, 2006 $800,000
------------------------------------- ----------------------------------
December 31, 2006 $900,000
------------------------------------- ----------------------------------
March 31, 2007 $1,000,000
------------------------------------- ----------------------------------
June 30, 2007 $1,100,000
------------------------------------- ----------------------------------
September 30, 2007 $1,200,000
------------------------------------- ----------------------------------
All amounts referenced in this Section shall be determined in accordance with
GAAP.
7.7 Change of Control. Borrower shall not cause, permit, or suffer,
directly or indirectly, any Change of Control.
7.8 Limitation on Indebtedness for Money Borrowed. Borrower shall not
create or suffer to exist any Indebtedness for Money Borrowed except: (i) the
Indebtedness for Money Borrowed of Borrower to Lender under this Agreement and
the Loan Documents; (ii) Indebtedness for Money Borrowed outstanding as of the
Closing Date and listed on Schedule 7.8; (iii) Indebtedness for Money Borrowed
secured by Permitted Liens; and (iv) other Indebtedness for Money Borrowed in an
aggregate amount not to exceed $100,000.
7.9 Mergers; Consolidations; Acquisitions. Without Lender's prior
written consent, Borrower shall not merge or consolidate, or permit any
Subsidiary of Borrower to merge or consolidate, with any Person; nor acquire, or
permit any of its Subsidiaries to acquire, all or any substantial part of the
properties and assets or Securities of any Person.
32
7.10 Subsidiaries. After the Closing Date, Borrower shall not create
any Subsidiaries, or transfer any assets to any Subsidiary, without Lender's
prior written consent.
7.11 Fiscal Year. Neither Obligor shall change its fiscal year end for
accounting purposes from December 31 of any year.
ARTICLE VIII - CONDITIONS PRECEDENT
8.1 The obligation of Lender to extend any credit under this Agreement,
including the making of the initial Revolving Loan Advance, the Term Loans and
any future Revolving Loan Advances, is subject to the fulfillment to Lender's
satisfaction of all of the following conditions:
(a) All legal matters incidental to the extension of credit by Lender
shall be satisfactory to counsel for Lender.
(b) Lender shall have received, in form and substance satisfactory to
Lender, each of the following, duly executed:
(i) This Agreement;
(ii) Borrower's borrowing resolutions and Guarantor's
authorizing resolutions;
(iii) UCC-1 Financing Statement(s);
(iv) An opinion of Borrower's counsel;
(v) The Deposit Account Control Agreement;
(vi) The Second Amended and Restated Continuing Guaranty
Agreement of Guarantor;
(vii) The Warrant Agreement;
(viii) A Landlord Waiver from each of Borrower's landlords;
(ix) The Information Certificates of Borrower and Guarantor; and
(x) Such other documents as Lender may require under this
Agreement.
(c) Borrower shall have established the Lockbox and Blocked Account as
required by Lender.
(d) Lender shall have received evidence of insurance and loss payee
endorsements and/or certificates of insurance naming Lender as loss payee, as
required under this Agreement, in form and substance satisfactory to Lender, at
Borrower's cost and expense.
(e) Lender shall have completed a field review of the records and other
information with respect to the Collateral as Lender may require, the results of
which shall be satisfactory to Lender in its discretion.
33
(f) Lender shall have received and reviewed UCC search results for all
jurisdictions in which assets of either Obligor are located in the United States
and their states of organization or formation, in form and substance
satisfactory to Lender.
(g) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has a valid perfected first security
interest in all of the Collateral except as otherwise permitted under this
Agreement.
(h) No Default or Event of Default shall have occurred and be
continuing.
(i) All representations and warranties of Obligors set forth in this
Agreement shall be true and correct in all material respects.
ARTICLE IX - EVENTS OF DEFAULT; REMEDIES
9.1 Events of Default. The occurrence or existence of any one or more
of the following events or conditions, whether voluntary or involuntary, shall
constitute an Event of Default:
(a) Borrower fails to pay when due (whether due at stated maturity, on
demand, upon acceleration or otherwise) any installment of principal, interest,
premium, if any, and fees on any of the Loans or otherwise owing under this
Agreement;
(b) Borrower fails to pay any of the other Obligations on the due date
thereof (whether due at stated maturity, on demand, upon acceleration or
otherwise) and such failure shall continue for a period of five (5) days after
Lender's giving Borrower written notice thereof;
(c) Borrower or any other Obligor fails or neglects to perform, keep or
observe any covenant contained in this Agreement or the other Loan Documents
(other than a covenant which is dealt with specifically elsewhere in this
Section 9.1) and the breach of such other covenant in this Agreement or the
other Loan Documents is not cured within ten (10) days after the sooner to occur
of Borrower's or such other Obligor'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 Borrower or such other Obligor;
(d) Any representation or warranty made by or on behalf of Borrower or
any other Obligor, or other information provided by or on behalf of Borrower or
any other Obligor to Lender, was incorrect or misleading in any material respect
at the time it was made or provided;
(e) Borrower any Affiliate of Borrower defaults: (i) as primary or
secondary obligor, in the payment of any principal or interest on any
Indebtedness for Money Borrowed (other than the Obligations or, for purposes of
this subsection (e) only, indebtedness owed to any party having executed a debt
or lien subordination agreement with Lender) in excess of $300,000, and such
default continues beyond any applicable grace period or, if such Indebtedness is
payable on demand, fails to pay such Indebtedness upon demand; or (ii) in the
observance of any covenant, term or condition contained in any agreement
evidencing, securing or relating to any Indebtedness for Money Borrowed (other
34
than the Obligations or, for purposes of this subsection (e) only, indebtedness
owed to any party having executed a debt or lien subordination agreement with
Lender) in excess of $300,000, if the effect of such default is to cause, or to
permit any other party to such Indebtedness to cause, all or part of such
Indebtedness to become due before its stated maturity;
(f) A writ of attachment, garnishment execution, distraint or similar
process in excess of $50,000 is issued against Borrower, any Subsidiary of
Borrower, or any of their respective properties;
(g) Lender determines, in its reasonable discretion, that a Materially
Adverse Effect has occurred, and such event is not cured within 5 Business Days
after Borrower receives, or is deemed to receive, notice of such event from
Lender;
(h) Borrower or any other Obligor becomes bankrupt; makes an assignment
for the benefit of creditors or consents to the appointment of a trustee or
receiver; a trustee or a receiver is appointed for Borrower or any other Obligor
or for a significant portion of Borrower's or any other Obligor's assets;
bankruptcy, reorganization or insolvency proceedings are instituted by or
against Borrower or any other Obligor; or if any of the foregoing occurs with
respect to any guarantor or other party liable for any of Borrower's obligations
owing to Lender;
(i) Any judgment or order for the payment of money in excess of $50,000
or in excess of $100,000 in the aggregate for all such judgments or orders, is
entered against Borrower, unless the same shall be (i) fully covered by
insurance and the issuer of the applicable policy shall have acknowledged full
coverage in writing within thirty (30) days of judgment, or (ii) vacated,
stayed, bonded, paid or discharged within a period of thirty (30) days from the
date of such judgment or order;
(j) Any Loan Document is terminated other than as provided for in this
Agreement or becomes void or unenforceable, or any Security Interest ceases to
be a valid and perfected first priority security interest in any portion of the
Collateral, other than as a result of the Permitted Liens;
(k) Any Obligor conceals, removes, or permits to be concealed or
removed, any of its assets with the intent to hinder, delay or defraud Lender or
any of any Borrower's other creditors;
(l) A Guarantor, surety or endorser for any of the Obligations dies,
defaults in any obligation owing to Lender, or prospectively terminates or
revokes such guaranty or surety;
(m) Any loss, theft, damage or destruction of any item of Collateral or
other property of Borrower which has a Materially Adverse Effect;
(n) There is filed against Borrower or any guarantor or other party
liable for any of Borrower's Obligations any civil or criminal action, suit or
proceeding under any federal or state racketeering statute (including, without
limitation, the Racketeer Influenced and Corrupt Organization Act of 1970),
which action, suit or proceeding could result in the confiscation or forfeiture
of any material portion of the Collateral;
35
(o) Any Termination Event with respect to any Plan shall have occurred;
or a decision shall have been made by Borrower or Borrower Affiliate, or any
member of the "controlled group of corporations" (as defined in Section
1563(a)(4) of the Internal Revenue Code determined without regard to Sections
1563(a) and (e)(3)(c) of such Code) of which Borrower or Borrower Affiliate is a
party, to terminate, file a notice of termination with respect to, or withdraw
from, any Plan.
9.2 Lender's Remedies. In addition to any other rights and remedies
that Lender may have, upon the occurrence and during the continuance of an Event
of Default, Lender may:
(a) Without notice to, or demand upon, Borrower:
(i) discontinue making any further Revolving Loan Advances;
(ii) terminate this Agreement;
(iii) declare all Obligations to be immediately due and payable;
(iv) take possession of all or any portion of the Collateral,
wherever located, and enter on any of the premises where
any of the Collateral may be and remove, repair and store
any of the Collateral until it is sold or otherwise
disposed of (Lender shall have the right to store, without
charge, all or any portion of the Collateral at any of
Borrower's business locations);
(v) use, without charge, Borrower's patents, copyrights, trade
names, trade secrets, trademarks, advertising materials or
any property of a similar nature, in advertising for sale
and selling any of the Collateral; and
(vi) renew, modify or extend any Receivable, grant waivers or
indulgences with respect to any Receivable, accept partial
payments on any Receivable, release, surrender or
substitute any security for payment of any Receivable, or
compromise with, or release, any party liable on any
Receivable in such a manner as Lender may, in its sole
discretion deem advisable, all without affecting or
diminishing Borrower's Obligations to Lender.
(b) With notice to Borrower:
(i) require Borrower, at Borrower's expense, to assemble the
Collateral and make the Collateral available to Lender at
locations reasonably convenient to Lender and Borrower;
(ii) sell or otherwise dispose of all or any portion of the
Collateral at public or private sale for cash or credit,
with such notice as may be required by law (in the absence
of any contrary requirement, Borrower agrees that ten (10)
days prior notice of a public or private sale of the
Collateral is reasonable), in lots or in bulk, all as
Lender, in its sole discretion, may deem advisable. Lender
shall have the right to conduct any such sales, without
charge, at Borrower's business locations. Lender may
purchase all or any portion of the Collateral at public
sale and, if permitted by law, at private sale and, in lieu
of actual payment of the purchase price, may offset the
amount of such price against the outstanding amount of the
Loans and any other amounts owing from Borrower to Lender.
36
Proceeds realized from the sale of any Collateral will be
applied in the following order: (a) to the reasonable
costs, expenses and attorneys' fees incurred by Lender in
connection with the collection, acquisition, protection and
sale of the Collateral; (b) to any accrued and unpaid
interest owing from Borrower to Lender; and (c) to any
other amounts owing from Borrower to Lender. Borrower
agrees that Borrower will remain fully liable for any
deficiency owing to Lender after the proceeds of the
Collateral have been applied to the Loans and all other
amounts owing from Borrower to Lender; and
(iii) be entitled to the appointment of a receiver upon
application therefor, without the requirement of posting a
bond or any other security.
(c) If any of the Collateral shall require repairing, maintenance,
preparation, or the like, or is in process or other unfinished state, Lender
shall have the right, but not the obligation, to repair or perform such
maintenance, preparation, processing or completion of manufacturing to place the
same in such saleable condition as Lender shall deem appropriate, but Lender
shall have the right to sell or dispose of such Collateral with or without such
processing.
ARTICLE X - JURY TRIAL WAIVER;
OTHER WAIVERS AND CONSENTS; GOVERNING LAW; AND RELEASE
10.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The provisions of this Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio, without reference to
applicable conflict of law principles.
(b) Borrower, Guarantor and Lender irrevocably consent and submit to
the non-exclusive jurisdiction of Ohio Courts in connection with the resolution
of any disputes relating to this Agreement or the other Loan Documents. Borrower
and Guarantor irrevocably waive any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this
Agreement or any of the other Loan Documents, or in any way connected with or
related or incidental to the dealings of the parties in respect of this
Agreement or the other Loan Documents or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agrees that any dispute with respect to
any such matters shall be heard only in the courts described above (except that
Lender shall have the right to bring any action or proceeding against Borrower
or its property or any other Obligor in the courts of any other jurisdiction
which Lender deems necessary or appropriate in order to realize on the
Collateral or otherwise enforce its rights against Borrower or its property, or
any guarantor of the Obligations).
(c) Each Borrower and Guarantor waives personal service of any and all
process upon it and consents that all such service of process may be made by
registered mail (return receipt requested) directed to Borrower or Guarantor, as
the case may be, at the address set forth below and service so made shall be
deemed to be completed five (5) Business Days after the same shall have been so
deposited in the U.S. mails. Nothing contained in this Agreement shall affect
the right of Lender to serve legal process by any other manner permitted by law.
37
(d) BORROWER, GUARANTOR AND LENDER EACH HEREBY WAIVE ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES TO THIS AGREEMENT IN
RESPECT OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE RELATED
TRANSACTIONS, INCLUDING WITHOUT LIMITATION, THE OBLIGATIONS OF BORROWER AND ANY
GUARANTOR, THE COLLATERAL, OR ANY INSTRUMENT, DOCUMENT OR GUARANTY DELIVERED
PURSUANT TO THIS AGREEMENT, OR THE VALIDITY, PROTECTION, INTERPRETATION,
ADMINISTRATION, COLLECTION OR ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING, WHETHER IN CONTRACT,
TORT, EQUITY OR OTHERWISE. BORROWER, GUARANTOR, AND LENDER EACH HEREBY AGREES
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL
COUNTERPART OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT
OF THE PARTIES TO THE WAIVER OF THEIR RIGHT TO A TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower or Guarantor
(whether in contract, tort, equity or otherwise) for losses suffered by Borrower
in connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted at all times in good faith and with the
exercise of ordinary care in the performance by it of the terms of this
Agreement.
10.2 Waiver of Certain Claims and Counterclaims. Borrower hereby agrees
that it will not assert against Lender any claim for consequential, incidental,
special or punitive damages in connection with this Agreement or any of the
other Loan Documents or the transactions contemplated hereby or thereby, and
Borrower expressly waives any and all right to assert any such claims. Borrower
further waives all rights to interpose any claims, deductions, setoffs or
counterclaims of any nature (other than compulsory counterclaims) in any action
or proceeding with respect to this Agreement, the Obligations, the Collateral or
any matter arising therefrom or relating hereto or thereto. No officer of Lender
has any authority to waive, condition, or modify the provisions of this section.
10.3 Indemnification. Borrower agrees to indemnify, save and hold
harmless Lender and its directors, officers, agents, attorneys and employees
from and against: (i) the use or contemplated use of the proceeds of any of the
Revolving Loan Advances or Term Loans, any transaction contemplated by this
Agreement or the other Loan Documents, or any relationship with Borrower or any
other party to this Agreement or the other Loan Documents; (ii) any
administrative or investigative proceeding by any governmental agency arising
38
out of or related to a claim, demand, action or cause of action described in
clause (i) above; and (iii) any and all liabilities, losses, costs or expenses
(including reasonable attorneys' fees and disbursements and other professional
services) that any party indemnified hereunder suffers or incurs as a result of
any foregoing claim, demand, action or cause of action; provided, however, that
no such indemnitee shall be entitled to indemnification for any loss caused by
its own gross negligence or willful misconduct. Any obligation or liability of
Borrower to any such indemnitee under this section shall survive the expiration
or termination of this Agreement and the repayment of the Loans and performance
of all Obligations.
10.4 Release of Claims. To induce Lender to enter into this Agreement,
Borrower hereby releases, acquits and forever discharges Lender, and all
officers, directors, agents, employees, successors and assigns of Lender, from
any and all liabilities, claims, demands, actions or causes of action of any
kind or nature (if there be any), whether absolute or contingent, disputed or
undisputed, at law or in equity, or known or unknown, that Borrower now has or
ever had against Lender, including without limitation those arising under or in
connection with any of the Loan Documents, the Existing Loan Agreement or any of
the other Existing Loan Documents, or Lender's negotiation, administration or
enforcement thereof, or otherwise. Borrower represents and warrants to Lender
that Borrower has not transferred or assigned to any Person any claim that
Borrower ever had or claimed to have against Lender.
ARTICLE XI - MISCELLANEOUS
11.1 Power of Attorney. Borrower irrevocably appoints Lender, and any
person designated by Lender, as Borrower's true and lawful attorney-in-fact to:
(a) endorse for Borrower, in Lender's or Borrower's name, any draft or other
order for the payment of money payable to Borrower; and (b) execute, in Lender's
or Borrower's name, Financing Statements describing the Collateral. Lender shall
not be liable to Borrower for any action taken by Lender or its designee under
this power of attorney, except to the extent that such action was taken by
Lender in bad faith or with gross negligence or willful misconduct. Borrower
agrees that a carbon, photographic or other reproduction of a Financing
Statement or this Agreement may be filed by Lender as a Financing Statement.
11.2 Outstanding Revolving Loan Advances. The outstanding principal
amount of, and accrued interest on, the Revolving Loan Advances and the Term
Loans and the Interest Rate applicable to the Revolving Loan Advances and the
Term Loans from time to time, shall be, at all times, ascertained from the
records of Lender and shall be conclusive absent manifest error.
11.3 Modifications and Course of Dealing. This Agreement constitutes
the entire agreement of Borrower and Lender relative to the subject matter
hereof. No modification of or supplement to this Agreement shall bind Lender
unless in writing and signed by an authorized officer of Lender. The enumeration
in this Agreement of Lender's rights and remedies is not intended to be
exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that Lender may have under any of the
other Loan Documents, the Uniform Commercial Code or other Applicable Law. No
course of dealing and no delay or failure of Lender to exercise any right, power
39
or privilege under any of the Loan Documents will affect any other or future
exercise of such right, power or privilege. The exercise of any one right, power
or privilege shall not preclude the exercise of any others, all of which shall
be cumulative.
11.4 Assignment and Participation. Borrower may not assign or transfer
any of their rights or delegate any of its obligations under this Agreement or
any of the other Loan Documents. Lender shall have the right, from time to time,
without notice to Borrower, to sell, assign or otherwise transfer all or any
part of its interest in this Agreement, the other Loan Documents, and the Loans
to any other party, or enter into participation arrangements with any other
party. Borrower authorizes Lender to deliver to potential assignees or
participants Borrower's financial information and all other information
delivered to Lender in furtherance of or pursuant to the terms of this
Agreement.
11.5 Delegation of Duties. Lender may execute any of its duties under
this Agreement or the other Loan Document by or through agents, employees or
attorneys-in-fact. Lender shall not be responsible for the negligence or
misconduct of any agent or attorney-in-fact selected by Lender as long as such
selection was made without gross negligence or willful misconduct.
11.6 Notices. Except as otherwise provided herein, whenever any notice, demand,
request or other communication shall or may be given to or served upon any party
by any other party, or whenever any party desires to give or serve upon any
other party any communication with respect to this Agreement, each such
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and five (5)
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
11.6), (c) one (1) Business Day after deposit with a reputable overnight courier
with all charges prepaid or (d) when hand-delivered, all of which shall be
addressed to the party to be notified and sent to the address or facsimile
number indicated in the signature page to this Agreement or to such other
address (or facsimile number) as may be substituted by notice given as herein
provided.
11.7 Expenses. Borrower agrees to pay, and to hold Lender harmless from
and against, all reasonable out-of-pocket expenses incurred by Lender (including
attorneys' fees and allocated costs of staff counsel) in connection with any
amendments, waivers or consents relating to this Agreement or any of the other
Loan Documents. Borrower further agrees to pay any reasonable fees, costs, or
expenses incurred by Lender arising in connection with Lender's enforcement or
preservation of its rights under this Agreement or any other Loan Document, or
in the collection of any of the Loans, including without limitation, attorneys'
fees (including allocated costs of staff counsel), expert fees, and legal costs.
11.8 Assignment of Receivables and Inventory. This Agreement may be
supplemented by separate assignments of Receivables and Inventory and, if such
assignments are executed, the rights and interests given by Borrower pursuant to
such assignments shall be in addition to, and not in limitation of, the rights
and security interests given by Borrower under this Agreement. Lender will not
be responsible for the safekeeping of any Inventory delivered to Lender, for the
collection of proceeds of any of the Collateral, or for losses of collected
proceeds held by Borrower in trust for Lender.
40
11.9 Binding Effect; Severability. This Agreement shall not be deemed
to create any right in any party except as provided herein and shall inure to
the benefit of, and be binding upon, the successors and assigns of Borrower and
Lender. All of Borrower's obligations under this Agreement are absolute and
unconditional and shall not be subject to any offset or deduction whatsoever.
The provisions of this Agreement are intended to be severable. If any provision
of this Agreement is held invalid or unenforceable in whole or in part, such
provision will be ineffective to the extent of such invalidity or
unenforceability without in any manner effecting the validity or enforceability
of the remaining provisions of this Agreement.
11.10 Final Agreement. This Agreement and the other Loan Documents are
intended by Borrower and Lender to be the final, complete, and exclusive
expression of the agreement between them. This Agreement supersedes any and all
prior oral or written agreements relating to the subject matter hereof. No
modification, rescission, waiver, release, or amendment of any provision of this
Agreement or any provision of any of the other Loan Documents shall be made,
except by a written agreement signed by Borrower, Guarantor and a duly
authorized officer of Lender.
11.11 Counterparts. This Agreement may be executed in any number of
counterparts, and by Lender, Borrower and Guarantor in separate counterparts,
each of which shall be an original, but all of which shall taken together
constitute one and the same agreement. The parties hereby acknowledge and agree
that facsimile signatures of this Agreement shall have the same force and effect
as original signatures.
11.12 Captions. The captions contained in this Agreement are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.
11.13 Borrower's Representative. Borrower hereby appoints and
authorizes ▇▇▇▇ ▇▇▇▇▇▇ to act as its representative and agent hereunder to issue
notices and other communications on its behalf (the "Borrower Representative").
Notwithstanding any provision herein to the contrary, Lender agrees that any
notice or other communication issued by an authorized representative on behalf
of Borrower Representative shall be acknowledged as a notice or other
communication properly issued by Borrower and that it shall not recognize any
notice or other communication that was not issued by Borrower Representative or
his authorized representative as a properly authorized notice or other
communication from Borrower.
41
The undersigned, pursuant to due authority, have caused this Agreement
to be executed as of the date set forth above.
BORROWER:
CIERA NETWORK SYSTEMS, INC.
By:___________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
GUARANTOR:
CCC GLOBALCOM CORPORATION
By: __________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
42
LENDER:
RFC CAPITAL CORPORATION
By: __________________________________
Name: ________________
Title: _________________
with a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
PARKER, HUDSON, RAINER & ▇▇▇▇▇ LLP
1500 Marquis Two Tower
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇., ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
43
ACKNOWLEDGMENT
STATE OF )
) ss:
COUNTY OF )
Before me, a Notary Public in and for said County and State, on this
day personally appeared _______________________________, known to me to be the
person whose name is subscribed to the foregoing instrument, who acknowledged
that he executed said instrument as his or her free and voluntary act and the
free and voluntary act of Borrower.
Given under my hand and Notarial Seal this _____ day of _________.
------------------------------------
Notary Public, State of __________
------------------------------------
Printed, typed or stamped name of Notary
Public
My commission expires:
44
EXHIBITS
(to Loan and Security Agreement)
EXHIBIT A
FORM OF
BORROWING BASE CERTIFICATE
See Attached
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EXHIBIT B
INFORMATION CERTIFICATE
See Attached
46
SCHEDULES
(to Loan and Security Agreement)
LIST OF SCHEDULES
Schedule 5.1(a) Organization; Qualification
Schedule 5.1(c) Borrower Affiliates
Schedule 5.1(d) Capitalization
Schedule 5.1(e) Business of Borrower
Schedule 5.2 Compliance
Schedule 5.3 Litigation
Schedule 5.4 Taxes and Returns
Schedule 5.5(a) Permitted Liens
Schedule 5.5(b) Title
Schedule 5.5(d) Inventory
Schedule 5.5(e) Equipment
Schedule 5.5(f) Real Property
Schedule 5.5(g) Corporate and Fictitious Names
Schedule 5.7 Environmental Compliance, Action, Liability
Schedule 5.8 Proprietary Rights
Schedule 5.9 Trade Names
Schedule 5.10 Employee Relations
Schedule 5.12 Bank Accounts
Schedule 6.13 Use of Proceeds
Schedule 7.8(d) Permitted Indebtedness
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