EXHIBIT 10.1
XXXXXX
SECURED REVOLVING CREDIT NOTE
$50,000,000.00
As of January 21, 1999
FOR VALUE RECEIVED, the undersigned DIAMOND MULTIMEDIA SYSTEMS,
INC. (the "Borrower"), a Delaware corporation with its principal
place of business at 0000 Xxxxxxxx Xxxxxx, Xxx Xxxx, Xxxxxxxxxx
00000-1922, hereby promises to pay to FINOVA CAPITAL CORPORATION
("Lender"), or order, at 0000 Xxxxx Xxxxxx, Xxxxx X00, Xxxx xx
Xxxxxxx, Xxxxxxxxxxxx 00000, or at such other address as the
holder may specify in writing, the principal sum of FIFTY MILLION
DOLLARS ($50,000,000.00), or such lesser sum which represents the
principal balance outstanding under the Total Facility established
pursuant to the provisions of that certain Loan and Security
Agreement dated of even date herewith, between Borrower and Lender
(the "Agreement"), plus interest in the manner and upon the terms
and conditions set forth below. This Secured Revolving Credit
Note ("Note") is made pursuant to the Agreement, the provisions of
which are incorporated herein by this reference. Capitalized
terms herein, unless otherwise noted, shall have the meaning set
forth in the Agreement. The actual amount due and owing hereunder
shall be evidenced by XXXXXX's records of receipts and
disbursements with respect to Revolving Loans, which records shall
be conclusive evidence of such amount due and owing absent
manifest error.
1.0 Rate And Payment Of Interest.
The outstanding principal balance of this Note shall bear
interest at a per annum rate of equal to the Prime Rate and as
more specifically described in the Agreement. Interest charges
and all other fees and charges herein shall be computed on the
basis of a year of 360 days and actual number of days elapsed and
shall be payable to Lender in arrears on the first Business Day of
each month hereafter at its address set forth above. Accrued but
unpaid interest under this Note shall be due and payable on the
first Business Day of each month, commencing February 1, 1999 and
at maturity, on which date all interest remaining unpaid shall be
due and payable.
2.0 Schedule of Principal Payments.
A final installment of all outstanding principal, accrued
and unpaid interest and all other sums payable pursuant to the
Loan Documents on January 21, 2001 unless due earlier pursuant to
the terms of the Loan Agreement.
3.0 Prepayment.
Prepayment may be made under this Note in whole or in part,
subject to the Prepayment Fee, as applicable, as set forth in the
Agreement.
4.0 Xxxxxx's Right Of Acceleration.
If the Agreement is terminated for any reason whatsoever, or
if there shall occur an Event of Default or if this Note is not
paid when due, the entire remaining principal balance and all
accrued and unpaid interest and other fees and charges with
respect to this Note shall, at Lender's option, become immediately
due and payable.
5.0 Holder's Rights Upon Default.
If any Event of Default occurs, then from the date such
Event of Default occurs until it is cured or waived in writing, in
addition to any agreed upon charges, the principal balance of this
Note shall thereafter, at Lender's option, bear interest at three
percentage points ( 3.00 %) per annum in excess of the interest
rate that would otherwise be charged as provided in the Agreement,
computed on the basis of a year of three hundred sixty (360) days
and the actual number of days elapsed.
6.0 Additional Rights Of Holder.
If any installment of principal or interest hereunder is not
paid when due, the holder shall have, in addition to the rights
set forth herein, in the Agreement and under law, the right to
compound interest by adding the unpaid interest to principal, with
such amount thereafter bearing interest at the rate provided in
this Note.
7.0 General Provisions.
7.1 If this Note is not paid when due or upon the occurrence of
any Event of Default, the undersigned further promises to pay all
reasonable costs of collection, foreclosure fees, reasonable
attorneys' fees and expert witness fees incurred by the holder,
whether or not suit is filed hereon, and the fees, costs and
expenses as provided in the Agreement.
7.2 The undersigned hereby consents to any and all renewals,
replacements and/or extensions of time for payment of this Note
before, at or after maturity.
7.3 The undersigned hereby consents to the acceptance, release
or substitution of security for this Note.
7.4 Presentment for payment, notice of dishonor, protest
and notice of protest are hereby expressly waived.
7.5 The contracted for rate of interest of the loan
contemplated hereby, without limitation, shall consist of the
following: (I) the interest rate set forth on the Schedule to
Loan Agreement, calculated and applied to the principal balance of
this Note in accordance with the provisions of this Note; (ii)
interest after an Event of Default, calculated and applied to the
amounts due under this Note in accordance with the provisions
hereof; and (iii) all Additional Sums (as herein defined), if any.
Xxxxxxxx agrees to pay an effective contracted for rate of
interest which is the sum of the above-referenced elements. All
reasonable fees consisting of examination fees, reasonable
attorneys' fees, expert witness fees, letter of credit fees,
collateral monitoring fees, closing fees, Facility Fees,
Anniversary Fees, Prepayment Fees, minimum interest charges, other
charges, goods, things in action or any other sums or things of
value paid or payable by Borrower (collectively, the Additional
Sums), whether pursuant to this Note, the Agreement or any other
documents or instruments in any way pertaining to this lending
transaction, or otherwise with respect to this lending
transaction, for the purpose of any applicable law that may limit
the maximum amount of interest to be charged with respect to this
lending transaction, shall be payable by Borrower as, and shall be
deemed to be, additional interest and for such purposes only, the
agreed upon and "contracted for rate of interest" of this lending
transaction shall be deemed to be increased by the rate of
interest resulting from the inclusion of the Additional Sums.
It is the intent of the parties to comply with the usury law of
the State of Arizona (the "Applicable Usury Law"). Accordingly,
it is agreed that notwithstanding any provision to the contrary in
this Note, or in any of the documents securing payment hereof or
otherwise relating hereto, in no event shall this Note or such
documents require the payment or permit the collection of interest
in excess of the maximum contract rate permitted by the Applicable
Usury Law (the "Maximum Interest Rate"). In the event (a) any
such excess of interest otherwise would be contracted for, charged
or received from Borrower or otherwise in connection with the loan
evidenced hereby, (b) the maturity of indebtedness evidenced by
this Note is accelerated in whole or in part, or (c) all or part
of the principal or interest of this Note shall be prepaid, so
that under any of such circumstances the amount of interest
contracted for, shared or received in connection with the loan
evidenced hereby, would exceed the Maximum Interest Rate, then in
any such event ( 1) the provisions of this paragraph shall govern
and control, (2) neither Borrower nor any other person or entity
now or hereafter liable for the payment hereof shall be obligated
to pay the amount of such interest to the extent that it is in
excess of the Maximum Interest Rate, (3) any such excess which may
have been collected shall be either applied as a credit against
the then unpaid principal amount hereof or refunded to Borrower,
at Lender's option, and (4) the effective rate of interest shall
be automatically reduced to the Maximum Interest Rate. It is
further agreed, without limiting the generality of the foregoing,
that to the extent permitted by the Applicable Usury Law: (x) all
calculations of interest which are made for the purpose of
determining whether such rate would exceed the Maximum Interest
Rate shall be made by amortizing, prorating, allocating and
spreading during the period of the full stated term of the loan
evidenced hereby, all interest at any time contracted for, charged
or received from Borrower or otherwise in connection with such
loan; and (y) in the event that the effective rate of interest on
the loan should at any time exceed the Maximum Interest Rate, such
excess interest that would otherwise have been collected had there
been no ceiling imposed by the Applicable Usury Law shall be paid
to Lender from time to time, if and when the effective interest
rate on the loan otherwise falls below the Maximum Interest Rate,
to the extent that interest paid to the date of calculation does
not exceed the Maximum Interest Rate, until the entire amount of
interest which would otherwise have been collected had there been
no ceiling imposed by the Applicable Usury Law has been paid in
full. Borrower further agrees that should the Maximum Interest
Rate be increased at any time hereafter because of a change in the
Applicable Usury Law, then to the extent not prohibited by the
Applicable Usury Law, such increases, if applicable, shall apply
to all indebtedness evidenced hereby regardless of when incurred;
but, again to the extent not prohibited by the Applicable Usury
Law, should the Maximum Interest Rate be decreased because of a
change in the Applicable Usury Law, such decreases shall not apply
to the indebtedness evidenced hereby regardless of when incurred.
7.6 No delay or omission on the part of the holder of this
Note in exercising any right shall operate as a waiver thereof or
of any other right.
7.7 No waiver by the holder of this Note upon any one
occasion shall be effective unless in writing nor shall it be
construed as a bar or waiver of any right or remedy on any future
occasion.
7.8 Time is of the essence for the performance by the
undersigned of the obligations set forth in this Note.
7.9 Should any one or more of the provisions of this Note
be determined illegal or unenforceable, all other provisions shall
nevertheless remain effective.
7.10 This Note cannot be changed, modified, amended or
terminated orally.
7.11 This Note shall be governed by, construed and enforced
in accordance with the laws of the State of Arizona, without
reference to the principles of conflicts of laws thereof.
7.12. THE UNDERSIGNED HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR
RELATED TO THIS NOTE AND ACKNOWLEDGES THAT XXXXXX ALSO WAIVES SUCH
RIGHT.
8.0 Security For This Note.
This Note is secured pursuant to the Agreement and is
subject to all of the terms and conditions thereof, including, but
not limited to, the remedies specified therein.
IN WITNESS WHEREOF, this Secured Revolving Credit Note has
been executed and delivered as of the date first set forth above.
DIAMOND MULTIMEDIA SYSTEMS, INC.
By:
Xxxxx X. Xxxxxx
Title: Chief Financial Officer
LOAN AND SECURITY AGREEMENT
DIAMOND MULTIMEDIA SYSTEMS, INC.
Borrower
0000 Xxxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000-1922
Borrower Fed ID Tax No. 00-0000000
$50,000,000.00 Credit Limit
January 21, 1999
THIS LOAN AND SECURITY AGREEMENT (collectively with the Schedule
to Loan Agreement (the "Schedule") attached hereto, the
"Agreement") dated the date set forth on the cover page, is
entered into by and between the borrower named on the cover page
(jointly and severally, the "Borrower"), whose address is set
forth on the cover page and FINOVA Capital Corporation ("FINOVA"),
whose address is 0000 Xxxxx Xxxxxx, Xxxxx 000, Xxxx xx Xxxxxxx,
Xxxxxxxxxxxx 00000.
1. DEFINITIONS.
1.1. Defined Terms. As used in this Agreement, the following
terms have the definitions set forth
below:
"Additional Sums" has the meaning set forth in Section 2.9 (a)
hereof.
"Affiliate" means any Person controlling, controlled by or under
common control with Borrower. For purposes of this definition,
"control" means the possession, directly or indirectly, of the
power to direct or cause direction of the management and policies
of any Person, whether through ownership of common or preferred
stock or other equity interests, by contract or otherwise.
Without limiting the generality of the foregoing. each subsidiary
of Borrower shall be an Affiliate.
"Agreement" has the meaning set forth in the preamble.
"Applicable Law" has the meaning set forth in Section 8.2 (a)
hereof.
"Applicable Usurv Law" has the meaning set forth in Section 2.9
(b) hereof.
"Blocked Account" has the meaning set forth in Section 2. 10 (c)
hereof.
"Business Day" means any day on which commercial banks in both Los
Angeles, California and Phoenix, Arizona not authorized to close.
"Capital Expenditures" means all expenditures made and liabilities
incurred for the acquisition of any fixed asset or improvement,
replacement, substitution or addition thereto which has a useful
life of more than one year and including, without limitation,
those arising in connection with Capital Leases.
"Capital Lease" means any lease of property by Borrower that, in
accordance with GAAP, should be capitalized for financial
reporting purposes and reflected as a liability on the balance
sheet of Borrower.
"Closing Fee" has the meaning set forth in the Schedule.
"Closing Date" means the date of the initial advance made by
FINOVA pursuant to this Agreement.
"Code" means the Uniform Commercial Code as adopted and in effect
in the State of Arizona from time to time.
"Collateral" has the meaning set forth in Section 3.1 hereof.
"Deposit Accounts" has the meaning set forth in Section 9105 of
the Code.
"Dominion Account" has the meaning set forth in Section 2.10 (c)
hereof.
"Earnings Before Interest, Taxes, Depreciation and Amortization"
for any fiscal period of Borrower means the net income of Borrower
for such fiscal period, plus interest expense, depreciation and
amortization and provision for income taxes for such fiscal period
and minus non-recurring miscellaneous income and expenses, all
calculated in accordance with GAAP.
"Eligible Inventory" means Inventory which FINOVA, in its
Permitted Discretion, deems Eligible Inventory, based on such
considerations as FINOVA may from time to time deem appropriate.
Without limiting the generality of the foregoing, no Inventory,
shall be Eligible Inventory unless, in FINOVA's Permitted
Discretion, such Inventory (i) consists of raw materials and
finished goods, in good, new and salable condition which are not
obsolete or unmerchantable, and are not comprised of work in
process, packaging materials or supplies; (iii) meets all
standards imposed by any governmental agency or authority; (iv)
conforms in all respects to the warranties and representations set
forth herein; (v) is at all times subject to FINOVA's duly
perfected, first priority security interest; and (vi) is situated
at a location in compliance with Section 5.16 hereof.
"Eligible Receivables" means Receivables arising in the ordinary
course of Xxxxxxxx's business from the sale of goods or rendition
of services, which FINOVA, in its Permitted Discretion, shall deem
eligible based on such considerations as FINOVA may from time to
time deem appropriate. Without limiting the foregoing, a
Receivable shall not be deemed to be an Eligible Receivable if (i)
the account debtor has failed to pay the Receivable within a
period of ninety (90) days after invoice date, to the extent of
any amount remaining unpaid after such period; (ii) the account
debtor has failed to pay more than 25% of all outstanding
Receivables owed by it to Borrower within ninety (90) days after
invoice date; (iii) the account debtor is an Affiliate of
Borrower; (iv) the goods relating thereto are placed on
consignment, guaranteed sale, "bill and hold," "COD" or other
terms pursuant to which payment by the account debtor may be
conditional; (v) the account debtor is not located in the United
States, unless the Receivable is supported by a letter of credit,
credit insurance, or other form of guaranty or security, in each
case in form and substance satisfactory to FINOVA; (vi) the
account debtor is the United States or any department, agency or
instrumentality thereof or any State. city or municipality of the
United States unless the provisions of the applicable Assignment
of Claims Act has been complied with: (vii) Borrower is or may
become liable to the account debtor for goods sold or services
rendered by the account debtor to Borrower; (viii) the account
debtor's total obligations to Borrower exceed 15% of all Eligible
Receivables, to the extent of such excess; (ix) the account debtor
disputes liability or makes any claim with respect thereto (up to
the amount of such liability or claim), or is subject to any
insolvency or bankruptcy proceeding, or becomes insolvent, fails
or goes out of a material portion of its business; (x) the amount
thereof consists of late charges or finance charges; (xi) the
amount thereof consists of a credit balance more than ninety (90)
days past due: (xii) the face amount thereof exceeds Three Million
Dollars ($3,000,000), unless accompanied by evidence of shipment
of the goods relating thereto satisfactory to FINOVA in its
Permitted Discretion; (Xiii) the invoice constitutes a progress
billing on a project not yet completed, except that the final
billing at such time as the matter has been completed and
delivered to the customer may be deemed an Eligible Receivable: or
(xiv) the amount thereof is not yet represented by an invoice or
bill issued in the name of the applicable account debtor.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment,
furnishings, fixtures, trade fixtures, motor vehicles, tools,
parts, dyes, jigs, goods and other tangible personal property
(other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any
of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of
the foregoing, wherever located.
"Environmental Costs" has the meaning set forth in Section 8.2 (b)
hereof.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter
become a member of a group of which Borrower is a member and which
is treated as a single employer under ERISA Section 4001(b)(1), or
IRC Section 414.
"Event of Default" means any of the events set forth in Section
7.1 hereof.
"Examination Fee" has the meaning set forth in the Schedule.
"Facilitv Fee" has the meaning set forth on the Schedule.
"FINOVA Affiliate" has the meaning set forth in Section 9.22
hereof.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time as set
forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and the statements and pronouncements of the Financial
Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently
applied, except that, for the financial covenants set forth in
this Agreement, GAAP shall be determined on the basis of such
principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements
delivered to Lender prior to the date hereof.
"General Intangibles" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower,
including, without limitation, all choses in action, causes of
action, corporate or other business records, Deposit Accounts,
inventions, designs, drawings, blueprints, Trademarks, Licenses
and Patents, names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and
other deposits, rights in all litigation presently or hereafter
pending for any cause or claim (whether in contract, tort or
otherwise), and all judgments now or hereafter arising therefrom,
rights to purchase or sell real or personal property, rights as a
licensor or licensee of any kind, royalties, telephone numbers,
proprietary information, purchase orders, and all insurance
policies and claims (including without limitation credit,
liability, property and other insurance) tax refunds and claims,
computer programs, discs, tapes and tape files, claims under
guaranties, security interests or other security held by or
granted to Borrower to secure payment of any of the Receivables by
an account debtor, all rights to indemnification and all other
intangible property of every kind and nature (other than
Receivables).
"Hazardous Substance" has the meaning set forth in Section 8.2
(a) hereof.
"Indebtedness" means all of Borrower's present and future
obligations, liabilities, debts, claims and indebtedness,
contingent, fixed or otherwise, however evidenced, created,
incurred, acquired, owing or arising, whether under written or
oral agreement, operation of law or otherwise, and includes,
without limiting the foregoing (i) the Obligations, (ii)
obligations and liabilities of any Person secured by a lien,
claim, encumbrance or security interest upon property owned by
Xxxxxxxx, even though Xxxxxxxx has not assumed or become liable
therefor, (iii) obligations and liabilities created or arising
under any lease (including Capital Leases) or conditional sales
contract or other title retention agreement with respect to
property used or acquired by Xxxxxxxx, even though the rights and
remedies of the lessor, seller or lender are limited to
repossession, (iv) all unfunded pension fund obligations and
liabilities and (v) deferred taxes.
"Inventory" means all of Borrower's now owned and hereafter
acquired goods, merchandise or other personal property, wherever
located, to be furnished under any contract of service or held for
sale or lease, all raw materials, work in process, finished goods
and materials and supplies of any kind, nature or description
which are or might be used or consumed in Borrower's business or
used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such goods, merchandise or
other personal property, and all documents of title or other
documents representing them.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"L C Fee" has the meaning set forth in Section 2.4 hereof.
"Letters of Credit" has the meaning set forth in Section 2.4
hereof.
"Loans" has the meaning set forth in Section 2.2 hereof.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Xxxxxxxx and payable to FINOVA, and any other
present or future agreement entered into in connection with this
Agreement, together with all alterations, amendments, changes,
extensions, modifications, refinancings, refundings, renewals,
replacements, restatements, or supplements, of or to any of the
foregoing.
"Loan Party" means Borrower, and each other party (other than
FINOVA) to any Loan Document.
"Loan Reserves" means, as of any date of determination, such
amounts as FINOVA may from time to time establish and revise in
good faith reducing the amount of Revolving Credit Loans and
Letters of Credit which would otherwise be available to Borrower
under the lending formula(s) provided in the Schedule: (a) to
reflect events, conditions, contingencies or risks which, as
determined by FINOVA in good faith, do or may reasonably be
expected to affect either (i) the Collateral or any other property
which is security for the Obligations or its value, (ii) the
assets, business or prospects of Borrower or any Guarantor or
(iii) the security interests and other rights of FINOVA in the
Collateral (including the enforceability, perfection and priority
thereof) or (b) to reflect FINOVA's good faith belief that any
collateral report or financial information furnished by or on
behalf of Borrower or any Guarantor to FINOVA is or is reasonably
likely to have been incomplete, inaccurate or misleading in any
material respect or (c) in respect of any state of facts which
FINOVA determines in good faith constitutes an Event of Default or
may, with notice or passage of time or both, constitute an Event
of Default."
"Loan Year" means each twelve month period commencing on the
Closing Date.
"Maximum Interest Rate" has the meaning set forth in Section 2.9
(c) hereof.
"Multiemployer Plan" means a "multiemployer plan" as defined in
ERISA Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which
covers employees of Borrower or any ERISA Affiliate.
"Obligations" means all present and future loans, advances,
debts, liabilities, obligations, covenants, duties and
indebtedness at any time owing by Borrower to FINOVA, whether
evidenced by this Agreement, any note or other instrument or
document, whether arising, from an extension of credit, opening of
a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment and
any participation by FINOVA in Xxxxxxxx's debts owing to others),
absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, xxxxxxx's fees,
expert witness fees, Examination Fee, letter of credit fees,
Collateral Monitoring Fee, Closing Fee, Facility Fee, Termination
Fee, Minimum Interest Charge and any other sums chargeable to
Borrower hereunder or under any other agreement with FINOVA.
Notwithstanding the foregoing, if FINOVA acquires by assignment
any unsecured indebtedness, such indebtedness shall not
automatically become secured by reason of this definition.
"Overadvance" has the meaning set forth in Section 2.3.
"Overline" has the meaning set forth in Section 2.3.
"PBGC" means the Pension Benefit Guarantee Corporation.
"Permitted Discretion" means FINOVA's judgment exercised in good
faith based upon its consideration of any factor which FINOVA
believes in good faith: (i) will or could reasonably be expected
to adversely affect the value of any Collateral, the
enforceability or priority of FINOVA's liens thereon or the amount
which FINOVA would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in
the liquidation of such Collateral; (ii) suggests that any
collateral report or financial information delivered to FINOVA by
any Person on behalf of the Borrower is incomplete, inaccurate or
misleading in any material respect; (iii) materially increases
the likelihood of a bankruptcy, reorganization or other insolvency
proceeding involving the Borrower, any Loan Party or any of the
Collateral, or (iv) creates or reasonably could be expected to
create an Event of Default. In exercising such judgment, FINOVA
may consider such factors already included in or tested by the
definition of Eligible Receivables or Eligible Inventory, as well
as any of the following: (i) the financial and business climate
of the Borrower's industry and general macroeconomic conditions,
(ii) changes in collection history and dilution with respect to
the Receivables, (iii) changes in demand for, and pricing of,
Inventory, (iv) changes in any concentration of risk with respect
to Receivables and/or Inventory, and (v) any other factors that
change the credit risk of lending to the Borrower on the security
of the Receivables and Inventory. The burden of establishing
lack of good faith hereunder shall be on the Borrower.
"Permitted Encumbrance" means the following: (1) purchase money
security interests in specific
Equipment; (ii) leases of specific items of Equipment; (iii) lines
for taxes, fees, assessments or other govemmental charges or
levies, either not delinquent or being contested in good faith by
appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP, provided the same have no
priority over FINOVA's security interests; (iv) liens of
materialmen, mechanics, warehousemen, carriers, or other similar
liens arising in the ordinary course of business and securing
obligations which either are not delinquent more than 45 days or
are being contested in good faith by appropriate proceedings and
for which adequate reserves have been established in accordance
with GAAP; (v) any judgment that is otherwise not an Event of
Default, unless the judgment it secures is not fully covered by
insurance and has not been discharged execution thereon
effectively stayed and bonded against pending appeal within 30
days of the entry thereof; (vi) liens existing on Equipment at the
time of its acquisition or lease by Borrower, provided that the
lien is confined solely to Equipment and improvements acquired
after the date hereof; (vii) licenses granted to others of
Borrower's Trademarks, Copyrights, Licenses and Patents that do
not interfere in any material respect with the business of
Borrower; (viii) easements, rights of way, servitudes or zoning or
building, restrictions and other minor encumbrances on real
property and irregularities in the title to such property which do
not in the aggregate materially impair the use or value of such
property or risk the loss or forfeiture of title thereto; and (ix)
liens which constitute banker's liens, rights of set-off or
similar rights and remedies as to deposit accounts or other funds
maintained with any bank or financial institution arising by
operation of law.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, limited liability company, government, or any agency
or political division thereof, or any other entity.
"Plan" means any plan described in ERISA Section 3(2) maintained
for employees of Borrower or any ERISA Affiliate, other than a
Multiemployer Plan.
"Prepared Financials" means the balance sheets of Borrower as of
the date set forth in the Schedule in the section entitled
'Reporting Requirements'', and as of each subsequent date on which
audited balance sheets are delivered to FINOVA from time to time
hereunder, and the related statements of operations, changes in
stockholder's equity and changes in cash flow for the periods
ended on such dates.
"Prime Rate" has the meaning set forth in the Schedule.
"Prohibited Transaction" means any transaction described in
Section 406 of ERISA which is not exempt by reason of Section 408
of ERISA, and any transaction described in Section 4975(c) of the
IRC which is not exempt by reason of Section 4975(c)(2) of the
IRC.
"Property" has the meaning set forth in Section 8.2(a) hereof.
"Quick Ratio" has the meaning set forth on the Schedule.
"Receivable Loans" has the meaning set forth on the Schedule.
"Receivables" means all of Xxxxxxxx's now owned and hereafter
acquired accounts (whether or not earned by performance), proceeds
of any letters of credit naming Borrower as beneficiary, contract
rights, chattel paper, instruments, documents and all other forms
of obligations at any time owing to Borrower, all guaranties and
other security therefor, whether secured or unsecured, all
merchandise returned to or repossessed by Xxxxxxxx, and all rights
of stoppage in transit and all other rights or remedies of an
unpaid vendor, lienor or secured party.
"Reportable Event" means a reportable event described in Section
4043 of ERISA or the regulations thereunder, a withdrawal from a
Plan described in Section 4063 of ERISA, or a cessation of
operations described in Section 4068(f) of ERISA.
"Revolving Credit Loans" has the meaning set forth in the
Schedule.
"Revolving Credit Limit" has the meaning set forth in the
Schedule.
"Revolving Interest Rate" has the meaning set forth in the
Schedule.
"Schedule" has the meaning set forth in the preamble.
"Subordinated Debt" means liabilities of Borrower the repayment of
which is subordinated, to the payment and performance of the
Obligations, pursuant to a subordination agreement acceptable to
FINOVA in its reasonable discretion.
"Tangible Net Worth" at any time means an amount equal to, (i)
the sum of the amounts at which Borrower's cash, Receivables,
Inventory (calculated at the lower of cost or market and
determined on a first-in, first-out basis) and net fixed assets
would be shown on a balance sheet of Borrower at such date
prepared in accordance with GAAP, provided that amounts due from
Affiliates shall be excluded therefrom, minus (ii) Total
Indebtedness of Borrower at such date.
"Term" has the meaning set forth on the Schedule.
"Termination Fee" has the meaning set forth in Section 9.2(d)
hereof.
"Total Facility" has the meaning set forth in Section 2.1 hereof.
"Trademarks, Copyrights, Licenses and Patents" means all of
Borrower's right, title and interest in and to, whether now owned
or hereafter acquired: (i) trademarks, trademark registrations,
trade names, trade name registrations, and trademark or trade name
applications, including without limitation such as are listed on
the Schedule attached hereto and made a part hereof, as the same
may be amended from time to time. and (a) renewals thereof, (b)
all income, royalties, damages and payments now and hereafter due
and/or payable with respect thereto, including without limitation,
damages and payments for past or future infringements thereof, (c)
the right to sue for past, present and future infringements
thereof, (d) all rights corresponding thereto throughout the
world, and (e) the goodwill of the business operated by Borrower
connected with and symbolized by any trademarks or trade names;
(ii) copyrights, copyright registrations and copyright
applications, including without limitation such as are listed on
the Schedule attached hereto and made a part hereof, as the same
may be amended from time to time, and (a) renewals thereof, (b)
all income, royalties, damages and payments now and hereafter due
and/or payable with respect thereto, including without limitation,
damages and payments for past or future infringements thereof, (c)
the right to sue for past, present and future infringements
thereof, and (d) all rights corresponding thereto throughout the
world; (iii) license agreements, including without limitation such
as are listed on the Schedule attached hereto and made a part
hereof, and the right to prepare for sale, sell and advertise for
sale any Inventory now or hereafter owned by Borrower and now or
hereafter covered by such licenses; and (iv) patents and patent
applications, registered or pending, including without limitation
such as are listed on the Schedule attached hereto, together with
all income, royalties, shop rights, damages and payments thereto,
the right to sue for infringements thereof, and all rights thereto
throughout the world and all reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof.
"Unused Line Fee" has the meaning set forth in the Schedule.
1.2. Other Terms. All accounting terms used in this Agreement,
unless otherwise indicated, shall have the meanings given to such
terms in accordance with GAAP. All other terms contained in this
Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined
therein.
2. LOANS; INTEREST RATE AND OTHER CHARGES.
2.1 Total Facility. Upon the terms and conditions set
forth herein and provided that no Event of Default or event which,
with the giving of notice or the passage of time, or both, would
constitute an Event of Default, shall have occurred and be
continuing, FINOVA shall, upon Borrowers request, make advances to
Borrower from time to time in an aggregate outstanding principal
amount not to exceed the Total Facility amount (the "Total
Facility") set forth on the Schedule hereto, subject to deduction
of reserves for accrued interest and such other reserves as FINOVA
deems proper from time to time, and less amounts FINOVA may be
obligated to pay in the future on behalf of Borrower. The
Schedule is an integral part of this Agreement and all references
to "herein", "herewith" and words of similar import shall for all
purposes be deemed to include the Schedule.
2.2 Loans. Advances under , the Total Facility ("Loans" and
individually, a "Loan" ) shall be
comprised of the amounts shown on the Schedule.
2.3. Overlines; Overadvances. If at any time or for any
reason the outstanding amount of advances (including all Letters
of Credit) extended or issued pursuant hereto exceeds any of the
dollar limitations ("Overline") or percentage limitations
("Overadvance") in the Schedule, then Borrower shall, upon
FINOVA's demand, immediately pay to FINOVA, in cash, the full
amount of such Overline or Overadvance which, at FINOVA's option,
may be applied to reduce the outstanding principal balance of the
Loans and/or cash collateralize all or any part of any outstanding
Letters of Credit. Without limiting Borrower's obligation to
repay to FINOVA on demand the amount of any Overline or
Overadvance, Borrower agrees to pay FINOVA interest on the
outstanding principal amount of any Overline or Overadvance, on
demand, at the rate set forth on the Schedule and applicable to
the Revolving Credit Loans.
2.4. Letters of Credit. At the request of Xxxxxxxx, FINOVA
may, in its Permitted Discretion, arrange for the issuance of
letters of credit for the account of Borrower and guarantees of
payment of such letters of credit, in each case in form and
substance satisfactory to FINOVA in its sole discretion
(collectively, "Letters of Credit"). The aggregate face amount of
all outstanding Letters of Credit from time to time shall not
exceed the amount shown on the Schedule, and shall be reserved
against the availability of Revolving Credit Loans. Borrower
shall pay all customary bank charges for the issuance of Letters
of Credit, together with an additional fee to FINOVA equal to the
percentage set forth on the Schedule of the aggregate face amount
of each Letter of Credit outstanding from time to time during the
term of this Agreement (the "L/C Fee"). The L/C Fee shall be
deemed to be fully earned upon the issuance of each Letter of
Credit and shall be due and payable on the first Business Day of
each month following a month during which any Letter of Credit is
outstanding. Any advance by FINOVA under or in connection with a
Letter of Credit shall constitute an Obligation hereunder. Each
Letter of Credit shall have an expiry date no later than thirty
(30) days prior to the last day of the Term. Immediately upon
any termination of this Agreement, Borrower shall either: (i)
provide cash collateral to FINOVA in an amount equal to 105% of
the maximum amount of FINOVA's obligations under or in connection
with all then outstanding Letters of Credit, or (ii) cause to be
delivered to FINOVA releases of all FINOVA's obligations under
outstanding Letters of Credit. At FINOVA's discretion, any
proceeds of Collateral received by FINOVA may be held as the cash
collateral required by this Section 2.4. Borrower hereby agrees
to indemnify, save, and hold FINOVA harmless from any loss, cost,
expense, or liability, including payments made by FINOVA,
reasonable expenses, and reasonable attorneys' fees incurred by
FINOVA arising out of or in connection with any Letters of Credit.
Borrower agrees to be bound by the issuing bank's regulations and
interpretations of any Letters of Credit guarantied by FINOVA and
opened for Borrower's account or by FINOVA's interpretations of
any Letter of Credit issued by FINOVA for Xxxxxxxx's account, and
Borrower understands and agrees that FINOVA shall not be liable
for any error, negligence, or mistake, whether of omission or
commission, in following Xxxxxxxx's instructions or those
contained in the Letters of Credit or any modifications,
amendments, or supplements thereto, except to the extent resulting
from XXXXXX's gross negligence or willful misconduct. Xxxxxxxx
understands that FINOVA may indemnify the bank issuing a Letter of
Credit for certain costs or liabilities arising out of claims by
Borrower against such issuing bank. Xxxxxxxx hereby agrees to
indemnify and hold FINOVA harmless with respect to any loss, cost,
expense, or liability incurred by FINOVA under any such
indemnification by FINOVA to any issuing bank.
2.5. Loan Account All advances made hereunder (including
without limitation all advances made by FINOVA under or in
connection with any Letter of Credit) shall be added to and deemed
part of the Obligations when made. FINOVA may from time to time
charge all Obligations of Borrower to Xxxxxxxx's loan account with
XXXXXX.
2.6. Interest; Fees. Borrower shall pay FINOVA interest on
the daily outstanding balance of the Obligations at the per annum
rate and at the times set forth on the Schedule. Borrower shall
also pay FINOVA the fees set forth on the Schedule.
2.7. Default Interest Rate. Upon the occurrence and during
the continuation of an Event of Default, Borrower shall pay FINOVA
interest on the daily outstanding balance of the Obligations and
any L/C Fee at a rate per annum which is three percent (3%) in
excess of the rate which would otherwise be applicable thereto
pursuant to the Schedule.
2.8. Examination Fee. Xxxxxxxx agrees to pay to FINOVA the
Examination Fee in the amount set forth on the Schedule in
connection with each audit or examination of Borrower performed by
FINOVA prior to or after the date hereof. Without limiting the
generality of the foregoing, Borrower shall pay to FINOVA an
initial Examination Fee in an amount equal to the amount set forth
on the Schedule. Such initial Examination Fee shall be deemed
fully earned at the time of payment and due and payable upon the
closing of this transaction, and shall be deducted from any good
faith deposit paid by Borrower to FINOVA prior to the date of this
Agreement.
2.9. Excess Interest.
(a) The contracted for rate of interest of the loan
contemplated hereby, without limitation, shall consist of the
following: (i) the interest rate set forth on the Schedule,
calculated and applied to the principal balance of the Obligations
in accordance with the provisions of this Agreement; (ii) interest
after an Event of Default, calculated and applied to the amount of
the Obligations in accordance with the provisions hereof, and
(iii) all Additional Sums (as herein defined), if any. Xxxxxxxx
agrees to pay an effective contracted for rate of interest which
is the sum of the above-referenced elements. The Examination Fee,
attorney's fees, expert witness fees, letter of credit fees,
collateral monitoring fees, closing fees, facility fees,
Termination Fees, other charges, goods, things in action or any
other sums or things of value paid or payable by Borrower
(collectively, the "Additional Sums"), whether pursuant to this
Agreement or any other documents or instruments in any way
pertaining to this lending transaction, or otherwise with respect
to this lending transaction, that under any applicable law may be
deemed to be interest with respect to this lending transaction,
for the purpose of any applicable law that may limit the maximum
amount of interest to be charged with respect to this lending
transaction, shall be payable by Borrower as, and shall be deemed
to be. additional interest and for such purposes only, the agreed
upon and "contracted for rate of interest" of this lending
transaction shall be deemed to be increased by the rate of
interest resulting from the inclusion of the Additional Sums.
(b) It is the intent of the parties to comply the usury
laws of the State of Arizona (the "Applicable Usury Law").
Accordingly, it is agreed that notwithstanding any provisions to
the contrary in this Agreement, or in any of the documents
securing payment hereof or otherwise relating hereto, in no event
shall this Agreement or such documents require the payment or
permit the collection of interest in excess of the maximum
contract rate permitted by the Applicable Usury Law (the "Maximum
Interest Rate"). In the event (a) any such excess of interest
otherwise would be contracted for, charged or received from
Borrower or otherwise in connection with the loan evidenced
hereby, or (b) the maturity of the Obligations is accelerated in
whole or in part, or (c) all or part of the Obligations shall be
prepaid, so that under any of such circumstances the amount of
interest contracted for, shared or received in connection with the
loan evidenced hereby, would exceed the Maximum Interest Rate,
then in any such event (1) the provisions of this paragraph shall
govem and control, (2) neither Borrower nor any other Person now
or hereafter liable for the payment of the Obligations shall be
obligated to pay the amount of such interest to the extent that it
is in excess of the Maximum Interest Rate, (3) any such excess
which may have been collected shall be either applied as a credit
against the then unpaid principal amount of the Obligations or
refunded to Borrower, at FINOVA's option, and (4) the effective
rate of interest shall be automatically reduced to the Maximum
Interest Rate. It is further agreed, without limiting the
generality of the foregoing, that to the extent permitted by the
Applicable Usury Law; (x) all calculations of interest which are
made for the purpose of determining whether such rate would exceed
the Maximum Interest Rate shall be made by amortizing, prorating,
allocating and spreading during the period of the full stated term
of the loan evidenced hereby, all interest at any time contracted
for, charged or received from Borrower or otherwise in connection
with such loan: and (y) in the event that the effective rate of
interest on the loan should at any time exceed the Maximum
Interest Rate. such excess interest that would otherwise have been
collected had there been no ceiling imposed by the Applicable
Usury Law shall be paid to FINOVA from time to time, if and when
the effective interest rate on the loan otherwise falls below the
Maximum Interest Rate, to the extent that interest paid to the
date of calculation does not exceed the Maximum Interest Rate,
until the entire amount of interest which would otherwise have
been collected had there been no ceiling imposed by the Applicable
Usury Law has been paid in full. Borrower further agrees that
should the Maximum Interest Rate be increased at any time
hereafter because of a change in the Applicable Usury Law, then to
the extent not prohibited by the Applicable Usury Law, such
increases shall apply to all indebtedness evidenced hereby
regardless of when incurred; but, again to the extent not
prohibited by, the Applicable Usury Law, should the Maximum
Interest Rate be decreased because of a change in the Applicable
Usury Law, such decreases shall not apply to the indebtedness
evidenced hereby regardless of when incurred.
2.10. Principal Payments: Proceeds of Collateral.
(a) Principal Payments. Except where evidenced by
notes or other instruments issued or made by Borrower to FINOVA
specifically containing payment provisions which are in conflict
with this Section 2.10 (in which event the conflicting provisions
of said notes or other instruments shall govem and control), that
portion of the Obligations consisting of principal payable on
account of Loans shall be payable by Borrower to FINOVA
immediately upon the earliest of (i) the Term, (ii) the occurrence
of an Event of Default in consequence of which FINOVA elects to
accelerate the maturity and payment of such loans, or (iii) any
termination of this Agreement pursuant to Section 9.2 hereof;
provided, however. that any Overadvance or Overline shall be
payable on demand pursuant to the provisions of Section 2.3
hereof.
(b) Collections. Upon the occurrence of an Event of
Default, FINOVA may, at its option and in its sole discretion and
in addition to all of its other rights under the Loan Documents,
require Borrower to make collection of all Receivables for FINOVA
by directing all account debtors and other third parties to remit
all payments owing to Borrower to a lockbox established in
connection with the Blocked Account. In the event Borrower shall
nevertheless directly receive any payments or other financial
proceeds of any Collateral, Borrower shall receive all payments as
trustee of FINOVA and immediately deliver all payments to FINOVA
in their original form as set forth below, duly endorsed in blank
or cause the same to be deposited into a Blocked Account Dominion
Account.
(c) Establishment of a Lockbox Account or Dominion Account.
Upon the occurrence of an Event of
Default, FINOVA may, at its option and in its sole discretion and
in addition to all of its other rights under the Loan Documents,
require Borrower to cause all proceeds of Collateral to be
deposited into a lockbox account, or such other "blocked account"
as FINOVA may require (each. a "Blocked Account") pursuant to an
arrangement with such bank as may be selected by Borrower and be
acceptable to FINOVA which proceeds, unless otherwise provided
herein, shall be applied in payment of the Obligations in such
order as FINOVA determines in accordance with Section 2.12. In
such event, Xxxxxxxx shall issue to any such bank an irrevocable
letter of instruction directing said bank to transfer such funds
so deposited to FINOVA, either to any account maintained by FINOVA
at said bank or by wire transfer to appropriate account(s) of
FINOVA. All funds deposited in a Blocked Account shall
immediately become the sole property of FINOVA and Borrower shall
obtain the agreement by such bank to waive any offset rights
against the funds so deposited. FINOVA assumes no responsibility
for any Blocked Account arrangement, including without limitation,
any claim of accord and satisfaction or release with respect to
deposits accepted by any bank thereunder. Alternatively, FINOVA
may establish depository accounts in the name of FINOVA at a bank
or banks for the deposit of such funds (each, a "Dominion
Account') and Borrower shall deposit all proceeds of Receivables
and all cash proceeds of any sale of Inventory or, to the extent
permitted herein, Equipment or cause same to be deposited, in
kind, in such Dominion Accounts of FINOVA in lieu of depositing
same to Blocked Accounts, and, unless otherwise provided herein,
all such funds shall be applied by FINOVA to the Obligations in
such order as FINOVA determines in accordance with Section 2.12,
with any remaining balance to be promptly paid over to Borrower.
(d) Payments Without Deductions. Borrower shall pay
principal, interest, and all other amounts payable hereunder, or
under any other Loan Document, without any deduction whatsoever,
including, but not limited to, any deduction for any setoff or
counterclaim.
(e) Collection Days Upon Repayment. In the event
Borrower repays the Obligations in full at any time hereafter,
such payment in full shall be credited (conditioned upon final
collection) to Borrowers loan account two (2) Business Days after
FINOVA's receipt thereof.
(f) Monthly Accountings. FINOVA shall provide
Borrower monthly with an account of advances, charges, expenses
and payments made pursuant to this Agreement. Such account shall
be deemed correct, accurate and binding on Borrower and an account
stated (except for reverses and reapplications of payments made
and corrections of errors discovered by FINOVA), unless Borrower
notifies FINOVA in writing to the contrary within thirty (30) days
after each account is rendered, describing the nature of any
alleged errors or admissions.
2.11. Application of Collateral. Except as otherwise
provided herein. FINOVA shall have the continuing and exclusive
right to apply or reverse and re-apply any and all payments to any
portion of the Obligations in such order and manner as FINOVA
shall determine in its sole discretion. To the extent that
Borrower makes a payment or FINOVA receives any payment or
proceeds of the Collateral for Borrower's benefit which is
subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver or any other party under any
bankruptcy law, common law or equitable cause, or otherwise, then,
to such extent, the Obligations or part thereof intended to be
satisfied shall be revived and continue as if such payment or
proceeds had not been received by FINOVA.
2.12. Application of Payments. The amount of all payments or
amounts received by FINOVA with respect to the Loan shall be
applied to the extent applicable under this Agreement: (i) first,
to accrued interest through the date of such payment, including
any Default Interest; (ii) then, to any late fees, overdue risk
assessments, Examination Fee and expenses, collection fees and
expenses and any other fees and expenses due to FINOVA hereunder;
and (iii) last, the remaining balance, if any, to the unpaid
principal balance of the Loan; provided however, while an Event of
Default exists under this Agreement, or under any other Loan
Document, each payment hereunder shall be (x) held as cash
collateral to secure Obligations relating to any Letters of Credit
or other contingent obligations arising under the Loan Documents
and/or (y) applied to amounts owed to FINOVA by Borrower as FINOVA
in its sole discretion may determine. In calculating interest and
applying payments as set forth above: (a) interest shall be
calculated and collected through the date a payment is actually
applied by FINOVA under the terms of this Agreement; (b) interest
on the outstanding balance shall be charged during any grace
period permitted hereunder; (c) at the end of each month, all
accrued and unpaid interest and other charges provided for
hereunder shall be added to the principal balance of the Loan; and
(d) to the extent that Borrower makes a payment or FINOVA receives
any payment or proceeds of the Collateral for Borrower's benefit
that is subsequently invalidated, set aside or required to be
repaid to any other Person, then, to such extent, the Obligations
intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by FINOVA and FINOVA may
adjust the Loan balances as FINOVA, in its sole discretion, deems
appropriate under the circumstances.
2.13. Notification of Closing. Borrower shall provide FINOVA
with at least forty-eight (48) hours prior written notice of the
Closing Date, to enable FINOVA to arrange for the availability of
funds. In the event the closing does not take place on the date
specified in Borrower's notice to FINOVA, other than through the
fault of FINOVA, Xxxxxxxx agrees to reimburse FINOVA for FINOVA's
costs to maintain the necessary funds available for the closing,
at the Revolving Interest Rate with respect to an amount equal to
the initial advance under the Revolving Credit Loans facility
which is to be made on the Closing Date, for the number of days
which elapse between the date specified in Borrower's notice and
the date upon which the closing actually occurs (which number of
days shall not include the date specified in Borrower's notice,
but shall include the Closing Date).
3. SECURITY.
3.1 Security Interest in the Collateral. To secure the
payment and performance of the Obligations when due, Borrower
hereby grants to FINOVA a first priority security interest
(subject only to Permitted Encumbrances) in all of Borrower's now
owned or hereafter acquired or arising Inventory, Equipment,
Receivables, life insurance policies and the proceeds thereof,
Trademarks, Copyrights, Licenses and Patents, Investment Property
(as defined in Section 9-115 of the Code) and General Intangibles,
including, without limitation, all of Borrower's Deposit Accounts,
money, any and all property now or at any time hereafter in
FINOVA's possession (including claims and credit balances), and
all proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties), all
products and all books and records and computer data related to
any of the foregoing; provided that in no event shall Collateral
include any licenses of or agreements related to franchises,
trademarks, copyrights, patents or similar intellectual property
licensed by Borrower from or to third parties or otherwise owned
by and used with the permission of third parties, to the extent
that such are consistent with past practices and made in the
ordinary course of business and the grant of a security interest
therein would terminate, violate or otherwise cause a default
under any such license or agreement; (all of the foregoing,
together with all other property in which FINOVA may be granted a
lien or security interest, is referred to herein, collectively, as
the "Collateral").
3.2. Perfection and Protection of Security Interest. Borrower
shall, at its expense, take all actions requested by FINOVA at any
time to perfect, maintain, protect and enforce FINOVA's first
priority security interest and other rights in the Collateral and
the priority thereof from time to time, including, without
limitation, (i) executing and filing financing or continuation
statements and amendments thereof and executing and delivering
such documents and titles in connection with motor vehicles as
FINOVA shall require, all in form and substance satisfactory to
FINOVA, (ii) maintaining a perpetual inventory and complete and
accurate stock records, (iii) delivering to FINOVA warehouse
receipts covering any portion of the Collateral located in
warehouses and for which warehouse receipts are issued, and
transferring Inventory to warehouses designated by FINOVA, (iv)
placing notations on Borrower's books of account to disclose
FINOVA's security interest therein and (v) delivering to FINOVA
all letters of credit on which Borrower is named beneficiary.
FINOVA may file, without Xxxxxxxx's signature, one or more
financing statements disclosing FINOVA's security interest under
this Agreement. Xxxxxxxx agrees that a carbon, photographic,
photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. If
any Collateral is at any time in the possession or control of any
warehouseman, bailee or any of Borrower's agents or processors,
Borrower shall notify such Person of FINOVA's security interest in
such Collateral and, upon FINOVA's request, instruct them to hold
all such Collateral for FINOVA's account subject to FINOVA's
instructions. From time to time, Borrower shall, upon FINOVA's
request, execute and deliver confirmatory written instruments
pledging the Collateral to FINOVA, but Xxxxxxxx's failure to do so
shall not affect or limit FINOVA's security interest or other
rights in and to the Collateral. Until the Obligations have been
fully satisfied and XXXXXX's obligation to make further advances
hereunder has terminated, XXXXXX's security interest in the
Collateral shall continue in full force and effect.
3.3. Preservation of Collateral. FINOVA may, in its
Permitted Discretion, at any time discharge any lien or
encumbrance on the Collateral or bond the same, pay any insurance,
maintain guards, pay any service bureau, obtain any record or take
any other action to preserve the Collateral and charge the cost
thereof to Borrowers loan account as an Obligation.
3.4. Insurance. Borrower will maintain and deliver
evidence to FINOVA of such insurance as is required by FINOVA,
written by insurers, in amounts customary for similarly situated
businesses, and with lender's loss payee and additional insured,
and other endorsements, satisfactory to FINOVA. All premiums with
respect to such insurance shall be paid by Xxxxxxxx as and when
due. Accurate and certified copies of the policies shall be
delivered by Borrower to FINOVA. If Borrower fails to comply
with this Section, FINOVA may (but shall not be required to)
procure such insurance and endorsements at Borrower's expense and
charge the cost thereof to Borrower's loan account as an
Obligation.
3.5. Collateral Reporting: Inventory.
(a) Invoices. Borrower shall not re-date any
invoice or sale from the original date thereof or make sales on
extended terms beyond those customary in Borrower's industry.
Borrower may extend or modify the term of any Receivable, provided
such extension or modification is consistent with past practices
and made in the ordinary course of business and so long as doing
so would not invalidate any insurance coverage or cause an
Overadvance, and no Event of Default otherwise exists. If
Borrower becomes aware of any matter affecting any Receivable,
including information affecting the credit of the account debtor
thereon, Borrower shall promptly notify FINOVA in writing.
(b) Instruments. In the event any Receivable is
or becomes evidenced by a promissory note, trade acceptance or any
other instrument for the payment of money, Borrower shall
immediately deliver such instrument to FINOVA appropriately
endorsed to FINOVA and, regardless of the form of any presentment,
demand, notice of dishonor, protest and notice of protest with
respect thereto, Borrower shall remain liable thereon until such
instrument is paid in full.
(c) Physical Inventory. Borrower shall conduct a
physical count of the Inventory at such intervals as FINOVA
requests, (but not more than quarterly, except that such
limitation shall not apply upon the occurrence of an Event of
Default) and promptly supply FINOVA with a copy of such accounts
accompanied by a report of the value (calculated at the lower of
cost or market value on a first in, first out basis) of the
Inventory and such additional information with respect to the
Inventory as FINOVA may reasonably request from time to time.
(d) Returns. For so long as no Event of Default
has occurred and is continuing and subject to the provisions of
Section 3.6(b), if any account debtor returns any Inventory to
Borrower in the ordinary course of its business, Borrower shall
promptly determine the reason for such return and promptly issue a
credit memorandum to the account debtor (sending a copy to FINOVA)
in the appropriate amount. In the event any attempted return
occurs after the occurrence and during the continuance of any
Event of Default, Borrower shall (i) hold the returned Inventory
in trust for FINOVA, (ii) segregate all returned Inventory from
all of Borrower's other property, (iii) conspicuously label the
returned Inventory as FINOVA's property, and (iv) immediately
notify FINOVA of the return of any Inventory, specifying the
reason for such return, the location and condition of the returned
Inventory, and on FINOVA's request deliver such returned Inventory
to FINOVA.
(e) Borrower shall not consign any Inventory.
3.6. Receivables.
(a) Eligibility. (i) Borrower represents and warrants
that each Receivable when created or reported to FINOVA covers and
shall cover a bona fide sale or lease and delivery by it of goods
or the rendition by it of services in the ordinary course of its
business, and shall be for a liquidated amount and FINOVA's
security interest shall not be subject to any offset, deduction,
counterclaim, rights of return or cancellation, lien or other
condition. If any representation or warranty herein is breached
as to any Receivable or any Receivable ceases to be an Eligible
Receivable for any reason other than payment thereof, then FINOVA
may, in addition to its other rights hereunder, designate any and
all Receivables owing by that account debtor as not Eligible
Receivables; provided, that FINOVA shall in any such event retain
its security interest in all Receivables, whether or not Eligible
Receivables, until the Obligations have been fully satisfied and
FINOVA's obligation to provide loans hereunder has terminated.
(ii) FINOVA at any time shall be entitled
to (i) establish and increase or decrease reserves against
Eligible Receivables and Eligible Inventory, (ii) in the exercise
of FINOVA's Permitted Discretion, reduce the advance rates in the
Schedule or restore such advance rates to any level equal to or
below the advance rates set forth in the Schedule or (iii) impose
additional restrictions (or eliminate the same) to the standards
of eligibility set forth in the definitions of "Eligible
Receivables" and "Eligible Inventory," in the exercise of its
Permitted Discretion. FINOVA may but shall not be required to
rely on the schedules and/'or reports delivered to FINOVA in
connection herewith in determining the then eligibility of
Receivables and Inventory. Reliance thereon by FINOVA from time
to time shall not be deemed to limit the right of FINOVA to revise
advance rates or standards of eligibility as provided above.
(b) Disputes. Borrower shall notify FINOVA
promptly of all disputes or claims and settle or adjust such
disputes or claims at no expense to FINOVA, but no discount,
credit or allowance shall be granted to any account debtor and no
returns of merchandise shall be accepted by Borrower without
FINOVA's consent, except for discounts, credits and allowances
made or given in the ordinary course of Xxxxxxxx's business.
FINOVA may, at any time after the occurrence and during the
continuance of an Event of Default, settle or adjust disputes or
claims directly with account debtors for amounts and upon terms
which FINOVA considers advisable in its reasonable credit judgment
and, in all cases, FINOVA shall credit Borrower's loan account
with only the net amounts received by FINOVA in payment of any
Receivables.
3.7. Equipment. Borrower shall keep and maintain the
Equipment in good operating condition and repair and make all
necessary replacements thereto to maintain and preserve the value
and operating efficiency thereof at all times consistent with
Borrower's past practice, ordinary wear and tear and obsolescence
excepted. Borrower shall not permit any item of Equipment to
become a fixture (other than a trade fixture) to real estate or an
accession to other property.
3.8. Other Liens; No Disposition of Collateral. Borrower
represents, warrants and covenants that except for FINOVA's
security interest, Permitted Encumbrances, and such other liens,
claims and encumbrances as may be permitted by FINOVA in its sole
discretion from time to time in writing, (a) all Collateral is and
shall continue to be owned by it free and clear of all liens,
claims and encumbrances whatsoever and (b) Borrower shall not,
without FINOVA's prior written approval, sell, encumber or dispose
of or permit the sale, encumbrance or disposal of any Collateral
or all or any substantial part of any of its other assets (or any
interest of Borrower therein), except for the sale of Inventory in
the ordinary course of Xxxxxxxx's business. In the event FINOVA
gives any such prior written approval with respect to any such
sale of Collateral, the same may be conditioned on the sale price
being equal to, or greater than, the fair market value or lesser
amount acceptable to FINOVA. The proceeds of any such sales of
Collateral shall be remitted to FINOVA pursuant to this Agreement
for application to the Obligations.
3.9. Collateral Security. The Obligations shall constitute
one loan secured by the Collateral.
FINOVA may, in its reasonable discretion, (i) exchange, enforce,
waive or release any of the Collateral, (ii) apply Collateral and
direct the order or manner of sale thereof as it may determine,
and (iii) settle, compromise, collect or otherwise liquidate any
Collateral in any reasonable manner without affecting its right to
take any other action with respect to any other Collateral.
4. CONDITIONS OF CLOSING.
4.1 Initial Advance. The obligation of FINOVA to make the
initial advance hereunder or to issue or arrange for the issuance
of the initial Letter of Credit hereunder is subject to the
fulfillment, to the satisfaction of FINOVA and its counsel, of
each of the following conditions on or prior to the date set forth
on the Schedule:
(a) Loan Documents. FINOVA shall have received each of
the following Loan Documents: (i) the Agreement fully and properly
executed by Xxxxxxxx: (ii) promissory notes in such amounts not to
exceed the Total Facility and on such terms and conditions as
FINOVA shall specify, executed by Borrower; (iii) such security
agreements, intellectual property assignments, pledge agreements,
mortgages and deeds of trust as FINOVA may require with respect to
this Agreement and any Guaranties, executed by each of the parties
thereto and, if applicable, duly acknowledged for recording or
filing in the appropriate govemmental offices; (iv) such other
documents, instruments and agreements in connection herewith as
FINOVA shall reasonably require, executed, certified and/or
acknowledged by such parties as FINOVA shall reasonably designate;
(b) Terminations By Existing Lender. Borrower's
existing lender(s) shall have executed and delivered UCC
termination statements and other documentation evidencing the
termination of its liens and security interests in the assets of
Borrower or a subordination agreement in form and substance
satisfactory to FINOVA in its sole discretion;
(c) Charter Documents. FINOVA shall have
received copies of Xxxxxxxx's By-laws and Articles or Certificate
of Incorporation, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of Borrower:
(d) Good Standing. FINOVA shall have received
a certificate of corporate status with respect to Borrower, dated
within ten (10) days prior to the Closing Date, by the Secretary
of State of the state of
incorporation of Borrower, which certificate shall indicate that
Borrower is in good standing in such state:
(e) Foreign Qualification. FINOVA shall have
received certificates of corporate status with respect to Borrower
and each other Loan Party, each dated within ten (10) days prior
to the Closing Date, issued by the Secretary of State of each
state in which such party's failure to be duly qualified or
licensed would have a material adverse effect on its financial
condition or assets, indicating, that such party is in good
standing;
(f) Authorizing Resolutions and Incumbency.
FINOVA shall have received a certificate from the Secretary of
Borrower attesting, to (i) the adoption of resolutions of
Xxxxxxxx's Board of Directors, and shareholders or members if
necessary, authorizing the borrowing of money from FINOVA and
execution and delivery of this Agreement and the other Loan
Documents to which Xxxxxxxx is a party, and authorizing specific
officers of Borrower to execute same, and (ii) the authenticity of
original specimen signatures of such officers:
(g) Insurance. FINOVA shall have received the
insurance certificates and certified copies of policies required
by Section 3.4 hereof, in form and substance satisfactory to
FINOVA and its counsel, together with an additional insured
endorsement in favor of FINOVA with respect to ail liability
policies and a lender's loss payable endorsement in favor of
FINOVA with respect to all casualty and business interruption
policies, each in form and substance acceptable to FINOVA and its
counsel;
(h) Title Insurance. FINOVA shall have received
binding commitments to issue such title insurance with respect to
Collateral or security for Guaranties which is comprised of real
property as it shall determine;
(i) Searches: Certificates of Title. FINOVA shall have
received searches reflecting the filing of its financing
statements and fixture filings in such jurisdictions as it shall
determine, and shall have received certificates of title with
respect to the Collateral which shall have been duly executed in a
manner sufficient to perfect all of the security interests granted
to FINOVA;
(j) Landlord, Bailee and Mortgagee Waivers. FINOVA
shall have received landlord, bailee and/or mortgagee waivers from
the lessors, bailees and/or mortgagees of all locations where any
Collateral is located;
(k) Fees. Borrower shall have paid all fees payable
by it on the Closing Date pursuant to this Agreement;
(l) Opinion of Counsel. FINOVA shall have received an
opinion of Xxxxxxxx's counsel covering such matters as FINOVA
shall determine in its sole discretion:
(m) Officer Certificate. FINOVA shall have received a
certificate of the President or the Chief Financial Officer or
similar official of Xxxxxxxx, attesting to the accuracy of each of
the representations and warranties of Borrower set forth in this
Agreement and the fulfillment of all conditions precedent to the
initial advance hereunder;
(n) Solvency Certificate. If requested, FINOVA
shall have received a signed certificate of the Borrower's duly
elected Chief Financial Officer concerning the solvency and
financial condition of
Borrower, on FINOVA's standard form;
(o) Search and References. FINOVA shall have
received and approved the results of UCC, tax lien, litigation,
judgment, and bankruptcy searches regarding Borrower, and shall
have received satisfactory customer, vendor and credit reference
checks on Borrower.
(p) No Material Adverse Changes. Prior to the
Closing Date, there shall have occurred no material adverse change
in the financial condition of Borrower, or in the condition of the
assets of Borrower, from that shown on the draft financial
statements for Borrower dated on the date set forth in the
Schedule. At the closing, Xxxxxxxx shall deliver to FINOVA an
officer's certification confirming that Borrower is unaware of the
existence of any such material adverse change in Seller's
financial condition.
(q) Material Agreements. FINOVA shall have received,
reviewed and approved all material agreements to which Borrower
shall be a party.
(r) Projections. Borrower shall submit cash flow
projections and pro forma balance sheet with adjusting entries (i)
showing that the proposed financing will provide sufficient funds
for the Borrower's projected working capital needs, and (ii)
showing: (1) that the Borrower will have reasonably sufficient
capital for the conduct of its business following the initial
funding, and (2) that the Borrower will not incur debts beyond its
ability to pay such debts as they mature.
(s) Opinions. To the extent any Person other than
Borrower shall be parties to the Loan Documents, FINOVA reserves
the right to require satisfactory opinions of counsel for each
such Person concerning the proper organization of such Person and
the due authorization, execution, delivery, enforceability,
validity and binding effect of the Loan Documents to which such
Person is a party. Each such opinion of counsel shall confirm. to
the satisfaction of FINOVA, that the opinion is being delivered to
FINOVA at the instruction of the party represented by such
counsel, that FINOVA is entitled to rely on such opinion and that
for purposes of such reliance, FINOVA is deemed to be in privity,
with the opining counsel.
(t) Schedule Conditions. Borrower shall have complied
with all additional conditions precedent as set forth in the
Schedule attached hereto.
(u) Other Matters. All other documents and legal
matters in connection with the transactions contemplated by this
Agreement shall have been delivered, executed and recorded and
shall be in form and substance satisfactory to FINOVA and its
counsel including, without limitation, each of the items listed on
the Closing Checklist attached as Exhibit 4.1 hereto.
4.2. Subsequent Advances._ The obligation of FINOVA to make
any advance or issue or cause any Letter of Credit to be issued
hereunder (including the initial advance or Letter of Credit)
shall be subject to the further conditions precedent that, on and
as of the date of such advance or Letter of Credit issuance: (a)
the representations and warranties of Borrower set forth in this
Agreement shall be accurate in all material respects, before and
after giving effect to such advance or issuance and to the
application of any proceeds thereof, (b) no Event of Default and
no event which, with notice or passage of time or both, would
constitute an Event of Default has occurred and is continuing, or
would result from such advance or issuance or from the application
of any proceeds thereof; (c) no material adverse change has
occurred in the Borrower's business, operations, financial
condition, in the condition of the Collateral or other assets of
Borrower or in the prospect of repayment of the Obligations; and
(d) FINOVA shall have received such other approvals, opinions or
documents as FINOVA shall reasonably request.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
5.1. Due Organization. It is a corporation duly organized,
validly existing and in good standing under the laws of the State
set forth on the Schedule, is qualified and authorized to do
business and is in good standing in all states in which such
qualification and good standing are necessary in order for it to
conduct its business and own its property, except where failure to
do so could not reasonably be expected to have a material adverse
effect on Borrower, and has all requisite power and authority to
conduct its business as presently conducted, to own its property
except where failure to have same could not reasonably be expected
to have a material adverse effect on Borrower and to execute and
deliver each of the Loan Documents to which it is a party and
perform all of its Obligations thereunder, and has not taken any
steps to wind-up. dissolve or otherwise liquidate its assets:
5.2. Other Names. Borrower has not, during the preceding
five (5) years, been known by or used any other corporate or
fictitious name except as set forth on the Schedule, nor has
Borrower been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets
of any Person during such time;
5.3. Due Authorization. The execution, delivery and performance
by Borrower of the Loan Documents to which it is a party have been
authorized by all necessary corporate action and do not and shall
not constitute a violation of any applicable law or of Borrowers
Articles or Certificate of Incorporation or By-
Laws or any other document, agreement or instrument to which
Borrower is a party or by which Borrower or its assets are bound:
5.4. Binding Obligation. Each of the Loan Documents to which
Borrower is a party is the legal, valid and binding obligation of
Borrower enforceable against Borrower in accordance with its
terms;
5.5. Intangible Property. Borrower possesses adequate
assets, licenses, patents, patent applications, copyrights,
trademarks, trademark applications and trade names for the present
conduct of its business without any known conflict with the rights
of others, and each is valid and has been duly registered or filed
with the appropriate govemmental authorities, and for the planned
future conduct of its business can readily obtain such on
commercially reasonable terms; each of borrower's trademarks
patent applications, copyrights, trademarks and trademark
applications which have been registered or filed with any
govemmental authority (including the U.S. Patent and Trademark
Office and the Library of Congress) are listed by name, date and
filing number on the Schedule;
5.6. Capital. Borrower has capital sufficient to conduct its
business, is able to pay its debts as they mature, and owns
property having a fair salable value occurred which, with the
giving of notice or the lapse of greater than the amount required
to pay all of its debts (including, reasonably anticipated
contingent debts);
5. 7. Material Litigation. Xxxxxxxx has no pending or overtly
threatened litigation, actions or proceedings except as disclosed
in Borrower's 10-K and 10-K. None of which could reasonably be
expected to materially and adversely affect its business, assets,
operations, prospects or condition, financial or otherwise, or the
Collateral or any of FINOVA's interests therein;
5.8. Title; Security Interests of FINOVA. Xxxxxxxx has
good, indefeasible and merchantable title to the Collateral and,
upon the execution and delivery of the Loan Documents the filing
of UCC-1 Financing Statements, delivery of the certificate(s)
evidencing any pledged securities, the filing of any collateral
assignments or security agreements regarding Borrower, Trademarks,
Copyrights, Licenses and/or Patents, if any, with the appropriate
govemmental offices and the recording of any been mortgages or
deeds of trust with respect to real property, in each case in the
appropriate offices, this Agreement and such documents shall
create valid and perfected first priority liens in the Collateral,
subject only to Permitted Encumbrances;
5.9. Restrictive Agreements; Labor Contracts. Borrower is
not a party or subject to any contract or subject to any charge,
corporate restriction, judgment, decree or order materially and
adversely affecting its business, assets, operations, prospects
condition, financial or otherwise, or which restricts its right or
ability to incur Indebtedness other than the Obligations, and it
is not party to any labor dispute. In addition, no labor contract
is scheduled to expire during the Initial Term of this Agreement,
except as disclosed to FINOVA in writing prior to the date hereof;
5.10. Laws. Borrower is not in violation of any
applicable statute, regulation, ordinance or any order of any
court, tribunal or govemmental agency, in any respect materially
and adversely affecting the Collateral or its business, assets,
operations, prospects or condition, financial or otherwise;
5.11. Consents. Borrower has obtained or caused to be
obtained or issued any required consent of a govemmental agency or
other Person in connection with the financing contemplated hereby;
5.12 Defaults. Borrower is not in default in any material
respect with respect to any note, indenture, loan agreement,
mortgage, lease, deed or other agreement to which it is a party or
by which it or its assets are bound under which there is an
indebtedness outstanding or available in excess of $5,000,000, nor
has any event occurred which, with the giving of notice or the
lapse of time, or both, would cause such a default;
5.13. Financial Condition. The Prepared Financials fairly
present Borrowers financial condition and results of operations
and those of such other Persons described therein as of the date
thereof in accordance with GAAP; there are no material omissions
from the Prepared Financials or other facts or circumstances not
reflected in the Prepared Financials; and there has been no
material and adverse change in such financial condition or
operations since the date of the initial Prepared Financials
delivered to FINOVA hereunder;
5.14. ERISA. None of Borrower, any ERISA Affiliate, or any
Plan is or has been in violation of any of the provisions of
ERISA, any of the qualification requirements of IRC Section 401(a)
or any of the published interpretations thereunder, nor has
Borrower or any ERISA Affiliate received any notice to such
effect. No notice of intent to terminate a Plan has been filed
under Section 4041 of ERISA, nor has any Plan terminated under
ERISA. The PBGC has not instituted proceedings to terminate, or
appointed a trustee administer, a Plan. No lien upon the assets
of Borrower has arisen with respect to a Plan. No prohibited
transaction or Reportable Event has occurred with respect Labor to
a Plan. Neither Borrower nor any ERISA Affiliate has incurred any
withdrawal liability with respect to any Multiemployer Plan.
Borrower and each ERISA Affiliate have made all contributions
required to be made by them or to any Plan or Multiemployer Plan
when due. There is no accumulated funding deficiency in any Plan,
whether or not waived;
5.15. Taxes. Xxxxxxxx has filed all tax returns and
such other reports as it is required by law to file and has paid
or made adequate provision for the payment on or prior to the date
when due of all taxes, assessments and similar charges that are
due and payable, except where contested in good faith by
appropriate proceedings and adequate reserves have been
established in accordance with GAAP;
5.16. Locations; Federal Tax ID No. Xxxxxxxx's chief
executive office and the offices and locations where it keeps the
Collateral (except for inventory in transit) are at the locations
set forth on the Schedule, except to the extent that such
locations may have been changed after notice to FINOVA in
accordance with Section 6.4 hereof, Xxxxxxxx's federal tax
identification number is as shown on the Schedule;
5.17. Business Relationships. There exists no actual or
threatened termination, cancellation or limitation of, or any
modification or change in, the business relationship between
Borrower and any customer or any group of customers related to
each other whose purchases individually or in the aggregate are
material to the business of Borrower, or with any material
supplier, and there exists no present condition or state of facts
or circumstances which could reasonably be expected to material
and adversely affect Borrower or prevent Borrower from conducting,
such business after the consummation of the transactions
contemplated by this Agreement in substantially the same manner in
which it has heretofore been conducted: and
5.18. Reaffirmations. Each request for a loan made by
Borrower pursuant to this Agreement shall constitute (i) an
automatic representation and warranty by Borrower to FINOVA that
there does not then exist any Event of Default and (ii) a
reaffirmation as of the date of said request of all of the
representations and warranties of Borrower contained in this
Agreement and the other Loan Documents.
6. COVENANTS.
6.1. Affirmative Covenants. Borrower covenants that, so
long as any Obligation remains outstanding, and this Agreement is
in effect, it shall:
6.1.1. Taxes. File all tax returns and pay or make
adequate provision for the payment of all taxes, assessments and
other charges on or prior to the date when due, except where
contested in good faith by appropriate proceedings and adequate
reserves have been established in accordance with GAAP
6.1.2. Notice Of Litigation. Promptly notify FINOVA in
writing, of any litigation, suit or administrative proceeding
which may materially and adversely affect the Collateral or
Borrowers business, assets, operations, prospects or condition,
financial or otherwise, whether or not the claim is covered by
insurance.
6.1.3. ERISA. Notify FINOVA in writing (i)
promptly upon the occurrence of any event described in Paragraph
4043 of ERISA, other than a termination, partial termination or
merger of a Plan or a transfer of a Plan's assets and (ii) prior
to any termination, partial termination or merger of a Plan or a
transfer of a Plan's assets;
6.1.4. Change in Location. Notify FINOVA in writing
thirty (30) days prior to any change in the location of Xxxxxxxx's
chief executive office or the location of any Collateral, or
Borrower's opening or closing of any other place of business;
6.1.5. Corporate Existence. Maintain its corporate
existence and its qualification to do business and good standing
in all states necessary for the conduct of its business and the
ownership of its property, except where failure to do so could not
reasonably be expected to have a material adverse effect on
Borrower, and maintain adequate assets, licenses, patents,
copyrights, trademarks and trade names for the conduct of its
business;
6.1.6. Labor Disputes. Promptly notify FINOVA in writing of
any labor dispute to which Xxxxxxxx is or may become subject and
the expiration of any labor contract to which Borrower is a party
or bound;
6.1.7. Violations of Law. Promptly notify FINOVA in
writing of any violation of any law, statute, regulation or
ordinance of any governmental entity, or of any agency thereof,
applicable to Borrower which may materially and adversely affect
the Collateral or Borrower's business, assets, prospects,
operations or condition, financial or otherwise:
6.1.8. Defaults. Notify FINOVA in writing within five (5)
Business Days of Borrower's default under any note, indenture,
loan agreement, mortgage, lease or other agreement to which
Borrower is a party or by which Borrower is bound under which
there is an Indebtedness outstanding, or available in excess of
$5,000,000, or of any other default under any Indebtedness of
Borrower outstanding or available in excess of $5,000,000;
6.1.9. Capital Expenditures. Promptly notify FINOVA in
writing of the making of any Capital Expenditure materially
affecting Borrowers business, assets, prospects, operations or
condition, financial or otherwise, except to the extent permitted
in the Schedule;
6.1.10. Books and Records. Keep adequate records
and books of account with respect to its business activities in
which proper entries are made in accordance with GAAP, reflecting
all of its financial transactions;
6.1.11. Leases; Warehouse Agreements. Provide FINOVA with (i)
copies of all agreements between Borrower and any landlord,
warehouseman or bailee which owns any premises at which any
Collateral may, from time to time, be located (whether for
processing, storage or otherwise), and (ii) without limiting the
landlord, bailee and/or mortgagee waivers to be provided pursuant
to Section 4.1 (j) hereof, additional landlord, bailee and/or
mortgagee waivers in form acceptable to FINOVA with respect to all
locations where any material portion of Collateral, as determined
in FINOVA's sole discretion, is hereafter located;
6.1.12. Additional Documents. At FINOVA's request, promptly
execute or cause to be executed and delivered to FINOVA any and
all documents, instruments or agreements reasonably deemed
necessary by FINOVA to facilitate the collection of the
Obligations or the Collateral or otherwise to give effect to or
carry out the terms or intent of this Agreement or any of the
other Loan Documents. Without limiting the Generality of the
foregoing, if any of the Receivables arises out of a contract with
the United States of America or any department, agency,
subdivision or instrumentality thereof, (i) prior to the
occurrence of an Event of Default, Borrower shall promptly notify
FINOVA in writing of any such Receivable in excess of $2.000,000,
and shall execute any instruments and take any other action
reasonably required or requested by FINOVA to comply with the
provisions of the Federal Assignment of Claims Act, and (ii) upon
the occurrence of an Event of Default, Borrower shall promptly
notify FINOVA in writing of any such Receivable (without dollar
limitation) and shall execute any instruments and take any other
action reasonably required or requested by FINOVA to comply with
the provisions of the Federal Assignment of Claims Act; and
6.1.13. Financial Covenants. Comply with the financial
covenants set forth on the Schedule.
6.2. Negative Covenants. Without FINOVA's prior written
consent, which consent FINOVA may withhold in its sole discretion,
so long as any Obligation remains outstanding and this Agreement
is in effect, Borrower shall not:
6.2.1. Mergers. Merge or consolidate with or acquire any
other Person, or make any other material change in its capital
structure or in its business or operations, which could reasonably
be expected to adversely affect the repayment of the Obligations:
6.2.2. Loans. Make advances, loans or extensions of
credit to, or invest in, any Person in excess of $500,000 in the
aggregate;
6.2.3. Dividends. Declare or pay cash dividends upon any of
its stock or distribute any of its property or redeem, retire,
purchase or acquire directly or indirectly any of its stock in
excess of $500,000 in the aggregate:
6.2.4. Adverse Transactions. Enter into any transaction
which materially and adversely affects the Collateral or its
ability to repay the Obligations in full as and when due;
6.2.5. Indebtedness of Others. Guarantee or become
directly or contingently liable for the Indebtedness of any
Person, except by (i) endorsement of instruments for deposit, (ii)
for the existing guarantees made by Borrower prior to the date
hereof, if any, which are set forth in the Schedule: (iii)
contingent obligation with respect to letters of credit, banker's
acceptances, surety bonds and the like in the ordinary course of
business, (iv) contingent obligations of Borrower with respect to
any obligations of a subsidiary, (vi) continent obligations in
connection with permitted investments under Section 6.2.2. and
(vii) contingent obligations consisting of guaranties and other
credit support in respect of transactions entered into in the
ordinary course of business and any other contingent obligations,
not to exceed $20,000.000 in the aggregate at any time.
6.2.6. Repurchase. Make a sale to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval,
consignment, or any other repurchase or return basis:
6.2.7. Name. Use any corporate or fictitious name other
than its corporate name as set forth in its Articles or
Certificate of Incorporation on the date hereof, or as set forth
on the Schedule, or other names with respect to which Xxxxxxxx has
given FINOVA at least thirty (30) days prior written notice;
6.2.8. Prepayment. Prepay any Indebtedness other than trade
payables and other than the
Obligations;
6.2.9. Capital Expenditure. Make or incur any Capital
Expenditure if, after giving effect thereto, the aggregate amount
of all Capital Expenditures by Borrower in any fiscal year would
exceed the amount set forth on the Schedule;
6.2.10. Compensation. Pay total compensation, including
salaries, withdrawals, fees, bonuses, commissions, drawing
accounts and other payments, whether directly or indirectly. in
money or otherwise, during any fiscal year to all of Borrower's
executives, officers and directors (or any relative thereof) in an
amount in excess of the amount set forth on the Schedule;
6.2.11 Indebtedness. Create, incur, assume or permit to
exist any Indebtedness (including Indebtedness in connection with
Capital Leases) in excess of the amount set forth on the Schedule,
other than (i) the Obligations, (ii) trade payables and other
contractual obligations to suppliers and customers incurred in the
ordinary course of business, and (iii) other Indebtedness existing
on the date of this Agreement and reflected in the Prepared
Financials (except Indebtedness paid on the date of this Agreement
from proceeds of the initial advances hereunder), (iv)
Subordinated Debt, (v) intercompany Indebtedness, (vi)
Indebtedness consisting of contingent obligations permitted by
Section 6.2.5. (vii) purchase money Indebtedness secured by
Permitted Encumbrances, and (viii) other Indebtedness not to
exceed $10,000,000 at any time outstanding;
6.2.12. Affiliate Transactions. Except as set forth
below or as otherwise permitted by this Agreement, sell, transfer,
distribute or pay any money or property to any Affiliate, or
invest in (by capital contribution or otherwise) or purchase or
repurchase any stock or Indebtedness, or any property, of any
Affiliate, or become liable on any guaranty of the indebtedness,
dividends or other obligations of any Affiliate. Notwithstanding
the foregoing, Borrower may pay compensation permitted by Section
6.23 to employees who are Affiliates and, if no Event of Default
has occurred, Borrower may (i) engage in transactions with
Affiliates in the normal course of business, in amounts and upon
terms which are fully disclosed to FINOVA and which are no less
favorable to Borrower than would be obtainable in a comparable
arm's length transaction with a Person who is not an Affiliate,
and (ii) make payments to a Subordinating Creditor that is an
Affiliate, subject to and only to the extent expressly permitted
in the Subordination Agreement between such Subordinating Creditor
and FINOVA;
6.2.13. Nature of Business. Enter into any
new business, except business reasonably related or incidental to
Xxxxxxxx's current business, or make any material change in any of
Borrower's business objectives, purposes or operations;
6.2.14. XXXXXX's Name. Use the name of FINOVA in connection
with any of Borrower's business or activities, except in
connection with internal business matters or as required in
dealings with governmental agencies and financial institutions or
with trade creditors of Borrower, solely for credit reference
purposes; or
6.2.15. Margin Security. Borrower will not (and has not in
the past) engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of
Regulation G or Regulation U issued by the Board of Governors of
the Federal Reserve System), and no proceeds of any Loan or other
advance will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying
any margin stock, or in any manner which might cause such Loan or
other advance or the application of such proceeds to violate (or
require any regulatory filing under) Regulation G, Regulation T,
Regulation U, Regulation X or any other regulation of the Board of
Governors of the Federal Reserve System, in each case as in effect
on the date or dates of such Loan or other advance and such use of
proceeds. Further, no proceeds of any Loan or other advance will
be used to acquire any security of a class which is registered
pursuant to Section 12 of the Securities Exchange Act of 1934.
6.2.16. Real Property. Purchase or acquire any real
property without FINOVA's prior written consent, a condition of
which consent shall include delivery of appropriate environmental
reports and analysis, in form and substance satisfactory to FINOVA
and its counsel.
7. DEFAULT AND REMEDIES.
7.1. Events of Default Any one or more of the following
events shall constitute an Event of Default under this Agreement:
(a) Borrower fails to pay when due and payable any
portion of the Obligations at stated maturity, upon acceleration
or otherwise and such failure shall continue for three (3)
Business Days;
(b) Borrower or any other Loan Party fails or neglects to
perform, keep or observe any covenant or agreement contained in
Sections 6.1.4, 6.1.5, 6.1.11, 6.1.13 or 6.2, or (ii) Borrower or
any other Loan Party fails or neglects to perform, keep or observe
any other Obligation including, but not limited to, any other
term, provision, condition, covenant or agreement contained in any
Loan Document to which Borrower or such other Loan Party is a
party, unless such failure or neglect is cured by Borrower or such
Loan Party within 15 days after the occurrence thereof,
(c) Any material adverse change occurs in
Borrower's business, assets, operations, prospects or financial
condition in the aggregate, provided that seasonably and monthly
fluctuations in the volume of Borrower's business activity which
are reasonably consistent with Borrower's past practices shall not
constitute a material adverse change in Borrower's business,
asset, operations or financial condition;
(d) The value or priority of FINOVA's security interest in
the Collateral is materially impaired;
(e) Any portion of Xxxxxxxx's assets is seized, attached,
subjected to a writ or distress warrant, is levied upon or comes
into the possession of any judicial officer;
(f) Borrower shall generally not pay its debts as they
become due or shall enter into any agreement (whether written or
oral), or offer to enter into any agreement, with all or a
significant number of its creditors regarding any moratorium or
other indulgence with respect to its debts or the participation of
such creditors or their representatives in the supervision,
management or control of the business of Borrower;
(g) Any bankruptcy or other insolvency proceeding
is commenced by Borrower, or any such proceeding is commenced
against Borrower and remains undischarged or unstayed for forty-
five (45) days;
(h) Any notice of lien, xxxx or assessment is filed of
record with respect to any of Borrowers assets;
(i) Any judgments not fully covered by insurance are
entered against Borrower in an aggregate amount exceeding
$5,000,000.00 in any fiscal year;
(j) Any default shall occur and the applicable grace
period shall expire under (i) any material agreement between
Borrower and any third party including, without limitation, any
default which would result in a right by such third party to
accelerate the maturity of any Indebtedness of Borrower to such
third party under which there is an Indebtedness outstanding or
available in excess of $10,000.000.00, or (ii) any Subordinated
Debt in excess $10,000,000.00;
(k) Any representation or warranty made or deemed to be
made by Borrower, any Affiliate or any other Loan Party in any
Loan Document or any other statement, document or report made or
delivered to FINOVA in connection therewith shall prove to have
been misleading in any material respect as of the date made;
(l) Any Prohibited Transaction or Reportable Event shall
occur with respect to a Plan which could have a material adverse
effect on the financial condition of Borrower; any lien upon the
assets of Borrower in connection with any Plan shall arise;
Borrower or any of its ERISA Affiliates shall fail to make full
payment when due of all amounts which Borrower or any of its ERISA
Affiliates may be required to pay to any Plan or any Multiemployer
Plan as one or more contributions thereto; Borrower or any of its
ERISA Affiliates creates or permits the creation of any
accumulated funding deficiency, whether or not waived; or
(m) Any transfer of more than fifty-one percent (51%)
of the issued and outstanding shares of common stock or other
evidence of ownership of Borrower.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, FINOVA
RESERVES THE RIGHT TO CEASE MAKING ANY LOANS DURING ANY CURE
PERIOD STATED ABOVE, AND THEREAFTER IF AN EVENT OF DEFAULT HAS
OCCURRED.
7.2. Remedies. Upon the occurrence of an Event of Default,
FINOVA may, at its option and in its sole discretion and in
addition to all of its other rights under the Loan Documents,
cease making Loans, terminate this Agreement and/or declare all of
the Obligations to be immediately payable in full. Xxxxxxxx
agrees that FINOVA shall also have all of its rights and remedies
under applicable law, including, without limitation, the default
rights and remedies of a secured party under the Code, and upon
the occurrence of an Event of Default Borrower hereby consents to
the appointment of a receiver by FINOVA in any action initiated by
FINOVA pursuant to this Agreement and to the jurisdiction and
venue set forth in Section 9.25 hereof, and Borrower waives notice
and posting of a bond in connection therewith. Further, FINOVA
may, at any time, take possession of the Collateral and keep it on
Borrower's premises at no cost to FINOVA, or remove any part of it
to such other place(s) as FINOVA may desire, or Borrower shall,
upon FINOVA's demand, at Borrower's sole cost, assemble the
Collateral and make it available to FINOVA at a place reasonably
convenient to FINOVA. FINOVA may sell and deliver any Collateral
at public or private sales, for cash, upon credit or otherwise, at
such prices and upon such terms as FINOVA deems advisable, at
FINOVA's discretion, and may, if FINOVA deems it reasonable,
postpone or adjourn any sale of the Collateral by an announcement
at the time and place of sale or of such postponed or adjourned
sale without giving a new notice of sale. Xxxxxxxx agrees that
FINOVA has no obligation to preserve rights to the Collateral or
xxxxxxxx any Collateral for the benefit of any Person. FINOVA is
hereby granted a license or other right to use, without charge,
Borrowers labels, patents, copyrights, name, trade secrets, trade
names, trademarks and advertising matter, or any similar property,
in completing production, advertising or selling any Collateral
and Borrowers rights under all licenses and all franchise
agreements shall inure to FINOVA's benefit. Any requirement of
reasonable notice shall be met if such notice is mailed postage
prepaid to Borrower at its address set forth in the heading to
this Agreement at least five (5) days before sale or other
disposition. The proceeds of sale shall be applied, first, to
all attorneys' fees and other expenses of sale, and second, to the
Obligations in such order as FINOVA shall elect, in its sole
discretion. FINOVA shall return any excess to Borrower and
Borrower shall remain liable for any deficiency to the fullest
extent permitted by law.
7.3. Standards for Determining Commercial Reasonableness.
Borrower and FINOVA agree that the following conduct by FINOVA
with respect to any disposition of Collateral shall conclusively
be deemed commercially reasonable (but other conduct by FINOVA,
including, but not limited to, FINOVA's use in its sole discretion
of other or different times, places and manners of noticing and
conducting any disposition of Collateral shall not be deemed
unreasonable): Any public or private disposition: (i) as to which
on no later than the fifth calendar day prior thereto written
notice thereof is mailed or personally delivered to Xxxxxxxx and.
with respect to any public disposition, on no later than the fifth
calendar day, prior thereto notice thereof describing, in general
non-specific terms. the Collateral to be disposed of is published
once in a newspaper of general circulation in the county where the
sale is to be conducted (provided that no notice of any public or
private disposition need be given to the Borrower or published if
the Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market);
(ii) which is conducted at any place designated by FINOVA, with or
without the Collateral being present; and (iii) which commences at
any time between 8:00 a.m. and 5:00 p.m. Without limiting the
generality of the foregoing, Xxxxxxxx expressly agrees that, with
respect to any disposition of accounts, instruments and general
intangibles. it shall be commercially reasonable for FINOVA to
direct any prospective purchaser thereof to ascertain directly
from Borrower any and all information concerning, the same,
including, but not limited to, the terms of payment, aging and
delinquency, if any, the financial condition of any obligor or
account debtor thereon or guarantor thereof, and any collateral
therefor.
8. EXPENSES AND INDEMNITIES
8.l. Expenses. Borrower covenants that, so long as any
Obligation remains outstanding and this Agreement remains in
effect, it shall promptly reimburse FINOVA for all reasonable
costs, fees and expenses incurred by FINOVA in connection with the
negotiation, preparation, execution, delivery, administration and
enforcement of each of the Loan Documents, including, but not
limited to, the attorneys' and paralegals' fees of in-house and
outside counsel, expert witness fees, lien, title search and
insurance fees, appraisal fees, all charges and expenses incurred
in connection with any and all environmental reports and
environmental remediation activities, and all other reasonable
costs, expenses, taxes and filing or recording fees payable in
connection with the transactions contemplated by this Agreement,
including, without limitation all such costs, fees and expenses as
FINOVA shall incur or for which FINOVA shall become obligated in
connection with (i) any inspection or verification of the
Collateral, (ii) any proceeding relating to the Loan Documents or
the Collateral, (iii) actions taken with respect to the Collateral
and FINOVA's security interest therein, including, without
limitation, the defense or prosecution of any action involving
FINOVA and Borrower or any third party, (iv) enforcement of any of
FINOVA's rights and remedies with respect to the Obligations or
Collateral and (v) consultation with FINOVA's attorneys and
participation in any workout, bankruptcy or other insolvency or
other proceeding involving any Loan Party or any Affiliate,
whether or not suit is filed or the issues are peculiar to federal
bankruptcy or state insolvency laws. Borrower shall also pay all
FINOVA customary charges in connection with bank wire transfers,
forwarding of loan proceeds, deposits of checks and other items of
payment, returned checks, establishment and maintenance of
lockboxes and other Blocked Accounts, and all other bank and
administrative matters, in accordance with FINOVA's schedule of
bank and administrative fees and charges in effect from time to
time.
8.2. Environmental Matters.
(a) Definitions. The following, definitions apply to
the provisions of this Section 8.2: (a) the term "Applicable Law"
shall include, but shall not be limited to, all local, state
and/or federal laws, rules, regulations or ordinances, whether
currently in existence or hereafter enacted, which govern, to the
extent applicable to the Property or to Borrower, (i) the
existence, cleanup and/or remedy of contamination on real
property; (ii) the protection of the environment from soil, air or
water pollution, or from spilled, deposited or otherwise emplaced
contamination; (iii) the emission or discharge of hazardous
substances into the environment; (iv) the control of hazardous
wastes; or (v) the use, -veneration, transport, treatment, removal
or recovery of Hazardous Substances; (b) the term "Hazardous
Substance" shall mean (i) any oil, flammable substance,
explosives, radioactive materials, hazardous wastes or substances,
toxic wastes or substances or any other wastes, materials or
pollutants which either pose a hazard to the Property or to
persons on or about the Property or cause the Property to be in
violation of any Applicable Law; (ii) asbestos in any form which
is or could become friable, urea formaldehyde foam insulation,
transformers or other equipment which contain dielectric fluid
containing levels of polychlorinated biphenyls, or radon gas;
(iii) any chemical, material or substance defined as or included
in the definition of "hazardous substances," "waste," "hazardous
wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," or "toxic substances" or words of
similar import under any Applicable Law; ; (iv) any other
chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority which may or
could pose a hazard to the health or safety of the occupants of
the Property or the owners and/or occupants of property adjacent
to or surrounding the Property, or any other person coming upon
the Property or adjacent property and (v) any other chemical,
materials or substance which may or could pose a hazard to the
environment: and (c) the term "Property" shall mean all real
property, wherever located, in which Borrower or any Affiliate of
Borrower has any right, title or interest, whether now existing or
hereafter arising, and including, without limitation, as owner,
lessor or lessee.
(b) Covenants and Representations. (1) Borrower
represents and warrants that there have not been during the period
of Xxxxxxxx's possession of any interest in the Property and, to
the best of its knowledge after reasonable inquiry, there have not
been at any other times, any activities on the Property involving,
directly or indirectly, the use, generation, treatment, storage or
disposal of any Hazardous Substances except in compliance with
Applicable Law (i) under, on or in the land included in the
Property, whether contained in soil, tanks, sumps, ponds, lagoons,
barrels, cans or other containments. structures or equipment, (ii)
incorporated in the buildings. structures or improvements included
in the Property. including any building material containing
asbestos, or (iii) used in connection with any operations on or in
the Property. (2) Without limiting the generality of the foregoing
and to the extent not included within the scope of this Section
8.2(b), Borrower represents and warrants that it is in material
compliance with Applicable Law and has received no notice from any
Person or any governmental agency or other entity of any violation
by Borrower of any Applicable Law, (3) Borrower shall be solely
responsible for and agrees to indemnify FINOVA, protect and defend
FINOVA with counsel reasonably acceptable to FINOVA, and hold
FINOVA harmless from and against any claims, actions,
administrative proceedings. judgments, damages, punitive damages,
penalties, fines, costs, liabilities (including sums paid in
settlements of claims), interest or losses, attorneys' fees
(including any, fees and expenses incurred in enforcing this
indemnity), consultant fees, expert fees, and other out-of-pocket
costs or expenses actually incurred by FINOVA (collectively, the
"Environmental Costs"), that may, at any time or from time to
time, arise directly or indirectly from or in connection with: (i)
the presence, suspected presence, release or suspected release of
any Hazardous Substance whether into the air, soil, surface water
or groundwater of or at the Property, or any other violation of
Applicable Law, or (ii) any breach of the foregoing
representations and covenants; except to the extent any of the
foregoing result from the negligence or actions of FINOVA. its
employees, agents and representatives. All Environmental Costs
incurred or advanced by FINOVA shall be deemed to be made by
FINOVA in good faith and shall constitute Obligations hereunder.
9. .MISCELLANEOUS.
9.1. Examination of Records; Financial Reporting:
(a) Examinations. FINOVA shall at all reasonable
times, upon reasonable notice, have full access to and the right
to examine, audit, make abstracts and copies from and inspect
Borrowers records, files, books of account and all other
documents, instruments and agreements relating to the Collateral
and the right to check, test and appraise the Collateral. Borrower
shall deliver to FINOVA any instrument necessary for FINOVA to
obtain records from any service bureau maintaining records for
Borrower. All instruments and certificates prepared by Borrower
showing the value of any of the Collateral shall be accompanied,
upon FINOVA's request, by copies of related purchase orders and
invoices. Notwithstanding the foregoing, except during the
continuance of an Event of Default. Borrower shall not be required
to disclose any document or information that constitutes non-
financial trade secrets or proprietary information, and in no
event shall Borrower be required to make any disclosure where
prohibited by law or agreement binding on Borrower. FINOVA may, at
any time after the occurrence of an Event of Default, remove from
Xxxxxxxx's premises Xxxxxxxx's books and records (or copies
thereof) or require Borrower to deliver such books and records or
copies to FINOVA. FINOVA may, upon reasonable notice, without
expense to FINOVA, use such of Borrower's personnel, supplies and
premises as may be reasonably necessary for maintaining or
enforcing FINOVA's security interest.
(b) Reporting Requirements. Borrower shall fumish
FINOVA, upon request, such information and statements as FINOVA
shall reasonably request from time to time regarding Borrowers
business affairs,
financial condition and the results of its operations. Without
limiting the generality of the foregoing
Borrower shall provide FINOVA with: (i) FINOVA's standard form
collateral and loan report, at each draw request and least
monthly, and upon FINOVA's request, copies of sales journals, cash
receipt journals, and deposit slips; (ii) upon FINOVA's request,
copies of sales invoices, customer statements and credit memoranda
issued, remittance advices and reports; (iii) copies of shipping
and delivery documents, upon request; (iv) on or prior to the date
set forth on the Schedule, monthly agings (aged from invoice date)
and reconciliations of Receivables (with listings of concentrated
accounts), payables reports, inventory reports, compliance
certificates and unaudited financial statements with respect to
the prior month prepared on a basis consistent with such
statements prepared in prior months and otherwise in accordance
with GAAP: (v) audited annual consolidated and financial
statements, prepared in accordance with GAAP applied on a basis
consistent with the most recent Prepared Financials provided to
FINOVA by Borrower, including balance sheets, income and cash flow
statements, accompanied by the unqualified report thereon of
independent certified public accountants of nationally recognized
standing, as soon as available, and in any event. within ninety
(90) days after the end of each of Borrower's fiscal years; and
(vi) such certificates relating to the foregoing as FINOVA may
request, including, without limitation, a quarterly certificate
from the chief financial officer of Xxxxxxxx showing Xxxxxxxx's
compliance with each of the financial covenants set forth in this
Agreement, and stating whether any Event of Default has occurred
or event which, with giving of notice or the passage of time, or
both, would constitute an Event of Default, and if so, the steps
being taken to prevent or cure such Event of Default. All reports
or financial statements submitted by Borrower shall be in
reasonable detail and shall be certified by the principal
financial officer of Xxxxxxxx as being complete and correct.
9.2. Term; Termination.
(a) Term. The Term of the Revolving Credit Loans
facility and the obligation of FINOVA to made advances with
respect thereto in accordance with this Agreement shall be as set
forth on the Schedule, and the Revolving Credit Loans facility and
this Agreement, unless earlier terminated as provided herein.
(b) Prior Notice. Each party shall have the right to
terminate this Agreement effective at the end of the Term by
giving the other party written notice not less than sixty (60)
days prior to the effective date of such termination, by
registered or certified mail.
(c) Payment in Full. Upon the effective date of
termination. the Obligations shall become
immediately due and payable in full in cash.
(d) Early Termination; Termination Fee. In addition
to the procedure set forth in Section 9.2(b), Borrower may
terminate this Agreement at any time but only upon sixty (60)
days' prior written notice and prepayment of the Obligations.
Upon any such early termination by Borrower or any termination of
this Agreement by FINOVA upon the occurrence of an Event of
Default, then, and in any such event, Borrower shall pay to FINOVA
upon the effective date of such termination a fee (the
"Termination Fee ") in an amount equal to the amount shown on the
Schedule.
9.3. Recourse to Security: Certain Waivers. All
Obligations shall be payable by Xxxxxxxx as provided for herein
and, in full, at the termination of this Agreement; recourse to
security shall not be required at any time. Borrower waives
presentment and protest of any instrument and notice thereof,
notice of default and, to the extent permitted by applicable law,
all other notices to which Borrower might otherwise be entitled.
9.4. No Waiver by FINOVA. Neither FINOVA's failure
to exercise any right, remedy or option under this Agreement, any
supplement, the Loan Documents or other agreement between FINOVA
and Borrower nor any delay by FINOVA in exercising the same shall
operate as a waiver. No waiver by FINOVA shall be effective unless
in writing and then only to the extent stated. No waiver by
FINOVA shall affect its right to require strict performance of
this Agreement. FINOVA's rights and remedies shall be cumulative
and not exclusive.
9.5. Binding on Successor and Assigns. All terms,
conditions, promises, covenants, provisions and warranties shall
inure to the benefit of and bind FINOVA's and Xxxxxxxx's
respective representatives, successors and assigns.
9.6. Severability. If any provision of this Agreement shall
be prohibited or invalid under applicable law, it shall be
ineffective only to such extent, without invalidating the
remainder of this Agreement.
9.7. Amendments; Assignments. This Agreement may not be
modified, altered or amended, except by an agreement in writing
signed by Xxxxxxxx and FINOVA. Borrower may not sell, assign or
transfer any interest in this Agreement or any other Loan
Document, or any portion thereof, including, without limitation,
any of Borrower's rights, title, interests, remedies, powers and
duties hereunder or thereunder. FINOVA may participate, sell,
assign, transfer or other dispose, of this Agreement and any of
the other Loan Documents, or of any portion hereof or thereof,
including, without limitation. XXXXXX's rights, title, interests,
remedies, powers and duties hereunder or thereunder (i) at any
time or times prior to the occurrence of any Event of Default,
with Xxxxxxxx's consent, which consent shall not be unreasonably
withheld, and (ii) at any time or times after the occurrence of an
Event of Default, Borrower hereby consenting thereto. In
connection therewith. FINOVA may disclose all documents and
information which FINO'VA now or hereafter may have relating to
Borrower or Borrowers business subject to an appropriate
confidentiality agreement substantially in accordance with Section
9.28. To the extent that FINOVA assigns its rights and obligations
hereunder to a third party, FINOVA shall thereafter be released
from such assigned obligations to Borrower and such assignment
shall effect a novation between Borrower and such third party.
9.8. Integration. This Agreement, together with the Schedule
(which is a part hereof) and the other Loan Documents, reflect the
entire understanding of the parties with respect to the
transactions contemplated hereby.
9.9. Survival. All of the representations and warranties
of Borrower contained in this Agreement shall survive the
execution, delivery and acceptance of this Agreement by the
parties. No termination of this Agreement or of any guaranty of
the Obligations shall affect or impair the powers, obligations,
duties, rights, representations, warranties or liabilities of the
parties hereto and all shall survive such termination.
9.10. Evidence of Obligations. Each Obligation may, in
FINOVA's discretion, be evidenced by notes or other instruments
issued or made by Borrower to FINOVA. If not so evidenced, such
Obligation shall be evidenced solely by entries upon FINOVA's
books and records.
9.11. Loan Requests. Each oral or written request for a loan by
any Person who purports to be any employee, officer or authorized
agent of Borrower shall be made to FINOVA on or prior to 11:00
a.m., Pacific time, on the Business Day on which the proceeds
thereof are requested to be paid to Borrower and shall be
conclusively presumed to be made by a Person authorized by
Borrower to do so and the crediting of a loan to Borrower's
operating account shall conclusively establish Borrower's
obligation to repay such loan. Unless and until Borrower
otherwise directs FINOVA in writing, all loans shall be wired to
Borrowers operating account set forth on the Schedule.
9.12. Notices. Any notice required hereunder shall be in
writing and addressed to the
Borrower and FINOVA at their addresses set forth at the beginning
of this Agreement. Notices hereunder shall be deemed received on
the earlier of receipt, whether by personal delivery, facsimile,
or otherwise, or within three (3) Business Days after deposit in
the United States mail, postage prepaid.
9.13. Brokerage Fees. Borrower represents and warrants to
FFNOVA that, with respect to the financing transaction herein
contemplated, no Person is entitled to any brokerage fee or other
commission and Xxxxxxxx agrees to indemnify and hold FINOVA
harmless against any and all such claims.
9.14. Disclosure. No representation or warranty made by
Borrower in this Agreement, or in any financial statement, report,
certificate or any other document fumished in connection herewith
contains any untrue statement of a material fact or omits to state
any material fact necessary to make the statements herein or
therein not misleading. There is no fact known to Borrower or
which reasonably should be known to Borrower which Borrower has
not disclosed to FINOVA in writing with respect to the
transactions contemplated by this Agreement which materially and
adversely affects the business, assets, operations, prospects or
condition (financial or otherwise), of Borrower.
9.15. Publicity. FINOVA, upon Xxxxxxxx's prior approval,
which approval shall not be unreasonably withheld, is hereby
authorized to issue appropriate press releases and to 'cause a
tombstone to be published announcing the consummation of this
transaction and the aggregate amount thereof.
9.16. Captions. The Section titles contained in this
Agreement are without substantive meaning and are not part of this
Agreement.
9.17. Injunctive Relief. Borrower recognizes that, in the
event Borrower fails to perform, observe or discharge any of its
Obligations under this Agreement, any remedy at law may prove to
be inadequate relief to FINOVA. Therefore, FINOVA, if it so
requests, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual
damages.
9.18. Counterparts: Facsimile Execution. This Agreement may
be executed in one or more counterparts, each of which taken
together shall constitute one and the same instrument, admissible
into evidence. Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as
delivery of a manually executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by
telefacsimile shall also deliver a manually executed counterpart
of this Agreement, but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
9.19 Construction. The parties acknowledge that each party
and its counsel have reviewed this Agreement and that the normal
rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any amendments or exhibits
hereto.
9.20. Time of Essence. Time is of the essence fort he
performance by Xxxxxxxx of the
Obligations set forth in this Agreement.
9.21. Liability. Neither FINOVA nor any FINOVA Affiliate shall be
liable for any indirect, special,
incidental or consequential damages in connection with any breach
of contract, tort or other wrong relating to this Agreement or the
Obligations or the establishment, administration or collection
thereof (including without limitation damages for loss of profits,
business interruption, or the like), whether such damages are
foreseeable or unforeseeable, even if FTNOVA has been advised of
the possibility of such damages. Neither FINOVA, nor any FINOVA
Affiliate shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or
suffered by the Borrower through the ordinary negligence of
FINOVA, or any FINOVA Affiliate. "FINOVA Affiliate" shall mean
FINOVA's directors, officers, employees, agents, attomeys or any
other Person or entity affiliated with or representing FINOVA.
9.22. Application of Insurance Proceeds. The net proceeds
of any casualty insurance insuring the Collateral, after deducting
all costs and expenses (including attorneys' fees) of collection,
shall be applied if no Event of Default then exists either toward
replacing or restoring the Collateral, in a manner and on terms
reasonably satisfactory to FINOVA, or if an Event of Default then
exists, at FINOVA's option, toward payment of the Obligations. Any
proceeds applied to the payment of Obligations shall be applied in
such manner as FINOVA may elect. In no event shall such
application relieve Borrower from payment in full of all
installments of principal and interest which thereafter become due
in the order of maturity thereof.
9.23. Power of Attomey. Borrower appoints FINOVA and its
designees as Xxxxxxxx's attorney, with the power to endorse
Xxxxxxxx's name on any checks, notes, acceptances, money orders or
other forms of payment or security that come into FINOVA's
possession; to sign Xxxxxxxx's name on any invoice or bill of
lading relating to any Receivable, on drafts against customers, on
assignments of Receivables, on notices of assignment, financing
statements and other public records, on verifications of accounts
and on notices to customers or account debtors; to send requests
for verification of Receivables to customers or account debtors;
after the occurrence of any Event of Default, to notify the post
office authorities to change the address for delivery of
Xxxxxxxx's mail to an address designated by FINOVA and to open and
dispose of all mail addressed to Borrower; and to do all other
things FINOVA deems reasonably necessary or desirable to carry out
the terms of this Agreement. Borrower hereby ratifies and approves
all acts of such xxxxxxx. Neither FINOVA nor any of its designees
shall be liable for any acts or omissions nor for any error of
judgment or mistake of fact or law while acting as Xxxxxxxx's
attomey, except resulting from its or their gross negligence or
willful misconduct. This power, being coupled with an interest, is
irrevocable until the Obligations have been fully satisfied and
FINOVA's obligation to provide loans hereunder shall have
terminated
9.24. Governing Law; Waivers. THIS AGREEMENT, INCLUDING
WITHOUT LIMITATION ENFORCEMENT OF THE OBLIGATIONS, SHALL BE
INTERPRETED IN ACCORDANCEWITH THE INTERNAL LAWS (AND NOT THE
CONFLICT OF LAWS RULES) OF THE STATE OF ARIZONA GOVERNING
CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. BORROWER
HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF MARICOPA IN THE STATE
OF ARIZONA OR, AT THE SOLE OPTION OF FINOVA, IN ANY OTHER COURT IN
WHICH FINOVA SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND
WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. BORROWER WAIVES ANY OBJECTION OF FORUM NON
CONVENIENS AND VENUE. BORROWER FURTHER WAIVES PERSONAL SERVICE OF
ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS BE MADE IN THE MANNER SET FORTH IN SECTION 9.12 HEREOF FOR
THE GIVING OF NOTICE. BORROWER FURTHER WAIVES ANY RIGHT IT MAY
OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT ENTERED AGAINST
IT.
9.25. MUTUAL WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND
BORROWER EACH HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY
RELATING TO: (i) THIS AGREEMENT; (ii) ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN FINOVA AND BORROWER; OR (iii) ANY
CONDUCT, ACTS OR OMISSIONS OF FINOVA OR BORROWER OR ANY OF THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER
PERSONS AFFILIATED WITH FINOVA OR BORROWER; IN EACH OF THE
FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
9.26. Confidentiality Agreement. FINOVA agrees to take and to
cause its Affiliates to take normal and reasonable precautions and
exercise due care to maintain the confidentiality of all non-
public information provided to it by Borrower under this Agreement
or any other Loan Document, and neither it nor any of its
Affiliates shall use any such information other than in connection
with or in enforcement of this Agreement and the other Loan
Documents or in connection with other business now or hereafter
existing or contemplated with Borrower or any subsidiary; except
to the extent such information (i) was or becomes generally
available to the public other than as a result of disclosure by
FINOVA or as a result of disclosure by a third parry in violation
of a confidentiality agreement known to FINOVA, or (ii) was or
becomes available on a non-confidential basis from a source other
than Borrower, provided that such source is not bound by a
confidentiality agreement with Borrower known to ' FINOVA;
provided, however, that FINOVA may disclose such information (A)
at the request or pursuant to any requirement of any govemmental
authority to which FINOVA is subject or in connection with an
examination of FINOVA by any such authority; (B) pursuant to
subpoena or other court process, provided that Borrower is given
notice and an opportunity to seek a protective order; (C) when
required to do so in accordance with the provisions of any
applicable requirement of law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which
FINOVA or its Affiliates may be a party, provided that Borrower is
given notice and an opportunity to seek a protective order; (E) to
the extent reasonably required in connection with the exercise of
any remedy hereunder or under any, other Loan Document; and (F) to
FINOVA independent auditors and other professional advisors.
Borrower:
DIAMOND MULTIMEDIA SYSTEMS, INC.
Fed. Tax ID #00-0000000
By________________________________
Xxxxx X. Xxxxxx, Chief Financial Officer
Schedule to Loan and Security Agreement
Borrower: DIAMOND MULTIMEDIA SYSTEMS, INC.
Address: 0000 Xxxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000-1922
Date: January 21,1999
This Schedule forms an integral part of the Loan and Security
Agreement between the above Borrower and FINOVA Capital
Corporation dated the above date, and all references herein and
therein to 'this Agreement" shall be deemed to refer to said
Agreement and to this Schedule.
DEFINITIONS (SECTION 1):
"Quick Ratio" means the ratio of all cash, cash equivalents and
Receivables to current Indebtedness.
TOTAL FACILITY (SECTION 2.1):
$50,000,000.00
LOANS (SECTION 2.2):
Revolving Credit Loans: A revolving line of credit
consisting of loans against Xxxxxxxx's Eligible Receivables
("Receivable Loans") and against Borrower's Eligible Inventory
("Inventory Loans") (the Receivable Loans and the Inventory Loans
shall be collectively referred to as the "Revolving Credit Loans")
in an aggregate outstanding principal amount not to exceed the
lesser of (a) or (b) below:
(a) Fifty Million Dollars ($50,000,000.00) (the "Revolving
Credit Limit"), less any Loan Reserves, or
(b) the sum of
(i) an amount equal to eighty percent (80%) of the net
amount of Eligible Receivables; plus
(ii) an amount equal to thirty percent (30%) of the value
of Xxxxxxxx's Eligible Inventory, calculated at the lower of cost
or market value and determined on a first-in, first-out basis;
less
(iii) any Loan Reserves.
INTEREST AND FEES (SECTION 2.6):
Revolving Interest Rate. Borrower shall pay FINOVA interest
on the daily outstanding balance of Xxxxxxxx's Revolving Credit
Loans at a per annum rate equal to the rate of interest published
in the "Money Rates" section of The Wall Street Journal as the
"prime rate" (the " Prime Rate). The interest rate chargeable
hereunder in respect of the Revolving Credit Loans (herein, the
"Revolving Interest Rate") shall be increased or decreased, as the
case may be, without notice or demand of any kind, upon the
announcement of any change in the Prime Rate. Each change in the
Prime Rate shall be effective hereunder on the first day following
the announcement of such change. Interest charges and all other
fees and charges herein shall be computed on the basis of a year
of 360 days and actual days elapsed and shall be payable to FINOVA
in arrears on the first Business Day of each month.
Application Fee. Prior to the Closing Date, Borrower shall have
paid FINOVA an application fee of Twenty Thousand Dollars
($20,000.00). This fee shall be credited against the initial
Examination Fee due FINOVA, and any of FINOVA's documented
reasonable legal fees and other reasonable out-of-pocket expenses.
Any amount then remaining shall either be returned to Borrower or
applied to reduce the outstanding balance of the Revolving Loans,
as Borrower shall elect.
Facility Fee. Borrower shall pay to FINOVA a facility fee
equal to one-tenths of one percent (0.10%) per annum of the amount
of the Total Facility pm January 30, 1999 and one-tenth of one
percent (0.10%) per annum of the amount of the Total Facility in
each subsequent anniversary thereof ('"Facility Fee"). The
Facility Fee shall be deemed fully earned at the time when due.
Unused Line Fee. With respect to each month, or portion thereof
during the term of this Agreement, Borrower shall unconditionally
pay to FINOVA a fee equal to one-tenth of one percent (0. 10%) per
annum of the difference between the Revolving Credit Limit and the
average daily outstanding balance of the Revolving Credit Loans
during such month, or portion thereof ("Unused Line Fee"), which
fee shall be calculated and payable monthly, in arrears, and shall
be due and payable, commencing on the first Business Day of the
first month following the Closing Date and continuing on the first
Business Day of each month thereafter.
Examination Fee. Prior to the Closing Date and on the last day
of each fiscal quarter thereafter, commencing March 3 1, 1999,
Borrower shall unconditionally pay to FINOVA an examination fee in
the amount of $4,000.00 in connection with any audits or
examinations of Borrower performed by FINOVA during such fiscal
quarter (the "Examination Fee"), which shall be deemed fully
earned on the date such payment is due.
CONDITIONS OF CLOSING (SECTION 4.1):
The obligation of FINOVA to make the initial advance is subject to
the fulfillment to the satisfaction of FINOVA and its counsel, of
each of the following conditions, in addition to the conditions
set forth in Sections 4.1 and 4.2 above:
(a) No Material Adverse Change (Section 4.1(q)). Draft financial
statements for Xxxxxxxx dated as of September 30, 1998. Further,
no material adverse change has occurred in the Borrower's
business, operations, financial condition, or assets or in the
prospect of repayment of the Obligations since September 30, 1998.
(b) Year 2000 Questionnaire (Section 4. 1 (v)). Borrower shall
have delivered to FINOVA a Year 2000 Questionnaire of FINOVA,
which shall be acceptable to FINOVA in its Permitted Discretion.
Borrower shall cause the conditions precedent set forth in Section
4.1 of this Agreement and set forth above in this Schedule to be
satisfied, and shall provide evidence to FINOVA that all such
conditions precedent have been satisfied, on or before the Closing
Date.
BORROWER INFORMATION:
Borrower's State of Incorporation (Section 5. 1): Delaware
Borrower's copyrights, patents trademarks, and licenses (Section
5.5). Listed on attached Exhibit A.
Fictitious Names/Prior Corporate Names (Section 5.2):
Prior Corporate Names: None
Fictitious Names: Diamond Communications Division
Diamond European Division
FINANCIAL COVENANTS (SECTION 6.1.13):
Borrower shall comply with all of the following covenants.
Compliance shall be determined as of the end of each quarter (as
determined by FINOVA in its sole discretion), except as otherwise
specifically provided below:
Collateral Coverage. Borrower shall maintain at the Closing Date
and at all times thereafter total eligible Collateral of not less
than one hundred twenty percent (120%) of the outstanding balance
of the Revolving Credit Loans, determined as of each advance and
at least monthly.
Debt to Tanigible Net Worth. Borrower shall maintain a ratio of
Indebtedness to Tangible Net Worth of not greater than:
2.5 to 1.0 As of the most recent month end prior to the Closing
Date and as of the end of each fiscal quarter thereafter.
Quick Ratio. Borrower shall maintain a Quick Ratio of not less
than:
.85 to 1:00 As of the most recent month end prior to the
Closing Date and as of the end of each fiscal quarter thereafter.
Tangible Net Worth. Borrower shall maintain Tangible Net Worth of
not less than Eighty Million Dollars ($80,000,000.00) as of the
most recent month end prior to the Closing Date and as of the end
of each fiscal quarter thereafter.
EBITDA. Borrower shall maintain positive Earnings Before
Interest Taxes Depreciation and Amortization on a cumulative year
to date basis, commencing with the fiscal quarter ending March 31,
1999 and as of the end of each fiscal quarter thereafter.
NEGATIVE COVENANTS (SECTION 6.2):
Existing Guaranties: None
Capital Expenditures: No limitation
Compensation: No limitation
Indebtedness: No limitation
REPORTING REQUIREMENTS (SECTION 9.1):
1. Borrower shall provide FINOVA with monthly agings aged by
invoice date and reconciliations of Receivables within fifteen
(15) days after the end of each month.
2. Borrower shall provide FINOVA with monthly accounts payable
agings aged by invoice date, outstanding or held check registers
and inventory certificates within fifteen (15) days after the end
of each month.
3. Borrower shall provide FINOVA with monthly perpetual
inventory reports for the Inventory valued on a first-in, first-
out basis at the lower of cost or market (in accordance with GAAP)
or such other inventory reports as are reasonably requested by
FINOVA, all within thirty (30) days after the end of each month.
4. Borrower shall provide FINOVA with monthly unaudited
consolidated financial statements within thirty-five (35) days
after the end of each month (but excluding those months that end
the quarter).
5. Borrower shall provide FINOVA with audited consolidated
fiscal financial statements within ninety (90) days after the end
of each fiscal year, as more specifically described in Section
9.1(b) hereof, and with an opinion issued by a Certified Public
Accountant of nationally recognized standing. This requirement
shall be deemed to be satisfied by delivery of the Form 10K
referred to in Paragraph 7 below.
6. Borrower shall provide FINOVA with quarterly revenue targets
for the upcoming two fiscal quarters of Borrower within fifteen
(15) days prior to the end of each fiscal quarter of Borrower.
7. Borrower shall provide FINOVA with SEC Form IO-Q within
forty-five (45) days after the end of each fiscal quarter and SEC
Form 10-K within ninety (90) days after the end of each fiscal
year.
8. Borrower shall provide FINOVA with a Borrowing Certificate
of Collateral Activity when Revolving Credit Loans are requested,
and as of the end of each month.
9. Borrower's balance sheets for purposes of the definition of
Prepared Financials shall be as of September 30, 1998.
TERM (SECTION 9.2):
The term of this Agreement shall be two (2) years from the date
hereof (the "Term"), unless earlier terminated as provided in
Section 7 or 9.2 above or elsewhere in this Agreement.
TERMINATION FEE (SECTION 9.2):
A) Revolving Credit Loans Facility. The Termination Fee
applicable to the Revolving Credit Loans facility provided for in
Section 9.2(d) shall be an amount equal to the following
percentage of the average daily outstanding balance of the
Obligations for the 180-day period (or lesser period if
applicable) preceding the date of termination:
(i) one fifteenth of one percent (0.15%), if such early
termination occurs on or prior to the first anniversary of the
date of this Agreement;
(ii) one tenth of one percent (0. I0%), if such early termination
occurs after the first anniversary of the date of this Agreement.
ADDITIONAL PROVISIONS:
1. Credit Insurance (Section 3.4). In addition to any other
insurance required by FINOVA and on the terms set forth in Section
3.4, FINOVA may require Borrower to maintain credit insurance,
written by insurers, in amounts, and with endorsements
satisfactory to FINOVA, and designating FINOVA as loss payee.
Borrower:
DIAMOND MULTIMEDIA SYSTEMS, INC.
By____________________________________
Xxxxx X. Xxxxxx, Chief Financial Officer
FINOVA CAPITAL COPRORATION
By
