EXHIBIT 10.35
LOAN AND SECURITY AGREEMENT
between
FIDELITY CAPITAL & INCOME FUND
as Lender
and
INTELOGIC TRACE, INC.
as Borrower
As of December 8, 1994
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS AND CONSTRUCTION......................................... 1
1.1 Definitions. .............................................. 1
1.2 Accounting Terms. .......................................... 11
1.3 Construction. .............................................. 11
1.4 Exhibits.................................................... 11
2. LOAN AND TERMS OF PAYMENT............................................ 11
2.1 Loan........................................................ 11
2.2 Overadvance................................................. 12
2.3 Mandatory Prepayment........................................ 12
2.4 Optional Prepayment......................................... 13
2.5 Interest Rates, Payments and Calculations................... 13
2.6 Crediting Payments.......................................... 15
2.7 Fees........................................................ 15
2.8 Use of Proceeds............................................. 16
3. TERM; CONDITIONS PRECEDENT........................................... 16
3.1 Conditions Precedent........................................ 16
4. CREATION OF SECURITY INTEREST........................................ 18
4.1 Grant of Security Interest.................................. 18
4.2 Negotiable Collateral....................................... 18
4.3 Collection of Accounts, General Intangibles,
Negotiable Collateral..................................... 18
4.4 Delivery of Additional Documentation Required............... 19
4.5 Power of Attorney........................................... 19
4.6 Right to Inspect............................................ 20
4.7 No Assumption............................................... 20
5. REPRESENTATIONS AND WARRANTIES....................................... 20
5.1 Corporate Existence; Compliance with Law.................... 21
5.2 Due Authorization; No Conflict.............................. 21
5.3 No Prior Encumbrances....................................... 21
5.4 Bona Fide Accounts.......................................... 21
5.5 Condition of Inventory...................................... 22
5.6 Location of Inventory and Equipment......................... 22
5.7 Inventory Records........................................... 22
5.8 Location of Borrower's Executive Offices.................... 22
5.9 Litigation.................................................. 22
5.10 No Material Adverse Change in Financial
Statements................................................ 23
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5.11 Solvency.................................................... 23
5.12 ERISA....................................................... 23
5.13 Environmental Condition..................................... 23
5.14 Margin Regulations.......................................... 24
5.15 Reliance by Lender; Cumulative.............................. 24
5.16 Bankruptcy Matters.......................................... 25
6. AFFIRMATIVE COVENANTS................................................ 25
6.1 Accounting System........................................... 25
6.2 Cash Flow, Balance Sheet and Income Statement
Reports................................................... 25
6.3 Assignments of Accounts..................................... 25
6.4 SEC Filings; Reports; Certificates.......................... 25
6.5 Title to Equipment.......................................... 26
6.6 Maintenance of Equipment.................................... 27
6.7 Taxes....................................................... 27
6.8 Insurance................................................... 27
6.9 Lender Expenses............................................. 28
6.10 Foothill Documents.......................................... 28
6.11 No Setoffs or Counterclaims................................. 28
7. NEGATIVE COVENANTS................................................... 28
7.1 Extraordinary Transactions and Disposal of
Assets.................................................... 28
7.2 Liens....................................................... 29
7.3 Change Name................................................. 29
7.4 Merge, Acquire.............................................. 29
7.5 Guarantee................................................... 29
7.6 Restructure................................................. 30
7.7 Prepayments................................................. 30
7.8 Amend Foothill Loan..........................................30
7.9 Change of Ownership......................................... 30
7.10 Consignments................................................ 30
7.11 Distributions............................................... 30
7.12 Accounting Methods.......................................... 30
7.13 Investments................................................. 30
7.14 Transactions with Affiliates................................ 31
7.15 Suspension.................................................. 31
7.16 Indebtedness.................................................31
8. EVENTS OF DEFAULT.................................................... 31
9. LENDER'S RIGHTS AND REMEDIES......................................... 35
9.1 Rights and Remedies......................................... 35
9.2 Remedies Cumulative......................................... 37
10. TAXES AND EXPENSES REGARDING THE COLLATERAL.......................... 37
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11. GOVERNING LAW; WAIVERS; AMENDMENTS; INDEMNIFICATION.................. 38
11.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver......................................... 38
11.2 Waiver of Notices........................................... 40
11.3 Amendments and Waivers...................................... 40
11.4 Waiver of Counterclaims..................................... 40
11.5 Indemnification............................................. 41
12. NOTICES.............................................................. 41
13. DESTRUCTION OF BORROWER'S DOCUMENTS.................................. 42
14. GENERAL PROVISIONS................................................... 43
14.1 Effectiveness............................................... 43
14.2 Successors and Assigns...................................... 43
14.3 Section Headings............................................ 43
14.4 Interpretation.............................................. 43
14.5 Final Agreement of the Parties.............................. 43
14.6 Severability of Provisions.................................. 44
14.7 Counterparts................................................ 44
14.8 Revival and Reinstatement of Obligations.....................44
15. TERMINATION.......................................................... 44
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SCHEDULES
Schedule 5.6 -- Inventory and Equipment Locations
Schedule 5.9 -- Litigation
Schedule 5.12 -- ERISA
Schedule 7.5 -- Guarantees
Schedule 7.13 -- Investments
Schedule 7.16 -- Indebtedness
EXHIBITS
Exhibit A -- Form of Note
Exhibit B -- Form of Intercreditor Agreement
Exhibit C -- Form of Foothill Loan
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LOAN AND SECURITY AGREEMENT dated as of December 8, 1994
between FIDELITY CAPITAL & INCOME FUND, a Massachusetts business trust
("Lender"), with a place of business located at 82 Devonshire Street - F7D,
Boston, Massachusetts 02109, and INTELOGIC TRACE, INC., a New York corporation
("Borrower"), with its chief executive office located at Turtle Creek Tower I,
P.O. Box 400044, San Antonio, Texas 78229-8415.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. As used in this Agreement, the
following terms shall have the following definitions:
"ACCOUNTS" means any "account," as such term is defined in
section 9-106 of the UCC and, in any event, shall include, without limitation,
all accounts receivable, book debts and other forms of obligations (other than
forms of obligations evidenced by Chattel Paper, Documents or Instruments)
including, without limitation, under any trade names, styles or divisions
thereof, whether arising out of goods sold or services rendered by Borrower or
from any other transaction, whether or not the same involves the sale of goods
or services by Borrower (including, without limitation, any such obligation that
might be characterized as an account or contract right under the UCC) and all of
Borrower's rights in, to and under all purchase orders or receipts for goods or
services, and all of Borrower's rights to any goods represented by any of the
foregoing (including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned, reclaimed
or repossessed goods), and all moneys due or to become due to Borrower under all
contracts for the sale of goods or the performance of services or both by
Borrower (whether or not yet earned by performance on the part of Borrower or in
connection with any other transaction) including, without limitation, the
right to receive the proceeds of said purchase orders and contracts, and all
collateral security and guarantees of any kind given by any person with respect
to any of the foregoing.
"AGREEMENT" shall mean this Loan and Security Agreement and
any extensions, riders, supplements, notes, amendments or modifications to or in
connection with this Loan and Security Agreement.
"BORROWER" shall have the meaning set forth in the
preamble to this Agreement.
"BORROWER'S BOOKS" shall mean all of Borrower's books and
records including ledgers, records indicating, summarizing or evidencing
Borrower's assets or liabilities, or the Collateral, all information relating to
Borrower's business operations or financial condition, and all computer
programs, disc or tape files, printouts, runs or other computer prepared
information relating to Borrower's business operations or financial condition,
and the equipment containing such information.
"BUSINESS DAY" shall mean any day which is not a Saturday,
Sunday or other day on which banks in the State of Texas or the Commonwealth of
Massachusetts are authorized or required to close.
"CASH" shall mean cash or cash equivalents.
"CHANGE OF CONTROL" shall be deemed to have occurred at such
times as a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act), other than a stockholder as of the date hereof or
pursuant to the Plan of Reorganization, becomes the "beneficial owner" (as
defined under Rule 13d-3 under the Exchange Act), directly or indirectly, of
more than fifty percent (50%) of the total voting power of all classes of stock
then outstanding of Borrower normally entitled to vote in elections of
directors.
"CHATTEL PAPER" shall mean any "chattel paper," as such term
is defined in section 9-105(1)(b) of the UCC.
"COLLATERAL" shall mean the following property and interests
in property of Borrower, whether now owned or hereafter acquired: all Accounts,
Chattel Paper, Contracts, Documents, Equipment, General Intangibles,
Instruments, Intellectual Property Collateral, Inventory, Cash, Securities,
Fixtures and all other goods and personal property of Borrower whether tangible
or intangible or whether now owned or hereafter acquired by Borrower and
wherever located, and to the extent not otherwise included, all Proceeds of each
of the foregoing and all accessions to,
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substitutions and replacements for, and rents, profits and
products of each of the foregoing.
"CONTRACTS" shall mean all contracts, undertakings or other
agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Borrower may now own or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.
"COPYRIGHTS" shall mean (i) all copyrights, registrations and
applications therefor, (ii) all renewals and extensions thereof, (iii) all
income, royalties, damages and payments now and hereafter due or payable or both
with respect thereto, including, without limitation, damages and payments for
past or future infringements or misappropriations thereof, (iv) all rights to
sue for past, present and future infringements or misappropriations thereof, and
(v) all other rights corresponding thereto throughout the world.
"DEFAULT RATE" shall have the meaning set forth in
Section 2.5(b) hereof.
"DERIVATIVE SETTLEMENT" shall mean any amounts (less
attorneys' fees and expenses in an aggregate amount not to exceed $800,000)
received by Borrower pursuant to the settlement agreement reached on May 13,
1994 with respect to shareholder litigation against Borrower and its board of
directors relating to Borrower's purchases of shares of capital stock of the
Borrower and Datapoint Corporation in 1990.
"DOCUMENTS" shall mean any "documents," as such term is
defined in section 9-105(1)(f) of the UCC.
"DOLLARS" and the sign "$" each means the lawful money of the
United States.
"EFFECTIVE DATE" shall mean the "Effective Date" as defined in
the Plan of Reorganization.
"EQUIPMENT" shall mean any "equipment," as such term is
defined in section 9-109(2) of the UCC and, in any event, shall include, without
limitation, all machinery, equipment, furnishings, fixtures, vehicles and
computers and
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other electronic data-processing and other office equipment and any and all
additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
"ERISA" shall mean the Employment Retirement Income Security
Act of 1974, as amended, and the regulations thereunder.
"ERISA AFFILIATE" shall mean 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.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of
1934, as amended, and the rules and regulations thereunder.
"FIELD SUPPORT SPARES" shall mean any and all spare parts,
components, top assemblies, subassemblies and similar items used by Borrower to
maintain or repair customer equipment.
"FIXTURES" shall mean any "fixtures" as such term is defined
in section 9-313(1)(a) of the UCC.
"FOOTHILL" shall mean Foothill Capital Corporation, a
California corporation.
"FOOTHILL LOAN" shall mean the Amended and Restated General
Loan and Security Agreement dated as of December 8, 1994, between Foothill and
Borrower, as amended from time to time in the form of Exhibit C hereto.
"FOOTHILL OVERADVANCE" shall mean an overadvance of up to One
Million Dollars ($1,000,000) by Foothill to Borrower in accordance with the
terms and provisions set forth in the Foothill Loan.
"GAAP" shall mean generally accepted accounting principles as
in effect from time to time.
"GENERAL INTANGIBLES" shall mean any "general intangibles," as
such term is defined in section 9-106 of the
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UCC and, in any event, shall include, without limitation, all right, title and
interest that Borrower may now or hereafter have in or under the IRS Refund, any
other state or local refunds of taxes, excises or similar charges, any Contract,
all customer lists, Copyrights, Trademarks, Patents, rights in intellectual
property, Licenses, permits, trade secrets, proprietary or confidential
information, inventions (whether patented or patentable or not), and technical
information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and
records, goodwill and rights of indemnification.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government,
any state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"INSOLVENCY PROCEEDING" shall mean any proceeding commenced by
or against any person or entity under any provision of the United States
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
including general assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
"INSTRUMENTS" shall mean any "instrument," as such term is
defined in section 9-105(1)(i) of the UCC, other than instruments that
constitute, or are a part of a group of writings that constitute, Chattel Paper.
"INTELLECTUAL PROPERTY COLLATERAL" shall mean all Copyrights,
Licenses, Patents, Trademarks and Trade Secrets as to which Lender has been
granted a security interest hereunder.
"INVENTORY" shall mean any "inventory," as such term is
defined in section 9-109(4) of the UCC and, in any event, shall include, without
limitation, all inventory, merchandise, goods and other personal property that
are held for sale or lease or are furnished or are to be furnished under a
contract of service or that constitute raw materials, work in process or
materials used or consumed or to be used or consumed in Borrower's business, or
the
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processing, packaging, delivery or shipping of the same, and all finished goods.
"IRC" shall mean the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
"IRS REFUND" shall mean any refund of federal income taxes
claimed or received by Borrower from the Internal Revenue Service.
"INTERCREDITOR AGREEMENT" shall mean the intercreditor
agreement dated as of the date hereof, between Lender and Foothill,
substantially in the form of Exhibit B hereto.
"LENDER EXPENSES" shall mean all costs and expenses (including
taxes, photocopying, notarization, telecommunication and insurance premiums)
which are paid or advanced by Lender relating to, under or in connection with
the Loan Documents; filing, recording, publication, appraisal (including
periodic Collateral appraisals) real estate survey, environmental audit and
search fees paid or incurred by Lender in connection with Lender's transactions
with Borrower; costs and expenses incurred by Lender in the disbursement of
funds to Borrower (by wire transfer or otherwise); charges resulting from the
dishonor of checks; costs and expenses incurred by Lender to correct any default
or enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale or advertising to sell the Collateral, or any portion thereof, whether or
not a sale is consummated; reasonable costs and expenses of examining Borrower's
Books; reasonable costs and expenses of third party claims or any suit incurred
by Lender in enforcing or defending the Loan Documents; and Lender's reasonable
attorneys' fees and expenses incurred in advising, structuring, drafting,
reviewing, amending, terminating, enforcing, defending or otherwise concerning
the Loan Documents, whether or not suit is brought.
"LICENSE" shall mean any Patent License, Trademark License or
other license as to which Lender has been granted a security interest hereunder.
"LOAN" shall have the meaning set forth in Section 2.1 hereof.
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"LOAN DOCUMENTS" shall mean this Agreement, the Note, the
Intercreditor Agreement and all other agreements, instruments and documents,
including, without limitation, security agreements, notes, warrants, guaranties,
mortgages, deeds of trust, subordination agreements, pledges, powers of
attorney, consents, assignments, collateral assignments, letter agreements,
contracts, notices, leases, amendments, financing statements, letter of credit
applications and reimbursement agreements, and all other writings heretofore,
now or hereafter executed by or on behalf of Borrower and delivered to Lender in
connection with or relating to this Agreement, together with all agreements,
instruments and documents referred to therein or contemplated thereby.
"MATERIAL ADVERSE EFFECT" shall mean, relative to any
occurrence of whatever nature (including any adverse determination in any
litigation, arbitration or governmental investigation or proceeding) and after
taking into account actual insurance coverage and effective indemnification with
respect to such occurrence (a) a material adverse effect on the financial
condition, business, operations, prospects, or properties of Borrower, (b) the
impairment of (i) the ability of Borrower to perform any of its payment or other
material obligations under this Agreement or any other Loan Document or (ii) the
ability of Lender to enforce any of such obligations or any of its remedies
under this Agreement or under any other Loan Document, (c) the occurrence of any
Event of Default or (d) the subjection of Lender to any civil or criminal
liability.
"MAXIMUM LAWFUL RATE" shall mean the maximum lawful
nonusurious rate of interest which, under laws in effect and applicable to
Lender, is permitted to be charged by Lender to Borrower on the transactions
evidenced by this Agreement and the Note, as from time to time in effect,
including changes in such maximum lawful rate as of the effective date of such
changes.
"MULTIEMPLOYER PLAN" shall mean 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.
"NEGOTIABLE COLLATERAL" shall have the meaning set forth in
Section 4.2 hereof.
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"NOTE" shall mean the note of Borrower dated the date hereof
in the aggregate principal amount of Five Million Dollars ($5,000,000),
substantially in the form of Exhibit A hereto.
"OBLIGATIONS" shall mean the unpaid principal balance of the
Loan and any Overadvances, all interest accrued hereunder and all other loans,
advances, overadvances, debts, principal, interest, premiums, liabilities,
obligations, fees (including early termination fees), lease payments,
guaranties, covenants and duties owing by Borrower to Lender, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and further including all interest not paid when due and all
Lender Expenses which Borrower is required to pay or reimburse under the Loan
Documents, by law or otherwise.
"ORDER" shall mean the Final Order entered on November 28,
1994 of the United States Bankruptcy Court for the Western District of Texas,
San Antonio Division, confirming the Plan of Reorganization.
"OVERADVANCE" shall have the meaning set forth in Section 2.2
hereof.
"PATENT LICENSE" shall mean any written agreement granting any
right to practice any invention on which a Patent is in existence.
"PATENTS" shall mean (i) all patents and patent applications,
(ii) all inventions and improvements described and claimed therein, (iii) all
reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof, (iv) all income, royalties, damages and payments
now and hereafter due and/or payable to such Company with respect thereto,
including, without limitation, damages and payments for past or future
infringements or misappropriations thereof, (v) all rights to sue for past,
present and future infringements or misappropriation thereof, and (vi) all other
rights corresponding thereto throughout the world.
"PBGC" shall mean the Pension Benefit Guarantee Corporation.
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"PCS ESCROW AGREEMENT" shall mean the escrow agreement between
Borrower and PC Service Source, Inc., referred to in the Master Repair Services
and Spare Parts Supply Agreement, dated as of November 17, 1994, between
Borrower and PC Service Source, Inc.
"PERMITTED LIENS" shall mean: (a) liens and security interests
held by Lender: (b) liens for unpaid taxes that are not yet due and payable and
(c) liens and security interests of Foothill as permitted in the Intercreditor
Agreement.
"PLAN" shall mean any plan described in ERISA Section 3(2)
maintained for employees of Borrower or any ERISA Affiliate, other than a
Multiemployer Plan.
"PLAN OF REORGANIZATION" shall mean that certain Modified
First Amended Chapter 11 Plan of Intelogic Trace, Inc. dated October 12, 1994,
as filed with the United States Bankruptcy Court for the Western District of
Texas, San Antonio Division, in Chapter 11 Case No. 94-52172C, as the same may
be amended, supplemented or otherwise modified from time to time.
"PROCEEDS" shall mean "proceeds," as such term is defined in
section 9-306(1) of the UCC and, in any event, shall include, without
limitation, (a) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to Borrower from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever) made or due and
payable to Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental body, authority, bureau or agency (or any person
acting under color of governmental authority), (c) any claim of Borrower against
third parties (i) for past, present or future infringement of any Patent or
Patent License or (ii) for past, present or future infringement or dilution of
any Trademark or Trademark License or for injury to the goodwill associated with
any Trademark, Trademark registration or Trademark licensed under any Trademark
License, and (d) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"PROHIBITED TRANSACTION" shall mean any transaction described
in Section 406 of ERISA which is not
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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.
"RELATED ENTITY" shall mean Lender and any other corporation
which is at least fifty percent (50%) owned by Lender or any of the foregoing
entities.
"REPORTABLE EVENT" shall mean 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.
"SECURITIES" shall mean any "securities" as that term is
defined in section 8-102(1)(c) of the UCC or under federal securities law,
whether or not such securities are marketable, including Borrower's stock in
Datapoint Corporation and Canal Capital Corporation (whether Borrower has legal
title or equitable title).
"TRADE SECRETS" shall mean trade secrets, along with any and
all (i) income, royalties, damages and payments now and hereafter due and/or
payable to Borrower with respect thereto, including, without limitation, damages
and payments for past or future infringements or misappropriations thereof, (ii)
rights to sue for past, present and future infringements or misappropriation
thereof, and (iii) all other rights corresponding thereto throughout the world.
"TRADEMARK LICENSE" shall mean any written agreement granting
any right to use any Trademark or Trademark registration.
"TRADEMARKS" shall mean (i) all trademarks (including service
marks and trade names, whether registered or at common law), registrations and
applications therefor, and the entire product lines and goodwill of Borrower's
business connected therewith and symbolized thereby, (ii) all renewals thereof,
(iii) all income, royalties, damages and payments now and hereafter due or
payable or both with respect thereto, including, without limitation, damages and
payments for past or future infringements or misappropriation thereof, (iv) all
rights to sue for past, present and future infringements or misappropriation
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thereof, and (v) all other rights corresponding thereto throughout the world.
"UCC" shall mean the Uniform Commercial Code as the same may,
from time to time, be in effect in the State of Texas; PROVIDED, HOWEVER, that
if, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Lender's security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of Texas, the term "UCC" shall mean the Uniform Commercial Code
as in effect in such other jurisdiction for purposes of the provisions hereof
relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
1.2 ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes thereto.
1.3 CONSTRUCTION. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular, to
the singular include the plural. The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Section,
subsection, clause and exhibit references are to this Agreement unless otherwise
specified.
1.4 EXHIBITS. All of the exhibits attached to this
Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT
2.1 LOAN. (a) Upon and subject to the terms and
conditions hereof, Lender agrees to make a loan to Borrower on the Effective
Date in an aggregate principal amount equal to Five Million Dollars ($5,000,000)
(the "Loan"). The Loan shall be evidenced by a promissory note to be executed
and delivered by Borrower at the time of such Loan, the form of which is
attached hereto and made a part hereof as Exhibit A (the "Note").
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(b) The Loan shall be made on notice, given not later
than 1:00 P.M. (New York City time) on the second Business Day prior to the
Effective Date, by Borrower to Lender. On the Effective Date, upon fulfillment
of the applicable conditions set forth in Section 3, Lender shall wire to a bank
designated by Borrower and reasonably acceptable to Lender, the amount of the
Loan.
2.2 OVERADVANCE. Following the Effective Date, Lender
(i) may, but shall not be obligated to, make one or more additional advances to
Borrower from the funds applied to repay the Loan in accordance with Section
2.3, in an aggregate principal amount not to exceed One Million Dollars
($1,000,000), subject to such terms and conditions as shall be agreed upon by
Lender and Borrower and (ii) to the extent obligated pursuant to the
Intercreditor Agreement shall make one or more additional advances to Borrower
to make funds available to repay the Foothill Overadvance in accordance with
Lender's obligations under the Intercreditor Agreement (each, an "Overadvance").
In the event Lender makes any such Overadvance to Borrower, the amount of such
Overadvance shall be added to the principal amount of, and shall be deemed to be
a part of, the Loan and shall be subject to the terms and conditions of this
Agreement, including the interest rate and repayment terms, applicable to the
Loan.
2.3 MANDATORY PREPAYMENT. (a) All proceeds realized
from any sale, transfer or other disposition of the Borrower's Inventory
(including any amounts received by Borrower in respect of the PCS Escrow
Agreement, but subject to the prior repayment of the Foothill Overadvance, in
accordance with the terms and conditions set forth in the Foothill Loan and the
Intercreditor Agreement) and Securities, and all amounts received by Borrower in
respect of the IRS Refund or the Derivative Settlement shall immediately upon
receipt thereof, be applied by Borrower first, to pay all accrued and unpaid
interest and all fees and expenses payable hereunder, and second to prepay the
principal balance of the Loan.
(b) No prepayment fee shall be payable in
respect of any mandatory prepayment under this Section 2.3.
(c) Amounts paid pursuant to this Section
2.3 may not be re-borrowed.
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2.4 OPTIONAL PREPAYMENT. (a) Borrower shall have the
right at any time, upon at least two (2) Business Days' prior notice to Lender,
stating the proposed date and aggregate principal amount of the prepayment, to
prepay the outstanding principal amount of the Loan in whole or in part,
together with accrued interest to the date of such prepayment on the principal
amount prepaid; provided, however, that each partial prepayment shall be in an
aggregate principal amount not less than Five Hundred Thousand Dollars
($500,000) or integral multiples of One Hundred Thousand Dollars ($100,000) in
excess thereof. Upon the giving of such notice of prepayment, the principal
amount of the Loan specified to be prepaid shall become due and payable on the
date specified for each such prepayment.
(b) No prepayment fee shall be payable in
respect of any optional prepayment under this Section 2.4.
(c) Amounts paid pursuant to this Section
2.4 may not be re-borrowed.
2.5 INTEREST RATES, PAYMENTS AND CALCULATIONS.
(a) INTEREST RATE. Subject to Section
2.5(b), the outstanding principal amount of the Loan shall bear interest at a
rate equal to the lesser of (i) the Maximum Lawful Rate and (ii) fifteen percent
(15%) per annum.
(b) DEFAULT RATE. From and after the
occurrence of an Event of Default the outstanding principal amount of the Loan
shall bear interest at a rate equal to the lesser of (i) the Maximum Lawful Rate
and (ii) seventeen percent (17%) per annum.
(c) PAYMENTS. Interest hereunder shall be
due and payable on the first Business Day of each calendar month during the term
hereof. Any interest not paid when due, together with all or any portion of the
other Obligations, shall, to the fullest extent permitted by law, accrue
interest at the Default Rate payable on demand. All interest shall be computed
on the basis of a three hundred sixty (360) day year for the actual number of
days elapsed.
(d) ALTERNATIVE INTEREST RATE. Notwithstanding
the provisions of Sections 2.5(a) and (b), if at any time the applicable
interest rate shall exceed the
13
Maximum Lawful Rate and thereafter the applicable interest rate shall become
less than the Maximum Lawful Rate, the rate of Interest payable hereunder shall,
at the option of Lender, be the Maximum Lawful Rate until the total interest
paid by Borrower equals the amount which would have been paid but for the
applicable interest rate having been in excess of the Maximum Lawful Rate. If at
maturity or final payment of the Obligations the total amount of interest paid
or accrued on the Obligations under the provisions of Sections 2.5 (a) and (b)
is less than the total amount of interest which would have accrued if the
applicable interest rate had at all times been in effect, then Borrower to the
fullest extent permitted by law, shall pay to Lender an amount equal to the
difference between (a) the amount of interest which would have accrued on the
Obligations if the Maximum Lawful Rate had at all times been in effect, and (b)
the amount of interest accrued in accordance with the provisions of Sections
2.5(a) and (b).
(e) INTEREST SAVINGS. It is the intention
of the parties hereto to conform strictly to all usury laws applicable to this
transaction. Accordingly, if the transactions contemplated hereby would be
usurious under applicable law (including the laws of the United States of
America or any jurisdiction whose laws may be mandatorily applicable
notwithstanding the other provisions of this Agreement), then, notwithstanding
anything to the contrary in this Agreement or in any other instrument or
agreement entered into in connection herewith, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under applicable law
that is contracted for, taken, reserved, charged, or received under this
Agreement or under any other instruments or agreements or otherwise in
connection herewith shall under no circumstances exceed the maximum amount
allowed by such applicable law, and any excess shall be credited on the
principal amount of the Obligations (or, if the principal amount of the
Obligations shall have been paid in full, refunded to Borrower); and (ii) in the
event that the maturity of the Obligations is accelerated for any reason under
this Agreement or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under applicable
law may never include more than the maximum amount allowed by such applicable
law, and excess interest, if any, provided for in this Agreement or otherwise
shall be cancelled automatically as of the date of such acceleration or
prepayment and, if
14
theretofore paid, shall be credited on the principal amount of the Obligations
(or, if the principal amount of the Obligations shall have been repaid in full,
refunded to Borrower). In determining whether or not the interest paid or
payable with respect to any indebtedness of Borrower to Lender, under any
specific contingency, exceeds the Maximum Lawful Rate, Borrower and Lender
shall, to the maximum extent permitted by applicable law, (i) characterize any
non-principal payment as an expense, fee, or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, (iii) amortize,
prorate, allocate and spread the total amount of interest throughout the full
term of such indebtedness so that the actual rate of interest on account of such
indebtedness does not exceed the maximum amount permitted by applicable law
and/or (iv) allocate interest between portions of such indebtedness, so that no
such portion shall bear interest at a rate greater than that permitted by
applicable law.
2.6 CREDITING PAYMENTS. Borrower shall make all
payments hereunder by wire transfer to Lender at The Bank of New York, ABA#
021-000-018, Account # 114669, with the notation "Transaction Description:
Intelogic Trace Exit Loan, or by such other method as may be substituted by
notice given as herein provided. The receipt by Lender of any funds in payment
of the Obligations shall be immediately applied to conditionally reduce the
Obligations, but shall not be considered a payment on account unless such wire
transfer is of immediately available federal funds and is made to the
appropriate deposit account of Lender. For interest calculation purposes, the
receipt of wire transfer or other item of payment by Lender shall be deemed to
have been paid to Lender two (2) Business Days after the date Lender actually
receives such wire transfer of immediately available federal funds.
Notwithstanding anything to the contrary contained herein, any wire transfer or
other payment received by Lender after 11:00 a.m. New York time shall be deemed
to have been received by Lender as of the opening of business on the immediately
following Business Day.
2.7 FEES. In consideration of Lender's agreement to
make available to Borrower the advances and loans provided for herein, Borrower
shall pay to Lender a fee (the "Closing Fee") consisting of 6,667 shares of the
Borrower's 10% Preferred Stock to be issued on or promptly following
15
the Effective Date. The Closing Fee shall be fully earned at the time of payment
and non-refundable.
2.8 USE OF PROCEEDS. The proceeds of the Loan made on
the Effective Date shall be used as follows:
(a) up to Four Million Dollars ($4,000,000)
shall be applied to repay the overadvance on Borrower's indebtedness to Foothill
outstanding immediately prior to the Effective Date; and
(b) the remaining proceeds shall be used for
general corporate purposes or to pay claims of creditors and expenses incurred
by Borrower in connection with the Plan of Reorganization.
3. CONDITIONS PRECEDENT
3.1 CONDITIONS PRECEDENT. Each of the following is a
condition precedent to Lender making the Loan hereunder:
(a) NOTE. Lender shall have received the Note
to the order of Lender duly executed by Borrower.
(b) INTERCREDITOR AGREEMENT. Lender shall have
received the Intercreditor Agreement duly executed by Foothill and Borrower.
(c) FOOTHILL LOAN. Foothill and Borrower shall
have duly executed the Foothill Loan.
(d) NO MODIFICATION TO THE PLAN OF
REORGANIZATION. The terms of the Plan of Reorganization shall not have been
modified in any manner adverse to Lender without the prior written consent of
Lender. All conditions to the consummation of the Plan of Reorganization set
forth in Article VIII thereof shall have been satisfied and shall have been
completed prior to, or simultaneously with, the Effective Date.
(e) BORROWER CERTIFICATE. Lender shall have
received a certificate of Borrower dated the Effective Date, in form and
substance satisfactory to Lender, executed by the President or any Vice
President and the Secretary or any Assistant Secretary of Borrower, certifying
that the
16
representations and warranties made by Borrower in each of the Loan Documents
are true and correct on and as of the date hereof and after giving effect to the
Loan required to be made pursuant hereto.
(f) CORPORATE PROCEEDINGS OF BORROWER.
Lender shall have received a copy of the resolutions, in form and substance
satisfactory to Lender, of the Board of Directors of Borrower authorizing (i)
the execution, delivery and performance of this Agreement and the other Loan
Documents, (ii) the borrowings contemplated hereunder and (iii) the granting by
it of the liens created pursuant to this Agreement and the other Loan Documents,
certified by the Secretary or an Assistant Secretary of Borrower as of the
Effective Date, which certificate shall state that the resolutions thereby
certified have not been amended, modified or revoked.
(g) BORROWER INCUMBENCY CERTIFICATE. Lender
shall have received a certificate of Borrower dated the Effective Date, in form
and substance satisfactory to Lender, as to the incumbency and signature of the
officers of Borrower executing any Loan Document, executed by the President or
any Vice President and the Secretary or any Assistant Secretary of Borrower.
(h) CORPORATE DOCUMENTS. Lender shall have
received true and complete copies of the Certificate of Incorporation and
By-Laws of Borrower, certified as of the Effective Date as complete and correct
copies thereof by the Secretary or an Assistant Secretary of Borrower.
(i) FEDERAL RESERVE FORM G-3. A true and
accurate Federal Reserve Form G-3 dated as of the date hereof shall have been
executed and delivered by Borrower to Lender.
(j) ASSIGNMENT OF PCS ESCROW AGREEMENT.
Lender shall have received, in form and substance satisfactory to Lender, an
assignment of the PCS Escrow Agreement, duly executed by Borrower and by PCS.
(k) INSURANCE ENDORSEMENT. Lender shall
have received evidence satisfactory to Lender that the insurance policies
provided for in Section 6.8 hereof are in full force and effect, certified by
the insurer thereof,
17
together with appropriate evidence showing a loss payable clause in favor of
Lender.
(l) LIEN SEARCHES. Lender shall be satisfied
that the results of the lien searches (which shall be performed at Borrower's
expense) shall not indicate any liens on the Collateral other than as created
pursuant to this Agreement, the other Loan Documents or as permitted by the
Intercreditor Agreement.
(m) ACTIONS TO PERFECT LIENS. The Borrower
shall execute all filings, recordings, registrations and perform all other
actions, including, without limitation, executing financing statements on form
UCC-1, necessary or, in the reasonable opinion of Lender, desirable to perfect
the liens created by this Agreement.
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. As security for the
prompt and complete payment and performance when due of all the Obligations and
to induce Lender to enter into the Loan Documents and to make the Loan in
accordance with the terms hereof, Borrower hereby assigns, conveys, mortgages,
pledges, hypothecates and transfers to Lender, and hereby grants to Lender a
security interest in, all presently existing and hereafter arising Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any
Collateral, including proceeds thereof, is evidenced by or consists of letters
of credit, notes, drafts, instruments, documents, leases or chattel paper
("Negotiable Collateral"), Borrower shall, immediately upon the request of
Lender, endorse and assign such Negotiable Collateral to Lender and deliver
physical possession of such Negotiable Collateral to Lender.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES,
NEGOTIABLE COLLATERAL. Lender or Lender's designee may, at such time as either
an Event of Default has occurred or Lender reasonably determines that a material
impairment of the prospect of repayment of any portion of the Obligations or of
the value or priority of Lender's security interest in the Collateral has
occurred or is imminently likely to occur, (a) notify customers or account
debtors of Borrower that the Accounts, General Intangibles and Negotiable
18
Collateral have been assigned to Lender or that Lender has a security interest
therein; (b) require Borrower to establish a lockbox or other restricted account
satisfactory to Lender for the collection of Accounts, General Intangibles or
Negotiable Collateral; and (c) collect the Accounts, General Intangibles and
Negotiable Collateral directly, but, unless and until Lender does so or gives
Borrower other written instructions, Borrower shall collect all Accounts,
General Intangibles and Negotiable Collateral for Lender, receive in trust all
payments thereon as Lender's trustee, and immediately deliver said payments to
Lender in their original form as received from the account debtor.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED.
Borrower shall execute and deliver to Lender, prior to or concurrently with
Borrower's execution and delivery of this Agreement and at any time thereafter
at the request of Lender, all financing statements, continuation financing
statements, fixture filings, security agreements, chattel mortgages, pledges,
assignments, endorsements of certificates of title, applications for title,
affidavits, reports, notices, schedules of accounts, letters of authority and
all other documents that Lender may reasonably request, in form satisfactory to
Lender, to perfect and continue perfected Lender's security interests in the
Collateral and in order to fully consummate all of the transactions contemplated
under the Loan Documents.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably
makes, constitutes and appoints Lender (and any authorized signatory of Lender)
as Borrower's true and lawful attorney in fact, with power to: (a) sign the name
of Borrower on any of the documents described in Section 4.4 or on any other
similar documents to be executed, recorded or filed in order to perfect or
continue perfected Lender's security interest in the Collateral; (b) send
requests for verification of Accounts; (c) at such time as an Event of Default
has occurred and is continuing, sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) at such time as an Event of Default has occurred and is continuing,
endorse Borrower's name on any checks, notices, acceptances, money orders,
drafts or other forms of payment or security that may come into Lender's
possession; (e) at such time as an Event of Default has occurred and is
continuing, notify the post office
19
authorities to change the address for delivery of Borrower's mail to an address
designated by Lender, to receive and open all mail addressed to Borrower, and to
retain all mail relating to the Collateral and promptly forward all other mail
as well as copies of any mail retained to Borrower; (f) at such time as an Event
of Default has occurred and is continuing, make, settle, and adjust all claims
under Borrower's policies of insurance and make all determinations and decisions
with respect to such policies of insurance; and (g) at such time as an Event of
Default has occurred and is continuing, settle and adjust disputes and claims
respecting the Accounts directly with account debtors, for amounts and upon
terms which Lender determines to be reasonable, and Lender may cause to be
executed and delivered any documents and releases which Lender determines to be
necessary. The appointment of Lender as Borrower's attorney in fact, and each
and every one of Lender's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Lender's obligation to provide advances hereunder is terminated.
4.6 RIGHT TO INSPECT. Lender (through any of its
officers, employees or agents) shall have the right, from time to time hereafter
upon reasonable prior notice during Borrower's usual business hours, or during
the usual business hours of any third party having control over the records of
Borrower, to inspect Borrower's Books and to check, test and appraise the
Collateral in order to verify Borrower's financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral.
4.7 NO ASSUMPTION. Nothing contained herein or in any
of the Loan Documents nor any grant of a security interest in the Collateral to
Lender or otherwise shall constitute or be deemed an assumption by Lender of any
liability or obligation under any agreement, contract or obligation of Borrower.
5. REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loan as herein provided for,
Borrower makes the following representations and warranties to Lender, each and
all of which shall be true and correct as of the date of (i) execution and
20
delivery of this Agreement or (ii) the making by Lender of any Overadvance, and
shall survive the execution and delivery of this Agreement:
5.1 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Borrower
(i) is a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation; (ii) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification (except for jurisdictions in which such failure to so qualify or
to be in good standing would not have a Material Adverse Effect); (iii) has the
requisite corporate power and authority and the legal right to own, pledge,
mortgage or otherwise encumber and operate its properties, to lease the property
it operates under lease, and to conduct its business as now, heretofore and
proposed to be conducted; (iv) has all material licenses, permits, consents or
approvals from or by, and has made all material filings with, and has given all
material notices to, all Governmental Authorities having jurisdiction, to the
extent required for such ownership, operation and conduct; (v) is in compliance
with its Certificate of Incorporation and ByLaws; and (vi) is in compliance with
all applicable provisions of law where the failure to comply would have a
Material Adverse Effect.
5.2 DUE AUTHORIZATION; NO CONFLICT. The execution,
delivery and performance of the Loan Documents are within Borrower's corporate
powers, have been duly authorized, and are not in conflict with nor constitute a
breach of any provision contained in Borrower's Certificate of Incorporation or
By-laws, nor will they constitute an Event of Default under any material
agreement to which Borrower is now or may hereafter become a party.
5.3 NO PRIOR ENCUMBRANCES. Borrower has good and
indefeasible title to the Collateral, free and clear of liens, claims, security
interests or encumbrances (except for liens in favor of Foothill, subject to the
Intercreditor Agreement).
5.4 BONA FIDE ACCOUNTS. The Accounts are, and at all
times, hereafter shall be, bona fide existing obligations created by the sale
and delivery of Inventory or the rendition of services to account debtors in the
ordinary
21
course of Borrower's business, and to the best of Borrower's knowledge are
unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims or rights of return or cancellation. The property or services
giving rise to such Accounts has been delivered to or performed for the account
debtor, or to the account debtor's agent for immediate shipment to and
unconditional acceptance by the account debtor. Except as disclosed to Lender in
writing, Borrower has not, and at all times hereafter, shall not have, received
notice of actual or imminent bankruptcy, insolvency or material adverse change
in the financial condition of any account debtor at the time an Account due from
such account debtor is assigned to Foothill.
5.5 CONDITION OF INVENTORY. Except Field Support Spares
under repair in the normal course of Borrower's business, all Inventory is now
and at all times hereafter shall be of good and marketable title and quality.
5.6 LOCATION OF INVENTORY AND EQUIPMENT. Except for the
items being repaired in the ordinary course of business, the Inventory and
Equipment is not now and shall not at any time hereafter be stored with a
bailee, warehouseman or similar party without Lender's prior written consent
which such consent shall not be unreasonably delayed or withheld. Borrower
shall keep the Inventory and Equipment only at the locations set forth on
Schedule 5.6 hereto.
5.7 INVENTORY RECORDS. Borrower now keeps, and hereafter
at all times shall keep, correct and accurate records itemizing and describing
the kind, type, quality and quantity of the Inventory, and Borrower's cost
therefor.
5.8 LOCATION OF BORROWER'S EXECUTIVE OFFICES. The
current location of Borrower's executive offices and Borrower's Books is at the
address indicated in the first paragraph of this Agreement and Borrower
covenants and agrees that it will not, without thirty (30) days prior written
notification to Lender, relocate its executive offices.
5.9 LITIGATION. Except as disclosed on Schedule 5.9
hereto, there are no actions or proceedings pending by or against Borrower
before any court or administrative agency and Borrower does not have knowledge
of any pending or threatened litigation, formal governmental investiga-
22
tions, or filed claims, complaints, actions or prosecutions involving Borrower
or any guarantor of the Obligations, except for ongoing collection matters in
which Borrower is the plaintiff. If any of the foregoing arises during the term
of this Agreement, Borrower shall promptly notify Lender in writing.
5.10 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All financial statements relating to Borrower which have been or may hereafter
be delivered by Borrower to Lender have been prepared in accordance with GAAP
and fairly present Borrower's financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has not been a
material adverse change in the financial condition of Borrower since the date of
the most recent of such financial statements submitted to Lender.
5.11 SOLVENCY. Borrower is now and shall be at all times
hereafter able to pay its debts (including trade debts) as they mature.
5.12 ERISA. The Intelogic Trace, Inc. Retirement Income
Plan (the "Intelogic Plan") was terminated by the Pension Benefit Guaranty
Corporation effective as of November 21, 1994, as disclosed on Schedule 5.12.
Except for the Intelogic Plan, neither the Borrower nor any ERISA Affiliate
maintains or contributes to any pension plan subject to Title IV of ERISA. The
Borrower and its ERISA Affiliates are in material compliance with the provisions
of ERISA and the qualification requirements of Section 401(a) of the IRC and any
regulations thereunder with respect to any Plan intended to constitute a
qualified plan under Section 401(a) of the IRC. No Prohibited Transaction has
occurred with respect to a Plan. Except with respect to the Intelogic Plan,
Borrower and its ERISA Affiliates have made all contributions required to be
made by them to any Plan when due.
5.13 ENVIRONMENTAL CONDITION. Except as to cleaning
material and solutions, packing materials and video display tubes used or
repaired in Borrower's ordinary course of business, none of Borrower's
properties or assets has ever been used by Borrower or, to the best of
Borrower's knowledge, by previous owners or operators in the disposal of, or to
produce, store, handle, treat, release or
23
transport, any hazardous waste or hazardous substance. None of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute. No lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower. Borrower has not received a summons, citation,
notice or directive from the Environmental Protection Agency or any other
federal or state governmental agency concerning any action or omission by
Borrower resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.14 MARGIN REGULATIONS. None of the proceeds of the Loan
shall be used, directly or indirectly, (i) for the purpose of purchasing or
carrying any "margin security," as that term is defined in Regulations G and U
of the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), (ii) for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security, or (iii) for any
other purpose which might cause the Loan to be considered a "purpose credit"
within the meaning of Regulation G, T, U or X of the Federal Reserve Board, or
otherwise to violate any of those regulations. A true and accurate Federal
Reserve Form G-3 dated as of the date of this Agreement has been executed and
delivered by Borrower to Lender. Borrower shall not take or permit any agent
acting on its behalf to take any action which might cause this Agreement or the
Loan to violate any regulation of the Federal Reserve Board.
5.15 RELIANCE BY LENDER; CUMULATIVE. Each warranty,
representation and agreement contained in this Agreement shall be automatically
deemed repeated if any Overadvance is made pursuant to Section 2.2 hereof, and
shall be conclusively presumed to have been relied on by Lender regardless of
any investigation made or information possessed by Lender. The warranties,
representations and agreements set forth herein shall be cumulative and in
addition to any and all other warranties, representations and agreements which
Borrower shall now or hereinafter give, or cause to be given, to Lender.
24
5.16 BANKRUPTCY MATTERS. The Plan of Reorganization and
the Order confirming the Plan of Reorganization are final and non-appealable.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of
the Obligations, and unless Lender shall otherwise consent in writing, Borrower
shall do all of the following:
6.1 ACCOUNTING SYSTEM. Borrower at all times hereafter
shall maintain a system of accounting in accordance with GAAP with ledger and
account cards or computer tapes, discs, printouts and records pertaining to the
Collateral which contain information as from time to time may reasonably be
requested by Lender. Borrower shall also keep proper books of Accounts showing
all sales, claims and allowances on its Inventory.
6.2 CASH FLOW, BALANCE SHEET AND INCOME STATEMENT
REPORTS. Upon request of Lender, Borrower shall deliver to Lender (i) detailed
cash flow reports reflecting all sources and uses of cash for the prior six (6)
months and all projected sources and uses of cash for the next twelve (12) month
period, (ii) monthly cash flow reports, (iii) monthly balance sheet reports and
(iv) monthly income statement reports.
6.3 ASSIGNMENTS OF ACCOUNTS. Upon request of Lender,
Borrower shall provide Lender with schedules describing all Accounts and shall
execute and deliver to Lender assignments of all Accounts. Borrower's failure to
execute and deliver such schedules or assignments shall not affect or limit
Lender's security interest or other rights in and to the Accounts.
6.4 SEC FILINGS; REPORTS; CERTIFICATES. Borrower shall
deliver to Lender, concurrently with the filing thereof with the Securities and
Exchange Commission, Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual
Reports and Form 8-K Current Reports, and any other filings made by Borrower
with the Securities and Exchange Commission. Borrower shall also deliver to
Lender any other report reasonably requested by Lender relating to the
Collateral and the financial condition of Borrower.
25
Upon request of Lender, Borrower shall deliver to Lender a
certificate signed by its chief financial officer or treasurer to the effect
that: (a) all reports, statements or computer prepared information of any kind
or nature delivered or caused to be delivered to Lender hereunder (i) to the
extent applicable have been prepared in accordance with GAAP consistently
applied and (ii) fully and fairly present the financial condition of Borrower;
(b) Borrower is in timely compliance with all representations, warranties and
covenants hereunder; and (c) on the date of delivery of such certificate to
Lender the officer signing such certificate does not know of any condition or
event which constitutes an Event of Default. To the extent that Borrower is
unable to so certify as to any of the foregoing matters, Borrower shall provide
such certificate with a detailed explanation of any matters to which it can not
so certify.
As soon as practicable, but in any event within two (2)
Business Days after Borrower becomes aware of the existence of any Event of
Default, or any development or other information which would have a Material
Adverse Effect, Borrower shall give telephonic or telecopied notice specifying
the nature of such Event of Default or development or information, including the
anticipated effect thereof, which notice shall be promptly confirmed in writing
within five (5) days.
At such time as either an Event of Default has occurred or
Lender determines that a material impairment of the prospect of repayment of any
portion of the Obligations or the value or priority of Lender's security
interest in the Collateral has occurred or is imminently likely to occur,
Borrower hereby irrevocably authorizes and directs all auditors, accountants or
other third parties to deliver to Lender, at Borrower's expense, copies of
Borrower's financial statements, papers related thereto, and other accounting
records of any nature in their possession, and to disclose to Lender, upon its
request, any information they may have regarding Borrower's business affairs and
financial condition.
6.5 TITLE TO EQUIPMENT. Upon Lender's request, Borrower
shall immediately deliver to Lender, properly endorsed as collateral, any and
all evidences of ownership of, certificates of title, or applications for title
to any items of Equipment.
26
6.6 MAINTENANCE OF EQUIPMENT. Borrower shall keep and
maintain the Equipment in good operating condition and repair, and make all
necessary replacements thereto so that the condition and operating efficiency
thereof shall at all times be maintained and preserved. Borrower shall not
permit any item of Equipment to become a fixture to real estate or an accession
to other property, and the Equipment is now and shall at all times remain
personal property.
6.7 TAXES. All assessments and taxes, whether real,
personal or otherwise, imposed, levied or assessed against Borrower or any of
its property which have become due and payable, have been paid, or will be paid
prior to delinquency, and shall hereafter be paid in full prior to delinquency,
except to the extent controverted in good faith by Borrower by proceedings which
stay the imposition of any penalty or fine resulting from the imposition
thereof, before delinquency or before the expiration of any extension period.
Borrower shall make due payment or deposit, prior to delinquency, of all
federal, state and local taxes, assessments or contributions required of it by
law, except to the extent controverted in good faith by Borrower by proceedings
which stay the imposition of any penalty or fine resulting from the imposition
thereof, and will execute and deliver to Lender, on demand, appropriate
certificates attesting to the payment or deposit thereof. Borrower will make
payment or deposit, prior to delinquency, of all tax payments and withholding
taxes required of it by applicable laws, including, without limitation, those
laws concerning F.I.C.A., F.U.T.A., state disability, and local, state and
federal income taxes, and will, upon request, furnish Lender with proof
satisfactory to Lender indicating that Borrower has made such payments or
deposits.
6.8 INSURANCE.
(a) Borrower, at its expense, shall keep the
Collateral insured against loss or damage by fire, theft, explosion, sprinklers,
and all other hazards and risks, and in such amounts, as ordinarily insured
against by other owners in similar businesses. Borrower shall also maintain
business interruption, public liability, product liability, and property damage
insurance relating to Borrower's ownership and use of the Collateral, as well
as insurance against larceny, embezzlement, and criminal misappropriation.
27
(b) All such policies of insurance shall be
in such form, and with such companies, and in such amounts as ordinarily insured
against by other owners in similar businesses and reasonably satisfactory to
Lender. All such policies of insurance (except those of public liability and
property damage) shall contain a lender's loss payable endorsement, or an
equivalent endorsement in a form reasonably satisfactory to Lender, showing
Lender and Foothill as co-loss payees thereof, and shall contain a waiver of
warranties, and shall specify that the insurer must give at least ten (10) days
notice to Lender before cancelling its policy for any reason. Borrower shall
deliver to Lender certified copies of such policies of insurance or certificates
evidencing the existence of such policies and evidence of the payments of all
premiums therefor. After the occurrence and continuation of an Event of Default,
all proceeds payable under any such policy shall be paid to and retained by
Lender.
6.9 LENDER EXPENSES. Borrower shall immediately and
without demand reimburse Lender for all sums expended by Lender which constitute
Lender Expenses and Borrower hereby authorizes and approves all advances and
payments by Lender in accordance with provisions of this Agreement for items
constituting Lender Expenses.
6.10 FOOTHILL DOCUMENTS. Upon request of Lender, Borrower
shall deliver to Lender copies of all documents, correspondence, notices and
certificates delivered in connection with or relating to the Foothill Loan.
6.11 NO SETOFFS OR COUNTERCLAIMS. All payments hereunder
and under the other Loan Documents made by or on behalf of Borrower shall be
made without setoff or counterclaim and shall be free and clear of, and without
deduction or withholding for or on account of, any federal, State or local
taxes.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of
the Obligations, Borrower will not do any of the following without Lender's
prior written consent:
7.1 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF ASSETS.
Enter into any transaction not in the ordinary and usual course of Borrower's
business, including, without
28
limitation, the sale, lease or other disposition of, moving, relocation or
transfer, whether by sale or otherwise, of any of Borrower's assets having an
aggregate value in excess of $50,000 (other than sales of Inventory in the
ordinary and usual course of Borrower's business as presently conducted and
sales of the Securities for cash in arms-length transactions and for fair market
value, provided in each case the proceeds thereof are applied by Borrower in
accordance with Section 2.3 hereof), the incurrence of any debts outside the
ordinary and usual course of Borrower's business except for renewals or
extensions of existing debts, or the making of any advance or loan except in the
ordinary course of business as presently conducted.
7.2 LIENS. Create, incur, assume or permit to exist,
directly or indirectly, any lien on or with respect to any of its property or
assets, of any kind, whether now owned or hereafter acquired, or any income or
profits therefrom, except for Permitted Liens.
7.3 CHANGE NAME. Change Borrower's name, business
structure or identity, or add any new fictitious name without giving Lender
ninety (90) days prior written notice of such change.
7.4 MERGE, ACQUIRE. Acquire, merge or consolidate with
or into any other business organization; provided, however, that any subsidiary
may be merged into or consolidated with Borrower so long as (i) no provision of
this Agreement would be violated thereby, (ii) Borrower gives Lender at least
ninety (90) days prior written notice of such merger or consolidation, and (iii)
Lender's rights in any Collateral will not be materially and adversely affected
by such merger or consolidation.
7.5 GUARANTEE. Guarantee or otherwise become in any way
liable with respect to the obligations of any third party except by endorsement
or instruments or items of payment for deposit to the account of Borrower or
which are transmitted or turned over to Lender, except for (i) guarantees
existing on the date hereof as listed on Schedule 7.5 attached hereto, (ii)
guarantees by endorsement of negotiable Instruments for deposit or collection
in the ordinary course of business, and (iii) guarantees and contingent
liabilities not exceeding in the aggregate at any one time Five Hundred Thousand
Dollars ($500,000).
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7.6 RESTRUCTURE. Make any change in Borrower's financial
structure or in any of its business operations, or change the date of its fiscal
year if such change would have a Material Adverse Effect on the Borrower's
business condition or on its ability to pay the Obligations, as determined by
Lender in its reasonable discretion.
7.7 PREPAYMENTS. Prepay any indebtedness owing to any
third party.
7.8 AMEND FOOTHILL LOAN. Authorize or execute any
amendment or waiver with respect to the Foothill Loan without the prior written
consent of Lender.
7.9 CHANGE OF OWNERSHIP. Cause, any direct or indirect
change in Borrower's ownership which would result in a Change of Control.
7.10 CONSIGNMENTS. Except in the ordinary course of
Borrower's business, consign any Inventory, sell any goods on bill and hold or
other unusual terms of sale.
7.11 DISTRIBUTIONS. Make any distribution or declare or
pay any dividends (in cash) on, or purchase, acquire, redeem or retire any of
Borrower's capital stock, of any class, whether now or hereafter outstanding.
7.12 ACCOUNTING METHODS. Modify or change its method of
accounting or enter into, modify or terminate any agreement presently existing
or at any time hereafter entered into with any third party accounting firm or
service bureau for the preparation or storage of Borrower's accounting records
without said accounting firm or service bureau agreeing to provide Lender
information regarding the Collateral or Borrower's financial condition. Borrower
waives the right to assert a confidential relationship, if any, it may have with
any accounting firm or service bureau in connection with any information
requested by Lender pursuant to or in accordance with this Agreement, and agrees
that Lender may contact directly any such accounting firm or service bureau in
order to obtain such information.
7.13 INVESTMENTS. Directly or indirectly make or own any
beneficial interest in (including stock, partnership interest or other
securities of), or make any loan, advance or capital contribution to, any
corporation, association, person or entity other than (i) investments of the
type and
30
quantity existing on the date hereof and listed on Schedule 7.13 hereto; (ii)
"Permitted Investments" (customarily defined as obligations guaranteed by the
United States, commercial paper maturing not more than 270 days after the
Issuance date and rated P-1 or A-1 or better, certificates of deposit maturing
not more than one (1) year after acquisition, and repurchase agreements having
maturities not more than ninety (90) days from the date of acquisition; and
(iii) other investments not in excess of One Hundred Thousand Dollars
($100,000).
7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly
enter into or permit to exist any material transaction with any person or entity
controlling, controlled by, or under common control (whether by contract,
ownership of voting securities, or otherwise) with Borrower except for
transactions which are in the ordinary course of Borrower's business, upon fair
and reasonable terms and no less favorable to Borrower than would be obtained in
an arm's length transaction with non-affiliated person or entity.
7.15 SUSPENSION. Suspend or go out of business.
7.16 INDEBTEDNESS. Create or suffer to exist any monetary
obligation or indebtedness except, (i) the Obligations, (ii) the Foothill Loan,
(iii) monetary obligation or indebtedness of Borrower in an aggregate principal
amount not exceeding One Hundred Thousand Dollars ($100,000), (iv) current
liabilities in respect of taxes, assessments and governmental charges or levies
incurred, or claims for labor, materials, inventory, services, supplies and
rentals incurred, or for goods or services purchased, in the ordinary course of
business consistent with the past practice of Borrower, (v) guarantees permitted
under Section 7.5 hereof, and (vi) indebtedness of Borrower outstanding on the
Effective Date and reflected on Schedule 7.16 hereto.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
8.1 If Borrower fails to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of principal,
interest, fees and
31
charges due Lender, taxes, reimbursement of Lender Expenses, or otherwise);
8.2 If Borrower fails to prepay the portion of the
Obligations that are mandatorily prepayable in accordance with Section 2.3
hereof within two (2) Business Days after receipt by the Borrower of any amounts
to be applied to the Obligations in accordance with such Section;
8.3 If Borrower fails or neglects to perform, keep or
observe any term, provision, condition, covenant or agreement contained in this
Agreement, in any of the Loan Documents, under the Plan of Reorganization and
the Order confirming the Plan of Reorganization or in any other present or
future agreement between Borrower and Lender;
8.4 If there is a material impairment of the prospect
of repayment of any portion of the Obligations owing to Lender or a material
impairment of the value or priority of Lender's security interests in the
Collateral;
8.5 If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any judicial officer or assignee unless Borrower
corrects any such action within three (3) Business Days after the occurrence
thereof;
8.6 If an Insolvency Proceeding is commenced by Borrower;
8.7 If an Insolvency Proceeding is commenced against
Borrower which is not stayed or dismissed within forty-five (45) days;
8.8 If Borrower is enjoined, restrained or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs and the failure by Borrower to continue to conduct such
affairs could reasonably be expected to have a Material Adverse Effect, unless
Borrower appeals and obtains a stay of such order within three (3) Business Days
after the entry thereof;
8.9 Unless adequately bonded to Lender's reasonable
satisfaction within a reasonable time after filing of such lien but in any event
prior to the commencement of foreclosure proceedings with respect
32
thereto, the occurrence of a notice of lien, levy or assessment is filed of
record with respect to any of Borrower's assets by the United States Government
or any department, agency or instrumentality thereof, or by any state, county,
municipal or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether choate or
otherwise, upon any of Borrower's assets and the same is not paid on the payment
date thereof;
8.10 If a judgment or other claim becomes a lien or
encumbrance upon any material portion of Borrower's assets;
8.11 If Borrower fails to pay any principal of, or premium
or interest on, any monetary obligation or indebtedness for borrowed money owing
to any person other than Lender, or any capitalized lease obligations,
contingent indebtedness in connection with any guarantee, letter of credit,
indemnity or similar type of instrument in favor of any person other than
Lender, in any case in an amount in excess of Five Hundred Thousand Dollars
($500,000), when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise); or any other
event shall occur or condition shall exist under any agreement or instrument
relating to any such indebtedness, that would accelerate, or would (following
notice or any cure period) permit the acceleration of, the maturity of such
indebtedness; or any such indebtedness shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof;
8.12 If Borrower makes any payment on account of monetary
obligations or indebtedness which have been subordinated to the Obligations
except to the extent such payment is allowed under this Agreement or under any
subordination agreement entered into with Lender (it being expressly agreed that
no such subordinated monetary obligation or indebtedness exists as of the date
of the execution of this Agreement);
8.13 If any misstatement or misrepresentation exists now
or hereafter in any warranty, representation, statement or report made to Lender
by Borrower or any officer, employee, agent or director of Borrower, or if any
33
such warranty or representation is withdrawn by any officer or director; which
misstatement, misrepresentation or withdrawal could reasonably be expected to
have a Material Adverse Effect;
8.14 If any guaranty of the Obligations is limited or
terminated by operation of law or by the guarantor thereunder, or any guarantor
becomes the subject of an Insolvency Proceeding;
8.15 If there occurs any event or circumstance that has a
Material Adverse Effect;
8.16 If a Prohibited Transaction or Reportable Event shall
occur with respect to a Plan which would be reasonably likely to have a Material
Adverse Effect; if any lien upon the assets of Borrower in connection with any
Plan shall arise; if Borrower or any ERISA Affiliate shall completely or
partially withdraw from a Multiemployer Plan or Multiple Employer Plan of which
Borrower or such ERISA Affiliate was a substantial employer, and such withdrawal
could, in the opinion of Lender, have a Material Adverse Effect on the financial
condition of Borrower; if 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; if Borrower or any of its ERISA Affiliates
creates or permits the creation of any accumulated funding deficiency, whether
or not waived; or upon the voluntary or involuntary termination of any Plan
which termination could, in the opinion of Lender, have a Material Adverse
Effect, or Borrower shall fail to notify Lender promptly and in any event within
ten (10) days of the occurrence of any event which constitutes an Event of
Default under this clause; and
8.17 If any writing, document, aging, certificate or other
evidence of the Accounts or Inventory shall be materially incomplete, incorrect
or misleading at the time the same is furnished to Lender; if Borrower shall
fail to comply with the terms of Section 6.6 of this Agreement; or if Borrower
shall fail to immediately remit each payment on any Account pursuant to the
terms of Section 2.3 of this Agreement.
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9. LENDER'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence of an
Event of Default, Lender may, at its election, without notice of its election
and without demand, do any one or more of the following, all of which are
authorized by Borrower:
(a) Declare all Obligations, immediately due
and payable;
(b) Terminate this Agreement and any of the
other Loan Documents as to any future liability or obligation of Lender, but
without affecting Lender's rights and security interest in the Collateral and
without affecting the Obligations;
(c) Settle or adjust disputes and claims
directly with account debtors for amounts and upon terms which Lender considers
commercially reasonable, and in such cases, Lender will credit Borrower's loan
account with only the net amounts received by Lender in payment of such disputed
Accounts after deducting all Lender Expenses incurred or expended in connection
therewith;
(d) Cause Borrower to hold all returned
Inventory in trust for Lender, segregate all returned Inventory from all other
property of Borrower or in Borrower's possession and conspicuously label said
returned Inventory as the property of Lender;
(e) Without notice to or demand upon
Borrower or any guarantor, make such payments and do such acts as Lender
considers necessary or reasonable to protect its security interests in the
Collateral. Borrower agrees to assemble the Collateral if Lender so requires,
and to make the Collateral available to Lender as Lender may designate. Borrower
authorizes Lender to enter the premises where the Collateral is located, to take
and maintain possession of the Collateral or any part of it, and to pay,
purchase, contest or compromise any encumbrance, charge or lien which in
Lender's determination appears to be prior or superior to its security interest
(except as set forth in the Intercreditor Agreement) and to pay all reasonable
expenses incurred in connection therewith. With respect to any of Borrower's
owned premises, Borrower hereby grants
35
Lender a license to enter into possession of such premises and to occupy the
same, without charge, for up to one hundred twenty (120) days in order to
exercise any of Lender's rights or remedies provided herein, at law, in equity,
or otherwise;
(g) Without notice to Borrower (such notice
being expressly waived) set off and apply to the Obligations any and all (i)
balances and deposits of Borrower held by Lender or any Related Entity, or (ii)
indebtedness at any time owing to or for the credit or the account of Borrower
held by Lender or any Related Entity;
(h) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Lender is hereby granted a license or other
right to use, without charge, Borrower's labels, Patents, Copyrights, rights of
use of any name, Trade Secrets, trade names, Trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any
Collateral and Borrower's rights under all licenses and all franchise agreements
shall inure to Lender's benefit;
(i) Sell the Collateral at either a public
or private sale, or both, by way of one or more contracts or transactions, for
cash or on terms, in such manner and at such places (including Borrower's
premises) as Lender determines is commercially reasonable. It is not necessary
that the Collateral be present at any such sale;
(j) Lender shall give notice of the disposition
of the Collateral as follows:
(1) Lender shall give Borrower and each holder of a
security interest in the Collateral who has
filed with Lender a written request for notice,
a notice in writing of the time and place of
public sale, or, if the sale is a private sale
or some other disposition other than a public
sale is to be made of the Collateral, then the
time on or after which the private sale or other
disposition is to be made;
36
(2) The notice shall be personally delivered or
mailed, postage prepaid, to Borrower as provided
in Section 12 of this Agreement, at least ten
(10) calendar days before the date fixed for the
sale, or at least ten (10) calendar days before
the date on or after which the private sale or
other disposition is to be made, unless the
Collateral is perishable or threatens to decline
speedily in value. Notice to persons other than
Borrower claiming an interest in the Collateral
shall be sent to such addresses as they have
furnished to Lender;
(3) If the sale is to be a public sale, Lender shall
also give notice of the time and place by
publishing a notice one time at least ten (10)
calendar days before the date of the sale in a
newspaper of general circulation in the county
in which the sale is to be held;
(k) Lender may credit bid and purchase at any
public sale; and
(l) Any deficiency which exists after
disposition of the Collateral as provided above will be paid immediately by
Borrower. Lender will return any excess to Borrower, without interest and
subject to the rights of third parties.
9.2 REMEDIES CUMULATIVE. Lender's rights and remedies
under this Agreement, the Loan Documents and all other agreements shall be
cumulative. Lender shall have all other rights and remedies not inconsistent
herewith as provided under the UCC, by law or in equity. No exercise by Lender
of one right or remedy shall be deemed an election, and no waiver by Lender of
any Event of Default on Borrower's part shall be deemed a continuing waiver. No
delay by Lender shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES REGARDING THE COLLATERAL
37
If Borrower fails to pay, prior to delinquency, any monies
(whether taxes, rents, assessments, insurance premiums, or otherwise) due to
third persons or entities, or fails to make, prior to delinquency, any deposits
or furnish any required proof of payment or deposit, all as required under the
terms of this Agreement, then, to the extent that Lender reasonably determines
that such failure by Borrower could have a Material Adverse Effect on Lender's
interests in the Collateral, in its reasonable discretion and without prior
notice to Borrower, Lender may do any or all of the following: (a) make payment
of the same or any part thereof, (b) set up such reserves in Borrower's loan
account as Lender deems necessary to protect Lender from the exposure created by
such failure, or (c) obtain and maintain insurance policies of the type
discussed in Section 6.8 of this Agreement, and take any action with respect to
such policies as Lender deems prudent. Any amounts paid or deposited by Lender
shall constitute Lender Expenses, shall be immediately charged to Borrower's
loan account and become additional Obligations, shall bear interest at the then
applicable rate hereinabove provided, and shall be secured by the Collateral.
Any payments made by Lender shall not constitute an agreement by Lender to make
similar payments in the future or a waiver by Lender of any Event of Default
under this Agreement. Lender need not inquire as to, or contest the validity of,
any such expense, tax, security interest, encumbrance, or lien and the receipt
of the usual official notice for the payment thereof shall be conclusive
evidence that the same was validly due and owing.
11. GOVERNING LAW; WAIVERS; AMENDMENTS; INDEMNIFICATION
11.1 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS;
JURY TRIAL WAIVER. (a) Except as otherwise expressly provided in any of the Loan
Documents, in all respects, including all matters of construction, validity and
performance, this Agreement and the Obligations arising hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
Commonwealth of Massachusetts applicable to contracts made and performed in such
state, without regard to principles thereof regarding conflict of laws, and any
applicable laws of the United States of America.
(b) Borrower and Lender irrevocably consent
and submit to the non-exclusive jurisdiction of the courts
of the Commonwealth of Massachusetts and waive any objection
38
based on venue or FORUM NON CONVENIENS with respect to any action instituted
therein, and agree that any dispute arising out of the relationship between any
such persons or the conduct of any such persons in connection with this
Agreement or otherwise shall be heard only in the courts described above (except
that Lender shall have the right to bring any action or proceeding against
Borrower or its property in the courts of any other jurisdiction which Lender
deems necessary or appropriate in order to realize on the Collateral).
(c) Borrower hereby waives personal service
of any and all process upon it and consents that all such service of process may
be made by registered mail (return receipt requested) directed to its address
set forth in Section 12 hereof and service so made shall be deemed to be
completed five (5) days after the same shall have been deposited in the U.S.
mail. In addition, Lender agrees promptly to forward by registered mail any
process so served upon such agent to Borrower at its address set forth in
Section 12 hereof. Borrower hereby consents to service of process as aforesaid.
(d) BORROWER AND LENDER EACH HEREBY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i)
ARISING UNDER THIS AGREEMENT OR THE LOAN DOCUMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR EITHER OF
THEM IN RESPECT TO THIS AGREEMENT OR THE LOAN DOCUMENTS OR THE TRANSACTIONS
RELATED HERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER EACH HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY OF THEM MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(e) Nothing in this Section 11.1 shall
affect the rights of Lender to serve legal process in any other manner permitted
by law or affect the rights of Lender to bring any action or proceeding against
Borrower or its property in the courts of any other jurisdiction.
(f) Lender shall not have any liability to
Borrower (whether in tort, contract, equity or otherwise)
39
for losses suffered by Borrower in connection with, arising out of, or in any
way related to the transactions or relationships contemplated by this Agreement,
or any act, omission or event occurring in connection herewith, unless it is
determined by a final and non-appealable judgment or court order binding on
Lender, that the losses were the result of acts or omission constituting gross
negligence or willful misconduct. In any such litigation, Lender shall be
entitled to the benefit of the rebuttable presumption that it acted in good
faith and with the exercise of ordinary care in the performance by it of the
terms of this Agreement.
11.2 WAIVER OF NOTICES. Borrower hereby expressly
waives demand, presentment, protest and notice of protest
and notice of dishonor with respect to any and all instruments and commercial
paper, included in or evidencing any of the Obligations or the Collateral, and
any and all other demands and notices of any kind or nature whatsoever with
respect to the Obligations, the Collateral and this Agreement, except such as
are expressly provided for herein. No notice to or demand on Borrower which
Lender may elect to give shall entitle Borrower to any other or further notice
or demand in the same, similar or other circumstances.
11.3 AMENDMENTS AND WAIVERS. Neither this Agreement nor
any provision hereof shall be amended modified, waived or discharged orally or
by course of conduct, but only by a written agreement signed by an authorized
officer of Lender and no Event of Default shall be deemed cured unless such cure
is acknowledged in writing by Lender. Lender shall not, by any act, delay,
omission or otherwise be deemed to have expressly or impliedly waived any of its
rights, powers and/or remedies unless such waiver shall be in writing and signed
by an authorized officer of Lender. Any such waiver shall be enforceable only to
the extent specifically set forth therein. A waiver by Lender of any right,
power and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy Lender would otherwise have on any
future occasion, whether similar in kind or otherwise.
11.4 WAIVER OF COUNTERCLAIMS. Borrower waives all rights
to interpose any claims, deductions, setoffs or counterclaims of any nature
(other then compulsory counterclaims) in any action or proceeding with respect
to
40
this Agreement, the Obligations, the Collateral or any matter arising therefrom
or relating hereto or thereto.
11.5 INDEMNIFICATION. Borrower shall indemnify, defend and
hold Lender, and its directors, agents employees and counsel, harmless from and
against any and all losses, claims, damages, liabilities, deficiencies,
judgments, penalties or expenses imposed on, incurred by or asserted against any
of them in connection with any litigation, investigation, claim or proceeding
commenced or threatened related to the negotiation, preparation, execution,
delivery, enforcement, performance or administration of this Agreement, any Loan
Document, or any undertaking or proceeding related to any of the transactions
contemplated hereby or any act, omission to act, event or transaction related or
attendant thereto, including, without limitation, amounts paid in settlement,
court costs, and the reasonable fees and expenses of counsel, PROVIDED, THAT,
Borrower shall have no obligation under this Section 11.5 to Lender with respect
to any indemnified matter resulting solely from Lender's gross negligence or
willful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section may be unenforceable
because it violates any law or public policy, Borrower shall pay the maximum
portion which it is permitted to pay under applicable law to Lender in
satisfaction of indemnified matters under this Section. The foregoing indemnity
shall survive the payment of the Obligations and the termination of this
Agreement. All of the foregoing costs and expenses shall be part of the
Obligations and secured by the Collateral
12. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection therewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be delivered in person with receipt acknowledged or
by registered or certified mail, return receipt requested, postage prepaid, or
telecopied and confirmed by telecopy answerback addressed as follows:
41
If to Borrower: Intelogic Trace, Inc.
8415 Datapoint Drive
San Antonio, Texas 78229-8480
Attention: Philip D. Freeman
Telecopy No. (210) 593-2201
With a copy to: Cox & Smith, Inc.
112 E. Pecan St.
Suite 1800
San Antonio, Texas 78205
Attention: Deborah D. Williamson
Telecopy No. (210) 226-8395
If to Lender: Fidelity Capital & Income Fund
82 Devonshire Street - F7D
Boston, Massachusetts 02109
Attention: Judy K. Mencher
Telecopy No. (617) 476-7774
With a copy to: Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Bruce R. Zirinsky
Telecopy No. (212) 310-8007
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other. All notices or demands sent in accordance with this Section 12 shall
be deemed received on the earlier of the date of actual receipt or three (3)
calendar days after the deposit thereof in the mail.
13. DESTRUCTION OF BORROWER'S DOCUMENTS
All documents, schedules, invoices, agings, or other papers
delivered to Lender may be destroyed or otherwise disposed of by Lender four (4)
months after they are delivered to or received by Lender, unless Borrower
requests, in writing, the return of said documents, schedules or other papers
and makes arrangements, at Borrower's expense, for their return.
42
14. GENERAL PROVISIONS
14.1 EFFECTIVENESS. This Agreement shall be binding and
deemed effective when executed by Borrower and accepted and executed by Lender.
14.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of the
parties; provided, however, that Borrower may not assign this Agreement or any
rights hereunder without Lender's prior written consent which such consent shall
not be unreasonably withheld or delayed, and any prohibited assignment shall be
absolutely void. No consent to an assignment by Lender shall release Borrower
from its Obligations. Lender may assign this Agreement and its rights and duties
hereunder. Lender reserves the right to sell, assign, transfer, negotiate, or
grant participations in all or any part of, or any interest in Lender's rights
and benefits hereunder. In connection therewith, Lender may disclose all
documents and information which Lender now or hereafter may have relating to
Borrower or Borrower's business.
14.3 SECTION HEADINGS. Headings and numbers have
been set forth herein for convenience only. Unless the
contrary is compelled by the context, everything contained
in each paragraph applies equally to this entire Agreement.
14.4 INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against Lender or
Borrower, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
14.5 FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT
(INCLUDING THE SCHEDULES AND EXHIBITS HERETO, IF ANY), THE NOTE AND THE OTHER
LOAN DOCUMENTS CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF
THE TEXAS BUSINESS AND COMMERCE CODE, AND REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
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14.6 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
14.7 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.
14.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the
incurrence or payment of the Obligations by Borrower or any guarantor of the
Obligations or the transfer by either or both of such parties to Lender of any
property of either or both of such parties should for any reason subsequently be
declared to be improper under any state or federal law relating to creditors'
rights, including, without limitation, provisions of the United States
Bankruptcy Code relating to fraudulent conveyances, preferences and other
voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if Fidelity is required to repay or
restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Fidelity is required to repay or restore,
and as to all reasonable costs, expenses and attorneys' fees of Fidelity related
thereto, the liability of Borrower or such guarantor shall automatically be
revived, reinstated and restored and shall exists as though such Voidable
Transfer had never been made.
15. TERMINATION. Upon termination of this Agreement and
upon complete repayment of all Obligations owing hereunder, Lender shall
promptly take all actions as are reasonably requested by Borrower to release all
rights Lender may have (except as to those which expressly survive termination)
and Lender shall give such notices and complete such documents reasonably
necessary to effect such termination.
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IN WITNESS WHEREOF, this Agreement has been duly executed as
of the date first written above.
INTELOGIC TRACE, INC.,
By: MIKE R. ELLIS
Name: Mike R. Ellis
Title: Vice President
FIDELITY CAPITAL & INCOME FUND,
By: JOHN H. COSTELLO
Name: John H. Costello
Title: Assistant Treasurer
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