EXHIBIT 10.37
AMENDED AND RESTATED GENERAL
LOAN AND SECURITY AGREEMENT
BETWEEN
FOOTHILL CAPITAL CORPORATION
AND
INTELOGIC TRACE, INC.
TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND CONSTRUCTION................................. 2
1.1 Definitions............................................. 2
1.2 Accounting Terms........................................ 8
1.3 Code.................................................... 8
1.4 Construction............................................ 8
1.5 Schedules and Exhibits.................................. 9
2. LOAN AND TERMS OF PAYMENT.................................... 9
2.1 Revolving Advances...................................... 9
2.2 Overadvances............................................ 10
2.3 Interest: Rates, Payments, and Calculations............. 10
(a) Interest Rate....................................... 10
(b) Default Rate........................................ 10
(c) Alternative Interest Rate........................... 10
(d) Interest Savings.................................... 11
(e) Payments............................................ 11
(f) Computation......................................... 12
2.4 Crediting Payments...................................... 12
2.5 Statements of Obligations............................... 12
2.6 Fees.................................................... 12
(a) Closing Fee......................................... 12
(b) Unused Line Fee..................................... 13
(c) Financial Examination, Documentation and
Appraisal Fees.................................... 13
3. CONDITIONS TO EFFECTIVENESS; TERM OF AGREEMENT............... 13
3.1 Conditions Precedent to Initial Advance................. 13
3.2 Term.................................................... 14
3.3 Effect of Termination................................... 14
3.4 Early Termination by Borrower........................... 14
4. CREATION OF SECURITY INTEREST................................ 14
4.1 Grant of Security Interest.............................. 14
4.2 Negotiable Collateral................................... 14
4.3 Collection of Accounts, General Intangibles,
Negotiable Collateral................................. 14
4.4 Delivery of Additional Documentation Required........... 14
4.5 Power of Attorney....................................... 15
4.6 Right to Inspect........................................ 15
5. REPRESENTATIONS AND WARRANTIES............................... 15
5.1 No Prior Encumbrances................................... 16
5.2 Eligible Accounts....................................... 16
5.3 Location of Inventory and Equipment..................... 16
5.4 Location of Chief Executive Office...................... 16
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5.5 Due Organization and Qualification...................... 16
5.6 Due Authorization; No Conflict.......................... 16
5.7 Litigation.............................................. 16
5.8 No Material Adverse Change in Financial Condition....... 17
5.9 Solvency................................................ 17
5.10 ERISA................................................... 17
5.11 Environmental Condition................................. 17
5.12 Patents, Copyrights and Trademarks...................... 18
5.13 Reliance by Foothill; Cumulative........................ 18
5.14 Prior Agreements........................................ 18
5.15 Bankruptcy Matters...................................... 18
6. AFFIRMATIVE COVENANTS........................................ 18
6.1 Accounting System....................................... 18
6.2 Collateral Reports...................................... 18
6.3 Schedules of Accounts................................... 19
6.4 Financial Statements, Reports, Certificates............. 19
6.5 Tax Returns............................................. 20
6.6 Returns and Allowances.................................. 20
6.7 Maintenance of Equipment................................ 20
6.8 Taxes................................................... 20
6.9 Insurance............................................... 20
6.10 Foothill Expenses....................................... 21
6.11 Financial Covenants..................................... 21
(a) Current Ratio....................................... 21
(b) Tangible Net Worth.................................. 21
(c) EBITDA.............................................. 21
6.12 No Setoffs or Counterclaims............................. 21
7. NEGATIVE COVENANTS........................................... 21
7.1 Indebtedness............................................ 21
7.2 Liens................................................... 22
7.3 Restrictions on Fundamental Changes..................... 22
7.4 Extraordinary Transactions and Disposal of Assets....... 22
7.5 Change Name............................................. 22
7.6 Merge, Acquire.......................................... 22
7.7 Guarantee............................................... 23
7.8 Restructure............................................. 23
7.9 Prepayments............................................. 23
7.11 Capital Expenditures.................................... 23
7.12 Distributions........................................... 23
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7.13 Accounting Methods...................................... 23
7.14 Investments............................................. 23
7.15 Transactions with Affiliates............................ 23
7.16 Suspension.............................................. 24
7.17 Compensation............................................ 24
8. EVENTS OF DEFAULT............................................ 24
9. FOOTHILL'S RIGHTS AND REMEDIES............................... 26
9.1 Rights and Remedies..................................... 26
9.2 Remedies Cumulative..................................... 27
10. TAXES AND EXPENSES REGARDING THE COLLATERAL.................. 28
11. WAIVERS; INDEMNIFICATION..................................... 28
11.1 Demand; Protest; etc.................................... 28
11.2 Foothill's Liability for Inventory or Equipment......... 28
11.3 Indemnification......................................... 28
12. NOTICES...................................................... 28
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER................... 29
14. DESTRUCTION OF BORROWER'S DOCUMENTS.......................... 30
15. GENERAL PROVISIONS........................................... 30
15.1 Effectiveness........................................... 30
15.2 Successors and Assigns.................................. 30
15.3 Section Headings........................................ 30
15.4 Interpretation.......................................... 31
15.5 Severability of Provisions.............................. 31
15.6 Amendments in Writing................................... 31
15.7 Counterparts............................................ 31
15.8 Revival and Reinstatement of Obligations................ 31
15.9 Integration............................................. 31
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TABLE OF SCHEDULES
Schedule 5.4 Location of Inventory and Equipment
Schedule 5.7 Pending Litigation
Schedule 5.10 ERISA Violations
Schedule 5.12 Borrower's Patents, Trademarks and Copyrights
Schedule 6.2 Form of Certificate Re: Adjusted Service Value
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AMENDED AND RESTATED GENERAL LOAN AND SECURITY AGREEMENT
This AMENDED AND RESTATED GENERAL LOAN AND SECURITY AGREEMENT, is
entered into as of December 8, 1994 between FOOTHILL CAPITAL CORPORATION, a
California corporation ("Foothill"), with a place of business located at 11111
Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333, and
Intelogic Trace, Inc., a New York corporation ("Borrower"), with its chief
executive office located at Turtle Creek Towers I, 8415 Datapoint Drive, San
Antonio, Texas 78229-8480, with reference to the following facts:
A. Foothill and Borrower have previously entered into a General
Loan and Security Agreement dated as of June 20, 1991, together with other
written agreements and amendments thereto (collectively, the "GLSA"), the terms
and obligations of which are reaffirmed.
B. On August 5, 1994, Borrower filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code with the United States
Bankruptcy Court, Western District of Texas, San Antonio Division commencing
Case No. 94-52172C (the "Case").
C. During the Case, Foothill continued to provide certain
financing to Borrower pursuant to the GLSA as modified by and pursuant to
various pleadings filed and orders entered in connection with the Case
(collectively, the "DIP Loan").
D. On December 8, 1994, Borrower reorganized pursuant to that
certain Modified First Amended Chapter 11 Plan of Intelogic Trace, Inc. dated
October 12, 1994 and filed in the Case (the "Reorganization Plan"), and the
Final Order entered on November 28, 1994 (the "Order") confirming the Plan filed
and entered in connection with Case. Pursuant to the Reorganization Plan and
Order, all assets and property of Borrower which were subject to the Case will
vest in and transfer to Borrower upon entry of the Order.
E. Foothill and Borrower wish to restate their respective
agreements and obligations under the GLSA and the orders entered in connection
with the DIP Loan as provided in this Agreement.
F. As of November 30, 1994, Borrower was indebted to Foothill in
the amount of Six Million Nine Hundred Ninety-One Thousand One Hundred
Forty-Three and 64/100 Dollars ($6,991,143.64) (the "Existing Obligations").
The parties agree that the following shall constitute the entire
agreement between them which shall restate the existing agreements between them:
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1. DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following definitions:
"ACCOUNT DEBTOR" means any person who is or who may become
obligated under, with respect to, or on account of an Account.
"ACCOUNTS" means any "account," as such term is defined in
section 9-106 of the Code and, in any event, shall include, without limitation,
all accounts receivable, book debts, service contracts and other forms of
obligations (other than forms of obligations evidenced by "chattel paper",
"documents" or "instruments", as those terms are defined under the Code)
including, without limitation, under any trade names, styles or divisions
thereof, whether arising out of goods sold or services performed by Borrower or
from any other transaction, whether or not the same involves the sale of goods
or the performance of services by Borrower (including, without limitation, any
such obligation that might be characterized as an account or contract right
under the Code) 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.
"ADJUSTED SERVICE VALUE" means fifteen percent (15%) of
Borrower's annualized field contract and time and materials service maintenance
revenues, net of deferred revenues, measured on a monthly basis, consistently
applied. The calculation of annualized field service maintenance revenues shall
be determined by multiplying the field service maintenance revenues for the
immediately preceding three (3) months by four (4).
"AGREEMENT" means this Amended and Restated General Loan and
Security Agreement and any extensions, riders, supplements, notes, amendments,
or modifications to or in connection with this Amended and Restated General Loan
and Security Agreement.
"AUTHORIZED OFFICER" means any officer of Borrower.
"BORROWER'S BOOKS" means 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.
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"BORROWING BASE" has the meaning set forth in Section 2.1, but in
no event shall the Borrowing Base exceed the Maximum Amount.
"BUSINESS DAY" means any day which is not a Saturday, Sunday, or
other day on which national banks are authorized or required to close.
"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 Securities and Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d- 3 under the Securities and Exchange
Act of 1934, as amended), directly or indirectly, of more than twenty percent
(20%) (or such other percentage as Foothill may consent to in writing) of the
total voting power of all classes of stock then outstanding of Borrower normally
entitled to vote in elections of directors, except as the same shall occur
pursuant to the terms of Borrower's Reorganization Plan and Order.
"CLOSING DATE" means the date of this Agreement.
"CODE" means the California Uniform Commercial Code.
"COLLATERAL" means each of the following: the Accounts;
Borrower's Books; the Equipment; the General Intangibles; the Inventory; the
Negotiable Collateral; any money, or other assets of Borrower which hereafter
come into the possession, custody, or control of Foothill; and the proceeds and
products, whether tangible or intangible, of any of the foregoing including
proceeds of insurance covering any or all of the Collateral, and any and all
Accounts, Equipment, General Intangibles, Inventory, Negotiable Collateral,
money, Deposit Accounts, or other tangible or intangible property resulting from
the sale, exchange, collection, or other disposition of the Collateral, or any
portion thereof or interest therein, and the proceeds thereof.
"CURRENT RATIO" means Borrower's current assets divided by
Borrower's current liabilities (each determined in accordance with GAAP.
"DAILY BALANCE" means the amount of an Obligation owed at the end
of a given day.
"EBITDA" means for any period, Borrower's net income before the
deduction of interest expense, provision for taxes with respect to such period,
depreciation and amortization expense (each determined in accordance with GAAP).
"ELIGIBLE ACCOUNTS" means those Accounts created by Borrower in
the ordinary course of business that arise out of Borrower's sale of goods or
rendition of services, that strictly comply with all of Borrower's
representations and warranties to Foothill as set forth in the Loan Documents,
and that are and at all times shall continue to be reasonably acceptable to
Foothill in all respects; provided, however, that standards of eligibility may
be fixed and revised from time to time by Foothill in Foothill's commercially
reasonable judgment. Eligible Accounts shall not include the following:
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(a) Accounts which the Account Debtor has failed to pay within
sixty (60) days of due date;
(b) Accounts with selling terms of more than sixty (60) days;
(c) Accounts with respect to which the Account Debtor is an
officer, employee, affiliate, or agent of Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the Account Debtor may be
conditional;
(e) Accounts with respect to which the Account Debtor is not a
resident of the United States, and which are not either (1) covered by credit
insurance in form and amount, and by an insurer satisfactory to Foothill, or (2)
supported by one or more letters of credit that are assignable and have been
delivered to Foothill in an amount and of a tenor, and issued by a financial
institution, acceptable to Foothill;
(f) With the exception of Accounts owing to Borrower by Datapoint
Corporation, Accounts with respect to which the Account Debtor is a subsidiary
of, related to, affiliated with or has common shareholders, officers or
directors with Borrower;
(g) Accounts with respect to which Borrower is or may become
liable to the Account Debtor for goods sold or services rendered by the Account
Debtor to Borrower;
(h) Accounts with respect to an Account Debtor whose total
obligations to Borrower exceed ten percent (10%) of all Eligible Accounts, to
the extent of the obligations of such Account Debtor in excess of such
percentage;
(i) Accounts with respect to which the Account Debtor disputes
liability or makes any claim with respect thereto, or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(j) Accounts the collection of which Foothill believes to be
doubtful by reason of the Account Debtor's financial condition; and
(k) Accounts owed by an Account Debtor that has failed to pay
fifty percent (50%) or more of its accounts owed to Borrower within sixty (60)
days of the date of the applicable invoices (within the applicable time period
set forth in subparagraph (a) above).
"EQUIPMENT" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, dies,
jigs, goods (other than consumer goods or farm products), and any interest in
any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing, wherever located.
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"ERISA" means the Employment Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which Borrower is a member and which is treated as a single
employer under ERISA Section 4001(b)(1), or IRC Section 414.
"EVENT OF DEFAULT" has the meaning set forth in Section 8.
"FIDELITY" means Fidelity Capital & Income Fund, a Massachusetts
business trust.
"FIELD SUPPORT SPARES" means any and all spare parts, components,
top assemblies, subassemblies and similar items used by Borrower to maintain or
repair customer equipment.
"FOOTHILL EXPENSES" means all: costs or expenses (including
taxes, photocopying, notarization, telecommunication and insurance premiums)
required to be paid by Borrower under any of the Loan Documents that are paid or
advanced by Foothill; documentation, filing, recording, publication, appraisal
(including periodic Collateral appraisals), real estate survey, environmental
audit, and search fees assessed, paid, or incurred by Foothill in connection
with Foothill's transactions with Borrower; costs and expenses incurred by
Foothill in the disbursement of funds to Borrower (by wire transfer or
otherwise); charges paid or incurred by Foothill resulting from the dishonor of
checks; costs and expenses paid or incurred by Foothill 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 paid or incurred by
Foothill in examining Borrower's Books; costs and expenses of third party claims
or any other suit paid or incurred by Foothill in enforcing or defending the
Loan Documents; and Foothill's reasonable attorneys' fees and expenses incurred
in advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including attorneys' fees and expenses incurred in
connection with a "workout", a "restructuring", or an Insolvency Proceeding
concerning Borrower or any guarantor of the Obligations), defending, or
concerning the Loan Documents, whether or not suit is brought.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all of Borrower's present and future
general intangibles and other personal property (including choses or things in
action, goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, monies due under any royalty or licensing
agreements, infringements, claims, computer programs, computer discs, computer
tapes, literature, reports, catalogs, deposit accounts, insurance premium rates,
tax refunds, and tax refund claims) other than goods and Accounts, and
Borrower's Books relating to any of the foregoing.
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"INDEBTEDNESS" shall mean: (a) all obligations of Borrower for
borrowed money; (b) all obligations of Borrower evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other obligations
of Borrower in respect of letters of credit, letter of credit guaranties,
bankers acceptances, interest rate swaps, controlled disbursement accounts, or
other financial products; (c) all obligations under capitalized leases; (d) all
obligations or liabilities of others secured by a lien or security interest on
any asset owned by Borrower, irrespective of whether such obligation or
liability is assumed; and (e) any obligation of Borrower guaranteeing or
intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or
sold with recourse to Borrower) any indebtedness, lease, dividend, letter of
credit, or other obligation of any other person.
"INSOLVENCY PROCEEDING" means 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, extensions generally with its creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor
Agreement among Foothill, Fidelity and Borrower of even date herewith.
"INVENTORY" means all present and future inventory in which
Borrower has any interest, including Field Support Spares, goods held for sale
or lease or to be furnished under a contract of service and all of Borrower's
present and future raw materials, work in process, finished goods, and packing
and shipping materials, wherever located, and any documents of title
representing any of the above and Borrower's Books relating to any of the
foregoing.
"INTERCREDITOR AGREEMENT" shall mean that certain Intercreditor
Agreement dated as of the date hereof, between Foothill, Fidelity and Borrower.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"JUDICIAL OFFICER OR ASSIGNEE" means any trustee, receiver,
controller, custodian, assignee for the benefit of creditors, or any other
person or entity having powers or duties like or similar to the powers and
duties of a trustee, receiver, controller, custodian, or assignee for the
benefit of creditors.
"LOAN DOCUMENTS" means, collectively, this Agreement, any note or
notes executed by Borrower to the order of Foothill, the Intercreditor
Agreement, and any other agreement entered into in connection with this
Agreement, together with all alterations, amendments, changes, extensions,
modifications, refinancing, refundings, renewals, replacements, restatements, or
supplements, of or to any of the foregoing.
"MAXIMUM AMOUNT" means the amount of Four Million Five Hundred
Thousand Dollars ($4,500,000) until June 30, 1995, which shall be reduced by One
Hundred Thousand Dollars ($100,000) on the first day of each month thereafter
commencing with July 1, 1995
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through December 1, 1995, at which time such amount shall be and remain at Three
Million Nine Hundred Thousand Dollars ($3,900,000).
"MAXIMUM RATE" means the maximum rate of interest permitted by
applicable law as the same exists from day to day during the term of this
Agreement, including, to the extent that Texas law may apply to the rights of
the parties hereunder notwithstanding the choice of California law contained in
Section 13 hereof (and without any intent of the parties to diminish or negate
the intent or effect of the provisions of Section 13 hereof), the greatest of
either (i) the "indicated rate ceiling" as defined in Article 1.04, Title 79,
Revised Civil Statutes of Texas (the "Act") with said indicated rate ceiling
being adjusted weekly as when permitted under the Act, (ii) the "annual ceiling"
or the "quarterly ceiling" from time to time in effect as referred to and
defined in the Act, upon the giving of notice by Foothill of its election to
utilize the "annual ceiling" or the "quarterly ceiling" to the extent permitted
by the Act and with the effect provided in Section (h)(1) of the Act, (iii) the
rate permitted by any federal law if such federal law applies or may be applied
to this transaction and when and for so long as the rate permitted thereunder is
greater than that permitted under clause (i) or clause (ii) hereof, or (iv) the
maximum rate permitted by applicable law when and as such law changes to permit
a greater maximum rate than that stated in clauses (i), (ii) or (iii) above.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
ERISA Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers employees
of Borrower or any ERISA Affiliate.
"NEGOTIABLE COLLATERAL" means all of Borrower's present and
future letters of credit, notes, drafts, instruments, documents, leases, chattel
paper, and Borrower's Books relating to any of the foregoing.
"OBLIGATIONS" means all Obligations under the GLSA, all
obligations and indebtedness under the DIP Loan, the Existing Obligations, all
claims and administrative claims by Foothill in connection with the Case, all
loans, advances, debts, principal, interest (including any interest that, but
for the provisions of the United States Bankruptcy Code, would have accrued),
premiums, liabilities (including all amounts charged to Borrower's loan account
pursuant to any agreement authorizing Foothill to charge Borrower's loan
account), obligations, fees, lease payments, guaranties, covenants, and duties
owing by Borrower to Foothill of any kind and description (whether pursuant to
or evidenced by the Loan Documents, by any note or other instrument, or by any
other agreement between Foothill and Borrower, and whether or not for the
payment of money), whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, and including any debt,
liability, or obligation owing from Borrower to others that Foothill may have
obtained by assignment or otherwise, and further including all interest not paid
when due and all Foothill Expenses that Borrower is required to pay or reimburse
by the Loan Documents, by law, or otherwise.
"OVERADVANCE" has the meaning set forth in Section 2.1(a).
"PBGC" means the Pension Benefit Guarantee Corporation.
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"PCS ESCROW AGREEMENT" shall mean that certain escrow agreement
by and between Borrower and PC Service Source, Inc. concerning the sale of
Borrower's Inventory and referred to in the Master Repair Services and Spare
Parts Supply Agreement between Borrower and PC Service Source, Inc.
"PERMITTED LIENS" means: (a) liens and security interests held by
Foothill; (b) liens for unpaid taxes that are not yet due and payable; (c) liens
and security interests of Fidelity as permitted in the Intercreditor Agreement;
and (d) purchase money security interests and liens of lessors under capitalized
leases to the extent that the acquisition or lease of the underlying asset was
permitted under Section 7.11, and so long as the security interest or lien only
secures the purchase price of the asset.
"PLAN" means any plan described in ERISA Section 3(2) maintained
for employees of Borrower or any ERISA Affiliate, other than a Multiemployer
Plan.
"PROHIBITED TRANSACTION" means any transaction described in
Section 406 of ERISA which is not exempt by reason of Section 408 of ERISA, and
any transaction described in Section 4975(c) of the IRC which is not exempt by
reason of Section 4975(c)(2) of the IRC.
"REFERENCE RATE" means the highest of the variable rates of
interest, per annum, most recently announced by (i) Bank of America, N.T.& S.A.,
San Francisco, California, (ii) Mellon Bank, N.A., Pittsburgh, Pennsylvania, and
(iii) Citibank, N.A., New York, New York, or any successor to any of the
foregoing institutions, as its "prime rate" or "reference rate", as the case may
be, whether or not such announced rate is the best rate available from such
financial institution.
"REPORTABLE EVENT" means a reportable event described in Section
4043 of ERISA or the regulations thereunder, a withdrawal from a Plan described
in Section 4063 of ERISA, or a cessation of operations described in Section
4068(f) of ERISA.
"TANGIBLE NET WORTH" means, as of the date the determination
thereof is to be made, Borrower's total stockholder's equity (deficit), MINUS
the intangible assets of Borrower.
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 and schedules thereto.
1.3 CODE. Any terms used in this Agreement which are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, and 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.
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Section, subsection, clause, and exhibit references are to this Agreement unless
otherwise specified.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT
2.1 REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this Agreement, and so
long as no Event of Default has occurred and is continuing, Foothill agrees to
make revolving advances to Borrower in an amount not to exceed the lesser of:
(i) the sum of (A) the Borrowing Base and (B)
until January 15, 1995, an overadvance of
up to One Million Dollars ($1,000,000)
which shall be reduced by the amount of all
proceeds received by Foothill from the sale
of Borrower's Inventory (including proceeds
from sales received with respect to the PCS
Escrow Agreement) (the "Overadvance"); and
(ii) the Maximum Amount.
For purposes of this Agreement "Borrowing Base" shall mean an amount equal to
the following amounts for the following periods:
PERCENTAGE OF
DATE ELIGIBLE ACCOUNTS
(i) The date of this Agreement 80%
through December 31, 1994
(ii) January 1, 1995 through 79%
January 10, 1995
(iii) January 11, 1995 through 78%
January 17, 1995
(iv) January 18, 1995 through 77%
January 24, 1995
(v) January 25, 1995 through 76%
February 7, 1995
(vi) February 8, 1995 through 75%
February 14, 1995
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(vii) February 15, 1995 through 74%
February 21, 1995
(viii) February 22, 1995 through 73%
March 7, 1995
(ix) March 8, 1995 through 72%
March 14, 1995
(x) March 15, 1995 through 71%
March 21, 1995
(xi) March 22, 1995 through 70%
December 31, 1995
(b) Notwithstanding anything to the contrary in subparagraphs (a)
and (b) above, Foothill may reduce its advance rates upon an Event of Default.
(c) Foothill shall have no obligation to make advances hereunder
to the extent they would cause the outstanding Obligations to exceed the Maximum
Amount.
(d) Foothill is authorized to make advances under this Agreement
based upon telephonic or other instructions received from anyone purporting to
be an Authorized Officer of Borrower or, without instructions, if in Foothill's
discretion such advances are necessary to meet Obligations. Borrower agrees to
establish and maintain a single designated deposit account for the purpose of
receiving the proceeds of the advances requested by Borrower and made by
Foothill hereunder. Unless otherwise agreed by Foothill and Borrower, any
advance requested by Borrower and made by Foothill hereunder shall be made to
such designated deposit account. The proceeds of the advances made under this
Section 2.1 shall be used by Borrower, consistent with this Agreement, for its
general working capital purposes, and capital expenditures permitted by Section
7.11 hereof. Amounts borrowed pursuant to this Section 2.1 may be repaid and
reborrowed at any time during the term of this Agreement so long as no Event of
Default has occurred and is continuing.
2.2 OVERADVANCES. If, at any time or for any reason, the amount
of Obligations owed by Borrower to Foothill pursuant to Section 2.1 is greater
than either the dollar or percentage limitations set forth in Section 2.1
Borrower shall pay to Foothill, in cash, the amount of such excess.
2.3 INTEREST: RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATE. All Obligations shall bear interest,
on the average Daily Balance, at a rate of four and one-half (4.5) percentage
points above the Reference Rate.
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(b) DEFAULT RATE. All Obligations shall bear interest, from and
after the occurrence and during the continuance of an Event of Default, at a
rate equal to six and one- half (6.5) percentage points above the Reference
Rate.
(c) ALTERNATIVE INTEREST RATE. Notwithstanding the provisions of
Section 2.3, if at any time the applicable interest rate shall exceed the
Maximum Rate and thereafter the applicable interest rate shall become less than
the Maximum Rate, the rate of interest payable hereunder shall, at the option of
Foothill, be the Maximum 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 Rate. If at maturity of final payment of
the Obligations the total amount of interest paid or accrued on the Obligations
under the provisions of Section 2.3 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 Rate had at all times
been in effect, and (b) the amount of interest accrued in accordance with the
provisions of Section 2.3.
(d) 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 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 Foothill, under any specific contingency, exceeds
the highest lawful rate, Borrower and Foothill 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.
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(e) PAYMENTS. Interest hereunder shall be due and payable on the
first Business Day of each calendar month during the term hereof. Foothill
shall, at its option, charge such interest, all Foothill Expenses, and all
installments due under any note to Borrower's loan account, which amounts shall
thereafter accrue interest at the rate then applicable hereunder. Any interest
not paid when due shall be compounded by becoming a part of the Obligations, and
such interest shall thereafter accrue interest at the rate then applicable
hereunder. Borrower shall pay Foothill all proceeds of Inventory which shall
reduce the Overadvance referenced in Section 2.1(a) until such time as the
outstanding balance of such Overadvance has been fully paid, but in any event,
all amounts owing under Section 2.1(a) shall be paid on or before January 17,
1995.
(f) COMPUTATION. The Reference Rate as of this date is eight and
one-half percent (8.5%) per annum. In the event the Reference Rate is changed
from time to time hereafter, the applicable rate of interest hereunder
automatically and immediately shall be increased or decreased by an amount equal
to the Reference Rate change. The rates of interest charged hereunder shall be
based upon the average Reference Rate in effect during the month. All interest
and fees chargeable under the Loan Documents shall be computed on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed.
2.4 CREDITING PAYMENTS. The receipt of any wire transfer of
funds, check, or other item of payment by Foothill 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 Foothill or unless and until
such check or other item of payment is honored when presented for payment. For
interest calculation purposes, all checks, wire transfers, or other items of
payment to Foothill shall be deemed to have been paid to Foothill two (2)
Business Day(s) after the date Foothill actually receives such wire transfer of
immediately available federal funds, or two (2) Business Day(s) after Foothill
actually receives possession of such check or other item of payment. This
calculation shall apply irrespective of Borrower's Obligations to Foothill.
Should such check or item of payment not be honored when presented for payment,
then, Borrower shall be deemed not to have made such payment, and interest shall
be recalculated accordingly. Anything to the contrary contained herein
notwithstanding, any wire transfer, check, or other item of payment received by
Foothill after 11:00 a.m. Los Angeles time shall be deemed to have been received
by Foothill as of the opening of business on the immediately following Business
Day.
2.5 STATEMENTS OF OBLIGATIONS. Foothill shall render statements
to Borrower of the Obligations, including principal, interest, fees, and
Foothill Expenses owing, and such statements shall be conclusively presumed to
be correct and accurate and constitute an account stated between Borrower and
Foothill unless, within sixty (60) days after receipt thereof by Borrower,
Borrower shall deliver to Foothill by registered or certified mail at its
address specified in Section 12, written objection thereto describing the error
or errors contained in any such statements.
2.6 FEES. Borrower shall pay to Foothill the following fees:
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(a) CLOSING FEE. The following amounts, each of which shall be
fully earned when paid:
(i) Twenty-Five Thousand Dollars ($25,000) payable on
the Closing Date;
(ii) Twenty-Five Thousand Dollars ($25,000) on April 1,
1995; and
(iii) Twenty-Five Thousand Dollars ($25,000) on July 1,
1995;
PROVIDED, HOWEVER, that in the event all Obligations of Borrower are paid in
full and this Agreement is terminated prior to any of the dates set forth in
clauses (ii) or (iii) above for the payment of any installment of the fees
pursuant to this Section 2.6(a), no payment of such installment of fees shall be
due and owing.
(b) UNUSED LINE FEE. On the first Business Day of each calendar
month during the term of this Agreement, a fee in an amount equal to one-half of
one percent (0.5%) per annum times the Average Unused Portion of the Maximum
Amount;
(c) FINANCIAL EXAMINATION, DOCUMENTATION AND APPRAISAL FEES.
Foothill's customary fee of Six Hundred Fifty Dollars ($650) per day per
examiner, plus out-of-pocket expenses for each financial analysis and
examination of Borrower performed by Foothill or its agents; Foothill's
customary appraisal fee of One Thousand Dollars ($1,000) per day per appraiser,
plus out-of-pocket expenses for each appraisal of the Collateral performed by
Foothill or its agents; and Foothill's customary fee of One Thousand Dollars
($1,000) per year for its loan documentation review.
3. CONDITIONS TO EFFECTIVENESS; TERM OF AGREEMENT
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of
Foothill to be obligated hereunder is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions on
or before the Closing Date.
(a) the Closing Date shall occur on or before December
10, 1994;
(b) receipt from Borrower or Fidelity on account of
Borrower of the difference between the Obligations
owing to Foothill on the Closing Date and the amount
which Borrower has available to borrow under Section
2.1(a) of this Agreement;
(c) confirmation that Borrower has completed its
obligations under the Reorganization Plan and Order
which are required to be completed on or before the
effective date of the Reorganization Plan pursuant
to Article VIII of the Reorganization Plan;
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(d) the execution of a loan and security agreement, and
any other documents required to be executed in
connection therewith, by and between Borrower and
Fidelity pursuant to which financing will be
provided by Fidelity to Foothill in an amount not to
exceed Six Million Dollars ($6,000,000);
(e) the execution of an Intercreditor Agreement among
Foothill, Borrower and Fidelity; and
(f) all other documents and legal matters in connection
with the transactions contemplated by this Agreement
shall have been delivered or executed or recorded
and shall be in form and substance satisfactory to
Foothill and its counsel.
3.2 TERM. This Agreement shall become effective upon the
execution and delivery hereof by Borrower and Foothill and shall continue in
full force and effect for a term ending on December 31, 1995. The foregoing
notwithstanding, Foothill shall have the right to terminate its obligations
under this Agreement immediately and without notice upon the occurrence of an
Event of Default.
3.3 EFFECT OF TERMINATION. On the date of termination, all
Obligations shall become immediately due and payable without notice or demand.
No termination of this Agreement, however, shall relieve or discharge Borrower
of Borrower's duties, Obligations, or covenants hereunder, and Foothill's
continuing security interest in the Collateral shall remain in effect until all
Obligations have been fully discharged and Foothill's obligation to provide
advances hereunder is terminated.
3.4 EARLY TERMINATION BY BORROWER. Borrower has the option to
terminate this Agreement by paying to Foothill, in cash, the Obligations.
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower hereby reaffirms its
prior grants and grants to Foothill a continuing security interest in all
currently existing and hereafter acquired or arising Collateral in order to
secure prompt repayment of any and all Obligations and in order to secure prompt
performance by Borrower of each of its covenants and duties under the Loan
Documents. Foothill's security interest in the Collateral shall attach to all
Collateral without further act on the part of Foothill or Borrower.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower shall, immediately upon the request of Foothill, endorse and assign
such Negotiable Collateral to Foothill and deliver physical possession of such
Negotiable Collateral to Foothill.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, NEGOTIABLE
COLLATERAL. Foothill, Borrower, and a bank that is acceptable to Foothill have
heretofore entered into a
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lockbox agreement, in form and substance satisfactory to Foothill in its sole
discretion pursuant to which all of Borrower's cash receipts, checks, and other
items of payment will be forwarded to Foothill on a daily basis. At any time,
Foothill or Foothill's designee may: (a) notify customers or Account Debtors of
Borrower that the Accounts, General Intangibles, or Negotiable Collateral have
been assigned to Foothill or that Foothill has a security interest therein; (b)
collect the Accounts, General Intangibles, and Negotiable Collateral directly
and charge the collection costs and expenses to Borrower's loan account.
Borrower agrees that it will hold in trust for Foothill, as Foothill's trustee,
any cash receipts, checks, and other items of payment that it receives on
account of the Accounts, General Intangibles, or Negotiable Collateral and
immediately will deliver said cash receipts, checks, and other items of payment
to Foothill in their original form as received by Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower has
executed and delivered to Foothill (and hereby reaffirms), prior to or
concurrently with Borrower's execution and delivery of this Agreement and at any
time thereafter at the request of Foothill, 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 Foothill may reasonably
request, in form satisfactory to Foothill, to perfect and continue perfected
Foothill'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 Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Borrower's true and lawful attorney, 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 Foothill's security interest in the
Collateral; (b) 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; (c) send
requests for verification of Accounts; (d) endorse Borrower's name on any
checks, notices, acceptances, money orders, drafts, or other item of payment or
security that may come into Foothill's possession; (e) at any time that an Event
of Default has occurred or Foothill deems itself insecure, notify the post
office authorities to change the address for delivery of Borrower's mail to an
address designated by Foothill, to receive and open all mail addressed to
Borrower, and to retain all mail relating to the Collateral and promptly forward
all other mail and copies of all mail retained to Borrower; (f) at any time that
an Event of Default has occurred or Foothill deems itself insecure, 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 any time that an Event of Default has occurred or Foothill deems itself
insecure, settle and adjust disputes and claims respecting the Accounts directly
with Account Debtors, for amounts and upon terms which Foothill determines to be
reasonable, and Foothill may cause to be executed and delivered any documents
and releases which Foothill determines to be necessary. The appointment of
Foothill as Borrower's attorney, and each and every one of Foothill's rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully repaid and performed and Foothill's obligation to
provide advances hereunder is terminated.
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4.6 RIGHT TO INSPECT. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter 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.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible
title to the Collateral, free and clear of liens, claims, security interests, or
encumbrances except for Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible 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 course of Borrower's business, unconditionally owed to Borrower without
defenses, disputes, offsets, counterclaims, or rights of return or cancellation.
The property or services giving rise to such Eligible 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. Borrower has not, and at all times hereafter, shall not have, received
notice of actual or imminent bankruptcy, insolvency, or financial embarrassment
of any Account Debtor at the time an Account due from such Account Debtor is
created.
5.3 LOCATION OF INVENTORY AND EQUIPMENT. Except for items being
repaired in the ordinary course of Borrower's business, the Inventory and
Equipment are not now and shall not at any time hereafter be stored with a
bailee, warehouseman, or similar party without Foothill's prior written consent.
Until Foothill shall have given its written consent, Borrower shall keep the
Inventory and Equipment only at the locations set forth on Schedule 5.4 attached
hereto.
5.4 LOCATION OF CHIEF EXECUTIVE OFFICE. The chief executive
office of Borrower is located 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 Foothill, relocate such chief
executive office.
5.5 DUE ORGANIZATION AND QUALIFICATION. Borrower is and shall at
all times hereafter be duly organized and existing and in good standing under
the laws of the state of its incorporation and qualified and licensed to do
business in, and in good standing in, any state in which the conduct of its
business or its ownership of property requires that it be so qualified.
5.6 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery, and
performance of the Loan Documents are within Borrower's corporate powers, have
been duly
16
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles or 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.
5.7 LITIGATION. Except as set forth on Schedule 5.7 attached
hereto, there are no actions or proceedings pending by or against Borrower
before any court or administrative agency and Borrower does not have knowledge
or belief of any pending, threatened, or imminent litigation, governmental
investigations, or claims, complaints, actions, or prosecutions involving
Borrower or any guarantor of the Obligations, except for ongoing collection
matters in which the Borrower is the plaintiff. If any of the foregoing arises
during the term of this Agreement, Borrower shall promptly notify Foothill in
writing.
5.8 NO MATERIAL ADVERSE CHANGE IN FINANCIAL CONDITION. All
financial statements relating to Borrower or any guarantor of the Obligations
that have been or may hereafter be delivered by Borrower to Foothill 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 or any guarantor since the date of the latest financial
statements submitted to Foothill on or before the Closing Date.
5.9 SOLVENCY. Borrower is able to pay all of its debts (including
trade debts and contingent liabilities) as they become due.
5.10 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 5.10 attached
hereto. 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.
5.11 ENVIRONMENTAL CONDITION. Except as to cleaning material and
solutions and packing materials 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
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 or operated by Borrower. Borrower has not received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
17
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.
5.12 PATENTS, COPYRIGHTS AND TRADEMARKS. Except as set forth on
Schedule 5.12 attached hereto, Borrower has no registered trademarks or
copyrights and has not applied for or been issued any patents by any
governmental authority or instrumentality hereof.
5.13 RELIANCE BY FOOTHILL; CUMULATIVE. Each warranty and
representation contained in this Agreement shall be automatically deemed
repeated with each advance and shall be conclusively presumed to have been
relied on by Foothill regardless of any investigation made or information
possessed by Foothill. The warranties and representations set forth herein shall
be cumulative and in addition to any and all other warranties and
representations that Borrower shall now or hereinafter give, or cause to be
given, to Foothill.
5.14 PRIOR AGREEMENTS. Except as modified by this Agreement, the
GLSA and DIP Loan are valid, binding and enforceable agreements in accordance
with their respective terms and are reaffirmed in full.
5.15 BANKRUPTCY MATTERS. The Reorganization Plan and Order are
final and non-appealable.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the Obligations, and
unless Foothill shall otherwise consent in writing, Borrower shall do all of the
following:
6.1 ACCOUNTING SYSTEM. Borrower at all times hereafter shall
maintain a standard and modern 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
be requested by Foothill. Borrower shall also keep proper books of account
showing all sales and claims.
6.2 COLLATERAL REPORTS. Borrower shall deliver to Foothill, no
later than the tenth (10th) day of each month during the term of this Agreement,
a detailed aging, by total, of the Accounts, a reconciliation statement, and a
summary aging, by vendor, of all accounts payable and any book overdraft and no
later than the thirtieth (30th) day of each month during the term of this
Agreement, a certificate signed by Borrower's chief financial officer or
corporate treasurer calculating the Adjusted Service Value (see Schedule 6.2
attached hereto). Original sales invoices evidencing daily sales shall be mailed
by Borrower to each Account Debtor with a copy to Foothill upon Foothill's
request and, at such time as either an event of default has occurred or Foothill
determines that a material impairment of the prospect of repayment of any
portion of the Obligations or of the value of priority of
18
Foothill's security interest in the Collateral has occurred or is imminently
likely to occur at Foothill's direction, the invoices shall indicate on their
face that the Account has been assigned to Foothill and that all payments are to
be made directly to Foothill. Borrower shall deliver to Foothill, as Foothill
may from time to time reasonably require, collection reports, sales journals,
invoices, original delivery receipts, customer's purchase orders, shipping
instructions, bills of lading, and other documentation respecting shipment
arrangements. Absent such a request by Foothill, copies of all such
documentation shall be held by Borrower as custodian for Foothill.
6.3 SCHEDULES OF ACCOUNTS. With such regularity as Foothill shall
require, Borrower shall provide Foothill with schedules describing all Accounts.
Foothill's failure to request such schedules or Borrower's failure to execute
and deliver such schedules shall not affect or limit Foothill's security
interest or other rights in and to the Accounts.
6.4 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower agrees
to deliver to Foothill: (a) as soon as available, but in any event within thirty
(30) days after the end of each fiscal month, except the third month of each
fiscal quarter within forty-five (45) days after the end of each fiscal month
during each of Borrower's fiscal years, a company prepared balance sheet, income
statement, and cash flow statement covering Borrower's operations during such
period; and (b) as soon as available, but in any event within ninety (90) days
after the end of each of Borrower's fiscal years, financial statements of
Borrower for each such fiscal year, audited by independent certified public
accountants reasonably acceptable to Foothill and certified, without any
qualifications, by such accountants to have been prepared in accordance with
GAAP, together with a certificate of such accountants addressed to Foothill
stating that such accountants do not have knowledge of the existence of any
event or condition constituting an Event of Default, or that would, with the
passage of time or the giving of notice, constitute an Event of Default. Such
audited financial statements shall include a balance sheet, profit and loss
statement, and cash flow statement, and such accountants' opinion letter to
management. Borrower shall have issued written instructions to its independent
certified public accountants, authorizing them to communicate with Foothill and
to release to Foothill whatever financial information concerning Borrower that
Foothill may request. If Borrower is a parent company of one or more
subsidiaries, or affiliates, or is a subsidiary or affiliate of another company,
then, in addition to the financial statements referred to above, Borrower agrees
to deliver financial statements prepared on a consolidating basis so as to
present Borrower and each such related entity separately, and on a consolidated
basis.
Together with the above, Borrower shall also deliver to Foothill
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, if any, as soon as the same are filed, or any other
information that is provided by Borrower to its shareholders, and any other
report reasonably requested by Foothill relating to the Collateral and financial
condition of Borrower.
Each month, Borrower shall deliver to Foothill a certificate
signed by its chief financial officer to the effect that: (a) all reports,
statements, or computer prepared information of any kind or nature delivered or
caused to be delivered to Foothill hereunder
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have been prepared in accordance with GAAP and 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 Foothill there does not exist any condition or
event which constitutes an Event of Default.
Borrower hereby irrevocably authorizes and directs all auditors,
accountants, or other third parties to deliver to Foothill, 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
Foothill any information they may have regarding Borrower's business affairs and
financial conditions.
6.5 TAX RETURNS. Borrower agrees to deliver to Foothill copies of
each of Borrower's future federal income tax returns, and any amendments
thereto, within thirty (30) days of the filing thereof with the Internal Revenue
Service.
6.6 RETURNS AND ALLOWANCES. Returns and allowances, if any, as
between Borrower and its Account Debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist at the
time of the execution and delivery of this Agreement.
6.7 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 value 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.
6.8 TAXES. All assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrower
or any of its property have been paid, and shall hereafter be paid in full,
before delinquency or before the expiration of any extension period. Borrower
shall make due and timely payment or deposit of all federal, State, and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Foothill, on demand, appropriate certificates attesting to the
payment or deposit thereof. Borrower will make timely payment or deposit of all
tax payments and withholding taxes required of it by applicable laws, including
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 Foothill with proof
satisfactory to Foothill indicating that Borrower has made such payments or
deposits.
6.9 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 also shall 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.
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(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as may be satisfactory to Foothill. All such
policies of insurance (except those of public liability and property damage)
shall contain a 438BFU lender's loss payable endorsement, or an equivalent
endorsement in a form satisfactory to Foothill, showing Foothill and Fidelity 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 prior written notice
to Foothill before canceling its policy for any reason. Borrower shall deliver
to Foothill certified copies of such policies of insurance and evidence of the
payment of all premiums therefor or certificates evidencing the same. All
proceeds payable under any such policy shall be payable to Foothill and Fidelity
to be applied on account of the Obligations.
6.10 FOOTHILL EXPENSES. Borrower shall immediately and without
demand reimburse Foothill for all sums expended by Foothill which constitute
Foothill Expenses and Borrower hereby authorizes and approves all advances and
payments by Foothill for items constituting Foothill Expenses.
6.11 FINANCIAL COVENANTS. Borrower shall maintain:
(a) CURRENT RATIO. An amount equal to seventy-five percent (75%)
of the ratio of Borrower's current assets divided by Borrower's current
liabilities based on the amount of Borrower's current assets and current
liabilities indicated on the balance sheet which shall be prepared in connection
with the Case to indicate Borrower's financial condition on the effective date
of the Reorganization Plan, measured on a monthly basis.
(b) TANGIBLE NET WORTH. A Tangible Net Worth at all times which
shall not decrease by an amount in excess of Five Hundred Thousand Dollars
($500,000) from the Tangible Net Worth calculated using the amounts indicated on
the balance sheet which shall be prepared in connection with the Case to
indicate Borrower's financial condition as of the effective date of the
Reorganization Plan, measured on a monthly basis.
(c) EBITDA. Borrower shall achieve and EBITDA of not less than
One Hundred Fifty Thousand Dollars ($150,000) per fiscal quarter.
6.12 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 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, so long as any credit
hereunder shall be available and until payment in full of the Obligations,
Borrower will not do any of the following without Foothill's prior written
consent:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
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(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness set forth in the latest financial
statements of Borrower submitted to Foothill on or
prior to the Closing Date;
(c) Indebtedness secured by Permitted Liens; and
(d) refinancing, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section
7.1 (and continuance or renewal of any Permitted
Liens associated therewith) so long as: (i) the
terms and conditions of such refinancing, renewals,
or extensions do not materially impair the prospects
of repayment of the Obligations by Borrower, (ii)
the net cash proceeds of such refinancing, renewals,
or extensions do not result in an increase in the
aggregate principal amount of the Indebtedness so
refinanced, renewed, or extended, and (iii) such
refinancing, renewals, refundings, or extensions do
not result in a shortening of the average weighted
maturity of the Indebtedness so refinanced, renewed,
or extended.
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 (including Permitted Liens that are
continued or renewed as permitted under Section 7.1(d)).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Except as contemplated
by the Reorganization Plan, enter into any merger, consolidation,
reorganization, or recapitalization, or reclassify its capital stock, or
liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one transaction or a series of transactions, all or any substantial part of
its business, property, or assets, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or substantially all the assets, stock, or
other evidence of beneficial ownership of any person or entity.
7.4 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF ASSETS. Enter into
any transaction not in the ordinary and usual course of Borrower's business,
including, but not limited to, the sale, lease, or other disposition of, moving,
relocation, or transfer, whether by sale or otherwise, of any of Borrower's
assets (other than sales of Inventory in the ordinary and usual course of
Borrower's business as currently conducted or as approved by Foothill prior to
such sale), or the making of any advance or loan except in the ordinary course
of business as currently conducted.
7.5 CHANGE NAME. Change Borrower's name, business structure, or
identity, or add any new fictitious name.
7.6 MERGE, ACQUIRE. Acquire, merge, or consolidate with or into
any other business organization.
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7.7 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 Foothill.
7.8 RESTRUCTURE. Make any change in Borrower's financial
structure, the principal nature of Borrower's business operations, or the date
of its fiscal year.
7.9 PREPAYMENTS. Except as permitted by the Intercreditor
Agreement, prepay any Indebtedness owing to any third party.
7.10 CHANGE OF CONTROL. Except such Change of Control as is
contemplated by Borrower's Reorganization Plan and Order, cause, permit, or
suffer any Change of Control.
7.11 CAPITAL EXPENDITURES. Make any plant or fixed capital
expenditure, or any commitment therefor, or purchase or lease any real or
personal property or replacement Equipment subject to a purchase money security
interest, trust deed or lease, in excess of One Hundred Thousand Dollars
($100,000) for any individual transaction or where the aggregate amount of such
transactions, in any fiscal year, is in excess of Five Hundred Thousand Dollars
($500,000).
7.12 DISTRIBUTIONS. Except as contemplated by the Reorganization
Plan, make any distribution or declare or pay any dividends (in cash or in
stock) on, or purchase, acquire, redeem, or retire any of Borrower's capital
stock, of any class, whether now or hereafter outstanding.
7.13 ACCOUNTING METHODS. Modify or change its method of
accounting or enter into, modify, or terminate any agreement currently 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 Foothill
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 Foothill pursuant to or in accordance with this Agreement, and
agrees that Foothill may contact directly any such accounting firm or service
bureau in order to obtain such information.
7.14 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; PROVIDED, HOWEVER, that after the
Closing Date, Borrower may continue to own any beneficial interest in (including
stock, partnership interest, or other securities of) any corporation,
association, person, or entity which was owned by Borrower as of the Closing
Date.
7.15 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter
into or permit to exist any material transaction with any person or entity
controlling, controlled by, or
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under common control (whether by contract, ownership of voting securities, or
otherwise) with Borrower except for transactions that are in the ordinary course
of Borrower's business, upon fair and reasonable terms, and that are fully
disclosed to Foothill and no less favorable to Borrower than would be obtained
in arm's length transaction with a non-affiliated person or entity.
7.16 SUSPENSION. Suspend or go out of a substantial portion of
its business.
7.17 COMPENSATION. Increase total maximum compensation to
officers, directors, employees, and other relevant individuals by more than
fifteen percent (15%) per annum.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an event
of default (each, an "Event of Default") 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 (including any interest which, but for the provisions of the United
States Bankruptcy Code, would have accrued on such amounts), fees and charges
due Foothill, taxes, reimbursement of Foothill Expenses, or otherwise);
8.2 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 Reorganization Plan and Order
or in any other present or future agreement between Borrower and Foothill;
8.3 If there is material impairment of the prospect of repayment
of any portion of the Obligations owing to Foothill or a material impairment of
the value or priority of Foothill's security interests in the Collateral;
8.4 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;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower and
remains undismissed for twenty (20) days (during which time Foothill shall have
no obligations to make advances to Borrower hereunder);
8.7 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;
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8.8 If 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;
8.9 If a judgment or other claim becomes a lien or encumbrance;
8.10 If there is a default in any material agreement to which
Borrower is a party with third parties resulting in a right by such third
parties, whether or not exercised, to accelerate the maturity of Borrower's
Indebtedness thereunder;
8.11 If Borrower makes any payment on account of Indebtedness
that has been subordinated to the Obligations except to the extent such payment
is allowed under any subordination agreement entered into with Foothill;
8.12 If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to Foothill
by Borrower or any officer, employee, agent, or director of Borrower, or if any
such warranty or representation is withdrawn by any officer or director;
8.13 If the obligation of any guarantor or other third party
under any loan document is limited or terminated by operation of law or by the
guarantor or other third party thereunder, or any guarantor or other third party
becomes the subject of an Insolvency Proceeding;
8.14 If a Prohibited Transaction or Reportable Event shall occur
with respect to a Plan which could have a material adverse effect on the
financial condition of Borrower; 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 Foothill, 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 Foothill,
have a material adverse effect on the financial condition of Borrower; or
Borrower shall fail to notify Foothill promptly and in any event within ten (10)
days of the occurrence of any event that constitutes an Event of Default under
this clause or would constitute such an Event of Default upon the exercise of
Foothill's judgment; and
8.15 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 Foothill.
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9. FOOTHILL'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence of an Event of
Default Foothill 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, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately due and payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of Foothill, but without affecting
Foothill's rights and security interest in the Collateral and without affecting
the Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Foothill considers advisable, and in
such cases, Foothill will credit Borrower's loan account with only the net
amounts received by Foothill in payment of such disputed Accounts after
deducting all Foothill Expenses incurred or expended in connection therewith;
(e) Without notice to or demand upon Borrower or any guarantor,
make such payments and do such acts as Foothill considers necessary or
reasonable to protect its security interest in the Collateral. Borrower agrees
to assemble the Collateral if Foothill so requires, and to make the Collateral
available to Foothill as Foothill may designate. Borrower authorizes Foothill 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 that in Foothill's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Foothill 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 Foothill's rights or remedies
provided herein, at law, in equity, or otherwise;
(f) 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 Foothill, or (ii) indebtedness at any time owing to
or for the credit or the account of Borrower held by Foothill;
(g) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Foothill 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
26
completing production of, advertising for sale, and selling any Collateral and
Borrower's rights under all licenses and all franchise agreements shall inure to
Foothill's benefit;
(h) 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 Foothill
determines is commercially reasonable. It is not necessary that the Collateral
be present at any such sale;
(i) Foothill shall give notice of the disposition of the
Collateral as follows:
(1) Foothill shall give Borrower and each holder of a
security interest in the Collateral who has filed with Foothill 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;
(2) The notice shall be personally delivered or
mailed, postage prepaid, to Borrower as provided in Section 12,
at least five (5) calendar days before the date fixed for the
sale, or at least five (5) 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 Foothill;
(3) If the sale is to be a public sale, Foothill also
shall give notice of the time and place by publishing a notice
one time at least five (5) 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;
(j) Foothill may credit bid and purchase at any public sale; and
(k) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third parties,
by Foothill to Borrower.
9.2 REMEDIES CUMULATIVE. Foothill's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by
Foothill of one right or remedy shall be deemed an election, and no waiver by
Foothill of any Event of Default shall be deemed a continuing waiver. No delay
by Foothill shall constitute a waiver, election, or acquiescence by it.
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10. TAXES AND EXPENSES REGARDING THE COLLATERAL
If Borrower fails to pay any monies (whether taxes, rents,
assessments, insurance premiums, or otherwise) due to third persons or entities,
or fails to make 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 Foothill determines that such failure by Borrower could have a material
adverse effect on Foothill's interests in the Collateral, in its discretion and
without prior notice to Borrower, Foothill 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 Foothill deems necessary to protect Foothill from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type described in Section 6.12, and take any action with respect to such
policies as Foothill deems prudent. Any amounts paid or deposited by Foothill
shall constitute Foothill 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 Foothill shall not constitute an agreement by Foothill to
make similar payments in the future or a waiver by Foothill of any Event of
Default under this Agreement. Foothill 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. WAIVERS; INDEMNIFICATION
11.1 DEMAND; PROTEST; ETC. Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees at any time held by Foothill on which Borrower may in any
way be liable.
11.2 FOOTHILL'S LIABILITY FOR INVENTORY OR EQUIPMENT. So long as
Foothill complies with its obligations, if any, under Section 9207 of the Code,
Foothill shall not in any way or manner be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other person whomsoever. All risk of loss, damage, or
destruction of the Collateral shall be borne by Borrower.
11.3 INDEMNIFICATION. Borrower agrees to indemnify Foothill and
its officers, employees, and agents and hold Foothill harmless against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party, and (b) all losses in any way suffered, incurred, or paid by Foothill as
a result of or in any way arising out of, following, or consequential to
transactions with Borrower whether under this Agreement, or otherwise. This
provision shall survive the termination of this Agreement.
12. NOTICES
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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 personally delivered or sent by registered or
certified mail, postage prepaid, return receipt requested, or by prepaid telex,
TWX, telefacsimile, or telegram (with messenger delivery specified) to Borrower
or to Foothill, as the case may be, at its addresses set forth below:
If to Borrower: INTELOGIC TRACE, INC.
Turtle Creek Tower I
8415 Datapoint Drive
San Antonio, Texas 78229-8480
Attention: Chief Executive Officer
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
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, other
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
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. Borrower acknowledges
and agrees that notices sent by Foothill in connection with Sections 9504 or
9505 of the Code shall be deemed sent when deposited in the mail or transmitted
by telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION,
AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE
THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL
BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL,
IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. EACH OF BORROWER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE
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TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13. BORROWER
AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY
OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
BORROWER AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill four
(4) months after they are delivered to or received by Foothill, unless Borrower
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS
15.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.
15.2 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 or
duties hereunder without Foothill's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by Foothill
shall release Borrower from its Obligations. Foothill may assign this Agreement
and its rights and duties hereunder. Foothill reserves the right to sell,
assign, transfer, negotiate, or grant participations in all or any part of, or
any interest in Foothill's rights and benefits hereunder. In connection
therewith, Foothill may disclose all documents and information which Foothill
now or hereafter may have relating to Borrower or Borrower's business. To the
extent that Foothill assigns its rights and obligations hereunder to a third
party, Foothill shall thereafter be released from such assigned obligations to
Borrower and such assignment shall effect a novation between Borrower and such
third party.
15.3 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.
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15.4 INTERPRETATION. Neither this Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against Foothill 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.
15.5 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.
15.6 AMENDMENTS IN WRITING. This Agreement cannot be changed or
terminated orally. All prior agreements, understandings, representations,
warranties, and negotiations, if any, are merged into this Agreement.
15.7 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.
15.8 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 Foothill 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 Foothill 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 Foothill is required to repay or restore, and as to all reasonable
costs, expenses and attorneys' fees of Foothill related thereto, the liability
of Borrower or such guarantor shall automatically be revived, reinstated and
restored and shall exist as though such Voidable Transfer had never been made.
15.9 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted, modified, or
qualified by any other agreement, oral or written, whether before or after the
date hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed at San Antonio, Texas.
INTELOGIC TRACE, INC.,
a New York corporation
("Borrower")
By: MIKE R. ELLIS
Its: Vice President
Accepted and effective this _____ day of December, 1994.
FOOTHILL CAPITAL CORPORATION,
a California corporation
("Foothill")
By: Mike Fishman
Its: Vice President
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