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[LOGO]
CREDIT AND GUARANTY AGREEMENT
by and among
MEMOREX TELEX CORPORATION
as Borrower,
MEMOREX TELEX SERVICES, INC.,
MEMOREX TELEX INC.,
MEMOREX TELEX (UK) LTD., and
MEMOREX TELEX N.V.
as the Guarantors,
and
FOOTHILL CAPITAL CORPORATION
Dated as of March 5, 1996
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CREDIT AND GUARANTY AGREEMENT
THIS CREDIT AND GUARANTY AGREEMENT (this "Agreement"), is entered into as
of March 5, 1996, among the following:
MEMOREX TELEX CORPORATION, a Delaware corporation ("Borrower"), with its
chief executive office located at 545 East John Carpenter Freeway, Irving, Texas
75062;
MEMOREX TELEX SERVICES, INC., a Delaware corporation ("Services"), with its
chief executive office located at 545 East John Carpenter Freeway, Irving, Texas
75062;
MEMOREX TELEX INC., a corporation organized under the laws of the Province
of Ontario, Canada ("Canada"), with its principal office located at 65 Allstate
Parkway, Markham, Ontario, L3R 9X1 Canada;
MEMOREX TELEX (UK) LTD., a corporation organized under the laws of England
and Wales ("UK"), with its principal office located at Eskdale Road, Winnersh,
Workingham, Berkshire RG11 5TS, United Kingdom;
MEMOREX TELEX N.V., a corporation organized under the laws of The
Netherlands (the "Parent"), with its principal office located at Hoogoorddreef
9, 1101 BA Amsterdam ZO, The Netherlands; and
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.
W I T N E S S E T H :
WHEREAS, Borrower, Services, Canada, UK, and the Parent have requested that
Foothill provide certain financing to Borrower, guarantied by the Guarantors;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Account Debtor" means any Person who is or who may become obligated under,
with respect to, or on account of an Account.
"Accounts" means all currently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to Parent or any of
its Consolidated Subsidiaries arising out of the sale or lease of goods or the
rendition of services by Parent or such Consolidated Subsidiary, irrespective of
whether earned by performance, and any and all credit insurance, guaranties, or
security therefor.
"Affiliate" means (i) any Person that directly, or indirectly through one
or more intermediaries, controls an Obligor (a "Controlling Person") and (ii)
any Person (other than the Parent or a Subsidiary of the Parent) which controls,
is controlled by or is under common control with a Controlling Person. The Agent
or any Restructuring Lender which, together with its affiliates, controls less
than 10% of the outstanding shares of Voting Stock shall not be deemed to be an
Affiliate. As used herein, the term "control" means possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agent" means Morgan Guaranty Trust Company of New York, in its capacity as
agent and as trustee for the Restructuring Lenders under the Restructured Credit
Agreement, and its successors in such capacity.
"Annualized Domestic Eligible Service Revenues" means Annualized Eligible
Service Revenues excluding (a) revenues from Service Accounts not created by
Borrower or Services and (b) revenues from those Service Accounts that are not
payable in Dollars or with respect to which the Account Debtor (i) does not
maintain its chief executive office in the United States, or (ii) is not
organized under the laws of the United States or any State thereof.
"Annualized Eligible Service Revenues" means, as of the date of any
determination, an amount equal to: (a) the product of (i) the aggregate amount
of revenues from Service Accounts of Parent and its Consolidated Subsidiaries
during the immediately preceding three (3) month period, MULTIPLIED BY (ii) four
(4); LESS (b) the amount of any deferred revenue at the end of such three (3)
month period.
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"Applicable Margin" means (a) during the period commencing on the
Closing Date and ending on the date immediately preceding the first (1st)
anniversary of the Closing Date, zero (0) percentage points, and (b) thereafter,
two (2) percentage points.
"Asia Pacific Sale" means a sale of all or substantially all of the capital
stock or assets of those Subsidiaries of the Parent, including, without
limitation, Australia, that comprise the Consolidated Company's Asia-Pacific
operations (other than Memorex Telex Japan Ltd.), and that are identified on
SCHEDULE A-1 attached hereto.
"Asia-Pacific Sale Condition" means the consummation of the Asia-Pacific
Sale on or before June 1, 1996.
"Asset Sale" means any sale, lease or other disposition (including, without
limitation, any such transaction effected by way of merger, amalgamation or
consolidation) by the Parent or any of its Subsidiaries subsequent to the
Closing Date of any asset, including, without limitation, any Sale and Leaseback
Transaction, whether or not involving a Capital Lease, but excluding: (i)
dispositions of inventory and used, surplus or worn-out equipment in the
ordinary course of business; (ii) dispositions of assets by the Parent or any of
its Subsidiaries to the Parent or any of its Subsidiaries; (iii) any sale of
leasebase receivables of the Parent or any of its Consolidated Subsidiaries;
(iv) the sale by Borrower or a Subsidiary of Borrower of the 100,000 shares of
Series A Convertible Preferred Stock of Telex Communications Group, Inc. ("TCI")
and the 100,000 shares of Series B Preferred Stock of TCI; (v) the sale or other
disposition of the capital stock of Memorex Telex Japan Ltd.; and (vi) any sale
or other factoring of accounts receivable (other than leasebase receivables and
other than Accounts created by UK or Canada); PROVIDED that
(A) each sale or factoring of accounts receivable pursuant to this
clause (vi) (a "Transferred Account Receivable") shall be without recourse
to any Obligor or any of its Subsidiaries (and for purposes of this
definition, a lien on such Transferred Account Receivable in favor of the
transferee of an interest in such receivable, or any other third party,
shall not in and of itself constitute recourse to the transferor of such
interest),
(B) the sum (the "Transferred Amount") of (1) the aggregate
uncollected balances of Transferred Accounts Receivable (exclusive of
defaulted accounts receivable) PLUS (2) the aggregate amount of all
collections on Transferred Accounts Receivable theretofore received by the
seller for the account of the purchaser but not yet remitted to the
purchaser MINUS (3) the aggregate unpaid amount of the deferred purchase
price, if any, ("holdback") in respect of Transferred Accounts Receivable
to the extent that such holdback has
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not been applied against defaulted accounts receivable, shall not exceed
$100,000,000 at any time, and
(C) the Transferred Amount in respect of Transferred Accounts
Receivable that but for such sale would have constituted Collateral located
in the United States shall not exceed $40,000,000 at any time.
"Australia" means Memorex Telex Pty Ltd., a corporation organized under the
laws of New South Wales, Australia, and its successors.
"Authorized Officer" means any corporate officer of Borrower properly
authorized in writing by such Borrower to transact business with Foothill.
"Bankruptcy Code" means Title I of the Bankruptcy Reform Act of 1978, as
amended, as set forth in title 11, Section 101 ET SEQ, of the United States
Code.
"Benefit Arrangement" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any member of the ERISA
Group.
"Borrower" means Memorex Telex Corporation, a Delaware corporation, and its
successors.
"Borrowing Base" has the meaning set forth in SECTION 2.03.
"Business Day" means any day, that is not a Saturday, Sunday, or other day
on which national banks are authorized or required by law to close.
"Canada" means Memorex Telex Inc., a corporation organized under the laws
of Ontario, Canada, and its successors.
"Capital Lease" means a lease that would be capitalized on a balance sheet
of the lessee prepared in accordance with generally accepted accounting
principles and the amount of any Capital Lease obligation shall be the
capitalized amount thereof, determined in accordance with generally accepted
accounting principles.
"Capital Stock" means any and all shares, interests, participations,
warrants, options, contingent equity rights or other equivalents (however
designated) of or in corporate stock or any other equity interest.
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"Central Obligors" means the Parent and each Subsidiary of Parent from time
to time party to any Restructured Collateral Document.
"CFO" means at any time the chief financial officer at such time of the
Parent and its Consolidated Subsidiaries.
"Closing Date" means the date of the funding of the Loan hereunder.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute.
"Collateral" has the meaning set forth in the Restructured Collateral
Agency Agreement.
"Collateral Access Agreement" means a landlord waiver, mortgagee waiver,
bailee letter, or a similar acknowledgement agreement of any warehouseman,
processor, or other Person in possession of Inventory, in each case, in form and
substance satisfactory to Foothill.
"Collateral Agent" means Morgan Guaranty Trust Company of New York in its
capacity as collateral agent under the Restructured Collateral Documents and its
successors in such capacity.
"Collateral Documents" means the (a) the assignments, security agreements,
pledge agreements, instruments, acknowledgments and other documents (as the same
may be amended, modified, supplemented or waived from time to time) described in
SCHEDULE C-1 to this Agreement and (b) all additional assignments, security
agreements, pledge agreements, instruments, acknowledgments and other documents
(as the same may be amended, modified, supplemented or waived from time to time)
which are delivered or to be delivered pursuant hereto (to the extent such
document pertains to the Collateral).
"Consolidated Capital Expenditures" means, for any period, the aggregate
amount of expenditures by the Parent and its Consolidated Subsidiaries for
plant, property and equipment during such period which in accordance with
generally accepted accounting principles are capitalized in the consolidated
financial statements of the Parent and its Consolidated Subsidiaries for such
period (reduced, to the extent otherwise reflected therein, by (x) the aggregate
principal amount of Debt incurred during such period pursuant to paragraph (iv)
or (vi) of Section 5.07(a) and (y)investments in sales-type leases made during
such period).
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"Consolidated Company" means the Parent and its Consolidated Subsidiaries.
"Consolidated Debt" means, at any date, the aggregate amount of Debt of the
Parent and its Consolidated Subsidiaries, determined on a consolidated basis as
of such date.
"Consolidated Subsidiary" means, at any date with respect to any Person,
any Subsidiary or other entity the accounts of which would be consolidated with
those of such Person in the consolidated financial statements of such Person as
of such date.
"Constitutional Documents" means, in relation to any corporate Person, the
Memorandum and Articles of Association, Certificate of Incorporation and By-Laws
or other constitutional documents of such corporate Person.
"Daily Balance" means the amount of an Obligation owed at the end of a
given day.
"Debt" of any Person means, without duplication, (i) all obligations of
such Person for borrowed money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person to pay the deferred purchase price of property or services, (iv) all
obligations of such Person as lessee under Capital Leases, (v) all obligations
of such Person to purchase securities which arise out of or in connection with
the sale of the same or substantially similar securities, (vi) all obligations
of such Person, fixed or contingent, to reimburse any other Person for amounts
drawn under a letter of credit or similar instrument, (vii) any preferred stock
of any Subsidiary of such Person, and any preferred stock of such Person which
is subject to redemption otherwise than at the sole option of such Person prior
to January 1, 2000; (viii) all Debt secured by a Lien on any asset of such
Person, whether or not such Debt is otherwise an obligation of such Person and
(ix) all Debt of others Guaranteed by such Person; PROVIDED that neither (A)
obligations of the Parent or any of its Consolidated Subsidiaries in respect of
non-recourse dispositions of accounts receivable (including, without limitation,
leasebase receivables) accounted for as sales under United States accepted
accounting principles in effect on December 31, 1995, nor (B) trade accounts
payable arising in the ordinary course of business nor obligations in respect of
insurance policies or performance or surety bonds which are not themselves
Guarantees of Debt (nor drafts, acceptances or similar instruments evidencing
the same nor obligations in respect of letters of credit supporting the payment
of the same) shall constitute Debt.
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"Default" means any condition or event that constitutes an Event of Default
or that with the giving of notice or lapse of time or both would, unless cured
or waived, become an Event of Default.
"Directly Imposed Foreign Taxes" has the meaning set forth in Section
10.11.
"Distribution" means Memorex Telex Distribution N.V., a corporation
organized under the laws of The Netherlands with its statutory seat in
Amsterdam, and its successors.
"Dollars" and the sign "$" mean lawful currency of the United States of
America.
"Domestic Securitization Reserve" means, as of any date of determination,
an amount equal to the Dollar amount of Morgan Delaware's aggregate 'Net
Investment' under the Receivables Purchase Agreement in Service Accounts, PLUS
the Dollar amount of Morgan Delaware's accrued but unpaid 'Yield' under the
Receivables Purchase Agreement.
"Eligible Accounts" means those Accounts created by the Non-Parent Obligors
in the ordinary course of business that arise out of the sale of goods or
rendition of services, and that strictly comply with each and all of the
representations and warranties respecting Accounts to Foothill in the Financing
Documents. Eligible Accounts shall not include the following:
(a) Accounts that the Account Debtor has failed to pay within ninety
(90) days of invoice date or Accounts with selling terms of more than thirty
(30) days;
(b) Accounts with respect to which the Account Debtor is an employee,
Affiliate, or agent of any Obligor;
(c) 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;
(d) Accounts that are not payable in Dollars or an Eligible Currency
or with respect to which the Account Debtor: (i) does not maintain its chief
executive office in the United States or an Eligible Foreign Jurisdiction, or
(ii) is not organized under the laws of the United States or any State thereof,
Canada, or an Eligible Foreign Jurisdiction, or (iii) is the government of any
foreign country or
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sovereign state, or of any state, province, municipality, or other political
subdivision thereof, or of any department, agency, public corporation, or
other instrumentality thereof;
(e) Accounts with respect to an Account Debtor whose total
obligations owing to one or more Non-Parent Obligors exceed twenty percent (20%)
of all Eligible Accounts, to the extent of the obligations owing by such Account
Debtor in excess of such percentage;
(f) 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;
(g) Accounts the collection of which Foothill, in its reasonable
credit judgment, believes to be doubtful by reason of the Account Debtor's
financial condition;
(h) Accounts with respect to which the goods giving rise to such
Account have not been shipped and delivered to and accepted by the Account
Debtor or the Account otherwise does not represent a final sale; and
(i) Accounts that represent progress payments or other advance
billings that are due prior to the completion of performance by the Obligors of
the subject contract for goods or services.
"Eligible Currency" means: (a) in respect of Accounts created by UK,
British Pounds Sterling; and (b) in respect of Accounts created by Canada,
Canadian Dollars.
"Eligible Foreign Jurisdiction" means any of: (i) the United Kingdom; and
(ii) any provinces of Canada other than Quebec, New Brunswick, Prince Edward
Island, Newfoundland, and Nova Scotia.
"Eligible Inventory" means Inventory consisting of first quality finished
goods held for sale in the ordinary course of Borrower's or Services' business,
that are located at the Borrower's or Services' premises identified on SCHEDULE
E-1, and that strictly comply with each and all of the representations and
warranties respecting Inventory made to Foothill in the Financing Documents. In
determining the amount to be so included, Inventory shall be valued at the lower
of cost or market, net of standard reserves for obsolescence and physical
inventory adjustments, on a basis consistent with the current and historical
accounting practices of Borrower or Services. An item of Inventory shall not be
included in Eligible Inventory if:
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(a) it is not owned solely by Borrower or Services, or Borrower or
Services does not have good, valid, and marketable title thereto;
(b) it is not located at one of the locations set forth on SCHEDULE
E-1 attached hereto;
(c) it consists of service parts, trade-ins, demonstration units, or
"holdover inventory;"
(d) it is not subject to a valid and perfected first priority
security interest in favor of Foothill or the Collateral Agent on behalf
thereof;
(e) it consists of goods returned or rejected by customers of
Borrower or Services, as the case may be, or goods in transit; and
(f) it is obsolete or slow moving, a restrictive or custom item,
work-in-process, a component that is not part of finished goods, or constitutes
spare parts, packaging and shipping materials, supplies used or consumed in the
business of Borrower or Services, Inventory subject to a security interest or
lien in favor of any third Person, bill and hold goods, defective goods,
"seconds," or Inventory acquired on consignment.
"Eligible Non-Securitized Account" means, as of any date of determination,
any Eligible Account other than an Eligible Securitized Account.
"Eligible Securitized Account" means, as of any date of determination, any
Eligible Account included in any 'Pool' (as defined in the Receivables Purchase
Agreement).
"Eligible Transferee" means (a) a commercial bank organized under the laws
of the United States, or any state thereof, and having total assets in excess of
$100,000,000; (b) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country, and having total
assets in excess of $100,000,000; provided that such bank is acting through a
branch or agency located in the United States; (c) a finance company, insurance
or other financial institution or fund that is engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of its business
and having total assets in excess of $50,000,000; (d) any Affiliate (other than
individuals) of Foothill; and (e) any other Person approved by Foothill and
Borrower.
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"Enforceable Judgment" means a judgment or order of a court or arbitral or
regulatory authority as to which the period, if any, during which the
enforcement of such judgment or order is stayed shall have expired; PROVIDED,
that if any judgment requires a monetary payment and does not set a date by
which such payment must be made, there shall be deemed to be a five-day period
after the entry of such judgment during which such payment may be made prior to
such judgement becoming an Enforceable Judgment. A judgment or order which is
under appeal or as to which the time in which to perfect an appeal has not
expired shall not be deemed an Enforceable Judgment so long as enforcement
thereof is effectively stayed pending the outcome of such appeal or the
expiration of such period, as the case may be.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to the
environment, the effect of the environment on human health or to emissions,
discharges or of pollutants, contaminants, Hazardous Substances or wastes into
the environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, Hazardous Substances or wastes or the clean-up or
other remediation thereof.
"Equipment" means all of the Non-Parent Obligors' present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including, without limitation, motor vehicles and
trailers), tools, parts, goods (other than consumer goods, farm products, or
Inventory), wherever located, including, without limitation, (a) any interest
of the Non-Parent Obligors in any of the foregoing, and (c) all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing.
"Equity Issuance" has the meaning set forth in Section 2.04(c)(iii) of the
Restructured Credit Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended or any successor statute.
"ERISA Group" means Borrower, any Subsidiary of Borrower, and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with Borrower or any
Subsidiary of Borrower, are treated as a single employer under Section 414 of
the Code.
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"Event of Acceleration" means any of the events or conditions set forth
in paragraphs (h), (i) and (j) of Section 7.01 with respect to any Material
Company.
"Event of Default" means any of the events or conditions set forth in
Section 7.01.
"Financial Obligation" means (i) any Debt, (ii) any obligation in respect
of any letter of credit, whether or not constituting Debt, and (iii) any
obligation in respect of any interest swap, currency swap, financial option or
futures contract or any similar arrangement.
"Financing Documents" means this Agreement, the Restructured Collateral
Agency Agreement, and the Collateral Documents, any note or notes executed by
Borrower and payable to Foothill, and any other agreement entered into, now or
in the future, in connection with this Agreement.
"Foothill" means Foothill Capital Corporation, a California corporation,
and its successors and assigns.
"Foothill Expenses" means all reasonable items as follows: costs or
expenses (including, without limitation, taxes and insurance premiums) required
to be paid by the Obligors under any of the Financing Documents that are paid or
incurred by Foothill; fees or charges paid or incurred by Foothill in connection
with Foothill's transactions with the Obligors, including, without limitation,
fees or charges for photocopying, notarization, telecommunication, public record
searches (including, without limitation, tax lien, litigation, and UCC
searches), filing, recording, publication, appraisal (including, without
limitation, periodic Collateral appraisals), real estate surveys, real estate
title policies, and environmental audits; 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 Financing 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,
irrespective of whether a sale is consummated; costs and expenses paid or
incurred by Foothill in examining any Obligor's books and records; costs and
expenses of third party claims or any other suit paid or incurred by Foothill in
enforcing or defending the Financing Documents or in connection with the
transactions contemplated by the Financing Documents or Foothill's relationship
with the Obligors; and Foothill's reasonable attorneys fees and expenses
incurred in advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including, without limitation, attorneys fees and
expenses incurred in connection with a "workout", a
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"restructuring", or an Insolvency Proceeding concerning any Obligor or any
other guarantor of the Obligations), defending, or concerning the Financing
Documents, irrespective of whether suit is brought.
"Foreign Taxes" means any Taxes levied or imposed by any government or any
taxing authority of or in any jurisdiction other than Taxes imposed by the
United States or any political subdivision or taxing authority thereof or
therein.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the obligee of such
Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part), PROVIDED that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guarantors" means, collectively, each of Services, UK, Canada, Australia
(from and after the time, if any, that Australia first becomes a Guarantor under
Section 3.02 hereof and thereafter for so long as Australia is not released
pursuant to Section 8.07 hereof from Australia's guaranty hereunder), and the
Parent, and "Guarantor" means any one of the foregoing.
"Hazardous Substances" means any toxic, radioactive, caustic or otherwise
hazardous substance, including, without limitation, petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"Holding" means Memorex Telex Holding N.V., a corporation organized under
the laws of The Netherlands with its statutory seat in Amsterdam, and its
successors.
"Indemnitee" has the meaning set forth in Section 14.03(b).
"Inventory" means all present and future inventory in which the
Non-Parent Obligors have any interest, including, without limitation, goods
held for sale or lease or to be furnished under a contract of service and all
of the Non-Parent Obligors' present
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and future raw materials, work in process, finished goods, mid packing and
shipping materials, wherever located, and any documents of title representing
any of the above.
"Investment" means any investment m any Person, whether by means of share
purchase, capital contribution, loan, purchase of Debt, Guarantee of Debt, time
deposit or otherwise.
"Investment Grade" means, when used with respect to any security or
obligation, that such security or obligation (or in the case of any equity
security, a class of debt securities issued by the same Person) shall have been
assigned a rating of Baa-3 (or the comparable rating in any successor rating
scheme) or better by Moody's Investors Service, Inc. (or any successor thereto)
or BBB- (or the comparable rating in any successor rating scheme) or better by
Standard and Poor's Corporation (or any successor thereto)
"J.V. Investments" means Investments by the Parent or any of its
Subsidiaries in: (i) Persons (other than Subsidiaries of the Parent) which are
expected to supply products or services to the Parent or any of its Subsidiaries
or whose products or services are expected to be marketed in conjunction with
the products or services of the Parent or any of its Subsidiaries; or (ii)
Persons engaged in business of a type conducted by the Parent or a Subsidiary of
the Parent and accounted for by the Parent and its Consolidated Subsidiaries on
the equity method.
"Leasebase Amount" has the meaning ascribed to that term in Section
5.13(c).
"Lender" means Foothill, each assignee of Foothill or another Lender for
purposes hereof pursuant to Section 10.08, and their respective successors and
assigns.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
or any deposit or maintenance, or use as collateral or support, in connection
with any obligation of such asset (including, without limitation, cash) or any
other arrangement the economic effect of which is to give a creditor
preferential access to such asset to satisfy its claim. For the purpose of this
Agreement, the Parent or any of its Subsidiaries shall be deemed to own subject
to a Lien (i) any asset that it has acquired or holds subject to the interest of
a vendor or lessor under any conditional sale agreement or other title retention
agreement relating to such asset or any Capital Lease or (ii) any account
receivable transferred by the Parent or any of its Subsidiaries with recourse.
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"Liquidation" means, in relation to any corporate Person, any dissolution,
termination, winding-up or liquidation, by whatsoever name known and in
whatsoever jurisdiction, of such Person.
"Loan" means the term loan made by Foothill to Borrower, as more fully
described in Section 2.01 of this Agreement.
"Lockbox Agreement" means, individually and collectively: (i) the Amended
and Restated Lockbox Agreement (Hardware), dated as of June 30, 1995, among
Borrower, Morgan Delaware, the Collateral Agent, and Bank of America Illinois;
and (ii) the Lockbox Agreement (Maintenance), dated as of June 30, 1995, among
Services, Morgan Delaware, the Collateral Agent, and Bank of America Illinois;
in each case, as amended to, and in effect on, the date hereof and as amended
from time to time.
"Marketable Securities" means (i) Dollars or direct non-callable
obligations of, or non-callable obligations guaranteed as to timely payment or
insured by, the United States or any agency or instrumentality thereof for the
payment of which obligation or guarantee the full faith and credit of the United
States is pledged and (ii) notes, bonds or stock that are listed on a national
securities exchange and are Investment Grade.
"Material Adverse Change" means with respect to the Consolidated Company, a
material adverse change in the business, properties, assets, financial position,
results of operations or prospects of the Consolidated Company, taken as a
whole.
"Material Company" means any Obligor, Central Obligor, or Security
Subsidiary.
"Material Plan" means at any time a Plan or Plans having aggregate Unfunded
Liabilities exceeding $1,000,000.
"Maturity Date" means March 5, 1998 or, if such day is not a Business Day,
the next preceding Business Day.
"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.
"Morgan Delaware" means J.P. Morgan Delaware, a corporation organized under
the laws of Delaware, and its successors.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA
14
Group is then making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions, including, without
limitation, for these purposes any Person which ceased to be a member of the
ERISA Group during such five year period.
"Net Cash Proceeds" means, with respect to any Asset Sale, an amount equal
to the cash proceeds received by the Parent or any of its Subsidiaries from or
in respect of such Asset Sale, less (x) any expenses reasonably incurred by the
Parent or such Subsidiary in respect of such Asset Sale, (y) the amount of any
Debt secured by a Lien on the related asset and required to be discharged from
the proceeds of such Asset Sale and (z) any taxes paid or payable by the Parent
or such Subsidiary (as are reasonably and in good faith estimated by the CFO) in
respect of such Asset Sale; PROVIDED, that, with respect to any Asset Sale, "Net
Cash Proceeds", determined as provided above, shall be adjusted by adding the
book value (net of any collection fee charged by the buyer) of all accounts
receivable being retained by Subsidiaries of the Parent and by subtracting the
book value of all accounts payable and other accrued liabilities related to the
assets being sold, incurred in the ordinary course of such business, which are
not being assumed by the buyer(s) of such assets, so long as the fair market
value of the total consideration for such Asset Sale is less than $2,000,000 and
the fair market value of the total consideration for all Asset Sales consummated
during any fiscal year, the Net Cash Proceeds of which are adjusted pursuant to
this PROVISO, is less than $5,000,000; and, PROVIDED, FURTHER, that "Net Cash
Proceeds" shall not include (i) the cash proceeds of any Asset Sale by Memorex
Telex Japan Ltd. or (ii) to the extent Foothill consents in writing in advance
of any particular transaction giving rise thereto, any Other cash proceeds
received by any Subsidiary of the Parent which, by reason of any law or
regulation of the jurisdiction where such Subsidiary maintains the bank account
in which such proceeds are held, are blocked and cannot be remitted from such
jurisdiction or can be remitted from such jurisdiction only through incurrence
of a material incremental tax liability. The Parent and its Subsidiaries shall
be deemed to have received at the closing of any Asset Sale cash in an amount
equal to the fair market value of the portion (if any) of the consideration for
such sale that consists of either Marketable Securities or Non-Cash Proceeds.
"Non-Cash Proceeds" shall have the meaning set forth in Section 5.09(b)
hereof.
"Non-Parent Obligors" means, collectively, the Obligors other than the
Parent, and "Non-Parent Obligor" means any one of them.
"Obligations" means all loans, advances, debts, principal, interest
(including, without limitation, any interest that, but for the provisions of the
Bankruptcy Code, would have accrued), premiums, liabilities (including, without
limitation, all amounts
15
charged to Borrower's Loan Account pursuant hereto), obligations, fees, or
Foothill Expenses (including, without limitation, any fees or expenses that,
but for the provisions of the Bankruptcy Code, would have accrued),
guaranties, covenants, and duties owing by the Obligors to Foothill of any
kind and description pursuant to or evidenced by the Financing Documents,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, and including, without limitation, all
interest not paid when due and all Foothill Expenses that the Obligors are
required to pay or reimburse in connection with the Financing Documents.
"Obligors" means, collectively, Borrower and each of the Guarantors, and
"Obligor" means any one of them.
"Overadvance" has the meaning set forth in SECTION 2.02.
"Parent" means Memorex Telex N.V., a corporation organized under the laws
of The Netherlands with its statutory seat in Amsterdam, and its successors.
"Participant" has the meaning set forth in Section 14.08(b)
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Asia-Pacific Proceeds Application" has the meaning set forth in
Section 2.02(a).
"Permitted Liens" means those Liens described in clauses (a) through (i) of
Section 5.08.
"Person" means an individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or other agency or political subdivision thereof or any other entity.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees of
any member of the ERISA Group or (ii) has at any time within the preceding five
years been maintained, or contributed to, by any Person which was at such time a
member of the ERISA Group for employees of any Person which was at such time a
member of the ERISA Group.
16
"Prepackaged Plan" has the meaning ascribed thereto in the Restructured
Credit Agreement.
"Qualification"' means, with respect to any report of independent public
accountants covering financial statements, a qualification to such report
(such as a "subject to" or "except for" statement therein) (I) resulting from
a limitation on the scope of examination of such financial statements or the
underlying data, (ii) with respect to the continued existence of the entity
whose financial statements are reported upon, as contemplated by Statement on
Auditing Standards No. 34, or (iii) which could be eliminated by changes in
financial statements or notes thereto covered by such report (such as, by the
creation of or increase in a reserve or a decrease in the carrying value of
assets) and which if so eliminated by the making of any such change and after
giving effect thereto would occasion a Default; PROVIDED that neither of the
following shall constitute a Qualification: (a) a consistency exception
relating to a change in accounting principles with which the independent
public accountants for the Person whose financial statements are being
examined have concurred or (b) a qualification relating to the outcome or
disposition of any uncertainty, including but not limited to threatened
litigation, pending litigation being contested in good faith, pending or
threatened claims or other contingencies, the impact of which litigation,
claims, contingencies or uncertainties cannot be determined with sufficient
certainty to permit quantification in such financial statements.
"Receivables Purchase Agreement" means the Amended and Restated
Receivables Purchase Agreement dated as of September 17, 1990, between
Borrower and Morgan Delaware, as amended to, and as in effect on, the date
hereof and as amended from time to time.
"Reference Rate" means the variable rate of interest, per annum, most
recently announced by Norwest Bank, Minnesota, N.A. or any successor to such
institutions, as its "prime rate", "base rate", or "reference rate", as the
case may be, irrespective of whether such announced rate is the best rate
available from such financial institution.
"Regulation G" means Regulation G of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Restricted Payment" means (i) any dividend or other distribution on any
shares of the Capital Stock of the Parent or any of its Subsidiaries (other
than stock splits, like-kind stock dividends or the distribution of shares of
Capital Stock of the Parent
17
pursuant to the exercise of Warrants issued pursuant to the Prepackaged Plan)
or (ii) any payment on account of the purchase, redemption, retirement or
acquisition of (a) any shares of Capital Stock of the Parent or any of its
Subsidiaries or (b) any option, warrant or other right to acquire shares of
capital stock of the Parent or any of its Subsidiaries; PROVIDED that
payments by any Subsidiary of the Parent to the Parent or any of its
Wholly-Owned Subsidiaries shall not constitute Restricted Payments.
"Restructured Collateral Documents" means the (a) Restructured Collateral
Agency Agreement, (b) the assignments, security agreements, pledge
agreements, instruments, acknowledgments and other documents (as the same may
be amended, modified, supplemented or waived from time to time) described in
Schedule C-1 to the Restructured Collateral Agency Agreement and (c) all
additional assignments, security agreements, pledge agreements, instruments,
acknowledgments and other documents (as the same may be amended, modified,
supplemented or waived from time to time) which the Representatives (as
defined in the Restructured Collateral Agency Agreement) from time to time
agree by notice to the Collateral Agent shall constitute Collateral Documents
for the purposes of the Restructured Collateral Agency Agreement or which are
delivered or to be delivered pursuant hereto (to the extent such document
pertains to the Collateral) or thereto.
"Restructured Collateral Agency Agreement" means the Amended and Restated
Restructured Collateral Agency, dated as of the date hereof, among the
Borrower, the Parent, certain Subsidiaries of the Parent listed on the
signature pages thereof, Foothill, the Agent, the Restructuring Lenders, and
the Collateral Agent, as the same may be modified, waived or amended from
time to time.
"Restructured Credit Agreement" means the Restructured Credit and
Guaranty Agreement dated as of March 24, 1994, as amended, among Borrower,
Holding, Distribution, Tulsa, the Parent, the lenders listed on the signature
pages thereof, and Morgan Guaranty Trust Company of New York, as agent.
"Restructuring Lender" means each Person listed as a Lender on the
signature pages of the Restructured Credit Agreement, each Assignee which
becomes a "Lender" for purposes of the Restructured Credit Agreement pursuant
to Section 14.08(c) of the Restructured Credit Agreement, and their
respective successors, and "Restructuring Lenders" means all of the foregoing.
"Restructured Loans" means the 'Loans' as defined in the Restructured
Credit Agreement.
18
"Sale and Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Parent or any of its Subsidiaries of any
property that, or of any property similar to and used for substantially the
same purposes as any other property that, has been or is to be sold,
assigned, transferred or otherwise disposed of by the Parent or any of its
Subsidiaries to such Person with the intention of entering into such a lease.
"Securitization Reserve" means, as of any date of determination, the
Dollar amount of Morgan Delaware's Net Investment under the Receivables
Purchase Agreement in Service Accounts.
"Security Subsidiaries" means all, and "Security Subsidiary" means any
one, of the following Subsidiaries of the Parent:
1. Memorex Telex Corporation
2. Tulsa Computer Products, Ltd.
3. Memorex Telex Inc.
4. Memorex Telex Holding N.V.
5. Memorex Telex AG
6. Memorex Telex Holdings (UK) Limited
7. Memorex Telex (UK) Limited
8. Memorex Telex S.A. (France)
9. Memorex Telex Italia SpA
10. Memorex Telex Distribution N.V.
11. Memorex Telex Nederland B.V.
12. Memorex Telex S.A. (Belgium)
13. Memorex Telex Pty Limited
14. Memorex Telex Wholesale Pty Limited
15. Services,
and any other Subsidiary of the Parent some or all of whose capital stock or
obligations serve as collateral for the Restructuring Lenders under one or
more of the Restructured Collateral Documents and any other Subsidiary of the
Parent formed or organized after the Closing Date.
"Service Accounts" means Accounts created in the ordinary course of
business arising arise out of the rendition of maintenance and other similar
services from recurring contracts with Account Debtors.
"Services" means Memorex Telex Services Inc., a Delaware corporation, and
its successors.
19
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
such Person.
"Tax" means any present or future tax, duty or other charge (including,
without limitation, interest and penalties imposed with respect thereto).
"Temporary Cash Investment" means (a) funds of any subsidiary of the
Parent or, subject to Section 5.22, of the Parent on deposit with a local
bank or (b) any Investment in (i) Dollars or direct non-callable obligations
of, or non-callable obligations guaranteed as to timely payment or insured
by, the United States or any agency or instrumentality thereof for the
payment of which obligation or guarantee the full faith and credit of the
United States is pledged, (ii) commercial paper rated at least A-1 by
Standard & Poor's Corporation and P-1 by Moody's Investors Service, Inc.,
(iii) time deposits with, including, without limitation, certificates of
deposit issued by, any office located in the United States of any bank or
trust company which is organized under the laws of the United States or any
state thereof and the senior debt securities of which are rated in one of the
two highest categories by a nationally recognized credit rating agency,
provided, in each case, that such Investment matures within 90 days from the
date of acquisition thereof, or (iv) repurchase obligations with a term of
not more than ten days with respect to securities described in clause (i)
above entered into with an office of a bank or trust company meeting the
criteria specified in clause (iii) above.
"Transferee" has the meaning set forth in Section 14.08(d).
"Tulsa" means Tulsa Computer Products, Ltd., an Oklahoma corporation, and
its successors.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed
by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair
market value of all Plan assets allocable to such liabilities under Title IV
of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"UK" means Memorex Telex (UK) Ltd., a corporation organized under the
laws of England and Wales, and its successors.
20
"U.S." and "United States" means the United States of America.
"U.S. Taxes" means any Taxes levied or imposed by the United States of
America or any political subdivision or taxing authority thereof or therein.
"Voting Stock" means Capital Stock of any class or classes (however
designated) having ordinary voting power for the election of managing
directors of the Parent, other than Capital Stock having such power only by
reason of the happening of a contingency.
"Warrants" means either or both (i) the stock subscription warrants
representing the right to purchase, in the aggregate, 1,532,156 shares of the
authorized common stock, dfl. 0.10 nominal value per share, of Memorex Telex
N.V. on and after the effective date of the Prepackaged Plan, at an exercise
price of $2.00 per share until the fifth anniversary of the effective date of
the Prepackaged Plan, which are authorized to be issued and distributed
pursuant to the Prepackaged Plan, or (ii) the stock subscription warrants
representing the right to purchase, in the aggregate, 1,000,000 shares of the
authorized common stock, dfl. 0.10 nominal value per share, of Memorex Telex
N.V. on and after the effective date of the Prepackaged Plan, at an exercise
price of $14.00 per share until the seventh anniversary of the effective date
of the Prepackaged Plan, which are authorized to be issued and distributed
pursuant to the Prepackaged Plan.
"Wholly-Owned Subsidiary" means, with respect to any Person, any
Subsidiary all of the shares of Capital Stock of which (except directors'
qualifying shares and investments by foreign nationals mandated by applicable
law) are at the time directly or indirectly owned by such Person. The Special
Purpose Domestic Receivables Subsidiary (if any) permitted by Section 5.16
hereof shall be deemed to be a Wholly-Owned Subsidiary.
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in accordance
with the United States generally accepted accounting principles as in effect
from time to time, applied on a basis consistent (except for changes
concurred in by the Parent's independent public accountants) with the most
recent audited consolidated financial statements of the Parent and its
Consolidated Subsidiaries delivered to Foothill; PROVIDED that, if Borrower
notifies Foothill that the Borrower wishes to amend any covenant in Article V
to eliminate the effect of any change in generally accepted accounting
principles on the operation of such covenant or calculation, as the case may
be (or if Foothill notifies Borrower that Foothill wishes to amend Article V
for such purpose), then Borrower's
21
compliance with such covenant or calculation, as the case may be, shall be
determined on the basis of generally accepted accounting principles in effect
immediately before the relevant change in generally accepted accounting
principles became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to Borrower and Foothill.
SECTION 1.03. CONVERSION OF AMOUNTS DENOMINATED IN FOREIGN CURRENCY. If
for purposes of any determination it is necessary to translate amounts
denominated in a currency other than Dollars into Dollars, such translation
shall be made: (a) if such determination relates to a matter reflected in the
consolidated financial statements, or the books and records, of the Parent
and its Consolidated Subsidiaries, on the basis reflected therein consistent
with the United States generally accepted accounting principles; and (b) in
other cases, for any month, at the exchange rate for such currency designated
by Borrower for such month and reported to Foothill hereunder. The foregoing
notwithstanding, if Foothill determines in its reasonable judgment that the
exchange rate applicable under (a) or (b) above does not reflect the fair
market exchange rate therefor, then such translation shall be made at the
exchange rate for such currency most recently reported in the WALL STREET
JOURNAL or REUTERS WIRE SERVICE at the time of such determination.
ARTICLE II
LOAN AND TERMS OF PAYMENT.
SECTION 2.01 LOAN. Foothill has agreed to make a term loan (the "Loan")
on the Closing Date to Borrower in the original principal amount of Twelve
Million Dollars ($12,000,000). Borrower promises to repay the Loan in full on
the Maturity Date. The outstanding principal balance and all accrued and
unpaid interest under the Loan shall be due and payable upon the termination
of this Agreement, whether by its terms, by prepayment, by acceleration, or
otherwise. The Loan may be prepaid, in whole or in part, without any premium
or penalty. All amounts outstanding under the Loan shall constitute
Obligations. Principal amounts borrowed under the Loan, once repaid, may not
be reborrowed at any time during the term of this Agreement.
SECTION 2.02 MANDATORY PREPAYMENT.
(a) ASSET SALES. In the event that the Parent or any of its
Subsidiaries shall at any time, or from time to time, engage in an Asset
Sale, Borrower shall prepay the Obligations in an amount equal to the Net
Cash Proceeds of such Asset Sale, to be paid to Foothill on the date on which
such Asset Sale is consummated; PROVIDED, HOWEVER, that in the case of the
Asia-Pacific Sale, Borrower shall not be obligated to prepay the Obligations
22
to the extent that the Net Cash Proceeds of the Asia-Pacific Sale (the
"Asia-Pacific Proceeds") are applied as follows (the "Permitted Asia-Pacific
Proceeds Application"): (i) the lesser of (y) the amount of all cash
Asia-Pacific Proceeds and (z) Seventeen Million Dollars ($17,000,000) cash is
retained and used by the Consolidated Company solely to support the
Consolidated Company's continuing operations and not applied toward the
obligations under the Restructured Credit Agreement; and (ii) iii the event
that the amount of all cash Asia-Pacific Proceeds is in excess of Seventeen
Million Dollars ($17,000,000), an amount not to exceed the amount of such
cash excess is applied as a partial prepayment toward Borrower's obligations
under the Restructured Credit Agreement.
(b) OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by the Borrower to Foothill pursuant to SECTION 2.01 is
greater than either the dollar or percentage limitations set forth in SECTION
2.03 (an "Overadvance"), Borrower immediately shall pay to Foothill, in cash,
the amount of such excess to be used by Foothill to repay the Obligations.
SECTION 2.03 BORROWING BASE. The outstanding principal amount of the
Loan shall not exceed, at any time or for any reason, the Borrowing Base. For
purposes of this Agreement, "Borrowing Base" shall mean the lowest of:
(x) the sum of: (i) the greater of: (A) seventy percent (70%) of
the amount of Eligible Securitized Accounts, LESS the Domestic
Securitization Reserve; and (B) zero (0); PLUS (ii) seventy percent (70%)
of the amount of Eligible Non-Securitized Accounts; PLUS (iii) fifty
percent (50%) of the amount of Eligible Inventory; PLUS (iv) Seven Million
Dollars ($7,000,000);
(y) thirty five percent (35%) of Annualized Eligible Domestic
Service Revenues, LESS the Securitization Reserve; and
(z) twenty percent (20%) of Annualized Eligible Service
Revenues, LESS the Securitization Reserve.
SECTION 2.04 INTEREST: RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATE. All Obligations shall bear interest at a per
annum rate equal to the lesser of: (i) the Maximum Rate; or (ii) the greater
of (A) the Reference Rate plus the Applicable Margin, or (B) seven percent
(7.0%) per annum.
(b) DEFAULT RATE. All Obligations shall bear interest, from and
after the occurrence and during the continuance of an Event of Default, at a
per annum rate equal
23
to the lesser of: (i) the Maximum Rate; or (ii) the rate otherwise applicable
under SECTION 2.04(a)(ii) plus three percent (3.0%) per annum.
(c) INTEREST CATCH-UP. Notwithstanding the provisions of Sections
2.05(a) and (b), 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 Sections 2.03(a) and (b)
is less than the total amount of interest which would have been 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 Foothill 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
Sections 2.03(a) and (b).
(d) MINIMUM INTEREST. In no event shall the rate of interest
chargeable hereunder on any Obligations be less than seven percent (7%) per
annum (or, if lower, the Maximum Rate).
(e) PAYMENTS. Interest hereunder shall be due and payable on the
first day of each month during the term hereof. Borrower hereby authorizes
Foothill, at its option, without prior notice to Borrower, to charge such
interest, all Foothill Expenses (as and when incurred), and all installments
or other payments due under the Loan or the Financing Documents to the
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 pan of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(f) COMPUTATION. The Reference Rate as of this date is eight and
one-quarter percent (8.25%) 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 such change in the Reference Rate. 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. All interest calculated at the Maximum
Rate shall be computed on the basis of a three hundred sixty-five (365) or
three hundred sixty-six day year, as appropriate.
24
(g) USURY. 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, without limitation, the laws of 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
canceled 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
paid in full, refunded to Borrower). In determining whether 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.
SECTION 2.05 BORROWER'S DESIGNATED ACCOUNT. Foothill is authorized to
make the Loan under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized Officer of
Borrower. Borrower shall designate in writing to Foothill the identity of the
deposit account of Borrower (the "Designated Account") established and
maintained by Borrower for the purpose of receiving the proceeds of the Loan
requested by Borrower and made by Foothill hereunder. Unless otherwise
agreed by Foothill and Borrower, the Loan requested by Borrower and made by
Foothill hereunder shall be made to Borrower's Designated Account.
25
SECTION 2.06 MAINTENANCE OF LOAN ACCOUNT: STATEMENTS OF OBLIGATIONS.
Foothill shall maintain an account on its books in the name of Borrower (the
"Loan Account") on which Borrower will be charged with the Loan and all
accrued interest, Foothill Expenses, and any other payment Obligations and on
which Borrower will be credited with all payments received by Foothill from
Borrower or for the Borrower's account, including, without limitation, all
amounts received by Foothill from any lockbox account in accordance with the
Lockbox Agreement and the Restructured Collateral Agency Agreement. Foothill
shall render statements regarding the Loan Account to Borrower, including,
without limitation, principal, interest, fees, and including, without
limitation, an itemization of all charges and expenses constituting 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 thirty (30) days after receipt thereof by Borrower,
Borrower shall deliver to Foothill by registered or certified mail at its
address specified under SECTION 10.01, written objection thereto describing
the error or errors contained in any such statements.
SECTION 2.07 FEES. Borrower shall pay to Foothill the following fees:
(a) CLOSING FEE. A one time fee in an amount equal to Seven Hundred
Fifty Thousand Dollars ($750,000), which fee is earned, in full, and
non-refundable on the Closing Date and is due and payable by Borrower to
Foothill in connection with this Agreement on the earliest to occur of: (i)
the Maturity Date; (ii) the prepayment in full of the Loan; and (iii) the
acceleration by Foothill of the Loan.
(b) FINANCIAL EXAMINATION AND APPRAISAL FEES. Foothill's customary fee
of Six Hundred Fifty Dollars ($650) per day per examiner and One Thousand
Five Hundred Dollars ($1,500) per day per appraiser for financial analyses
and examinations and collateral appraisals, plus out-of-pocket expenses for
each such financial analysis, examination and appraisal performed by Foothill
or its agents; PROVIDED, HOWEVER, that so long as no Event of Default has
occurred and is continuing, the appraisal fee payable by Borrower will not
exceed the amount of such fee for three (3) appraiser-days.
SECTION 2.08 FOOTHILL EXPENSES. Borrower shall pay to Foothill all
Foothill Expenses promptly upon demand by Foothill.
26
ARTICLE III
CONDITIONS; TERM OF AGREEMENT
SECTION 3.01. CONDITIONS PRECEDENT TO THE LOAN. The obligation of
Foothill to make the Loan 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) receipt by Foothill of counterparts hereof signed by each Obligor
and Foothill (or, in the case of any party other than the Obligors, as to
which an executed counterpart shall not have been received, receipt by
Foothill in form satisfactory to it of telex, facsimile or other written
confirmation of execution of a counterpart hereof by such party);
(b) receipt by Foothill of counterparts of the Restructured Collateral
Agency Agreement, each duly executed by authorized officials of each of the
parties listed on the signature pages thereof (including, without limitation,
the Agent and each Restructuring Lender);
(c) receipt by Foothill of duly executed counterparts of the Collateral
Documents (including, without limitation, to the extent practicable,
Collateral Documents in respect of the Lien on the assets of Canada and UK
located outside the United States), together with evidence satisfactory to
Foothill of the effectiveness of the security contemplated thereby;
(d) receipt by Foothill of copies of each Lockbox Agreement, together
with a certificate of the Secretary of Borrower certifying the same to be
true, correct, and complete copies thereof and certifying the lockbox
arrangements contemplated thereunder are in fill force and effect;
(e) receipt by Foothill of any unpaid fees and expenses (including,
without limitation, attorneys fees) accrued or incurred, or estimated to have
been accrued or incurred, by or on behalf of Foothill pursuant to or in
connection with this Agreement and the Financing Documents;
(f) receipt by Foothill of opinions of special counsel for the Obligors,
in form satisfactory to Foothill, covering such matters relating to the
transactions contemplated hereby as Foothill may reasonably request;
(g) receipt by Foothill of a certificate signed by the Chief Financial
Officer of Borrower to the effect that (i) such Chief Financial Officer was
the Chief Financial Officer on December 31, 1995, (ii) immediately after such
effectiveness, no Default shall have occurred and be continuing and, to the
best of his knowledge, no Material Adverse Change
27
has occurred since December 31, 1995, and (iii) to the best of his knowledge,
each of the representations and warranties made by the Obligors in or
pursuant to the Financing Documents is true and correct in all material
respects on and as of such Closing Date;
(h) receipt by Foothill of a certificate from the Secretary of each
Obligor attesting to: (i) the resolutions of such Obligor's board of
directors (or foreign equivalent thereof) authorizing its execution,
delivery, and performance of this Agreement and the other Financing Documents
to which it is a party and authorizing specific officers to execute the same;
(ii) the incumbency and signature specimen of each such authorized officer;
and (iii) copies of such Obligor's Constitutional Documents, as amended,
modified, or supplemented to the Closing Date; in each case, in form and
substance satisfactory to Foothill;
(i) receipt by Foothill of certificates of corporate status (or the
relevant foreign equivalents thereof) with respect to each Obligor, dated
within ten (10) days of the Closing Date, by the appropriate officer of the
jurisdiction of incorporation of such Obligor, which certificates shall
indicate that such Obligor is in good standing (or the relevant foreign
equivalent thereof) in such jurisdiction;
(j) receipt by Foothill of: (i) certificates of corporate status with
respect to Borrower, dated within ten (10) days of the Closing Date, by the
appropriate officer of the states of New Jersey, North Carolina, Oklahoma,
and Texas; and (ii) a certificate of corporate status with respect to
Services, dated within ten (10) days of the Closing Date, by the appropriate
officer of the state of Texas; which certificates shall indicate that such
Obligor is in good standing in such jurisdiction;
(k) receipt by Foothill of searches reflecting the filing of the
Collateral Agent's financing statements and fixture filings (and the relevant
foreign equivalents thereof);
(l) the execution and delivery of all counterpart signature pages to the
amendments and waivers in respect of the Restructured Credit Agreement by the
Agent each Restructuring Lender, and each Material Company party thereto,
whereby, among other things, the execution, delivery, and performance by the
Obligors of the Financing Documents and the consummation of the transactions
contemplated thereby are permitted by the Restructuring Lenders;
(m) receipt by Foothill of copies of the Restructured Credit Agreement
(including all amendments and modifications to date) and the Receivables
Purchase Agreement (including all amendments and modifications to date),
together with a certificate of the Secretary of Borrower certifying the same
to be true, correct, and complete copies thereof;
28
(n) receipt by Foothill of certificates of insurance in respect of the
Non-Parent Obligors, together with the endorsements thereto (including,
without limitation, a 438BFU lender's loss payable endorsement, or an
equivalent endorsement in a form satisfactory to Foothill, showing the
Collateral Agent as loss payee thereof), as are required by the Restructured
Collateral Agency Agreement, the form and substance of which shall be
satisfactory to Foothill;
(o) the representations and warranties contained in this Agreement and
the other Loan Documents shall be true and correct in all respects on and as
of the date of the making of the Loan;
(p) no Event of Default or event which with the giving of notice or
passage of time would constitute an Event of Default shall have occurred and
be continuing on the date of the making of the Loan;
(q) no injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the making of the Loan shall have been
issued and remain in force by any governmental authority against 'any
Borrower, Foothill, or any of their Affiliates; and
(r) the Closing Date shall occur on or before March 22, 1996.
SECTION 3.02 CONDITIONS SUBSEQUENT TO THE LOAN. The following shall be
conditions subsequent and the failure to satisfy on a timely basis one or
more of the same shall constitute an Event of Default hereunder:
(a) In the event the Asia-Pacific Sale Condition is not satisfied, then
Borrower shall cause Australia to execute and deliver to Foothill, on or
before June l, 1996, (i) such joinder documents as Foothill may request, in
form and substance satisfactory to Foothill, by which Australia agrees to
join in and become bound by the provisions of this Agreement as a Guarantor,
and (ii) to the extent practicable, such Collateral Documents as Foothill may
request in order to grant the Collateral Agent for the benefit of Foothill a
perfected security interest in the personal property Collateral of Australia;
(b) To the extent that any Collateral Documents in respect of the Lien
on the assets of Canada and UK located outside the United States are not
executed and delivered on or before the Closing Date under Section 3.01(c)
hereof, UK and Canada shall execute and deliver to Foothill, within thirty
(30) days following the Closing Date, such Collateral Documents, together
with evidence satisfactory to Foothill of the effectiveness of the security
contemplated thereby;
29
(c) Within sixty (60) days following the Closing Date, Foothill shall
receive duly executed Collateral Access Agreements for the Obligors'
non-owned locations in each of: (i) Raleigh, North Carolina; and (ii) if
requested by Foothill, Tulsa, Oklahoma; and
(d) Within thirty (30) days following the Closing Date, the Obligors
shall deliver to Foothill the certified copies of the policies of insurance,
together with the endorsements thereto (including, without limitation, a
438BFU lender's loss payable endorsement, or an equivalent endorsement in a
form satisfactory to Foothill, showing the Collateral Agent or Foothill as
loss payees thereof (as their interests may appear)), as are required by the
Restructured Collateral Agency Agreement, the form and substance of which
shall be satisfactory to Foothill.
SECTION 3.03 TERM. This Agreement shall become effective upon the
execution and delivery hereof by the Obligors and Foothill and shall continue
in full force and effect for a term ending on the Maturity Date, unless
sooner terminated pursuant to the terms hereof. The foregoing
notwithstanding, Foothill shall have the right to terminate its obligations
under this Agreement immediately and without notice upon the occurrence and
during the continuation of an Event of Default.
SECTION 3.04 EFFECT OF TERMINATION. On the date of termination, all
Obligations immediately shall become due and payable without notice or
demand. No termination of this Agreement, however, shall relieve or discharge
the Obligors of their duties, Obligations, or covenants hereunder, and
Foothill's continuing security interests in the Collateral shall remain in
effect until all Obligations have ken fully and finally discharged.
SECTION 3.05 EARLY TERMINATION BY BORROWER. The provisions of SECTION
3.03 notwithstanding, Borrower shall have the option, at any time upon sixty
(60) days prior written notice to Foothill, to terminate this Agreement by
paying to Foothill, in cash, the Obligations.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Obligors jointly and severally represent and warrant to Foothill that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. Each Obligor is a
corporation duly incorporated, validly existing and (in the case of each such
Person incorporated under the laws of any State of the United States and each
other such Person as to which such
30
concept has meaning under the laws of the jurisdiction of its incorporation)
in good standing under the laws of its jurisdiction of incorporation and has
all corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted
(except, to the extent that failure to comply with the foregoing statements
could not, in the aggregate, have a material adverse effect on the business,
financial position, results of operations or prospects of the Obligors and
their Consolidated Subsidiaries, considered as a whole), and each Obligor is
duly qualified as a foreign corporation, licensed and (in the case of each
such Person incorporated under the laws of any State of the United States and
each other such Person as for which such concept has meaning under the laws
of the jurisdiction of its incorporation) in good standing in each
jurisdiction where qualification or licensing is required by the nature of
its business or the character and location of its property, business or
customers and in which the failure so to qualify or be licensed, as the case
may be, in the aggregate, could have a material adverse effect on the
business, financial position, results of operations or prospects of the
Obligors and their Subsidiaries, considered as a whole.
SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION.
The execution and delivery by each Obligor of each of the Financing Documents
to which it is a party and the performance by such Obligor of its obligations
thereunder are within the corporate power of such Obligor, have been duly
authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official (except
such as shall have been obtained and be in full force and effect on and after
the date of execution and delivery of the related Financing Document by the
related Obligor) and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the Constitutional Documents
of such Obligor or of any agreement, judgment, injunction, order, decree or
other instrument binding upon such Obligor.
SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of each Obligor, and the other Financing Documents, when
executed and delivered as contemplated by this Agreement, will constitute
valid and binding obligations of each Obligor that is a party thereto.
SECTION 4.04. FINANCIAL INFORMATION. (a) The unaudited consolidated
balance sheet of the Parent and its Consolidated Subsidiaries as of December
31, 1995 and the related unaudited consolidated statements of operations and
cash flows for the nine months then ended, set forth in the Parent's
quarterly report for the fiscal quarter then ended as filed with the
Securities and Exchange Commission on Form 10-Q, a copy of which has been
delivered to Foothill, fairly present, in conformity with United States
generally accepted accounting principles applied on a basis consistent with
the financial statements referred to in subsection (b) of this Section 4.04,
the consolidated financial position of the Parent and its Consolidated
Subsidiaries as of such date and their consolidated results of
31
operations and cash flows for such six month period (subject to normal
year-end audit adjustments).
(b) The consolidated balance sheet of the Parent and its Consolidated
Subsidiaries as of March 31, 1995 and the related consolidated statements of
operations and cash flows for the fiscal year then ended, reported on by
Ernst & Young and set forth in the Parent's 1995 Form 10-K, a copy of which
has been delivered to Foothill, fairly present, in conformity with United
States generally accepted accounting principles, the consolidated financial
position of the Parent and its Consolidated Subsidiaries as of such date and
their consolidated results of operations and cash flows for such fiscal year.
(c) There has been no Material Adverse Change, nor any event which is
reasonably likely to result in a Material Adverse Change, since December 31,
1995.
SECTION 4.05. LITIGATION. There is no action, suit or proceeding pending
against, or to the knowledge of any Obligor threatened against any Obligor or
any Subsidiary of any thereof, before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could materially and adversely
affect the business, financial position, results of operations or prospects
of the Consolidated Company, considered as a whole, or which in any manner
questions the validity of any Financing Document.
SECTION 4.06. COMPLIANCE WITH ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and
the Code with respect to each Plan and is in compliance in all material
respects with the presently applicable provisions of ERISA and the Code with
respect to each Plan. No member of the ERISA Group has (i) sought a waiver of
the minimum funding standard under Section 412 of the Code in respect of any
Plan, (ii) failed to make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could
result in the imposition of a Lien or the posting of a bond or other security
under ERISA or the Code or (iii) incurred any liability under Title IV of
ERISA other than a liability to the PBGC for premiums under Section 4007 of
ERISA.
SECTION 4.07. TAXES. The Obligors and each Subsidiary of any of them have
filed all material Tax returns that are required to be filed by them and have
paid all Taxes due pursuant to such returns or pursuant to any assessment
received by any of them, except for any such Taxes being diligently contested
in good faith and by appropriate proceedings or being paid in accordance with
the terms of any settlement agreement entered into by the Obligors. Charges,
accruals and reserves have been provided on the books of the Parent and its
Subsidiaries in respect of all Taxes or other governmental charges which are
32
adequate in the aggregate in accordance with generally accepted accounting
principles, and no Tax liabilities in excess of the amounts so provided are
anticipated that could materially and adversely affect the business,
financial position, results of operations or prospects of the Consolidated
Company, considered as a whole.
SECTION 4.08. COMPLIANCE WITH LAWS. Each Obligor is in compliance in all
material respects with all applicable laws, rules and regulations, other than
such laws, rules or regulations (i) the validity or applicability of which
such Obligor is contesting in good faith or (ii) failure to comply with which
cannot reasonably be expected to have consequences which would materially and
adversely affect the business, financial position, results of operations or
prospects of the Obligors and their Consolidated Subsidiaries, considered as
a whole.
SECTION 4.09. NOT AN INVESTMENT COMPANY. None of the Obligors is an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION 4.10. NO DEFAULTS. (a) No Obligor or any Subsidiary thereof is
in violation of, or in default under, any term or provision of any charter,
by-law, mortgage, indenture, agreement, instrument, statute, rule,
regulation, judgment, decree, order, writ or injunction applicable to it,
such that such violations or defaults in the aggregate might materially and
adversely affect the financial condition, results of operations, business or
prospects of the Consolidated Company, considered as a whole, or the ability
of any Obligor to perform its obligations under the Financing Documents.
(b) Upon the effectiveness of this Agreement, no Default will have
occurred and then be continuing.
SECTION 4.11. POSSESSION OF FRANCHISES. LICENSES ETC. The Obligors and
each Subsidiary of any of them own or possess all franchises, patents,
trademarks, service marks, trade names, copyrights, licenses and other rights
that are necessary in any material respect for the ownership and operation of
their respective properties and businesses, and none of the Obligors or any
Subsidiary of any of them is in violation of any provision thereof such that
any lack of such ownership or possession or violations in the aggregate might
materially and adversely affect the financial condition, results of
operation, business or prospects of the Consolidated Company, considered as a
whole, or the ability of any Obligor to perform its obligations under the
Financing Documents.
SECTION 4.12. FULL DISCLOSURE. All information heretofore furnished by
the Obligors or any Subsidiary of any of them to Foothill for purposes of or
in connection with this Agreement or any transaction contemplated hereby was,
and all such information
33
hereafter furnished by the Obligors or any Subsidiary of any of them to
Foothill will be, true and accurate in every material respect or based on
reasonable estimates on the date as of which such information is stated or
certified. The Obligors have disclosed to Foothill in writing any and all
facts which materially and adversely affect or may affect (to the extent the
Obligors can now reasonably foresee), the business, properties, financial
position, results of operations or prospects of the Consolidated Company,
considered as a whole, or the ability of the Obligors to perform their
obligations under the Financing Documents.
SECTION 4.13. REPRESENTATIONS IN OTHER AGREEMENTS TRUE AND CORRECT. Each
of the representations and warranties contained in any Financing Document is
true and correct.
SECTION 4. 14. ENVIRONMENTAL LAWS. In the ordinary course of its
business, the Parent conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of the Parent
and its Subsidiaries, in the course of which it identifies and evaluates
associated liabilities and costs (including, without limitation, any capital
or operating expenditures required for clean-up or closure of properties
presently or previously owned, any capital or operating expenditures required
to achieve or maintain compliance with environmental protection standards
imposed by law or as a condition of any license, permit or contract, any
related constraints on operating activities, including, without limitation,
any periodic or permanent shutdown of any facility or reduction in the level
of or change in the nature of operations conducted thereat, any costs or
liabilities in connection with off-site disposal of wastes or Hazardous
Substances, and any actual or potential liabilities to third parties,
including, without limitation, employees, and any related costs and
expenses). On the basis of this review, the Parent has reasonably concluded
that such associated liabilities and costs, including, without limitation,
the costs of compliance with Environmental Laws, are unlikely to have a
material adverse effect on the business, financial condition, results of
operations or prospects of the Parent and its Consolidated Subsidiaries,
considered as a whole.
SECTION 4.15. LIENS. There are no Liens of any nature whatsoever on any
properties of the Obligors or any of their Subsidiaries other than Permitted
Liens. No Obligor is a party to any contract, agreement, lease or
instrument, the performance of which, either unconditionally or upon the
happening of an event, will result in or create a Lien (other than a
Permitted Lien) on the property or assets of any Obligor or otherwise result
in a violation of any Financing Document.
SECTION 4.16. ELIGIBLE ACCOUNTS. The Eligible Accounts are, at the time
of the creation thereof and as of each date on which Borrower includes them
in a Borrowing Base calculation or certification, bona fide existing
obligations created by the sale and delivery
34
of Inventory or the rendition of services to Account Debtors in the ordinary
course of the Non-Parent Obligors' business, unconditionally owed to the
Non-Parent Obligors without defenses, disputes, offsets, counterclaims, or
rights of return or cancellation. The property giving rise to such Eligible
Accounts have been delivered to the Account Debtor, or to the Account
Debtor's agent for immediate shipment to and unconditional acceptance by the
Account Debtor. At the time of the creation of an Eligible Account and as of
each date on which the Borrower includes an Eligible Account in a Borrowing
Base calculation or certification, no Obligor has received notice of actual
or imminent bankruptcy, insolvency, or material impairment of the financial
condition of any applicable Account Debtor regarding such Eligible Account.
SECTION 4.17. ELIGIBLE INVENTORY. All Eligible Inventory is now and at
all times hereafter shall be of good and merchantable quality, free from
defects.
SECTION 4.18. LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party
(without Foothill's prior written consent) and are located only at the
locations identified on SCHEDULE 5.14 or otherwise permitted by SECTION 5.14.
SECTION 4.19. INVENTORY RECORDS. The Obligors now keep, and hereafter at
all times shall keep, correct and accurate records itemizing and describing
the kind, type, quality, and quantity of the Inventory, and the Obligors'
cost therefor.
ARTICLE V
COVENANTS
The Obligors jointly and severally agree that, so long as any Obligations
remains unpaid, the Obligors will perform and comply with, and will cause
their respective Subsidiaries, as applicable, to perform and comply with,
each of the following covenants.
SECTION 5.01. INFORMATION. Borrower will deliver to Foothill:
(a) within 90 days after the end of each fiscal year of the Parent, (i)
the consolidated balance sheet of the Parent and its Consolidated
Subsidiaries as of the end of such fiscal year, and the related consolidated
statements of operations and cash flows for such fiscal year, setting forth
in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and accompanied by an opinion or opinions thereon by
Ernst & Young or other independent public accountants of nationally
recognized standing, which opinion (x) shall state that such financial
statements present fairly the consolidated
35
financial position of the companies being reported upon as of the date of
such financial statements and the consolidated results of their operations
for the period covered by such financial statements in conformity with
generally accepted accounting principles applied on a consistent basis
(except for changes with which such accountants concur) and that the
examination of such accountants in connection with such financial statements
has been made in accordance with generally accepted auditing standards and,
accordingly, included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances and (y)
shall not contain any Qualification for any fiscal year after the fiscal year
ending March 31, 19%, and (ii) a certificate, certified by the CFO, in the
form agreed upon by the Parent and Foothill and setting forth the Parent's
calculation of the Leasebase Amount for such fiscal year;
(b) within 45 days after the end of each of the first three quarters of
each fiscal year of the Parent, the consolidated balance sheet of the Parent
and its Consolidated Subsidiaries, and the related consolidated statements of
operations and cash flows for such quarter and for the portion of the fiscal
year ended at the end of such quarter, setting forth in each case in
comparative form the figures for the corresponding quarter and the
corresponding portion of the previous fiscal year, all prepared in accordance
with Rule 10-01 of Regulation S-X of the General Rules and Regulations under
the Securities Act of 1933, or any successor rule that sets forth the manner
in which interim financial statements shall be prepared, and certified
(subject to normal year-end audit adjustments) as to fairness of presentation
and consistency by the chief financial officer or the chief accounting
officer of the Parent;
(c) within 45 days after the end of each fiscal quarter of each fiscal
year of the Parent, (i) the balance sheet of each Obligor, on a stand-alone
basis, and the related statements of operations and cash flows for such
quarter and for the portion of the fiscal year ended at the end of such
quarter, prepared on a basis consistent with the financial statements
referred to in subsection (b)and certified (subject to normal year-end audit
adjustments) as to fairness of presentation and consistency by the chief
financial officer or the chief accounting officer of the relevant Obligor,
(ii) a certificate of the CFO setting forth all cash payments received during
such fiscal quarter in respect of any Non-Cash Proceeds held by the Parent or
any of its Consolidated Subsidiaries, as permitted by the first PROVISO in
Section 5.09(b), and (iii) a certificate of the CFO setting forth the
aggregate amount as at the last day of such fiscal quarter of Liens on any
asset (including, without limitation, cash) of any Obligor securing any
obligation which is not Debt, other than Liens arising in the ordinary course
of business which constitute (A) statutory Liens or landlords and carriers',
warehouseman's, mechanics', suppliers', materialmen's, repairmen's or other
like Liens with respect to amounts not yet delinquent or being contested in
good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with generally accepted
accounting principles shall have been made
36
therefor; (B) Liens for taxes, assessments, government charges or claims
which are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and if a reserve or other appropriate
provision, if any, as shall be required in conformity with generally accepted
accounting principles shall have been made therefor; (C) Liens incurred or
deposits made in connection with workers' compensation, unemployment
insurance and other types of social security; (D) easements, rights-of-way,
restrictions and other similar charges or encumbrances not interfering in any
material respect with the business of any Obligor; (E) Liens imposed by
operation of law which do not materially affect any Obligor's ability to
perform its obligations under the Financing Documents; and (F) Liens in favor
of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods;
(d) within twenty Business Days after the end of each calendar month,
(i) consolidated cash forecasts (substantially in the form customarily
prepared by the Parent) for a period covering at least the following twelve
weeks based upon the Parent's best estimates, information and assumptions at
the time, and (ii) the consolidated balance sheet of the Parent and its
Consolidated Subsidiaries, and the related consolidated statements of profit
and loss and of cash flows for such calendar month, in each case in the form
in which such statements are prepared for the Board of Supervisors of the
Parent;
(e) within 120 days after the end of each fiscal year of the Parent, a
projected consolidated balance sheet of the Parent and its Consolidated
Subsidiaries as of the end of the following fiscal year, and the related
consolidated statements of projected operations land cash flows (in each case
substantially in the form customarily prepared by the Parent) for such fiscal
year, based on the Parent's best estimates, information and assumptions at
the time;
(f) simultaneously with the delivery to Morgan Delaware of the daily and
monthly reports required under the Receivables Purchase Agreement, copies of
such reports;
(g) simultaneously with the delivery of each set of financial statements
referred to in paragraphs (a) and (b) of this Section, a certificate of the
CFO (i) setting forth in reasonable detail such calculations as are required
to establish whether the Parent was in compliance with the requirements of
Sections 5.06 through 5.13, inclusive, on the date of such financial
statements, (ii) stating whether there exists on the date of such certificate
any Default and, if any Default then exists, setting forth the details
thereof and the action that the Parent is taking or proposes to take with
respect thereto, (iii) stating whether, since the date of the most recent
previous delivery of financial statements pursuant to paragraph (a) or (b) of
this Section, there has been any Material Adverse Change not reflected in the
financial statements delivered simultaneously therewith and, if so, the
nature of such
37
Material Adverse Change and (iv) stating whether, since the date of the most
recent financial statements previously delivered pursuant to paragraph (a) or
(b) of this Section, there has been a change in the generally accepted
accounting principles applied in preparing the financial statements then
being delivered from those applied in preparing the most recent audited
financial statements so delivered which is material to the financial
statements then being delivered;
(h) simultaneously with the delivery of each set of financial statements
referred 10 in paragraph (a) of this Section, a letter from the firm of
independent public accountants that reported on such statements stating (i)
whether anything has come to their attention in the course of their normal
audit procedures to cause them to believe that there existed on the date of
such statements any Default and (ii) whether in their opinion the
calculations set forth in the officer's certificate delivered simultaneously
therewith pursuant to paragraph (g) of this Section 5.01, to the extent
derived from data contained in the accounting records of the Parent and its
Consolidated Subsidiaries, have been determined in accordance with the
relevant provisions of this Agreement;
(i) forthwith upon the occurrence of any Default, a certificate of the
CFO setting forth the details thereof and the action that the Parent is
taking or proposes to take with respect thereto;
(j) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto) and annual, quarterly or monthly
reports that the Parent or any of its Subsidiaries shall have filed with the
Securities and Exchange Commission;
(k) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section
4043 of ERISA) with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such report able event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of
such notice; (iii) receives notice from the PBGC under Title IV of ERISA of
an intent to terminate, impose liability (other' than for premiums under
Section 4007 of ERISA) in respect of, or appoint a trustee to administer any
Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding
standard under Section 412 of the Code, a copy of such application; (v) gives
notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy
of such notice and other information filed with the PBGC; (vi) gives notice
of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or
38
in respect of any Benefit Arrangement or makes any amendment to any Plan or
Benefit Arrangement which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security, a certificate of the chief
financial officer or the chief accounting officer of the Parent setting forth
details as to such occurrence and action, if any, which the Parent or
applicable member of the ERISA Group is required or proposes to take;
(l) as soon as reasonably practicable after any Obligor obtains
knowledge of the commencement of, or of a material threat of the commencement
of, an action, suit or proceeding against the Parent or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency
or official in which there is a non-remote possibility of an adverse decision
which could materially and adversely affect the business, financial position,
results of operations or prospects of the Consolidated Company, considered as
a whole, or which in any manner questions the validity of any Financing
Document, the Obligors will inform Foothill of the nature of such pending or
threatened action, suit or proceeding and will provide such additional
information as may be reasonably requested by Foothill;
(m) [intentionally omitted]
(n) from time to time such additional information regarding the
financial position, results of operations, business or prospects of the
Parent or any of its Subsidiaries as Foothill may reasonably request; and
(o) In addition to the copies of the daily and monthly reports delivered
to Morgan Delaware required to be delivered concurrently to Foothill pursuant
to Section 5.01(f) hereof, the Obligors shall deliver to Foothill the
following documents at the following times in form and substance satisfactory
to Foothill: (i) on a weekly basis, (A) Inventory reports in respect of
Inventory located at the Obligors' Raleigh, North Carolina location,
specifying the Obligors' cost thereof, and (B) a detailed aging, by total, of
the Accounts of UK and Canada; (ii) on a monthly basis and, in any event, by
no later than the tenth (10th) Business Day of each month during the term of
this Agreement, (A) a detailed calculation of the Borrowing Base, together
with a reconciliation to the detailed calculation of the Borrowing Base
previously provided to Foothill, (B) a detailed aging, by total, of the
Accounts of the Non-Parent Obligors, together with a reconciliation to the
detailed calculation of the Borrowing Base previously provided to Foothill,
(C) a summary aging, by vendor, of the Obligors' accounts payable, and the
Dollar amount of any book overdraft, and (D) Inventory reports specifying the
Obligors' cost of the Obligors' Inventory by category, with additional detail
showing additions to and deletions from the Inventory; and (iii) such other
reports as to the Collateral or the financial condition of the Obligors as
Foothill may request from time to time.
39
SECTION 5.02. PAYMENT OF OBLIGATIONS. The Obligors will, and will cause
each other Material Company to, pay and discharge, as the same shall become
due and payable, (i) all material claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons which, in
any such case, if unpaid, might by law give rise to a Lien upon any of its
property or assets, and (ii) all material taxes, assessments and governmental
charges or levies upon it or its property or assets, except where any of the
items in clause (i) or (ii) above may be contested in good faith by
appropriate proceedings, and the relevant Obligor or other Material Company,
as the case may be. shall have set aside on its books, in accordance with
generally accepted accounting principles, appropriate reserves for the
accrual of any such items; PROVIDED that the Obligors shall, and shall cause
one or more of the appropriate Subsidiaries of the Parent to, exercise any
option reasonably available to pay tax claims (including, without limitation,
interest thereon if applicable) in installments over any extended period.
SECTION 5.03. MAINTENANCE OF PROPERTY; INSURANCE. The Obligors will, and
will cause each other Material Company to: (a) keep all material property
useful and necessary in its business in good working order and condition in
accordance with generally accepted industry standards applicable to the line
of business in which such property is used; (b) maintain with financially
sound and responsible insurance companies, insurance on all their respective
properties in at least such amounts and against at least such risks (and with
such risk retention) as are usually insured against in the same general area
by companies of established repute engaged in the same or a similar business;
and (c) furnish to Foothill, upon written request from Foothill, information
presented in reasonable detail as to the insurance so carried.
Notwithstanding the foregoing, the Obligors may, in lieu of maintaining the
insurance required by the preceding sentence, self-insure, or cause any other
Material Company to self-insure, with respect to the properties and risks
referred to in the preceding sentence to the extent that such self-insurance
is customary among companies of established repute engaged in the line of
business in which such properties are used or to which such risks pertain.
SECTION 5.04. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. (a)
Subject to Section 5.09, the Obligors will continue, and will cause their
respective Subsidiaries to continue, to engage in business of the same
general type as now conducted by the Obligors and their respective
Subsidiaries, as such business is described in the 1995 Form 10-K, and will
preserve, renew and keep in full force and effect, and will cause each other
Material Company to preserve, renew and keep in full force and effect, their
respective corporate existences and their respective rights, privileges,
licenses and franchises necessary or desirable in the normal conduct of
business.
(b) The Parent shall continue, and shall cause its Subsidiaries to
continue to maintain the Lockbox Agreement (or any replacement agreement in
substantially similar
40
form which is reasonably satisfactory to Foothill), in substantially the form
in effect on the Closing Date or with such amendments, modifications or
changes as are satisfactory to Foothill. The Parent shall continue, and
shall cause its Subsidiaries to continue, to maintain working capital
financing arrangements similar to the Receivables Purchase Agreement or which
provide a comparable amount of working capital financing based on the sale or
other disposition or the pledge of U.S. accounts receivable. The Parent
shall, and shall cause each of its Subsidiaries to, establish in each
jurisdiction (other than France) in which Collateral exists under the
Collateral Documents, lockbox or other similar arrangements satisfactory to
Foothill.
SECTION 5.05. INSPECTION OF PROPERTY BOOKS AND RECORDS. The Parent will
keep, and will cause each other Material Company to keep, proper books of
record and account in which full, true and correct entries in conformity with
generally accepted accounting principles shall be made of all dealings and
transactions in relation to its business and activities. The Parent, upon
reasonable request by Foothill, will permit, and will cause each other
Material Company to permit, representatives of Foothill to visit and inspect
any of their respective properties, to examine and make abstracts from any of
their respective books and records and to discuss their respective affairs,
finances and accounts with their respective officers, employees and
independent public accountants, all at such reasonable times and as often as
may reasonably be desired.
SECTION 5.06. MAINTENANCE OF STOCK OF SUBSIDIARIES. Except as permitted
by Section 5.16 hereof, the Parent will at all times maintain direct or
indirect ownership of 100% of the outstanding shares (Other than directors'
qualifying shares and investments by foreign nationals mandated by applicable
law) of each class of capital stock of each of its Subsidiaries which is a
Material Company, other than Persons that have become Subsidiaries of the
Parent by way of Investments permitted by Section 5.13 (as to which the
Parent will at all times maintain direct or indirect ownership of the maximum
percentage of the capital stock of such Subsidiary that the Parent has owned
directly or indirectly at any time), except for a disposition by the Parent
of its entire Investment in any of its Subsidiaries in accordance with
Section 5.09 and except for a sale or disposition of its entire Investment in
the capital stock of Memorex Telex Japan Ltd.
SECTION 5.07. LIMITATION ON DEBT. (a) The Parent will not, and will not
permit any of its Subsidiaries to, incur or at any time be liable with
respect to any Debt except Debt under the Financing Documents and:
(i) Debt under the Restructured Credit Agreement; PROVIDED that
the aggregate principal amount of the Restructured Loans outstanding
at any time shall not exceed $100,000,000;
41
(ii) Debt owing to the Parent or a Wholly-Owned Subsidiary of the
Parent;
(iii) Debt outstanding on the Closing Date and identified on
SCHEDULE A-1 of the Restructured Credit Agreement as in effect as of
the Closing Date, a copy of which schedule is attached hereto as
SCHEDULE 5.07;
(iv) Debt of any Person outstanding at the date such Person
becomes a Subsidiary of the Parent and not created in contemplation of
such event;
(v) Debt in respect of Capital Leases entered into in connection
with a Sale and Leaseback Transaction permitted by Section 5.09;
(vi) Debt secured by a Lien permitted by paragraph (g) of Section
5.08; PROVIDED that with respect to such Liens, the aggregate
principal amount of Debt secured thereby shall at no time exceed
$10,000,000;
(vii) Debt of Memorex Telex Japan Ltd. which is not Guaranteed by
the Parent or any other Subsidiary of the Parent; and
(viii) Debt not otherwise permitted by this Section 5.07(a) in
the aggregate outstanding principal amount (calculated, with respect
to Debt denominated in currencies other than Dollars, without regard
to variances of less than 5% between the dollar equivalent value of
such Debt at the time of its incurrence and its dollar equivalent
value at the date of determination under this Section 5.07(a)(viii))
not to exceed $40,000,000 at any time.
(b) At no time shall the sum of (i) the outstanding principal amount of
the Loan plus the Restructured Loans, (ii) the aggregate outstanding
principal amount of borrowings under any other secured or unsecured,
committed or uncommitted credit lines available to the Parent or any of its
Subsidiaries, and (iii) the aggregate amount of receivables factored
(exclusive of holdback, if any) exceed $230,000,000.
SECTION 5.08. NEGATIVE PLEDGE. The Parent will not, and will not permit
any of its Subsidiaries to, create, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired by the Parent or any of its
Subsidiaries, except:
(a) Liens securing the Loan and other obligations of the Obligors under
the Financing Documents created pursuant to the Collateral Documents.
42
(b) Liens existing on the Closing Date securing Debt that is outstanding
on such date and identified on SCHEDULE 5.08;
(c) Liens securing the Restructured Loans and other obligations of the
Central Obligors created pursuant to the Restructured Credit Agreement and
the Restructured Collateral Documents, subject to the provisions of Section
9.01 of the Restructured Collateral Agency Agreement;
(d) any Lien existing on any asset prior to the acquisition thereof by
such Subsidiary and not created in contemplation of such acquisition;
(e) any Lien existing on any asset of any Person at the time such Person
becomes a Subsidiary of the Parent and not created in contemplation of such
event;
(f) any Lien created by a Capital Lease otherwise permitted hereunder;
(g) any Lien on any asset of a Subsidiary of the Parent securing Debt
incurred or assumed by such Subsidiary for the purpose of financing all or
any part of the cost of acquiring such asset, PROVIDED that such Lien
attaches to such asset concurrently with the acquisition thereof;
(h) any Lien on any account receivable of a Subsidiary which is factored
by such Subsidiary or as to which an interest has been transferred by such
Subsidiary as security for any financing (in each case to the extent
permitted and in accordance with the terms of this Agreement), which Lien
does not secure any Debt of the Parent or any of its Subsidiaries (other than
the obligation to pass on collections of such receivable if any to the extent
received by the Parent or any of its Subsidiaries);
(i) Liens arising in the ordinary course of business which (i) do not
secure Debt and (ii) do not in the aggregate materially detract from the
value of its assets or materially impair the use thereof in the operation of
its business; and
(j) any extension, renewal or replacement, in whole or in part, of any
Lien described in the foregoing clauses (b) through (i); PROVIDED that any
such extension, renewal or replacement shall be no more restrictive in any
material respect than the Lien so extended, renewed or replaced and shall not
extend to any other asset of the Parent or any of its Subsidiaries other than
such asset originally covered by such Lien or any improvements thereon or
additions or accessions thereto.
SECTION 5.09. CONSOLIDATIONS, MERGERS AND ASSET SALES. (a) The Parent
will not, and will not permit any other Material Company to, consolidate or
merge with or into, or
43
sell, lease or otherwise dispose of all or substantially all of its assets
to, any other Person, except that any Material Company may merge with any
Person (other than a Material Company) if such Material Company is the
surviving corporation and if, immediately after such merger (and giving
effect thereto), no Default shall have occurred and be continuing; PROVIDED,
HOWEVER, that in the case of the merger of any Non-Parent Obligor with a
Material Company that is not a Non-Parent Obligor, such Non-Parent Obligor
shall be the surviving corporation.
(b) The Parent will not, and will not permit any of its Subsidiaries to,
make any Asset Sale, unless (i) the consideration therefor is not less than
the fair market value of the related asset (as determined in good faith by
the Parent) or, in the case of a Sale and Leaseback Transaction giving rise
to a Capital Lease, 60% of such fair market value AND (ii) the consideration
for such Asset Sale consists solely of cash or Marketable Securities payable
at the closing thereof; PROVIDED, HOWEVER, that the consideration for any
Asset Sale may consist in whole or in part of assets that are payable upon
the closing of such Asset Sale but which are neither cash nor Marketable
Securities ("Non-Cash Proceeds") so long as (i) such Non-Cash Proceeds do not
exceed $250,000 for any one transaction and (ii) the aggregate fair market
value of such Non-Cash Proceeds, calculated for each Asset Sale as of the
date on which such Asset Sale is consummated, net of any cash proceeds of
such Non-Cash Proceeds received from time to time, does not at any time
exceed $1,000,000; PROVIDED FURTHER that the Asia-Pacific Sale shall be
permitted to be consummated so long as no Default or Event of Default has
occurred and is continuing or would result therefrom and so long as either
all Obligations are paid in full in cash or item (i) in the definition of
"Permitted Asia-Pacific Proceeds Application" is satisfied.
SECTION 5.10. RESTRICTED PAYMENTS. The Parent will not, and will not
permit any of its Subsidiaries to, declare or make any Restricted Payment.
SECTION 5.11. INVOICING. Subject to the Collateral Documents and the
Receivables Purchase Agreement, original sales invoices evidencing daily
sales shall be mailed by the Non-Parent Obligors to each Account Debtor and,
at the Collateral Agent's direction, the invoices shall indicate on their
face that the Account has been assigned to the Collateral Agent and that all
payments are to be made directly to the Collateral Agent.
SECTION 5.12. LIMITATIONS ON INVESTMENTS. (a) The Parent will not, and
will not permit any of its Subsidiaries to, make or acquire any Investment,
except:
(i) subject to the limitations of Section 5.13, Investments in
the Parent and its Consolidated Subsidiaries
(ii) subject to the limitations of Section 5.13, J.V. Investments;
44
(iii) temporary cash investments in bank time deposits or money
market instruments of recognized credit quality; and
(iv) instruments received as consideration for Asset Sales,
subject to the limitations of Section 5.09(b)
(b) Notwithstanding anything in this Agreement to the contrary, the
Parent shall not, and shall not permit any of its Subsidiaries to, exercise
any warrant, option or other similar right or any convertible security, if
such exercise requires any use or transfer of any asset by the Parent or such
Subsidiary, unless the security or other asset received by the Parent or such
Subsidiary upon such exercise is sold or otherwise disposed of for cash
within 5 days.
SECTION 5.13. CAPITAL EXPENDITURES. (a) The Parent and its Subsidiaries
may retain and apply up to 66% of the proceeds of any Equity Issuance to make
capital expenditures for property, plant and equipment and J.V. Investments.
(b) Subject to Section 5.12(b) and to paragraph (c) of this Section
5.13, the Parent and its Subsidiaries may make J.V. Investments; PROVIDED
that such J.V. Investments (other than Investments permitted by subsection
(a) hereof) do not exceed (i) $2,500,000 individually, (ii) $5,000,000 in the
aggregate in any fiscal year and (iii) Foothill is granted a security
interest in the equity interest of the Parent and its Subsidiaries in all
J.V. Investments entered into on or after the date hereof, subject to any
prior claim by any Person who is a participant in such J.V. Investment
pursuant to the operative documents of such J.V. Investment.
(c) The sum of (i) Consolidated Capital Expenditures for any fiscal year
plus (ii) the aggregate amount of J.V. Investments made during such fiscal
year (in each case exclusive of capital expenditures and J.V. Investments
permitted by subsection (a) hereof) shall not exceed the amount set forth
below for such fiscal year:
FISCAL YEAR
ENDING MARCH 31 AMOUNT
--------------- ------
1996 $15,000,000
1997 $15,000,000
1998 $15,000,000
For purposes of this Section 5.13(c), Consolidated Capital Expenditures for
any fiscal year shall include the net amount of leasebase assets to the
extent of the amount, if any, by which such net amount at the end of such
fiscal year exceeds the Leasebase Amount for
45
such fiscal year (such excess amount being referred to herein as the
"Leasebase Increment"). The "Leasebase Amount" shall be, for the fiscal year
ending March 31, 1995, $9,000,000 and, for any subsequent fiscal year, the
sum of (a) the Leasebase Amount for the prior fiscal year plus (b) the
Leasebase Increment for such prior fiscal year.
SECTION 5.14. LOCATION OF INVENTORY AND EQUIPMENT. The Non-Parent
Obligors shall keep the Inventory and Equipment only at the locations
identified on SCHEDULE 5.14; PROVIDED, HOWEVER, that the Non-Parent Obligors
shall be permitted to have: (a) Inventory in-transit between any two such
locations or from any such location to a destination specified by the
purchaser of such Inventory; (b) Inventory consigned by the Non-Parent
Obligors located with the consignees thereof; and (c) Inventory sold on
approval located with the purchaser thereof; in each case, in the ordinary
course of business; PROVIDED FURTHER that the Non-Parent Obligors may amend
SCHEDULE 5.14 so long as such amendment occurs by written notice to Foothill
not less than thirty (30) days prior to the date on which the Inventory or
Equipment is moved to such new location, so long as such new location is
within the continental United States, Canada, or the United Kingdom, and so
long as, at the time of such written notification, the Non-Parent Obligors
provide any financing statements or fixture filings (or foreign equivalents,
as applicable) necessary to perfect and continue perfected security interests
of Foothill (or the Collateral Agent for the benefit thereof) in such assets
and, if requested by Foothill, also provides to Foothill (or the Collateral
Agent for the benefit thereof) a Collateral Access Agreement.
SECTION 5.15. HEDGING FACILITIES. The Parent will not, and will not
permit any of its Subsidiaries to, enter into any interest swap, currency
swap, financial option or futures contract or any other similar arrangement
except for the purpose of the BONA FIDE hedging of actual financial exposures
of the Parent and its Consolidated Subsidiaries incurred in the ordinary
course of business.
SECTION 5.16. SPECIAL PURPOSE DOMESTIC RECEIVABLES SUBSIDIARY. (a)
Foothill agrees that if Borrower creates and owns a Special Purpose Domestic
Receivables Subsidiary, (i) Foothill shall not require the Special Purpose
Domestic Receivables Subsidiary to, and shall acknowledge and agree that the
Special Purpose Domestic Receivables Subsidiary may not, Guaranteed or grant
a Lien on its assets to secure, the Obligations under the Financing Documents
or the Restructured Loans or any other obligations under the "Financing
Documents" (as defined in the Restructured Credit Agreement), and (ii)
domestic Accounts of Borrower or Services purchased by the Special Purpose
Domestic Receivables Subsidiary shall be free and clear of the Liens of the
Collateral Agent, and Foothill authorizes the Collateral Agent to release and
terminate its Liens in such Accounts in reliance upon a certificate of
Borrower to the effect that such Accounts are being sold in compliance with
the requirements of this Agreement and the Restructured Credit Agreement;
PROVIDED, HOWEVER, that, in each case, no Default or Event
46
of Default shall exist or be continuing at the time of, or result from, the
initial transfer of such Accounts to the Special Purpose Domestic Receivables
Subsidiary.
(b) As used herein, "Special Purpose Domestic Receivables Subsidiary"
means:
(i) a wholly-owned Subsidiary of Borrower (PROVIDED that such
Subsidiary may be less than wholly-owned to the extent that a DE
MINIMIS economic interest in such Subsidiary is held by a third
Person for the purpose of effectuating the bankruptcy-remote
status of such Subsidiary);
(ii) all of the issued and outstanding capital stock of which (except
for any such stock owned by a third Person as permitted by clause
(i) of this subsection) is at all times subject to a valid and
binding first priority Lien in favor of the Collateral Agent;
(iii) that is not at any time obligated with respect to any Debt
of any Other Person;
(iv) that does not create, assume, or suffer to exist any Liens on any
of its assets that secure any obligations of any other Person;
and
(v) that is formed solely for the limited purpose of, and engages in
no activities except as are necessary for, effecting financing
domestic Accounts originated by Borrower or Services.
(c) The foregoing provisions of this Section 5.16 do not amend or waive
any provisions of this Agreement that limit or otherwise regulate sales or
factoring of Accounts by the Parent and its Subsidiaries or the use of
proceeds thereof and such provisions of this Agreement shall govern the sales
of domestic Accounts of Borrower and Services to an by the Special Purpose
Domestic Receivables Subsidiary, and the application of proceeds of such
sales.
(d) If and when the transactions contemplated in this Section 5.16 are
consummated, the parties hereto agree to modify the applicable provisions of
this Agreement, in form and substance satisfactory to Foothill, to effectuate
and reflect the substance of this Section 5.16.
47
SECTION 5.17. TRANSACTIONS WITH AFFILIATES. The Parent will not, and will
not permit any of its Subsidiaries to, directly or indirectly, pay any funds to
or for the account of, make any Investment in, lease, sell, transfer or
otherwise dispose of any assets, tangible or intangible, to, or participate in,
or effect any transaction in connection with any joint enterprise or other joint
arrangement with, any Affiliate; PROVIDED, HOWEVER, that the foregoing
provisions of this Section 5.17 shall not prohibit (a) the Parent or any of
its Subsidiaries from declaring or paying any lawful dividend so long as, after
giving effect thereto, no Default shall have occurred and be continuing, (b)the
Parent or any of its Subsidiaries from making sales to or purchases from any
Affiliate and, in connection therewith, extending credit or making payments, or
from making payments for services rendered by any Affiliate, if such sales or
purchases are made or such services are rendered in the ordinary course of
business and on terms and conditions at least as favorable to the Parent or such
Subsidiary as the terms and conditions which would apply in a similar
transaction with a Person not an Affiliated, (c) the Parent or any of its
Subsidiaries from making payments of principal, interest and premium on any Debt
of the Parent or such Subsidiary held by an Affiliate if the terms of such Debt
are substantially as favorable to the Parent or such Subsidiary as the terms
which could have been obtained at the time of the creation of such Debt from a
lender which was not an Affiliate, (d) the Parent or any of its Subsidiaries
from participating in, or effecting any transaction in connection with, any
joint enterprise or other joint arrangement with any Affiliate if the Parent or
such Subsidiary participates in the ordinary course of its business and on a
basis no less advantageous than the basis on which such Affiliate participates,
(e) the Parent or any of its Subsidiaries from making any Investment permitted
by Section 5.12(a)(iii), and (f) the Parent or any of its Subsidiaries (i) from
making any payment due in respect of the Loan, or (ii) from providing
compensation, indemnification and other benefits to any director or officer of
the Parent or such subsidiary who also is an employee, officer, director,
trustee or is otherwise affiliated or associated with an Affiliate on terms no
more favorable than those on which compensation, indemnification and such other
benefits are provided to directors and officers of the Parent or such Subsidiary
who are not so affiliated or associated with any Affiliate; and, PROVIDED,
FURTHER, that the Parent will not, and will not permit any of its Subsidiaries
to, make payments to or for the account of any Affiliate in respect of financial
advisory, management, transaction or other similar fees, except as otherwise
permitted by this Section 5.17.
SECTION 5.18. FISCAL YEAR. The Parent will not change its fiscal year from
the twelve months ending March 31.
SECTION 5.19. CONSTITUTIONAL DOCUMENTS. The Parent will not permit any
Material Company to amend its Constitutional Documents in any manner that could
adversely affect the rights of Foothill under the Financing Documents or
Foothill's ability to enforce the same.
48
SECTION 5.20. MEETINGS WITH FOOTHILL. The Parent and Borrower will make its
respective officers available to meet with representatives of Foothill at a
mutually agreeable location within the first 50 days of each fiscal quarter of
the Parent during the term of this Agreement for the purpose of reviewing the
financial performance during the preceding fiscal quarter, and the then-current
financial condition and prospects, of the Parent and its Consolidated
Subsidiaries, in general, and of the Obligors, in particular.
SECTION 5.21. EXCULPATION AND INJUNCTION. The Parent and each Obligor
hereby exculpates, and the Parent hereby causes each other Subsidiary of the
Parent to exculpate, Foothill for any actions or omissions in good faith in
connection with any exercise of remedies and agrees not to pursue any legal
action either to limit or prohibit the exercise of any remedy in accordance
herewith by Foothill or to assert any claim for any act or omission relating
thereto.
SECTION 5.22. NET ASSET OUTFLOW: DISTRIBUTION ACCOUNT BALANCE. Anything to
the contrary in this Agreement notwithstanding, from and after the Closing Date
until all Obligations are paid in full in cash, the aggregate net outflow
(netting inflows from outflows on an aggregate combined basis) of assets from
(x) all Non-Parent Obligors on a combined basis, to (y) the Parent or any
Subsidiary of the Parent that is not a Non-Parent Obligor on a combined basis,
in whatever form, including sales or other dispositions of assets, intercompany
loans, dividends, investments, or other transfers, but excluding sales of
domestic Accounts of Borrower or Services to the Special Purpose Domestic
Receivables Subsidiary permitted by Section 5.16 hereof shall not exceed Ten
Million Dollars ($10,000,000) without the prior written consent of Foothill. The
Parent shall not permit the balance standing to the credit of the account
maintained by Distribution with Bank of America Illinois to exceed $5,000,000
for more than three (3) consecutive Business Days.
ARTICLE VI
[INTENTIONALLY OMITTED]
ARTICLE VII
DEFAULTS
SECTION 7.01. DEFAULTS. An Event of Default shall have occurred if:
(a) Borrower shall fail to pay when due any principal of the Loan; or
49
(b) Borrower shall fail to pay any interest on any Loan or any fees or any
other amount payable under this Agreement for a period of five days after the
same shall become due; or
(c) any Obligor shall fail to observe or perform any covenant contained in
Sections 5.06, 5.09, 5.10, 5.12 to 5.15 inclusive, 5.16, 5.19, or 5.21; or
(d) any Obligor shall fail to observe or perform any of its covenants or
agreements contained in the Financing Documents (other than those covered by
paragraph (a), (b) or (c) above) for 10 days after the Parent shall have become
aware of such failure, except, in the case of the covenants contained in
Sections 5.03, 5.04(a), 5.05, 5.16(a) and 5.18, such period shall be 30 days,
instead of 10 days; or
(e) any representation, warranty, certification or statement made by any
Obligor in any Financing Document or in any certificate, financial statement or
other document delivered pursuant thereto shall prove to have been incorrect in
any material respect when made; or
(f) the Parent or any of its Subsidiaries shall fail to make any payment
in respect of any Financial Obligation (other than the Loan) in a principal (or
face) amount of $1,000,000 or more when due or within any applicable grace
period; or
(g) any event or condition shall occur that results in the acceleration of
the maturity of any Financial Obligation in a principal (or face) amount of
$1,000,000 or more of the Parent or any of its Subsidiaries or enables (or, with
the giving of notice or lapse of time or both, would enable) the holder or
holders of such Financial Obligation or any Person acting on behalf of such
holder or holders to accelerate the maturity thereof, or any security therefor
becomes enforceable; or
(h) the Parent or any Subsidiary of the Parent shall commence a voluntary
case or other proceeding seeking Liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing; or
50
(i) an involuntary case or other proceeding shall be commenced against the
Parent or any Subsidiary of the Parent seeking Liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Parent or any Subsidiary of the Parent under
the Federal bankruptcy laws as now or hereafter in effect; or
(j) the Parent or any of its Subsidiaries admits its inability to pay its
debts as and when they fall due or becomes or is deemed to be unable to pay its
debts (whether for the purpose of the Insolvency Act of 1986 of Great Britain or
otherwise) or insolvent, or convenes a meeting for the purpose of proposing, or
otherwise proposes or enters into, any composition or arrangement with its
creditors or any group or class thereof, or anything analogous to, or having a
substantially similar effect to, any of the events specified in this paragraph
or in paragraph (h) or (i) above occurs in any jurisdiction; or
(k) any member of the ERISA Group shall fail to pay when due an amount or
amounts aggregating in excess of $1,000,000 which it shall have become liable to
pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any member of the ERISA Group, any
plan administrator or any combination of the foregoing, other than pursuant to a
standard termination within the meaning of Section 4041(b) of ERISA in
connection with which Borrower has provided Foothill with an opinion of
Borrower's independent actuary reasonably acceptable to Foothill that such
termination can be effected solely on the basis of existing Plan assets
augmented by a commitment to contribute an additional amount not exceeding
$1,000,000, PROVIDED, that, in the event, notwithstanding such opinion, any
member of the ERISA Group is required to contribute an amount in excess of
$1,000,000 in order to effect such standard termination, then such notice of
intent shall be deemed to constitute an Event of Default; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate, to impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer any Material Plan; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c) (5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a payment obligation
in excess of $1,000,000; or
(l) an Enforceable Judgment for the payment of money in excess of
$1,000,000, to the extent not covered by insurance, shall be rendered against
the Parent or any of its Subsidiaries; or
51
(m) unless otherwise permitted by Section 5.06, any Material Company shall
cease to be a Wholly-Owned Subsidiary of the Parent; or
(n) after the Closing Date, any person or group of persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
shall have acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under said Act, but
excluding any shares which such person or group of persons has the right to
acquire upon the exercise of any Warrant) of 35% or more of the outstanding
shares of Voting Stock; or
(o) (i) the CFO in office on the date hereof and any date thereafter (the
Incumbent CFO") shall for any reason cease to be CFO and either (x) no successor
shall have been appointed within 120 days after such event occurs or (y) a
successor to such Incumbent CFO shall have been appointed during such 120-day
period but, within 21 days after such appointment becomes effective, Foothill
delivers a notice to the Parent that such successor CFO is not reasonably
satisfactory to them and such notice is not withdrawn by Foothill within 60 days
after the date on which it was delivered to the Parent, or (ii) the Incumbent
CFO shall cease to be a member of the managing board of the Parent and the
successor to such Incumbent CFO, once appointed to such position, shall not have
been duly elected by the shareholders of the Parent to be a member of the
managing board of the Parent within 90 days after the date such appointment
became effective; or
(p) any authorization, approval, consent, license or exemption necessary
or, in the opinion of counsel to Foothill, desirable for any Obligor to comply
with its obligations under any Financing Document or for the enforceability of
any Financing Document expires or is revoked, withheld or modified in a manner
unacceptable to Foothill or fails to be granted or to remain in full force and
effect and the effect of any of the foregoing is not, or is not able to be,
remedied within ten days; or the validity of any Financing Document is contested
or denied by any Obligor; or Foothill or the Collateral Agent on behalf thereof
does not have, or ceases to have, valid and effective Liens on any material
portion of the Collateral securing the Loan with the relative priorities
contemplated by the Collateral Documents; or
(q) the failure by any Restructuring Lender to deliver to Foothill any
payment collected or received, directly or indirectly, by such Restructuring
Lender that such Restructuring Lender is required to deliver to Foothill in
accordance with Section 9.01(a) of the Restructured Collateral Agency Agreement.
If an Event of Default under SECTION 7.01(a), (b), OR (q) shall have
occurred and be continuing then, and in every such event, Foothill may, at its
option, by notice to Borrower
52
declare the Loan (together with accrued interest thereon) and all other
Obligations to be, and the Loan and such other amounts shall thereupon
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Obligors;
PROVIDED, HOWEVER, that in the case of any Event of Acceleration, without any
notice to any Obligor or any other act by Foothill, the Loan and all other
Obligations shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived
by the Obligors. If any other Event of Default has occurred and is
continuing, Foothill may give such notice to the Collateral Agent as shall
cause the Collateral Agent to commence the enforcement of remedies under the
Collateral Documents.
ARTICLE VIII
GUARANTEE
SECTION 8.01. THE GUARANTEE. (a) Each Guarantor hereby unconditionally and
irrevocably guarantees to Foothill the due and punctual payment of all present
and future indebtedness evidenced by or arising out of this Agreement and any
other Financing Document, including, but not limited to, the due and punctual
payment of principal of and interest on the Loan and the due and punctual
payment of all other sums now or hereafter owed by Borrower under this Agreement
and the other Financing Documents as and when the same shall become due and
payable, whether at maturity, by declaration or otherwise, according to the
terms hereof and thereof. In case of failure by any Obligor punctually to pay
any indebtedness guaranteed hereby, each Guarantor hereby unconditionally agrees
to cause such payment to be made punctually as and when the same shall become
due and payable, whether at maturity or by declaration or otherwise, and as if
such payment were made by such Obligor.
(b) Without prejudice to its obligations to Foothill hereunder, each
Guarantor hereby agrees with Foothill to pay to Foothill from time to time on
demand all amounts from time to time due and payable by it for the account of
Foothill pursuant to any Financing Document to the extent not already paid. Any
payment made pursuant to any such demand shall PRO TANTO satisfy such
Guarantor's obligations to make payment for the account of Foothill pursuant to
such Financing Document.
SECTION 8.02. GUARANTEE UNCONDITIONAL. The obligations of each Guarantor
under this Article VIII shall be unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by:
53
(a) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of Borrower under any Financing Document by operation
of law or otherwise;
(b) any modification or amendment of or supplement to any Financing
Document;
(c) any modification, amendment, waiver, release, non-perfection or
invalidity of any direct or indirect security, or of any guarantee or other
liability of any third party, for any obligation of Borrower under any Financing
Document;
(d) any change in the corporate existence, structure or ownership of
Borrower, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting Borrower or its assets or any resulting release or
discharge of any obligation of Borrower contained in any Financing Document;
(e) the existence of any claim, set-off or other rights which such
Guarantor may have at any time against Borrower, Foothill, or any other Person,
whether or not arising in connection with any Financing Document, PROVIDED that
nothing herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(f) any invalidity or unenforceability relating to or against Borrower for
any reason of any Financing Document, or any provision of applicable law or
regulation purporting to prohibit the payment by Borrower of the principal of or
interest on the Loan or any other amount payable by Borrower under this
Agreement; or
(g) any other act or omission to act or delay of any kind by Borrower,
Foothill, or any other Person or any other circumstance whatsoever that might,
but for the provisions of this paragraph, constitute a legal or equitable
discharge of the obligations of such Guarantor under this Article VIII.
SECTION 8.03. DISCHARGE ONLY UPON PAYMENT IN FULL. Each Guarantor's
obligations under this Article VIII shall remain in full force and effect until
the principal of and interest on the Loan and all other amounts payable by any
Obligor under any Financing Document shall have been paid in fill.
SECTION 8.04. WAIVER. Each Guarantor irrevocably waives acceptance hereof,
presentment, demand, protest and any notice not provided for herein, as well as
any requirement that at any time any action be taken by any Person against any
Obligor or any other Person or against any security.
54
SECTION 8.05. SUBROGATION AND CONTRIBUTION. Each Guarantor irrevocably
waives any and all rights to which it may be entitled, by operation of law or
otherwise, upon making any payment hereunder (i) to be subrogated to the rights
of the payee against any Obligor with respect to such payment or against any
direct or indirect security therefor, or otherwise to be reimbursed, indemnified
or exonerated by or for, the account of any Obligor in respect thereof or (ii)
to receive any payment, in the nature of contribution or for any other reason,
from any other Guarantor with respect to such payment.
SECTION 8.06. STAY OF ACCELERATION. If acceleration of the time for payment
of any amount payable by Borrower under this Agreement is stayed upon the
insolvency, bankruptcy or reorganization of Borrower, all such amounts otherwise
subject to acceleration under the terms of this Agreement shall nonetheless be
payable by the Guarantors hereunder forthwith on demand by Foothill.
SECTION 8.07. RELEASE OF AUSTRALIA AS GUARANTOR. Upon the consummation of
the Asia-Pacific Sale as permitted in accordance with Section 5.09(b), the
guarantee by Australia hereunder of the Obligations automatically shall be
terminated and of no further force and effect, and the definition of
'Guarantors' thereafter shall be deemed to no longer include Australia.
SECTION 8.08. LIMITED GUARANTEES OF UK. Anything in this Agreement to the
contrary notwithstanding, the maximum aggregate amount recoverable from UK and
Memorex Telex Holding (UK) Limited ("UK Holding") under (x) this Agreement, (y)
Article II of that certain Subsidiary Guaranty Agreement, dated as of March 24,
1994 (as amended), among Parent, Australia, Memorex Telex Wholesale Pty Limited,
and the "Subsidiary Guarantors" referred to therein (including UK and UK
Holding), and (z) Article II of the "1992 Guaranty Agreements" (as defined in
such Subsidiary Guaranty), collectively, shall be limited to $60,000,000 and the
maximum aggregate amount recoverable from UK alone under the foregoing items
(x), (y), and (z), collectively, shall be limited to $30,000,000.
ARTICLE IX
JUDICIAL PROCEEDINGS
SECTION 9.01. CONSENT TO JURISDICTION. Each Obligor (a) irrevocably submits
to the non-exclusive jurisdiction of any New York State or Federal court sitting
in The City of New York over any suit, action or proceeding arising out of or
relating to any Financing Document, and (b) to the fullest extent it may
effectively do so under applicable law, irrevocably waives and agrees not to
assert, by way of motion, as a defense or otherwise any claim that it is not
subject to the jurisdiction of any such court, any objection that it
55
may now or hereafter have to the laying of the venue of any such suit, action
or proceeding brought in any such court and any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum.
SECTION 9.02. ENFORCEMENT OF JUDGMENTS. Each Obligor agrees, to the fullest
extent it may effectively do so under applicable law, that a judgment in any
suit, action or proceeding of the nature referred to in Section 9.01 brought in
any such court shall be conclusive and binding upon such Obligor and may be
enforced in the courts of the United States or the State of New York (or any
other courts to the jurisdiction of which it is or may be subject) by a suit
upon such judgment.
SECTION 9.03. SERVICE OF PROCESS. (a) Each Obligor hereby irrevocably
designates, appoints, authorizes and empowers as its agent for service of
process, O'Sullivan Graev & Karabell, LLP, at its offices presently located at
30 Rockefeller Plaza, New York, New York 10112, to accept and acknowledge for
and on behalf of such Obligor service of any and all process, notices or other
documents which may be served in any suit, action or proceeding of the nature
referred to in Section 9.01 in any New York State or Federal court sitting in
The City of New York. Said designation and appointment shall continue until all
principal of and interest on the Loan and any other amounts payable by any
Obligor under this Agreement or any other Financing Document shall have been
paid in full.
(b) In lieu of service upon its agent, each Obligor (i) consents to process
being served in any suit, action or proceeding of the nature referred to in
Section 9.01 by mailing a copy thereof by registered or certified air mail,
postage prepaid, return receipt requested, to its address specified in or
designated pursuant to Section 10.01, and (ii) agrees that such service (A)
shall be deemed in every respect effective service of process upon it in any
such suit, action or proceeding and (B) shall, to the fullest extent permitted
by law, be taken and held to be valid personal service upon and personal
delivery to it.
(c) Without prejudice to the effectiveness of any process served in the
manner specified under paragraph (a) above, copies of such process shall also be
sent to Borrower at the addresses specified in or designated pursuant to Section
10.01.
SECTION 9.04. NO LIMITATION ON SERVICE OR SUIT. Nothing in this Article IX
shall affect the right of Foothill to serve process in any manner permitted by
law, or limit any right that Foothill may have to bring proceedings against any
Obligor in the courts of any jurisdiction or to enforce in any lawful manner a
judgment obtained in one jurisdiction in any other jurisdiction.
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ARTICLE X
MISCELLANEOUS
SECTION 10.01. NOTICES. Unless otherwise specified herein, all notices,
requests and other communications to any party hereunder shall be in,writing
(including, without limitation, bank wire, telex, telecopy or similar writing)
and shall be personally delivered or sent by registered or certified mail,
postage prepaid, return receipt requested, or by prepaid telex, overnight
courier, telefacsimile, or telegram (with messenger delivery specified) to an
Obligor or to Foothill, as the case may be, at its address set forth below:
If to any Obligor: c/o MEMOREX TELEX CORPORATION
545 East Carpenter Freeway
Irving, Texas 75062
Attn: Anthony Barbieri, Esq.,
General Counsel
Fax No. 214.444.3600
with copies to: O'SULLIVAN GRAEV & KARABELL, LLP
30 Rockefeller Plaza, 41st Floor
New York, New York 10112
Attn: Robert Seber, Esq.
Fax No. 212.408.2420
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
Fax No. 310.575.3435
with copies to: BROBECK, PHLEGER & HARRISON LLP
550 South Hope Street, Suite 2100
Los Angeles, California 90071
Attn: John Francis Hilson, Esq.
Fax No. 213.239.1324
Each such notice, request or other communication shall be effective (i) if given
by telex, when such telex is transmitted to the telex number specified in this
Section 10.01 and the appropriate answerback is received, (ii) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified in
this Section 10.01, (iii) if given by mail, ten days after such communication is
deposited in the mails with first class postage prepaid,
57
addressed as aforesaid or (iv) if given by any other means, when delivered at
the address specified in this Section 10.01; PROVIDED that notices to
Foothill under Article II or X shall not be effective until received;
PROVIDED FURTHER that each Obligor acknowledges and agrees that notices sent
by Foothill in connection with Sections 9-504 or 9-505 of the New York
Uniform Commercial Code shall be deemed sent when deposited in the mail or
transmitted by telefacsimile or other similar method set forth above. 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.
SECTION 10.02. NO WAIVER. No failure or delay by Foothill in exercising any
right, power or privilege under any Financing Document shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies provided in the Financing Documents shall be cumulative
and not exclusive of any rights or remedies provided by law.
SECTION 10.03. EXPENSES; DOCUMENTARY TAXES; INDEMNIFICATION. (a) Borrower
shall pay (i) all out-of-pocket expenses of Foothill and the Collateral
Agent, including, without limitation, fees and disbursements of the law
firm(s) acting as special United States counsel for Foothill and the
Collateral Agent and such local counsel as may be retained by Foothill or the
Collateral Agent, in connection with the preparation and administration of
the Financing Documents, any waiver or amendment of any provision thereof, or
any Default or alleged Default hereunder or thereunder, within 30 days after
the receipt by Borrower of an invoice pertaining thereto from Foothill, and
(ii) if any Event of Default occurs, all out-of-pocket expenses incurred by
Foothill, including, without limitation, fees and disbursements of counsel,
in connection with such Event of Default (including, without limitation, any
visit to and inspection of the Parent and its Consolidated Subsidiaries after
the occurrence and during the continuance of any Event of Default) and
collection and other enforcement proceedings resulting therefrom. Borrower
agrees to indemnify Foothill from and hold it harmless against any transfer
taxes, documentary taxes, stamp taxes or other similar assessments or charges
made by any governmental authority by reason of the execution and delivery of
the Financing Documents.
(b) Borrower agrees to indemnify Foothill, its affiliates and the
respective directors, officers, agents and employees (each, an "Indemnitee") and
hold each Indemnitee harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without limitation, the
reasonable fees and disbursements of counsel and any settlement costs, which may
be incurred after the Closing Date by such Indemnitee in connection with any
investigative, administrative or judicial proceeding (whether or not such
Indemnitee shall be designated a party thereto) brought or threatened relating
to or arising out of the Financing Documents, or any actual or proposed use of
the proceeds of
58
the Loan hereunder, PROVIDED that no Indemnitee shall have the right to be
indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.
SECTION 10.04. RIGHT OF SET-OFF. Upon the occurrence of a Default,
Foothill is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply (or cause the Collateral Agent or
any subagent thereof to do the same) any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by Foothill to or for the credit or the account of any Obligor
against any and all of the obligations of such Person now or hereafter existing
under the Financing Documents, irrespective of whether or not Foothill shall
have made any demand under any Financing Document or such deposit obligations
may be unmatured. Foothill agrees promptly to notify Borrower after any such
set-off and application made by Foothill, PROVIDED that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of Foothill under this Section 10.04 are in addition to other rights and
remedies which Foothill may have upon the occurrence and during the continuance
of any Default or any Event of Default.
SECTION 10.06. AMENDMENTS AND WAIVERS. (a) Any provision of this Agreement
or the other Financing Documents may be amended or waived if, and only if, such
amendment or waiver is in writing and is signed by Borrower and Foothill (and,
if the rights or duties of any other Obligor are affected thereby, by it),
PROVIDED that, no such amendment or waiver shall, unless signed by Foothill, (w)
reduce the principal of or rate of interest on any Loan or any fees payable
hereunder, (x) postpone the date fixed in Section 2.04(b) for any payment of
principal of or interest on any Loan or any fees payable hereunder, (y) change
the aggregate unpaid principal amount of the Note or any Other provision of this
Agreement or (z) subject any Lender to any additional obligation.
SECTION 10.07. 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 WITH RESPECT TO ALL MATTERS
ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 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 NEW YORK, STATE OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT
FOOTHILL'S (OR COLLATERAL
59
AGENT'S) OPTION, IN THE COURTS OF ANY JURISDICTION WHERE FOOTHILL (OR
COLLATERAL AGENT) ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR
OTHER PROPERTY MAY BE FOUND. EACH PARTY HERETO WAIVES, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE 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 10.07. EACH PARTY
HERETO HEREBY WAIVES ITS 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, WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY HERETO REPRESENTS THAT IT 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.
SECTION 10.08. SUCCESSORS AND ASSIGNS; PARTICIPATIONS; NOVATION. (a) This
Agreement and the other Financing Documents shall bind and inure to the benefit
of the respective successors and assigns of each of the parties; PROVIDED,
HOWEVER, that no Obligor may assign this Agreement or any other Financing
Document or any rights or duties hereunder or thereunder without Foothill's
prior written consent and any prohibited assignment shall be absolutely void. No
consent to an assignment by Foothill shall release any Obligor from its
Obligations. Foothill may assign all or any ratable part of the Obligations and
the rights and obligations of Foothill under this Agreement and the other
Financing Documents. Any such assignment by Foothill to a Person other than an
Eligible Transferee shall be subject to the prior written consent of the
Obligors, which consent shall not be unreasonably withheld, conditioned, or
delayed. No consent or approval by any Obligor is required in connection with
any such assignment by Foothill to an Eligible Transferee. Anything contained
herein to the contrary notwithstanding, the consent of the Obligors shall not be
required if such assignment is in connection with any merger, consolidation,
sale, transfer, or other disposition of all or any substantial portion of the
business or loan portfolio of Foothill. 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 under the Financing Documents.
Any such participation by Foothill to a Person other than an Eligible Transferee
shall be subject to the prior written consent of the Obligors, which consent
shall not be unreasonably withheld, conditioned, or delayed. No consent or
approval by any Obligor is required in connection with any such participation by
Foothill to an Eligible Transferee. In connection with any such assignment or
60
participation, Foothill may disclose all documents and information which
Foothill now or hereafter may have relating to the Parent and its Subsidiaries,
in general, and the Obligors, in particular. To the extent that Foothill
assigns its rights and obligations under the Financing Documents to a third
Person, Foothill thereafter shall be released from such assigned obligations to
the Obligors and such assignment shall effect a novation between the Obligors
and such third Person.
(b) The Obligors authorize, and hereby cause the Parent on behalf of
itself and its Subsidiaries to authorize, Foothill to disclose to any
participant or assignee (each a "Transferee") and any prospective Transferee any
and all financial information in Foothill's possession concerning the Obligors
and the Parent and its Subsidiaries which has been delivered to Foothill by them
pursuant to this Agreement or which has been delivered to Foothill by them in
connection with Foothill's credit evaluation prior to entering into this
Agreement.
(c) No Transferee shall be entitled to receive any greater payment under
Section 10.03 or 10. 11 than Foothill would have been entitled to receive with
respect to the rights assigned, unless such assignment is made with the prior
written consent of Borrower.
SECTION 10.10. JUDGEMENT CURRENCY. If, for the purpose of enforcing the
obligations of the Obligors hereunder or under any other Financing Document, it
is necessary to convert a sum due hereunder in Dollars into another currency,
the parties hereto agree, to the fullest extent that they may effectively do so,
that the rate of exchange used shall be that at which in accordance with normal
banking procedures Foothill could purchase Dollars with such other currency at
or about 11:00 A.M. (London time) on the Business Day preceding that on which
final judgment is given. The obligations of the Obligors in respect of any sum
due to Foothill hereunder or under the other Financing Documents shall,
notwithstanding any adjudication expressed in a currency other than Dollars, be
discharged only to the extent that on the Business Day following receipt by
Foothill of any sum adjudged to be so due in such other currency Foothill may in
accordance with normal banking procedures purchase Dollars with such other
currency; if the amount of Dollars so purchased is less than the sum originally
due to Foothill, as the case may be, in Dollars, each Obligor agrees, to the
fullest extent that it may effectively do so, as a separate obligation and
notwithstanding any such adjudication, to indemnify Foothill against such loss,
and if the amount of Dollars so purchased exceeds the sum originally due to
Foothill, Foothill agrees to remit such excess to Borrower.
SECTION 10.11. FOREIGN TAXES. All payments of principal of and interest on
the Loan and of all other amounts payable under this Agreement for the account
of Foothill shall be paid without withholding or deduction for or on account of
any Foreign Taxes. If any Foreign Taxes are so levied or imposed by way of
withholding or deduction,
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Borrower will pay additional interest or will make additional payments in
such amounts so that every net payment of principal of and interest on the
Loan and of all other amounts payable under this Agreement, after withholding
or deduction for or on account of any Foreign Taxes, will not be less than
the amount provided for herein. Borrower shall furnish to Foothill within 30
days official receipts evidencing such withholding or deduction. If any
Foreign Taxes are levied or imposed with respect to payment of principal or
interest on the Loan or any other amount payable under this Agreement
(including, without limitation, this Section 10.11) other than by way of
withholding or deduction ("Directly Imposed Foreign Taxes"), Borrower shall
promptly pay to Foothill additional interest, or will make additional
payments, in such amounts so that every net payment of such additional
interest or payments, after withholding or deduction for or on account of any
Foreign Taxes, will not be less than the amount of Directly Imposed Foreign
Taxes levied or imposed on such Lender. If any additional amount shall become
payable pursuant to this Section 10.11, Borrower and Foothill will enter into
discussions in good faith with a view to determining whether any means (not
being detrimental in the opinion of Foothill to the interests of Foothill)
exist by which such amounts may lawfully be mitigated. Foothill shall use
reasonable efforts consistent with legal and regulatory restrictions to file
any certificate or similar document requested by the Obligors, if the making
of such a filing would avoid the need for or reduce the amount of any such
Directly Imposed Foreign Taxes attributable to the Loan and would not result
in any unreimbursed loss, cost or expense or otherwise be disadvantageous to
Foothill as determined in Foothill's sole discretion.
SECTION 10.12. COUNTERPARTS; INTEGRATION. This Agreement may be signed in
any number of counterparts, each of which shall be an original, and all of which
taken together shall constitute a single agreement, with the same effect as if
the signatures thereto and hereto were upon the same instrument. This Agreement
and the other Financing Documents constitute the entire agreement and
understanding among the parties hereto and supersede any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof.
SECTION 10.13. CONFIDENTIALITY. Foothill agrees to keep confidential from
anyone other than Persons employed or retained by Foothill who are expected to
become engaged in evaluating, approving, structuring or administering the Loan
any information delivered or made available by Borrower to it and indicated in
writing as confidential; PROVIDED that nothing herein shall prevent Foothill
from disclosing such information (a) to any Restructuring Under, (b) to any
other Person if reasonably incidental to the administration of the Loan or the
other Obligations, (c) upon the order of any court or administrative agency, (d)
upon the request or demand of, or pursuant to any regulation of, any regulatory
agency or authority, (e) to the NAIC or any similar association or authority,
(f) which had been publicly disclosed other than as a result of a disclosure by
Foothill or any Lender
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prohibited by this Agreement, (g) in connection with any litigation to which
Foothill or its subsidiaries or parent may be a party, (h) to the extent
reasonably required in connection with the exercise of any remedy hereunder,
(i) to Foothill's legal counsel and its respective independent auditors and
(j) to any actual or proposed Transferee of all or part of its rights
hereunder provided that such actual or proposed Transferee agrees in writing
to the provisions of this Section 10.13.
SECTION 10.15. SUBSIDIARY GUARANTY DEED POLL. In the absence of fraud or
misconduct by the directors of Australia, Foothill agrees, expressly for the
benefit of such directors, not to pursue any action under section 588G of the
Corporation Law of Australia in connection with the Subsidiary Guaranty Deed
Poll (if any) of Australia.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first above
written.
BORROWER:
MEMOREX TELEX CORPORATION
By:
---------------------------------
Name:
Title:
GUARANTORS:
MEMOREX TELEX SERVICES, INC.
By:
---------------------------------
Name:
Title:
MEMOREX TELEX INC.
By:
---------------------------------
Name:
Title:
MEMOREX TELEX (UK) LTD.
By:
---------------------------------
Name:
Title:
64
MEMOREX TELEX N.V.
By:
---------------------------------
Name:
Title:
LENDER:
FOOTHILL CAPITAL CORPORATION
By:
---------------------------------
Name:
Title:
65
SCHEDULES:
A-1 - Asia-Pacific Subsidiaries
E-1 - Eligible Inventory Locations
5.07 - Permitted Existing Debt
5.08 - Permitted Existing Liens
5.14 - Locations of Inventory and Equipment
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SCHEDULE A-1
ASIA-PACIFIC SUBSIDIARIES
[See Attached]
67
SCHEDULE C-1
COLLATERAL DOCUMENTS
[See Attached]
68
SCHEDULE E-1
LOCATIONS OF ELIGIBLE INVENTORY
[See Attached]
69
SCHEDULE 5.07
PERMITTED EXISTING DEBT
[See Attached]
70
SCHEDULE 5.08
PERMITTED EXISTING LIENS
[See Attached]
71
SCHEDULE 5.14
LOCATION OF INVENTORY AND EQUIPMENT
[See Attached]
72