EXHIBIT 10.20
LOAN AND SECURITY AGREEMENT
This Agreement is between the undersigned Borrower and the undersigned
Lender concerning loans and other credit accommodations to be made by Lender to
Borrower.
SECTION 1. PARTIES
1.1 The "Borrower" is the person, firm, corporation or other entity,
identified as the Borrower in Section 10.6(c) and its successors and assigns. If
more than one Borrower is specified in Section 10.6(c), all references to
Borrower shall mean each of them, jointly and severally, individually and
collectively, and the successors and assigns of each.
1.2 The "Lender" is The CIT Group/Credit Finance, Inc. and its
successors and assigns.
SECTION 2. LOANS AND OTHER CREDIT ACCOMMODATIONS
2.1 Revolving Loans. Lender shall, subject to the terms and conditions
contained herein, make revolving loans to Borrower ("Revolving Loans") in
amounts requested by Borrower from time to time, but not in excess of the Net
Availability existing immediately prior to the making of the requested loan and
provided the requested loan would not cause the outstanding Obligations to
exceed the Maximum Credit; provided, however, that maximum borrowings hereunder
outstanding at any one time shall be limited to two million dollars ($2,000,000)
and not the Maximum Credit until: (i) Borrower begins selling the Ruby XGA
Projector, and, (ii) Lender is satisfied in its sole discretion that the
turnover, dilution and other aspects of Borrower's sales and receipts therefor
support and justify the advance formula set forth in this Agreement.
(a) The "Maximum Credit" is set forth in Section 10.1(a) hereof,
subject to the limiting provisions of 2.1, above.
(b) The "Gross Availability" shall be calculated at any time as (i) the
product obtained by
multiplying the outstanding amount of Eligible Accounts, net of all taxes,
discounts, allowances and credits given or claimed, by the Eligible Accounts
Percentage set forth in Section 10.1(b),
plus: (ii) the product(s) obtained by multiplying the applicable
Eligible Inventory Percentage(s), if any, set forth in Section
10.1(b) by the values (as determined by Lender based on the
lower of cost or market) of Eligible Inventory, but the amount
so added shall not exceed any sublimits set forth in Section
10.1(c),
(c) The "Net Availability" shall be calculated at any time as an amount
equal to the Gross Availability minus the aggregate amount of all
then-outstanding Obligations to Lender other than the then outstanding principal
balance of the Term Loan, if any.
(d) "Eligible Accounts" are accounts created by Borrower in the
ordinary course of its business which are and remain acceptable to Lender for
lending purposes. General criteria for Eligible Accounts are set forth below but
may be revised from time to time by Lender, in its sole judgment, on fifteen
(15) days' prior written notice to Borrower. Lender shall, in general, deem
accounts to be Eligible Accounts if: (1) such accounts arise from bona fide
completed transactions and have not remained unpaid for more than the number of
days after the invoice date set forth in Section 10.1(d); (2) the amounts of the
accounts reported to Lender are absolutely owing to Borrower and do not arise
from sales on consignment, guaranteed sale or other terms under which payment by
the account debtors may be conditional or contingent; (3) the account debtor's
chief executive office or principal place of business is located in the United
States (subject to ss.10.1(b), below); (4) such accounts do not arise from
progress billings, retainages or bill and hold sales; (5) there are no contra
relationships, setoffs, counterclaims or disputes existing with respect thereto
and there are no other facts existing or threatened which would impair or delay
the collectibility of all or any portion thereof; (6) the goods giving rise
thereto were not at the time of the sale subject to any liens except those
permitted in this Agreement; (7) such accounts are not accounts with respect to
which the account debtor or any officer or employee thereof is an officer,
employee or agent of or is affiliated with Borrower,
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directly or indirectly, whether by virtue of family membership, ownership,
control, management or otherwise; (8) such accounts are not accounts with
respect to which the account debtor is the United States or any State or
political subdivision thereof or any department, agency or instrumentality of
the United States, any State or political subdivision, unless there has been
compliance with the Assignment of Claims Act or any similar State or local law,
if applicable; (9) Borrower has delivered to Lender or Lender's representative
such documents as Lender may have requested pursuant to Section 5.8 hereof in
connection with such accounts and Lender shall have received a verification of
such account, satisfactory to it, if sent to the account debtor or any other
obligor or any bailee pursuant to Section 5.4 hereof; (10) there are no facts
existing or threatened which might result in any adverse change in the account
debtor's financial condition; (11) such accounts owed by a single account debtor
or its affiliates do not represent more than twenty percent (20%) of all
otherwise Eligible Accounts (accounts excluded from Eligible Accounts solely by
reason of this subsection (11) shall nevertheless be considered Eligible
Accounts to the extent of the amount of such accounts which does not exceed
twenty percent (20%) of all otherwise Eligible Accounts); (12) such accounts are
not owed by an account debtor who is or whose affiliates are past due more than
sixty (60) days upon other accounts owed to Borrower comprising more than fifty
percent (50%) of the accounts of such account debtor or its affiliates owed to
Borrower; (13) such accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the amount of any customer credit
limits as established, and changed, from time to time by Lender on notice to
Borrower (accounts excluded from Eligible Accounts solely by reason of this
subsection (13) shall nevertheless be considered Eligible Accounts to the extent
the amount of such accounts does not exceed such customer credit limit); and
(14) such accounts are owed by account debtors deemed creditworthy at all times
by Lender.
(e) "Eligible Inventory" is inventory owned by Borrower which is and
remains acceptable to Lender for lending purposes and is located at one of the
addresses set forth in Section 10.6(e).
(f) Lender shall have a continuing right to deduct reserves in
determining the Gross
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Availability ("Reserves"), and to increase and decrease such Reserves from time
to time, if and to the extent that, in Lender's sole judgment, such Reserves are
necessary to protect Lender against any state of facts which does, or would,
with notice or passage of time or both, constitute an Event of Default or have
an adverse effect on any Collateral. Lender may, at its option, implement
Reserves by designating as ineligible a sufficient amount of accounts or
inventory which would otherwise be Eligible Accounts or Eligible Inventory so as
to reduce Gross Availability by the amount of the intended Reserve.
(g) Subject to the terms and conditions hereof, including but not
limited to the existence of sufficient Gross and Net Availability, Borrower
agrees to borrow sufficient amounts from time to time so that the outstanding
Revolving Loans and the Term Loan, shall at all times equal or exceed the
principal amount set forth in Section 10.1(e) as the Minimum Borrowing;
provided, that if Borrower fails to do so, interest shall nevertheless accrue on
the Obligations as if Borrower had borrowed such amounts as would have been
sufficient to maintain the outstanding Revolving Loans and Term Loan at an
amount equal to the Minimum Borrowing (and Lender shall have the right to charge
Borrower's loan account for such additional interest), and provided further that
such accrual shall not impose upon Lender any obligation to make loans to
Borrower to increase the outstanding Revolving Loans or Term Loan to such
Minimum Borrowing. Minimum Borrowing is defined to include average loan balance
and average letters of credit outstanding.
2.2 Term Loan. Any term loan and the terms of such loan, made by Lender
to Borrower are set forth in Section 10.2 ("Term Loan").
2.3 Accommodations
(a) Lender may, in its sole discretion, issue or cause to be issued,
from time to time at Borrower's request and on terms and conditions and for
purposes satisfactory to Lender (such as the purchase of inventory in the
ordinary course of business), credit accommodations consisting of letters of
credit, bankers' acceptances, merchandise purchase guaranties or other
guaranties or indemnities
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for Borrower's account ("Accommodations"). Borrower shall execute and perform
additional agreements relating to the Accommodations in form and substance
acceptable to Lender and the issuer of any Accommodations, all of which shall
supplement the rights and remedies granted herein. Any payments made by Lender
or any affiliate of Lender in connection with the Accommodations shall
constitute additional Revolving Loans to Borrower.
(b) In addition to the fees and costs of any issuer in connection with
issuing or administering Accommodations, Borrower shall pay monthly to Lender,
on the first day of each month, a charge on open Accommodations at the rate per
annum set forth in Section 10.3(a) (the "Accommodation Charges").
(c) No Accommodation will be issued unless the full amount of the
Accommodation requested, plus fees and costs for issuance, is less than the Net
Availability existing immediately prior to the issuance of the requested
Accommodation, or if the requested Accommodation would cause the outstanding
Obligations to exceed the Maximum Credit, or cause the open amount of
Accommodations to exceed, at any time, the Accommodation sublimit set forth in
Section 10.3(b).
(d) All indebtedness, liabilities and obligations of any sort
whatsoever, however arising, whether present or future, fixed or contingent,
secured or unsecured, due or to become due, paid or incurred, arising or
incurred in connection with any Accommodation shall be included in the term
"Obligations", as defined herein, and shall include, without limitation, (i) all
amounts due or which may become due under any Accommodation; (ii) all amounts
charged or chargeable to Borrower or to Lender by any bank, other financial
institution or correspondent bank which opens, issues or is involved with such
Accommodations; (iii) Lender's Accommodation Charges and all fees, costs and
other charges of any issuer of any Accommodation; and (iv) all duties, freight,
taxes, costs, insurance and all such other charges and expenses which may
pertain directly or indirectly to any Obligations or Accommodations or to the
goods or documents relating thereto.
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(e) Borrower unconditionally agrees to indemnify and hold Lender
harmless from any and all loss, claim or liability (including reasonable
attorneys' fees) arising from any transactions or occurrences relating to any
Accommodation established or opened for Borrower's account, the Collateral
relating thereto and any drafts or acceptances thereunder, including any such
loss or claim due to any action taken by an issuer of any Accommodation.
Borrower further agrees to indemnify and hold Lender harmless for any errors or
omissions in connection with the Accommodations, whether caused by Lender, by
the issuer of any Accommodation or otherwise. Borrower's unconditional
obligation to indemnify and hold Lender harmless under this provision shall not
be modified or diminished for any reason or in any manner whatsoever, except for
Lender's gross negligence or willful misconduct. Borrower agrees that any
charges made to Lender by any issuer of any Accommodation shall be conclusive on
Borrower and may be charged to Borrower's account.
(f) Lender shall not be responsible for: the conformity of any goods to
the documents presented; the validity or genuineness of any documents; delay,
default, or fraud by the Borrower or shipper and/or anyone else in connection
with the Accommodations or any underlying transaction.
(g) Borrower agrees that any action taken by Lender, if taken in good
faith, or any action taken by an issuer of any Accommodation, under or in
connection with any Accommodation, shall be binding on Borrower and shall not
create any resulting liability to Lender. In furtherance thereof, Lender shall
have the full right and authority to clear and resolve any questions of
non-compliance of documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute for Borrower's account any and
all applications for steamship or airway guarantees, indemnities or delivery
orders; to grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents; and to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications or Accommodations. All of
the foregoing actions may be taken in Lender's sole name, and the issuer thereof
shall be entitled to comply with and honor any and all such documents or
instruments executed by or received solely from Lender, all without any notice
to or any consent from
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Borrower. None of the foregoing actions described in this subsection (g) may be
taken by Borrower without Lender's express written consent.
SECTION 3. INTEREST AND FEES
3.1 Interest. (a) Interest on the Revolving Loans and Term Loans shall
be payable by Borrower on the first day of each month, calculated upon the
closing daily balances in the loan account of Borrower for each day during the
immediately preceding month, at the per annum rate set forth as the Interest
Rate in Section 10.4(a). The Interest Rate shall increase or decrease by an
amount equal to each increase or decrease, respectively, in the Prime Rate (as
defined below), effective as of the date of each such change. On and after any
Event of Default or termination or non-renewal hereof, interest on all unpaid
Obligations shall accrue at a rate equal to two percent (2%) per annum in excess
of the Interest Rate otherwise payable until such time as all Obligations are
indefeasibly paid in full (notwithstanding entry of any judgment against
Borrower or the exercise of any other right or remedy by Lender), and all such
interest shall be payable on demand. In no event shall charges constituting
interest exceed the rate permitted under any applicable law or regulation, and
if any provision of this Agreement is in contravention of any such law or
regulation, such provision shall be deemed amended to conform thereto.
(b) The "Prime Rate" is the rate of interest publicly announced by
Chase Manhattan Bank in New York, New York, or its successors, and assigns from
time to time as its prime rate (the Prime Rate is not intended to be the lowest
rate of interest charged by Chase Manhattan Bank to its borrowers).
3.2 Closing Commitment Letter Fee. Borrower shall pay Lender a
Closing Commitment Letter Fee in the amount and in the manner set forth in
Section 10.4(c)
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3.3 Facility Fee. Not applicable
3.4 Account Servicing Fee. Borrower shall pay Lender monthly, on the
first day of each month during the initial and each renewal Term an Account
Servicing Fee for the immediately preceding month (or part thereof) in the
amount set forth in Section 10.4(e).
3.5 Success Fee. Borrower shall pay Lender annually, a Success Fee as
is set forth in ss. 10.4(d), on account of each year of the Term hereof and any
renewal thereof.
3.6 Charges to Loan Account. At Lender's option, all payments of
principal, interest, fees, costs, expenses and other charges provided for in
this Agreement, or in any other agreement now or hereafter existing between
Lender and Borrower, may be charged on the date when due, as principal to any
loan account of Borrower maintained by Lender. Interest, fees for
Accommodations, the Unused Line Fee and any other amounts payable by Borrower to
Lender based on a per annum rate shall be calculated on the basis of actual days
elapsed over a 360-day year.
SECTION 4. GRANT OF SECURITY INTEREST
4.1 Grant of Security Interest. To secure the payment and
performance in full of all Obligations, Borrower hereby grants to Lender a
continuing security interest in and lien upon, and a right of setoff against,
and Borrower hereby assigns and pledges to Lender, all of the Collateral,
including any Collateral not deemed eligible for lending purposes.
4.2 "Obligations" shall mean any and all Revolving Loans, Term Loans,
Accommodations and all other indebtedness, liabilities and obligations of every
kind, nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees and expenses, however evidenced,
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whether as principal, surety, endorser, guarantor or otherwise, whether arising
under this Agreement or otherwise, whether now existing or hereafter arising,
whether arising before, during or after the initial or any renewal Term or after
the commencement of any case with respect to Borrower under the United States
Bankruptcy Code or any similar statute, whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, original, renewed or extended and whether
arising directly or howsoever acquired by Lender including from any other entity
outright, conditionally or as collateral security, by assignment, merger with
any other entity, participations or interests of Lender in the obligations of
Borrower to others, assumption, operation of law, subrogation or otherwise and
shall also include all amounts chargeable to Borrower under this Agreement or in
connection with any of the foregoing.
4.3 "Collateral" shall mean all of the following property of Borrower:
All now owned and hereafter acquired right, title and interest of
Borrower in, to and in respect of all: accounts, interests in goods represented
by accounts, returned, reclaimed or repossessed goods with respect thereto and
rights as an unpaid vendor; contract rights; chattel paper; investment property;
general intangibles (including, but not limited to, tax and duty refunds,
registered and unregistered patents, trademarks, service marks, copyrights,
trade names, applications for the foregoing, trade secrets, goodwill, processes,
drawings, blueprints, customer lists, licenses, whether as licensor or licensee,
choses in action and other claims, and existing and future leasehold interests
in equipment and fixtures); documents; instruments; letters of credit, bankers'
acceptances or guaranties; cash monies, deposits, securities, bank accounts,
deposit accounts, credits and other property now or hereafter held in any
capacity by Lender, its affiliates or any entity which, at any time,
participates in Lender's financing of Borrower or at any other depository or
other institution; agreements or property securing or relating to any of the
items referred to above;
All now owned and hereafter acquired right, title and interest of
Borrower in, to and in respect of goods, including, but not limited to:
All inventory, wherever located, whether now owned or hereafter
acquired, of whatever kind, nature or description, including all raw materials,
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work-in-process, finished goods, and materials to be used or consumed in
Borrower's business; and all names or marks affixed to or to be affixed thereto
for purposes of selling same by the seller, manufacturer, lessor or licensor
thereof;
All equipment and fixtures, wherever located, whether now owned or
hereafter acquired, including, without limitation, all machinery, equipment,
motor vehicles, furniture and fixtures, and any and all additions,
substitutions, replacements (including spare parts), and accessions thereof and
thereto;
All consumer goods, farm products, crops, timber, minerals or the like
(including oil and gas), wherever located, whether now owned or hereafter
acquired, of whatever kind, nature or description;
All now owned and hereafter acquired right, title and interests of
Borrower in, to and in respect of any personal property in or upon which Debtor
has or may hereafter have a security interest, lien or right of setoff;
All present and future books and records relating to any of the above
including, without limitation, all computer programs, printed output and
computer readable data in the possession or control of the Borrower, any
computer service bureau or other third party;
All products and proceeds of the foregoing in whatever form and
wherever located, including, without limitation, all insurance proceeds and all
claims against third parties for loss or destruction of or damage to any of the
foregoing.
SECTION 5. COLLECTION AND ADMINISTRATION
5.1 Collections. Borrower shall, at Borrower's expense and in the
manner requested by Lender from time to time, direct that remittances and all
other proceeds of accounts and other Collateral be sent to a lock box designated
by and/or maintained in the name of Lender, and deposited into a bank account
now or hereafter selected by Lender and maintained in the name of Lender under
arrangements with the depository bank under which all funds deposited to such
bank account are required to be transferred solely to Lender. Borrower shall
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bear all risk of loss of any funds deposited into such account unless such loss
is the result of Lender's willful misconduct. In connection therewith, Borrower
shall execute such lock box and bank account agreements as Lender shall specify.
Any collections or other proceeds received by Borrower shall be held in trust
for Lender and immediately remitted to Lender in kind.
5.2 Payments. All Obligations shall be payable at Lender's office set
forth below or at Lender's bank designated in Section 10.6(b) or at such other
bank or place as Lender may expressly designate from time to time for purposes
of this Section. Lender shall apply all proceeds of accounts or other Collateral
received by Lender and all other payments in respect of the Obligations to the
Revolving Loans whether or not then due or to any other Obligations then due, in
whatever order or manner Lender shall determine. For purposes of determining
Gross and Net Availability and for the calculation of the Minimum Borrowing,
remittances and other payments with respect to the Collateral and Obligations
will be treated as credited to the loan account of Borrower maintained by Lender
and Collateral balances to which they relate, upon the date of Lender's receipt
of advice from Lender's bank that such remittances or other payments have been
credited to Lender's account or in the case of remittances or other payments
received directly in kind by Lender, upon the date of Lender's deposit thereof
at Lender's bank, subject to final payment and collection. In computing interest
charges, the loan account of Borrower maintained by Lender will be credited with
remittances and other payments the number of days set forth in Section 10.4(b)
after the day Lender has received advice of receipt of remittances in Lender's
account at Lender's Bank. For purposes of this Agreement, "Business Day" shall
mean any day other than a Saturday, Sunday or any other day on which banks
located in states where Lender has its offices, are authorized to close.
5.3 Loan Account Statements. Lender shall render to Borrower monthly a
loan account statement. Each statement shall be considered correct and binding
upon Borrower as an account stated, except to the extent that Lender receives,
within sixty (60) days after the mailing of such statement, written notice from
Borrower of any specific exceptions by Borrower to that statement.
5.4 Direct Collections. Lender may, at any time, whether or not an
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Event of Default has occurred, without notice to or assent of Borrower, (a)
notify any account debtor that the accounts and other Collateral which includes
a monetary obligation have been assigned to Lender by Borrower and that payment
thereof is to be made to the order of and directly to Lender, (b) send, or cause
to be sent by its designee, requests (which may identify the sender by a
pseudonym) for verification of accounts and other Collateral directly to any
account debtor or any other obligor or any bailee with respect thereto, and (c)
demand, collect or enforce payment of any accounts or such other Collateral, but
without any duty to do so, and Lender shall not be liable for any failure to
collect or enforce payment thereof. At Lender's request, all invoices and
statements sent to any account debtor, other obligor or bailee, shall state that
the accounts and such other Collateral have been assigned to Lender and are
payable directly and only to Lender.
5.5 Attorney-in-Fact. Borrower hereby appoints Lender and any designee
of Lender as Borrower's attorney-in-fact and authorizes Lender or such designee,
at Borrower's sole expense, to exercise at any times in Lender's or such
designee's discretion all or any of the following powers, which powers of
attorney, being coupled with an interest, shall be irrevocable until all
Obligations have been paid in full: (a) receive, take, endorse, assign, deliver,
accept and deposit, in the name of Lender or Borrower, any and all cash, checks,
commercial paper, drafts, remittances and other instruments and documents
relating to the Collateral or the proceeds thereof, (b) transmit to account
debtors, other obligors or any bailees notice of the interest of Lender in the
Collateral or request from account debtors or such other obligors or bailees at
any time, in the name of Borrower or Lender or any designee of Lender,
information concerning the Collateral and any amounts owing with respect
thereto, (c) notify account debtors or other obligors to make payment directly
to Lender, or notify bailees as to the disposition of Collateral, (d) take or
bring, in the name of Lender or Borrower, all steps, actions, suits or
proceedings deemed by Lender necessary or desirable to effect collection of or
other realization upon the accounts and other Collateral, (e) after an Event of
Default, change the address for delivery of mail to Borrower and to receive and
open mail addressed to Borrower, (f) after an Event of Default, extend the time
of payment of, compromise or settle for cash, credit, return of merchandise, and
upon any terms or conditions, any and all accounts or other Collateral which
includes a monetary obligation and discharge or release the account debtor or
other obligor, without affecting any of the Obligations, and (g) execute in the
name of Borrower and file against Borrower in favor of Lender financing
statements or amendments with respect to the Collateral.
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5.6 Liability. Borrower hereby releases and exculpates Lender, its
officers, employees and designees, from any liability arising from any acts
under this Agreement or in furtherance thereof, whether as attorney-in-fact or
otherwise, whether of omission or commission, and whether based upon any error
of judgment or mistake of law or fact, except for its own gross negligence or
willful misconduct. In no event will Lender have any liability to Borrower for
lost profits or other special or consequential damages.
5.7 Administration of Accounts. After at least two (2) days prior
written notice by Lender to Borrower and automatically, without notice, after an
Event of Default, Borrower shall not, without the prior written consent of
Lender in each instance, (a) grant any extension of time of payment of any of
the accounts or any other Collateral which includes a monetary obligation, (b)
compromise or settle any of the accounts or any such other Collateral for less
than the full amount thereof, (c) release in whole or in part any account debtor
or other person liable for the payment of any of the accounts or any such other
Collateral, or (d) grant any credits, discounts, allowances, deductions, return
authorizations or the like with respect to any of the accounts or any such other
Collateral.
5.8 Documents. At such times as Lender may request and in the manner
reasonably specified by Lender, Borrower shall deliver to Lender or Lender's
representative, as Lender shall designate, copies or original invoices,
agreements, proofs of rendition of services and delivery of goods and other
documents evidencing or relating to the transactions which gave rise to accounts
or other Collateral, together with customer statements, schedules describing the
accounts or other Collateral and/or statements of account and confirmatory
assignments to Lender of the accounts or other Collateral, in form and substance
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satisfactory to Lender and duly executed by Borrower. Without limiting the
provisions of Section 5.7, Borrower's granting of credits, discounts,
allowances, deductions, return authorizations or the like will be promptly
reported to Lender in writing in Borrower's usual reporting requirements
hereunder. In no event shall any such schedule or confirmatory assignment (or
the absence thereof or omission of any of the accounts or other Collateral
therefrom) limit or in any way be construed as a waiver, limitation or
modification of the security interests or rights of Lender or the warranties,
representations and covenants of Borrower under this Agreement. Any documents,
schedules, invoices or other paper delivered to Lender by Borrower may be
destroyed or otherwise disposed of by Lender six (6) months after receipt by
Lender, unless Borrower requests their return in writing in advance and makes
prior arrangements for their return at Borrower's expense.
5.9 Access. From time to time as requested by Lender, at the sole
expense of Borrower, Lender or its designee shall have access, prior to an Event
of Default during reasonable business hours and on or after an Event of Default
at any time, to all of the premises where Collateral is located for the purposes
of inspecting the Collateral, and all Borrower's books and records, and Borrower
shall permit Lender or its designee to make such copies of such books and
records or extracts therefrom as Lender may request. Without expense to Lender,
Lender may use such of Borrower's personnel, equipment, including computer
equipment, programs, printed output and computer readable media, supplies and
premises for the collection of accounts and realization on other Collateral as
Lender, in its sole discretion, deems appropriate. Borrower hereby irrevocably
authorizes all accountants and third parties to disclose and deliver to Lender
at Borrower's expense all financial information, books and records, work papers,
management reports and other information in their possession regarding Borrower.
5.10 Environmental Audits. From time to time, as requested by Lender,
at the sole expense of Borrower, Borrower shall provide Lender, or its designee,
complete access to all of Borrower's facilities for the purpose of conducting an
environmental audit of such facilities as Lender or its designees may deem
necessary. Borrower agrees to cooperate with Lender with respect to any
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environmental audit conducted by Lender or its designee pursuant to this Section
5.10.
SECTION 6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND
COVENANTS
Borrower hereby represents, warrants and covenants to Lender the
following, the truth and accuracy of which, and compliance with which, shall be
continuing conditions of the making of loans or other credit accommodations by
Lender to Borrower:
6.1 Financial and Other Reports. Borrower shall keep and maintain its
books and records in accordance with generally accepted accounting principles,
consistently applied. Borrower shall at its expense deliver to Lender on or
before: (a) the fifteenth (15th) day of each month, true and complete monthly
agings of its accounts receivable, accounts payable and notes payable; (b) the
25th day of each month an inventory report and an internally prepared interim
monthly financial statement for the immediately preceding month. Annually,
Borrower shall deliver audited financial statements of Borrower accompanied by
the report and opinion thereon of independent certified public accountants
acceptable to Lender, as soon as available, but in no event later than ninety
(90) days after the end of Borrower's fiscal year. All of the foregoing shall be
in such form and together with such information with respect to the business of
Borrower or any guarantor, as Lender may in each case request.
6.2 Trade Names. Borrower may from time to time render invoices to
account debtors under its trade names set forth in Section 10.6(g) after Lender
has received prior written notice from Borrower of the use of such trade names
and as to which, Borrower agrees that: (a) each trade name does not refer to
another corporation or other legal entity, (b) all accounts and proceeds thereof
(including any returned merchandise) invoiced under any such trade names are
owned exclusively by Borrower and are subject to the security interest of Lender
and the other terms of this Agreement, and (c) all schedules of accounts and
confirmatory assignments including any sales made or services rendered using the
15
trade name shall show Borrower's name as assignor and Lender is authorized to
receive, endorse and deposit to any loan account of Borrower maintained by
Lender all checks or other remittances made payable to any trade name of
Borrower representing payment with respect to such sales or services.
6.3 Losses. Borrower shall promptly notify Lender in writing of any
loss, damage, investigation, action, suit, proceeding or claim relating to a
material portion of the Collateral or which may result in any material adverse
change in Borrower's business, assets, liabilities or condition, financial or
otherwise.
6.4 Books and Records. Borrower's books and records concerning accounts
and its chief executive office are and shall be maintained only at the address
set forth in Section 10.6(d). Borrower's only other places of business and the
only other locations of Collateral, if any, are and shall be the addresses set
forth in Section 10.6 hereof, except Borrower may change such locations or open
a new place of business after thirty (30) days prior written notice to Lender.
Prior to any change in location or opening of any new place of business,
Borrower shall execute and deliver or cause to be executed and delivered to
Lender such financing statements, financing documents and security and other
agreements as Lender may reasonably require, including, without limitation,
those described in Section 6.14.
6.5 Title. Borrower has and at all times will continue to have good and
marketable title to all of the Collateral, free and clear of all liens, security
interests, claims or encumbrances of any kind except in favor of Lender and
except, if any, those set forth on Schedule A hereto.
6.6 Disposition of Assets. Borrower shall not directly or indirectly
without the written consent of CIT: (a) sell, lease, transfer, assign, abandon
or otherwise dispose of any part of the Collateral or any material portion of
its other assets (other than sales of inventory to buyers in the ordinary course
of business) or (b) consolidate with or merge with or into any other entity, or
permit any other entity to consolidate with or merge with or into Borrower or
(c) form or acquire any interest in any firm, corporation or other entity.
16
6.7 Insurance. Borrower shall at all times maintain, with financially
sound and reputable insurers, insurance (including, without limitation, at the
option of Lender, earthquake and flood insurance) with respect to the Collateral
and other assets. All such insurance policies shall be in such form, substance,
amounts and coverage as may be satisfactory to Lender and shall provide for
thirty (30) days' prior written notice to Lender of cancellation or reduction of
coverage. Borrower hereby irrevocably appoints Lender and any designee of Lender
as attorney-in-fact for Borrower to obtain at Borrower's expense, any such
insurance should Borrower fail to do so and, after an Event of Default, to
adjust or settle any claim or other matter under or arising pursuant to such
insurance or to amend or cancel such insurance. Borrower shall deliver to Lender
evidence of such insurance and a lender's loss payable endorsement satisfactory
to Lender as to all existing and future insurance policies with respect to the
Collateral. Borrower shall deliver to Lender, in kind, all instruments
representing proceeds of insurance received by Borrower. Lender may apply any
insurance proceeds received at any time to the cost of repairs to or replacement
of any portion of the Collateral and/or, at Lender's option, to payment of or as
security for any of the Obligations, whether or not due, in any order or manner
as Lender determines.
6.8 Compliance With Laws. Borrower is and at all times will continue to
be in compliance with the requirements of all material laws, rules, regulations
and orders of any governmental authority relating to its business (including
laws, rules, regulations and orders relating to taxes, payment and withholding
of payroll taxes, employer and employee contributions and similar items,
securities, employee retirement and welfare benefits, employee health and
safety, or environmental matters) and all material agreements or other
instruments binding on Borrower or its property. All of Borrower's inventory
shall be produced in accordance with the requirements of the Federal Fair Labor
Standards Act of 1938, as amended and all rules, regulations and orders related
thereto. Borrower shall pay and discharge all taxes, assessments and
governmental charges against Borrower or any Collateral prior to the date on
which penalties are imposed or liens attach with respect thereto, unless the
same are being contested in good faith and, at Lender's option, Reserves are
established for the amount contested and penalties which may accrue thereon.
17
6.9 Accounts. With respect to each account deemed an Eligible Account,
except as reported in writing to Lender, Borrower has no knowledge that any of
the criteria for eligibility are not or are no longer satisfied. As to each
account, except as disclosed in writing to Lender at the time such account
arises (a) each is valid and legally enforceable and represents an undisputed
bona fide indebtedness incurred by the account debtor for the sum reported to
Lender, (b) each arises from an absolute and unconditional sale of goods,
without any right of return or consignment, or from a completed rendition of
services, (c) each is not, at the time such account arises, subject to any
defense, offset, dispute, contra relationship, counterclaim, or any given or
claimed credit, allowance or discount, and (d) all statements made and all
unpaid balances and other information appearing in the invoices, agreements,
proofs of rendition of services and delivery of goods and other documentation
relating to the accounts, and all confirmatory assignments, schedules,
statements of account and books and records with respect thereto, are true and
correct and in all respects what they purport to be.
6.10 Equipment. With respect to Borrower's equipment, Borrower shall
keep the equipment in good order and repair, and in running and marketable
condition, ordinary wear and tear excepted.
6.11 Financial Covenants. Borrower shall at all times maintain working
capital and net worth (each as determined in accordance with generally accepted
accounting principles, in effect on the date hereof, consistently applied) in
the amounts set forth in Section 10.5(a) and (b) and Borrower shall not,
directly or indirectly, expend or commit to expend, for fixed or capital assets
(including capital lease obligations) an amount in excess of the capital
expenditure limit set forth in Section 10.5(c) in any fiscal year of Borrower.
6.12 Affiliated Transactions. Borrower will not, without the prior
written consent of Lender, directly or indirectly: (a) lend or advance money or
property to, guarantee or assume indebtedness of, or invest (by capital
contribution or otherwise) in any person, firm, corporation or other entity; or
18
(b) declare, pay or make any dividend, redemption or other distribution on
account of any shares of any class of stock of Borrower now or hereafter
outstanding; or (c) make any payment of the principal amount of or interest on
any indebtedness owing to any officer, director, shareholder, or affiliate of
Borrower; or (d) make any loans or advances to any officer, director, employee,
shareholder or affiliate of Borrower, (e) enter into any sale, lease or other
transaction with any officer, director, employee, shareholder or affiliate of
Borrower on terms that are less favorable to Borrower than those which might be
obtained at the time from persons who are not an officer, director, employee,
shareholder or affiliate of Borrower. Excluded from the foregoing prohibitions
are payments to or for the benefit of Borrower's subsidiaries or affiliates made
in the ordinary course of business and not exceeding in the aggregate fifty
thousand dollars ($50,000) in any calendar year.
6.13 Fees and Expenses. Borrower shall pay, on Lender's demand, all
costs, expenses, filing fees and taxes payable in connection with the
preparation, execution, delivery, recording, administration, collection,
liquidation, enforcement and defense of the Obligations, Lender's rights in the
Collateral, this Agreement and all other existing and future agreements or
documents contemplated herein or related hereto, including any amendments,
waivers, supplements or consents which may hereafter be made or entered into in
respect hereof, or in any way involving claims or defense asserted by Lender or
claims or defense against Lender asserted by Borrower, any guarantor or any
third party directly or indirectly arising out of or related to the relationship
between Borrower and Lender or any guarantor and Lender, including, but not
limited to the following, whether incurred before, during or after the initial
or any renewal Term or after the commencement of any case with respect to
Borrower or any guarantor under the United States Bankruptcy Code or any similar
statute: (a) all costs and expenses of filing or recording (including Uniform
Commercial Code financing statement filing taxes and fees, documentary taxes,
intangibles taxes and mortgage recording taxes and fees, if applicable); (b) all
title insurance and other insurance premiums, appraisal fees, fees incurred in
connection with any environmental report, audit or survey and search fees; (c)
all fees as then in effect relating to the wire transfer of loan proceeds and
other funds and fees then in effect for returned checks and credit reports; (d)
all expenses and costs heretofore and from time to time hereafter incurred by
Lender during the course of periodic field examinations of the Collateral and
Borrower's operations, plus a per diem charge at the rate set forth in Section
19
10.4(g) for Lender's examiners in the field and office; and (e) the costs, fees
and disbursements of in-house and outside counsel to Lender, including but not
limited to such fees and disbursements incurred as a result of litigation
between the parties hereto, any third party and in any appeals arising therefrom
6.14 Further Assurances. At the request of Lender, at any time and from
time to time, at Borrower's sole expense, Borrower shall execute and deliver or
cause to be executed and delivered to Lender, such agreements, documents and
instruments, including waivers, consents and subordination agreements from
mortgagees or other holders of security interests or liens, landlords or
bailees, and do or cause to be done such further acts as Lender, in its
discretion, deems necessary or desirable to create, preserve, perfect or
validate any security interest of Lender or the priority thereof in the
Collateral and otherwise to effectuate the provisions and purposes of this
Agreement. Borrower hereby authorizes Lender to file financing statements or
amendments against Borrower in favor of Lender with respect to the Collateral,
without Borrower's signature and to file as financing statements any carbon,
photographic or other reproductions of this Agreement or any financing
statements signed by Borrower.
6.15 Revolving Loans. The Revolving Loans will not at any time exceed
the Gross Availability for three (3) consecutive days unless Lender has
consented.
6.16 Environmental Condition. None of Borrower's properties or assets
has ever been designated or identified in any manner pursuant to any
environmental protection statute as a hazardous waste or hazardous substance
disposal site, or a candidate for closure pursuant to any environmental
protection statute. No lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned by
Borrower. Borrower has not received a summons, citation, notice, or directive
from the Environmental Protection Agency or any other federal or state
governmental agency any action or omission by Borrower resulting in the
releasing, or otherwise exposing of hazardous waste or hazardous substances into
the environment. Borrower is in compliance (in all material respects) with all
statutes, regulations, ordinances and other legal requirements pertaining to the
production, storage, handling, treatment, release, transportation or disposal of
any hazardous waste or hazardous substance.
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SECTION 7. EVENTS OF DEFAULT AND REMEDIES
7.1 Events of Default. All Obligations shall be immediately due and
payable, without notice or demand, and any provisions of this Agreement as to
future loans and credit accommodations by Lender shall terminate automatically,
upon the termination or non-renewal of this Agreement or, at Lender's option,
upon or at any time after the occurrence or existence of any one or more of the
following "Events of Default":
(a) Borrower fails to pay when due any of the Obligations or fails to
perform any of the terms of this Agreement or any other existing or future
financing, security or other agreement between Borrower and Lender or any
affiliate of Lender;
(b) Any representation, warranty or statement of fact made by Borrower
to Lender in this Agreement or any other agreement, schedule, confirmatory
assignment or otherwise, or to any affiliate of Lender, shall prove inaccurate
or misleading;
(c) Any guarantor revokes, terminates or fails to perform any of the
terms of any guaranty, endorsement or other agreement of such party in favor of
Lender or any affiliate of Lender;
(d) Any judgment or judgments aggregating in excess of $100,000 or any
injunction or attachment is obtained against Borrower or any guarantor which
remains unstayed for a period of ten (10) days or is enforced;
(e) Borrower or any guarantor or a general partner of a guarantor or
Borrower (which is a partnership), being a natural person, dies, or Borrower or
any guarantor which is a partnership or corporation, is dissolved, or Borrower
or any guarantor which is a corporation fails to maintain its corporate
existence in good standing, or the usual business of Borrower or any guarantor
ceases or is suspended;
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(f) Any change in the controlling ownership of Borrower unless approved
by Lender in advance;
(g) Borrower or any guarantor becomes insolvent, makes an assignment
for the benefit of creditors, makes or sends notice of a bulk transfer or calls
a general meeting of its creditors or principal creditors;
(h) Any petition or application for any relief under the bankruptcy
laws of the United States now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed by or against Borrower or any guarantor;
(i) The indictment or threatened indictment of Borrower or any
guarantor under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against Borrower or any guarantor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of Borrower or such guarantor;
(j) Any default or event of default occurs on the part of Borrower
under any agreement, document or instrument to which Borrower is a party or by
which Borrower or any of its property is bound, creating or relating to any
indebtedness of Borrower to any person or entity other than Lender in an amount
exceeding $100,000, if the effect of such default is to accelerate, or to permit
the acceleration of, the maturity of all or any part of such indebtedness, or
all or any part of any such indebtedness shall be declared to be due and payable
or required to be prepaid or any other reason, in either event prior to the
stated maturity thereof.
(k) Lender in good faith believes that either (i) the prospect of
payment or performance of the Obligations is impaired or (ii) the Collateral is
not sufficient to secure fully the Obligations; or
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(l) any material adverse change occurs in the nature or conduct of
Borrower's business.
7.2 Remedies. Upon the occurrence of an Event of Default and at any
time thereafter, Lender shall have all rights and remedies provided in this
Agreement, any other agreements between Borrower and Lender, the Uniform
Commercial Code or other applicable law, all of which rights and remedies may be
exercised without notice to Borrower, all such notices being hereby waived,
except such notice as is expressly provided for hereunder or is not waivable
under applicable law. All rights and remedies of Lender are cumulative and not
exclusive and are enforceable, in Lender's discretion, alternatively,
successively, or concurrently on any one or more occasions and in any order
Lender may determine. Thereupon and thereafter and without limiting the
foregoing, Lender may (a) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender, (b) with or without judicial process or the
aid or assistance of others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(c) require Borrower, at Borrower's expense, to assemble and make available to
Lender any part or all of the Collateral at any place and time designated by
Lender, (d) collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (e) extend the time of payment of, compromise or settle
for cash, credit, return of merchandise, and upon any terms or conditions, any
and all accounts or other Collateral which includes a monetary obligation and
discharge or release the account debtor or other obligor, without affecting any
of the Obligations, (f) sell, lease, transfer, assign, deliver or otherwise
dispose of any and all Collateral (including, without limitation, entering into
contracts with respect thereto, by public or private sales at any exchange,
broker's board, any office of Lender or elsewhere) at such prices or terms as
Lender may deem reasonable, for cash, upon credit or for future delivery, with
the Lender having the right to purchase the whole or any part of the Collateral
at any such public sale, all of the foregoing being free from any right or
equity of redemption of Borrower, which right or equity of redemption is hereby
expressly waived and released by Borrower. If any of the Collateral is sold or
leased by Lender upon credit terms or for future delivery, the Obligations shall
not be reduced as a result thereof until payment therefor is finally collected
by Lender. If notice of disposition of Collateral is required by law, seven (7)
23
days prior notice by Lender to Borrower designating the time and place of any
public sale or the time after which any private sale or other intended
disposition of Collateral is to be made, shall be deemed to be reasonable notice
thereof and Borrower waives any other notice. In the event Lender institutes an
action to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, Borrower waives the posting of any bond which might
otherwise be required.
7.3 Application of Proceeds. Lender may apply the cash proceeds of
Collateral actually received by Lender from any sale, lease, foreclosure or
other disposition of the Collateral to payment of any of the Obligations, in
whole or in part (including reasonable attorneys' fees and legal expenses
incurred by Lender with respect thereto or otherwise chargeable to Borrower) and
in such order as Lender may elect, whether or not then due. Borrower shall
remain liable to Lender for the payment of any deficiency together with interest
at the highest rate provided for herein and all costs and expenses of collection
or enforcement, including reasonable attorneys' fees and legal expenses.
7.4 Lender's Cure of Third Party Agreement Default. Lender may, at its
option, cure any default by Borrower under any agreement with a third party or
pay or bond on appeal any judgment entered against Borrower, discharge taxes,
liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and pay any amount, incur any expense or
perform any act which, in Lender's sole judgment, is necessary or appropriate to
preserve, protect, insure, maintain, or realize upon the Collateral. Lender may
charge Borrower's loan account for any amounts so expended, such amounts to be
repayable by Borrower on demand. Lender shall be under no obligation to effect
such cure, payment, bonding or discharge, and shall not, by doing so, be deemed
to have assumed any obligation or liability of Borrower.
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SECTION 8. JURY TRIAL WAIVER; CERTAIN OTHER WAIVERS AND CONSENTS
8.1 JURY TRIAL WAIVER. BORROWER AND LENDER EACH WAIVE ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER OF THEM AGAINST
THE OTHER WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE
OBLIGATIONS, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY BORROWER OR LENDER,
OR, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE
RELATIONSHIP BETWEEN BORROWER AND LENDER. IN NO EVENT WILL LENDER BE LIABLE FOR
LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
8.2 Counterclaims. Borrower waives all rights to interpose any claims,
deductions, setoffs or counterclaims of any kind, nature or description in any
action or proceeding instituted by Lender with respect to this Agreement, the
Obligations, the Collateral or any matter arising therefrom or relating thereto,
except compulsory counterclaims.
8.3 Jurisdiction. Borrower hereby irrevocably submits and consents to
the nonexclusive jurisdiction of the State and Federal Courts located in the
State in which the office of Lender designated in Section 10.6(a) is located and
any other State where any Collateral is located with respect to any action or
proceeding arising out of this Agreement, the Obligations, the Collateral or any
matter arising therefrom or relating thereto. In any such action or proceeding,
Borrower waives personal service of the summons and complaint or other process
and papers therein and agrees that the service thereof may be made by mail
directed to Borrower at its chief executive office set forth herein or other
address thereof of which Lender has received notice as provided herein, service
to be deemed complete five (5) days after mailing, or as permitted under the
rules of either of said Courts. Any such action or proceeding commenced by
Borrower against Lender will be litigated only in a Federal Court located in the
district, or a State Court in the State and County, in which the office of
Lender designated in Section 10.6(a) is located and Borrower waives any
objection based on forum non conveniens and any objection to venue in connection
therewith.
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8.4 No Waiver by Lender. Lender shall not, by any act, delay, omission
or otherwise be deemed to have expressly or impliedly waived any of its rights
or remedies unless such waiver shall be in writing and signed by an authorized
officer of Lender. A waiver by Lender of any right or remedy on any one occasion
shall not be construed as a bar to or waiver of any such right or remedy which
Lender would otherwise have on any future occasion, whether similar in kind or
otherwise.
SECTION 9. TERM OF AGREEMENT; MISCELLANEOUS
9.1 Term. This Agreement shall only become effective upon execution and
delivery by Borrower and Lender and shall continue in full force and effect for
a term set forth in Section 10.7 from the date hereof.
9.2 Early Termination. At any time seventy-five (75) days prior to the
end of the then current Term, Borrower may also terminate this Agreement by
giving Lender at least thirty (30) days prior written notice and payment in full
of all of the Obligations as provided herein, including the Early Termination
Fee, unpaid Closing Commitment Letter Fee and all other fees that may then or
thereafter be due to Lender under this Agreement; provided, however, that the
Success Fee for unexpired Term subsequent to Termination shall be computed based
upon the $25,000 minimum set forth in sub-section 10.4 (d), below. Lender shall
also have the right to terminate this Agreement at any time upon or after the
occurrence of an Event of Default. If Lender terminates this Agreement upon or
after the occurrence of an Event of Default, Borrower shall pay Lender
forthwith, in full, payment of all Obligations, including Early Termination Fee,
unpaid Closing Commitment Fee and all other fees that may then or thereafter be
due to Lender under this Agreement. In view of the impracticality and extreme
difficulty of ascertaining actual damages and by mutual agreement of the parties
as to a reasonable calculation of Lender's lost profits, the Early Termination
fee shall be equal to three percent (3%) of the Maximum Credit if termination
26
occurs during the first year of the Term of this Agreement, two percent (2%) of
the Maximum Credit if termination occurs during the second year of the Term of
this Agreement and one percent (1%) of the Maximum Credit thereafter.
9.3 Termination Indemnity Deposit. Upon termination of this Agreement
by Borrower, as permitted herein, in addition to payment of all Obligations
which are not contingent, Borrower shall deposit such amount of cash collateral
as Lender determines is necessary to secure Lender from loss, cost, damage or
expense, including reasonable attorneys' fees, in connection with any open
Accommodations or remittance items or other payments provisionally credited to
the Obligations and/or to which Lender has not yet received final and
indefeasible payment.
9.4 Notices. Except as otherwise provided, all notices, requests and
demands hereunder shall be (a) made to Lender at its address set forth in
Section 10.6(a) and to Borrower at its chief executive office set forth in
Section 10.6(d), or to such other address as either party may designate by
written notice to the other in accordance with this provision, and (b) deemed to
have been given or made: if by hand, immediately upon delivery; if by telex,
telegram or telecopy (fax), immediately upon receipt; if by overnight delivery
service, one day after dispatch; and if by first class or certified mail, three
(3) days after mailing.
9.5 Severability. If any provision of this Agreement is held to be
invalid or unenforceable, such provision shall not affect this Agreement as a
whole, but this Agreement shall be construed as though it did not contain the
particular provision held to be invalid or unenforceable.
9.6 Entire Agreement; Amendments; Assignments. This Agreement
contains the entire agreement of the parties as to the subject matter hereof,
all prior commitments, proposals and negotiations concerning the subject matter
hereof being merged herein. Neither this Agreement nor any provision hereof
shall be amended, modified or discharged orally or by course of conduct, but
only by a written agreement signed by an authorized officer of Lender. This
Agreement shall be binding upon and inure to the benefit of each of the parties
27
hereto and their respective successors and assigns, except that any obligation
of Lender under this Agreement shall not be assignable nor inure to the
successors and assigns of Borrower.
9.7 Discharge of Borrower. No termination of this Agreement shall
relieve or discharge Borrower of its Obligations, grants of Collateral, duties
and covenants hereunder or otherwise until such time as all Obligations to
Lender have been indefeasibly paid and satisfied in full, including, without
limitation, the continuation and survival in full force and effect of all
security interests and liens of Lender in and upon all then existing and
thereafter-arising or acquired Collateral and all warranties and waivers of
Borrower.
9.8 Usage. All terms used herein which are defined in the Uniform
Commercial Code shall have the meanings given therein unless otherwise defined
in this Agreement and all references to the singular or plural herein shall also
mean the plural or singular, respectively.
9.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State in which the office of Lender set forth in
Section 10.6(a) below is located.
SECTION 10. ADDITIONAL DEFINITIONS AND TERMS
10.1 (a) Maximum Credit: $5,000,000, subject to the limiting
conditions in 2.1 and 2.1(a), above.
(b) Gross Availability Formulas:
Eligible Accounts Percentage: Seventy-three percent (73%)
of eligible
accounts not more than 60 days from due date, so long as the accounts dilution
does not exceed twelve percent (12%). If dilution calculated on a rolling ninety
(90) day average exceeds twelve percent (12%), then the advance formula will be
reduced by one percentage point (1%) for each one percentage point (1%), or
28
fraction thereof, increase in dilution above twelve percent (12%). After a first
field examination six (6) months after the date of Closing, Lender will
re-evaluate Borrower's dilution and may increase the Eligible Accounts
Percentage one percentage point for each percentage point, or fraction thereof,
decrease in dilution below twelve percent (12%) to a maximum advance of eighty
percent (80%) against Eligible Accounts. Eligible Accounts shall exclude foreign
accounts unless insured by credit insurance or secured by a Letter of Credit
issued or confirmed by a bank acceptable to Lender. "Dilution" as used herein
shall mean the quotient obtained by dividing the aggregate of all credits,
allowances, discounts, write-offs, contra accounts and setoffs reducing the
amounts collectible from all accounts receivable of Borrower from the period
selected, by the gross sales for such period.
Eligible Inventory Percentages Not Applicable.
Finished Goods Not Applicable.
Raw Materials Not Applicable.
(c) Inventory Sublimit(s): Not applicable.
(d) Maximum days after due date for Eligible Accounts: Sixty (60) days.
(e) Minimum Borrowing: One million dollars ($1,000,000), with any
minimum borrowing charge under ss. 2.1 (g), above, to be charged annually.
10.2 Term Loan: None.
a) amount $ Zero (0)
b) monthly amortization Not applicable.
c) maturity date Not applicable.
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10.3 Accommodations:
(a) Lender's Charge for Accommodations: 1.75% per annum of the face
amount of all standby and documentary letters of credit outstanding plus
reimbursement to Lender of all charges and fees charged by the issuing bank,
payable monthly.
(b) Sublimit for Accommodations: $ 2,000,000.
10.4 Interest, Fees & Charges:
(a) Interest Rate: Prime Rate plus 1 1/2% per annum.
(b) Clearance: One (1) Business Day.
(c) Closing Commitment Letter Fee: Seventy-five thousand dollars
($75,000), of which $12,500 is earned and payable upon issuance of a Commitment
Letter by Lender, $12,500 is earned and payable upon Closing, $25,000 earned at
Closing but payable at the end of the first year of the Term hereof and $25,000
earned at Closing but payable at the end of the second year of the Term hereof.
(d) Success Fee: The greater of: (i).Twenty-five thousand dollars
($25,000) and (ii) the increase (if any) in the closing asked price on NASDAQ
(or other exchange or appropriate quotation, if Borrower ceases being listed on
NASDAQ) of Borrower's capital stock, accounting from Closing (and after the
first year accounting from the last anniversary of Closing) to each (next)
anniversary of Closing, but not to exceed One hundred thousand dollars
($100,000) annually, payable on the day immediately following each anniversary
of Closing.
(e) Account Servicing Fee: Not applicable.
(f) Unused Line Fee: per annum Not applicable.
(g) Field Examination per diem
charge per examiner $650. But limited to $6,500 per year so
long as Borrower is not in default
hereunder
10.5 Financial Covenants:
(a) Working Capital: Not Applicable.
(b) Net Worth: Not Applicable.
(c) Capital Expenditures: per fiscal year Not Applicable.
10.6 (a) Lender's Office: The CIT Group/Credit Finance, Inc.
STAR Division, Att'n.: Mr. Richard A. Simons
10 South LaSalle Street
Chicago, IL 60603
30
(b) Lender's Bank: Bank of America, Illinois
231 South LaSalle Street
Chicago, IL 60697
(c) Borrowers: nView Corporation
nView International Corporation
(d) Borrowers' Chief
Executive Office: 860 Omni Boulevard
Newport News, Virginia 23606-4238
(e) Locations of Eligible
Inventory Collateral: No Eligible Inventory for loan
advances.
(f) Borrowers' Other Offices and Locations of Collateral: None.
(g) Borrowers' Trade Names for Invoicing: None other than corporate
names.
10.7 Term: three (3) Years from date hereof.
IN WITNESS WHEREOF, Borrowers and Lender have duly executed this
Agreement this 23rd day of February, 1998
LENDER: BORROWER:
THE CIT GROUP/CREDIT FINANCE, INC. NVIEW CORPORATION
By: By:
Richard A. Simons, Senior Vice-President Diane H. Lingo, Vice-President, Finance
BORROWER:
NVIEW INTERNATIONAL CORPORATION
By:
Diane H. Lingo, Executive Vice-President
31
SCHEDULE A
Permitted Liens:
Equipment leases now and hereafter entered into by Borrower to acquire
equipment in the ordinary course of business, so long as no such lease causes or
requires Borrower to encumber any of its assets other than the leased equipment.
Inchoate liens created by statute for taxes, which liens are discharged
by Borrower's timely payment of such taxes or contesting same in good faith and
in accordance with law.