<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
- -Act of 1934
For the quarterly period ended December 31, 1999
Commission file Number 0-6508
IEC ELECTRONICS CORP.
---------------------------------------------------------
(Exact name of registrant as specified in its charter.)
Delaware 13-3458955
----------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
105 Norton Street, Newark, New York 14513
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices (Zip Code)
(315) 331-7742
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code:
Indicate by check mark whether the registrant(1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Common Stock, $0.01 Par Value - 7,588,051 shares as of February 7, 2000.
Page 1 of 12
<PAGE>
PART 1 FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements
Consolidated Balance Sheets as of :
December 31, 1999 (Unaudited) and September 30, 1999........... 3
Consolidated Statements of Operations for the three months ended:
December 31, 1999 (Unaudited) and December 25, 1998(Unaudited). 4
Consolidated Statement of Cash Flows for the three months ended:
December 31, 1999 (Unaudited) and December 25, 1998(Unaudited). 5
Notes to Consolidated Financial
Statements (Unaudited)......................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................... 9
PART II
Item 1. Legal Proceedings............................................... 11
Item 2. Changes in Securities........................................... 11
Item 3. Defaults Upon Senior Securities................................. 11
Item 4. Submission of Matters to a Vote of Security Holders............. 11
Item 5. Other Information............................................... 11
Item 6. Exhibits and Reports on Form ................................... 11
Signature .............................................................. 12
Page 2 of 12
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND SEPTEMBER 30, 1999
(in thousands, except share data)
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 1999
------------- --------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ - $4,007
Accounts receivable 29,989 23,734
Inventories 40,450 30,728
Income taxes receivable - 2,966
Life insurance proceeds receivable 2,016 -
Other current assets 766 516
------------- ------------
Total current assets 73,221 61,951
------------- ------------
Property, Plant and Equipment, net 20,085 21,778
--------------- ------------
Other Assets:
Cost in excess of net assets acquired, net 10,085 10,173
Other assets 310 17
-------------- ------------
10,395 10,190
-------------- -------------
$103,701 $93,919
=============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,579 $1,053
Accounts payable 29,592 21,819
Accrued payroll and related expenses 2,431 3,867
Accrued insurance 1,347 798
Other accrued expenses 959 990
--------------- ------------
Total current Liabilities 35,908 28,527
--------------- ------------
Long-term Debt 19,892 16,547
--------------- ------------
Shareholders' Equity:
Preferred stock, par value $.01 per share
Authorized - 500,000 shares
Outstanding - 0 shares - -
Common stock, par value $.01 per share
Authorized - 15,000,000 shares
Outstanding - 7,585,651 shares and
7,583,076 shares, respectively 76 76
Additional paid-in capital 38,570 38,566
Retained earnings 9,418 10,642
Accumulated other comprehensive income -
Cumulative translation adjustment 248 (28)
Treasury Stock, at cost - 20,573 shares (411) (411)
--------------- -----------
Total shareholders' equity 47,901 48,845
--------------- -----------
$103,701 $93,919
================ =============
<FN>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these balance sheets
</FN>
</TABLE>
Page 3 of 12
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
AND DECEMBER 25, 1998
(in thousands, except share data)
<CAPTION>
3 MONTHS 3 MONTHS
ENDED ENDED
DECEMBER DECEMBER
31, 1999 25, 1998
----------- ----------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $43,770 $36,281
Cost of sales 43,741 36,883
----------- -----------
Gross profit (loss) 29 (602)
Selling and Administrative expenses 2,906 2,597
----------- ------------
Operating loss (2,877) (3,199)
Interest expense (361) (154)
Other income (expense), net 15 (13)
Life insurance proceeds 2,000 -
----------- ------------
Loss before benfit from income taxes (1,223) (3,366)
Benefit from income taxes - (1,061)
------------- -------------
Net loss ($1,223) ($2,305)
============== ==============
Net loss per common and common
and common equivalent share
Basic ($0.16) ($0.30)
Diluted ($0.16) ($0.30)
Weighted average number of common and
common equivalent shares outstanding
Basic 7,565,078 7,562,503
Diluted 7,565,078 7,562,503
<FN>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these financial statements.
</FN>
</TABLE>
Page 4 of 12
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 AND
DECEMBER 25, 1998
(in thousands)
<CAPTION>
3 MONTHS 3 MONTHS
ENDED ENDED
DECEMBER DECEMBER
31, 1999 25, 1998
---------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,223) ($2,305)
Adjustments to reconcile net loss
to net cash (used in) operating activities:
Depreciation and amortization 1,892 2,583
Amortization of cost in excess of
net assets acquired 88 101
Common stock issued under Directors Stock Plan 4 -
Changes in operating assets and liabilities:
(Increase) decrease:
Accounts receivable (6,289) 983
Inventories (9,742) 1,288
Income taxes receivable 2,966 (1,099)
Life insurance receivable (2,016) -
Other current assets (256) (757)
Other assets (244) 32
Increase (decrease):
Accounts payable 8,258 26
Accrued payroll and related expenses (1,429) (1,534)
Other accrued expenses 516 (114)
---------- -----------
Net cash used in operating activities (7,475) (796)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (190) (544)
Proceeds from sale of building - 220
Proceeds from sales of equipment 52 -
---------- -----------
Net cash used in investing activities (138) (324)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit agreements 21,471 2,600
(Repayments) under line of credit agreements (17,600) (3,600)
Cost incurred to secure debt facility 243
Principal payments on long-term debt - (158)
---------- -----------
Net cash provided by (used in)
financing activities 3,628 (1,158)
---------- -----------
Net decrease in cash and cash equivalents (3,985) (2,278)
Effect of exchange rate changes (22) -
Cash and cash equivalents at beginning of period 4,007 2,278
=========== ===========
Cash and cash equivalents at end of period $ - $ -
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $330 $191
======== ======
Income taxes ($2,954) $37
======== ======
<FN>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these financial statements.
</FN>
</TABLE>
Page 5 of 12
<PAGE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(1) Business and Summary of Significant Accounting Policies
Business
- --------
IEC Electronics Corp. (IEC) is an independent contract manufacturer of complex
printed circuit board assemblies and electronic products and systems. IEC offers
its customers a wide range of manufacturing services, on either a turnkey or
consignment basis, including material procurement and control, manufacturing and
test engineering support, statistical quality assurance and complete resource
management.
Consolidation
- -------------
The consolidated financial statements include the accounts of IEC Electronics
Corp., and its wholly-owned subsidiaries, IEC Electronics-Edinburg, Texas Inc.
(Edinburg), IEC Arab, Alabama Inc.(Arab), and IEC Electronics - Ireland Ltd.
(Longford), (collectively, the Company). In September 1999, the Company annouced
its plan to close its underutilized Longford operations and to transfer some of
the customers served there to its other operations in New York and Texas. In
August 1998, the Company announced plans to close its Arab operations and to
transfer many of the customers served in that facility to the Company's other
operations in New York and Texas. All significant intercompany transactions and
accounts have been eliminated.
Revenue Recognition
- -------------------
The Company recognizes revenues upon shipment of product for both turnkey and
consignment contracts.
Cash and Cash Equivalents
- -------------------------
Cash and Cash equivalents include highly liquid investments with original
maturities of three months or less. The Company's cash and cash equivalents are
held and managed by institutions which follow the Company's investment policy.
The fair value of the Company's financial instruments approximates carrying
amounts due to the relatively short maturities and variable interest rates of
the instruments, which approximate current market interest rates.
Inventories
- -----------
Inventories are stated at the lower of cost (first-in, first-out) or market. The
major classifications of inventories are as follows at period end
(in thousands):
December September
31, 30,
1999 1999
-----------------------
(Unaudited)
Raw materials $30,921 $23,226
Work-in-process 9,529 7,502
=======================
$40,450 $30,728
=======================
Foreign Currency Translation
- ----------------------------
The assets and liabilities of the Company's foreign subsidiary are translated
based on the current exchange rate at the end of the period for the balance
sheet and a weighted-average rate for the period of the consolidated statement
of operations. Translation adjustments are recorded as a separate component of
equity. Transaction gains or losses are included in operations.
Page 6 of 12
<PAGE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Unaudited Financial Statements
- ------------------------------
The accompanying unaudited financial statements as of December 31, 1999, and for
the three months ended December 31, 1999 have been prepared in accordance with
generally accepted accounting principles for interim financial information. In
the opinion of management, all adjustments considered necessary for a fair
presentation, which consist solely of normal recurring adjustments have been
included. The accompanying financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's
September 30, 1999 Annual Report on Form 10-K.
Net Income per Common and Common Equivalent Share
- --------------------------------------------------------
(in thousands, except for share and pre share data)
(Loss)Income Shares Per Share
Three Months Ended (Numerator) (Denominator) Amount
- -------------------------------------------------------------------------------
December 31, 1999
Basic EPS
Loss available to common Shareholders ($1,223) 7,565,078 ($0.16)
====================================
December 25, 1998
Basic EPS
Loss available to common Shareholders ($2,305) 7,562,503 ($0.30)
====================================
Basic EPS was computed by dividing reported earnings available to common
shareholders by weighted-average common shares outstanding during the three
month period. No reconciliation is provided as the effect would be antidilutive.
(2) Comprehensive Income
--------------------
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income"(SFAS No. 130) on October 1, 1998. SFAS No. 130
requires comprehensive income and its components to be presented in the
financial statements. Comprehensive income, which includes net income (loss)
and foreign currency translation adjustments, was as follows for the three
months ended December 31, 1999 and December 25, 1998.(in thousands):
3 MONTHS 3 MONTHS
ENDED ENDED
DECEMBER DECEMBER
31, 1999 25, 1998
---------- -----------
(Unaudited) (Unaudited)
Net loss $ (1,223) $ (2,305)
Other comprehensive income (loss):
Foreign currency translation adjustments 276 (23)
---------- -----------
Comprehensive loss $ (947) $ (2,328)
========== ===========
Page 7 of 12
<PAGE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(3) Financing Arrangements
----------------------
On December 28, 1999, the Company refinanced its existing credit facility with a
new bank group. The new agreement is a three year secured asset based facility
for $30.0 million, increasing to $35.0 million in year two. The credit facility
consists of two components, the first a $20.0 million revolving credit facility
(increasing to $25.0 million in year two) based on eligibility criteria for
receivables and inventory. Amounts borrowed are limited to 85 percent of
qualified accounts receivable, 20 percent of raw materials, and 30 percent of
finished goods inventory, respectively. The second component consists of a $10
million three-year term loan with monthly principal installments based on a
five year amortization beginning in April 2000. At December 31, 1999, $21.5
million was outstanding with $7.3 million available under the new three year
secured asset based facility.
(4) Life Insurance Proceeds
-----------------------
The Company's President and Chief Executive Officer died suddenly on
December 11, 1999. In the second quarter of fiscal 2000, the Company received
non-taxable income from insurance proceeds of approximately $2.0 million
(5) Litigation
-----------
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. Although occasional adverse decisions
(or settlements) may occur, the Company believes that the final disposition of
such matters will not have a material adverse effect on the financial position
or results of operations of the Company.
(6) ACCOUNTING PRONOUNCEMENTS:
In June 1999, the Financial Accounting Standards Board issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Actives - Deferral of
Effective Date of FASB Statement No. 133 for one year". With issuance of SFAS
No. 137, the Company is required to adopt SFAS No. 133 on a prospective basis
for interim periods and fiscal years beginning March 1, 2001. The Company
believes that the effect of adoption of SFAS No. 133 will not be material based
on the Company's current risk management strategies.
(7) Longford Operations
On December 21, 1999, a third party entered into an option agreement with the
Company to purchase certain assets and assume the lease of the Company's
Longford facility. Although there can be no assurances that this agreement will
be consummated, a benefit of approximately $750,000 to $850,000 could result
from the reversal of a previously established restructuring reserve at closing.
Page 8 of 12
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
Results of Operations - Three months ended December 31, 1999 as
- --------------------------------------------------------------------------------
compared to three months ended December 25, 1998.
- -------------------------------------------------
Net sales for the three month period ended December 31, 1999, were $43.8 million
as compared to $36.3 million for the comparable period of the prior fiscal year,
an increase of 20.6 percent. The increase in sales was primarily due to an
increase in demand from its two largest customers. Sales to new customers were
approximately 2 percent of the sales for the quarter. Turnkey sales were 97
percent of net sales in the quarter as compared to 94 percent for the comparable
period of the prior year. Turnkey sales this quarter was affected by the
unusally high material content of a large job.
The gross profit was $29,000 or 0.1 percent of sales in 1999 versus a
gross loss of ($602,000) or (1.7) percent of sales in the comparable
period of 1998. The increase was due to lower labor and overhead costs as a
percent of sales.
Selling and administrative expenses increased to $2.9 million in the three
months ended December 31, 1999, from $2.6 million in the comparable period of
the prior fiscal year, an increase of 11.5 percent. This increase is primarily
due to increases in sales commissions associated with higher sales levels. As a
percentage of net sales, selling and administrative expenses decreased to 6.6
percent from 7.2 percent in the same quarter of the prior year.
Net loss for the quarter was ($1.2) million versus ($2.3) million in the
comparable quarter of the prior year. Diluted loss per share was ($.16) as
compared to diluted loss per share of ($.30) per share in the comparable
period of the prior fiscal year. Excluding the effects of the life insurance
proceeds of $2.0 million, the net loss would have been ($3.2) million or ($0.42)
per share in the current quarter.
Higher accounts receivable levels are reflective of the increased volume of
sales.
At quarter-end the inventory level was $40.5 million up from $30.7 million. This
represents annualized turns of 4.7 days. Inventory growth to support
increasing production level is currently a very major focus item at IEC.
Liquidity and Capital Resources
- -------------------------------
Net sales for the month of December 1999 were $23.2 million, representing 53
percent of the total net sales for the three month period ending
December 31, 1999. Net sales for the month of December 1998 were $14 million,
representing 39% of the total net sales for the three month period ending
December 25, 1998. The Company operates on a calendar quarter consisting of four
weeks in the first and second months And five weeks in the third month.
On December 28, 1999, the Company refinanced its existing credit facility with a
new bank group. The new agreement is a three year secured asset based facility
for $30 million, increasing to 35 million in the second year. At December 31,
1999, $21.5 million was outstanding with 7.3 million remaining under the new
three year secured asset based facility.
On December 21, 1999, a third party entered into an option agreement with the
Company to purchase certain assets and assume the lease of the Company's
Longford facility. Although there can be no assurances that this agreement will
be consummated, a benefit of approximately $750,000 to $850,000 could result
from the reversal of a previously established restructuring reserve at closing.
The Company believes that funds generated from operations and its existing
credit facilities will be sufficient for the Company to meet its capital
expenditures and working capital needs for its operations as presently
conducted. As part of its overall business strategy, the Company may from time
to time evaluate acquisition opportunities. The funding of these future
transactions, if any, may require The Company to obtain additional sources of
financing.
The impact of inflation on the Company's operations has been minimal due to the
fact that it is able to adjust its bids to reflect any inflationary increases in
cost.
Page 9 of 12
<PAGE>
Year 2000 Conversion
- --------------------
The Company has completed its Year 2000 Project ("Y2K") as scheduled, including
addressing leap year calendar date calculation concerns. The possibility of
significant interruptions of normal operations has been reduced. As of
January 28, 2000, the Company's products, computing, and communications
infrastructure systems have operated without Y2K related problems and appear to
be Y2K ready. The Company is not aware that any of its major customers or
third-party suppliers have experienced significant Y2K related problems.
The Company believes that all its critical systems are Y2K ready. However,
this is not a guarantee that the Company has discovered all possible failure
points. Specific factors contributing to this uncertainty include failure to
identify all systems, non-ready third parties whose systems and operations
impact the Company, and other similar uncertainties.
Contingency plans are complete and will be implemented if required. Should a
significant problem occur, the Company would revert to standard manual
contingency procedures to continue operation until the problem is corrected.
To date, the Company has spent an estimated $500,000 on this project. The
funding for this project comes from operations and working capital. None of the
Company's other mission critical information projects have been delayed due to
the implementation of the Y2K project.
Recently Issued Accounting Standards
- ------------------------------------
In June 1998, SFAS No. 137,"Accounting for Derivative Instruments
and Hedging Actives - Deferral of Effective Date of FASB Statement No. 133",
was issued. With issuance of SFAS No. 137, the Company is required to adopt SFAS
No. 133 on a prospective basis for interim periods and fiscal years beginning
March 1, 2001. The Company believes that the effect of adoption of SFAS No. 133
will not be material based on the Company's current risk management strategies.
Forward-Looking Statements
- --------------------------
Except for historical information, statements in this quarterly report are
forward-looking made pursuant to the safe harbor created by the Private
Securities Litigation Reform Act of 1995 and are therefore subject to certain
risks and uncertainties, including timing of orders and shipments, availability
of material, product mix and general market conditions that could cause actual
results to differ materially from those projected in the forward- looking
statements. Investors should consider the risks and uncertainties discussed in
the September 30, 1999, Form 10-K and its other filings with the Securities and
Exchange Commission.
Page 10 of 12
<PAGE>
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings
None.
Item 2 -- Changes in Securities
None.
Item 3 -- Defaults Upon Senior Securities
None.
Item 4 -- Submission of Matters to a Vote of Security Holders
None.
Item 5 -- Other Information
None.
Item 6 -- Exhibits and Reports on Form 8-K
a. Exhibits
10.1 Loan and Security agreement Among IEC ELECTRONICS CORP. ("IEC")
Whose address and Chief Executive Office is 105 Norton Street, Newark,
Newark, New York 14513 and IEC ELECTRONICS-EDINBURG, TEXAS INC.
("IEC-EDINBURG")whose address and Chief Executive Office is 1920 SE.
Industrial Park Drive, Edinburg, Texas 78539 and HSBC BANK USA, as
agent ("Agent") Commercial Finance Department, One HSBC Center,
Buffalo, New York and HSBC BANK USA, Commercial Finance Department,
One HSBC Center, Buffalo, New York and GENERAL ELECTRIC CAPITAL
CORPORATION ("GE Capital"), 201 High Ridge Road, Stamford, Connecticut
06927
b. Reports on Form 8-K
On December 14, 1999, the Company filed a Current Report on Form 8-K
regarding the sudden death of Dr. David W. Fradin, the Company's Chief
Executive Officer and a director of Registrant, on December 11, 1999,
Page 11 of 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IEC ELECTRONICS CORP.
REGISTRANT
Dated:February 10, 2000 By:/s/Russell E. Stingel
-----------------------
Russell E. Stingel
Chairman of the Board and
Interim Chief Executive Officer
Dated:February 10, 2000 By:/s/Richard L. Weiss
-----------------------
Vice President and
Chief Financial Officer
Page 12 of 12
<PAGE>
- --------------------------------------------------------------------
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------
Among
IEC ELECTRONICS CORP. ("IEC")
whose address and Chief Executive Office is
105 Norton Street
Newark, New York 14513
and
IEC ELECTRONICS-EDINBURG, TEXAS INC. ("IEC-EDINBURG")
whose address and Chief Executive Office is
1920 Southeast Industrial Park Drive
Edinburg, Texas 78539
(IEC and IEC-Edinburg are referred to herein individually as a "Debtor"
and collectively as the "Debtors")
And
HSBC BANK USA, as agent ("Agent")
Commercial Finance Department
One HSBC Center
Buffalo, New York 14203
And
HSBC BANK USA ("HSBC Bank")
Commercial Finance Department
One HSBC Center
Buffalo, New York 14203
and
GENERAL ELECTRIC CAPITAL CORPORATION ("GE Capital")
201 High Ridge Road
Stamford, Connecticut 06927
(HSBC Bank and GE Capital are referred to herein individually as a "Lender"
and collectively as the "Lenders")
DATED: DECEMBER 28, 1999
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS.................................................1
1.1. CERTAIN SPECIFIC TERMS............................1
1.2. SINGULARS AND PLURALS............................10
1.3. U.C.C. DEFINITIONS...............................11
2. LOANS......................................................11
2.1. REVOLVING CREDIT.................................11
2.2. PROCEEDS OF AN ADVANCE...........................12
2.3. ESTABLISHMENT OF RESERVES........................12
2.4. LETTERS OF CREDIT................................12
2.5. TERM LOAN........................................13
3. COLLATERAL AND INDEBTEDNESS SECURED........................13
3.1. SECURITY INTEREST................................13
3.2. OTHER COLLATERAL.................................14
3.3. INDEBTEDNESS SECURED.............................14
4. REPRESENTATIONS AND WARRANTIES.............................14
4.1. CORPORATE EXISTENCE..............................14
4.2. CORPORATE CAPACITY...............................15
4.3. VALIDITY OF RECEIVABLES..........................15
4.4. INVENTORY........................................15
4.5. TITLE TO COLLATERAL..............................16
4.6. NOTES RECEIVABLE.................................16
4.7. EQUIPMENT........................................16
4.8. PLACE OF BUSINESS................................16
4.9. FINANCIAL CONDITION..............................16
4.10.TAXES............................................17
4.11.LITIGATION.......................................17
4.12.ERISA MATTERS....................................17
4.13.ENVIRONMENTAL MATTERS............................18
4.14.VALIDITY OF TRANSACTION DOCUMENTS................19
4.15.NO CONSENT OR FILING.............................19
4.16.NO VIOLATIONS....................................19
4.17.TRADEMARKS AND PATENTS...........................19
4.18.CONTINGENT LIABILITIES...........................19
4.19.COMPLIANCE WITH LAWS.............................20
4.20.LICENSES, PERMITS, ETC...........................20
- i -
<PAGE>
4.21.LABOR CONTRACTS..................................20
4.22.CONSOLIDATED SUBSIDIARIES........................20
4.23.AUTHORIZED SHARES................................20
4.24.LAWS AND REGULATIONS.............................20
4.25.SOLVENCY.........................................21
4.26.BANK ACCOUNTS....................................21
4.27.DISCLOSURE.......................................21
5. CERTAIN DOCUMENTS TO BE DELIVERED TO AGENT.................21
5.1. DOCUMENTS........................................21
5.2. INVOICES.........................................21
5.3. CHATTEL PAPER....................................22
6. COLLECTIONS................................................22
7. PAYMENT OF PRINCIPAL, INTEREST, FEES, AND COSTS AND..
EXPENSES...............................................22
7.1. PROMISE TO PAY PRINCIPAL.........................22
7.2. PROMISE TO PAY INTEREST..........................23
7.3. PROMISE TO PAY FEES..............................24
7.4. PROMISE TO PAY COSTS AND EXPENSES................24
7.5. METHOD OF PAYMENT OF PRINCIPAL, INTEREST, FEES,
AND COSTS AND EXPENSES...........................25
7.6. COMPUTATION OF DAILY OUTSTANDING BALANCE
OF ADVANCES......................................26
7.7. ACCOUNT STATED...................................26
8. PROCEDURES AFTER SCHEDULING RECEIVABLES....................27
8.1. RETURNED MERCHANDISE.............................27
8.2. CREDITS AND EXTENSIONS...........................27
8.3. RETURNED INSTRUMENTS.............................27
8.4. DEBIT MEMORANDA..................................28
8.5. NOTES RECEIVABLE.................................28
9. AFFIRMATIVE COVENANTS......................................28
9.1. FINANCIAL STATEMENTS.............................28
9.2. GOVERNMENT AND OTHER SPECIAL RECEIVABLES.........29
9.3. TERMS OF SALE....................................30
9.4. BOOKS AND RECORDS................................30
9.5. INVENTORY IN POSSESSION OF THIRD PARTIES.........30
9.6. EXAMINATIONS.....................................30
9.7. VERIFICATION OF COLLATERAL.......................30
9.8. RESPONSIBLE PARTIES..............................31
9.9. TAXES............................................31
9.10.LITIGATION.......................................31
- ii -
<PAGE>
9.11.INSURANCE........................................31
9.12.GOOD STANDING; BUSINESS..........................32
9.13.PENSION REPORTS..................................33
9.14.NOTICE OF NON-COMPLIANCE.........................33
9.15.COMPLIANCE WITH ENVIRONMENTAL LAWS...............33
9.16.DEFEND COLLATERAL................................33
9.17.USE OF PROCEEDS..................................34
9.18.COMPLIANCE WITH LAWS.............................34
9.19.MAINTENANCE OF PROPERTY..........................34
9.20.LICENSES, PERMITS, ETC...........................34
9.21.TRADEMARKS AND PATENTS...........................34
9.22.ERISA............................................34
9.23.MAINTENANCE OF OWNERSHIP.........................34
9.24.ACTIVITIES OF CONSOLIDATED SUBSIDIARIES..........34
9.25.MILLENNIUM COMPLIANCE............................35
10. NEGATIVE COVENANTS.........................................35
10.1.LOCATION OF INVENTORY, EQUIPMENT, AND BUSINESS
RECORDS..........................................35
10.2.BORROWED MONEY...................................35
10.3.SECURITY INTEREST AND OTHER ENCUMBRANCES.........36
10.4.STORING AND USE OF COLLATERAL....................36
10.5.MERGERS, CONSOLIDATIONS, OR SALES................36
10.6.CAPITAL STOCK....................................36
10.7.DIVIDENDS OR DISTRIBUTIONS.......................37
10.8.INVESTMENTS AND ADVANCES.........................37
10.9.GUARANTIES.......................................37
10.10.LEASES..........................................37
10.11.CAPITAL EXPENDITURES............................37
10.12.COMPENSATION....................................37
10.13.NAME CHANGE.....................................37
10.14.DISPOSITION OF COLLATERAL.......................37
10.15.FINANCIAL COVENANTS.............................38
10.16.AFFILIATE TRANSACTIONS..........................38
11. EVENTS OF DEFAULT...........................................38
11.1.EVENTS OF DEFAULT................................38
11.2.EFFECTS OF AN EVENT OF DEFAULT...................42
12. AGENT'S RIGHTS AND REMEDIES................................43
12.1.GENERALLY........................................43
12.2.NOTIFICATION OF ACCOUNT DEBTORS..................43
12.3.POSSESSION OF COLLATERAL.........................43
12.4.COLLECTION OF RECEIVABLES........................43
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12.5.ENDORSEMENT OF CHECKS; DEBTOR'S MAIL.............43
12.6.LICENSE TO USE PATENTS, TRADEMARKS, AND
TRADENAMES.......................................44
13. MISCELLANEOUS..............................................44
13.1.PERFECTING THE SECURITY INTEREST; PROTECTING THE
COLLATERAL.......................................44
13.2.PERFORMANCE OF DEBTOR'S DUTIES...................44
13.3.NOTICE OF SALE...................................44
13.4.WAIVER BY AGENT..................................44
13.5.WAIVER BY DEBTOR.................................45
13.6.SETOFF...........................................45
13.7.ASSIGNMENT.......................................45
13.8.SUCCESSORS AND ASSIGNS...........................45
13.9.MODIFICATION.....................................45
13.10.COUNTERPARTS....................................45
13.11.GENERALLY ACCEPTED ACCOUNTING PRINCIPLES........46
13.12.INDEMNIFICATION.................................46
13.13.TERMINATION; PREPAYMENT PREMIUM.................47
13.14.FURTHER ASSURANCES..............................48
13.15.HEADINGS........................................48
13.16.CUMULATIVE SECURITY INTEREST, ETC.............. 48
13.17.AGENT AND LENDERS' DUTIES...................... 49
13.18.NOTICES GENERALLY.............................. 49
13.19.SEVERABILITY................................... 49
13.20.INCONSISTENT PROVISIONS; AGENCY AGREEMENT...... 49
13.21.ENTIRE AGREEMENT/AGENCY AGREEMENT.............. 49
13.22.APPLICABLE LAW................................. 50
13.23.CONSENT TO JURISDICTION........................ 50
13.24.JURY TRIAL WAIVER.............................. 50
SCHEDULE - Attached
Rider 10.16 - Exempt Equipment - Attached
EXHIBITS - Attached
Exhibit A - Financial Statement Certification
Exhibit B - Compliance Certificate
Exhibit C - Term Note - HSBC Bank
Exhibit D - Term Note - GE Capital
Exhibit E - Request Certificate
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Debtors, Agent and each Lender agrees as follows:
1. DEFINITIONS.
1.1. CERTAIN SPECIFIC TERMS. For purposes of this
Agreement, the following terms shall have the following meanings:
(a) ACCOUNT DEBTOR means the person, firm, or entity
obligated to pay a Receivable.
(b) ADVANCE means a loan made to a Debtor by the Lenders under
the Revolving Credit, pursuant to this Agreement.
(c) AGENCY AGREEMENT means the Agency Agreement among Agent,
HSBC Bank and GE Capital dated of even date herewith, as amended from
time to time.
(d) AGENT means HSBC Bank acting in its capacity as agent for
the benefit of the Lenders pursuant to the terms of the Agency
Agreement.
(e) BORROWING CAPACITY means, at the time of computation, the
amount specified in Item 1 of the Schedule.
(f) BUSINESS DAY means a day other than a Saturday, Sunday, or
other day on which banks are authorized or required to close under
the laws of New York; provided, that for purposes of Item 20 of the
Schedule and of calculations made with reference thereto, a Business
Day shall be deemed to be the equivalent of 1.4 calendar days.
(g) COLLATERAL means collectively all of the property of
Debtors, or either of them, subject to the Security Interest and
described in Sections 3.1 and 3.2.
(h) CONSOLIDATED SUBSIDIARY means any corporation, partnership,
limited liability company or other entity of which at least 50% of
the voting stock is owned by a Debtor directly, or indirectly,
through one or more Consolidated Subsidiaries. If a Debtor has no
Consolidated Subsidiaries, the provisions of this Agreement relating
to Consolidated Subsidiaries shall be inapplicable without affecting
the applicability of such provisions to such Debtor alone.
(i) CREDIT means any discount, allowance, credit, rebate, or
adjustment granted by a Debtor with respect to a Receivable of such
Debtor, other than a cash discount described in Item 3 of the
Schedule.
<PAGE>
(j) DEBTOR and DEBTORS means the person or entity or persons or
entities defined on the cover page to this Agreement.
(k) DISPOSAL means the intentional or unintentional abandonment,
discharge, deposit, injection, dumping, spilling, leaking, storing,
burning, thermal destruction, or placing of any Hazardous Substance
so that it or any of its constituents may enter the environment.
(l) ELIGIBLE INVENTORY means all Inventory of a Debtor in which
Agent has a first priority perfected security interest reduced by (i)
any Inventory as to which a representation or warranty contained in
Section 4.4 or 4.5 is not, or does not continue to be, true and
accurate; (ii) any Inventory produced under a Hub Agreement (as
defined in Item 2 of the Schedule) while the other party to such Hub
Agreement has any Receivables which are more than 120 days past due
and the amount thereof exceeds thirty percent (30%) of the total
Account Debtor balance; and (iii) any Inventory which is otherwise
unacceptable to Agent, in its reasonable judgment. In determining
whether any particular Inventory constitutes Eligible Inventory,
Agent shall not include any such Inventory to which any of the
exclusionary criteria set forth below applies. Eligible Inventory
shall not include any Inventory of any Debtor:
(i) that is not owned by such Debtor free and clear of all
liens and rights of any other person or entity (including the
rights of a purchaser that has made progress payments and the
rights of a surety that has issued a bond to assure such
Debtor's performance with respect to that Inventory), except the
liens in favor of Agent, on behalf of itself and Lenders;
(ii) that is (x) not located on premises owned, leased or
operated by such Debtor, or (y) is stored with a bailee,
warehouseman or similar person or entity, unless Agent has given
its prior consent thereto and unless (aa) a satisfactory bailee
letter or landlord waiver has been delivered to Agent, or (bb)
reserves satisfactory to Agent have been established with
respect thereto, or (z) located at any site in the United States
if the aggregate book value of Inventory at any such location is
less than $50,000.00;
(iii)that is placed on consignment, is in transit or is
otherwise not located on premises owned or leased by such
Debtor;
(iv) that is covered by a negotiable document of title,
unless such document has been delivered to Agent;
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(v) that in Agent's reasonable determination, is excess,
obsolete, unsalable, shopworn, seconds, damaged or unfit for
sale;
(vi) that consists of display items or packing or shipping
materials, manufacturing supplies, work-in-process Inventory or
replacement parts;
(vii)that consists of goods which have been returned by
the buyer;
(viii) that is not of a type held for sale in the
ordinary course of such Debtor's business;
(ix) as to which the Security Interest therein is not a
first priority perfected lien;
(x) that consists of any costs associated with
"freight-in" charges unless such Inventory is Hub Finished
Goods;
(xi) consists of Hazardous Materials or goods that can be
transported or sold only with licenses that are not readily
available; or
(xii)is not covered by casualty insurance acceptable to
Agent.
(m) ENVIRONMENT means any water including, but not limited to,
surface water and ground water or water vapor; any land including
land surface or subsurface; stream sediments; air; fish, wildlife,
plants; and all other natural resources or environmental media.
(n) ENVIRONMENTAL LAWS means all federal, state, and local
environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances, regulations, codes, and rules
relating to the protection of the Environment and/or governing the
use, storage, treatment, generation, transportation, processing,
handling, production, or disposal of Hazardous Substances and the
policies, guidelines, procedures, interpretations, decisions, orders,
and directives of federal, state, and local governmental agencies and
authorities with respect thereto.
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<PAGE>
(o) ENVIRONMENTAL PERMITS means all licenses, permits,
approvals, authorizations, consents, or registrations required by any
applicable Environmental Laws and all applicable judicial and
administrative orders in connection with ownership, lease, purchase,
transfer, closure, use, and/or operation of any property owned,
leased, or operated by a Debtor or any Consolidated Subsidiary and/or
as may be required for the storage, treatment, generation,
transportation, processing, handling, production, or disposal of
Hazardous Substances.
(p) ENVIRONMENTAL QUESTIONNAIRE means a questionnaire and all
attachments thereto concerning (i) activities and conditions
affecting the Environment at any property of a Debtor or any
Consolidated Subsidiary or (ii) the enforcement or possible
enforcement of any Environmental Law against a Debtor or any
Consolidated Subsidiary.
(q) ENVIRONMENTAL REPORT means a written report prepared for
Agent by an environmental consulting or environmental engineering
firm.
(r) ERISA means the Employee Retirement Income Security Act of
1974, as amended from time to time.
(s) EVENT OF DEFAULT means an Event of Default or Events of
Default as defined in Section 11.1.
(t) EXTENSION means the granting to an Account Debtor of
additional time within which such Account Debtor is required to pay a
Receivable.
(u) FEDERAL BANKRUPTCY CODE means Title 11 of the United States
Code, entitled "Bankruptcy," as amended, or any successor federal
bankruptcy law.
(v) HAZARDOUS SUBSTANCES means, without limitation, any
explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum and petroleum
products, methane, hazardous materials, hazardous wastes, hazardous
or toxic substances, and any other material defined as a hazardous
substance in Section 101(14) of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section
9601(14).
(w) HSBC PAYMENT ACCOUNT means the special bank account or
accounts owned by Agent to which Proceeds of Collateral, including,
without limitation, payments on Receivables and other payments from
sales or leases of Inventory, are credited. There is an HSBC Payment
Account if so indicated in Item 8 of the Schedule.
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<PAGE>
(x) IEC INVENTORY BORROWING BASE means the Inventory Borrowing
Base as applicable to the Eligible Inventory of IEC.
(y) IEC-EDINBURG INVENTORY BORROWING BASE means the Inventory
Borrowing Base as applicable to the Eligible Inventory of
IEC-Edinburg.
(z) IEC RECEIVABLES BORROWING BASE means the Receivables
Borrowing Base as applicable to the Receivables and Ineligible
Receivables of IEC.
(aa) IEC-EDINBURG RECEIVABLES BORROWING BASE means the
Receivables Borrowing Base as applicable to the Receivables and
Ineligible Receivables of IEC-Edinburg.
(bb) INDEBTEDNESS means all indebtedness or other obligations of
the Debtors, or either of them, to Agent and/or each Lender now or
hereafter incurred or arising under the Transaction Documents, of
every kind and character, primary or secondary, direct or indirect,
absolute, contingent or otherwise, sole, joint or several and whether
such indebtedness or other obligations are from time to time reduced
and thereafter increased, or entirely extinguished and thereafter
reincurred, including, without limitation: (i) all Advances, the Term
Loan and all other indebtedness not yet outstanding, but contracted
for, or with respect to which any other commitment related to this
Agreement or any of the other Transaction Documents exists; (ii) all
interest provided in any instrument, document, or agreement which
accrues on any such indebtedness until payment of such indebtedness
in full including, without limitation, any interest accruing after
the filing of a bankruptcy petition; (iii) all obligations to pay
fees, charges, costs, expenses and indemnities under any of the
Transaction Documents; and (iv) all indebtedness or other obligations
of the Debtors, or either of them, to HSBC Bank arising under the ACH
facility and the corporate credit card facility established for the
Debtors, or either of them, with HSBC Bank.
(cc) INELIGIBLE RECEIVABLES means the following described
Receivables and any other Receivables which, are not reasonably
satisfactory to Agent for credit or any other reason:
(i) Any Receivable which has remained unpaid for more than
the number of days specified in Item 4 of the Schedule.
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<PAGE>
(ii) Any Receivable with respect to which a representation
or warranty contained in Sections 4.3, 4.5, or 4.6 is not, or
does not continue to be, true and accurate, including, without
limitation, any Receivable subject to a setoff. The ineligible
amount of the setoff Receivable will be the lesser of the amount
of the Receivable or the account payable.
(iii) Any Receivable with respect to which a Debtor
has extended the time for payment without the consent of Agent,
except as provided in Section 8.2(a).
(iv) Any Receivable as to which any one or more of the
following events occurs: a Responsible Party shall die or be
judicially declared incompetent; a request or petition for
liquidation, reorganization, arrangement, adjustment of debts,
adjudication as a bankrupt, or other relief under the
bankruptcy, insolvency, or similar laws of the United States,
any state or territory thereof, or any foreign jurisdiction, now
or hereafter in effect, shall be filed by or against a
Responsible Party; a Responsible Party shall make any general
assignment for the benefit of creditors; a receiver or trustee,
including, without limitation, a "custodian," as defined in the
Federal Bankruptcy Code, shall be appointed for a Responsible
Party or for any of the assets of a Responsible Party; any other
type of insolvency proceeding with respect to a Responsible
Party (under the bankruptcy laws of the United States or
otherwise) or any formal or informal proceeding for the
dissolution or liquidation of, settlement of claims against, or
winding up of affairs of, a Responsible Party shall be
instituted; all or any material part of the assets of a
Responsible Party shall be sold, assigned, or transferred; a
Responsible Party shall fail to pay its debts as they become
due; or a Responsible Party shall cease doing business as a
going concern.
(v) All Receivables owed by an Account Debtor owing
Receivables classified as ineligible under any criterion set
forth in any of Sections 1.1(ac)(i) through 1.1(ac)(iv), if the
outstanding dollar amount of such Receivables constitutes a
percentage of the aggregate outstanding dollar amount of all
Receivables owed by such Account Debtor equal to or greater than
the percentage specified in Item 5 of the Schedule.
(vi) All Receivables owed by an Account Debtor which
does not maintain its chief executive office in the United
States or which is not organized under the laws of the United
States or any state, unless otherwise specified in Item 6 of the
Schedule, or which is not denominated in U.S. Dollars.
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<PAGE>
(vii) All Receivables owed by an Account Debtor if a
Debtor or any person who, or entity which, directly or
indirectly controls such Debtor, either owns in whole or
material part, or directly or indirectly controls, such Account
Debtor.
(viii) Any Receivable arising from a consignment or
other arrangement, pursuant to which the subject Inventory is
returnable if not sold or otherwise disposed of by the Account
Debtor; any Receivable constituting a partial billing under
terms providing for payment only after full shipment or
performance; any Receivable arising from a bill and hold sale or
in connection with any pre-billing where the Inventory or
services have not been delivered, performed, or accepted by the
Account Debtor if Agent has not entered into a satisfactory
written agreement with such Account Debtor relating to such
Receivables; and any Receivable as to which the Account Debtor
contends the balance reported by a Debtor is incorrect or not
owing.
(ix) Any Receivable which is unenforceable against
the Account Debtor for any reason.
(x) Any Receivable which is an Instrument, Document,
or Chattel Paper or which is evidenced by a note, draft, trade
acceptance, or other instrument for the payment of money where
such Instrument, Document, Chattel Paper, note, draft, trade
acceptance, or other instrument has not been endorsed and
delivered by a Debtor to Agent.
(xi) Any Receivable or Receivables owed by an Account
Debtor which exceeds any credit limit established by Agent for
such Account Debtor; provided, that such Receivable or
Receivables shall be ineligible only to the extent of such
excess.
(xii) Any Receivable which does not arise from the sale
of goods or the performance of services by a Debtor in the
ordinary course of its business.
(xiii) Any Receivable with respect to which an invoice,
acceptable to Agent in form and substance, has not been sent to
the applicable Account Debtor.
(xiv) Any Receivable which is otherwise unacceptable
to Agent, in its reasonable judgment.
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<PAGE>
(dd) INTERNAL REVENUE CODE means the Internal Revenue Code of
1986, as amended from time to time.
(ee) INVENTORY means inventory, as defined in the Uniform
Commercial Code as in effect in the State as of the date of this
Agreement, and in any event shall include returned or repossessed
Goods.
(bb) INVENTORY BORROWING BASE means, at the time of computation
with respect to the applicable Debtor, an amount up to the
percentages specified in Item 2 of the Schedule of the dollar value
of Eligible Inventory for such Debtor, such dollar value to be
calculated at the lower of actual cost or market value and accounted
for in the manner specified in Item 7 of the Schedule, less the
amount of any reserves established by Agent in accordance with
Section 2.3.
(cc) INVOICE means any document or documents used, or to be
used, to evidence a Receivable.
(dd) LENDER and LENDERS means Lender and Lenders as defined on
the cover page of this Agreement.
(ee) LETTER OF CREDIT means any documentary letter of credit
issued by a Lender pursuant to Section 2.4 of this Agreement solely
for the purchase by a Debtor of Inventory unless another purpose is
otherwise approved by all of the Lenders.
(ff) LOAN means any loan made to a Debtor individually, or the
Debtors collectively, by the Lenders pursuant to this Agreement.
(gg) PENSION EVENT means, with respect to any Pension Plan, the
occurrence of (i) any prohibited transaction described in Section 406
of ERISA or in Section 4975 of the Internal Revenue Code; (ii) any
Reportable Event; (iii) any complete or partial withdrawal, or
proposed complete or partial withdrawal, of a Debtor or any
Consolidated Subsidiary from such Pension Plan; (iv) any complete or
partial termination, or proposed complete or partial termination, of
such Pension Plan; or (v) any accumulated funding deficiency (whether
or not waived), as defined in Section 302 of ERISA or in Section 412
of the Internal Revenue Code.
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<PAGE>
(hh) PENSION PLAN means any pension plan, as defined in Section
3(2) of ERISA, which is a multiemployer plan or a single employer
plan, as defined in Section 4001 of ERISA, and subject to Title IV of
ERISA and which is (i) a plan maintained by a Debtor or any
Consolidated Subsidiary for employees or former employees of Debtor
or of any Consolidated Subsidiary; (ii) a plan to which a Debtor or
any Consolidated Subsidiary contributes or is required to contribute;
(iii) a plan to which a Debtor or any Consolidated Subsidiary was
required to make contributions at any time during the five (5)
calendar years preceding the date of this Agreement; or (iv) any
other plan with respect to which a Debtor or any Consolidated
Subsidiary has incurred or may incur liability, including, without
limitation, contingent liability, under Title IV of ERISA either to
such plan or to the Pension Benefit Guaranty Corporation. For
purposes of this definition, and for purposes of Sections 1.1(dd),
4.12, and 11.1(i), Debtor shall include any trade or business
(whether or not incorporated) which, together with a Debtor or any
Consolidated Subsidiary, is deemed to be a "single employer" within
the meaning of Section 4001(b)(1) of ERISA.
(ii) PRIME RATE means the rate of interest publicly announced by
HSBC Bank USA from time to time as its prime rate and is a base rate
for calculating interest on certain loans. The rate announced by HSBC
Bank USA as its prime rate may or may not be the most favorable rate
charged by HSBC Bank to its customers.
(jj) PRO-RATA SHARE means as to HSBC Bank 55% and as to GE
Capital 45%.
(kk) RECEIVABLE means the right to payment for Goods sold or
leased or services rendered by a Debtor, whether or not earned by
performance, and may, without limitation, in whole or in part be in
the form of an Account, Chattel Paper, Document, or Instrument.
(ll) RECEIVABLES BORROWING BASE means, at the time of its
computation with respect to the applicable Debtor, the aggregate
amount of the outstanding Receivables in which Agent for the benefit
of the Lenders and for its benefit as Agent has a first priority
perfected security interest (adjusted with respect to Credits and
returned merchandise as provided in Article 8 hereof) less the amount
of Ineligible Receivables and any reserves established by Agent in
accordance with Section 2.3.
(mm) RELEASE means "release," as defined in Section 101(22) of
the Comprehensive, Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Section 9601(22), and the regulations
promulgated thereunder.
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<PAGE>
(nn) REPORTABLE EVENT means any event described in Section
4043(b) of ERISA or in regulations issued thereunder with regard to a
Pension Plan.
(oo) RESPONSIBLE PARTY means an Account Debtor, a general
partner of an Account Debtor, or any party otherwise in any way
directly or indirectly liable for the payment of a Receivable.
(pp) REVOLVING CREDIT means the Revolving Credit as defined in
Section 2.1(a).
(qq) SCHEDULE means the schedule executed in connection with,
and which is a part of, this Agreement.
(rr) SECURITY INTEREST means the security interest granted to
the Agent for the benefit of itself and the Lenders by each of the
Debtors as described in Section 3.1.
(ss) STATE means the State of the United States specified in
Item 31 of the Schedule.
(tt) TERM LOAN means Term Loan as defined in Section 2.5.
(uu) TERM NOTE means Term Note as defined in Section 7.1(b).
(vv) THIRD PARTY means any person or entity who has executed and
delivered, or who in the future may execute and deliver, to Agent or
any Lender any agreement, instrument, or document, pursuant to which
such person or entity has guarantied the payment of the Indebtedness
or has granted Agent or any Lender a security interest in or lien on
some or all of such person's or entity's real or personal property to
secure the payment of the Indebtedness.
(ww) TRANSACTION DOCUMENTS means this Agreement, the Term Note
and all documents, including, without limitation, the collateral
documents, letter of credit agreements, notes, acceptance credit
agreements, security agreements, pledges, guaranties, mortgages,
title insurance, assignments, and subordination agreements required
to be executed by any Debtor, any Third Party, or any Responsible
Party pursuant hereto or in connection herewith.
1.2. SINGULARS AND PLURALS. Unless the context otherwise requires,
words in the singular number include the plural, and in the plural
include the singular.
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<PAGE>
1.3. U.C.C. DEFINITIONS. Unless otherwise defined in Section 1.1
or elsewhere in this Agreement, capitalized words shall have the
meanings set forth in the Uniform Commercial Code as in effect in the
State as of the date of this Agreement.
20 LOANS.
2.1. (a) REVOLVING CREDIT. Each Lender severally, but not
jointly, agrees, subject to the terms of this Agreement, to lend
their Pro-Rata Share of the maximum amount of Advances ("Maximum
Limit") at any one time outstanding as set forth below ("Revolving
Credit"):
(i) From the date hereof until the first annual anniversary
of the date hereof ("First Anniversary Date"), the Maximum Limit
shall be $20,000,000 which, if fully advanced, would be
apportioned between the Lenders as follows:
HSBC Bank - $11,000,000
GE Capital- $ 9,000,000
(ii) After the First Anniversary Date and during the
balance of the term hereof, the Maximum Limit shall be
$25,000,000 which if fully advanced would be apportioned between
the Lenders as follows:
HSBC Bank - $13,750,000
GE Capital- $11,250,000
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(b) REQUESTS FOR AN ADVANCE. From time to time, a Debtor may
make a written or oral request for an Advance, so long as the sum of
the aggregate principal balance of outstanding Advances to such
Debtor and the requested Advance does not exceed the IEC Borrowing
Capacity or the IEC-Edinburg Borrowing Capacity, as applicable and
the outstanding principal balance for all Debtors does not exceed the
Borrowing Capacity; and each Lender shall make its Pro-Rata Share of
such requested Advance, provided that (i) the IEC Borrowing Capacity
or IEC-Edinburg Borrowing Capacity, as applicable would not be so
exceeded; (ii) the Borrowing Capacity would not be so exceeded; (iii)
there has not occurred an Event of Default or an event which, with
notice or lapse of time or both, would constitute an Event of
Default; and (iv) all representations and warranties contained in
this Agreement and in the other Transaction Documents are true and
correct on the date such requested Advance is made as though made on
and as of such date. Notwithstanding any other provision of this
Agreement, Agent may from time to time reduce the percentages
applicable to each Receivables Borrowing Base and each Inventory
Borrowing Base as they relate to amounts of the applicable IEC
Borrowing Capacity or IEC-Edinburg Capacity if Agent determines in
its reasonable judgment, that there has been a material change in
circumstances related to any or all Receivables or Inventory of such
Debtor from those circumstances in existence on or prior to the date
of this Agreement or in the financial or other condition of such
Debtor. Each oral request for an Advance shall be conclusively
presumed to be made by a person authorized by such Debtor to do so,
and the making of the Advance to a Debtor as hereinafter provided
shall conclusively establish such Debtor's obligation to repay the
Advance. In no event shall a Lender be obligated to fund more than
its Pro-Rata Share of any requested Advance.
2.2. PROCEEDS OF AN ADVANCE. Advances shall be made in the manner
agreed by Debtors and the Agent in writing or, absent any such
agreement, as determined by the Agent.
2.3. ESTABLISHMENT OF RESERVES. Agent may, at any time and from time
to time, in its reasonable judgment, establish reserves against the
Receivables or the Inventory of any Debtor. The amount of such reserves
shall be subtracted from the IEC Receivables Borrowing Base or
IEC-Edinburg Receivables Borrowing Base, as applicable, or the IEC
Inventory Borrowing Base or IEC-Edinburg Inventory Borrowing Base, as
applicable, when calculating the amount of the Borrowing Capacity. The
initial reserves are set forth on Item 35 of the Schedule.
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2.4. LETTERS OF CREDIT. At the request of a Debtor, and upon
execution of Letter of Credit documentation satisfactory to HSBC Bank, and
provided all representations and warranties contained in this Agreement
and the Transaction Documents are true and correct on the date of such
Letter of Credit as though made on and as of such date and no Event of
Default has occurred and is continuing and no event or condition exists
which with notice or lapse of time or both, would constitute an Event of
Default, HSBC Bank, within the limits of the IEC Borrowing Capacity or
IEC-Edinburg Borrowing Capacity, as applicable, as then computed, as well
as subject to the limits of the Borrowing Capacity, may issue Letters of
Credit from time to time for the account of such Debtor in an amount not
exceeding in the aggregate at any one time outstanding the amount set
forth in Item 9 of the Schedule. The Letters of Credit shall be on terms
mutually acceptable to Agent, HSBC Bank and such Debtor however, no Letter
of Credit shall have an expiration date more than ninety (90) days from
the date of issuance and no Letter of Credit shall have an expiration date
later than the termination date of this Agreement. An Advance in an amount
equal to any amount paid by HSBC Bank on any draft drawn under any Letter
of Credit shall be deemed made to such Debtor, without request therefor,
immediately upon any payment by HSBC Bank on such draft. In connection
with the issuance of Letters of Credit, such Debtor shall pay to Agent the
fees set forth in Item 19 of the Schedule.
2.5. TERM LOAN. Each Lender severally, but not jointly, agrees, on
the terms and conditions set forth in this Agreement, and relying on the
representations and warranties contained in this Agreement to lend its
Pro-Rata Share of $10,000,000 to the Debtors, and the Debtors agree to
borrow from the Lenders in not more than two advances on or before May 15,
2000 the sum of Ten Million Dollars ($10,000,000) ("Term Loan"). The
initial advance of the Term Loan shall be made on the date hereof in the
amount of $8,800,000 in the aggregate. The second advance in the amount of
$1,200,000 in the aggregate may be drawn only after (i) IEC has delivered
satisfactory evidence to the Agent and the Lenders that a Phase 2
Environmental Report has been received on the Newark Property (as defined
in Section 3.2 hereof) indicating no environmental problem requiring
remediation, or if remediation is required, that such remediation has been
completed at a cost not in excess of $1,200,000 in the aggregate, (ii) IEC
has executed and delivered a satisfactory $2,400,000 collateral mortgage
and a satisfactory ALTA title insurance policy insuring such mortgage, and
(iii) the representations and warranties made in this Agreement and the
Transaction Documents are true and correct as if made on such date, and no
Event of Default has occurred and is continuing and no event or condition
exists which with notice or lapse of time or both would constitute an
Event of Default. The Term Loan must be fully drawn not later than May 15,
2000 or the Lenders' obligations to make such second advance shall
terminate on May 15, 2000 automatically without the need for any notice
from Agent or the Lenders to the Debtors. Once paid, the Term Loan, and
any portions thereof, may not be reborrowed.
30 COLLATERAL AND INDEBTEDNESS SECURED.
3.1. SECURITY INTEREST. Each Debtor hereby grants to Agent for the
benefit of the Lenders and for its benefit as Agent a security interest
in, and a lien on, the following property of such Debtor wherever
located and whether now owned or hereafter acquired:
(a) All Accounts, Inventory, General Intangibles, Chattel Paper,
Investment Property, Documents, and Instruments, whether or not
specifically assigned to Agent, including, without limitation, all
Receivables and all Equipment, whether or not affixed to realty, and
Fixtures.
(b) All guaranties, collateral, liens on, or security interests
in, real or personal property, leases, letters of credit, and other
rights, agreements, contracts, and property securing or relating to
payment of Receivables.
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(c) All books, records, ledger cards, data processing records,
computer software, and other property at any time evidencing or
relating to Collateral.
(d) All monies, securities, and other property now or hereafter
held, or received by, or in transit to, Agent or any Lender from or
for such Debtor, and all of such Debtor's deposit accounts, credits,
and balances with any Lender existing at any time.
(e) All parts, accessories, attachments, special tools,
additions, replacements, substitutions, and accessions to or for all
of the foregoing.
(f) All Proceeds and products of all of the foregoing in any
form, including, without limitation, amounts payable under any
policies of insurance insuring the foregoing against loss or damage,
and all increases and profits received from all of the foregoing.
3.2. OTHER COLLATERAL. Nothing contained in this Agreement shall
limit the rights of Agent or any Lender in and to any other collateral
securing the Indebtedness which may have been, or may hereafter be,
granted to Agent or any Lender by a Debtor or any Third Party, pursuant to
any other agreement including, without limitation, (i) the real property
owned by IEC and commonly known as 105 Norton Street, Newark, New York
("Newark Property") and the rents therefrom, (ii) the real property owned
by IEC-Edinburg and commonly known as 1920 Southeast Industrial Park
Drive, Edinburg, Texas ("Edinburg Property") and (iii) all outstanding
stock of IEC-Edinburg.
3.3. INDEBTEDNESS SECURED. The Security Interest secures payment
of the Indebtedness.
40 REPRESENTATIONS AND WARRANTIES. To induce the Agent and the Lenders to enter
into this Agreement, to make the Term Loan to the Debtors and make Advances to a
Debtor from time to time as herein provided, Debtors represent and warrant and,
so long as any Indebtedness remains unpaid or this Agreement remains in effect,
shall be deemed continuously to represent and warrant as follows:
4.1. CORPORATE EXISTENCE. Each Debtor and each Consolidated
Subsidiary is duly organized and existing and in good standing under the
laws of the state specified in Item 10 of the Schedule and is duly
licensed or qualified to do business and in good standing in every state
and foreign jurisdiction in which the nature of its business or ownership
of its property requires such licensing or qualification.
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4.2. CORPORATE CAPACITY. The execution, delivery, and performance of
the Transaction Documents are within each Debtor's corporate powers, have
been duly authorized by all necessary and appropriate corporate and
shareholder action, and are not in contravention of any law or the terms
of such Debtor's articles or certificate of incorporation or by-laws or
any amendment thereto, or of any indenture, agreement, undertaking, or
other document to which such Debtor is a party or by which such Debtor or
any of such Debtor's property is bound or affected.
4.3. VALIDITY OF RECEIVABLES. (a) Each Receivable is genuine and
enforceable in accordance with its terms and represents an undisputed and
bona fide indebtedness owing to a Debtor by the Account Debtor obligated
thereon; (b) there are no defenses, setoffs, or counterclaims against any
Receivable; (c) no payment has been received on any Receivable, and no
Receivable is subject to any Credit or Extension or agreements therefor
unless written notice specifying such payment, Credit, Extension, or
agreement has been delivered to Agent; (d) each copy of each Invoice is a
true and genuine copy of the original Invoice sent to the Account Debtor
named therein and accurately evidences the transaction from which the
underlying Receivable arose, and the date payment is due as stated on each
such Invoice or computed based on the information set forth on each such
Invoice is correct; (e) all Chattel Paper, and all promissory notes,
drafts, trade acceptances, and other instruments for the payment of money
relating to or evidencing each Receivable, and each endorsement thereon,
are true and genuine and in all respects what they purport to be, and are
the valid and binding obligation of all parties thereto, and the date or
dates stated on all such items as the date on which payment in whole or in
part is due is correct; (f) all Inventory described in each Invoice has
been delivered to the Account Debtor named in such Invoice or placed for
such delivery in the possession of a carrier not owned or controlled
directly or indirectly by a Debtor; (g) all evidence of the delivery or
shipment of Inventory is true and genuine; (h) all services to be
performed by a Debtor in connection with each Receivable have been
performed by such Debtor; and (i) all evidence of the performance of such
services by a Debtor is true and genuine.
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4.4. INVENTORY. (a) All representations made by each Debtor to the
Agent and the Lenders, and all documents and schedules given by such
Debtor to the Agent and the Lenders, relating to the description,
quantity, quality, condition, and valuation of the Inventory are true and
correct; (b) no Debtor has received any Inventory on consignment or
approval unless such Debtor (i) has delivered written notice to Agent
describing any Inventory which such Debtor has received on consignment or
approval, (ii) has marked such Inventory on consignment or approval or has
segregated it from all other Inventory, and (iii) has appropriately marked
its records to reflect the existence of such Inventory on consignment or
approval; (c) Inventory is located only at the address or addresses of the
applicable Debtor set forth at the beginning of this Agreement, the
locations specified in Item 11 of the Schedule, or such other place or
places as approved by Agent in writing; (d) all Inventory is insured as
required by Section 9.11, pursuant to policies in full compliance with the
requirements of such Section; and (e) all Inventory has been produced by
the applicable Debtor in accordance with the Federal Fair Labor Standards
Act of 1938, as amended, and all rules, regulations, and orders
promulgated thereunder.
4.5. TITLE TO COLLATERAL. (a) Each Debtor is the owner of its
respective Collateral free of all security interests, liens, and other
encumbrances except the Security Interest and except as described in Item
12 of the Schedule; (b) each Debtor has the unconditional authority to
grant the Security Interest to the Agent for the benefit of the Agent and
the Lenders; and (c) assuming that all necessary Uniform Commercial Code
filings have been made and, if applicable, assuming compliance with the
Federal Assignment of Claims Act of 1940, as amended, Agent has an
enforceable first lien for the benefit of the Lenders and for its benefit
as Agent on all Collateral, subordinate only to those security interests,
liens, or encumbrances described as having priority over the Security
Interest in Item 12 of the Schedule.
4.6. NOTES RECEIVABLE. No Receivable is an Instrument, Document, or
Chattel Paper or is evidenced by any note, draft, trade acceptance, or
other instrument for the payment of money, except such Instrument,
Document, Chattel Paper, note, draft, trade acceptance, or other
instrument as has been endorsed and delivered by the applicable Debtor to
Agent and has not been presented for payment and returned uncollected for
any reason.
4.7. EQUIPMENT. Equipment is located, and Equipment which is a
Fixture is affixed to real property, only at the address or addresses of
the applicable Debtor set forth at the beginning of this Agreement, the
locations specified in Item 11 of the Schedule, or such other place or
places as approved by Agent in writing. Such real property is owned by a
Debtor or by the person or persons named in Item 11 of the Schedule and is
encumbered only by the mortgage or mortgages listed in Item 11 of the
Schedule.
4.8. PLACE OF BUSINESS. (a) Unless otherwise disclosed to Agent and
the Lenders in Item 11 or Item 13 of the Schedule, each Debtor is engaged
in business operations which are in whole, or in part, carried on at the
address or addresses specified at the beginning of this Agreement and at
no other address or addresses; (b) if such Debtor has more than one place
of business, its chief executive office is at the address specified as
such at the beginning of this Agreement; and (c) such Debtor's records
concerning the Collateral are kept at the address or addresses specified
at the beginning of this Agreement or in Item 13 of the Schedule.
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4.9. FINANCIAL CONDITION. Each Debtor has furnished to Agent and the
Lenders such Debtor's September 30, 1999 financial statements, which
statements represent correctly and fairly the results of the operations
and transactions of such Debtor and the Consolidated Subsidiaries as of
the dates, and for the period referred to, and have been prepared in
accordance with generally accepted accounting principles consistently
applied during each interval involved and from interval to interval. Since
the date of such financial statements, there have not been any materially
adverse changes in the financial condition reflected in such financial
statements, except as disclosed in writing by such Debtor to Agent and the
Lenders. IEC has delivered to Agent and the Lenders a solvency certificate
as to the present and future solvency of IEC and its subsidiaries
containing reasonable assumptions of financial performance, and otherwise
in form and content acceptable to Agent and the Lenders.
4.10.TAXES. (a) All federal, state, local, foreign and other tax
returns required to be filed by such Debtor and each Consolidated
Subsidiary have been filed, and all taxes required by such returns have
been paid including, without limitation, income, franchise, and sales
taxes; and (b) neither such Debtor nor any Consolidated Subsidiary has
received any notice from the Internal Revenue Service or any other taxing
authority proposing additional taxes.
4.11.LITIGATION. Except as disclosed in Item 35 of the Schedule,
there are no actions, suits, proceedings, or investigations pending or, to
the knowledge of such Debtor, threatened against such Debtor or any
Consolidated Subsidiary or any basis therefor which, if adversely
determined, would, in any case or in the aggregate, materially adversely
affect the property, assets, financial condition, or business of such
Debtor or any Consolidated Subsidiary or materially impair the right or
ability of such Debtor or any Consolidated Subsidiary to carry on its
operations substantially as conducted on the date of this Agreement.
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4.12.ERISA MATTERS. (a) No Pension Plan has been terminated, or
partially terminated, or is insolvent, or in reorganization, nor have any
proceedings been instituted to terminate or reorganize any Pension Plan;
(b) neither a Debtor nor any Consolidated Subsidiary has withdrawn from
any Pension Plan in a complete or partial withdrawal, nor has a condition
occurred which, if continued, would result in a complete or partial
withdrawal; (c) neither a Debtor nor any Consolidated Subsidiary has
incurred any withdrawal liability, including, without limitation,
contingent withdrawal liability, to any Pension Plan, pursuant to Title IV
of ERISA; (d) neither a Debtor nor any Consolidated Subsidiary has
incurred any liability to the Pension Benefit Guaranty Corporation other
than for required insurance premiums which have been paid when due; (e) no
Reportable Event has occurred; (f) no Pension Plan or other "employee
pension benefit plan," as defined in Section 3(2) of ERISA, to which the
applicable Debtor or any Consolidated Subsidiary is a party has an
"accumulated funding deficiency" (whether or not waived), as defined in
Section 302 of ERISA or in Section 412 of the Internal Revenue Code; (g)
the present value of all benefits vested under any Pension Plan does not
exceed the value of the assets of such Pension Plan allocable to such
vested benefits; (h) each Pension Plan and each other "employee benefit
plan," as defined in Section 3(3) of ERISA, to which the applicable Debtor
or any Consolidated Subsidiary is a party is in substantial compliance
with ERISA, and no such plan or any administrator, trustee, or fiduciary
thereof has engaged in a prohibited transaction described in Section 406
of ERISA or in Section 4975 of the Internal Revenue Code; (i) each Pension
Plan and each other "employee benefit pension plan," as defined in Section
3(2) of ERISA, to which the applicable Debtor or any Consolidated
Subsidiary is a party has received a favorable determination by the
Internal Revenue Service with respect to qualification under Section
401(a) of the Internal Revenue Code; and (j) neither a Debtor nor any
Consolidated Subsidiary has incurred any liability to a trustee or trust
established pursuant to Section 4049 of ERISA or to a trustee appointed
pursuant to Section 4042(b) or (c) of ERISA.
4.13.ENVIRONMENTAL MATTERS. Except as otherwise disclosed in the
preliminary Environmental Report being prepared by GZA Geo Environmental
of New York on the Newark Property,
(a) Any Environmental Questionnaire previously provided to Agent
and/or either Lender was and is accurate and complete and does not omit
any material fact the omission of which would make the information
contained therein materially misleading.
(b) No above ground or underground storage tanks containing
Hazardous Substances are, or have been located on, any property owned,
leased, or operated by any Debtor or any Consolidated Subsidiary.
(c) No property owned, leased, or operated by any Debtor or any
Consolidated Subsidiary is, or has been, used for the Disposal of any
Hazardous Substance or for the treatment, storage, or Disposal of
Hazardous Substances.
(d) No Release of a Hazardous Substance has occurred, or is
threatened on, at, from, or near any property owned, leased, or operated
by any Debtor or any Consolidated Subsidiary.
(e) Neither any Debtor nor any Consolidated Subsidiary is
subject to any existing, pending, or threatened suit, claim, notice of
violation, or request for information under any Environmental Law nor has
any Debtor or any Consolidated Subsidiary provided any notice or
information under any Environmental Law.
(f) Each Debtor and each Consolidated Subsidiary are in
compliance with, and have obtained all Environmental Permits required by,
all Environmental Laws.
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4.14.VALIDITY OF TRANSACTION DOCUMENTS. The Transaction Documents
constitute the legal, valid, and binding obligations of each Debtor and
each Consolidated Subsidiary and any Third Parties thereto, enforceable in
accordance with their respective terms, except as enforceability may be
limited by applicable bankruptcy and insolvency laws and laws affecting
creditors' rights generally.
4.15.NO CONSENT OR FILING. No consent, license, approval, or
authorization of, or registration, declaration, or filing with, any court,
governmental body or authority, or other person or entity is required in
connection with the valid execution, delivery, or performance of the
Transaction Documents or for the conduct of each Debtor's business as now
conducted, other than filings and recordings to perfect security interests
in or liens on the Collateral in connection with the Transaction
Documents.
4.16.NO VIOLATIONS. Neither a Debtor nor any Consolidated Subsidiary
is in violation of any term of its articles, or certificate of
incorporation, or by-laws, or of any mortgage, borrowing agreement, or
other instrument or agreement pertaining to indebtedness for borrowed
money except as set forth in Item 35 of the Schedule. Neither a Debtor nor
any Consolidated Subsidiary is in violation of any term of any other
indenture, instrument, or agreement to which it is a party or by which it
or its property may be bound, resulting, or which might reasonably be
expected to result, in a material and adverse effect upon its business or
assets. Neither a Debtor nor any Consolidated Subsidiary is in violation
of any order, writ, judgment, injunction, or decree of any court of
competent jurisdiction or of any statute, rule, or regulation of any
governmental authority. The execution and delivery of the Transaction
Documents and the performance of all of the same, is, and will be, in
compliance with the foregoing and will not result in any violation
thereof, or result in the creation of any mortgage, lien, security
interest, charge, or encumbrance upon, any properties or assets except in
favor of the Agent for the benefit of the Agent and the Lenders. There
exists no fact or circumstance (whether or not disclosed in the
Transaction Documents) which materially adversely affects, or in the
future (so far as a Debtor can now foresee) may materially adversely
affect, the condition, business, or operations of such Debtor or any
Consolidated Subsidiary.
4.17.TRADEMARKS AND PATENTS. Each Debtor and each Consolidated
Subsidiary possesses all trademarks, trademark rights, patents, patent
rights, tradenames, tradename rights and copyrights that are required to
conduct its business as now conducted without conflict with the rights or
claimed rights of others. A list of the foregoing is set forth in Item 14
of the Schedule.
4.18.CONTINGENT LIABILITIES. There are no suretyship agreements,
guaranties, or other contingent liabilities of a Debtor or any
Consolidated Subsidiary which are not disclosed by the financial
statements described in Section 4.9 or Item 25 of the Schedule.
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4.19.COMPLIANCE WITH LAWS. Each Debtor is in compliance with all
applicable laws, rules, regulations, and other legal requirements with
respect to its business and the use, maintenance, and operations of the
real and personal property owned or leased by it in the conduct of its
business.
4.20.LICENSES, PERMITS, ETC. Each franchise, grant, approval,
authorization, license, permit, easement, consent, certificate, and order
of and registration, declaration, and filing with, any court, governmental
body or authority, or other person or entity required for or in connection
with the conduct of a Debtor's and each Consolidated Subsidiary's business
as now conducted is in full force and effect.
4.21.LABOR CONTRACTS. Neither a Debtor nor any Consolidated
Subsidiary is a party to any collective bargaining agreement or to any
existing or threatened labor dispute or controversies except as set forth
in Item 15 of the Schedule.
4.22.CONSOLIDATED SUBSIDIARIES. Each Debtor has no Consolidated
Subsidiaries other than those listed in Item 33 of the Schedule, and the
percentage ownership of such Debtor in each such Consolidated Subsidiary
is specified in such Item 33. IEC will cause IEC Arab, Alabama Inc. to be
dissolved, and will deliver satisfactory evidence thereof to Agent, by
June 30, 2000, and will cause all of the net proceeds received by IEC from
the sale of the assets of IEC Arab, Alabama, Inc. to be promptly paid to
the Agent for application to the Revolving Credit. IEC will also cause
IEC-Edinburg to be dissolved or merged into IEC, and provide satisfactory
evidence thereof, to Agent by June 30, 2000. IEC will also cause IEC
Electronics-Ireland Limited to be dissolved as soon as possible but not
later than December 1, 2001 and provide satisfactory evidence thereof to
Agent by December 31, 2001.
4.23.AUTHORIZED SHARES. Each Debtor's total authorized common shares,
the par value of such shares, and the number of such shares issued and
outstanding, are set forth in Item 16 of the Schedule. All of such shares
are of one class and have been validly issued in full compliance with all
applicable federal and state laws, and are fully paid and non-assessable.
No other shares of such Debtor of any class or type are authorized or
outstanding, except as set forth in Item 16 of the Schedule.
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4.24.LAWS AND REGULATIONS. Neither a Debtor nor any Consolidated
Subsidiary is engaged principally, or as one of its important activities,
in the business of extending credit for purpose of purchasing or carrying
"margin stock." None of the proceeds of the Advances or the Term Loan will
be used for the purpose of, or be made available by such Debtor in any
manner to any other person to enable such person or assist such person in,
directly or indirectly purchasing or carrying "margin stock." Terms for
which meanings are provided in F.R.S. Board Regulations T, U or X or any
regulations substituted therefore, as from time to time in effect, are
used in this Section 4.24 with such meanings. Neither a Debtor nor any
Consolidated Subsidiary is an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or a "holding company", or
a "subsidiary company" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
4.25.SOLVENCY. Each Debtor and each Consolidated Subsidiary is and at
all times hereafter shall be solvent and able to pay its respective debts
as they mature, and has, and shall at all times hereafter own, property
which has a fair market value greater than the amount required to pay its
debts as they mature.
4.26.BANK ACCOUNTS. No Debtor or Consolidated Subsidiary has any bank
account or other deposit relationships with any financial institution
other than HSBC Bank except as have been disclosed to the Agent and the
Lenders in writing.
4.27.DISCLOSURE. Neither this Agreement nor any Transaction Document,
nor any certificate, statement, agreement or other document furnished to
the Agent or any Lender in connection herewith or therewith, contains any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and therein, in
light of the circumstances under which they were made, not misleading.
There is no fact known to either Debtor which materially adversely affects
the business, property, assets, financial condition or results of
operations of such Debtor and its Subsidiaries, taken as a whole, which
has not been set forth in this Agreement or the Transaction Documents or
in the certificates, statements, agreements or other documents furnished
in writing to the Agent and the Lenders prior to or at the date hereof in
connection with the transactions contemplated hereby and thereby.
50 CERTAIN DOCUMENTS TO BE DELIVERED TO AGENT.
5.1. DOCUMENTS. Each Debtor shall deliver to Agent, all documents
with respect to such Debtor specified in Item 17 of the Schedule, as
frequently as indicated therein or at such other times as Agent may
request, and all other documents and information reasonably requested by
Agent, all in form, content and detail satisfactory to Agent. The
documents and schedules to be provided under this Section 5.1 are solely
for the convenience of Agent in administering this Agreement and
maintaining records of the Collateral. Any Debtor's failure to provide
Agent with any such schedule shall not affect the Security Interest.
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5.2. INVOICES. Each Debtor shall cause all of its Invoices to be
printed and to bear consecutive numbers and shall prepare and issue its
Invoices in such consecutive numerical order. If requested by Agent, all
copies of Invoices not previously delivered to Agent shall be delivered to
Agent with each schedule of Receivables. Copies of all Invoices which are
voided or canceled or which, for any other reason, do not evidence a
Receivable shall be included in such delivery. If any Invoice or copy
thereof is lost, destroyed, or otherwise unavailable, such Debtor shall
account in writing, in form satisfactory to Agent, for such missing
Invoice.
5.3. CHATTEL PAPER. The original of each item of Chattel Paper
evidencing a Receivable shall be delivered to Agent with the schedule
listing the Receivable which it evidences, together with an assignment in
form and content satisfactory to Agent of such Chattel Paper by the
applicable Debtor to the Agent.
60 COLLECTIONS. Unless Agent notifies a Debtor that it specifically dispenses
with one or more of the following requirements, any Proceeds of Collateral
received by such Debtor, including, without limitation, payments on Receivables,
other payments from sales or leases of Inventory or other assets and from life
insurance proceeds, shall be held by such Debtor in trust for Agent in the same
medium in which received, shall not be commingled with any assets of such
Debtor, and shall be delivered immediately to Agent. So long as Agent elects to
keep the HSBC Payment Account in existence, each Debtor shall deposit payments
on Receivables and all other payments from sales or leases of Inventory or other
assets, and life insurance proceeds into the HSBC Payment Account and shall, on
the day of each such deposit, forward to Agent a copy of the deposit receipt of
the depository bank indicating that such deposit has been made. Upon receipt of
such payments other than payments from sales of other assets, Agent, shall apply
same directly to the payment of the Revolving Credit, and then in accordance
with Section 7.5, and payments from sales of other assets shall be applied in
accordance with Section 7.5. Checks drawn on the HSBC Payment Account, and all
or any part of the balance of the HSBC Payment Account, shall be applied from
time to time in accordance with the foregoing.
70 PAYMENT OF PRINCIPAL, INTEREST, FEES, AND COSTS AND
EXPENSES.
7.1. PROMISE TO PAY PRINCIPAL.
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(a) Each Debtor promises to pay in full to each Lender such
Lender's Pro-Rata Share of the outstanding principal of Advances for
such Debtor in full upon termination of this Agreement pursuant to
Section 13.13, or acceleration of the time for payment of the
Indebtedness, pursuant to Section 11.2. Whenever the outstanding
principal balance of Advances exceeds the IEC Borrowing Capacity or
IEC-Edinburg Borrowing Capacity, such Debtor promises to immediately
pay to each Lender such Lender's Pro-Rata Share of the excess of the
outstanding principal balance of Advances over the IEC Borrowing
Capacity or IEC-Edinburg Borrowing Capacity, as applicable, provided
however, if the principal balance of Advances continues to exceed the
Borrowing Capacity, Debtors promise to immediately pay to each Lender
such Lender's Pro-Rata Share of the excess.
(b) Debtors promise to pay to Lenders the Term Loan in
installments of principal as follows: thirty-four (34) equal monthly
principal installments each in the amount of $175,438.60 payable on
the first day of each month commencing April 1, 2000 through and
including January 1, 2003 followed by one (1) final installment on
January 31, 2003 in an amount equal to the then unpaid principal of
and interest on the Term Loan. Debtors further agree to pay to
Lenders the outstanding principal balance of the Term Loan in full
upon termination of this Agreement pursuant to Section 13.13, or
acceleration of the time for payment of the Indebtedness pursuant to
Section 11.2. The Term Loan shall be evidenced by notes of the
Debtors each substantially in the form of Exhibit C attached hereto
and made a part hereof with all blanks appropriately completed
(collectively, the "Term Note"). The Term Note shall become
immediately due and payable if a Debtor voluntarily repays all or
substantially all of the Advances other than temporarily from
internally generated funds in the ordinary course of business.
All amounts payable to each Lender hereunder shall be paid to Agent
for the account of each Lender and shall be distributed by Agent to
each Lender in accordance with the Agency Agreement of even date
herewith.
7.2. PROMISE TO PAY INTEREST.
(a) Each Debtor promises to pay interest on the principal of
Advances for such Debtor from time to time unpaid at the fluctuating
per annum rate specified in Item 18 of the Schedule. From the date of
the occurrence of, and during the continuance of, a default and
notice thereof to such Debtor by Agent, such Debtor, as additional
compensation to the Lenders for their increased credit risk promises
to pay interest on (i) the principal of Advances, whether or not past
due; and (ii) past due interest and any other amount past due under
the Transaction Documents (other than the Term Note), at a per annum
rate of 3% greater than the rate of interest specified in Item 18 of
the Schedule.
(b) Debtors promise to pay to Lenders interest on the
outstanding Term Loan from time to time unpaid at a per annum rate
specified in Item 18 of the Schedule. From the date of, and during
the continuance of, an Event of Default, Debtors, as additional
compensation to the Lenders for their increased credit risk promises
to pay interest on (i) the outstanding principal amount of the Term
Loan whether or not past due; and (ii) past due interest and any
other amount past due on the Term Note at a per annum rate of three
percent (3%) greater than the rate of interest specified on Item 18
of the Schedule.
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(c) Interest on the Advances shall be paid to the Agent for the
account of the Lenders (i) on the first day of each month commencing
February 1, 2000 in arrears, (ii) on termination of this Agreement,
pursuant to Section 13.13, (iii) on acceleration of the time for
payment of the Indebtedness, pursuant to Section 11.2, and (iv) on
the date the Indebtedness is paid in full.
(d Interest on the Term Loan shall be paid to the Agent for the
account of the Lenders (i) monthly, in arrears, commencing February
1, 2000 and on the first day of each month thereafter, (ii) on
termination of this Agreement, pursuant to Section 13.13, (iii) on
acceleration of the time for payment of the Indebtedness, pursuant to
Section 11.2, and (iv) on the date the Indebtedness is paid in full.
(e Any change in the interest rate resulting from a change in
the Prime Rate shall take effect simultaneously with such change in
the Prime Rate. Interest shall be computed on the daily unpaid
principal balance of Advances and the Term Loan. Interest shall be
calculated for each calendar day at 1/360th of the applicable per
annum rate which will result in an effective per annum rate higher
than that specified in Item 18 of the Schedule. In no event shall the
rate of interest exceed the maximum rate permitted by applicable law.
If any Debtor pays to Agent or any Lender interest in excess of the
amount permitted by applicable law, such excess shall be applied in
reduction of the principal of Advances made pursuant to this
Agreement or to the Term Loan, as appropriate, and any remaining
excess interest, after application thereof to the principal of
Advances or the Term Loan, shall be refunded to such Debtor.
(f Interest paid to Agent shall be distributed by Agent to each
Lender in accordance with the Agency Agreement.
7.3. PROMISE TO PAY FEES. Each Debtor promises to pay to Agent any
fees specified in Item 19 of the Schedule on the applicable due dates
also specified in Item 19 of the Schedule.
7.4. PROMISE TO PAY COSTS AND EXPENSES.
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(a Each Debtor agrees to pay to Agent and each Lender, on
demand, all costs and expenses as provided in this Agreement, and all
costs and expenses incurred by each of them from time to time in
connection with this Agreement, including, without limitation, those
incurred in: (i) preparing, negotiating, amending, waiving, or
granting consent with respect to the terms of any or all of the
Transaction Documents, including, without limitation, preparing,
negotiating, and amending any documents in connection with the
assignment or sale by any Lender of all or a portion of the
Indebtedness or participation interests therein pursuant to Section
13.7 hereof; (ii) enforcing the Transaction Documents; (iii)
performing, pursuant to Section 13.2, a Debtor's duties under the
Transaction Documents upon such Debtor's failure to perform them;
(iv) filing financing statements, assignments, or other documents
relating to the Collateral (e.g., filing fees, recording taxes, and
documentary stamp taxes); (v) maintaining the HSBC Payment Account;
(vi) administering the Transaction Documents, but not ordinary
general and administrative expenses; (vii) compromising, pursuing, or
defending any controversy, action, or proceeding resulting, directly
or indirectly, from Agent or any Lender's relationship with any
Debtor, regardless of whether such Debtor is a party to such
controversy, action, or proceeding and of whether the controversy,
action, or proceeding occurs before or after the Indebtedness has
been paid in full; (viii) realizing upon or protecting any
Collateral; (ix) enforcing or collecting any Indebtedness or guaranty
thereof; (x) employing collection agencies or other agents to collect
any or all of the Receivables; (xi) examining a Debtor's books and
records or inspecting the Collateral including, without limitation,
the reasonable costs of examinations and inspections conducted by
third parties, provided that nothing herein shall limit Agent's right
to audit, examination, inspection, or other fees otherwise payable
under Section 7.3; and (xii) obtaining independent appraisals from
time to time as deemed necessary or appropriate by Agent.
(b Without limiting Section 7.4(a), each Debtor also agrees to
pay to Agent and each Lender, on demand, the actual fees and
disbursements incurred by Agent or any such Lender for attorneys
retained by Agent or any such Lender for advice, suit, appeal, or
insolvency or other proceedings under the Federal Bankruptcy Code or
otherwise, or in connection with any purpose specified in Section
7.4(a).
7.5. METHOD OF PAYMENT OF PRINCIPAL, INTEREST, FEES, AND COSTS AND
EXPENSES. Without limiting any Debtor's obligation, pursuant to
Sections 7.1, 7.2., 7.3, and 7.4 to pay the principal of Advances, the
principal of the Term Loan, interest, fees, and costs and expenses, the
following provisions shall apply to the payment thereof:
(a Payment of Principal. Each Debtor authorizes Agent to apply
any Proceeds of such Debtor's Collateral, including, without
limitation, payments on Receivables, other payments from sales or
leases of Inventory, and any funds in the HSBC Payment Account, to
the unpaid principal of Advances for such Debtor and the Term Loan.
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(b Payment of Interest, Fees, and Costs and Expenses. Without
limiting any Debtor's obligation to pay accrued interest, fees, and
costs and expenses, each Debtor authorizes Agent to (provided,
however, Agent shall incur no liability for failure to): (i) make an
Advance for such Debtor to pay for such items; or (ii) apply Proceeds
of such Debtor's Collateral, including, without limitation, payments
on Receivables, other payments from sales or leases of Inventory, and
any funds in the HSBC Payment Account, to the payment of such items.
(c Unless otherwise specifically provided in another provision
of this Agreement, Agent, shall apply any payments and credits and
Proceeds of Collateral including insurance proceeds to which the
Agent and the Lenders are entitled under this Agreement and the
Transaction Documents, if any, to be made on all or any part of any
component or components of the Indebtedness, whether principal,
interest, fees, costs and expenses, or otherwise in the following
order of priority: (i) unpaid fees, costs and expenses due hereunder;
(ii) unpaid accrued interest on the Term Loan; (iii) unpaid accrued
interest on the Revolving Credit; (iv) the outstanding principal
balance of the Term Loan; and (v) the outstanding principal balance
of the Revolving Credit.
7.6. COMPUTATION OF DAILY OUTSTANDING BALANCE OF ADVANCES. For the
purpose of calculating the aggregate principal balance of outstanding
Advances under Section 2.1, Advances shall be deemed to be paid on the
date that checks drawn on, or other funds received from, the HSBC Payment
Account are applied by Agent to Advances, and on the date any other
payments on Receivables, or other payments from sales or leases of
Inventory to be so applied, have been processed for collection by Agent;
provided, however, for the purpose of calculating interest payable by a
Debtor, funds from the HSBC Payment Account, payments on Receivables,
other payments from sales or leases of Inventory, and any other payments,
shall be deemed to be applied to Advances the number of days specified in
Item 20 of the Schedule after the application of such funds from the HSBC
Payment Account or receipt of such payments by Agent, and the amount of
interest payable will be adjusted by Agent from time to time accordingly.
Notwithstanding any other provision of this Agreement, if any item
presented for collection by Agent is not honored, Agent may reverse any
provisional credit which has been given for the item and make appropriate
adjustments to the amount of interest and principal due.
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7.7. ACCOUNT STATED. Each Debtor agrees that each monthly or other
statement of account mailed or delivered by Agent to such Debtor
pertaining to the outstanding balance of Advances and/or the Term Loan,
the amount of interest due thereon, fees, and costs and expenses shall be
final, conclusive, and binding on such Debtor and shall constitute an
"account stated" with respect to the matters contained therein unless,
within thirty (30) calendar days from when such statement is mailed or, if
not mailed, delivered to such Debtor, such Debtor shall deliver to Agent
written notice of any objections which it may have as to such statement of
account, and in such event, only the items to which objection is expressly
made in such notice shall be considered to be disputed by such Debtor.
8. PROCEDURES AFTER SCHEDULING RECEIVABLES.
8.1. RETURNED MERCHANDISE. Each Debtor shall notify Agent immediately
of the return, rejection, repossession, stoppage in transit, loss, damage,
or destruction of any Inventory. Agent shall make appropriate adjustments
to the IEC Receivables Borrowing Base or IEC-Edinburg Receivables
Borrowing Base, as applicable, and the IEC Inventory Borrowing Base or
IEC-Edinburg Receivables Borrowing Base, as applicable, to reflect the
return of such Inventory.
8.2. CREDITS AND EXTENSIONS.
(a Granting of Credits and Extensions. Any Debtor may grant such
Credits and such Extensions as are ordinary in the usual course of
such Debtor's business without the prior consent of Agent; provided,
however, that any such Extension shall not extend the time for
payment beyond thirty (30) days after the original due date as shown
on the Invoice evidencing the related Receivable, or as computed
based on the information set forth on such Invoice.
(b Accounting for Credits and Extensions. Each Debtor shall make
a full accounting of each grant of a Credit or an Extension,
including a brief description of the reasons therefor and a copy of
all credit memoranda. Such accountings shall be in form satisfactory
to Agent and shall be delivered to Agent daily or at such other
intervals as may be specified in Item 17 of the Schedule. All credit
memoranda issued by a Debtor shall be numbered consecutively and
copies of the same, when delivered to Agent, shall be in numerical
order and accounted for in the same manner as provided in Section 5.2
with respect to Invoices.
(c Adjustment to Receivables Borrowing Base. The applicable
Receivables Borrowing Base for such Debtor will be reduced by the
amount of all applicable Credits reflected in an accounting required
by Section 8.2(b) and by the full amount of any applicable
Receivables for which Extensions were granted.
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8.3. RETURNED INSTRUMENTS. In the event that any check or other
instrument received in payment of a Receivable shall be returned
uncollected for any reason, Agent shall again forward the same for
collection or return the same to the applicable Debtor. Upon receipt of a
returned check or instrument by a Debtor, such Debtor shall immediately
make the necessary entries on its books and records to reinstate the
Receivable as outstanding and unpaid and immediately notify Agent of such
entries. All Receivables of an Account Debtor with respect to which such
check or instrument was received shall thereupon become Ineligible
Receivables.
8.4. DEBIT MEMORANDA.
(a Unless Agent otherwise notifies a Debtor in writing, such
Debtor shall deliver at least weekly to Agent, together with the
schedule of Receivables provided for in Item 17 of the Schedule,
copies of all debit memoranda issued by such Debtor.
(b All debit memoranda issued by a Debtor shall be numbered
consecutively and copies of the same, when delivered to Agent, shall
be in numerical order and accounted for in the same manner as
provided in Section 5.2 with respect to Invoices.
8.5. NOTES RECEIVABLE. No Debtor shall accept any note or other
instrument (except a check or other instrument for the immediate payment
of money) with respect to any Receivable without the prior written consent
of Agent. If Agent, in its reasonable judgment, consents to the acceptance
of any such note or instrument, the same shall be considered as evidence
of the Receivable giving rise to such note or instrument, shall be subject
to the Security Interest, and shall not constitute payment of such
Receivable, and such Debtor shall forthwith endorse such note or
instrument to the order of Agent and deliver the same to Agent, together
with the Schedule listing the Receivables which it evidences. Upon
collection, the proceeds of such note or instrument may be applied
directly to unpaid Advances, interest, and costs and expenses as provided
in Section 7.5.
9. AFFIRMATIVE COVENANTS. So long as any part of the Indebtedness remains
unpaid, or this Agreement remains in effect, each Debtor shall comply with the
covenants contained in Item 21 of the Schedule or elsewhere in this Agreement,
and with the covenants listed below:
9.1. FINANCIAL STATEMENTS. There shall be furnished to Agent:
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(a Within five (5) days of filing with the SEC but not more than
one hundred twenty (120) days after the end of each fiscal year,
audited consolidated and consolidating financial statements of IEC
and each Consolidated Subsidiary as of the end of such year, fairly
presenting IEC's and each Consolidated Subsidiary's financial
position, which statements shall consist of a balance sheet and
related statements of income, retained earnings, and cash flow
covering the period of IEC's immediately preceding fiscal year, and
which shall be prepared by independent certified public accountants
satisfactory to Agent.
(b) On or before December 30th of each fiscal year, consolidated
financial statements of IEC and each Consolidated Subsidiary as of
the end of each October and November of such fiscal year fairly
presenting IEC's and such Consolidated Subsidiary's financial
position, and within twenty-five (25) days after the end of each
month thereafter, consolidated financial statements of IEC and each
Consolidated Subsidiary as of the end of such month, fairly
presenting IEC's and such Consolidated Subsidiary's financial
position and showing the current month compared to the same month in
the prior fiscal year and current year-to-date compared to
year-to-date of the prior fiscal year. All such statements shall
consist of a balance sheet and related statements of income, retained
earnings, and cash flow covering the period from the end of the
immediately preceding fiscal year to the end of such month, all in
such detail as Agent may request and signed and certified to be
correct by the president or chief financial officer of IEC or other
financial officer satisfactory to Agent in the form of Exhibit A
attached hereto and made a part hereof.
(c) Within twenty-five (25) days after the end of each fiscal
quarter, a compliance certificate executed by the president or chief
financial officer of each Debtor or other financial officer
satisfactory to Agent in the form of Exhibit B attached hereto and
made a part hereof provided, however, the compliance certificate for
the fourth fiscal quarter will be delivered simultaneously with the
year-end financial statements.
(d) Within thirty (30) days prior to the end of each fiscal
year, pro forma financial statements of IEC prepared on a
consolidated basis as of the end of the next following fiscal year
and consisting of a balance sheet and related statements of income,
retained earnings and cash flow, all in such detail as Agent may
request and signed by the president or chief financial officer of IEC
or other financial officer satisfactory to Agent.
(e) Promptly after their preparation, copies of any and all
proxy statements, financial statements, and reports which any Debtor
sends to its shareholders, and copies of any and all periodic and
special reports and registration statements which any Debtor files
with the Securities and Exchange Commission.
(f) Such additional information as Agent may from time to time
reasonably request regarding the financial and business affairs of
any Debtor or any Consolidated Subsidiary.
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9.2. GOVERNMENT AND OTHER SPECIAL RECEIVABLES. Each Debtor shall
promptly notify Agent in writing of the existence of any Receivable as to
which the perfection, enforceability, or validity of Agent's Security
Interest in such Receivable, or Agent's right or ability to obtain direct
payment to Agent of the Proceeds of such Receivable, is governed by any
federal or state statutory requirements other than those of the Uniform
Commercial Code, including, without limitation, any Receivable subject to
the Federal Assignment of Claims Act of 1940, as amended.
9.3. TERMS OF SALE. The terms on which sales or leases giving rise
to Receivables are made shall be as specified in Items 3 and 22 of the
Schedule.
9.4. BOOKS AND RECORDS. Each Debtor shall maintain, at its own cost
and expense, accurate and complete books and records with respect to such
Debtor's Collateral, in form satisfactory to Agent, and including, without
limitation, records of all payments received and all Credits and
Extensions granted with respect to the Receivables, of the return,
rejection, repossession, stoppage in transit, loss, damage, or destruction
of any Inventory, and of all other dealings affecting the Collateral. Each
Debtor shall deliver such books and records to Agent or its representative
on request. At Agent's request, such Debtor shall mark all or any records
to indicate the Security Interest. Each Debtor shall further indicate the
Security Interest on all financial statements issued by it or shall cause
the Security Interest to be so indicated by its accountants. The HSBC
Payment Account, if any, is not an asset of any Debtor and shall not be
shown as an asset of any Debtor in such books and records or in such
financial statements.
9.5. INVENTORY IN POSSESSION OF THIRD PARTIES. If any Inventory
remains in the hands or control of any of a Debtor's agents, finishers,
contractors, or processors, or any other third party, such Debtor, if
requested by Agent, shall notify such party of Agent's Security Interest
in the Inventory and shall instruct such party to hold such Inventory for
the account of Agent and subject to the instructions of Agent.
9.6. EXAMINATIONS. Each Debtor shall at all reasonable times and from
time to time permit Agent or its agents to inspect the Collateral and to
examine and make extracts from, or copies of, any of such Debtor's books,
ledgers, reports, correspondence, and other records.
9.7. VERIFICATION OF COLLATERAL. Agent and each Lender shall have the
right to verify all or any Collateral in any manner and through any medium
Agent or such Lender may consider appropriate and each Debtor agrees to
furnish all assistance and information and perform any acts which Agent or
such Lender may require in connection therewith.
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9.8. RESPONSIBLE PARTIES. Each Debtor shall notify Agent of the
occurrence of any event specified in Section 1.1(y)(iv) with respect to
any Responsible Party promptly after receiving notice thereof.
9.9. TAXES. Each Debtor shall promptly pay and discharge all of its
taxes, assessments, and other governmental charges prior to the date on
which penalties are attached thereto, establish adequate reserves for the
payment of such taxes, assessments, and other governmental charges, make
all required withholding and other tax deposits, and, upon request,
provide Agent with receipts or other proof that such taxes, assessments,
and other governmental charges have been paid in a timely fashion;
provided, however, that nothing contained herein shall require the payment
of any tax, assessment, or other governmental charge so long as its
validity is being contested in good faith, and by appropriate proceedings
diligently conducted, and adequate reserves for the payment thereof have
been established.
9.10.LITIGATION.
(a Each Debtor shall promptly notify Agent in writing of any
litigation, proceeding, or counterclaim against, or of any
investigation of, such Debtor or any Consolidated Subsidiary if: (i)
the outcome of such litigation, proceeding, counterclaim, or
investigation may materially and adversely affect the finances or
operations of such Debtor or any Consolidated Subsidiary or title to,
or the value of, any Collateral; or (ii) such litigation, proceeding,
counterclaim, or investigation questions the validity of any
Transaction Document or any action taken, or to be taken, pursuant to
any Transaction Document.
(b Each Debtor shall furnish to Agent such information regarding
any such litigation, proceeding, counterclaim, or investigation as
Agent shall request.
9.11.INSURANCE.
(a Each Debtor shall at all times carry and maintain in full
force and effect such insurance as Agent may from time to time
require, in coverage, form, and amount, and issued by insurers,
satisfactory to such Debtor and Agent, including, without limitation:
workers' compensation or similar insurance; public liability
insurance; business interruption insurance; and insurance against
such other risks as are usually insured against by business entities
of established reputation engaged in the same or similar businesses
as such Debtor and similarly situated.
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(b Each Debtor shall deliver to Agent the policies of insurance
required by Agent, with appropriate endorsements designating Agent as
an additional insured, mortgagee and loss payee as requested by
Agent. Each policy of insurance shall provide that if such policy is
canceled for any reason whatsoever, if any substantial change is made
in the coverage which affects Agent, or if such policy is allowed to
lapse for nonpayment of premium, such cancellation, change, or lapse
shall not be effective as to Agent until thirty (30) days after
receipt by Agent of written notice thereof from the insurer issuing
such policy.
(c Each Debtor hereby appoints Agent as its attorney-in-fact,
with full authority in the place and stead of such Debtor and in the
name of such Debtor, Agent, or otherwise, from time to time in
Agent's discretion, to take any actions and to execute any
instruments which Agent may deem necessary or desirable to obtain,
adjust, make claims under, and otherwise deal with insurance required
pursuant hereto and to receive, endorse, and collect any drafts or
other instruments delivered in connection therewith.
(d) The Agent shall receive the proceeds of any and all
insurance that may become payable with respect to any of a Debtor's
insured property ("Insurance Proceeds") and apply the same first to
the expenses, if any, of collection thereof, and then in accordance
with Section 7.5(c) hereof. All Insurance Proceeds are hereby
assigned to the Agent for the benefit of the Agent and the Lenders
and the applicable Debtor shall, upon request of the Agent, make,
execute, acknowledge and deliver any and all additional assignments
and documents as may be necessary from time to time to enable the
Agent to collect and issue receipts for any Insurance Proceeds.
Notwithstanding the foregoing, if Insurance Proceeds are less than
$500,000 and no Event of Default has occurred and is continuing
hereunder, upon request of the applicable Debtor such Insurance
proceeds so held by the Agent shall be made available for repair or
restoration of the insured property and disbursed by the Agent during
the course of such repair or restoration under safeguards reasonably
satisfactory to Agent. Any sums remaining after completion of repair
or restoration shall be applied in accordance with Section 7.5(c).
The Agent shall not be, under any circumstances, liable or
responsible for failure to collect, or exercise diligence in the
collection of, any Insurance Proceeds.
9.12.GOOD STANDING; BUSINESS.
(a Each Debtor shall take all necessary steps to preserve its
corporate existence and its right to conduct business in all states
in which the nature of its business or ownership of its property
requires such qualification.
(b Each Debtor shall engage only in the business conducted by it
on the date of this Agreement.
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9.13.PENSION REPORTS. Upon the occurrence of any Pension Event, the
applicable Debtor shall furnish to Agent, as soon as possible and, in any
event, within thirty (30) days after such Debtor knows, or has reason to
know, of such occurrence, the statement of the president or chief
financial officer of such Debtor setting forth the details of such Pension
Event and the action which such Debtor proposes to take with respect
thereto.
9.14.NOTICE OF NON-COMPLIANCE. Each Debtor shall notify Agent in
writing of any failure by such Debtor or any Third Party to comply with
any provision of any Transaction Document immediately upon learning of
such non-compliance, or if any representation or warranty contained in any
Transaction Document is no longer true.
9.15.COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a Each Debtor shall comply with all Environmental Laws.
(b Each Debtor shall not suffer, cause, or permit the Disposal
of Hazardous Substances at any property owned, leased, or operated by
it or any Consolidated Subsidiary.
(c Each Debtor shall promptly notify Agent in the event of the
Disposal of any Hazardous Substance at any property owned, leased, or
operated by such Debtor or any Consolidated Subsidiary, or in the
event of any Release, or threatened Release, of a Hazardous
Substance, from any such property.
(d Each Debtor shall, at Agent's request, provide, at such
Debtor's expense, updated Environmental Questionnaires and/or
Environmental Reports concerning any property owned, leased, or
operated by Debtor or any Consolidated Subsidiary.
(e Each Debtor shall deliver promptly to Agent (i) copies of any
documents received from the United States Environmental Protection
Agency or any state, county, or municipal environmental or health
agency concerning such Debtor's or any Consolidated Subsidiary's
operations; and (ii) copies of any documents submitted by such Debtor
or any Consolidated Subsidiary to the United States Environmental
Protection Agency or any state, county, or municipal environmental or
health agency concerning its operations.
9.16.DEFEND COLLATERAL. Each Debtor shall defend the Collateral
against the claims and demands of all other parties (other than Agent),
including, without limitation, defenses, setoffs, and counterclaims
asserted by any Account Debtor against such Debtor or Agent.
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9.17.USE OF PROCEEDS. Each Debtor shall use the proceeds of Advances
and the proceeds of the Term Loan solely for such Debtor's working capital
and for such other legal and proper corporate purposes as are consistent
with all applicable laws, such Debtor's articles or certificate of
incorporation and by-laws, resolutions of such Debtor's Board of
Directors, and the terms of this Agreement.
9.18.COMPLIANCE WITH LAWS. Each Debtor shall comply with all
applicable laws, rules, regulations, and other legal requirements with
respect to its business and the use, maintenance, and operations of the
real and personal property owned or leased by it in the conduct of its
business.
9.19.MAINTENANCE OF PROPERTY. Each Debtor shall maintain its
property, including, without limitation, the Collateral, in good condition
and repair and shall prevent the Collateral, or any part thereof, from
being or becoming an accession to other goods not constituting Collateral.
9.20.LICENSES, PERMITS, ETC. Each Debtor shall maintain all of its
franchises, grants, authorizations, licenses, permits, easements,
consents, certificates, and orders, if any, in full force and effect until
their respective expiration dates.
9.21.TRADEMARKS AND PATENTS. Each Debtor shall maintain all of its
trademarks, trademark rights, patents, patent rights, licenses, permits,
tradenames, tradename rights, and approvals, if any, in full force and
effect until their respective expiration dates.
9.22.ERISA. Each Debtor shall comply with the provisions of ERISA and
the Internal Revenue Code with respect to each Pension Plan.
9.23.MAINTENANCE OF OWNERSHIP. Each Debtor shall at all times
maintain ownership of the percentages of issued and outstanding capital
stock of each Consolidated Subsidiary set forth in Item 33 of the
Schedule.
9.24.ACTIVITIES OF CONSOLIDATED SUBSIDIARIES. Unless the provisions
of this Section 9.24 are expressly waived by Agent in writing, each Debtor
shall cause each Consolidated Subsidiary to comply with Sections 9.1(b),
9.9, 9.11(a), 9.12, 9.15, and 9.18 through 9.22, inclusive, and any of the
provisions contained in Item 21 of the Schedule, and shall cause each
Consolidated Subsidiary to refrain from doing any of the acts proscribed
by Sections 10.2, 10.3, and 10.5 through 10.14, inclusive, or proscribed
by any of the provisions contained in Item 21 of the Schedule.
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9.25.MILLENNIUM COMPLIANCE.
(a) Each Debtor shall be "Millennium Compliant". As set forth
herein, Millennium Compliant means that software, hardware, embedded
microchips and other processing capabilities utilized by, and
material to, the business operations (Systems) of such Debtor
function accurately and consistently accept date input, provide date
output and perform calculations on dates before, during and after
January 1, 2000 without interruption and without any change in
operations associated with the advent of the year 2000.
(b) Upon request by Agent, a Debtor shall provide to Agent its
plan to become Millennium Compliant and status reports on the
implementation of the same, or such other information which is
sufficient to demonstrate that such Debtor will be Millennium
Compliant.
10. NEGATIVE COVENANTS. So long as any part of the Indebtedness remains
unpaid or this Agreement remains in effect, a Debtor, without the written
consent of Agent, shall not violate any covenant contained in Item 21 of the
Schedule and shall not:
10.1.LOCATION OF INVENTORY, EQUIPMENT, AND BUSINESS RECORDS. Move the
Inventory, Equipment, or the records concerning the Collateral from the
location where they are kept as specified in Items 11 and 13 of the
Schedule; provided, however work-in-process Inventory can be moved between
IEC and IEC-Edinburg Inventory locations and to the location of Debtor's
Mexican affiliate, and Equipment can be moved between Debtors' Equipment
locations in Newark, New York and Edinburg, Texas; and nothing herein
shall prevent or prohibit the Debtors from transferring up to $50,000
worth of testing and minor production equipment to IEC's Mexican
affiliate, or from conducting business in accordance with Debtor's Shelter
Services Agreement.
10.2.BORROWED MONEY. Create, incur, assume, or suffer to exist any
Obligations (as defined below) except to Lenders under this Agreement and
except as may be specified in Item 23 of the Schedule.
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"Obligations" of any Debtor shall mean without duplication (a) all
indebtedness of such Debtor for borrowed money or for the deferred
purchase price of property payment for which is deferred six (6)
months or more, but excluding obligations to trade creditors incurred
in the ordinary course of business that are not overdue by more than
six (6) months unless being contested in good faith, (b) all
reimbursement and other obligations with respect to letters of
credit, bankers' acceptances and surety bonds, whether or not
matured, (c) all obligations evidenced by notes, bonds, debentures or
similar instruments, (d) all indebtedness created or arising under
any conditional sale or other title retention agreement with respect
to property acquired by such Debtor (even though the rights and
remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (e)
all capital lease obligations, (f) all obligations of such Debtor
under commodity purchase or option agreements or other commodity
price hedging arrangements, in each case whether contingent or
matured, (g) all obligations of such Debtor under any foreign
exchange contract, currency swap agreement, interest rate swap, cap
or collar agreement or other similar agreement or arrangement
designed to alter the risks of that Debtor arising from fluctuations
in currency values or interest rates, in each case whether contingent
or matured, (h) all indebtedness referred to above secured by (or for
which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) any lien upon or in
property or other assets (including accounts and contract rights)
owned by such Debtor even though such Debtor has not assumed or
become liable for the payment of such indebtedness.
10.3.SECURITY INTEREST AND OTHER ENCUMBRANCES. Create, incur, assume,
or suffer to exist any mortgage, security interest, lien, or other
encumbrance upon any of its properties or assets, whether now owned or
hereafter acquired, except mortgages, security interests, liens, and
encumbrances (a) in favor of Agent and (b) as may be specified in Item 12
of the Schedule.
10.4.STORING AND USE OF COLLATERAL. Place the Collateral in any
warehouse which may issue a negotiable Document with respect thereto or
use the Collateral in violation of any provision of the Transaction
Documents, of any applicable statute, regulation, or ordinance, or of any
policy insuring the Collateral.
10.5.MERGERS, CONSOLIDATIONS, OR SALES. (a) Merge or consolidate with
or into any corporation; (b) enter into any joint venture or partnership
with any person, firm, or corporation; (c) convey, lease, or sell all or
any material portion of its property or assets or business to any other
person, firm, or corporation except for the sale of Inventory in the
ordinary course of its business and in accordance with the terms of this
Agreement; or (d) convey, lease, or sell any of its assets to any person,
firm, or corporation for less than the fair market value thereof and the
net proceeds from any such conveyance, lease or sale shall be paid to
Agent for the benefit of the Lenders within one (1) Business Day of
receipt thereof by Debtor as a mandatory repayment of the Indebtedness.
10.6.CAPITAL STOCK. Purchase or retire any of its capital stock or
otherwise change the capital structure of such Debtor or change the
relative rights, preferences, or limitations relating to any of its
capital stock.
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10.7.DIVIDENDS OR DISTRIBUTIONS. Pay or declare any cash or other
dividends or distributions on any of its corporate stock, except that
stock dividends may be paid, and except that a Consolidated Subsidiary may
pay dividends of any kind to such Debtor.
10.8.INVESTMENTS AND ADVANCES. Create any new subsidiary or make any
investment in, or advances to, any other person, firm, or corporation
except (a) advance payments or deposits against purchases made in the
ordinary course of such Debtor's regular business; (b) any existing
investments in, or existing advances to, the Consolidated Subsidiaries; or
(c) any investments or advances that may be specified in Item 24 of the
Schedule.
10.9.GUARANTIES. Become a guarantor, a surety, or otherwise liable
for the debts or other obligations of any other person, firm, or
corporation, whether by guaranty or suretyship agreement, agreement to
purchase indebtedness, agreement for furnishing funds through the purchase
of goods, supplies, or services (or by way of stock purchase, capital
contribution, advance, or loan) for the purpose of paying or discharging
indebtedness, or otherwise, except as an endorser of instruments for the
payment of money deposited to its bank account for collection in the
ordinary course of business and except as may be specified in Item 25 of
the Schedule.
10.10. LEASES. Enter, as lessee, into any lease of real or personal
property (whether such lease is classified on such Debtor's financial
statements as a capital lease or operating lease) if the aggregate of the
rentals of such lease and of such Debtor's other then existing leases
would exceed, in any one of such Debtor's fiscal years, the amount
specified in Item 26 of the Schedule.
10.11. CAPITAL EXPENDITURES. Make or incur any capital
expenditures in any one fiscal year in an aggregate amount in excess of
the amount, if any, specified in Item 27 of the Schedule.
10.12. COMPENSATION. Intentionally Omitted.
10.13. NAME CHANGE. Change its name without giving at least thirty
(30) days prior written notice of its proposed new name to Agent, together
with delivery to Agent of UCC-1 Financing Statements reflecting such
Debtor's new name, all in form and substance satisfactory to Agent.
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10.14. DISPOSITION OF COLLATERAL. Sell, assign, or otherwise
transfer, dispose of, or encumber the Collateral or any interest therein,
or grant a security interest therein, or license thereof, except to Agent
for the benefit of itself and the Lenders and except the sale or lease of
Inventory in the ordinary course of business of such Debtor and in
accordance with the terms of this Agreement.
10.15. FINANCIAL COVENANTS. Fail to comply with the financial
covenants set forth in Item 30 of the Schedule.
10.16. AFFILIATE TRANSACTIONS. Enter into, or permit any Subsidiary
to enter into, or carry out any transaction with an affiliated entity
including, without limitation, purchasing property or services from or
selling property or services to such affiliated entity unless such
transaction is (i) entered into in the ordinary course of business upon
fair and reasonable arm's-length terms and conditions and (ii) in
accordance with all applicable laws, statutes, rules, regulations,
ordinances, orders, judgments, guidelines or decisions of any applicable
state or Federal governmental authority or authorities; provided, however,
nothing herein shall prevent or prohibit the Debtors from transferring up
to $50,000 worth of testing and minor production equipment to IEC's
Mexican affiliate, or from conducting business in accordance with Debtor's
Shelter Services Agreement.
11. EVENTS OF DEFAULT.
11.1.EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an event of default (individually, an
Event of Default and, collectively, Events of Default):
(a Nonpayment. Nonpayment when due of any principal,
interest, premium, fee, cost, or expense due under the Transaction
Documents.
(b Negative Covenants. Default in the observance of any of
the covenants or agreements of any Debtor contained in Article 10
or contained in Sections 9.11, 9.17 or 9.23.
(c Article 6. Default in the observance of any of the
covenants or agreements of any Debtor contained in Article 6.
(d Other Covenants. Default in the observance of any of the
covenants or agreements of any Debtor contained in the Transaction
Documents, other than in Article 10, Sections 9.11, 9.17 or 9.23,
Article 6 or Sections 7.1, 7.2, 7.3, 7.4 or 7.5, or in any other
agreement with Agent which is not remedied within the earlier of ten
(10) days after (i) notice thereof by Agent to such Debtor, or (ii)
the date such Debtor was required to give notice to Agent under
Section 9.14.
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(e Cessation of Business or Voluntary Insolvency Proceedings.
The (i) cessation of operations of any Debtor's business as conducted
on the date of this Agreement; (ii) filing by any Debtor of a
petition or request for liquidation, reorganization, arrangement,
adjudication as a bankrupt, relief as a debtor, or other relief under
the bankruptcy, insolvency, or similar laws of the United States of
America or any state or territory thereof or any foreign jurisdiction
now or hereafter in effect; (iii) making by any Debtor of a general
assignment for the benefit of creditors; (iv) consent by any Debtor
to the appointment of a receiver or trustee, including, without
limitation, a "custodian," as defined in the Federal Bankruptcy Code,
for any Debtor or any of such Debtor's assets; (v) making of any, or
sending of any, notice of any intended, bulk sale by any Debtor; or
(vi) execution by any Debtor of a consent to any other type of
insolvency proceeding (under the Federal Bankruptcy Code or
otherwise) or any formal or informal proceeding for the dissolution
or liquidation of, or settlement of, claims against or winding up of
affairs of, any Debtor.
(f Involuntary Insolvency Proceedings. (i) The appointment of a
receiver, trustee, custodian, or officer performing similar
functions, including, without limitation, a "custodian," as defined
in the Federal Bankruptcy Code, for any Debtor or any of such
Debtor's assets; or the filing against any Debtor of a request or
petition for liquidation, reorganization, arrangement, adjudication
as a bankrupt, or other relief under the bankruptcy, insolvency, or
similar laws of the United States of America, any state or territory
thereof, or any foreign jurisdiction now or hereafter in effect; or
of any other type of insolvency proceeding (under the Federal
Bankruptcy Code or otherwise) or any formal or informal proceeding
for the dissolution or liquidation of, settlement of claims against,
or winding up of affairs of any Debtor shall be instituted against
any Debtor; and (ii) such appointment shall not be vacated, or such
petition or proceeding shall not be dismissed, within sixty (60) days
after such appointment, filing, or institution.
(g Other Indebtedness and Agreements. Failure by any Debtor to
pay, when due, (or, if permitted by the terms of any applicable
documentation, within any applicable grace period) any indebtedness
owing by such Debtor to any Lender or any other person or entity
(other than the Indebtedness incurred, pursuant to this Agreement,
and including, without limitation, indebtedness evidencing a deferred
purchase price), whether such indebtedness shall become due by
scheduled maturity, by required prepayment, by acceleration, by
demand, or otherwise, or failure by any Debtor to perform any term,
covenant, or agreement on its part to be performed under any
agreement or instrument (other than a Transaction Document)
evidencing or securing or relating to any indebtedness owing by such
Debtor when required to be performed if the effect of such failure is
to permit the holder to accelerate the maturity of such indebtedness.
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(h Judgments. Any judgment or judgments against any Debtor in
excess of $50,000 individually or in the aggregate above the amount
of such Debtor's insurance coverage shall remain unpaid, unstayed on
appeal, undischarged, unbonded, or undismissed for a period of thirty
(30) days.
(i Pension Default. Any Reportable Event which Agent shall
determine in good faith constitutes grounds for the termination of
any Pension Plan by the Pension Benefit Guaranty Corporation, or for
the appointment by an appropriate United States district court of a
trustee to administer any Pension Plan, shall occur and shall
continue thirty (30) days after written notice thereof to the
applicable Debtor by Agent; or the Pension Benefit Guaranty
Corporation shall institute proceedings to terminate any Pension Plan
or to appoint a trustee to administer any Pension Plan; or a trustee
shall be appointed by an appropriate United States district court to
administer any Pension Plan; or any Pension Plan shall be terminated;
or any Debtor or any Consolidated Subsidiary shall withdraw from a
Pension Plan in a complete withdrawal or a partial withdrawal; or
there shall arise vested unfunded liabilities under any Pension Plan
that, in the good faith opinion of Agent, have or will or might have
a material adverse effect on the finances or operations of any
Debtor; or any Debtor or any Consolidated Subsidiary shall fail to
pay to any Pension Plan any contribution which it is obligated to pay
under the terms of such plan or any agreement or which is required to
meet statutory minimum funding standards.
(j Collateral; Impairment. There shall occur with respect
to the Collateral any (i) misappropriation, conversion, diversion,
or fraud; (ii) levy, seizure, or attachment; or (iii) material
uninsured loss, theft, or damage.
(k Insecurity; Change. Agent shall believe in good faith that
the prospect of payment of all, or any part, of the Indebtedness or
performance of any Debtor's obligations under the Transaction
Documents or any other agreement between Agent and any Debtor is
impaired; or there shall occur any materially adverse change in the
business or financial condition of any Debtor.
(l Third Party Default. There shall occur with respect to any
Third Party or any Consolidated Subsidiary, including, without
limitation, any guarantor or Consolidated Subsidiary (i) any event
described in Section 11.1(e), 11.1(f), 11.1(g), or 11.1(h); (ii) any
pension default event such as described in Section 11.1(i) with
respect to any pension plan maintained by such Third Party or such
Consolidated Subsidiary; or (iii) any failure by Third Party or such
Consolidated Subsidiary to perform in accordance with the terms of
any agreement between such Third Party and Agent and/or either or
both Lenders.
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(m Representations. Any certificate, statement, representation,
warranty, or financial statement furnished by, or on behalf of, any
Debtor or any Third Party, pursuant to, or in connection with, this
Agreement (including, without limitation, representations and
warranties contained herein) or as an inducement to Agent or any
Lender to enter into this Agreement or any other lending agreement
with any Debtor shall prove to have been false in any material
respect at the time as of which the facts therein set forth were
certified or to have omitted any substantial contingent or
unliquidated liability or claim against any Debtor or any such Third
Party, or if on the date of the execution of this Agreement there
shall have been any materially adverse change in any of the facts
disclosed by any such statement or certificate which shall not have
been disclosed in writing to Agent and each Lender at, or prior to,
the time of such execution.
(n Challenge to Validity. Any Debtor or any Third Party
commences any action or proceeding to contest the validity or
enforceability of any Transaction Document or any lien or security
interest granted or obligations evidenced by any Transaction
Document.
(o Death or Incapacity; Termination. Any Third Party dies or
becomes incapacitated, or terminates or attempts to terminate, in
accordance with its terms or otherwise, any guaranty or other
Transaction Document executed by such Third Party.
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(p Change of Control. (i) If any person not presently a
shareholder of IEC, or two or more persons acting in concert not
presently shareholders of IEC, shall have acquired beneficial
ownership (within the meaning of Rule 13d-3, of the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as
amended), directly or indirectly, of the voting stock of IEC (or
other securities convertible into such voting stock) representing 15%
or more of the combined voting power of all voting stock of IEC, or
if any person or two or more persons acting in concert who are
presently shareholders of IEC shall have acquired such beneficial
ownership representing 45% or more of the combined voting power of
all voting stock of IEC; (ii) the individuals who at the date hereof
were Directors of IEC (together with any other Director whose
election to the Board of Directors of IEC (or whose nomination by the
Board of Directors for election by the stockholders of IEC) was
approved by a vote of at least a majority of the Directors then in
office who either were directors at the date hereof or whose election
was previously so approved) shall cease for any reason to constitute
a majority of the Board of Directors of IEC; or (iii) any person or
two or more persons acting in concert shall have acquired by contract
or otherwise, or shall have entered into a contract or arrangement
that, upon consummation, will result in its or their acquisition of
the power to exercise, directly or indirectly, a controlling
influence over the management or policies of IEC.
(q) Millennium Compliance. (i) Failure of any Debtor to be
Millennium Compliant (pending full implementation of such Debtor's
plan to become Millennium Compliant, such Debtor will not be
considered in default under this sub-paragraph until such time as any
of its Systems begins to malfunction as a result of the coming or
arrival of the year 2000), or (ii) if Agent determines, in its sole
discretion, that any Debtor's plan to become Millennium Compliant
and/or the implementation thereof are insufficient to ensure that
such Debtor will be Millennium Compliant.
(r) Lock Box. If any Debtor shall (i) notify or otherwise direct
its Account Debtors to remit payments directly to such Debtor, to any
party other than Agent, or to a lock box other than the Lock Box
Numbers 953 and 2843 located at the United States Post Office at 1200
William Street, Buffalo, New York ("Lock Box"); or (ii) revoke
Agent's power of agency or otherwise preclude Agent's access to the
Lock Box; or (iii) the letter agreement between Debtors and Agent
dated of even date herewith related to the Lock Box and/or agreements
attached thereto terminate or cease to be in full force and effect.
11.2.EFFECTS OF AN EVENT OF DEFAULT.
(a) Upon the happening of one or more Events of Default (except
an Event of Default under either Section 11.1(e) or 11.1(f)), Agent
may declare any obligations it may have hereunder to be canceled, and
the principal of the Indebtedness then outstanding to be immediately
due and payable, together with all interest thereon and costs and
expenses accruing under the Transaction Documents. Upon such
declaration, any obligations any Lender may have hereunder shall be
immediately canceled, and the Indebtedness then outstanding shall
become immediately due and payable without presentation, demand, or
further notice of any kind to any Debtor.
(b) Upon the happening of one or more Events of Default under
Section 11.1(e) or 11.1(f), Lenders' obligations hereunder shall be
canceled immediately, automatically, and without notice, and the
Indebtedness then outstanding shall become immediately due and
payable without presentation, demand, or notice of any kind to any
Debtor.
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12. AGENT'S RIGHTS AND REMEDIES.
12.1.GENERALLY. Agent's rights and remedies with respect to the
Collateral, in addition to those rights granted herein and in any other
agreement between any Debtor and Agent now or hereafter in effect, shall
be those of a secured party under the Uniform Commercial Code as in effect
in the State and under any other applicable law.
12.2.NOTIFICATION OF ACCOUNT DEBTORS. Upon the occurrence of an Event
of Default or an event which with notice or lapse of time, or both, would
constitute an Event of Default, Agent may, at any time and from time to
time, notify any or all Account Debtors of the Security Interest and may
direct such Account Debtors to make all payments on Receivables directly
to Agent. At any time, Agent may notify any and all Account Debtors to
verify the accounts of such Account Debtors.
12.3.POSSESSION OF COLLATERAL. Whenever Agent may take possession of
the Collateral, pursuant to Section 12.1, Agent may take possession of the
Collateral on either of the Debtors' premises or may remove the
Collateral, or any part thereof, to such other places as the Agent may, in
its sole discretion, determine. If requested by Agent, a Debtor shall
assemble the Collateral and deliver it to Agent at such place as may be
designated by Agent.
12.4.COLLECTION OF RECEIVABLES. Upon the occurrence of an Event of
Default or an event which with notice or lapse of time, or both, would
constitute an Event of Default, Agent may demand, collect, and sue for all
monies and Proceeds due, or to become due, on the Receivables (in either a
Debtor's or Agent's name at the latter's option) with the right to
enforce, compromise, settle, or discharge any or all Receivables. If Agent
takes any action contemplated by this Section with respect to any
Receivable, a Debtor shall not exercise any right that such Debtor would
otherwise have had to take such action with respect to such Receivable.
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12.5.ENDORSEMENT OF CHECKS; DEBTOR'S MAIL. Each Debtor hereby
irrevocably appoints Agent such Debtor's agent with full power, in the
same manner, to the same extent, and with the same effect as if such
Debtor were to do the same: upon the occurrence and during the continuance
of an Event of Default or an event which with notice or lapse of time, or
both, would constitute an Event of Default, to endorse such Debtor's name
on any Instruments or Documents pertaining to any Collateral, to receive
and collect all mail addressed to such Debtor, to direct the place of
delivery of such mail to any location designated by Agent, to open such
mail, to remove all contents therefrom, and to retain all contents thereof
constituting or relating to the Collateral. This agency is unconditional
and shall not terminate until all of the Indebtedness is paid in full and
this Agreement has been terminated. Agent agrees to give a Debtor notice
in the event it exercises this agency, except with respect to the
endorsement of such Debtor's name on any instruments or documents
pertaining to any Collateral.
12.6.LICENSE TO USE PATENTS, TRADEMARKS, AND TRADENAMES. Each Debtor
grants to Agent for the benefit of the Lenders and itself a royalty-free
license to use any and all patents, trademarks, and tradenames now or
hereafter owned by, or licensed to, such Debtor for the purposes of
manufacturing and disposing of Inventory after the occurrence of an Event
of Default. All Inventory shall at least meet quality standards maintained
by such Debtor prior to such Event of Default.
13. MISCELLANEOUS.
13.1.PERFECTING THE SECURITY INTEREST; PROTECTING THE COLLATERAL.
Each Debtor hereby authorizes Agent to file such financing statements
relating to the Collateral without such Debtor's signature thereon as
Agent may deem appropriate, and appoints Agent as such Debtor's
attorney-in-fact (without requiring Agent) to execute any such financing
statement or statements in such Debtor's name and to perform all other
acts which Agent deems appropriate to perfect and continue the Security
Interest and to protect, preserve, and realize upon the Collateral.
13.2.PERFORMANCE OF DEBTOR'S DUTIES. Upon any Debtor's failure to
perform any of its duties under the Transaction Documents, including,
without limitation, the duty to obtain insurance as specified in Section
9.11, Agent may, but shall not be obligated to, perform any or all such
duties.
13.3.NOTICE OF SALE. Without in any way requiring notice to be given
in the following manner, each Debtor agrees that any notice by Agent of
sale, disposition, or other intended action hereunder, or in connection
herewith, whether required by the Uniform Commercial Code as in effect in
the State or otherwise, shall constitute reasonable notice to such Debtor
if such notice is mailed by regular or certified mail, postage prepaid, at
least five (5) days prior to such action, to such Debtor's address or
addresses specified above or to any other address which such Debtor has
specified in writing to Agent as the address to which notices hereunder
shall be given to such Debtor.
13.4.WAIVER BY AGENT. No course of dealing between any Debtor and
Agent and/or any Lender and no delay or omission by Agent or any Lender in
exercising any right or remedy under the Transaction Documents or with
respect to any Indebtedness shall operate as a waiver thereof or of any
other right or remedy, and no single or partial exercise thereof shall
preclude any other or further exercise thereof or the exercise of any
other right or remedy. All rights and remedies of Agent and the Lenders
are cumulative.
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13.5.WAIVER BY DEBTOR. Agent shall have no obligation to take, and
each Debtor shall have the sole responsibility for taking, any and all
steps to preserve rights against any and all Account Debtors and against
any and all prior parties to any note, Chattel Paper, draft, trade
acceptance, or other instrument for the payment of money covered by the
Security Interest whether or not in Agent's possession. Agent shall not be
responsible to any Debtor for loss or damage resulting from Agent's
failure to enforce any Receivables or to collect any moneys due, or to
become due, thereunder or other Proceeds constituting Collateral
hereunder. Each Debtor waives protest of any note, check, draft, trade
acceptance, or other instrument for the payment of money constituting
Collateral at any time held by Agent on which such Debtor is in any way
liable and waives notice of any other action taken by Agent, including,
without limitation, notice of Agent's intent to accelerate the
Indebtedness or any part thereof.
13.6.SETOFF. Without limiting any other right of Agent or any Lender,
whenever Agent has the right to declare any Indebtedness to be immediately
due and payable (whether or not it has so declared), each Lender, at its
sole election, may setoff against the Indebtedness any and all monies then
or thereafter owed to any Debtor by such Lender in any capacity, whether
or not the Indebtedness or the obligation to pay such monies owed by such
Lender is then due, and such Lender shall be deemed to have exercised such
right of setoff immediately at the time of such election even though any
charge therefor is made or entered on such Lender's records subsequent
thereto.
13.7.ASSIGNMENT. The rights and benefits of Agent and each Lender
hereunder shall, if Agent or such Lender so agrees, inure to any party
acquiring any interest in the Indebtedness or any part thereof. The right
of Agent or a Lender to sell or assign its rights and benefits hereunder
is subject to the terms of the Agency Agreement.
13.8.SUCCESSORS AND ASSIGNS. Agent, Lender and Debtor, as used
herein, shall include the successors or assigns of those parties, except
that Debtor shall not have the right to assign its rights hereunder or any
interest herein.
13.9.MODIFICATION. No modification, rescission, waiver, release, or
amendment of any provision of this Agreement shall be made, except as may
be provided in Item 35 of the Schedule or by a written agreement signed by
Debtors and a duly authorized officer of Agent.
13.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, and by Agent, each Lender and each Debtor on
separate counterparts, each of which, when so executed and delivered,
shall be an original, but all of which shall together constitute one and
the same Agreement.
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13.11. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Any financial
calculation to be made, all financial statements and other financial
information to be provided, and all books and records to be kept in
connection with the provisions of this Agreement, shall be in accordance
with generally accepted accounting principles consistently applied during
each interval and from interval to interval; provided, however, that in
the event changes in generally accepted accounting principles shall be
mandated by the Financial Accounting Standards Board or any similar
accounting body of comparable standing, or should be recommended by a
Debtor's certified public accountants, to the extent such changes would
affect any financial calculations to be made in connection herewith, such
changes shall be implemented in making such calculations only from and
after such date as such Debtor and Agent shall have amended this Agreement
to the extent necessary to reflect such changes in the financial and other
covenants to which such calculations relate.
13.12. INDEMNIFICATION.
(a) If after receipt of any payment of all, or any part of, the
Indebtedness, Agent or any Lender is, for any reason, compelled to
surrender such payment to any person or entity because such payment
is determined to be void or voidable as a preference, an
impermissible setoff, or a diversion of trust funds, or for any other
reason, the Transaction Documents shall continue in full force and
each Debtor shall be liable, and shall indemnify and hold Agent and
each Lender harmless for, the amount of such payment surrendered. The
provisions of this Section shall be and remain effective
notwithstanding any contrary action which may have been taken by
Agent or any Lender in reliance upon such payment, and any such
contrary action so taken shall be without prejudice to Agent's and
Lenders' rights under the Transaction Documents and shall be deemed
to have been conditioned upon such payment having become final and
irrevocable. The provisions of this Section 13.12(a) shall survive
the termination of this Agreement and the Transaction Documents.
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(b) Each Debtor agrees to indemnify, defend, and hold harmless
Agent and each Lender from, and against, any and all liabilities,
claims, damages, penalties, expenditures, losses, or charges,
including, but not limited to, all costs of investigation,
monitoring, legal representations, remedial response, removal,
restoration, or permit acquisition, which may now, or in the future,
be undertaken, suffered, paid, awarded, assessed, or otherwise
incurred by Agent or any Lender or any other person or entity as a
result of the presence of, Release of, or threatened Release of
Hazardous Substances on, in, under, or near the property owned,
leased, or operated by any Debtor or any Consolidated Subsidiary. The
liability of a Debtor under the covenants of this Section 13.12(b) is
not limited by any exculpatory provisions in this Agreement or any
other documents securing the Indebtedness and shall survive repayment
of the Indebtedness or any transfer or termination of this Agreement
regardless of the means of such transfer or termination. Each Debtor
agrees that Agent and each Lender shall not be liable in any way for
the completeness or accuracy of any Environmental Report or the
information contained therein. Each Debtor further agrees that the
Agent and Lenders have no duty to warn such Debtor or any other
person or entity about any actual or potential environmental
contamination or other problem that may have become apparent, or will
become apparent, to Agent or any Lender.
(c) Each Debtor agrees to pay, indemnify, and hold Agent and
each Lender harmless from, and against, any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, or disbursements of any kind or nature whatsoever
(including, without limitation, counsel and special counsel fees and
disbursements in connection with any litigation, investigation,
hearing, or other proceeding) with respect, or in any way related, to
the existence, execution, delivery, enforcement, performance, and
administration of this Agreement and any other Transaction Document
(all of the foregoing, collectively, the "Indemnified Liabilities").
The agreements in this Section 13.12(c) shall survive repayment of
the Indebtedness.
13.13. TERMINATION; PREPAYMENT PREMIUM.
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(a) Termination. This Agreement is, and is intended to be, a
continuing Agreement and shall remain in full force and effect for an
initial term equal to the term set forth in Item 32 of the Schedule
and for any renewal term also specified in Item 32 of the Schedule;
provided, however, that any party may terminate this Agreement as of
the end of the initial term or any subsequent renewal term by giving
the other party notice to terminate in writing at least sixty (60)
days prior to the end of any such period whereupon at the end of such
period all Indebtedness shall be due and payable in full without
presentation, demand, or further notice of any kind, whether or not
all or any part of such Indebtedness is otherwise due and payable
pursuant to the agreement or instrument evidencing same. Agent may
terminate this Agreement immediately and without notice upon the
occurrence of an Event of Default. Notwithstanding the foregoing or
anything in this Agreement or elsewhere to the contrary, the Security
Interest, Agent's and Lenders' rights and remedies under the
Transaction Documents and Debtors' obligations and liabilities under
the Transaction Documents, shall survive any termination of this
Agreement and shall remain in full force and effect until all of the
Indebtedness outstanding, or contracted or committed for (whether or
not outstanding), before such termination, and any extensions or
renewals thereof (whether made before or after receipt of such
notice), together with interest accruing thereon after such
termination, shall be finally and irrevocably paid in full. No
Collateral shall be released or financing statement terminated until:
(i) such final and irrevocable payment in full of the Indebtedness as
described in the preceding sentence; and (ii) Debtors, Agent and the
Lenders execute a mutual general release, subject to Section 13.12 of
this Agreement, in form and substance satisfactory to the Agent,
Lenders and Debtors and their counsel.
(b) Prepayment Premium - Advances. If Debtors pay in full all,
or substantially all, of the principal balance of Advances prior to
the end of the initial term or any renewal term of this Agreement as
set forth in Item 32 of the Schedule, other than temporarily from
funds internally generated in the ordinary course of Debtors'
business, at the time of any such payment Debtors shall also pay to
Agent for the account of the Lenders the prepayment premium set forth
in Item 34 of the Schedule. Any tender of payment in full of such
principal balance following an acceleration by Agent of the
Indebtedness, pursuant to Section 11.2 shall be, for purposes of this
Section 13.13(b), deemed to be considered a prepayment requiring
Debtors to pay the prepayment premium set forth in Item 34 of the
Schedule.
(c) Prepayment Premium - Term Loan. If Debtors prepay any
portion of the Term Loan, Debtors shall also pay to Agent for the
account of the Lenders the prepayment premium set forth in Item 34 of
the Schedule. Any such prepayment shall be applied to installments of
the Term Note in inverse order of maturity. Any tender of payment in
full of such principal balance following an acceleration by Agent of
the Indebtedness, pursuant to Section 11.2 shall be, for purposes of
this Section 13.13(c), deemed to be considered a prepayment requiring
Debtors to pay the prepayment premium set forth above. No prepayment
premium will be required in connection with a Mandatory Prepayment as
set forth in Item 21 of the Schedule unless such prepayment involves
the sale of one or more assets (including sales previously made since
the date hereof) which individually or in the aggregate exceed
$1,000,000, and then the prepayment premium set forth in Item 34 of
the Schedule shall be applied to the amount of such sale or sales in
excess of $1,000,000.
13.14. FURTHER ASSURANCES. From time to time, each Debtor shall take
such action and execute and deliver to Agent such additional documents,
instruments, certificates, and agreements as Agent may reasonably request
to effectuate the purposes of the Transaction Documents.
13.15. HEADINGS. Article and Section headings used in this
Agreement are for convenience only and shall not affect the construction
of this Agreement.
13.16. CUMULATIVE SECURITY INTEREST, ETC. The execution and delivery
of this Agreement shall in no manner impair or affect any other security
(by endorsement or otherwise) for payment or performance of the
Indebtedness, and no security taken hereafter as security for payment or
performance of the Indebtedness shall impair in any manner or affect this
Agreement, or the security interest granted hereby, all such present and
future additional security to be considered as cumulative security.
- 48 -
<PAGE>
13.17. AGENT AND LENDERS' DUTIES. Without limiting any other
provision of this Agreement: (a) the powers conferred on Agent or any
Lender hereunder are solely to protect its interests and shall not impose
any duty to exercise any such powers; and (b) except as may be required by
applicable law, Agent and each Lender shall not have any duty as to any
Collateral or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Collateral.
13.18. NOTICES GENERALLY. All notices and other communications
hereunder shall be made by telegram, telex, electronic transmitter,
overnight air courier, or certified or registered mail, return receipt
requested, and shall be deemed to be received by the party to whom sent
one Business Day after sending, if sent by telegram, telex, electronic
transmitter, or overnight air courier, and three Business Days after
mailing, if sent by certified or registered mail. All such notices and
other communications to a party hereto shall be addressed to such party at
the address set forth on the cover page hereof or to such other address as
such party may designate for itself in a notice to the other party given
in accordance with this Section 13.18.
13.19. SEVERABILITY. The provisions of this Agreement are independent
of, and separable from, each other, and no such provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that
for any reason any other such provision may be invalid or unenforceable in
whole or in part. If any provision of this Agreement is prohibited or
unenforceable in any jurisdiction, such provision shall be ineffective in
such jurisdiction only to the extent of such prohibition or
unenforceability, and such prohibition or unenforceability shall not
invalidate the balance of such provision to the extent it is not
prohibited or unenforceable nor render prohibited or unenforceable such
provision in any other jurisdiction.
13.20. INCONSISTENT PROVISIONS; AGENCY AGREEMENT. The terms of this
Agreement and the other Transaction Documents shall be cumulative except
to the extent that they are specifically inconsistent with each other, in
which case the terms of this Agreement shall prevail. As between the Agent
and the Lenders, this Agreement is subject to the terms of the Agency
Agreement.
- 49 -
<PAGE>
13.21. ENTIRE AGREEMENT/AGENCY AGREEMENT. This Agreement, the Agency
Agreement and the other Transaction Documents constitute the entire
agreement and understanding between the parties hereto with respect to the
transactions contemplated hereby and supersede all prior negotiations,
understandings, and agreements between such parties with respect to such
transactions, including, without limitation, those expressed in any
commitment letter delivered by Agent or HSBC Bank to Debtors. Each Debtor
acknowledges that it has been advised that the Agency Agreement exists and
provides for the administration of the Revolving Credit, Term Loan, this
Agreement and the Transaction Documents by the Agent, and contains, among
other things, restrictions and limitations on the authority of the Agent
to act without the consent of some or all of the Lenders in certain
instances. Each Debtor hereby consents to the existence of the Agency
Agreement; acknowledges it has no rights thereunder; and agrees to
cooperate with the Agent and the Lenders in revising any of the
Transaction Documents which need revision in case additional lenders are
added as "Lenders" in the future.
13.22. APPLICABLE LAW. THIS AGREEMENT, AND THE TRANSACTIONS EVIDENCED
HEREBY, SHALL BE GOVERNED BY, AND CONSTRUED UNDER, THE INTERNAL LAWS OF
THE STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, AS THE SAME
MAY FROM TIME TO TIME BE IN EFFECT, INCLUDING, WITHOUT LIMITATION, THE
UNIFORM COMMERCIAL CODE AS IN EFFECT IN THE STATE.
13.23. CONSENT TO JURISDICTION. DEBTORS, AGENT AND THE LENDERS AGREE
THAT ANY ACTION OR PROCEEDING TO ENFORCE, OR ARISING OUT OF, THE
TRANSACTION DOCUMENTS MAY BE COMMENCED IN ANY COURT OF THE STATE IN ANY
COUNTY, OR IN THE DISTRICT COURT OF THE UNITED STATES FOR THE WESTERN
DISTRICT OF NEW YORK, AND EACH DEBTOR WAIVES PERSONAL SERVICE OF PROCESS
AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR PROCEEDING
IN ANY SUCH COURT SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL
JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO SUCH DEBTOR, OR
AS OTHERWISE PROVIDED BY THE LAWS OF THE STATE OR THE UNITED STATES.
- 50 -
<PAGE>
13.24. JURY TRIAL WAIVER. DEBTORS, AGENT AND THE LENDERS HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY
DEBTORS OR AGENT AND THE LENDERS MAY HAVE IN ANY ACTION OR PROCEEDING, IN
LAW OR IN EQUITY, IN CONNECTION WITH THE TRANSACTION DOCUMENTS OR THE
TRANSACTIONS RELATED THERETO. EACH DEBTOR REPRESENTS AND WARRANTS THAT NO
REPRESENTATIVE OR AGENT OF AGENT OR ANY AGENT OF ANY LENDER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT AGENT OR ANY LENDER WILL NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS RIGHT TO JURY TRIAL WAIVER.
EACH DEBTOR ACKNOWLEDGES THAT AGENT AND THE LENDERS HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS
SECTION 13.24.
Accepted at Buffalo, New York by:
HSBC BANK USA, as Agent IEC ELECTRONICS CORP.
By /s/Douglas D. Smith By /s/Richard L. Weiss
---------------------- ----------------------
Douglas D. Smith, Vice President (6964) Name:Richard L. Weiss
Title:Vice President and Chief
Financial Officer
HSBC BANK USA, as a Lender IEC ELECTRONICS-EDINBURG, TEXAS INC.
By /s/Douglas D. Smith By /s/Richard L. Weiss
---------------------- ----------------------
Douglas D. Smith, Vice President (6964) Name:Richard L. Weiss
Title:Vice President and Chief
Financial Officer
GENERAL ELECTRIC CAPITAL
CORPORATION, as a Lender
By:/s/Peggy Erlenkotter
Name:Peggy Erlenkotter
Title:Duly authorized Signatory
BFLO Doc # 958651.13
<PAGE>
EXHIBIT A
FINANCIAL STATEMENT CERTIFICATION
The undersigned, the ______________________ of IEC Electronics Corp.
and the _________________ of IEC Electronics-Edinburg, Texas Inc. (collectively,
the "Debtor") hereby certified to HSBC Bank USA, as Agent, that attached hereto
is a true, correct and complete copy of the Debtor's financial statements as of
the month ending _____________, 19__ which financial statements fairly present
Debtor's [and each consolidated subsidiary's] financial position and consist of
a balance sheet and related statements of income, retained earnings, and cash
flow covering the period from the end of the immediately preceding fiscal year
to the end of such month.
IEC ELECTRONICS CORP.
By:__________________________________
Name:
Title:
IEC ELECTRONICS-EDINBURG,
TEXAS INC.
By:
Name:
Title:
Date: _________________, __
<PAGE>
EXHIBIT B
COMPLIANCE CERTIFICATE
IEC Electronics Corp. and IEC Electronics-Edinburg, Texas Inc.
(collectively, "Debtor") hereby certifies to HSBC Bank USA as Agent ("Agent")
and to HSBC Bank USA and General Electric Capital Corporation, as lenders
("Lenders") pursuant to the Loan and Security Agreement among Debtor, Agent and
Lenders dated December 28, 1999, as may be amended from time to time ("Loan
Agreement") that:
A. General
1. Capitalized terms not defined herein shall have the meanings
set forth in the Loan Agreement.
2. The Debtor has complied with all the terms, covenants and
conditions to be performed or observed by it contained in the Loan Agreement and
the Transaction Documents to which Debtor is a party.
3. Neither on the date hereof nor, if applicable, after giving effect
to the Advance made on the date hereof, does there exist an Event of Default or
an event which would with notice or the lapse of time, or both, constitute an
Event of Default.
4. The representations and warranties contained in the Loan
Agreement, in any Transaction Document to which Debtor is a party and in any
certificate, document or financial or other statement furnished at any time
thereunder are true, correct and complete in all material respects with the same
effect as though such representations and warranties had been made on the date
hereof, except to the extent that any such representation and warranty relates
solely to an earlier date (in which case such representation and warranty shall
be true, correct and complete on and as of such earlier date).
B. Financial Covenants:
1. As of the date hereof or, for such period as may be designated
below, the computations, ratios and calculations as set forth below in
accordance with Item 30 of the Schedule, are true and correct:
(a) Minimum Tangible Net Worth
as of ________, ____:
(i)Stockholders'
equity = $_______
(ii)Subordinated debt = $_______
<PAGE>
- 3 -
(iii)(i) plus (ii) = $_______
(iv) Intangible
Assets = $_______
(v) (iii) less (iv) $_________
REQUIRED BY ITEM 30(b) $_______
(b) Debt-to-Worth Ratio
as of ________, ____:
(i) Total Liabilities = $________
(ii) Subordinated Debt = $________
(iii)(i) less (ii) = $________
(iv) Tangible Net Worth
from (c)(v) above = $________
(v) Ratio of (iii) to (iv) = ___ to ___
REQUIRED BY ITEM 30(c) $________
(c) Net Income After Taxes
as of _________, ____ = $_______
REQUIRED BY ITEM 30(d) $________
(d) Minimum Cash Flow Coverage Ratio
as of ________, ____ = $_______
REQUIRED BY ITEM 30(e) $________
(e) Capital Expenditures
as of ________, ____ = $_______
REQUIRED BY ITEM 27 $________
(f) Annual Lease Rentals
as of ________, ____ = $_______
REQUIRED BY ITEM 26 $________
<PAGE>
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of
Debtor, has executed and delivered this certificate in the name and on behalf of
the Debtor on ___________, 19__.
IEC ELECTRONICS CORP.
By
Name:
Title:
IEC ELECTRONICS-EDINBURG,
TEXAS INC.
By
Name:
Title:
BFLO Doc # 958651.13
<PAGE>
EXHIBIT C
TERM NOTE
December 28, 1999
$5,500,000.00 Buffalo, New York
FOR VALUE RECEIVED, the undersigned jointly and severally promise to
pay to the order of HSBC Bank USA as a lender ("HSBC Bank"), at the office of
HSBC Bank USA as agent located at One HSBC Center, Buffalo, New York, or, at the
Agent's option, at such other place as may be designated in writing from time to
time by the Agent, in lawful money of the United States of America, the
principal sum of Five Million Five Hundred Thousand and 00/100 Dollars
($5,500,000.00) or an amount equal to the unpaid advances made to the
undersigned pursuant to Section 2.5 of the Agreement (as defined below) together
with interest, payable in nearly equal consecutive monthly installments of
principal as follows: thirty-four (34) equal consecutive monthly principal
installments of $96,491.23 each commencing April 1, 2000 and payable on the
first day of each month thereafter, to and including January 1, 2003 and one (1)
final principal installment on January 31, 2003 in an amount equal to the unpaid
principal of and interest on this Note.
The undersigned further promises to pay interest on the principal
amount hereof from time to time unpaid from the date hereof at the rates and on
the dates determined in accordance with the Loan and Security Agreement, dated
of even date herewith, among the undersigned, the Agent, HSBC Bank and General
Electric Capital Corporation ("GE Capital") as the same may from time to time be
amended, supplemented or otherwise modified ("Agreement"). Interest shall be
computed in accordance with the Agreement. Capitalized terms used herein and not
otherwise defined are used with their defined meanings from the Agreement.
Upon failure to make any payment of interest or principal on this
Note within ten (10) days of the due date thereof, the undersigned promises to
pay, upon demand by Agent, a late charge equal to five percent (5%) of the
amount of any such overdue amount of principal or interest. The assessment
and/or collection of late charges shall in no way impair the right of Agent or
Lenders to pursue any other remedies hereunder.
The Agent may inscribe on the schedule on the reverse side hereof and
any continuation schedules thereof ("Schedule"), the advances made under this
Note, the amounts of this Note from time to time subject to the Prime Rate
Option and the Libor Rate Option, the applicable rate of interest and the
applicable Interest Period, if any, any prepayments or payments thereof, and the
outstanding principal balance hereof. Each entry set forth on the Schedule shall
be prima facie evidence of the facts so set forth. No failure by Agent to make,
and no error by the Agent in making, any inscription on the Schedule shall
affect the undersigned's obligation to repay the outstanding principal amount of
the Note, or interest thereon at the agreed upon rate of interest.
<PAGE>
- 2 -
This Note is being executed in connection with the Agreement, to
which reference is made hereby with respect to, among other things, rights of
prepayment, prepayment premiums and fees, collateral, and acceleration of the
principal hereof on the occurrence of certain events. This Note shall also
become immediately due and payable if the undersigned voluntarily repays all or
substantially all of the Advances under the Loan Agreement other than
temporarily from internally generated funds in the ordinary course of business.
No failure by the holder hereof to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise by the holder of any right or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the holder as herein specified
are cumulative and not exclusive of any other rights or remedies which such
holder may otherwise have.
No modification, rescission, waiver, release or amendment of any
provision of this Note shall be made, except by a written agreement subscribed
by duly authorized officers of the undersigned and the holder hereof.
The undersigned hereby waives diligence, presentment, protest and
demand, and also notice of protest, demand, dishonor and nonpayment of this
Note.
The undersigned agrees to pay on demand all reasonable costs and
expenses incurred by the holder hereof in enforcing and collecting the
indebtedness evidenced by this Note, or in realizing upon or protecting any
collateral securing same, including, without limitation, if holder retains
counsel for advice, suit, appeal, insolvency or other proceedings under the
Federal Bankruptcy Code or otherwise, or for any of the above purposes, the
reasonable attorneys' fees and expenses incurred by holder.
This Note shall be construed under, and governed by, the internal
laws of the State of New York without regard to principles of conflicts of laws.
IEC ELECTRONICS CORP.
By:/s/Richard L. Weiss
----------------------
Name:Richard L. Weiss
Title:Vice President and Chief
Financial Officer
IEC ELECTRONICS-EDINBURG,
TEXAS INC.
By: /s/Richard L. Weiss
-----------------------
Name:Richard L. Weiss
Title:Vice President and Chief
Financial Officer
<PAGE>
SCHEDULE
Loans, Interest Rates and Periods
================================================================================
AMOUNT
SUBJECT
TO EXPIRATION
AMOUNT LIBOR DATE OF AMOUNTS
OF RATE APPLICABLE INTEREST PAID OR OUTSTANDING INSCRIPTION
DATE ADVANCE OPTION RATE PERIOD PREPAID BALANCE MADE BY
OR PRIME
RATE
OPTION
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<PAGE>
EXHIBIT D
TERM NOTE
December 28, 1999
$4,500,000.00 Buffalo, New York
FOR VALUE RECEIVED, the undersigned jointly and severally promise to
pay to the order of General Electric Capital Corporation as a lender ("GE
Capital"), at the office of HSBC Bank USA as agent ("Agent") located at One HSBC
Center, Buffalo, New York or, at the holder's option, at such other place as may
be designated in writing from time to time by the holder, in lawful money of the
United States of America, the lesser of the principal sum of Four Million Five
Hundred Thousand and 00/100 Dollars ($4,500,000.00) or an amount equal to the
unpaid advances made to the undersigned pursuant to Section 2.5 of the Agreement
(as defined below) together with interest, payable in nearly equal consecutive
monthly installments of principal as follows: thirty-four (34) equal consecutive
monthly principal installments of $78,947.37 each commencing April 1, 2000 and
payable on the first day of each month thereafter, to and including January 1,
2003 and one (1) final principal installment on January 31, 2003 in an amount
equal to the unpaid principal of and interest on this Note.
The undersigned further promises to pay interest on the principal
amount hereof from time to time unpaid from the date hereof at the rates and on
the dates determined in accordance with the Loan and Security Agreement, dated
of even date herewith, among the undersigned, the Agent, HSBC Bank USA and GE
Capital as the same may from time to time be amended, supplemented or otherwise
modified ("Agreement"). Interest shall be computed in accordance with the
Agreement. Capitalized terms used herein and not otherwise defined are used with
their defined meanings from the Agreement.
Upon failure to make any payment of interest or principal on this
Note within ten (10) days of the due date thereof, the undersigned promises to
pay, upon demand by Agent, a late charge equal to five percent (5%) of the
amount of any such overdue amount of principal or interest. The assessment
and/or collection of late charges shall in no way impair the right of Agent or
Lenders to pursue any other remedies hereunder.
The Agent may inscribe on the schedule on the reverse side hereof and
any continuation schedules thereof ("Schedule"), the advances made under this
Note, the amounts of this Note from time to time subject to the Prime Rate
Option and the Libor Rate Option, the applicable rate of interest and the
applicable Interest Period, if any, any prepayments or payments thereof, and the
outstanding principal balance hereof. Each entry set forth on the Schedule shall
be prima facie evidence of the facts so set forth. No failure by Agent to make,
and no error by the Agent in making, any inscription on the Schedule shall
affect the undersigned's obligation to repay the outstanding principal amount of
the Note, or interest thereon at the agreed upon rate of interest.
<PAGE>
- 3 -
This Note is being executed in connection with the Agreement, to
which reference is made hereby with respect to, among other things, rights of
prepayment, prepayment premiums and fees, collateral, and acceleration of the
principal hereof on the occurrence of certain events. This Note shall also
become immediately due and payable if the undersigned voluntarily repays all or
substantially all of the Advances under the Loan Agreement other than
temporarily from internally generated funds in the ordinary course of business.
No failure by the holder hereof to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise by the holder of any right or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the holder as herein specified
are cumulative and not exclusive of any other rights or remedies which such
holder may otherwise have.
No modification, rescission, waiver, release or amendment of any
provision of this Note shall be made, except by a written agreement subscribed
by duly authorized officers of the undersigned and the holder hereof.
The undersigned hereby waives diligence, presentment, protest and
demand, and also notice of protest, demand, dishonor and nonpayment of this
Note.
The undersigned agrees to pay on demand all reasonable costs and
expenses incurred by the holder hereof in enforcing and collecting the
indebtedness evidenced by this Note, or in realizing upon or protecting any
collateral securing same, including, without limitation, if holder retains
counsel for advice, suit, appeal, insolvency or other proceedings under the
Federal Bankruptcy Code or otherwise, or for any of the above purposes, the
reasonable attorneys' fees and expenses incurred by holder.
This Note shall be construed under, and governed by, the internal
laws of the State of New York without regard to principles of conflicts of laws.
IEC ELECTRONICS CORP.
By: /s/Richard L. Weiss
Name:Richard L. Weiss
Title:Vice President and Chief
Financial Officer
IEC ELECTRONICS-EDINBURG, TEXAS INC.
By:/s/Richard L. Weiss
Name:Richard L.Weiss
Title:Vice President and Chief
Financial Officer
<PAGE>
SCHEDULE
Loans, Interest Rates and Periods
================================================================================
AMOUNT
SUBJECT
TO EXPIRATION
AMOUNT LIBOR DATE OF AMOUNTS
OF RATE APPLICABLE INTEREST PAID OR OUTSTANDING INSCRIPTION
DATE ADVANCE OPTION RATE PERIOD PREPAID BALANCE MADE BY
OR PRIME
RATE
OPTION
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<PAGE>
EXHIBIT E
REQUEST CERTIFICATE
The undersigned hereby certifies to HSBC BANK USA as Agent ("Agent"),
in accordance with the terms of a Loan and Security Agreement dated December 28,
1999 ("Loan Agreement") among IEC Electronics Corp. ("IEC"), IEC
Electronics-Edinburg, Texas Inc. ("IEC-Edinburg"), Agent, and HSBC Bank USA,
individually as a lender, and General Electric Capital Corporation ("GE
Capital") as a lender. Capitalized terms used herein and not otherwise defined
are used with their defined meanings in the Loan Agreement.
The undersigned requests or has requested by telephone or facsimile
notice a:
(Check One)
[ ] Advance
[ ] Term Loan
to be made or continued as, or converted to, a
(Check One)
[ ] Prime Rate Loan
[ ] Libor Loan
in the amount of $________________, for an Interest Period, if applicable, of
(Check One)
Interest Period
[ ] 30 days
[ ] 60 days
[ ] 90 days
The proposed Loan/Continuation Commencement Date is ____________, ____ .
The Loan is to be made to:
[ ] IEC
[ ] IEC-Edinburg
<PAGE>
- 2 -
WITNESS the signature of the undersigned authorized signatory on
behalf of the entity to whom this Loan is to be made this ____ day of
- -------------, ----.
IEC ELECTRONICS CORP. IEC ELECTRONICS-EDINBURG,
TEXAS INC.
By:_____________________________ By:________________________________
Name:__________________________ Name:_____________________________
Title:___________________________ Title:_______________________________
[Deliver Duplicate Copies to HSBC Bank USA and
General Electric Capital Corporation]
<PAGE>
SCHEDULE
This Schedule is a part of a Loan and Security Agreement, dated
December 28, 1999, among IEC Electronics Corp. ("IEC"), IEC
Electronics-Edinburg, Texas Inc. ("IEC-Edinburg"), and HSBC Bank USA as agent
("Agent") and HSBC Bank USA ("HSBC Bank") and General Electric Capital
Corporation ("GE Capital") as lenders ("Lenders"). (IEC and IEC-Edinburg are
referred to herein individually as a "Debtor" and collectively as the
"Debtors".)
1. Borrowing Capacity (ss. 1.1(e))
Borrowing Capacity at any time shall be the net amount determined by
taking the lesser of the following amounts:
(A) The applicable Maximum Limit of $20,000,000 prior to the First
Anniversary Date, and $25,000,000 thereafter.
or
(B) the amount equal to the sum of the IEC Borrowing Capacity and the
IEC-Edinburg Borrowing Capacity (each as defined below)
and subtracting from the lesser of (A) or (B) above, the sum of (a)
banker's acceptances, plus (b) letters of guaranty, plus (c) Letters of Credit.
"IEC Borrowing Capacity" at any time shall be the amount equal to the
sum of:
(i) up to 85% of the IEC Receivables Borrowing Base; and
(ii) the amount of the IEC Inventory Borrowing Base; provided
however, for calculation purposes, in no event shall the amount
of the IEC Inventory Borrowing Base plus the amount of the
IEC-Edinburg Inventory Borrowing Base be greater than $4,000,000
prior to the First Anniversary Date increasing to $5,000,000
after the First Anniversary Date provided Debtors have improved
their Inventory reporting capabilities so as to be able to
report raw material Inventory on a segmented basis in a manner
satisfactory to the Lenders.
"IEC-Edinburg Borrowing Capacity" at any time shall be the amount
equal to the sum of:
(i) up to 85% of the IEC-Edinburg Receivables Borrowing Base; and
<PAGE>
- 22 -
(ii) the amount of the IEC-Edinburg Inventory Borrowing Base;
provided however, for calculation purposes, in no event shall
the amount of the IEC-Edinburg Inventory Borrowing Base plus the
amount of the IEC Inventory Borrowing Base be greater than
$4,000,000 prior to the First Anniversary Date or $5,000,000
after the First Anniversary Date, provided Debtors have improved
their Inventory reporting capabilities so as to be able to
report raw material Inventory on a segmented basis in a manner
satisfactory to the Lenders.
The Maximum Limit is subject to reduction on the terms hereafter set
forth:
(i) Debtors shall only be permitted to elect a reduction by giving
Agent 20 days prior written notice.
(ii) Debtors may exercise the election to reduce the Maximum Limit
only twice during each calendar year during the term of this
Agreement.
(iii)The amount of each elected reduction must equal $500,000 or a
whole multiple thereof as selected by Debtors, and the aggregate
amount of all reductions cannot exceed $5,000,000 in any one
calendar year.
(iv) The reduction of the Maximum Limit shall be effective on the
first day of the month following the end of the twenty day prior
notice period, provided Debtors have paid on or before such
anticipated effective date a reduction fee equal to 1/8% of the
amount of the reduction.
2. Inventory Borrowing Base Percentages (ss. 1.1(bb))
The following percentages of dollar value (calculated at the lower
of actual cost or market value) are applicable to the following categories
of Eligible Inventory:
| x | HUB Finished Goods, to the extent of up to 30%;
| x | raw materials, to the extent of up to 20%;
| | work in process, to the extent of up to 0%.
As used herein "HUB Finished Goods" means finished goods inventory of
Debtor manufactured under written HUB agreements in effect from time to
time and satisfactory to Agent and Lenders as evidenced by Agent's written
acknowledgment thereof (individually, a "Hub Agreement" and collectively,
the "Hub Agreements"). As of the date of this Schedule, Agent and the
Lenders have approved three existing HUB Agreements between Debtor and (i)
TTC, (ii) Lucent/Ascend Communications and (iii) Compaq Computer
Corporation.
<PAGE>
3. Cash Discount (ss.ss. 1.1(i) & 9.3)
Maximum Cash Discount of 1/2%, 10 days net 30 except for Compaq Asia,
Compaq Houston, and Compaq Scotland which are 3/4% 10 days net 45 and GE
AEG Niederspannungstechnik, GE Caribe, GE Elec. Distribution & Control,
and General Electric ED & C which are 1-1/2% 15 days net 60, and all other
GE accounts which are 1/2% 10 days net 50.
4. Receivables--Age (ss. 1.1(ac)(i))
90 days after the Invoice date
Datings: Payment terms of up to
60 days, ineligible 120 days
after invoice date
5. Receivables Disqualification Percentage (ss.1.1(ac)(v))
30 % or more
6. Permissible Foreign Account Debtors (ss. 1.1(ac)(vi))
None
7. Inventory Accounting (ss. 1.1(bb))
| X | First-in, first-out (FIFO)
| | Last-in, first-out (LIFO)
| | Other as specified below:
8. HSBC Payment Account (ss. 1.1(w))
There is an HSBC Payment Account.
Name and address of depository bank HSBC Bank USA
One HSBC Center
Buffalo, NY 14203
Account numbers: IEC Electronics Corp. 713-00567-0
IEC Electronics-Edinburg, Texas Inc. 750-19916-4
<PAGE>
9. Letters of Credit (ss.2.4)
$2,000,000
10. State of Incorporation (ss. 4.l)
- --------------------------------------------------------------------
Entity Jurisdiction of Foreign
Incorporation Qualifications
- --------------------------------------------------------------------
- --------------------------------------------------------------------
IEC Electronics Corp. Delaware New York
- --------------------------------------------------------------------
- --------------------------------------------------------------------
IEC Arab, Alabama Inc. Alabama N/A
- --------------------------------------------------------------------
- --------------------------------------------------------------------
IEC Electronics-Edinburg, Texas N/A
Texas Inc.
- --------------------------------------------------------------------
- --------------------------------------------------------------------
IEC Electronics-Ireland Ireland N/A
Limited
- --------------------------------------------------------------------
- --------------------------------------------------------------------
IEC Electronics Foreign Barbados N/A
Sales Corp.
- --------------------------------------------------------------------
11. Location(s) of Inventory and Equipment (ss.ss. 4.4(c), 4.7, 4.8(a) & 10.1)
- --------------------------------------------------------------------
Locations of Inventory:
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Corporation: Address
- --------------------------------------------------------------------
- --------------------------------------------------------------------
IEC Electronics Corp. 105 Norton Street, Newark NY -
Owned
- --------------------------------------------------------------------
- --------------------------------------------------------------------
235 Murray Street, Newark NY -
Leased
- --------------------------------------------------------------------
- --------------------------------------------------------------------
204 Norton Street, Newark NY -
Owned
- --------------------------------------------------------------------
- --------------------------------------------------------------------
400 Norton Street, Newark NY -
Owned
- --------------------------------------------------------------------
- --------------------------------------------------------------------
513 West Union Street, Newark NY -
Leased
- --------------------------------------------------------------------
- --------------------------------------------------------------------
IEC Electronics-Edinburg, 1920 Southeast Industrial Park
Texas Inc. Drive, Edinburg, Texas
- --------------------------------------------------------------------
- --------------------------------------------------------------------
IEC Mexico-Av. Ind. Rio San Juan
Manzana 7 Lote 6
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Parque Industrial del Norte
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Cd. Reynosa, Tamaulipas, Mexico
V.P. 88350
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Warehoused Inventory Under Compaq Hub Agreements:
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Customer Address
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Compaq Houston CTI HMC 7401 Security Way Houston,
Texas
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Compaq Scotland Express Cargo Forwarding LTD
- --------------------------------------------------------------------
- --------------------------------------------------------------------
West Avenue Phoenix Industrial
Estate
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Linwood PA3 18F
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Compaq Singapore MSAS Global Logisticson behalf of
Calidad
Sembawang Free Trade Zone
Deptford Road Unit ST 5 Singapore
DC 759657 ST5
- --------------------------------------------------------------------
Equipment Locations:
- --------------------------------------------------------------------
Corporation Address
- --------------------------------------------------------------------
- --------------------------------------------------------------------
IEC Electronics Corp. 105 Norton Street, Newark NY
- --------------------------------------------------------------------
- --------------------------------------------------------------------
235 Murray Street, Newark NY
- --------------------------------------------------------------------
- --------------------------------------------------------------------
204 Norton Street, Newark NY
- --------------------------------------------------------------------
- --------------------------------------------------------------------
400 Newark Street, Newark NY
- --------------------------------------------------------------------
- --------------------------------------------------------------------
513 West Union Street, Newark NY
- --------------------------------------------------------------------
- --------------------------------------------------------------------
IEC Arab, Alabama Inc. 350 11th St. SW, Arab, Alabama
- --------------------------------------------------------------------
- --------------------------------------------------------------------
IEC Electronics-Edinburg, Texas, 1920 Southeast Industrial Park
Inc. Drive, Edinburg, Texas
IEC Mexico-Av. Ind. Rio San
Juan Manzana 7 Lote 6
Parque Industrial del Norte
Cd. Reynosa, Tamaulipas,
Mexico C.P. 88350
- --------------------------------------------------------------------
- --------------------------------------------------------------------
IEC Electronics-Ireland Limited IDA Industrial Estate
Ballinalec Road Longford Ireland
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12. Permitted Encumbrances (ss.ss. 4.5(a), 4.5(c) & 10.3)
None
13. Business Records Location (ss.ss. 4.8(a), 4.8(c) & 10.1)
IEC Electronics Corp. IEC Electronics-Edinburg, Texas Inc.
105 Norton Street 1920 Southeast Industrial Park Drive
Newark, NY 14513 Edinburg, TX 78539
14. Trademarks and Patents (ss. 4.17)
Debtor: IEC holds patents unrelated to contract manufacturing and also
employs various registered trademarks. IEC does not believe that
either patent or trademark protection is material to the
operation of its business.
15. Labor Contracts (ss. 4.21)
Debtor: None
Consolidated Subsidiaries: None
<PAGE>
16. Authorized Shares (ss. 4.23)
IEC:
No. of authorized common shares - 50,000,000
Par Value of common shares: $.01 per share
No. of issued and outstanding shares: 7,583,965
No. of authorized preferred shares: 500,000
Par Value of preferred shares: $.01 per share
No. of issued and outstanding preferred shares: none
IEC-Edinburg:
No. of authorized common shares - 1,000,000
Par Value of common shares: $1.00
No. of issued and outstanding shares: 415,715
Check If Frequency
17. Required Documents (ss.ss. 5.1, 8.2(b)) Required Due
Receivables Schedules | X | Daily
Receivables Aging | X |
Monthly -
within 15
days after
month end
Inventory Reports
a. Value Report | X | Monthly -
within 15
days after
month end
<PAGE>
b. Periodic Summary Report | X | Monthly -
within 15
days after
month end
c. Dispute Report | X | Immediately
Credits and Extensions Reports | X | Daily
Cash Receipts Journal and | X | Daily
Schedule of Payments on
Receivables
Copies of shipping documents | X | As requested
relating to the Receivables
List of names and addresses | X | Quarterly -
of Account Debtors within 25
days after
quarter end
Payables aging report, showing | X | Monthly -
the amounts due and owing on all
within 15 of such Debtor's payables
according days after to such Debtor's
records as of the month end.
close of such periods as shall
be specified by Agent
Reconciliation report | X | Monthly
reconciling monthly financial within
statements with Receivable Aging, 25 days
Inventory Report and Payable after end
Aging of month
Loan Request, Remittance and | X | On the Date
Collateral Report (L408SF) of each Advance
Request
<PAGE>
Other as indicated below:
Calculation of Ineligible | X | Monthly -
Inventory and Receivables within 15
days after
month end.
18. Interest Rate (ss. 7.2)
(a) Definitions. Unless otherwise defined in this Item 18, all
capitalized terms shall have the definitions set forth elsewhere in this
Agreement. For the purposes of this Item 18 only, the term "Debtor" shall
mean (i) IEC and IEC-Edinburg, collectively, when used in connection with
any request, selection, option, obligation or notice for a Loan which is
the Term Loan or a portion thereof, (ii) IEC, individually, when used in
connection with any request, selection, option, obligation or notice for a
Loan which is an Advance or a portion thereof for IEC, and (iii)
IEC-Edinburg, individually, when used in connection with any request,
selection, option, obligation or notice for a Loan which is an Advance or
a portion thereof for IEC-Edinburg. For the purposes of this Item 18, the
following terms as used in this Item 18 shall have the following meanings:
"Business Day" means any day (i) excluding Saturday, Sunday and
any day on which banks in Buffalo, New York are required or
authorized by law or other governmental action to close, and (ii)
which is also a day for trading by and between banks in U.S. Dollar
deposits in the London Interbank Eurodollar Market.
"Commencement Date" means the date on which a Prime Rate Loan
converts to a Libor Loan, the date a Libor Loan is first made, or the
date a Libor Loan is continued as a new Libor Loan.
"Interest Period" means with respect to Advances, and with
respect to the Term Loan a thirty (30) day, sixty (60) day, or ninety
(90) day period, in each case selected by Debtor in accordance with
the provisions hereof during which the Libor Rate is in effect,
provided that the foregoing provision relating to Interest Periods is
subject to the following:
(a) if any Interest Period would otherwise end on a day
that is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the result
of such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period shall
end on the immediately preceding Business Day;
(b) any Interest Period that would otherwise extend beyond
the maturity date of the Term Loan or of the Initial Term of the
Revolving Credit, as applicable, shall end two (2) Business Days
prior to such date;
<PAGE>
(c) any Interest Period pertaining to a Libor Loan that
begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on
the last Business Day of a calendar month; and
(d) Debtor shall select Interest Periods so as not to
require a payment or prepayment of any Libor Loan during an
Interest Period for such Loan.
"Libor Interest Determination Date" means a Business Day that is
two Business Days prior to the commencement of each Interest Period
during which a Libor Rate will be applicable.
"Libor Loan" means any Loan on which interest is calculated
based on a Libor Rate.
"Libor Rate" means the rate of interest per annum determined by
Agent applicable to any selected Interest Period based on the average
rate per annum which the offices of various leading banks located in
London, England offer for deposits in U.S. Dollars in the London
Interbank Eurodollar Market at approximately 11:00 a.m. (London time)
on a Libor Interest Determination Date in an amount approximately
equal to the amount of the applicable Libor Loan, reserve adjusted.
"Pricing Grid" means the grid set forth in this Item 18 for
determining the interest rate in effect from time to time.
"Prime Rate Loan" means any Loan on which interest is calculated
based on the Prime Rate.
"Request Certificate" means a certificate in the form annexed
hereto as Exhibit E.
(b) Interest Rate Options. Unless Debtor exercises the option set
forth below with respect to the availability of the Libor Rate, the
outstanding Advances and the Term Loan shall bear interest at a rate per
annum based on the Prime Rate as determined from the Pricing Grid. If
Debtor exercises the option to choose the Libor Rate, Advances and
portions of the Term Loan with respect to which the option has been so
exercised shall bear interest at a rate of interest equal to the Libor
Rate applicable thereto as determined from the Pricing Grid.
<PAGE>
(c) Option Procedure. Debtor shall have the option (i) that any Loan
to be made shall be a Libor Loan ("Libor Rate Option") or a Prime Rate
Loan ("Prime Rate Option"); (ii) to convert all or any portion of the
outstanding Loans from a Prime Rate Loan to a Libor Loan or from a Libor
Loan to a Prime Rate Loan, provided, however, Libor Loans may only be
converted to Prime Rate Loans on the expiration date of the Interest
Period; or (iii) upon the expiration of any Interest Period to continue
all or any portion of the outstanding principal balance of a Libor Loan as
a Libor Loan, the succeeding Interest Period of which shall commence on
the expiration date of the Interest Period of the Libor Loan to be
continued. Notwithstanding the foregoing, if an Event of Default shall
then exist, Debtor may not elect that any Loan to be made shall be a Libor
Loan, to convert a Prime Rate Loan to a Libor Loan or to continue a Libor
Loan as a new Libor Loan, but all Loans shall then be required to be made
as, or converted to, Prime Rate Loans (which shall bear interest as
determined from the Pricing Grid).
Debtor shall exercise such option by giving irrevocable notice of
such election to Agent by delivering to Agent a completed and duly
executed Request Certificate (with a copy to each Lender who is not the
Agent) not later than 10:00 a.m. (EST) at least three (3) Business Days
prior to the requested Commencement Date, and, in the case of the
continuation of a Libor Loan, such continuation shall take place on the
last day of the applicable Interest Period with respect to the Libor Loan
being so continued; provided, however, at any one time, Debtor shall not
have more than three (3) Interest Periods (i.e., periods beginning or
ending on different dates) applicable to the portion of the Advances
bearing interest based on a Libor Rate and three (3) Interest Periods
applicable to the Term Loan. Each such request for, to convert to, or
continue a Libor Loan shall include the requested Commencement Date (which
shall be a Business Day), the amount requested, or to be converted or
continued, and the Interest Period.
Agent shall not incur any liability to Debtor in acting upon any
telephonic notice which Agent believes in good faith to have been given by
a duly authorized officer of Debtor or other person authorized to act on
behalf of Debtor or for otherwise acting under this Item 18.
Except as provided for in Subsection (d) below, notice by Debtor of
its election pursuant to this Subsection (c) shall be irrevocable after
the applicable Libor Interest Determination Date, and Debtor shall be
bound to borrow, continue or convert in accordance therewith.
All outstanding Loans with respect to which no notice has been given
regarding the applicable interest rate shall be Prime Rate Loans.
(d) (i) Increased Costs. In the event that on any Libor Interest
Determination Date, Agent shall have determined (which
determination shall be final, conclusive and binding) that:
<PAGE>
(1) by reason of conditions in the London Interbank
Eurodollar Market or of conditions affecting the position
of Agent or any Lender in such market occurring after the
date hereof, adequate and fair means do not exist for
establishing the Libor Rate, or
(2) by reason of (x) any applicable law or governmental
rule, regulation, guideline or order (or any written
interpretation thereof and including any new law or
governmental rule, regulation, guideline or order but
excluding any of the foregoing relating to taxes referred
to in Subsection (e) below) or (y) other circumstances
affecting Agent or any Lender or the London Interbank
Eurodollar Market or the position of Agent or any Lender in
such market (such as, but not limited to, official reserve
requirements), the Libor Rate does not represent the
effective pricing to Agent or any Lender for U.S. dollar
deposits of comparable amounts for the relevant period due
to increased costs; then, and in any event as soon as
possible after being notified of a new Interest Period,
give a notice by telephone, confirmed in writing to the
Debtor of such determination.
Thereafter, Debtor shall pay to Agent for the account of
Lenders, upon written request therefor, such additional amounts
as Agent or the applicable Lender in its sole discretion, shall
reasonably determine to be required to compensate Lenders for
such increased costs. A certificate as to such additional
amounts submitted to Debtor by Agent or the applicable Lender
shall, absent manifest error, be final, conclusive and binding
upon all parties hereto.
In lieu of paying Agent such additional amounts as required by
this Subsection (d), Debtor may exercise the following options:
(1) If such determination by Agent relates only to the
making or continuation of, or conversion to, a Libor Loan then
being requested by the Debtor pursuant to the terms hereof,
Debtor may, on such Libor Interest Determination Date by giving
notice by telephone to Agent, withdraw such request; or
(2) Debtor may, by giving notice by telephone to Agent
require Agent to convert the Libor Loan then being requested (or
into which a Prime Rate Loan was to be converted) to a Prime
Rate Loan or to convert such Debtor's outstanding Libor Loan
that is so affected into a Prime Rate Loan at the end of the
then current Interest Period.
<PAGE>
(ii) Required Termination and Repayment of Libor Loans. In the
event Agent or the applicable Lender shall have reasonably
determined, at any time (which determination shall be final,
conclusive and binding), that the making or continuation of any
or all of the Libor Loans:
(1) has become unlawful by compliance by Agent or any
Lender in good faith and with any applicable law, governmental
rule, regulation, guideline or order, or
(2) would cause Agent or any Lender severe hardship as a
result of a contingency occurring after the date of this
Agreement which materially and adversely affects the London
Interbank Eurodollar Market (such as, but not limited to,
disruptions resulting from political or economic events); then,
and in either such event, Agent shall on such date (and in any
event as soon as possible after making such determination) give
telephonic notice to Debtor, confirmed in writing, of such
determination, identifying which of the Libor Loans are so
affected.
Debtor shall, upon the termination of the then current Interest
Period applicable to each Libor Loan so affected or, if earlier,
when required by law, repay each such affected Libor Loan,
together with all interest accrued thereon.
In lieu of the repayment to Agent required by this Subsection
(d), Debtor may exercise the following options:
(1) If the determination by Agent relates only to the
making or continuation of, or conversion to, a Libor Loan then
being requested by Debtor pursuant to the terms hereof, Debtor
may, on such date by giving notice by telephone to Agent,
withdraw such request; or
(2) Debtor may, by giving notice by telephone to Agent,
require Agent to convert the Libor Loan then being requested (or
into which a Prime Rate Loan was to be converted) to a Prime
Rate Loan, or to convert its outstanding Libor Loan or Libor
Loans that are so affected into a Prime Rate Loan at the end of
the then current Interest Period applicable to each such Libor
Loan (or at such earlier time as repayment is otherwise required
to be made pursuant to this subsection (d)). Such notice shall
pertain only to the Libor Loan or Libor Loans outstanding or to
be outstanding during each such affected Interest Period.
<PAGE>
(e) Taxes. If any taxes or duties of any kind shall be payable, or
ruled to be payable, by or to any taxing authority of or in the
United States, or any other foreign country, or any political
subdivision of any thereof, in respect of any of the
transactions contemplated by this Agreement (including, but not
limited to, execution, delivery, performance, enforcement, or
payment of principal of or interest on this Agreement, the
Advances, the Term Loan, any letter of credit, or the making of
a Libor Loan), by reason of any now existing or hereafter
enacted statute, rule, regulation or other determination
(excluding any taxes imposed on or measured by the net income of
Agent or any Lender), Debtor will:
(i) Pay on written request therefor all such taxes or duties,
including interest and penalty, if any,
(ii) Promptly furnish Agent with evidence of any such payment,
and
(iii)Indemnify and hold Agent and Lenders harmless and
indemnified against any liability or liabilities with
respect to or in connection with any such taxes or the
payment thereof or resulting from any delay or omission to
pay such taxes.
(f) Liquidation Fee. Debtor shall have the right to repay at any
time, all or any portion of a Prime Rate Loan. Any repayment of
a Libor Loan before the end of the Interest Period applicable
thereto (whether because of acceleration by Agent, voluntary
repayment by Debtor or for any other reason) shall be
accompanied by a payment of a liquidation fee determined by
Agent and the Lenders at the time of such repayment sufficient
to compensate Agent and Lenders for all of the costs, expenses
and penalties (including, without limitation, lost profits)
incurred or suffered by Agent or any Lender by reason of such
repayment. Agent's and each Lender's calculation of any
liquidation fee shall be conclusive absent manifest error. All
repayments shall be applied first to any outstanding Prime Rate
Loans, unless the Debtor directs otherwise.
(g) Pricing Grid - Advances and Term Loan. The applicable initial
rates of interest to be charged for each Prime Rate Loan and
Libor Loan made hereunder as an Advance or under the Term Note
shall be initially established as of the date of this Agreement
and are listed below on the Pricing Grid as "Initial Pricing."
<PAGE>
The Initial Pricing and all subsequent pricing shall be subject
to adjustment on the thirtieth day after the end of each of the
Debtor's fiscal quarters ("Pricing Date") during the term hereof
based on a change in the Debtor's Debt-to-Worth Ratio as defined
in Item 30 hereof ("Pricing Event"). Such Debt-to-Worth Ratio
shall be calculated as of the end of the applicable fiscal
quarter of Debtor ("Calculation Date"). Any such pricing change
shall be effective as of the first day of the quarter next
following the Calculation Date and shall apply to all existing
Libor Loans, Prime Rate Loans, and Loans thereafter made. Agent
shall notify the Company promptly after the Agent's
determination of the occurrence of such a price change.
INITIAL PRICING
A. Initial Pricing - Advances
Prime Rate Loans - Prime Rate
Libor Loans - Libor Rate plus 200 Basis Points ("BP")
B. Initial Pricing - Term Loan
Prime Rate Loans - Prime Rate plus 1/8%
Libor Loans - Libor Rate plus 215 BP
PRICING AFTER A PRICING EVENT
A. ADVANCES
Consolidated
Debt-to-Worth
Ratio Prime Rate Option Libor Rate Option
<= 1.00 Prime Rate Libor Rate plus 185 BP
=> 1.01 and <=1.25 Prime Rate Libor Rate plus 200 BP
=> 1.26 and <=1.50 Prime Rate plus 1/4% Libor Rate plus 300 BP
=> 1.50 Prime Rate plus 3 1/4% Libor Rate plus 600 BP
<PAGE>
B. TERM LOAN
Debt-to-Worth
Ratio Prime Rate Option Libor
Rate Option
<= 1.00 Prime Rate plus 1/8% Libor Rate plus 200 BP => 1.01 and
<=1.25 Prime Rate plus 1/8% Libor Rate plus 215 BP => 1.26 and <=1.50
Prime Rate plus 1/2% Libor Rate plus 325 BP => 1.50 Prime Rate plus 3
1/2% Libor Rate plus 625 BP
19. Fees and Due Dates (ss.ss. 2.4, 7.3)
Type Amount Due Date(s)
Facility Fee $60,000 At Closing
Unused Line Fee 1/3% Monthly in arrears on the
first day of each month.
Letter of Credit Fees Usual and customary Upon Demand
opening, drawing, amendment
and other fees and charges of
Agent including payment
commissions
Agent's Collateral As determined by Agent Upon Demand
Examination Fees based on the costs of such examination
20. Uncollected Funds Adjustment (ss. 7.6)
2 Business Days
21. Additional Covenants (ss.ss. 9 & 10)
10.16 Mandatory Prepayment. Fail to make within one Business Day of the
receipt of the net sale proceeds from the sale of any Debtor's assets other than
Inventory sold in the ordinary course of such Debtor's business including real
estate, stock, machinery or equipment (other than certain assets listed on Rider
10.16 to this Schedule), a mandatory prepayment of principal of the Term Note,
in the amount of such net sale proceeds.
<PAGE>
22. Terms of Sale (ss.9.3)
Due dates of no more than 30 calendar days from date of Invoice,
except in regard to transactions specified below under "Datings."
Datings: Not Applicable
23. Permitted Borrowings (ss. 10.2)
None except to Agent and the Lenders and intercompany loans permitted
under ss.10.8(d) Item 24 hereof.
24. Permitted Investments and Advances (ss. 10.8(d))
Intercompany advances between IEC and IEC-Edinburg of up to
$5,000,000 at any one time.
25. Permitted Guaranties (ss.ss. 4.18, 10.9)
Debtor: Guaranty of Lease, dated as of December 18, 1998, entered into
by and between Matamoros Industrial Partners, L.P. and IEC
Electronics, S de R.L. de CV.
Guaranty of Lease, dated as of February 12, 1994, entered into
by and between Tower Securities Limited and Ohshima Electronics
Manufacturing Limited, which lease was assigned to and assumed
by IEC Electronics- Ireland Limited.
Consolidated Subsidiaries: Guaranty of indebtedness of Debtors to Lenders.
26. Maximum Annual Lease Rentals (ss. 10.10)
Combined for IEC and Consolidated Subsidiaries:
Fiscal year ended September 2000: $ 700,000
Fiscal year ended September 2001: $1,000,000
Fiscal year ended September 2002: $1,000,000
<PAGE>
27. Permitted Capital Expenditures (ss.10.11)
Combined for IEC and Consolidated Subsidiaries:
Fiscal year ended September 2000: $2,500,000
Fiscal year ended September 2001: $5,000,000
Fiscal year ended September 2002: $5,000,000
28. Maximum Aggregate Compensation (ss. 10.12(a))
Not Applicable
29. Maximum Annual Compensation for Certain Individuals (ss. 10.12(b))
Not Applicable
30. Financial Covenants (ss. 10.15)
Definitions:
(a) "Intangible Assets" means (1) all loans or advances to, and other
receivable owing from, any officers, employees, subsidiaries and
other affiliates, (2) all investments, whether in a subsidiary or
otherwise, (3) goodwill, (4) any other assets deemed intangible under
generally accepted accounting principles, and (5) any other assets
determined to be intangible by Agent in its reasonable credit
judgment.
"Net Income After Taxes" means, for the period of determination, net
income after provisions for taxes for such period, determined in
accordance with generally accepted accounting principles consistently
applied.
(b) Minimum Tangible Net Worth: Debtor shall maintain a consolidated
Minimum Tangible Net Worth in the amounts set forth below as of the
last calendar day of each final quarter for the time periods set
forth below:
Amount (000's omitted)
12/99 $ 34,900,
3/00 $ 33,400,
6/00 $ 33,500,
9/00 $ 35,200,
12/00 $ 35,200,
3/01 x + $ 300,
<PAGE>
6/01 x + $ 500,
9/01 x + $ 700,
12/01 same as 9/01
3/02 x + $ 300,
6/02 x + $ 500,
9/02 x + $ 700,
"x" means an amount equal to Debtor's actual consolidated
Tangible Net Worth as of the end of the Debtor's most recently
completed fiscal year
"Tangible Net Worth" means the sum of stockholders' equity plus the
principal balance of any debt that is subordinated to the
Indebtedness in a manner satisfactory to Agent, minus the book value
of Intangible Assets (as defined above), all determined in accordance
with generally accepted accounting principles consistently applied.
(c) Maximum Debt-To-Worth Ratio: Debtor shall maintain a ratio
("Debt-To-Worth Ratio") of total consolidated liabilities (excluding
the principal balance of any debt that is subordinated to the
Indebtedness in a manner satisfactory to Agent) to consolidated
Tangible Net Worth (as defined above) of no greater than the ratio
set forth below during the time periods set forth below:
Time Period Ratio
12/31/99, 3/31/00, 6/30/00, 9/30/00 1.50
12/31/00, 3/31/01, 6/30/01, 9/30/01 1.35
12/31/01, 3/31/02, 6/30/02, 9/30/02 1.00
(d) Minimum Net Income Before Taxes: Debtor shall maintain
consolidated Net Income Before Taxes of at least the amount set
forth below as of the dates set forth below:
Amount (000's omitted) Date
($3,000) 9/30/00
$ 700 9/30/01
$1,000 9/30/02
(e) Minimum Cash Flow Coverage Ratio: Debtor shall maintain a ratio of
consolidated Net Income After Taxes plus consolidated depreciation
and amortization expenses for the fiscal year then ended to the
amount of Debtor's consolidated capital expenditures for such fiscal
year plus principal payments made on long-term debt for such fiscal
year excluding the amount of any prepayments during such fiscal year
resulting from the sale of assets.
<PAGE>
Ratio Date
1.10 to 1.0 9/30/00
1.30 t 1.0 9/30/01
1.50 to 1.0 9/30/02
31. State (ss. 1.1(ss))
New York
32. Initial Term and Renewal Term (ss. 13.13(a))
Initial Term: To expire on January 31, 2003
Renewal Term: None
33. Percentage of Stock Ownership of Consolidated Subsidiaries (ss. 4.22,
ss. 9.23)
IEC's Percentage of
Consolidated Subsidiary Ownership
IEC Electronics-Edinburg, Texas Inc. 100%
IEC Arab, Alabama Inc. 100%
IEC Electronics-Ireland Limited 100%
IEC Electronics Foreign Sales Corp. 100%
34. Prepayment Premium (ss. 13.13(b))
From the date of Agreement through 12/31/00 1% *
From 1/1/01 - 12/31/01 1/2% *
From 1/1/02 - 12/31/02 1/4% *
* Of the Maximum Limit and the outstanding principal balance of the Term
Loan; provided, however, that any reduction of the Maximum Limit or the
principal balance of the Term Loan shall not be given effect for the
purpose of this computation if such reduction became effective within 10
months of the prepayment of the Loan; provided further, however, in such
case, the amount of the related reduction fee paid in accordance with the
provisions of Item 1 of the Schedule shall be applied as a credit against
the amount of the prepayment premium due; and provided further no
prepayment premium shall be payable upon a Mandatory Prepayment as defined
in Item 21 of this Schedule.
<PAGE>
35. Other Provisions (ss. 13.9)
Reserves (ss. 2.3)
1. Reserve against margin collateral for Debtor's ACH Facility with
HSBC Bank
2. Reserve against Letters of Credit computed at the inverse of the
raw materials Inventory advance rate.
3. Reserves against equipment sold or transferred until substituted
equipment is in place and approved by Agent.
Litigation (ss.4.11)
During fiscal 1999, IEC received a Notice of Infringement, along with an
offer of a license, from the Lemelson Foundation. The notice alleged that
IEC has infringed on certain patents of the Lemelson Foundation relating
to machine vision and bar-code technology. To date, approximately 480
companies, large and small, have signed licenses with the Lemelson
Foundation, believing that a known royalty rate which could be built into
the cost of the product was preferable to ongoing litigation with
uncertain results. IEC is a member of an industry association named "IPC",
which, on behalf of the electronics manufacturing service industry, has
negotiated a form license agreement which, essentially, obtained rights to
all of the Lemelson patents for a one-time paid-up royalty. As of
September 30, 1999, IEC has calculated the cost of the license fee to be
approximately $530,000, payable, without interest, one-half by February
29, 2000 and one-half by August 31, 2001. IEC has recorded approximately
$400,000 on its books to reflect the past and current year's impact
against the cost of goods sold.
IEC-Edinburg is one of 146 defendants named by Anglo Metal, Inc. as
potentially responsible parties in a CERCLA environmental action filed in
the U.S. District Court for the Southern District of Texas. Allegedly, a
predecessor corporation of IEC-Edinburg (Calidad Electronics Inc.) or its
predecessor (Control de Calid Electronics) shipped same hazardous material
on some date between 1954 and 1990. The plaintiff has offered to settle
this claim for a $5,000 sum.
No Violation (ss.4.16)
Covenant Failures Under the Senior Debt Facility with Chase, HSBC and Key
operating under a Forbearance Agreement that expires December 31, 1999
which Senior Debt Facility will be paid in full upon the closing hereof.
Irish IDA-Grant Repayment due to failure to maintain required minimum
number of employees.
<PAGE>
The undersigned have executed this Schedule on December 28, 1999.
HSBC BANK USA, as Agent IEC ELECTRONICS CORP.
By /s/Douglas D. Smith By /s/Richard L. Weiss
--------------------- ----------------------
Douglas D. Smith, Vice President (6964) Name:Richard L. Weiss
Title:Vice President and
Chief Financial Officer
HSBC BANK USA, as a Lender IEC ELECTRONICS-EDINBURG,
TEXAS INC.
By /s/Douglas D. Smith By /s/Richard L.Weiss
-------------------- ---------------------
Douglas D. Smith, Vice President (6964) Name:Richard L. Weiss
Title:Vice President And Chief
Financial Officer
GENERAL ELECTRIC CAPITAL
CORPORATION, as a Lender
By /s/Peggy Erlenkotter
- -----------------------
Name:Peggy Erlenkotter
Title:Duly Authorized Signatory
<PAGE>
Rider 10.16
Assets excluded from Mandatory Prepayment
1. Land and building located at 350 11th Street SW, Arab, Alabama.
2. Equipment owned by IEC Electronics-Ireland Limited.
3. The following equipment.
Model ............................. Serial Number Asset Number
TEST (NEWARK)
Genrad 2282 ....................... 99 4689
Genrad 2286 ....................... 275 2319
Genrad 2272 ....................... 226 3097
Factron 333 ....................... 80/116980 1395
Genrad 2276 ....................... 378 2906
EDINBURG
1700S ............................. 19306 2160
Axial CF-7 ........................ 9061523
CP III ............................ UMA 547 1910
CP III ............................ 2194 1903
Dip F ............................. 1069 1960
Dip F Rotary ...................... 1058 1189C
HT-3 .............................. 0356 2957
HT-3 .............................. 361 2669
Multi-mod 6794 .................... 1291 1985
Soltec 6522 ....................... 9303272301 2454
SP 1500 ........................... 1587 1587
SP 200 ............................ 4016 4016
SP 200 ............................ 4010 4010
Tape & Reel ....................... 1323 1323
UCSM-C 60-ST ...................... 322 1187C
VCD - F ........................... 879 1975
Wire Prep ......................... 94-015 1198
NEWARK
1700S ............................. 69306 2245
1700S ............................. 19409 2781
1700S ............................. 69504B 3531
1700S ............................. 119324 2656
1700S ............................. 129308 2686
1700S ............................. 099402A 3147
1700S ............................. 119216 2133
<PAGE>
- 3 -
Model ............................ Serial Number Asset Number
3M-MATIC ......................... 4419 3289
3M-MATIC ......................... 1101 2915
544 Wash ......................... 6-0016-F56-01-1 N/A
Artos CS-6 ....................... 19421 N/A
Auto Inserter .................... 2456 2124
Auto Inserter .................... 2457 2125
Auto Inserter .................... 2458 2127
Beseler T-18-8M .................. 119509881 N/A
Blue M Oven ...................... 3373 N/A
Board Flipper .................... 1920 4824
Boardloader ...................... 6E4/2 1987
CAC ADM2220 ...................... N/A N/A
CEN-CORP Shear ................... SM912FQD 1947
CNC Auto splicer ................. 950617 N/A
Conveyor ......................... 4011 4713
Conveyor ......................... 3692 3692
Conveyor 3 FT .................... N/A 2072
CP 3 ............................. 2032 1939
CP 3 ............................. N/A 2038
CP 3 ............................. 549 2162
CP 3 ............................. 2080 1950
CP 6 ............................. 1372 N/A
Dead Weight Tester ............... N/A 1247
Eastey CT 160-36 ................. 28018-TLMB N/A
Eastey EM1610-36 ................. 26018TMB N/A
Eastey EM16T ..................... 41316TPP 2859
Eastey ET2012 .................... 1062012TLMB 2959
Eastey Sealer & EM ............... 45616-TRP N/A
HPD1-11 .......................... 333 1982
HT-3 ............................. 363 2712
HT-3 ............................. 309 2543
HVC - 102 ........................ HV9328 2179
HVA - 70 ......................... HVA 9250 2273
IP 3 ............................. 896 3912
IP 3 ............................. 701 4345
Mania Tester ..................... N/A 1718
Muti Press ....................... 16349 1421
Panasert 8202BA .................. 2831202002 1981
Press HP - 10 .................... 10269 3842
Press HP - 15 .................... 15237 4351
Router ........................... 1178 2820
Router ........................... 1179 2729
<PAGE>
Router ............................... 4138 2047
Scale ................................ N/A 1160
Solder Robot ......................... N/A 4074
Soltec 6522 .......................... 9212264401 2163
Soltec 6522 .......................... 9212264301 2309
Soltec 6522 .......................... 9406315601 3403
Soltec 6522 .......................... 9303272401 2207
SP - 2400 ............................ 2051 2957
SP-200 ............................... 4025 2185
SP200 ................................ 14009 2714
SP-2400 .............................. 1842 N/A
SP-2400 .............................. 4028 2715
SP-2400 .............................. 4009 2108
SPM .................................. 7134 N/A
SPM- ................................. 7004 2884
SPM- ................................. 7228 7228
T20-9 ................................ 877466 3843
Ultra pak 337 ........................ UPK 337-186 1884
Ultrapak 337-24 ...................... 6-1531-502-01-01 N/A
Ultrapak 445 ......................... UPK-125955-0969 1944
UPK 337 .............................. 504-334-01-1 1885
Wire Prep ............................ 19671 938
Wire Prep ............................ 22956 1474
Wire Prep (ARTIOS) ................... 38554 N/A
Wire Prep (Molex) .................... N/A N/A
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 29,989
<ALLOWANCES> 0
<INVENTORY> 40,450
<CURRENT-ASSETS> 73,221
<PP&E> 20,085
<DEPRECIATION> 0
<TOTAL-ASSETS> 103,701
<CURRENT-LIABILITIES> 35,908
<BONDS> 19,892
0
0
<COMMON> 76
<OTHER-SE> 47,825
<TOTAL-LIABILITY-AND-EQUITY> 103,701
<SALES> 43,770
<TOTAL-REVENUES> 45,785
<CGS> 43,741
<TOTAL-COSTS> 2,906
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 361
<INCOME-PRETAX> (1,223)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,223)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,223)
<EPS-BASIC> (0.16)
<EPS-DILUTED> (0.16)
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