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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______TO______
COMMISSION FILE NUMBER:0-9160
INTEK DIVERSIFIED CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 04-2450145
(STATE OF INCORPORATION) I.R.S. EMPLOYER
IDENTIFICATION NUMBER
214 CARNEGIE CENTER, SUITE 304 08549-6237
PRINCETON, NEW JERSEY
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
Registrant's telephone number, including area code: (609) 419-1222
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK $.01 PAR VALUE
(Title of Each Class)
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 twelve months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
As of December 31, 1997, the aggregate market value of voting stock held by
non-affiliates was approximately $17,116,747. The number of shares outstanding
of the Registrant's Common Stock was 41,973,946 as of December 31, 1997.
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ITEM 6. SELECTED FINANCIAL DATA
The following data is derived from the Company's audited financial and
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto appearing elsewhere herein.
YEAR ENDED SEPTEMBER 30,
(THOUSANDS, EXCEPT SHARE AMOUNTS)
1997 1996 1995
---- ---- ----
STATEMENT OF OPERATIONS DATA:
Total Revenues (1) $42,284 $23,899 $32,601
Total Costs and Expenses 68,222 34,317 33,997
Operating Loss (25,938) (10,418) (1,396)
Net Loss (26,999) (9,089) (1,171)
Loss applicable to Common Shareholders $(27,999) $(9,089) $(1,171)
Net Loss Per Share applicable to Common
Shareholders $(0.74) $(0.36) $(0.05)
Weighted Average Number of
Shares Outstanding 37,885,371 25,000,000 25,000,000
BALANCE SHEET DATA:
Total Assets $112,565 $50,253 $37,463
Working Capital 21,289 (5,268) 3,538
Long Term Debt 45,136 32,837 23,187
Shareholders' Equity (Deficit) $54,289 $(21,289) $(12,949)
RECENT SALES OF UNREGISTERED SECURITIES
On August 27, 1997, under Section 4(2) of the Securities Act of 1933, as
amended, the Company issued 300,000 shares of Common Stock to Robert J.
Shiver, Chairman and Chief Executive Officer of Intek, pursuant to his
employment agreement, and in partial consideration of his services as an
officer of Intek.
(1) See Note 2a "Summary of Significant Accounting Policies -- Principles of
Consolidation" in Consolidated Financial Statements and Notes thereto
appearing elsewhere herein.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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, on January 15, 1998.
INTEK DIVERSIFIED CORPORATION
By: /s/ D. Gregg Marston
-------------------------
D. Gregg Marston
Chief Accounting Officer
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INDEX TO EXHIBITS
Exhibit No. Page No.
- ----------- --------
3.1(i) Articles of Incorporation of Intek Diversified (2)
Corporation (the "Registrant").
3.1(ii) By-Laws of the Registrant. (2)
10.1 Employment Agreement dated as of September 8, 1997 (1)
between Intek Diversified Corporation and Robert J. Shiver
10.2 Employment Agreement dated as of February 18, 1997, (1)
by and between Intek Diversified Corporation and Lee R.
Montellaro.
10.3 Employment Agreement dated as of April 21, 1997, by and (1)
between Intek Diversified Corporation and Donald Goeltz.
10.4 Second Amended and Restated Loan Agreement dated as of (1)
December 29, 1997, between Intek Diversified Corporation
as Borrower and Securicor Communications Limited as Lender.
10.5 Promissory note dated December 29, 1997, (1)
in the amount of $29,500,000 made by Intek Diversified
Corporation to the order of Securicor Communications
Limited.
10.6 Preferred Stock Purchase Agreement dated as of December (1)
29, 1997, between Intek Diversified Corporation and
Securicor Communications Limited.
10.7 Loan and Security Agreement dated December 24, 1997, (1)
by and between Summit Commercial/Gibraltar Corp., as
Lender and Midland USA, Inc., as Borrower.
10.8 Subordination Agreement dated December 24, 1997, (1)
by and among Intek Diversified Corporation and Summit
Commercial/Gibraltar Corp.
10.9 Termination and Release dated as of December 29, 1997, (1)
between Intek Diversified Corporation and Securicor
Communications Limited.
11 Statement re computation of per share earnings. (4)
12 Statement re computation of ratios. (4)
21 Subsidiaries. (1)
23.1 Consent of Arthur Andersen LLP. (1)
23.2 Consent of Baker Tilly. (1)
27 Financial Data Schedule. (1)
(1) Included in this Report.
(2) This exhibit is contained in the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994, filed with the Commission
on April 17, 1995 (Commission File No. 0-9160), and incorporated
herein by reference.
(4) Not applicable.
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Execution Copy
$29,500,000
SECOND AMENDED AND RESTATED
LOAN AGREEMENT
Dated as of December 29, 1997
between
INTEK DIVERSIFIED CORPORATION
as Borrower
and
SECURICOR COMMUNICATIONS LIMITED
as Lender
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SECOND AMENDED AND RESTATED LOAN AGREEMENT, dated as of December 29,
1997, between INTEK DIVERSIFIED CORPORATION, a Delaware corporation having an
office at 214 Carnegie Center, Suite 304, Princeton, New Jersey 08540 (the
"Borrower"), and SECURICOR COMMUNICATIONS LIMITED, a company incorporated under
the laws of England and Wales having an office at 15 Carshalton Road, Sutton,
Surrey, SM1 4LD, England ("Lender").
W I T N E S S E T H :
WHEREAS, Borrower and Lender entered into a Stock Purchase Agreement,
dated as of June 18, 1996, as amended by agreement of the parties dated as of
September 19, 1996 (the "Stock Agreement"), pursuant to which Lender sold
Borrower all of the outstanding securities (other than certain preferred shares)
of Lender's wholly-owned subsidiary, Securicor Radiocoms Limited ("Radiocoms"),
in consideration for 25,000,000 shares of Borrower's Common Stock (the
"Securicor Transaction"); and
WHEREAS, pursuant to the Stock Agreement, Lender agreed, among other
things, to advance up to $15 million to Borrower to finance the combined
business of Borrower, the U.S. LMR Distribution Business and Radiocoms which was
implemented by the Amended and Restated Loan Agreement between Borrower and
Lender dated as of December 3, 1996 (the "First Restated Loan Agreement");
WHEREAS, pursuant to the First Restated Loan Agreement, Borrower
assumed all of the obligations of Midland USA, Inc., a wholly owned subsidiary
of Borrower ("MUSA") outstanding under a Loan Agreement between Borrower and
MUSA dated as of September 19, 1996 and such obligations became obligations of
Borrower under the First Restated Loan Agreement; and
WHEREAS, the Lender has made additional advances to Borrower (the
"Other Advances") represented by the loan agreements (the "Other Loan
Agreements") listed in Schedule I hereto having various maturities and interest
rates; and
WHEREAS, the aggregate amount outstanding under the First Restated
Loan Agreement and Other Loan Agreements, including accrued interest thereon, as
of the date hereof, is $25,422,996.30 as of the date of this amendment; and
WHEREAS, concurrently with the execution of this Agreement, Borrower
and Lender have entered into a "Preferred Stock Purchase Agreement and
"Termination and Release"; and
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WHEREAS, the parties wish to amend and restate the Loan Agreement as
set forth herein to, among other things, provide for a single integrated credit
facility and provide for certain other changes;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree as follows:
1. DEFINITIONS
In addition to the defined terms appearing above, capitalized terms used in
this Agreement shall have (unless otherwise provided elsewhere in this
Agreement) the following respective meanings when used herein:
"Advance" shall have the meaning ascribed to it in Section 2.1(a) hereof.
"Affiliate" shall mean, with respect to any Person, any other Person that
controls such Person or is controlled by or under common control with such
Person.
"Agreement" shall mean this Loan Agreement, including all amendments,
modifications and supplements hereto and any appendices, exhibits or schedules
to any of the foregoing, and shall refer to the Agreement as the same may be in
effect at the time such reference becomes operative.
"Ancillary Agreements" shall mean any and all supplemental agreements,
undertakings, instruments, documents or other writings executed by Borrower.
"Business Day" shall mean any day that is not a Saturday, a Sunday or a day on
which banks are required or permitted to be closed in the State of New York.
"Cash Equivalents" shall mean (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within one year from the date of acquisition thereof; (ii) commercial
paper maturing no more than one year from the date of creation thereof and at
the time of their acquisition having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's Investors Service, Inc.; and (iii)
certificates of deposit, maturing no more than one year from the date of
creation thereof, issued by commercial banks incorporated under the laws of the
United States of America, each having combined capital, surplus and undivided
profits of not less than $200,000,000 and having a rating of "A" or better by a
nationally recognized rating agency.
"Change of Control" shall mean any acquisition, directly or indirectly, in one
transaction or a series of transactions, by any Person, other than Lender or any
Affiliate thereof, of greater than (i) 50% or more of the issued and outstanding
Common Stock, or (ii) 50% or more of the assets of
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Borrower and its Subsidiaries, taken as a whole (including without limitation
the sale by Borrower of the stock of a Subsidiary or Subsidiaries whose combined
assets represent 50% or more of the assets of Borrower and its Subsidiaries,
taken as a whole).
"Charges" shall mean all federal, state, county, city, municipal, local, foreign
or other governmental taxes at the time due and payable, levies, assessments,
charges, liens, claims or encumbrances upon or relating to (i) the Collateral,
(ii) the Obligations, (iii) Borrower's or any of its Subsidiaries' ownership or
use of any of its assets, or (iv) any other aspect of Borrower's or any of the
Subsidiaries' business.
"Closing Date" shall mean the date on which all of the conditions precedent to
the effectiveness of this Agreement have been satisfied.
"Code" shall mean the Uniform Commercial Code of the jurisdiction with respect
to which such term is used, as in effect from time to time.
"Commitment Termination Date" shall mean December 31, 2002.
"Common Stock" shall mean common stock, par value $0.01, of Borrower.
"Default" shall mean any event which, with the passage of time or notice or both
would, unless cured or waived, become an Event of Default.
"Event of Default" shall have the meaning ascribed to it in Section 9.1 hereof.
"Federal Reserve Board" shall have the meaning ascribed to it in Section 4.8
hereof.
"Fiscal Year" shall mean the fiscal year ended September 30. Subsequent changes
of the fiscal year of Borrower shall not change the term "Fiscal Year," unless
Lender shall consent in writing to such changes.
"GAAP" shall mean generally accepted accounting principles in the United States
of America as in effect from time to time.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any obligation of such
Person guaranteeing any indebtedness, lease, dividend, or other obligation
("primary obligations") of any other Person (the "primary obligor") in any
manner including, without limitation, any obligation or
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arrangement of such Person (a) to purchase or repurchase any such primary
obligation, (b) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) to indemnify the owner of such
primary obligation against loss in respect thereof.
"Indebtedness" of any Person shall mean (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services
(including, without limitation, reimbursement and all other obligations with
respect to surety bonds, letters of credit and bankers' acceptances, whether or
not matured, but not including obligations to trade creditors incurred in the
ordinary course of business), (ii) all obligations evidenced by notes, bonds,
debentures or similar instruments, (iii) all indebtedness created or arising
under any conditional sale or other title retention agreements with respect to
property acquired by such Person (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), (iv) all Guaranteed Indebtedness,
(v) all Indebtedness referred to in clause (i), (ii), (iii) or (iv) 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
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, and (vi) the Obligations.
"Letter of Credit Obligations" shall mean all outstanding obligations incurred
by Lender at the request of Borrower, whether direct or indirect, contingent or
otherwise, due or not due, in connection with the issuance or guarantee, by
Lender or another, of letters of credit, bank acceptances in respect of letters
of credit, or the like. The amount of such Letter of Credit Obligations shall
equal the maximum amount which may be payable by Lender thereupon or pursuant
thereto.
"Letters of Credit" shall mean commercial or standby letters of credit issued at
the request and for the account of Borrower, and bankers' acceptances issued by
Borrower, for which Lender has incurred Letter of Credit Obligations pursuant
thereto.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to
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give, any financing statement perfecting a security interest under the Code or
comparable law of any jurisdiction).
"Loan" shall mean the aggregate amount of Advances outstanding at any time plus
the amount of any interest capitalized with respect thereto.
"Loan Documents" shall mean this Agreement, the Note, and any other Ancillary
Agreements as to which Lender is a party or a beneficiary and all other
agreements, instruments, documents and certificates, including, without
limitation, pledges, powers of attorney, consents, assignments, contracts,
notices, and all other written matter whether heretofore, now or hereafter
executed by or on behalf of Borrower or any of its Affiliates, or any employee
of Borrower or any of its Affiliates, and delivered to Lender in connection with
this Agreement or the transactions contemplated hereby.
"Material Adverse Effect" or "Material Adverse Change" shall mean an event or
circumstance which materially adversely affects the business, properties,
financial condition or operations of Borrower and its Subsidiaries (taken as a
whole).
"Maximum Lawful Rate" shall have the meaning ascribed to it, in Section 2.4(c)
hereof.
"Net Worth" shall mean the total assets less the total liabilities of Borrower
and its consolidated Subsidiaries as determined in accordance with GAAP;
PROVIDED, HOWEVER, that in no event shall the par value of the Radiocoms
Preferred Stock be counted as a liability in making such calculation nor shall
any outstanding preferred stock of Borrower be counted as a liability.
"Note" shall have the meaning ascribed to it in Section 2.1(b).
"Obligations" shall mean all loans, advances, debts, liabilities, and
obligations, for monetary amounts (whether or not such amounts are liquidated or
determinable) owing by Borrower to Lender (including all Letter of Credit
Obligations), and all covenants and duties regarding such amounts, of any kind
or nature, present or future, whether or not evidenced by any note, agreement or
other instrument, arising under any of the Loan Documents. This term includes,
without limitation, all interest (whether capitalized or otherwise), charges,
expenses, attorneys' fees and any other sum chargeable to Borrower under any of
the Loan Documents.
"Person" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Radiocoms" shall have the meaning ascribed to it in the recitals hereof.
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"Radiocoms Preferred Stock" shall mean the 20,000 shares of Preference Stock of
Radiocoms, par value $1,000 per share, which are issued and outstanding as of
the date hereof.
"Repayment Date" means June 30, 2003.
"Securicor Transaction" shall have the meaning ascribed to it in the recitals
hereof.
"Senior Debt" shall mean all Indebtedness of Borrower (including without
limitation all principal of and premium, if any, and interest on, and all other
amounts of any nature whatsoever owing in respect of such Indebtedness, as the
same may be amended, modified or supplemented and any refinancing thereof from
time to time) other than Indebtedness which, in accordance with its terms, ranks
pari passu or junior to the Loan.
"Senior Indebtedness" shall have the meaning ascribed to it in Section 10.1
hereof.
"Significant Financing" shall mean any sale by the Borrower of equity, including
preferred stock (except preferred stock sold to Lender or any of its
affiliates), or indebtedness for cash (or a combination thereof) exceeding
$8,000,000.
"Solvent" shall mean, when used with respect to any Person, that:
the present fair saleable value of such Person's assets (including,
without limitation, the fair saleable value of the goodwill and other
intangible assets) is in excess of the total amount of such Person's
liabilities;
such Person is able to pay its debts as they become due; and
such Person does not have unreasonably small capital to carry on such
Person's business as theretofore operated and all businesses in which
such Person is about to engage.
"Stock" shall mean all shares, options, warrants, general or limited partnership
interests, participations or other equivalents (regardless of how designated) of
or in a corporation, partnership or equivalent entity whether voting or
nonvoting, including, without limitation, common stock, preferred stock, or any
other "equity security" (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended).
"Subordinated Indebtedness" shall have the meaning ascribed to it in Section
10.1 hereof.
"Subsidiary" shall mean any Person 50% or more of whose issued and outstanding
voting securities is owned or controlled, directly or indirectly, by the
specified Person.
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"Taxes" shall have the meaning ascribed thereto in Section 2.11 hereof.
"Trademarks" shall mean the Trademarks described on Schedule 4.12(b) hereto and
the trade name "Midland" and similar variations thereof, and all registrations,
applications and renewals thereof and all logos, whether or not registered, used
in connection therewith.
Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly
modified by the phrase "in accordance with GAAP" shall in no way be construed to
limit the foregoing. All other undefined terms contained in this Agreement
shall, unless the context indicates otherwise, have the meanings provided for by
the Code as in effect in the State of New York to the extent the same are used
or defined therein. The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole, including the
Exhibits and Schedules hereto, as the same may from time to time be amended,
modified or supplemented, and not to any particular section, subsection or
clause contained in this Agreement.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
2. AMOUNT AND TERMS OF CREDIT
2.1. (a) REVOLVING ADVANCES. Upon and subject to the terms and conditions
hereof (including the condition that at the time of such advance, the Lender
shall be the beneficial owner of 50% or more of the Borrower's common
stock), Lender shall make available, from time to time on a revolving basis,
until the Commitment Termination Date, for Borrower's use and upon the request
of Borrower therefor, advances (each, an "Advance") in an aggregate amount
(which amount shall include all outstanding Letter of Credit Obligations,
whether or not then due and payable) which shall not exceed $29,500,000 (less
the sum of Scheduled and Mandatory Prepayments set forth in Section 2.5(c) and
(d)). Each Advance shall be made on notice, given no later than 1:00 P.M. (New
York City time) on the second Business Day prior to the proposed Advance, by
Borrower to Lender and no Advance shall be requested unless the amount thereof
is equal to the greater of (i) $500,000 and (ii) a whole number multiple of
$500,000 in excess thereof unless the availability under this Agreement is less
than $500,000 in which case such Advance shall equal such amount; PROVIDED,
HOWEVER, that there shall be no minimum Advance with respect to any Letter of
Credit Obligations to be incurred pursuant to Section 2.2. Each such notice (a
"Notice of Advance") shall be in writing in substantially the form of Exhibit A
hereto, executed by any duly authorized officer of Borrower, specifying therein
the requested date and amount of such Advance. Lender shall, before 5:00 P.M.
(New York City time) on the date of the proposed
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Advance, upon fulfillment of the applicable conditions set forth in Section 3,
wire to a bank in the United States or the United Kingdom designated by Borrower
and reasonably acceptable to Lender the amount of such Advance.
(b) NOTE. The Loan made by Lender shall be evidenced by a promissory note to be
executed and delivered by Borrower at or prior to the Closing Date, the form of
which is attached hereto and made a part hereof as Exhibit B (the "Note"). The
Note shall be payable to the order of Lender and shall represent the obligation
of Borrower to pay the amount of the Loan, with interest thereon as prescribed
in Section 2.4. The date and amount of each Advance and each payment of
principal and interest or any capitalization of interest with respect thereto
shall be recorded on the books and records of Lender, which books and records
shall constitute PRIMA FACIE evidence of the accuracy of the information therein
recorded. Borrower acknowledges that, (i) as of the date hereof, the amount
outstanding under the Restated Loan Agreement is $10,752,555, (ii) the principal
amount outstanding under the Other Loan Agreements is $12,500,000; (iii) the
amount of accrued and unpaid interest outstanding as of the date hereof under
the Restated Loan Agreement and the Other Loan Agreements is $2,170,441.30;
(iv) that such amount constitutes the amount outstanding under this Agreement as
of the date hereof, and (v) that the amount of the Loan shall be increased by
the amount of any payments on or pursuant to any Letter of Credit Obligations,
regardless of the date of such payments. The entire unpaid balance of the Loan
and all other Obligations shall be due and payable on the Repayment Date.
(c) TERMINATION OF OTHER LOAN AGREEMENTS. This Agreement shall supersede
and the Lender and Borrower agree that the other Loan Agreement are hereby
terminated.
2.2. LETTERS OF CREDIT. (a) Lender shall, subject to the terms and
conditions hereinafter set forth, (i) incur Letter of Credit Obligations in
respect of the issuance, on the Closing Date, of such Letters of Credit
supporting obligations of Borrower or its Subsidiaries, as Borrower shall
request by written notice to Lender executed by any duly authorized officer of
Borrower, which is received by Lender not less than 2 Business Days prior to the
Closing Date, and (ii) incur from time to time on written request of Borrower or
its Subsidiaries, additional Letter of Credit Obligations in respect of Letters
of Credit supporting obligations of Borrower or its Subsidiaries; PROVIDED,
HOWEVER, that no such Letter of Credit shall have an expiry date which is after
September 30, 1998. It is understood that the determination of the bank or
other legally authorized Person (including Lender) which shall issue or accept,
as the case may be, any letter of credit or bankers acceptance contemplated by
this Section 2.2(a) shall be made by Lender, in its sole discretion.
(b) In the event that Lender shall make any payment on or pursuant to any
Letter of Credit Obligation, such payment shall then be deemed to constitute an
Advance under Section 2.1(a) hereof (whether or not Borrower is then permitted
to request Advances at such time).
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(c) In the event that Lender shall incur any Letter of Credit Obligations
pursuant hereto at the request or on behalf of Borrower hereunder, Borrower
shall pay to Lender, as compensation to Lender for such Letter of Credit
Obligation, all fees and charges paid by Lender on account of such Letter of
Credit Obligation to the issuer or like party. Fees payable in respect of
Letter of Credit Obligations shall be paid to Lender, in arrears, on the first
day of each month for the preceding month.
2.3. USE OF PROCEEDS. Borrower shall apply the proceeds of the Advances
for the general corporate purposes of Borrower and its Subsidiaries.
2.4. INTEREST ON LOAN . (a) (i) From the Closing Date through and
including the Commitment Termination Date, interest accrues on the amount
outstanding from time to time under the Loan at the rate of eleven and one-half
percent (11-1/2%) per annum, calculated on the basis of a 360 day year for the
number of days elapsed. Interest will be capitalized on June 30, of each year
of the Loan and shall be added to the principal amount outstanding at such time
under the Loan.
(ii) Interest accrued and uncapitalized on the Repayment Date shall be
payable on such date.
(b) So long as any Event of Default shall be continuing, the interest rate
applicable to the Loan shall be increased by 3% per annum above the rate
otherwise applicable.
(c) Notwithstanding anything to the contrary set forth in this Section 2.4, if
at any time until payment in full of all of the Obligations, the applicable rate
of interest under this Agreement exceeds the highest rate of interest
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto (the "Maximum Lawful Rate"), then in
such event and so long as the Maximum Lawful Rate would be so exceeded, the rate
of interest payable hereunder shall be equal to the Maximum Lawful Rate;
PROVIDED, HOWEVER, that if at any time thereafter the applicable rate of
interest under this Agreement is less than the Maximum Lawful Rate, Borrower
shall continue to pay interest hereunder at the Maximum Lawful Rate until such
time as the total interest received by Lender from the making of advances
hereunder is equal to the total interest which Lender would have received had
the applicable rate of interest under this Agreement been (but for the operation
of this paragraph) the interest rate payable since the Closing Date.
Thereafter, the interest rate payable hereunder shall be the applicable rate of
interest under this Agreement, unless and until such rate shall again exceed the
Maximum Lawful Rate, in which event this paragraph shall again apply.
2.5. PREPAYMENTS. (a) Upon the Lender ceasing to be the beneficial owner of
more than 50% of
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the Borrower's Common Stock as a result of any transaction except the direct or
indirect transfer of the Common Stock of Borrower by Lender, the commitment of
Lender to make Advances under this Agreement shall immediately terminate, and
Borrower shall immediately pay to Lender the full amount of the Loan then
outstanding, together with any accrued but uncapitalized interest thereon.
(b) Borrower shall have the right, at any time, to prepay the Loan, in whole or
in part, without premium or penalty, upon at least three Business Days
irrevocable notice to Lender specifying (i) the amount to be repaid and (ii) the
date of such repayment. If any such notice is given, Borrower shall make the
prepayment specified therein, and such prepayment shall be due and payable as
specified therein. Amounts prepaid may be reborrowed, but only so long as
Lender retains beneficial ownership of more than 50% of Borrower's Common Stock.
Each partial prepayment of the Loan pursuant to this Section 2.5(b) shall be in
an amount equal to the lesser of $1,650,000 or a whole number multiple of
$1,650,000 in excess thereof or such lesser amount outstanding and shall be
accompanied by payment of interest (whether or not capitalized) allocable to the
amount of principal prepaid.
(c) Borrower will make mandatory principal prepayments (i) at the rate of
$500,000 per month beginning July 1, 2001; and (ii) at the rate of $1,000,000
per month beginning July 1, 2002 and ended May 1, 2003 ("Scheduled Prepayment")
or, if less, the amount of the Loan Outstanding..
(d) The Company will make additional prepayments of principal at the rate of
50% of the net proceeds of a Significant Financing exceeding $8,000,000 on the
second business day following the date the Borrower completes a Significant
Financing ("Mandatory Prepayments"). Concurrently with each Mandatory
Prepayment, the Borrower will pay interest (whether or not capitalized)
associated with such Mandatory Prepayment.
2.6. RECEIPT OF PAYMENTS. Borrower shall make each payment under this
Agreement not later than 11:00 A.M. (New York City time) on the day when due in
lawful money of the United States of America in immediately available funds to
Lender's depositary bank as designated by Lender from time to time for deposit
in Lender's depositary account. For purposes only of computing interest
hereunder, all payments shall be applied by Lender on the day payment has been
credited by Lender's depository bank to Lender's account in immediately
available funds. For purposes of determining the amount of funds available for
borrowing by Borrower pursuant to Section 2.1(a) hereof, such payments shall be
applied by Lender against the outstanding amount of the Loan at the time they
are credited to its account.
2.7. APPLICATION OF PAYMENTS. Borrower irrevocably waives the right to direct
the application of any and all payments at any time or times hereafter received
by Lender from or on behalf of Borrower, and Borrower irrevocably agrees that
Lender shall have the continuing exclusive right
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to apply any and all such payments against the then due and payable Obligations
of Borrower and in repayment of the Loan as Lender may deem advisable. Lender
is authorized to, and at its option may, make advances on behalf of Borrower for
payment of all fees, expenses, charges, costs, principal and interest incurred
by Borrower hereunder when and as Borrower fails to promptly pay any such
amounts. At Lender's option and to the extent permitted by law, any advances so
made may be deemed Advances constituting part of the Loan hereunder.
2.8. ACCOUNTING. Lender will, upon Borrower's request, provide a monthly
accounting of transactions under the Loan to Borrower within 10 days of the end
of the month. Each and every such accounting shall (absent manifest error) be
deemed final, binding and conclusive upon Borrower in all respects as to all
matters reflected therein, unless Borrower, within 20 days after the date any
such accounting is rendered, shall notify Lender in writing of any objection
which Borrower may have to any such accounting, describing the basis for such
objection with specificity. In that event, only those items expressly objected
to in such notice shall be deemed to be disputed by Borrower. Lender's
determination, based upon the facts available, of any item objected to by
Borrower in such notice shall (absent manifest error) be final, binding and
conclusive on Borrower, unless Borrower shall commence a judicial proceeding to
resolve such objection within 45 days following Lender's notifying Borrower of
such determination.
2.9. INDEMNITY. Borrower shall indemnify and hold Lender and its officers,
directors, employees, agents, Affiliates and shareholders (collectively, the
"Indemnified Persons") harmless from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable attorneys' fees and disbursements, including
those incurred upon any appeal) which may be instituted or asserted against or
incurred by any Indemnified Person as the result of the execution of the Loan
Documents or extension of credit hereunder; PROVIDED, HOWEVER, that Borrower
shall not be liable for such indemnification to such Indemnified Person to the
extent that any such suit, action, proceeding, claim, damage, loss, liability or
expense results from such Indemnified Person's negligence or willful misconduct.
2.10. ACCESS. Lender and any of its officers, employees and/or agents shall
have the right, exercisable as frequently as Lender determines to be
appropriate, during normal business hours (or at such other times as may
reasonably be requested by Lender), to inspect the properties and facilities of
Borrower and to inspect, audit and make extracts from all of Borrower's records,
files and books of account. Borrower shall deliver any document or instrument
reasonably necessary for Lender, to obtain records from any service bureau
maintaining records for Borrower, and shall maintain duplicate records or
supporting documentation on media, including, without limitation, computer tapes
and discs owned by Borrower. Borrower shall instruct its banking and other
financial institutions to make available to Lender such information and records
as Lender may reasonably request.
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2.11. TAXES. (a) Any and all payments by Borrower hereunder or under the
Note shall be made, in accordance with this Section 2.11, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on or measured by the net income of Lender by the
jurisdiction under the laws of which Lender is organized or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If Borrower shall be required by law to deduct any Taxes from or in respect of
any sum payable hereunder or under the Note to Lender, (i) the sum payable shall
be increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.11) Lender receives an amount equal to the sum it would have received had no
such deductions been made, (ii) Borrower shall make such deductions, and
(iii) Borrower shall pay the full amount deducted to the relevant taxing or
other authority in accordance with applicable law.
(b) In addition, Borrower shall pay any present or future stamp or documentary
taxes or any other sales, transfer, excise, mortgage recording or property
taxes, charges or similar levies that arise from any payment made hereunder or
under the Note or from the execution, sale, transfer, delivery or registration
of, or otherwise with respect to the Loan Documents and any other agreements and
instruments contemplated thereby (hereinafter referred to as "Other Taxes").
(c) Borrower shall indemnify Lender for the full amount of Taxes or Other Taxes
(including without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 2.11) paid by Lender and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be made within 30 days from the
date such Lender makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, Borrower shall
furnish to Lender, at its address referred to in Section 11.10, the original or
a certified copy of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement of Borrower
hereunder, the agreements and obligations of Borrower contained in this Section
2.11 shall survive both (i) the payment in full of principal and interest
hereunder and under the Note and (ii) the termination of this Agreement.
3. CONDITIONS PRECEDENT
3.1. CONDITIONS TO THE EFFECTIVENESS. Notwithstanding any other provision of
this Agreement and
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without affecting in any manner the rights of Lender under the Restated Loan
Agreement or other Loan Agreements, this Agreement shall not be effective, and
Borrower shall have no rights under this Agreement, and Lender shall not be
obligated to make available any Advance or Letter of Credit hereunder, unless
and until Borrower shall have delivered to Lender, in form and substance
satisfactory to Lender and (unless otherwise indicated) each dated not later
than the Closing Date:
(a) The Note to the order of Lender duly executed by Borrower.
(b) Resolutions of the board of directors of Borrower certified by the
Secretary or Assistant Secretary of Borrower, as of the Closing Date, to be duly
adopted and in full force and effect on such date, authorizing (i) the
consummation of each of the transactions contemplated by the Loan Documents and
(ii) specific officers to execute and deliver this Agreement and the other Loan
Documents.
(c) A certificate of the chief executive officer of Borrower stating
that all of the representations and warranties of the Borrower contained herein
or in any of the Loan Documents are correct on and as of the Closing Date as
though made on and as of such date, and no event has occurred and is continuing,
or would result from any Advance, if made on the Closing Date, which constitutes
or would constitute a Default or an Event of Default.
(d) Certificates of the Secretary or an Assistant Secretary of Borrower, dated
the Closing Date, as to the incumbency and signatures of the officers of
Borrower executing any of the Loan Documents and any other certificate or other
document to be delivered pursuant hereto or thereto, together with evidence of
the incumbency of such Secretary or Assistant Secretary.
(e) Such additional information and materials as Lender may reasonably request,
including, without limitation, copies of any debt agreements, security
agreements and other material contracts.
3.2. FURTHER CONDITIONS TO EACH ADVANCE AND LETTER OF CREDIT . It shall be a
further condition to the funding of each subsequent Advance and incurrence of
Letter of Credit Obligations that the following statements shall be true on the
date of each such Advance or incurrence:
(a) All of the representations and warranties of Borrower contained
herein or in any of the Loan Documents shall be correct on and as of the Closing
Date and the date of each such Advance as though made on and as of such date,
except to the extent that any such representation or warranty expressly relates
to an earlier date and for changes therein permitted or contemplated by this
Agreement.
(b) No event shall have occurred and be continuing, or would result from
the funding of any Advance, which constitutes or would constitute a Default or
an Event of Default.
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(c) The aggregate principal amount of the Advances made to Borrower
hereunder after giving effect to such Advance, plus the aggregate amount of all
outstanding Letter of Credit Obligations (whether or not then due or payable),
shall not exceed $29,500,000.
The acceptance by Borrower of the proceeds of any Advance or the incurrence by
Lender of Letter of Credit Obligations shall be deemed to constitute, as of the
date of such acceptance, a representation and warranty by Borrower that the
conditions in this Section 3.2 have been satisfied.
4. REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loan, as herein provided for, Borrower makes the
following representations and warranties to Lender, each and all of which shall
be true and correct as of the date of execution and delivery of this Agreement:
4.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW . Borrower and each Subsidiary
of Borrower (i) is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation; (ii) except as indicated
on Schedule 4.1(ii) hereto, is duly qualified to do business and is in good
standing under the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification (except for
jurisdictions in which such failure to so qualify or to be in good standing
would not have a Material Adverse Effect); (iii) has the requisite corporate
power and authority and the legal right to own, pledge, mortgage or otherwise
encumber and operate its properties, to lease the property it operates under
lease, and to conduct its business as now, heretofore and proposed to be
conducted; (iv) except as indicated on Schedule 4.1(iv) hereto, has all material
licenses, permits, consents or approvals from or by, and has made all material
filings with, and has given all material notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct; (v) is in compliance with its certificate of
incorporation and by-laws; and (vi) is in compliance with all applicable
provisions of law where the failure to comply would have a Material Adverse
Effect.
4.2. EXECUTIVE OFFICES . The location of Borrower's executive offices and
principal place of business is set forth in Schedule 4.2 hereto, and, after the
Closing Date, as set forth in a written amendment thereto delivered by Borrower
to Lender.
4.3. SUBSIDIARIES. There exist no Subsidiaries of Borrower other than (a) as
set forth on Schedule 4.3 hereto, which sets forth such Subsidiaries, together
with their respective jurisdictions of organization, and the authorized and
outstanding capital Stock of each such Subsidiary, by class and number and
percentage of each class legally owned by Borrower or a Subsidiary of Borrower
or any other Person, or to be owned by the Closing Date or (b) after the Closing
Date, as set forth
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in a written amendment to Schedule 4.3 delivered by Borrower to Lender. There
are no options, warrants, rights to purchase or similar rights covering capital
Stock for any such Subsidiary.
4.4. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution,
delivery and performance by Borrower of the Loan Documents, Ancillary Agreements
and all instruments and documents to be delivered by Borrower, to the extent it
is a party thereto, hereunder and thereunder: (i) are within Borrower's
corporate power; (ii) have been duly authorized by all necessary or proper
corporate action; (iii) are not in contravention of any provision of Borrower's
certificates or articles of incorporation or by-laws; (iv) will not violate any
law or regulation, or any order or decree of any court or governmental
instrumentality in any material respect; (v) will not conflict with or result in
the breach or termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which Borrower or any of its Subsidiaries is a
party or by which Borrower or any of its Subsidiaries or any of their respective
properties is bound; (vi) will not result in the creation or imposition of any
Lien upon any of the property of Borrower or any of its Subsidiaries; and
(vii) do not require the consent or approval of any Governmental Authority or
any other Person. Each of the Loan Documents has been duly executed and
delivered for the benefit of or on behalf of Borrower and each constitutes a
legal, valid and binding obligation of Borrower, to the extent it is a party
thereto, enforceable against it in accordance with its terms.
4.5. SOLVENCY. After giving pro forma effect to the Preferred Stock Purchase
and Termination and Release and the initial Advance, if made on the Closing
Date, and the payment of all estimated legal, accounting and other fees related
hereto, Borrower will be Solvent as of and on the Closing Date.
4.6 LABOR MATTERS. There are no strikes or other labor disputes against
Borrower pending or, to Borrower's knowledge, threatened which would have a
Material Adverse Effect.
4.7 INVESTMENT COMPANY ACT. Neither Borrower nor any of its Subsidiaries is
an "investment company" or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company", as such terms are defined
in the Investment Company Act of 1940, as amended. The making of the Advances
by Lender, the application of the proceeds and repayment thereof by Borrower and
the consummation of the transactions contemplated by this Agreement and the
other Loan Documents will not violate any provision of such Act or any rule,
regulation or order issued by the Securities and Exchange Commission thereunder.
4.8 MARGIN REGULATIONS. Neither Borrower nor any of its Subsidiaries owns
any "margin security," as that term is defined in Regulations G and U of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
and the proceeds of the Advances will be used only for the purposes contemplated
hereunder. The Advances will not be used, directly or indi-
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rectly, for the purpose of purchasing or carrying any margin security, for the
purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry any margin security or for any other purpose which might
cause any of the loans under this Agreement to be considered a "purpose credit"
within the meaning of Regulations G, T, U or X of the Federal Reserve Board.
Borrower will not take or permit any Subsidiary or agent acting on its behalf to
take any action which might cause this Agreement or any document or instrument
delivered pursuant hereto to violate any regulation of the Federal Reserve
Board.
4.9 NO LITIGATION. Except as set forth on Schedule 4.9 hereto, no action,
claim or proceeding is now pending or, to the knowledge of Borrower, threatened
against Borrower or any of its Subsidiaries at law, in equity or otherwise,
before any court, board, commission, agency or instrumentality of any federal,
state, or local government or of any agency or subdivision thereof, or before
any arbitrator or panel of arbitrators, which, if determined adversely, could
have a Material Adverse Effect, nor to the knowledge of Borrower does a state of
facts exist which is reasonably likely to give rise to such proceedings.
4.10 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Borrower and each of its
Subsidiaries owns all material patents, patent applications, copyrights,
trademarks, trademark applications, and know-how (collectively, "Intangible
Property") necessary to continue to conduct its business as heretofore conducted
by it, now conducted by it and proposed to be conducted by it, each of which is
listed, together with Patent and Trademark Office application or registration
numbers, where applicable, on Schedule 4.11(a) hereto. Further, (i) Borrower
and each of its Subsidiaries has good and lawful title to the Intangible
Property owned by it (subject to the licenses set forth on Schedule 4.11(d)
hereto); (ii) to Borrower's knowledge, the Intangible Property is valid and
subsisting and is enforceable; (iii) to Borrower's knowledge, there are no
actual or threatened claims by third parties regarding the Intangible Property;
(iv) to Borrower's knowledge, the Intangible Property does not infringe or
otherwise violate any rights of any third party, except where any violation or
infringement would not have a Material Adverse Effect.
4.11 NO MATERIAL ADVERSE EFFECT. No event has occurred and is continuing
which has had or could have a Material Adverse Effect.
5. FINANCIAL STATEMENTS AND INFORMATION
5.1. REPORTS AND NOTICES. Borrower covenants and agrees that from and after
the Closing Date and until the Commitment Termination Date, it shall deliver to
Lender:
(a) Within 45 days after the end of each fiscal month, (i) a copy of
the unaudited consolidated balance sheets of Borrower as of the end of such
month and the related statements of income and cash flows for that portion of
the Fiscal Year ending as of the end of
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such month, and (ii) a copy of the unaudited consolidated statements of income
of Borrower for such month, all prepared in accordance with GAAP (subject to
normal year-end adjustments), accompanied by the certification of the chief
executive officer or chief financial officer of Borrower that all such financial
statements are complete and correct and present fairly in accordance with GAAP
(subject to normal year-end adjustments), the financial position, the results of
operations and the statements of cash flows of Borrower as at the end of such
month and for the period then ended, and that there was no Default or Event of
Default in existence as of such time.
(b) As soon as practicable, but in any event within two (2) Business Days
after Borrower becomes aware of the existence of any Default or Event of
Default, or any development or other information which would have a Material
Adverse Effect, telephonic or telegraphic notice specifying the nature of such
Default or Event of Default or development or information, including the
anticipated effect thereof, which notice shall be promptly confirmed in writing
within five (5) days.
(c) If requested by Lender, copies of all federal, state, local and foreign
tax returns and reports in respect of income, franchise or other taxes on or
measured by income (excluding sales, use or like taxes) filed by Borrower or any
of its Subsidiaries.
(d) Such other information respecting Borrower's or its Subsidiaries'
business (including with respect to orders received and inventory purchased),
financial condition or prospects as Lender may, from time to time, reasonably
request.
5.2. COMMUNICATION WITH ACCOUNTANTS. Borrower authorizes Lender to
communicate directly with its (or any of its Subsidiaries') independent
certified public accountants and tax advisors and authorizes those accountants
to disclose to Lender any and all financial statements and other supporting
financial documents and schedules including copies of any management letter with
respect to the business, financial condition and other affairs of Borrower or
any of its Subsidiaries. At Lender's request, Borrower shall deliver a letter
addressed to such accountants and tax advisors instructing them to comply with
the provisions of this Section 5.2.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, unless Lender shall otherwise consent in
writing, from and after the date hereof and until the Repayment Date:
6.1. MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Borrower shall:
(a) do or cause to be done all things necessary to preserve and keep in full
force and effect the corporate existence, and the rights and franchises of
Borrower and each of its Subsidiaries; (b) transact business on
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behalf of itself or any Subsidiary only in such names as Borrower shall specify
to Lender in writing not less than thirty days prior to the first date such name
is used by Borrower and (c) at all times maintain, preserve and protect all of
its Trademarks and any tradenames.
6.2. PAYMENT OF OBLIGATIONS. (a) Borrower shall: (i) pay and discharge or
cause to be paid and discharged all its and its Subsidiaries' Indebtedness,
including, without limitation, all the Obligations as and when due and payable,
and (ii) pay and discharge or cause to be paid and discharged promptly all
(A) Charges imposed upon it, its income and profits, or any of its property
(real, personal or mixed), and (B) lawful claims for labor, materials, supplies
and services or otherwise before any thereof shall become in default.
(b) Borrower, on behalf of itself or any Subsidiary, may in good faith
contest, by proper legal actions or proceedings diligently pursued, the validity
or amount of any Charges or claims arising under Section 6.2(a)(ii), provided
that at the time of commencement of any such action or proceeding, and during
the pendency thereof (i) adequate reserves with respect thereto are maintained
on the books of Borrower, in accordance with GAAP; (ii) such contest operates to
suspend collection of the contested Charges or claims and is maintained and
prosecuted continuously with diligence; (iii) no Lien shall exist for such
Charges or claims during such action or proceeding; (iv) Borrower shall promptly
pay or discharge such contested Charges and all additional charges, interest,
penalties and expenses, if any, and shall deliver to Lender evidence acceptable
to Lender of such compliance, payment or discharge, if such contest is
terminated or discontinued adversely to Borrower; and (v) Lender has not advised
Borrower in writing that Lender reasonably believes that nonpayment or
nondischarge thereof would have a Material Adverse Effect.
(c) Notwithstanding anything to the contrary contained in Section 6.2(b)
above, Borrower shall have the right to pay the charges or claims arising under
Section 6.2(a)(ii) and in good faith contest, by proper legal actions or
proceedings, the validity or amount of such charges or claims.
6.3 BOOKS AND RECORDS. Borrower shall keep, and shall cause its Subsidiaries
to keep, all books, accounts and records in the ordinary course of business.
6.4 LITIGATION. Borrower shall notify Lender in writing, promptly upon
learning thereof, of any litigation commenced against Borrower or any of its
Subsidiaries, and of the institution against any of them of any suit or
administrative proceeding that may have a Material Adverse Effect.
6.5 INSURANCE. Borrower shall maintain insurance covering, without
limitation, fire, theft, burglary, public liability, property damage, product
liability and insurance on all property and assets of Borrower and its
Subsidiaries, all in amounts customary for its business and in any event with a
lender's loss payable clause for the benefit of Lender.
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6.6 COMPLIANCE WITH LAW. Borrower shall, and shall cause its Subsidiaries
to, comply in all material respects with all federal, state and local laws and
regulations applicable to it.
6.7 SUPPLEMENTAL DISCLOSURE. From time to time as may be necessary (in the
event that such information is not otherwise delivered by Borrower to Lender
pursuant to this Agreement), so long as there are Obligations outstanding
hereunder, Borrower will supplement each Schedule (if any) or representation
herein with respect to any matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in such Schedule or as an exception to such representation or
which is necessary to correct any information in such Schedule or representation
which has been rendered inaccurate thereby; PROVIDED, HOWEVER, that such
supplement to such Schedule or representation shall not be deemed an amendment
thereof unless otherwise consented to by the Lender.
6.8 NET WORTH. Borrower shall maintain at all times, on a consolidated
basis with its Subsidiaries, a Net Worth of not less than $20 million.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, without Lender's prior written
consent, from and after the date hereof and until the Repayment Date:
7.1. MAINTENANCE OF BUSINESS. Borrower shall not and shall not permit any of
its subsidiaries to engage in any business other than the business currently
engaged in by Borrower or such Subsidiary.
7.2. TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule 7.2(b),
Borrower shall not, and shall not permit any of its Subsidiaries to, enter into
or be a party to any transaction with any Affiliate of Borrower, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's or
such Subsidiary's business and upon fair and reasonable terms that are fully
disclosed to Lender and are no less favorable to Borrower or such Subsidiary
than would be obtained in a comparable arm's-length transaction with a Person
not an Affiliate of Borrower.
7.3. EVENTS OF DEFAULT. Borrower shall not, and shall not permit any of its
Subsidiaries to, take or omit to take any action, which act or omission would
constitute (i) a default or an event of default pursuant to, or noncompliance
with any of, the terms of any of the Loan Documents or (ii) a material default
or an event of default pursuant to, or noncompliance with any other contract,
lease, mortgage, deed of trust or instrument to which it is a party or by which
it or any of its property is bound, or any document creating a Lien, unless such
default, event of default or non-compliance would not have a Material Adverse
Effect.
8. TERM
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8.1 TERMINATION . Subject to the provisions of Section 2 hereof, the
financing arrangement contemplated hereby in respect of the Loan shall be in
effect until the Commitment Termination Date.
8.2 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING ARRANGEMENT .
Except as otherwise expressly provided for in the Loan Documents, no termination
or cancellation (regardless of cause or procedure) of any financing arrangement
under this Agreement shall in any way affect or impair the powers, obligations,
duties, rights and liabilities of Borrower or the rights of Lender relating to
any transaction or event occurring prior to such termination. Except as
otherwise expressly provided herein or in any other Loan Document, all
undertakings, agreements, covenants, warranties and representations contained in
the Loan Documents shall survive such termination or cancellation and shall
continue in full force and effect until such time as all of the Obligations have
been paid in full in accordance with the terms of the agreements creating such
Obligations, at which time the same shall terminate.
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9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
9.1. EVENTS OF DEFAULT . The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(a) Borrower shall fail to make any payment of principal of, or interest
on or any other amount owing in respect of, the Loan or any of the other
Obligations when due and such failure continues for a period of five (5) days.
(b) Borrower shall fail or neglect to perform, keep or observe any of
the provisions of Section 6.8 or Section 7 hereof.
(c) Borrower shall fail or neglect to perform, keep or observe any other
provision of this Agreement or of any of the other Loan Documents and the same
shall remain unremedied for a period ending on the first to occur of twenty (20)
days after Borrower shall receive written notice of any such failure from any
Lender or forty five (45) days after Borrower shall become aware thereof.
(d) A default shall occur under any other agreement, document or
instrument to which Borrower or any of its Subsidiaries is a party or by which
Borrower's or any of its Subsidiaries' property is bound, and such default
causes (or permits any holder of such Indebtedness or a trustee to cause) such
Indebtedness or a portion thereof in an aggregate amount exceeding $250,000 to
become due prior to its stated maturity or prior to its regularly scheduled
dates of payment.
(e) Any representation or warranty herein or in any Loan Document or in any
written statement pursuant thereto or hereto, report, financial statement or
certificate made or delivered to Lender by Borrower shall be untrue or incorrect
in any material respect, as of the date when made or deemed made (including
those made or deemed made pursuant to Section 3.2).
(f) Any of the assets of Borrower or any of its Subsidiaries shall be
attached, seized, levied upon or subjected to a writ or distress warrant, or
come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors of Borrower or any Subsidiary of Borrower and shall
remain unstayed or undismissed for thirty (30) consecutive days; or any Person
other than Borrower shall apply for the appointment of a receiver, trustee or
custodian for any of the assets of Borrower or any Subsidiary of Borrower and
shall remain unstayed or undismissed for thirty (30) consecutive days; or
Borrower or any Subsidiary of Borrower shall have concealed, removed or
permitted to be concealed or removed, any part of its property, with intent to
hinder, delay or defraud its creditors or any of them or made or suffered a
transfer of any of its property or the incurring of an obligation which may be
fraudulent under any bankruptcy, fraudulent
21
<PAGE>
conveyance or other similar law.
(g) A case or proceeding shall have been commenced against Borrower or
any Subsidiary of Borrower in a court having competent jurisdiction seeking a
decree or order in respect of Borrower or any Subsidiary of Borrower (i) under
title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of Borrower or any Subsidiary of Borrower or
of any substantial part of its or their properties, or (iii) ordering the
winding-up or liquidation of the affairs of Borrower or any Subsidiary of
Borrower and such case or proceeding shall remain undismissed or unstayed for
thirty (30) consecutive days or such court shall enter a decree or order
granting the relief sought in such case or proceeding.
(h) Borrower or any Subsidiary of Borrower shall (i) file a petition
seeking relief under title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable federal, state or foreign bankruptcy
or other similar law, (ii) consent to the institution of proceedings thereunder
or to the filing of any such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of Borrower or any Subsidiary of Borrower or
of any substantial part of its or their properties, (iii) fail generally to pay
its debts as such debts become due, or (iv) take any corporate action in
furtherance of any such action.
9.2. REMEDIES. If any Event of Default specified in Section 9.1 shall have
occurred and be continuing, Lender may, by written notice to Borrower and the
lender with respect to any Senior Debt (the "Senior Lender") declare all
Obligations to be forthwith due and payable, whereupon all such Obligations,
without presentment, demand, protest or further notice of any kind, all of which
are expressly waived by Borrower, shall become due and payable (x) if none of
the Senior Debt is outstanding, immediately and (y) if any Senior Debt is
outstanding, upon the first to occur of (1) acceleration of any Senior Debt or
(2) the fifth Business Day after receipt by Borrower and the Senior Lender of
such written notice given hereunder, unless on or prior to the date such amounts
become due and payable Borrower shall have cured the default, event or condition
resulting in such Event of Default and no other Event of Default is then
continuing and Borrower shall have given notice of such cure to Agent and
Lenders; PROVIDED, HOWEVER, that upon the occurrence of an Event of Default
specified in Section 9.1(f), (g) or (h) hereof, such Obligations shall become
due and payable without declaration, notice or demand by Lender.
Notwithstanding the above, at any time after such declaration of acceleration
has been made and before payment in full of the Obligations, Lender, by written
notice to Borrower, may rescind and annul such declaration and its consequences
if all Events of Default, other than the non-payment of principal of the Loan
which has become due solely by such declaration of acceleration, have been cured
or waived.
22
<PAGE>
9.3. WAIVERS BY BORROWER. Except as otherwise provided for in this Agreement
and applicable law, Borrower waives (i) presentment, demand and protest and
notice of presentment, dishonor, notice of intent to accelerate, notice of
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by Lender on which Borrower may in any way be liable and hereby
ratifies and confirms whatever Lender may do in this regard, (ii) all rights to
notice and a hearing prior to Lender's taking possession or control of, or to
Lender's replevy, attachment or levy upon, any bond or security which might be
required by any court prior to allowing Lender to exercise any of its remedies,
and (iii) the benefit of all valuation, appraisal and exemption laws. Borrower
acknowledges that it has been advised by counsel of its choice with respect to
this Agreement, the other Loan Documents and the transactions evidenced by this
Agreement and the other Loan Documents.
9.4 RIGHT OF SET-OFF. Upon the occurrence and during the continuance of any
Event of Default, Lender is hereby authorized at any time and from time to time,
to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by Lender to or for the credit or
the account of Borrower against any and all of the obligations of Borrower now
or hereafter existing under this Agreement, and the Note held by Lender
irrespective of whether or not Lender shall have made any demand under this
Agreement or such Note and although such obligations may be unmatured. Lender
agrees promptly to notify Borrower after any such set-off and application made
by Lender; PROVIDED, HOWEVER, that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of Lender under
this Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which Lender may have.
10. SUBORDINATION
10.1. LOAN SUBORDINATED TO SENIOR INDEBTEDNESS. Borrower covenants and
agrees, and Lender likewise covenants and agrees, that all payments of the
principal of (and premium, if any), and interest on, the Loan and all other
Obligations by Borrower pursuant to this Agreement (collectively the
"Subordinated Indebtedness") shall be subordinated in accordance with the
provisions of this Section 10 to the prior payment in full of all Senior
Indebtedness of Borrower. For purposes of this Section 10, the term "Senior
Indebtedness" shall mean the Senior Debt of Borrower and shall include principal
of and premium, if any, and interest (including interest accruing at the rate
provided for in the documents evidencing such Senior Indebtedness after the
commencement of any proceeding of the type referred to in Section 10.2(a)
hereof, whether or not an allowed claim in such proceeding) on all loans and
other extensions of credit under, and all expenses, fees, reimbursements,
indemnities and other amounts owing pursuant to, all such Senior Debt of the
Borrower.
23
<PAGE>
10.2 PRIORITY AND PAYMENT OVER OF PROCEEDS IN CERTAIN EVENTS. (a) Upon
payment or distribution of assets or securities of Borrower of any kind or
character, whether in cash, property or securities, upon any dissolution or
winding up or total or partial liquidation or reorganization of Borrower,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or
other proceedings or upon an assignment for the benefit of creditors or any
other marshalling of the assets and liabilities of Borrower, all Senior
Indebtedness shall first be paid in full in cash, or payment provided for in
cash or cash equivalents in a manner satisfactory to the holders of Senior
Indebtedness, before any direct or indirect payments or distributions,
including, without limitation, by exercise of set-off, of any cash, property or
securities on account of principal of (or premium, if any) or interest on the
Subordinated Indebtedness and to that end the holders of Senior Indebtedness
shall be entitled to receive (pro rata on the basis of the respective amounts of
Senior Indebtedness held by them) directly, for application to the payment
thereof (to the extent necessary to pay all Senior Indebtedness in full after
giving effect to any substantially concurrent payment or distribution to or
provision for payment to the holders of such Senior Indebtedness), any payment
or distribution of any kind or character, whether in cash, property or
securities, in respect of the Subordinated Indebtedness. The holders of Senior
Indebtedness are hereby authorized to file an appropriate claim for and on
behalf of Lender if they or any of them do not file, and there is not otherwise
filed on behalf of the Holders, a proper claim or proof of claim in the form
required in any such proceeding prior to 30 days before the expiration of the
time to file such claim or claims.
(b) No direct or indirect payment by or on behalf of Borrower of principal of
(premium, if any), or interest on, the Loan, whether pursuant to the terms of
this Agreement, upon acceleration or otherwise, shall be made if at the time of
such payment there exists (i) a default in the payment of all or any portion of
principal of (premium, if any), interest on, fees or other amounts owing in
connection with any Senior Indebtedness, or (ii) any other default or event of
default under any document or instrument evidencing the Senior Indebtedness as
the same may be amended, modified or otherwise refinanced (and Lender has
received notice thereof from the agent for or representative of the holders of a
majority of the outstanding principal amount of the Senior Indebtedness (the
"Representative") as provided below), and in either case such default or event
of default shall not have been cured or waived in writing; PROVIDED, HOWEVER,
that if within the period specified in the next sentence with respect to a
default or event of default referred to in clause (ii) above, the holders of
Senior Indebtedness have not declared the Senior Indebtedness to be immediately
due and payable (or have declared such Senior Indebtedness to be immediately due
and payable and within such period have rescinded such acceleration), then and
in that event, payment of principal of, and interest on, the Loan shall be
resumed. With respect to any default or event of default under clause (ii)
above the period referred to in the preceding sentence shall commence upon
receipt by Lender of a written notice or notices (which shall specify all
defaults and events of default existing under such documents or instruments on
the date of such notice and of which the Representative, whichever is giving
such notice, had actual knowledge at such time)
24
<PAGE>
of the commencement of such period from the Representative, and shall end at the
completion of the 180th day after the beginning of such period. Only one such
180 day period may commence within any 360 consecutive days. Upon termination
of any such period, Borrower shall resume payments on account of the principal
of (premium, if any), and interest on, the Loan, and on account of all other
Subordinated Indebtedness, subject to the provisions of Sections 10.1 and 10.2
hereof.
(c) (i) In the event that, notwithstanding the foregoing
provision prohibiting such payment or distribution, Lenders shall
have received any payment on account of the Subordinated
Indebtedness at a time when such payment is prohibited by such
provision before the Senior Indebtedness is paid in full, then and
in such event, such payment or distribution shall be received and
held in trust by Lender apart from its other assets and paid over or
delivered to the holders of the Senior Indebtedness remaining unpaid
to the extent necessary to pay in full in cash the principal of
(premium, if any), and interest on, such Senior Indebtedness in
accordance with its terms and after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness.
(ii) Nothing contained in this Section 10 will limit the right of
the Lender to take any action to accelerate the maturity of the
Subordinated Indebtedness pursuant to Section 9.2 hereof.
(iii) Upon any payment or distribution of assets or securities
referred to in this Section 10, Lender shall be entitled to rely
upon any order or decree of a court of competent jurisdiction in
which such dissolution, winding up, liquidation or reorganization
proceedings are pending, and upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other person
making any such payment or distribution, delivered to Lender for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other
Indebtedness of Borrower, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 10.
10.3. RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS NOT TO BE IMPAIRED . No right
of any present or future holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act by any such holder, or by any
noncompliance by Borrower with the terms and provisions and covenants herein
regardless of any knowledge thereof such holder may have or otherwise be charged
with.
The provisions of this Section 10 are intended to be for the benefit of, and
shall be enforceable
25
<PAGE>
directly by, the holders of the Senior Indebtedness. Borrower and Lender
acknowledges that the holders of the Senior Indebtedness are or will be relying
upon the provisions of this Section 10 in extending such Senior Indebtedness.
10.4 SUBROGATION . Upon the payment in full of all Senior Indebtedness,
Lender shall be subrogated to the extent of the payments or distributions made
to the holders of, or otherwise applied to payment of, the Senior Indebtedness
pursuant to the provisions of this Section 10 and to the rights of the holders
of Senior Indebtedness to receive payments or distributions of assets of
Borrower made on the Senior Indebtedness until the Loan shall be paid in full;
and for the purposes of such subrogation, no payments or distributions to
holders of Senior Indebtedness of any cash, property or securities to which
Lender would be entitled except for the provisions of this Section 10, and no
payment over pursuant to the provisions of this Section 10 to holders of Senior
Indebtedness by Lender, shall, as between Borrower, their creditors other than
holders of Senior Indebtedness and Lender, be deemed to be payment by Borrower
to or on account of Senior Indebtedness, it being understood that the provisions
of this Section 10 are solely for the purpose of defining the relative rights of
the holders of Senior Indebtedness, on the one hand, and Lender, on the other
hand.
If any payment or distribution to which Lender would otherwise have been
entitled but for the provisions of this Section 10 shall have been applied,
pursuant to the provisions of this Section 10, to the payment of Senior
Indebtedness, then and in such case, Lender shall be entitled to receive from
the holders of Senior Indebtedness at the time outstanding any payments or
distributions received by such holders of Senior Indebtedness in excess of the
amount sufficient to pay all Senior Indebtedness in full.
10.5. OBLIGATIONS OF BORROWER UNCONDITIONAL . Nothing contained in this
Section 10 or elsewhere in this Agreement or in the Note is intended to or shall
impair, as between Borrower and Lender, the obligations of Borrower, which are
absolute and unconditional, to pay to Lender the principal of (premium, if any),
and interest on, the Loan as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of Lender and creditors of Borrower other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent any Holder from
exercising all remedies otherwise permitted by applicable law upon the
occurrence of a default or event of default under this Agreement, subject to the
rights, if any, under this Section 10 of the holders of Senior Indebtedness in
respect of cash, property or securities of Borrower received upon the exercise
of any such remedy.
The failure to make a payment on account of principal of, or interest on, the
Loan by reason of any provision of this Section 10 shall not be construed as
preventing the occurrence of a Default or an Event of Default hereunder.
26
<PAGE>
10.6. NOTICE TO LENDER . Borrower shall give prompt written notice to
Lender of any fact known to Borrower which would prohibit the making of any
payment on or in respect of the Loan, but failure to give such notice shall not
affect the subordination of the Subordinated Indebtedness to the Senior
Indebtedness provided in this Section 10. Notwithstanding the provisions of
this Section 10 or any other provision of this Agreement or the Loan, Lender
shall not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or in respect of the Loan, unless and
until Lender shall have received written notice thereof from Borrower, the
Representative or other holder of Senior Indebtedness, and, prior to the receipt
of any such written notice, subject to the provisions of this Section 10, Lender
shall be entitled in all respects to assume no such facts exist. Nothing
contained in this Section 10.6 shall limit the right of the holders of Senior
Indebtedness to recover payments as contemplated by Sections 10.1 and 10.2.
10.7. RIGHT OF LENDER AS HOLDER OF SENIOR INDEBTEDNESS . Lender in its
individual capacity shall be entitled to all the rights set forth in this
Section 10 with respect to any Senior Indebtedness which may at any time be held
by it, to the same extent as any other holder of Senior Indebtedness, and
nothing in this Agreement shall deprive Lender of any of its rights as such
holder.
10.8 REINSTATEMENT . The provisions of this Section 10 shall
continue to be effective or be reinstated, and the Senior Indebtedness shall not
be deemed to be paid in full, as the case may be, if at any time any payment of
any of the Senior Indebtedness is rescinded or must otherwise be returned by the
holder thereof upon the insolvency, bankruptcy or reorganization of the Borrower
or otherwise, all as though such payment had not been made.
11. MISCELLANEOUS
11.1. COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT; SALE OF INTEREST.
(a) The Loan Documents constitute the complete agreement between the parties
with respect to the subject matter hereof and may not be modified, altered or
amended except by an agreement in writing signed by Borrower and Lender.
Borrower may not sell, assign or transfer any of the Loan Documents or any
portion thereof including, without limitation, Borrower's rights, title,
interests, remedies, powers and duties hereunder or thereunder. Borrower hereby
consents to Lender's sale of participations, assignment, transfer or other
disposition, at any time or times, of any of the Loan Documents or of any
portion thereof or interest therein, including, without limitation, Lender's
rights, title, interests, remedies, powers or duties thereunder, whether
evidenced by a writing or not. Borrower agrees that it will use its best
efforts to assist and cooperate with Lender in any manner reasonably requested
by Lender to effect the sale of participations in or assignments of any of the
Loan Documents or of any portion thereof or interest therein.
27
<PAGE>
(b) In the event Lender assigns or otherwise transfers all or any part of the
Note Borrower shall, upon the request of Lender, issue a new Note to effectuate
such assignment or transfer.
11.2. FEES AND EXPENSES . If, at any time or times, regardless of the
existence of an Event of Default, Lender shall employ counsel or other advisors
for advice or other representation or shall incur reasonable legal or other
costs and expenses in connection with any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Lender, Borrower or any other
Person) in any way relating to any of the Loan Documents or any other agreements
to be executed or delivered in connection herewith, including any future
amendments, supplements, waivers or consents at the request of Borrower, then,
and in any such event, the attorneys' and other parties' fees reasonably arising
from such services, including those of any appellate proceedings, and all
expenses, costs, charges and other fees reasonably incurred by such counsel and
others in any way or respect arising in connection with or relating to any of
the events or actions described in this Section shall be payable, on demand, by
Borrower to Lender and shall be additional Obligations secured under this
Agreement and the other Loan Documents. Without limiting the generality of the
foregoing, such expenses, costs, charges and fees may include: paralegal fees,
costs and expenses; accountants' and investment bankers' fees, costs and
expenses; court costs and expenses; photocopying and duplicating expenses; court
reporter fees, costs and expenses; long distance telephone charges; air express
charges; telegram charges; secretarial overtime charges; and expenses for
travel, lodging and food paid or incurred in connection with the performance of
such legal services.
11.3. NO WAIVER BY LENDER . Lender's failure, at any time or times, to
require strict performance by Borrower of any provision of this Agreement any of
the other Loan Documents shall not waive, affect or diminish any right of Lender
thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Lender of an Event of Default by Borrower under the Loan
Documents shall not suspend, waive or affect any other Event of Default by
Borrower under this Agreement and any of the other Loan Documents whether the
same is prior or subsequent thereto and whether of the same or of a different
type. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the other Loan
Documents and no Event of Default by Borrower under this Agreement and no
defaults by Borrower under any of the other Loan Documents shall be deemed to
have been suspended or waived by Lender, unless such suspension or waiver is by
an instrument in writing signed by an officer of Lender and directed to Borrower
specifying such suspension or waiver.
11.4 REMEDIES . Lender's rights and remedies under this Agreement shall be
cumulative and nonexclusive of any other rights and remedies which Lender may
have under any other agreement, including without limitation, the Loan
Documents, by operation of law or otherwise.
28
<PAGE>
11.5 WAIVER OF JURY TRIAL . THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THE LOAN
DOCUMENTS.
11.6 SEVERABILITY . Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
11.7 PARTIES . This Agreement and the other Loan Documents shall be binding
upon, and inure to the benefit of, the successors of Borrower and Lender and the
assigns, transferees and endorsees of Lender.
11.8 CONFLICT OF TERMS . Except as otherwise provided in this Agreement or
any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.
11.9 GOVERNING LAW . EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE
LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE,
WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. LENDER AND BORROWER AGREE TO
SUBMIT TO PERSONAL JURISDICTION AND TO WAIVE ANY OBJECTION AS TO VENUE IN THE
COUNTY OF NEW YORK, STATE OF NEW YORK. SERVICE OF PROCESS ON BORROWER OR LENDER
IN ANY ACTION ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS SHALL BE
EFFECTIVE IF
29
<PAGE>
MAILED TO SUCH PARTY AT THE ADDRESS LISTED IN SECTION 11.10 HEREOF. NOTHING
HEREIN SHALL PRECLUDE LENDER OR BORROWER FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION.
11.10 NOTICES . Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by
another, or whenever any of the parties desires to give or serve upon another
any communication with respect to this Agreement, each such notice, demand,
request, consent, approval, declaration or other communication shall be in
writing and either shall be delivered in person with receipt acknowledged or by
registered or certified mail, return receipt requested, postage prepaid, or
telecopied and confirmed by telecopy answerback addressed as follows:
(a) If to Lender at:
15 Carshalton Road
Sutton Surrey SM1 4LD
England
Attention: Nigel Griffiths, LLB
Telecopy No. (0181) 770 1145
With copies to:
Weil, Gotshal & Manges LLP
99 Bishopsgate
London, EC2M 3XD
Attention: David Lefkowitz, Esq.
Telecopy No. (0171) 426 0990
(b) If to Borrower, at:
Intek Diversified Corporation
214 Carnegie Center, Suite 304
Princeton, NJ 08540
Attention: Lee Montellaro
Telecopy No.: (609) 419-1222
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<PAGE>
With copies to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Howard Chatzinoff, Esq.
Telecopy No.: (212) 310-8007
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback or
seven (7) Business Days after the same shall have been deposited (i) in the
United States mail (in the case of notice being given by Borrower or any other
Person in the United States) or (ii) in the United Kingdom mail (in the case of
notice being given by Lender or any other Person located in the United Kingdom).
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
11.11 SURVIVAL . The representations and warranties of Borrower in this
Agreement shall survive the execution, delivery and acceptance hereof by the
parties hereto and the closing of the transactions described herein or related
hereto.
11.12 SECTION TITLES . The Section titles and Table of Contents contained in
this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
11.13 COUNTERPARTS . This Agreement may be executed in any number of separate
counterparts, each of which shall, collectively and separately, constitute one
agreement.
[SIGNATURE PAGE FOLLOWS]
31
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
INTEK DIVERSIFIED CORPORATION
By:
-------------------------------------
Name:
Title:
SECURICOR COMMUNICATIONS LIMITED
By:
-------------------------------------
Name:
Title:
The undersigned hereby guarantees to Borrower the performance by Lender of all
of its obligations under this Agreement.
SECURITY SERVICES PLC
By:
-------------------------------------
Name:
Title:
Date:
32
<PAGE>
SCHEDULE I
OTHER LOANS
Annual
Agreement Date Principal Maturity Interest
-------------- --------- --------- ---------
September 11, 1997
(September Facility) $2.0 Million 10/15/98 12.5%
May 12, 1997
(March Facility) $6.0 Million 10/15/98 11.0%
May 20, 1997
(May Facility) $4.5 Million 10/15/98 17.5%
33
<PAGE>
SCHEDULE 4.1
CORPORATE MATTERS
4.1(ii) Qualified to Do Business
Midland USA, Inc. is not qualified to do business in the states of Massachusetts
and Texas.
34
<PAGE>
SCHEDULE 4.2
EXECUTIVE OFFICES
The executive office and principal place of business of Intek Diversified
Corporation is 214 Carnegie Center, Suite 304, Princeton, New Jersey 08540 .
35
<PAGE>
SCHEDULE 4.3
SUBSIDIARIES
<TABLE>
<CAPTION>
Name of Subsidiary Number Percentage
- ------------------ Jurisdiction of Classes of of Shares Issued of Class
By Borrower Incorporation Capital Stock And Outstanding Owned
- ----------- ------------- ------------- --------------- -----
<S> <C> <C> <C> <C>
Roamer One, Inc. Delaware common stock 100
100%
Midland USA, Inc. Delaware common stock 100
100%
Olympic Plastics
Company, Inc. California common stock 253,164
100%
IMCX Corporation California common stock 100
100%
IDC International
Corporation Florida common stock 1,000
100%
Securicor England and common stock --
100%
Radiocoms Limited Wales preferred stock --
0%1
Linear Modulation England and
Technology Limited Wales common stock --
100%
</TABLE>
- ---------------
1 Owned by Securicor Communications Limited
36
<PAGE>
SCHEDULE 4.9
LITIGATION
Charlotte Scott et al v. Joseph Steingold et al, Case No. 97-6-7871 (U.S.
District Court, Northern District of Illinois).
37
<PAGE>
SCHEDULE 4.12
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
4.12(a) Patents
Midland USA, Inc.:
US Patent Number 4,718,586 (Swivel Fastening Device)
4.12(b) Trademarks
Midland USA, Inc.:
The trademark "Midland" Reg. No 927193, serial number 72-277,496, first
registered on January 18, 1972 and renewed on December 13, 1991.
The trademark "Midland" Reg. No 895483, serial number 72-156,089, first
registered on July 28, 1970 and renewed on December 18, 1990.
Roamer One, Inc.:
The trademark "ROAMER R and design" Reg. No. 1,494,062, first registered
June 28, 1988.
The trademark "ROAMER R and design" Reg. No. 1,494,063, first registered
June 28, 1988.
The trademark "ROAMER" Reg. No. 1,494,064, first registered June 28, 1988.
The trademark "R and design" Reg. No. 1,599,916, first registered June 5,
1990.
The trademark "RoameR" Reg. No. 1,625,235, first registered on November 27,
1990.
The trademark "ROAMER" Reg. No. 1,634,393, first registered on February 5,
1991.
The trademark "RENT-A-ROAMER and..." Reg. No. 1,635,737, first registered
on February 19, 1991.
The trademark "ROAMER ONE", serial number 74/198,033. The application for
this trademark has been approved and will be issued shortly.
38
<PAGE>
The trademark "ROAMER", Canadian Reg. No. 594,735.
4.12(c) Copyrights
None
4.12(d) Licenses
Midland USA, Inc.:
1) Midland USA - Midland International Corp. Trademark License
Agreement dated September 19, 1996.
2) Midland International Corp. - Midland Consumer Int'l. Exclusive
License Agreement dated June 30, 1995.
3) Midland International Corp. - LETT Electronics Private Label Agreement
dated March 1, 1995.
4) Midland International Corp. - American Digital Communications, Inc.
Asset Purchase Agreement dated December 29, 1995.
39
<PAGE>
SCHEDULE 7.2(b)
CERTAIN TRANSACTIONS
Any management or consulting agreement referenced in the Borrower's Proxy
Statement, dated November 8, 1996, under the caption "Certain Relationships and
Related Transactions."
Employment Agreement dated April 21, 1997 between Borrower and Donald
Goeltz.
Employment Agreement dated February 18, 1997 between Borrower and Lee R.
Montellaro.
Employment Agreement dated September 8, 1997 between Borrower and Robert J.
Schiver.
Inter-company loans between Borrower and its Subsidiaries.
40
<PAGE>
EXHIBIT A
NOTICE OF ADVANCE
_____________, 199_
Securicor Communications Limited
15 Carshalton Road
Sutton, Surrey
SM1 4LDAttention:Michael Wilkinson
Gentlemen:
The undersigned, INTEK DIVERSIFIED CORPORATION, refers to the
Amended and Restated Loan Agreement, dated as of November __, 1997 (the "Loan
Agreement", the terms defined therein being used herein as therein defined),
between the undersigned and SECURICOR COMMUNICATIONS LIMITED, and hereby gives
you notice, irrevocably, pursuant to Section 2.1 of the Loan Agreement, that the
undersigned hereby requests an Advance under the Loan Agreement, and in that
connection sets forth below the information relating to such Advance as required
by Section 2.1(a) of the Loan Agreement:
(i) The date of the requested Advance shall be _______________, 199__.
(ii) The aggregate amount of the requested Advance is $___________
(minimum: $500,000).
(iii) The Advance shall be used solely as permitted by Section 2.3 of the
Loan Agreement.
41
<PAGE>
The undersigned hereby certifies that the statements contained in
Section 3.2 of the Loan Agreement are true on the date hereof, and will be true
on the date of the requested Advance, before and after giving effect thereto and
to the application of the proceeds therefrom.
Very truly yours,
INTEK DIVERSIFIED CORPORATION
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
42
